UWM tightens VOE standards as jobless claims rise

UWM tightens VOE standards as jobless claims rise
There’s been an uptick in the number of mortgage loans falling out as they approach closing — even up to the day of closing. That’s because jobless claims doubled to their all-time high in just a matter of weeks, and borrowers who were employed at the start of their loan process may have lost their jobs very recently.

A total of 6.65 million people filed jobless claims in the week ended March 28, the Labor Department said on Thursday. That’s up from the prior record of 3.31 million for the previous week, which was revised upward.

To manage the surging number of recently unemployed borrowers, United Wholesale Mortgage has tightened its underwriting standards on verifying income and employment, re-verifying employment status on the day of closing.

“We’re doing them again right before closing to make sure that people still have jobs, because people are losing jobs at such an alarming rate right now,” UWM CEO Mat Ishbia told HousingWire. “And so we put an extra process in place, which most people actually appreciate and recognize, but some people probably don’t love it.”

Under regulatory guidelines, it is acceptable to verify employment up to 10 days before closing, but UWM is operating out of an abundance of caution.

“It’s a little bit less business because we put a couple overlays in place to protect in this unprecedented time,” he said. “I think all lenders are doing that. I want to do more loans. But I’m not going to do more loans if they’re unemployed; we’re just doing prudent underwriting.”

Ishbia said that after UWM implemented these standards, other lenders quickly followed suit. In fact, he said he expects that over the next 90 days, every lender will be following these standards.

According to the company, adding this extra step has not slowed down their process or time to close. Ishbia said that currently 7% of the staff at UWM, or about 400 of the 1,500 employees, are focused solely on VOE.

“It’s not slowing down the process at all, we’re closing loans on average about 15 days or less,” he said.

And as lenders are already beginning to adopt tighter protocols, Ishbia said this underwriting standard is likely to become widespread.

“I think the key here is UWM is the first one out with prudent underwriting standards that might become the new norm,” he said.
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Iowa now allows remote online notarization amid COVID-19

Iowa now allows remote online notarization amid COVID-19
The rapid spread of COVID-19 continues to push states across the country to loosen their requirements around remote online notarizations (RON), allowing real estate closing to continue with as little contact as possible. 

Even with a bipartisan movement in Congress to legalize RON nationwide due to a new socially distant world, some states are taking matters into their own hands and issuing executive orders to temporarily allow RON transactions.

One of those states: Iowa.

Iowa’s emergency declaration last week that suspended the requirement for a notary to be physically present was unique since the state already passed RON legislation in the spring of 2019. But the bill does not go into effect until July 1, 2020. 

“Iowa’s credit union industry was proud to advocate for remote notarization during the 2019 legislative session with other strong collaborators like LenderClose,” Murray Williams, president and CEO of the Iowa Credit Union League, said in a release. “While we knew at the time that some Iowans had barriers to visiting their credit union in person, none of us could have imagined the current situation. We thank Governor Kim Reynolds for the swift action that enables credit unions to harness the power of technology to help Iowans buy homes and refinance mortgages in a manner that is safe during this difficult time.”

Prior to stay-at-home orders and a growing push to remain socially distant from others, a little more than 20 states in the country had passed RON legislations. Now, according to the Mortgage Bankers Association, 15 states have enabled RON through temporary executive order due to the coronavirus. 

While notaries are considered an essential business in many places across the country, a lot of notaries are implementing remote technology, along with other lower contact methods, to limit the amount of interaction needed in a closing. 

Des Moines, Iowa-based LenderClose helped execute one of the first-ever RON closings for a mortgage loan in Iowa, using its RON solution to eSign and notarize the entire closing transaction via computer, smartphone or tablet. 

With Iowa’s original RON legislation set to go into effect in three months, Matt Dodds, Dupaco Community Credit Union chief operations officer, also looked at the future impact of the bill, stating in the release, “In the short-term, remote online notarizations minimize person-to-person interactions to help protect both our members and our employees. In the future, this technology will allow us to more effectively support and serve our members, regardless of where they live, when they’re ready to close on a loan.”
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[PULSE] Public-private partnerships are key to helping consumers navigate confusing times

[PULSE] Public-private partnerships are key to helping consumers navigate confusing times
Experience has shown me that, when functioning at its best, the mortgage industry works in partnership with lenders, servicers, real estate agents and housing counselors, all collaborating to help families achieve a big part of the American Dream.

