Housing Headlines: Gateway First Bank and Zillow Offers

Housing Headlines takes a look at the latest news in housing, real estate, fintech, and beyond. It features new product updates, launches, expansions, integrations, announcements, and more.

Gateway First Bank announced it opened 34 new mortgage centers in 2019 to meet increased demand from its local communities. 

Now, Gateway First Bank has more than 160 mortgage centers across the United States and is licensed in 40 states. 

“We are outperforming our competition and delivering for our clients faster than ever,” said Stephen Curry, Chairman and CEO of Gateway, in a release. “Our momentum is a testament to our team members’ persistent focus on hard work. I look forward to seeing Gateway continue to expand our footprint across the nation for our clients and the success of all of our team members.”

Zillow Offers has expanded to Tucson this week, allowing homeowners to avoid the hassle of selling their home. 

By selling to Zillow Offers, sellers can avoid those hassles and focus on their new home sooner. The company says sellers will have the peace of mind of knowing when the sale will close, and exactly how much money they will get in net proceeds.

The service is also available across Maricopa County in the metro Phoenix area, where Zillow Offers first launched in April 2018.

Tucson is the 23rd market where Zillow Offers is available. Zillow, its parent company, has also announced plans to bring Zillow Offers to Cincinnati, Jacksonville, Florida, and Oklahoma City in 2020.

Zillow has established new partnerships across the country with regional homebuilders to help home shoppers transition into their new homes seamlessly. 

With the help of Zillow Offers, home shoppers who buy a new construction home from one of Zillows homebuilder partners can sell their existing home directly to Zillow. 

Homebuilder partners will also have an extended closing period – anywhere from seven days to eight months – so the worry of their existing home won’t interfere with the move-in date of their new construction home.

Partners include: The Providence Group in Atlanta; NewStyle Communities in Charlotte, N.C.; Kindred Homes in Dallas and San Antonio, Texas; Saratoga Homes in Houston; Avex Homes in Orlando, Florida; Woodbridge Pacific Group in Riverside, California; Caviness & Cates, Drees Homes and Stanley Martin Homes in Raleigh, North Carolina, and Minto Communities in Florida.

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Housing starts soar to a 13-year high

Housing construction continued to improve in December as the nation’s homebuilders increased their building efforts nationwide, sending the unadjusted pace to a 13-year high.  

According to the Department of Housing and Urban Development and the Department of Commerce, housing starts spiked 16.9% in December to a seasonally adjusted annual rate of 1.608 million and the pace for November was revised upward.

“Today’s housing numbers not only confirm the home building revival this year, but they double down on its magnitude,” said Robert Frick, Navy Federal Credit Union’s corporate economist. “Not only will homebuyers desperate for inventory see their choices rise, but housing should start contributing noticeably to GDP.”

In December, single-family starts grew 11.2% from November to 1.055 million units while multifamily starts grew a whopping 32% to 536,000 units, according to the report.

Permits rose 3.9% to a seasonally adjusted annual rate of 1.474 million, which is 5.8% above the December 2018 rate of 1.339 million. Single-family permits increased 0.5% to 916,000 while multifamily permits fell 11.1% to 458,000.

During the month, single-family completions rose 0.7% to 912,000, while multifamily completions increased 19.4% to 357,000.

Although housing starts increased significantly in December, Mike Fratantoni, the Mortgage Bankers Association’s chief economist, warns the pace is likely to slow in the months ahead.

“On a seasonally adjusted basis, housing starts jumped in December to their highest level in 13 years,” Fratantoni said. “Surprisingly, single-family starts increased relative to November even on an unadjusted basis – unusual at this time of year – and was driven by a rise in the South.”

“While single-family permits are up almost 11% relative to last year, the level suggests that this jump in starts is unlikely to persist, and we would expect them to return back below 1 million this spring,” he said.

