Real estate investment management firm Pretium Partners has raised nearly $1 billion for a new fund dedicated to acquiring built-to-rent (BTR) homes, Bloomberg reported on Tuesday.
The company led by former Goldman Sachs partner Don Mullen also said in a statement that it has now invested a total of more than $2.5 billion in purpose-built rental homes. The investment has resulted in 7,500 new built-to-rent homes acquired across 37 cities and 11 states.
“Decades of under-building and under-investment have led to today’s shortage of viable housing in the United States. That deficit can only be fixed with new capital invested to create new housing supply,” Josh Pristaw, Pretium’s head of real estate, said in a statement. “We are proud to be in a position to create necessary new housing throughout the United States and eager to continue investing in new homes to expand housing choice and supply over the next decade.”
Since borrowing costs surged in 2022, investors have developed other ways to buy homes, including directly from builders. In January, Blackstone announced plans to buy Tricon Residential, which owns more than 37,000 U.S. rental homes.
In June 2023, Pretium also acquired thousands of homes in a $1.5 billion deal with D.R. Horton, one of the nation’s largest builders.
Proptech company RealReports, formerly known as BHR, has successfully secured $2 million in seed funding. TTV Capital, Moderne Ventures, Erez Capital and other venture capital firms led the round of investment.
With this capital infusion, the company aims to accelerate its product development, grow its team and pursue market penetration with real estate brokerages, MLS associations and other proptech companies nationwide.
“We are thrilled to have such engaged and helpful investors join us in this round, and are more confident than ever before about our path forward,” James Rogers, co-founder and CEO of RealReports, said in a statement.
RealReports is a real estate platform that gathers property data, ranging from climate risk to valuation, in one place. It pulls information from more than 30 data providers and also features an AI-powered assistant, Aiden, which can answer questions about a property. The product is marketed toward real estate agents to help them build trust and credibility with their clients, the news release states.
In an environment in which agents are increasingly under scrutiny, having a clear understanding of data trends is a competitive advantage for real estate professionals.
RealReports also announced a partnership with Plunk, an AI-powered home analytics platform, last November. This collaboration made property research, comprehensive valuation and remodeling insights available in one place.
How will mortgage rates impact seasonal inventory in 2024? Is the seasonal bottom going to happen later than I want? Maybe. It’s not what I wanted to see in 2024, but I have to be realistic since we are already in February.
In the last four years, we have had abnormal seasonal inventory data, meaning that the spring inventory bottom happens later in the year. This is due to demand rising late in one year, pushing through the early part of the next year and preventing inventory growth. Also, when mortgage rates rise, the inventory peak happens later in the year.
I hope we find the seasonal bottom early in February rather than wait for March or April. Since eight of the last nine weeks (excluding the holiday period) have had positive purchase application data, I might need to wait a few more weeks before we see the seasonal bottom.
Weekly housing inventory data
One substantial positive story for 2024 is that we have more housing inventory year over year. It’s not a lot, but anything is positive, which I will take. I am a very pro-housing supply person and will feel much better about the housing market when we return to pre-COVID-19 levels for total active listings. However, last week, inventory fell week to week but was up year over year.
Here is a look at last week:
Weekly inventory change (Jan. 19-26): Inventory fell from 503,233 to 497,389
Same week last year (Jan. 20-27): Inventory fell from 466,391 to 457,717
The inventory bottom for 2022 was 240,194
The inventory peak for 2023 is 569,898
For context, active listings for this week in 2015 were 936,253
New listings data
I have been hoping for more new listings data growth in 2024 and even though we’re positive year over year, it’s just not as much as I would like. But at least it’s positive! New listings were trending at the lowest levels ever in 2023, but that should not be the case in 2024. Never forget most sellers are buyers of homes as well, especially if the economy isn’t in a job loss recession. This is a topic I recently discussed on CNBC.
Weekly new listing data for last week over the last several years:
2024: 44,167
2023: 40,767
2022: 40,370
Price cut percentage
Every year, one-third of all homes take a price cut before selling — this is very traditional housing activity. However, when mortgage rates rise and demand gets hit, the price cut percentage data grows year over year.
A perfect example was in 2022: when housing inventory rose faster as demand crashed, the percentage of price cuts rose faster. That increase matched the slope of the inventory increase, and people needed to cut prices to sell their homes. Existing home sales stopped crashing after November of 2022 and this data line has stabilized. As long as this trend continues, we will go below the price cut percentage in 2023 in the spring of this year.
This is the price-cut percentage for the same week over the last few years:
2024: 30.6%
2023: 33%
2022: 19.2 %
Mortgage rates and the 10-year yield
The 10-year yield is the key for housing in 2024. In my 2024 forecast, I have the 10-year yield range between 3.21%-4.25%, with a critical line in the sand at 3.37%. If the economic data stays firm, we shouldn’t break below 3.21%, but if the labor data gets weaker, that line in the sand — which I call the Gandalf line, as in “you shall not pass” — will be tested.
This 10-year yield range means mortgage rates between 5.75%-7.25%, but this assumes spreads are still bad. The spreads have been improving this year so much that if we hit 4.25% on the 10-year yield, we won’t see 7.25% in mortgage rates.
It was a crazy week for the 10-year yield and mortgage rates as it was jobs week and the Federal Reserve held its Federal Open Markets Committee (FOMC) meeting. The 10-year yield started at 4.13%, got as low as 3.81%, and ended the week at 4.02%. Mortgage rates started the week at 6.88%, fell to a low of 6.63%, then shot up to 6.92% on jobs Friday as the labor data came in stronger than anticipated and the 10-year yield spiked higher with mortgage rates, as you can see in the chart below. I also wrote about the jobs report in this article.
