buyer

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Anywhere Real Estate’s settlement agreement in two class action antitrust lawsuits dealing with buyer broker compensation raises important questions about the future of buyer’s agency and how other defendants are viewing the fast approaching trials.

Top of mind, of course, is what exactly the settlement agreements include, besides an agreement by Anywhere to pay a total of $83.5 million in damages for both the Moehrl and Sitzer/Burnett suits.

Steve Berman, the managing partner and co-founder of Hagens Berman Sobol Shapiro LLP, which represents the plaintiffs in the Moehrl suit, said the “settlement includes significant changes to Anywhere’s practices relating to the conduct that we have challenged.” However, the exact terms of the settlement won’t be known until the plaintiffs file a motion to approve the settlement agreement. Anywhere declined to comment on the exact terms of the agreement.

Meanwhile, Steve Murray, the co-founder of RealTrends Consulting, said he believes the changes Anywhere proposed to make could mark the end of buyer broker compensation as we know it.

“As far as cooperation and compensation, that is now pretty much over,” Murray said. “The biggest combined brokerage company in the country in terms of all their brands, just said, ‘We’re out. We are not going to defend this case anymore,’ so that will definitely lead to changes.”

Murray sees three possible outcomes for the lawsuits.

“Worst case scenario, the broker representing the buyer will have to negotiate their own fee with their client and the seller can no longer be compelled to make a blanket offer of compensation in order to list on the MLS,” Murray said. “The second thing that could happen is that more and more buyers will go directly to the listing agent, in which case they are clearly unrepresented. The third thing that would happen is a whole new kind of buyer brokers arise that charge an hourly flat fee to represent buyers,” according to Murray.

In preparation for these outcomes, Berkshire Hathaway HomeServices Drysdale Properties broker-owner Gretchen Pearson said she has been working with her agents to implement buyer’s agency agreements.

“If an agent files a buyer’s agency agreement for me, the broker, to review, the work flows just aren’t there in our document management system,” Pearson said. “The software we use isn’t built that way.” Therefore, it won’t just impact agents, but technology systems, she added.

While the lawsuits’ potential impact on buyer’s agency and buyer broker compensation is the largest question looming, Murray also wonders how the settlement agreement will impact Anywhere’s many franchise owners.

“Will the plaintiffs now just go and start suing individual Coldwell Banker franchises?” he posited.

When asked how the agreement would impact its affiliates, Anywhere highlighted a line from their initial statement.

 “Anywhere has taken the first important step toward a resolution that not only releases the company but also our affiliated agents and franchisees,” the company said.

Murray said he believes this could be the start of more settlements to come from the other defendants in the suit.

“They are all going to be running for settlements now,” Murray said. “I think this is a floodgate moment for sure.”

Ken Trepeta, the president of RESPRO, is holding off on making any predictions, suggesting it might depend on the terms spelled out in the settlement agreement.

“If they are settling this and it goes away and they don’t admit wrongdoing and there is no requirement to change policies,” he said. Damages in the Sitzer/Burnett suit are anticipated to be up to $4 billion, while damages in the Moehrl suit are expected to reach up to $40 billion.

The National Association of Realtors, a defendant in both lawsuits, says it is not giving up the fight.

“Settlement is always an option for any party in litigation. NAR’s commitment to defend ourselves in court remains unchanged and we are confident we will prevail in proving the lawfulness of the rules under attack. Pro-competitive, pro-consumer local MLS broker marketplaces ensure equity, efficiency, transparency and market-driven pricing options for home buyers and sellers,” Mantill Williams, NAR’s vice president of communications, wrote in an email to HousingWire.

The practice of the listing broker paying the buyer broker’s compensation saves sellers time and money by having many buyer brokers participating in that local marketplace, NAR noted. 

For buyers, the NAR argues these marketplaces save them the burden of extra costs at closing, allowing them to get professional representation and make homeownership possible for more people. 

Keller Williams, RE/MAX, and HomeServices of America, the lawsuits’ three other defendants, declined to comment.

The Sitzer/Burnett lawsuit is scheduled to head to trial on October 16, 2023, while a trial date for the Moehrl lawsuit has yet to be set, but it is expected to take place in early 2024.

Originally filed in 2019, the Moehrl and Sitzer/Burnett lawsuits take aim at NAR’s Participation Rule, which requires listing agents to make a blanket offer of compensation to buyers’ agents in order to list the property on a realtor-affiliated multiple listing service (MLS). According to the plaintiffs, commission sharing inflates the costs for consumers, in violation of the Sherman Antitrust Act. NAR contends that the current commission structure, which has been in place for over 100 years, actually helps consumers.

Source: housingwire.com

Apache is functioning normally

Lately, there’s been a lot of talk about a lack of affordability, even a potential housing bubble.

And it comes as no surprise, given the massive shock of a near-tripling of mortgage rates over just a year and a half.

The 30-year fixed could be had in the low 3s, maybe even high 2s back in early 2022, and today is closer to 7%.

At the same time, home prices haven’t come down, despite a slowing rate of appreciation.

Together, this has brought the housing market to its knees and pushed many prospective buyers onto the sidelines. But those who sell are still reaping massive profits.

Home Buying Is the Least Affordable Since 1984

Remember those 1980s mortgage rates that were in the double-digits? Well, today’s mortgage rates are nowhere close.

However, due to sky-high home prices and elevated interest rates, home buying is the least affordable it has been since 1984.

That’s right, it hasn’t been this bad in about 40 years, which illustrates just how challenging this housing market has become.

Per Black Knight, it now requires 38.3% of the median household income to make a monthly mortgage payment on an average-priced home.

Using Freddie Mac’s 7.23% average for a conforming 30-year fixed mortgage as of August 24th, the monthly principal and interest payment climbed to $2,423.

And this assumes the buyer comes in with a 20% down payment, when in reality many borrowers can only muster 3-5%.

To the point of it being a bubble, it would take some heavy lifting to bring affordability back to its 25-year average.

We’re talking some combination of a ~27% decline in home prices, a 4%+ reduction in 30-year mortgage rates, or a whopping 60% increase in median household.

Which of those three do you think are likeliest to transpire? Probably none of them barring another massive housing crash.

But a combination of the first two is reasonable, whether it’s a 10% drop in home prices and a 2% drop in mortgage rates. Or some other combination.

It’s unclear if wages are going to see much improvement from here on out, certainly nowhere close to 60%.

For perspective, the 30-year fixed averaged about 13.2% the last time housing affordability was this bad.

This tells you home price growth has far outpaced wage growth, essentially demanding low interest rates bridge the gap.

Despite this, home sellers are racking up massive gains, thanks to double-digit home price appreciation over the past several years.

The Few Home Sellers Out There Are Raking in Big Profits

Redfin reported today that 97% of home sellers sold for a profit during the three months ending July 31st.

And the typical property that sold went for a whopping 78.4% more than the seller paid, or $203,232.

While there is a severe lack of affordability in today’s housing market, there seems to be an even bigger shortage of homes to purchase.

As such, home prices remain on the up and up, allowing the few sellers out there to take in a tidy profit.

