Category Archives: Real Estate

Ready for the coming increase in households

It’s official — Ben Carson accepted President-elect Donald Trump’s offer to become the next secretary of the U.S. Department of Housing and Urban Development.

For HousingWire readers, this news isn’t surprising since we exclusively reported Carson’s intention to accept the nomination last week.

Although many expected Carson to announce his acceptance after the Thanksgiving holiday, a week passed in silence. In the meantime, other appointments were made, including Quicken Loans executive vice president Shawn Krause, who was named to the HUD transition team.

Whatever the reason, there’s no further room for speculation. Trump officially offered, and Carson accepted, the new role as HUD secretary. Now the only thing standing in Carson’s way is approval from Congress.

“I am thrilled to nominate Dr. Ben Carson as our next Secretary of the U.S. Department of Housing and Urban Development,” Trump said. “Ben Carson has a brilliant mind and is passionate about strengthening communities and families within those communities.”

“We have talked at length about my urban renewal agenda and our message of economic revival, very much including our inner cities,” he said. “Ben shares my optimism about the future of our country and is part of ensuring that this is a Presidency representing all Americans. He is a tough competitor and never gives up.”

Trump’s team also put out an official statement on the President-elect’s Facebook page.

From the post:

President-Elect Donald J. Trump Intends to Nominate Dr. Ben Carson as Secretary of the United States Department of Housing and Urban Development.

“I am honored to accept the opportunity to serve our country in the Trump administration,” Carson said. “I feel that I can make a significant contribution particularly by strengthening communities that are most in need. We have much work to do in enhancing every aspect of our nation and ensuring that our nation’s housing needs are met.”

As far as the housing industry, reactions to Carson’s nomination vary wildly. Many are confused about Carson’s nomination to HUD, given his background as a neurosurgeon, and some even go as far as to say this nomination proves the new administration doesn’t care about housing.

On the other hand, as HousingWire’s Brena Swanson explains here, his nomination has certainly put the public’s attention on the position.

Lead House Financial Services Committee again

Hensarling currently serves as chairman of the House Financial Services Committee, and will serve his third term in that role beginning in January.

In his time as the chairman of the House Financial Services Committee, especially in his most recent term, Hensarling pushed for regulatory rollback.

Earlier this year, Hensarling introduced a bill in the House that would replace the Dodd-Frank Wall Street Reform Act with a “pro-growth, pro-consumer” alternative that would bring significant reforms to the Consumer Financial Protection Bureau, and much more.

The bill, called the Financial CHOICE act, passed out of the House Financial Services Committee in September.

The bill looks to gain traction in the next Congress, as President-elect Donald Trump is already signaling that his administration plans to “dismantle” Dodd-Frank.

Recently, at the Housing America’s Families Forum hosted by the J. Ronald Terwilliger Foundation for Housing America’s Families, Hensarling called Dodd-Frank a “grave mistake” and said Republicans will work to repeal it in 2017.

“I am humbled by the support and trust of my colleagues to continue my service as chairman of the Financial Services Committee,” Hensarling said of his upcoming term.

“In the coming Congress, we will continue our important work of helping to grow the economy for all Americans, not just those at the top,” Hensarling continued.

“We will focus on ending taxpayer-funded bailouts and too big to fail. We will work to hold both Wall Street and Washington accountable, because consumers must be vigorously protected from fraud as well as the loss of their economic liberty,” Hensarling concluded. “As chairman, I look forward to working with the incoming Trump Administration to advance bold and ambitious solutions that will help make America better, stronger and more prosperous.”

Fighting Hensarling at every step of the way when it comes to dismantling Dodd-Frank will be Waters, who was recently re-elected unanimously by the Democratic Caucus to serve as Ranking Member of the House Financial Services Committee.

It will be Waters’ third term as Ranking Member.

“I am honored to have been re-elected to lead the House Financial Services Committee in the 115th Congress,” Waters said.

“We face many challenges in the years ahead, with President-elect Trump threatening to dismantle Dodd-Frank, putting our financial stability and consumer protections at risk,” Waters continued. “It is more important now than ever for Democrats to fight for what they believe in, and I will continue to lead that fight for American consumers and our most vulnerable populations.”

Attract international home buyers

As international buyers are increasing, they are also bringing new trends to the market. For example, the Chinese influence is affecting home values for street addresses that contain the Chinese lucky number – four.

Now, even the way homes are sold may need to change. Jack Ryan, founder of REX, an online brokerage, former partner at Goldman Sachs and a onetime opponent of President Barack Obama for the Illinois Senate seat, decided to do just that.

Home prices continue to increase, a trend that will continue into 2017, according to a new report from CoreLogic.

