Grinding Toward Recovery?

In the News  

Presented by Prairie Title
Commentary by Frank Pellegrini, Prairie Title CEO           

We are about to close the books on 2014, not exactly a banner year, but not a horrible one either. It says something about the economic straits we’ve found ourselves in for six years that results we would have considered poor a decade ago we now look upon as OK.

What’s keeping the housing market from reaching its full potential? That’s the question asked in a recent Los Angeles Times article by Lew Sichelman, a long-time real estate observer and writer. Sichelman touches on skittish demand, lack of inventory and other factors we have discussed before, but it was one number that really got my attention: Zillow reports that 32% of all adults are now living with someone (not as a couple).

The article quotes Zillow Chief Economist Stan Humphries: “The rise in doubled-up households is a troubling sign of the times and starkly illustrates one of the prime drivers behind weak sales.”

Doug Duncan, chief economist at Fannie Mae, noted the same issue when he spoke at the recent ALTA convention, telling his audience, “Today, demand weakness trumps credit tightness.” Duncan hit hopeful notes too. One of the main themes of his talk was, “Housing will continue its grind upwards. It’s in the right direction but it will be a struggle to get there.” I’d urge you to view Duncan’s excellent presentation here. His talk begins at the 1 hour, 6 minute mark.

There is positive news that supports Duncan’s thesis, as home sales and prices improved in October. NAHB also cites an uptick in existing home sales for the second straight month in October, including a 5.1% increase in the Midwest from September. And Zillow sees millenials moving more strongly into the market next year.

How should we view the current state of housing? I wish I knew the definitive answer, and that it was positive overall. I do believe that housing will continue the “grind upwards,” and that 2015 will be a better year in our industry than 2014. We’ll all just have to keeping grinding along with the market, doing all we can every day to run our businesses efficiently, keep our clients happy, and prepare for the day when the grind brings us back to prosperity in our industry.


Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.

Other stories we’re following: 

Housing market inches toward full recovery.
Economists see U.S. housing as steady in ‘15.
Part 1: Great overview of REPA-TILA implementation.
Rising rates and the housing recovery.

The Modern Communications Environment

In the News  

Presented by Prairie Title      
Commentary by Frank Pellegrini, Prairie Title CEO  

During last month’s American Land Title Association convention in Seattle, I participated in a panel discussion that focused on communication, especially our efforts to explain the value of our products and services. In our corner of the real estate world, I’m not convinced we have developed easy-to-understand messages and taken advantage of the best means to deliver those messages.

To keep pace in the modern communications environment, in which the expectation is that any information is available at anyone’s fingertips anytime, it’s essential that we utilize today’s media to provide accurate information about what we do and why our services are valuable. Primarily, that means building effective social media platforms while avoiding common social media mistakes. Perhaps Realtors® are more used to explaining their business because of their ongoing direct interaction with home buyers and sellers; most of the rest of us in the industry could probably use a little help with that.

One of the key takeaways in the ALTA panel discussion was provided by Michelle Korsmo, ALTA’s executive director. Michelle advised the title professionals assembled for the convention to “better educate our real estate partners about the value of our business.”

That really got me thinking. I’ve been in this business a long time and, collectively, I haven’t seen an overabundance of effort to reach out to our partners with the goal of better explaining the value of title insurance. Do you agree that we could do a better job? What aspect(s) of our business are we not good at explaining? I’d really like to get your feedback via a personal note or a posting on our blog.

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.

Other stories we’re following:            

Fannie Mae Home outlook for 2015              
8 years later, inching toward the peak
Ingredients for recovery                                
Chicago housing picture brighter.
House price index up in August                     
CFPB releases new rules Readiness Guide
 

In The News

In the News  

Presented by Prairie Title           
Commentary by Frank Pellegrini, Prairie Title CEO  

One distressing story line that has emerged in the real estate market is the dearth of so-called millennials (roughly ages 18-34) buying and selling homes. It has been the history of the American economy following the Great Depression that each current middle-aged generation has been succeeded in home ownership in greater numbers by the following generation. That spurs home building and, if there aren’t sufficient buyers, sellers’ aspirations to move into larger homes or downsize when the time is right become difficult to fulfill.