Bill Emerson,Guest Author

Every day, people rely on mortgage professionals for clarity and direction as they navigate the process of buying or refinancing a home. They seek out our expertise in simplifying the complex; helping clients understand complicated issues like interest rates, financial requirements, guidelines and how to make the best financial decisions for themselves and their families.

Now, more than ever, we need this commitment to collaboration in the housing finance ecosystem – and it must extend beyond the usual scope. Because of the coronavirus outbreak, and the resulting economic hardships that have added stress and challenges throughout the country, it is imperative that public-private partnerships between policymakers and industry set the tone of clarity and accuracy to protect and educate consumers.

Congress has called on the industry to provide forbearance for consumers who are experiencing difficult financial circumstances, and frankly, it’s the right call, given what we are facing as a nation.

But to do this right, we must provide a clear and unified message.

It is not helpful to promote and encourage forbearance for homeowners without fully educating consumers about what that entails. The confusion surrounding what forbearance means, and who should apply for it, results from miscommunication. There are consumers who should apply for forbearance and many who should continue to make their payments because they can. Applying for mortgage assistance when it isn’t needed just slows down the process for the many Americans who do need it.

This need for a clear message also extends to all elected officials, many of whom have made statements of mortgage relief being offered to their citizens, without the ability to enact the change.

While I’m certain this is being done out of care and concern, it places undue stress on mortgage servicers and consumers alike. This practice must stop now.

This is a time for unity and clarity.

The reality about a forbearance is, when the forbearance period ends (which will typically be between three-12 months), the missed payments become due. There are generally three ways to address those missed payments: 1) Pay the total amount at once (a lump-sum); 2) Enter into a repayment plan; or 3) Modify the mortgage terms to create a new affordable long-term payment. 

Each option has pros and cons. A lump-sum is likely untenable for most. Many won’t qualify for a repayment plan given the significant payment increases that will result. And modifications can increase the term of the mortgage or, depending on the circumstances, alter the interest rate.

Forbearance can be an excellent way to provide relief to a temporary loss or reduction of income. But again, it is critical that homeowners fully understand how forbearance works, which may differ depending on the type of loan the homeowner has, so they can make the best choice for their unique circumstance. This requires education and patience with clients who are likely frustrated and confused.

That’s why the need for a public-private partnership is so critical – to ensure core messaging from servicers, GSEs and government officials is delivered to consumers across the country in a clear, accurate manner, in order to avoid extra confusion in this time of high stress.

Great things happen when the public and private sectors work together.

At Quicken Loans, we are stepping up to assist our hometown of Detroit during this pandemic. Given the unprecedented nature of what we are currently experiencing, we cannot expect the city’s government to handle this on its own. To get through difficult times it takes extraordinary cooperation and collaboration.

Just last week, in five short days, 100 Quicken Loans team members stood up technology and logistics to ensure the City of Detroit could test 400 residents per day for COVID-19. But we weren’t alone. JP Morgan Chase also played a pivotal role in securing a testing lab. What was even more incredible was that nobody involved in the project cared who got credit, we were in this effort for the greater good of the community.

Lenders aren’t the only organizations in the mortgage space that are making a positive impact on their communities. The Mortgage Bankers Association established its Open Doors Foundation in 2011 to provide mortgage and rental payment assistance to families with critically ill or injured children so that parents and guardians could focus on the medical needs of their loved ones. Since its inception, Open Doors has raised roughly $7 million to assist nearly 5,000 families throughout the country.

The outpouring of gratitude and support is happening at the local level too, with many mortgage brokers around the country rolling up their sleeves to help serve their communities. Bander Mortgage in Glencoe, Illinois is making donations of $100 in their clients’ names to various COVID-related community groups. Grant Stern, President of Florida-based Morningside Mortgage, is helping lead the charge for MasksNow.org, a coalition of more than 1,000 volunteers hand-sewing masks for our medical heroes and fellow citizens.

Many other present-day examples exist in relation to the current coronavirus outbreak, with companies putting in additional effort to feed our brave medical personnel and first responders, build much-needed masks, build and distribute ventilators, coordinate additional COVID-19 test stations and convert building space into hospitals so more people can receive care.

In challenging times, it is amazing just how much good can be seen all around us – especially when we take down our invisible walls and work together. History has shown us this repeatedly. It truly is the American way.

