Report: Over half of homes on the market will sell below original price

Is there a Black Friday looming for home sales too?

Home trade-in company Knock forecasted that by the end of September 2019, 67% of listings on the market were expected to sell below their original list prices, up 1.6% from the third quarter 2019 forecast.

To that point, the study showed that out of the current listings, 67% are predicted to sell at a discount to their original list prices in Q4 2019, a slight increase from the Q3 2019 prediction, which reflects seasonality.

In Q3 2019, 26.3% of homes sold at a discount of 5% or more. Knock now predicts that 32.1% of homes will sell at a discount of 5% or more in Q4 2019.

According to Knock, there are 10 markets that expect to see a significant decrease in home prices through the end of 2019, as shown in the image below.

(Image courtesy of Knock. Click to enlarge.)

A slower quarterly rate of change in deals points to a more balanced housing market, with 63.6% of homes sold below original list prices in Q3 2019. That’s up 1.9% quarter over quarter compared to 5.2% quarter over quarter in Q3 2018.

“As seasonality takes hold heading into the holidays, we can expect to see a slowdown in the market, but there will still be plenty of opportunities for buyers to find deals,” said Jamie Glenn, co-founder and COO at Knock. “

Knock’s Q4 Forecast points to a year over year trend in the overall softening of the market that creates even more potential for buyers looking to take advantage of current mortgage rates and decreased competition at this time of year,” Glenn added.

The Southeast and Southwest markets are expected to see the highest rate of deals in Q4 2019, with top 10 markets including No. 1 Miami, No. 4 New Orleans, and No. 10 Las Vegas.

Miami is No. 1 again in terms of deals, with 84.2% of homes predicted to sell at a deal in Q4 2019 after 85.3% did in Q3 2019.

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Support for affordable housing policies growing

As home values become more unattainable, more homebuyers say they are willing to support policies that impact affordable housing.

Redfin surveyed more than 3,000 U.S. residents who bought or sold a primary residence in the last year or plan to in the next year. The survey found that people are nearly twice as likely to support policies designed to keep homes affordable compared to policies that would strengthen home values.

In fact, 34% of those surveyed said they support policies designed to keep homes more affordable, while 19% said they prefer policies meant to strengthen home values.

Meanwhile, more than a third of respondents actually supported both types of policies.

Almost half of those who responded said that rising home prices over the last decade have made their life worse. Conversely, 16% said rising home prices made their lives better.

Last month, a study from the National Association of Home Builders said that 55% of home shoppers found the experience unsuccessful, and couldn’t find a home in their price range.

Beyond that, a study from Freedom Debt Relief said that a quarter of homeowners wish they were renting instead of owning.

As for how housing could be made more affordable, nearly two-thirds of those surveyed said that the government should provide down payment assistance to working-class families with buying their first home.

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NAR, MBA, NAHB and ABA decry “single-minded focus” on debt, income measure

The heavy-hitters of the mortgage and housing industries teamed up to publish a joint statement on Monday decrying “single-minded focus” on a mortgage qualification measure known as the debt-to-income ratio, or DTI.

The Mortgage Bankers Association, the National Association of Home Builders, the National Association of Realtors and the American Bankers Association said regulations rely too much on a gauge that’s a “weak predictor” of a home loan’s likelihood of default.

“The discussion on mortgage risk has been colored by a single-minded focus on just one factor that lenders use to examine a borrower’s likelihood to repay a mortgage: the debt-to-income ratio,” said the jointly signed column that ran in the American Banker and the Asset Securitization Report. “Yes, the DTI is important. But it is just one of many considerations lenders use in combination when evaluating whether a borrower can and will repay a loan.”

The importance placed on DTI should be more in line with other qualifications, the groups said.

“Other factors including credit history, cash reserves, property equity and liquid assets also help to paint a more complete picture of a borrower’s true credit profile and the true risks assumed by a lender,” the statement said.

The amount of cash a borrower has is a better indicator than DTI, they said.

“Numerous studies have determined that DTI by itself is a weak predictor of a loan’s likelihood of default,” the groups said. “Other recent studies have shown that a borrower’s liquid cash reserves are a far more important indicator of risk when unemployment is rising.”