I have always stressed that the labor data is more critical for mortgage rates than the inflation growth rate at this stage. The growth rate of inflation is slowing down noticeably. PCE inflation data is running below 2% on the three- and six-month data line trends, but the 10-year yield is still over 4% and we are near 7% mortgage rates. If jobless claims data ran over 323,000 on the four-week moving average, that would be a different story, as the 10-year yield would be much lower.
Purchase application data
Last week was the first negative week in the purchase application data report since rates fell, as we saw a decline of 11% weekly and they were down 20% year over year. Rates had been ticking up a bit higher, but before last week, it didn’t impact the data much. Eight out of the last nine weeks that I have counted (after making some holiday adjustments) are positive, and for 2024, we have two positive prints versus one negative print.
We always want to weigh this index after the second week of January to the first week of May: After May, total volumes traditionally always fall. Much like 2022-203 data, we have a bounce in demand as mortgage rates have fallen. The question is: how will the rest of the heat months act? Last year, rates spiked up higher and then headed toward 8%. This year should be a different story unless the Fed messes it up.
The week ahead
After a crazy week of labor data and remarks by Fed Chair Jerome Powell, we should have a calmer week with some manufacturing data, household credit data and the all-important jobless claims data.
I will be very interested to see how the 10-year yield trades, especially after Powell talks on 60 Minutes Sunday night — that has the potential to be a market mover. Remember, to their credit, the Federal Reserve used the term restrictive policy when the 10-year yield broke over 4.25% and headed toward 5%. Talk is cheap, and I will need to see some action before they want lower yields to ensure they focus on their dual mandate by keeping prices stable and employment high.
Commercial real estate has had a few rough years, and it seems like things won’t be getting better anytime soon. The sector is set for a potential rise in defaults, as higher interest rates have increased the costs of refinancing.
And with $2.8 trillion due between now and 2028, more landlords could be feeling the crunch. According to data firm Trepp, commercial debt maturities are expected to balloon in the next few years. While many loans were extended or refinanced, the clock is slowly ticking for the CRE sector as those extensions are coming due.
Worst Commercial Slump in the Last 50 Years
The CRE market has been struggling to regain its footing since the start of the pandemic, especially in office space. When the pandemic hit, many office spaces emptied, forcing landlords to make deals to delay payments until things recovered.
Commercial Mortgage Maturities by Lender Type (2023-2028) – Trepp
Unfortunately for those invested in the office arena, remote and hybrid working is now becoming the norm, with many businesses downsizing their office space or even becoming fully remote.
Now that the CRE debt is coming due, landlords are starting to squirm. Because of how commercial mortgages are structured, when the debt matures, the principal must be paid off in full or refinanced.
This has led to one of the steepest commercial real estate price declines in the last 50 years, a group of economists at the International Monetary Fund (IMF) found. This can largely be attributed to higher interest rates, steep monetary policy tightening, and stricter bank lending standards, according to the IMF.
While the office sector has been the hardest hit, the entire market has felt the sting over the last few years thanks to a souring CRE market. Vacancy rates in multifamily homes have increased, and rent growth is expected to decline in the coming year, according to CBRE. Industrial spaces are also showing signs of weakening.
The only potential bright spot in CRE is the retail sector, as robust consumer spending and suburban migration has driven demand for outdoor shopping centers.
Interest Rates Aren’t Going Down Fast Enough
While interest rates have gone down a bit, it might not be enough. According to The Wall Street Journal, many borrowers are refinancing at rates higher than when they first took out loans.
The Federal Reserve is under pressure to cut rates, with some economists expecting a cut by the end of the year to 3.75%-4% and continued cuts by the first half of 2026 until the rate hits 1.75%-2%. However, that might not be fast enough for the CRE sector. Fitch Ratings expects delinquency rates in commercial real estate to increase to 4.5% this year, while regulators are worried about the spillover effects.
In its 2023 annual report, the Financial Stability Oversight Council (FSOC) cited exposure to commercial real estate as a concern for financial institutions and said that they need to better understand the risk. Nearly 50% of CRE’s outstanding debt is held by banks.
“As losses from a CRE loan portfolio accumulate, they can spill over into the broader financial system. Sales of financially distressed properties can… lead to a broader downward CRE valuation spiral,” FSOC said in its report.
The Bottom Line for Real Estate Investors
Commercial real estate investors should buckle in and get ready for a bumpy ride over the next few years. That said, although the CRE space is under pressure, there’s still some time for landlords to negotiate. Still, with CRE sales also under pressure, that’s devalued properties, making it hard for lenders and borrowers to agree on how much the property should be worth.
With banks becoming more risk averse around CRE and under more regulatory scrutiny, that could open opportunities for non-bank lenders such as private credit to step in. And for some savvy investors, the stress in the CRE market could provide opportunities.
In other words, there could be opportunities for investors to find distressed properties for a great value, provided they’re prepared to weather some uncertainty in the next few years. However, uncovering these bargains will require a lot of due diligence to avoid falling for value traps.
Real estate investors should make sure to heavily scrutinize every opportunity that presents itself. While there will certainly be some opportunities to revitalize properties, not all cheap properties will be worth the long-term price.
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https://frankbuysphilly.com/wp-content/uploads/2024/02/offices-1024x517.jpg5171024Frank Buys Phillyhttps://frankbuysphilly.com/wp-content/uploads/2017/10/Bo-Final-Logo.pngFrank Buys Philly2024-02-04 02:09:242024-02-04 02:09:24$2 Trillion in Commercial Debt is Coming Due—What Does That Mean for the Industry?
Today we got a jobs Friday hat trick! Better headline jobs were reported, with positive revisions and more robust wage growth, which caught bond traders off guard and sent bond yields and mortgage rates higher today. Now, we do have some quirky seasonality issues with this report, but as I have often stressed, don’t look at one to two positive or negative job reports; take the longer-term trend. The trend looks right to me, so let me explain my take.