All is not lost though. A recent CNBC piece asks whether millenials are starting to embrace the American Dream, and the answer is really quite positive. Millenials are waiting longer to buy their first homes and may opt for buying in the city rather that the suburbs, but they are moving into the home buying market. CNBC quotes a report from the Demand Institute: “Today there are just 13.3 million [U.S.] households, both rental and owned, headed by millennials, but this number will nearly double in the next five years.”

But don’t expect the situation to change overnight. Patrick Simmons of Fannie Mae recently commented that, “The continued slide in household formation and homeownership among young adults suggests that more robust labor market improvements, among other factors, are needed for young Americans to get a stronger foothold in the housing market.”

As a real estate practitioner and half of a Baby Boomer couple that may be looking to downsize before too long, I hope that more robust labor market is coming, and coming soon.

On a different note: The first Tuesday in November is Election Day, and this year in Illinois we have a full slate of races including U.S. Senator, governor, statewide constitutional officers and members of the state legislature. I am not in the business of endorsing candidates, but I am a fierce advocate for voting. We have important issues to decide in our state and our country in the coming years, and the most important way to ensure that you have a voice in the process is to vote. Whatever your political leanings, I urge you to get out and vote on November 4.

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.

Other stories we’re following:

 

Mortgage Activity Stuck in Neutral                            
New Home Sales Hit Six-Year High
Consumers Expect Rising Home Prices                             
Don’t Blame Appraisals.

In The News - September 2014

In the News

Presented by Prairie Title

Commentary by Frank Pellegrini, Prairie Title CEO 

  

Unless a federal agency intervenes, Zillow is about to merge with Trulia, creating an organization that features two of the three largest real estate listing portals. Does that herald the end of the Realtor® era? Hardly. 

 

As NAR’s annual survey of home buyers and sellers pointed out last fall, 88 percent of buyers reported that they purchased their home through an agent, while an identical percentage of sellers reported being assisted by an agent. So, nearly 90 percent of buyers and sellers don’t go it alone, and those numbers have been growing since 2001. Here’s one reason why: Moving real estate is hard work. It takes time and effort and nothing beats experience in finding a seller-buyer match that works.

 

Like everyone in the real estate industry, agents face challenging circumstances these days mainly stemming from economic conditions. Rapidly changing technology also raises questions about the human factor in facilitating home sales that I would argue are more perceptual than real. That same NAR survey reports that use of the Internet in the home search process rose to 92 percent, yet the vast majority of those buyers still bought through an agent. The Internet is a tool, not a replacement for the skill, expertise and experience built up over years by real estate agents.

  

In an interesting article posted on Inman News, the author asks the simple question: Can you convince sellers you are not obsolete? He starts from the premise that brokers are absolutely not obsolete, but like everyone in our industry they need to be prepared to justify their role in real estate transactions to clients every day.

 

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.

 

Other stories we’re following: 

• QM Rules Cause Lenders to Expect Tougher Environment
• Housing Starts Improve in July
• ALTA Best Practices Help Title Companies Adapt 
• Interesting Take on the Housing Market: Housing Won’t Recover Without These Factors.

In The News

In the News

It’s hard to believe, but half the year has passed. Where do we stand in the real estate industry? In the same jumble we began the year in, I’m afraid. As has become customary, confusion reigns. Take mortgage applications as an example. They’re up then down, then the cycle repeats itself. Interest rates inch up then decrease a bit then rise again.

Two headlines I came across recently tell the tale of how difficult it is to decide whether to be pessimistic or optimistic about the real estate market – or to just throw up your hands resigned to not having a good feel for where we are as an industry:

Fitch: Housing market getting ready to grow Freddie: Many home markets are stalling

Home buyers and sellers are just as confused. Determining when it’s a good time to list your home or look for a new home or both can by mystifying these days, and I’m afraid that until we return to a more "normal" climate in which trends make sense we’re in for challenging times.        

Some good news arrived toward the end of July when the national economy seemed to pick up steam. Daily Finance had a very positive story about the economy Roaring Back to Life, while the employment picture was positive again with 209,000 new jobs created by private business in July.

 I’ll go out on a limb and declare that I am cautiously optimistic about the second half of 2014. National economic trend lines are good, lenders are eager to lend, Realtors® want to move homes and more Americans are moving toward the economic stability required to consider purchasing a home. I believe in our collective power to move the needle. Let’s see if we can make it happen.

