Last week, construction finance platform Rabbet announced raising a Series A funding round of $8 million led by Goldman Sachs, QED Investors, and Camber Creek. The Fintech company which was formerly known as Contract Simply – helps companies involved in construction finance to digitize and view documents relevant to a deal.
“Rabbet brings efficiency, accuracy and visibility to the complex construction finance industry.”
Rabbet’s groundbreaking software solves a huge point of pain for construction loan processing by helping to expedite construction draw processing, which saves time and money while minimizing human error in data processing. Currently, these processes are manual and paper-based, making it time-consuming and prone to errors.
This funding round comes as the construction markets are in a big slowdown, a trend which has caused a shift from new developments toward the operations and technology end of the business. Given this “throttling back” environment, many in the business of construction finance are searching for new ways to streamlining and making more efficient all their processes.
Rabbet provides just such a streamlining solution, at a time when Fintech investing is empowering entreprenuers to blaze new trails with AI, machine learning, and VR. RealtyBizNews asked Jake Fingert, General Partner at Camber Creek about the VC firms investment in Rabbet. Here’s what Fingert had to say:
“Given the recent deceleration of the construction market, many in the industry are shifting more of their focus from new development to operations and technology. Rabbet is the leading construction loan software solution, an area ripe for innovation and where many in the space, such as Goldman Sachs, are looking for more efficient ways of doing business. Rabbet’s technology significantly reduces the time it takes to process a loan, which means faster payments for subcontractors and more interest for banks, all while digitizing the workflow to improve compliance and record keeping. Instead of ten days, banks are pushing out draws in as little as two days.”
Rabbet’s platform helps banks, developers, and contractors to perform streamlining functions which are currently manual paper-based functions. The Austin based startup makes use of machine learning to located and extract key information from documents so that data and information can be migrated to PDF or spreadsheet form. At the end of the day, Rabbet technology creates a cross-sharing capability that is not currently available. Will Mitchell, Rabbet’s , CEO and co-founder, told interviewers last week:
“All this information is trapped in disconnected PDFs, spreadsheets, emails. We want to focus on the efficiency, accuracy and transparency that software can bring to this complex industry.”
Goldman Sachs’ construction finance division uses Rabbet’s software for streamlining and modernizing their construction investing operations, according to this Reuters release.
Babbet announced the company will use the new funding to continue to invest in the development of its automation platform, to expand service offerings, and to cultivate partnerships. The company also announced an expansion of its software engineering and sales teams in Austin.
Founded back in 2017, Babbet (Contract Simply) was accelerated with Y Combinator. Since that time the company has seen rapid growth, having improved efficiency for projects sized up to $150 million nationwide.
Phil Butler is a former engineer, contractor, and telecommunications professional who is editor of several influential online media outlets including part owner of Pamil Visions with wife Mihaela. Phil began his digital ramblings via several of the world’s most noted tech blogs, at the advent of blogging as a form of journalistic license. Phil is currently top interviewer, and journalist at Realty Biz News.
Mortgage applications dropped for the second straight week — falling 2.2%, according to the latest report from the Mortgage Bankers Association.
The continued increase in mortgage rates is to blame, according to MBA’s Associate Vice President of Economic and Industry Forecasting Joel Kan. Rates have jumped north of 3%, with most recent reports showing it hovering around 3.5%.
New home applications are down as well, as builders are still suffering from missing construction crews and the skyrocketing price of lumber and building materials. Home prices in general are staying high, as well.
“Purchase market activity was up 5% from a year ago, as the recovering job market and demographic factors drive demand, despite ongoing supply and affordability constraints,” Kan said. “After reaching a recent high in the last week of January, the refinance index has since fallen 26% to its lowest level since September 2020.”
The refinance index decreased 4% from the previous week, and the overall index decreased 2%. The refinance share of mortgage activity decreased as well, to 62.9% of total applications from 64.5 % the previous week. The unadjusted Purchase Index, however, increased 3% compared with the previous week and was 5% higher than the same week one year ago.
“The purchase market helped offset the slump in refinances,” Kan said.
The FHA share of total mortgage applications increased to 11.7% from 11.6% the week prior. The VA share of total mortgage applications decreased to 10.3% from 11.1% the week prior.
Here is a more detailed breakdown of this week’s mortgage application data:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.28% from 3.26%
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) remained unchanged at 3.34%
The average contract interest rate for 30-year fixed-rate mortgages increased to 3.25% from 3.20% — the second week in a row of increases
The average contract interest rate for 15-year fixed-rate mortgages increased to 2.67% from 2.63%
The average contract interest rate for 5/1 ARMs increased to 2.82% from 2.69%
2008 & 2018 lenders: ghosts in the machine; warehouse, pre-approval, DPA, manufactured housing, marketing products
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2008 & 2018 lenders: ghosts in the machine; warehouse, pre-approval, DPA, manufactured housing, marketing products
By: Rob Chrisman
Wed, Aug 2 2023, 8:26 AM
“If you have no interest in banking, you are not a loan.” (Best said out loud to a 6th grader.) Cutting edge humor aside, this morning I head to Orlando for the FAMP event, in a state where there are a total of 186 banks operating with 4162 branches. Some of the conversation will be about Freddie Mac earning $2.9 billion in the 2nd quarter (how’d your company do?). Banks… Last Friday we saw something we haven’t seen for a while: a bank closure. “Heartland Tri-State Bank of Elkhart, Kansas, was closed by the Kansas Office of the State Bank Commissioner, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver… the FDIC entered into a purchase and assumption agreement with Dream First Bank, National Association, of Syracuse, Kansas…” While we’re on Agency and government news, the Federal Reserve’s quarterly Senior Loan Officer Opinion Survey found that banks have tightened credit standards for both business and consumer clients, and they expect to tighten further through the rest of the year. “…a less favorable or more uncertain economic outlook, an expected deterioration in collateral values, and an expected deterioration in credit quality of [commercial real estate] and other loans.” (Today’s podcast can be found here and is sponsored by Candor. Candor’s patented automated underwriting decision engine, CogniTech, is a state-of-the-art, 100 percent machine platform that can handle infinite loan scenarios. Listen to an interview with Polunsky Beitel Green attorney Andy Duane on recent capital rules plans changes by U.S. bank regulators.)
Lender and broker software, products, and services
In 2022, Americans spent an average of $6,000 on engagement rings to demonstrate lifelong commitment to their partners. Just as the act of proposing with a ring symbolizes a promise, SimpleNexus, an nCino company, also seeks to engage prospective homebuyers with the promise of an intuitive, modern home financing experience. A single-sign mobile app gives borrowers the convenience of managing their mortgage loan from anywhere, with a rich feature set that allows them to submit an application, scan and upload documents, eSign disclosures, and attend virtual eClosings. What’s more, built-in messaging and notification features foster meaningful connections between lenders, borrowers, and their real estate agents. See how SimpleNexus can put your organization and your borrowers on the path to a future filled with security and prosperity. Schedule a demo today.
Click links, ask questions later. The most common attack vector for a cyberattack is the human element. It’s what phishing emails, phone calls and text messages all have in common. Yet while it’s the weakest link, the human element could be your organization’s greatest prevention layer if trained correctly. In an industry that incentivizes people based on sales goals, every mortgage lead has bottom line potential. And in the current market, it’s only human to go after leads without stopping to consider their legitimacy. But recent data shows just how risky clicking without thinking can be. According to ISACA, in 2022 social engineering (tricking humans) was the #1 attack vector, and even the best teams are vulnerable. Learn how to do a better job at testing and training your team to identify legitimate leads. Talk to Richey May’s cybersecurity experts for help assessing and defining your cybersecurity training needs.
“Attention Mortgage Technology Companies! Discover the secrets to thriving in this competitive market with our free white paper, tailored specifically for you. Written by Seroka Brand Development, the mortgage industry’s leading marketing and public relations company, this exclusive guide reveals top marketing and PR strategies for 2023. As the industry faces its current set of challenges, effective yet cost-conscious marketing is more crucial than ever for companies like yours, competing for every opportunity. Learn six impactful ways to reach your target market and secure success through the rest of 2023 and beyond. Don’t miss out on this invaluable resource: download your FREE white paper now.”
