Venture-backed residential brokerage Compass has hired bookrunners ahead of an independent public offering in 2021, according to a new report.

Compass, most recently valued at $6.4 billion, is working with Goldman Sachs and Morgan Stanley to underwrite the IPO, according to Bloomberg, which cited anonymous sources.

Like other real estate companies of late, SoftBank-backed Compass has benefited from low interest rates and changing consumer behavior that’s driven new home purchases across the country.

Founded in 2012 by Robert Reffkin and Ori Allon, New York-based Compass has raised more than $1.5 billion from blue-chip investors, including SoftBank, Fidelity, Wellington Management, Goldman Sachs, Dragoneer, Canadian Pension Plan Investment Board, IVP, LeFrak and others.

Compass positions itself as a tech-forward brokerage that has gradually branched out beyond brokerage – it offers a concierge service, facilitates bridge loans, has a title-and-escrow arm, and has deployed a bevy of resources into tech centers in Seattle and Hyderabad.

The residential brokerage has also spent heavily to acquire smaller brokerages and top agents in over a dozen markets across the country since its founding, which led to accusations of agent poaching and issuing huge splits and signing bonuses that drove up costs to unsustainable levels.

There are also open questions about how much expansion is possible for the brokerage, which currently boasts more than 18,000 agents and sold over $91 billion worth of property in 2019, according to Real Trends.

In the early days of the pandemic, when lockdowns prevented Compass from showing homes in its strongest market, the brokerage elected to cut 15% of non-agent staff. Compass subsequently rebounded to cash in on record home sales in the summer and into the fall.

Realogy, the largest brokerage conglomerate in the U.S., is currently trading at $12.35 a share, up dramatically from a low of $2.09 in March. Despite its heft, Realogy’s market cap stands at roughly $1.43 billion, less than Compass has raised across several funding rounds.

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The pandemic has shifted the pecking order of the real estate industry’s location-location-location axiom for many homebuyers — high-cost and high-density urban is out, while suburban is back in vogue and rural is experiencing a bit of a revival.

Many real estate investors were serendipitously ahead of this shift even before the pandemic started, driven by both affordability and an affinity for overlooked markets.

“Currently I’m in some of the Southern markets like Alabama, Mississippi, Texas, Indianapolis, Ohio. Those markets I’m able to put a little bit less money in but also make a comfortable amount of return,” said Bijan Green, a Denver-based real estate investor. “A deal for me is a property I can buy for under $100,000, typically.”

Green gave the example of a Fort Wayne, Indiana, property he purchased on via a bank-owned (REO) auction in July 2019. Following extensive renovations that took nearly a year to complete, the property was resold to an owner-occupant buyer in July 2020.

Located 125 miles northeast of Indianapolis and about 170 miles southeast of Chicago, Fort Wayne is in Allen County — a top 50 market for out-of-state buyers like Green, according to data from the marketplace.

The data shows 30% of all properties purchased via online REO auction in Allen County were to out-of-state buyers, ranking 36th highest among 198 U.S. counties with at least 10 online REO auction sales through the first 10 months of 2020. The 30% of purchases going to out-of-state buyers in Allen County so far in 2020 is up from 21% in 2019 and 11% in 2018.

Allen County fits a similar profile to the top five counties with the highest percentage of out-of-state buyers so far in 2020: counties outside of major metropolitan areas with populations between 60,000 and 200,000. Three of the four counties are home to an army base or other army facility.

Those top five counties were Comanche County/Lawton, Okla. (75% out-of-state buyers); Calhoun County, Ala. (60%); Richmond County/Augusta, Ga. (56%); Salem County, N.J. (56%); and Rock Island County/Quad Cities, Ill. (54%). See sidebar for more details on these markets.

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Investing Where the Heart Is

Out-of-state buyers often have a personal connection or special affinity for the markets where they are purchasing, even if those markets are literally across the country. San Francisco-based real estate investor Will Wenzel started purchasing distressed properties in his hometown county of Fairfield County, Conn. — 2,959 miles away from San Francisco — when he had a “Eureka Moment” shortly after the declaration of the pandemic in March.