The current need in the mortgage industry for government agencies and private lenders to work together and speak in a unified, easy-to-understand voice is more important than ever. It’s up to all of us – lenders, state and federal government officials, FHFA, Fannie Mae, Freddie Mac, Ginnie Mae, FHA and so many more – to come together to best serve consumers, and support peoples’ homeownership dreams in a responsible and crystal clear manner.

Let’s show our country what is possible when people truly come together.

Bill Emerson is Vice Chairman of Quicken Loans and the Former Chairman of the Mortgage Bankers Association.
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Multifamily market permits continue to decline

Multifamily market permits continue to decline
Prior to stay-at-home orders and businesses closing, the multifamily market was already seeing a decline in both permits and starts, a new report from RealPage said.

Permits fell to 415,000 units on a seasonally adjusted annual basis in February, marking the second-lowest annual rate in 17 months, down 20.2% from January and 5% from February 2019.

Now, due to the effects of the coronavirus, permits are more likely to decrease, although many local governments have deemed construction and real estate an essential industry.

And, as many open houses have been canceled or moved to virtual, the number of movers has also slowed down.

According to Zumper’s National Rent Report for April, Google search volumes for apartments for rent were down between 10% and 35% last week in its top cities, while long-term inventory dropped by about 12% last week.

Multifamily completions were down in all regions, with the Midwest, Northeast and South regions down by about half from last year, while the West region was down by about a quarter.

In February, multifamily construction starts trailed behind permits, month over month. While starts saw a 17% month-to-month decline between January and February, they were still up 44.3% year-over-year. However, that data is from before the spread of COVID-19.

Overall, total residential permitting levels have exceeded 1.4 million units in six out of the last seven months, exceeding 1.5 million units in January for the first time since March 2007, according to the report.

Total residential starts averaged 1.36 million units in the past 12 months, while single-family starts averaged 920,000 units, RealPage said.
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Title Industry Delivers With Curbside, Drive-through Closing Options

Title Industry Delivers With Curbside, Drive-through Closing Options
Title and settlement companies across the country have modified their closing processes to serve their customers and keep everyone safe in a world of social distancing and the COVID-19 pandemic.
In addition to safe closing protocols, companies have developed drive-through or curbside closings as a signing option to handle the near historic levels of business.
Inspiring his idea to keep clients safe, Rob Fricks, managing member of the Georgia-based law firm Fricks Bohan LLC, thought about fast-food restaurants and automated carwashes.
“We could close transactions that way,” he said. Starting on March 22, the firm started offering drive-through closings.
Sellers and buyers remain in their vehicles and an attorney goes to the seller vehicle and then to the buyer vehicle. The real estate agents remain in the parking lot out of the flow of traffic. Their checks and settlement statements are delivered after the closing to their respective vehicles.
“We have designated lanes for buyers and sellers,” Frick said. “We have two attorneys, so we can close two transactions at the same time.”
To comply with safety guidelines, the law firm’s staff wears gloves for each closing and masks/bandannas. The customers keep the pens and disposable clipboards. Post-closers handling the files also wear gloves. 
“We wash our hands and use hand sanitizer constantly,” Frick added. “Everyone has been amazingly accommodating and understanding.” 
California-based The Closing Exchange offers what it calls Curbside Closing, Alan Frelix, CEO of The Closing Exchange, says this concept is the same as a mobile signing, except the notary signing agent and the consumer will not conduct the signing or the notarization in the same room. In a time of social distancing, the notary signing agent will meet the signer(s) at the desired location, but the entire signing will be held with a barrier between the signer and the notary signing agent abiding by the CDC's social distancing practices.
"Our Curbside Closing provides clients and their customers the peace of mind of a germ- and stress-free signing experience in a time where stress levels are high," said Alan Frelix, CEO of The Closing Exchange. "Abiding by the Centers for Disease Control and Prevention's (CDC) social distancing guidelines, our Curbside Closing option allows the signer(s) to sign the documents at a convenient place and time without the need for a signing agent to enter the signer's home or to meet face-to-face without a protective barrier."
At the law firm Khani & Auerbach in Hollywood, Fla., attorney Khila Khani said they created a safe space to conduct closings outdoors or via drive-through. Her staff wears masks and gloves during the transaction. The table is cleaned after every use. Only Khani, the law firm’s other partner and one other staff member is permitted in the office.
“We are trying as hard as possible to avoid face-to-face closings, but the lenders are not being very flexible about it, even though both my partner and I are capable of conducting e-closings and are both remote online notaries,” Khani said.
Curbside closings also have been implemented by Alyeska Title Guaranty Agency in Alaska.
"The process is still taking place," said Chelsea Arthur, an escrow manager at Alyeska Title. "We want to make sure that the home buying economy doesn't get affected here in Alaska as much as possible."
The title company created a short video to highlight the new closing process, inform consumers that deals are still closing and that procedures have been implemented to keep the community safe. The title agency’s escrow officers wear masks and gloves when meeting clients in their car.
"We're definitely still busy and believe it or not we're actually busier than we have been all year," Arthur said.