“AFR Wholesale® (AFR) is teaming up with financing experts from Fannie Mae for the next session of our Why Wait Live Webinar Series! Please join us Wednesday, August 9th at 2 PM EST, where we will be highlighting what you need to know about manufactured home financing. AFR has been a leading expert in manufactured homes for over 25 years. With this added knowledge and proven experience, we’ll be an extension of your team to help the prospects in your portfolio to become borrowers. Over this series, AFR has been discussing affordable financing solutions that together will help us provide homeownership opportunities to more families. Register Today! This is a live webinar, and a recording will not be provided. Sign up today and don’t miss it! If you are currently a partner of AFR, start utilizing these programs right away! Contact AFR by going to afrwholesale.com, email [email protected] or call 1-800-375-6071.”
“Why are some lenders and LOs thriving in this market? Because they know there are still 1st-time buyers and people seeking DPA! Stairs Financial aggregates DPA information and matches homebuyers, often CRA-eligible, to lenders/programs on our platform to help lenders create customers for life. Through Stairs, borrowers are educated about loan programs and terms to better understand their loan options before connecting with our lender network. Stairs is launching in Texas and quickly expanding nationwide with licenses in 40 states. We’re partnering with national, regional, and local lenders in every market to ensure every aspiring homeowner gets the help they need. By seamlessly connecting to your PPE, Stairs can show borrowers your rates, loan terms, and DPA program options. Further, we can deliver mortgage leads to your CRM or lead management system. If your firm wants to help more 1st-time buyers achieve their dream of homeownership, contact Mike Romano.”
“This seems too good to be true” is what we hear pretty often when it comes to QuickQual. Lucky for you, it is true. Loan officers issue QuickQuals right from within the LOS and give borrowers and Realtors the ability to run payments and update pre-approval letters within guardrails you set. Check out QuickQual by LenderLogix and they’ll text a demo right to your phone!
Warehouse/liquidity programs
If you’re heading to California for Western Secondary, carve out time to meet with the team from Flagstar Bank. At a time when banks are downsizing or leaving the warehouse business altogether, Flagstar remains firmly committed to the mortgage space. They’re the second largest warehouse lender with $119 billion in assets, offering the strength, stability, and best-in-class service you’ve been looking for. Flagstar warehouses most loan types, including conventional, non-QM, and construction, and offers MSR, servicer advance, and EBO financing solutions. Their warehouse platform is flexible enough for 400+ warehouse clients of all sizes to fund quickly and easily. While you’re at the conference, talk to Flagstar about their experienced Specialized Mortgage Banking Solutions team to find out if they can help streamline operations and provide greater value for cash balances. With 35 years of experience, Flagstar is a trusted lending partner ready to unlock a world of opportunities for your business. Contact Jeff Neufeld or Patti Robins today to discuss what Flagstar can do for you.
“If you’re attending the California MBA Western Secondary Market Conference in Dana Point, make sure to include Axos Bank’s Warehouse Lending Team in your agenda. Our team will be available to discuss strategies and showcase how our diverse array of Agency, Jumbo, and Non-QM products can provide you with the flexibility and liquidity needed to become a top producer in today’s market. With our expanded portfolio programs and extended cutoff times (6:15 p.m. ET), achieving success has never been easier. To secure a meeting time, simply reach out to Eric Nelepovitz and Justin Castillo via email, or if you have any questions, feel free to contact the Warehouse Lending team at 888-764-7080. Don’t miss out on this opportunity to elevate your business to the next level.”
The only thing constant is change
Independent mortgage banks and credit unions aren’t the only entities who originate residential loans. Banks have been in the news!
Grizzled industry vet Ken Sonner, showing his age, noted, “The ‘Banc of California buying PacWest’ deal is very interesting. A $10BB bank tries to swallow a $40BB bank? Kinda like GreenPoint buying Headlands.” Don’t forget that Norwest bought Wells Fargo but kept Wells’ name.
And then there’s this story: “Donald Trump’s business empire faced a potential crisis after he left the White House and his longtime accounting firm warned not to rely on his past financial statements. But Axos Bank, an online-only financial firm headquartered in San Diego, soon agreed to loan him $225 million, stabilizing his finances.”
In general, do you think anything is permanent in residential lending? How many of 2008’s top 20 are still in the game? Wells Fargo, Chase, Bank of America, Countrywide Financial, Citi, Residential Capital LLC, Wachovia, SunTrust Mortgage, US Bank Home Mortgage, PHH Mortgage, Washington Mutual, Taylor, Bean, & Whitaker, Flagstar Bank, AmTrust Bank, National City Mortgage, ING Bank, BB&T Mortgage, First Horizon Home Loans, Franklin American Mortgage Company, and IndyMac.
How about in 2018?
Wells Fargo, Chase, Quicken Loans, PennyMac Financial, United Wholesale Mortgage, Bank of America Home Loans, U.S. Bank Home Mortgage, Caliber Home Loans, Amerihome Mortgage, loanDepot.com, Flagstar Bank, Freedom Mortgage, Fairway Independent Mortgage Corp., Guaranteed Rate Inc., SunTrust Mortgage, Nationstar Mortgage, Citizens Bank, Guild Mortgage, Stearns Lending LLC, and Navy Federal Credit Union.
Recognize some ghosts?
Capital markets: rates, as always, up some, down some
Yesterday was yet another volatile day in rates and MBS as rates staged another breakout to higher yields after shrugging off month-end buying and some weak data. While volatility remains elevated it also remains range-bound, and sentiment is that the Fed is finally finished with its historically aggressive pace of tightening.
On the data front, we received a weaker than expected ISM Manufacturing survey (Institute for Supply Management) for July as the manufacturing economy continues to contract. New Orders improved, and pricing pressures continue to fall. Supply delivery times decreased. Overall, the news on pricing should be good for the Fed, as it looks like its tightening policy is having the desired effect. There was also a smaller than expected increase in June Construction Spending (actual 0.5 percent) after increasing an upwardly revised 1.0 percent in May. Residential spending continues to be powered by new single-family construction to meet demand that cannot be satisfied through the existing home market.
Ahead of Friday’s payrolls report, job openings were 9.6 million at the end of June, according to the JOLTS report. Hires decreased to 5.9 million, with losses experienced in finance and manufacturing. The “quits” rate, which tends to forecast wage inflation, decreased to 2.4 percent from 2.6 percent in June and 2.7 percent a year ago. The jobs market remains exceptionally tight but continues to show incremental signs of weakening. Job openings have fallen 20 percent since the Fed began tightening policy in March 2022, even with the unemployment rate trending sideways. Price growth still elevated and a pullback in demand for workers ongoing, a “soft landing” remains far from assured, but this is an encouraging step toward inflation subsiding without a recession.
Today’s economic calendar kicked off with mortgage applications decreasing 3.0 percent from one week earlier, according to data from MBA. We’ve also received ADP employment (324k, nearly twice as strong as expected! We’ll learn the U.S. Treasury details of the Quarterly Refunding (3-year notes, 10-year notes, and 30-year bonds) where we can expect amounts to increase from previous auctions in the face of a Fitch downgrade of U.S. debt. We begin the day with Agency MBS prices unchanged from Tuesday and the 10-year yielding 4.04 after closing yesterday at 4.05 percent; the 2-year is at 4.90, showing no impact of Fitch’s opinion of U.S. debt. Much ado about nothing?
Jobs and transitions
“FLCBank is looking for seasoned Wholesale Account Executives in the northeast, southeast, central, and northwest regions. If you are looking to make a move and join a company with a tenured culture of collaboration, team-based success, and the security of working for a federally chartered national bank, then it’s time to call Bob Eisendrath, Strategic National Account Manager (414.350.3986). FLCBank is an agency-approved lender, offering a suite of Jumbo products with IO, fixed, and ARM options, as well as bank portfolio products like bridge loans. Our AEs work with Brokers, Non-Delegated Correspondents and have the opportunity to offer warehouse lines to your customers. FLCB cultivates a fun team environment where both sales and the operations staff are passionate about delivering exceptional customer experience with every loan. We offer competitive compensation, an energized culture, and seasoned operations and support staff. FLCBank is an Equal Opportunity/Affirmative Action Employer.”