“We wanted to see the area do well. We wanted to invest capital back into the area in which we grew up,” said Wenzel, who is partnering in the venture with a long-time friend who is a designer and general contractor in Connecticut. “When the pandemic started, we realized that we were at the beginning of a great suburbanization where the millennial generation is moving to the suburbs.”

The analysis shows that 58% of online REO purchases made by buyers located in California were for out-of-state properties, the fourth highest of any state behind Utah, Colorado and Arizona. In some coastal counties such as Contra Costa, Los Angeles, Orange and San Diego, the percent of buyers purchasing out of state was above 60%.

Wenzel’s willingness to start buying in the uncertain days and weeks immediately following the pandemic declaration paid off.

“There was just no one else buying,” he said. “It was just a once-in-a-lifetime opportunity.”

Wenzel said competition for distressed properties has picked back up since those early days of the pandemic, but he still sees plenty of opportunity for these value-add investing opportunities given the broader millennial-driven suburbanization trend.

“You have the housing stock sitting on the market and it’s kind of obsolete in terms of being useful to the next generation,” he said, adding that he and his business partner completely renovate the homes they purchase to make them like new construction once completed. “These suburbs, they’ve really been lacking investment the last 10 years. They need people like us to come in and invest with capital and build for the future.”

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Top 5 Counties for Out-of-State Buyers

Comanche County, Oklahoma
Located on Interstate 44 about 80 miles south of Oklahoma City and about 200 miles north of Dallas-Fort Worth, Comanche County had a population of 120,749 in 2019, according to data from the Census Bureau. The county experienced a net population increase of 221 people in 2019, its biggest increase since 2012. Lawton, Oklahoma is the primary city in the county and adjacent to the Fort Sill army base. data shows that 75 percent of all REO properties in Comanche County that sold via online REO auction so far in 2020 went to out-of-state buyers — up from 45 percent in 2019 and 29 percent in 2018. The average sales price for REO properties sold so far in 2020 in Comanche County was $28,240 — just $20.10 per square foot.

Calhoun County, Alabama
Calhoun County has attracted the nation’s second highest share of out-of-state buyers so far in 2020 despite a slight decrease in population in 2019. Census data shows a population of 113,605, down by 726 from 2018, for the county, which is located off Interstate 20 about 70 miles east of Birmingham and about 100 miles west of Atlanta. The county seat is Anniston, home to the Anniston Army Depot.

Sixty percent of REO properties purchased via online auction in Calhoun County in the first 10 months of 2020 went to out-of-state buyers, according to the data. That was up from 20 percent in 2019 and 50 percent in 2018. REO properties in Calhoun County have sold for an average price of $30,808 so far in 2020. That amounts to $24.10 per square foot.

Richmond County, Georgia
Home to the city of Augusta, Georgia — host of the Masters Golf Tournament — Richmond County is the most populous of the top five counties for out-of-state buyers. Census data shows a population of 202,518 in 2019 and a net population gain of 851 compared to 2018. Augusta is located about 150 miles southeast of Atlanta and about 160 miles northwest of Charleston, South Carolina. The Fort Gordon U.S. Army base is also located in Richmond County. data shows 56 percent of REO properties in Richmond County that sold via online auction in the first 10 months of 2020 went to out-of-state buyers, up from 22 percent in 2019 and 31 percent in 2018. The average price for REOs sold so far in 2020 in Richmond County was $67,880, or $40.80 per square foot.

Salem County, New Jersey
Salem County is the only county among the top five for out-of-state buyers that posted a decrease in its share of out-of-state buyers through the first 10 months of 2020 compared to 2019. The data shows 56 percent of REO properties sold so far in 2020 went to out-of-state buyers, equaling the share in Richmond County, Georgia, but down from 60 percent in 2019.

With a population of 62,385 in 2019, Salem County is also the least populated of the top five counties for out-of-state buyers. The county is located only about 45 miles southwest of Philadelphia and about 120 miles northeast of Washington, D.C. Census data shows a net population loss of 361 people in 2019. The average price for REO properties sold via online auction in the first 10 months of 2020 was $70,405, or $44.90 per square foot.

