Kaz Nejatian: Home ownership delays threaten wealth transfer and social stability

Important takeaways

• Home ownership plays an important role in social inclusion and can lead to better health outcomes for individuals.
• Delays in home ownership among young people may impact wealth transfer and social stability in the long term.
• Rising transaction costs in purchasing housing have greatly reduced the supply of housing.
• An increase in capital in the housing market can encourage more transactions, similar to other sectors such as the car market.
• Housing costs have increased in proportion to incomes, making home ownership more affordable.
• Larger asset sizes should theoretically lead to reduced trading frictions and effective market clearing.
• The iBuying model, despite criticism, has shown economic viability when properly managed.
• Opendoor integrates AI into real estate products to revolutionize the home buying and selling process.
• Traditional underwriting methods in the mortgage industry are considered outdated and in need of modernization.
• The Opendoor approach can significantly reduce the time required to fund a loan, improving efficiency.
• The integration of AI into mortgage lending processes can eliminate the need for human interaction in home buying.
• Trends in home ownership delays among younger generations can affect long-term economic and social structures.
• Rising transaction costs since the 1990s have had a significant impact on housing supply and affordability.

Guest introduction

Kaz Nejatian is the Chief Executive Officer of Opendoor Technologies Inc. He previously served as Chief Operating Officer and VP of Product at Shopify, where he led product quality and operations in the large e-commerce space. Kaz also held product leadership roles at Meta and co-founded Kash, a mobile payments company that was acquired by a leading US fintech in 2017.

The impact of homeownership on community and individual outcomes

• When you own your home you have a stake in the future of your community… children who grow up in a home owned by their parents have better life outcomes.

  – Kaz Nejatian

• Home ownership is linked to stronger community relationships and improved health outcomes for children.
• The stability that home ownership provides can lead to increased community involvement.

• Home ownership significantly affects community engagement and individual life outcomes.

  – Kaz Nejatian

• The social implications of home ownership extend beyond the individual to the wider community.
• Owning a home can provide a sense of investment in a community’s future.
• The benefits of owning a home are not only financial but also social and community.
• Understanding the relationship between home ownership and community stability is important for policymakers.

Home ownership delays and their economic implications

• For the first time in American history young people are buying their first home on average after they turn 40… the transfer of wealth in America is primarily through home ownership.

  – Kaz Nejatian

• Delays in home ownership among young people may disrupt traditional ways of transferring wealth.
• The tendency to buy homes later in life may affect social mobility and stability.
• The economic and social consequences of delayed home ownership need to be addressed.
• Changes in the age of home ownership can lead to changes in wealth distribution patterns.
• Understanding current trends in home ownership is critical to predicting future economic impacts.
• Delays in home ownership may lead to a re-examination of how wealth is passed down from generation to generation.
• The long-term effects of this trend could reshape the housing market and social structures.

Rising housing costs

• If we just remove that 10% and go back to what transaction costs would have been in 1990 that’s the equivalent of building 5,000,000 new homes in America and there is no plan to build 5,000,000 new homes anywhere.

  – Kaz Nejatian

• Rising transaction costs have had a major impact on housing affordability.
• Reducing operating costs can have a significant impact on the housing market.
• The historical context of transaction costs is important in understanding current market challenges.
• Rising costs have created economic barriers to home ownership for many.
• The economic effects of transaction costs extend beyond individual consumers to the broader market.
• Addressing transaction costs can lead to increased housing availability and affordability.
• Policy makers need to consider the transaction costs of housing market changes.

Market capitalization and consumer behavior

• It’s almost like adding money to the market people should want to do more… when you add money to the car market people buy more cars.

  – Kaz Nejatian

• An increase in market capitalization can lead to higher transaction volumes.
• Liquidity affects consumer behavior in various sectors, including real estate.
• Understanding the impact of liquidity on the market is critical to predicting consumer trends.
• The relationship between liquidity and transactions is a central principle of economics.
• Liquidity can drive market activity and influence buying decisions.
• The housing market may benefit from increased capital to encourage transactions.
• Liquidity’s role in the market highlights the need for policies that improve market efficiency.