Connie Clancy, president of Legacy Title, developed the curbside and drive-through options after the governor in Minnesota issued a stay-at-home order lasting through April 10.
"We recognized immediately that this situation would cause a shift in the traditional way of doing closings and began implementing changes right away," Clancy said. "We started with separating parties into different closing rooms, offering curbside service and then saw the opportunity to offer the drive-through option and acted quickly to make it happen for our customers."
Executive Closer Carmen Jorgensen oversees the drive-through closings for Legacy Title. She says that clients appreciate the option.
"Some of our clients need to have their children with them because school is closed, Jorgensen said. “Doing this in the drive-through ensures we are adhering to the social distancing orders all of us have been given. A few clients told us they were considering canceling their closing for safety reasons until they found out about this convenient option."
While this probably won’t be the new normal, Clancy is proud to work in an industry that supports working together to put the consumer first and keep everyone safe.
“Even in difficult situations, essential business like this must happen,” she said. “Whether someone is buying, selling or refinancing we recognize the importance of their investment and want to continue to make this experience as positive as possible for all involved."
Share Your Story
ALTA would like to hear how you are continuing to serve your customers and communities during this uncertain and unprecedented time. Here are three ways you can share your story with us:

Email your story at communications@alta.org.
Post your story in the comments section below.
Share your story on Facebook and use #gooddeeds.

Source: blog.alta.org

Quicken Loans’ family of companies to help manufacture coronavirus PPEs and other critical medical supplies

Quicken Loans’ family of companies to help manufacture coronavirus PPEs and other critical medical supplies
Detroit-based Quicken Loans and the Rock Family of Companies — including Rocket Mortgage — announced several public-private partnerships to manufacture and distribute personal protective equipment for its hometown’s hospitals, government workers and health professionals.

Among the plans announced Thursday in a statement: The Quicken Loans Community Fund is purchasing a mask production line-machine that will produce more than 500,000 masks a week, while the Industrial Sewing and Innovation Center (ISAIC) will train workers and manufacture the masks in a facility from workwear brand Carhartt.

Other actions include sourcing 100,000 N95 masks for local hospitals and health care providers; contracting with private and/or cargo aircraft for immediate delivery of PPE, ventilators and other equipment; offering team member and technology support; and launching a marketing campaign to highlight health care workers. The Quicken Loans Community Fund and Gilbert Family Foundation already had donated $1.2 million for coronavirus relief efforts in Detroit. 

Michigan currently ranks third in reported COVID-19 cases, more than 9,300 as of Thursday afternoon, according to a CDC website, behind only New York and New Jersey.

Other Michigan companies, including General Motors, have also pledged resources to provide more PPEs and medical supplies.
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ClosingCorp: Closing Costs Averaged $5,779 in 2019

ClosingCorp: Closing Costs Averaged ,779 in 2019
Closing costs for a single-family property averaged $5,749 including taxes—$3,339 excluding taxes—according to data released by ClosingCorp.
"In 2019, the U.S. mortgage industry originated more than $2.3 trillion in purchase and refinance loans—a significant year-over-year increase in volume,” said Bob Jennings, chief executive officer of ClosingCorp. “Unlike the cost of many products that spike when demand goes up, the costs associated with mortgage closings remained flat in 2019. This was good news for homebuyers. In fact, the difference in the average closing cost between 2018 and 2019 was only $30, including taxes, and $5, excluding taxes."
ClosingCorp analyzed 1.6 million single family purchase transactions—roughly 33% of all single family existing home purchases last year.
ClosingCorp’s calculations include lender’s title, owner’s title, appraisals, settlement fees, recording fees, land surveys and transfer tax. ClosingCorp uses home price data from CoreLogic to estimate closing costs for an average home at the state, core-based statistical area (CBSA) and county levels. ClosingCorp uses ranges, rather than single values, because it allows them to more accurately capture fees associated with the real transactions.
Jennings attributed much of the cost control to the increased use of technology by both lenders and settlement services providers which enabled the industry to scale up capacity while holding the line on closing costs.
"It will be interesting to see if this trend continues in 2020, as record low interest rates were accelerating refinances just before the industry began to face the national COVID-19 emergency," he noted.
The 2019 report shows the jurisdictions with the highest average closing costs, including taxes, were:

