MReport December 2019

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14 | M R EP O RT COVER STORY housing will remain costly, both in value and affordability," Casa said. "While the challenges facing home- buyers will continue, prospective buyers should be educated that now is the time to buy." Len Kiefer, Deputy Chief Economist at Freddie Mac, told MReport that sharp declines in in- terest rates "led to an acceleration in housing market activity. While there was some weakness in the early part of the year, as those higher rates from last fall worked in, we saw the housing market bounce back." Millennial Movements T ransUnion released a study in November that projected eight million millennial and first-time homebuyers entering the housing market by 2022. Data also found that first-time buyers are younger today than they were a decade ago. The average age of homebuyers declined from 39 in 2010 to 36 in 2018. Consumers between the ages of 25-34 have also seen their share of all first-time homebuyers rise by 6%. "There has been a lot of dis- cussion in the marketplace that younger people today may not be as interested as prior gen- erations in buying a home and being tied down to one loca- tion," said Joe Mellman, SVP and Head of Mortgage Business for TransUnion. "Our survey results suggest that is not the case at all. Rather, younger people may have in fact been deterred from home purchase by challenges they faced in the financially difficult times of the last decade." Mellman added that only 10% of respondents said being tied down to one location would be a reason to delay home purchase. "Just like others before them, the younger generation seem to place value in homeownership," Mellman added. Duncan said millennials, who are buying homes, are more conservative in the amount of debt they are taking on when compared to past generations. He added we have yet to hit the peak of millennial homebuying, and the demand from this segment of the population is "still going to be strong for some time." "I just don't see the builders catching up to that demand from millennials. So, a question is on the other end of the age spec- trum: Will there be a sufficient supply of existing homes as people downsize or there is the death of spouse or owners sell second homes?" Duncan said. Duncan said builders are not building a sufficient quantity to the entry-level space, and the baby boomers and Gen Xers are not moving. Kiefer said the homeowner- ship for those under the age of 35 is only growing, and lower mortgage rates are helping both millennials and first-time buyers. However, these buyers are facing a tight housing market and low supply, and Kiefer and his team estimate the market is 2.5 million units under supplied. The U.S. added roughly 1.3 mil- lion housing units in 2018. Kiefer said that from 1968 to 2008, there were only two years where the U.S. built fewer units: 1981 when mort- gage interest rates were 18% and 1991 when there was a recession. "Even though we've been in a decade of recovery, we're still building at recessionary levels, and the result of that is tight markets," Kiefer said. "You see young adults doubling up, living in shared living arrangements, not forming households, and affordability being a major challenge in the market." Even if they can find a home that fits their needs, there's still the matter of simply having enough to afford the home. As Bechtel pointed out, however, there are many programs for millennials and first-time buyers that cover support, down-payment assistance, and closing-cost assistance. "Through our surveys and in regular conversations with home- buyers, we continue to find a stag- gering number of people who think they have to have 20% down to buy a house," Bechtel said. "Many people still seem to believe that you've got to have perfect credit and a large down payment, but in reality there are many programs out there to assist homebuyers." The Tech Frontier T he move to technology has been swift and evident over the past year. Companies are not only making a move to tech, but they are investing big money in it. SnapDocs announced in November that it raised $25 mil- lion so it can continue to develop AI so that homebuyers can "close on their dream homes faster and with far less stress." Ribbon is investing $330 million to expand into new markets and accelerate product development. "The real estate market is rapidly evolving as consumer demand drives innovative solu- tions forward," said Matt Harris, Partner at Bain Capital Ventures, in a release from Ribbon. Rajesh Bhat, CEO and co- founder of Roostify, said prices, tight inventory, and the lack of affordability would continue to be an issue in 2020. However, he noted that one opportunity to alleviate these issues is to lower origination costs through the digitization of the application processes. Dan Sogorka, CEO of Cloudvirga, told MReport that the biggest technological change over the past year had been the rise in online real estate services for both buyers and sellers. "Searching for homes online has been mainstream for nearly two decades now, but the actual selling process has been handled by local real estate professionals—until re- cently," Sogorka said. "Consumers can now receive offers instantly by selling their home to internet-based real estate companies." He said customers have priori- tized convenience, and the idea of being able to sell homes quickly, without holding open houses, putting homes on the market, or stressing about finding the right buyer has become more appealing. Sogorka added that this is an example of technology "giving the real estate industry a lift," and that it is all possible due to machine learning and AI, which allows real estate companies to use data and analytics to understand the expected value of a property. "We know automation is a key factor in increasing efficiency and "Just like others before them, the younger generation seem to place value in homeownership" —Joe Mellman, SVP and Head of Mortgage Business, TransUnion

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