2021 – Page 38

A Record 1 In 4 Single-Family Homes for Sale In the First Quarter Were New Construction

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New construction is taking up a bigger piece of the pie as low mortgage rates and surging homebuyer demand make homebuilding more attractive during the coronavirus pandemic More than a quarter (25.7%) of single-family homes for sale in America during the first quarter were new-construction homes, according to a new report from Redfin (www.redfin.com), the technology-powered real estate brokerage. That is up from 20.4% a year earlier and represents the highest share on record. New-construction homes have steadily been taking up a larger piece of the pie over the last decade, but there has been a notable acceleration during the coronavirus pandemic. There are two primary reasons, according to Redfin Lead Economist Taylor Marr: an increase in homebuilding and a decrease in the number of Americans putting their houses up for sale. “Building homes has become more attractive and profitable during the pandemic due to record-low mortgage rates and red-hot homebuyer demand,” Marr said. “At the same time, many homeowners have opted to stay put and refinance or remodel their existing homes instead of selling them, allowing new-construction homes to take up a larger portion of the market.” U.S. housing starts—the number of new residential construction projects—jumped nearly 20% month over month in March to the highest level since 2006, a sign that homebuilders are growing more bullish despite lumber shortages and elevated construction costs. Meanwhile, listings of existing homes fell. A lot of pandemic homebuyers have also turned to the new-construction market because bidding wars are fierce and new homes have historically attracted less competition. But the U.S. housing shortage has grown so severe that some newly built homes now have waitlists that are 90 buyers deep, said Redfin’s Salt Lake City Market Manager, Ryan Aycock. Some builders are even canceling contracts with buyers who refuse to accept price increases. “New construction has typically been a good option for buyers who don’t want to deal with bidding wars because builders don’t usually set deadlines for offers. Buyers also like that they can often buy a new home for what it’s actually listed for rather than having to offer way over the asking price to win,” said Redfin Houston real estate agent Melanie Miller. “However, inventory for new construction is very low and prices are now rising for many new and pre-construction homes because lumber prices have gone up. I had one buyer who came to terms with a builder at a certain price. The builder called us the next day and said they can’t do that price anymore because their suppliers just increased prices.” El Paso, TX and Boise, ID Have the Highest Share of New-Construction HomesIn El Paso, TX, 53.2% of single-family homes for sale in the first quarter were newly built—the largest share of the 82 U.S. metropolitan areas in Redfin’s analysis. Metros must have had populations of at least 750,000 and at least 50 sales of newly built single-family homes in the first quarter to be included in Redfin’s analysis. The other metros in the top 10 were Boise, ID (46.7%), Houston (35.5%), Raleigh, NC (34.5%), Baton Rouge, LA (34.1%), Albany, NY (33.7%), Nashville, TN (31.9%), Charlotte, NC (31.6%), Oklahoma City, OK (30.8%) and Knoxville, TN (29.6%). In Fresno, CA, just 2.4% of single-family homes for sale in the first quarter were newly built—the smallest share of the 82 metros in Redfin’s analysis. It was followed by Oakland, CA (2.9%), Bakersfield, CA (3.2%), Riverside, CA (3.4%), Pittsburgh (3.8%), Anaheim, CA (4.2%), San Diego (4.4%), Las Vegas (4.5%), Camden, NJ (4.7%) and Newark, NJ (5%). California metros fill the bottom of the list in part because they tend to have less vacant land available and less space zoned for housing development, Marr said. When broken down by region, the West had the lowest share of newly built homes as a portion of total single-family homes for sale, at just 8.4%. It was followed by the Northeast (11.4%), the Midwest (15.4%) and the South (25.8%). Certain major metros are excluded from Redfin’s analysis because its methodology filters out metros where there were fewer than 50 sales of newly built single-family homes in the first quarter. San Francisco and Philadelphia are among the metros excluded for this reason. Looking Ahead: Building Permits Are Up the Most In Elgin, IL and Tacoma, WASingle-family building permits, or government-granted authorizations that allow builders to begin construction of single-family homes, jumped 25.7% year over year during the first quarter. In Elgin, IL, single-family permits climbed 68.3%—the biggest jump of the metros in Redfin’s analysis for which U.S. Census permit data was available. It was followed by Tacoma, WA (58.9%), Bridgeport, CT (57.9%), Minneapolis (57.5%) and Albany, NY (57%). Just five of the metros in Redfin’s analysis saw a decline in single-family permits. The largest drop was in Newark, NJ, where permits fell 22% from a year earlier in the first quarter. Next came Allentown, PA (-19.6%), Virginia Beach, VA (-10.5%), San Diego (-9.2%) and Camden, NJ (-5.6%). To read the full report, including charts with metro-level data, please visit: https://www.redfin.com/news/new-construction-Q1-2021

