Like its competitors, Tennessee-based First Community Mortgage, Inc. (FCM) reduced the company’s size through 2022 amid a tough mortgage market. At the start of 2023, the company is investing in training the sales team on tactics to start growing the business again. Surprisingly, the landscape is helping.

“There is certainly optimism in the air as mortgage applications have started to pick up on,” Keith Canter, CEO at First Community Mortgage, said. “The optimism is based on two factors: one, we’ve seen a nice trend in rates, moving lower over the last few weeks; and two, more and more houses are building up in inventory, so we’re seeing sellers being more willing to work with buyers.”

Altos Research data confirms Canter’s perception that there are more houses in inventory. The weekly inventory rose from 471,349 to 472,688 from January 6 to January 13.  

Meanwhile, a Mortgage Bankers Association (MBA) report covering 75% of all U.S. retail and residential market shows how demand for home loans has quickly increased. The Market Composite Index, a measure of mortgage loan application volume, rose 27.9% on a seasonally adjusted basis for the week ending January 13 compared to one week earlier.

“Mortgage rates are now at their lowest level since September 2022, and about a percentage point below the peak mortgage rate last fall,” Mike Fratantoni, MBA’s senior vice president and chief economist, said in a statement. “As we enter the beginning of the spring buying season, lower mortgage rates and more homes on the market will help affordability for first-time homebuyers.”

After peaking at 7.36% on October 20, mortgage rates are in the lower 6%, according to different data sources. 

The MBA measured the 30-year fixed rate for conforming loan balances ($726,200 or less), which decreased to 6.23% this week from 6.42% last week. Jumbo loans (greater than $726,200) went from 6.09% to 6.08% in the same period. Rates were even lower at Mortgage News Daily, marking 6.17% on Wednesday morning for conforming loans.

Taking advantage of refis

Borrowers are taking advantage of refinancings this week amid lower rates. The MBA data shows that the demand for the product rose 34% this week compared to the previous week. Meanwhile, purchase apps had a 25% increase in the same period. 

Despite these gains, refinance activity remains more than 80% below last year’s pace and purchase volume remains 35% below levels from one year ago.  

According to Logan Mohtashami, lead analyst at HousingWire, seasonality impacts the mortgage apps data since the market is coming off a seasonal low in volume.

“So, you can see some crazy moves in the MBA index that had a waterfall dive in 2022,” Mohtashami said.

Regarding refinancings, which dried up last year amid surging rates, the analyst said demand is recovering.

“People want better cash flow, so they are not thinking that much ahead whether rates will go down even further,” Mohtashami said. “If rates fall more, they will refinance again.”

The refinance share of mortgage activity increased to 31.2% of total applications this week from 30.7% the previous week. 

What to expect

For Canter, the mortgage market is not “out of the woods,” despite the better landscape at the beginning of 2023, as there’s no guarantee that rates will stay at the current level.   

“The Federal Reserve will take the gas off of raising short-term rates, but there’s no guarantee. So, we have interest rate risk,” Canter said. “And the demand out there will create a floor on how far home prices can fall. Builders are slowing down the number of homes they’re building, which adds more pressure to inventory.”



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After a year of declines, homebuilder sentiment started off 2023 with a modest uptick, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) report, released Wednesday. It suggests homebuilder sentiment has bottomed out and (slightly) better days are ahead for homebuilders.

In January, builder confidence in the market for newly build single-family homes rose four points from December’s reading, to an index value of 35.

The NAHB/HMI report is based on a monthly survey of NAHB members, in which respondents are asked to rate both current market conditions for the sale of new homes and expected conditions for the next six months, as well as traffic of prospective buyers of new homes. Scores for each component of the homebuilder confidence survey are then used to calculate an index, with any number greater than 50 indicating that more homebuilders view conditions as favorable than not.

The NAHB attributes the increase to the slight decrease in mortgage rates at the end of last year.

“The rise in builder sentiment also means that cycle lows for permits and starts are likely near, and a rebound for home building could be underway later in 2023,” Jerry Konter, the NAHB Chairman, said in a statement.

The trade organization’s chief economist is also optimistic.

“While NAHB is forecasting a decline for single-family starts this year compared to 2022, it appears a turning point for housing lies ahead,” Robert Dietz, the trade group’s chief economist, said in a statement. “In the coming quarters, single-family home building will rise off of cycle lows as mortgage rates are expected to trend lower and boost housing affordability. Improved housing affordability will increase housing demand, as the nation grapples with a structural housing deficit of 1.5 million units.”

Three other indices monitored by the NAHB also posted gains in January. The gauge measuring current sales conditions rose to 40, up four points month over month. The component analyzing sales expectations for the next six months rose two points to a reading of 37 and the index that charts traffic of prospective buyers rose three points from December to a reading of 23.

Regionally, the three-month moving averages for HMI scores posted mixed results, with the West gaining one point to a reading of 27, the South holding steady at 36, and the Northeast and the Midwest dropping modestly to 33 and 32, respectively.

Another survey, the BTIG/HomeSphere State of the Industry Report, also reported a leveling in homebuilder outlook. According to the survey, 71% of builders saw a yearly decrease in sales last month, the same as in November. Despite a 70% yearly decrease in traffic, builder reported a slight improvement in performance relative to expectations with 11% of respondents reporting that sales were better than expected and 35% reporting that sales were worse than expected. These metrics are improved from 10% and 50%, respectively in November.

“Conditions continue to be very slow given higher mortgage rates, fear of falling real estate values and weak confidence among consumers,” Carl Reichardt, a BTIG analyst, said in a statement.

The BTIG/HomeSphere study is a survey of approximately 50-100 small- to mid-sized homebuilders that sell, on average, 50-100 homes per year throughout the nation. In December the survey had 91 respondents.

Despite the more positive outlook, homebuilders are still cutting prices and using incentives to sell homes, with 29% of survey respondents reporting they cut some, most or all base prices and 41% reported using incentives.

“It appears the low point for builder sentiment in this cycle was registered in December, even as many builders continue to use a variety of incentives, including price reductions, to bolster sales,” Konter said.



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The rapid price boom many housing markets experienced during the pandemic is slowing down, and many economists expect a housing market correction. The good news is that the housing market isn’t expected to crash. The bad news is that the housing market is entering a new era that isn’t likely to benefit anyone specific.

Homes listed in 2023 may stay on the market longer, and sellers may not realize the same profits they could have six months ago. Meanwhile, even if buyers can snag a lower price on a home in some markets, high interest rates are hurting affordability. Agents are already hurting from the slowdown in selling activity, and investors will need to adapt to new conditions that are making some investment strategies impractical. No one wins. However, everyone can be mindful of housing forecasts and adjust their plans to capture the best possible outcomes in a difficult situation. 

The Impact on Sellers

The Market Is Already Shifting

Sellers may be aware that listing now will mean a longer process and higher mortgage payments on a new home, but people still need to move. Inventory has begun increasing, leading to less competition, although inventory is still tight relative to pre-pandemic levels. The sale-to-list price ratio is dropping as well—gone are the days of multiple offers above-asking. And the median number of days a home stays on the market has been increasing since June. While trends in individual markets vary, many are shifting into the hands of the buyer

Sellers Are Still Poised to Earn Profits

Existing home prices skyrocketed during the pandemic. Between December 2019 and June 2022, home prices rose 45%, the biggest jump since the U.S. national home price index was developed. The markets that saw the most rapid increases are slowing down the fastest, but even the most dire housing forecasts predict a drop of up to 30% in the most overvalued markets—not enough to wipe away the equity gains most homeowners experienced, though some individuals could lose money to bad timing. 

Some families could stand to earn up to $1 million in untaxed capital gains if the More Homes on the Market Act, which the National Association of Realtors endorses, passes. The legislation would double the threshold for the capital gains exclusion, which is now $250,000 for single filers and $500,000 for married couples. The law may encourage previously hesitant homeowners to downsize, the NAR says. 

But it’s a difficult time for growing families to move to a larger home. Sellers who bought their homes during the homebuying boom, when interest rates were low, may face unaffordable mortgage payments if they try to trade up. The monthly payment on a 30-year fixed mortgage for a median-priced home has more than doubled since the second quarter of 2020, based on new mortgage rates and elevated prices. 

Timing Is Everything

A variety of firms, including Morgan Stanley, Moody’s Analytics, and Capital Economics, have revised their 2023 housing forecasts to predict even steeper drops than they originally estimated. The most optimistic experts only expect a modest increase in prices—for example, NAR Chief Economist Lawrence Yun says prices could rise 1% across all markets next year. The timing of falling prices and housing market recovery is still unpredictable. Yet, it could make the difference between meager profits and huge capital gains for sellers. 