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Jan. 17: AE, DTC jobs; 2nd, renovation products; after DFSNY letter, CEOs can’t ignore LIBOR transition

I’ve gotta hand it to those writers who put out listings for real estate agents. Maybe if I had a bunch of money I could live in a “secluded retreat” or an “enchanted villa.” I have never lived in a place described as a “retreat,” having stunning or remarkable views or panoramic vistas in a “gorgeous natural setting.” No luxury living, nor a delightful “chalet.” No soaring ceilings in the spacious great room or mudroom, filled with “warm ambiance.” Prestigious enclave? Nope. Has a house ever brought me conveniences and lifestyle? No. I’ve never lived in a house with casual banquette dining, nor in a “one-of-a-kind cottage.” Sure those are the terms real estate agents use to sell houses. They are generally an optimistic lot, but homebuilders, who create these structures, saw their optimism slip slightly to start 2020. But is still high. Low interest rates are making home-buying more affordable, despite the price premium for new construction due (in part) to permit costs. Builders are also starting to pivot more to entry-level homes after a decade of building mostly move-up product. We need it. And look at those housing start numbers from this morning below!

Jobs

Newfi Lending, delivering great service, technology, and its own proprietary Non-QM suite of products continues to grow and innovate in 2020 positioning itself as a leader in the industry. “Newfi also offers a full set of competitive agency and government products, along with 5 different jumbo options that include a 40-year IO. In a market rally, when loan officers step away from Non-QM to refocus on refinances, Newfi is nimble and able to pivot quickly, making it a perfect fit for AEs who are looking for a lender with exceptional product diversity. Newfi is committed to providing excellent customer service with dedicated inside pipeline sales support allowing the AEs to focus on relationship development with brokers and building the Newfi brand. With leading edge technology, a simple easy to use broker portal and the on-going launch of unique new programs, Newfi is excited to continue to bring even more value to their partners by being a one stop lender. To learn more about career opportunities at Newfi reach out to Wendy Licis. Come grow with us!”

A well-known household name with a spectacular reputation of consumer trust is looking for Call Center Loan Officers (federal registration) for its St. Petersburg, Florida location. Warm leads are generated internally from existing consumer relationships across multiple states within their area of operation. Candidates should be familiar with Encompass and both conventional and government originations and demonstrate superior customer communication skills that reinforce the company’s commitment to an on-going relationship across multiple product lines. Excellent compensation including base plus incentive and benefits. Interested parties should send their resumes to Chrisman LLC’s Anjelica Nixt.  

Lender products and services

Brokers should know that American Financial Resources, Inc. (AFR) announced another addition to its suite of specialty loan programs: USDA Renovation. Great for clients in designated rural areas, USDA Renovation loans allow eligible borrowers to finance the cost of repairs to improve an existing dwelling at the time of purchase, all with up to 100% financing on the “as-improved” value (plus guarantee fee, if financed). This means eligible home buyers can purchase and improve a home beyond what is already permitted by the USDA Repair Escrow. In addition to unique products and services, AFR also provides its business partners with industry-leading technology, professional expertise and continuous educational opportunities. For more information on becoming an AFR partner, email sales@afrwholesale.com or call 1-800-375-6071.

Spring EQ Wholesale, the industry’s premier second lien lender, offers 95% combo, 100% CLTV stand-alone and pays Lender Paid Compensation (LPC) up to $10,000. Available equity is at historic highs, and Spring EQ is excited to announce a series of three fast paced educational webinars for its partners. 2nd mortgage Home Equity lending is often misunderstood; and has come in and out of favor for years. Originators refer them to other companies, as they think they are not worth the effort and worst of all, they let their past clients find ways of borrowing without giving trusted advice. You can sign up for the webinar here. Remember that Spring EQ currently offers fixed rates that are comparable to wholesale HELOC lender’s rates, creating a fiscally responsible, budget friendly way for clients with needs to tap their available equity. Please contact your Account Executive or visit Spring EQ Wholesale here.

