We got a great existing home sales report on Thursday, but is this data already too old? Existing home sales showed a jump in sales, which was anticipated by most as we had positive, forward-looking housing data due to mortgage rates falling from 8.03% to 6.63%. However, the last four weeks have had negative trending data. This is nothing dramatic, but similar to what we saw in 2023 when mortgage rates rose from 5.99% up to 7.25%.

But before we address this, let’s look at the report because this report still shows what I have believed for a long time: even with elevated mortgage rates and home prices, lower rates lead to more demand as we are working from historically low levels of sales.

Here are some charts reviewing today’s report with a host of data lines from the NAR existing home sales report:

https://www.nar.realtor/newsroom/existing-home-sales-rose-3-1-in-january

A few critical glaring points: active inventory is still historically low, and so is monthly supply data. This is the timeframe where seasonality kicks in for both to go lower and it will be interesting to see where inventory goes this year with the NAR data. Our data lines here at Housing — which track things weekly — show inventory is growing year over year with new listings growth as well.

From NAR: Total existing-home elevated 3.1% from December to a seasonally adjusted annual rate of 4.00 million in January.

Last year, we had 12 weeks of positive, forward-looking housing data, but it all fell into the March report we got for February, so we had a big jump in sales and a lower trend the rest of the year. This year, we might have a split two-month increase in sales before the forward-looking data takes us lower. The recent existing home sales bounce surprised some people, but the context is critical: we were working from a lower bar in sales this year than last year.

The recent move in mortgage rates from 8.03% to 6.63% pushed the purchase application data positive. Since November of 2023, purchase application data was positive for about eight weeks before it turned negative after rates rose to above 7% again.

From NAR: First-time buyers were responsible for 28% of sales in January; Individual investors purchased 17% of homes; All-cash sales accounted for 32%; Distressed sales represented 2% of sales; Properties typically remained on the market for 36 days in January.

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A few notes on the data above: obviously, distressed sales are not a thing and haven’t been for some time. Another positive data line is that the days on market are above 30 days, which is something I would love to see year-round. The days on market are very seasonal, but we haven’t had the days on market stay over 30 days year-round since 2020, which is a reflection of active listings still being near all-time lows.  

Cash sales rising year over year looks normal as mortgage demand is lower year over year. So, as it goes with traditional January data, there are no real surprises here but a glimmer of hope that with more inventory this year, the days on market can show year-over-year growth every month.

This existing home sales report was solid, as lower mortgage rates did their thing, but looking at the current data, the last four weeks have had negative purchase application data. Purchase apps look out 30-90 days before they hit sales data. Sometimes it comes early or later in that timeframe, but after eight positive weeks of positive purchase apps, we have now had four straight negative weeks. This means 2024 is starting to look a lot like 2023 unless rates fall soon. 

We don’t want to see mortgage rates break out toward 8%; even the Fed has said getting to 8% was a restrictive policy and something that isn’t in its interest. So let’s keep an eye out on that 4.34% level on the 10-year yield and hope that doesn’t break. Otherwise we could have a horrible carbon copy of what we saw in 2023.

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Mortgage servicers, regulators and economists are closely watching the delinquency rates for Federal Housing Administration (FHA) loans following a spike in the fourth quarter of 2023.

Industry experts say that although there’s a correlation between unemployment and delinquency rates, some homeownership costs — including insurance — have increased significantly over the past two or three years, which has had a strong financial impact on homeowners. But experts also say the situation is not as bad as the one experienced during the COVID-19 pandemic.

The sources spoke about these issues during this week’s Mortgage Bankers Association (MBA) Servicing Solutions Conference & Expo in Orlando.

The latest MBA data shows that the delinquency rate for one- to four-unit properties rose to 3.88% at the end of 2023, compared to 3.62% in the third quarter, but still below the historic average of 5.25%. Meanwhile, the FHA-insured loan delinquency rate recorded a larger jump during the same period to 10.81%, up from 9.5%, the highest level since Q3 2021.

“We are seeing a bit of a pickup for two quarters in a row, but it’s very important to keep in mind that we were at the absolute lowest point in delinquencies in the third quarter of 2023,” Marina Walsh, MBA vice president of industry analysis, research and economics, said in a market outlook session.

According to Walsh, the delinquency rate for FHA loans increased by 130 basis points from the third to fourth quarters, but the current level is “certainly not nearly where it was at the height of COVID-19.” 

In addition, she said that foreclosures are not picking up, so borrowers are either paying off their loans before entering the severe delinquency stage, or if they are in the serious delinquency stage, they are entering a workout. 

“The question I posed to all of you is, ‘Is this a blip or a bigger trend?’” Walsh said, adding that based on data MBA has received from the industry, she believes the delinquency rate could come down a bit in first-quarter 2024 following the end of the busy holiday shopping season.