Rock Island County, Illinois
Home to two of the four cities that comprise the Quad Cities on the Illinois-Iowa border, Rock Island County had a population of 141,879 in 2019, down by 742 people from 2018, according to the Census Bureau. The county is home to the Rock Island Arsenal, the largest government-owned weapons manufacturing arsenal in the United States.

The data shows that 54 percent of all REO properties purchased via online auction in Rock Island County in the first 10 months of 2020 were to out-of-state buyers. That was up from 40 percent in 2019 and 42 percent in 2018. The average price for REO properties sold via online auction so far in 2020 was $45,719, or $35.40 per square foot

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Sometimes keeping things simple makes the message more clear. I have been consistent in my stance that during the years 2008 to 2019, we had the weakest housing recovery ever. I said that housing starts would never start a year at 1.5 million until we reached the years 2020-2024. Only then would we see enough demand from the new home sales market to warrant that much construction.

This hasn’t happened yet, but the recent hew home sales report indicates we are getting there.

The Census Bureau reports: “New Home Sales Sales of new single-family houses in October 2020 were at a seasonally adjusted annual rate of 999,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.3% (±13.6%)* below the revised September rate of 1,002,000, but is 41.5% (±22.6%) above the October 2019 estimate of 706,000.” 

Along with the growth in new home sales, the monthly supply for new homes has declined dramatically. This data line has always been my most crucial housing chart to follow, and it has never looked better.

Again from the Census report: “The seasonally adjusted estimate of new houses for sale at the end of October was 278,000. This represents a supply of 3.3 months at the current sales rate.” 

Why is builder confidence at an all-time? Anything below 4.3 months of supply indicates that builders will have the utmost confidence to build. Higher levels of Inventory in the range of 4.4 to 6.4 months indicate slow and steady growth for housing starts, like what we saw from in the previous expansion.

If inventory breaks over 6.5 months, then the market has issues, and builders will likely stall on construction. This happened in 2018 when mortgage rates reached 4.75%  to 5%. I then put the housing market in the penalty box until the supply got below 6.5 months. I warned back then not to assume that the housing market peaked, as better times were just around the corner when we would come into the best housing demographic patch ever during the years 2020 to 2024.

We spent 2019 getting rid of the excess housing supply to end the year flat in housing starts. Now, new home sales are 41.5% year over year and 20.6% year to date.

With all this hoopla, keep in mind that this data will moderate. Also, never forget this sector of our economy is very sensitive to higher mortgage rates, so if the economy gets better, it will impact the new home sales market — all housing data moderates to a more normal demand trend and the recent home sales especially.

The housing market over time is not like toilet paper sales. It doesn’t go parabolic during a hoarding session. Monthly supply level trends are more useful than any single report to gauge the new home sales market’s strength, and it looks great now as the three-month supply trend is currently at 3.33 months.

Unlike March and April, purchase application data is holding up very well, even with the rise in cases. I talked about this recently on HousingWire. Today’s report from the MBA showed a 19% increase in purchase applications year over year — down from last week’s increase of 26% year over year. This will be the 27th straight week of year-over-year growth.

Some were concerned that the recent massive spike in COVID-19 cases would dampen demand like it did in March and April, but we are in a better economic spot now than we were back then. We also now believe that Americans who bought homes during the worse weeks of the pandemic didn’t have any competition and were not outbid.

The entire housing market has changed since that period. While the growth rate can cool down during this period dealing with the spike in Covid19 cases, it won’t be like what we saw earlier in the year.

I wish everyone, including my housing bubble-boy friends, a wonderful Thanksgiving.  We have been through a lot as a country and lost too many fellow Americans due to this virus. The vaccine is around the corner with better treatments, so stay smart and safe and enjoy the holiday.

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The battle for CoreLogic’s board continued on Tuesday after Senator Investment Group and Cannae Holdings, who attempted an unsolicited takeover bid of the company this summer, initiated a written consent process to remove and replace additional directors.

CoreLogic shareholders voted on Nov. 17 to replace three of the 12 current directors with the investment groups’ nominees, but the two investor group have said they need a “safeguard” to make sure the process moves forward.

In a response on Tuesday, CoreLogic did not explicitly comment on the written consent the investors called for, focusing rather of the current sale process that began this longtime feud.

