decades

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Existing home sales data

According to the NAR, total existing-home sales — completed transactions that include single-family homes, townhomes, condominiums, and co-ops — waned 2.2% from June to a seasonally adjusted annual rate of 4.07 million in July. Year-over-year, sales slumped 16.6% (down from 4.88 million in July 2022). “Two factors are driving current sales activity – inventory availability and mortgage rates,” said NAR Chief Economist Lawrence Yun. “Unfortunately, both have been unfavorable to buyers.”

As we can see in the chart below, since 2010, whenever rates rise, demand falls. When rates fall, demand picks up again. What happened with existing home sales in February was that we had three months of positive purchase application data as mortgage rates fell from 7.37% to 5.99%. We had a massive one-month print from 4 million to 4.5 million. After that, little has been happening with existing home sales — mortgage rates and home prices are too high to push growth. 

No movement in purchase apps

Purchase application data year to date has 16 negative prints versus 14 positive prints and one flat print. So, there is little movement in either direction. If I swing back to November 9, 2022, then we have 21 positive prints. Hopefully, this shows you the power of forward-looking purchase apps data, which aren’t collapsing currently, but they’re not growing either. We are stuck at deficient levels but heading lower as mortgage rates have risen. 


Now let’s look at the buyer profile and the days on the market. Days on the market are growing year over year, positive for housing, but still too low for my taste. You must understand that days on the market are seasonal, so we will be entering the timeline when the days on the market will grow. The key is to focus on the year-over-year data rather than the seasonal fall and rise.

@NAR_Research

First-time buyers were responsible for 30% of sales in July; Individual investors purchased 16% of homes; All-cash sales accounted for 26% of transactions; Distressed sales represented 1% of sales; Properties typically remained on the market for 20 days. #NAREHS

“Total housing inventory registered at the end of July was 1.11 million units, up 3.7% from June but down 14.6% from one year ago (1.3 million). Unsold inventory sits at a 3.3-month supply at the current sales pace, up from 3.1 months in June and 3.2 months in July 2022,” according to NAR.

Historical inventory levels

Even with the biggest one-year sales crash ever, NAR-reported inventory levels are still near all-time lows. If most home sellers are buyers, then when they list their homes, they know they’re qualified to buy a home at current rates. Hopefully, this explains why we still have low active listings data. Traditionally, we have between 2-2.5 million active listings, currently at 1.11 million. 


NAR Inventory data going back to 1982.

Today’s existing home sales data shows that we were slowing down again — even before the recent move in higher mortgage rates. However, home sales aren’t crashing like in 2022, and inventory has been negative year over year for some time now. This is a much different housing cycle than the ones we have seen in previous decades.

The 30-year mortgage and low total housing cost has made the American home not only the best hedge against inflation but a hedge against an aggressive Federal Reserve. Remember, sellers are buyers, and we lack both to push more housing demand in the existing home sales market.

Source: housingwire.com

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In this Aug. 21, 2012, file photo, the exterior of a house with a pending home sale sign is viewed in Palo Alto, Calif. (AP Photo/Paul Sakuma, File)

Bay Area home prices are falling as mortgage rates climb to their highest levels in more than two decades, squeezing many house-hunters out of the market and keeping would-be sellers on the fence.

The median price of existing single-family homes dropped 5.2% to $1.26 million across the region from June to July, according to the California Association of Realtors. The decline followed steady price gains most of the year as sales picked up during the traditionally busier spring and early summer home-buying seasons.

But now, spiking mortgage rates are slamming the brakes on an already challenged local real estate market. On Thursday, Freddie Mac reported the average rate for a typical 30-year fixed mortgage rose to 7.09%, up from 6.96% last week, reaching the highest peak since 2002.

“People are just not jumping into buying a home right now at these interest rates,” South Bay real estate agent Ramesh Rao said.

Meanwhile, a 30-year fixed “jumbo” home loan — which is common for more expensive houses — averaged 7.65% on Thursday, according to Bankrate.com. In the Bay Area, a jumbo loan is a mortgage that exceeds $1,089,200.

Mortgage rates have been on a sharp upward trajectory since last year when the Federal Reserve began raising the cost of borrowing to rein in inflation. Rates have more than doubled their recent sub-3% lows, in turn boosting monthly home payments for new mortgages by thousands of dollars and squashing a record-setting pandemic real estate boom.

In November, rates briefly topped 7% before falling to around 6% in February. They’ve been trending up again since.

Despite slowing inflation, Oscar Wei, an economist with the realtors association, said rates could reach as high as 7.5% in the coming weeks before dropping to around 6.5% by the end of the year.

Chart showing the increase in median home sale prices by county for an existing single-family home. 

That will likely put more downward pressure on home prices in the near term. And even if rates decline in the months ahead, fewer people typically look for homes during the second half of the year, meaning prices should continue to soften in line with seasonal trends.

“For buyers who are interested in buying in the fall and winter, there could be some opportunities because it might not be as competitive,” Wei said. “There may be a little more negotiation power for buyers.”

From June to July, median home prices dropped 8.5% in San Francisco to $1.46 million, 3.4% in Alameda County to $1.26 million, 3.2% in Contra Costa County to $900,000, 2.7% in San Mateo County to $1.98 million and 1.4% in Santa Clara County to $1.8 million.

For more than a year now, buyers who’ve been able to stomach the steeper rates have been left with few homes to choose from. That’s partly due to the Bay Area’s chronic housing shortage. But many homeowners who might otherwise be willing to sell have also been unwilling to give up the lower rates they locked in before the recent spike.

