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A New Go of New Home Sales!

with John and Anya

Episode 2,  January 4, 2022

Ripe for Disruption: The Last of the Unicorns

All other industries have been disrupted. Tech giants have saved the biggest and best for last. This episode highlights why our time has come, and how to survive and even, thrive amid these monumental changes.

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Today we’re talking about the last frontier – New Home Sales and why it’s ready for disruption. But before we get started with this topic, let’s talk about unicorns. We’re calling the new home sales industry the last of the unicorns because we’re the last industry that has not been disrupted by technology. To give you some background, to be a unicorn you need a multi-billion-dollar market, and we qualify for that. You also want industries that are fragmented. There are no dominant players, no standard practices and you want one that’s very inefficient. Now, what are the consequences of being huge? If you’re a huge market, you attract a lot of new players.

You can see what’s happening now with the hot new homes industry – a lot of new builders are coming into this market. It’s also attracting a lot of investors too which leads to market consolidation as the bigger guys start to eat up the little guys. And just as an example, if you look at the video rental industry-when VCR’s were popular there were a lot of mom and pop video stores until they were all bought up by Blockbuster. Blockbuster dominated VCR industry, but they were using old technology. Then Netflix came with their streaming technology and eliminated the entire VCR rental industry.  

Technology can quickly disrupt an industry by using a whole new platform, but what that offers at the end is a much more competitive market and it’s a new home market that’s ultimately better for not just the consumers, but even for the new players, the vendors and the builders that survive.


One of the major characteristics of a unicorn is a huge market. And just to put it in perspective here of the top 10 industries in this country, which is about 77% of the economy-real estate is number one, it constitutes 13% of the gross domestic product. The GDP of new homes has traditionally been about 10% of that-about $300 billion a year. But it has a much bigger potential-as two thirds of all buyers prefer to buy new according to Zillow study. So there’s a lot of opportunity for us to gain some of that market share. A lot of it is currently lost because relative to used homes the process of buying new is much more complicated.

For that reason, most of the tech funding has been flowing into general real estate because all things being equal, even without technology, it’s much easier to buy a used home because you can walk through it and it offers transparent pricing. But it’s about to change.

This is where the tech money has been going to historically. But we’re starting to see in the last few years, billions of dollars moving into real estate, obviously real estate is booming, not just here but around on the world. So we’re going to see a lot more tech startups and that will trickle down into new home sales.


The other attribute of a unicorn is it’s a highly fragmented industry. So there are no industry leaders or standard practices. In the US, at its 2006 peak back, there were about 70,000 home builders. Many consolidated or went out of business after the crash. But now with the resurgence of the new home market, it went from 45,000 to about 50,000 now. One of the reasons why this is highly fragmented is because new homes is the most complex, expensive product that anyone will ever going to make. It’s also a very complex purchase. And the other part of it is this it is not a frequent purchase. Shoppers are new to real estate or construction, and architecture and they need to be educated. Fortunately, technology can overcome these obstacles.


The other major characteristic of an industry ripe for disruption is that it’s very inefficient. And you can tell when things are inefficient. In our industry, we have agents. Anytime there’s an intermediary between the buyer and the seller and it is not direct-to-consumer, it’s inefficient. Particularly to our industry, there are many steps in the buying process. There are lots of intermediaries and it takes months to purchase. There are many handoffs and multiple channels that you go through in making your purchase through that complex sales journey. Basically, the buyers already start-off the shopping journey, not understanding builder speak, real estate speak, financial and legal speak:  there’s a misunderstanding of a lot of terms.


Unlike an online shopping experience where marketing and sales are combined, we traditionally separate marketing and sales. Marketing may get people to the table. Then they pass them over to a salesperson who has to now re-learn everything that the buyer has already decided on. That’s partly because they can’t buy online. All of this just exacerbates this lengthy post-sale construction and closing process. That finish line is way, way down the line. Consumers want to continue that transparency, that journey online, wherever they are, anytime, any way, anyhow.


So many things are lost in translation and that gives an opportunity for disruption. The homes only virtually exist. You must buy in pieces, it’s a complex, risky and expensive. It’s a collaborative purchase. It’s a lengthy shopping, construction, closing process. There are many handoffs. You can’t just talk to one person. You must talk to every person and then go around in circles and you often have to sell something to buy something. How many products do you know that you actually have to sell something to buy the product? Companies like Opendoor are trying to make this process of selling existing homes-easier, eliminating contingencies for new home shoppers.


Technology can break down the barriers and the tech savvy consumers are already there. The problem is the builders haven’t kept up with the way buyers want to shop. There’s a lot of money pouring in from venture capital firms that are investing in PropTech, as well as FinTech because PropTech and FinTech (financial technology) are two sides of the same coin. You need both to transact.

Big builders with their large software development teams and staff are moving into that. They’ve already moved into to Buy Online capabilities and better customer experiences and sales, kiosks and things like that. So the remaining 49,000 builders need to keep up as consumers are going to gravitate to what they feel most comfortable with. We’ve seen more changes in the last five years related to technology than in the previous fifteen. And I think in the next three years, you’re going to see more changes than in the last five years. The problem is that changes will come faster, but the time to build up for that is going to take longer because it does require ripping-out your old systems, building for the cloud, across all your channels, training new people, hiring new people. So the time to start is now!

Technology can make buying New easy. If you can show them exactly what it’s going to look like, give them an option to customize, price and buy online – then it makes it easy. If they can visualize the whole process, it does make it easy.

If you’re a small builder, one of the main things you’re selling, is not just your product, but you’re selling a better quality of customer service to these home buyers versus say the large production builders. But if you can’t communicate that better customer service in the language that your ideal customer speaks, then you’re going to lose them. Because at that point they’re going to shop based on price and brand and maybe, popularity. So technology can be viewed as, as an asset and not a liability. This leads to the perfect storm for disruption.


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