Below is an explanation of all my economic work on the labor market during and beyond the COVID-19 recovery.
1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By December the upfront recovery phase was done, and I needed to model out when would get the jobs lost back.
2. Early in the labor market recovery, when we saw some weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose all the way to 12 million and are currently a bit over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver. You can read about that here.
3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too
4. This is the key one for right now!
If COVID-19 didn’t happen, we would have between 157 million and 159 million jobs today, which would have been regular with where job growth was running in February of 2020. Today, we are at 157 million! The reason this is so important is because job growth should be cooling down right about now. So, ignore this report and the last revisions and look at the trend of job growth data, it looks perfectly fine. At this stage of the economic cycle, the jobless claims data is more key, and right now, that data isn’t flashing red signals yet. 323,000 on the 4-week moving average has been my line in the sand, and we aren’t close to that yet.
With all that said, it isn’t surprising that the 10-year yield is still above 4% because I favor labor data over inflation. I can’t claim higher rates based on the growth rate of inflation data, but I can based on labor data. I say this because I don’t believe the Fed has pivoted yet. On to the report.
From BLS: Total nonfarm payroll employment rose by 353,000 in January, and the unemployment rate remained at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, retail trade, and social assistance. Employment declined in the mining, quarrying, and oil and gas extraction industry.
Here are the jobs that were created and lost in the previous month:
In this jobs report, the unemployment rate for education levels looks like this:
Less than a high school diploma: 6.0%
High school graduate and no college: 4.3%
Some college or associate degree: 3.3%
Bachelor’s degree or higher: 2.1%
So what should be made of this jobs report since other data lines show the labor market is less tight? Go with the trend; the job growth numbers are slowing down on schedule, but the labor market isn’t breaking.
Over the next 12 months, the trend data will clearly show what I am talking about, as the last 12 months of the labor data have also shown. We must learn to separate the slowdown in job growth from the labor market breaking. This is why I have stressed the 323,000 jobless claims data since 2022. We traditionally have one to two reports a year that beat positive and one to two reports a year that miss. Don’t put your weight on one to two reports — focus on the trend and all the labor data put together.
With ongoing liquidity challenges and a continuing lag in Home Equity Conversion Mortgage (HECM) case numbers, reverse mortgage business in 2024 started off with a bit of a whimper.
Both HECM endorsements and HECM-backed securities (HMBS) issuance saw modest declines in January, although four of the top 10 HECM lenders managed to post slight gains for the month. This is according to HECM endorsement data compiled by Reverse Market Insight (RMI), and HMBS issuance data from public Ginnie Mae data and private sources compiled by New View Advisors.
HECM volume, inbound inquiries
HECM endorsements fell on a per-unit basis by 1.7%, according to RMI, to 2,153 loans for the month of January. Among the top 10 lenders that posted gains, the biggest performer was Goodlife Home Loans, which recorded a 27% gain to 47 loans, followed by Fairway Independent Mortgage Corp. (up 19.1% to 106 loans), Finance of America Reverse (up 17.7% to 592 loans) and Longbridge Financial (up 7% to 258).
“The key is non-refi case numbers issued right now, so we’re less worried about endorsements at the moment since case numbers are so low,” RMI President John Lunde said when reached by RMD.
John Lunde
Outreach to individual reverse mortgage originators has seemed to indicate a perceived rise in inbound inquiries, but inquiries do not always result in closed loans. When asked if this could be “noise” or if it could lead to a change in volume levels, Lunde expressed cautious optimism.
“We’re seeing expected rates roughly a point less than what we saw at the 10-year CMT (constant maturity Treasury) peak recently in October, which has a huge impact on borrower qualification and originator marketing results,” Lunde said. “There’s always been a seasonality to the industry where the holidays are significantly slower than immediately before and after.”
Among the tracked performance regions, RMI singled out New England as having particular momentum, which could result in it overtaking the New York/New Jersey region if the trend persists.
“I think it speaks to the regulatory challenges in New York primarily, along with the inability to do co-op properties in the HECM program,” Lunde said. “New York could be so much bigger than it is now, but those two definitely limit things relative to other states.”
New York passed a law in 2021 that allows for proprietary reverse mortgages to be conducted on co-ops, but HECM loans do not qualify.
Case numbers, looking ahead
Case number data for November 2023, which RMI characterized as “disappointing,” was also released. Cases dropped 22% from October, steeper than the decline one year prior when the HECM-to-HECM refi boom dried up.
But things could turn around, Lunde explained.
“Seasonality is in our favor now and the significant drop in the 10-year CMT is a huge help,” he said. “The other two big things that originators are more in control of is orienting their efforts toward purchase business now that HECM offers similar seller concessions as competing forward loans, which is huge, and working with advisers to develop relationships with mutually beneficial referrals.”
RMI will be exploring more on these topics in the future, Lunde said, calling them “the future of reverse.”
As for what originators should keep in mind as they progress further into the year, Lunde said there is reason to be optimistic.
“We have significant support for positive program changes to both [the HECM and HMBS] programs, which could really help things,” he explained. “But originators should keep in mind how long those take to transpire and just how out of their control those factors are. Focus on the hard work of building a sustainable referral business and the tools that can help you do that. If a windfall comes from further rate drops or program changes, so much the better.”
HMBS issuance
On the securities side of the equation, issuance in January fell to $445 million, down $12 million from December. The January tally of 79 pools issued was flat compared to December and, barring the early days of the Ginnie Mae HMBS program in 2009, it was the fourth-lowest monthly tally ever, according to New View Advisors.
Finance of America Reverse remained the top issuer in January at $155 million, a slight $2 million reduction from the prior month. Longbridge posted a $3 million gain in issuance to $93 million, while Liberty Reverse Mortgage/PHH Mortgage and Mutual of Omaha issued $83 million and $75 million, respectively.