Sellers now putting houses up on the market are often doing so reluctantly.

“It’s definitely more so out of necessity, and they’re doing so unhappily because they have a direct comparison point to just a year and a half ago,” said Montana Gabrielle Hooks, an Oakland real estate agent.

Hooks said some of her clients have been forced to sell as their employers put an end to full-time remote work. One is stuck selling a recently purchased, spacious new-build in suburban Fairfield after being required to show up to the office in San Francisco.

“They would have never have purchased it if there was even a decent chance that they had to come back to the office so soon,” she said.

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Source: mercurynews.com

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Interest rates are based on trading levels in the bond market.  Bond traders began their day looking at significantly weaker levels (i.e. higher yields/rates) versus last Friday, but for no apparent reason.  Actually, it would be more fair to say “for no new reason.”

Reasons for the rising rate momentum are apparent and ongoing.  Decades-high inflation required decades-high rates to fix.  The higher rates are supposed to be damaging the economy more than they have.  Until that damage shows up, rates have a green light to continue higher.

As more and more market participants abandon their preconceived notions regarding an imminent rate reversal, the upward momentum takes on a certain glacial quality.  In other words, it’s self-sustaining, often resulting in days like today where rates look like they’re acting on some obvious catalyst despite the absence of any such news.

Mortgage rates were already new 7.4% by the end of last week and today’s increases bring the average lender closer to 7.5%.  This is the highest since late 2000.   Lower rates are still available for certain scenarios and discount points, but many scenarios are also seeing higher rates.

Source: mortgagenewsdaily.com

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Nestled in Arizona’s picturesque landscape, Prescott is a city that seamlessly blends history, natural beauty, and community spirit. Prescott exudes a sense of timelessness as Arizona’s first territorial capital while embracing modernity. Beyond its charming streets and stunning vistas, this city holds many intriguing facts that have helped shape its character today. Whether you are looking to rent an apartment in Prescott, or purchase a home in the area, this Redfin article will explore five captivating facts about Prescott and its enduring significance in both the past and the present.

1. Prescott was named after someone who had never been to Arizona

Amidst the American West’s expansion, Prescott emerged as a settlement, chosen to serve as the Territorial Capital of Arizona In 1864. This decision was made due to Prescott’s central location and its potential to foster commerce, government administration, and development in the newly carved Arizona Territory. The city’s establishment coincided with the Civil War. It was named in honor of William H. Prescott, one of the most distinguished historians of the 19th century, but who also ironically had never set foot in what would become the great state of Arizona. The city of Prescott served as the capital until 1867 when the designation was moved to Tucson and later to Phoenix.

2. The city has a rich mining history

Prescott’s history is rooted in mining, a legacy that played a vital role in shaping the city’s growth and character. With the discovery of gold in the nearby Bradshaw Mountains during the 1860s, Prescott swiftly evolved into a bustling mining town, drawing prospectors and settlers seeking their fortunes. The Bradshaw Mountains yielded valuable minerals like gold, silver, and copper, fueling a mining boom that transformed Prescott into a regional economic powerhouse. Though the initial rush subsided, mining remained a cornerstone of Prescott’s economy for decades, with the city’s landscape dotted with historic structures from its mining bygone days. 

3. Prescott is part of the “Quad-City” area

Prescott is part of a region known as the “Quad-City” area, a collective term that encompasses four distinct municipalities nestled in the heart of north-central Arizona. Alongside Prescott, this community consists of Prescott Valley, Chino Valley, and Dewey-Humboldt. These cities form a network that shares resources, amenities, and a common identity. The Quad-City area is known for its picturesque landscapes, moderate climate, and harmonious urban and rural living blend. 

4. The Yavapai tribe first inhabited the area of Prescott

The surrounding area of Prescott is the ancestral homeland of the Yavapai tribe, the region’s original inhabitants. Before European settlement, the Yavapai people established communities in the valleys and mountains surrounding present-day Prescott. With a deep connection to the land, they thrived through a lifestyle centered around hunting, gathering, and cultivating resources. The Yavapai’s intricate knowledge of the local flora, fauna, and ecosystems enabled them to flourish within the diverse terrain. Their cultural traditions, spiritual beliefs, and unique way of life created a harmonious relationship between their community and the natural environment. 

5. Half the city burned down in 1900

In 1900, Prescott faced a significant event called the “Great Fire of 1900.” Erupting on the Fourth of July, the fire consumed a substantial portion of Prescott’s downtown area. Fueled by strong winds and dry conditions, the flames swiftly spread through wooden structures, shops, and residences. The fire’s path of destruction altered the city’s landscape, leaving many historic buildings and landmarks reduced to ashes. 

Source: redfin.com

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The average U.S. mortgage rate for a 30-year fixed loan is 2.87% this week, dropping one basis point from last week’s 2.88%, Freddie Mac said in a report on Thursday. The rate is now one basis point from an all-time low set in mid-September.

The average fixed rate for a 15-year mortgage was 2.37%, rising one basis point from last week’s 2.36%, the mortgage securitizer said.

Mortgage rates that have stayed below 3% for 11 consecutive weeks have boosted housing demand, acting as a counter-weight for an economy that is struggling amid the worst public health crisis in more than a century.

“With near-record-low rates, buyer demand remains robust with strong first-time buyers coming into the market,” said Sam Khater, Freddie Mac’s chief economist. “The demand is particularly strong in more affordable regions of the country such as the Midwest, where home prices are accelerating at the highest rates over the last two decades.”

Sales of existing homes rose to a 14-year high of six million at an annualized pace in August, the National Association of Realtors said in a report last month.

