New AI Applications Aim to Unlock Equity to Break Real Estate Gridlock

The U.S. housing market has been in a state of gridlock for the past few years.

The result is the cycle currently defining today’s landscape, where homeowners feel locked in, unwilling to sell and give up their favorable mortgage rates, while buyers are deterred by high costs.

HomeLight founder and CEO Drew Uher told PYMNTS’ Karen Webster that artificial intelligence could help unlock equity and add movement to a static market.

Many homeowners are stuck in their homes due to low-interest rate mortgages, unable to sell even when life circumstances might suggest they should. Conversely, potential buyers are being priced out by high mortgage rates and stagnant housing prices. This combination has led to a slowdown in the market, with transaction volumes “at their lowest since the mid-1990s,” surpassing even the downturn seen during the 2008 financial crisis, Uher said.

“It’s a mess out there,” he explained. “There are millions of homeowners who own a home and have this amazing low interest rate on their mortgage. As a result, they feel like they can’t sell.”

On the buyer side, affordability remains a major issue. Home prices have remained high, and the jump in mortgage rates has made financing a home purchase more expensive than ever. Buyers have fewer options, and sellers are hesitant to list their homes in a market where they know the buying pool is constrained. This has led to what Uher described as “a complete bloodbath over the last two years” for those in the real estate industry.

Read also: HomeLight Raises $20 Million to Expand Bridge Loan Product

Transaction volumes have plummeted, creating a challenging environment for real estate professionals from brokers to mortgage companies that rely on activity in the market to thrive. Home prices themselves, on the other hand, remain at a high level, meaning residential real estate remains an asset, at least for those fortunate enough to own their home.

But even those who already own a home are finding the path to buying a new one obstructed.

“For homeowners stuck in this situation, who want to sell their current home and buy another home, regardless of the market, they are commonly plagued by the problem that they oftentimes need to sell their current home first in order to afford the new home,” explained Uher.

Except in today’s marketplace, making an offer on a new home contingent on selling an existing home is often a non-starter, he added. Other options, such as selling and leasing back the property for a period, or moving into a rental temporarily, are expensive and disruptive.

“If you’re a consumer, there’s really no good options,” Uher said.

As homeowners look for ways to overcome the challenges of rising mortgage rates and stagnant home prices, new digital products could play a role in helping them achieve their real estate goals.

“Many homeowners need to unlock the equity from their current home in order to put toward the down payment,” said Uher, noting that HomeLight’s own Buy Before You Sell solution was designed to make buying and selling homes more accessible by streamlining traditionally complex and time-consuming process and offering more flexibility and transparency.

The Buy Before You Sell program simplifies the traditional real estate purchase process by allowing homeowners to buy their new home before selling their current one. This reduces the time, cost and stress involved in managing both transactions at once.

A key innovation in HomeLight’s Buy Before You Sell product is its use of AI. The program is an “AI-first” product, using AI throughout the entire process, from home valuation to client qualification. According to Uher, AI is used to provide “instant decisioning” on how much equity a homeowner can unlock from their current property, based on real-time market data.

“We’re now available in 47 states, so the bulk of the U.S.,” he said. “One of the things we’ve learned is that this is, in one way, a lender-based product.”

For mortgage lenders and loan officers, this technology is integrated directly into their existing tools, such as loan origination systems and point-of-sale systems. This integration allows loan officers to provide immediate, data-backed insights to clients on how much equity they can access for their new home purchase.

Uher emphasized the importance of AI in streamlining this process, reducing the need for lengthy valuations and underwriting processes, and ensuring that transactions move quickly and efficiently.

Looking ahead, he said he sees AI-driven innovation as an essential tool in helping homeowners navigate the challenges of buying a new house in a high-rate, high-cost environment.

“The happy path is everything is handled by technology alone, and the human beings are brought in to handle very bizarre or weird cases,” he said.

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