The majority of sellers purchased their homes well before property values skyrocketed, making it pretty easy to snag a six-figure gain.

San Jose leads the nation in median capital gain at a staggering $755,000. It’s also 108.6% higher than what the seller paid.

San Francisco isn’t far behind at $625,500 and 70.5%, respectively, followed by Anaheim at $470,000 and 88.7%.

Even Detroit, which ranked last in terms of dollar gains of the 50 metros analyzed saw a median $80,500 capital gain.

If we consider percentage gains, Fort Lauderdale topped the list with a 122.2% cap gain, followed by San Jose and Miami.

Some Home Sellers Are Losing Money, Especially in San Francisco

While most sellers are making out like bandits, Redfin did note that some home sellers are parting with their properties at a loss.

This is especially true in San Francisco, which has struggled with falling property values and tech layoffs.

San Francisco’s median home sale price fell a record 13.3% year-over-year from April 2022 to April 2023, more than triple the nationwide decline of 4.2% at that time.

But as of July, prices were down just 4.3% year-over-year, somewhat closer to the national gain of 1.6%.

This might explain why 12% of home sellers in San Francisco sold for a loss during the three months ending July 31st.

Put another way, one of every eight homes that sold during this period went for less than what the seller paid.

And the typical seller sold for about $100,000 less than what they paid, tying New York for the largest median loss in dollars.

Nationwide, the typical homeowner who sold for a loss only sold for $35,538 less than what they paid.

Other major metros that had a high percentage of sellers taking a loss included Detroit (6.9%), Chicago (6.5%), New York (5.9%), and Cleveland (5.8%).

One Redfin Premier agent said some condos in the Bay Area are selling below 2018/2019 purchase prices because commuting into downtown San Francisco is no longer “a thing anymore.”

Meanwhile, an agent in Boise said some clients will need to sell at a $100,000 loss as they move back to Seattle because work-from-home (WFH) has ended and they bought the properties recently.

But the price point on such transactions is generally above $750,000, which probably isn’t your typical home in that part of Idaho.

And as you can see from the chart above, very few homes are selling for below what the seller originally paid.

So before we get excited about another short sale wave, as seen in the early 2000s, we may want to temper our expectations.

Of course, market conditions can change fast. For example, a year ago only 0.2% of Austin homes sold at a loss versus 3% in the same period this year.

Austin had the lowest share of home sales at a loss of the top 50 metros. Not so anymore.

Source: thetruthaboutmortgage.com

Apache is functioning normally

QC/Fraud, LO AI, MSR Financing, GNMA Programs; Disaster Updates and Guides – The CFPB is There for Us

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QC/Fraud, LO AI, MSR Financing, GNMA Programs; Disaster Updates and Guides – The CFPB is There for Us

By:
Rob Chrisman

Tue, Sep 5 2023, 10:40 AM

It was a rough weekend. My cat Myrtle, resting comfortably at the top of the food chain, was visibly miffed at me not nominating her (again) for the vaulted “40 under 40” award. I reminded her that she is way over that in cat years, but my explanation fell on her one deaf ear and her one good ear despite me telling her how much line-caught salmon we could buy with the nomination fee. (Hey, don’t get me wrong. I know some of those folks who were nominated or selected, and the industry is better off because of them!) If lenders would like a little good news, they should know that, despite the low interest rates we saw a few years ago, people are still moving, and that’s a source of business. Around 8.6 percent of Americans moved last year, slightly more than the previous year, but still below pre-pandemic levels. Accordingly, WalletHub released its report on 2023’s Best States to Live in. Chalk it up to complete East Coast bias, but Massachusetts, New Jersey, New Hampshire, and New York took the top four spots. Really? (Today’s podcast can be found here and this week’s is sponsored by LoanCare, a Fidelity National Financial (NYSE: FNF) division and award-winning developer of the most sophisticated mortgage servicing portfolio management tool, LoanCare Analytics, built to support MSR investors with a focus on customer engagement, liquidity, and credit risk. Hear an interview with Flagstar’s Jason Lee on how capital markets departments balance volume and margin.)

Lender and Broker Products, Programs, and Services

Mortgage servicers of all sizes trust their portfolios to MSP®, Black Knight’s loan servicing system. In fact, Fahe (Federation of Appalachian Housing Enterprises), a nonprofit that serves the people and communities of Appalachia, recently signed a contract for MSP. In Black Knight’s recent announcement, Fahe states that top-tier technology will help it realize its mission and better serve its communities. Wondering if the MSP loan servicing system is the right fit for your servicing business? Learn why it’s the one loan servicing system for every mortgage servicer.

NEW: Maxwell’s Mini-Guide to Surviving Today’s Big Housing Market Reset, ft. advice from Maxwell Co-founder & CEO John Paasonen, Rob Chrisman himself, theLender EVP Chris Ledwidge, and more. Is your lending business prepared for a market reset? To thrive, lenders need a fresh game plan driven by home buyer trends, creative lead generation, and insightful data. Maxwell put this guide together to help you refresh your thinking for the market ahead. In it, you’ll learn ways to rebuild your pipeline, the borrower segments that are still rising in the housing market, and how to better leverage data to make confident business decisions. Lenders: The next five years likely won’t be anything like the last five. Now is the time to rethink your business. Click here to download your free copy of Maxwell’s Mini-Guide to Surviving Today’s Big Housing Market Reset.

Profitable Mortgage Companies are focused on the long-term value of the customer relationship. Essex Mortgage’s partners enjoy greater customer retention, GNMA pass-thru pricing, no overlays, no LLPA’s, NO EPOs and NO EPDs, as well as Tax Deferred asset growth and a long-term cash flow stream without having to be a GNMA issuer themselves. Please contact us to discuss how the Essex GNMA Excess MSR program can help retain and enhance your customer relationship, broaden guidelines, and expand into new markets. Please contact Kimberly Schenck.

“Your business can benefit from powerful national banking resources that incorporate personalized, one-on-one relationships with industry experts. Western Alliance Bank delivers stable, trusted treasury management and fraud protection services from cash management to financing to account security. These tools can help you keep operations running smoothly, conveniently manage custodial and payroll accounts, and originate streamlined online wire transfers. Our Specialized Mortgage Services team tailors mortgage finance products to your needs, including warehouse lending, MSR financing, note financing and corporate credit card services that offer speed to approval and certainty of execution. Discover how competitive rates, efficient cash flow cycles and a streamlined banking relationship can help you achieve your goals. Contact Mark Short (469) 702-6212, Nick Richards (646) 708-1211, Nicole Avey (720) 633-4759, Elizabeth Mix (480) 329-2122, Jim Karr (626) 390-8534 or Chris Martin (480) 341-5483. Western Alliance Bank, Member FDIC.”

Ready to mend your relationship with your loan origination system? Join the TRUE team on September 20th and hear directly from TruStone and V.I.P Mortgage on how they’re applying AI technology to solve the challenges related to their LOS platforms. The roundtable discussion will unpack the frustrations related to most of today’s more popular LOS platforms, the crucial importance of well-organized borrower data, and how applying AI at specific points in the document journey can dramatically change the way LOS platforms perform. Sign up today.

