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Direct homebuyer Opendoor getting into mortgage business

Late last year, Opendoor, an online marketplace that buys homes directly from homeowners, announced that it raised $210 million to fund the company’s expansion beyond the two markets where it initially launched.

The company first began operating in Phoenix and Dallas-Fort Worth, but back in December, Opendoor said that it planned to expand to 10 new markets this year.

The company now operates in Las Vegas and Atlanta.

And as it turns out, that’s not the only way that Opendoor plans to expand; the company is also getting into the mortgage business.

The company is currently piloting a mortgage program in Phoenix, touting its ability to save homebuyers when they buy one of Opendoor’s properties.

Opendoor, which launched in 2014, operates by buying homes directly from sellers, then turning around and selling the homes on its own marketplace.

A homeowner seeking to sell their home can go to Opendoor, enter details about their home, and get a near-instant price quote for the home.

If the seller accepts, Opendoor then allows the seller to close on the sale when they’re ready, rather than on the timeline of another buyer.

From there, Opendoor makes any necessary repairs or upgrades, then sells the home through its marketplace.

According to the details provided by the company, more than 3,500 Phoenix homeowners have bought and sold homes with Opendoor. While that figure may not be earth-shattering, consider the company’s growth in just the last few years.

During a HousingWire webinar on Wednesday, Daren Blomquist, the senior vice president of communications for ATTOM Data Solutions, spoke about Opendoor and similar “instant offer” companies.

As shown in the chart below, taken from the webinar and courtesy of ATTOM, Opendoor’s growth over the last three years is significant.

Instant offers in Phoenix

(Click to enlarge)

The company also claims that it is the top listing agent in the Phoenix area, and said that 10,000 “home shoppers” visit the company’s site each month.

The company now says it’s taking a similar approach to the mortgage business.

“Mortgages are typically a huge pain point in the buying process, but now Opendoor is extending the same speed and service from the buying and selling experience to mortgages, with an added boost of cost savings for the customer,” the company said in statement.

Buyers using Opendoor Mortgage will be eligible for a 1% discount off the purchase of an Opendoor home in the form of a credit towards closing costs.

“We’re fearless about reinventing every step of the transaction to put more dollars in the pockets of our customers,” the company said.

The company said that buyers using Opendoor Mortgage can get prequalified in 30 minutes and close on a home on their timeline, just as they can when selling their home to Opendoor.

The company also claims that a buyer can close on an Opendoor Mortgage in as little as 15 days. According to the company, every buyer gets a dedicated loan expert, which allows them to lock in a mortgage tailored to their financial situation.

The company also launched its own title insurance operation, Opendoor Title, to cover all parts of the real estate transaction.

“We launched Opendoor Mortgage and Opendoor Title so we could handle the process for our customers from start-to-finish and ensure a streamlined transaction,” the company said.

While Opendoor is getting into the mortgage business, the company is not acting as the lender for its mortgage program. Rather, Opendoor will act as a licensed mortgage broker that works with correspondent lenders.

Back in December, the company said that it was handling $60 million in home volume each month and served more 4,000 homeowners since it launched.

Opendoor’s latest round of funding valued the company at $1 billion, making it the latest billion-dollar company to attempt to be a true one-stop-shop for the homebuying process.

Earlier this year, Redfin revealed that it recently began buying homes directly from homeowners with a service called “Redfin Now.” That news came on the heels of Redfin launching Redfin Mortgage, which added a mortgage-lending operation into Redfin’s existing digital-focused real estate brokerage and title businesses.

Now, count Opendoor among the companies that are trying to do it all in the real estate process.

[Update: This article is now updated to reflect that Opendoor operates in Las Vegas and Atlanta.]

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Here are the top 10 metros where Millennials are moving

Despite the idea that Millennials move around and don’t want to be tied down, young people today are actually less likely to move than previous generations.

In fact, data from the U.S. Census Bureau shows the mobility rate for young people currently sits at the lowest rate in 50 years. But SmartAsset, a financial data and technology company, analyzed the migration patterns of those 20 to 34-year-olds Millennials who did choose to move.