DTI ratios have improved this year as mortgage rates hovered near three-year lows and the economy entered its 11th year of expansion, according to Ellie Mae data.

The average ratios for closed loans in September were the lowest since 2016, which is also the last time mortgage rates were this cheap. The ratios measure how much of a borrower’s income goes toward a housing payment, as well as to all debt payments, so they tend to improve as rates drop.

The average “front end” ratio, measuring income compared to the debt incurred by the new monthly mortgage payment, was 24%. The average “back end” ratio, measuring all recurring debt including housing payments, stood at 37%. At the start of the year, the average front end ratio was 26% and the average back end was 39%.

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Compass now offering bridge loan services to help homeowners use equity to buy new homes

It seems that the No. 1 goal for most of the big companies in real estate these days is to offer homeowners an easier way to access the equity in their home to enable them to buy a new home faster.

That’s leading companies like Zillow, Redfin, and even Realogy, which includes Better Homes and Gardens Real EstateCentury 21Coldwell Banker, Corcoran, ERA, and Sotheby’s International Realty, to roll out iBuyer programs where they are either directly buying the houses themselves or facilitating the sale to a third-party buyer.

That allows homeowners to get cash for their home faster
than the traditional sales process, thereby allowing them to use that money to
buy their new home.

Now, one of the fastest growing real estate companies in the nation is putting its own spin on this movement.

This week, Compass rolled out a new program designed to help homeowners access their equity to buy a new home. But the company isn’t getting into the homebuying business itself.

Rather, Compass is
expanding into the lending business, sort of.

Compass announced
this week that it is now offering “Compass Bridge Loan Services,” a program in
which Compass real estate agents can now facilitate a bridge loan for their clients,
using the homeowner’s equity as the collateral.

The bridge loan
allows the homeowners to access the equity in their home and use that money to
help buy their new home. The loan is then paid back using the proceeds from the
sale of the homeowner’s existing home.

Consider it iBuyer-lite.

“We are incredibly
excited to be able to offer Compass Bridge Loan Services to home buyers and
sellers across the country,” said Carly Litzenberger, senior director of new
ventures at Compass. “Until now it’s been far too difficult for homeowners to
easily access the equity in their homes. By unlocking this capital, Compass is
putting the power back in the hands of the homeowner and bringing a new group of
buyers to the housing market.”

Compass is not
providing the loans itself. Rather, the company is partnering with several
lenders to provide the bridge loans, including Better.com and Freedom
Mortgage
.

“Better.com and
Compass both have similar shared visions of making the homeownership process
easier through best-in-class technology and superior customer service,” said
Vishal Garg, CEO and founder of Better.com. “We’re thrilled to partner together
on a service that combines a concierge-like customer offering with innovation.”

On its website, Compass said it decided to roll out the bridge loan program after considering the program for some time. The company also said despite partnering with Better.com and Freedom, Compass clients are not obligated to use either lender.

“After months of
research, Compass has selected lenders that are offering competitive rates and
dedicated service for Compass clients,” the company states on its website. “Already
working with a lender you love? No problem. This unique solution lets you
choose the provider that works best for you.”

Compass also states
that homeowners working with a Compass agent can apply for “no out of pocket
costs” for up to six months on any approved bridge loan.

“As part of the
service, Compass clients can apply for up to six months of loan payments,” the
company stated. “Compass is using its own funds to support the no out-of-pocket
costs offering.”

As for why sellers
may want to take advantage of this program, Compass lays out several reasons:

  • The financial flexibility to make a down payment without having to sell their existing home
  • Quickly take action when they find the home they want to buy
  • Have the security in knowing where they are going to live before leaving their current home
  • Sell on their terms and watch from the comfort of their new home while their old house sells at the optimal time

According to
Compass, the company has already begun rolling out the service in select
markets and states that early feedback from agents and clients has been “overwhelmingly
positive.”

In fact, Compass
states that bridge loans were the “single most-requested service from Compass
agents and their clients in 2019.”

According to the
company, that feedback from agents is one of main reasons the company invested “significant
time and resources” into the development of this program.

The offering is the
latest from Compass, which has been attracting real estate agents away from
competitors in droves with its technology tools. And now, the company’s agents
can offer bridge loans to their clients too.

