“Innovation has to come from startups,” Divvy Homes CEO Adena Hefets told an Inman Connect New York panel on Friday.
As home prices rise and competition for affordable homes amps up, real estate experts debate whether change will come from a housing crash — but according to Divvy Homes CEO Adena Hefets, who spoke Friday at an Inman Connect New York 2020 panel, change will come from technology.
In the past year alone, the number of homes that cost less than $200,000 fell by 18.1 percent. While builder sentiment is high, not enough new homes are being built to keep up with demand.
Nationwide, 3.9 million new homes need to get built in a year to meet current needs while 5.9 million were built between all of 2012 and 2019.
“The onus is on startups to educate [about alternative finance methods] and provide a new value product,” Hefets told Clelia Peters, the president of Warburg Realty and Inman’s editor-at-large, who moderated the panel.
“We’re at the very start of a wave that’s going to build over the next five years,” she said.
Divvy Homes, which closed a $43 million Series B funding round in September, allows potential homeowners to pick out a home within a pre-determined price range and contribute 2 percent of the purchase price.
It buys the home on their behalf and rents the home back to the customer. Twenty-five percent of the rent goes toward customer equity. After three years, the renter is meant to amass 10 percent equity and use that as a down payment to buy it from Divvy.
“Incomes aren’t growing at the point that home prices are growing and, fundamentally, we just don’t have enough affordable homes,” Hefets said, adding that her goal was to allow those who would otherwise not be able to afford a home work toward it.
She said that the desire to own a home is still as strong as ever because, across generations, it is still the primary source of wealth for most people — bringing up the example of her immigrant parents, who refinanced their home every time she and her three siblings went to college.
But as inventory for affordable homes remains so low that many would-be homeowners simply can’t break into the market, alternative financing is attracting more consumers.
Home prices have grown by 120 percent while incomes have not kept up nearly as much. She pressed agents to consider alternative financing options they can offer their clients such as, among others, rent-to-own.
In this housing market, she said, a client who has to wait six months to save up a down payment will most likely lose the house to another buyer.
“Housing should be the most affordable that it’s ever been but we’re not feeling that,” she said.