Do you have what it takes to be a mortgage superstar? Do you want to work with a lender that is leading the way in using AI to revolutionize the mortgage industry? If so, you need to check out Stockton Mortgage, a proud adopter of Lender Toolkit and its revolutionary solution, AI Underwriter™, which automates and applies underwriting conditions in 90 seconds or less. With just one click, you can review credit reports, income, assets, appraisals, loan data, fraud reports and more. Stockton Mortgage is using AI Underwriter to boost its productivity, quality, compliance, and find issues earlier in the process, delivering faster communication to Stockton’s customers. Stockton is looking for talented and ambitious professionals to join its team and grow with others on the team. If you’re ready to take your career to the next level and be part of the tech future of mortgage lending, visit Stockton’s website or contact the team today.
“Security National Mortgage Company (SNMC) has announced that Austin Jacks has joined the Company to serve as its Chief Marketing Officer. Mr. Jacks has over a decade of mortgage industry marketing experience focused on creating marketing products and building teams to enable loan originators to thrive. Mr. Jacks most recently served as the field marketing manager for Nations Lending. Joel Harward, SNMC’s SVP, stated, “Austin’s approach to modern marketing and his extensive experience will help us elevate awareness of the Company’s brand and expand its market share. His passion for marketing, strategic focus, and creativity will make him a great addition to the SNMC team. We are confident that Austin will play a key role in SNMC’s continued growth and success.” If you are interested to find out why Austin Jacks joined SNMC and why “It is Better Here”, please check us out here.”
How many ads for mortgages have you seen like this ad for mobile homes?
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In a clear sign of the times, Zillow has announced a partnership to syndicate new-construction listings on Redfin.
This means home shoppers will see more new builds than they did in the past, at a time when existing housing supply has rarely been lower.
It also means home builders will gain even more exposure, further boosting their already-high market share.
Once launched, Redfin will source non-MLS new-construction listings exclusively from their competitor Zillow.
And any new-construction listings that are available through an MLS will continue to be discoverable on the Redfin platform.
Zillow and Redfin Linkup a Boon to Home Builders
Zillow apparently has the largest selection of new-construction communities of all real estate U.S. websites.
This seems to be due to their existing partnerships with home builders, whereby they advertise their properties on Zillow.
To broaden their reach, these listings are slated to be syndicated to Redfin starting in the fourth quarter of 2023.
And Redfin users will get to take advantage of new features designed specifically to discover new-construction communities and connect with home builders.
Powered by Zillow’s Community pages, they’ll list all available homes for sale within the community, along with their amenities.
Shoppers will be able to view move-in ready homes, nearly complete homes, and even lots.
Those interested will find a direct link to the home builder’s website, along with pertinent contact information and sales center hours.
New Home Sales Up Big Year-Over-Year
The U.S. Census Bureau recently reported that sales of newly built single‐family houses climbed to a seasonally adjusted annual rate of 697,000 in June 2023, up an estimated 23.8% from a year earlier.
Meanwhile, the seasonally‐adjusted estimate of new homes for sale at the end of June was 432,000, which represents a 7.4-month supply at the current sales rate.
That’s down from 448,000 a year earlier, when supply stood at 9.5 months.
At the same time, Zillow reported that there were 28% fewer new listings in June compared to a year ago.
And Redfin noted that about one-third of all single-family homes available for sale were new construction, which is apparently a record-high share.
As you can see from the chart above (from early 2022), newly-built homes saw their market share rise from around 21% in 2019 to 34.1% by the end of 2021.
It appears their market share has climbed even higher since then, as existing supply continues to be hard to come by.
Where Did Existing Home Supply Go?
The National Association of Realtors (NAR) reported that there were just 1.08 million unsold existing homes at the end of June.
That was down 13.6% from a year ago when there were about 1.25 million existing homes available.
This represents a 3.1-month supply at the current monthly sales pace. Interestingly, it’s up slightly from 3.0 months in May and 2.9 months in June 2022.
As for why, demand is also low, mainly because housing affordability is so poor at the moment.
Between much higher mortgage rates and all-time high home prices, there aren’t many willing and able buyers out there.
Still, inventory remains in short supply, especially due to the mortgage rate lock-in effect. In short, existing owners are staying put because of the stark difference in interest rates.
Even if they’re able to sell their home and buy a replacement at today’s rates, going from a 2-3% rate to a 7% rate isn’t ideal for anyone.
Home building has also lagged for many years, so inventory wasn’t great to begin with over the past decade.
This explains why the median existing-home price was $410,200 last month, the second-highest price of all time and just shy of its record-high $413,800 in June 2022.
Home Builders to the Rescue
To help alleviate this supply and demand imbalance, home builders have been stepping up their game.
They’ve been offering both temporary and permanent rate buydowns to ease affordability concerns.
And because they often have their own financing departments, they’re able to get creative and really push down rates.
While someone purchasing an existing home might be subject to a 6-7% mortgage rate, the home builders could be able to offer a 5% mortgage rate.
This is a huge advantage for builders. Additionally, they don’t have to worry about a seller finding a replacement property.
As such, there’s no mortgage rate lock-in to worry about, nor is a contingent sale necessary.
Collectively, this may explain why the market share of new homes has increased so much. And why Zillow and Redfin want more new home listings on their platforms.
So if you’re a prospective home buyer, don’t be surprised if you see more and more newly-built homes versus existing homes in your searches.
Read more: Should I buy a new home or an old home?
Read more: Fed hikes interest rates again Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis at the National Association of Home Builders, voiced the same concerns: “The lack of existing inventory and the Federal Reserve nearing the end of its rate hikes signal that demand for new homes may rise in the coming quarters.” … [Read more…]
Telling your own girlfriend that you won’t host a work even at her place because her home decor is bad?
It must be BAD.
But did this guy go too far by saying that to his GF?
Let’s see what’s going on here…
“I’ve (M32) been with my girlfriend (F29) for over a year now. She’s smart, funny, a bit quirky, and has a serious job with a good salary.
We have a great time together and generally get along very well. The only thing is her choice in home ‘decor’ is bizarre, to put it frankly, and not something you think a normal, grown adult would be into.
Her apartment is definitely a reflection of herself and interests. Not in the best way though.
My girlfriend has wall dedicated to animation in one room of her apartment, like Futurama pieces and etchings of some weird triangle guy. Then there’s the wall of framed preserved insects in another room. But not insects like butterflies or moths. Instead she displays tarantulas, beetles, and large stick insects.
Her bathroom has a subtle theme of the ocean-pretty common. But instead of starfish or shells, she has a little anglerfish nightlight, a small vampiric squid painting, and then a framed diagram of what apparently is a Goblin Shark right by the toilet.
I would say a majority of her home decor and furnishings are okay. The apartment itself is very modern and sleek. It’s just the random decor and juvenile-ish themes like cartoons, insects, and bizarre ocean creatures, is off putting.
This is where I might be the AH. I avoid bringing people over to her place, especially people from my job, because of how juvenile it looks. Everyone’s impressed when they see the high rise, but that quickly fades once you enter. The one time I brought a work colleague over they ended up telling me after that they found her insect wall terrifying. I work in finance and appearances and first impressions are important.
My office will hold casual gatherings where we get together for a few drinks, good food, and we rotate hosts. And this time, it’s my turn. The problem is my place is under some construction and not an ideal place to be right now, so I’ve been staying with my girlfriend.
My girlfriend suggested that we host my colleagues here since she has the space and thinks it’ll be fun. I told her I planned on skipping my rotation and seeing if the next person would be okay with hosting early.
She kept pressing on why I didn’t want them over here, so I finally said it’s because her home decor is strange and not something a grown woman would have, and also that her insect wall horrified the one colleague that did come over.
My girlfriend got mad and said at the end of the day, it’s not my space and these things bring her joy. She also said that she is indeed an adult woman, which is exactly why her apartment is decorated in such a manner.
I love my girlfriend, I do. And it’s okay to have different interests. But does an adult really need to decorate with them besides a few things here and there? I mean, my own mother asked if my girlfriend was autistic after she saw the entire apartment for the first time.