These increasing home prices are narrowing the scope of possible buyers on luxury homes, and increasing the possibility that it will be bought by an international buyer. That is exactly what Ryan realized when he decided to turn to virtual reality to sell a $57.5 million home in Malibu, California, according to an article by James Tarmy for Bloomberg.

From the article:

“For homes like this,” Ryan said, gesturing to the house’s fireplace, “there’s a 50 percent chance that the buyer is outside the U.S., in around 15 financial capitals—London, Shanghai, Paris, Beijing.”

To reach that elusive group of the super-rich, Ryan had to get creative, which is why he decided to pay a virtual reality company to map the house and create an interactive video.

Virtual reality allows viewers to see the home as though they were really there by looking through a view piece strapped onto their head. Several different agents have begun playing with virtual reality as a tool for selling homes or condos, but is it working?

From the article:

The video, he said, has been useful, though he considers VR one of several marketing tools. “I couldn’t give tangible results, like ‘five deals closed because we had VR,’” he [Adam Greene, vice president of residential development at Forest City Ratner] said. “I think it gives the whole experience of the sales center something a little bit different.” Indeed, multiple brokers all echoed the same point: VR is presently a tool that can get buyers excited, not an actual replacement for seeing the house in person.

Ryan’s virtual reality video cost in the low tens of thousands to produce, according to the article.

Expect home prices to start rising

Consumers became more optimistic about the housing market immediately following the election, according to Fannie Mae’s Home Purchase Sentiment Index. What’s more, the share of Americans who expect home prices will only continue to increase grew four percentage points to 35%, reversing the three-month downward trend.

The HPSI decreased in November for the fourth consecutive month, sliding down 0.5 points to 81.2. Four of the six components of the HPSI decreased. The election created a great divide in confidence levels from before and after election day.

“The November Home Purchase Sentiment Index outcome is difficult to interpret as the data collection period occurred across the Presidential election timeline,” said Doug Duncan, Fannie Mae senior vice president and chief economist. “The results are fairly evenly split between responses collected before and after the election, and there is evidence of an increase in consumer optimism in the immediate aftermath of the election.”

Those who said now is a good time to buy a home decreased by one percentage point to 30%, while those who said now is a good time to sell fell by six percentage points to 13% in November. Those who said now is a bad time to sell even rose two percentage points to 38%.

“However, if mortgage rates continue their recent rise, we may see a dampening in home purchase attitudes,” Duncan said. “There are clear predecessors for rapid market changes that ultimately dissipated, which urges caution in the interpretation of stability in short-term rate changes.”

Those who say mortgage rates will go down over the next twelve months decreased by six percentage points to -51%, while those who say they are not concerned about losing their job fell five percentage points to 64%.

Americans who answered their household income is significantly higher than it was 12 months ago rose 11 percentage points to 15%, reversing the decrease seen in October.

Fannie Mae forecasts only modest growth in the next 12 months.

Bank reportedly fails fair lending requirement

The dark clouds surrounding Wells Fargo are about to get a lot darker, as the bank, which is already in hot water over its recent fake account scandal, is reportedly falling short in its fair lending requirements and faces additional sanctions.

Over the last few months, Wells Fargo has been in the crosshairs of various regulators after the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau and the city and county of Los Angeles fined Wells Fargo $185 million because more than 5,000 of the bank’s former employees opened approximately 2 million fake accounts in order to get sales bonuses.

In the fallout from the fake account scandal, Wells Fargo CEO John Stumpf lost his job, the bank lost business from several states, and the OCC slapped additional sanctions on it, including forcing the bank to ask the OCC for approval if it wants to make a change to its board of directors or its senior executive officers.

Now, according to a new report from Reuters, Wells Fargo is about to be more hot water with the OCC for reportedly failing to meet its requirements under the Community Reinvestment Act.

Under the Community Reinvestment Act guidelines, banks are legally required to meet the credit needs of low- and moderate-income communities.

From Reuters:

Wells Fargo is due to be deemed a bank that “needs to improve” under the Community Reinvestment Act (CRA), a law meant promote fair lending.

The move is a two-notch downgrade from the “outstanding” tag Wells Fargo has held since 2008 and the change would give regulators a greater say on day-to-day matters like opening new branches.

The ruling from the Office of the Comptroller of the Currency, the main regulator for national banks, is due by early January, said the sources with knowledge of the plans.

The ruling would be significant, considering Wells Fargo’s status as one of the largest (if not the largest) mortgage lenders in the country.

Reuters cautions that Wells Fargo could win an appeal of the downgrade. According to the Reuters report, that decision is still pending.

