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All-Cash Offers

A reader asked about this company, and but I didn’t think they were operating in California yet.  But they are – and it sounded like a great idea too.

Their initial pitch was to charge 2% for providing the funds for buyers to make all-cash offers on homes.

But they just had to keep going, and now they now have a full staff of clerks to provide realty, mortgage, title, and escrow services too.

https://www.flyhomes.com/

CEO and co-founder: Our approach—which brings every step of the process under one roof—helps buyers separate fear from risk to make more informed homebuying decisions. We are thrilled to bring our reimagined real estate process to create radically different experiences for homebuyers.

It will be radically different alright. They have had seven listings in San Diego County so far, and ALL of the listing agents got their real estate license this year.  Their office is in San Mateo.

The disruptors all think this business looks easy, and by hiring a few novices, they can load up on VC money and conquer.  But they could have offered the initial plan to all realtors and made their 2% on far more sales than they will with their skeleton staff cutting their teeth on the whole process.

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Richard found a company that says they will provide funding for buyers to make all-cash offers, but their website doesn’t mention the program:

https://vimeo.com/user21327396/review/575935386/c4ee7f8712

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It could be a great idea if implemented effectively to all realtors!

The Fed’s Soft Landing

The jumbo rate was 3.25% on April 22nd

From Mortgage News Daily – thank you:

Mortgage rates were surprisingly steady today as the bond market reacted to a new policy announcement from the Fed. Perhaps “reacted” is the wrong word considering the market’s response.  Specifically, the bond market (which dictates interest rates on mortgages and beyond) was hard to distinguish from most any other random trading day.  That’s nothing short of impressive given what transpired.

So what transpired?  That requires a bit of background, but let’s make it quick.

  • The Fed is currently buying $120 bln / month in new Treasuries and MBS.  These purchases greatly contribute to the low rate environment for mortgages.
  • The Fed has done this, off and on in the past since 2009.
  • 2013 was the first major example of the Fed “tapering” its monthly bond purchases after an extended period of accommodation.  Markets freaked out and rates spiked at the fastest pace in years.
  • Late 2021 is well understood to be the second major example of Fed tapering and markets have been speculating as to when it would become official.

Today’s announcement advanced the verbiage that suggests the Fed will begin tapering at the next policy meeting in November.  Then, in the post-meeting press conference, Fed Chair Powell bluntly and explicitly confirmed the Fed is indeed planning on announcing the tapering plan at the next meeting unless the next jobs report is surprisingly bad.

Bonds definitely experienced some volatility during today’s Fed events, but again, that volatility existed within a perfectly normal range.  The absence of a bigger market reaction is a testament to the Fed’s transparency efforts.

In short, they ended up saying almost exactly what they’ve been telegraphing in the past month of speeches, and markets revealed themselves to be positioned for an “as-expected” result.  So not only was the Fed transparent, but markets were also fully betting on that transparency.  Relative to some of the drama in 2013, today amounted to a perfectly threaded needle of epic proportions.

What does it mean for mortgage rates?  Today?  Nothing really.  Lenders barely budged from yesterday.

All of the above having been said, sometimes it takes a few days for post-Fed rate momentum to truly kick in.  Additionally, we’d expect some of today’s potential impact to instead be seen in the wake of the next jobs report on October 8th.

http://www.mortgagenewsdaily.com/consumer_rates/986363.aspx

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Disruption From Mortgage Companies

Mike sent out a comparison of mortgage lenders and their quest to disrupt the real-estate-selling business. Here he shows how Rocket is the dominant mortgage lender in the country, and their press release describes their ambition – they think being the jack-of-all-trades will cause them to dominate the space, and now every real estate company will have to offer all services just to keep up. The winners will be determined by who advertises the most:

Their press release linked here:

https://www.prnewswire.com/news-releases/rocket-homes-combines-every-aspect-of-home-buying-and-selling-into-one-simple-customizable-platform-301352134.html

An excerpt:

Rocket Homes, a technology-driven real estate service provider and part of Rocket Companies, today announced it is revolutionizing the way home buying and selling is done in America by seamlessly integrating the tools, professionals and innovations needed to win in a red-hot housing market. Rocket Homes will be the first real estate company ever to create a wide array of choices for those in the market, putting clients in the position to create their own truly bespoke experience, rather than the traditional one-size-fits-all approach that has been the standard for more than a century.

