First-time homebuyers made up 55% of agency purchase mortgages in 2023, according to Intercontinental Exchange (ICE) eMBS data, the highest such share in the 10 years ICE has been tracking the metric.
A record 47% of government-sponsored enterprise (GSE) purchase loans in 2023 came from first-time homebuyers, a number that’s been trending gradually higher throughout the past decade.
“Since 1995, only two quarters have seen fewer than one million first lien mortgages originated,” Andy Walden, vice president of enterprise research at ICE.
“The first was Q1 2023, and Q4 the second. Looking back, last year’s market was dominated by purchase lending, with loans to buy homes making up 82% of a historically low number of originations. While it remains a tough market for prospective purchasers, our eMBS agency securities database revealed that first-time homebuyers actually made up 55% of all agency purchase mortgages last year. That’s the highest share in the 10 years we’ve been tracking the metric.”
Counter to that trend, the first-time homebuyer share of Ginnie Mae purchase loan issuance pulled back in recent years as they have relied heavily on GSE mortgages.
“The market in which these folks purchased their first home was one of record house prices, ballooning down payments, rising rates and elevated debt-to-income ratios (DTIs). Given record exposure to first-time homebuyer loans, it’ll be worth watching the performance of this cohort very closely moving forward, particularly for those invested in 2023 agency MBS,” said Walden.
First-time homebuyers averaged higher front-end DTIs for all products, but particularly for conventional mortgages, where the DTI for first-time homebuyers at 31.2% is more than 4 percentage points higher than for repeat buyers in recent months.
Back-end DTIs vary less between first-time and repeat buyers, as first-time homebuyers who spend more of their income on housing spend less on other debt, according to ICE market trends data.
Interest rates and origination trends
While purchase lending will continue to dominate 2024 originations, a 19% month-over-month jump in refi activity on improved rates highlighted the potential for a rebound in refinance lending if rates move lower, ICE noted.
In January, ICE’s conforming 30-year fixed mortgage rate lock index showed rates averaging 6.6%. Mortgage rates have averaged close to the 7% mark as of Feb. 29 following a series of positive economic data.
In turn, rate/term refis, which have effectively been nonexistent for some time, made up 24% of all refinance activity to mark a two-year high.
“We noted last month that if industry rate projections hold firm, we could see a mini-surge of refi activity around the 2023 vintage by the end of 2024,” Walden continued.
“Even the relatively slight rate pullbacks of December and January spurred a growing number of homeowners to refinance. Demand is clearly there when rates cross certain thresholds and, if current rate forecasts hold true, we expect that demand to increase throughout the year.”
When it comes to retaining the business of refinancing homeowners, the industry has a lot of ground to make up.
Servicers retained just one of every five such borrowers in Q4 2024, a 17-year low. Non-bank servicers did a better job, retaining a little over one in four refinancing borrowers, while bank lenders retained only one in 10.
“Providing an exemplary servicing experience is critical to reversing this trend, as is effectively identifying and engaging with customers likely to refinance. And when they have the opportunity to serve that customer, lenders need to be sure the front-end of the process is smooth as well,” Walden noted.
Source link
:215-447-7209
: deals(at)frankbuysphilly.com
The Carrington Companies names Andrew Taffet as CEO
The Carrington Companies tapped Andrew Taffet as its new CEO. Taffet, who is currently serving as Carrington’s chief investment officer, will continue in that role while succeeding company founder Bruce Rose.
Rose will assume the role of executive committee chairman for the Carrington Companies. Taffet, meanwhile, will be in charge of day-to-day operations and oversight of the company, a task he’s been handling for some time now.
He has been with Carrington for nearly 20 years after joining as associate director and head of analytics in 2004. He was previously promoted to portfolio manager and managing director before becoming CIO in 2014.
“This is not a dramatic handoff by any means, but rather a natural next step for our business,” Rose said in a statement. “The Carrington Companies will continue to operate as they have for the past 20-plus years. Our effectively self-hedged business strategy positions us for continued success, as we have demonstrated even during the most challenging market cycles.”
Carrington is a holding company and its primary business includes single-family mortgage asset management, as well as mortgage origination in the retail, wholesale and correspondent spaces; servicing; and real estate sales and settlement services.
