MReport May 2022

TheMReport — News and strategies for the evolving mortgage marketplace.

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M R EP O RT | 21 COVER STORY Anywhere. Anytime. MReport Digital Bringing Today's Lending Headlines into Focus, MReport Digital Puts Mortgage Banking News at Your Fingertips Experts you trust. People you know. News you want. MReport is putting essential mortgage market news at your fingertips with our new digital edition, now available online via your smartphone, tablet, or computer. Enjoy the magazine at your desk, and tap into MReport Digital's easily accessible platform anywhere, anytime. Committed to giving originators, servicers, and all lending professionals access to smarter perspectives, MReport believes it's time to think differently about the mortgage industry. Because the American Dream is evolving . . . are you? Subscribe to MReport and MReport Digital now! Call 800.856.8060 or connect with us online at to take advantage of our special introductory offer! powered by THEFIVESTARINSTITUTE down payment, opening the doors of home- ownership for many. While first-time buyers seized the opportu- nity to spend their newfound wealth, remote work opportunities also paved the way for more second-home buyers. This segment was seeking larger, more spacious homes in rural areas, away from the hustle and bustle of the city, as business could now be conducted virtually anywhere via electronic means. The home investor market share hit a record in Q 4 of 2021, as Redfin recently reported the number of homes bought by investors declined 9.1% from the Q 3 peak; however, this was still up significantly from pre-pandemic levels. Investors purchased 80,293 homes in Q 4, up 43.9% year over year. These new segments had a huge impact on housing inventory, as the number of homes available trended downward at a time when more buyers were seeking available options. Is There an Answer? W hat options are available to those who are simply priced out of the market? Even renting is becoming an affordability nightmare. Those looking to save are ham- pered by continual increases in rental prices nationwide. Redfin recently reported that the median rent price surged 17% in March 2022 to $1,940, the largest annual hike since February 2020. In conjunction, the median price of a mortgage rose twice as fast, rising by 34% com- pared to last March to $1,910, which was also the biggest increase in Redfin's records. "The truth is that not many affordable housing options are available," said Jennifer Rasmussen, VP and Head of Thought Leadership for SitusAMC Insights. "One may argue that people who cannot afford single- family housing could find financial relief by renting either single-family or multifam- ily housing instead. In actuality, SitusAMC Insights finds that while homes are the least affordable they have been since 2007, owning a home is still more affordable than renting nationwide, as multifamily rents began sky- rocketing in most metros in the middle of 2021. This is one of the reasons why so many adults are still living with their parents. The share of people living in multigenerational households is 18%, and it's 31% for young adults (aged 25 to 29)." For others, inflationary issues are forcing them to seek higher-paying jobs to keep pace with today's economic pressures. Moving to a lower-cost area may be another solution for prospective buyers who have the means, as suggested by Louis Zitting, Founder & CEO of Murray, Utah-based MonitorBase. "Homebuyers should consider their current job … they either need to increase their income or move to a lower cost area," Zitting said. "This is happening more rapidly now with many employers embracing the ability to work remotely. Or, they should consider buying a condo. That will allow them to start building equity and have the tax benefits of owning versus renting." Cake Mortgage CEO David Abelyan echoes these sentiments. "Don't be afraid of moving to a different area to get a starter home that's affordable," Abelyan said. "Continue being smart with your money and saving, look at different geographical areas to purchase to get your foot in the door. It's much better to move and buy a home and at least bank in the appreciation based on inflation alone than continue to sit on the sidelines." Another option—as noted by ClearPath Lending Director of Operations Adam Mercado—is pooling your funds together to achieve the American Dream of homeowner- ship. "Co-buying is an interesting concept that is becoming more popular," Mercado said. "Find a like-minded friend and pool your assets and income to buy a property together. You can even consider a duplex, so you both have separate living spaces for privacy and comfort." When Will the Dust Settle? I s there an end in sight to remedy the affordability issue? Will more and more Americans be shut out of the elusive American Dream of homeownership by forces out of their control? CBC Mortgage Agency Founder Richard Ferguson has an idea on how to turn the affordability tide. "There is no one thing that needs to happen, but rather a concerted effort by policymakers, central bankers, and regulators to break the affordability cycle," Ferguson said. "First and foremost, the Fed needs to get infla- tion under control. Waiting too long to pump the brakes in the midst of unprecedented gov- ernment spending has led to the predictable outcome of rising inflation and rising interest rates. The Fed has a number of tools to curb inflation and needs to use them." And, as Odeta Kushi, Deputy Chief Economist at First American, suggests, more bumpy roads may lie ahead before the path smooths out. "Affordability will likely worsen before it improves," Kushi noted. "While nominal house price growth may moderate due to the affordability squeeze on buyers who are on the margin, the severe supply-demand imbalance means the housing market is unlikely to cool enough to result in a material improvement

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