Selling now means facing less affordable payments on a new home. But waiting until late 2023 could leave sellers in a worse situation—mortgage rates might stay elevated, while housing prices could drop. Holding out until late 2025 or 2026 is likely the best option, especially for sellers with fixed-rate mortgages, since most experts expect the market to rebound by then. But not everyone will have the option of waiting. 

The Impact on Buyers

Affordability Pressure in Today’s Market

Prospective homebuyers face several challenges in today’s market. Thanks to inflation, incomes are stretched thin. Prices at the grocery store and rents that are expected to continue to climb through 2023 are making it difficult for people to save. The median-priced home, which is now $454,900, has become out of reach for median-income households. Mortgage rates have come down slightly but are unlikely to drop further and may even go up since the Fed’s fight to tame inflation is ongoing. At current rates, the mortgage payments on a median-priced home would eat up 38% of a median-income household’s monthly earnings. 

A Housing Correction Could Provide Limited Relief

If prices fall as many economists expect, buyers may be able to capture better deals in 2023 or 2024 and realize appreciation gains in 2025 or 2026. But predictions aren’t exact, and experts disagree on when prices will hit bottom. And it’s difficult to determine when mortgage rates will come down. Inflation has been stubborn to the Fed’s efforts. 

Even with moderate price relief, affordability will remain a problem for prospective homebuyers. In order for mortgage payments to return to 18% of household income, which has been typical for homebuyers historically, prices would have to drop 39%, The Washington Post reports. That’s a larger price correction than anyone is expecting. 

Financing Strategies Are Evolving

In 2021, applying for a traditional 30-year fixed-rate mortgage was a no-brainer. Buyers could benefit from historically low rates. Now, a traditional mortgage means getting locked into a higher interest rate. Now that buyers are counting on refinancing once interest rates come down, they’re pursuing financing strategies they may have been deemed too risky in the past. 

For example, adjustable-rate mortgages are becoming more popular, even though they come with unpredictable monthly payments once the fixed-rate period ends. That uncertainty may have deterred mortgage applicants in the past, but ARMs made up 12.8% of home loan applications as of the second week in October, up from only 3.1% at the start of the year. ARM rates haven’t risen quite as much as fixed mortgage rates, allowing homebuyers to access lower monthly mortgage payments, at least during the fixed-interest phase of the loan. 

There may also be opportunities for buyers to use other creative financing options that might not have made sense or been available in a different market. For example, sellers may be willing to offer owner financing, which may be more accessible to low-income buyers with a low down payment or those with poor credit. With owner or seller financing, the seller becomes the lender, holding onto the deed until the buyer has paid for the home with interest. Seller financing can be risky because it’s not subject to the same consumer protections as a traditional mortgage, but it can often result in more flexible terms and cost savings over time. 

The Impact on Agents

Not Enough Business

In 2021, over 47 million Americans left their jobs voluntarily. Many felt trapped in low-paying jobs without opportunities for advancement. It’s now being called The Great Resignation, and while stimulus checks during the pandemic may have been a motivating factor for people to find new careers, some experts say the trend has been ongoing for a decade. People are seeking better ways to live and make money in jobs that provide better pay and more flexibility. That trend collided with high demand in the housing industry, causing more people to become real estate agents. 

The number of U.S. real estate agents peaked in 2021, and now there isn’t enough business to go around. Selling activity is down almost 30%. Agents have gone from fielding too many phone calls from prospective clients to knocking on the doors of homeowners facing foreclosure, hoping to acquire new listings and earn commissions. 

Differentiating and Expanding to Survive

Widespread layoffs in the housing industry and decreased selling activity have led many real estate agents to pursue side hustles until selling activity rebounds. Those who hope to stay in the game will need to adapt. More competition among agents requires more aggressive marketing strategies, including social media marketing. Real estate agents may also need to expand the area or price point they work in or even move to a new market altogether where there’s more demand. Real estate consulting work may be an option for some, while others with less experience may drop out of the industry entirely. Agents can also take advantage of our Featured Agent program for consistent investor leads!

The Impact on Investors

Cash Is King

High mortgage rates are squeezing the margins of investment deals for investors who rely on financing. If interest rates were still at 3.25%, investors would be able to get nearly 40% more cash flow on a median-priced rental property that achieves the 1% rule—one that can capture 1% of the purchase price in monthly rent. High mortgage rates leave less room for vacancy problems, maintenance issues, and other things that can go wrong with an investment property. Unless investors have the reserves to buy properties in cash, they’ll be looking at a narrower segment of properties that can achieve the return they’re looking for. 

The Right Timing Can Maximize Your Returns

As with any investment, it’s best to buy property when prices are at their lowest and sell when prices are high. Home values in 2023 aren’t predictable but are likely to fall, reaching a bottom in 2024 or 2025. Sometimes, investors can use the expectation of lower prices to their advantage. With buyer competition waning, homes are sitting on the market longer. It’s no longer unreasonable to offer a price below asking, especially in markets where price cuts are common

However, the uncertainty of future home values also makes certain investment strategies risky. A successful fix-and-flip deal requires a quick renovation. But the real estate market is already losing steam. Investors who acquire a fixer property now could bFe looking at lower home values when they try to resell in a few months. 

Choosing the Right Strategy Is More Important than Ever

Real estate is still a great investment, but certain strategies are becoming less viable. It’s becoming cheaper to rent than buy in most markets, which makes it difficult for investors to get positive cash flow from a long-term rental. Just as agents need to adapt by looking at other markets, investors may need to pursue long-distance investing if they’re hoping for the stability of a long-term rental. 

Meanwhile, the short-term rental market is becoming saturated. In 2021, the demand for Airbnb rentals was high, encouraging investors to enter the market as hosts. The number of available rentals on the platform surged 23.2% over the course of the year ending in September 2022. Now, there’s a massive oversupply of Airbnb properties relative to consumer demand, causing occupancy rates to fall. 

But a rising number of digital nomads may create demand for medium-term rentals in some markets. With a medium-term rental, the investor furnishes the property, pays the utilities, and rents out the unit for one to six months at a time. The medium-term rental is the Goldilocks of real estate investment strategies—it offers greater stability than a short-term rental and higher cash flow potential than a long-term rental. However, it only works in the right market. A hot urban area that is also home to employers that use traveling professionals will likely provide the most opportunities for investors. 

Everyone Must Adapt

To get the best outcomes from your real estate transaction, you’ll need to pay attention to the changing market and adapt accordingly. That’s true for buyers, sellers, agents, and investors. With the right strategy and some patience, anyone can weather the predicted housing correction—there may even be opportunities to profit from it. 

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.



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The mortgage servicing rights (MSR) market has opened 2023 with a healthy volume of capital committed to purchasing the assets along with multiple sellers primed for deals — as evidenced by the $60 billion to $65 billion in MSR portfolio offerings currently out for bid, market experts say.

That good news, however, is being overshadowed for now by what sources in the MSR market describe as a rumored record-sized series of planned MSR offerings that are reportedly being prepared by banking giant Wells Fargo, which last week officially announced plans “to reduce the size of its servicing portfolio.” 

One MSR market source, who asked not to be named, said rumors around a potential Wells Fargo mega-offering or series of offerings surfaced late last year and have taken on renewed urgency with Wells Fargo’s recent public announcement.

“We had started hearing in the fourth quarter that they were going to be coming out with a $100 billion to $150 billion conventional (Fannie Mae and Freddie Mac MSR] offering, and they would follow that with $100 billion of Ginnie” [MSRs],” the market source said. “So, with the Wells Fargo announcement, the rumors are that there’s $250 billion of MSRs [based on loan volume serviced] that are going to be made available.”

Fannie and Freddie purchase and securitize conventional mortgages that meet their guidelines. Ginnie Mae guarantees mortgage-backed securities issued by lenders who originate loans through government-backed housing programs, such as the Federal Housing Administration.

Although the potential Wells Fargo MSR package offerings are still in the realm of “market rumors,” MSR experts say, those rumors are having an immediate impact on the MSR market. They say such a huge volume of MSR offerings hitting the market in a short time span would affect pricing and liquidity — at least at the top end of the market.

“While I’m unable to confirm or deny the volume that Wells plans to release to the market, what you heard seems in line with what we’re also hearing,” said Mike Carnes, managing director of the MSR valuations group at MIAC Analytics, which provides MSR advisory services. “While I don’t think it greatly impacts the liquidity of deals less than $3 billion, Wells [assuming the rumors about the bank’s planned MSR sales are accurate] may very well impact the liquidity of $10 billion and greater deals.”

