2023 – Page 65

Top 10 Markets With the Biggest Increase of Homes for Sale in 2023

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Buyers are entering a calmer housing market, but with little incentive for homeowners with sub 3% mortgage rates to sell and 50 of the 100 largest markets expected to see inventory declines, they will continue to have a limited number of homes to choose from. Shoppers with some flexibility in terms of when and where they purchase may have a better chance of finding a home, according to the Knock Buyer-Seller Market Index. According to the Index, which analyzes key housing market metrics to measure the degree to which the nation’s 100 largest markets favor home buyers or sellers, the housing market has shifted dramatically over the past 12 months when none of the markets tracked favored buyers. In December 2022, 13 markets favored buyers, 43 were neutral, not favoring buyers or sellers, and 44 favored sellers. Despite a slight increase in home prices (+0.7%) from December 2021, homes sold at a lower price than the asking price in all but six of the 100 largest markets – Buffalo, N.Y.; Hartford, Conn.; New Haven, Conn.; Rochester, N.Y.; Springfield, Mass. and Syracuse, N.Y. Median days on the market increased to 29, a full two weeks longer than a year ago. At year-end, there were a total of 354,000 homes for sale, an increase of 32.1% year over year, primarily as a result of falling sales, not the addition of new listings. “We expect 2023 to bring more balance to the housing market, which is certainly good news for buyers following three years of intense competition. At the same time, with inventory down nearly 42% from the start of the pandemic and no real incentive for sellers to move, finding a home you both like and can afford will remain a challenge,” said Knock Co-Founder and CEO Sean Black. “Those buyers with flexibility on where and when to move have an opportunity to find more homes for sale in some of the nation’s largest and most desirable housing markets beginning in the fall.” The 10 markets where buyers will see more choicesIf one thing is true about 2023, it’s that buyers will experience different scenarios based on their location. While inventory is expected to increase 17% across the nation, the number of homes available for sale is expected to decline in half of the largest 100 markets. To find where it might be easier to buy, Knock looked at the markets where inventory is forecast to increase the most and when buyers will have the most options. The top 10 markets likely to see the biggest gains in for-sale homes in 2023 in rank order are: Salt Lake City; Dallas, Denver; Charlotte, N.C.; Memphis, Tenn.; Las Vegas; Charleston, S.C.; Colorado Springs, Colo; St. Louis and New Orleans. Inventory in these markets is forecast to increase throughout 2023, peaking in September, October and November. This means there will be more choices for buyers with flexibility to wait until the fall. Inventory in the Top 10 markets reached all-time lows during the pandemic. However, they did not see the same massive declines as the rest of the nation. In the three top markets – Salt Lake City, Dallas and Denver – inventory declined by approximately 20.3%, 34.3% and 19.9%, respectively, between December 2019 and December 2022. This is lower than the 42% decline seen nationwide. Although low housing inventory has led to record-high home prices over the past several years, the forecasted inventory growth in these markets won’t necessarily translate into home price declines. Only three of the markets – Salt Lake City, Las Vegas and New Orleans – are forecast to see price declines over the next 12 months. Six are projected to see prices rise with the median home price in St. Louis forecast to increase nearly 10% year-over-year. Currently, only three of these markets – Colorado Springs, Colo., Dallas and Las Vegas – favor buyers. By the second half of 2023, all but St. Louis, which will be in neutral territory, will favor buyers. Markets forecast to see the largest inventory gains Rank Market ProjectedYOYinventorygrowth Mediansale price Projectedsale pricechange Month inventorywill peak Currentmarketstatus National 17.1 % $365,000 -4.0 % September Neutral 1 Salt Lake City, Utah 178.0 % $460,000 -17.0 % October Neutral 2 Dallas-Fort Worth-Arlington, Texas 100.4 % $375,831 6.3 % October Favors Buyers 3 Denver-Aurora-Lakewood, Colo. 95.1 % $550,000 4.8 % September Neutral 4 Charlotte-Concord-Gastonia,N.C.-S.C. 81.8 % $349,000 7.9 % December Neutral 5 Memphis, Tenn.-Miss.-Ark. 48.2 % $255,000 0.3 % November Neutral 6 Las Vegas- Henderson-Paradise, Nev. 39.6 % $382,000 -6.8 % September Favors Buyers 7 Charleston-North Charleston, S.C. 39.3 % $362,500 0.0 % September Neutral 8 Colorado Springs, Colo. 38.0 % $430,000 0.5 % September Favors Buyers 9 St. Louis, Mo.