U.S. Foreclosure Activity Continues to Increase Despite Government Moratorium

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Number of Homes Flipped by Investors Decreases for First Time Since 2014 ATTOM Data Solutions, licensor of the nation’s most comprehensive foreclosure data and parent company to RealtyTrac (realtytrac.com), released its Q1 2021 U.S. Foreclosure Market Report, which shows there were a total of 33,699 U.S. properties with foreclosure filings—default notices, scheduled auctions or bank repossessions—during the first quarter of 2021, up 9% from the previous quarter but down 78% from a year ago. The report also shows a total of 11,880 U.S. properties with foreclosure filings in March 2021, up 5% from the previous month but down 75% from March 2020—the second consecutive month with month-over-month increases in U.S. foreclosure activity. “The foreclosure moratorium on government-backed loans has virtually stopped foreclosure activity over the past year,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “But mortgage servicers have been able to begin foreclosure actions on vacant and abandoned properties, which benefits neighborhoods and communities. It’s likely that these foreclosures are causing the slight uptick we’ve seen over the past few months.” Highest foreclosure rates in Delaware, Illinois, and Florida Nationwide one in every 4,078 housing units had a foreclosure filing in Q1 2021. States with the highest foreclosure rates were Delaware (one in every 1,705 housing units with a foreclosure filing); Illinois (one in every 2,175 housing units); Florida (one in every 2,237 housing units); Indiana (one in every 2,397 housing units); and Ohio (one in every 2,500 housing units). Among 220 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in Q1 2021 were Lake Havasu City, Arizona (one in every 518 housing units); Provo, Utah (one in 1,280); McAllen, Texas (one in 1,297); Shreveport, Louisiana (one in 1,353); and Atlantic City, New Jersey (one in 1,441). Other major metros with a population of at least 1 million and foreclosure rates in the top 50 highest nationwide, included Cleveland, Ohio at No.6; Birmingham, Alabama at No. 9; Jacksonville, Florida at No. 12; Miami, Florida at No. 34; and Riverside, California at No. 39. Foreclosure starts increase 3% from last quarter Lenders started the foreclosure process on 17,652 U.S. properties in Q1 2021, up 3% from the previous quarter but down 78% from a year ago. Those states that saw the greatest quarterly increase in foreclosure starts and had 500 or more foreclosure starts in Q1 2021, included California (up 36%); Ohio (up 25%); North Carolina (up 15%); Virginia (up 11%); and South Carolina (up 10%). Bank repossessions increase 14% from last quarter Lenders repossessed 7,320 U.S. properties through foreclosure (REO) in Q1 2021, up 14% from the previous quarter but down 87% from a year ago. Those states that had the greatest number of REOs in Q1 2021 were Florida (945 REOs); Illinois (610 REOs); California (414 REOs); Texas (370 REOs); and Arizona (330 REOs). Average foreclosure timeline increases 8% in first quarter 2021 Properties foreclosed in the first quarter of 2021 had been in the foreclosure process an average of 930 days, up 8% from an average 857 days for properties foreclosed in the fourth quarter of 2020 and up 38% from an average of 673 days for properties foreclosed in the first quarter of 2020. “The government’s foreclosure moratorium, and the CARES Act mortgage forbearance program have extended foreclosure timelines for owner-occupied homes by a full year,” Sharga noted. “Hopefully, this extra time will give financially-distressed homeowners the chance to get back on their feet, and work with their lenders to avoid a foreclosure when the government programs expire.” States with the longest average foreclosure timelines for properties foreclosed in Q1 2021 were Arizona (1,939 days); New Jersey (1,764 days); New York (1,691 days); Pennsylvania (1,654 days); and Hawaii (1,650 days). States with the shortest average times to foreclose in Q1 2021 were West Virginia (48 days); Montana (76 days); Nebraska (112 days); Mississippi (132 days); and Missouri (189 days).