Housing costs are compared to income trends

• Housing costs due to conflicts have increased dramatically while house prices have decreased.

  – Kaz Nejatian

• Housing costs have risen faster than incomes, affecting affordability.
• The disconnect between the cost of income and the cost of housing is a critical market problem.
• Rising housing costs create barriers to home ownership for many people.
• Understanding historical trends in housing costs is critical to addressing affordability.
• The economic effects of rising costs extend to volatile markets.
• Policy makers need to address the housing cost-income gap to improve affordability.
• The problem of affordability requires comprehensive solutions to balance costs and income.

Asset size and transaction efficiency

• The fact that the maximum asset size is high means that the friction should be low because the market should be easily clear.

  – Kaz Nejatian

• Larger asset sizes should lead to lower transaction volume in the market.
• The relationship between asset size and efficiency is an important principle of economics.
• Understanding the effect of asset size on transactions is important in market analysis.
• Capital goods can facilitate efficient market clearing and reduce friction.
• The housing market can benefit from policies that improve transaction efficiency.
• Asset size plays an important role in determining market behavior and efficiency.
• Policy makers need to consider asset size in market reforms to improve efficiency.

The performance of the iBuying model

• They have the math wrong… if you ignore the era of bad management decisions opendoor had a good economic base in its purchasing model for most of its life.

  – Kaz Nejatian

• Criticism of the iBuying model may overlook its economic viability.
• The iBuying model has proven to be economically viable when managed properly.
• Understanding the economics of the iBuying model is critical to evaluating its effectiveness.
• The success of the model depends on effective management and strategic decisions.
• The iBuying model could play an important role in the future of real estate transactions.
• Critics need to consider the historical performance of the model in evaluating its effectiveness.
• The potential impact of the iBuying model on the market highlights the need for data analysis.

Integrating AI into lending products

• We’re going to build the first AI mortgage product… you’ll be able to buy a home and get a loan without talking to a human.

  – Kaz Nejatian

• Opendoor uses AI to simplify the mortgage process.
• The integration of AI can revolutionize traditional methods of mortgage lending.
• The use of AI in lending can eliminate the need for human interaction in transactions.
• Understanding the role of AI in financial services is critical to predicting industry trends.
• The integration of AI can improve efficiency and reduce costs in the lending process.
• The potential of AI to transform the mortgage industry highlights the need to adapt to the technology.
• The Opendoor approach may set the precedent for future innovations in real estate.

A modern necessity in writing

• I think the traditional subtext is deeply flawed and deeply broken.

  – Kaz Nejatian

• Traditional underwriting methods are considered outdated and need to be changed.
• Modernizing underwriting processes can improve the efficiency of the real estate industry.
• Understanding the current limitations of writing is essential to changing the industry.
• Modern demand reflects broader trends in financial services.
• The mortgage industry could benefit from adopting new underwriting practices.
• Policy makers need to address writing errors to improve market efficiency.
• The call for modernization highlights the industry’s need for technological advancement.

A reduction in mortgage financing periods

• If we run our own mortgage business that month can be down to eight days… we can buy your house and give you a loan and everything can be done in days rather than months.

  – Kaz Nejatian

• Opendoor aims to significantly reduce housing finance timelines.
• Shortening turnaround times can improve efficiency and reduce real estate transaction costs.
• Understanding traditional mortgage processes is essential to evaluating the Opendoor approach.
• The potential to disrupt traditional processes highlights the need for innovation.
• Reducing timelines can improve the home buying experience for buyers.
• The Opendoor approach could set a new standard for efficiency in the real estate industry.
• The focus on reducing timelines reflects broader trends toward greater efficiency in financial services.