LIBOR transition, probably to SOFR: you can’t ignore it

At this point nearly everyone know that the publication of LIBOR is not guaranteed beyond 2021. And we’re already in 2020. Yes, most lenders are already using Treasury securities for an index, and are waiting for the Agencies to provide firm documentation guidance (see below). For some basic information, this primer is a good place to start to learn about an overview of the LIBOR transition, as well as an actionable checklist, with a focus on the proposed US alternative reference rate, Secured Overnight Financing Rate (SOFR). And here’s a good summary as well.

The senior management of lenders and servicers cannot ignore this, nor rely on vendors to tell them what to do. The question is not only is your company knowingly putting borrowers into adjustable rate mortgages tied to an index that is expected to cease being published, but what are your policies and procedures in dealing with your servicing portfolio that contains loans tied to LIBOR?

Owners and CEOs were reminded of this when a wide variety of institutions received a letter from the New York Department of Financial Services requesting them to provide the Department with their company’s LIBOR transition plan. NY is requesting information on governance, operational risk, communications with borrowers, and so on – check out the link above. Each NYDFS-regulated institution must submit the institution’s plan for addressing the transition away from Libor-based credit, derivative, and securities exposures. The NYDFS letter has spurred additional focus by financial institutions in the issue, and not only by those regulated by NYDFS. Buckley wrote a full special alert.

We can all assume that other states and other regulators will follow suit. Questions will be asked during regulator audit exams. ARRC is a helpful resource with its implementation checklist. Lenders and other financial institutions are basing their transition on this document, especially if lenders are wondering how to even start the process. It helps you catalog LIBOR exposure, assets and liabilities, and helps you bucket your exposure on maturity. ARRC published its White Paper in July, with Freddie and Fannie rumored to play a large role in it.

And this isn’t confined to the forward lending business. The switch impacts reverse lenders, as well as their clients, and once again it is important for senior management to be ahead of the curve.

Recall that both Fannie Mae and Freddie Mac published information about the LIBOR-SOFR transition, including additional information about the structure of SOFR-based Adjustable-Rate mortgage offering and how it compares with LIBOR-based hybrid ARMs. Here is the Fannie Mae SOFR information webpage. Click to view the Freddie Mac publication. Freddie priced a new offering of Structured Pass-Through Certificates (K Certificates), which includes a class of floating rate bonds indexed to the Secured Overnight Financing Rate (SOFR). The $765 million in K Certificates (K-F73 Certificates) settled last month.

Banks are looking into whether artificial intelligence can smooth migration from Libor to another benchmark for existing contracts. AI could be useful for the switch, but much of the analysis still has to be done by humans. Yet here’s a story on how regional banks face a bumpy road away from Libor. Lenders fear replacement could notch outsize drops at times of economic stress. And the U.S. Commodity Futures Trading Commission aims to make it easier to convert Libor swaps contracts to the Secured Overnight Financing Rate.

But the argument that the Secured Overnight Financing Rate should be the exclusive replacement for US dollar Libor is increasingly called into question. “I believe, as many do, that there is no reason why Libor, having been a singular rate, should be replaced by a singular rate,” says J. Christopher Giancarlo, former chairman of the Commodity Futures Trading Commission.

If you want to do what the “Big Boys” are doing, large global banks are transitioning away from Libor the quickest because of their access to resources, regulators and experience, according to researchers at Cadwalader, Wickersham & Taft and Sia Partners. The law firm’s survey of 75 financial firms found that while US regional banks haven’t made as much progress, they plan to specifically budget for the transition during the coming year.

Banks are preparing to transition from Libor to another interest-rate benchmark, but completing the shift by the end of 2021 will be a challenge, particularly regarding altering legacy contracts. Fiona Maxwell writes, “They may face the huge task of identifying thousands of investors to make changes to the provisions of existing contracts; if they don’t, these may fall into noncompliance.”

It may not be a slam dunk. Slow progress in updating software for using an alternative reference rate could cause UK banks to miss an October 2020 deadline for ending use of Libor in contracts. The deadline is an industry goal, not a regulatory deadline, but the Financial Conduct Authority says banks that miss it “will face a lot of questions from us as to how they are managing the risks.”