-Ill. 35.8 % $230,000 9.8 % September Favors Sellers 10 New Orleans- Metairie, La. 34.2 % $270,424 -0.1 % October Neutral Buyers expected to return with seasonal force in spring, creating a window for sellersThe housing market will likely return to more seasonal patterns in 2023 – shifting toward sellers in the spring before moving firmly into buyer market territory by summer where it will remain through year-end. By December 2023, 34 markets are forecast to be buyers’ markets (up from 13 in December 2022), 34 markets will remain sellers’ markets (down from 44) and 32 will be neutral. Inventory constraints will keep home prices from falling significantly. Just 16 of the nation’s 100 largest markets are expected to see home price declines. In contrast, the forecast calls for median sale price increases of at least 10% in 20 markets during the same time frame. Home prices are forecast to peak at $366,000 by June 2023 – well below the record-breaking annual median sale price peak of $410,000 set in April, May and June 2022. By December, the median price is forecast to be $351,000, a 4% decline from $365,000 year-over-year. Home sales are forecast to decline by 10.5% year over year, with the number of home sales declining in 75 markets. Median days on market are forecast to increase to 52 days by year-end — the longest of any time since January 2017. Raleigh, N.C. and Greeley, Colo., are expected to lead the nation in days on market at 130 and 104 days, respectively. The sale-to-ask price ratio is forecast to hover between 2-3% below list price through spring. It will begin to decline in August, ending the year down 4%, the lowest since January 2017, the beginning of Knock’s Buyer-Seller Market Index. To view the full report, including

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S&P Dow Jones Indices (S&P DJI) released the latest results for the S&P CoreLogic Case-Shiller Indices, the leading measure of U.S. home prices. Data released for November 2022 show that home price gains declined across the United States. More than 27 years of history are available for the data series and can be accessed in full by going to: https://www.spglobal.com/spdji/en/index-family/indicators/sp-corelogic-case-shiller/ YEAR-OVER-YEAR The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 7.7% annual gain in November, down from 9.2% in the previous month. The 10-City Composite annual increase came in at 6.3%, down from 8.0% in the previous month. The 20-City Composite posted a 6.8% year-over-year gain, down from 8.6% in the previous month. Miami, Tampa, and Atlanta reported the highest year-over-year gains among the 20 cities in November. Miami led the way with a 18.4% year-over-year price increase, followed by Tampa in second with a 16.9% increase, and Atlanta in third with a 12.7% increase. All 20 cities reported lower price increases in the year ending November 2022 versus the year ending October 2022. MONTH-OVER-MONTH Before seasonal adjustment, the U.S. National Index posted a -0.6% month-over-month decrease in November, while the 10-City and 20-City Composites posted decreases of -0.7% and -0.8%, respectively. After seasonal adjustment, the U.S. National Index posted a month-over-month decrease of -0.3%, and the 10-City and 20-City Composites both posted decreases of -0.5%. In November, all 20 cities reported declines before seasonal adjustments. After seasonal adjustments, 19 cities reported declines, with only Detroit increasing 0.1%. ANALYSIS “November 2022 marked the fifth consecutive month of declining home prices in the U.S.,” says Craig J. Lazzara, Managing Director at S&P DJI. “For example, the National Composite Index fell -0.6% for the month, reflecting a -3.6% decline since the market peaked in June 2022. We saw comparable patterns in our 10- and 20-City Composites, both of which stand more than -5.0% below their June peaks. These declines, of course, came after very strong price increases in late 2021 and the first half of 2022. Despite its recent weakness, on a year-over-year basis the National Composite gained 7.7%, which is in the 74th percentile of historical performance levels. “All 20 cities in our November report showed price declines on a month-over-month basis, with a median decline of -0.8%. Moreover, for all 20 cities, year-over-year gains in November were lower than those of October, with a median year-over-year increase of 6.4%. Interestingly, home prices in San Francisco were down by -1.6% year-over-year, the first negative result for any city since San Francisco’s -0.4% decline in October 2019. This is the worst year-over-year result for San Francisco in more than 10 years (since a -3.0% result in March 2012). West coast weakness was not limited to California, as San Francisco was followed by Seattle (+1.5%) and Portland (+3.9%) at the bottom of the league table. “In contrast, November’s best-performing cities were clustered in the Southeast. Miami (+18.4%) was the best performer, followed by Tampa (+16.9%). November is the eighth consecutive month that one of our Florida cities has been the national leader. The month’s bronze medal went to Atlanta (+12.7%), narrowly edging out Charlotte (+12.6%). Unsurprisingly, the Southeast (+15.1%) and South (+14.3%) were the strongest regions and the West (+4.0%) was the weakest. “As the Federal Reserve moves interest rates higher, mortgage financing continues to be a headwind for home prices. Economic weakness, including the possibility of a recession, would also constrain potential buyers. Given these prospects for a challenging macroeconomic environment, home prices may well continue to weaken.” For more information about S&P Dow Jones Indices, please visit https://www.spglobal.com/spdji/en/.