“Issuer 42,” the designation applied to the former Reverse Mortgage Funding (RMF) portfolio now under the control of Ginnie Mae, again issued no HMBS pools in January.
The month’s original, first-participation production fell visibly below year-ago levels, hitting $282 million last month compared to $347 million in January 2023. Of the 79 pools issued in January, 21 were first participations, while another 21 pools of the full total had “aggregate pool size less than $1 million,” stemming from a Ginnie Mae HMBS policy introduced last year.
“2024 is off to a slow start with January 2024’s issuance volume being $78 million less than January 2023’s issuance,” said Michael McCully, partner at New View Advisors. “We expect to see similar industry volume for 2024.”
New View expects HMBS issuance will once again fall well below the record-setting levels of 2022, which saw $14 billion in volume. In 2023, issuance failed to reach half of that level, settling in at about $6.5 billion.
When asked if the new Ginnie Mae policy that allows for smaller HMBS pool sizes could make a difference this year, McCully said it was possible, but that does not mean it will impact the final issuance figure all that much.
“The smaller and more frequent pool issuance helps liquidity but does not have a material impact on origination volume,” he said.
When asked what industry professionals should most keep in mind heading further into 2024, McCully was concise.
“Interest rates remain our bellwether; as the 10-year goes, so goes the industry,” he said.
https://frankbuysphilly.com/wp-content/uploads/2024/01/computergraph_unsplash.jpg9001350Frank Buys Phillyhttps://frankbuysphilly.com/wp-content/uploads/2017/10/Bo-Final-Logo.pngFrank Buys Philly2024-02-02 21:28:092024-02-02 21:28:09Reverse mortgage volume, HMBS issuance fall slightly in January
Top 10 mortgage lender and servicer NewRez is restructuring its distributed retail mortgage business, which has resulted in cuts to regional and divisional managers. The restructuring also includes reduced compensation for loan officers, and sources said that many are seeking new opportunities at rival lenders.
Nonproducing regional and divisional managers were let go on Wednesday as part of the restructuring, multiple sources told HousingWire.
A top executive at NewRez told HousingWire that the goal is to “flatten” the organization and better align the distributed retail division with other sales forces to capture servicing business.
Sources said that NewRez had engaged in merger-and-acquisition talks with at least one large independent mortgage bank to sell its retail division, still known to some in the industry as Caliber Home Loans, but a deal did not materialize. NewRez declined to comment on recent M&A rumors, but an executive said its retail platform is not for sale.
“We’re committed to retail,” the NewRez executive said in a conversation with HousingWire on Thursday. “There’s always noise about NewRez not being committed to retail. That’s not an accurate statement.”
NewRez said the restructuring will position LOs to generate their own business while also executing on in-house servicing leads.
NewRez is among the industry’s largest holders of mortgage servicing rights (MSR), with a portfolio that clocked in at $452 billion in unpaid balance as of January, per Recursion estimates.
“Given the size of our MSR portfolio and focus on recapture, we believe our localized model is a differentiator, especially when you compare it to other large servicers,” the NewRez executive said. “So, we’re committed to retail, and we want to align our leadership with our goals and objectives.”
Employees on Thursday told HousingWire that significant changes were made to loan officer compensation agreements and they expected many LOs to depart for other lenders.
NewRez said it hoped to retain LOs and would continue to hire in the distributed retail channel.
NewRez, itself owned by real estate investment trust Rithm Capital, acquired Caliber in 2021 in a deal that was valued at nearly $1.7 billion. Much of the appeal was tied Caliber’s servicing portfolio. As of June 203, more than 200,000 loans had been transferred to the NewRez technology platform.
The Tech100 Mortgage award celebrates the most innovative and impactful organizations in housing. More than just an acknowledgment; the Tech100 award is a testament to the transformative impact these companies have made, propelling the mortgage sector into new realms of efficiency, transparency and accessibility.
Now in its 12th year, the Tech100 program provides housing professionals with a comprehensive list of the most innovative and impactful organizations in the industry. The list can be leveraged to identify partners and solutions to the challenges that mortgage lenders and real estate professionals face every day.
Take a look below to see the full list of this year’s honorees. Congratulations to the 2024 Tech100 Mortgage winners.
The Tech100 Real Estate award celebrates the most innovative and impactful organizations in housing. More than just an acknowledgment; the Tech100 award is a testament to the transformative impact these companies have made, propelling the real estate sector into new realms of efficiency, transparency and accessibility.
Now in its 5th year, the Tech100 Real Estate program provides housing professionals with a comprehensive list of the most innovative and impactful organizations in the industry. The list can be leveraged to identify partners and solutions to the challenges that real estate professionals face every day.
Take a look below to see the full list of this year’s honorees. Congratulations to the 2024 Tech100 Real Estate winners.
Shortly after EasyKnock acquired home equity investment platform Balance Homes, the company appointed former Balance Homes co-founders Judd Schoenholtz and Aaron LaRue as chief revenue officer and chief technology officer, respectively.
“Judd and Aaron’s respective leadership is key as we continue on EasyKnock’s path to develop the first marketplace in the industry,” Jarred Kessler, CEO and founder of EasyKnock, said in a statement. “They each have already had great influence on the organization in the strategic planning for the year ahead, and I’m excited to see their impact as we continue to build.”
In his new role, Schoenholtz will be responsible for driving growth for the EasyKnock marketplace. His first order of business will be to integrate Balance Homes’ product and team with the EasyKnock platform. Before starting Balance Homes, Schoenholtz co-founded and served as CEO at Open Listings, an online real estate brokerage that was acquired by Opendoor. He also has experience designing and building digital products for companies like Google, Mattel, Samsung, Target and JetBlue.
