Apr 21, 2021 - Economy

Skyrocketing housing prices drive the world's fastest unicorn

A "For Sale" sign.

Photo: David Paul Morris/Getty Images

With U.S. home sales scorching and home prices setting new record highs every month, Pacaso was able to demand a $1 billion valuation after less than five months in business by dividing up homeownership into fractional shares.

Why it matters: Pacaso's record-fast rise to unicorn status — "the fastest-growing company of anything I've ever seen before" co-founder Spencer Rascoff tells me on the latest episode of "Voices of Wall Street" — is a reflection of not just the market's appetite for companies offering fractional shares of things, but of just how expensive homeownership has become.

What it means: Pacaso, a startup that allows multiple people to co-own a second home, is betting that the growing lack of affordable housing is a problem that extends even to upper-income families and individuals.

  • "Many, many people aspire to second home ownership but for most people, it doesn't make sense to own all of a second home, either because it's too expensive or you don't want the hassle of all of that or you won't be using it enough," Rascoff says in the interview.
  • "So if you want a place in Tahoe or Scottsdale or Napa Valley or Aspen you can buy a quarter of a home through Pacaso or an eighth of a home through Pacaso and then you co-own that home with a couple other families."

How it works: Pacaso marks up home prices by 10% to 12% and owners pay a 1% fee to manage the property, which is purchased as an LLC split between the co-owners.

  • "There's more interest in second home ownership than ever before and that's why the company's growing so quickly," Rascoff says.

Why you'll hear about this again: The supply of available new and existing homes is at a record low level.

  • With supply costs continuing to rise, especially the all-important cost of lumber, which Rascoff notes is "up 4x versus pre-COVID because global supply chains are kind of a mess," supplies are likely to remain limited, driving prices even higher.
  • That combined with rising mortgage rates is likely to push more first-time buyers out of the market.
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