At Connect Now on Thursday, presenter Clelia Peters was joined by Eddie Lim, a Silicon Valley-based serial entrepreneur who founded Point after becoming unsettled by the traditional process of trying to access home equity.
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The home equity market is changing much faster than most people realize.
Call it alternative finance, proptech or fintech – it really doesn’t matter. What the real estate industry should know is that the most painful, service-intensive aspect of buying and owning a home is finally evolving. But thanks to a slowdown in real estate, change may come a little more slowly, a fact that got Inman talking Connect now on Nov 17
It’s true that a few big players Beat and Ribbon, have had dramatic staff cuts amid a slowdown in home sales. But the dice have fallen. The line of organizations lining up to use it is getting longer and longer. Nonetheless, declines in market activity seep into the innovation space.
Host Clelia Peters was joined by Eddie Lim, a Silicon Valley-based serial entrepreneur who founded a home equity investment company called Pointafter being rocked by the traditional process of trying to access home equity.
Lim’s biggest frustration stems from the notion that the sheer volume of home equity suggests it should be easier to leverage.
“Ironically, in US real estate, there’s $28.30 trillion in home equity; it’s the largest asset class in the world,” Lim said. “And it has no equity financing.”
Peters noted that Lim’s success and collective expertise also gives him a unique vantage point from which to scour the proptech market. As someone who has relied on funding to start multiple companies, Lim knows how the venture capital and financing sectors work.
“Many investors are in a wait-and-see mode, [but] In the real estate world, many investors are pulling out in large part because the securitization markets are closed,” he said.
Lim believes tourist investors, money people who drop by the proptech space to see what all the fuss is about, have left. It goes back to basics.
Granted, “back to basics” may be seen by some as code for “we’re in trouble.” Peters asked Lim about this, citing alleged plights of companies, particularly fintechs, that are intertwined with the real estate market.
Lim didn’t dismiss it.
“You’re right,” he said. “We see pain in many areas.”
Lim said that any company that relies on a unique financing model — or lending practice — for real estate should be concerned, noting Wells Fargo reported a 90 percent drop in the mortgage business.
While new money dispensers may freeze right now, it was August at Inman Connect Las Vegas when Peters himself reminded the industry that plenty of money has already been raised and will need it be used.
“The smart investors are thinking about what they want to own in two years,” Lim said. “What do I want to buy today knowing how interest rates and house prices will rise in two, three, four years?”
To get what’s out there, according to Peters, financiers need to be educated on the value of new fintech models and how they will make a positive difference. It starts with knowing the customer.
For example, a Point customer is someone who could simply benefit from having more money in their pocket, whether to pay for education, make improvements, pay off retail debt, or just have cash on hand. Point customers don’t have to pay back the loan if needed for 30 years.
“The no monthly payment feature is the big aha moment for customers,” Lim said. “After our homeowners make this investment, on average, we see their non-mortgage debt drop 20 percent across our baseline, and they stay.” persist for years.”
Of course, home ownership capitalization poses a risk to the collective future prosperity of American homeowners. It can be argued that savvy startups have spotted an astronomically deep pool of money and found clever ways to tap it. Peters asked Lim about it.
It’s about partnership, he said.
“This environment accelerates the idea of someone being a partner with you in the home ownership stack,” he said, “in the same way that a company goes public and retail investors hold shares in the company.”
Lim equates this consumer sentiment with why iBuyers has managed to catch on, as well as other transaction alternatives filling the market.
Tapping into home equity as a stable source of income during uncertain times can help homeowners better navigate an uncertain market. Credit cards, for example, can be paid off to reduce high-interest debt payments while dealing with inflation.
Peters pointed out that the idea of ”home” is evolving. It’s more than a roof over your head and a long-term wealth creator. It is an active, dynamic asset with an ever-changing role.
And that’s an idea that real estate agents can convey to their clients.
Email Craig Rowe