LaRue, meanwhile, will focus on the expansion of EasyKnock’s technology platform. Throughout his career, he has worked at multiple financial companies including Zillow, SoFi and Clara Lending, leading platform and product development efforts.
The hires come on the heels of a series of proptech startup purchases by EasyKnock. In May 2023, the company gobbled up Ribbon, a power buyer firm. In September, it acquired home maintenance platform Onder, and in December, it acquired Balance Homes.
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Pretium Partners raises $1 billion to acquire BTR homes: Bloomberg
Real estate investment management firm Pretium Partners has raised nearly $1 billion for a new fund dedicated to acquiring built-to-rent (BTR) homes, Bloomberg reported on Tuesday.
The company led by former Goldman Sachs partner Don Mullen also said in a statement that it has now invested a total of more than $2.5 billion in purpose-built rental homes. The investment has resulted in 7,500 new built-to-rent homes acquired across 37 cities and 11 states.
“Decades of under-building and under-investment have led to today’s shortage of viable housing in the United States. That deficit can only be fixed with new capital invested to create new housing supply,” Josh Pristaw, Pretium’s head of real estate, said in a statement. “We are proud to be in a position to create necessary new housing throughout the United States and eager to continue investing in new homes to expand housing choice and supply over the next decade.”
Elevated mortgage rates and limited housing inventory fuel the ongoing demand for single-family rental units, keeping construction starts afloat in the BTR market.
Since borrowing costs surged in 2022, investors have developed other ways to buy homes, including directly from builders. In January, Blackstone announced plans to buy Tricon Residential, which owns more than 37,000 U.S. rental homes.
In June 2023, Pretium also acquired thousands of homes in a $1.5 billion deal with D.R. Horton, one of the nation’s largest builders.
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RealReports raises $2 million in seed funding
Proptech company RealReports, formerly known as BHR, has successfully secured $2 million in seed funding. TTV Capital, Moderne Ventures, Erez Capital and other venture capital firms led the round of investment.
With this capital infusion, the company aims to accelerate its product development, grow its team and pursue market penetration with real estate brokerages, MLS associations and other proptech companies nationwide.
“We are thrilled to have such engaged and helpful investors join us in this round, and are more confident than ever before about our path forward,” James Rogers, co-founder and CEO of RealReports, said in a statement.
RealReports is a real estate platform that gathers property data, ranging from climate risk to valuation, in one place. It pulls information from more than 30 data providers and also features an AI-powered assistant, Aiden, which can answer questions about a property. The product is marketed toward real estate agents to help them build trust and credibility with their clients, the news release states.
In an environment in which agents are increasingly under scrutiny, having a clear understanding of data trends is a competitive advantage for real estate professionals.
RealReports also announced a partnership with Plunk, an AI-powered home analytics platform, last November. This collaboration made property research, comprehensive valuation and remodeling insights available in one place.
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How will mortgage rates impact seasonal inventory in 2024?
How will mortgage rates impact seasonal inventory in 2024? Is the seasonal bottom going to happen later than I want? Maybe. It’s not what I wanted to see in 2024, but I have to be realistic since we are already in February.
In the last four years, we have had abnormal seasonal inventory data, meaning that the spring inventory bottom happens later in the year. This is due to demand rising late in one year, pushing through the early part of the next year and preventing inventory growth. Also, when mortgage rates rise, the inventory peak happens later in the year.
I hope we find the seasonal bottom early in February rather than wait for March or April. Since eight of the last nine weeks (excluding the holiday period) have had positive purchase application data, I might need to wait a few more weeks before we see the seasonal bottom.
Weekly housing inventory data
One substantial positive story for 2024 is that we have more housing inventory year over year. It’s not a lot, but anything is positive, which I will take. I am a very pro-housing supply person and will feel much better about the housing market when we return to pre-COVID-19 levels for total active listings. However, last week, inventory fell week to week but was up year over year.
Here is a look at last week:
New listings data
I have been hoping for more new listings data growth in 2024 and even though we’re positive year over year, it’s just not as much as I would like. But at least it’s positive! New listings were trending at the lowest levels ever in 2023, but that should not be the case in 2024. Never forget most sellers are buyers of homes as well, especially if the economy isn’t in a job loss recession. This is a topic I recently discussed on CNBC.
Weekly new listing data for last week over the last several years:
Price cut percentage
Every year, one-third of all homes take a price cut before selling — this is very traditional housing activity. However, when mortgage rates rise and demand gets hit, the price cut percentage data grows year over year.
A perfect example was in 2022: when housing inventory rose faster as demand crashed, the percentage of price cuts rose faster. That increase matched the slope of the inventory increase, and people needed to cut prices to sell their homes. Existing home sales stopped crashing after November of 2022 and this data line has stabilized. As long as this trend continues, we will go below the price cut percentage in 2023 in the spring of this year.
This is the price-cut percentage for the same week over the last few years:
Mortgage rates and the 10-year yield
The 10-year yield is the key for housing in 2024. In my 2024 forecast, I have the 10-year yield range between 3.21%-4.25%, with a critical line in the sand at 3.37%. If the economic data stays firm, we shouldn’t break below 3.21%, but if the labor data gets weaker, that line in the sand — which I call the Gandalf line, as in “you shall not pass” — will be tested.
This 10-year yield range means mortgage rates between 5.75%-7.25%, but this assumes spreads are still bad. The spreads have been improving this year so much that if we hit 4.25% on the 10-year yield, we won’t see 7.25% in mortgage rates.
It was a crazy week for the 10-year yield and mortgage rates as it was jobs week and the Federal Reserve held its Federal Open Markets Committee (FOMC) meeting. The 10-year yield started at 4.13%, got as low as 3.81%, and ended the week at 4.02%. Mortgage rates started the week at 6.88%, fell to a low of 6.63%, then shot up to 6.92% on jobs Friday as the labor data came in stronger than anticipated and the 10-year yield spiked higher with mortgage rates, as you can see in the chart below. I also wrote about the jobs report in this article.