Combined sales of single-family houses, townhomes, condominiums and cooperatively owned apartments rose 2.4% from July, according to the report. Compared to a year ago, prior to the COVID-19 pandemic, August’s sales were 11% higher, NAR said.

“The buyers are coming in because of the low interest rates – that’s the number 1 reason,” said Lawrence Yun, NAR’s chief economist.

The low rates are also putting upward pressure on home prices, because cheaper financing typically means borrowers qualify for bigger mortgages and can bid higher for properties they want. The median existing-home price in August was $310,600, up 11.4%, and prices rose in every region, NAR said.

The boost in demand that comes from the low rates have worsened an inventory shortage that plagued the market long before the pandemic hit the U.S.

The number of homes on the market at the end of August totaled 1.49 million, down 18.6% year-over-year, the NAR report said.

Unsold inventory measured as a “months supply” number that gauges how long it would take to sell all the homes if nothing else came on the market, was three months, NAR said. That’s down from 3.1 months in July and compared with four months a year ago.

Source: housingwire.com

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Barrier options are complex derivative products that have payoffs based on whether an underlying asset crosses a pre-specified price threshold.

There are several types of barrier options, and they are used to hedge a portfolio or simply to speculate on an underlying asset’s price change, much like regular call and put options. But due to the restriction of the barrier, premiums tend to be lower when initiating the trade.

What Is a Barrier Option?

Barrier options are just like regular options with the inclusion of an additional barrier to the regular option payoff.

Beginners start trading options with purchases of simple puts and calls. Options trading quickly turns complex as you dive into writing options, combination strategies, and exotic options.

In contrast to barrier options, plain-vanilla options typically have some value as the asset approaches and then crosses the strike price. Before an option is in the money, the value is known as time or extrinsic value.

Once an option is in the money, the option price is a combination of intrinsic value and extrinsic value.

A barrier option’s payoff (or lack thereof) is predicated by the underlying asset crossing some barrier price determined upon option initiation. Once the barrier is crossed, the nature of the option changes.

In some cases, the option is “normal” but after crossing the barrier it becomes worthless forever, simply by crossing the barrier. Other barrier options begin as worthless (or close to it), but revert to a normal option once they cross the barrier, even if they later cross the barrier again.

These products can be used to develop simple or complex strategies in options trading.

💡 Quick Tip: If you’re an experienced investor and bullish about a stock, purchasing call options (rather than the stock itself) can allow you to take the same position, with less cash outlay. It is possible to lose money trading options, if the price moves against you.

How Barrier Options Work

First, recognize that a barrier option is an exotic option — it comes with added rules and features compared to the more common American-style and European-style flavors. A barrier option is also path-dependent, much like non-exotic options, in that its value is determined by changes in the underlying asset’s market price.

A key feature of a barrier option is when it can be exercised. Depending on the barrier option pricing terms, its value activates or becomes worthless at that crossover price.

Pros and Cons of Barrier Options

Barrier options work like puts and calls, but they feature more restrictions than standard American or European options. That leads to advantages and disadvantages for both the holder and seller of a barrier option.

Barrier options’ pricing terms often dictate how and when traders of these derivatives might use them in their trading strategies.

In general, there is less risk for the barrier option seller and more restrictions put on the owner. Both parties, however, should be aware that there is less liquidity in barrier option markets compared to more actively traded standard options markets.

Pros Cons
Lower option premiums means a cheaper way to trade for option buyers Less chance to exercise due to restrictive terms (for the holder)
Reduced risk to the option writer Poor liquidity versus plain vanilla puts and calls
Can be more customized than standard options Added complexity makes barrier options tougher to understand for new traders

Finally, user-friendly options trading is here.*

Trade options with SoFi Invest on an easy-to-use, intuitively designed online platform.

Knock-In and Knock-Out Barrier Options

Knock-in and knock-out barrier options are the two common types of barrier options. Knock-in options are unable to be exercised until the underlying security crosses a trigger point, deemed the barrier price.

Knock-out options can be exercised immediately, but they turn inactive (worthless) at the time of breaching the barrier price. It can be helpful to see how these products work via barrier options examples.

Knock-In

Knock-In Option Example

Let’s say you buy a knock-in barrier call option featuring a strike price of $100 and a barrier of $110 while the underlying security trades at $90. The option is not exercisable until the underlying asset’s price climbs above the $110 barrier.

The option owner pays a premium but that premium is lower than for a regular call. Why?

Two reasons:

1.    The barrier option won’t be immediately exercisable and is worth close to zero until the underlying asset crosses the barrier price.

2.    The barrier price typically exceeds the strike price for calls and is below the strike price for puts. That means the likelihood to have any intrinsic value is lower because the option must first breach the barrier. A regular option has intrinsic value once it exceeds the strike price.

However, after the barrier is breached the barrier option will trade like any other standard call option with a strike of $100, no matter what the price does subsequent to breaching the barrier. If the barrier is not broken, the seller keeps the premium.

Knock-in barrier options are broken down further into up-and-in or down-and-in options.

The call above is an up-and-in barrier option example, the asset price must move up for the option to be exercisable. Down-and-in means the price must move down to the barrier before it is exercisable and typically is used for barrier put options.

Knock-Out

Knock-Out Option Example

For a knock-out barrier option, we’ll assume you bought an up-and-out call option with a barrier of $50 and a strike of $40 while the underlying asset trades at $35. If the asset rallies to $50, the option will cease to exist and be worth nothing.

A knock-out option is worthless even if the underlying asset’s price touches the barrier price for only a moment before falling back.

