In mortgage and finance, high rates are ‘a little bit of a blessing’


Wednesday’s panel at ICNY 2024 says a high interest rate environment will continue driving innovation in the mortgage and finance sector.

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The ongoing reaction to a period of high interest rates after historically low ones is driving innovation and other previously overlooked opportunities within the real estate industry, a panel of experts said at Inman Connect New York on Wednesday.

As one example, while interest rates are high for typical buyers, Pacaso has found that its business structure allows it to give buyers access to artificially low rates.

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David Willbrand of Pacaso | Image by: AJ Canaria Creative Services

Pacaso buys homes, converts them into limited liability companies and then sells one-eighth shares in those companies that grant owners proportional access to the home during the year.

As the owner and eventual manager of the home, David Willbrand, the company’s chief legal officer, said, Pacaso now has mortgages with rates much lower than the market rate. As shares in homes are bought and sold, the company can pass on the lower borrowing costs to buyers through assumable mortgages, Willbrand said.

“Typically what would happen in real estate is that mortgage would disappear,” Willbrand said. “What we’re able to do is keep that original paper in place, and so offer those terms to new buyers, which is very attractive and a huge competitive advantage to us in this economy.”

It’s not, however, necessarily an advantage Pacaso wants to rely on long term, Willbrand said.

“I would like us just to get back to solely being a company that just lives and breathes on real estate,” he said. “I don’t want to win on financing. I want to make that accessible for everyone.”

Willbrand was joined by Christian Wallace, chief of integrated home services at Real Brokerage.

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Christian Wallace of Real Brokerage | Image by: AJ Canaria Creative Services

Wallace said she expected the high-interest environment that sent the industry into a skid would actually help drive more innovation around mortgages and finance.

“Everything that we’re talking about is because rates got high,” Wallace said. “We’re trying to find new ways because we have a problem … What we’re going to see by the end of 2024 is we’re going to see more innovations because we have gone through this.”

“As much as we all can say it’s so hard with rates,” Wallace said, “it’s actually a little bit of a blessing because I think there’s going to be some really neat things that are going to come up soon.” 

Willbrand noted agents operating in a high-interest environment could look to capitalize on companies like his that have found opportunities to transact.

“We have, at this point in time, $1 billion in cumulative revenue,” he said. “Most of that is real estate transaction related. There were a lot of real estate agents that made a lot of money living inside of that revenue growth for us. And that opportunity is available.”

“It’s a way to access an opportunity and a revenue source that maybe wouldn’t have existed at another point in time,” Willbrand said. “There are lots of different things that are happening. When lots of different things are happening, there’s always money to be made in the cracks.”

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