And so the FSB plans more scrutiny regarding Libor switch. A Financial Stability Board report on benchmark reform recommends financial and nonfinancial firms make “significant and sustained efforts” to switch away from Libor by the end of 2021. “Given the degree of risk arising from the continued reliance on Libor, regulated firms should expect increasing scrutiny of their transition efforts as the end of 2021 approaches,” the report states.

 

Swaps firms get CFTC no-action relief during Libor switch. Three separate divisions of the Commodity Futures Trading Commission have issued letters stating no-action relief until Dec. 2021 for swaps firms transitioning from Libor. The relief covers rules that include uncleared swap margin and swap clearing requirements. And a Financial Stability Board report on benchmark reform recommends financial and nonfinancial firms make “significant and sustained efforts” to switch away from Libor by the end of 2021. “Given the degree of risk arising from the continued reliance on Libor, regulated firms should expect increasing scrutiny of their transition efforts as the end of 2021 approaches,” the report states.

Lastly, the first options on futures contracts based on the Secured Overnight Financing Rate have been listed by CME Group. The first trade involved December options on three-month SOFR futures.

Capital markets

To keep things in perspective, knowing that jobs and housing drive the economy, last week we learned that the U.S. economy added 145,000 jobs in December to finish out the year and unemployment remained near 50-year lows at 3.5%. But we’ve seen unimpressive wage growth for a long time: hourly earnings increased slightly during the month and for the prior twelve months rose by the smallest amount since July 2018. Most of the jobs created were in retail trade, leisure and hospitality, and health care. For the year, the economy averaged +176,000 jobs per month, well below 2018’s monthly average of 223,000. The labor market remains tight, but given the categories of jobs being created, there is little upward pressure on wages or inflation. From the Fed’s point of view, the data should not provide motivation for changes to the current monetary policy. Barring a significant widening in December’s trade report, the recent contraction in the trade gap should provide a nice boost to Q4 GDP. It remains to be seen, however, if the decline in imports during November was due to imports pulling forward demand ahead of the potential tariffs that ultimately did not go into effect. This could potentially lead to a reversal as import activity returns to normal given the Phase 1 trade deal.

Yesterday U.S. Treasuries pulled back (MBS barely moved, equity indices hit new all-time highs and the 10-year yield is once again trading back above 1.80 percent) with most of the price action coming early in the day due to stronger than expected data. The December Retail Sales report showed a larger than expected increase in sales excluding autos, surging past expectations in December following an upwardly revised increase in November, as consumers continue to be a focal point of growth for the U.S. economy. Initial claims registered lower than expected, and the Philadelphia Fed Survey increased well beyond expectations for January, jumping to its highest level since August. The Senate voted 90-10 in favor of the U.S.-Mexico-Canada Agreement, good for our economy.

Today’s economic calendar is already underway with December Housing Starts (up almost 17 percent, a 15-year high) and December Building Permits (dropping almost 4 percent). Rounding out the week in a bit will be December Industrial Production and Capacity Utilization, JOLTS job openings for November, as well as the preliminary January Michigan Consumer Sentiment figures. There are two Fed speakers: Philadelphia’s Harker in the morning and closing with Fed Governor Quarles in the afternoon. In between, the Desk will conduct a UMBS15 FedTrade operation targeting up to $203 million 2.5 percent. We begin the day with Agency MBS prices worse a few ticks and the 10-year yielding 1.83 percent.

I’m terrible with names. It’s not my fault, it’s a condition. There’s a name for it…

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Home Ownership is Still Part of the American Dream” If you have the inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2020 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

Here are the best locations for an investment property in 2020

The 2019 multifamily and single-family market proved to be hot, and 2020 will only get hotter.

According to a new survey from TurboTenant, there were 31 cities from 20 states that were featured in the best place to buy a rental investment property report for 2020.

(Image courtesy of TurboTenant. Click to enlarge.)

New York and Ohio tied for the most cities represented, at three each, including Buffalo and Rochester, New York, as well as Akron and Columbia, Ohio. Seven states had double representation, including Iowa, Missouri, New Hampshire and Pennsylvania. Cities from Florida, Montana, North Carolina, South Carolina and Delaware also made the list.

