“Jaime has led at companies ranging from de novo banks, to leading regional banks, to industry leaders such as Mr. Cooper,” Sagent CEO Geno Paluso said in a Press release. “Jaime knows every detail that mortgage servicers need to win, and he’ll make Sagent a stronger-than-ever strategic partner to our customers and prospects.” “Jaime’s finance … [Read more…]
“A national secondary market for construction financing could allow lenders, like state housing finance agencies and banks, to provide the investment capital needed to get multifamily housing projects built and keys in families’ hands.”
This is the conclusion of a new report published by the Center for Public Enterprise, a nonprofit organization that promotes the expansion of public sector projects.
Such lenders, the report states, could underwrite mezzanine construction loans under the assumption that a national housing construction fund would have the ability to buy these loans on the secondary market. This could make the overall cost to entry — which is already low — more digestible.
“The size of the investments needed to get typical multifamily housing projects moving is small: mezzanine loans covering less than 20% of project costs could bring average costs of capital down significantly, allowing shovels to get into the ground,” the report reads.
Due to the well-documented issues facing housing supply across the U.S., and coupled with high home prices and persistently high interest rates, multifamily housing starts have slowed despite low vacancy rates nationwide. But when demand comes back, new housing that “should have been built has not been, starting another price cycle,” the report explained.
Establishing a national housing construction fund has the potential to reduce burdens on builders and lenders caused by higher rates. It could also potentially create “an economic environment where housing production achieves a degree of insulation from the business cycle factors that are not indicative of housing demand,” the report said. This could lead to a situation where housing production becomes “smoother and more stable across time.”
Since policy proposals tailored to the needs of housing construction haven’t materialized to any meaningful degree, stakeholders are reliant on monetary policy — a “broadsword, not a scalpel” when it comes to the interests of the housing industry. Price pressures are addressed primarily by making it more difficult to conduct business operations as opposed to addressing the root issues specific to a particular industry.
“If monetary policy is successful in reducing demand — often by inducing a recession — then eventually, interest rates normalize and, theoretically, demand comes back,” the report states. “And herein lies the problem: housing stock, particularly multifamily housing, takes time to build — far more time than it takes to produce most other goods and services Americans use on a daily basis.
“When the economy comes back, the new units which should have been available for a resurgent consumer market are not available because construction did not occur during the trough of the cycle.”
These actions also serve to teach builders that should there be a monetary policy instrument used to impact the economy, it will also likely be bad for them, leading to a pullback in construction activity in preparation for a policy change. This necessitates federal tools that can help to more precisely alleviate these burdens on housing construction, the report suggests.
“National housing researchers, including Freddie Mac, estimate that the housing supply shortfall across the country is between 1 million and 5 million homes. There are many policy levers that must be pulled to get there,” the report reads.
“A financing lever with the ability to partially insulate housing investment from the volatility of the business cycle has been, until now, a missing piece among the array of tools and interventions. We hope that a housing construction fund, as outlined here, can fill that gap.”
The latest annual report from The Counselors of Real Estate highlights 10 major issues expected to impact the housing industry in 2024, but developers are painfully familiar with at least two of them: labor shortages and skyrocketing capital costs.
Today’s market conditions help illustrate the case for green, factory building as an effective solution for developers, especially for those who’ve put projects on hold due to rising interest rates and dried up investor pools. Transitioning to factory building from on-site construction reduces building costs by 20% and significantly improves delivery time; and by using green materials, developers can open up new financing options that, together, turn project economics right-side-up.
Addressing a dwindling workforce and increased labor costs
The United States construction industry is facing an extreme labor shortage, falling short of roughly 650,000 workers needed to drive the completion of critical residential and infrastructure projects across the country. The root cause of this shortage is multifaceted – but is largely driven by an aging work population and a lack of interest from young talent. The result is a sharp increase in labor costs, and longer construction times. U.S. developers spent an extra $30 billion to $40 billion in 2022, drastically impacting bottom lines and the ability to get new projects financed. And the problem is only getting worse.