I have always stressed that the labor data is more critical for mortgage rates than the inflation growth rate at this stage. The growth rate of inflation is slowing down noticeably. PCE inflation data is running below 2% on the three- and six-month data line trends, but the 10-year yield is still over 4% and we are near 7% mortgage rates. If jobless claims data ran over 323,000 on the four-week moving average, that would be a different story, as the 10-year yield would be much lower.
Purchase application data
Last week was the first negative week in the purchase application data report since rates fell, as we saw a decline of 11% weekly and they were down 20% year over year. Rates had been ticking up a bit higher, but before last week, it didn’t impact the data much. Eight out of the last nine weeks that I have counted (after making some holiday adjustments) are positive, and for 2024, we have two positive prints versus one negative print.
We always want to weigh this index after the second week of January to the first week of May: After May, total volumes traditionally always fall. Much like 2022-203 data, we have a bounce in demand as mortgage rates have fallen. The question is: how will the rest of the heat months act? Last year, rates spiked up higher and then headed toward 8%. This year should be a different story unless the Fed messes it up.
The week ahead
After a crazy week of labor data and remarks by Fed Chair Jerome Powell, we should have a calmer week with some manufacturing data, household credit data and the all-important jobless claims data.
I will be very interested to see how the 10-year yield trades, especially after Powell talks on 60 Minutes Sunday night — that has the potential to be a market mover. Remember, to their credit, the Federal Reserve used the term restrictive policy when the 10-year yield broke over 4.25% and headed toward 5%. Talk is cheap, and I will need to see some action before they want lower yields to ensure they focus on their dual mandate by keeping prices stable and employment high.
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$2 Trillion in Commercial Debt is Coming Due—What Does That Mean for the Industry?
Commercial real estate has had a few rough years, and it seems like things won’t be getting better anytime soon. The sector is set for a potential rise in defaults, as higher interest rates have increased the costs of refinancing.
And with $2.8 trillion due between now and 2028, more landlords could be feeling the crunch. According to data firm Trepp, commercial debt maturities are expected to balloon in the next few years. While many loans were extended or refinanced, the clock is slowly ticking for the CRE sector as those extensions are coming due.
Worst Commercial Slump in the Last 50 Years
The CRE market has been struggling to regain its footing since the start of the pandemic, especially in office space. When the pandemic hit, many office spaces emptied, forcing landlords to make deals to delay payments until things recovered.
Unfortunately for those invested in the office arena, remote and hybrid working is now becoming the norm, with many businesses downsizing their office space or even becoming fully remote.
Now that the CRE debt is coming due, landlords are starting to squirm. Because of how commercial mortgages are structured, when the debt matures, the principal must be paid off in full or refinanced.
This has led to one of the steepest commercial real estate price declines in the last 50 years, a group of economists at the International Monetary Fund (IMF) found. This can largely be attributed to higher interest rates, steep monetary policy tightening, and stricter bank lending standards, according to the IMF.
While the office sector has been the hardest hit, the entire market has felt the sting over the last few years thanks to a souring CRE market. Vacancy rates in multifamily homes have increased, and rent growth is expected to decline in the coming year, according to CBRE. Industrial spaces are also showing signs of weakening.
The only potential bright spot in CRE is the retail sector, as robust consumer spending and suburban migration has driven demand for outdoor shopping centers.
Interest Rates Aren’t Going Down Fast Enough
While interest rates have gone down a bit, it might not be enough. According to The Wall Street Journal, many borrowers are refinancing at rates higher than when they first took out loans.
The Federal Reserve is under pressure to cut rates, with some economists expecting a cut by the end of the year to 3.75%-4% and continued cuts by the first half of 2026 until the rate hits 1.75%-2%. However, that might not be fast enough for the CRE sector. Fitch Ratings expects delinquency rates in commercial real estate to increase to 4.5% this year, while regulators are worried about the spillover effects.
In its 2023 annual report, the Financial Stability Oversight Council (FSOC) cited exposure to commercial real estate as a concern for financial institutions and said that they need to better understand the risk. Nearly 50% of CRE’s outstanding debt is held by banks.
“As losses from a CRE loan portfolio accumulate, they can spill over into the broader financial system. Sales of financially distressed properties can… lead to a broader downward CRE valuation spiral,” FSOC said in its report.
The Bottom Line for Real Estate Investors
Commercial real estate investors should buckle in and get ready for a bumpy ride over the next few years. That said, although the CRE space is under pressure, there’s still some time for landlords to negotiate. Still, with CRE sales also under pressure, that’s devalued properties, making it hard for lenders and borrowers to agree on how much the property should be worth.
With banks becoming more risk averse around CRE and under more regulatory scrutiny, that could open opportunities for non-bank lenders such as private credit to step in. And for some savvy investors, the stress in the CRE market could provide opportunities.
In other words, there could be opportunities for investors to find distressed properties for a great value, provided they’re prepared to weather some uncertainty in the next few years. However, uncovering these bargains will require a lot of due diligence to avoid falling for value traps.
Real estate investors should make sure to heavily scrutinize every opportunity that presents itself. While there will certainly be some opportunities to revitalize properties, not all cheap properties will be worth the long-term price.
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Jobs data sends mortgage rates higher
Today we got a jobs Friday hat trick! Better headline jobs were reported, with positive revisions and more robust wage growth, which caught bond traders off guard and sent bond yields and mortgage rates higher today. Now, we do have some quirky seasonality issues with this report, but as I have often stressed, don’t look at one to two positive or negative job reports; take the longer-term trend. The trend looks right to me, so let me explain my take.
Below is an explanation of all my economic work on the labor market during and beyond the COVID-19 recovery.
1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By December the upfront recovery phase was done, and I needed to model out when would get the jobs lost back.
