For years, the U.S. housing market has been stuck in its old ways. While sectors like retail and travel got a digital makeover, buying a house remained a clunky, slow process, even though we all wanted it to be easier. Today, however, technology is reshaping the experience for both buyers and developers, from virtual property tours to AI-powered recommendations and streamlined digital transactions.
This shift is especially visible in premium developments such as Waldorf Residences, where modern buyers expect seamless digital experiences alongside luxury living standards.
But now, three big things are happening that could finally shake things up.
- The National Association of Realtors (NAR) settlement is changing how agents get paid, which could lead to new ways of doing business.
- Rocket Companies just bought Redfin, hinting at a future where one tech platform could handle the entire home-buying journey.
- Generative AI is getting good enough to simplify tasks like searching for homes and handling paperwork.
These shifts all point to a more digital, customer-friendly future. But they also make you wonder: what really drives innovation in real estate, and why has it been so hard to get right?
What’s been tried so far
Over the past 20 years, companies have tried to digitize different parts of the process. Zillow changed how we search for homes by putting listings and value estimates online for everyone. Redfin tried to be a more efficient brokerage, using salaried agents and digital tools to offer buyers a cut of the commission. Rocket Mortgage made getting a loan fast and easy on your phone, and it worked — they became the biggest mortgage lender in the country. More recently, iBuyers like Opendoor tried to offer instant cash offers for homes.
What drives real estate innovation?
Research shows it all comes down to one thing: people want convenience and speed, and they’re willing to pay for it. My own research found that fintech lenders like Rocket charged more than traditional banks but still won over customers because their digital process was faster. People cared more about saving time than saving a few bucks.
The same thing happened with iBuyers. My analysis shows that many sellers were happy to take a 3% lower price just to skip the hassle of a traditional sale. This proves that the speed and certainty of an instant offer are worth real money.
Why is this so hard?
While tech has helped with some of the friction and paperwork, most innovations have hit the same wall: housing is complicated, local, and a huge deal emotionally. Buying a home isn’t like ordering from Amazon; it’s a high-stakes financial decision you don’t make very often.
Every market is different, and every property is unique, which makes it tough to automate things like property values. Two houses on the same street can be wildly different, which isn’t the case for two identical cars. This mix of high stakes, infrequent transactions, and local quirks makes real estate much harder to standardize than other industries.
This also explains why most big real estate tech companies have struggled to turn a profit. Zillow and Opendoor have consistently lost money, and Redfin’s profits have been all over the place. Only Rocket has managed to stay around break-even. While they’re all still growing, their financial struggles show just how tough this industry is.
My research points to other hurdles, too. Rocket got huge by focusing on a relatively safe part of the business: government-backed loans where the risk is low. Automating deals where the risk is higher is much harder. iBuying, for example, works best for cookie-cutter homes that are easy to value.
For unique properties, the model falls apart. If you get the price wrong by just 5%, you can attract a flood of overpriced homes, which kills your profit margins. As I predicted, both Zillow and Redfin ended up ditching their iBuying businesses after losing a ton of money.
The NAR settlement: a game changer?
Recent regulatory changes are also shaking things up. The NAR settlement in March 2024 is designed to make agent fees more transparent and competitive. It scraps the rule requiring listing agents to offer a commission to the buyer’s agent on the MLS and requires agents to have written agreements with their clients. These changes should make people more aware of what they’re paying and will likely push agent fees down.
What’s next? The holy grail of a digital closing
The Rocket-Redfin deal is a big bet on what many see as the ultimate goal in real estate tech: a fully digital closing. Imagine being able to handle everything — from browsing listings to signing the final papers — all on one platform.
In theory, it sounds amazing. In practice, it’s still a long way off. The system is fragmented, and the legal and financial risks are huge. Even with e-signatures, you still have delays from appraisals and inspections. People want speed, but they also want trust and expert advice. Because of this, a fully automated closing probably won’t happen anytime soon. It’s just too complex.