Three Distinct Quarters Tell the Story of a Resilient Housing Market

Differences Between Pandemic and Great Recession By: Steve Gaenzler, SVP, Data & Analytics, Radian One year ago, it would have been nearly impossible for prognosticators looking ahead to fathom what was to beset the U.S. in 2020. A worldwide pandemic with terrible human loss, record low unemployment rates flipped to record highs in a matter of weeks, 30-day mortgage delinquency counts shooting to a level higher than the peak of the Great Recession, and equity markets that lost almost half of their value only to roar back to near pre-pandemic levels in less than six months. Like watching a professional tennis match, the ups and downs have been dizzying. And all the while, U.S. residential home prices have appreciated without pause as demand continued to outpace supply. We have been tracking the U.S. real estate markets using the Radian Home Price Index (HPI). Provided by Radian’s subsidiary Red Bell Real Estate, the Radian HPI measures changes in real estate markets more quickly and with more granularity than any other measure. It has provided evidence of three very distinct housing market quarters. The first three months of the year were strong for the housing market. Then as the pandemic took hold and lockdowns were implemented nationally, home sales activity was curtailed substantially.   From April through June the U.S. recorded much slower home price growth. But the third quarter of 2020 showed evidence of a dramatic recovery and a clear return to the faster price appreciation rates reported at the end of 2019. Amazingly, with all the financial challenges this year, home sales activity will end 2020 as the highest year ever recorded, and home prices will have continued to climb.   This was made possible through the confluence of events new and old. For those dealing with loss of job or income, the mortgage forbearance and eviction moratorium programs that were quickly put in place have kept people in their homes—a critical difference from the last financial crisis.  Direct payments to small businesses and consumers distributed aid more quickly and to those in need without an intermediary, also a change from the Great Recession.   But longstanding supply shortages and an increase in demand for low density (i.e., suburban) single family homes were met with historical lows in mortgage rates. In the first three quarters of the year, the Radian HPI has risen at an annualized rate of 7.4 percent, which was higher than the increase of 6.4 percent recorded during the first nine months of 2019. During the third quarter, national home prices increased at an annualized 8.9 percent, which outpaced the 6.8 percent annualized gains during the second quarter, when home price gains were positive, but more subdued. In fact, construction and supply shortages were made worse all over the country by pandemic related demographic changes. For example, with so many children moving back home with their parents, the supply of newly empty-nester homes typically added to the market has shrunk considerably. Over the past decade, on average the supply of homes on the market in the summer is about 25 percent higher than the winter lows of supply. This year, however, the summer market was only 8 percent higher, meaning more than 165,000 homes that would have typically been for sale, were not.    So, what can we expect for the balance of the year? The Radian HPI should offer a few clues soon. Unlike legacy indices that offer a picture with considerable time lag, the Radian HPI produces results just 15-days after months-end, making it the most responsive measure of changing patterns. And the Radian HPI is also more granular. Micro-market indices provide a view on markets all the way to the zip code or neighborhood. When overlaid with property attributes such as bedrooms or square footage within a micro market, the Radian HPI provides an even better look at trends that might tell us what is happening on the ground.

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Popcorn Ceilings Are Bad

Easy Tips to Make Your House More Marketable By: Nicole Brungardt, Senior Account Manager, Property Masters Acoustic ceilings, or better known as “popcorn” ceilings, were first introduced in the 1930’s—can you guess why? The aggressive texture was easier and faster to apply, they were more cost effective, and they hid imperfections and muffled sound. Who cannot get behind that? Millennials—and I will tell you why. NOT INSTA-WORTHY First impressions are everything when looking at homes to purchase. When buyers first set out on the journey of purchasing a property, they do a Google search before hitting the streets. This means you better have great pictures of the house you worked so diligently on to get market ready! Behind all good photos is great lighting! Popcorn ceilings will sabotage your asset’s online presence. The uneven texture of the popcorn causes light to bounce and create harsh shadows. This is especially true if a room has recessed or flushed lighting which can translate very poorly in a photo and could ultimately deter a buyer from visiting the home in person. AGE AND REPAIRS Roofs leak and pipes burst! This is just something that comes with owning a home. Depending on the age of the popcorn ceiling and who initially applied it, it is extremely difficult to match the consistency and color after water damage. Imperfections will stick out like a sore thumb in photos and in person.  Over time, the ceiling will begin to deteriorate and start flaking off. The flakes consist of styrofoam, cardboard, and vermiculite—which is not the same as asbestos but often has traces of it. THERE’S A SOLUTION There are several solutions to get rid of this unsightly ceiling and imperfections! All you need is a ladder, a spray bottle/mister, a handy scraper, face coverings, a drop cloth, and patience. Before you start scraping, consider the age of your home and factor in the possibility of the popcorn containing asbestos. The Clean Air Act of 1970 banned spray asbestos, so if the home was built prior to 1980 it is advisable to have it tested before beginning this project. The key is to dampen the popcorn as much as possible and work in sections. This will allow the “popcorn” clumps to fall to the ground instead of creating a chalky cloud of mess. Once all the popcorn is removed, sand out the imperfections and apply a light skim coat to smooth it all out and then paint! Smoothing out the ceiling will give the room a more finished look that showcases the simplicity of the structure and the intricate details. Also, it makes the lighting “pop” while also giving the potential buyer the creative freedom to make the house their home. That’s what it’s all about!