Single-Family Rentals Have More Runway Ahead

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Institutional Investors Reconsider the ‘Get Out’ Portion of Their Initial ‘Get In, Get Out’ Purchase Strategy by Steven Katz These days, it is rare to pick up any real estate publication and not see a single-family rental (SFR) headline near the top of the page. Industry attention and institutional participation are seemingly growing by the minute. Naturally, where there are advocates, there are also devil’s advocates, and they have raised the question as to whether the SFR space is already getting crowded. It may be true that the sector is no longer in its infancy, but if that is the case, it has only matured into its adolescence. SFR is in the middle of a rapid transformation, and it likely has several years of evolution before approaching anything resembling an equilibrium. Thanks to the sector’s still-low prevalence of professional management, efficiency-delivering tech adoption and supportive demographic drivers, there is little doubt that SFR has the solid fundamentals to sustain its momentum. From Crisis to Creation As the story goes, the professionally managed SFR sector as we know it today is a byproduct of the Great Recession and the inexorably linked Housing Crisis. Institutional capital opportunistically picked up undervalued single-family homes, adopted a rental strategy and waited for prices to recover for a profitable exit. However, over those initial few years, rental housing management was still in the nascent stages of determining the best ways to operate SFR communities. Since then, the adoption of new technologies has streamlined operations and simplified the landlord-customer relationship. The implementation of self-showing technology, digital lockboxes and online rental screening tools have all allowed for a quicker, more seamless leasing process. Time is money in this industry, and the efficient matching of potential renters with their ideal units meaningfully cuts down on implicit vacancy costs. Once a home is leased, renters now have access to mobile apps that streamline the process for maintenance requests, allowing landlords to monitor the property and get ahead of potential issues. A 2017 study of apartment tenants by Buildium found that 53% of renters prefer to be contacted via email with important updates from their landlord, while 47% of renters want the ability to file and track maintenance requests electronically. This shift in renter preferences has likely leapt even further during the pandemic as the ability to conduct business remotely became paramount. Lastly, the integration of smart home technologies, especially in HVAC systems, reduces excess energy usage and allows for both greener pockets and environments. Collectively, these new developments have freed up time and resources for managers and tenants alike, all while improving product quality and the user experience. The sheer volume of new innovative technologies introduced into SFR over the past decade is immense. Taking all of the small incremental cost savings together has proven to be a game changer for the industry — it is a main reason why institutional investors have reconsidered the ‘get out’ portion of their initial ‘get in, get out’ purchase strategy. Demographic Sweet Spot Inarguably, the single-family rental tenant profile is one of the sector’s most attractive aspects. On average, SFR tenants stay in their homes longer than in any other type of rental housing. According to our research partner, Chandan Economics, 76.0% of SFR tenants remain in their units for more than one year, with the share falling to 74.0% in two- to four-family homes and 69.9% in multifamily properties (Chart 1). Moreover, SFR leads the pack in the percentage of tenants who stay for five years or more. A sizable 35.6% of SFR households are five-year-plus residents, with the total edging down to 32.4% and 27.6% for two- to four-family and multifamily, respectively. These data are in line with what we all already know to be true: once there are kids in the home, moving becomes a more arduous process. For reference, single-family rental properties are 37% more likely to have children in the household than all other rental types. Between renters’ penchant for remaining in their homes for longer and the fierce competition to get into available units, it should come as no surprise that vacancy rates in SFR properties have historically sat 2.6% lower than all other asset types. For landlords, these lower vacancy rates translate to less time without cashflow generation. Certainly, these trends speak to SFR’s in-place value proposition, but how are forward-looking trends likely to shape future demand? The pandemic has accelerated domestic migration, and the SFR market is positioned to be a primary beneficiary. Chandan Economics notes that, generally, states that have enjoyed higher levels of population growth over the past year tended to have higher shares of SFR as a percent of total rentals (Chart 2). Within the 10 states posting the highest population growth in 2020, SFR made up an average of 45.0% of all rental households (Chart 3). The share rises to 46.2% for the next 10 by population growth but falls thereafter. A Whole Lot of Runway Despite attracting both investor and media attention, the SFR market is still largely owned by smaller investors. According to a Chandan Economics analysis of the Census Bureau’s 2018 Rental Housing Finance Survey, the share of SFR owned and operated by institutional managers was just 2.3% in that year, while multifamily’s share was 8.3% (Chart 4). The splits are even more disproportionate when it comes to the share of units owned and operated by individual investors. The ‘mom and pop’ contingent accounted for 72.5% of SFR units and just 11.9% of multifamily units. The trifecta of LLP, LP and LLC investors, a group that makes up a dynamic middle ground between large and small investors, accounts for 57.7% of multifamily control and just 15.7% within SFR. While these data seem to reflect two separate rental housing universes, as the SFR sector continues to scale up, attract institutional investment and bring on professional managers that offer innovative technologies, institutional SFR is looking more like institutional multifamily day by day. It is only natural that their ownership