So Reddit, AITA for telling my girlfriend her home decor is the reason I won’t host a work gathering at her place?”
Here’s what Reddit users had to say about this.
This reader said this guy is an a**hole and they don’t think any of this stuff is childish.
Photo Credit: Reddit
Another Reddit user agreed that this guy is an a**hole.
Photo Credit: Reddit
And one individual agreed and said that adults are allowed to have interests!
Photo Credit: Reddit
My opinion… who has work get togethers at their homes anymore?
Zillow Group‘s new-construction listings will be automatically syndicated to Redfin. The deal between the listing platforms comes as new construction listings form roughly 30% of the housing sales market.
The partnership is aimed at expanding the reach of homebuilder listings on Zillow, allowing Redfin’s brokerage customers to explore a broader range of new construction for sale, the two companies said on Tuesday.
“Zillow’s Community pages, in particular, help buyers understand the benefits of a new-construction home and give home builders a place to highlight all the amenities within a new-build community,” Owen Gehrett, vice president and general manager of new construction at Zillow, said in a statement.
“The partnership with Redfin extends this unique and valuable resource to a wider audience. It benefits home builders by expanding their reach to additional home buyers,” Gehrett added.
Zillow and Redfin’s partnerships come at a time when buyers are increasingly turning to new construction due to a rate lock-in effect caused led by high mortgage rates.
New single-family home sales rose 23.8% in June from a year ago while the market saw 28% fewer new listings added during the same period.
With inventory of existing homes dwindling and buyers’ demand for new construction rising, one-third of single-family homes available for sale were newly built homes – marking a record-high share, according to a Redfin analysis.
“This (Zillow partnership) is a win-win-win for our customers, agents and the builders who advertise with Zillow, who will now reach the homebuyers on Redfin,” Adam Wiener, Redfin’s president of real estate operations, said.
“The partnership provides a new revenue opportunity while allowing us to focus on what we do best, helping customers buy and sell homes with local Redfin agents,” Wiener added.
Zillow, the country’s top real estate listing platform, recorded a $22 million net loss in the first quarter of 2023. Its business model relies heavily on revenue from real estate agent advertising, and it’s been a sluggish housing market.
Traffic to its apps and site remained flat compared to a year ago and other metrics including – Premier Agent and Zillow Home Loans – were not as strong.
Despite weak financial earnings, executives said they will focus on making the home-buying transaction more seamless for the remainder of 2023.
Real estate brokerage and listings platform Redfin was also in the red in Q1 — reporting a $60.8 million net loss, an improvement on the $90.8 million lost in Q1 2022.
While executives at Redfin noted that the company is headed in the right direction, the firm is unlikely to get in the black in Q2 – with net loss projected to be between $35 million and $44 million.
The Jefferson Avenue commercial district in Buffalo, New York, is anchored by a supermarket.
There are dozens of other businesses and services along the 12-block corridor — a couple of bank branches, a library, a coffee shop, gas stations, a small plaza with a dollar store and a primary care clinic and a business incubator for entrepreneurs of color.
But Tops Friendly Markets, the only grocery store on Buffalo’s vast East Side, is the center of activity. More than just a place to buy food, pick up medications and use an ATM, the store is a communal gathering space in a predominantly Black neighborhood that, for generations, has been segregated, isolated and disenfranchised from the wealthier — and whiter — parts of the city.
Which explains how it came to be the site of a mass shooting on a spring day in May of last year. On that Saturday, a gunman, who lived 200 miles away in another part of the state, drove to Jefferson Avenue and went into Tops, and in just a few minutes killed 10 people, injured three and inflicted mass trauma across the community.
It is a scenario that has sadly, and repeatedly, played out in other parts of the country that have experienced mass shootings. But this one came with a twist: The gunman’s intention was to kill as many Black people as possible.
To achieve that, he specifically targeted a ZIP code with one of the highest percentages of Black residents in New York state. All 10 who died that day were Black.
“The mere fact that someone can research, ‘Where will the greatest number of Black people be … on a Saturday morning,’ that’s not by chance,” said Franchelle Parker, a community organizer and executive director of Open Buffalo, a nonprofit focused on racial, economic and ecological justice. “That’s not a mistake. It’s a community that’s been deeply segregated for decades.”
The day of the shooting, Parker, who grew up in nearby Niagara Falls, was driving to Tops, where she planned to buy a donut and an unsweetened iced tea before heading into the Open Buffalo office, which is located a block away from Tops. The mother of two had intended to complete the mundane task of cleaning up her desk — “old coffee cups and stuff” — after a busy week.
She saw the news on Twitter and didn’t know if she should keep driving to Jefferson Avenue or turn around and go back home. She eventually picked the latter.
When she showed up the next day, there were thousands of people grieving in the streets. “The only way that I could explain my feeling, it was almost like watching an old war movie when a bomb had gone off and someone’s in, like, shell shock. That’s how it felt,” said Parker, vividly recounting the community’s collective trauma in a meeting room tucked inside of Open Buffalo’s second-story office on Jefferson Avenue.
Almost immediately following the May 14, 2022, massacre, which was the second-deadliest mass shooting in the United States last year, conversations locally and nationally turned to the harsh realities of the East Side and how long-standing factors that affect the daily life of residents — racism, poverty and inequity — made the community an ideal target for a white supremacist.
Now, more than a year after the tragedy, there is growing concern that not enough is being done fast enough to begin to dismantle those factors. And amid those conversations, there are mounting calls for the banking industry — whose historical policies and practices helped cement the racial segregation and disinvestment that ultimately shaped the East Side — to leverage its collective power and influence to band together in an effort to create systemic change.
The ideas about how banks should support the East Side and better embed themselves in the neighborhood vary by people and organizations. But the basic argument is the same: Banks, in their role as financiers and because of the industry’s history of lending discrimination, are obligated to bring forth economic prosperity in disinvested communities like the East Side.
I know banks are often looked upon sort of like a panacea, but I don’t particularly see it that way. I think others have a role to play in all of this.
Chiwuike Owunwanne, corporate responsibility officer at KeyBank
“Banks have been very good at providing charitable contributions to the Black community. They get an ‘A’ for that,” said The Rev. George Nicholas, an East Side pastor who is also CEO of the Buffalo Center for Health Equity, a four-year-old enterprise focused on racial, geographic and economic health disparities. “But doing the things that banks can do in terms of being a catalyst for revitalization and investment in this community, they have not done that.”
To be sure, banks’ ability to reverse the course of the community isn’t guaranteed — and there is no formula to determine how much accountability they should hold to fix deeply entrenched problems like racism. Several Buffalo-area bankers said that while the Tops shooting heightened the urgency to help the East Side, the industry itself cannot be the sole driver of change.
“There are a lot of institutions … that can certainly play a part in reversing the challenges that we see today,” said Chiwuike “Chi-Chi” Owunwanne, a corporate responsibility officer at KeyBank, the second-largest bank by deposits in Buffalo. “I know banks are often looked upon sort of like a panacea, but I don’t particularly see it that way. I think others have a role to play in all of this.”
A long history of segregation
How the East Side — and the Tops store on Jefferson Avenue — became the destination for a racially motivated mass murderer is a story about racism, segregation and disinvestment.
Even as it bears the nickname “the city of good neighbors,” Buffalo has long been one of the most racially segregated cities in the United States. Of the 114,965 residents who live on the East Side, 59% are Black, according to data from the 2021 U.S. Census American Community Survey. The percentage is even higher in the 14208 ZIP code, where the Tops store is located. In that ZIP code, among 11,029 total residents, nearly 76% are Black, the census data shows.
The city’s path toward racial segregation started in the early 20th century when a small number of job-seeking Black Americans migrated north to Buffalo, a former steel and auto manufacturing hub at the far northwestern end of New York state. Initially, they moved into the same neighborhoods as many of the city’s poorer immigrants and lived just east of what is today the city’s downtown district. As the number of Blacks arriving in Buffalo swelled in the 1940s, they were increasingly confronted with various housing challenges, including racist zoning laws and restrictive deed covenants that kept them from buying homes in more affluent white areas.
