May 19, 2019

Unbundling real estate

Illustration: Rebecca Zisser/Axios

There's a lot of risk in real estate. Just owning it, of course, is the main risk. It can work out well for people lucky enough to be able to put a small down payment on a house before it soars in value.

Why it matters: Real estate can also cause a global financial crisis, should millions of Americans find themselves underwater on their mortgages.

Driving the news: Wall Street is increasingly looking for ways to take on these risks. Companies like Point will buy an equity stake in your home, while Zillow and Opendoor will take on the risk of finding a buyer, giving you an up-front cash payment for your house, no staging or repainting necessary. Often, the houses they buy end up getting rented out by giant Wall Street landlords, rather than being sold to individuals.

  • Redfin is trying out a similar approach for buyers, moving toward a future where house hunters can buy entirely online.
  • The entrenched system of 6% brokerage commissions is being taken to court, with Redfin's CEO describing the existing MLS cartel as a dinosaur about to be hit by an asteroid.

What we’re seeing: WeWork was designed to be asset-light, renting out office space and then subleasing it to smaller tenants. Now, seeing demand for real estate risk, it has created a sister company, ARK, to buy up the buildings it's renting in. Investors get to choose exactly which risk they're interested in.

  • The government is also in the business of reallocating real estate risk to revitalize depressed urban areas. University of Georgia law professor Mehrsa Baradaran has proposed a "Homestead Act for the 21st Century" that would give abandoned properties to local residents without needing to create financier-friendlyOpportunity Zones.

The big picture: De-risking homeownership has always made sense. That's why the government created Fannie Mae and Freddie Mac. If Silicon Valley financiers lose money by taking on these risks, well, they can afford to. And if they can find a way to efficiently renovate homes at scale, that could save more than money, it could save marriages.

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Coronavirus kills 2 Diamond Princess passengers and South Korea sees first death

Data: The Center for Systems Science and Engineering at Johns Hopkins, the CDC, and China's Health Ministry. U.S. numbers include Americans extracted from Princess Cruise ship.

Two elderly Diamond Princess passengers have been killed by the novel coronavirus β€” the first deaths confirmed among the more than 600 infected aboard the cruise ship. South Korea also announced its first death Thursday.

The big picture: COVID-19 has now killed more than 2,200 people and infected over 75,465 others, mostly in mainland China, where the National Health Commission announced 118 new deaths since Thursday.

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SoftBank to cut its stake to get T-Mobile's Sprint deal done

Illustration: Rebecca Zisser/Axios

T-Mobile and Sprint announced a revised merger agreement that will see SoftBank getting a smaller share of the combined company, while most shareholders will receive the previously agreed upon exchange rate. The companies said they hope to get the deal as early as April 1.

Why it matters: The amended deal reflects the decline in Sprint's business, while leaving most shareholders' stake intact and removing another hurdle to the deal's closure.

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