apartments by marriott bonvoy

by Carole VanSickle Ellis
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A New Innovation to Meet the Changing Needs of the Traveling Public By Carole VanSickle Ellis Almost 100 years ago, Marriott International began not as an international chain of hotel brands and bespoke service providers but, instead, as a small A&W root beer stand owned and operated in Washington, D.C., by founder J. Willard Marriott, Sr., and his wife, Alice. Over time, that company grew to include the East Coast’s first drive-in restaurant, the world’s first in-flight catering service, and, in 1957, a monumental shift into the hotel business in Arlington, Virginia. Today, the company is poised for another strategic expansion — this time into the serviced-apartment concept in the United States and Canada. Serviced apartments are fully furnished apartments available for short- or long-term stays, depending on the preference of the service provider. For Marriott, this shift is not really as monumental as it might first appear. The company has 26 years of experience with Marriott Executive Apartments operating in Asia, Europe, the Middle East, Africa, and Latin America. Apartments by Marriott Bonvoy is simply the next link in the chain. “We are always peeking around the corner, looking for opportunities for our company to grow and serve the traveling public in new ways,” said Noah Silverman, Marriott International’s global development officer for the U.S. and Canada. Silverman explained that the company has been tracking the travel preferences of today’s “digital nomads,” remote employees and freelancers who are location-independent and use technology to perform their jobs from anywhere, as well as consumers who are increasingly combining business and leisure travel. Since the advent of COVID-19 in early 2020, the concept of being able to work from anywhere has expanded into the mainstream, with entire families engaging in longer-term stays in intriguing locations. “Customer preferences have evolved as the digital nomad has grown up, and workplace requirements have evolved to allow people to work from locations other than their office,” Silverman continued. “We have also seen a significant increase in leisure travel and extended families all traveling together. This new product will meet the needs of that growing population, one that is looking for more space and the ability to park themselves for longer periods in a larger, residential-style apartment versus a traditional hotel room.” Paul Loehr, the company’s regional vice president of full service brands in the U.S. West Region, called Apartments by Marriott Bonvoy a “unique opportunity” not just for travelers, but also for real estate investors and developers to partner with Marriott in a new way. “We are already fielding many phone calls from developers and potential partners who have specific projects in mind that they feel are an ideal fit for the concept,” Loehr said. He added, “There has been incredible interest in the offering from parties ranging from existing hotel partners who increasingly see value in the serviced apartment space to traditional apartment developers.” Lisa Sexton, regional vice president of full service brands for the U.S. East Region, called the response to the initial announcement “incredible.” She explained, “It is not limited to one type of market or catering to one type of traveler over another.” All three agreed that the prevailing drivers of interest in this new offering are rooted in the Marriott brand itself and the potential for Apartments by Marriott Bonvoy operators to customize the projects to fit the needs of the development and the local market. “As a brand partner, we are able to deliver higher-rate premiums at lower cost than when developers do things on their own,” Silverman explained. “The product is appealing because of the reputational endorsement that comes with being part of the Marriott Bonvoy portfolio of brands, the significant advantage of our large-scale distribution platform, and our 170-million-plus members loyalty program.” Loehr emphasized that Marriott prioritizes developer and investor returns in a variety of ways early in the development process as well as once the doors of a new facility open. “We review each application carefully to make sure that the location and type of product will work together to optimize the partners’ chances of financial success,” he said. This means being willing to ask tough questions early on. “We ask about rates, revenues, and costs to build,” Loehr explained, noting that specific urban and secondary markets are well-suited for Apartments by Marriott Bonvoy. Expanding the Pool of Owners and Franchisees When Marriott first began considering the idea of premium-tier serviced apartments in the United States