Factory-built homes aren’t new but are severely under leveraged by developers for multi-family construction. For one, factory-based construction reduces labor costs by making work more efficient and tapping into labor pools that traditional construction can’t access. Traditional construction requires workers to move from house to house and project to project – and less time actually building. And the itinerant nature of the work makes it unattractive to a large part of the workforce.
Good factory builders, on the other hand, operate like car production lines, where the structure moves to the workers who are specialized and stationary. Those workers produce more per labor hour, which means less labor cost per square foot of structures built. And, because the work is done in one place and in more pleasant and controlled factory conditions, it is easier to attract talent, particularly people who might not usually consider construction as a profession, such as women and younger workers.
Time is also money. Factory building doesn’t just provide a developer with confidence in delivery timelines by avoiding inclement weather or scheduling delays; it can also cut build times and skilled labor hours by up to 50%. Shortening the build time means less project overhead, and less interest carry. Those are savings that go straight to a developer’s returns.
Green isn’t just the color of money – it’s the source of untapped funding
In addition to higher costs of development, projects are also sidelined because of reduced availability of bank financing, higher interest rates and investors unwilling to pick up the slack. Just a few years ago, a developer could borrow up to 80 percent of a project cost, but in today’s economic environment, only 50-60 percent of a project is likely to be financed – leaving a significant gap. Here, too, green factory building can be a solution. Energy efficient homes open the door to new and better financing options.
There are innovative factory-based builders who use materials and assembly methods that allow for significant energy savings that will endure for the life of the home or building. The energy efficiency of this type of construction makes it eligible for “green” financing. Green bonds, for example, are earmarked to raise money for climate and environmental projects, and they enable sustainably minded investors to fill the gap that traditional investors have left.
By reducing the total cost of a project with labor and materials savings and then adding better financing options, a developer can get back to delivering projects that meet financial objectives. For example, consider a project with a total cost of $50M. With traditional onsite construction and today’s capital costs, this project may only deliver an unattractive 15% IRR. But consider a scenario where factory-based construction allows a developer to reduce the total cost of the project by 10% or more and also access green financing to cover upwards of 30% – that same project could be delivering an IRR greater than 30%.
Given market conditions, it’s no surprise that multifamily construction starts are down substantially– but not for lack of demand: there’s an estimated deficit of 3.8M homes across the U.S. In other words, opportunity is knocking for developers who can structure economically viable projects. With the right factory-based, sustainable builder, it’s possible to get back to strong IRRs and sustainable profits.
Chris Anderson is the CEO of Vantem.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this piece: [email protected]
Generative artificial intelligence holds a wealth of potential — and risk — for the mortgage industry, but despite the challenges, the developing technology is finding its place within company workflows.
Some of the greatest potential for adoption lies in marketing uses.
“Imagine if you Googled a topic, and then clicked through several links, and then summarized what you found in those links. Imagine if a machine could do that for you in 30 seconds,” said Adam O’Daniel, chief marketing officer at Guild Mortgage.
“It’s not delivering me any data that I couldn’t have probably found through Google search. It just saved me the time and in sorting through it and compiling the data.”
Across business segments, AI is demonstrating value as a tool that drives efficiency and even fuels inspiration among marketing professionals, even though widespread apprehension remains. Although mortgage and real estate companies have the same concerns around risks as others, their marketing teams and loan officers are testing the waters to varying degrees and learning to tailor AI for their specific needs.
“It’s a starting point for many, and it has been helpful if you’re, for instance, having a creative block,” said Whitney Blessington, chief marketing officer at Churchill Mortgage. “We call it like someone to brainstorm with, even though it’s not a person.”
Generative AI benefits also result from its ability to conduct quick research. “It can help you come up with good topics,” O’Daniel said.
A useful but still-developing technology opportunity Mortgage companies, more than other types of companies, appear open to exploring how artificial intelligence might help their marketing efforts.
While some forms of AI are already used in the underwriting context, especially for tasks related to data extraction and processing, concerns about enforcement of possible noncompliance leave some lenders wary about applying the technology in a customer-facing capacity. Marketing tasks, though, offer the opportunity to see how AI can improve efficiency within the appropriate guardrails.