The call above is immediately exercisable and will always trade at a lower price than a regular call. Why?

Reasons include:

1.    If the underlying asset is far from the barrier, the option will be cheaper than a regular option as it is still at some small risk of breaching the barrier and being worthless.

2.    As the underlying asset moves closer to the barrier the option will move towards zero as the risk of crossing the barrier increases dramatically.

Knock-out barrier options are broken down further into up-and-out or down-and-out options. The difference is which way the price must move to breach the barrier and become worthless.

As you can see, barrier options pricing puts a spin on the usual calls and puts you might be familiar with.

Types of Barrier Options

Beyond knock-in and knock-out options, there are a few other barrier option types to learn about.

Rebate Barrier Options

Rebate barrier options have provisions that allow the holder to retain some value of the option contract even if the barrier price is not reached. It might be a percentage of the premium paid from the execution of the trade.

This might be seen as a less risky version of barrier options as it is not an all-or-nothing approach.

Turbo Warrant Barrier Options

Turbo warrant barrier options are traded more actively in overseas markets. They are a category of down-and-out options and feature high leverage.

While they can be risky, turbo warranty barrier options are also less volatile than other types.

Parisian Option

Both time and price are key variables with Parisian barrier options. They work similarly to Asian options. They are different in that the underlying security’s price must not only cross the barrier but stay above that price for a predetermined time period before the contract is in effect.

The Takeaway

Barrier options offer traders another means to hedge a portfolio or speculate on an underlying asset. This type of option is exotic, meaning it is more complex than plain vanilla puts and calls.

With barrier “in” options, the call or put does not go into effect until a barrier price level is hit while “out” options are active until the barrier price is touched.

Barrier options give investors more flexibility and customization at a cheaper price, but they can be more restrictive and less liquid than other options.

Qualified investors who are ready to try their hand at options trading, despite the risks involved, might consider checking out SoFi’s options trading platform. The platform’s user-friendly design allows investors to trade through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors.

With SoFi, user-friendly options trading is finally here.

FAQ

Are barrier options American or European?

Barrier options are complex exotic options different from the two common styles of options: American and European. While American-style options can be exercised at any time, before and at expiration, and while European-style options can be exercised only at expiration, barrier options are exercisable only after the barrier price is reached.

How are barrier options valued?

Barrier options have a path-dependent value since their worth is based on the underlying asset’s price movements. It is only when the underlying price crosses the barrier price that the option has value and can be exercised. If that predetermined barrier option price is never reached, then the option is worthless with a typical knock-out option. Knock-in options are non-exercisable until they reach the barrier price.

Can you replicate barrier options?

Some strategies can replicate the structure and payoff profile of barrier options. Many of these analyses were performed by academics over recent decades. The goal is often to produce sound portfolio hedging techniques.

Photo credit: iStock/nensuria

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The information provided is not meant to provide investment or financial advice. Also, past performance is no guarantee of future results.
Investment decisions should be based on an individual’s specific financial needs, goals, and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
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For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or prequalification for any loan product offered by SoFi Bank, N.A.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Source: sofi.com

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In our latest real estate tech entrepreneur interview, we’re speaking with Lucas Haldeman from SmartRent.

Who are you and what do you do?

I’m Lucas Haldeman, and I Co-Founded and serve as the CEO of SmartRent, an enterprise home automation company powering the intelligence behind 80,000+ smart homes in multifamily residences across the country. I’ve spent over two decades developing web-based technologies in the real estate space, initially as employee no. 18 at AllApartments.com (the first site to publish a national database of apartment communities online), and post-exit was with Homestore.com (now Move, Inc.) through a successful IPO. Prior to founding SmartRent, I served as Chief Technology and Marketing Officer of Colony Starwood Homes (NYSE: SFR), developing a custom platform that helped the business acquire, renovate, lease and manage more than 40,000 single-family homes in 12 states.

What problem does your product/service solve?

Despite the growing demand for and proliferation of smart home devices, multifamily communities haven’t had a way to appeal to renters that want that smart device connectivity in their homes, but are unable to invest in or own their own products due to the provisional nature of renting a home. Multifamily owners needed a solution that combined an enterprise and consumer approach, but most IoT platforms and products are too complex to properly implement.

That’s why we are revolutionizing the way rental properties manage their assets and market to their residents. Our goal is to make it easy for multifamily communities to offer their residents luxuries like smart home tech that previously only applied to single-family homeowners. Residents enjoy the advantage of having smart devices in their rental home with full control over them, while property managers and owners have peace of mind in knowing their assets are protected and are notified of issues (like a leak) before they become a catastrophic, costly event.

Our platform has also solved a lot of problems property managers face today. Properties no longer have to worry about using or losing physical keys and instead have the ability to assign digital access codes for things like maintenance work orders, vendor access, prospective resident self-guided tours and more. Simply put, our platform saves time and money for property owners as well as creating a new revenue stream for them, and a heightened living experience for their residents.

We do all of this with a focus on security and privacy, so residents can enjoy an upleveled experience without worrying about compromising their privacy. We never sell customer data to third parties and property managers only have access to information that would impact their assets, like leaks or thermostat issues. Consumer behavior will always remain private so renters can enjoy the benefits of a full smart home ecosystem without worrying about their security or privacy.

What are you most excited about right now?

I’m most excited that we’re bringing the benefits of smart home technology to people who have been traditionally excluded from utilization – our clients run the gamut from luxury apartments to affordable housing, but all are rentals. And renters simply have not been able to fully experience a full smart home ecosystem until now. I’m eager for what this holds for the future, and how these multifamily properties can evolve to support how we live our lives today. Helping to bring the population of 43 million renters in the US into the next era of living — which includes full-fledged smart communities and amenities for seamless transactions in the on-demand economy (rideshare pickups, food and package delivery) — is exciting for us.

