At the turn of the 20th century, there were almost 100 different car companies operating in Detroit alone.
But by the 1920s, there were basically three companies – Ford, General Motors and Chrysler – according to this Wikipedia article.
What does this have to do with mortgages and real estate?
A lot, b/c at some point our industries will have to consolidate too in order to compete.
Car companies were all small operations at first making custom-built cars with basic features.
But then they started to differentiate themselves by offering better starting systems, designs, colors, motors, transmissions, suspension systems and much else.
Later on, it was seat belts, power windows, power steering, hydraulic brakes, air conditioning, and entertainment systems – among other things.
The biggest game-changer of all, however, was the drastic reduction in price offered by Ford for its Model T.
In 1909, the price was $850 ($24,000 today) but it fell to only $360 in 1917 – and sales soared by 700 times where they were in 1909!
Ford did this with its moving assembly line and many other innovations.
You can read about this here.
The mortgage industry currently has about 25,000 registered companies – give or take – and it is obviously ripe for consolidation.
The real estate brokerage field is similarly crowded and ripe for more consolidation.
These industries have not consolidated yet b/c they have both been riding booms for the last 30+ years; b/c the barriers to entry for starting a new firm are very low; and b/c true innovations that would allow a firm to capture market share like Ford have been lacking.
This will change once and for all on the mortgage side once the current refi boom ends.
The innovations will come in two areas: (1) a much easier application and approval process with the use of better technology and systems; and (2) the offering of much lower rates (lower costs) with better technology (AI), better systems, cheaper overseas labor, and economies of scale (which is why consolidation/size will be necessary).
Companies that are not obsessed with this now will go the way of Studebaker, DeSoto, Packard, Kaiser Motors and many other car companies that didn’t see the writing on the wall.
We definitely want to be like Ford circa 1913, but with a far less nutty CEO. 😊
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