FintechMortgage

The $22 trillion equity Extravaganza: In search of the Good Guys

Residential Real Estate in the US is a $40 trillion asset class. The number is staggering – it’s about twice US GDP. When a company’s valuation hits $1 billion, we call it a “unicorn.” Well, imagine 40,000 unicorns stacked on top of each other and you get the US housing stock!

Perhaps more interesting than the size of the overall asset class is the $22 trillion of equity Americans own in their homes. While there is a lot of attention – and rightly so – on the mortgage and loan industry, in excess of 50% of the asset value is owned equity. This constitutes the largest source of wealth for the bulk of American families and is the single largest source of generational wealth transfer for the majority of these families. 

Now, many companies are training their sights on this incredible pool of wealth.  Their offerings are interesting and varied. One recently profiled company offers liquidity for a percentage of your home, though valued at a discount. 

It’s a joint risk proposition. 

Other, perhaps traditional, offers allow a homeowner to take out a line of credit with the equity in the home as the collateral. Though the offerings are different, one thing remains the same: none of them helps the homeowner increase the equity in their home via liquidity instruments that are easy, secure, and cost-effective so that the vast majority of homeowners who are “house poor” can avail of the unheralded run-up in equity in the American housing landscape.

The notion that PropTech companies in the space actually create value versus just attempting to gain a share of already existing value is a rare one. The ones that do, we’ll deem “The Good Guys.”

Here’s the thing: There aren’t too many Good Guys in the marketplace. 

The housing ecosystem must foreground the homeowner and then align the homeowners’ interests with those of brokers, agents, contractors and investors. Through that virtuous circle, all elements of the ecosystem benefit. 

We need more PropTech companies that wear capes. There’s a multi-trillion dollar extravaganza awaiting them, and through them the American families who can use a superhero.

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