“The Board of Directors is working to oversee, and is fully supportive of, its robust sale process to maximize value for CoreLogic shareholders. This process has already resulted in written indications of interest in acquiring CoreLogic at values of at least $80 per share from multiple competing parties – and the process is well underway.  We are pursuing a process that is designed to achieve a successful outcome, and we expect to receive definitive proposals in early 2021,” the response said. 

Prior to the Nov. 17 special meeting, CoreLogic and the two investor groups lobbied shareholders publicly as the investment groups originally intended to fully replace CoreLogic’s board with their own nominees.

Shareholders voted to remove current directors J. David Chatham, Thomas C. O’Brien and David Walker. In their place, three nominees of Senator and Cannae were chosen for appointment to fill the vacancies, including W. Steve Albrecht, Wendy Lane, and Henry W. “Jay” Winship.

After the results of the vote were public, CoreLogic chairman Paul Folino welcomed Albrect, Lane and Winship to the board and said the company will work quickly to get them up to speed on its strategic review process – an operation Cannae and Senator called into question several times and one that CoreLogic often defended.

“On behalf of the entire Board, I would like to thank David, Thomas and David for their numerous contributions to CoreLogic. During their tenure, the company has been successfully transformed into a leading information services provider and our stock price has quadrupled,” Folino continued. “We wish these dedicated directors the very best in their future endeavors. Their experience and guidance have been invaluable, and it has been a pleasure to work with them on behalf of our shareholders.”

Cannae and Senator, however, have called for written consent.

“The submission of this record date request ensures we can act promptly by written consent to hold the Company accountable if there continue to be unexplainable delays in the process or if we learn the Board is not acting in the best interests of shareholders,” the investment groups said in a release. “If this step is required, we would be in position to move forward as early as December to seek to remove and replace six directors.”

“Following the announcement today of our three nominees being added to the Board, this approach would give shareholders the chance to ensure a majority of the Board would be newly added and fully independent,” Senator and Cannae said.

CoreLogic’s board has been fighting a public battle with the investors, who jointly own or have an economic interest equivalent to approximately 15% of CoreLogic’s outstanding common stock, since June, when the two investors sent a letter to the CoreLogic Board of Directors with an all-cash proposal for $66 a share.

The investors dropped their takeover bid on Nov. 2 after CoreLogic confirmed it was exploring multiple offers to sell at or above $80 per share, however, it did not deter the investors from amplifying pressure for shareholders to fully replace the board with their own nominees.

In tandem with the written consent, Cannae and Senator expressed their intent to remain one of the largest shareholders of CoreLogic at least through the announcement of a transaction agreement being reached. Though they do plan to reduce their economic position as part of their ongoing portfolio management.

As of Nov. 24, CoreLogic’s investor site is updated with the new nominees in place.

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The S&P CoreLogic Case-Shiller index covering home prices of all nine U.S. census divisions rose 7% in September from a year ago, the greatest year-over-year gain since 2014, and nearly 23% higher than its last peak in 2006.

The September increase was also greater than the 4.8% uptick reported in August, and represented the largest annual gain since May 2014 as record-low mortgage rates and a lack of inventory continued to put upward pressure on home prices.

“Home prices are normally sticky, meaning that they often take a while to respond to market shifts,” said Matthew Speakman, economist at Zillow. “These elevated levels of market competition have been placing upward pressure on prices for months, but home prices have just recently begun to take off in earnest. Some measures show home prices now growing at a faster pace than they ever have.”

Homes went under contract two weeks faster in September than they did a year earlier, but construction is playing catch-up to feed the frenzy, said Speakman.

Single-family housing starts, driven heavily by low interest rates and changing consumer patterns, rose to an annual rate of 1.53 million in October, the highest since this February and far past 1.108 million recorded in September, according to the U.S Census Bureau.

The price jumps reported in the Case-Shiller Index roughly matched up with statistics from the Federal Housing Finance Administration, which reported that prices increased 3.1% over the second quarter, the biggest gain since at least 1991, when the agency began keeping records.