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Completed Foreclosure Auctions Up 24 Percent to Six-Month High

Most auctions on vacant or abandoned properties exempt from moratoria Foreclosure sales rate at seven-year high, REO bids per asset at all-time high Building backlog of foreclosures could exceed 1.1 million by Q2 2021 By: Daren Blomquist, VP, Market Economics, Auction.com Auction.com, the nation’s leading distressed real estate marketplace, released its Q4 2020 Distressed Market Outlook, which shows that completed foreclosure auctions in September increased 24 percent from the previous month to the highest level since the COVID-19 pandemic was declared in March. “Foreclosure supply is slowly returning to the market as servicers refine their vacant or abandoned procedures and as states gradually open up,” said Ali Haralson, chief business development officer at Auction.com. “These vacant or abandoned properties, which are exempt from the national foreclosure moratoria on government-backed mortgages, benefit neighborhoods when they are returned to occupancy.” Foreclosure Auctions by State Despite increasing to a six-month high, completed foreclosure auctions in September were still just 22 percent of year-ago levels—or 78 percent below year-ago levels. States with an above-average share of year-ago foreclosure volume in September included Colorado (92 percent), Oklahoma (86 percent), Kentucky (56 percent), Arkansas (54 percent) and Indiana (49 percent). States with a below-average share of year-ago foreclosure volume included New York, Oregon, and New Jersey (all at 0 percent) along with Washington and Massachusetts (both at 5 percent). Foreclosure Auction Demand Demand for distressed properties—both at foreclosure auction and for online auctions of bank-owned (REO) properties—hit new multi-year highs during the third quarter of 2020, according to buyer demand data from the Auction.com marketplace. The foreclosure sales rate—the percentage of properties brought to foreclosure auction that sold to a third-party buyer rather than reverting to the lender as REO— increased to a seven-year high of 55.6 percent in September. The average price per square foot for third-party foreclosure auction sales dipped in the third quarter, likely because of the shift to vacant or abandoned properties that often come with more deferred maintenance, but the average price relative to estimated full market value (price execution) increased to a 6.5-year high in September. “Buyers are showing up in force at the live foreclosure auctions, both in-person at the auction venues and now also virtually, thanks to the Remote Bid feature on the Auction.com mobile app,” said Steve Price, SVP of trustee operations at Auction.com. “Where available, this feature allows buyers to participate in real time at the auction from just about anywhere.” REO Auction Demand The average number of bids per REO sold via online auction increased to 12.0 in September, the highest average bids per REO sold as far back as data is available, September 2012. The increased competition for online REO auctions helped to push the average price per square foot to an all-time high of $87 in July and average price relative to seller reserve to a new all-time high of 104.5 percent in September. “Buyers can bid, buy and close on online REO auction properties without leaving their homes, making this inventory particularly attractive to real estate investors and other buyers in this season of social distancing,” said Walter Skrzynski, SVP of online auction sales at Auction.com. Estimated Foreclosure Backlog Data from the Auction.com platform and other industry sources shows a growing backlog of mortgages that are in foreclosure or delinquent but not in a mortgage forbearance program. These mortgages will be those that are most likely to restart or continue the foreclosure process when the nationwide moratoria on government-backed mortgages is lifted. “We estimate the foreclosure backlog will have grown to more than 1.1 million residential properties by the end of the first quarter of 2021,” said Daren Blomquist, vice president of market economics at Auction.com. “That means we would expect the foreclosure process to start or restart on the mortgages secured by those properties once applicable moratoria are lifted and courts begin to resume foreclosure cases in judicial states. Given the patchwork of state approaches, the return of this backlogged volume will likely be spread over months, if not years.” 

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Surround Yourself with Great People