Carnes said MIAC currently has three MSR packages out for bid or about to be priced that combined are valued at more than $4 billion based on the loan portfolios to be serviced. The MSR deals involve various combinations of loans backed by Fannie Mae and Freddie Mac and/or Ginnie Mae.

“If Wells saturates the market with mega offerings, they could very well pull the larger buyers out of the market for the foreseeable future,” Carnes added. “Basically, too much supply equals lower prices.”

Adding some credence to the rumors of a pending huge offering of MSR assets, industry publication Inside Mortgage Finance reported recently that its sources in the investment banking arena indicated an $85 billion portfolio of MSRs was being prepped for sale by an unspecified seller, a deal that might possibly be carved into two packages. The publication also reported that speculation was mounting that the seller might be Wells Fargo.

Carnes and other MSR advisory-firm experts say the start of the year is when MSR buyers have new budgets and are flush with capital. Those buyers can include banks, independent mortgage banks and private investors, some backed by private equity firms.

“If one or two firms step up and buy it all [any large Wells Fargo MSR offerings], it has very little impact,” Carnes said. “If it gets spread out over a period of years, with multiple large offerings and multiple buyers, it could make it difficult for anyone else wanting to sell in larger quantities.

“To safeguard against possible market saturation, look for sellers to accelerate the sale of their MSRs, hoping to get in front of the market while buyers still have the budgets and bandwidth to buy.” 

Tom Piercy, managing director of Incenter Mortgage Advisors, another big player in the MSR space, added that this year “there is a tremendous amount of capital committed to the asset [MSRs].”

Incenter is serving as an advisor for some $17 billion in MSR portfolio offerings across three deals out for bid currently, plus another $9 billion private nonauction deal now in the works. The three MSR packages being auctioned publicly, all with bid due dates in January, include a $10.2 billion bulk offering Fannie and Freddie MSRs; a separate $2.1 billion offering of Fannie and Freddie MSRs; and a $4.8 billion jumbo-loan servicing package being offered by a bank.

In addition, Piercy said Incenter has another $25 billion or so in MSR portfolio offerings in the pipeline across two other deals. Piercy estimated that as of early January, across the entire MSR market, and including “his peers in the industry,” there was about “$60 billion to $65 billion in play in the marketplace publicly.”

“Normally, at the beginning of the year, you’ve got all new budgets [for MSR buyers], so you’ve got a lot of capital commitment and people ready to buy,” Piercy said. “So, that’s why you push hard to get those deals out.

“Now, there’s all these rumors tied to [Wells Fargo] and an abundance of MSR being released.”

Piercy said those rumors, whether they turn out to be true or not, are already having a “major impact” on the market.

“This week there’s been a storm of calls and texts, and [I’m] talking with buyers and getting their perspective on the marketplace right now,” Piercy said. “I’ve had so many comments with regard to this [Wells Fargo rumor] and whether it’s going to cause all the capital to be used up, and MSR values will drop. 

“There’s a lot of [buyers that] feel there’s going to be a buying opportunity, so I’m struggling with this because based on the volume and what is going to be offered, there’s less than a handful of [buyers] who could actually look at those large deals.”

As a result of the limited buyer pool for mega-MSR deals — potentially involving a total of up to $250 billion in MSRs portfolio offerings — Piercy said he it’s not clear how the market would be impacted ultimately, explaining that the devil is always in the details. He said if Wells Fargo did move forward with a couple huge MSR offerings, “there’s this whole other market that’s going to continue in the $250 million to as much as $20 billion range, and there’s different buyers that operate within that category.”

“It’s too early to say what the sell side will do [if the Wells Fargo MSR-sale rumors turn out to be true],” Piercy said. “Every MSR trade is unique, not only the asset itself is unique, but the reason for selling is unique, and so that would impact as to what trades may go off versus which ones are pulled back.”

“By next week, we may know something different. But what we’re dealing with now is … a problem around perceived value, given the rumors of sizable volume coming to market as a result of recent announcements [related to Wells Fargo]. So, perception is reality right now.”

Rob Nunziata, co-CEO of FBC Mortgage, a nonbank seller-servicer, said there are more companies selling MSRs now than in the recent past because of market conditions, with mortgage rates doubling over the past year — creating cash-flow urgencies for some lenders. “And the number of buyers really hasn’t changed that much … so you have a little bit of imbalance” he added.

Nunziata, whose mortgage company originated some $7.4 billion in loans across all business channels in 2021, said MSR assets also provide “real cash flow” if kept on the books.

“Servicing books typically will yield around 10%,” he said. “There’s a good yield that comes from the servicing book.

“So, there’s no need to sell it [MSR portfolios] because there’s an income stream, but everybody’s situation is different,” Nunziata added. “Some lenders may need to sell servicing, and if they do, right now is probably not the optimal time to do it if they can wait.”

Wells Fargo will pounce on opportunities

Wells Fargo officials did not respond to a request for comment for this story. However, Wells Fargo CEO Charlie Scharf, in the lender’s recent fourth-quarter 2022 earnings call, said the following in response to an analyst’s question about the bank’s MSR portfolio plans:

“The fact that we’ll be originating a lot less will certainly mean that over time, the MSR and the overall servicing book will come down very naturally based upon that, over a fairly long period of time. But we’ll also look for intelligent and economic ways to reduce the complexity and the size of our servicing book between now and then. And if those present themselves, we’ll certainly be interested in doing that.”

That response does not seem to rule out that Wells Fargo might entertain a mega-MSR offering, or series of smaller but still huge transactions this year. The bank recently reported a profit of $13.2 billion for 2022, down 39% from its 2021 profit of $21.6 billion.

In addition to reducing the size of its MSR portfolio, Wells Fargo, the third largest U.S. mortgage lender based on originations, announced on Jan. 10 that it will be existing the correspondent channel, which was responsible for some 44% of the bank’s total mortgage origination volume of $14.6 billion in the fourth quarter of 2022. The bank’s Q4 mortgage origination volume was down 70% year over year, HousingWire reported last week.

Mortgage-data analytics firm Recursion reports that as of the first week of January 2023, Wells Fargo’s total MSR portfolio stood at $608.2 billion, representing about a 7.3% share of the total $8.37 trillion in MSR volume outstanding as of that date — including Ginnie Mae, Fannie Mae and Freddie Mac MSRs. 

Broken down by MSR channel, the lender’s MSRs portfolio linked to Fannie Mae-backed loans total $269.4 billion as of the same date, or about and an 8% market share. Its MSR portfolio of Freddie Mac-backed loans totaled $226.5 billion, or a 7.9% market share.

Wells Fargo’s Ginnie Mae MSR portfolio stood at $112.3 billion as of early January, representing a 5.3% market share, according to Recursion’s data. The leading all-agency MSR servicers as of the first week of January, according to Recursion, include Wells Fargo at No. 1, followed by PennymacJ.P. Morgan ChaseRocket MortgageLakeview Loan ServicingFreedom MortgageMr. CooperRithm Capital (formerly New Residential), and United Wholesale Mortgage.

Piercy said whether the rumors related to Wells Fargo and potential mega-MSR offerings are true or not will ultimately play out and that will “work its way through” the market.

“MSRs have a lot of significant interest as an alternative investment,” he added. “I was extremely bullish with regard to liquidity coming into this year. 

“And I’m ultimately feeling as if we should remain bullish, if we can get through this initial reaction to what may happen in the marketplace. I think the laws of economics will ultimately settle in here as soon as there’s greater certainty.”



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San Diego, California-based startup Splitero, which is focused on home equity investments (HEI), has raised about $12 million in a Series A funding round to expand its operations. 

Fiat Ventures led the investment round of $11.7 million, the parties announced Tuesday. Gemini VenturesJoint EffectsPBJ CapitalPermit VenturesDream VenturesGoodwater CapitalSpark Growth Ventures, and Oyster Fund participated in the investment round. 

According to Splitero CEO Michael Gifford, the company raised capital amid “tremendous growth” — despite the challenging economic environment. The startup formerly operated in California, Colorado and Washington but announced its expansion into Oregon and Utah as well. 

Splitero’s business model consists of providing up to $500,000 as a lump sum of cash to homeowners without income and credit score requirements or monthly payments. In exchange, customers give a share of the home’s appreciation to the startup. Clients must retain a stake of at least 20% in their homes. 

Homeowners have the option to repurchase the share of the house from Splitero at any time within the 30-year term via a refinance, home sale or cash buyout. Founded by real estate veterans in 2021, Splitero said it has secured more than $1 billion in equity for homeowners.

“Homeowners’ financial needs are constantly evolving, creating a demand for unique and flexible solutions that support them in reaching their goals and achieving financial wellness,” Alex Harris, Fiat Ventures’s general partner, said in a statement.   