Looking through a more localized lens, Phoenix experienced the steepest year-over-year gain, rising 11.4% – the 16th consecutive month Phoenix home prices rose more than those of any other city. Seattle took the second-greatest increase once again, up 10.1%, with San Diego following at 9.5%.

Housing prices were consistently robust nationally even in the worst-performing cities – New York (4.3%) and Chicago (4.7%)., according to Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices.

“Our three monthly readings since June of this year have all shown accelerating growth in home prices, and September’s results are quite strong. This month’s increase may reflect a catch-up of COVID-depressed demand from earlier this year; it might also presage future strength, as COVID encourages potential buyers to move from urban apartments to suburban homes,” said Lazzara. “The next several months’ reports should help to shed light on this question.”

Though home prices continued to rise in September, homebuyers showed little interest in slowing down, driving existing home sales up for the fifth consecutive month in October, 4.3% year-over-year.

However, the Conference Board’s Consumer Confidence Index declined slightly in November to 96.1 from 101.4 in October. The index, a key measure in gauging whether people are willing to make big-ticket purchases like homes, fell as consumers lost morale for business conditions and the labor market.

“While the worsening spread of COVID-19, and the economic uncertainty that accompanies it, do pose some potential risks to the booming housing market, it appears unlikely that this remarkable growth in home prices will abate in the coming months,” Speakman said.

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Ellie Mae’s Origination Insight report for October demonstrates some of the side effects of the historically low mortgage rates we’ve seen in 2020: incredibly high volume and an increase in time-to-close.

Across the board, 30-year mortgage rates decreased on average from 3% in September to 2.99% in October, continuing this year’s trend of low rates. The 30-year conventional dropped from 3.02% to 3.01%, and VA fell from 2.78% to 2.75%. FHA loans remained the same, holding steady at 3.01% in October. 

From September to October, the average time to close all loans increased from 51 to 54 days, with the average time to close a refinance increasing from 54 to 57 days and average time for a purchase climbing one day to 48 days. That’s a little more than 6 weeks for people trying to move into a house.

Time to close has been creeping up since the lows seen in March when shut-downs started happening. Refis now take 22 days longer in October than they did back March.

The number of closed loans increased 7.1% over September, per Ellie Mae. Seasonally, October over September for 2019, 2018, 2017 were up 4.8%, up 9.9%,  and up 5.6% respectively.

The number of conventional loans increased in October to 82% – up from 80% in September. Overall loan applications are down 9.3% from September.  FHA loans held steady at 10% between the two months, while VA loan numbers dropped from 6% to 5%. 

Numbers throughout the industry are favorable for buyers, though, when compared to the months before the COVID-19 pandemic forced an economic shutdown. In February, 30-year rates sat at an average of 3.86%.

The average FICO score on all closed loans remained at 753 in October, unchanged from the month prior. LTV stayed at 73 and DTI decreased to 23/35.

FHA refinance FICO scores held at 679 for the second consecutive month, and conventional refinance FICO scores decreased one point to 766 in October. VA refinance FICO scores decreased to 736 in October, down from 738 in September. 

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The mortgage industry is responding with mixed reviews to the Federal Housing Finance Agency‘s Final Capital Rule for mortgage giants Fannie Mae and Freddie Mac, which it released on Wednesday.

The final rule mandates that the GSEs maintain tier 1 capital in excess of 4% to avoid restrictions on capital distributions and discretionary bonuses. According to the FHFA, the increase in required capital is due in part to the increase in the enterprises’ adjusted total assets to $6.6 trillion.

Mike Calabria, FHFA director, said the organization is confident that the Final Capital Rule puts Fannie Mae and Freddie Mac on a path toward a sound financial footing, and is another milestone necessary for responsibly ending the conservatorships.

On Thursday, Mortgage Bankers Association President and CEO Bob Broeksmit said the MBA appreciates the time and effort given to reviewing comments from industry stakeholders and regulatory agencies prior to its finalization, but is disappointed in several aspects of the rule.

“Despite the concerns we expressed that the high levels of required capital in the proposed rule would adversely impact the cost and availability of credit for consumers, the final rule actually increases the total capital requirement for the GSEs,” said Broeksmit.

