Financial Advisor magazine recently had a chance to catch up with the Thomas Sponholtz, CEO of home co-investing company Unison. The RETech industry is an important part of the investible fintech ecosystem. Many RETechs operate through P2P/ marketplace lending models, but Unison offers a different type of financial product to consumer home financing—the home co-investment.
Real estate remains the largest percentage, by far, of most people’s investment portfolios and is also the largest investable asset class. Unison offers two products: HomeBuyer and HomeOwner. With HomeBuyer, Unison co-invests in down payments, which enables consumers to purchase their ideal home sooner by reducing the time to save for a down payment. Additional benefits include lower mortgage payments because of a larger (Unison-shared) down payment, no mortgage insurance costs, and more liquidity to invest in other assets, pay off debts, etc.
With HomeOwner, Unison enables homeowners to access home equity in an existing home. In both cases, Unison shares a percentage of the appreciation (or depreciation) in value when the home is sold (or at the end of the 30-year contract with Union). The company’s products are available in 30 states, where more than 90% of US housing stock lies. You can see a full list here.
Unison recently published its annual “Home Affordability Report for 2019” ranking city markets that are the most and least affordable. Some findings from the report:
• Nationwide, it takes 14 years to save for a 20% down payment on a median priced home for those earning the median income. This means that many prospective millennial homebuyers won't achieve the American dream until well into their 40s.
• In the eight least affordable cities, it will take 30 years or longer: Boston (30 years), San Jose and San Diego (31), Miami and Manhattan (36), and Honolulu and San Francisco (40). Los Angeles tops the list at 43 years.
• The City of Angels tops the list with a median home value of $622,523 but a median income of $58,043 ($3,000 below the national median of $61,045). A typical Los Angeles resident earning the median income won't be able to afford a home until 2061.
• The Quarter Century Club: With all four of its largest cities requiring more than 25 years to save for a down payment (San Diego and San Jose, 31 years; San Francisco, 40 years; Los Angeles, 43 years) California is the founding member state. Other cities in the club are Honolulu (40), New York City (36), Miami (36), Boston (30), Washington, DC (28), and Seattle (27).
• While Los Angeles leads in longest to save, San Francisco is the most expensive city: With a median home value topping $1 million – the highest in the nation – San Francisco is the most expensive city in the U.S. to purchase a home. A San Francisco resident faces a monthly mortgage payment of $5,052, requiring annual income over $200,000. From 2017 to 2018, median incomes grew more quickly than median home values, cutting the number of years it takes to save for a down payment from 42 to 40. But the income needed to support the typical monthly payment still makes San Francisco prohibitively expensive for most.
• Boomtowns where costs are climbing. Booming markets are great for existing homeowners, but in many cities around the country home price increases have led to rapid increases in monthly payments that far exceed corresponding income growth. Monthly payments are way up in Miami (26%), Las Vegas (24%), Phoenix (20%), and Tampa (17%).