SmartAsset used data from the 2015 U.S. Census Bureau’s 1-Year American Community Survey to look at migration data on 218 cities, all 50 states and the District of Columbia.

For states, the study showed New York is losing its appeal, as it saw the biggest loss in Millennials, with 29,000 moving out. 

On the other end of the spectrum, Texas moved to the top of the list, becoming the No. 1 state for Millennial migration. It received 33,098 new Millennials in 2015. SmartAsset’s study showed that the four states with the largest number of migrated Millennials — Texas, North Carolina, Colorado and Florida — all boast some of the nation’s fastest growing economies.

As far as cities, there are a number of surprises on this list of top 10 cities where Millennials are moving. The net number of migrants is listed for each:

10. St. Paul, Minnesota – 4,144

Moved in: 32,424

Moved out: 28,280

9. Denver, Colorado – 4,221

Moved in: 64,976

Moved out: 60,755

Colorado

8. Fort Collins, Colorado – 4,315

Moved in: 24,847

Moved out: 20,532

7. San Francisco, California – 4,833

Moved in: 62,399

Moved out: 57,566

san francisco houses

6. Spring Valley, Nevada – 5,347

Moved in: 13,546

Moved out: 8,199

5. Fargo, North Dakota – 5,990

Moved in: 19,375

Moved out: 13,385

4. Norfolk, Virginia – 7,198

Moved in: 33,795

Moved out: 26,597

3. Oakland, California – 7,494

Moved in: 26,456

Moved out: 18,962

california

2. Seattle, Washington – 9,886

Moved in: 86,641

Moved out: 76,755

1. Charlotte, North Carolina – 10,707

Moved in: 71,240

Moved out: 60,533

large

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Executive Conversation: Javid Jaberi on a healthy real estate marketplace

SPONSORED CONTENT

Executive Conversations is a HousingWire web series that profiles powerful people in the financial industry, highlighting the operations and the people that make this sector tick. In the latest installment, we sit down with Javid Jaberi, executive vice president of single family residential operations at Auction.com, to discuss what it takes to establish a healthy real estate marketplace and what the company has learned in the past decade.

Q: What are buyers and sellers looking for in a real estate marketplace today?

Javid JaberiA: Buyers and sellers alike are looking for greater transparency and more information relating to the property and market intelligence. Buyers recognize the value of our marketplace for its unparalleled volume and penetration of distressed real estate, but they also value the access we provide specific to a property’s condition, the neighborhood it’s located in, and, if it’s inhabited, the tenants.

This greater level of intelligence into the property builds trust and confidence within buyers, enabling them to make more informed decisions about what to bid on and how to best leverage the asset should they win. 

For sellers, increased transparency means valuable insight into buyer interest on a particular property. A seller’s ultimate goal is to dispose of the asset quickly and efficiently, resulting in the best outcome on investment. Our marketplace generates more qualified buyers to compete in a marketplace that aligns with both seller and buyer objectives.

Q: How do you determine whether a real estate marketplace is healthy or not?

A: As market conditions change, marketplaces should provide an accurate read on pricing and the efficiency of selling. In a healthy marketplace like Auction.com, buyers continue to find the opportunities they seek, sellers receive market prices and qualified bids early and often, and the process of transferring ownership through the marketplace remains effective and risk-free. We see it every day as buyers and sellers interact successfully through our marketplace.

Q: What then are the keys to creating and operating a healthy real estate marketplace?

A: First and foremost, it is created through the expertise of our staff and the rich relationship with our partners in the 3,100 counties we serve nationwide. These relationships help us accurately — and quickly — process assets through from onboarding an asset onto our platform to the successful closing of sale while ensuring all seller and legal requirements are met.

This level of detail requires an in-house team that has developed proven strategic processes and perfected the engagement with buyers and sellers beyond just selling the asset.

The marketplace must also have the capacity to increase demand through a scalable platform, one that provides a wide-array of offerings to meet the wants of potential buyers. Economies of scale are also important as a healthy marketplace is one that supports a large population of both buyers and sellers.

At Auction.com, we work to ensure we earn the trust of our buyers and sellers by providing educational resources to buyers (both new and returning), and sharing the latest industry insights with our sellers in order to help them create the best disposition strategy for their portfolio.