“All these increases in costs impact people’s ability to pay, without question,” Steven R. Bailey, senior managing director and chief servicing officer at PennyMac Financial Services, said in an executives’ perspective session. “But we still see the strongest correlation is between unemployment and delinquency.”

Bailey said that although increases in delinquencies are not a trend that servicers want to see, “I don’t look at it with the same fear that I used to look like.” 

Homeowners insurance

According to industry experts, one of the costs affecting homeowners is their insurance, which can lead to increases in delinquencies. California and Florida are among the states where the situation is more evident. 

Seven of the 12 largest insurers in California have either paused or restricted new policies over the past 18 months, including State Farm and Allstate. In September, the state’s top insurance regulator announced that new rules are in the works to persuade insurers to remain.

In Florida, the departure of many insurers and reinsurers has resulted in homeowners paying an average of nearly $4,000 a year, almost three times the U.S. average, according to estimates from the Insurance Information Institute. In some instances, homeowners have seen their insurance costs more than triple, but a new bill seeks to help them.

“That’s a combination of both rates from a carrier perspective, as well as just the increase in home values,” Patrick A. Sullivan, vice president of industry relations and compliance at Assurant, said in a session about homeowners insurance. 

Sullivan said reinsurance is another factor weighing on homeowners insurance costs, a function of the global capital markets. He added that reinsurance costs have more than tripled over the past three years.

“Homeowners insurance is certainly a problem we need to tackle together,” John Bell, executive director of loan guaranty service at the U.S. Department of Veteran Affairs (VA), said during a regulatory session. 

“I hope that there are others on this panel and others out there that want to work together to try to solve some of those rising prices that our homeowners just can’t absorb, and at some point in time, it’s going to hurt the market.”

Bell said that if a home costs $800 per month more than last year, the industry needs to figure out how to solve it. Bell and the VA are working to move forward with options to help veterans avoid foreclosure, including a partial claim solution.

FHA Commissioner Julia Gordon, who announced the agency’s new payment supplement partial claim during the conference, added that the issue of homeowners insurance will take a village to tackle. 

“And that’s going to take real work in the states also, which is hard, and we just have to do it if we want people to be protected,” Gordon said.

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Less than 24 hours after announcing Nick Bailey’s departure from the firm, RE/MAX executives found themselves on a call with investors and analysts to discuss the company’s fourth-quarter and full year 2023 earnings.

In his opening remarks, Erik Carlson, who was named CEO of RE/MAX Holdings in November, mentioned the promotions of Amy Lessinger, who is replacing Bailey as RE/MAX president, Abby Lee and Susie Winders, but he made no mention of Bailey other than to note his departure. Additionally, no analysts asked questions about the changes the firm made to its C-suite.

“These are well-deserved positive changes that I believe will help us navigate the road ahead and realize our full potential,” Carlson said.

In their new roles, the firm’s new leaders find themselves tasked with getting RE/MAX back on a profitable track. Despite losing $10.9 million in Q4 2023 and a total of $69 million for the full year, RE/MAX’s revenue of $76.6 million in Q4 was down only 5.7% year over year, while the $325.7 million in yearly revenue was down 7.8%.

These results came as the number of existing home sales dropped 18.7% year over year in 2023 to a near 30-year low of 4.09 million. RE/MAX’s U.S. agent count, meanwhile, fell from 58,719 at end of 2022 to 55,131 at end of 2023.

The company’s global agent count is up 0.6% annually to 144,835, due to slight growth in its Canadian agent count and a strong uptick in its international agent count, the latter of which rose from 60,175 at the end of 2022 to 64,536 at the end of 2023.

With this in mind, Carlson said two of the firm’s main priorities are to stabilize and grow its U.S. agent count and to expand its mortgage business. He said leaders are confident that these areas can “grow into a meaningful revenue business.”

“Posting gains in those two areas would build market share, increased revenue and earnings, and will create momentum for additional growth,” Carlson said.

As RE/MAX has attempted to overcome the challenges posed by housing market conditions, executives said they have reevaluated some of the programs the company offers in an effort to pinpoint which initiatives are worth further investment. One such program, Carlson said, is its teams initiative, which is launched in mid-2022 and expanded again in 2023.

“As a result of the program impact and our lessons learned, we are expanding the modified version of the program to encourage team recruitment and growth across much of the U.S.,” Carlson said. “From our perspective this is prudent, proven investment that will help franchises grow their offices, help team leaders build larger teams and, simultaneously, it sends a message across the industry that teams have yet another reason to affiliate with RE/MAX.”