Northwest reaches all time low

Pending home sales hit an all-time high in the Northwest, but new listings took a plunge, according to the latest report from Northwest Multiple Listing Service.

The report, which covers 23 counties in and around Washington state, showed that new listings added during November dropped to an 11-month low. This could increase home prices as buyers fight over the dwindling inventory, which is now at an all-time low.

“Last year’s holiday season ended up being the best time to sell a home around King County as sellers took the winter months off, but buyers remained persistent,” said Robert Wasser, Northwest MLS director and Prospera Real Estate owner/broker. “The supply of homes for sale hit a post-recession low, and so far, this year is mirroring last winter’s trends.”

Inventory decreased by 13.2% in November, but pending home sales increased 94% in the Northwest. Prices increased by 11% compared to last year.

This left a housing supply of just 1.69 months, a new low. King Country showed the lowest level of supply at just 0.96 of a month.

Pending home sales totaled 8,217 for the month, compared to the 5,779 new listings.

The cause for the sudden surge could be the oncoming winter months, but there is also another factor causing borrowers to flood the market.

“November’s pending sales for the four-county area of King, Snohomish, Pierce and Kitsap were the highest since 2005,” said J. Lennox Scott, John L. Scott Real Estate chairman and CEO.

“There were 44% more pendings than new listings,” Scott said. “Every time interest rates increase 0.5% we see these surges because buyers become anxious about increasing rates – but on a historical basis rates are still amazing.”

The recovering housing market

This increase is already making waves in the housing market. According to Black Knight’s report, the number of potential refinance candidates fell by more than 50% over the last few weeks.

And it could only continue to increase from here. Housing experts are saying there is a 100% chance that the Federal Reserve will elect to raise rates at its last meeting of the year.

But now, next year could bring a new danger to the housing market via raising interest rates, according to Mark Fleming, First American senior vice president and chief economist. Supply for first-time buyers will be in greater demand than ever.

“As rates go up, all those existing home owners now don’t have an incentive to move,” Fleming told HousingWire. “They may not supply their homes to the market for that potential first-time homebuyer to buy.”

While previously first-time buyers tended to look at pre-existing homes, currently homeowners may be running out of incentives to put their home on the market, making the need for affordable newly constructed homes more important than ever, Fleming said.

“The need for new housing to be more affordable I think will be more important than it’s been in a long, long time,” he said.

However, there is still an upside. While interest rates may be increasing, they are still at historic lows, and are expected to remain so throughout 2017. Home supply could continue to be a problem throughout next year, but affordability is still much better than it was during housing’s peak years of 2006 and 2007.

In fact, despite increasing interest rates, 2017 will still finish out the year 34% more affordable than the market peak in 2007, according to First American’s forecast.

“We do lose more affordability – rates go up, purchasing power goes down – but even having done that, it still goes from 36% more affordable than housing peaks down to 34% more affordable, which, in qualitative terms, means still highly affordable,” Fleming said.

Overall, the housing market continues to improve. Mortgage credit availability increased, easing credit standards slightly in October, according to the Mortgage Bankers Association’s Mortgage Credit Availability Index, which analyzes data from Ellie Mae’s AllRegs Market Clarity business information tool.

Pending home sales increased only slightly in October, but enough to hit the highest pacesince July this year, according to the most recent report from the National Association of Realtors.

And a new report from Black Knight Financial Services shows that by one metric, the housing market is healthier than it’s been since the crisis began: the rate of loans in active foreclosure is lower right now than at any point in the last nine years.

Election pushes up consumer optimism

The Michigan average since its inception is 85.4. During non-recessionary years the average is 87.6. The average during the five recessions is 69.3.

“Consumer confidence surged in early December to just one-tenth of an Index point below the 2015 peak—which was the highest level since the start of 2004,” said Richard Curtain, Survey of Consumers chief economist. “The surge was largely due to consumers’ initial reactions to Trump’s surprise victory.”

“When asked what news they had heard of recent economic developments, more consumers spontaneously mentioned the expected positive impact of new economic policies than ever before recorded in the long history of the surveys,” Curtin said. “To be sure, an equal number volunteered negative judgments about prospective economic policies, but the frequency of those negative references was less than half its prior peak levels whereas positive references were about twice its prior peak.”

Within the index, current economic conditions increased 4.5% from last month’s 107.3 and 3.7% from last year’s 108.1 to 112.1 at the beginning of December.

“There were a few exceptions to the early December surge in optimism, mainly among those with a college degree and among residents of the Northeast, although no group has adopted a pessimistic outlook for the economy,” Curtin said. “The most important implication of the increase in optimism is that it has raised expectations for the performance of the economy.”

