1. Interest rates

The most decisive factor shaping demand for homes is the price of access to capital. Mortgage rates have more than doubled since this time last year, forcing more consumers to remain in rentals and hold out for a return to more favorable rates. At the same time, however, limited supplies of rental units—in addition to inflation and collusion—have driven up the cost of rent, which may further delay, or completely prevent, homeownership for many. 

At the same time, those with the means to do so—whether through cash or via cheaper institutional investment—have continued purchasing homes. Over the long run, this risks further skewing the share of homes owned by the wealthy, by hedge funds and/or by property management conglomerates. While refi giants like Rocket Mortgage are pivoting to selling longer-term loans to existing homeowners by highlighting the benefits of lower monthly payments, home sellers may increasingly pander to those looking to rent out homes, rather than live in them themselves. 

2. Fractional ownership 

One of the real-estate companies taking advantage of current market conditions is Arrived Homes, which acquires single-family homes for use as rental properties. Backed by the likes of Jeff Bezos, Marc Benioff, and Dara Khosrowshahi, Arrived Homes sees the potential for individuals to collect passive income through fractional investments in individual rental homes—ranging from $100 to $10,000 per property. 

Arrived Homes faces competition, including from Web3 challengers like Tykes. Less formally structured than its Bezos-backed counterpart, Tykes also sees the use in fractional ownership and syndicated real estate investment. For those without the means to own a home themselves, products like Arrived Homes and Tykes could potentially offer higher returns than traditional investment vehicles and function as a wealth-developing gateway to full-fledged homeownership, though that depends upon the cost of mortgages, rent, and home construction in the coming years. Regardless, more home sellers may see themselves pitching their homes to LLCs and DAOs rather than individuals. 

3. Property technology + costs

The cost to build a home significantly impacts how that home is sold—and to whom. But modular design strategies have the potential to drive costs down without significantly compromising on quality. Startups like Cover, which raised $60 million last year, and Green Canopy NODE, $10 million, hope to revolutionize home construction through simple but substantial construction changes. Cover, for instance, puts plumbing and wiring in ceilings rather than walls, because repairs can be done more cheaply and expediently by popping off ceiling modules, rather than cutting and patching holes in walls. Scaling prefab construction can also streamline zoning and permitting processes, and even make home sales compatible with direct-to-consumer strategies that we see for far cheaper goods.