The company is bringing together a comprehensive suite of services that includes: credit reporting, home search, the industry-leading ForSaleByOwner.com process, on-staff real estate agents, a nationwide network of trusted real estate professionals, iBuying services to provide a back-up offer to sellers – along with direct connections to Rocket Mortgage, America’s largest mortgage lender, and Amrock, a premier closing and settlement services provider.

“There is nothing more exciting than getting the keys to a new home, but far too often the process of getting to that point is confusing and fragmented. At Rocket Homes, we are laser-focused on using technology and innovation to create a fully customized and transparent experience that is stress-free and fully integrated – working seamlessly with sister companies to simplify and speed-up the process, all while saving our clients money,” said Doug Seabolt, CEO of Rocket Homes. “Whether a client is looking to sell their house on their own, get assistance from an on-staff Rocket Homes agent or meet face-to-face with our trusted local real estate professionals, we will have unique options and resources to help every client move through the process in a way that is fully customized to them.”

Homeowners looking to sell their property will have the ability to select the right experience for their needs and goals thanks to Rocket Homes Seller Solutions.  Through the program, sellers can:

  • Leverage the industry-leading ForSaleByOwner.com platform that provides sellers all the tools they need to go through the process on their own. This option has become increasingly popular among homeowners in today’s competitive housing market.
  • Work with highly skilled, on-staff Rocket Homes Real Estate Agents that advise clients on the best list price, facilitate professional photos, list the house on the local multiple listing service, negotiate offers and handle all paperwork. Just like Rocket Mortgage effectively serves clients in all 50 states from centralized locations, Rocket Homes agents will assist with the most complex moments of the real estate transaction from downtown Detroit. With this option – which will be open to the public starting in the fourth quarter of 2021 – homeowners pay a significantly lower commission of only 1.5% for the selling agent, as opposed to the traditional fee of 3% — which represents a savings of $4,500 on a $300,000 home sale.
  • If a homeowner wants to work with an expert in their local area, they can tap into the Rocket Homes Verified Partner Agent Network of trusted and vetted professionals. This is a nationwide group of the best real estate agents who consistently receive top ratings from the clients they serve. The Partner Agent Network provides the option of a high-touch, in-person experience that some sellers desire. It consists of thousands of professionals working in every state, representing more than 3,000 counties across the country.

True to the company’s promise of providing certainty in complex moments, a soon-to-be-released iBuyer program, facilitated through third-party partner companies, will ensure every owner is given the opportunity to receive a guaranteed offer on their house. Consumers who need to sell their house before buying another often lose out on their new dream home due to the need to make a contingency offer – meaning their deal hinges on closing the sale on their existing property.  With the forthcoming program from Rocket Homes, these consumers will now have a guaranteed offer on their current house and can eliminate the need for contingency altogether.

 

Forbearance Expirations

Hat tip to GW and AK who sent me an article by Fortune, that references this article:

https://www.zillow.com/research/forbearance-exits-inventory-2021-29931/

An excerpt:

With expiration of a broad federal foreclosure moratorium on July 31, hundreds of thousands of U.S. homeowners are expected to exit forbearance in coming months. A significant share of these homeowners will likely end up listing their home for sale, contributing meaningfully to overall inventory levels and allowing homeowners in forbearance to benefit from home price appreciation and use the equity gained for a future down payment, according to a Zillow analysis.

Unlike 2008, when financial conditions and a souring housing market pushed many homeowners into involuntary foreclosure, strong equity growth and a robust sellers market are likely to ensure that even distressed homeowners have more options and the housing market is likely to be insulated from widespread disruption.

The largest wave of forbearance exits is expected in September and October of 2021, and Zillow projects that forbearance exits will lead to an additional 0.40 months of housing supply in August – October of 2021, a 15% increase relative to 2.6 months of supply in June. For context, this additional 0.40 months of supply roughly means an extra 211,700 homes for sale, which would represent 13.1% of all predicted sales over the next three months.

I hope those in forbearance do list their home for sale – call me today!

The NSDCC market is starved for inventory – look at the differences:

September 14, 2020:

654 active listings

481 pending listings

September 13, 2021:

316 active listings

304 pending listings

Last year we had more than twice the number of active listings as we have today! We can handle more!

But the foreclosure laws in California were significantly modified and nobody is going to get foreclosed – so don’t wait around for that to happen. The most likely scenario is for the lenders to continue the free-rent program for another year or two, and only lightly suggest a potential sale to those not paying their mortgage – which will only sprinkle an occasional new listing upon us.

