How close are we to a real estate tipping point where fully online transactions are the rule, not the exception?
In his best-selling book, The Tipping Point, Malcolm Gladwell defines a tipping point as "that magic moment when an idea, trend or social behavior crosses a threshold, tips, and spreads like wildfire." [paragraph] Many mortgage industry observers wondered if Detroit-based Quicken Loans' launch of Rocket Mortgage[TM] during Super Bowl 50 might represent such a tipping point--the moment when home loans finally crossed the chasm and moved from an archaic, paper- and labor-intensive process into a new paradigm marked by the ease, efficiency and anytime/anywhere nature of internet technology. [paragraph] The answer in the short term appears to be no--or at least not yet. [paragraph] But tipping points are often viewed much more clearly with the perspective of hindsight, and there are forces at play that suggest the mortgage industry--and more broadly, the entire home-buying process--may finally be on the cusp of the kind of fundamental and disruptive consumer-driven change other industries have experienced since the advent of the internet.
Consumers drive online transactions
Take retail sales, for example. According to the Department of Commerce's Quarterly Retail E-Commerce Sales report for the second quarter of 2016, online sales accounted for more than 8 percent of all retail sales--more than $97 billion in online transactions. This represents year-over-year growth of almost 16 percent during a period when overall retail sales rose by slightly more than 2 percent.
In fact, since the Commerce Department started tracking retail e-commerce sales in the fourth quarter of 1999, online sales have consistently outpaced overall retail sales, and grown from 0.8 percent to today's numbers. The trajectory is clear, and internet retail trailblazers like Amazon.com and eBay[TM] have paved the way for traditional brick-and-mortar retailers to more aggressively pursue online sales, with major implications for the entire industry--from the number of stores needed to the number of new distribution centers springing up to handle order fulfillment.
The travel industry, often viewed as the poster child for internet disruption to a traditional business, is an even starker example of what happens when consumers are given access to the information needed to make an educated purchase. According to Statistic Brain Research Institute, Ladera Ranch, California, 57 percent of all travel bookings--more than 148 million--are made online. More than 90 percent of all travel includes some website use, according to HotelMarketing.com, and both of these percentages have consistently grown over the past decade.
In fact, the travel industry may be experiencing a second-generation tipping point: A 2015 forecast by eMarketer Inc., New York, shows that the majority of online travel booking from 2016 onward will take place on mobile devices, especially smartphones.