Capacity is heading to The Mortgage Collaborative’s “Music in My Ears Conference” in Nashville, TN, next week! CEO David Karandish will speak on Monday, September 11th, at 3:15 p.m. about our latest offerings: generative AI-powered Guideline Search and tailored AI Assessments. Get game-changing, personalized insights on successfully implementing AI and automation in your business! Be sure to stop by our session in Nashville or book one-on-one time with our team here. The mortgage industry desperately needs a platform that securely integrates with lenders’ key systems, providing loan officers with instant, actionable answers about borrower opportunities, loan statuses, guidelines, and more. Capacity reduces the time LOs spend logging into a sea of endless systems to find information. If this sounds familiar, why not find out how Capacity can save your team time and frustration? See how it works.

“TENA Companies, Inc. is your strategic mortgage Quality Control partner in the fight against fraud. Develop your strategy against evolving mortgage market fraud with help from our proficient and highly trained auditors. Fraud involving income and employment schemes, as well as occupancy-related deception, continue to impact risk levels for all lenders. As highlighted in Fannie Mae’s July 2023 Quality Insider: Reviewing your fraud controls in QC, a robust Quality Control plan is an integral component for identifying patterns that can be indicative of fraud. These insights enable lenders to proactively implement processes for fraud prevention. Safeguard your operations, ensure risk mitigation, and strengthen your Quality Control by partnering with TENA. Contact us today!”

Disaster News and Updates

Last year, U.S. disaster damage totaled $171.5B. Destructive weather and climate events, or bad forestation or building practices, factor into the mix of hurricanes, wildfires, tornados, and drought. Few are forecasting them to decrease or affect a smaller geographic range. Is your lending operation ready? What are you telling your borrowers about insurance? Major insurers say they will cut out damage caused by hurricanes, wind, and hail, not to mention along coastlines and in wildfire prone areas, suggesting that companies will just insure for liability and fire. So if that is the case, will insurance rates fall? Of course not. But where does all of this leave the mortgage servicers?

When disasters strike, lenders often postpone loan closings, impacting origination revenue and impairing the ability to fund new loans. Loans that have already been funded may be difficult to sell, further limiting liquidity. Black Knight has a piece worth skimming, or more, about how you can reduce your financial exposure, decrease costs, and better serve borrowers by preparing before, during and after a disaster. Download a complimentary ebook: Climate-Change and Weather-Related Disasters: How to Manage Mortgage Risk.

Nearly every part of the United States faces natural disasters, whether they be earthquakes, hurricanes, tornadoes, forest fires, drought, or volcanoes. A declaration by FEMA triggers lender and servicer policies and procedures.

Mortgage Quality Management & Research (MQMR) sent out Fannie Mae Disaster Relief – FAQ. Check out more equally insightful FAQs. (To learn more about Mortgage Quality Management & Research, download MQMR’s white paper.)

Recently we’ve had Florida Hurricane Idalia FEMA-4734-DR, Illinois Severe Storms and Flooding DR-4728-IL, Mississippi DR-4727, and Vermont DR-4720: Update to End Date of Occurrence.

Florida, Georgia, and the Carolinas were hit by Hurricane Idalia, causing damage from storm surge, flooding, and high winds. Recovering from a catastrophic event like this one can feel overwhelming. It’s not always easy to know where to turn for help and what steps to take. The CFPB put together a guide to handling finances that you can share with the people you serve, to help them manage the money decisions they face. View CFPB’s disasters and emergencies guide providing resources to help recovery, including how to tackle housing issues, protect finances, deal with property damage, manage bills, and ask financial companies for help.

Freddie Mac issued a reminder to homeowners and mortgage servicers of its relief options for those affected by Hurricane Idalia. Freddie Mac’s forbearance program provides homeowners mortgage relief for up to 12 months without incurring late fees or penalties. Freddie Mac’s disaster relief options are available to homeowners who have been impacted by an eligible disaster. This includes anytime the homeowner’s property experiences an insurable loss, and also covers instances where their homes or places of employment are located in Presidentially Declared Major Disaster Areas where federal Individual-Assistance programs are made available to affected individuals and households. Foreclosure and other legal proceedings are also suspended while homeowners are on a forbearance plan. More information is available on My Home by Freddie Mac where owners can read about the steps they can take to help recover from a natural disaster, including frequently asked questions related to disaster and mortgage relief.

Fannie Mae reminded homeowners and renters impacted by natural disasters, including Hurricane Idalia, of available mortgage assistance and disaster relief options. Mortgage servicers are also reminded of options to assist homeowners under Fannie Mae’s guidelines.

Under Fannie Mae’s guidelines for single-family mortgages impacted by a natural disaster:

Homeowners and renters looking for disaster recovery resources may visit FannieMae.com to learn more about addressing immediate needs. Fannie Mae also offers help navigating the broader financial effects of a disaster to homeowners and renters through disaster recovery counseling at 855-HERE2HELP (855-437-3243).

PHH Correspondent posted information regarding Illinois DR-4728: New Disaster Declared, Mississippi DR-4727, and Vermont DR-4720. Go to the PHH company library to view the announcement and for all disaster declared counties, requirements, procedures, and conditions.

On 9/1/2023, with Amendment No. 1 to DR-4734, FEMA declared federal disaster aid with individual assistance has been made available to 6 additional Florida counties affected by Hurricane Idalia from 8/27/2023 and continuing. See the attached announcement for inspection requirements. AmeriHome Mortgage 20230901-CL Disaster Announcement.

Capital Markets

It’s looking more and more like a goldilocks scenario for the Federal Reserve. Last week was crammed with key economic data on the labor market and inflation which will probably be instrumental in shaping the decision of the Fed’s monetary policy committee at its meeting later this month. Many of the indicators pointed towards cooling in the economy, strengthening hopes that it would be enough for the central bank to keep rates steady. Friday’s nonfarm payrolls report showed an uptick in the unemployment rate. Market participants took heart from the data, which suggests that the highly resilient labor market is finally cracking and that the effects of the Fed’s aggressive tightening campaign are showing up.

More specifically, we learned at the close of last week that U.S. unemployment rose to 3.8 percent in August, a significant increase from July’s rate of 3.5 percent and the highest percentage since February 2022, as the economy continued to lose momentum built up after pandemic lockdowns. Non-Farm Payrolls barely beat consensus (expected +170k, actual +187k) and previous prints were revised lower (June was cut from +209k to +105k). More people entered the workforce, increasing the size of the labor force by 736k, which will help bring supply and demand more into balance.

Keep in mind that increased hiring and slowing wage growth are key ingredients of the Fed’s fight against pandemic-era inflation, and the overall report was good news for the bond market, as it shows the Fed’s tightening is gaining traction in the labor market. In theory, this will take some of the pressure off the Fed to keep hiking rates and give the central bank some confidence to let previously enacted hikes work their way through the economy. The next Fed meeting is only two weeks away.