Black Buffalonians also faced housing discrimination in the form of redlining, the practice of restricting the flow of capital into minority communities. In 1933, as the Great Depression roiled the economy, a temporary federal agency known as the Home Owners’ Loan Corporation used government bonds to buy out and refinance mortgages of properties that were facing or already in foreclosure. The point was to try to stabilize the nation’s real estate market.
As part of its program, HOLC created maps of American cities, including Buffalo, that used a color coding scheme — green, blue, yellow and red — to convey the perceived riskiness of making loans in certain neighborhoods. Green was considered minimally risky; other areas that were largely populated by immigrant, Black or Latino residents were labeled red and thus determined to be “hazardous.”
“The goal was to free up mortgage capital by going to cities and giving banks a way to unload mortgages, so they could turn around and make more mortgage loans,” said Jason Richardson, senior director of research at the National Community Reinvestment Coalition, an association of more than 750 community-based organizations that advocates for fair lending. “It was kind of a radical concept and it has evolved over the decades into our modern mortgage finance system.”
The Federal Housing Administration, which was established as a permanent agency in 1934, used similar methods to map urban areas and labeled neighborhoods from “A” to “D,” with “A” considered to be the most financially stable and “D” considered the least. Neighborhoods that were largely Black, even relatively stable ones, were put in the “D” category.
The result was that banks, which wanted to be able to sell mortgage loans to the FHA, were largely dissuaded from making loans in “risky” areas. And Buffalo’s East Side, where the majority of Blacks were settling, was deemed risky. Unable to get loans, Blacks couldn’t buy homes, start businesses or build equity. At the same time, large industrial factories on the East Side were closing or moving away, limiting job opportunities and contributing to rising poverty levels.
“Today what we’re left with is the residue of this process where we’ve enshrined … a pattern of economic segregation that favors neighborhoods that had fewer Black people in them and generally ignores neighborhoods that had African Americans living in them,” Richardson said.
Case in point: Research by the National Community Reinvestment Coalition shows that three-quarters of neighborhoods that were once redlined are low- to moderate-income neighborhoods today, and two-thirds of them are majority minority communities.
Adding to the division between Blacks and whites in Buffalo was the construction of a highway called the Kensington Expressway. Built during the 1960s, the below-grade, limited-access highway proved to be a speedy way for suburban workers to get to their downtown jobs. But its construction cut off the already-segregated East Side even more from other parts of the city, displacing residents, devaluing houses and destroying neighborhoods and small businesses.
As a result of those factors and more, many Black residents have become “trapped” on the East Side, according to Dr. Henry Louis Taylor Jr., a professor of urban and regional planning at the University at Buffalo. In 1987, Taylor founded the UB Center for Urban Studies, a research, neighborhood planning and community development institute that works on eliminating inequality in cities and metropolitan regions. In September 2021, eight months before the Tops shooting, the Center for Urban Studies published a report that compared the state of Black Buffalo in 1990 to present-day conditions. The conclusion: Nothing had changed for Blacks over 31 years.
As of 2019, the Black unemployment rate was 11%, the average household income was $42,000 and about 35% of Blacks had incomes that fell below the poverty line, the report said. It also noted that just 32% of Blacks own their homes and that most Blacks in the area live on the East Side.
“Those figures remain virtually unchanged while the actual, physical conditions that existed inside of the community worsened,” Taylor told American Banker in an interview in his sun-filled office at the center, located on the University at Buffalo’s city campus. “When we looked upstream to see what was causing it, it was clear: It was systemic, structural racism.”
Banks’ moral obligations
As the East Side struggled over the decades with rampant poverty, dilapidated housing, vacant lots and disintegrating infrastructure, banks kept a physical presence in the community, albeit a shrinking one. In mid-2000, there were at least 20 bank branches scattered across the East Side, but by mid-2022, the number had fallen to around 14, according to the Federal Deposit Insurance Corp.’s deposit market share data. The 14 include four new branches that have opened since early 2019 — Northwest Bank, KeyBank, Evans Bank and BankOnBuffalo.
The first two branches, operated by Northwest in Columbus, Ohio, and KeyBank, the banking subsidiary of KeyCorp in Cleveland, were requirements of community benefits agreements negotiated between each bank and the National Community Reinvestment Coalition. In both cases, Northwest and KeyBank agreed to open an office in an underserved community.
Evans Bank opened its first East Side branch in the fall of 2021. The office is located in the basement of an $84 million affordable senior housing building that was financed by Evans, a $2.1 billion-asset community bank headquartered south of Buffalo in Angola, New York.
Banks have been very good at providing charitable contributions to the Black community. They get an ‘A’ for that. But doing the things that banks can do in terms of being a catalyst for revitalization and investment in this community, they have not done that.
The Rev. George Nicholas, an East Side pastor who is also CEO of the Buffalo Center for Health Equity
On the community and economic development front, banks have had varying levels of participation. Buffalo-based M&T Bank, which holds a whopping 64% of all deposits in the Buffalo market and is one of the largest private employers in the region, has made consistent investments in the East Side by supporting Westminster Community Charter School, a kindergarten through eighth-grade school, and the Buffalo Promise Neighborhood, a nonprofit organization focused on improving access to education in the city’s 14215 ZIP code.
Currently, Buffalo Promise Neighborhood operates four schools. In addition to Westminster, it runs Highgate Heights Elementary, also K-8, as well as two academies that serve children ages six weeks through pre-kindergarten. Twelve M&T employees are dedicated to the program, according to the Buffalo Promise Neighborhood website. The bank has invested $31.5 million into the program since its 2010 launch, a spokesperson said.
Other banks are making contributions in other ways. In addition to the Jefferson Avenue branch and as part of its community benefits plan, Northwest Bank, a $14.2 billion-asset bank, supports a financial education center through a partnership with Belmont Housing Resources of Western New York. Meanwhile, the $198 billion-asset KeyBank gave $30 million for bridge and construction financing for Northland Workforce Training Center, a $100 million redevelopment project at a former manufacturing complex on the East Side that was partially funded by the state.
BankOnBuffalo’s East Side branch is located inside the center, which offers KeyBank training in advanced manufacturing and clean energy technology careers. A subsidiary of $5.6 billion-asset CNB Financial in Clearfield, Pennsylvania, BankOnBuffalo’s office opened a month after the shooting. The timing was coincidental, but important, said Michael Noah, president of BankOnBuffalo.
“I think it just cemented the point that this is a place we need to be, to be able to be part of these communities and this community specifically, and be able to build this community up,” Noah said.
In terms of public-private collaboration, some banks have been involved in a deeper way. In 2019, New York state, which had already been pouring $1 billion into Buffalo to help revitalize the economy, announced a $65 million economic development fund for the East Side. The initiative is focused on stabilizing neighborhoods, increasing homeownership, redeveloping commercial corridors including Jefferson Avenue, improving historical assets, expanding workforce training and development and supporting small businesses and entrepreneurship.
In conjunction with the funding, a public-private partnership called East Side Avenues was created to provide capital and organizational support to the projects happening along four East Side commercial corridors. Six banks — Charlotte, North Carolina-based Bank of America, the second-largest bank in the nation with $2.5 trillion of assets; M&T, which has $203 billion of assets; KeyBank; Warsaw, New York-based Five Star Bank, which has about $6 billion of assets; Northwest and Evans — are among the 14 private and philanthropic organizations that pledged a combined $8.4 million to pay for five years’ worth of operational support, governance and finance, fundraising and technical assistance to support the nonprofits doing the work.
Laura Quebral, director of the University at Buffalo Regional Institute, which is managing East Side Avenues, said the banks were the first corporations to step up to the request for help, and since then have provided loans and other products and education to keep the program moving.
Their participation “is a signal to the community that banks cared and were invested and were willing to collaborate around something,” Quebral said. “Being at the table was so meaningful.”
Richard Hamister is Northwest’s New York regional president and former co-chair of East Side Avenues. Hamister, who is based in Buffalo, said banks are a “community asset” that have a responsibility to lift up all communities, including those where conditions have arisen that allow it to be a target of racism like the East Side.
