Could the Way We Buy Homes Change Forever?
Join the Fool for a talk with Chris Mayer, who is the Paul Milstein Professor of Real Estate at Columbia Business School. Mayer is also a visiting scholar at the Federal Reserve Bank of New York and the co-director of the Richard Paul Richman Center for Business, Law, and Public Policy. His research has delved into topics such as housing cycles, mortgage markets, debt securitization, and commercial real estate valuation.
People have been predicting the death of the real estate brokerage for years now. Mayer looks at how technology affects the industry, and whether that "death" will ever actually come. He explains some benefits of Denmark's unique mortgage system, where mortgage bonds trade directly on NASDAQ.
Full transcript below.
David Hanson: You mentioned Zillow. I mentioned Trulia earlier. When you look at those type of companies, the tech-type companies, do you think there's a fundamental change in the way we could get mortgages, go through the housing process in the next 10 years, 15 years?
Or is it going to look the exact same -- you're still walking into a mortgage broker, going through that whole process? It just seems like a process that is ripe for disruption. There's a lot of layers to the process. Do you see evidence of that changing at all in the future?
Chris Mayer: I have to say, I have enough gray hair to remember when people first called the death of the real estate broker industry. That death has been called many times, and it hasn't happened yet.
That does not mean that technology hasn't fundamentally changed how things are going, and you've just got to believe that technology is going to push down the cost of buying and selling a home, and of getting a mortgage.
There's no question that technology could help people a lot. If you look, for example, at refinancing decisions, people who are financially sophisticated do a much better job at optimizing how they manage their finances and their mortgage than people who don't.
This is not rocket science. This is something that technology can and should help them. Do I expect that to happen? I do. I expect those industries are going to continue to be affected to an enormous degree by technology. It already is, but it's going to continue to push down prices, and that's a good thing for consumers.
The upside, the challenges, there are still regulatory challenges associated with the mortgage process that haven't been resolved. I hope with all of the conversation with GSE reform and the top line -- how do we deal with Fannie and Freddie -- I would really love us to go to a system that looks more like the Danish mortgage system, where you have a national Registry of Deeds, where your mortgage bond actually trades on NASDAQ.
You literally look up mortgage bonds on NASDAQ, see where your mortgage bond is, and buy and sell your mortgage inside those bonds. That level of transparency and liquidity makes housing much more affordable for people who live in Denmark.
Hanson: You mean I can't go look at my mortgage on Fannie Mae right now? Not available?
Mayer: Well, they're starting to put some of the data available, but you can literally look and you can buy your mortgage out of a mortgage bond. If a mortgage broker originates a mortgage in Denmark, they price it off the market that day, and put it into the market.
There's no having this thing sit on a balance sheet, all of these inefficient things. There are real opportunities for us to use technology in ways that I think would make the system more efficient, and would also be very consumer-friendly in helping people make better decisions.
You've got to believe that people are going to be developing systems to do that -- and it's not only the ones you name. There are going to be personal finance sites, which are going to really help people do a better job of managing their finances, and those personal finance sites surely are going to start incorporating mortgages as part of what they do. You've seen Zillow and Trulia jump into this business as well.
I really think that part of it is just getting started.
Hanson: Great. Thanks for joining us.
Mayer: Sure. Happy to come.
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David Hanson owns shares of Zillow. The Motley Fool recommends Zillow. The Motley Fool owns shares of Zillow. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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