Investor Profile

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Jeffrey Hotz From Musician to Real Estate Entrepreneur As the son of a real estate agent mother, Jeff Hotz always had a passion for real estate. He also had a passion for music. After graduating high school, Jeff joined the United States Marine Corps with the express goal of being a musician in the Corps. He did that and much more for six years, from 1998–2004 (as a musician in the Corps, you are first and foremost a fighting Marine). After that he took a “military” break and became a licensed real estate agent and property manager in the Washington, D.C. area before joining the United States Navy and becoming the Navy Region Southwest Brass Quintet Leader and Drum Major. He finally settled into the United States Army Reserves as a Trumpet Instrumentalist and Platoon Sergeant, positions he still holds today. While in Washington, D.C. in 2012 he saw a “We Buy Ugly Houses®” billboard and the rest is HomeVestors of America history. In 2013, he bought a HomeVestors franchise and became an independently owned and operated business owner in the Cleveland, Ohio market, forming Marcor Investments LLC. Because of military commitments, he ended up transferring his franchise to the Chicago area for a time, before ultimately securing a firm footing in Columbus, Ohio. In Jeff’s own words, he was “the right person at the right time”. The timing was perfect to immerse himself in his “real estate passion”. He always wanted to be his own boss and create something for himself and his family, specifically, long-term legacy wealth. Jeff’s wife, Kellie, is a Communications Consultant in the bio-tech industry, and together they have two boys: Brady, 12 and Bennett, 3. Similar to other successful HomeVestors independent business owners, Jeff has relied heavily on the support, structure, and time-tested proven systems of HomeVestors, including the Development Agent (DA) program. He also credits his military experiences and the knowledge gained from serving in the military. As Jeff puts it, “I do what I’m told to do.” He also credits strategic and tactical thinking, the mission accomplishment credo, and the ethics of selfless service. “Real estate is a numbers game,” added Jeff, “but people are the most important part. You need to be passionate about helping people!” Jeff equates his military “family” with his HomeVestors® “family.” “I would go to war with my HVA family,” Jeff stressed. At a mere 41 years old, 20+ years in the military, and a HomeVestors franchisee for 8 years, Jeff is on his way to building his long-term legacy wealth by also creating his own personal real estate portfolio along the way. Marcor Investments had their best year in 2020, pandemic and all. And, since 2017, Jeff has been the Development Agent for the entire state of Ohio. The DA program provides the necessary field support for both the new business owners as well as the seasoned ones. Jeff’s advice to fellow independent business owners: “Get committed…push back the noise…move forward…and focus on mission accomplishment.” Spoken like a true Marine andtrumpet player. HomeVestors What exactly does it mean to be a HomeVestors business owner? Owning a real estate business is life changing and naturally comes with risks! When you become a HomeVestors® business owner, you get immediate access to motivated seller leads, financing resources, one-on-one coaching with your local Development Agent, proprietary software for analyzing properties and deals, and access to a nationwide network of coaches and peers. Your house-buying business is yours and you run it as your own venture. If you are interested in a franchise, contact April Nealey at april.nealey@homevestors.com Each franchise office is independently owned and operated.