2. Early in the labor market recovery, when we saw some weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose all the way to 12 million and are currently a bit over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver. You can read about that here.
3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too
4. This is the key one for right now!
If COVID-19 didn’t happen, we would have between 157 million and 159 million jobs today, which would have been regular with where job growth was running in February of 2020. Today, we are at 157 million! The reason this is so important is because job growth should be cooling down right about now. So, ignore this report and the last revisions and look at the trend of job growth data, it looks perfectly fine. At this stage of the economic cycle, the jobless claims data is more key, and right now, that data isn’t flashing red signals yet. 323,000 on the 4-week moving average has been my line in the sand, and we aren’t close to that yet.
With all that said, it isn’t surprising that the 10-year yield is still above 4% because I favor labor data over inflation. I can’t claim higher rates based on the growth rate of inflation data, but I can based on labor data. I say this because I don’t believe the Fed has pivoted yet. On to the report.
From BLS: Total nonfarm payroll employment rose by 353,000 in January, and the unemployment rate remained at 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, retail trade, and social assistance. Employment declined in the mining, quarrying, and oil and gas extraction industry.
Here are the jobs that were created and lost in the previous month:
In this jobs report, the unemployment rate for education levels looks like this:
So what should be made of this jobs report since other data lines show the labor market is less tight? Go with the trend; the job growth numbers are slowing down on schedule, but the labor market isn’t breaking.
Over the next 12 months, the trend data will clearly show what I am talking about, as the last 12 months of the labor data have also shown. We must learn to separate the slowdown in job growth from the labor market breaking. This is why I have stressed the 323,000 jobless claims data since 2022. We traditionally have one to two reports a year that beat positive and one to two reports a year that miss. Don’t put your weight on one to two reports — focus on the trend and all the labor data put together.
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Reverse mortgage volume, HMBS issuance fall slightly in January
With ongoing liquidity challenges and a continuing lag in Home Equity Conversion Mortgage (HECM) case numbers, reverse mortgage business in 2024 started off with a bit of a whimper.
Both HECM endorsements and HECM-backed securities (HMBS) issuance saw modest declines in January, although four of the top 10 HECM lenders managed to post slight gains for the month. This is according to HECM endorsement data compiled by Reverse Market Insight (RMI), and HMBS issuance data from public Ginnie Mae data and private sources compiled by New View Advisors.
HECM volume, inbound inquiries
HECM endorsements fell on a per-unit basis by 1.7%, according to RMI, to 2,153 loans for the month of January. Among the top 10 lenders that posted gains, the biggest performer was Goodlife Home Loans, which recorded a 27% gain to 47 loans, followed by Fairway Independent Mortgage Corp. (up 19.1% to 106 loans), Finance of America Reverse (up 17.7% to 592 loans) and Longbridge Financial (up 7% to 258).
“The key is non-refi case numbers issued right now, so we’re less worried about endorsements at the moment since case numbers are so low,” RMI President John Lunde said when reached by RMD.
Outreach to individual reverse mortgage originators has seemed to indicate a perceived rise in inbound inquiries, but inquiries do not always result in closed loans. When asked if this could be “noise” or if it could lead to a change in volume levels, Lunde expressed cautious optimism.
“We’re seeing expected rates roughly a point less than what we saw at the 10-year CMT (constant maturity Treasury) peak recently in October, which has a huge impact on borrower qualification and originator marketing results,” Lunde said. “There’s always been a seasonality to the industry where the holidays are significantly slower than immediately before and after.”
Among the tracked performance regions, RMI singled out New England as having particular momentum, which could result in it overtaking the New York/New Jersey region if the trend persists.
“I think it speaks to the regulatory challenges in New York primarily, along with the inability to do co-op properties in the HECM program,” Lunde said. “New York could be so much bigger than it is now, but those two definitely limit things relative to other states.”
New York passed a law in 2021 that allows for proprietary reverse mortgages to be conducted on co-ops, but HECM loans do not qualify.
Case numbers, looking ahead
Case number data for November 2023, which RMI characterized as “disappointing,” was also released. Cases dropped 22% from October, steeper than the decline one year prior when the HECM-to-HECM refi boom dried up.
But things could turn around, Lunde explained.
“Seasonality is in our favor now and the significant drop in the 10-year CMT is a huge help,” he said. “The other two big things that originators are more in control of is orienting their efforts toward purchase business now that HECM offers similar seller concessions as competing forward loans, which is huge, and working with advisers to develop relationships with mutually beneficial referrals.”
RMI will be exploring more on these topics in the future, Lunde said, calling them “the future of reverse.”
As for what originators should keep in mind as they progress further into the year, Lunde said there is reason to be optimistic.
“We have significant support for positive program changes to both [the HECM and HMBS] programs, which could really help things,” he explained. “But originators should keep in mind how long those take to transpire and just how out of their control those factors are. Focus on the hard work of building a sustainable referral business and the tools that can help you do that. If a windfall comes from further rate drops or program changes, so much the better.”
HMBS issuance
On the securities side of the equation, issuance in January fell to $445 million, down $12 million from December. The January tally of 79 pools issued was flat compared to December and, barring the early days of the Ginnie Mae HMBS program in 2009, it was the fourth-lowest monthly tally ever, according to New View Advisors.
Finance of America Reverse remained the top issuer in January at $155 million, a slight $2 million reduction from the prior month. Longbridge posted a $3 million gain in issuance to $93 million, while Liberty Reverse Mortgage/PHH Mortgage and Mutual of Omaha issued $83 million and $75 million, respectively.
“Issuer 42,” the designation applied to the former Reverse Mortgage Funding (RMF) portfolio now under the control of Ginnie Mae, again issued no HMBS pools in January.