Q: What has Auction.com done differently that has led to the creation of such a marketplace?

A: First, we’ve spent the last 10 years learning what the market needs and how to deliver it. We have more experience in this business than anyone and it shows in the platform we’ve built and the number of users we have attracted.

Beyond that, it requires a culture that fosters continuous improvement. Things change so rapidly in our industry and neither buyers nor sellers have the time or resources to keep up-to-date on all of the constant changes. So they rely on us for that and we have to be up to that challenge. That takes great people and we believe we have the best working for us.

You can train anyone to learn a new skill, but the level of commitment and dedication that our team have simply can’t be taught, and it is taking our company and our clients “Beyond the Bid” to something much more powerful in the industry.

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GDP estimate surges to 3% in second quarter

Real gross domestic product surged in the second quarter to a level not seen since the first quarter of 2015, according to the second estimate from the Bureau of Economic Analysis.

The second estimate shows GDP in the second quarter increased to 3%. This is up from the advanced estimate’s 2.6% and up from the 1.4% increase in the first quarter.

In fact, the chart below shows this increase marks the highest GDP level since the first quarter of 2015.

Click to Enlarge

GDP

(Source: BEA)

Recently, HousingWire examined whether President Donald Trump is on track to meet his campaign promise of 4% GDP. This increase puts the administration one step closer to that goal.

However, one expert explained this increase may not last.

“The American consumer was behind second quarter GDP numbers being revised up from 2.6% to 3%: Spending was revised to 3.3% from 2.8%, and consumers account for two-thirds of GDP,” said Robert Frick, Navy Federal Credit Union corporate economist. “But is it sustainable? Given wage gains are meager, and consumers are saving less and charging more, this may be a temporary surge.”

“Not coincidentally, today the ADP Employment report revised up its job numbers,” Frick said. “Americans are optimistic given the jobs situation, and that may be what’s behind increased spending.”

Real gross domestic income increased 2.9% in the second quarter, up from the first quarter’s increase of 2.7%. The average of real GDP and real GDI, a supplemental measure a measure of U.S. economic activity that equally weights GDP and GDI, increased 3% in the second quarter, up from an increase of 2% in the first quarter.

Here are updates to the previous estimate:

Current-dollar GDP: Increased to 4%, up from last estimate’s 3.6%

Gross domestic purchases price index: Held steady at 0.8%

Personal consumption expenditures: Held steady at 0.3%

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ADP: Employment increases 237,000 in August

Employment is set to boom in August, surpassing last month’s increase, according to the ADP and Moody’s Analytics National Employment Report.

The report predicts an increase of 237,000 jobs in August, up significantly from last month’s prediction of 178,000 and even up from the U.S. Bureau of Labor Statistics’ report which showed an increase of 209,000.

The chart below shows August’s prediction compared to previous months, however, as the numbers from last month show, ADP’s prediction is not always in line with the employment report’s final number.

Click to Enlarge

ADP

(Source: ADP, Moody’s Analytics)

“The job market continues to power forward,” Moody’s Analytics Chief Economist Mark Zandi said. “Job creation is strong across nearly all industries, company sizes. Mounting labor shortages are set to get much worse.”

It’s been a problem facing the housing industry for some time. Back in January, Bill Banfield, Quicken Loans executive vice president of capital markets said: “While overall confidence in the housing market and economy continues to strengthen, a shortage of skilled workers is starting to press on the industry.”

In short, we are creating all these jobs and don’t have enough builders in the workforce to fill them, which is applying pressure on housing starts, which Banfield aforementioned.

“The initial BLS employment estimate is often very weak in August due to measurement problems, and is subsequently revised higher,” Zandi said. “The ADP number is not impacted by those problems.”