Everything in Life is Sales By: Danny Byrnes, Chief Revenue Officer, Nationwide Title Clearing When I was in high school, I started working at a technology company that developed and delivered an accounting software platform. Years later, that company was acquired by Microsoft. It was an easy job to get as my father owned the company. Growing up in the analog 70’s I became fascinated with the technology that was presenting itself in the 80’s. I had a passion for dissecting every piece of hardware and software I could get my hands on and this job was perfect for that. Wanting independence, and to know that I could succeed without my father’s help, I moved from the east coast to Los Angeles. I took a job selling auto and boat insurance at one of the largest insurance brokerages on the west coast. It was a great company, but it was my first role in sales, and I hated it. The competitive nature between the sales reps, the shifty prospects and clients, sales quotas, metrics, etc. was a great experience but it was not for me, so I thought. I made the first quota assigned to me and resigned. I left there swearing I would never attempt to do sales again. Can’t Get Away from Sales Moving on, I started working at a music production company managing sound and lighting equipment for live performances. I found myself moving from the recording studios to local clubs then out on the road touring with international acts. I suppose I was better at handling people than I was caring for equipment as I quickly moved up to management and overseeing all touring operations for many national and international artists. The president of the company was extraordinarily successful in bringing on new clients that I was responsible for. We later partnered together and started an international booking agency for musicians. Before I knew it, I was in sales again, booking tours for bands all over the world. Musicians were the product and concert promoters were the clients. In denial that I was in sales (due to the oath I swore that I would never do it again) is how I formed my sales approach. I was not “selling” but rather developing relationships and facilitating a way for musicians to get out on the road to communicate their message of art to as many people as possible. With that mindset it was never a burden. Getting married and settling down to raise a family, I had to get off the road. I sold the booking agency and moved back east where the rest of my family was. I was not really looking for a job and did not have an interest in getting a sales job. I had a friend who owned a software company and he needed some help with the tech support for his products. I jumped in and took over the support department. In support, I was selling more products than the sales team just by talking to the prospects and clients and helping them, not “selling” them. Did I naturally apply sales technique unbeknownst to me? Was I tracking how many calls out, average call time, successful closes, pipeline, managing a quota, etc.? No. But I sure was selling. Consequently, I was moved into a formal sales position and eventually became responsible for the whole department. Our department tripled the company revenue in 5 years. The company wanted to relocate out to the west coast, and I did not so I took a sales position at another software company selling network security products. Softening up to the idea of sales (and enjoying the large commission checks) I decided to give in, admit that this is what I like to do, and really play the game. I made quota in my first quarter and exceeded quota each quarter after that for a year. I then moved into the Enterprise sales with the “big boys”. At first, I was intimidated by the Enterprise Sales Executives as they had the formal sales training and experience that I thought I was lacking. It turned out that I was fine and continued to make quota. Beginning With NTC The company was acquired, and new leadership was brought in with a complete restructure. The new management had the idea that the sales executives that were exceeding quota were making too much money and the ones that were not making quota were not making enough. I witnessed one of the biggest mistakes you can make in any sales operations. The compensation of the top performers was cut in half and the compensation of non-performers was raised by 20%. In an effort to increase their bottom line they sealed their fate. It was at this time that two friends of mine, the CEO, and the VP Sales of Nationwide Title Clearing, invited me out for a cigar and a few beers. While enjoying a nice stogie and a hearty Belgian beer I found myself being recruited. Working in the financial industry was the last thing on my mind but given the current situation I accepted. To this day they both still argue about who closed me on taking the job. I just smile and nod. I gave my notice and during my exit interview the VP Sales pulled me into her office and asked why I was moving from a booming industry (technology) to a very troubled mortgage industry (this was in 2010). I explained to her that I felt the mortgage industry was starving for technology and I was going to take advantage of that. The first 6 months were rough. I was constantly questioning myself as to what I was doing. I had to learn an entire industry and sell products that I was not as familiar with as my peers. I decided to fully commit and learn everything about what we were delivering as a company. I had some great help from my co-workers and quickly

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Offerpad Adds New Chief Growth Officer and Chief Legal Officer in Executive Team Build-out

As part of its strategy to advance its Real Estate Solutions Center and future business plans, real estate tech innovator Offerpad, based in Phoenix, Arizona, announced the expansion of its Executive Team. David Connelly, previously with Citigroup, joins Offerpad as the company’s new Chief Growth Officer, and from Taylor Morrison Home Corporation, Ben Aronovitch has been hired as its new Chief Legal Officer. “With the addition of David and Ben, we’ve made the best real estate team in the world even better,” said Offerpad Founder and CEO Brian Bair. “Their extensive expertise and past experience will help move Offerpad through the next exciting phase of our growth and development. Connelly now runs growth initiatives for the flourishing real estate tech company. His responsibilities include launching new revenue channels, assisting with capital markets opportunities, and helping to lead strategic partnerships for the company. As Offerpad’s new CLO, Aronovitch will lead the company’s legal, compliance and risk management functions. “Offerpad is a strategy-driven and forward-thinking company. I’m pleased to be coming on board at such a pivotal moment in the company’s development,” said Aronovitch.

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GROUNDFLOOR Lowers Fees and Announces New Lending Initiatives

GROUNDFLOOR, the award-winning wealthtech platform that allows everyone to build wealth through real estate, is rolling out a series of initiatives to meet the growing demand for residential real estate investment capital and opportunities to supply it. The new lending initiatives from GROUNDFLOOR include: The Loan 100 Program. Available only to the most experienced borrowers in GROUNDFLOOR’s network, the Loan 100 product provides financing for up to 100% of total project costs, including purchase and renovation. Reduced Origination Fees and Interest Rates. The reduced fees include a decrease of 1% across the board and of up to 1.5% off origination fees for qualifying borrowers. This ability to reduce fees is a direct result of GROUNDFLOOR’s increased capacity to finance larger-balance loans and by leveraging proprietary technology to streamline loan processing capacity. Full Lending Operations to 30 States. The wealthtech platform has now expanded to resume its lending programs with deferred payment options and zero interest reserves across 30 states. New Construction Loans in NC and GA. GROUNDFLOOR is offering highly flexible new construction loans with non-recourse financing and attractive interest on disbursement terms for qualified builders.

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