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How do you improve the real estate market for buyers?

It’s no secret that it’s been easy to sell upper-middle-class or upper-class homes over the past few years, especially in strong markets. As an extreme example, some REALTORS® have reported selling homes on Long Island sight unseen with a single text message after Amazon announced it would locate a portion of its second headquarters in New York City.

But what about buyers who aren’t flush with Amazon’s money?

It’s an entirely different story.

For the average American, a single-family home is becoming less and less affordable. Saying that may seem controversial—but just because something is controversial doesn’t mean it’s wrong. In fact, many industry market experts attribute the recent slight softening of what had been a very hot market to a lack of affordable housing stock.

Recent research from the Department of Housing and Urban Development shows that middle-class families can no longer afford single-family homes in cities like Portland, Denver, Sacramento, San Bernardino, and Baltimore. While it should come as no surprise that single- family homes are unaffordable for middle-class buyers in New York and San Francisco, the idea that the middle-class families are priced out of San Bernardino should surprise (and trouble) those of us in real estate who care about the overall health of the industry.

(No offense to San Bernardino. I’m sure it’s a lovely place.)

So, if unaffordability is a growing problem, what’s the solution?

That answer is complicated, but in the past a lack of affordable housing has been primarily thought of as a public-sector problem with a public-sector solution. In other words, it was the government’s problem to fix, and anyone who has worked in real estate knows just how controversial even a proposed affordable-housing development can be.

Viewing affordability as exclusively a government problem needing a government solution is a shortsighted way to think about housing and the middle class.

A lack of affordable homes isn’t just a public-sector problem. If REALTORS® can’t serve large portions of the residential market due a lack of inventory, that’s a private-sector problem. While the public sector certainly has a role in addressing the issue of affordability, the reality is that governments have never been very good at building reasonably priced, safe homes that create long-term wealth for families who live in those homes.

Rather than hold contentious city council meetings to debate housing proposals that ultimately go nowhere, we can begin to make progress by making the residential real estate market more efficient and lowering transaction costs associated with buying a home.

After all, anyone who has bought or sold a home knows that while the bulk of the cost is the actual home and the land it sits on, there are plenty of other transactional costs that help drive up the cost.

How can we lower those transactional costs?

Innovation.

Sometimes innovation is the result of better technology, like Transactly’s platform that gives sellers the opportunity to select from multiple preferred partner agents. Greater efficiencies created by our platform will inevitably lead to lower commissions, flat commissions, and more-aggressive commission rebates. While commissions certainly aren’t one of the main reasons housing is unaffordable for many middle-class buyers, reducing transaction costs (and making real estate transactions more efficient and transparent) will, over time, help keep homes more affordable.

While no one wants to repeat the mistakes of the housing crisis, it’s worth noting that it wasn’t government-mandated construction of cheaper homes that brought middle-class and lower- middle-class buyers into the market. Instead, it was innovation in the form of alternative mortgage products that didn’t really lower the cost of the home, but instead structured the transaction in a different way.

It is completely possible to learn a lesson from that era without repeating the same mistakes.

At Transactly, we care deeply about buyers, sellers, and agents at every end of the housing spectrum. We know that a market that’s only strong for upper-middle-class or wealthy buyers is not sustainable. Because housing represents such a large part of economy (and the bulk of wealth for most Americans), change comes slowly—but even though it’s slow, change still needs to happen.

And we’re proud to be part of a nationwide group of real estate innovators working to make that change happen.

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