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Calabria says he’s willing to wipe out Fannie Mae, Freddie Mac shareholders

Mark Calabria, director of the Federal Housing Finance Agency, said he’s willing to wipe out Fannie Mae and Freddie Mac shareholders if needed to protect taxpayers from another bailout.

“I’m working for the taxpayers,” Calabria said during testimony Tuesday to the House Financial Services Committee. “If the circumstances present themselves where we have to wipe out the shareholders, we will.”

The FHFA director was responding to a question from Rep. Bill Foster, D-IL, who responded to Calabria’s pledge by saying: “I look forward to that.” Fannie Mae and Freddie Mac back about half of the nation’s mortgages.

Calabria added he believes shareholders should have lost their stakes in the private companies in 2008 when the two government-sponsored enterprises, or GSEs, were taken over during the mortgage meltdown.

Instead, they were put into conservatorship – not receivership, which would have been a clearer legal situation – and the government received new senior preferred stock and common stock warrants amounting to 79.9% of the companies.

Fannie and Freddie shares that once traded over $60 each and were considered almost as safe as U.S. Treasuries because of the implied federal backing were suddenly worth pennies. That’s when hedge funds like Pershing Square and Wall Street firms like Blackstone stepped in and began scooping them up.

Last month, investors won a lawsuit on appeal that advanced their position that the government’s forced sweep of GSE profits into the Treasury was illegal, causing the shares to soar.

“I’m on the record as saying in 2008 what we should have done is wipe out the shareholders,” Calabria told Congress in the Tuesday hearing.

But, Calabria said, his mandate now is to put the companies on firm footing and release them from conservatorship or, if warranted, put them into receivership – and he made clear his intent was the former.

Treasury Secretary Steve Mnuchin, who sat next to Calabria at the witness table at the Tuesday hearing, last month released the Trump administration’s long-awaited “blueprint” laying out plans to reform the nation’s housing finance system and release Fannie Mae and Freddie Mac from conservatorship, calling it the “last unfinished business of the financial crisis.”

Three weeks ago, the FHFA announced it would allow Fannie and Freddie to rebuild a portion of their capital reserves to a total of $45 billion combined. The two companies have paid pack taxpayers for their bailouts, plus more than $100 billion on top of it.

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Digital lending platform Roostify plots expansion with new investment from Santander

Roostify, which powers the digital mortgage platforms of JPMorgan ChaseTD BankGuild Mortgage, HSBC Bank USA and more, is plotting an expansion in the U.S. and internationally thanks to a new injection of funding from Santander Group and others.

Roostify and Santander announced Tuesday that Santander InnoVentures, Santander
Group’s fintech venture capital fund, led an expansion funding round for the
digital lending platform provider.

Also participating in the funding round were existing
investors JPMorgan Chase and Colchis
Capital
, among others.

The companies did not disclose how much money the company raised in this funding, nor how much Santander’s venture capital fund is investing, but the investment is the Santander’s second in Roostify.

In early 2018, Santander InnoVentures took part in Roostify’s $25 million Series B funding round. And now, the company is investing again, which should help Roostify continue expanding.

Roostify, which was founded in 2012, has grown steadily over
the last several years, including becoming the digital mortgage platform
provider for the banks mentioned above.

According to the company, its monthly loan volume has more than doubled over the last 12 months. The company is now seeing nearly $20 billion a month in mortgages processed via its platform.

Roostify states that the new funding from Santander will support
the company’s continued development of its mortgage platform, as well as “additional
consumer lending products.”

Beyond that, Roostify will also be expanding its geographic
footprint to include the U.K. and Europe.

As for Santander, the company’s VC fund is supporting
Roostify’s expansion with an investment and a global agreement that could see
Roostify powering Santander’s expansions into “new core markets.”

According to the companies, since InnoVentures’ initial investment
in Roostify, the companies have been “exploring ways of working together,
commercially and beyond.”

The investment also could conceivably be setting the stage
for Roostify’s Series C funding round at some point in the near future.

“We’re excited to continue supporting Roostify in their next
stage of growth as they forge ahead with their multinational and product
expansion strategy,” Manuel Silva Martínez, partner and head of investments at
Santander InnoVentures, said in a statement. “The company has seen impressive
growth since we originally invested in them last year, and the European
mortgage lending market is ripe for the type of machine learning tools that
Roostify offers.”