In the mortgage space, Carrington Mortgage Services provides nonqualified mortgages (non-QM), conventional mortgages and government-backed loans through the FHA, VA and USDA programs..
Headquartered in California, Carrington services loans in all 50 states and Puerto Rico. It is licensed to lend in 48 states.
Carrington originated $1.38 billion in mortgage volume in 2023 across 7,193 units, according to data platform Modex. The lender has 282 sponsored mortgage originators, the Nationwide Multistate Licensing System (NMLS) shows.
Source link
Former Caliber CEO Sanjiv Vas joins Two Harbors board
Sanjiv Vas, former CEO of Caliber Home Loans, has joined the board of directors at Two Harbors Investment Corp, a Minnesota-based real estate investment trust that expects to launch a mortgage originations platform in the second quarter of 2024.
“Sanjiv’s depth of experience in mortgage finance, consumer understanding and thought leadership will serve our company well as we continue to grow and evolve our business strategy and operational platform,” Stephen G. Kasnet, chairman of Two Harbors, said in a statement.
A mortgage industry veteran, Vas has served since October 2023 as the president of tech company Pagaya Technologies Ltd., which offers artificial intelligence infrastructure for the financial ecosystem. He oversees the strategy and growth of Pagaya’s commercial business – including its single-family rental business and its subsidiary Darwin Homes.
Before joining Pagaya, Vas was CEO of Caliber Home Loans. He stepped down in January 2022, less than one year after Newrez acquired the mortgage lender and servicer.
The executive also held previous leadership and senior positions at First Data Corp., a KKR-owned company; Citibank’s mortgage division; Morgan Stanley; American Express; and Bank of America.
Vas is joining Two Harbors as the company is set to launch a mortgage originations division, which is part of its strategy to retain borrowers from its servicing portfolio when interest rates drop.
Regarding the platform, Two Harbors President and CEO Bill Greenberg told HousingWire recently that the company has “this opportunity, given where our portfolio is and where interest rates are, to build something from scratch, and we can make it entirely custom fit to our business.”
“We don’t have to buy something that other people have made that doesn’t fit very well and that’s upside down on costs,” Greenberg added.
Two Harbors’ originations business will hedge its servicing portfolio of $216 billion in unpaid principal balance (UPB) as of Dec. 31, 2023. The company has hired industry veteran Kyle Kilpatrick to lead the newly created division.
Source link
Earn More Money By Renting Your Property by the Room
When it comes to maximizing profit on your investment property, you’ve likely considered quite a few rental strategies. If long-term doesn’t pencil out, you could always consider revenue from medium-term or short-term tenants if your market supports it. But there is another successful, profitable rental strategy you should add to your arsenal: renting your property “by the room.”
Also referred to as a boarding or rooming house strategy, renting by room is not a new concept. But these kinds of arrangements are not as common as they were at the turn of the 20th century. Renting by room fills an important market gap, though, creating opportunities for renters who may not be able to afford an entire apartment on their own in a time of extreme housing shortages. In aggregate, you also stand to make a ton more money than if you just housed a single tenant.
If you think rent by room could work for you, here are some things to keep in mind.
Start-up Costs Are Minimal
In the rent-by-room model, since your tenants will be renting a private bedroom each and sharing common spaces like living rooms and kitchens, you’ll want to make sure each bedroom has a lock on it for privacy and tenant security, and ideally, its own thermostat. Usually, in these scenarios, bedrooms also come furnished. If you have a bedroom with an en suite, you can charge a little more per month, but it’s not a required feature since tenants can share bathrooms.
Where to List
Airbnb currently allows you to list your room rental (and offers protection through Air Cover), but this platform will likely attract more short-term tenants. There are also newcomers to the rent-by-room market, like PadSplit, that take care of all the management of a rent-by-room, including things like background and income checks as well as evictions.
How the Numbers Break Down
Say you have a typical four-bedroom, three-bathroom single-family home. In this hypothetical situation, if you were to rent the full house to one tenant, you would gross $2,000 a month. Instead, if you rent the same home by room to four different people, you could make $1,000 a month from each tenant, increasing your gross revenue to $4,000. PadSplit estimates that owners can make up to 2.5x more renting by the room than they make with a single tenant.