Among other increases, the report predicted a boom in new construction jobs. The goods-producing sector is set to increase by 33,000 jobs overall, with changes in the following areas:

Natural resources and mining: Decrease 1,000

Construction: Increase 18,000

Manufacturing: Increase 16,000

The service-providing sector is set to increase by 204,000 jobs, with changes in these areas:

Trade, transportation and utilities: Increase 56,000

Information: Decrease 3,000

Financial activities: Increase 11,000

Professional and business: Increase 39,000

Education and health: Increase 45,000

Leisure and hospitality: Increase 51,000

Other services: Increase 5,000

“In August, the goods-producing sector saw the best performance in months with solid increases in both construction and manufacturing,” said Ahu Yildirmaz, ADP Research Institute vice president and co-head.

“Additionally, the trade industry pulled ahead to lead job gains across all industries, adding the most jobs it has seen since the end of 2016,” Yildirmaz said. “This could be an industry to watch as consumer spending and wage growth improves.”

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Majority of Hurricane Harvey homeowners uninsured and face billions in damages

Hurricane Harvey hit South Texas as a Category 4 storm, the first major hurricane to make landfall in the U.S. since 2005.

In addition to the lives tragically lost, estimates show the damage could total in the tens of billions of dollars, according to a report, RMBS 2.0 Exposure to Hurricane Harvey Affected Counties, released by Kroll Bond Rating Agency.

CoreLogic, a leading global property information, analytics and data-enabled solutions provider, conducted an analysis for the flooding occurring due to Hurricane Harvey. The analysis showed 52% of residential and commercial properties in the Houston metro are at high or moderate risk of flooding, but are not in a Special Flood Hazard Area as identified by the Federal Emergency Management Agency.

By Monday morning, FEMA declared 24 counties disaster areas, the state of Louisiana declared five counties and the state of Texas declared 54 disaster areas.

KBRA predicted the storm could cause an estimated total outstanding collateral balance of $653 billion.

KBRA used the Texas and Louisiana declared disaster areas, specific to Hurricane Harvey as of Monday, to identify properties in the related securitizations. Within these counties, the process for identifying exposures could overestimate exposure relative to actual damage as effects of the storm may be localized within a given county. However, given that the storm is still active in the area, the affected area may increase in size through the coming weeks.

The map below shows the exposure predictions from KBRA:

Click to Enlarge

Hurricane Harvey

(Source: KBRA)

The hurricane is expected to cause flood damage of at least $35 billion, according to Robert Hunter, Consumer Federation of America director of insurance. While this is about the same level as Hurricane Katrina, most Louisiana homeowners had flood insurance, according to an article by Bernard Condon and Ken Sweet for USA Today.

Hunter estimates only about 20% of homeowners affected by Harvey have coverage, according to the article.

“Hurricane Harvey has claimed lives and has been estimated to cause billions of dollars to residential and commercial properties,” KBRA wrote. “Our sincere thoughts go out those who are affected by this disaster.”

Click to Enlarge

Hurricane Harvey

(Source: KBRA)

The housing industry continues its effort to help victims of the hurricane. For example, Wells Faro and JPMorgan Chase each donated $1 million for Hurricane Harvey relief efforts. Click here to see what other companies are doing to help the hurricane victims.

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Black Knight: Home prices hit yet another new high in June

Home prices increased from last month, reaching another all-new high, according to the monthly Home Price Index released by Black Knight Financial Services.

Home prices increased 0.9% from May to $281,000 in June, setting yet another all-new peak for home prices. This represents an increase of 6.2% from last year, according to the report.

The Black Knight HPI uses repeat sales data from its records data set and its loan-level mortgage performance data to produce home prices for disclosure and non-disclosure states.

Home price increases spread to all 50 states in June, and among the nation’s 40 largest metros, Las Vegas, Nevada, Nashville, Tennessee, and Seattle, Washington, all grew by 10% or more annually.

Here are the top six metros with the highest increase from last month:

6. Racine, Wisconsin – 1.9%

5. Buffalo, New York – 2%

NY

4. Milwaukee, Wisconsin – 2%

Median home price: $212,000

Increase from last year: 6%

3. Ithaca, New York – 2%

2. Detroit, Michigan – 2.1%

Median home price: $178,000

Increase from last year: 8.1%

DetroitBridgePhoto.jpg

1. Carson City, Nevada – 2.2%

Similar to last month, the majority of the growth continues to occur outside of major cities. Only two of the top six cities, Detroit and Milwaukee, appeared in Black Knight’s list of the U.S.’ top 40 largest metros.