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.

Related stories we’re following:
Mortgage markets show gains in Q2
Freddie Mac June numbers.
Existing home sales.
Housing markets new normal?

In the News

Presented by Prairie Title                                                     July 8, 2014

 

 

 

Commentary by Frank Pellegrini, Prairie Title CEO

　

As we all search for bright news in the real estate industry (some of which did arrive at the end of June in the residential end of the business), several segments of the commercial real estate sector show signs of vitality and a solid future. Specifically, multifamily housing and mixed-use properties are growing.

 

 

The National Association of Home Builders reported late in June that condo and co-op sales as well as multifamily lending grew. NAHB also reported in May that production of apartments and condominiums showed positive growth in the first quarter of 2014, according to its latest Multifamily Production Index (MPI). The index increased three points to 53, which is the ninth consecutive quarter with a reading of 50 or above. The MPI measures builder and developer sentiment about current conditions in the apartment and condominium market.

Anecdotally, we’ve seen growth in our commercial business at Prairie Title, with mixed-use and multifamily leading the way. Mixed-use is particularly interesting since these projects take time to develop and plan and can really add to the vitality of the community where they’re located. Think about what the new JV formed to develop the old downtown Chicago post office will do for that part of the Loop.

*****

A quick note on another subject: We recently said farewell, at least on a permanent basis, to Prairie Title’s resident lender pro Terri Konajeski, who retired after more than four decades in the business. Terri came to Prairie Title in 1999 as our primary lender sales contact. We wish Terri well as she turns the page on a new life which, thankfully, will include Prairie Title on a consulting basis.

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.

Related stories we’re following:

New construction in multifamily is ahead of 2013 levels thus far this year, says Reis Inc.

Employment growth surges in June.

Interest rates hold steady.

In the News

Presented by Prairie Title                                  June 6, 2014

 

Commentary by Frank Pellegrini, Prairie Title CEO

 

Tired of getting whipsawed back and forth by contradictory news on the residential real estate front? Me too. It seems like whenever we read a positive story about sales or pricing, we get blindsided by dour reports. Some of the journalists who cover our industry seem to be in competition to deliver the most depressing news and conjecture the fastest. What are we to make of all this?

Think about CoreLogic’s recent price appreciation report. National home prices were up 10.5 percent in April from 2013, though they increased at the slowest rate of appreciation in 14 months. At the same time, continued inventory shortages in many markets are expected to keep driving prices higher in the year ahead. Good news if you’re selling your home. Not so good news for buyers competing for less inventory than we need to really get things moving.

One observation I would make is that optimism and pessimism move on a sliding scale in reaction to conditions in the local marketplace. All real estate is local, right? While trends certainly influence our industry at a macro level, once you get down into the weeds things can look different. I try not to let the macro have undo influence over business decisions at the micro level. 

Housing truly is the engine that can, and someday will, push the economy forward in a big way. Not today, but sooner rather than later, and in some markets sooner than others. Meanwhile, all we can do is manage our businesses to the environment and be prepared to hit the accelerator when the time comes.

 

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com. 

Related stories we’re following:

From the Tribune: mortagage refinancings hits six year low.

From Bloomberg: Yellen Has Scant Power to Relieve U.S. Housing Slowdown

Unrelated, but worth watching: 

Affiliated Business Arrangements get closer scrutiny.

 

In the News

Presented by Prairie Title                                  May  14, 2014 

Commentary by Frank Pellegrini, Prairie Title CEO 

We’re coming up on six years of a lackluster, if not at times downright dismal, real estate market. Consider this statistic: seasonally adjusted housing starts were at 2.19 million in February 2006, and still as high as 1.33 million in August 2007 just before the bottom dropped out of the economy. In March of this year the rate for housing starts was 946,000, a bit better than the previous months but still well below the types of numbers we’d like to see. 

The economy in general certainly is better than 2009-11. We’ve been adding jobs and the unemployment rate has been ticking down, but still the residential real estate market is in the doldrums. What’s holding us back? Consider these frustrating headlines (when read side by side) from the Wall Street Journal:

Job Growth Gathers Strength (May 2)…….Demand for Home Loans Plunges (April 24) 

In my view, three national trends have combined to prevent the emergence of the robust real estate market we’ve all been waiting for: 

1.      Interest rates have ticked lower lately but are still higher than a year ago and are likely to increase as we move through 2014.