In 2024 research released by Arizent, 64% of mortgage industry professionals said they would be open to utilizing artificial intelligence for a majority of their marketing and promotional tasks in a hypothetical scenario where regulations did not exist. Interest in the mortgage industry far exceeded the percentage of similar responses in six other financial sectors, none of which surpassed 50%.
At the same time, 55% within home lending said they would use it for most tasks associated with research and fact checking.
Its use in advertising, though, still presents some risk of bias in outreach, according to recent guidelines issued by the U.S. Department of Housing and Urban Development.
But despite the industry’s enthusiasm, the “A” in AI doesn’t stand for accuracy, and human marketing professionals will need to remain a fixture, mortgage leaders say. Even when used for research purposes, users have found themselves running into factually incorrect responses.
“You can’t count on it blindly,” Blessington said. “You still have to do your homework.”
“I think the biggest thing is, today, it really helps someone streamline their workflows,” she added, comparing it to an intern who might conduct low-level administrative work, such as writing metadata descriptions or alternative text for images.
“It helps you go from ideation to planning to actual content,” said O’Daniel. However, when generative AI “writes” any of its own content itself, it fails to perform to the standards the industry might want, he said.
“It may use terminology that is more appropriate for a bank and not an independent mortgage lender, and so you have to adjust the terminology. Some of the more finer nuances of the business — it doesn’t fully deliver.”
Current use scenarios and risks Use of artificial intelligence, particularly generative AI like ChatGPT or Microsoft Copilot, is still in its nascent stage within the mortgage industry; but with expectations of rapid expansion, it stands to change how future work can be done.
Entering AI waters may seem daunting, but the technology also offers customization that can facilitate ease of use, according to Ginger Bell, who regularly conducts seminars on artificial intelligence for real estate professionals. Bell is a co-host of the podcast AI Clubhouse and founder of housing industry video platform Edumarketing.com.
A loan officer or lender can customize their generative AI to home in on situations or guidelines it commonly addresses. “You can actually just type a scenario, and it reads the guidelines,” Bell said, while cautioning verification is still necessary.
“You can also ask it to cite exactly where it’s pulling that information from, and a lot of it is just training it to be able to ask the questions correctly, telling it what you want in terms of the response and then how you want that response to look.”
Bell commonly sees ChatGPT being used to assist in composing emails and social media posts, and some mortgage professionals also employ it to write video marketing scripts. Users can tailor a gen AI tool by feeding it their previously written transcripts, articles or other work, eventually training it to sound more like their own voice, she said.
But oversight and enhancements need to remain top of mind as well, said Jason Perkins, co-founder and president of Bonzo, a provider of communication engagement software and a mortgage customer-relationship management system.
“I look at AI-generated content as a frame of your business, not the be-all,” he said. “Personalization is what drives conversations.”
Generative AI can also quickly build marketing campaigns through a series of prompts — a set of instructions or steps to create messages with given parameters that might address a specific topic or target a borrowing segment. The prompts can also ensure that necessary disclosures and licensing information are included.
“A lot of companies need to realize this is a big compliance opportunity to make sure that your loan officers are providing their information in a compliant way,” Bell said.
However, while businesses have the capability to personalize their prompts and content via an open source generative AI platform, a number of companies are instead turning to enterprise versions that protect proprietary information and maintain compliance. Certain accounting firms go as far as requiring employees to use personalized generative AI under enterprise editions that remain closed sources, according to Bell.
“There’s a lot of folks who use what’s available to consumers on ChatGPT and other platforms like that, and certainly, it’s a great tool, but we’re trying to be very thoughtful about how to use those platforms,” O’Daniel said.
“You use a public platform — the data that I upload to the model stays with that model to fuel future learnings, which is amazing; but we might want to share information from a product guide or some other company program that we don’t want to be out of our control,” Guild’s marketing leader added.
When using a public platform “be aware as far as not putting any nonpublic information in there because it is open source,” Bell advised. In addition to potential noncompliance, it opens up businesses to cybersecurity risk.
Reliance on public artificial intelligence platforms without proper vetting of the content they produce also carries risk of potential copyright infringement, according to Perkins.