and Canada, the company was primarily considering how to meet a new and growing customer preference while expanding its pool of owners and franchisees. Silverman explained that they expected to attract primarily hotel owners seeking to diversify their existing holdings, and that expectation has proved valid. However, he continued, there has been substantial interest from the multifamily development community as well, even though that group of owners/investors previously focused almost exclusively on traditional, long-term rentals. “An increasing number of the investors expressing interest are hotel developers who are thinking about adding a few floors to a planned building or developing an entire building for short-term rentals,” Silverman said. “If you are one of these developers or a multifamily developer looking to move into this space, Apartments by Marriott Bonvoy should be considered. Our system can reliably deliver customers in a cost-effective way, and we think savvy investors are seeing that and responding to it.” Silverman continued, “Previously, in the United States and Canada, our extended stay brand offerings topped out in the upscale quality tier with Residence Inn by Marriott and Element by Westin. Those are unbelievably powerful and successful hotel brands, but we believe there is a higher-end consumer willing to pay more for a truly differentiated, premium and luxury product, and that is what Apartments by Marriott Bonvoy will be.” Loehr noted that many parties expressing interest in the offering have specific developments already underway that could incorporate the Apartments by Marriott Bonvoy concept. “The developer will create a unique brand for the project and deliver an attractive

Turning the Tide

by Jon Hornik
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NPLA & Pitbull Conference By Jon Hornik The National Private Lenders Association (NPLA) is the association that represents and protects the interests of Private Lenders as it pertains to new legislation and public policy. Our organization has built a community of members made up of lenders, capital providers, brokers, developers, and industry service providers. The mission of the NPLA is to support, protect, and grow the Private Lending Industry. Pitbull Conference is known as the “Market Maker in Private Lending,” producing the largest national Private Lending conferences three times per year. Serving the Private Lending space for more than 20 years, our success can be attributed to consistently producing premium events for industry professionals to network and grow their businesses. Although the association is independent of the conference, moving forward, the NPLA will play a more prominent role in the event. The conference will provide high-caliber networking opportunities, crucial real-time information regarding marketplace conditions and industry standards, and a lineup of entertaining events. We have established a strong foundation with the brightest minds in Private Lending. Now, the changes we are making will enhance the membership experience and transform the Pitbull Conference. We welcome you to join our community of members and conference guests. Below are our membership updates and conference lineup. NPLA Membership Updates We believe a diversified and engaged membership base will enhance the experience of our members. That is why we have expanded our membership options. If you have heard about the NPLA, but have been unsure about joining, consider an Affiliate Membership to get your foot in the door. Membership Details » $2990/year membership for one » $200 discount to Pitbull Conference » Access to one NPLA conference call per month » Access to all NPLA video conference call recordings » Full access to the NPLA Portal (Member Directory and Active Lender Directory) » Permission to display the NPLA logo on your company website and email signature » Legislative updates » NPLA lapel pin This membership does not include: in-person NPLA member-only events, voting eligibility, or committee participation. Limited availability for two years. Be Prepared for What’s to Come in 2023 The NPLA hosts biweekly meetings that have become a trusted resource for members. Members and special guest speakers discuss the most critical issues facing the Private Lending Industry. We are excited to announce our exceptional lineup ofcontent that will advance our mission to build community through education and mentorship. February » Housing Market Forecasts and Economic Outlook for 2023Learn what various research houses are saying about house prices and the broader economic outlook for 2023. » John Burns Real Estate Consulting Session: Single-Family Rental and BTR UpdateDanielle Nguyen, Senior Research Manager March » Cash Management for Private Lenders — How to Maximize your Balance Sheet in Tough TimesManaging cash flow is paramount in times of constrained liquidity and is essential for a company’s survival. This encompasses cost management discipline, balance sheet velocity through quick loan sales, and proactive special servicing. » Brokering Loans, White Label Table Funding, Closed Loan