Though we’ve already received the latest rate decision from Royal Bank of Australia this morning, where rates were held steady at 4.10 percent, today is light on economic data. After this commentary goes out, markets will receive August employment trends and July factory orders. Highlights from the remainder of the week include September’s Fed Beige Book tomorrow and July Wholesale Inventories on Friday. We begin the trading week with Agency MBS prices worse .125-.250 and the 10-year yielding 4.22 after closing last week at 4.17 percent on no real news.

 Download our mobile app to get alerts for Rob Chrisman’s Commentary.

Source: mortgagenewsdaily.com

Apache is functioning normally

Just about everyone knows home prices have been on the mend for a while now, though in the grand scheme of things, not very long.

Still, in just over a year or so, prices have chalked double-digit gains, which is great for existing homeowners, especially those formerly in underwater positions.

Unfortunately, the rapid ascent of home prices has to have a cost, and that’s a lack of affordability, or at least reduced affordability, for new home buyers.

I myself began worrying about another bubble back in February, seeing that inventory was highly constrained and bidding wars were thrusting prices to inconceivable heights.

But as the months wore on, I realized it was just the beginning. Home prices were just starting to recover, despite not being all that far from prior bubble highs in some markets.

Now summer is coming to a close and there doesn’t seem to be any end in sight. I thought things were cooling off, but people keep buying at seemingly any price. Listing prices continue to march higher in the hot markets nationwide, and now some areas are even registering new all-time highs.

Again, great for existing homeowners looking to gain enough equity to sell, or for those who purchased a year ago when home prices seemingly bottomed.

But now comes the question of sustainability going forward. If these rapid price increases prove to be too much to bear, home prices could reverse course again.

Of course, that may not happen for years, which is the good news about what could be the beginning of a bubble.

[S&P/Case-Shiller Creator Says Phoenix and Las Vegas ‘Clearly in Bubbles’]

Affordability Below Its Long-Term Trend Line

John Carney over at CNBC is the one who uttered the “B-word,” using the National Association of Realtor’s monthly affordability index as evidence.

The index takes average mortgage rates and median home prices, and assumes a home buyer will put down 20% and keep their front-end DTI ratio at 25%.

When the index is at 100, it means households earning the median income can afford a median home price at an average mortgage rate.

But a reading of 100 isn’t good, not even close. In fact, the last time it was near 100 was in 2006, when it dipped to 101. And we all know what happened next.

This is the great flaw of relying on a real estate agent’s interpretation of affordability…things will pretty much always be affordable.

Anyway, that’s why you have to look at the long-term trend line, not whether the reading is above 100 or not.

That’s what a group of Robert Morris University researchers did – they believe a housing bubble exists when the index value falls below its trend for at least three consecutive months.

During the beginning of the year, the reading was above 200, thanks to ultra-low mortgage rates and home prices that were still unsure of their direction.

But the index has dropped steadily as both rates and prices have risen, and beginning in April of this year, the index fell below its trend line.

The reading has remained below trend ever since, so by the researchers’ measure, we are in a housing bubble.

Bubbles Take a While to Pop

Here’s the good news. Despite apparently being in a housing bubble, it generally seems to take a while for the bubble to inflate and eventually pop.

So just because we’ve started a new bubble doesn’t mean housing is dead.

The Robert Morris economists said affordability fell below trend in early 2004 and it wasn’t until mid-2006 that home prices peaked and began to nosedive.

And seeing that there are more safeguards in place this time around, it could take even longer for the bubble to generate to full size and burst.

At the moment, most homeowners are opting for long-term fixed mortgages, and other than the FHA, most borrowers are required to put a fair bit of money down.

There also aren’t many high-risk loan programs available in the market, unless you consider ARMs, which could balloon higher by the time their first adjustment period comes along.

Perhaps this latest bubble, assuming it exists, has been driven by low mortgage rates, whereas the previous one was fueled by easy credit, including subprime mortgages.

Hopefully this one ends a little better.

Source: thetruthaboutmortgage.com

Apache is functioning normally

Real estate giant Anywhere has reached a settlement agreement in two of the major class action antitrust lawsuits facing the housing industry.

According to court documents filed on Tuesday, Anywhere Real Estate and the home sellers suing the firm in both the Moehrl and Sitzer/Burnett cases, which both deal with buyer brokers’ commissions, have reached a preliminary settlement agreement, settling all claims in both suits. Before the agreements are finalized they must be approved by the U.S. District Court judges in Illinois (Moehrl) and Missouri (Sitzer/Burnett), who are overseeing the two lawsuits.

No details about either agreement were disclosed in the filings, but attorneys for the plaintiffs in the Moehrl lawsuit told HousingWire the agreement for both lawsuits was a total of $83.5 million, as the two plaintiff classes negotiated the settlement together.

“The monetary settlement was the most that could be obtained in light of Anywhere’s available financial resources. Critically, the settlement includes significant changes to Anywhere’s practices relating to the conduct that we have challenged,” Steve Berman, the managing partner and co-founder of Hagens Berman Sobol Shapirio LLP, wrote in an email. “Our antitrust team looks forward to continuing to pursue additional relief against remaining defendants for those who have been systematically overcharged for simply selling their homes in an already unstable housing market.”

Anywhere asked the court the firm be excused from the pretrial conference on the Sitzer/Burnett suit, scheduled for this coming Friday. The Sitzer/Burnett suit is slated to head to trial on October 16, 2023.

A trial date has yet to be set for the Moehrl lawsuit.

“We are pleased that Anywhere has reached a nationwide settlement with the plaintiffs in the Burnett and Moerhl lawsuits,” an Anywhere spokesperson wrote in an email. “The path to obtain final approval and implement the settlement is a long one, and Anywhere has taken the first important step toward a resolution that not only releases the company but also our affiliated agents and franchisees. We believe the settlement will remove future uncertainty with respect to the upcoming trial, potential additional claims, and legal expense, enabling Anywhere to focus on and continue delivering what’s next for agents and franchisees. Given ongoing legal proceedings and confidentiality agreements between parties, we cannot comment further at this time.”   

Anywhere is just one of the many defendants in these lawsuits, which also include Keller Williams, RE/MAX, HomeServices of America and the National Association of Realtors.

The two lawsuits take aim at NAR’s Participation Rule, which requires listing agents to make a blanket offer of compensation to buyers’ agents in order to list the property on a realtor-affiliated multiple listing service (MLS). According to the plaintiffs, commission sharing inflates the costs for consumers, in violation of the Sherman Antitrust Act. NAR contends that the current commission structure, which has been in place for over 100 years, actually helps consumers.

Damages in the Sitzer/Burnett suit are anticipated to be up to $4 billion, while damages in the Moehrl suit are expected to reach up to $40 billion.

The other defendants in the suits have yet to file settlement agreements.

Attorneys for the plaintiffs in the Moehrl suit did not return a request for comment.

Source: housingwire.com

Apache is functioning normally

Buying and selling a home can be a confusing, intimidating process. From fine-tuning the initial listing to completing the mountains of paperwork needed for closing, homebuyers and sellers can find themselves juggling a wide range of issues. Real estate professionals can help by hosting educational workshops to help make the transaction easier. Here are 11 tips to make these workshops more effective.