“They’re just aggregating data off of the internet,” he said. “Businesses and companies are going to put fences around their data,” meaning companies need to be aware of how loan officers and staff use AI-generated content in social posts or advertising.
Future potential and customer trust While marketing content crafted from AI has primarily appeared in written form, artificial intelligence is taking hold in other creative outlets. “Now there’s so many new technologies that are being built around this,” Bell said.
Advanced generative AI tools that alter photographs already exist, alongside emerging businesses that produce original imagery and videos based on an individual’s likeness and voice from a single recording.
However, while AI-generated imagery video represents one of the next growth phases for automation, it also brings with it a potential for misuse by fraudsters and a conundrum for businesses of all types who want to use technology to their advantage without eroding relationships with clients.
“I think there’s a number of questions around how that affects your brand,” O’Daniel said.
“It can go both ways. There are people who would appreciate more frequent informational updates from their lender and from their loan officer. So if the technology can help us deliver more frequent helpful information, that can build trust; but if the customer feels as if they’ve been misled and that this avatar is not really their loan officer, that can destroy trust. So I think we have to be very cautious.”
Job creation slowed in June, despite continued tight labor market conditions, which economists say is good news for the Federal Reserve. Data from the U.S. Bureau of Labor Statistics released on Friday shows that total nonfarm payroll rose by 206,000 jobs in June, compared to 272,000 jobs in May.
Job gains in June were most notable in industries like government (70,000), health care (49,000), social assistance (34,000) and construction (27,000), a positive for the housing industry.
When broken out, the residential construction sector added 3,100 jobs month over month, while the number of residential specialty trade contractors rose 2,400 from a month prior. Overall, for the past year, the construction sector has added an average of 20,000 jobs per month.
The real estate and rental and leasing services sector added 1,100 jobs from May with real estate posting a 500-job gain and the rental and leasing sector gaining 800 jobs.
Despite the continuing job growth, unemployment rose slightly from May to 4.1% in June, with 6.8 million people unemployed. A year ago, the unemployment rate was 3.6% with 6 million people unemployed.
While economists noted that the month’s job gains were higher than anticipated, they highlighted that most of the jobs were in the government sector.
“Similar to May, the headline gain in nonfarm payroll employment data in June does not tell the entire story,” Mike Fratantoni, the MBA’s senior vice president and chief economist, said in a statement. “While the headline gain showed an increase of 206,000 jobs, more than one-third of that was a gain in government employment, largely a function of increases in state and local jobs. Although June’s increase was above our expectations, both April and May figures were revised down by a combined 111,000 jobs, marking the three-month average down to a 177,000 increase.”
Fratantoni also highlighted the rise in unemployment as an indicator that the job market was slowing.
Although a cooling economy is what the Federal Reserve wants to see, economist believe this jobs report does not guarantee an interest rate cut.
“This not-too-cold/not-too-hot Goldilocks economy is what we want to see as the Federal Reserve will deliberate on the timing of interest rate cuts in the second half of 2024. In addition to today’s report, the Fed is watching a range of other economic indicators, most notably inflation,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “The first June inflation reading will be out next week. Lower inflation and a looser labor market means it is more likely for there to be two rate cuts instead of one in 2024.”
If the Fed does cut interest rates, Sturtevant believes housing market activity will pick up as many buyers have been waiting on the sidelines hoping for lower rates.
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Mortgage rates look like they have room to keep dropping in July after a closely-watched gauge of inflation showed the economy continued to cool in May.
The personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred gauge of inflation, fell to 2.56 percent in May from a year ago, the Commerce Department’s Bureau of Economic Analysis reported Friday.
It was the second-consecutive month that annual inflation inched closer to the Fed’s 2 percent target, raising the odds that the central bank will start bringing short-term interest rates down as soon as September.
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Core PCE, which excludes the cost of food and energy and can be a more reliable indicator of underlying inflation trends, dropped to 2.57 percent in May — the lowest reading since March 2021. The Core PCE index hasn’t moved away from the Fed’s 2 percent target since January 2023.