What’s next for you?

SmartRent had a big year of growth in 2019 — we announced our Series B followed shortly by an extension from the Amazon Alexa Fund, rolled out a self-guided tour solution and launched our Alloy Fusion Hub, which serves as the center of the smart home ecosystem. We also recently became the first smart home vendor to integrate with the four top property management systems. We’re excited to continue this momentum into the future, offering new and existing customers new technologies and conveniences to simplify residents’ lives, streamline property managers’ jobs and increase revenue for property owners. Top of mind for us are appliances with predictive maintenance, like leak sensors that can shut off a valve before a flood even begins and HVAC units that connect to utility monitoring services that help monitor meter levels, or sensors in connected common areas so residents can determine things like open parking spots or available gym equipment before arriving.

What’s a cause you’re passionate about and why?

In conjunction with my career in real estate I have always felt strongly about supporting organizations helping all people find suitable housing; more recently as I have watched (and hopefully been an advocate) as my partner has moved from breast cancer victim to breast cancer survivor I have become passionate about finding a cause and a cure.

Thanks to Lucas for sharing his story. If you’d like to connect, find him on LinkedIn here.

We’re constantly looking for great real estate tech entrepreneurs to feature. If that’s you, please read this post — then drop me a line (drew @ geekestatelabs dot com).

Source: geekestateblog.com

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Mortgage rates accelerated past 7% for the first time since November, landing at its highest level since 2002, according to Freddie Mac’s weekly Primary Mortgage Market Survey.

The average 30-year mortgage rate came in at 7.09% for the seven-day period ending Aug. 16, up 13 basis points from 6.96% a week earlier. The current level now stands close to two percentage points higher from the 5.13% average reported a year ago. The latest rise also marks the fourth straight week of increases in the 30-year rate.

The last time the 30-year average was as high in Freddie Mac’s survey was April 2002 when it stood at 7.13% Since finishing 2021 at 3.11%, the 30-year rate has shot up almost 4% in 20 months.

Experts pointed to the effect recent economic data had in driving rates higher. “The economy continues to do better than expected and the 10-year Treasury yield has moved up, causing mortgage rates to climb,” said Sam Khater, Freddie Mac’s chief economist, in a press release. 

Similarly, the 15-year average jumped up 12 basis points to 6.46% compared to 6.34% seven days ago, according to Freddie Mac. In the same weekly period 12 months ago, the 15-year rate came in at 4.55%.

Strong retail data over the past week helped fuel additional upward movement after the Federal Reserve announced a 25-basis point hike in the federal funds rate in July, according to Orphe Divounguy, senior macroeconomist at Zillow Home Loans. The retail sales report “showed that U.S. consumers continue to spend despite higher interest rates and inflation, which remains elevated despite continuing to cool,” Divounguy said in a research statement. 

Signs of a robust economy will keep upward pressure on Treasury yields and mortgage rates, which often move in tandem, Divounguy added.

Yields on the 10-year Treasuries showed a mostly steady climb upward over the past week. On Aug. 10, yields came in at 4.02% but began trading Thursday at 4.29%, rising to 4.31% by 12 noon.

But the recent upswing in the 30-year average also comes as productivity, wage and jobs data could cause the Fed to take the foot off the gas pedal in its inflation fight, “something that could offer some much needed relief for interest rates, Divounguy added. 

“But for now, upside inflation risk remains and this week’s release of the Fed’s meeting minutes revealed rate hikes may still be on the table,” he said.

Earlier this week, the Mortgage Bankers Association also reported average 30-year interest rates among its members leaping to their highest mark in more than two decades for conforming loans. However, rates for Federal Housing Administration-backed mortgages pulled back below 7%, with volumes rising for applications sponsored by the agency. The increase “could indicate that some buyers remain active in their home buying search despite higher rates,” said MBA President and CEO Bob Broeksmit in a statement. 

But larger market forces continue to cap the extent buyer activity can currently grow, with costs also expected to remain elevated through next year, according to analysts at Moody’s Investors Service.

“Demand has been impacted by affordability headwinds, but low inventory remains the root cause of stalling home sales,” Freddie Mac’s Khater said.

Source: nationalmortgagenews.com

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Pricing, Internal Audit, CRM, Home Insurance, Lead Generation Tools; Comp Survey; MBA’s Cost Per Loan Stats

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Pricing, Internal Audit, CRM, Home Insurance, Lead Generation Tools; Comp Survey; MBA’s Cost Per Loan Stats

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Rob Chrisman

Fri, Aug 18 2023, 10:49 AM

As numbers approaching a thousand head to Orange County, CA, for the California MBA’s Western Secondary, keeping an eye on the remnants of a hurricane, it is not an easy lending environment with mortgage rates at 20-year highs, firmly in the 7’s. Thomas Edison believed, “Vision without execution is hallucination.” Many owners of lenders and vendors had very good vision and execution some years ago when creating their companies. But thinking that 2020 and 2021 would continue indefinitely would have been classified as a hallucination, and obviously things have become much more difficult with many wondering where things go from here. I don’t have a crystal ball, but a certain percentage of those owners who deferred being serious about exploring a sale, waiting, until after the cycle was obviously on the downside, they’ve perhaps undermined an opportunity for negotiating more favorable deal terms. It can be argued that the smarter entrepreneurs engaged in company sale negotiations while industry mindset is mostly driven by prosperity. (Today’s podcast can be found here and this week’s is sponsored by Richey May, a recognized leader in providing specialized advisory, audit, tax, technology and other services to the mortgage industry for almost four decades.)