1. Find your audience

Not every real estate transaction is the same because not all buyers and sellers are the same. Before you plan your workshop, consider who your target clients are. Do you specialize in helping first-time buyers and sellers, or are you leaning towards working with real estate investors? Maybe you are focusing on empty nesters looking to downsize or clients looking for vacation homes they want to rent out in the off-season.

Your audience will determine the focus of your workshop. It’s the first step to making your workshop a success, and also influences how you will market your event (more on that below).

2. Organize relevant topics

Your audience determines the topics you cover. Veteran investors don’t need a lecture on what to bring to the closing table, but first-time buyers do. First-time home sellers might be interested in learning how to prep their homes for sale, while rookie buyers might want a step-by-step outline of the entire process.

Start planning your event by making a list of the subjects that might be confusing or complicated, and plan your workshop itinerary from there. 

3. Choose a venue

Don’t plan to fail by failing to plan, especially when it comes to things like parking, accessibility, and capacity. The venue you select needs to be comfortable and accommodating for everyone. Consider things such as:

  • Parking (number of spaces and accessibility for those in wheelchairs)
  • Seating at the venue (tables, chairs, etc.)
  • Location (central to public transportation)

Some good workshop venue options include community centers, public libraries, and hotel conference rooms. If you’re hoping to reach clients who are relocating from out of state, consider hosting workshops online.

4. Market your event

You can plan a perfect event, but if your marketing strategy isn’t comprehensive, how will people know about it? Again, how you market will depend on your audience. Social media marketing is a great way to spread the word and can be coordinated so one post hits multiple platforms at a time.

Other ways to reach a wider audience include:

  • Posting on community bulletin boards (in physical locations or online)
  • Sending a note to your mailing list
  • Asking former clients to spread the word

Another way to market is to ask influencers on social media to help promote the event. They may also be able to attend the event, bringing their audience with them.

5. Provide take-home resources

Real estate transactions can be complicated, and some attendees may be overwhelmed by the amount of information you present. Help them better understand and retain information by providing resources they can take home. 

These handouts can include:

  • Checklists for the buying and selling process
  • Definitions of real estate terminology
  • Outlines of how to prepare a home to sell
  • A basic step-by-step guide to buying a home
  • Lists of related real estate professionals (i.e., mortgage lenders, home inspectors, etc.)

Very few people can attend an hour-long lecture and remember everything they heard. For best results, present information in many different ways. Use short videos, slideshows, and small-group discussions and activities to deepen their understanding of the topic.

7. Highlight guest speakers

Guest speakers provide two primary benefits to your workshop. They bring specialized expertise. Real estate transactions involve a variety of professionals, each experts in their field. Inviting these experts to speak is a great way to help workshop attendees better understand each step of the process. For example, a mortgage lender can describe different types of mortgages and explain which might be best for the buyer or the type of transaction. Guest speakers can also offer a neutral third-party perspective on sensitive topics, like how to save money at closing.

They cross-promote the event. Guest speakers will promote the event on their social media platforms. This increases your potential audience and introduces you to more people you might not otherwise reach.

8. Make it interactive

Very few people enjoy sitting in a chair for hours being lectured to. Give participants a chance to engage with speakers and other attendees. You can do this by facilitating small group discussions, encouraging questions, and organizing breakout sessions on specific topics of interest.

9. Ask for feedback

Getting a real estate workshop right the first time is hard, so asking participants for feedback is key. This helps refine planning for future events and helps build relationships with attendees. Additionally, positive feedback can be used (with permission) as testimonials to promote future workshops.

10. Follow up with participants

Asking for feedback is just the first level of follow-up after the workshop. Send out thank-you notes or emails the day after the workshop. On day three post-workshop, reach out again with an invitation to engage. This might look like:

  • Asking attendees if they have other questions
  • Providing additional resources
  • Sending listings based on interest
  • Offering incentives for continued collaboration

This is not the time for a hard sell, but following up with attendees is an opportunity to develop positive relationships that might lead to more business opportunities in the future.

11. Keep the most important thing the most important thing

Homeownership remains a crucial part of what is commonly referred to as the American Dream. The primary goal of these workshops is to educate people on how they can be involved in the pursuit of homeownership. For homeowners looking to sell, your workshop can be critical in their path to building generational wealth.

The most important thing? Educating attendees and demonstrating your knowledge, professionalism, and trustworthiness. By doing this, you position yourself as a valuable resource in your community who genuinely cares about their clients and wants the best for them. Ultimately, that will build a solid foundation for professional relationships that continue to grow as your clients’ needs evolve.

Luke Babich is the co-founder of Clever Real Estate.

Source: housingwire.com

Apache is functioning normally

Colorado Springs-area home sales fell again last month and prices remained flat as the local housing market continued to feel the effects of spiking mortgage rates.

According to a new Pikes Peak Association of Realtors market trends report that examined home sales last month that took place mostly in the Springs and surrounding El Paso County:

• Single-family home sales totaled 1,067 in August, a nearly 22% decline from the same month last year and the 15th consecutive month that local sales have fallen on a year-over-year basis.

• Homes spent an average of 29 days on the market in August before they sold, an increase from 17 days during the same month last year.

• The median price, or midpoint, of homes that sold in August was $480,000, a 0.1% drop from $480,592 in August 2022. Home prices had increased each month from December 2014 to November 2022, but began to slide late last year and now have declined on a year-over-year basis in eight out of the last nine months.  

• The supply of homes listed for sale totaled 2,420 in August, down 8.3% from the same month last year. On the one hand, August’s listings were the most for any month since November, yet they remained far below pre-Great Recession years, when August inventories often topped 3,000 and 4,000.

The Springs-area housing market, like that of many other cities, has done an about-face since the second half of last year because of higher long-term mortgage rates.

For years, historically low rates in the neighborhood of 3% for a 30-year, fixed-rate loan helped spur a furious demand for single-family homes. That demand, coupled with a shortage of properties for sale, sent Springs-area median home prices soaring over several years; in June 2022, they hit a record high of $495,000.

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After the Federal Reserve began to hike interest rates last year to tamp down surging inflation, mortgage rates rose, too, and roughly doubled to more than 6% for 30-year loans by the end of last year.

That trend of high rates continued through the first several months of this year. In mid-August, long-term mortgages topped 7%; last week, the national average for a 30-year, fixed rate mortgage was 7.18%, according to mortgage buyer Freddie Mac.

Higher rates have priced many homebuyers out of the market and sent sales plunging.

Local real estate agents, however, have said that the demand for homes remains relatively strong. As a result, and combined with tight inventories, prices haven’t plunged, though they are down from their record highs.   

The new home side of the Springs-area housing market also has felt the effects of higher mortgage rates.  

In August, 127 permits were issued for the construction of single-family, detached homes, according to a new Pikes Peak Regional Building Department report. August’s tally was up 15.5% compared with the same month last year.

But the pace of home construction through the first eight months of this year remains well behind the same period in 2022, Regional Building Department figures show. Through August of this year, single-family detached permits totaled 1,655, down 36.4% from 2,604 on a year-over-year basis.