“While FHFA took modest steps to recognize the value of credit risk transfers, these steps appear to be more than offset by other changes that increase the risk-based capital requirements relative to FHFA’s earlier proposal. We also remain concerned that the high leverage ratio requirements will be binding more frequently than is appropriate and will further contribute to negative impacts on consumers,” Broeksmit said.

“Given that this rule will affect both the cost and availability of mortgage credit for borrowers, we believe FHFA should conduct a quantitative impact study to determine the full impact of the rule. QIS reports have been critical to properly calibrating other major capital rules undertaken by the banking agencies and should be a part of this process, given the impact on the $11 trillion housing finance market,” Broeksmit continued.

The National Association of Federally-Insured Credit Unions applauded Calabria’s commitment to “building a robust regulatory capital framework” for the GSEs as the FHFA attempts to reform the housing finance system.

And Fannie Mae CEO Hugh Frater agreed. According to Frater, FHFA’s capital rule is an important step in ensuring the housing finance system can serve the needs of homeowners, renters, and the broader mortgage market for generations to come.

“The new capital standards set the stage for a responsible end to the conservatorship and a future recapitalization of Fannie Mae,” Frater said.

Investment firm Compass Point Research and Trading pointed out several parts of the Final Capital Rule that will have the most consequential results.

For example, using data from Q2 2020, Compass said the GSEs would need to hold $283.4 billion in capital compared to $262.7 billion under the proposed rule released earlier this year. According to Compass, the $20.7B increase from the proposal to final rule is due to the risk floors being increased from 15% to 20%, changes to the single-family grids and multipliers, and the home price countercyclical trigger.

As far as how the rule affects GSE conservatorship, Compass said finalizing the rule is a positive step toward eventually amending the Preferred Stock Purchase Agreement (PSPA).

A spokesperson for the FHFA told American Banker on Wednesday, “The next step, according to senior FHFA officials, is for the FHFA and the Treasury Department to amend the preferred stock purchase agreements, which lay out the government’s ownership in Fannie and Freddie.”

On the flip side, Compass said while the final rule provides a modicum of CRT relief, that benefit is likely offset by more cumbersome single-family risk grids/multipliers and an increase in the risk weight floor.

“In the simplest terms, the considerable capital requirements will negatively impact the earnings return profile of the GSEs, which in turn could make raising equity capital more difficult,” Compass said in a release. “For a typical business facing this headwind, raising prices would be a viable option.

“The GSEs, however, are not normal businesses and raising G-Fees is politically unpalatable and therefore incredibly difficult. Any curtailment of mortgage credit availability via pricing changes will be met with opposition from the mortgage industry, Congressional Democrats, and the incoming administration,” Compass said.

Managing director Bose George, at Keefe, Bruyette & Woods (KBW), agreed with Compass that the increase in capital relief for CRT transactions was a positive product of the rule, but some flaws in the final rule may prove more difficult for the GSEs in the long run.

George estimates that run-rate earnings for the two GSEs is around $20 billion annualized, so building required capital through retained earnings would be challenging given the long timeline. He also noted that this level of required capital makes the process of recapitalization more challenging since it would be difficult to generate an attractive ROE without raising guarantee fees.

“George believes that the new administration would be very opposed to higher guarantee fees as a mechanism to increase earnings and attract capital, since this would translate to higher mortgage rates for borrowers. While Mark Calabria’s term goes until 2024, the Supreme Court will be hearing a case that challenges the constitutionality of the structure of the FHFA,” a KBW release said.

The Center for Responsible Lending worries that those who will experience the greatest impact from the rule will be lower-wealth families and families of color.

“The FHFA’s new capital rule places the burden of future catastrophic risk on the backs of these hardworking families and will unnecessarily raise the cost of mortgages for all borrowers, resulting in limited credit availability,” said CRL Executive Vice President Nikitra Bailey. “The rule pushes homeownership farther away from families of color long denied mortgage credit access.”

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Existing home sales came in at a whopping 6,850,000, beating estimates with the highest print since 2006. Days on market fell from 36 days to 21 days on a year-over-year basis. Cash buyers remain at a historically high level of 19%, the same as last year, while sales grew 26.6% year over year. We have done a lot running around with the existing home sales data to be up just 2.4% year to date. 