District of Columbia ($25,800)
Delaware ($13,273)
New York ($12,847)
Washington ($12,406)
Maryland ($11,876)

The states with the lowest closing costs, including taxes, were:

Indiana ($1,909)
Missouri ($2,063)
South Dakota ($2,159)
Iowa ($2,194)

Source: blog.alta.org

New York state reverses prohibition on in-person showings, appraisals

New York state reverses prohibition on in-person showings, appraisals
New York state announced Wednesday that it will allow those in real estate to resume providing some services, such as in-person showings, appraisals and inspections, something that had been forbidden by New York’s stay-at-home order on March 22.

The Real Deal reported late Wednesday that New York Gov. Andrew Cuomo’s administration reversed its previous decision to prohibit these activities, stating in an email to the New York State Association of Realtors that, “The following functions of real estate and/or Realtors are considered essential: residential home and commercial office showings; home inspections; and residential appraisers.”

The governor’s office also clarified the essential nature of other real estate functions. “Back-office real estate work is deemed essential, but please utilize telecommuting or work-from-home procedures to the maximum extent possible.”

The directive allows these services to be performed in person, but noted that people needed to maintain social distancing, keeping six feet of separation between them.

The reversal follows a week of uncertainty across the nation as those in mortgage and real estate sort out what jobs are deemed essential — a designation that can differ by state, county or city. HousingWire has covered the implications for notaries and homebuilders, as well as real estate agents.

In the face of numerous challenges, lenders and real estate agents are working to find innovative ways to keep the wheels of the housing industry rolling, whether that’s virtual home tours, drive-by appraisals or remote notarizations.

In addition, the federal government has tried to remove some of the roadblocks the industry is facing in serving consumers, loosening standards on valuations, verification of income and employment and more.

New York City is now seen as the epicenter of the coronavirus outbreak in the U.S., with more than 1,300 virus-related deaths reported as of April 1. Cuomo has been one of the most active and visible leaders in the country’s fight against the outbreak, extending stay-at-home orders, building emergency hospitals and calling out the federal government for its lack of support.

It remains to be seen if his reversal will trigger similar actions in other states.
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[PULSE] A federal liquidity solution for the mortgage servicing industry

[PULSE] A federal liquidity solution for the mortgage servicing industry
Policymakers are considering ways to ensure the mortgage servicing industry –– the central plumbing of the U.S. housing financial system –– remains functional during the COVID-19 crisis. 

Policies established by various federal housing agencies and augmented in the $2 trillion CARES Act that offer homeowners affected by the crisis forbearance on their monthly mortgage payments could cost the industry $75 billion – $100 billion, according to the Mortgage Bankers Association. This could cause lasting damage to the housing market that will make the coming economic recovery longer and harder. 

Any solution to this crisis needs to go beyond temporary forbearance on foreclosures. It must also prevent homeowners who cannot pay their mortgage payments from eventually defaulting and facing complex loan modifications with potentially higher monthly payments, or losing their homes.

The system needs a clean and simple way to protect homeowners, cover the payments they currently are unable to meet, and defer such unpaid amounts at 0% interest until they pay off their mortgages. Such a solution also needs to maintain the financial integrity of the servicing industry and the secondary mortgage market.

The CARES Act creates the opportunity for a fast, efficient, and cost-effective federal program that, in protecting servicers, protects America’s homeowners for the long term.

We envision a program that would create a Federal Reserve funding facility for single-family servicers of Ginnie Mae, Fannie Mae, Freddie Mac and state and local housing finance agency home mortgage portfolios. It would enable up to 6.75 million low- and moderate-income homeowners to avoid default on their mortgages despite layoffs and unemployment due to the pandemic.