ServiceLink

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Scaling Your Residential Real Estate Portfolio Through SFR Properties 2021 could be the ideal year for investing in SFR properties. Here’s where to find the support you need to grow your residential property portfolio. “More U.S. households are renting than in any point in 50 years.” When Pew Research Center made headlines with its analysis of Census Bureau Housing Data on renting versus homeownership in 2017, the broader public was clued in to the trend SFR investors had been leveraging for some time. The growth comparison was stark: While the number of renters increased by 23 million from 2006 to 2016, the number of homeowners increased by fewer than 700,000. Market momentum continues to support a single-family rental investment strategy, as families increasingly seek more space without the long-term commitment of homeownership. In fact, the Urban Land Institute (ULI)/PricewaterhouseCoopers (PwC) report, Emerging Trends in Real Estate® 2021, suggests that single-family homes marketed to moderate-income renters may hold the strongest investment and development potential among residential property types in 2021. Many SFR investors agree that 2021 may be an opportune moment to grow residential real estate portfolios. “It is a great time to scale,” says Stacy Marshall, Assistant Vice President, Business Development & Strategy at ServiceLink. “Although inventory has recently been low due to increased demand during the pandemic, SFR properties have become more profitable than they were a couple of years ago.” Inventories are also expected to grow as the foreclosure moratorium is lifted. “We are beginning to see an increase in distressed housing, which opens up new opportunities for investors,” Marshall says. “Where in the past these investors might have purchased, fixed and flipped these properties, now they’re doing the fix but then renting instead of flipping to take advantage of the growing demand.” How to Scale Your Residential Property Portfolio Scaling an SFR portfolio requires a variety of capabilities. “It’s important for investors to perform market analytics to gain an understanding of which MSAs they want to expand into,” says Terri Hunter, Vice President, National Sales Executive at ServiceLink. “Then they need to act quickly to get those areas up and running. Having a partnership with a national organization with capabilities in valuation, title, property preservation and auction services can help them accelerate the process of scaling their residential property portfolio.” Hunter identifies several actions investors can take to position themselves to successfully scale their residential real estate portfolios: Seek specialized valuation expertise. SFR appraisals are not typical appraisals; they require seasoned appraisers with experience in this type of transaction’s special requirements. “SFR appraisers need to provide both as-is and as-repaired values, which means taking into account budgets, surveys and other factors related to repairing or upgrading properties; they also need to understand the urgency of each transaction,” Marshall says. “At ServiceLink, we handpick appraisers with SFR experience in markets across the country to be part of our dedicated panel. The investors we work with benefit from this experience when they request either a Desktop Appraisal with Inspection (DVI) or traditional appraisal product.” Quality control is, of course, vital to the valuation process. An ideal valuation partner will not only comply with GSE, and USPAP requirements, but also be able to incorporate custom lender requirements into their quality control checklist and processes. Be prepared to close quickly. A partner with centralized title and close capabilities can speed your decisioning, title clearance and closing. Since many SFR properties come onto the market as a result of foreclosure, you need to be able to trust your partner to make business-based title underwriting decisions and identify and clear any title issues as quickly as possible, and then close the transaction smoothly. ServiceLink has in-house access to underwriters for accelerated decisions and a centralized team with no down-lining that doesn’t have to hand off to another title office. This greatly expedites closing, along with the cutting-edge technology used in the process. This technology is supported by teams of title curative specialists and other experts experienced in the nuances of SFR properties. Investors who leverage ServiceLink Title and Close, backed by this team, often find they can close about 10 days sooner than they would have going the more traditional route. Consider outsourcing inspections and day-to-day maintenance. As you grow your SFR holdings in various geographic markets, having a reliable resource to conduct condition, move-out, work-in-progress and disaster inspections, as well as to provide day-to-day property maintenance, is important. A reliable, responsive property preservation partner offers you the assurance that your properties are protected and kept up to municipal, county and state code. “Outsourcing inspections and day-to-day maintenance lifts a heavy burden from investors,” says Hunter. “For those who don’t have full staff coverage, ServiceLink provides a national solution. We cover thousands of investors nationwide, so if we get a request for an inspection, or repair or maintenance services on a particular property, we can respond right away. We have the capability to customize inspection reports, too, so that they include all of the information and photos the client requests.” Have a source for properties. Zeroing in on the right properties can be a challenge when you’re approaching a new market. You need an insider—someone who knows neighborhoods, market values, median incomes and more. The auction arm of ServiceLink provides all of this to its investor partners through ServiceLink Auction, an easy-to-use digital platform that enables investors to find a property, make an offer and close the deal. Choose a partner with national scope. Working with a national partner offers important advantages: accelerating your entry into new markets by leveraging that national presence and eliminating the need for you to contact providers in each state, for starters. If you choose your partner carefully, you will also have access to specialized expertise and services to take you all the way from sourcing properties to closing transactions and maintaining your properties. As for scalability, because national companies process thousands of transactions each month, they are prepared to take on additional volume at a moment’s

