Custom homebuilding spiked before the coronavirus pandemic, and a few new startups are trying to monetize that trend by taking homebuilding online.
One startup, Welcome Homes, offers an online customization tool that allows buyers to select paint colors, light fixtures, door handles, tile types, appliances and more — similarly to how you might build a custom car or Nike shoe online.
“The goal here is, first and foremost, to provide people with an option to buy a house online… [We want to] make it really, really easy and simple for people to just go online, click, and build,” said Mitch Wainer, chief marketing officer of Welcome Homes, a New York-based Tri-state online custom-homebuilding startup that launched on October 20. The startup claims to cut the homebuilding timeline in half.
The traditional custom-homebuilding process relies on Excel spreadsheets, QuickBooks and infrequent updates, say entrepreneurs, but online builders allow clients to visualize choices, see daily updates, catch and correct errors in real time, make payments online and easily communicate with their project manager, they say.
“[Typical custom-built homes] would be built with zero technology,” Nikki Pechet, CEO and co-founder of Homebound, a California-based custom homebuilder, told Yahoo Finance. But with online technology, “you can see in real-time what's happening on the [construction] site,” she said.
Custom homebuilding gains in the past few years have been encouraging. Builders made 18.13% more custom-designed detached single-family homes in the last quarter of 2019 compared to the same time in 2018, and 14.37% more in the first quarter of 2020 compared to the same time in 2019, according to the Federal Reserve Bank of St. Louis.
The industry’s growth comes after a decade of slow gains. Builders made almost double the number of custom homes in the second quarter of 2019 (211,000) than a decade prior, when homebuilding crashed due to the Great Recession (112,000 homes were built in the second quarter of 2009), but custom homebuilding is still only at half its pre-crisis peak in 2005 (778,000 custom detached single-family homes in 2019 compared to almost 1.5 million in 2005).
“People shy away from building a home from scratch because of all the complexities of dealing with all the different parties, general contractors, to get a home up and running off the ground. And also pricing is unpredictable and not transparent. So we want to make that entire process from end-to-end seamless, frictionless, and easy for home buyers,” said Wainer.
Custom home growth dipped almost 10% in the second quarter of 2020 due to coronavirus lockdowns, with only 190,000 detached single-family housing starts compared to 211,000 at the same time last year.
Third quarter housing starts data are not released yet, but custom builds are expected to rebound as part of the national housing market boom this summer and fall. Tech-first custom homebuilders hope to be at the forefront of demand, especially as the coronavirus pandemic shifts consumers online.
“It's even more important during COVID [to have online management tools], where you have regulations changing constantly and where you have a lot more fluctuations in those supply chains and labor availability because of what's happening with pandemic,” Pechet told Yahoo Finance in February, before lockdowns went in place in the U.S.
Sarah Paynter is a reporter at Yahoo Finance.
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