Here’s how it would work:

A Fed commitment of $19.25 billion combined with $16.25 billion in Treasury equity investment of the $425 billion authorized in the stimulus, creates $35 billion of liquidity for regular principal and interest advances on mortgage-backed securities.This money is provided through a Federal Reserve facility for mortgage servicers.The Fed receives full repayment with interest at 2%; the Treasury investment enables the Fed to provide funding at 0% on behalf of homeowners throughout the country.Funding runs through commercial bank intermediaries to servicers to cover the costs they incur each month on behalf of borrowers to make scheduled payments on mortgage-backed securities and bonds and escrow deposits for borrowers’ taxes, homeowners’ insurance, and mortgage insurance.Treasury receives up to 75% of its investment back (roughly $12 billion) when borrowers pay off their mortgages. The Treasury’s net investment of approximately $4 billion prevents foreclosure losses on millions of federally insured and guaranteed mortgages, as happened during the financial crisis.

Under the program we envision, targeted federal investment enables borrowers to avoid loan default despite missing up to three monthly payments during their forbearance periods; they simply pay this money back at 0% interest, whenever they pay off their loan. 

And the program enables servicers to stay in business and helps keep the housing system intact under highly stressful conditions — and avoid untold amounts in foreclosure losses by the federal housing agencies and GSEs down the line.

If the Presidential emergency lasts longer, the program can be scaled up to cover additional missing monthly payments through larger investments by the Federal Reserve and Treasury.

More details on how the proposed Mortgage Servicer Funding Facility would work are here.
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Here’s a look at a post-iBuyer housing market

Here’s a look at a post-iBuyer housing market
As we enter into really our third full week of the new normal, I have been fascinated by the steady stream of predictions and pontificators out there. 

Mary Frances Coleman, Columnist

Most of the discussions have been questioning whether the industry and markets as we knew them are ever going to rebound. Others have centered around the obvious euphoria that many agents and brokerages are exhibiting now that the iBuyers have halted iBuying.

To that extent, I decided to take a look at the data in my marketplace which is predominantly Maricopa County, Arizona, to see if there are any true signs that the market is shifting.

A market snapshot

Understand that we are really only looking at a tiny set of numbers. There is not enough historical information yet to truly analyze what is happening or even theorize about what is to come. But here is what I can tell you.

The Arizona Regional Multiple Listing Service (ARMLS) of which I am a dues-paying agent member, posts “hot sheet” numbers on the dashboard page. For those who do not know, this term harkens back to the olden days when listings were printed in books and delivered to offices weekly with updates on the status of properties. You remember. When the consumer needed the agent to find out information on what is for sale and what closed escrow. The “hot sheets” were printed and distributed to fill in the gaps between printings.

As of Monday, there were 1180 new listings taken within the past 72 hours. During that same time period, 417 new offers were accepted but continuing to accept back-up offers, 63 additional offers were accepted with a contingency, and 678 properties went straight to pending sale. 

Out of 17,545 listings, 6,748 are pending. Oops, in the past hour now 6,759 are pending.

More than 1,400 contracts closed escrow between Match 25 and March 30, and two of those days were the weekend!

While those seem like great numbers and a strong market, let’s look at the flip side.

During these same 72 hours, 159 listings canceled, 196 went temporarily off the market, and 77 went into the new “delayed” listing status which is the result of the NAR “coming soon” vote. Don’t get me started…

So what do these numbers really mean?

The snapshot here is why it is so important to understand how numbers can be misleading.

For those in markets that aren’t as robust as the market covered by ARMLS, these are terrific numbers. But compared to the beginning of the month –– which is not even enough time to have an accurate measure of information –– these numbers could show a trend.

From March 1 to March 15, there were 12,969 current active listings. That’s about 5,000 less than there are now. So, are more people listing their house now, or are there fewer buyers, keeping the active listing numbers high?

There is some argument that the withdrawal of the iBuyer market has accounted for a rise in properties being listed. If there are no iBuyers to give a seller an offer, perhaps they will go the traditional route and list. 

For more on that, I reached out to Tina Tamboer, senior real estate analyst for The Cromford Report. We spoke about the current conditions, and she agrees that there is hardly enough data to analyze.

However, we did connect on some very important points that provide some insight into the iBuyer withdrawal and the potential benefit or harm.