Final Thoughts
The average length of stay is shorter with room-by-room rentals, averaging eight months versus a full year. But that’s still a lot less turnover/management than with a typical STR model. Instead of one lease, you’ll need as many leases as you have bedrooms and tenants, so there is more management if you choose to self-manage, and of course, roommate issues are no fun to referee. In some states, you may also need a special license from the state to run a boarding house.
Find an Agent in Minutes
Match with an investor-friendly agent who can help you find, analyze, and close your next deal.
Ready to succeed in real estate investing? Create a free BiggerPockets account to learn about investment strategies; ask questions and get answers from our community of +2 million members; connect with investor-friendly agents; and so much more.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
Source link
Rithm Capital to issue $775M in unsecured debt
Rithm Capital, a New York-based asset manager with a focus on real estate — and the parent of multichannel lender Newrez — is the latest company in the mortgage space to issue debt.
Rithm is joining a list that includes competitors Mr. Cooper Group, Freedom Mortgage, PennyMac Mortgage Investment Trust and Pennymac Financial Services, each of which have issued debt since September 2023.
On Monday, Rithm announced its plan to offer $775 million in senior unsecured notes due in 2029 for qualified institutional buyers.
The company said that the proceeds will be used to reduce indebtedness. The debt issuance include a cash tender offer announced Monday to purchase up to $275 million of Rithm’s $550 million in outstanding senior unsecured notes, priced at 6.25% and due in 2025.
The tender offer will expire on April 1 unless it is extended or terminated early by the company.
The remainder of the net proceeds will be used for “general corporate purposes,” the company said in a statement that did not provide further details.
Analysts anticipated that mortgage companies would issue debt in an attempt to improve liquidity and fund their business and investment activities, specifically by targeting mortgage servicing rights (MSR) deals.
Rithm posted $532.7 million in GAAP net income in 2023. Last year was marked by its purchase of consumer loans from Goldman Sachs, as well as the acquisitions of Sculptor Capital Management and Computershare Mortgage Services, including Specialized Loan Servicing (SLS).
In February, the company announced that it would issue a one-year loan, purchase common stock and become the external manager of its peer, Great Ajax Corp.
Source link
Inventory is 19% higher than a year ago: Altos
At HousingWire, we have a debate about whether home sellers will freeze up again this year as mortgage rates stay stubbornly high. We’ve had seller growth for 18 weeks in a row. I’ve previously been confident that trend will continue.
A couple months ago, when rates were in the 6s still, I suggested that we could see 15% home sales growth this year. More sellers means more sales. But now it’s March, and mortgage rates are the highest they’ve been all year, the economy continues to report strong numbers so the Fed is growing less likely to cut rates soon.
And as a result, as inventory builds, the sales growth trend shows signs of slowing. Will sellers retreat entirely, like they did last year? We know that these higher mortgage rates are deterring buyers, and inventory is building. But will rates deter sellers also? Will higher rates keep a cap on inventory like it did a year ago?
I still feel like the biggest risk for housing this year is too much inventory growth, with fewer buyers and more sellers. I always emphasize the Altos Rule which says that higher rates lead to greater inventory. Mortgage rates are up over last month, and over last year. Inventory is up in lock step. So that rule holds. In the face of growing supply of unsold homes on the market, we have to ask how much inventory will this market handle before home prices start to decline? We’re at 19% year over year inventory gains now. That seems like a lot, but it could be maybe 40% growth in the number of homes on the market by this summer — if mortgage rates stay elevated and sellers don’t get cold feet.
Year-over-year inventory change is one of the most clear signals for home price changes a year further out. Mortgage rates could keep climbing. Up until recently, the bond market has expected the Fed to cut interest rates early in 2024. Because the economy is so strong and resilient, those rates cut expectations are being pushed further into the future.
So the two questions we’re examining today are: How much does inventory have to climb before home prices fall? And will sellers back off so that inventory is capped like it was last year?
At Altos Research we track every home for sale in the country every week. This market changes too quickly to wait a month for the latest data. We track all the pricing, all the supply and demand, all the sales, and all the changes in that data so you can understand immediately as it happens.