“We operate under federal charters, so we have an obligation to the community to not only provide products and services they need but also support when you go through a tragedy like that,” Hamister said. “We also have a moral obligation to try to help when things are broken … and to do what we can. We can’t fix everything, but we’ve got to fix our piece and try to help where we can.”
In the wake of a tragedy
After the massacre, there was a flurry of activity within banks and other organizations, local and out-of-town, to respond to the immediate needs of East Side residents. With the community’s only supermarket closed indefinitely, much of the response centered around food collection and distribution. Three of M&T’s five East Side branches, including the Jefferson Avenue branch across the street from Tops, became food distribution sites for weeks after the shooting. On two consecutive Fridays, Northwest provided around 200 free lunches to the community, using a neighborhood caterer who is also the bank’s customer. And BankOnBuffalo collected employee donations that amounted to more than 20 boxes of toiletries and other items that were distributed to a nonprofit.
At the same time, M&T, KeyBank and other banks began financial donations to organizations that could support the immediate needs of the community. KeyBank provided a van that delivered food and took people to nearby grocery stores. Providence, Rhode Island-based Citizens Financial Group, whose ATM inside Tops was inaccessible during the store’s temporary closure, installed a fee-free ATM near a community center located about a half-mile north of Tops, and later put a permanent ATM inside the center that remains there today. And M&T rolled out a short-term loan program to provide capital to East Side small-business owners.
One of the funds that benefited from banks’ support was the Buffalo Together Community Response Fund, which has raised $6.2 million to address the long-term needs of the East Side.
Bank of America and Evans Bank each donated $100,000 to the fund, whose list of major sponsors includes four other banks — JPMorgan Chase, Citigroup, M&T and KeyBank. Thomas Beauford Jr., a former banker who is co-chair of the response fund, said banks, by and large, directed their resources into organizations where the dollars would have an immediate impact.
“Banks said, ‘Hey, you know … it doesn’t make sense for us to try to build something right now. … We will fund you in the work you’re doing,'” said Beauford, who has been president and CEO of the Buffalo Urban League since the fall of 2020. “I would say banks showed up in a big way.”
Fourteen months later, banks say they are committed to playing a positive role on the East Side. For the second year, KeyBank is sponsoring a farmers’ market on the East Side, an attempt to help fill the food desert in the community. Last fall, BankOnBuffalo launched a mobile “bank on wheels” truck that’s stationed on the East Side every Wednesday. The 34-foot-long truck, which is staffed by two people and includes an ATM and a printer to make debit cards, was in the works before the shooting, and will eventually make four stops per week around the Buffalo area.
Evans has partnered with the city of Buffalo to construct seven market-rate single family homes on vacant lots on the East Side. The relationship with the city is an example of how banks can pair up with other entities to create something meaningful and lasting, more than they might be able to do on their own, said Evans President and CEO David Nasca.
The bank has “picked areas” where it can use its resources to make a difference, Nasca said.
“I don’t think the root causes can be ameliorated” by banks alone, he said. “We can’t just grant money. It has to be within our construct of a financial institution that invests and supports the public-private partnership. … All the oars [need to be] pulling together or this doesn’t work.”
‘Little or no engagement with minorities’
All of these efforts are, of course, welcomed by the community, but there is still criticism that banks haven’t done enough to make up for their past contributions to segregating the city. And perhaps more importantly, some of that criticism centers on banks failing to do their most basic function in society — provide credit.
In 2021, the New York State Department of Financial Services issued a report about redlining in Buffalo. The regulator looked at banks and nonbank lenders and found that loans made to minorities in the Buffalo metro area made up 9.74% of total loans in Buffalo. Overall, Black residents comprise about 33% of Buffalo’s total population of more than 276,000, census data shows.
The department said its investigation showed the lower percentage was not due to “excessive denials of loan applications based on race or ethnicity,” but rather that “these companies had little or no engagement with minorities and generally made scant effort to do so.”
“The unsurprising result of this has been that few minority customers or individuals seeking homes in majority-minority neighborhoods have made loan applications … in the first instance.”
Furthermore, accusations of redlining persist today, even though the practice of discriminating in housing based on race was outlawed by the Fair Housing Act of 1968.
In 2014, Evans was accused of redlining by the New York State Attorney General, which said the community bank was specifically avoiding making mortgage loans on the East Side. The bank, which at the time had $874 million of assets, agreed to pay $825,000 to settle the case, but Nasca maintains that the charges were unfounded. He points to the fact that the bank never had a fair lending or fair housing violation, no specific incidents were ever claimed and that the bank’s Community Reinvestment Act exam never found evidence of discriminatory or illegal credit practices.
The bank has a greater presence on the East Side today, but that’s because it has grown in size, not because it is trying to make up for previous accusations of redlining, he said.
“Ten years ago, our involvement [on the East Side] certainly wasn’t what you’re seeing today,” Nasca said. “We were looking to participate more, but we were participating within our means and our reach. As we have grown, we have built more resources to be able to do more.”
Shortly after accusations were made against Evans, Five Star Bank, the banking arm of Financial Institutions in Warsaw, New York, was also accused of redlining by the state Attorney General. Five Star, which has been growing its presence in the Buffalo market for several years, wound up settling the charges for $900,000 and agreeing to open two branches in the city of Rochester.
KeyBank is currently being accused of redlining by the National Community Reinvestment Coalition. In a 2022 report, the group said that KeyBank is engaging in systemic redlining by making very few home purchase loans in certain neighborhoods where the majority of residents are Black. Buffalo is one of several cities where the bank’s mortgage lending “effectively wall[ed] out Black neighborhoods,” especially parts of the East Side, the report said.
KeyBank denied the allegations. In March, the coalition asked regulators to investigate the bank’s mortgage lending practices.
Beyond providing more credit, some community members believe that banks should be playing a larger role in addressing other needs on the East Side. And the list of needs runs the gamut from more grocery stores to safe, affordable housing to infrastructure improvements such as street and sidewalk repairs.
Alexander Wright is founder of the African Heritage Food Co-op, an initiative launched in 2016 to address the dearth of grocery store options on the East Side, where he grew up. Wright said that while banks’ philanthropic efforts are important, banks in general “need to be in a place of remediation” to fix underlying issues that the industry, as a whole, helped create. (After publication of this story, Wright left his job as CEO of the African Heritage Food Co-Op.)
Aside from charitable donations, banks should be finding more ways to work directly with East Side business owners and entrepreneurs, helping them with capital-building support along the way, Wright said. One place to start would be technical assistance by way of bank volunteers.
“Banks are always looking to volunteer. ‘Hey, want to come out and paint a fence? Want to come out and do a garden?'” Wright said. “No. Come out here and help Keshia with bookkeeping. Come out here and do QuickBooks classes for folks. Bring out tax experts. Because these are things that befuddle a lot of small businesses. Who is your marketing person? Bring that person out here. Because those are the things that are going to build the business to self-sufficiency.
“Anything short of the capacity-building … that will allow folks to rise to the occasion and be self-sufficient I think is almost a waste,” Wright added. “We don’t need them to lead the plan. What we need them to do is be in the community and [be] hearing the plan and supporting it.”
Parker, of Open Buffalo, has similar thoughts about the role that banks should play. One day, soon after the massacre, an ATM appeared down the street from Tops, next to the library that sits across the street from Parker’s office. Soon after the ATM was installed, Parker began fielding questions from area residents who were skeptical of the machine and wanted to know if it was legitimate. But Parker didn’t have any information to share with them. “There was no outreach. There was no community engagement. So I’m like, ‘Let me investigate,'” she said. “I think that’s a symptom of how investment is done in Black communities, even though it may be well-intentioned.”
As it turns out, the temporary ATM belonged to JPMorgan Chase. The megabank has had a commercial banking presence in Buffalo for years, but it didn’t operate a retail branch in the region until last year. Today it has four branches in operation and plans to open another two by the end of the year, a spokesperson said.
After the Tops shooting, the governor’s office reached out to Chase asking if the bank could help in some way, the spokesperson said in response to the skepticism. The spokesperson said that while the Chase retail brand is new to the Buffalo region, the company has been active in the market for decades by way of commercial banking, private banking, credit card lending, home lending and other businesses.