Ian Shepherdson
“Looking ahead, we see little chance of a lasting and broad-based re-acceleration in the core PCE deflator after the slowing in April and May,” Pantheon Macroeconomics Chief Economist Ian Shepherdson said in a note to clients. “Accumulating labor market slack is increasingly weighing on wage growth, commodity prices are broadly flat, supply chains remain fluid, margins are under increasing pressure, and newly-agreed rents are rising slowly.”
While Pantheon economists expect core PCE to pick up slightly from May to June, after that they’re looking for “a multi-month run” of decelerating inflation.
“If we’re right, the Fed should be confident enough by its meeting in September that core PCE inflation is heading sustainably back to 2 percent that it can start to ease,” Shepherdson said.
Futures markets tracked by the CME FedWatch tool on Friday put the odds of at least one Fed rate cut in September at 64 percent, up from 46 percent on May 28.
PCE and Core PCE trending down
After peaking at 7.12 percent in June 2022, a series of Fed rate hikes gradually tamed inflation to 2.48 percent in January. But the PCE price index showed inflation worsening in February and March, sending mortgage rates rebounding as hopes for multiple Fed rate cuts in 2024 dimmed.
The latest declines in PCE and core PCE were in line with expectations, as previous data releases that the indexes build on — including the Consumer Price Index (CPI) and Producer Price Index (PPI) — also suggested that inflation eased in May.
Bond market investors who fund most mortgages initially snapped up 10-year Treasury notes after the PCE numbers for May were released at 8:30 a.m. EDT Friday, pushing yields as low as 4.26 percent. But 10-year Treasury yields, a barometer for mortgage rates, quickly climbed back above Thursday’s close of 4.29 percent.
Daily loan lock data tracked by Optimal Blue, which lags by a day, showed rates for 30-year fixed-rate mortgages averaging 6.88 percent Thursday, down 39 basis points from a 2024 high of 7.27 percent registered April 25. A basis point is one-hundredth of a percentage point.
An index maintained by Mortgage News Daily (MND) showed rates for 30-year fixed-rate loans climbed 2 basis points Friday, to 7.07 percent. Rates reported by MND are higher because they are adjusted to estimate the effective rate borrowers would be offered even if they’re not paying points. Optimal Blue tracks contracted rates, including those locked in by borrowers who pay points to get a lower rate.
Mortgage rates are largely determined by investor demand for mortgage-backed securities, and investors are skittish about the prospects that the Fed will continue its “higher for longer” rate strategy. Fed policymakers indicated at their June 12 meeting that they’ll be cautious about bringing rates down until they’re certain that inflation won’t surge again.
Speaking to bankers at a conference Thursday, Federal Reserve Governor Michelle Bowman attributed much of last year’s progress on inflation to “easing of supply chain constraints, increases in the number of available workers due in part to immigration, and lower energy prices.”
Michelle Bowman
Bowman called it “unlikely” that those factors will contribute to bringing inflation down more in the future. Supply chains “have largely normalized, the labor force participation rate has leveled off in recent months below pre-pandemic levels, and an open U.S. immigration policy over the past few years, which added millions of new immigrants in the U.S., may become more restrictive.”
Additional “upside risks” that inflation will worsen include potential spillovers from regional conflicts that might disrupt global supply chains and send food, energy, and commodity prices soaring.
“There is also the risk that the loosening in financial conditions since late last year, reflecting considerable gains in equity valuations, and additional fiscal stimulus could add momentum to demand, stalling any further progress or even causing inflation to reaccelerate,” Bowman said.
Bowman, rated by Reuters as the most hawkish Fed policymaker for her hardline stance against inflation, reiterated that she’s willing to raise rates if needed — a position she’d previously staked out in October and May.
“While the current stance of monetary policy appears to be at a restrictive level, I remain willing to raise the target range for the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or reversed,” Bowman said Thursday.
Mortgage rates expected to keep falling
Source: Fannie Mae Housing Forecast, June 2024; MBA Mortgage Finance Forecast, June 2024.
But the recent decline in mortgage rates from 2024 highs has revived interest among homebuyers, and housing industry economists think rates have more room to come down this year and next.