To determine the top cities, the report compared the average rent with the monthly mortgage payment. The terms were set at 30 years, with a 20% down payment, and a 4.1% interest rate, which is the current national average. If positive numbers were reported in all categories, the location made the list.

Overall, the results found that the best places to invest in are in the Midwest and the East Coast.

In November, TurboTenant also showed that New York, Pennsylvania, Massachusetts, and New Hampshire were standouts, which is no big change from January’s report.

No. 1 on the list was Reading, Pennsylvania, which TurboTenant said has positive growth across the board. The number of leads per property in this town is its highest, at 271, with an average of eight days on the market. Home values here are increasing 11.1% year over year, with a median sale price of $140,000.

At the bottom of the list, No. 31, Auburn, Alabama actually is second place for the highest population growth and first place for employment growth. The median sale price of a home is $169,000, and the average two-bedroom rent is $919. Properties here spend an average of 14 days on the market.

Check out the rest of the list here.

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Fewer U.S. homeowners moved in 2019 than ever before

What do Americans do when so few new homes are being built? Remodel, according to the latest report for Buildfax

According to the housing data and analytics company, 2019 marked the lowest rate of mobility in the U.S. since the metric was first tracked in 1947. Only 9.8% of Americans moved last year. Though this marks a new low, it’s not terribly far off from the only 10.1% who moved between 2017 and 2018. 

Buildfax’s report pointed to new construction as part of the issue. Namely, the lack thereof. While single-family housing authorizations increased 4.82% year over year in 2019, the year did not close out on a strong note. According to the report, authorizations decreased by 2.61% from November to December 2019.

“The U.S. is facing a housing shortage, in part due to the slowdown in housing construction last year. This has been felt in both large metros and smaller cities across the country,” Buildfax Managing Director Jonathan Kanarek said. “Now, even though the economy is showing strong growth and mortgage rates remain low, those who want to buy a new home are experiencing challenges with increased competition on a tight housing supply.”

Instead, the report states, people are remodeling. Buildfax reports that existing maintenance volume and spending increased 9.47% and 16.26% year over year, respectively. In the past, Buildfax has often referred to home maintenance activity as a recession indicator. As this activity increases, Buildfax asserts that recession probability lowers, and vice versa.

That said, in its December Healthy Housing Report, Buildfax states that “maintenance and remodeling increased substantially, potentially fueled by homeowners who feel unable to buy a new home and therefore invest in their existing property.”

As many economists have pointed out, U.S. homeowners have been staying put for a while now. The concept of “aging in place” is not a new one. In August of 2018, AARP revealed that almost 90% of homeowners approaching retirement want to stay in their homes as they age.

And for the most part, they are.

 Last February, Freddie Mac released a study showing that seniors born after 1931 are staying in their homes longer than previous generations. According to the report, this generation held 1.6 million houses back from the market in 2018. 

HousingWire Columnist Logan Mohtashami offered his own analysis on the topic.

“Americans are staying in their homes longer because the house they have is perfectly suitable for their family’s need,” he writes. “For more than four decades, home sizes have been getting bigger while family size has been in decline.”

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Housing market challenged by a dearth of construction workers

One of the biggest challenges facing the U.S. housing market is a dearth of construction workers that’s keeping homebuilders from meeting the demand of an expanding population, according to Federal Reserve Governor Michelle Bowman, one of the people who votes on the central bank’s monetary policy.

A shortage of properties on the market has been restricting real estate sales in some parts of the country, she said. The answer is building more homes, but housing starts have lagged household formation, she said.

One of the biggest reason for that is the lack of construction workers, Bowman said Thursday in a speech in Kansas City, Missouri.

“The ratio of job vacancies to unemployment in the construction industry – a measure of labor market strength – shot up to historic highs at the end of 2018, and it has remained near those levels,” Bowman said. “These indicators confirm what I have been hearing from construction industry employers during my visits to different parts of the country – it’s extremely difficult to find and hire workers, skilled or otherwise.”

