A New York-based startup aiming to quickly and seamlessly put migrating millennials into new homes has quickly found itself with a 1,400-person waiting list of customers looking to partake in the first fully online building, customization and purchasing experience.
According to Welcome Homes Co-founder and CEO Alec Hartman, with huge consumer demand for new construction houses and scarce supply available in the Greater New York City region, the idea of making a $1,000,000 purchase online is not as crazy as it seems.
“We look at upper-middle-class millennials who are cycling out of major cities, and they have terrible options for buying a place right now,” Hartman said in a recent interview with PYMNTS. “That [newly built] product — which is the most desirable product for the segment we’re talking about — does not exist.” Hartman noted that his company’s price guarantee and pre-construction closing process also eliminate the stress of cost overruns and contractor delays, while providing buyers with peace of mind.
“So the value is, you get a brand-new house with all the modern amenities for the price of an existing home, and you get that price guaranteed by us,” he said. “That price guarantee is the biggest value prop.” In addition, once local building permits are approved, the buyer can also get the house in just six months, which Hartman said is about twice as fast as most new construction purchases.
Serving an Old Trend With New Sensibilities
The trend of growing families fleeing to the suburbs has been supporting single-family home prices within 60 minutes of major metropolitan areas for generations. As much as this familial flow has delivered a steady stream of relocations, the pandemic added an unprecedented sense of urgency and demand to already constrained supply, making it even tighter.
Add in the changing tastes of millennials who skew toward smaller, simpler and more sustainable designs, and the online design-build idea starts to make sense. In fact, Hartman said the desire to have new construction and to avoid homeowner headaches were the top reasons that first-time buyers said they were attracted to Welcome Homes.
“They’re not McMansions. They’re not crazy. We spent a lot of time making sure the design and quality are there,” Hartman explained, noting that the company’s current two models are 3,200 and 4,500 square feet and start at $650,000, excluding land. “So they’re not huge homes,” he said, but they’re not 700-square-foot Manhattan apartments, either.
Invest in a House, Invest in the Company
The idea for Welcome Homes was hatched about a year ago, followed by a $5.3 million round of seed funding and then a public launch with 25 properties in the New York, New Jersey and Connecticut Tri-state area in October 2020.
“Welcome Homes is solving a clear problem by making it easier and more accessible for anyone to build a new home,” said investor Don Stalter of Global Founders Capital, who added that Hartman’s team is in a position to “create a game-changing product at scale in a legacy real estate industry that is ready for change,”
To that point, although Welcome Homes is still an early-stage startup focused on the part of the country that the founders know best, the long-term plans for the company and business model are much broader. “The goal of this company is to be able to offer a turnkey product all over the country,” Hartman said. “We started with what we knew best, where we knew we could drive a ton of value, and then we’re going to replicate for that same customer in other major cities that have similar migration patterns.”
The company’s next targeted locations include Austin, Nashville, North Carolina or the west coast of Florida.
Friction and Wet Ink
“Customize your home, select your area and click to order,” the company’s website says. As much as the process is designed to be fully digital, different state regulations still carry some “wet ink” requirements that require some actual in-person appearances, but Hartman believes that is likely to change.
“It looks like we might be able to do the whole thing online,” he said. “We’re not there yet, but eventually it’ll become favorable to do [closings] with Docusign, and I think the entire experience one day will be 100 percent digital.”
With consumers proving to be increasingly comfortable buying bigger and bigger items online, from vacation rentals to major home repairs to new and used cars and boats, the 10x jump to real estate would seem to be the logical next step up the “big-ticket item” ladder.
In the meantime, Welcome Homes continues to ramp up in order to have the processing power to deliver that many homes in a quality manner. “We’re not willing to compromise on any of those things, because we’re an early-stage startup and brand is important, so we’re trying to make sure we do the best for our customers,” Hartman said. “We are trying to move as many people who are very ready to go through the funnel as quickly as possible, get their pre-approvals [in place] and get their offers on their land done and everything else.”