2.      The national supply of distressed homes has dropped (CoreLogic reports a 10 percent drop in completed foreclosures from March 2013 to March 2014), so fewer bargains are available to prospective buyers.

3.      Consumer pessimism has lead to fewer listed homes and sales. 

Until we see improvement on several of these fronts I’m afraid we’re stuck in a negative cycle. It’s anybody’s guess as to when the market will get better. I suspect that when conditions improve residential real estate will take off quickly and dramatically. 

Until that time comes, we’ll just have to keep believing that the turnaround is imminent. 

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com. 

Related stories we’re following:

Perspective on mortgage rates.  Homeowners ready to spend on housing?  Affordability a problem.

In the News

Presented by Prairie Title                                  April 4, 2014

 

Commentary by Frank Pellegrini,

Prairie Title CEO

 

It is widely accepted that a healthy housing sector is fundamental to the well-being of our economy. As such, it is not surprising that full recovery from the Great Recession hinges in great part on the strength of the housing market.

We’re watching some notable stories on that aspect of the recovery. These include discussions over the continued deductibility of home mortgage interest in plans to reform the tax code and the fate of Fannie Mae and Freddie Mac.

 

Of course, every issue has at least two sides. The argument over the mortgage interest deduction is no different. Compelling arguments are being asserted to keep it as is, limit it, or do away with it. Some experts insist that without the deduction home ownership would cease to be desirable, and others assure us that its impact on the overall decision to purchase a home is negligible. Some believe the deduction only benefits the wealthy, others try to convince us that the middle class would be deeply harmed without it. To see pros and cons you may be interested in this March piece in the Wall Street Journal.

 

What to do with secondary market giants, Fannie Mae and Freddie Mac, is equally controversial, particularly against the backdrop of the recent stellar financial performance of both entities. Nonetheless, it is the concern of many that the involvement of government and its support is too deep.

 

A recent proposal offered by Senators Tim Johnson and Mike Crapo would create a new agency and would restructure the way mortgage loans are transacted on the secondary market. Since a vibrant and fluid environment for mortgage securitization is essential to the health of housing, this and other similar proposals require close scrutiny. View the current proposals side by side here.

Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.

 Other stories we’re following:

ARMs make a comeback.

Mortgage rate watch.  

FHA’s newest policies for mortgage insurance premiums.

 

 

 

 

 

 

 

 

 

QM Firmly In Place

In January, the "Qualified Mortgage" (QM) was born. The QM, a type of mortgage designed with consumer interests at its core, is the offspring of the Consumer Financial Protection Bureau (CFPB).

 Recognizing that consumers were harmed by aggressive marketing of mortgages that borrowers were not able to repay, the CFPB set out to create a basic standard of mortgage underwriting that squarely addresses ability to repay. The QM rule sets limits for interest rates, maturity, payment limits, and limits on upfront costs. In addition, loan originators must verify and document all information collected to establish the borrower’s financial condition. If a loan complies with the QM standards, the lender is afforded a "safe harbor " against attacks on the loan’s enforceability.

If a loan does not qualify as a QM, severe penalties may be imposed against a lender. Further, borrowers may have defenses against foreclosure if they find themselves unable to fulfill the obligations of the mortgage.

The limit on upfront costs (points and fees) is 3 percent of the mortgage amount. This limit includes all costs associated with services rendered by affiliates of the lender (i.e., appraisal, credit reporting, title insurance, settlement, etc.). Costs for services furnished by non-affiliates do not have to be loaded in the 3 percent cap.

Advocacy efforts by groups representing affiliated service providers have sought to change this dichotomy. H.B. 3211, currently under debate in the U.S. House of Representatives, seeks to treat all fees and costs associated with processing, underwriting and closing the loan the same (whether rendered by an affiliate or non-affiliate). The fate of the QM as Congress scrutinizes the implications of its implementation is a story all in the real estate industry should be following.

 Questions or comments? Call me at 708-386-7900, or send me an email: frank@prairietitle.com.

 

 

 

Other stories we’re following:

Cyber Security guidelines:

Home sellers returning for Spring?

GSE reform closer?