Home equity products have become more popular due to surging house prices in the U.S. According to Black Knight, homeowners reached $11.5 trillion in tappable equity in the second quarter of 2022, $5 trillion above pre-pandemic levels. Tappable equity is the amount homeowners can borrow against while keeping a 20% stake in their homes. 

Numerous mortgage lenders are investing in home equity line of credit (HELOC) products, such as HomepointGuaranteed Rate, United Wholesale Mortgage and loanDepot.



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Tenant not paying rent? Debating whether a year-long, six-month, or month-to-month lease is best? Don’t know how to estimate rent for a new unit? On this week’s Rookie Reply, we’re tackling some of the most troublesome yet common questions that rookie real estate investors have. We’ll be going deep into property management, tenant screening, and what to do when a tenant stops paying. So fret not when investing; there’s always a way to make a win-win!

This time around, we’re joined by Alexandra Burnham, live for Phoenix! Alexandra is like many real estate investors, except for one big difference. Alexandra and her partner share over $750,000 of student debt! Talk about a hole in your pocket! But, instead of letting the naysayers convince her that she can’t invest with her debt, Alexandra has flipped the situation on its head, buying five rental properties and tackling her debt faster thanks to multiple income streams. Stick around for her full story and the phenomenal advice she gives to get your property locked up and leased!

If you want Ashley and Tony to answer a real estate question, you can post in the Real Estate Rookie Facebook Group! Or, call us at the Rookie Request Line (1-888-5-ROOKIE).

Ashley:
This is Real Estate Rookie, episode 252. Another thing you can do, too, as a landlord is look into different kinds of funding, state funding, county funding, for the tenants. There are a lot of resources, even small non-profit organizations, that will help people who need help to subsidize their rental income. Especially since COVID and during COVID, there was a lot of programs that were put out that helped people get caught up on rent that you could apply to as the tenant, and even the landlord could apply on the tenant’s behalf. My name is Ashley Care, and I am here with my co-host Tony Robinson.

Tony:
Welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, motivation and stories you need to hear to kickstart your investing journey. Today I want to shout out someone by the user name of Agboola5252. I’m just going to call you Boola, all right? But Boola left a five-star review on Apple Podcast that says, “I’m a real estate agent in Minnesota looking to invest in real estate, and I think I found the perfect virtual mentor to help get me started. This is the best place to learn if you’re feeling overwhelmed.” Boola, we appreciate you. For all of our rookies that are listening to this podcast, if you have not yet taken the two minutes to write an honest review and help us reach more people, I’m asking you, I’m begging you to do that. The more reviews we get, the more folks we reach. The more folks we reach, the more folks we help. That’s what we’re here to do.

Ashley:
I have to say, some of these user names for your guys’ Apple reviews are quite entertaining. We had, what, Milkman, recently?

Tony:
We had Milkman earlier.

Ashley:
Honestly, I don’t even know what mine is, how to even set that into my [inaudible 00:01:45].

Tony:
I think mine is actually the name of my podcast that I started when I was 22, called Do Really Good. I think that’s still like my Apple podcast review name.

Ashley:
Yeah. I’ll have to look what mine is. But today we have a great show for you. We are live, in person. We love recording in person, and we hope you guys do, too. Please leave us a comment on the YouTube videos, or if you leave us a review on your favorite podcast platform, let us know what city you guys want us to come to next. We have Alex on the show today. She is a dentist and started investing in real estate to help pay down some of her student loan debt, and she does reveal, after continuously saying many times it’s a large amount of debt, she gives us what that amount is.

Tony:
It’s a mind-boggling number. But Alex has a really cool backstory too, right? Because she, like most people that become health professionals, her and her husband both are in the medical field, a lot of them never really even think about investing in real estate as a full-time thing. It’s just something they kind of do on the side. But she’s really taken a more active approach in building her real estate portfolio, and we kind of get to hear the why behind that.
We’ve got Alex coming up. Alex. You guys want to clap it up for Alex?

Ashley:
Woo, Alex.

Tony:
Alex actually hopped on a flight from Fort Lauderdale this morning, so she-

Alexandra:
4:30 a.m.

Tony:
4:30 a.m., and she’s still going. Clap it up one more time for Alex. That’s an early flight.

Ashley:
Alex, tell everyone a little bit about yourself and how you got started in real estate.

Alexandra:
My husband and I are healthcare professionals, and being in school our whole lives, we didn’t know a lot about finances, truthfully. We didn’t really work while we were in school. And so I’ve seen a lot of healthcare professionals who have a high income, but they’re still living paycheck to paycheck or they’re burnt out from work, and we just didn’t want to be like that. And so I researched a lot on how to not do that, and, obviously, real estate was one of the top ones.

Tony:
But outside of real estate, you looked at some other things beforehand.

Alexandra:
Yes.

Tony:
What were some of those other options, and maybe, why didn’t they work out for you?

Alexandra:
I did everything. I dove in, I took the Dave Ramsey Financial Peace University. I tried to study a little bit on stocks and day trading. Please don’t ask me anything about those things. I don’t know anything. It just didn’t interest me. Of course, real estate investing was one of the top things online, and so I just researched real estate investing for beginners. BiggerPockets came up, and I started listening to the OG podcast, and that’s how it started.

Tony:
If you can, tell us just what does your portfolio look like today? How many units? Where are those units located at?

Alexandra:
We have three in Kansas City, and we have one short-term rental here in Phoenix. We have a new build here in Surprise, Arizona, as well.

Ashley:
What was your big motivator for getting into real estate investing?

Alexandra:
Truthfully, I just did it. We see a lot of the people in our profession burnt out, and we just didn’t want to be like that. We do like what we do. We love what we do, and we want to have a choice of going to work and not have to go to work to pay off our student loans, and have to go to work to live up to this lifestyle or anything.

Ashley:
You already told us earlier, but I just want to see everyone’s jaw drop when you tell us what that student loan debt is.

Alexandra:
I don’t know the exact number, but my husband and I combined in student loan debt, just student loans is over $750,000.

Tony:
But-

Alexandra:
Man, I wish we had a camera on this side. Why has no one been recording?

Tony:
But can you tell them what you and your husband do for a living? They went to good use, I would say.

Alexandra:
My husband is an orthopedic surgeon, and I’m a general dentist. It sounds like, yes, high income and all that, but, again, $750,000. If I listened to a lot of the people in our lives who tell us, “You can’t invest, because look at your student loans. You have no money to do that. You need to pay the student loan off,” we would not be in the position we are, and we would not be able to do that.

Tony:
I know you’re taking real estate investing super seriously and there’s a big change coming next year. Can you share that with everyone and what the motivation was behind that?

Alexandra:
Our third deal was a seller-financed deal. For 2023, I’m going to take a year off of dentistry and try to see how many creative financing deals I can get in that year. I am not quitting dentistry, but I’m just going to take one year off.

Ashley:
I mean, you guys have to clap for that. I mean, that’s amazing, being able to have that option to do that. Tell us what your goal is for the next year.

Alexandra:
My goal is to try and get 12 creative financing deals. I mean, I don’t know if I’m shooting for the moon or not, but we’ll see. That’s a goal that I have.

Tony:
All right. Last thing before we get into the question here. What is some advice you can give to a new investor if they were looking to get started today? Based on your experiences, based on everything you’ve done.

Alexandra:
I would say invest in yourself and take action. Like I said, a lot of people in our lives, my close friends, my family, they literally told us, “You shouldn’t do this.” They kind of tried to steer us away from it. But if we didn’t take action, we wouldn’t be able to have had the five properties that we have now, and, hopefully, scale from here. I would just say try and network as much as you can. By the way, this is my first networking event ever.

Tony:
This is her first meet-up ever.

Alexandra:
Take action, because, again, if you listen to all the other people who say don’t, don’t listen to the people who aren’t doing it.

Ashley:
Okay. For our question, what is a healthy return for a buy and hold in Phoenix? What is attractive about the Phoenix market to you? You have your short-term rental here. I mean, technically, your short-term a buy and hold. You’re holding it. What made you want to come into the Phoenix market and why are you going to continue to invest here?

Alexandra:
I think it’s because I’m from Phoenix. My family still lives here. So I was familiar with the area, and because we are out of state, I was able to use that second home loan, the vacation. But I love the Phoenix area. Everyone still comes here to vacation. There’s a lot of snowbirds. There’s a lot of hospitals. There’s a lot of growth. Even though the market is what it is, there is so much growth in Arizona, and I’m sure everyone here knows that, with all the big companies coming here. You still have to look at the numbers, though. Don’t do something that’s going to make your wallet cringe. You need to make a return, still. With a short-term rental, it’s a little higher than a long-term rental. Ours right now, it’s a little lower than I thought. It’s about 23%, I would say. But it just started, so I’m-

Tony:
23% is still pretty good.