SalesThough liquidity is tighter, it’s still there under the right terms. Learn about the various methods of funding and understand the risks and benefits of each. April » Funds, REITs, Syndication, CrowdfundingAs liquidity has dried up, the private lending market has gone full circle back to some of the old ways of funding. A few examples are private placement funds, co-lender or participation of loans, and direct retail investment through crowdfunding. However, some of these methods have been refined. Learn from different lenders about the various vehicles they use to fund their loans. » Legal (MLPAs, Participation Agreements, Reps/Warrants, Buybacks)Understanding key terms in loan sale and participation agreements. In good times these agreements are rarely looked at; however, changing markets tend to reveal weaker lending practices, which expose lenders to asymmetric existential risks. This session will discuss methods to ensure that your loan production is tight and adheres to the reps/warrants you are making. May » Warehouse LinesFrom seasoning lines (to quickly fund and sell off balance sheet) to longer-term hold lines — mark to market vs. committed. Learn about the types of lines available and how lenders use them to expand their balance sheets and create additional liquidity when capital markets are tight. » John Burns Real Estate Consulting Session: For Sale Market Update (New Homes and Resale)Devyn Bachman, Senior Vice President June » InsuranceThe cryptic world of insurance leaves most lenders inadequately covered. For balance sheet lenders and those selling loans to loan aggregators, insurance losses could trigger buyback risks and principal losses. Learn why Homeowners insurance is not enough and the types of policy features and limits that are required. » John Burns Real Estate Consulting Session: JBREC’s Macro OutlookAlex Thomas, Senior Analyst Questions about the NPLA? Contact Amy Kame, amy@nplaonline.com Join the NPLA community at https://nplaonline.com/#join Experience the New Pitbull Conference 2023 March 25-27, Ritz-Carlton, Key Biscayne, Miami Our new event structure showcases the biggest players in the Private Lending Industry, educational and motivational speakers, and newly added networking sessions with hundreds of local brokers. We welcome you to join our community and attend our upcoming conference. Register at https://pitbullconference.com/march-2023-event-registration/ See What the Buzz Is About — Key Biscayne Event Lineup Saturday, March 25 » NPLA Golf TournamentKick off the weekend with the NPLA Golf Tournament. Members and conference guests will enjoy a day on the greens at the Miami Beach Golf Club, including lunch, swag items, awards, and a cocktail hour. This is a great networking opportunity. Tournament fee not included in registration. This event is complimentary for Corporate and Associate NPLA members. Sunday, March 26 » NPLA Membership Meeting and Networking BreakfastNPLA members will meet to discuss progress, goals, and strategic initiatives for the association and the industry in the coming year. We will also be hosting a member-only networking breakfast. This is a closed event for Corporate and Associate NPLA members only. » Pitbull Networking Session #1 (NEW Event)Start the evening in the sponsor hall and network

Recipe for Success: Building Trust and Bringing Out the Best in People

by Carole VanSickle Ellis
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John Gordon — Director of National Accounts, Home Depot By Carole VanSickle Ellis In 1980, a newly married John Gordon and his wife were heading toward Lansing, Michigan, where they expected Gordon to join computing powerhouse IBM in the company’s marketing department while his wife earned her master’s degree at Michigan State. They were loading the truck to head for Michigan when they got the call: IBM was in a hiring freeze and Gordon’s offer had been rescinded. The job was not available anymore. “This was 1980, and the unemployment rate in Michigan was either 16% or 13%,” Gordon recalled. “I can’t remember whether unemployment or interest rates were higher.” They arrived at their new apartment, unloaded the truck, and Gordon started looking for work. “I had paid my room and board in college doing handyman jobs and had enjoyed doing those kinds of things. I had worked as a carpenter’s helper in high school,” he said. “When my wife told me she saw a “Now Hiring” sign at 84 Lumber, I applied and got a job as a counter salesman. I worked there for 12 years in positions from salesman to VP of Regional Purchasing before joining Home Depot.” Gordon joined Home Depot early, starting out as an assistant manager in the Pineville, North Carolina, store. It was the company’s first store in the state. Ultimately, he took over as manager of that store before opening a store in Rock Hill, South Carolina, and eventually helping launch the company’s Pro Initiative in 1999. “When we started the Pro Initiative, we did it because we believed we could be doing business with professional customers as well as our DIY customers, so my 84 Lumber background made me a good fit. Today, that