Thursday, December 17, 2015

In the News


December 17, 2015 

Well, the Fed has acted, at long last. Yesterday, Fed governors voted to
raise interest rates for the first time since before the financial crisis began in late 2008. It was a modest increase, just 0.25 percentage points, but monumental in the sense that it was so long in coming. The New York Times called it, "a vote of confidence in the strength of the American economy at a time when much of the rest of the global economy is struggling."

The Fed announcement emphasized that any additional increases will come slowly. "The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run."

Just before the announcement, a
column published in the Washington Post even questioned whether the Fed would quickly end up back where it started. Wonkblog author Matt O’Brien states: "The simple story is that central bankers, who pride themselves on choosing the hard right over the easy inflationary wrong, tend to look for any excuse to end zero interest rates, even if they have to invent one. But raising rates before the economy is ready means you will have to cut them back down to zero in rather short order — which has been the case in Europe, Japan, Sweden and Israel."

What will the news mean for the real estate market? No one knows for sure, of course, but I suspect that it will be something of a non-event. The market has been churning through its own recovery in fits and starts over a number of years, and it’s hard to imagine this one event, or even a series of small increases, will have a great impact.

From my perspective, we head into 2016 in generally good shape. Builders are
confident, loans are being processed despite some TRID headaches and the commercial outlook is good. We are in a much better place than we were just a few years ago, and for that we should all be grateful.

This is our final In The News of the year. Happy Holiday Season to all. See you in 2016!


Let’s keep the discussion going. Call or email me, or write a comment below
.


Other stories we’re following:

Construction Spending Near
8-year High.

TRID and Lending.

Mortgages for Underserved Markets?

Economic Headwinds won’t Stop Growth.

Wednesday, December 9, 2015

Are Boomers In The Way?


Ken Harney, one of my favorite real estate writers, wrote an intriguing column last week asking whether Baby Boomers are getting in the way of a prosperous real estate market. Harney starts the column with this paragraph:

“They rocked at Woodstock, marched in protest on campus, distrusted authority, and then as adults, took out mortgages and bought lots of real estate. But now, say some economists, baby boomers aren't selling their houses as earlier generations did — they're not downsizing fast enough as they approach and pass traditional retirement ages — and that's contributing to inventory shortages of homes for sale as well as rising prices.”

There are so many factors at play in the residential real estate market that I hesitate lay blame at any particular group’s feet. (Full disclosure here: Mary and I are smack dab in the middle of the demographic, and still in our home). Sure, Boomers are staying in their homes longer, but there are many reasons: 

·         Some are waiting for their individual markets to improve so they can realize the promise of using equity from their homes in their retirement years.

·         Some are frustrated because the housing market where they want to live doesn’t have enough inventory of available, affordable homes to move into.

·         Some just like living where they live.

Movement at the “more mature” end of the housing demographic is intertwined with all other elements of the residential market. If couples that have raised their families stay put, then younger families have a hard time finding homes to raise their families in. As a result, Millennials have a harder time finding their first home. On the other hand, if Boomer couples leave their family homes, they are often competing with Millennials for smaller single family home and condos. And the loop goes round and round.

But changes are coming, Harney asserts. He quotes Fannie Mae's Simmons: “Boomers will not inhabit this vast inventory (32 million homes) forever,” and when their circumstances change — which they inevitably will with age — watch out. “Their actions will reverberate through the housing market.”

What do you think?

Wednesday, December 2, 2015

E-Closings: Coming soon to a Lender near You?

I read with interest an article published in National Mortgage News just the other day titled, "What the GSE Plan to Collect TRID Documents Means for E-Closings." The article got me to thinking about the future of closings and how the technological revolution we live in every day will affect the future of the business I hold dear.

The thesis of the article, as written by Bonnie Sinnock, is: "A plan by the government-sponsored enterprises to begin electronically collecting the new Closing Disclosure data is designed to promote Fannie Mae and Freddie Mac's loan quality and risk management goals. But the initiative may also prompt broader use of electronic signatures and paperless processing in the mortgage industry."

Couple that with Quicken Loans’ announcement last week that it now officially offers a fully online mortgage through its new end-to-end online product, Rocket Mortgage, and it’s enough to make a mortgage industry veteran run for cover.

So much needs to shake out yet before we know what final form e-closings will take – and how deeply they will take root in our business – but without a doubt we are moving in that direction. What can we do now to prepare?

Above all else, make cybersecurity a top priority in your office. Study it, implement changes, bring in a consultant to help you get it right — do what you need to do but make it happen. Make no mistake, any company that has problems keeping information secure won’t be in business very long.

Earlier this year, Kelly Adkisson, a managing director at Accenture Credit Services, explained to HousingWire that: "Millennials are expecting different services and capabilities from lenders." Accenture’s research suggests the emergence of a new high value customer segment – "Generation D," people who are deeply digital, integrating online and social media into the fabric of their lives.

Because they have grown up online, they are comfortable living in that world day to day, but they also understand better than my generation the risks inherent online. They’re willing to transact business (including real estate closings) online, but their sensitive information must be kept secure.

What do you think?