Source: gazette.com

Apache is functioning normally

Intercontinental Exchange (ICE) completed its acquisition of Black Knight Tuesday, making the combined company the biggest player in the mortgage tech space. I sat down with Tim Bowler, president of ICE Mortgage Technology, a business unit of ICE, to talk about the company’s mortgage automation strategy — and what keeps him up at night.

Sarah Wheeler: ICE’s acquisition of Black Knight just closed today. What is top of mind for you moving forward?

Tim Bowler: We’re incredibly excited about what we will be able to bring to our customers, to borrowers, as well as to other stakeholders across the mortgage ecosystem. We’ll accelerate our focus on delivering value and efficiencies with the combined ICE and Black Knight entities so we can continue the journey of helping more people into homeownership.  

SW: ICE Mortgage Technology is known for its focus on automation. What parts of the mortgage loan process have been the most resistant to digitization up to this point?

TB: It’s hard to say because there are so many different kinds of transactions between borrowers and lenders. What we’re trying to do at ICE is break down the various transactions where a borrower and a lender might interface and figure out how we can deliver a set of technology tools and solutions so that the borrower can get their loan — for purchase or refinance — as fast as possible with the least amount of cost.

That mindset of knowing that mortgage transactions vary depending on the borrower’s circumstances is an important lens for us because it helps us actually get to the solutions that make the most sense for each one of those discrete transactions.

SW: How does ICE determine the right balance between automation and the human element?

TB: The reality is that the mortgage process, particularly in today’s purchase market, is still a deeply human process. We realize that we are providing the appropriate set of tools and solutions to those humans who are helping those borrowers through the most important financial transaction of their life, so that the processcan be as efficient, seamless and pleasant as possible. The right technology can help you achieve faster approvals and faster closing, while also giving greater comfort and certainty to that borrower.

It’s also helping those borrowers find the right products. Those will inevitably flow through a lender, so we make sure that the lenders have as much information as possible around what might be the best, most appropriate alternatives to present to borrowers.

SW: The FHFA recently held a tech sprint for the mortgage industry and part of the goal was to find out why adoption was low on some of the tech solutions that have been available for years that could really benefit lenders, servicers and borrowers if they were adopted. What do you see as the key obstacles to tech adoption now as, as opposed to in the past?

TB: It seems like each mortgage process should be relatively standardized because we’re manufacturing loans — the vast majority of which will be purchased by the two GSEs or insured by FHA, VA or USDA.

But in the midst of that process is an individual or family and it ends up being a very human-to-human experience. Maybe in the past, the industry looked and asked how we could just industrialize everything associated with the mortgage underwriting approval and funding process too myopically. We think taking a step back to look at that origination process through a human lens will be helpful to increase the uptake of some of the tools that are out there to make the process work.

SW: The cost of origination has been front and center for mortgage banking executives. How are the most successful mortgage executives prioritizing their resources right now?

TB: In this purchase market, it’s the ones who are identifying borrowers they can work with on purchasing that first home. Or, if they are selling and then buying another home, the lenders getting them approved as fast as possible. It’s so important in this market that when a buyer puts an offer on a home, it’s 100% clear that financing is available and ready to support the purchase. And then closing as fast as possible because we’re still in a tight housing market with tight inventory.

SW: We know that homeowners who locked in low mortgage rates might stay in their current home for years. And that’s just building on a trend that’s just been going on even before we got to these really low mortgage rates. What’s the role of tech as lenders play the long game in this market?

TB: Many families and households locked in extremely favorable rates. But I think there’s a dynamism in the U.S. economy and in the housing markets that means people will still move, they’ll still buy a bigger home when the time is right.

In today’s environment, I think there are going to be more households looking to use their equity to invest in their home within the context of retaining the existing primary mortgage that they have at attractive rates. So, for us as a technology provider, it is finding solutions that make it efficient for borrowers to make important investments in their house through mortgage products that meets their needs from a pricing perspective, while also delivering a smooth experience throughout the process.

SW: Affordable housing initiatives are on the radar of more lenders this year, but your typical loan officer may not have a lot of experience there. How are lenders helping borrowers take advantage of loan product innovation and affordable housing initiatives?

TB: There’s no doubt that debt-to-income levels are going to be stressed for that first-time borrower because home prices have remained high despite higher interest rates. And I think it’s incumbent on all of us in the industry to provide tools so lending officers have the knowledge they need to help borrowers access affordable programs, so they know what’s available and how pricing works for those programs.

SW: AI has really stepped into the spotlight this year. Is this going to be a time we will look back on as being a turning point?

TB: The way I think about a lot of these new tools that are being created, whether they be generative AI or more efficient search or more efficient document recognition, is that they should be used to help buyers have a better experience. Correctly harnessed and used, AI could ultimately lead to a more efficient process where decision-making for the borrower is faster.

Our team is focused on thinking about technology in this way: How do we help our customers and partners help borrowers have a better experience through the advanced technologies and tools that are being developed?

SW: Looking out 10 years, what part of the mortgage ecosystem will have changed most in that time frame? What challenges do you think we’ll still be talking about solving with technology?

TB: There are four key aspects to the mortgage process that could be evolved. First is determining whether the homebuyer has the capacity to cover that housing cost on a regular basis. And my hunch tells me that over the course of the next decade, we’re going to develop better tools than those that exist today to be able to highlight the fact that borrowers have the ability to repay on their loan. And a lot of that will come from better mechanisms to evaluate past rental history and the borrowers’ ability to manage housing payments consistently.

As a technology provider, we want to find a better way to show the ability to repay so that the ultimate investor in that mortgage or the insurer feels comfortable with it without having to retain massive amounts of personal information on a multi-decade basis, which is inefficient for the system and puts that information at risk.

Secondly, I think the tools around how we assess the value of the property and the risk associated with that property will evolve to drive a more efficient process, particularly for that first-time borrower or that lower wealth transaction.

The third area is trying to find a way to have a better outcome with refinancing for lower loan balance borrowers than what we saw in the last period of refinancing where the frequency of higher loan balances refinances was just so much greater relative to moderate-balance borrowers, who could benefit the most.

Lastly, this is just a deeply personal point for me because I’m always shocked at how inefficient it is: We’ve got to be able to use technology so when a borrower makes that last payment on the mortgage and owns that house free and clear, the release of liens or security interests is improved.

SW: You are the head of a very large mortgage tech company. What keeps you up at night?

TB: The lack of housing supply in the country and the lack of affordable housing supply, specifically. That lack is driving the cost of housing to artificially high levels that is really squeezing so many lower- and middle-income households.

And I’m hoping and praying that policymakers can be more creative and collaborative in that regard because we have to solve it for this generation of kids and the next generation of kids to come. So that they’ve got adequate housing at fair prices that does not chew up half of their paycheck — that is absolutely critical if you want to keep this economy going.

SW: Lastly, what makes you hopeful or optimistic about our industry right now?

