MReport July 2022

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M REPORT | 57 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA Trend to Watch: PropTech At the crossroads of FinTech and real estate, PropTech aims to increase efficiency and save originators money. P ropTech, or the amalgamation of FinTech and real es- tate, has been a growing trend recently with the word popping up in conversation more and more often. The ultimate goal of PropTech is to make real estate transac- tions more efficient, leading to savings for originators, and faster processing and closing times. Knowing this, Citi Global Perspectives & Solutions (Citi GPS), a part of Citi Bank, released a first-of-its-kind report on the emerging PropTech industry as part of its "Home of the Future" series exploring where the trend currently stands and where it may go from here. The report ultimately found that this segment is ripe for growth. Much like when home prices went online in the 2000s and offered more information to buyers, there are still areas of the homebuying process, such as securing a mortgage and in- surance, that are largely walled-off from the general public and are the likely candidates for future PropTech growth. "The process of buying a house is pretty painful with the large amount of paperwork. And while some frictions in the buying process are healthy, there is a big opportunity to streamline things," noted Roger Ashworth, Head of U.S. Non- Agency MBS Strategy. "That's where PropTech comes in—to look for those efficiencies in the market." Other important notes the report covers on the move to- wards a frictionless housing market are: • Innovation is happening in terms of business models as well, with the rise of home equity investment contracts, iBuyers (a company that uses technology to make an offer on your home instantly), and institutional single-family rentals (SFRs). • Home equity investment contracts could deliver double-digit returns for co-investors of a property, while at the same time helping consumers tap some of the record-high equity in the housing market. • iBuyers purchase homes for resale and offer a variety of services to home sellers from offer pricing to renovating. • Institutional single-family rentals (SFRs) make up 3% of the SFR market and are poised for growth. Mortgage Origination and Adjacent Industries Represent a ~$14 Billion Mortgage Tech TAM Source: Company Reports, Citi Research for major costs on the median- priced home purchased during Q2 of 2022 in 232, or 40% of the 575 markets in the report. The top 20 highest annual wages required to afford typi- cal homes again are all on the east or west coast, led by New York County (Manhattan), New York ($362,691); San Mateo County (outside San Francisco), California ($357,567); Marin County (outside San Francisco), California ($347,958); San Francisco County, California ($327,220); and Santa Clara County (San Jose), California ($322,131). The lowest annual wages required to afford a median- priced home in Q2 of 2022 are in Schuylkill County, Pennsylvania (outside Allentown) ($17,595); Cambria County, Pennsylvania (outside Pittsburgh) ($20,171); Mercer County, Pennsylvania (outside Pittsburgh) ($23,255); Fayette County, Pennsylvania (outside Pittsburgh) ($23,638); and Bibb County (Macon), Georgia ($24,501), Homeownership is less af- fordable than historic averages in nearly all counties. Among the 575 counties analyzed in the report, 560 (97%) are less affordable in Q2 of 2022 than their historic afford- ability averages. That is up from 80% in Q1 of 2022, 69% a year ago and more than double the 44% level in Q2 of 2020. Historic in- dexes have worsened this quarter compared to a year ago in all but two of those counties. Historic affordability nation- wide has declined for the sixth quarter in row to the worst level since the second quarter of 2007, near the end of the last housing- market boom. Counties with a population of at least 1 million that are less affordable than their historic averages (indexes of less than 100 are considered less affordable compared to historic aver- ages) include Maricopa County (Phoenix), Arizona (index of 58); Mecklenburg County (Charlotte), North Carolina (59); Travis County (Austin), Texas (60); Collin County (Plano), Texas (60); and Clark County (Las Vegas), Nevada (60). Counties with the worst affordability indexes in the sec- ond quarter of 2022 are Clayton County, Georgia (outside Atlanta) (index of 47); Canyon County, Idaho (outside Boise) (48); Rankin County (Jackson), Mississippi (48); Maury County, Tennessee (outside Nashville) (49); and Pinal County, Arizona (outside Phoenix) (49). Among counties with a popula- tion of at least 1 million, those where the affordability indexes have worsened most from the sec- ond quarter of 2021 to Q2 of 2022 are Hillsborough County (Tampa), Florida (index -30%); Clark County (Las Vegas), Nevada (-30%); Collin County (Plano), Texas (-30%); Maricopa County (Phoenix), Arizona (-30%); and Pima County, (Tucson), Arizona (-30%). Only 3% of markets are more affordable than historic averages. Among the 575 counties in the report, only 15 (3%) are more afford- able than their historic affordability averages in Q2 of 2022. That is down from 20% of the same group in the prior quarter, 31% a year ago and 56% in Q2 of 2020. Counties with a population of at least 1 million that are more affordable than their historic aver- ages (indexes of more than 100 are considered more affordable compared to historic averages) include Westchester County, New York (outside New York City) (in- dex of 103) and New York County (Manhattan), New York (101). Counties with the best afford- ability indexes in the second quar- ter of 2022 include Macon County (Decatur), Illinois (index of 129); San Francisco County, California (115); Mercer County, Pennsylvania (out- side Pittsburgh) (114); Peoria County, Illinois (107); and Schuylkill County, Pennsylvania (outside Allentown) (106). Counties with a population of least 1 million where the afford- ability index has declined the least from Q2 of last year to the same period this year are Oakland County, Michigan (outside Detroit) (index -11%); Cook County (Chicago), Illinois (-13%); Cuyahoga County (Cleveland), Ohio (-17%); Westchester County, New York (outside New York City) (-17%); and Bronx County, New York (-18%).

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