Alexandra:
Yeah. I still think the Phoenix market is a great area to invest in. So look for growth and make sure you do your homework with the numbers. Make sure the numbers work. And network. I would say network. Our places in Kansas City, I’ve never been to them. I managed two rehabs at the same time while being a full-time dentist. Even though I didn’t network in person, all the groups online, BiggerPockets, the forums, were so helpful. That’s how I met so many people, and I trust them. Obviously, that’s how we were able to finish those projects and scale, I guess.

Ashley:
Okay. We’re going to start with our first rookie reply question, and this question comes from Tim Reese. If you own multiple properties, what’s your backup plan if your tenants stop paying rent all at once and can’t be evicted? I think a lot of investors saw this during COVID, whereas there was the moratorium where you could not evict tenants, and there was tenants who really could not afford to make payments at that time. And then there was some, and I’m not going to name names of my tenant that took advantage and didn’t pay the whole time. I think this is definitely a risk as a landlord and something that new investors are very scared of. Alex, what would be your advice to get over that fear of that happening or something they could implement in put in place to mitigate that risk?

Alexandra:
That’s a challenging one. He means if all of them stopped paying?

Ashley:
Yes.

Alexandra:
That is a challenging one. I would first talk to the tenants. I mean, they’re human, you’re human. I would try, maybe, if they really can’t pay, try to come up with a payment plan or something. Like, “Hey, I know you can’t pay the full amount, but can you give me 50% of this month, and then try to ease your way back into it somehow?” That’s tough. I haven’t had that situation, thank God, so far.

Ashley:
Well, I think that part of that reason it’s so tough is because I think the chance of that happening is rare. Unless maybe you have two or three units, then the less units you have, the more probable that’s going to happen. But as you grow and scale your portfolio, there’s kind of that less chance of every single unit being non-paying at the same exact time. But this is where your cash reserves come in, is having those three to six months cash reserves for each unit set in place, so you can at least cover those expenses and get a game plan in place for those three to six months. Especially if you have a smaller portfolio, highly recommend starting out with six months. That covers your mortgage, your property taxes and your insurance for those upcoming months.

Tony:
That’s a great answer. The only thing I would add to him is, like Ashley said, is that I do think that unless there’s a global pandemic that happens again, probably super rare that you’re going to see a point where all of your tenants aren’t paying. If there isn’t a major health scare or something that’s preventing people from paying, and your tenants just decide not to pay, then you might need to do a slightly better job of screening your tenants. That would probably be my advice back to you. If you’re nervous about that, spend a little bit more time up front on the screening process to make sure you get the highest quality tenant.

Ashley:
Another thing you can do, too, as a landlord is look into different kinds of funding, state funding, county funding, for the tenants. There are a lot of resources, even small, nonprofit organizations that will help people who need help to subsidize their rental income. This is completely different than Section 8, because Section 8, you can be on a waiting list for three years to get assistance. But there are smaller organizations, and especially since COVID and during COVID, there was a lot of programs that were put out that helped people get caught up on rent that you could apply to as a tenant, and even the landlord could apply on the tenant’s behalf. That would be something to give your tenant, some of these programs that they may not even know about where they can get that assistance, and that’s going to your local housing authority and organization website.
For example, in Buffalo there’s HOME NY is one of them, and then there’s also Belmont Housing. That would be the best resource to find out about these kind of programs that can help your tenant get caught up on rent.
Another favorite is doing cash for keys. If your tenant is paying, instead of waiting the three months until you can do an eviction or whatever that waiting time period is, maybe just offer them, say, ‘You know what? I’ll give you $500, I’ll give you $1,000 if you move out by next week. I’ll come here, all your stuff is gone, you hand me the keys, and I will hand you a $1,000 check or $1,000 cash, and we’ll part ways.” That may be enough for them to go and get another unit and start over.

Tony:
You took the words out of my mouth. That was the next piece I was going to land on, as well.

Ashley:
I read your mind, and I was like, “You know what? That’s a great idea. I’m going to say it before he does.”

Tony:
That telekinesis.

Ashley:
Okay, let’s check out our next question. This one is from Brian Cavalier. Is it a bad idea to lower the rent if no one is applying for a unit? Plenty of showings and interest, but no one is following through. Alex, what would you think about that?

Alexandra:
This actually happened to us. The first unit we turned into long-term rental, and it actually rented out for $200 more than our goal was. And then that tenant, when they moved out, they moved out in the middle of winter. It’s snowing. No one really moves at that time. We knew that we wouldn’t get a renter for that amount that we were going to get in the summertime. We actually did have to lower it a little bit, but we were still cash flowing a little bit. As long as you’re not negative, I think, cover what you need to cover and still have a little bit of reserves, I think you’re okay. Ashley, what you always harp on, always make sure you have reserves, just in case. But we had to do that, and we’re still okay. I mean, we still have those tenants there. They signed an 18-month lease, so it’s a little lower than the first one, but, hey, we got someone in there for 18 months.

Ashley:
Sometimes that’s better is not having that turnover, is taking a little bit off the monthly rent to have somebody there longer, because turnovers can be expensive.

Tony:
I briefly worked for this massive property management company when I graduated from college.

Ashley:
I feel like today I’m learning all of these new things about you.

Tony:
I was there for six weeks, and I’m actually non-rehireable there, because I didn’t give them a full two-week notice when I left. But, anyway, I learned a few things while I was there for that month and a half.
One of the things they did was they adjusted the pricing based on the term of the lease. Say that someone was signing a lease in June, and they know that December is a difficult time to relist a property. They would give you the option of having a six-month lease, but it would be significantly more expensive than a 12-month lease that would expire in June, and they did that for all of their properties. These are massive apartment complexes, a hundred units, but that’s how they tried to decrease the number of move-outs during the slow season when they would have to charge less and increase the number of move-outs during the peak season when they could charge more.

Alexandra:
We negotiated with them to do the 18-month lease instead of a 12-month, because if we did 12, we would have another turnover, potentially, in the wintertime. We added a couple more months to the lease, so if they did turnover, then it would be in the spring/summer where it’s more demand.

Tony:
Have you ever done that for your listings? For your listings. Sorry, short-term mental brain talking. For your long-term rentals?

Ashley:
Actually, no, I haven’t. And you would think in Buffalo nobody wants to move in the snow, which is completely true. I think that’s a great idea.

Tony:
All right, this next question comes from Shauna Garnett, and Shauna’s question is, what’s everyone’s thoughts on doing a six-month lease and then moving to month-to-month? I hate the idea of being stuck with a bad tenant for a full year. I feel like we just kind of touched on this a little bit, but I mean, I don’t know, what are your thoughts, Alex, on a shorter lease to get around the potential of having a bad tenant?

Alexandra:
They just nervous, then, for the tenant?

Tony:
That’s what it sounds like, right?

Alexandra:
I mean, I would say vet your tenant as best as you can. There’s certain criterias that you can find out from BiggerPockets, forums, and things like that, from property managers. Screen them really heavily, so you can at least trust them. You might get a bad tenant even if you have a six-month lease. They might stop paying after a month, but you really have to just vet them really well. I don’t think I really answered it, sorry.

Tony:
No, that’s a great answer.

Ashley:
I do think that is a fear. Especially if you are in a state where it is more tenant-friendly, where it is harder to evict a tenant, especially if they’re locked into a lease. I’ve actually been more favorable to being month-to-month, because instead of doing an eviction for non-payment, you can do an eviction for non-renewal. When they’re month-to-month, you have to give certain notice. If they’ve lived there less than a year, it’s 30-days notice. If they’ve lived there, I think it’s up to two years, then it’s 60 days. And then over two years, it’s 90-days notice. You give them notice stating that you’re not going to renew their lease, and then you have those three months, and then that’s when you can either increase the rent or offer that non-renewal. It’s an easier way to evict in New York State right now doing the non-renewal process than the actual non-payment process. That would be one benefit, I guess, if you are in a state where it’s more tenant-friendly, the laws, than it is landlord-friendly.

Tony:
Yeah, Shauna, I think, like we said, sometimes turnover is more expensive, so if you have all these month-to-month leases and you’re allowing people to swap out every six to seven months, it could end up costing you more money in the long run. To your point, Alex, I think spending time vetting upfront could be better.

Ashley:
Too, how easy is it for a tenant to actually get out of a lease? Because, in New York State, it is very easy for a tenant to kind of get out of their lease. They can maybe lose their security deposit, but still move out. It’s very hard to, if you do put the stipulation in their lease that, okay, if they move out, they lose their security deposit and they pay rent until a new tenant is put into the property. But you have to actively search for a new property. So they have a very good case, “Oh, well, you didn’t find a tenant for two months. It was your fault. It was too slow.” Things like that. So it’s very hard to actually get that money out of the tenant and to get them to continue to pay for that vacancy until it is filled.