One solution is vocational training programs that connect young adults with jobs in the construction industry, she said.

“I am hopeful that these efforts, along with a continued strong job market, will encourage more people to join – or, in some cases, rejoin – the construction trades,” she said.

Single-family housing starts likely will total 1 million in 2020, the highest since 2007, the National Association of Realtors said in a forecast last month. In the five-year period that ended in 2019, the average was 822,000 a year, according to government data. From 1958 to 2007, the year before the housing crash, single-family housing starts averaged 1.1 million as the population expanded.

Housing is an issue that has a broad impact on GDP, said Bowman. Spending on existing homes as well as the construction of new residences accounts for 15% of the U.S. economy, she said.

“My colleagues and I at the Federal Reserve pay close attention to developments in the housing sector, in part because it has historically been such an important driver of economic growth,” Bowman said. “If we include the amount families spend on shelter each month as well as the construction of new houses and apartments, housing generates about 15 cents out of every dollar of economic activity,” Bowman said.

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Can these mortgage startups change the world, or will Zillow and Opendoor take it all?

Venture capital-backed home lending startups fill key first-time homebuyer, cash-out and investor niches. But will they really change the world, or just be niches? It’s a little of both. Let’s take a look.  

Startups Love Giant Mortgage Stats

Like all venture capitalist pitches, fintech and proptech startup pitches begin with total addressable market (TAM). 

Julian Hebron, Columnist

Why? Because mortgage and housing TAM is super sexy to entrepreneurs hunting for an opportunity as the economic cycle matures. 

The U.S. housing market is worth $30.7 trillion, of which $11 trillion is loans on the homes and $19.7 trillion is equity owned by homeowners. And there are about 6 million homes sold and $1.6 trillion in first mortgages made each year.

If we get just 2% mortgage market share within our three-year plan, that’s $32 billion in fundings!

Laughable, I know. But this is how some startups rationalize. 

In reality, it’s way harder than it looks to fund even $5 billion. It gets exponentially harder when you go above $10 billion, and then again for $20 billion.

Then if you almost double that again, you’re in the nation’s top 10 mortgage lenders, all of which took one to three decades to build organically and through mergers and acquisitions.

Startups Must Be Worth $5 to 10 Billion & Change The World 

Most lenders aren’t giants, and this clashes with today’s aggressive VC quest for unicorns, which are private companies worth $1 billion or more. 

The most vocal of unicorn-or-bust VCs is the indomitable Keith Rabois of Founders Fund. He’s Harvard, Stanford, PayPal Mafia, and has served as an investor and executive at LinkedIn, Square, Yelp, YouTube, Yammer, Palantir, Lyft, Airbnb, Eventbrite, Quora and more (as you’ll see below).

With that record, he’s hard to ignore when he browbeats his winner-take-all unicorn vision into you, which is: 

Your startup must change an industry or the world and be worth $10 billion or more. Maybe it can be worth as little as $5 billion, but below that, you haven’t changed either. 

This ethos has led to a record 199 U.S. unicorns today, up from an already high 117 just two years ago according to CB Insights and PwC.

Which VC-Backed Mortgage Models Work Best? 

So which VC-backed home lending models work right now? Are they unicorns in the making? 

  • Non-owner-occupied models put a fintech spin on hard money, helping investors buy, fix and flip homes. Relevant product, some good brands, but a niche that doesn’t change the industry.
  • Rent-to-own models keep popping up but it’s very capital-intensive to buy the homes and fund scale marketing. And nine-figure valuations given to firms focused on limited geographies don’t pencil. I’m open to being proven wrong here, but this also looks like a niche. 
  • Shared appreciation models are the most consumer-relevant so far. To summarize all the math, these companies give homebuyers up to half of their down payment with no interest or loan payments in exchange for about one-third of the home’s appreciation later on.

Unison and Andreesen Horowitz-backed Point are the two leading players, but Unison is the OG. They were founded as FirstRex in 2004 and rebranded to Unison in 2016.  