Lender and Broker Software and Services

“No time for social media marketing? Introducing… Social Media Marketing for Busy Loan Officers. Tired of stressing over what to post on Facebook or LinkedIn? Want to grow your audience on Instagram without spending hours each week crafting the perfect post? With Be Loangendary, we do all of it for you. Here’s how: 1) Our team of mortgage copywriters and designers craft your social posts every week. 2) Once they’re perfect, we schedule and post to your social accounts. 3) You sit back, relax, and watch the “likes” start rolling in. With Be Loangendary, you get engaging mortgage content without breaking a sweat. That’s social media done for you. Want to get started? Enjoy a 14-day free trial on us!”

“Salesforce is committed to partnering with mortgage lenders to drive their technology transformation with modern solutions that are already in practice and serving many of the top mortgage lenders in the country. As part of its efforts to drive the industry forward through the adoption of a modern tech stack, Salesforce identified UMortgage to establish the precedent of utilizing its mortgage and lending software to its fullest potential to facilitate better client experiences. Using customized task management systems and automations within Salesforce, UMortgage has been able to achieve 300% year-over-year growth and near-perfect 95 net promoter score (NPS), an indicator of a best-in-class client experience. Check out the following link to learn more about the innovative technological systems that are helping UMortgage Loan Originators maximize their lead generation & conversion. With an investment in intuitive solutions, UMortgage is driving the mortgage industry towards a better future that enables brokers to thrive.”

We’re hearing that lenders are ramping up their tech stacks and (most importantly) focusing on the quality of the data powering that technology. If you’re considering taking your company’s tech stack to the next level, look for a property data provider that delivers the most comprehensive data through the best channels to meet your unique business needs. That’s why we’re highlighting First American Data & Analytics and its repository of more than 8+ billion recorded documents. First American is more than just a data provider. It offers end-to-end solutions for the mortgage lifecycle. From detecting fraud and risk to providing valuation solutions, First American powers lenders to make informed, data-driven decisions. If you’re ready to have access to the most accurate, complete, and current data, reach out to the team and get a data sample now.

“Lenders, the home insurance market is facing unprecedented volatility. We want to hear if it’s affecting your business and the closing process. Take our five-minute survey to share your thoughts. As a thank you, you can select to be entered to win a $100 Amazon gift card, compliments of Matic Insurance. Click here to begin the survey. Matic is a home insurance marketplace built for the mortgage industry. Learn how mortgage enterprises can implement a new revenue stream that helps borrowers navigate the insurance buying process. Book a demo today.

Wholesale lending is undergoing a transformation that will leave those who cling to outdated processes behind. Using bargain CRMs as electronic phone books or even worse, spreadsheets to track brokers, is a clear sign that your sales process is holding you back. Modern CRM technology like OptifiNow provides a comprehensive, out-of-the-box solution that helps wholesale lenders create a sales and marketing process that drives broker engagement and significantly increases loan volume. Download our guide to finding the right CRM for wholesale lenders to learn how to transform your wholesale business and stay ahead of the competition!

What’s an internal audit anyway and do you need one? An internal audit acts as a third line of defense for your mortgage operation. It provides comprehensive assurance based on the highest level of independence and objectivity to evaluate the effectiveness of management’s internal controls. This function should advise your mortgage operation on plans to achieve the company’s strategic, operational, financial and compliance goals. An effective internal audit should go far beyond just checking a compliance box; it should be an integral part of protecting your company. If you want to ensure you’re adhering to regulatory requirements and demonstrating good faith business practices, a Richey May internal audit is a good fit. If you’re looking to be Fannie Mae approved in the future or want to maintain your approved status, it’s required. If you’re unsure whether you need an internal audit, ask one of Richey May’s experts today or learn more here.

Pricing Products and Programs

“Lender Price introduces Composable Pricing UI, an innovative user interface that empowers lenders to effortlessly customize their pricing engine using No Code or Low Code options. With a variety of skinning options and increased flexibility, Lender Price users can now easily create a personalized pricing experience with an abundance of options to choose from. Surpassing the limitations of single UI platforms seen with competitors, the era of rigid, one-size-fits-all PPE’s is over. With a flexible pricing engine like Lender Price, users now have the ability to tailor their interface based on their individual needs and preferences. Composable UI represents a paradigm shift in digital lending technology UX, liberating both individuals and organizations from the constraints of single UI platforms,” said Dawar Alimi, Lender Price CEO. “With an abundance of options and unparalleled flexibility, users can personalize and take charge of their pricing experience.” Email us or request a demo today.”

In this market, hustle is everything. You can’t afford to waste a single deal or a single minute. That’s why ReadyPrice has launched its innovative new Shop, Lock & Deliver loan exchange platform, designed to help independent mortgage brokers like you save time and money. Now you can shop competitive loan offerings from multiple lenders, get rate lock guarantees in real time, receive underwriting findings, and deliver the borrower’s complete loan file to lenders and all on a single platform, at no cost to brokers. It’s the industry’s most powerful universal delivery portal, and it’s already helping brokers around the country thrive and compete in even the toughest market environments. Multiple lenders. One platform. Zero b.s. Check ReadyPrice out today.