Homebuyer demand for purchase loans picked up for the third-consecutive week during the week ending June 21 after mortgage rates hit their lowest levels in months, according to a weekly survey of lenders by the Mortgage Bankers Association (MBA).
In a June 24 forecast, MBA economists said they expect rates on 30-year fixed-rate loans to drop to 6.6 percent during the fourth quarter of 2024, and to an average of 6.0 percent during Q4 2025.
Fannie Mae economists said on June 10 that they envision 30-year fixed-rate loans will drop to 6.7 percent during Q4 2024, and to 6.3 percent by the end of next year.
More listings and lower mortgage rates should boost 2025 home sales by 9.3 percent, to 5.3 million transactions, Fannie Mae forecasters said.
But analysts at Bank of America Global Research think home sales might not rebound until 2026 if home prices continue to rise and inventory continues to be constrained by the “lock-in effect” experienced by homeowners who refinanced when rates were at historic lows.
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Powell was referring to the current situation in which homeowners holding historically low rate mortgages aren’t feeling incentivized to sell their homes, reducing the number of properties available in the market.
A Federal Housing Finance Agency research paper published in March 2024 shows that nearly all 50 million active mortgages have fixed rates, and most have interest rates far below prevailing market rates, creating a disincentive to sell.
The paper suggests that a homeowner with a 4% mortgage rate — closer to the pandemic-era levels of 2% to 4% — is more than 50% less likely to sell with mortgage rates at 7% than if they were at 4%.
Also on Wednesday, as expected, the Fed maintained its short-term policy interest rate between 5.25% and 5.5%. It also released estimates showing that most of its officials forecast only one rate cut this year, compared to a majority who were planning for a total of three cuts in March. That’s despite the lowest annual inflation report since early 2021.
“The Fed is wrangling with tenacious inflation. The consumer price index for May was lower than expected, but the Fed won’t claim success until inflation has improved several months in a row,” Holden Lewis, a home and mortgage expert at NerdWallet, said in a statement.
According to Lewis, mortgage rates dropped slightly last week, but the decline doesn’t imply a long-term trend. In his opinion, “mortgage rates are likely to remain stubbornly above 6.5% for the rest of 2024.”
Fed officials not only reduced the number of projected rate cuts this year from three to one but also increased their year-end rate estimate. The median federal funds rate at the end of 2024 is expected to be 5.1%, compared to 4.6% in March. For 2025, projections went from 3.9% in March to 4.1% in June.
It means that “once it starts, this cutting cycle is likely to be shorter than past cycles,” according to Mortgage Bankers Association (MBA) chief economist Mike Fratantoni.
Wednesday’s announcement, however, did not change the MBA’s forecast that mortgage rates will drop to about 6.5% by the end of 2024.
Freddie Mac’s latest index, released on Thursday, shows that 30-year fixed mortgages are averaging 6.95%. The conforming loan rate was 7.15% at HousingWire’s Mortgage Rates Center.
“Mortgage rate trends aren’t likely to bust the mortgage rate inventory lock-in effect until at least the end of the year, and possibly well into 2025, as the Fed holds fast on fighting inflation,” Realtor.com senior economist Ralph McLaughlin said in a statement.
According to McLaughlin, the 10-year yield has to drop by 150 to 200 basis points for homeowners to feel comfortable selling and buying another home.
“At current spreads, this could require 3-4 quarter-point rate cuts by the Fed,” McLaughlin said. “As of now, the market is pricing in just one cut by the end of the year and 2-3 cuts in 2025. As such, anyone hoping the lock-in effect will be busted this year may be sorely disappointed.”
Housing industry experts believe that deals are being made by sellers and buyers who face life events — such as people divorcing or retiring, moving to another state for work or forming families.
Chuckie Reddy, partner and head of growth investments at QED Investors, a fintech venture capital firm with more than $5 billion under management, said that as relief in mortgage rates is delayed, “we are starting to see some signs of inventory build, which may lead to some price reductions.”