TB: I’m deeply optimistic about our industry. Despite the fact that we face a myriad of challenges, I wouldn’t trade our mortgage market for any other mortgage market on the planet. We’re innovative, we’re dynamic, we have the ability to fund mortgages through thick or thin. We have all the tools at our disposition to retain the best mortgage market on the planet.

It is just incumbent on everybody in the ecosystem to work hard every day and in every way to make a difference to have a better, fairer, more dynamic market.

Want more mortgage and real estate technology features? Subscribe to the weekly HousingStack newsletter here.

Source: housingwire.com

Apache is functioning normally

Whoa, have you seen what just happened to interest rates!?

Suddenly, after at least fourteen years of our financial world being mostly the same, somebody flipped over the table and now things are quite different. 

Interest rates, which have been gliding along at close to zero since before the Dawn of Mustachianism in 2011, have suddenly shot back up to 20-year highs. 

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Which brings up a few questions about whether we need to worry, or do anything about this new development.

  • Is the stock market (index funds, of course) still the right place for my money?
  • What if I want to buy a house?
  • What about my current house – should I hang onto it forever because of the solid-gold 3% mortgage I have locked in for the next 30 years?
  • Will interest rates keep going up? 
  • And will they ever go back down?

These questions are on everybody’s mind these days, and I’ve been ruminating on them myself. But while I’ve seen a lot of play-by-play stories about each little interest rate increase in the financial newspapers, none of them seem to get into the important part, which is, 

“Yeah, interest rates are way up, but what should I do about it?”

So let’s talk about strategy.

Why Is This Happening, and What Got Us Here?

*

Interest rates are like a giant gas pedal that revs the engine of our economy, with the polished black dress shoe of Federal Reserve Chairman Jerome Powell pressed upon it. 

For most of the past two decades, Jerome’s team and their predecessors have kept the pedal to the metal, firing a highly combustible stream of easy money into the system in the form of near-zero rates. This made mortgages more affordable, so everyone stretched to buy houses, which drove demand for new construction. 

It also had a similar effect on business investment: borrowed money and venture capital was cheap, so lots of entrepreneurs borrowed lots of money and started new companies. These companies then rented offices and built factories and hired employees – who circled back to buy more houses, cars, fridges, iPhones, and all the other luxurious amenities of modern life.

This was a great party and it led to lots of good things, because we had two decades of prosperity, growth, raising our children, inventing new things and all the other good things that happen in a successful rich country economy.

Until it went too far and we ended up with too much money chasing too few goods – especially houses. That led to a trend of unacceptably fast Inflation, which we already covered in a recent article.

–

So eventually, Jay-P noticed this and eased his foot back off of the Easy Money Gas Pedal. And of course when interest rates get jacked up, almost everything else in the economy slows down.

And that’s what is happening right now: mortgages are suddenly way more expensive, so people are putting off their plans to buy houses. Companies find that borrowing money is costly, so they are scaling back their plans to build new factories, and cutting back on their hiring. Facebook laid off 10,000 people and Amazon shed 27,000.

We even had a miniature banking crisis where some significant mid-sized banks folded and gave the financial world fears that a much bigger set of dominoes would fall.

All of these things sound kinda bad, and if you make the mistake of checking the news, you’ll see there is a big dumb battle raging as usual on every media outlet. Leftists, Right-wingers, and anarchists all have a different take on it:

  • It’s the President’s fault for printing all that money and running up the debt! We should have Fiscal Discipline!
  • No, it’s the opposite! The Fed is ruining the economy with all these rate rises, we need to drop them back down because our poor middle class is suffering! 
  • What are you two sheeple talking about? The whole system is a bunch of corrupt cronies and we shouldn’t even have a central bank. All hail the true world currency of Bitcoin!!!

The one thing all sides seem to agree on is that we are “experiencing hard economic times” and that “the country is headed in the wrong way”.

Which, ironically, is completely wrong as well – our unemployment rate has dropped to 50-year lows and the economy is at the absolute best it has ever been, a surprise to even the most grounded economists.

The reality? We’re just putting the lid back onto the ice cream carton until the economy can digest all the sugar it just wolfed down. This is normal, it happens every decade or two and it’s no big deal.

Okay, but should I take my money out of the stock market because it’s going to crash?

This answer never changes, so you’ll see it every time we talk about stock investing: Holy Shit NO!!!

The stock market always goes up in the long run, although with plenty of unpredictable bumps along the way. Since you can’t predict those bumps until after they happen, there is no point in trying to dance in and out of it. 

But since we do have the benefit of hindsight, there are a few things that have changed slightly: From its peak at the beginning of 2022 until right now (August 2023 as I write this), the overall US market is down about 10%. Or to view it another way, it is roughly flat since June 2021, so we’ve seen two years with no gains aside from total dividends of about 3%.

Since the future is always the same, unknowable thing, this means I am about 10% more excited about buying my monthly slice of index funds today than it was at the peak.

Should I start putting money into savings accounts instead because they are paying 4.5%?

This is a slightly trickier question, because in theory we should invest in a logical, unbiased way into the thing with the highest expected return over time.

When interest rates were under 1%, this was an easy decision: stocks will always return far more than 1% over time – consider the fact that the annual dividend payments alone are 1.5%! 

But there has to be some interest rate at which you’d be willing to stop buying stocks and prefer to just stash it into the stable, rewarding environment of a money market fund or long-term bonds or something else similar. Right now, if a reputable bank offered me, say, 12% I would probably just start loading up.

But remember that the stock market is also currently running a 10% off sale. When the market eventually reawakens and starts setting new highs (which it will someday), any shares I buy right now will be worth 10% more. And then will continue going up from there. Which quickly becomes an even bigger number than 12%. 

In other words, the cheaper the stocks get, the more excited we should be about buying them rather than chasing high interest rates.

As you can see, there is no easy answer here, but I have taken a middle ground:

  • I’m holding onto all the stocks I already own, of course
  • BUT since I currently have an outstanding margin loan balance for a house I helped to buy with several friends (yes this is #3 in the last few years!), I am paying over 6% on that balance. So I am directing all new income towards paying down that balance for now, just for peace of mind and because 6% is a reasonable guaranteed return.
  • Technically, I know I would probably make a bit more if I let the balance just stay outstanding, kept putting more money into index funds, and paid the interest forever, but this feels like a nice compromise to me

What if I want to Buy a House?

–

For most of us, the biggest thing that interest rates affect is our decisions around buying and selling houses. Financing a home with a mortgage is suddenly way more expensive, any potential rental house investments are suddenly far less profitable, and keeping our old house with a locked-in 3% mortgage is suddenly far more tempting. 

Consider these shocking changes just over the past two years as typical rates have gone from about 3% to 7.5%.