“I believe the iBuyer marketplace is grossly overstated in its market share by some people,” Tamboer said. “True market share for flip investors is only calculated on the acquisition side. If iBuyers left the market completely, the Greater Phoenix marketplace (not ARMLS…because iBuyers purchase outside of the MLS) would only drop about 4% in total sales volume because they’re just a middleman between the seller and final buyer.  The final sale would still happen without them.”

That’s significant to understand because Arizona is a hotbed of iBuyer activity. We have all of the recognized programs like Opendoor, Offerpad, Zillow, Redfin, and some of the non-national programs like 72 Sold and Doug Hopkins, both of which tell potential sellers that they can submit their property and get a quote for purchase.

This interesting distinction allows for some data crunching over the next few weeks. The iBuyers have cited concerns for the safety of the community as reasons for halting their purchases. However, that doesn’t really answer the question of why some are canceling the current contracts for purchase. Those could still happen, but they are falling out right and left.

Here’s why: They don’t have the money. Most of these companies are funded by Wall Street and venture capitalist money. No sector of the market has been hit harder than Wall Street. Investors are simply closing up shop right now and protecting what money they do have.

Those same investors are not buying rental properties as investments through REITs and other funds. So now we are faced with these gigantic companies, blowing through cash to purchase these properties, being stuck with them. And they have to get rid of them in order to free up cash just to operate.

Remember, many of these companies are publicly traded. And many of them continuously report yearly losses while the PR machines say “we are working towards profitability.”

Is the perceived increase in listings related to more of these iBuyer-owned properties on the market in order to get them off of the books, or because traditional buyers are hesitant to jump in right now?

Tamboer had some theories about this. She remarks that the current pandemic has “Taken our market from seven layers of insanity down to 4!”

What is a layer, you ask? I asked too!

Tamboer explained that a layer is like a degree of “hotness” for a market.  A “regular hot” market is considered one where there are 50-75 properties under contract for every 100 active for sale.  “Really hot” is 76-100 under contract for every 100 listings. A FRENZY/INSANE market is where there is more under contract than what’s active for sale. 

Three weeks ago (just prior to the stay-at-home order given by Arizona Governor Doug Ducey) some areas of Greater Phoenix had five times more properties under contract than were active for sale. If a buyer with a budget between $200K-$250K was looking in Chandler for a home, they would’ve had three properties to look at in the entire city while 37 were already under contract. 

Now, three weeks after the governor’s order, that same buyer has 20 properties to choose from and 27 under contract. While it’s definitely better for the buyer, there’s little chance of home values declining under these circumstances.

Hello, housing supply

With the current market, that ratio is dropping, and the same areas are experiencing a 10% increase in supply. The availability of more homes is why we are seeing more listings.

But the price point and the availability have caused some buyers to jump in right now. The traditional buyer feels like he or she now has an actual chance to get an offer accepted. No competition from iBuyers. Perhaps not multiple offers at once.

And according to Tamboer, we are also seeing supply right now coming out of the short-term rental supply (Airbnb, VRBO types) and into the sales supply. The pandemic is causing the owners of the highly coveted seasonal investment property to miss the highly coveted season. Especially in Arizona, and that means converting to long term rental or simply listing for sale.

The big question being asked out there is if there is going to be more supply, when are prices going to go down? The answer is: It depends.

Overall, the U.S. real estate market is not in the free fall that it was in during 2008.

Today, the market prices have risen, but homes, in general, are still within affordability ranges, and real people can still buy houses, not just Wall Street and investors. That’s why “It depends.”

If the real people and traditional buyers can weather the storm, and the government allows for forbearances instead of foreclosures when people get behind on their payments because they are not working, we should be OK.

Looking ahead

The data has to cycle through at least a season to be reliable, and we are all hoping that this pandemic is over before then.

“It’s reasonable to expect a recession,” Tamboer said. “It’s not reasonable to expect massive depreciation of homes or another foreclosure crisis.”

Some good news is many of the organizations that came into existence after the crash of the 2008s and beyond, are still in existence today and ready to help if necessary. 

Most of us are not ready to look at the data and say there has already been a significant shift. In fact, in my market in Arizona, although we are seeing those cancellation numbers grow, we are also seeing closings continue and listings come on the market.

So with the iBuyer programs continuing to lose investment, and certain markets opening up to traditional buyers who may not have had an opportunity to buy, maybe this is the time to actually buy a house.

I’m pretty sure when we make it through this new normal of being stuck in our houses or apartments with our families for weeks, a lot of us will say “When this whole thing is over, we’re moving!”
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