Q&A with Jennifer McGuinness, President of Invigorate Finance

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Starting a New Chapter and Looking Ahead REI INK had the opportunity to interview Jennifer McGuinness, the president of Invigorate Finance, a newly formed partnership between Mortgage Venture Partners and Fay Financial. McGuinness brings over twenty-five years of lending and aggregation, banking, asset management, servicing, securitization, and structured finance experience to Invigorate Finance. Most recently, she was the Founder and Head of Aggregation & Structured Finance for Mortgage Venture Partners. She is also the Founder of Strategic Venture Partners. Both Mortgage Venture Partners and Strategic Venture Partners were named 2020 Top 25 FinTech Innovators. Q: You recently announced a new chapter with Invigorate Finance. Why did you decideto partner with Fay as opposed to staying on your own with Mortgage Venture Partners (“MVP”)? A: Both MVP and Invigorate Finance are closed loan mortgage conduit aggregators. Under the MVP structure, we were solely able to offer delegated correspondent aggregation. But with Invigorate Finance, we will also shortly launch a non-delegated correspondent channel. In addition, generally lenders face two really big challenges: (1) the cost to originate is expensive and (2) servicing transfer is difficult and can cause significant “noise” for their customer leading to, for example, a less than desirable customer service experience when they make their first payments or take their first draw on a line of credit. I have known Ed Fay a long time and he has done a good job building a services business that I believe will add significant value for certain Invigorate Finance clients. This partnership allows for us to deliver a quality of service that no other aggregator can match. Invigorate Finance truly offers complete solutions and is a real partner for lenders and investors alike. We are not merely a “take out”. Q: How do you work with Lenders to increase production without sacrificing customer service? A: Entities that are solely in the aggregation business to flip loans to other investors will make a little money standing in the middle, but they tend to outsource everything. When a lender deals with an “outsourced” aggregator there is a general lack of consistency in standards and practices, which is important because it can impact how loans are underwritten and whether exceptions are prudently assessed, for example. This is not the Invigorate Finance business model. Invigorate Finance does not outsource the operational features of its business, such as credit; hence the lender truly builds a relationship with us that is based on knowledge and that is how a business thrives. At the end of the day, Invigorate Finance is a customer service driven business. If the lender is working on an exception when underwriting a loan, they are going to be working with our internal team; if they are working to clear a condition before we purchase the loan they will be working with our internal team. We do not ask vendors to run our business for us. We run our business and that creates true rapport with our lender partners and investors. Q: Whenever you take a new step in your career it seems to be to invent something. Why is that? A: I think it is less about inventing things and more about the enjoyment of taking on a challenge that, if achieved could bring the market forward or enhance access to credit. I also love to learn new things or grow aspects of my knowledge base further. Throughout my career I have been very lucky to have been given the opportunity to truly build and run the full lifecycle of origination, asset management, servicing and structured finance, and have done so in lenders, banks, aggregators, hedge funds and REIT’s. I believe this background allows me to look at an opportunity from all sides rather than from only one “silo” and therefore provides me, our team, our lender partners, and investors with optimized outcomes. Now, it is important to note that I have not done any of the things I have achieved alone. I have been blessed with great mentors and team members over the years and it is their achievement as well as my own. Q: You are making a push to solve some of the supply problems we are seeing in the single-family rental space through aggregating new construction lines of credit—explain your thinking here. A: When looking at the market today, the biggest challenge I see initially is that demand does outweigh supply if you are solely looking at “for sale” real estate and mortgage rates. The demand of the homebuyer, coupled with the demand of the institutional investor, continues to drive home prices up in many markets. This, hand in hand with record low mortgage rates, has well positioned home buyers to make better purchase offers which could result in lower investment returns for investors, should they have to increase “buy prices” to acquire additional real estate. Single Family housing starts have increased by over $1.2 million in November 2020 per the Census Bureau which is more than a 25% increase from 2019. While a lot of the new construction will go to owner-occupants, this significant addition of new homes will begin to equalize the lack of supply for investors. By offering new construction lines of credit we are funding what is necessary to effectuate the build of the homes to actually help that demand be put to work. Q: Where do you think the market is heading? A: Now that the broader market has begun to equalize, the non-QM and non-agency markets are both starting to rebound. In addition, with recent announcements from the GSEs, there are additional opportunities opening up for non-agency segments of the market. For example, the 7% saturation for non-owner-occupied properties really does create opportunity for other lending programs to pick up additional volume to service this customer base. Good examples are our 1st lien HELOC, our 1st lien jumbo and our non-QM 1st lien programs—they all have applications for second homes and non-owner-occupied dwellings. The obvious follow up question is, “Will that create