For more on inventory trends, pricing, price reductions and home sales, check out the above video.
You should expect home prices to climb for the rest of the spring to peak in June. We can see how sensitive this number is changes in mortgage rates. There are buyers on the sidelines and if rates were to finally fall again, you’ll see inventory fall with new bidders, you’ll see fewer price reductions and you’ll see the leading indicators of home sales prices, like what we have here, you’ll see those climb over last year. That’s if mortgage rates ease down, but the fact is rates have been climbing. And we can absolutely see the impact on home buyers.
These are pivotal weeks for the housing market. There are home buyers and sellers sitting on the sidelines waiting for conditions to improve. And meanwhile mortgage rates are actually rising, so conditions may not be improving. If potential sellers knew the data, would they act differently?
Mike Simonsen is the president and founder of Altos Research.
Download the free Altos eBook: “How to Use Market Data to Build Your Real Estate Business”
Source link
First-time homebuyers made up a record share of agency purchase loans in 2023
First-time homebuyers made up 55% of agency purchase mortgages in 2023, according to Intercontinental Exchange (ICE) eMBS data, the highest such share in the 10 years ICE has been tracking the metric.
A record 47% of government-sponsored enterprise (GSE) purchase loans in 2023 came from first-time homebuyers, a number that’s been trending gradually higher throughout the past decade.
“Since 1995, only two quarters have seen fewer than one million first lien mortgages originated,” Andy Walden, vice president of enterprise research at ICE.
“The first was Q1 2023, and Q4 the second. Looking back, last year’s market was dominated by purchase lending, with loans to buy homes making up 82% of a historically low number of originations. While it remains a tough market for prospective purchasers, our eMBS agency securities database revealed that first-time homebuyers actually made up 55% of all agency purchase mortgages last year. That’s the highest share in the 10 years we’ve been tracking the metric.”
Counter to that trend, the first-time homebuyer share of Ginnie Mae purchase loan issuance pulled back in recent years as they have relied heavily on GSE mortgages.
“The market in which these folks purchased their first home was one of record house prices, ballooning down payments, rising rates and elevated debt-to-income ratios (DTIs). Given record exposure to first-time homebuyer loans, it’ll be worth watching the performance of this cohort very closely moving forward, particularly for those invested in 2023 agency MBS,” said Walden.
First-time homebuyers averaged higher front-end DTIs for all products, but particularly for conventional mortgages, where the DTI for first-time homebuyers at 31.2% is more than 4 percentage points higher than for repeat buyers in recent months.
Back-end DTIs vary less between first-time and repeat buyers, as first-time homebuyers who spend more of their income on housing spend less on other debt, according to ICE market trends data.
Interest rates and origination trends
While purchase lending will continue to dominate 2024 originations, a 19% month-over-month jump in refi activity on improved rates highlighted the potential for a rebound in refinance lending if rates move lower, ICE noted.
In January, ICE’s conforming 30-year fixed mortgage rate lock index showed rates averaging 6.6%. Mortgage rates have averaged close to the 7% mark as of Feb. 29 following a series of positive economic data.
In turn, rate/term refis, which have effectively been nonexistent for some time, made up 24% of all refinance activity to mark a two-year high.
“We noted last month that if industry rate projections hold firm, we could see a mini-surge of refi activity around the 2023 vintage by the end of 2024,” Walden continued.
“Even the relatively slight rate pullbacks of December and January spurred a growing number of homeowners to refinance. Demand is clearly there when rates cross certain thresholds and, if current rate forecasts hold true, we expect that demand to increase throughout the year.”
When it comes to retaining the business of refinancing homeowners, the industry has a lot of ground to make up.
Servicers retained just one of every five such borrowers in Q4 2024, a 17-year low. Non-bank servicers did a better job, retaining a little over one in four refinancing borrowers, while bank lenders retained only one in 10.
“Providing an exemplary servicing experience is critical to reversing this trend, as is effectively identifying and engaging with customers likely to refinance. And when they have the opportunity to serve that customer, lenders need to be sure the front-end of the process is smooth as well,” Walden noted.
Source link
There Is an Interest Rate That Will Unfreeze the Market—But Will We Ever Get There?