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Here are the 10 hottest housing markets in August

As the new school year gets underway, the nation’s housing market isn’t expected to improve much, with inventory shortages and rising home prices likely to continue.

The names at the top of the list for the hottest housing markets in August should look pretty familiar except for one housing market that made a surprising jump, moving six places on the list.

According to the latest data from realtor.com, inventory continued to sell at a record pace in August, moving 8% faster than in August 2016.

For comparison, the hottest housing market in the country had a median age of inventory of 31 days in August, while No. 10 on the list had a median age of inventory of 39 days in August, which isn’t a huge difference. The full list can be seen in the chart below.

Even though the national median age of listings on realtor.com in August is 66 days, which is two days more than last month, it is still six days faster than the median age for August 2016.

The median nationwide home list price, $275,000, has remained unchanged since May and is 10% higher than it was last August.

Unfortunately for home shoppers, numbers are not expected to improve a lot.

By the end of the month, realtor.com said that another 500,000 new listings will have hit the market in August, representing the biggest year-over-year increase in new inventory since March 2016.

But the problem is that these aren’t the houses the market needs. Many of the homes being listed are at relatively high price points, failing to provide relief to the lower end of the market where there is the most demand.

“As we enter the last days of summer, many frustrated house hunters know this tale of steep prices, limited options and intense competition all too well. For first-time buyers, those conditions aren’t likely to improve much during the fall, unfortunately, though there could be the start of some relief in the mid- to upper-tier,” said Danielle Hale, chief economist for realtor.com.

Check below for the chart of the 10 hottest housing markets.

Click to enlarge

hottest housing markets

(Source: realtor.com)

Given Detroit’s major jump, realtor.com gave a little more insight on what’s going on in the city since its infamous fall following the financial crisis.

For August, the Detroit metro area jumped six places on the list, making it the fourth hottest market in the country, up from its No. 10 spot last month.

“Detroit jumped into realtor.com’s top five hottest housing markets last month, said Hale. “While prices are increasing in Detroit, homes are still priced about 20 percent below the national average, which has made the market a hotbed for buyers. On top of that, the market’s median income is nearly identical to the national average, which gives those looking for a home a lot of buying power in this metro.”

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Economists: Existing home sales disappointing but unsurprising

The National Association of Realtors reported existing home sales decreased 1.3% to its lowest level in a year, a move that economist said while disappointing, was not unexpected.

One economist explained this low level of home sales since last year as it struggles against low inventory levels.

“Today’s existing home sales data was disappointing, if unsurprising, and the decline in sales in July was compounded by downward revisions to June sales,” Zillow Senior Economist Aaron Terrazas said. “The American housing market is stuck in its own kind of stagflation: Existing home sales have been flat since last fall, while home values are up more than 4% over the same period.”

One economist said the second half of 2017 will see gains in existing home sales, however it could be brought down by low housing inventory.

“The fundamentals of housing demand remain strong, led by solid job gains, faster household formations, and low mortgage rates,” Nationwide Senior Economist Benjamin Ayers said. “These suggest that existing home sales should move higher as the year progresses, although actual sales will likely be held back by the lack of inventory.”

“Under more normal demand/supply conditions, existing home sales would be expected to rise sharply during the second half of 2017 – but in the current tight market, the actual gains are expected to be more modest,” Ayers said.

And other experts agreed the current home sales could become the new norm amid the low housing inventory market.

“Existing home sales still fell below the pre-recession norm, taking into account the U.S. population, and reached just 83.5% of normal in July,” Trulia Senior Economist Cheryl Young said. “Expect this rate remain below normal as first-time and younger home buyers struggle to gain a foothold in the housing market because of low supply.”

The chart below shows existing home sales dropped below the pre-recession average in 2007, and has yet to rise above it again.

Click to Enlarge

home sales

(Source: Trulia)

One expert pointed out homebuyer demand continues to be strong, despite rising home prices, a sign of health in the housing market.