Assuming a buyer comes up with the average 10% down payment:

  • The monthly mortgage payment on a $400k house has gone from about $1500 at the beginning of 2022 last year to roughly $2500 today. Even scarier, the interest portion of that monthly bill has more than doubled, from $900 to $2250!
  • For a home buyer with a monthly mortgage budget of $2000, their old maximum house price was about $500,000. With today’s interest rates however, that figure has dropped to about $325,000
  • Similarly, as a landlord in 2022 you might have been willing to pay $500k for a duplex which brought in $4000 per month of gross rent. Today, you’d need to get that same property for $325,000 to have a similar net cash flow (or try to rent each unit for a $500 more per month)  because the interest cost is so much higher.
  • And finally, if you’re already living in a $400k house with a 3% mortgage locked in, you are effectively being subsidized to the tune of $1000 per month by that good fortune. In other words, you now have a $12,000 per year disincentive to ever sell that house if you’ll need to borrow money to buy a new one. And you have a potential goldmine rental property, because your carrying costs remain low while rents keep going up.

This all sounds kind of bleak, but unfortunately it’s the way things are supposed to work – the tough medicine of higher interest rates is supposed to make the following things happen:

  • House buyers will end up placing lower bids which fit within their budgets.
  • Landlords will have to be more discerning about which properties to buy up as rentals, lowering their own bids as well.
  • Meanwhile, the current still-sky-high prices of housing should continue to entice more builders to create new homes and redevelop and upgrade old buildings and underused land, because high prices mean good profits. Then they’ll have to compete for a thinner supply of home buyers.

The net effect of all this is that prices should stop going up, and ideally fall back down in many areas. 

When Will House Prices Go Back Down?

This is a tricky one because the real “value” of a house depends entirely on supply and demand. The right price is whatever you can sell it for. However, there are a few fundamentals which influence this price over the long run because they determine the supply of housing.

  1. The actual cost of building a house (materials plus labor), which tends to just stay pretty flat – it might not even keep up with inflation.
  2. The value of the underlying land, which should also follow inflation on average, although with hot and cold spots depending on which cities are popular at the time.
  3. The amount of bullshit which residents and their city councils impose upon house builders, preventing them from producing the new housing that people want to buy.
NIMBYS in my own area, damaging the housing market.

The first item (construction cost) is pretty interesting because it is subject to the magic of technological progress. Just as TVs and computers get cheaper over time, house components get cheaper too as things like computerized manufacturing and global trade make us more efficient. I remember paying $600 for a fancy-at-the-time undermount sink and $400 for a faucet for my first kitchen remodel in the year 2001. Today, you can get a nicer sink on Amazon for about $250 and the faucet is a flat hundred. Similarly, nailguns and cordless tools and easy-to-install PEX plumbing make the process of building faster and easier than ever.

On the other hand, the last item (bullshit restrictions) has been very inflationary in recent times. I’ve noticed that every year another layer of red tape and complicated codes and onerous zoning and approval processes gets layered into the local book of rules, and as a result I just gave up on building new houses because it wasn’t worth the hassle. Other builders with more patience will continue to plow through the murk, but they will have less competition, fewer permits will be granted, and thus the shortage of housing will continue to grow, which raises prices on average.

Thankfully, every city is different and some have chosen to make it easier to build new houses rather than more difficult. Even better, places like Tempe Arizona are allowing good housing to be built around people rather than cars, which is even more affordable to construct.

But overall, since overall US house prices adjusted for inflation are just about at an all-time high, I think there’s a chance that they might ease back down another 25% (to 2020 levels). But who knows: my guess could prove totally wrong, or the “fall” could just come in the form of flat prices for a decade that don’t keep up with inflation, meaning that they just feel 25% cheaper relative to our higher future salaries.

–

When Will Interest Rates Go Back Down?

The funny part about our current “high” interest rates is that they are not actually high at all. They’re right around average.So they might not go down at all for a long time.

Remember that graph at the beginning of this article? I deliberately cropped it to show only the years since 2009 – the long recent period of low interest rates. But if you zoom out to cover the last seventy years instead, you can see that we’re still in a very normal range.

–

But a better answer is this one: Interest rates will go down whenever Jerome Powell or one of his successors determines that our economy is slowing down too much and needs another hit from the gas pedal. In other words, whenever we start to slip into a genuine recession. 

In order to do that however, we need to see low inflation, growing unemployment, and other signs of an economy that’s not too hot. And right now, those things keep not showing up in the weekly economic data.

You can get one reasonable prediction of the future of interest rates by looking at something called the US Treasury Yield Curve. It typically looks like this:

–

What the graph is telling you is that as a lender you get a bigger reward in exchange for locking up your money for a longer time period. And way back in 2018, the people who make these loans expected that interest rates would average about 3.0 percent over the next 30 years.

Today, we have a very strange opposite yield curve:

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If you want to lend money for a year or less, you’ll be rewarded with a juicy 5.4 percent interest rate. But for two years, the rate drops to 4.92%. And then ten-year bond pays only 4.05 percent.

This situation is weird, and it’s called an inverted yield curve. And what it means is that the buyers of bonds currently believe that interest rates will almost certainly drop in the future – starting a little over a year from now.

And if you recall our earlier discussion about why interest rates drop, this means that investors are forecasting an economic slowdown in the fairly near future. And their intuition in this department has been pretty good: an inverted yield curve like this has only happened 11 times in the past 75 years, and in ten of those cases it accurately predicted a recession.

So the short answer is: nobody really knows, but we’ll probably see interest rates start to drop within 18-24 months, and the event may be accompanied by some sort of recession as well.

The Ultimate Interest Rate Strategy Hack

–

I like to read and write about all this stuff because I’m still a finance nerd at heart. But when it comes down to it, interest rates don’t really affect long-retired people like many of us MMM readers, because we are mostly done with borrowing. I like the simplicity of owning just one house and one car, mortgage-free. 

With the current overheated housing market here in Colorado, I’m not tempted to even look at other properties, but someday that may change. And the great thing about having actual savings rather than just a high income that lets you qualify for a loan, is that you can be ready to pounce on a good deal on short notice. 

Maybe the entire housing market will go on sale as we saw in the early 2010s, or perhaps just one perfect property in the mountains will come up at the right time. The point is that when you have enough cash to buy the thing you want, the interest rates that other people are charging don’t matter. It’s a nice position of strength instead of stress. And you can still decide to take out a mortgage if you do find the rates are worthwhile for your own goals.

So to tie a bow on this whole lesson: keep your lifestyle lean and happy and don’t lose too much sweat over today’s interest rates or house prices. They will probably both come down over time, but those things aren’t in your control. Much more important are your own choices about earning, saving, healthy living and where you choose to live. 

With these big sails of your life properly in place and pulling you ahead, the smaller issues of interest rates and whatever else they write about in the financial news will gradually shrink down to become just ripples on the surface of the lake.

In the comments: what have you been thinking about interest rates recently? Have they changed your decisions, increased, or perhaps even decreased your stress levels around money and housing?

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* Photo credit: Mr. Money Mustache, and Rustoleum Ultra Cover semi gloss black spraypaint. I originally polled some local friends to see if anyone owned dress shoes and a suit so I could get this picture, with no luck. So I painted up my old semi-dressy shoes and found some clean-ish black socks and pants and vacuumed out my car a bit before taking this picture. I’m kinda proud of the results and it saved me from hiring Jerome Powell himself for the shoot.

Source: mrmoneymustache.com