Silicon Valley and Wall Street both seem to be obsessed with real estate tech. The money is pouring in, and the valuations are sky high.
Why? According to panelists at Inman Connect San Francisco, it’s a combination of perfect timing, opportunity and the reliability of housing as an investment.
“Housing is not going away,” activist short seller Andrew Left said during the panel, entitled, “What You Should Know About Wall Street That You Don’t.”
“The underlying asset is a key asset of people’s lives.”
Left answered questions on stage from Warburg Realty President Clelia Peters and The Agency’s CEO Mauricio Umansky.
Wall Street values disruption more than profitability, Left said. That’s why Netflix briefly had a higher valuation than Disney and why Compass raised $450 million.
“Wall Street pays a lot of money for disruption,” Left said. “It’s still very much up in the air — who’s going to be the ultimate disruptor? In the meantime, let’s just give them all big valuations.”
But beyond disruption — the work of industry veterans like Zillow and Redfin and now the next generation of startups like Opendoor and Purplebricks — the reliability of real estate itself as an investment is part of these companies’ appeal.
“You’re in a market that’s not going anywhere, that will get traded even during recessions,” Left said.
And during economic downturns, companies like Opendoor that are funded by venture capital will likely buy homes when individual buyers won’t. Companies like Purplebricks that cut commission costs for consumers will have more appeal. As soon as consumers have to start selling homes for less than they purchased them for, those companies will gain more traction, Left said.
“Those companies have to be in place to go ahead and take advantage,” Left said.
But real estate tech companies haven’t yet been able to totally replace the role of the real estate agent, and that’s why many of them aren’t yet profitable, Left said.