Under the modified teams program, in order to unlock the program’s financial incentives (which include reduced recurring fees and a broker fee cap), a brokerage in an eligible state must first add any combination of six team leaders or members from outside the RE/MAX network.

RE/MAX executives also addressed the commission lawsuits and the firm’s settlement agreement related to the Sitzer/Burnett, Moehrl and Nosalek suits, which was confirmed as a nationwide settlement.

“While the settlement came at a significant financial cost, we believe it was the right decision for all our stakeholders, affiliates, employees, shareholders and debt holders alike,” Carlson said. “We view it as an investment in the brands, the networks, the franchisees and, most importantly, the agents.”

Executives noted they were “cautiously optimistic” about the settlement gaining final approval in May, an outcome that would see copycat litigation also go away. They also noted that RE/MAX is viewing this as an opportunity to further double down on agent education.

“In RE/MAX University, we offer something called the Accredited Buyer Representation Designation, which gives our agents education on exactly how to articulate their value proposition, so we anticipate that there will be more demand for that as we move forward,” Lessinger said.

As RE/MAX heads further into 2024, executives said they expect to continue seeing a purge of nonproductive agents across the industry, as well as more transactions in 2024 than in 2023, which they believe will serve their highly productive agents well.

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HousingWire Editor in Chief Sarah Wheeler sat down with Jason Cave, former deputy director at the FHFA where he ran their FinTech Office, to talk about where mortgage tech is falling short, and what the government should do to help.

Sarah Wheeler: What led you to leave FHFA for the private sector?

Jason Cave: I spent 30 years in the government — 27 at FDIC and three at FHFA. It was the right time to make a change and I figured it would be neat to work on some of the issues with the fintechs. There are a lot of banking challenges, just like with mortgage, and it felt like a good time to be part of the solution. So, I’ve been helping companies navigate the D.C. landscape, and just helping improve engagement. And it’s a lot of fun to wake up and do a bunch of different things on a given day. I guess I’m a gig economy worker now! A month in, I’m enjoying it.

SW: Looking at the mortgage space, what are some of the challenges when it comes to technology?

JC: There are several, but I think for IMBs specifically, it’s finding a way to get a stable investment track — something that allows you then to be able to continue to build in good times and bad times, because this industry is so boom/bust. And it seems like with technology, even when times are good, a lot of companies aren’t interested because there’s so much money to be made. That’s a broad generalization, but this is coming from discussions with lenders as well as vendors.

And then when times are tough, you know, you’ve just got to hang on and putting that kind of money into technology is tough. Many players in the mortgage space are well behind technological advances, and they need to find ways to really smooth that out, so that they’re continuing to make some investment in all the cycles. That would make them so much more efficient.

SW: You launched FHFA’s Velocity tech sprint in 2023 to bring the industry together to collaborate on solving some of the tech problems we face. What were some of the areas it focused on?

JC: We got a lot of different ideas! A lot of the discussions were very much: ‘let’s not just make incremental changes, let’s really look long-term. Like, how could we actually use blockchain or some form of distributed ledger to really build a better mousetrap?’ But the issue with so many of the ideas is that you have to have the policymakers or regulators, the GSEs, the lenders, and all the other parties on the same page. Now, the positive thing with that is, if you can get that, I think you can make real change.

The downside is that it takes a lot to get everybody there. But I think some of the problems we have today is because it’s so difficult to get everyone at the table. You have a lot of solutions, where it’s like, well, I’m not going to get everybody — I’m going to get a lender and I’m going to get a vendor and then we’re going to do this. And then somebody else says I’m going to get a title company and I’m going to get a POS provider, and we’re going to do this. And that’s quicker and easier, but I don’t know if it’s effective.

At the end of the day, I think we’re finding that companies are having challenges both on adoption and integration. And so maybe this idea of really putting in the time to get everybody at the table and start building makes sense.

A lot of people brought up things [in the tech sprint] that were not heavy lifts, but so important, like down payment assistance. There are so many programs out there, but sometimes in Washington, we forget that just because there are a lot of programs out there, doesn’t mean they’re accessible, doesn’t mean everybody knows about them. We also had some really good ideas about the front end, really being able to pull customer information quicker.

SW: What were some of the themes that came out of the tech sprint that you’re excited about?

JC: The trusted repositories. I’m excited because I think this is something that has not gotten a lot of investment and attention. And I think it goes back to the need for collective action. Just that word itself means you need to have a lot of people that are agreeing to move forward and do these transactions in a different way. And it’s going to affect all of us, but we’re going to be okay with it — we’re going to find a way to make money at it and also be efficient and lay the tracks down.

