Smart machines could eventually kill the mortgage finance and real estate space. At least, that's my opinion.
I know what you’re asking — how could technological innovation destroy two pillars of the U.S. economy?
In some ways, this is an accurate perception. Technology in the future will certainly help lenders and servicers detect risk early on.
In fact, many investors have spent the past four years figuring out how they can better use data and technology to prevent the financial crisis that evolved from the 2008 housing crisis.
From this viewpoint, technology is definitely a good thing.
But a source of mine sent over an article this morning that is worthy of a good read.
In it, The Economist poses a frightening question: Will smart machines eventually replace knowledge workers, making them go the way of the manufacturing sector, which is already well sunk in the U.S.?
The reality is that as technology improves, companies need fewer people. Some machines are already considered smarter than people. After all, they are robots. They don’t get tired. They don’t get moody… and even better for business leaders, they don’t get paid and will never have a mortgage.
And this is what spells doom for the mortgage and real estate industries. An economy with no jobs for a large segment of its population can never emulate yesterday's America when homeownership was a staple of the dream.
In the past, Americans bought homes because they could afford to. If they lost a job, another job would eventually surface around the corner.
But the changing economic landscape has made the bet on homeownership — or any large asset purchase — more of a Vegas gamble. In an economy where machines and outsourcing jobs dominate, the U.S. consumer is nothing but a feckless creature living in a state as ambiguous as yesterday’s CD player.
So why is this bad for real estate?
A mortgage lives off the entire economy. Employed Americans buy houses, pay for cars, send their kids to school and spend money at local businesses. They give back more than a machine even if they come with unpleasant personalites at times.
As more Americans find themselves in an economy where technology kills their pocketbooks, they will inevitably live in a future where the momentum and security needed to buy a home is nothing but a distant memory — think 1980s and 1990s as the glory years followed by a technology-induced dystopia.
I was in the supermarket last week and was forced to use the automatic teller since it was late and the store wouldn’t pay for clerk staff after 10 p.m. Unfortunately, the machine ate my dollar.
It was a scene out of the Terminator: me versus the machine. The machine was winning until a kind staffer found me in trouble and offered assistance.
When she walked away after cleaning up the machine’s mistake, she said to me: "And they want to replace us with more of these?"
I thought about it, and I don’t want to replace her with a machine. Nor do I want to live in an America where the financial base is not strong enough to support consumer goods, housing and every other part of a healthy economy.
If more in the mortgage and real estate space would force their friends in Congress to focus on macroeconomic issues — outsourcing and the effects of technology — would the nation's leaders have a more realistic picture of what is going on here?
The mortgage industry went through a tough five years, but is the real culprit the overall economy? An economy that produces nothing, employs few and distances itself from people will always create more pain than pleasure. It also won't see growing or even stable homeownership rates.
Lucky for me and my lost dollar, there is always something better than a machine — a fellow human being who has a job to do and most likely a mortgage to pay.