STRATMOR Comp Information and Survey

Yesterday I published, “What do underwriters and processors and LOs make? STRATMOR has the information, spelled out in a recent Perspectives piece.” Several wrote to say that there is a wide disparity in pay based on experience, at every level, and that averages may not be telling the whole story. Point well taken, although the drop in volume/units has not been matched by the drop in personnel. Stay tuned…

Information is critical in making payroll decisions. STRATMOR Group’s Compensation Connection® Study provides valuable insight into compensation components, incentive plan structures, role specifics and more, aggregated by company type, annual volume, and region. Prior three-year trending is also included on most metrics. Get the compensation data you need: sign up for the Fall 2023 Compensation Connection® Study today!

Lenders can Relive the 2nd Quarter of 2023

Spoiler alert: Losses continue but at a slower pace. The MBA has crunched the numbers of those surveyed and calculated that independent mortgage banks (IMBs) and mortgage subsidiaries of chartered banks reported a pre-tax net loss of $534 on each loan they originated in the second quarter of 2023, an improvement from the reported loss of $1,972 per loan in the first quarter of 2023.

Marina Walsh, CMB, MBA’s Vice President of Industry Analysis and overall good person, summed up the Quarterly Mortgage Bankers Performance Report. “After 11 consecutive quarters of increases, origination costs declined by over $2,000 per loan. Volume picked up during the spring homebuying season and additional personnel were shed. However, the substantial cost savings per loan was not enough to put the average net production income in the black… Production losses were less severe than the previous two quarters and net servicing financial income was strong. Additionally, most mortgage companies in our survey managed to squeeze out an overall profit during one of the toughest times for the mortgage industry.”

Once again, servicing income helped big time. Think about that as companies sell it off. When the MBA looked at both production and servicing, 58 percent of companies were profitable last quarter, an improvement from 32 percent in the first quarter of 2023 and 25 percent in the fourth quarter of 2022. Still, the average pre-tax production loss was 18 basis points (bps) in the second quarter of 2023, compared to an average net production loss of 68 bps in the first quarter of 2023, and down from a loss of 5 basis points one year ago. The average quarterly pre-tax production profit, from the third quarter of 2008 to the most recent quarter, is 47 basis points.

“Total production revenue (fee income, net secondary marketing income and warehouse spread) decreased to 328 bps in the second quarter, down from 358 bps in the first quarter. On a per-loan basis, production revenues decreased to $10,510 per loan in the second quarter, down from $11,199 per loan in the first quarter.

“The purchase share of total originations, by dollar volume, increased to a study high of 89 percent in the second quarter. For the mortgage industry as a whole, MBA estimates the purchase share was at 80 percent in the second quarter, with the average loan balance for first mortgages increasing to $343,386 in the second quarter, up from $329,159 in the first quarter.

It ain’t cheap to do a loan. “Total loan production expenses (commissions, compensation, occupancy, equipment, and other production expenses and corporate allocations) decreased to $11,044 per loan in the second quarter, down from a study-high $13,171 per loan in the first quarter of 2023. From the third quarter of 2008 to last quarter, loan production expenses have averaged $7,236 per loan.

“Servicing net financial income for the second quarter (without annualizing) was $94 per loan, up from $54 per loan in the first quarter. Servicing operating income, which excludes MSR amortization, gains/loss in the valuation of servicing rights net of hedging gains/losses, and gains/losses on the bulk sale of MSRs, was $105 per loan in the second quarter, up from $102 per loan in the first quarter.”

For all the stats, there are five Mortgage Bankers Performance Report publications per year: four quarterly reports and one annual report. Contact Falen Taylor (202-557-2771). The reports can also be purchased on the MBA’s website.

Capital Markets

At this point it can be argued that the Fed doesn’t want to see higher long-term rates. But bond yields continue to rise across the board, impacting mortgage rates of course, continuing an upswing that began nearly three months ago at the beginning of the summer. In fact, the yield on the benchmark 10-year Treasury (US10Y) closed at 4.25% on Wednesday, the highest level since 2008. The upward march this week follows the release of the latest Federal Open Market Committee minutes, which stressed that additional interest rate hikes might be needed.

“With inflation still well above the Committee’s longer-run goal and the labor market remaining tight, most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy… Participants generally noted a high degree of uncertainty regarding the cumulative effects on the economy of past monetary policy tightening... and emphasized the importance of communicating as clearly as possible about the Committee’s data-dependent approach to policy and its firm commitment to bring inflation down to its 2% objective.”

Stronger-than-expected economic data continues to pour in, helping stock market prices, especially if you think the Fed to end its hiking cycle soon. Others say 10-year yields above 4 percent still present a good buying opportunity, in contrast to the potential rewards from pricey stocks and multiples that might not be as appealing. But it seems that bond investors have shifted to a “higher-for-longer” narrative coming out of the Fed, causing nominal rates and real rates to keep moving higher. Not good for housing affordability.

Strong economic data continued yesterday with initial jobless claims -11k and Philly Fed beating expectations by 22 points. That helped to lift benchmark 10-year U.S. Treasury yields above 4.30 percent as MBS once again sold off across the coupon stack. The recent surge in U.S. mortgage rates to anywhere between 10-month and two-decade highs, depending on who you ask, has pushed housing affordability to the lowest level in nearly four decades. Yesterday also brought another troubling sign for the Chinese economy as Beijing authorities are said to have told state-owned banks to step up intervention in the currency market in a push to prevent a surge in yuan volatility.

With no major data releases or Fedspeak today, the market will be left to its own devices. We begin the day with Agency MBS prices better from Thursday afternoon by .250, the 10-year yielding 4.22 after closing yesterday at 4.31 percent, and the 2-year at 4.91: yield curve inversion is alive and well without a recession.