Tony:
I don’t know how you-

Ashley:
Or, even if it is filled right away, you still had that turnover cost that you’re not recouping.

Tony:
Just one other piece on that. The way that that same property management company I was talking about that I worked for, that’s how their lease was set up, that if you broke your lease, you were responsible for the rent until someone else moved in. And if you didn’t pay, they would send you to collections, and they would let collections kind of chase after you. I don’t know if you want to do all that, Shauna, but we’re just talking [inaudible 00:20:36].

Ashley:
Okay. Our last question is from Matt Pauls. How do you determine rental rates in an area? Thanks in advance.

Alexandra:
There’s a lot of websites, platforms that you can use. You can even search Zillow, honestly, and just look at the neighborhood that you’re in or that the property is in, and look at what the comps are in the area and what they’re going for, for rent. But Rentometer is a great website, as well.

Tony:
The BP rent estimator is actually pretty spot-on. I bought my first rental property before the rent estimator rolled out, so just out of pure curiosity, I went back and plugged that address into the rent estimator, and it was spot-on to what I was charging my tenant. Or, I think it was off $25 bucks, something like that, but it was pretty close. So if you’re looking at markets trying to understand what that rent could be, I think the rent estimators a great tool.

Ashley:
The only trouble with some of those tools is that when you get into rural areas where I invest, there’s not enough data for them to actually pull information. That’s where going to Facebook Marketplace, even Craigslist, and seeing what properties are listed at, and then just checking every week. If there was a listing there last week, and it’s gone the next week, then most likely it was rented for what the asking rent was, and you can use that as a comparable. Then, also, calling property management companies in that area, and you can even just pretend you’re looking to rent an apartment, even if they don’t have anything vacant. Just asking, “What size are your one-bedroom apartments, and what do you currently rent them for? What’s included?” Things like that, too.

Tony:
Going back to that same company, that was actually part of my job as the leasing agent was to call other apartment complexes just to get rental estimates on comparable units so we would know how to price, so it is a common practice.

Ashley:
Okay, cool. Well those are our rookie reply questions for you guys today. Alex, thank you so much for joining us.

Alexandra:
Thank you so much for having me. It was so fun.

Ashley:
Can you let everyone know where they could reach out to you and find out some more information about you?

Alexandra:
Yeah, on Instagram, I’m AK_Burnham, and then on Facebook, Alexandra Burnham.

Ashley:
Okay, cool. Thank you so much. I’m Ashley @WealthFromRentals, and he’s Tony @TonyJRobinson on Instagram. Thank you guys so much for listening, and we will be back on Wednesday with a guest.

Speaker 4:
(singing).

 

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The nation’s single-family investment-property sector and the lenders serving those borrowers face some major challenges in 2023 as rent growth is slipping, vacancy rates growing, home-value growth faltering, and a possible recession looms. 

For the non-QM lenders serving the single-family investment-property space who have managed interest-rates well to stay ahead of the market, however, there’s still plenty of opportunity to pick up market share, industry observers argue. 

In addition, secondary market investors continue to show interest in well-underwritten, higher-rate loans secured by single-family rental properties. That, in turn, could lead to improved liquidity outlets for loans secured by single-family investment properties — through the private-label securitization (PLS) market and via insurers, pension funds and other institutional investors that hold loans or mortgage-backed securities in portfolio. 

Ben Hunsaker, a portfolio manager focused on securitized credit for California-based Beach Point Capital Management, said there are already at least three investment-property backed PLS deals in the cue this year. They include a $405.2 million offering backed by 842 loans, OBX 2023-NQM1 Trust, which is sponsored by Onslow Bay Financial, according to abond presale report released by Kroll Bond Rating Agency (KBRA) on Jan. 5. “Approximately 36.8% of the subject [loan] pool is secured by investment properties,” the presale report states. 

Another of the planned offerings is a $485.9 million deal backed by 902 loans that is sponsored by VMC Asset Pooler LLC, an affiliated of Invictus Capital Partners. The offering is dubbed Verus Securitization Trust 2023-1, according to a KBRA bond presale report released on Jan. 11. The fling shows that 460 loans in the offering, or nearly 40%, are investment properties, with the balance being non-QM loans secured by owner-occupied properties and a handful of second-home loans. 

The third deal in motion, also backed in part by investment properties, is now undergoing due-diligence review. It is an estimated 470-loan securitization — with no value yet assigned in the due-diligence documents filed with the U.S. Securities and Exchange Commission. The pending offering, called NRMLT 2023-NQM1, is sponsored by Rithm Capital, formerly known as New Residential

“It looks to be about 50% investor properties,” Ben Hunsaker said of the planned NRMLT offering.

The PLS deals in the pipeline are a sign that investment-property mortgages are still in demand — both by borrowers and bond investors.

Still, it’s far from all good news for nonbank lenders. High interest rates and inflation are projected to shrink overall mortgage originations in 2023 — including in the investment-property space— compared with 2022, a year in which the bleeding had already begun.

National real estate brokerage platform Redfin reports that investor home purchases dropped more than 30% year over year in the third-quarter of 2022, which is “the largest decline since the Great Recession, aside from the second quarter of 2020,” at the height of the pandemic.

The Mortgage Bankers Association’s (MBA’s) most recent market forecast projects that overall mortgage origination this year will dip to $1.45 trillion — down by 15% compared with 2022. Mortgage production in 2022 nationally was down about 50% from $4.44 trillion in 2021 — a year in which 30-year fixed mortgage rates were about half of what they are today.

“We are expecting a recession in the first half of 2023, which will result in the unemployment rate increasing … to 5.5% by the end of 2023,” the MBA’s December market-forecast report states. The nation’s unemployment rate stood at 3.5% as of December — with an estimated 5.7 million unemployed people.

That market contraction, along with a more difficult inflationary operating environment for property owners and businesses generally, is also expected to be a drag on the potential volume of loan originations secured by single-family rental properties. That is happening in the context of a shrinking universe of lenders capable of serving that market, however, creating an opportunity for the healthier non-QM lenders to expand their market share, according to Hunsaker. 

“I think if you look at the landscape for originators … the guys [non-QM lenders] who survived, who thrived, managed their interest-rate risk well and are still able to quote and lock [loans],” Hunsaker said. “They were quoting and locking [loans] at probably [a range of] 8.75% to 10.5%, and while you’re seeing investor non-QM origination rates down, [they’re down] less than owner-occupied non-QM loans.”

He added, however, there also are many non-QM lenders that have not fared as well and now don’t have the warehousing capacity or the interest-rate risk-management capacity to excel in the current market.

“And so, what do you have to do? You have to cut your production and keep it to what you can fund with cash on hand or with a relatively conservative warehouse capacity,” he added. “I think that cohort of the origination market [those not prepared for the current market dynamics] has probably seen more volume declines than the cohort that either has balance-sheet capacity or has forward-flow agreements or has some sort of a [liquidity] take off.”

Although there is already some PLS deal activity involving investment-property loans cued up early in 2023, projections from the Kroll Bond Rating Agency (KBRA) show that overall PLS issuance in 2023 will be down by as much as 40% in 2023, compared with 2022. And 2022 was off by some 17% from 2021. Securitization has traditionally been one of the major liquidity channels for many nonbank lenders.

PLS offerings backed by investment properties across the prime and nonprime space, based on deals tracked by KBRA, slowed considerably as interest rates rose in 2022 —  with the rate on a 30-year fixed mortgage starting the year at 3.22% and ending 2022 near 6.5%, according to Freddie Mac. Rising rates and associated volatility made executing securitization transactions profitably incredibly difficult for most deal sponsors. 

KBRA’s data show that for the full year in 2022, there were some 43 PLS offerings valued at $17.5 billion that were backed in whole or in part by investment properties. Only 10 of those deals, worth about $3.3 billion, were issued in the final six months of 2022, however. Those deals involve investment properties owned by individuals or small “mom and pop” landlords and do not include securitizations undertaken by large institutional owners of investment properties — the so-called Wall Street investors.

“There’s some of that [investment-property collateral] going into securitizations [now], but we don’t think the backlog is very big relative to where you historically have seen it in the December-January time frame,” Hunsaker said, adding on a positive note, however, that “we’ve seen securitization spreads firm up over the past 20 or 30 days.” That is happening in the context of inflation showing signs of abating as well — down from annualized high of 9.1% in June to 6.5% as of December, based on the Consumer Price Index.