“We’re really starting to see for the first time some data showing that buyers are a little bit exhausted and that sellers are coming to the market, setting up the scenario where we could return to market equilibrium with housing price cuts and softness in house prices,” Reddy said in a statement.
The HousingWire award spotlight series highlights the individuals and organizations that have been recognized through our Editors’ Choice Awards. Nominations for HousingWire’s 2024 Women of Influence award are open now through May 31st, 2024. Click here to nominate someone.
For the past 15 years, the HousingWire Women of Influence award has celebrated the exceptional contributions of women leaders in the housing industry. This prestigious recognition honors those leaders who have made a significant impact on their organizations and the industry at large through their leadership, innovation and dedication.
In honor of the 2024 Women of Influence nomination period, we’re taking a look back at previous year’s winners. We reached out 2023 honorees to learn the most valuable lessons they’ve learned throughout their careers. Take a look below to see what they said.
Throughout my career, I’ve really seen that helping others isn’t just nice, it’s crucial. When you’re just zeroed in on your own stuff, it’s easy to lose touch with what’s happening around you. But when you help someone else up, you end up getting new perspectives and ideas that can push your own boundaries. It’s all about making sure we’re not climbing alone. And another lesson, though it might sound cliché, is that the biggest insights often come from making mistakes, particularly when taking chances. Each time I’ve stepped out of my comfort zone, whether things turned out well or not, I’ve gained invaluable skills. These experiences teach resilience, adaptability, and often point you towards your best next move. — Ines Hegedus-Garcia, Executive Vice President at Avanti Way Realty
One of the most transformative lessons I’ve embraced is the art of becoming a ‘collector’ of remarkable people. I don’t just meet individuals; we forge deep connections, cherishing the relationships that form the very fabric of our shared journey. When these remarkable individuals cross my path, I embrace and hold on to the unique value they bring. These aren’t just fleeting interactions but deep, enduring bonds that have stood the test of time—5, 10, even 25 years. They’re fundamental in every aspect, offering more than mere professional collaboration; they are the bedrock of personal growth, support, and the very essence of heartfelt connection. In times of adversity, the power of these connections becomes unmistakably clear. The voices of encouragement and truth from these cherished relationships are priceless, offering not just advice but profound, meaningful engagement that has deeply influenced my path. These are not just relationships; they are the pillars that support and enrich our lives continuously, essential for nurturing resilience and well-being. — Sarah Middleton, Chief Growth Officer at Movement Mortgage
My advice is to dedicate yourself to continuous learning. Whether through formal education, on-the-job-training, industry conferences, or self-study, staying informed is essential in navigating the ever-evolving landscape of the housing market. — Odeta Kushi, VP, Deputy Chief Economist at First American Financial Corporation.
The number one rule of the marketplace is to understand your customer. Knowing what they need, what they want and what they fear is fundamental for success. The housing market has shifted. Today it’s dominated by baby boomers who make up 39% of all homebuyers and 52% of all home sellers.
Known as “Peak 65”, in 2024 more than 12,000 people per day will turn 65. The massive age wave is cresting over the next three years, and by 2030 all boomers will have turned 65. This has baby boomers deeply concerned about retirement, as they are scrambling to prepare for life after work. The expensive and limited housing inventory today has created a scarcity mentality, that has Realtors struggling to provide appropriate housing for an aging population.
The Retirement Trifecta
To retire successfully, to meet the challenges and manage the risks boomers face, they will need to secure their own personal, Financial Trifecta of:
Income for living, care for aging and housing forever.
These critical needs are the fundamentals of retirement planning, and “Peak 65” demographics will largely reshape housing, real estate and lending for decades to come.
To understand your boomer customer is to know what they fear most. In this age of longevity, when the boomer generation must plan for decades of life after work, the big fear is running out of money. In my experience of serving boomers for more than four decades, the biggest fear is the loss of their independence, and becoming a burden on their children if they run out of money.
Accommodate the trifecta
Those Realtors, builders and originators who choose to serve this massive market shift, will need to accommodate the Retirement Trifecta. Baby boomers value relationships with those providers, that customize solutions to fit their needs and wants to retire.