Forbearances

Another update on the forbearance exits. Nobody is going to get foreclosed in North San Diego County’s coastal region, mostly because of the ample equity position every homeowner has in place – but those positions could cause them to sell. Won’t the homeowners be spoiled from the 12+ months of free rent, and, once they recognize the alternatives (renting for ridiculous rates here or moving out of state), be more likely to work out a payment plan with their lender? Yes! But this would be a good time for a surge, if it happens!

Black Knight estimates that nearly 630,000 forbearance plans, more than one-third of those currently active, are slated for review this month. Of those, 400,000 will have reached the end of their 18 months of forbearance eligibility unless the maximum term is extended again.

The end of August saw a significant decline in forbearance numbers as servicers worked through the month’s crop of three-month reviews. Plans declined by 53,000 over the week ended August 31 with more than 23,000 from FHA or VA portfolios. The number of GSE (Fannie Mae and Freddie Mac) loans dropped by 20,000 and loans serviced for bank portfolios or private label securities (PLS) saw a 10,000 unit decline. The number of plans is down by 9 percent since the end of July.

Black Knight estimates that approximately 1.71 million borrowers remain in forbearance, 3.2 percent of the 53 million outstanding mortgages. Those loans have an unpaid balance of $331 billion. The total includes 514,000 GSE loans, 676,000 FHA and VA loans, and 520,000 portfolio/PLS loans. The loans remaining in forbearance represent 1.8 percent of the GSEs’ totals and 5.6 percent and 4.0 percent of FHA/VA and portfolio/PLS loans, respectively.

http://www.mortgagenewsdaily.com/09032021_black_knight_forbearances.asp

Forever Homes and Loans

Mortgage rates in July, 1985

After the TV show, Derrick and I were discussing the good old days when homes were cheap and everyone moved often.  He is a mortgage originator, so I asked him how many adjustable loans he has done this year.

His answer? None.

Back in the day, adjustable-rate mortgages were the preferred product. Look at the difference:

$300,000 loan amount

Monthly payment at 11.875% = $3,057

Monthly payment at 9.0% = $2,414

Difference = $643 per month!

Nobody looked too hard at the terms of the ARM because a) $643 per month was a ton of money back then, and b) no one planned to stay forever.  Home buyers could always refinance if they had to, but many solved their ARM concerns by moving again – heck, there were lots of homes for sale!

Then the 2-out-of-5-year tax exemption was passed in 1997 which really juiced the market.  Homeowners were rewarded with tax-free money for moving!

It was rare that anyone had the full $500,000 in net profit, mostly due to the lower home prices and because of other recent moves.  Yet many moved again just to say they got their tax-free money!

At the same time, the mortgage industry, led by Countrywide, flooded the market with an alternative – the interest-only mortgage with a rate that was fixed for the initial period, and you could choose 3, 5, 7 or 10 years.  Once those saturated the market, Countrywide stole the neg-am ARM idea from the S&Ls and spiked them with high margins, and, well, we know how that ended.

As the private mortgage companies exited the market, the government lowered rates, and backed Fannie/Freddie to provide market liquidity. For the last ten years, the only program being offered is the 30-year fixed rate mortgage, and because rates are so much lower than before, buyers didn’t mind.

The end result? Today, you never hear anyone buying a home for the short-term.

The combination of ultra-low rates and difficulty of finding a better home has locked in everyone into their current home.  Even if the current home becomes unsuitable, it beats moving again.

The low-inventory era is here to stay, and will likely get worse.

Mortgage-Rate Massacre

This is turning into the February mortgage-rate massacre, and there’s no real end in sight.  But home sellers aren’t going to believe for weeks or months that they might have to back off their price, so don’t expect any changes.

To say that bond market volatility has been elevated recently is an understatement of extreme proportions.  Things are happening that haven’t happened in years.  Some measures of volatility rival the March 2020 panic surrounding covid, only this time, there’s no catalyst other than the market movement itself.

Today was by far the worst of the bunch when it comes to this most recent spate of volatility.

Most any mortgage lender added another eighth of a percent to their 30yr fixed rate offerings.  Over the course of the past week, most lenders are .25-.375% higher.  And compared to the beginning of last week, many lenders are a full HALF POINT higher.  In other words, what had been 2.75% is now 3.25%.  What had been 2.875% is now 3.375%.

Are this high rates in a historical context?  Not at all.  Before covid, they’d be in line with record lows.

But relative to the recent lows, this rate spike is getting to be about as abrupt as we’ve seen in the past few decades–not quite on par with the worst offenders, but close enough to be in their same league.

http://www.mortgagenewsdaily.com/consumer_rates/968604.aspx

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