Filed under: News
Jan 6 2014, 2:16pm CST | by Forbes
Despite the prospect of rising interest rates, years of oversupply and falling prices, the real estate market has sprung to life in most of the country over the last year. Even in some of the areas that were hardest hit during the financial crisis – such as metro Las Vegas and parts of Southern California – home prices have rebounded to near pre-2008 levels, while housing starts are beginning to ramp up again.
This is welcome news on multiple fronts, as an influx of new construction jobs and rising home equity values will hopefully help fuel more economic growth, consumer confidence and spur hiring among companies.
At the same, however, it also highlights how maddening and painful the home buying process can be. It’s difficult to fathom why an industry sector that is so vital to the economic well-being of the country consistently wastes so much of people’s time, money and energy.
From the very first open house to the often contentious bidding process to the mountain of paperwork that is typically associated with each closing sale, it’s difficult to think of a market that operates more inefficiently. The source of the problem is simple: A lack of an electronic, efficient market.
Home valuations often vary greatly and are almost always purely subjective. Prices are often set by self-interested real estate brokers who get paid commissions based on the sale price of a property or even worse, individual homeowners, who in many respects are even more compromised, as there is perhaps no one more ill-suited to appraise a piece of real estate than the person who owns it.
Because of this, owners often spend months balking at any offer below their asking price, which forces potential buyers, exasperated after trading unsuccessful bids and counter bids, to move on to the next opportunity or – just as frequently – walk away from the real estate purchase process entirely. And if the marketplace ultimately achieves its objective by matching a buyer and seller, it is frequently only after the price of the home has come down and the parties involved have absorbed significant opportunity costs.
Here is the fix: The real estate industry desperately needs what stocks, bonds and commodities investors have had for decades: a transparent, predictable and liquid market that not only captures supply and demand dynamics but allows for expeditious, low-cost and hassle-free transactions. Such a market would increase activity, lower broker fees and make it easier for homeowners to unload properties.
It’s a good question. But not one with a good answer.This gaping hole in the marketplace is begging for a company – or a joint effort comprised of multiple companies – to fill it. Potential candidates include the following:
Although creating a truly electronic real estate market has many challenges, if the major players in the market get together and create this exchange it would revolutionize a truly inefficient market. It would help consumers by lowering costs and fees as well as creating a much more efficient market to buy real estate. Buyers will really get the house they want without the personal issues of the seller and sellers will know that their house will actually sell, although they must accept the true market price of the house. With more transactions, less hassles and standardized paperwork and procedures, this electronic real estate market will revolutionize the industry.
Though a company creating, developing and overseeing a real estate exchange may seem like a pipe dream, it shouldn’t be – it should be the goal. The equities markets work because they are fairly efficient with many players all determining pricing. The same cannot be said about the current state of the real estate market, and the time is right for a company or team of companies to do something about it. Investors who are serious watchers of the real estate market and seeking to place long-term bets on truly disruptive players with significant upside potential should continue to monitor this sector closely.
Ross Gerber is CEO and president of Santa Monica, Calif-based Gerber Kawasaki, an investment advisory with approximately $200 million in assets under advisement. Clients and employees may own positions in companies mentioned, but readers shouldn’t buy anything without doing their own research.
Source: The Edge Singapore
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.
blog comments powered by Disqus
The “geek mind” is concerned with more than just the latest iPhone rumors, or which company will win the gaming console wars. I4U is concerned with more than just the latest photo shoot or other celebrity gossip.
The “geek mind” is concerned with life, in all its different forms and facets. The geek mind wants to know about societal and financial issues, both abroad and at home. If a Fortune 500 decides to raise their minimum wage, or any high priority news, the geek mind wants to know. The geek mind wants to know the top teams in the National Football League, or who’s likely to win the NBA Finals this coming year. The geek mind wants to know who the hottest new models are, or whether the newest blockbuster movie is worth seeing. The geek mind wants to know. The geek mind wants—needs—knowledge.
Read more about The Geek Mind.