The housing market is clearly hot.

While we celebrate these strong numbers, keep in mind these three points:

First, expect the data to moderate, so don’t freak out when we see the rate of growth cool down. A normal trend will eventually materialize. You may be told that future moderation indicates “cracks in the housing market, but don’t buy into it.  I previously wrote that if we really saw cracks in the housing market, these are a few indicators to track and to beware of doom and gloom housing headlines.

Second, if the next existing home sales report misses expectations, you may be told that this is due to a lack of inventory. Don’t listen. Remember, lower inventory tends to go with higher sales — and higher sales means folks are buying homes…therefore…I know you are following me here… there must be homes to buy.  

Navigating capacity concerns amidst record-high volumes

When it comes to common pain points lenders are seeing in the second half of 2020, handling high loan volumes continues to loom large. Here’s a scalable way to tackle it.

Presented by: Xome

Unsold inventory sits at an all-time low 2.5-month supply at the current sales pace, down from 2.7 months in September and down from the 3.9-month figure recorded in October 2019. Inventory is tight, but it’s not non-existent. Tight inventory also encourages builders to create more inventory.

Lastly, we need to keep an eye on home prices. The increase of 15.5% year over year is a concern. My biggest fear for housing in the years 2020-2024 was not that home prices would crash by 30%-50%, as our bubble-boy friends have been telling us since 2012, but that real home prices might take off, creating an affordability issue for some buyers.

We have three exigent factors that could contribute to unhealthy price growth:

First, the years 2020-2024 have the best housing market demographics ever recorded in history. Second, housing tenure is currently at 10 years, double what it was from 1985 to 2007. People are staying in their homes longer. And third, mortgage rates will stay low during these five years of great demographics and long housing tenure. I expect mortgage rates to be below 5% the majority of this time unless some significant fiscal stimulus occurs when the economy is back on track after the COVID-19 crisis gets under control. 

These recent reports concur with the strong mortgage purchase application data and pending home sales data we have had since May. 

Again, expect these numbers to moderate — that is just part of the process for finding the trend — so don’t freak out. Before COVID-19, housing market data broke out for the first time in a long time. If you look back at the February data, we should have had total existing home sales of  5,710,000 -5,840,000. If we don’t hit those numbers, then COVID-19 took a little of the shine off of the demand, but this demand might just be pushed out to 2021.

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At the Notarize Rewired event Wednesday on the panel, Home Buying After COVID, four experts talked about some of the largest pain points in the title industry. When asked if they could change one thing, or “wave a magic wand,” about the housing industry’s journey toward digital mortgage adoption, the panelists were clear: integration.

The trend toward a fully digital mortgage continues to grow. In fact, volume on the Notarize platform has increased 600% since April, and the company is now processing more than $7 billion in real estate closings every month. But despite this increase, full digital adoption could still be a long way from being achieved.

“We see kind of coupling of technologies: people are really specific with what they’re good at, and the services they’re offering,” said Tyler Thompson, Second Century Ventures and REACH managing partner. “So I think we need better integration from real estate, mortgage to title; remote online notarization is a huge part of that.

“I think that those processes and experiences are so disjointed, there’s no communication, this isn’t a smooth process,” Thompson said. “So really, with my magic wand, I would love to see companies work better together across that spectrum.”

Other panelists agreed that integration is critical for any kind of meaningful change toward a fully digital mortgage experience.

“The world of integrations is where we have to be,” said Marnie Blanco, Dotloop vice president of industry relations. “The old thought that somebody can have a complete stack these days, from soup to nuts, is kind of gone out the window. Everybody specializes, and they do it well. And so they have to integrate the full experience 100%.

“And we’re not there,” Blanco continued. “I mean, the whole mortgage and title are missing pieces right now. And so, we get there and we get so close, but then you don’t get your dessert at the end of the meal. And then you feel let down. So we have to be there. That’s exactly where we go.”

Panelist Don Evans, Realogy Title Group senior vice president of east region, agreed that integration is critical to digital mortgage, but added that a higher focus on the consumer would also be necessary to the industry’s success.