In addition to the ATM, the bank provided funding to local organizations including FeedMore Western New York, which distributes food throughout the region.
“We are committed to continuing our support for Buffalo and helping the community increase access to opportunities that build wealth and economic empowerment,” the spokesperson said in an email.
In the year since the massacre, there has been some progress by banks in terms of their interest in listening to the East Side community and learning about its needs, said Nicholas. But he hasn’t felt an air of urgency from the banking community to tackle the issues right now.
“I do experience banks being a little more open to figuring out what their role is, but it’s slow. It’s slow,” said Nicholas. The senior pastor of the Lincoln Memorial United Methodist Church, located about a mile north from Tops, Nicholas is part of a 13-member local advisory committee for the New York arm of Local Initiatives Support Coalition, or LISC. The group is focused on mobilizing resources, including banks, to address affordable housing in Western New York, specifically in the inner city, as well as training minority developers and connecting them to potential investors, Nicholas said.
Of the 13 members, seven are from banks — one each from M&T, Bank of America, BankOnBuffalo, Evans and KeyBank, and two members from Citizens Financial Group. One of the priorities of LISC NY is health equity, and the fact that banks are becoming more engaged in looking at health disparities is promising, Nicholas said. Still, they have more work to do, he said.
“I need them to think more on how to strengthen and build the economy on the East Side and provide leadership around that, not only to provide charitable things, but using sound business and banking and community development principles to say, ‘OK, if we’re going to invest in this community, these are the types of things that need to happen in this community,’ and then encourage their partners and other people they work with … to come fully in on the East Side.”
Some bankers agree with the community activists.
“Putting a branch in is great. Having a bank on wheels is great,” said Noah of BankOnBuffalo. “But if you’re not embedded in the community, listening to the community and trying to improve it, you’re not creating that wealth and creating a better lifestyle for everyone.”
What could make a substantial difference in terms of banks’ impact on the community is a combination of collaboration and leadership, said Taylor. He supports the idea of banks leading the charge on the creation of a comprehensive redevelopment and reinvestment plan for the East Side, and then investing accordingly and collaboratively through their charitable foundations.
“All of them have these foundations,” Taylor said. “You can either spend that money in a strategic and intentional way designed to develop a community for the existing population, or you can spend that money alone in piecemeal, siloed, sectorial fashion that will look good on an annual report, but won’t generate transformational and generational changes inside a community.”
Banks might be incentivized to work together because it could mean two things for them, according to Taylor: First, they’d have an opportunity to spend money in a way that would have maximum impact on the East Side, and second, if done right, the city and the banks could become a model of the way to create high levels of diversity, equity and inclusion in an urban area.
“If you prove how to do that, all that does is open up other markets of consumption all over the country because people want to figure out how to do that same thing,” Taylor said.
Some of that is already happening, at least on a bank-by-bank case, said KeyBank’s Owunwanne. Through the KeyBank Foundation, the company is able to leverage different relationships that connect nonprofits to other entities and corporations that can provide help.
“I see this as an opportunity for us to make not just incremental changes, but monumental changes … as part of a larger group,” Owunwanne said “Again, I say that not to absolve the bank of any responsibility, but just as a larger group.”
Downstairs from Parker’s office, Golden Cup Coffee, a roastery and cafe run by a husband and wife team, and some other Jefferson Avenue businesses are trying to build up a business association for existing and potential Jefferson-area businesses. Parker imagined what the group could accomplish if one of the banks could provide someone on a part-time basis to facilitate conversations, provide administrative support and coordinate marketing efforts.
“In the grand scheme of things, when we’re talking about a multimillion dollar [bank], a part-time employee specifically dedicated to relationship-building and building out coalitions, it sounds like a small thing,” Parker said. “But that’s transformational.”
[Note from the editor: Originally published on Thomvest’s Blog]
Today we’re pleased to release an updated version of the real estate technology market map we originally published in 2018. A high-resolution version of the map can be accessed here, and the full list of companies is available here.
This market map includes 180 real estate technology companies operating across every phase of the home purchase value chain. These companies have collectively raised more than $20B in venture capital, and range from seed stage businesses to public companies. If you’d like to suggest a company to be added to this market map, please submit them using this form.
You’ll notice that several companies are included in more than one section — this is due to the fact that many of these businesses have expanded their product areas to capture multiple phases of the transaction process. For instance, while Blend’s original product focused specifically on the mortgage point-of-sale, the company has since expanded to offer home insurance and digital closings. As such, we’ve included the Blend logo in those areas.
At Thomvest, we’ve been actively studying how technology is being utilized in real estate. We view technology as both a means of lowering transaction costs and an enabler of new transactions by better matching demand and supply. Software is also being adopted across some of the more labor-intensive areas of real estate — for instance, in property management and home improvement — as a means of improving efficiency and productivity.
Personally, I’ve been impressed by the quality of entrepreneurs building technology companies in residential real estate. Founders here are passionate about creating better experiences for consumers. Many have experienced their own frustrations when buying or selling a property, and aspire to rebuild the experience from the ground up. Others are seasoned operators within real estate and see technology as a competitive advantage in an otherwise analog asset class.
Impacts of COVID-19 on technology adoption
Every constituency within the real estate sector — including agents, lenders, title companies, and attorneys — are scrambling to adjust to life under lockdown. In my last post on the housing market, I touched on the dramatic impact COVID-19 has had on transaction volume and home showings. In many ways, the pandemic has accelerated existing trends around digitization of the home buying process. There are a few areas in particular where technology is being utilized:
1. Deepened reliance on “home shopping” apps Shelter-in-place is created new behaviors around the home shopping experience. Rather than spending a half day touring open homes, prospective buyers are relying on apps like Zillow and Realtor.com to “tour” properties in lieu of an in-person visit. Zillow created 525% more 3D home tours in April compared to February, and CEO Rich Barton recently remarked that “the virtual tools home shoppers need for safety today will become their expectations for convenience tomorrow.”
2. Rapid adoption of digital tools for real estate transactions Many of the processes associated with closing a real estate transaction are traditionally completed in-person. These include appraisals, inspections, notarizations and local government filings. Fortunately, startups are here to help. Companies like Blend, Modus, Side and Snapdocs offer products that enable digital closings. 46 states now let notaries do their jobs using a combination of video and online document sharing, up from 23 prior to the pandemic. Additionally, large mortgage buyers like Fannie Mae and Freddie Mac are increasingly relying on automated home valuations in lieu of in-person appraisals. We believe these new methods are here to stay, which will be a strong tailwind for startups building digital home buying experiences.
3. More tools for homeowners to manage their largest asset Startups in the real estate vertical must take advantage of their agility relative to incumbent banks, and design products and services that reflect today’s changing consumer needs. This can take the form of better credit products (for example, smart loans powered by LoanSnap or HELOCs offered by Figure), or novel home equity products like Unison. We’re also seeing a number of interesting businesses that help homeowners maintain and improve their property, including Pro.com and Made Renovation. These startups help automate much of home renovation process, including design, planning & construction.
Fannie Mae Moderator: Good day, and welcome to the Fannie Mae Second Quarter 2023 Financial Results Conference Call. At this time, I will now turn it over to your host, Pete Bakel, Fannie Mae’s Director of External Communications.
Pete Bakel: Hello, and thank you all for joining today’s conference call to discuss Fannie Mae’s second quarter 2023 financial results. Please note this call includes forward-looking statements, including statements about Fannie Mae’s expectations related to: economic and housing market conditions; the future performance of the company and its book of business; and the company’s business plans and their impact. Future events may turn out to be very different from these statements.
The “Forward-looking Statements” section in the company’s Second Quarter 2023 Form 10-Q, filed today, and the “Risk Factors” and “Forward-Looking Statements” sections in the company’s 2022 Form 10-K, filed on February 14, 2023, describe factors that may lead to different results.
A recording of this call may be posted on the company’s website. We ask that you do not record this call for public broadcast, and that you do not publish any full transcript.
I’d now like to turn the call over to Fannie Mae Chief Executive Officer, Priscilla Almodovar, and Fannie Mae Chief Financial Officer, Chryssa C. Halley.