“The bottom line is that there simply are not enough homes on the market to keep the overall pace growing each month,” realtor.com Chief Economist Danielle Hale said. “At the same time, continued buyer interest in the face of more than five years of price growth is a sign of strong demand and bodes well for the health of the housing market in the future.”

Other economists agreed, saying while low inventory is holding back sales, the housing demand continues to be strong.

“Though there has been steady economic growth and a strong demand for housing, we’ve seen a low inventory continuing to hold the market back,” said Bill Banfield, Quicken Loans executive vice president of capital markets. “These trends coupled with low rates make the market much more competitive for consumers to purchase a home.”

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Everything you need to know about Fannie, Freddie appraisal-free purchase mortgages

Late last week, Freddie Mac announced it would be extending its appraisal-free mortgage program to purchase loans starting September 1, 2017. Fannie Mae’s announcement quickly followed, offering its product effective immediately.

But what does that mean exactly? Who qualifies? Are the GSEs moving to take appraisers out of the home buying process?

At HousingWire, we set to work to find answers to these questions and more. Here is everything you need to know about the new programs.

For starters, why move to the purchase market to begin with? And how many Fannie and Freddie financed loans will qualify?

Both GSEs already had a program in place for appraisal free refinances. Freddie Mac began their program earlier this summer, while Fannie Mae began offering appraisal-free mortgages on some of its refinances through its Day 1 Certainty program back in 2016.

The answer from both companies was the same: After rising interest rates shifted the market from a refi market and more to purchase, the GSEs extended their programs to meet the needs of the shifting market.

Who qualifies? Zack Dawson, Fannie Mae director of collateral policy, listed several eligibility criteria for Fannie’s Property Inspection Waiver program. Some requirements include the purchase loan having at least 80% loan-to-value ratio, being single-family and condo properties, primary occupancy and second homes and only when Fannie already has a prior appraisal in electronic format that has been analyzed by collateral underwriters.

The chart below shows some eligibility requirements for PIW:

Click to Enlarge

Fannie PIW

(Source: Fannie Mae)

Freddie also listed several requirements for its Automated Collateral Evaluation including being at least 80% LTV, a single-family residence, a one-unit dwelling and the borrower’s primary residence.

Andy Higginbotham, Freddie Mac senior vice president of strategic delivery and operations of single-family business, explained that unlike Fannie’s requirements, Freddie ACE loans did not need to have a prior appraisal in the system.

“We’re leveraging previous data around appraisals so we do have those records out there, but it doesn’t have to be exactly that one, and then we look at other sources of data that will also give us additional sources of information so that we get very comfortable with what that value assumption is going to be whether we agree with it or whether we don’t,” Higginbotham told HousingWire. “We don’t have that restriction, and that, frankly, opens up the window to a broader population of eligibility.”

When analyzing the requirements, Dawson explained that it does not expect more than 5% of purchase loans will be eligible for Fannie’s PIW program. Higginbotham said it is too soon to tell how many purchase loans will be eligible for Freddie’s ACE program, but concurs the majority will still need a traditional appraiser.

While neither GSE is currently making plans to expand the program to more borrowers, they also did not deny the possibility.

“Never say never, but I think what we want to do is evaluate what we have over the next few months and make sure that we’re comfortable with the result that we’re getting back and that the process works really well for the lender and the borrower,” Higginbotham said.

And Fannie Mae’s response was similar, ensuring its dedication to continue to improve the mortgage origination process, but still unsure about opening the door to more PIW loans.

“Fannie Mae is going to continue to innovate and continue to lead the market in the area,” Dawson said. “I can’t say definitively yes or no this will or will not expand. Fannie Mae is very committed to driving responsible innovation in the collateral space and trying to modernize the mortgage origination process.”

The GSEs explained a traditional appraisal is still very important to the mortgage origination process, and that job won’t be going away anytime soon.

“I think we’ll constantly be looking at ways to improve the model and to drive that percentage up as much as we can, but I don’t think ever we’ll see anything but the vast majority of the loans still needing that traditional appraisal,” Higginbotham told HousingWire.

He explained that by automating some of the simpler mortgages, appraisals will be able to focus on the ones that need more expertise, saying, “They’ll still have that opportunity for as long as I can see in the future.”