With mortgage rates on the rise, the residential real estate market has entered a period of transition after some of its best years on record.
“The impressive pace of investment in real estate innovation in recent years will be hard to match,” First American Chief Innovation Officer Paul Hurst said in a release. “In 2021, venture-backed proptech companies raised nearly $21 billion, according to Crunchbase. And that doesn’t include the substantial sums that large, established players have poured into enhancing their transaction processes.”
But even with rising mortgage rates and a slowdown in venture capital spending, the pace of innovation is unlikely to slow, Hurst said. That’s because enormous opportunity remains for real estate companies to use technology to scale their business rapidly and reach new levels of efficiency.
“Established lenders are unlikely to throttle back on innovation in any significant way in the medium- to long-term, particularly in areas where that innovation can reduce operating expenses,” he said. “And newer models, such as iBuyers and power buyers, rent-to-own, single-family rental investments, and fractional ownership will continue to make the real estate market more liquid and deeper.”
Hurst detailed five areas of innovation that are driving the transformation of the real estate transaction and will remain critical through market fluctuations. The first is digital document management and eClosings.
“Making the completion of mortgage documents more efficient is an important step to improving the real estate transaction experience,” he said.
Next is remote online notarization (RON).
“The pandemic greatly accelerated the adoption of RON, offering homebuyers, sellers and borrowers greater flexibility, convenience and the safety of closing their home purchase or refinance transactions remotely,” Hurst said. “RON is now approved in 40 states, offering a fully digital process in which electronic documents are eSigned and eNotarized, and it’s expected that the volume of remote notarized transactions will continue to increase.”
Third is “instant” title decisions fueled by data, and fourth is a faster, increasingly digital closing process.
The last innovation Hurst cited is the more efficient funding of transactions, which he said is often overlooked in innovation discussions.
“The history of innovation demonstrates that it never stops,” he said. “Economic and competitive forces keep driving innovation forward, so count on still more progress in the transformation of real estate transactions despite the market adjustment to rising mortgage rates.”