Again, the trifecta is:
Income for living: In retirement, a boomer must establish sufficient and sustainable streams of income to meet the rising costs of living longer, in this new inflationary era.
Care for aging: Aging is a family affair that requires both financial as well as care-giver strategies, with the cash to pay for it.
Housing forever: Boomers must secure housing that is safe and appropriate for aging, through all the stages of retirement.
Housing costs will likely be the number one expense through retirement. Because 78% of boomers surveyed want to age-In-place, costs of home modification and maintenance will need to be carefully planned out.
Boomers in pursuit of their Trifecta will need us to understand and accommodate the urgent demands of their retirement. A housing professional’s value proposition must extend beyond building and selling homes and originating mortgage loan transactions. The housing industry must provide real solutions to the challenges that a rapidly growing, elder centric population demands. The industry professionals with the vision to adapt their services will be those who will thrive and help usher in a great new era of American housing.
The housing wealth solution
The baby boom generation has created more housing wealth than any other generation in history. Today, boomers have approximately 13 trillion in available home equity. Boomers home equity will likely grow past 20 trillion by the end of this decade. Today, boomers are living in the very asset needed to help provide for their personal Retirement Trifecta.
To solve the problems we face, and unleash the possibilities of the future, we as an industry must elevate the scope and purpose of our work. We need inspired home-building that includes universal design. We need Realtors trained in matters of aging-in-place, who are committed to guiding senior buyers into buying decisions that will provide housing security for the long-term. We also need a growing professional class of strategic mortgage planners committed to providing home equity conversion solutions that address the demands of the Retirement Trifecta.
From my experience as a home builder, and a mortgage planning specialist, having sat down at more than 4,000 kitchen tables, serving the housing needs of homeowners since 1976, this truth I confidently share with you.
“The single most impactful quality of life decision people make, is the home in which they choose to live.”
Home is where family happens, and we who provide housing have the great privilege, through our life’s work, to make the dreams of those we serve, the possible dream.
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The Department of Housing and Urban Development announced an upcoming sale of vacant loans secured by home equity conversion mortgages.
HVLS 2024-2 will be up for bid on May 7 and comprises approximately 1,265 notes with loan balances of close to $346 million. The sale consists of due and payable residential loans secured by first-lien HECMs, where borrowers and non-borrowing spouses are now deceased, the announcement from HUD’s office of asset sales said.
Nonprofits, government agencies and for-profit businesses, are all eligible to bid in the sale. HUD will also consider offers from joint ventures and other partnerships between various enterprises.
HUD vacant loan sales, which were first introduced in 2016, emerged as a means to help increase supply through the disposition of assets. As much as 50% of an offering is sometimes prioritized for nonprofit and government organizations in hopes of providing housing, including homeownership opportunities for residents making under 120% of area median income. Unlike prior HVLS auctions, no mention was made of designated allotment for specific buyer segments in the latest announcement.
Through the first half of 2023, nonprofits have purchased 28% of all HVLS loans for sale since the program’s launch, HUD said in a report late last year. Settled loan count totaled 10,280.
An approximate 52% share of loans sold through HVLS come from 10 states. Florida headed the list with 13%, with Texas in second place at 7%. California, Illinois and New York all followed at 5% each.
The latest sale comes as home affordability and inventory issues rise in the public consciousness, after President Biden made the country’s housing situation a key talking point in his recent State of the Union address. The creation of more units has been a focus in the Biden Administration’s housing action plan, first announced a year ago. At the end of 2020, Freddie Mac estimated the U.S. was short 3.8 million units to adequately meet demand.
HECMs, a Federal Housing Administration-backed product offered to homeowners 62 or older, allows older borrowers to tap into home equity as they age, and are assigned to HUD from prior servicers when balances reach 98% of maximum claim amounts. Rather than foreclose on homes when borrowers are deceased, the agency puts loans up for sale to avoid disposition costs and help the housing industry generate supply.
Finance of America currently comes in as the country’ top HECM originator with almost one-third of overall volume, according to data from Reverse Market Insight. Mutual of Omaha Mortgage comes in second with about 22% of originations.