Last week, Realtor.com published another version of its ‘‘magic number’’ forecast. The number in question is the mortgage rate number low enough to ‘‘unfreeze’’ the real estate market.
We know that the market has been in something of a gridlock for over a year now:
Something has to give.
The consensus is that this something is mortgage rates—they’ll have to come down substantially for the housing market to get back to anything resembling normality.
What’s the Magic Number?
So, Realtor.com asks, what is the mortgage rate threshold that needs to be crossed for buyers to start buying again? Well, the answer depends on who you ask and when.
Of the 5,000 U.S. consumers surveyed, 22% would consider a home purchase if rates went below 6%. And for 18% of respondents, a rate of below 7% would be good enough.
Long-suffering millennials and Gen Z buyers are even more resigned to high rates—47% of respondents in the millennial bracket and 37% in the Gen Z bracket would still take the plunge even if rates topped 8%. Basically, buyers in these categories will buy no matter what—if they just manage to save up enough and can find a home to buy.
Asking the Right Questions
However, there is an elephant in the room with this ‘‘magic number’’ forecasting: It’s not asking the right question. And because it’s not asking the right question, it’s not precise enough in its choice of respondents.
First-time buyers, daunted and discouraged as they may be by the new reality of high home prices and high rates, will not give up on their perception of homeownership as a dream worth striving toward. But first-time buyers also hold no power in the current real estate market dynamic. The people who do are existing homeowners who aren’t selling. It’s these people who are worth asking for the ‘‘magic number’’ that may give them enough confidence to move and finally release inventory.
As it turns out, there is a different survey that talks to the right people. John Burns Research and Consulting surveyed existing homeowners last year and found that ‘‘71% of prospective homebuyers who plan to purchase their next home with a mortgage say they are not willing to accept a mortgage rate above 5.5%.’’
Note that the question isn’t about what existing homeowners could afford (all respondents had household incomes of above $50,000) but about what they are willing to accept. And the majority of them, 62%, believe that ‘‘a historically normal mortgage rate is below 5.5%.’’
This perception is factually inaccurate. According to Freddie Mac records going back to 1971, the long-term average mortgage rate is just under 8%. So, first-time millennial buyers actually have more realistic expectations than existing homeowners.
That, of course, is because 80% of existing homeowners currently have mortgages with a below 5% rate, and a third are on rates below 3%, according to Zillow. It’s more than understandable that many of them have no desire to sell and lock themselves into the current rates (which were at a 7.9% 30-year average as of this writing).
Will the Market Unfreeze Itself Anytime Soon?
The reality is that we are a long way off from the ‘‘magic number’’ of 5.5% that would theoretically release all the inventory that sellers are holding on to. Of course, some people will sell anyway, for one pressing life reason or another.
Recent research by the Haas School of Business shows that while a 1% increase in mortgage rates reduces moving rates by 9%, once ‘‘the benefit of refinancing exceeds its cost, moving probabilities become unrelated to’’ mortgage rates.
All that said, the incentive to move has to be pretty high, e.g., a large salary increase. And even then, low mortgage rates often trump wage increases: People tend to stay put if their current fixed rate is low enough.
So, what could truly unfreeze the housing market? One solution could be more portable mortgage products, where a mortgage can be transferred to a new property with the existing rate. Another solution could involve making typical fixed mortgage terms shorter like they are in many other countries. Otherwise, we may see a deeper, longer-term freeze: a 25% decline in existing homeowners moving by 2033, according to the Haas study.
Make Easier and Smarter Financing Decisions
Deciding how to finance a property is one of the biggest pain points for real estate investors like you. The wrong decision may ruin your deal.
Download our What Mortgage is Best for Me worksheet to learn how different mortgage rates impact your deal and discover which loan products make the most sense for your unique position.
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
Source link
Kiavi closes on $350M securitization
Kiavi, one of the nation’s largest private lenders for residential real estate investors, closed a $350 million unrated securitization of residential transition loans (RTLs), the company announced on Monday.
The loans bundled in the securitization were mostly investment property loans used for fix-and-flip transactions. This securitization marked Kiavi’s 16th such transaction and elevated the company’s total issuance to more than $4 billion since it launched its securitization program in 2019.
