Why we're building Crib Equity

Why we're building Crib Equity

A more affordable path to homeownership matters to us

Home ownership has long been central to the American Dream, and for good reason. Owning a home provides a sense of pride and accomplishment, as well as stability and security. It allows individuals and families to put down roots and historically has been the principal driver of household wealth.

However, a growing number of challenges have made it difficult to realize this dream. For starters, home prices have vastly outpaced household income over multiple decades. More recently, a succession of economic downturns have stunted earnings for those early in their career, and rising education costs have made student loans the number one cause of delayed down payment savings. These trends have strained affordability standards for most and put the cost of housing out of reach for many – particularly first-time buyers. Nowhere is this more pronounced than in urban areas where demand has dramatically outpaced supply.

Home Value Change vs. Income Change

For first-time buyers, the data is clear. The share of first-time buyers is currently lower than at any time since data collection started in 1981, and the typical first-time buyer is now close to 40 years old. As stark a picture as this paints, the data only tells part of the story. Lack of access to homeownership is also a personal issue, affecting families across the country in very real ways, including my own.

I count myself lucky to have been born and raised in Northern California. I consider it to be one of the most beautiful parts of the world and I’m not alone – the desirability is reflected in the extremely high cost of real estate. Given the cost, for many years homeownership was more a pipe dream and than a future plan. But, at some point the reality of rooting ourselves and owning the home we were going to raise a family in became paramount. Unfortunately, after three years of failed offers and a continual cutting back on our wish list, my wife and I realized it wasn’t economically feasible to buy in the Bay Area.

Perhaps the most frustrating part was that we had good jobs and we were working hard to save considerable sums each year towards a down payment. Our problem, like most, was that home prices kept climbing too. With each passing month our goal post kept moving further out. The amount we needed for a down payment kept increasing, and our salaries had to keep growing to satisfy lenders.

It felt like all we needed was a way in. If we owned our home, we would have fixed payments each month, no longer worrying about rent increases. Our home equity would also grow with the market. Our savings would then allow us to keep advancing each year rather than falling behind. Our solution? We moved 1,000 miles away to the Seattle area, uprooting our lives with a 6-month old, to find a more affordable market. That was the cost of being able to afford a home and the home-life that we wanted for our family.

It was only once we entered into homeownership that I truly realized its benefits and the opportunity it created for our family. We purchased a home for 25% less than what we would have needed to pay if we’d bought in our desired California location. Nonetheless, the home equity appreciation we experienced allowed us to eventually sell our home three years later and afford the down payment we needed to move back to California. It was only by getting into homeownership that we were able to grow enough savings to move up in the market.

Looking back, the story is a happy one for my family. I also believe our challenges were not uncommon. Like most, saving a sufficient down payment was our biggest barrier to purchasing the home we wanted. Overcoming that down payment hurdle – in our case by moving thousands of miles to a more affordable market – put our family on a trajectory that unlocked our future as homeowners.

If Crib Equity had existed at the time, we could have accomplished the same thing, but without the two grueling interstate moves. Instead of purchasing for 25% less in Seattle, we would have been able to afford 25% more in the Bay Area. And, we would have been able to enter into homeownership earlier, banking more years of home equity gains.

With Crib Equity we aim to build a better, more affordable path to homeownership. A path that allows people to become homeowners sooner, without the need to compromise on home price and location. We remove the down payment barrier so people can purchase a home they love and start growing their home equity sooner, so that when the market goes up they go up with it rather than being left behind or squandering thousands a month in rent.

So, how do we solve the down payment problem? Investors have long recognized the value and opportunity in owning real estate. They also have the liquidity and access to capital to acquire it. Recently, it’s been good for business, but hard on homeowners. For example, in 2021 hedge fund investors bought 42% of homes for sale in the Atlanta area, and 39% in the Phoenix area. With deep pockets they can outcompete families struggling to accumulate a down payment amidst soaring cost of living and rent increases. But, the way we see it, it doesn’t have to be investors versus families.

By allowing investors to invest alongside homebuyers, everyone can share in the financial opportunity of homeownership. Even better, investor dollars can begin to price people into homes, rather than price them out. With Crib Equity we see an opportunity to turn competition into cooperation and create a win-win for both sides. For homeowners a new affordable path to ownership. For investors a more cost-effective and diversified avenue to investing in single-family homes.

We’re doing this because homeownership matters. I can tell you from experience that purchasing a home is a life-changing event. The data also backs it up. Homeowners have 40 times the net worth of renters. Their families have better educational opportunities and outcomes, and experience better physical and psychological health. Communities with more homeowners also have fewer disturbances and less crime, as well as more community involvement and faster home value appreciation.

Source: Federal Reserve Bank of San Francisco

Crib Equity exists to offer a more affordable path to homeownership, and a means to meaningful impact these measures of personal and societal progress.