Martínez will be also be joining Roostify’s board of
directors as an observer.

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Facebook commits $1 billion to affordable housing

Facebook
announced Tuesday it is committing $1 billion to help address the affordable
housing crisis in California.

The social media site’s investment will help create up to
20,000 new housing units to help essential workers such as teachers, nurses and
first responders, to live closer to the communities they work in. Facebook
partnered with California Governor Gavin Newsom and the State of California to
accelerate progress in affordable housing.

“Access to more affordable housing for all families is key
to addressing economic inequality and restoring social mobility in California
and beyond,” Newsom said. “State government cannot solve housing affordability
alone, we need others to join Facebook in stepping up – progress requires
partnership with the private sector and philanthropy to change the status quo
and address the cost crisis our state is facing. Public-private partnerships
around excess land is an important component in moving us forward.”

Facebook explained that a family of four in San Francisco
making more than $100,000 per year is still considered low income.

Back in 2017, Facebook announced it was building affordable housing in Silicon Valley so that its employees would have affordable places to live.

Now, Facebook will be investing $1 billion over the next 10
years in these areas:

  • $250 million to a partnership with the State of
    California for mixed-income housing on excess state-owned land in communities
    where housing is scarce. This public-private partnership ensures that
    incremental new housing supply is brought to the market segments that need it
    most.
  • $150 million for the production of affordable housing, including housing for the homeless, in the San Francisco Bay Area. We will contribute to the Bay’s Future Fund, the affordable housing investment fund of Partnership for the Bay’s Future, to work toward a more livable, equitable and racially and economically diverse Bay Area.
  • $225 million in land in Menlo Park. This is land Facebook previously purchased, which is now zoned for housing. We are committed to producing more than 1,500 units of mixed-income housing.
  • $25 million to build teacher and essential
    worker housing on public land for school districts in San Mateo and Santa Clara
    Counties. This partnership with Santa Clara County and local school districts,
    announced October 17, will help fund construction of housing on county-owned
    land for teachers and other essential workers, enabling them to live near the
    communities where they work.
  • $350 million in funds for additional commitments
    based on the rollout and effectiveness of the initiatives described above.
    These funds will also be used to support more affordable housing in other
    communities where Facebook has offices.

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NAR: Existing home sales dampened by the housing market’s lack of inventory

After rising for two consecutive months, the nation’s existing home sales declined 2.2% in September, according to the National Association of Realtors.

Total existing home sales – completed transactions that include single-family homes, townhomes, condominiums, and co-ops – decreased to a seasonally adjusted annualized rate of 5.38 million. That being said, sales are now 3.9% above September 2018’s rate.

Lawrence Yun, NAR’s chief economist said despite historically low mortgage rates, sales have not commensurately increased, in part due to a low level of new housing options.

“We must
continue to beat the drum for more inventory,” Yun said. “Home prices are
rising too rapidly because of the housing shortage, and this lack of inventory
is preventing home sales growth potential.”

In September, the median price for an existing home was $272,100, a gain of 5.9% from last year’s rate of $256,900. This marks the 91st straight month of year-over-year gains.

According to NAR, total homes available for sale remained on par with August’s 1.83 million but fell 2.7% from last year’s rate of 1.88 million.

There
was a 4.1-month supply of unsold inventory at the current sales pace, up from
4 in August, but down from and 4.4 a year ago. Properties stayed on the
market an average of 32 days in September, rising from 31 days in August but remaining
the same as last year. The report states that 49% of homes stayed on the market
for less than a month.

The average commitment rate for a 30-year, conventional, fixed-rate mortgage fell from 3.62% in August to 3.61% in September and the average commitment rate for all of 2018 was 4.54%, according to Freddie Mac.

“For families on the sidelines thinking about buying a home, current rates are making the climate extremely favorable in markets across the country,” said NAR President John Smaby. “These traditionally low rates make it that much easier to qualify for a mortgage, and they also open up various housing selections to buyers everywhere.”

