According to a recent Gallup survey, 78% of Americans—the highest since Gallup started the survey in 1978—say it is a bad time to buy a house, due to 20-year high mortgage rates and lack of supply. And it doesn’t help that income growth has been slow to catch up with the pace of growth in cost of homes.
The Federal Finance Housing Agency reported that home prices rose 74% from 2010 to 2022, while the average wage rose 54% during the same time. In Durham County, wages rose 38% while home prices tripled that rate at 105%.
With high housing prices and even higher mortgage rates, traditional home ownership is trickier than ever. One Triangle-based real estate tech startup led by serial entrepreneurs believes it has an innovative answer to the problem—especially for people who think they might move again in 3-5 years.
Acting as a partner rather than as a bank, Acre allows people to find a home through its platform without needing to take out a mortgage and avoiding all the additional costs that come with closing on a home purchase. Acre’s platform allows also customers to benefit from the home’s appreciation in a shorter period of time without needing to sell the home to realize that appreciation—with all the accompanying costs and risks of selling—saving thousands compared to owning the home with a traditional mortgage.
Getting a mortgage can be one of the most painful experiences about owning a home, according to Acre Co-Founder and President Kent Keirsey. Not only does taking out a mortgage inevitably mean higher debt, but it also can be an extremely tedious process with seemingly little reward-—as Keirsey found out the hard way when getting his own mortgage.
“I remember thinking that we could probably figure out how to take on all this debt and how to navigate all these loans,” Keirsey said, “but then I wouldn’t be able to move or leave my job because I’m stuck with this huge mortgage.”
Nearly 82% of homeowners feel “locked-in” by their existing mortgages. That’s what inspired Keirsey and his other co-founders to create a solution where homeowners can avoid debt and have the flexibility to move whenever they want without being tied down.
CEO and Co-Founder Mike Schneider said that 30% of homeowners sell within five years of purchase because of different life factors such as changing school districts or retirement. In these cases, people often look toward renting, which can have larger financial downsides and doesn’t allow people to feel a sense of ownership.
Acre is especially designed for homeowners looking to move every 3-5 years, with the possibilities of renewal or buying the home outright if the family decides to stay. Whatever they choose, homeowners will not only not have to worry about additional closing fees or high interest rates on top of their monthly payments, but they also can avoid competition in the housing market if they do decide to stay.
“It’s good to have a true sense of home and a place to call home, and we believe in home,” Keirsey said. “Studies have shown that it’s good for communities, health outcomes, financial outcomes and educational outcomes to have a true sense of ownership in your home.”
How the platform works is that at the initial closing of an Acre home, the homeowner pays 5% of the home’s value. That enables them to access their value share, which is their share in the home’s appreciation.
Homeowners then choose between an Acre Saver plan, which has a lower monthly payment and allows homeowners earn a 10% share of appreciation; and the Acre Boost plan, which has the same monthly cost as a mortgage payment, but with a 50% appreciation share.
“Since there’s no loan [with Acre], they’re not buying more of the home every month, they’re just sharing in appreciation,” Schneider said. “People often forget that when you take on a 30-year mortgage, you’re going to pay almost twice that value of the home over 30 years because of interest.”
Schneider and Keirsey also believe the macro real estate landscape makes this a great time for a solution like Acre’s. Large institutional investors such as private equity firms and pension funds are increasingly investing in single-family residential properties—there’s an estimated $110B earmarked for that purpose, Keirsey says.
Many of those properties are being positioned as rentals. But the Acre team feels its solution is better for the people living in those homes—which Acre purchases for cash and then shares any appreciation in value—for the investors, and for communities as a whole.
“We are helping big institutional investors like pension funds and others that want to invest in single family homes do that in a way that helps build and foster ownership and communities as opposed to locking up more inventory,” Schneider said.
The Acre team has already shown they can hit it big with a real estate-focused tech startup. Schneider was previously the CEO and Keirsey the COO of Durham-based First, which was acquired by real estate giant RE/MAX in late 2019. (See our article on the deal here.)
With that experience under their belts, they’re being very intentional about building the Acre team—and they have big goals.
“It’s important to us to build a great organization where people can thrive and do their best work and have a positive impact on the world and feel like they’re giving back by building something,” Keirsey said.
Schneider adds: “ We love building great teams and organizations, but there’s an opportunity to build a really scalable company here in the Triangle that we can ramp up to billions of dollars in valuation in the coming years and have a real impact on society. We’re solving one of the biggest issues of our time, which is that people can’t afford their homes.”