Real estate startups are beset from all sides by existential threats — No. 1 of which is simply this depressed housing market. Four dozen proptech leaders shared their experiences with Intel.
This report is available exclusively to subscribers of Inman Intel, the data and research arm of Inman offering deep insights and market intelligence on the business of residential real estate and proptech. Subscribe today.
It’s rough out there for proptech founders.
This critical sector of the housing industry helps brokerages stay on the cutting edge while facing unique challenges along the way in sales, integration and user buy-in.
But all of these hurdles pale in comparison to a bigger-picture obstacle: Brokerages are waiting for the housing market to rebound before embarking on a true tech splurge.
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One proptech leader spoke for many when asked about the prevailing attitude among customers.
“Fear,” this leader wrote. “Our clients are being conservative about future spending.”
That feeling — which brokerage leaders might describe more as a healthy dose of caution — is gripping the entire industry right now, and stands as one of the main factors handcuffing the progress of proptech companies, according to nearly four dozen entrepreneurs and executives surveyed in February by the Inman Intel Index.
These 47 tech company leaders make up a small portion of the 811 real estate professionals who took the survey in February, a number that makes it trickier to identify how their opinions might be evolving from month to month.
But their combined experience on the ground is a crucial piece of the puzzle as Intel keeps tabs on real estate industry sentiment across the brokerage, proptech and lending worlds.
Read these insights and observations from proptech sector leadership in the full report below.
A tough case to make
The challenges proptech leaders face are many and varied.
But when asked by Intel in February which barrier stood out most, these proptech respondents painted a clear picture.
- Half of proptech leaders surveyed by the Intel Index last month named “residential real estate market pressures” as their biggest challenge selling their tech in 2023 — the most of any response choice.
- An equal share of proptech respondents said market pressures would remain their biggest challenge in 2024 as well.
- The largest remaining group of proptech respondents — 28 percent — named the related question of their cost-value proposition as the biggest challenge instead.
Previous editions of the Intel Index confirm that most brokerages are continuing to make investments in real estate tech, and are open to similar — or possibly larger — spend in the year ahead.
But it’s clear that the ongoing market uncertainties are being felt by proptech entrepreneurs as they try to articulate their value to potential clients.
The path ahead
It’s not just the depressed transaction market that is putting a damper on their prospects. Other macro headwinds in the real estate industry are rippling through the proptech sector as well.
In no area is this more apparent than the concern over the regulatory framework that governs real estate.
This structure is undergoing a rapid period of change as a result of commission-related rulings and settlements that have largely served as a setback to real estate’s biggest players, including the National Association of Realtors.
- When asked about the previous year, 52 percent of the proptech leaders who replied to Intel in February reported interest rates or recruiting tech talent were the most challenging parts of the business environment.
- But when the focus turns to the next 12 months, that same share of proptech respondents pointing to the interest-rate and labor-market environments dropped to 37 percent.
- Meanwhile, anxieties over the next year appear to be shifting instead to regulatory impacts. Nearly 19 percent of proptech respondents say regulation was the biggest challenge in the business environment over the past year, compared to 33 percent who believe it will be the biggest problem in the year to come.
And the most important factor in the eventual proptech recovery? A host of factors could be part of that solution, these leaders said.
- 28 percent of proptech leaders in the survey named Federal Reserve rate cuts later this year as the key step in any proptech recovery.
- The remaining responses were split between a number of categories including the promise of AI, an increased return to offices, dry-powder resource deployment and a change in political leadership in Washington, D.C.
Intel will continue to gather feedback from proptech leadership and their brokerage counterparts in the months to come.
But as long as the transaction market remains depressed, it seems they believe their hopes for expansion will remain largely on hold.
Methodology notes: This month’s Inman Intel Index survey was conducted Feb. 20-March 3, 2024. The entire Inman reader community was invited to participate, and Intel received 811 responses. Respondents for this survey were directed to the SurveyMonkey platform, where they self-identified their profiles within the residential real estate market. Respondents were limited to one response per device, but there was no limitation to IP addresses. Once a profile (residential real estate agent, mortgage broker/banker, corporate executive/investor/proptech, or other) was selected, respondents answered a unique set of questions for that specific profile. Because the survey did not request demographic information for age, gender or geography, there was no data weighting. This survey will be conducted monthly, with both recurring and unique questions for each profile type.
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