“We’ve also heard a lot of it [single-family investment-property collateral] has gone to … more balance-sheet oriented end users, such as insurance companies, banks, and some non-securitization [players] using private credit funds,” Hunsaker added. “I think [institutions] like that are stoked to get a 9% to 10% yield range on those assets — maybe a little bit less.”

Empty sails in single-family

The economic doldrums slowing growth in the overall housing market, including rental rates more recently, if not reversed, will continue to negatively affect both new loan originations in the year ahead and the profit margins for single-family rental investors. That includes rentals owned by so-called mom-and-pop landlords — with 10 or fewer properties. Those smaller-scale landlords account for the bulk of the nation’s single-family investment-property market. 

Although the single-family rental market is distinct from the multifamily apartment market, they both compete for the nation’s pool of renters. And across the apartment market over the past four months, rental and occupancy rates been declining, with “more multifamily units under construction than at any point since 1970,” according to a recent report by rental marketplace Apartment List, which has some 6 million rental units listed on its platform, 

“We estimate that the national median rent fell by 0.8 percent month-over-month in December … the fourth consecutive monthly decline, and the third largest monthly decline in the history of our estimates, which start in January 2017,” the Apartment List report states. “The preceding two months (October and November 2022) are the only two months with sharper declines.

“… In the most recent four months from August through November, it [the vacancy rate] has increased by 0.8 percentage points, reaching 5.9% this month [December, up from 4.1% in October 2021]. …We expect that 2023 will be a year of flat to modest rent growth, but it is unlikely that prices will fall significantly throughout the year.”

Short term rental growth is slowing

In addition to the economic strain being felt by mom-and-pop landlords due to increasing costs fueled by inflation as rental and occupancy rates plateau, market experts say the economic drag will hit even harder the short-term rental sector — which is dominated by less-experienced investors listing their rental properties through online platforms like Airbnb and Expedia’s Vrbo

A recently released report by short-term rental analytics firm AirDNA projects that this year the supply of short-term rental units will increase by 9% while demand for rooms is projected to increase at only a 5.5% clip. The result, according to the report, is that revenue per available room is expected to decrease in 2023 by 1.6% year over year — compared with a 2.1% year-over-year gain in 2022 and a nearly 28% bump in 2021.

“So, in 2022, we saw about 20% demand growth,” said Jamie Lane, vice president of research at AirDNA. “[This] year, we’re expecting [less than] 6%. 

“That is a significant slowing.”

Lane added that the projected supply growth for 2023 is likely to come, to a large degree, from homeowners who now have very low interest rates, compared with the current market, and “maybe were thinking of moving, but they don’t necessarily want to give up their home with that 3% mortgage, so they’ll rent it out” instead.

“What you’ve seen [in the short-term rental market] is you go from premiums of about 80% [in 2021] — i.e., the revenue that you’d earn is almost double what the cost of that revenue is,” Lane said. “And that’s gone down [as of late 2022] to about 10% or so.

Staying alive in single-family

There is opportunity ahead in the single-family investment property sector, however, for lenders and borrowers alike who do their homework and understand the peculiarities of the markets they are operating in today — and act accordingly, market experts say.

“In certain markets, like in Phoenix, certain parts of Florida and the Southeast, [for example], I agree there were basically fields of homes built, and they were built based off the extreme growth we saw in 2020, 2021 … and that [development] may have outpaced the demand growth in those areas,” said Doug Faron, a founding partner of Florida-based Shoreham Capital, a build-for-rent and multifamily residential developer. “We’re really thinking about rental yields. 

“We’re thinking about what the end buyer wants, which with us is an institutional fund. What yields are they [the end buyers] targeting for their investments and can we — because of where we think rents are going [in a specific area] and how we’re going to manage this asset — achieve a yield and exit that makes sense.”

It may well be a case of not letting the good be the enemy of the perfect when it comes to investment-property plays in the current dour housing market. As evidence that some investors seem to see it that way, loan-aggregation platform MAXEX reveals in a December market report that its investment-property loan-trading volume has expanded significantly over the past few months, with nearly two-thirds of locks “coming in the form of investment-property loans.”

Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors, also provides some indirect rational for continued optimism about the single-family investment-property market overall in the current high-rate environment.

“With the qualifying income near the $100,000 threshold, 32% of all households and [only] 15% of all renters can currently afford to buy the median-priced home,” she said. 

The MAXEX report concludes that the high cost of financing a home purchase “has relegated many would-be homebuyers to the sidelines, where renting is the more affordable option for the time being.” 

“… This has created a strong market for real estate investors who continued to buy homes despite elevated home prices and higher interest rates,” the MAXEX report concludes.

Rick Sharga, executive vice president of marketing for real-estate research firm RealtyTrac, explained in a prior interview that the time horizon for most investors in the rental-property market tends to be longer-term.

“So, even if there is a [home]-price correction, with a longer time horizon, you’re more likely to be able to ride that out and get back to where you were, and actually ahead of where you were,” he explained. “In the meanwhile, you’ve been renting it out, at least at a breakeven number for that that whole period of time, and in most cases probably cashflow positive. 

“I personally think the rental sector of the market is a little less vulnerable to bubbles, to price increases and decreases.”



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Today’s inflation data has shown that the peak growth rate of inflation is behind us. This should also mean mortgage rates hit their highs. The key phrase I have stressed since I wrote about the case for mortgage rates to go lower on Oct. 27 is thinking 12 months out. The trend is your friend, and the month-to-month data has cooled off noticeably.

That cooling happened even with the biggest inflation component — shelter inflation — still rising in the lagged modeled CPI data. This means shelter inflation isn’t being properly accounted for versus the real-time data.

The Consumer Price Index month-to-month readings show that inflation has peaked, as seen below.

If it weren’t for the lagging CPI shelter index, the biggest component, the headline core print, would be lower today on a year-over-year basis. It’s a positive thing that most people have gotten the memo on this reality about shelter inflation because it shows how the headline year-over-year prints are lower as we speak.

While still hot, the year-over-year inflation growth rate is falling, see below. 

All this is happening with the labor market still very tight, which means the Fed doesn’t need to create a job-loss recession to bring inflation down. The best way to fight inflation is to add more supply, demand destruction is not the most effective way, and it will impact future production.

The jobless claims data on Thursday, as you can see below, was still solid and running at 205,000 for the headline, with a four-week moving average of 212,500.

For those who were saying we needed an unemployment rate above 6% to bring down inflation, you must feel sick to your stomach as that advice would have meant millions of Americans would have lost their job for no reason.

How did the bond market react to this inflation data? It was a mild day compared to what we saw back in November of 2022. However, as I am writing this, the 10-year yield is at 3.45%, which is the third time we are trying to lower this area.

This does mean mortgage rates should be getting better today. We are getting closer to a five-handle in mortgage rates and farther away from the 8%-10% mortgage rates people were talking about late last year when rates peaked at 7.37%.

Digging into the inflation data

From BLS
The Consumer Price Index for All Urban Consumers (CPI-U) declined 0.1 percent in December on a seasonally adjusted basis, after increasing 0.1 percent in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 6.5 percent before seasonal adjustment. The index for gasoline was by far the largest contributor to the monthly all items decrease, more than offsetting increases in shelter indexes. The food index increased 0.3 percent over the month with the food at home index rising 0.2 percent. The energy index decreased 4.5 percent over the month as the gasoline index declined; other major energy component indexes increased over the month.

Breaking down some of the internals is key to understanding the CPI data. Of course, the biggest component of inflation is housing. I stressed in late 2020 that shelter inflation was going to take off, but the opposite is the reality now. However, the CPI data lags badly here.

Thankfully, the Federal Reserve understood this and created its own index in December to account for the lag. Back in September, on CPI inflation day, I talked about how this would be a positive story in 2023. I said by January or February, it would be evident that the growth rate of shelter inflation was falling, and people have gotten the memo. I could not have asked for a better outcome than where we are today.

Shelter inflation will always lag; let’s wait until October of 2023 to see when this data line will finally show some peaking and follow the more current data. When that starts to happen, core CPI will fall more noticeably. As we can see in the graph below, the growth rate is still hot here with shelter data.

The growth rate of food inflation looks like it’s peaking; we all know the drama the bird flu has done to egg prices, and there is nothing the Fed can do about that. Food inflation is part of headline inflation, which tends to have wild swings up and down, and this is why it’s not something the Fed looks at. 

We all know the massive car inflation story post COVID-19, a lack of production and chips have boosted inflation here badly. However, this is rolling over too.

The energy fall is well known as oil prices have fallen noticeably since the spike from the Russian invasion of Ukraine. Oil is a weapon of war in this modern age and we have fought back on this front with our reserves. But what happens when the reserves run low, and China returns from its COVID-19 shutdowns and starts driving cars again? Something to think about in the future.

