Nate Baker wants to revolutionize the real estate experience. The CEO and founder of digital title startup Qualia, Baker has helped pioneer things like digital closings and just days ago announced a new platform to help enterprise customers manage thousands of transactions.
But despite his record so far — Qualia has also managed to raise $95 million since its founding in 2015 — Baker believes the biggest transformations in the real estate industry are still yet to come.
Baker will be discussing the future of real estate this year at Inman Connect New York, and recently sat down for a phone call with Inman to chat about what the biggest trends will be going forward. What follows is a version of that conversation that has been edited for length and clarity.
Inman: Talk to me first about 2020. What property technology trends do you see dominating this year?
Baker: I would say that the first thing to point out is one, real estate is really important. But two, it hasn’t changed as much as you might expect in the last 20 years. If you think about what you can do in the rest of your life, you actually have Amazon delivering you stuff in two hours if you live in San Francisco. You have the ability to buy stocks on your phone for no fees.
Tech has really moved forward dramatically in the rest of our lives, but the real estate transaction — despite the best efforts of thousands of companies, including us — hasn’t yet been transformed.
I think what we’re seeing across the real estate industry right now is basically a slingshot catching up to the rest of the world in terms of how the transaction works.
So I think we’re going to continue to see the iBuyers, that model, grow across the country. And really scale.
I think we’re going to continue to see the vertical integrations of a lot of these lead aggregators. So think Zillow’s non-iBuying business. Or think about realtor.com. Or some of these other smaller but growing platforms.
And if you look at where I’m from — San Francisco, where I live right now — land use regulation is continuing to be very onerous and making it very difficult to build anything new. And I think that’s going to continue to worsen in a lot of big cities. So I think we’re going to continue to have really difficult supply issues in these big cities, which is going to drive up prices.
And we’re going to continue having growth in a lot of smaller cities like Austin. Like Salt Lake City. And quite a few more places.
You mentioned that the real estate industry is still catching up in terms of technology. What’s the hold up? Why is it taking so long?
The answer is that it is genuinely complicated. And it requires the participation of many transaction participants. If you think about Amazon, they can mostly control the warehouses and the delivery network. And everything is just how they need it to be. That’s why they can give such a good experience.
But in the real estate industry, there are so many participants that all have to be on the same page. You have real estate agents, but you also have a lender and their entire team. You have the title company. You have the buyer and the seller. It just goes on and on.
The confusion arises from having so many participants that need to coordinate. That really is the fundamental problem in my opinion. Which is why I think that’s the interesting thing to work on, basically bringing everyone together on one platform. That’s what we do at Qualia.
You also mentioned the growth of iBuying. How big do you think it can get?
I think that in three years we could be looking at something like 10 percent of the market. Which is a big number. But we’re also seeing new competitors spring up everyday with a lot of financing and an appetite to go after this market.
So I think as that machinery evolves, we’re going to see their cost of acquiring properties come down. Their cost of management comes down with scale. And I think they’re going to be able to move into tighter markets. That leads to that increased market share.
You also mentioned onerous land use issues. What did you mean? What’s the problem there?
There are nine districts in San Francisco. I was talking with my district supervisor not that long ago and she said that there was something like 300 units that have been built in our district in the last 10 years. Three hundred new housing units in San Francisco in one ninth of the area. Which to me is shocking. And you definitely feel that in the rent prices. There are no cranes around the city.
It’s a really big problem in my opinion. In San Francisco, New York, some of the cities in the country where a lot of innovative companies are based, it used to be that you could move here and work your way up. You could move here very cheaply, as a dishwasher or something, and get close to one of these companies and work your way up. That’s not possible now because of our housing policy.
It’s so expensive to move to the city that it keeps people out. It makes it very hard to come here for the opportunity that the city represents. So you’re seeing a large movement away from San Francisco and New York.
And I would highlight Austin as I think the city that is most benefiting from this right now. If you look at Austin, their skyline has dozens of cranes. They’re building lots of big buildings for office and residential space. And the city is growing incredibly quickly. The commercial vacancy rate in Austin is lower than in San Francisco. Which is hard to believe.
I think that a lot of companies also are moving offices out of San Francisco because it’s just difficult to bring people here. It’s difficult to find people because the housing supply isn’t there. We, as an example, have two thirds of our employees based out of Austin. And I think that’s becoming increasingly popular among tech companies.
If you were the king of San Francisco or another high priced city, what would you do to fix these problems?
These are very complex issues. There are certainly problems with displacing existing residents if you do too much construction, and I think that’s a lot of the problem people are trying to solve here.
But it’s clear that what we’re doing in San Francisco is not working well. The scope of the homelessness problem in San Francisco is astonishing and I think it’s a direct result of a lot of our housing policies.
So I think the most important thing to do is to reduce some of the zoning restrictions and to allow new supply to come online. I think it’s important that people be able to build more easily, and build more easily around public transportation. I think that would help solve a lot of these problems.
Finally, talk to me about Connect and what you hope people take away from the comments you’ll be delivering.
I think it’s very important for people to understand that the market is going to change a lot in the next 10 years. It has already changed and I think it’s accelerating. The thing that I keep saying is that it’s a very important industry but the technology is very bad.
At some point, the technology is going to catch up. And when that does happen I think it changes the expectations for the consumer. And the expectations for the lender and the title company. And it really will create a more seamless experience.
So what I think people need to be ready for is how they can play in that world. What are the right touch points, and how do you prepare yourself ahead of time.
Are you ready for what the industry holds in 2020? Inman Connect New York is your key to unlocking opportunity in a changing market. At Connect you will gain insight into the future, discover new strategies and network with real estate’s best and brightest to accelerate your business. Create your 2020 success story at Inman Connect New York, January 28-31, 2020.
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