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Source: mortgagenewsdaily.com

Apache is functioning normally

A great Listing pre-qualification script pulls out critical facts so you can be best prepared to not just take the listing, but to price it right in the first place! Not prequalifying is unprofessional and can waste your time and the sellers. Always prequalify, 100% of the time! Price it to sell, not to sit.  

The best price reduction conversation is the one you never have to have. All pricing scripts are best used at the listing table!  

Don’t lose the listing of a motivated, have-to-sell seller over price. If they have sell, you have to take the listing! Someone is going to make a commission. Shouldn’t it be you?  

Proper previous planning prevents pitifully poor pricing!  

Don’t go to your next listing appointment unless you know the following items:  

What the seller wants, needs or thinks it’s worth

Pricing the home correctly in the first place prevents future price reduction drama. It’s not unusual for a homeowner to believe that their home should fetch a price higher than the comps. You should always find out how they arrived at ‘their’ price. Learn that information before you arrive at the appointment so you can better strategize, explain the pricing strategy and consider how to ultimately price the home.  

Try saying the following when the seller requests a list price that is too high: “That’s interesting, ‘seller.’  How did you arrive at that price?” Listen to their answer, carefully!

Secret #1

Sellers overprice out of either ignorance or arrogance. Even in a hot seller’s market, there is aspirational pricing. You can price too high. Ignorance is when they just don’t know how to price a home. Square feet matters, bedrooms, baths, views and condition are all taken into account. Arrogance is when they won’t listen to comps and have reasons other than real value to try to justify their price. 

Secret #2

Sometimes, especially in a low-inventory market, your potential seller client may know about comparable sales you didn’t capture. Private sales, for sale by owner and other sales not found in your MLS could be really good comparable homes, so ask good questions and don’t just assume your seller is overpriced.  

The average days on the market

You should know this stat for properties like your subject property. This information helps set both your expectations and the homeowner’s expectations. Not just for your town or even zip code, but for their neighborhood, school district and MLS code. Drill down as best you can to understand the days on the market for homes as similar to theirs as possible. Sometimes even the style of the home can make a difference.  

The list to sell price ratio

This data helps you combat the ‘price it high, let them negotiate’ objection. It can also help you know if you can price it right on the mark and expect to get slightly more. Are homes selling on average for 105% of the list price? Or, are sellers in the subject neighborhood typically settling at about 95% of the list price?  

Know the number of homes competing with your subject property

What are you up against? How would it compare in the eyes of the buyer? If you’re showing your new listing versus its competition, do you look priced right, overpriced or priced so well you’d be dying to write an offer and snap it up?  

Secret: If you’re the only home on the market in the entire zip code or MLS code,  you can price it higher than you could if there were seven other competing homes, all within the same neighborhood. Especially if the competing homes are basically the same size and age. In that case, you need to be staged better and priced better than your competition or you’ll be the  one who’s stuck doing price reduction calls in about 60 days.  

Secret: The next time you have to do continuing education, take an Appraisal class. This will help you become more confident in your pricing strategy. It will show you multiple ways of arriving at the correct price. Don’t just use ‘cost per square foot’ to arrive at the right price!  

New construction in the area that competes with your potential listing

Remember when builders provide in-house financing, they often can sell a more expensive home for the same payment as your resale. If there are new homes going up, be certain to tour them and understand the builder’s perks and financing before you go to your listing appointment.  

Secret: A resale home for $350,000 may be competing with new construction as high as $500,000 if the builder has buy-downs and in-house financing with incentives that reduce the mortgage interest rate. Know what’s going on with the new construction! Have the new build salespeople explain their different mortgage plans to you. Ask lots of questions like, ‘what happens when they have build clients who need to sell their old  house?’ 

What is the seller’s time frame

Ideally, when does the home need to sell and close by?  

Secret: If they don’t actually have a time frame, you may have a problem! The less motivated they are, the higher they may wish to price the home. That is a recipe for a tough relationship.  

What is motivating the sale?

When you know why they want to or have to move, you can use this to stay on task during the appointment, referring to their needs and making it more about them than about you. This can also greatly affect your pricing strategy. If they are closing on a new home in 60 days, your strategy will be different than if they want to sell first, rent for a while and then decide what to do later. If you don’t find out, you’ll be left guessing, and guessing is not a good strategy.

Secret: You can actually win a competitive listing situation by simply asking and then focusing on exactly what the seller really needs. Be the one who is their problem solver, not the agent who assumes they know everything. Sellers appreciate the attention to detail and focus on their needs.  

Are they listing and buying or just listing?

Is there a referral needed for where they’re moving to? Are they already in contract on something? Is there more than one transaction for you to help them with?  

What happens if it doesn’t sell?

Or, if they don’t get their ideal price? Is keeping the house an option? If they’re thinking about  perhaps turning it into a rental property, you should do your research about going rates for a home like this one. Can they break even or make money on the potential lease payment, or would they be losing every month? You can see how it would affect your strategy and pricing. 

How did they happen to call you?

Track your sources of business. Tracking where your listing appointments are come from will tell you what’s working. Do more of what’s working and fewer things that are speculative and costly.  

What’s the bottom Line?

Don’t go to any listing appointment without having the answers to the ten points we discussed here. Knowledge equals confidence. Ignorance equals fear. You’ll present more confidently and walk away with not only the listing but also the seller’s trust. Start out the relationship right if you expect to have a great relationship, including repeat and referral business!  

Tim and Julie Harris host a podcast for real estate professionals. Tim and Julie have been real estate coaches for more than two decades, coaching the top agents in the country through different types of markets.

Source: housingwire.com