Blockchain sort of gets a bad name because it’s often connected with crypto. But a lot of these trusted systems run on distributed ledger technology. I’m not a techie, but I’ve looked at it and talked with a lot of people. And when you read what distributed ledger technology is meant for and where it really can bear the greatest fruit, it seems made for mortgage. And I think that’s something that the government and the GSEs are going to really need to encourage — I don’t think this is just going to happen from the bottom up. It’s too much money and it’s too big of a change. So I would like to see that become a priority.

SW: Where else do you think it will take government incentives or at least clearer regulation to advance tech?

JC: We need that sort of strong encouragement/directive even in areas where there’s already been work done. So one of the first things that we wanted to tackle with Velocity was the consumer information and the services that can quickly allow people to transmit what’s normally done in a paper-based, labor-intensive way. Tools such as Day 1 Certainty and AIM have been around for so long — six, seven, eight years — but take up was so low. What is the holdup? What are the bottlenecks? And how do we really push through them? And I think that’s something FHFA and the GSEs need to really push.

When adoption rates are so low, it becomes a vicious cycle. Adoption rates are low, that means people don’t think that the tools are effective, that means that they don’t use it, that means adoption rates go lower.

But think about Day 1 Certainty. I mean, one of its main reasons for coming into existence was to deal with the rep and warranty issue years ago. This isn’t just innovation, this was Fannie Mae and Freddie Mac getting the benefit of a secure, true document — it’s not something I can pull out and doctor up, it’s the actual record. And so it’s safer. You would think some of these tools are just a no-brainer, but I don’t think that’s the case. So that’s an area where Fannie and Freddie as well as FHFA should really push on it.

I would even be so bold to say I think the enterprises should be required to be getting adoption rates of 50% or more, and if they’re not, to really be able to explain why people aren’t using these very important tools they’ve developed. A lot of money has gone into building those tools. Also, to be very transparent, I am advising Argyle and they are one of those providers, so just full disclosure there that I’m advising them. But they and other companies like them are doing really interesting work.

SW: Let’s talk more about direct source data, since it seems like low-hanging fruit, whether that’s credit scores or verification of income and assets.

JC: I couldn’t agree more. And whether it’s The Work Number or credit scores, those are two examples where the consumer is paying that bill directly. And as we already know, closing costs go up every year. It’s an impediment for people — especially those with lower to moderate income — to be able to refinance and get the credit they need. So the more people do what Sandra Thompson is doing by looking at credit scores and trying to create greater competition, the better.

I mean, anytime somebody all of a sudden gets to double their fees because they see that their potential monopolies is threatened, I think it’s a sign that it’s a monopoly! As a taxpayer, I’m flabbergasted to see companies say, now that we might have to lose some of that, we’re going to increase our fees and make it up in the meantime. I think that’s a problem.

And I think that what CFPB did with the proposed Personal Financial Rights Data rule, they have started down that path with making banks share this information. Banks have been able to have a lot of our information locked up, but it’s not locked up for them — they get to use it. And when we want to use it or allow others to use it, it’s not that easy. I applaud the CFPB for really taking issue with that because it is the consumer’s information.

Now, I would say it’d be very nice if the CFPB expanded that to look at things such as payroll and credit scores, because the companies that I just talked about, are unfortunately not getting picked up. It’s the banks, right? And I really do hope that CFPB looks at some of these other companies, who are saying well, we built the pipes, and so we should be able to charge what we want. I don’t think so. There are a lot of subsidies in this housing space. I don’t know who built the pipes. I don’t think anybody on their own, with all their own private money, did it — I think there was a lot of help along the way. And, and again, when you look at who’s paying the bill at the end, it’s really troubling.

SW: What about alternative data? Where is that headed?

JC: I’m not sure where it’s going. I think it’s another one of those areas that with some guardrails, is going to be necessary because of demographics. The reality is that if you do 1099 work, it’s really hard to get a mortgage. I know that from the work we did at FHFA. Those processes are still geared to the 1950s Ward Cleaver family. I’ve heard concerns that some of the alternative credit information is not as robust, it’s not being based on longer-term data histories. I think it’s fine to raise those issues. I don’t think it’s fine to say that means we’re not going to factor it in or we’re going to be very stingy with whatever credit we give for those sorts of things. I think there are some companies like Argyle and others that are finding ways to be able to get that information from good verifiable sources so that lenders can bring that information in into the equation.

SW: What happens to the FHFA’s Velocity tech sprint now that you’re gone?

JC: The Velocity tech sprint and just the FinTech office in general is in very good hands. At FHFA Anne Marie Pippin is continuing to do that work. She did most of the heavy work when I was there, so you’re seeing Anne Marie at the various conferences and panels. FHFA Director Thompson continues to strongly support the work. She has Tracy Stephan, who we brought on board, who was a long term executive at Fannie and also Leah Price has joined recently. And while they have a small group, you’ve got some good leadership and also some people that have actually done this work.

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