The index of consumer expectations increased 4.3% from last month’s 85.2 and 7.5% from last year’s 82.7 to 88.9 at the beginning of December.

So what does that mean for the Trump administration as it looks to take over in January? Curtin explains.

“President-elect Trump must provide early evidence of positive economic growth as well as act to keep positive consumer expectations aligned with performance,” he said. “Either too slow growth or too high expectations represent barriers to maintaining high levels of consumer confidence.”

Curtain concluded that until specific policies are proposed, there is no reason to alter the 2017 forecast of 2.5% for real consumption.

Black Knight Financial Services

The bottom line, according to Black Knight’s report, is that housing is less affordable right now than it was before the election.

In fact, home affordability is now at its lowest point since June 2010.

Per Black Knight’s report, the post-election interest rate bump means that the average home price is $16,400 more expensive for the buyer than it was before the election.

That equates to borrowers being on the hook for $60 more per month in principal and interest in order to purchase the median home. That figures rises to $72 per month for borrowers putting 3.5% down on their home.

According to Black Knight’s report, it now requires 21.6% of median income to purchase the median priced home nationwide, which is still low by historical standards, but the highest it’s been since June 2010.

For reference, interest rates in June 2010 were 4.75%, but home prices were about 20% lower than they are now.

So the interest rate increase impacts potential borrowers and could inhibit home sales some moving forward.

But the impact isn’t felt by new buyers only.

According to Black Knight’s report, the number of potential refinance candidates fell by more than 50% over the last few weeks.

As a result of the increase rate bump, roughly 4.3 million borrowers were removed from the pool of potential refinance candidates.

That leaves 4 million borrowers in the total refinanceable population, which matches a 24-month low.

Black Knight notes that borrowers are still leaving $1 billion in potential savings on the table on a monthly basis, but that’s less than half the $2.1 billion that borrowers could have saved on a monthly basis if they refinanced before the election.

“The results of the U.S. presidential election triggered a treasury bond selloff, resulting in a corresponding rise in both 10-year Treasury and 30-year mortgage interest rates,” said Black Knight Data & Analytics Executive Vice President Ben Graboske.

“As mortgage rates jumped 49 basis points in the weeks following the election, we saw the population of refinanceable borrowers cut by more than half,” Graboske continued.

“These changes will likely have an impact on refinance origination volumes moving forward,” Graboske added. “And, since higher interest rates tend to reduce the refinance share of the market – specifically in higher credit segments – which typically outperform their purchase mortgage counterparts, they may potentially impact overall mortgage performance as well.”

New fully digital mortgag

On Thursday, Caliber Home Loans, a mortgage origination and servicing company, unveiled a fully digital mortgage that the company claims can shrink the loan process from 45 days down to 10 days or less.

HousingWire got a preview of the program, which Caliber Home Loans calls the “Caliber Ultimate Homebuying Experience.”

According to details provided by Caliber, the “Ultimate Homebuying Experience” is a streamlined application, approval and closing experience for conventional, government, and Caliber portfolio loans.

The program takes nearly all of the mortgage process online, using various technological advancements to automate the process, from application all the way through closing.

Caliber boasts that this program is different than some other digital mortgages because of the company’s “best-in-class” loan officers and account executives, who work with the borrower throughout the process.

According to the company, the program can “simplify the mortgage process and to reduce stress” on borrowers.

So how does Caliber close a loan in 10 days or less?

According to the company, its “Ultimate Homebuying Experience” automates much of the home buying process, including appraisals in some cases, which several other lenders recently cited as a impediment to shorter loan closing times.

Caliber said that it developed a full application process that takes only minutes, as well as electronic verification for some of the “most important” parts of the mortgage application, including income, assets and employment.

That electronic verification reduces the need for loan applicants to provide physical documents, like W-2 forms or bank statements.

Using those technological advancements, Caliber claims that it take a loan from application to closing in less than 10 days on eligible mortgages, all while providing “personalized assistance” from Caliber loan officers and account executives to help borrowers through the entire loan process.

Sanjiv Das, the CEO of Caliber Home Loans and a former CEO of CitiMortgage, said that the shorter loan process does not mean that the lender’s underwriting standards are impacted in any way.

“We place the consumer experience at the center of all the products and services we offer, and this program underscores that commitment,” Das said.

“The Caliber Ultimate Homebuying Experience will make mortgage applications, approvals and closings easier and faster and does not impact our robust underwriting guidelines,” Das added.

“With our high-touch business model, we think it’s the best of all worlds,” Das concluded. “We are thrilled to launch this program and look forward to enhancing the homebuying experience for our clients.”