initiative accounts for about half the revenue of a $150 billion company!” “We Knew We Had Something Big” Gordon laughed when asked how things were in the beginning before the team knew for sure that the Pro Initiative would be a success. “It was great, and it was terrible,” he said. “I was doing all the things I like doing — dealing with contractors that I knew could benefit from all the resources at Home Depot and that previously had only shopped in our stores to a small degree — but we were already a really big, $30-billion business that only could change the way things worked so quickly.” Gordon described the process of integrating Home Depot Pro into the greater Home Depot body as “teaching a monster to dance.” He explained, “When your monster dances one way, it turns out you don’t have to teach the entire beast to dance differently. You just figure out which parts need to move and change those.” Gordon said the joke in the early 2000s was that every Home Depot was different. “If you saw one Home Depot store, you saw one Home Depot store,” he laughed. “So at every store, we had to go in and figure out what things had to change.” That involved everything from Pro Desk placement to product inventory and how to serve the needs of customers who would order 50 or 100 of an item at a time instead of fewer than 10. “It was an exciting time,” Gordon said. “It went screaming by, still feels like it was yesterday.” Gordon emphasized that in those early days with Pro Desk, as today, the group of people he worked with made up an incredible team and support system. He noted that many of his former team members and customers have gone on to work in high-profile positions across the industry, and he is proud to see them sitting on speakers’ panels onstage and still figuring out solutions to problems that real estate investors encounter today. “Working with all of these people, trusting them and having their trust as we figured things out in this industry, those are things of which I’m really most proud,” he said. “It’s About Relationships” One of the most constant themes in Gordon’s career in the industry has been his dedication to building and maintaining trust and solid relationships with peers and colleagues. At its foundation, Gordon said, this core behavior has its roots in a conversation he had with Dave Young, an executive and colleague from his earliest days at 84 Lumber. “Dave was getting ready to retire, and I think he was trying to make sure I understood that just because now I was in a big position at a big company it did not give me permission to be anything but respectful and to build strong, strong relationships,” said Gordon. He continued, “He told me a story about a time he was trying to sell a certain type of siding that he simply could not make profitable in a particular market. No matter what he tried, he sold at a loss or very close to a loss. When he shared that with the leadership at the siding company, they told him they would send him a separate blank invoice for that market and he could fill in the cost he needed that would allow for both competitive and profitable sales.” Gordon recalled being dumbstruck. “Who is going to give you a blank invoice?” he asked. Young told him, “It’s about relationships,” and 42 years later, Gordon has never forgotten this. “When I’m in a scenario to make decisions and be in the driver’s seat, I remember what Dave told me that day, and I make the decisions based on being the kind of person that people can trust.” This dedication to being trustworthy and honest has made Gordon a perfect fit for the Home Depot culture, he said, adding, “If you go in a Home Depot store today, there are people who have been there 20, 30, even 40 years, and I get asked a lot, ‘Why do people stay at Home Depot so long?’ The truth is that it is because Home Depot makes it easy to

Utilizing Blockchain Technology in the Construction Industry

by Paul Gozzo
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Is It Necessary? Will It Help? By Paul Gozzo New home construction is not broken. In fact, just the opposite; construction has evolved well over the last ten plus years. Builders of all sizes and specialties who build affordable houses all the way up to large custom homes, have adopted many new technologies into their processes. The majority of those innovations have taken place on the materials side of the building equation. These technological advances have historically focused on one area of need with a specific intent to improve that ingredient of the build. This includes concepts ranging from smaller components like leak detection systems to much more robust applications such as alternatives to concrete, all of which will continue to evolve and grow until they become generally accepted pieces of the residential build environment. Lagging behind these mostly material advancements and where we have yet to see any significant improvements is in the way new home construction is financed. We certainly have witnessed incredible amelioration with construction processes such as with prefabricated construction where entire sections of a