First-time
buyers comprised 33% of sales in September, up from August’s rate of 31% and September
2018’s rate of 32%. NAR revealed that the annual share of first-time buyers
held steady at 33%.

Single-family
home sales retreated from a seasonally adjusted annual rate of 4.91 million in August
to 4.78 million in September, which is 3.9% above a year ago. The median
existing single-family home price was $275,100 in August, increasing 6.1% from September
2018. 

Existing
condominium and co-op sales recorded a seasonally adjusted annual rate of 600,000
units in September, which is 1.7% above August’s rate, but 3.44% higher than a
year ago. The median existing condo price was $248,600 in September,
increasing 4.5% from 2018. 

Here’s a
regional breakdown of the nation’s existing-home sales:

  • Existing home sales in the Northeast dropped 3.1% from the prior month’s rate to an annual rate of 690,000, which is a 1.5% annual increase. The median price in the Northeast increased by 5.2% from September 2018 and came in at $301,100.
  • In the Midwest, existing home sales fell 3.1% from the prior month at an annual rate of 1.27 million, which is about equivalent to September 2018’s level. The median price in the Midwest was $213,500, increasing 7.2% from a year ago.
  • Southern existing home sales declined 2.1% to an annual rate of 2.28 million in September, up 6% from last year. The median price in the South rose to $403,600, increasing 4.5% from September 2018.
  • Existing home sales in the West decreased by 0.9% to an annual rate of 1.14 million in September, which is 5.6% above last year’s rate. The median price in the West was $403,600, climbing 4.5% from this time last year.

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Dallas tornado leaves 15 miles of homes with at least 50% damage probability

A series of tornados touched down in Dallas Sunday night, one gliding along the ground for an estimated 14 to 16 miles. And much of that area has at least 50% destruction probability, new data from CoreLogic shows.

The sirens wailed across Dallas as a tornado was confirmed
to have touched down. CoreLogic Weather Verification Services also confirmed
that hail up to 2.5 inches accompanied the storm in North Dallas and up to 1.5
inches south of Dallas.

 The pictures below
show the debris that cluttered the streets and even a city bus turned over by
the storm. But that was even mild in terms of the destruction Sunday’s tornado
left.

CoreLogic meteorologists on the insurance and spatial team showed the area of Dallas the tornado touched down. In the chart below, the lighter magenta shows areas on the path where there is 50% damage probability, the darker magenta represents 70% and the green represents 90%.

The National Weather
Service
confirmed the tornadoes include an EF-3, the one shown above which
hit Dallas, and EF-1 which touched down in Rowlett and an EF-0 which hit Wills
Point.

Reports show at least six people have been hospitalized, but
there have been no major injuries or deaths reported.

Many residents are now displaced, and about 130,000 are
without power across North Texas, according to Oncor.

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Harvard: Remodeling market to stall in 2020

Home renovation spending reached a record high this summer, according to Harvard University’s Joint Center for Housing Studies. Although they expected those numbers to continue to soar through the end of 2019, the JCHS now says it expects a complete stall come 2020.

(Image courtesy of Harvard University’s Joint Center for Housing Studies. Click to enlarge.)

The Leading Indicator of Remodeling Activity released by the Remodeling Futures Program at JCHS said that annual gains in homeowner spending for improvements and repairs will dissipate by the second half of 2020.

To that point, the LIRA states that the annual home improvement and maintenance expenditures will post a modest decline of 0.3% through the third quarter of 2020.

“Continued weakness in existing home sales and new construction will lead to sluggish remodeling activity next year,” said Chris Herbert, managing director of the JCHS. “Slowdowns in other key indicators of improvement spending—project permitting, sales of building materials, and home prices—also suggest the remodeling market may be reaching a turning point.”

Back in July, JCHS said that it expected remodeling spending to total a record $331 billion for all of 2019.

Now, the furthest projection in the index (the end of Q2 2020) suggests that spending over the prior 12 months will probably total $323 billion.

“At $325 billion, owner improvement and repair spending in the coming year is expected to essentially remain flat compared to market spending of $326 billion over the past four quarters,” says Abbe Will, associate project director in the Remodeling Futures Program at the Center. “However, today’s low mortgage interest rates may help counter some of these headwinds, which could buoy home improvement expenditure over the coming year.”

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