The deal drew significant interest from institutional investors and made it Kiavi’s largest securitization since November 2021. In the context of the transaction, investors will benefit from a two-year revolving period during which they can reinvest their principal payoffs to purchase additional newly originated loans.
Nomura Securities International was the primary entity responsible for structuring the deal. Barclays Capital and Performance Trust Capital Partners were joint bookrunners and co-lead managers on the transaction.
“We’re thrilled to apply this capital to help more and more real estate investors scale their businesses while creating move-in ready homes for millions of Americans,” Arvind Mohan, CEO of Kiavi, said in a statement.
“Kiavi’s platform and unique use of AI, data, and machine-learning models are significant contributors to our consistent track record of performance, which has helped us build and grow reliable institutional demand for Kiavi’s RTL assets over the past five years. We aim to build upon our technology and AI capabilities to further serve our customers and drive our performance as we continue to grow.”
The deal followed on the heels of a $300 million securitization by Kiavi in January. The lender also communicated that it funded $4 billion in fix-and-flip loans in 2023, a company record for a calendar year, despite the challenging housing market.
According to Attom’s home flipping report for third-quarter 2023, the national flip rate declined for a second straight quarter to its lowest point in two years. But home flips still represented 7.2% of all home purchases in Q3 2023, higher than the typical share seen since 2000.
Source link
Announcing HousingWire’s 2024 Finance Leaders
HousingWire is excited to introduce the winners of the 2024 Finance Leaders award, recognizing the top finance executives in housing who are driving financial performance, expanding margins, improving liquidity and helping their businesses access the capital markets. In its 4th year, 40 honorees were recognized.
This year’s Finance Leaders were selected by HousingWire’s selection committee based on their professional achievements within their organizations, contributions to the overall housing economy, client impact and personal success.
“Even the best business operators, innovators and entrepreneurs have no chance at winning or growing without creative, diligent and strategic financial management and execution,” said Clayton Collins, CEO of HW Media. “The executives recognized in the 2024 HousingWire Finance Leaders program represent the strategic finance leaders that unlock and empower progress. They navigate capital markets, execute strategic growth initiatives and facilitate accretive M&A deals. The 2024 Finance Leaders exemplify excellence.”
Take a look at the full list of this year’s honorees below!
Source link
Mortgage rates flirt with 7% mark again
Mortgage rates continued to trend up this week and dampen homebuyer momentum.
The 30-year fixed-rate mortgage averaged 6.94% as of Feb. 29, an increase from last week’s figure of 6.90%, according to Freddie Mac’s Primary Mortgage Market Survey released on Thursday.
Meanwhile, the 15-year fixed rate averaged 6.26% this week, down from 6.29% during the prior week. And HousingWire’s Mortgage Rates Center showed that Polly’s average 30-year fixed rate for conventional loans was 7.23% on Thursday, up from 7.19% at the same time last week.
“Mortgage rates continued their ascent this week, reaching a two-month high and flirting with 7% yet again,” Freddie Mac chief economist Sam Khater said in a statement.
“The recent boomerang in rates has dampened already tentative homebuyer momentum as we approach the spring, a historically busy season for homebuying. While sales of newly built homes are trending in a positive direction, higher rates and elevated prices continue to pose affordability challenges that may leave potential homebuyers on the sidelines.”
The release of the core Personal Consumption Expenditures Price Index (PCE) on Thursday received a lot of attention as it is considered to be the Federal Reserve’s preferred inflation measure for monetary policy decisions. In January, the PCE rose at the fastest pace in nearly a year, supporting the central bank’s conservative approach to rate cuts.
Many home shoppers are delaying their purchases in the hopes of lower mortgage rates and more inventory in the spring. Other buyers are choosing to pivot to new construction, attracted to the concessions offered by homebuilders, including rate buydowns.
Given the recent string of strong economic data, the Fed is likely to push off rate cuts until this summer.
“It’s quite possible that the Fed may not change its strategy on interest rates until late this year, so potential home buyers may need to contend with high mortgage rates for the remainder of the year,” CoreLogic chief economist Selma Hepp said in a statement.
Source link