The CPI report came in line with what most people were expecting, so there is no real shocker news here. However, the bigger story is the trend, and if you’re hoping for the Fed to keep over-hiking and put the U.S. in a massive recession, today wasn’t a good day for you.

I saw one discussion on Twitter where an analyst was claiming the Fed needs to take the Fed’s fund rate to 7% or 8%. This was the hope for bearish Americans — that maybe the Fed still hadn’t got the memo that the fear of 1970s inflation just isn’t going to stick in this modern-day economy without supply shocks at this stage.

The bond market, as always, had gotten ahead of the Federal Reserve, and maybe the Fed will eventually get it. However, for now, rates are going lower, and the fear of 8%-10% mortgage rates for the spring of 2023 is slowly dying a good death, like the fear of 1970s inflation.

If you want a soft landing, this is the inflation data you want to see, something I talked about last year, even on recession watch. It’s a good day for the United States of America and the housing market.



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Outside of the roller coaster ride the FTX and Terra coins took, I have rarely seen anything quite like the trajectory nationwide rents have taken over the previous year.

Take a look for yourself.

YoY rent growth by unit 2022
Median Rent Growth Year-Over-Year By Unit Size – Realtor.com

Of course, this is only showing the year-over-year change and not the rents themselves. Rents are still up year-over-year despite the dramatic about-face that occurred around last March. That being said, we have reached an inflection point where rents have started to decline month-over-month in nominal terms as well. 

As Realtor.com notes,

“In November 2022, the U.S. rental market experienced single-digit growth for the fourth month in a row after ten months of slowing from January’s peak 17.4% growth. The median rent growth across the top 50 metros slowed to 3.4% year-over-year for 0-2 bedroom properties, the lowest growth rate in 19 months. The median asking rent was $1,712, down by $22 from last month and $69 from the peak but is still $308 (21.9%) higher than the same time in 2019 (pre-pandemic).” [Emphasis mine]

And if we were to account for inflation, the decline is even sharper.

YoY median rent growth 2022
Median Rent Growth Year-Over-Year Compared With Average Median Rent (2019 – 2023) – Realtor.com

Furthermore, the “builders strike”, as I call it, “could also put off home shopping plans and further increase rental demand.” The supply side also bodes poorly (or bodes well, depending on your perspective) for future rent prices,

“On the supply side, the number of for-rent properties may gradually increase as homebuilding activity continues to pivot to multi-family properties. This extra supply in multi-family homes could shift market balance, raising the still-low rental vacancy rate and helping temper recent rent growth driven by the excess demand.”  

To drive home just how dramatic this shift has been, compare the fastest metro-level rent growth in the top ten cities over the past six months, 12 months, and since the beginning of the pandemic, according to data from ApartmentList. It goes from 37% growth since March of 2020 (Tampa) to 7% in the last 12 months (Indianapolis) to 1% in the last six months (Indianapolis). 

fastest metro-level rent growth
Fastest Metro-Level Rent Growth (2020 – 2023) – ApartmentList

When the fastest-growing metro area is at 1% growth, that should tell you everything you need to know. 

For what it’s worth, the worst-performing market over the past six months was Providence, Rhode Island, at -6%. Since March 2020, the worst has been San Francisco at -5%, but that is mostly due to local factors. In fact, San Francisco is one of only two markets with negative rent growth since March 2020 and one of only five with less than 10% positive rent growth.

slowest metro rent growth dec22
Slowest Metro-Level Rent Growth (2020 – 2023) – ApartmentList

Why is This Happening?

One part of this is just seasonality. Prices and rents both tend to dip a bit in the winter. But this is a much larger dip than normal seasonality would predict. There’s much more to the story than just that.

Before the Fed started jacking up interest rates, real estate prices were skyrocketing due to a variety of factors, most notably historically low interest rates and the large, country-wide housing shortage that came from a decade of insufficient housing construction. That shortfall in supply was then further exacerbated by Covid and lockdown-induced delays. 

The housing shortage had the same effect on the rental market as it did on the sales market. However, when rates went up, the “sellers strike” began, and new listings fell dramatically. Remember, unlike in 2008, most homeowners today have 30-year fixed loans with low interest rates. There is little incentive to sell.

So one of the first pieces of advice I gave given this new and very odd market was, “[I]f you own your home and need to move for work or other reasons, selling your home is not the way to go.” You really shouldn’t ever sell or refinance a house with an interest rate of 3% or less.

“Instead, it makes more sense to rent out your current home and then rent where you are moving (assuming it doesn’t make sense or is unaffordable to buy there).”

It turns out that a lot of people took this advice or had a similar thought. At the same time that new listings are way down, we have noticed the number of rental listings shoot up in every submarket of the Kansas City metro area we have properties in, both for houses and apartments. It appears to be that way all around the country.

Furthermore, while rents on new listings were increasing by over 15% from one year to the next, that was nowhere near the rent increase the average tenant had to pay. As NPR pointed out, “Government consumer price data show that the average rent Americans actually pay—not just the change in price for new listings—rose 4.8% over the past year.”

The average increase on a lease renewal hasn’t come close to the average increase on a new rental listing. Thus, not surprisingly, many tenants (like homeowners) aren’t moving. 

Americans, on the whole, are moving less than at any time since 1948, and according to data from RealPage, apartment lease renewals are at 65%, up almost 10% from just 2019. 

With more properties coming to the rental market, that increases competition and puts downward pressure on prices. At the same time, most tenants aren’t paying rent at market rates for new listings six months ago because their lease renewals weren’t keeping up with market increases. Thereby, they don’t have much incentive to move if they are going to have to pay a substantially higher price in order to do so. 

Several other trends have also contributed to this state of affairs. For one, many of the construction projects Covid delayed have finally come online, adding additional supply to the market. In addition, inflation and rising housing costs were nearing the limits of affordability in the middle of 2022. This has hampered rent growth, particularly by convincing more Americans to move in together.

As many as one-in-three adults rely on their parents for financial support, and many young adults, in particular, have taken to moving back in with their parents. More Americans are also open to renting out a room or portion of their house. A Realtor.com survey found that a full 51% of homeowners were willing to rent out extra space in their homes, a rate that is highest amongst Millennials (67%). Indeed, Americans living with roommates is an increasingly prevalent trend for years

All of these trends put together are bringing rental prices back down to Earth. 

Is Renting Your Property Now a Bad Idea?

As with the real estate market in general, it is highly unlikely that the rental market will collapse. After all, there is still a housing shortage, and new construction is slowing down again because of high rates (at least high by recent standards).

Furthermore, many people who were looking to buy a home are in the process of giving up and looking to rent. As their plans change, that will increase demand and put upward pressure on the market. And again, part of this recent decline is just seasonality, and as we enter the warmer months, the market should heat up again (pun possibly intended, I’m not quite sure), at least to a certain extent.

Rents skyrocketing over the past few years was an aberration, and the fact they are coming back down to Earth may not be great for landlords, but it is better for the country on the whole. While new purchases are made more difficult by higher interest rates, the rental market should stabilize. 

You should not expect rents to be much higher next year than they are now. But I wouldn’t worry too much about being unable to rent your properties.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.



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Michigan-based United Wholesale Mortgage (UWM) is taking another step to aggressively reduce its prices in order to gain market share in a shrinking mortgage market. 

The company announced on Wednesday that it is giving up to 125 basis points to brokers to use on any loans they lock with the lender, with a maximum of 40 basis points per loan.

According to a spokesperson for the company, LOs can apply their own pricing enhancement to their borrowers with these basis points.

“Sometimes 10-20 basis points is all an LO needs to win over a real estate agent or get creative on a borrower’s loan,” the company said in a statement. 

Brokers can use the points for conventional, government and non-agency loans up to $1 million. 

The program, dubbed “Control Your Price,” is effective immediately and is evidence of how the company intends to keep pushing its rivals in 2023. To support its strategy, the mortgage lender had about $800 million in cash as of the third quarter of 2022. 

For most of 2022, UWM had an aggressive pricing strategy in place to gain market share and attract loan officers from the retail to the wholesale channel. With the Game On initiative, the lender slashed prices across all loans by 50 to 100 basis points. 

In December, UWM’s chief strategy officer, Alex Elezaj, told HousingWire the company doesn’t “have any intention right now to stop Game On, which has been a big win for our company.” 

According to Elezaj, “Retail loan officers continue to convert over to wholesale, and this [Game On] was an extra incentive.” 

Late last year, UWM also expanded temporary buydowns for jumbo loans, which makes sense as borrowers have increased negotiating power amid surging mortgage rates. The company also recently announced a flat fee of $37.35 for credit reports.  



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