Capital markets participants understand how Unison fits within the traditional mortgage mix, and they’re entrenched with lender salesforces, which helps control consumer-direct marketing spend. 

Which VC-Backed Housing Models Will Change The World?

Shared appreciation is relevant stuff for the right consumer profiles, but not the stuff of world-changing unicorns. 

Happy to eat those words later, but I stand by them now for two reasons:  

  • Niches matter. I disagree with Rabois that companies must be unicorns to change lives. Also maturing unicorns will need great niche companies to buy.
  • Shared appreciation is smarter than a reverse mortgage for cash out as the home-owning population ages. Maybe still a niche, but a great one. 

Niches won’t change our housing finance world, but let’s bring it home with a VC-backed model that might. 

One-Stop-Shop Homeownership Will Indeed Change The World

Now back to Rabois for what may be his magnum opus: Opendoor, the pioneer of the instant-buyer (iBuyer) model. 

Now worth roughly $4 billion, Opendoor is on it’s way to becoming a one-stop-shop for home buying, owning and selling. 

The company he co-founded is making home buying and selling like trading your car.

It’s not just about mortgage or real estate fees, it’s monetizing the whole homeownership lifecycle. Despite the monetization complexity, the story plays by offering a one-stop-shop experience consumers demand. 

Opendoor is a key reason Zillow pivoted last year to go “down funnel” from providing leads to buying, selling, and financing homes themselves. 

Zillow currently has a market cap of $9.8 billion, and is telling Wall Street it intends to grow revenue from $1.3 billion now to $20 billion in the next four years.  

Mortgage Scale Unproven For Opendoor & Zillow 

Skeptics say tech unicorns differ from mortgage and housing plays because mortgage and housing touch the real world. 

Other real world-touching unicorns have struggled, most notably WeWork in commercial real estate. And like commercial, housing goes way beyond software and apps. There are humans involved at every step. 

So far, Opendoor (and Zillow) are proving resourceful with ground teams to fix up the homes they buy, and agents to help consumers. Scaling mortgage remains unproven for both firms. 

But my joke for Opendoor here in San Francisco is that it’s Goldman Sachs West – because of it’s highly sophisticated capital markets team. Between that and having such an aggressive and connected co-founder, they might just show us the future of housing finance.

We will see. In the meantime, the consumer wins as the one-stop-shop vision takes shape.

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Home renovation boom expected to weaken in 2020

U.S. homeowners are expected to spend less on home improvement and repairs over the next year, according to the Leading Indicator for Remodeling Activity from Harvard University’s Joint Center for Housing Studies.

Annual gains in homeowner expenditures for improvements and repairs are projected to shrink to 1.5% by the end of 2020 from an annual gain of 4.8% in 2019, the center said in a report on Thursday. Annual increases in the past decade have ranged from 5% to 7%, the report said.

The estimate would put 2020’s spending on home renovation and repairs at $333 billion, compared with $328 billion in 2019 and $313 billion in 2018, the report said. 

“A 2020 growth projection of less than 2% is certainly lackluster for the remodeling market, especially given historical average annual growth of about 5 percent,” the report said. “Even so, homeowner improvement and repair expenditures are still set to expand this year.”

Renovation spending can be an indicator of real estate demand because home sellers usually spruce up their properties before listing them. On the other side of the transaction, buyers often spend money after closing on a home to renovate and redecorate in a way they like.

Those expenditures are an important part of the U.S. economy because it boosts the consumer spending that accounts for about 70% of GDP.

The projected softening in renovation demand for existing properties comes at a time when homebuilding activity is expected to pick up. Builders probably will start construction on 975,000 single-family homes in 2020, Fannie Mae said in a Dec. 23 forecast. That would be the highest level since 2007, based on government data.

The slowdown expected for renovation spending this year probably won’t continue into 2021, the Harvard report said.

“While homebuilding and sales activity are now firming, softness from earlier last year will continue to pull on remodeling spending growth in 2020,” the report said. “However, the slowdown should begin to moderate by year-end as today’s healthier housing market indicators will ultimately lead to more home renovation and repair.”

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