In short, Loftium elegantly addresses the pre-purchase problem by giving homeowners a portion of their downpayment to help them better monetize the value of their home via Airbnb. Then can split the revenue generated for a fixed period of time, typically 12–36 months.
By Chirag Chotalia and Josh Stein
Homeownership and the resulting buildup in home equity is, by a wide margin, the predominant source of the average American household’s net worth. Yet homeownership rates have stagnated, and for some groups, in particular millennials, rates have drastically declined over the last decade. The New York Times recently published a compelling piece illustrating the impact of this phenomenon on the lives of everyday Americans.
This phenomenon has been driven by several macro trends. Interestingly, despite conventional wisdom that might suggest otherwise, reports published by Fannie Mae and Bank of America show no change in millennial attitudes toward the desirability of home purchasing — 91% of renters between the age of 25–34 want to eventually buy homes.
The research we’ve come across points to real financial and structural hurdles that make homeownership less attainable today than for prior generations. Some of the most significant drivers:
- At a national level, home prices have escalated at a pace significantly above wage or employment growth.
- Additionally, even with stagnating incomes, student debt burdens have dramatically increased — in the last decade, the number of borrowers has grown 90% and the average balance per borrower has grown 80%.
- The average share of income spent on rent has risen from a historic average of 25% to over 30% today. In fact, renting is now more expensive than owning in most major markets, and not by a small margin.
These trends have resulted in reduced savings for down payments, which 68% of millennials identify as the #1 barrier to home purchasing.
While we’ve been encouraged by the emergence of co/social living to drive down rental/living expenses as well as established solutions like Airbnb to help homeowners manage carrying costs post-purchase, we have been keenly interested in teams attacking the pre-purchase problem.
That’s why we were thrilled when our friends at Lerer Hippeau Ventures connected us to Yifan Zhang and Adam Stelle, the founders of Loftium, in March; and why we are excited to announce that we’ve led Loftium’s seed round, which closed in April.
To learn more about Loftium, visit www.loftium.com. We’re sure you’ll be hearing more about this company for many years to come!
Josh Stein is a partner at DFJ
Follow Josh @dfjJosh
Chirag Chotalia is a principal at DFJ
Follow Chirag @cchotalia