Jarred Kessler, the founder and CEO of home lease back company EasyKnock, thinks the current boom times in the housing market are just temporary, and that the coronavirus pandemic may ultimately spell years of trouble for real estate.
“I think it’s going to be years,” Kessler argued of the outbreak’s economic impacts. “I think whatever people think is normal, that dream is going to be over for awhile.”
Kessler made the comments while speaking with Inman to discuss the near-term future of real estate, as well as his company’s latest fundraising success. On the latter front, EasyKnock announced this month that it has raised an additional $5 million as part of a Series B funding round. The fundraising round was previously announced in June, though at that time it had only generated $20 million. The new money, which came from Viola FinTech, raises EasyKnock’s total Series B haul to $25 million.
The new cash followed EasyKnock’s seed round of investment that raised $103 million, and its Series A round which brought in $215 million in debt-equity funding.
Kessler told Inman that EasyKnock — which buys homes and then leases them back to the previous owners — will use the new money to increase its headcount, improve its technology and potentially make acquisitions.
In a statement, Kessler also noted that the money comes to the company when “traditional real estate and homeownership is in the midst of a dramatic transformation.”
Kessler further elaborated on that transformation in his conversation with Inman. Most notably, Kessler doesn’t believe the current surge in the real estate market will continue indefinitely. Right now, agents across the country have reported unprecedented levels of activity, including unusually competitive bidding wars. Kessler was of course aware of these conditions, and said that “right now everyone is feeling euphoria in the housing market.”
However, he also pointed to high unemployment numbers and said that as government aid programs become less aggressive, more and more people are going to worry about their finances.
“That’s slowly going to start to filter into the rest of the economy and hurt the housing market,” he said.
Kessler specifically thinks activity in the housing market will slow down in the fall, perhaps in October or November. And he believes that the current trend toward high demand and low inventory will reverse itself, as more people are forced to list their homes at the same time that demand goes down.
Ultimately, it could take “two to four years” before things get back to “normal,” though Kessler compared the current situation to 9/11 to make the point that the coronavirus crisis may forever change the definition of “normal.”
On the other hand, Kessler also envisions significant geographic variation in the housing market’s performance. Places like Colorado, Montana, Wyoming, Ohio, Florida and other states may pull ahead because they have low taxes and remain relatively affordable. However, bigger cities may have a harder time.
“New York is going to struggle for a few years,” Kessler said. “You have businesses leaving and you have high taxes and you have crime going up.”
None of this is especially reassuring news for the market generally, though Kessler does think that a company such as EasyKnock will be useful during potentially harder times. EasyKnock offers a few different services, including a kind of bridge program in which the firm buys a house while the owners look for a new place, as well as a program in which the company buys the home and leases it back to the prior owners for an indefinite time period. EasyKnock customers can also sell to the company with an option to buy back the home at a later date.
Kessler said these programs give people more flexibility, which is something that could be especially useful in these uncertain ties. Such flexibility may be particularly appealing to consumers working in the “gig economy” — or people such as Uber drivers or freelance writers or in some cases real estate professionals who file 1099 tax forms — who may have inconsistent income streams.
“We give people the benefit of selling,” Kessler said, “without having to move.”