“I think focusing on the consumer is something that isn’t done in our industry enough, and actually providing a way for agents and consumers to have a better experience together through this thing,” Evans said. “The consumer kind of gets shuffled around.”

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Real estate agents across the country have made it clear – low inventory and low mortgage rates have kept them busy throughout the pandemic, especially in typical vacation destinations. That trend is holding true for the housing market in Hawaii, located about 2,500 miles west of the mainland.

According to Title Guaranty Hawaii, single-family home sales in the month of September were up 46.2% year over year on the big island, Hawaii. Across all islands of the Aloha state, single-family home sales rose 15.7% year over year.

Increased demand has had a knock-on effect on prices, with single-family home prices increasing year over year on every island in September. On Hawaii, home prices increased 6.7%; Kauai increased 31.7%; Maui increased 9.1%; and Oahu increased 13.3%. The median list price as of Wednesday in Hawaii was $640,000, according to Redfin.

But buying a house isn’t the only cost for people relocating to a Pacific island paradise. The average cost of moving a 3-bedroom house to Hawaii is between $5,000-$10,000, based on the weight of the shipment or the dimensions, and it costs about $1,000 to $1,500 to ship a car, according to Hawaii life.

Donna Duryea, a Realtor at Corcoran Pacific Properties, told HousingWire that a local shipping company asked for a 30% increase in fees because the number of ships has been “curtailed” due to COVID-19. Duryea said that a lot of buyers prefer turnkey homes, or fully furnished homes because they don’t want to spend money shipping personal items.

But the rising costs aren’t deterring buyers from the Hawaii housing market, with many buying sight-unseen.

“I just had a client fly in and it’s the first time they’ve seen the house they bought in July,” Duryea said. “They were just here last week.”

Duryea added that she’s noticed more multi-generational families moving in with each other, too.

“People aren’t downsizing right now, they’re looking to be able to put multiple families in, and definitely to bring elderly to live with them,” Duryea said. “I think you’re going to see a whole lot more parents being cared for in the family home…what I’m seeing is people are looking for big houses.”

As the Hawaii housing market continues to soar, housing inventory remains low. On the eastern half of the Big Island, Jonathan Correa with Better Homes and Gardens Real Estate Hank Correa Realty said that construction has been booming and “they can’t build them fast enough” in Pahoa.

About a month ago, Correa said he had five homes in escrow that were still under construction.

“Price-wise, they’re going anywhere from 230 to 260, and those are standard first-time buyer homes…three beds, two baths around 1,200 square feet,” Correa said. “That’s kind of the hottest market, I would say.”

Correa said that about 25% of his buyers are coming from San Francisco and other parts of California, and some from New York.

RE/MAX agent Victoria Murphy said that she categorizes homebuyers in three groups – current renters, off-island retirees and military. Murphy said over the last month alone, she saw an increase of retirees seeking to refinance their primary homes on the mainland and use their cash-out refinance to use as a down payment in her market of Oahu.

In Oahu last October, single-family home prices were $780,000. This October, that price rose to $865,000. Murphy also mentioned that condo prices decreased in October year over year, from $441,000 to $439,000 this year.

“I think the highest in terms of cash over appraisal that I’ve witnessed was $85,000,” Murphy said. “That’s wild to me.”

Murphy got her Realtor’s license earlier this year. She said that this year couldn’t have gone better for a newly licensed agent.

“It’s been absolutely wild,” Murphy said. “I should hit 60 transactions in my first year, which is insane for a new agent.”

James Lewis, a Realtor with Coldwell Banker Realty – Diamond Head in Honolulu, said that he’s noticed fewer people want to go to the mainland because of COVID-19, and that’s barring some from travelling, much less moving there.

“Inventory is the lowest, I think probably since they started keeping stats,” Lewis said. “People just don’t want to sell, where are they going to go? They don’t want to go to the mainland.”

Lewis is also getting homebuyers from California, and one from Utah. He said his buyers are seeking out homes on the beach, now that social activities have been curtailed.

“There’s lots of multiple offers [on homes],” Lewis said. “Homes are selling for an average of 100% of listing price. So some things are selling over, some things are selling under, but average out to 100%.”

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