The month’s original, first-participation production fell visibly below year-ago levels, hitting $282 million last month compared to $347 million in January 2023. Of the 79 pools issued in January, 21 were first participations, while another 21 pools of the full total had “aggregate pool size less than $1 million,” stemming from a Ginnie Mae HMBS policy introduced last year.
“2024 is off to a slow start with January 2024’s issuance volume being $78 million less than January 2023’s issuance,” said Michael McCully, partner at New View Advisors. “We expect to see similar industry volume for 2024.”
New View expects HMBS issuance will once again fall well below the record-setting levels of 2022, which saw $14 billion in volume. In 2023, issuance failed to reach half of that level, settling in at about $6.5 billion.
When asked if the new Ginnie Mae policy that allows for smaller HMBS pool sizes could make a difference this year, McCully said it was possible, but that does not mean it will impact the final issuance figure all that much.
“The smaller and more frequent pool issuance helps liquidity but does not have a material impact on origination volume,” he said.
When asked what industry professionals should most keep in mind heading further into 2024, McCully was concise.
“Interest rates remain our bellwether; as the 10-year goes, so goes the industry,” he said.
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NewRez restructures retail division, cuts senior managers
Top 10 mortgage lender and servicer NewRez is restructuring its distributed retail mortgage business, which has resulted in cuts to regional and divisional managers. The restructuring also includes reduced compensation for loan officers, and sources said that many are seeking new opportunities at rival lenders.
Nonproducing regional and divisional managers were let go on Wednesday as part of the restructuring, multiple sources told HousingWire.
A top executive at NewRez told HousingWire that the goal is to “flatten” the organization and better align the distributed retail division with other sales forces to capture servicing business.
Sources said that NewRez had engaged in merger-and-acquisition talks with at least one large independent mortgage bank to sell its retail division, still known to some in the industry as Caliber Home Loans, but a deal did not materialize. NewRez declined to comment on recent M&A rumors, but an executive said its retail platform is not for sale.
“We’re committed to retail,” the NewRez executive said in a conversation with HousingWire on Thursday. “There’s always noise about NewRez not being committed to retail. That’s not an accurate statement.”
NewRez said the restructuring will position LOs to generate their own business while also executing on in-house servicing leads.
NewRez is among the industry’s largest holders of mortgage servicing rights (MSR), with a portfolio that clocked in at $452 billion in unpaid balance as of January, per Recursion estimates.
“Given the size of our MSR portfolio and focus on recapture, we believe our localized model is a differentiator, especially when you compare it to other large servicers,” the NewRez executive said. “So, we’re committed to retail, and we want to align our leadership with our goals and objectives.”
Employees on Thursday told HousingWire that significant changes were made to loan officer compensation agreements and they expected many LOs to depart for other lenders.
NewRez said it hoped to retain LOs and would continue to hire in the distributed retail channel.
NewRez, itself owned by real estate investment trust Rithm Capital, acquired Caliber in 2021 in a deal that was valued at nearly $1.7 billion. Much of the appeal was tied Caliber’s servicing portfolio. As of June 203, more than 200,000 loans had been transferred to the NewRez technology platform.
Executives at Rithm Capital have also floated the possibility of spinning out a mortgage division.
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Announcing the 2024 Tech100 Mortgage Winners!
The Tech100 Mortgage award celebrates the most innovative and impactful organizations in housing. More than just an acknowledgment; the Tech100 award is a testament to the transformative impact these companies have made, propelling the mortgage sector into new realms of efficiency, transparency and accessibility.
Now in its 12th year, the Tech100 program provides housing professionals with a comprehensive list of the most innovative and impactful organizations in the industry. The list can be leveraged to identify partners and solutions to the challenges that mortgage lenders and real estate professionals face every day.
Take a look below to see the full list of this year’s honorees. Congratulations to the 2024 Tech100 Mortgage winners.
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Announcing the 2024 Tech100 Real Estate winners!
The Tech100 Real Estate award celebrates the most innovative and impactful organizations in housing. More than just an acknowledgment; the Tech100 award is a testament to the transformative impact these companies have made, propelling the real estate sector into new realms of efficiency, transparency and accessibility.
Now in its 5th year, the Tech100 Real Estate program provides housing professionals with a comprehensive list of the most innovative and impactful organizations in the industry. The list can be leveraged to identify partners and solutions to the challenges that real estate professionals face every day.
Take a look below to see the full list of this year’s honorees. Congratulations to the 2024 Tech100 Real Estate winners.
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EasyKnock announces two new executive hires
Shortly after EasyKnock acquired home equity investment platform Balance Homes, the company appointed former Balance Homes co-founders Judd Schoenholtz and Aaron LaRue as chief revenue officer and chief technology officer, respectively.
“Judd and Aaron’s respective leadership is key as we continue on EasyKnock’s path to develop the first marketplace in the industry,” Jarred Kessler, CEO and founder of EasyKnock, said in a statement. “They each have already had great influence on the organization in the strategic planning for the year ahead, and I’m excited to see their impact as we continue to build.”
In his new role, Schoenholtz will be responsible for driving growth for the EasyKnock marketplace. His first order of business will be to integrate Balance Homes’ product and team with the EasyKnock platform. Before starting Balance Homes, Schoenholtz co-founded and served as CEO at Open Listings, an online real estate brokerage that was acquired by Opendoor. He also has experience designing and building digital products for companies like Google, Mattel, Samsung, Target and JetBlue.
LaRue, meanwhile, will focus on the expansion of EasyKnock’s technology platform. Throughout his career, he has worked at multiple financial companies including Zillow, SoFi and Clara Lending, leading platform and product development efforts.
The hires come on the heels of a series of proptech startup purchases by EasyKnock. In May 2023, the company gobbled up Ribbon, a power buyer firm. In September, it acquired home maintenance platform Onder, and in December, it acquired Balance Homes.
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