The housing market’s recent growth has given rise to a variety of new real estate technology companies. But can they survive the shifting market?
Curbed reports that real estate technology companies, or proptech, have grown in recent years in response to a need to update the antiquated housing industry. But some of these companies might see their business models challenged as price increases slow and home sales lag.
So-called “iBuyers” like Opendoor and Offerpad offer an algorithmically determined price to motivated home sellers who for whatever reason need to move as soon as possible and don’t want the hassle of the conventional home-selling process. These startups then flip the house on the open market.
They claim the vast majority of their revenue comes from a transaction fee, not from price appreciation between the period when they buy the house and flip it. If that’s true, they’ll be more vulnerable to the home sales volume slowing than home prices leveling off.