new house are built off-site utilizing warehouse efficiencies including robotics. The sections are then transported to jobsites and assembled like an adult version of the classic metal toy, Erector Set. And, 3D printing by innovators such as ICON continues to evolve, as well. In fact, Lennar, one of the nation’s leading homebuilders, has partnered with ICON to build 3D-printed homes at a project currently underway in Georgetown, Texas. Yet, the process by which houses are actually built has not changed much at all. While existing processes are not necessarily flawed, there is room for improvement. I believe the advancement of blockchain technology will affect positive change when it comes to scattered site new home construction and specifically, the relationship between borrowers and lenders as it relates to workflow and payments. Blockchain and the Lending Process Historically, a borrower seeking a new home construction loan would submit an application to a bank or private lender and would need to have roughly 10%-30% of the total project cost including lot value in cash to get a loan. Plus, they would need additional equity to make the first set of payments to contractors and municipalities before being reimbursed in arrears through the archaic draw inspection process whereby an independent third party is engaged by the lender to inspect the home being constructed. These inspections can occur 20-25 times during the building process. The inspectors then report back to their client confirming that the money being lent has been spent on that exact project so that the lender can release the next payment to their borrowing client. With blockchain technology, the power to automate all components of the construction process now exists allowing for greater visibility and a faster construction process. For example, draw inspections alone can become obsolete as the need to confirm dollars spent on a project can shift from scheduling third party inspectors for approval to instant verification because blockchain can automate the contractual process and record all of the transactions along the way, including local building codes. While process improvement and clarity between lender and borrower are helpful, the existing methodology works, so this is not a situation where something is broken and needs to be fixed. However, among the many positive potential enhancements that blockchain can offer new construction comes in the speeding up and expediting of the process. For example, in most of the counties where I have built new homes, the municipalities inspect the job five to seven times during construction. This probably will not change any time soon, but if the draw inspection process can be built around these municipal inspections, then in theory the need for third party loan verification approval (20+ inspections) can be omitted and the build process can move along quicker and thus speed up project delivery. Blockchain and Construction Data Another benefit of blockchain technology infiltrating new home construction is in the collection and transfer of construction data at the time of sale. This means that all the details of the newly built house are transferred to the new and subsequent owners upon sale which can be tremendously helpful for homeowners and investor/landlords alike when diagnosing an issue at a later point in time. Think of not only having the product name and serial number for a microwave or AC unit to determine what the warranty status is but having that information in much more detail for every aspect of your investment property. This would include not only data on each big ticket item beyond mechanicals to include plumbing, windows, and doors but also at a more granular level to include paint colors, fixtures, hardware, and lighting, to name a few. Then further out, any additional remodeling work can be documented on the blockchain resulting in a very clear and detailed view of the home from its inception. As an investor, wouldn’t you like to see this level of detail prior to submitting your best offer? Other potential applications include the way subcontractor work is tracked and payments are processed. This would include concepts such as what can be most closely associated with a “score card,” whereby vendors are rated similar to the way you and your Uber driver rate each other. In this case, blockchain can be used to track timelines and budget metrics for each subcontractor culminating in quantifiable performance reporting which is helpful not only to general contractors and builders, but also to contractors (at least the ones that perform well anyway.) Smart Contracts Additionally, if contractors can adopt the same technology as builders, then “smart contracts” can be used as an accountability measure defined in advance between builder and contractor and where automated payments can occur when predetermined milestones are met. By definition, a smart contract is a self-executing contract with the terms of the agreement between the parties being directly written into lines of code. The code and the agreements contained therein exist across a distributed,