Priscilla Almodovar: Welcome, and thank you for joining us today. Let me begin by spending a few minutes on the economic environment before turning to our performance in the second quarter of 2023. After that, our Chief Financial Officer, Chryssa Halley, will discuss our second quarter results and current outlook for the economy.
Macroeconomic Conditions
Economic data was mixed in the second quarter, though GDP growth was stronger than anticipated. The Federal Reserve continued tightening monetary policy and raised their target Fed Funds rate twice in the past few months. One of the focal points in their decision-making has been how much housing contributes to inflation. And while overall inflation has slowed, housing’s contribution to inflation has remained elevated.
The resiliency of the housing market continued to surprise many of us, especially since mortgage rates and high home prices continue to weigh on housing affordability. The lack of housing supply is a major contributing factor. Many current homeowners are reluctant to sell their existing homes and give up their low mortgage rates they locked in in 2020 or 2021. Earlier this month, the National Association of REALTORS® reported that there were 1.08 million existing homes for sale last month compared with 1.92 million in June 2019. This lack of existing home supply drove stronger than expected home price growth. In fact, we estimate that single-family home prices rose about 5% during the first six months of the year, while many of us were anticipating a decline.
Single-family mortgage origination volumes in the overall market were about 35% lower than the same time last year, despite the estimated $120 billion increase quarter-on-quarter due to the typical spring homebuying season.
It continues to be a tough market for our lender counterparties — something we are monitoring closely.
Thanks to the dedication of our leadership and teams across the company, we continued to support an unprecedented housing market while generating strong financial results and effectively managing risk.
Second Quarter Financial Results
Now, turning to our second quarter financial performance. The strength in home prices during the quarter had a direct impact on our earnings, largely due to the decrease in our single-family allowance that Chryssa will talk about.
We reported $5 billion in net income and $7.1 billion in net revenues. As a result, through retained earnings we continued to build our net worth, which reached $69 billion as of the end of June.
I’m proud that through our efforts, we provided $104 billion of liquidity to the single-family and multifamily markets. In doing so, we helped borrowers obtain mortgage credit for approximately 420,000 home purchases, refinances, and rental units. This included approximately 139,000 units of multifamily rental housing, a significant majority of which were affordable to households earning at or below 120% of area median income. We also helped 108,000 first-time homebuyers purchase a home.
Mission Performance
Despite challenges with housing affordability and supply, consumers’ homeownership aspirations remain high. And while Fannie Mae cannot directly control these factors, we are working to help address housing challenges consumers face — especially those that disproportionately burden underserved renters and homeowners. And we’re doing so safely and soundly. Let me touch on a few examples.
First, we advanced our mortgage pricing model. The new construct improves support for traditionally underserved borrowers while further aligning our pricing model to our capital requirements. Second, we continued to support Special Purpose Credit Programs, currently active in six markets, that are expected to make loan qualification easier for underserved borrowers. And third, we introduced a new option for lenders to verify a property’s market value and eligibility as part of our journey to make the home valuation process more effective, efficient, and unbiased.
Now, our role is not just about helping consumers get into a home — it is also about ensuring they remain stably housed. Housing stability is key to well-being, for both individuals and communities. On that note, I’m gratified that as of the end of June, we stood at less than 100,000 seriously delinquent single-family loans, coming a long way from the over 1 million seriously delinquent loans we saw in our single-family book in February of 2010. In addition to market factors, this is a testament to the enhanced underwriting policies, servicing options, and support we give to lenders and borrowers. This includes things like free counseling assistance to borrowers and renters impacted by natural disasters and free foreclosure prevention assistance to borrowers in distress. We remain focused on continuing to support renters and homeowners as they face the uncertainties of the current market.
Wrap Up
You know, this fall marks 15 years since Fannie Mae was placed in conservatorship. A lot has changed since that time. Today Fannie Mae has been transformed. Fannie Mae is safer and stronger, thanks to years of work to improve the resiliency of our business and our steadfast focus on strong risk management. Because of this, we continue to be a stabilizing force in the market and to deliver on our mission — like we did through the COVID-19 pandemic, and how we’re doing now through this challenging economic cycle. We are committed to being a reliable source of liquidity and stability to the housing finance system in the United States.
Now, I’ll turn it over to Chryssa to discuss our second quarter financial results.
Chryssa C. Halley: Second Quarter Results
Thank you, Priscilla. And good morning.
As Priscilla mentioned, we reported $5 billion in net income in the second quarter, a $1.2 billion increase compared to the first quarter of this year. Our second quarter net revenues remained strong at $7.1 billion thanks to healthy guaranty fee income. This is relatively flat compared to the prior quarter. A $1.3 billion benefit for credit losses was the primary driver of the quarter-over-quarter growth in net income. This was mainly driven by stronger than expected actual home price growth during the quarter of 3.6% that resulted in a decrease in our single-family allowance.
Let me now turn to a few highlights of our Single-Family business. Despite higher mortgage interest rates quarter-over-quarter, our single-family acquisition volumes increased by 32%, to $89 billion in the second quarter compared to $68 billion in the first quarter. However, this was still 48% lower than the $172 billion of single-family loans we acquired in the second quarter of last year. Not surprisingly given the rate environment, the purchase share of our acquisitions reached 86% in the second quarter — a level we have not seen for at least 23 years. Our overall single-family book of business remained strong, with a weighted average mark-to-market loan-to-value ratio of 51% and weighted average credit score at origination of 752. Our single-family serious delinquency rate remained at historically low levels, and as of June 30 stood at 55 basis points. We continue to manage credit risk through credit risk transfer transactions. In the second quarter, we transferred a portion of the credit risk on approximately $116 billion of mortgages through our single-family credit risk transfer programs.
Shifting to our Multifamily business, we acquired $15.1 billion of multifamily loans in the second quarter, bringing our acquisitions through June 30 to $25 billion. Our volume cap for the year is $75 billion. The overall credit profile of our multifamily book remains strong, with a weighted-average original loan-to-value ratio of 64% and a weighted-average debt service coverage ratio of 2.1 times. However, our multifamily seniors housing loans, especially those that are adjustable-rate mortgages, remain stressed. Seniors housing loans represent 4% of our multifamily book as of the end of the second quarter, but nearly 40% of these loans had a debt service coverage ratio below 1.0 as of June 30, indicating a heightened risk of default. We recorded a $152 million provision for credit losses in the second quarter in our multifamily book, primarily due to decreases in estimated property values seen in the overall multifamily sector following years of strong growth. Our multifamily serious delinquency rate increased slightly to 37 basis points as of the end of June, up from 35 basis points at the end of March. Our primary way to share risk on our multifamily book is through our unique DUS® risk-sharing model, where originating lenders typically retain approximately one-third of the credit risk on loans we acquire. In addition, in April of this year, we closed a multifamily credit insurance risk transfer transaction, transferring a portion of risk to diversified insurers and reinsurers.
Outlook
Before we close out, I’ll touch on our current economic outlook. The economy has remained more resilient than we expected earlier in the year, but we believe it is still on a decelerating path, and additional drags are likely forthcoming. While noting the probability of a “soft landing” may have increased of late, our Economic and Strategic Research Group expects the economy will enter a modest recession in the fourth quarter of this year or the first quarter of next year. The full effects of tighter monetary policy and tightening credit conditions to date have yet to be fully felt in the real economy and on consumers, and additional banking stress remains a possibility. Given current housing demand and the lack of existing homes for sale, we expect strength in new home sales and construction will support the overall economy as it exits a modest recession. We currently forecast the 30-year fixed rate mortgage rate will average 6.6% for the year.
When we spoke last quarter, we anticipated single-family home price declines on a national basis in 2023. However, given strong home price growth in the first half of the year, we now project national home price growth of 3.9% for the full year. We continue to expect regional variation in home price changes. Our expectations are based on many assumptions, and our actual results could differ materially from our current expectations.
As a reminder, we make available on our webpages a financial supplement with today’s filing that provides additional insights into our business.
Thank you for joining us today.
Fannie Mae Moderator: Thank you, everyone. That concludes today’s call. You may disconnect.