Low-cost residential real estate brokerage is not necessarily a new phenomenon. About 50 years ago, a trailblazer named Dave Liniger created the concept of “real estate maximums,” birthing RE/MAX. RE/MAX was probably the most radical low-cost ‘disruptor’ this market has ever seen.  About 10 years later Gary Keller founded Keller Williams, and it was KW that revolutionized the cap-commission model, which, for all intents and purposes, is a low-cost model. The flat-fee model has also been around for decades, but only in the last 10-15 years has it taken off.Are agents really keeping 100%?Flat-fee brokers advertise themselves as 100% firms. Real estate agents under their flag get to keep 100% of the commission earned in a transaction. The way these firms make money is by charging a monthly fee and/or a transaction fee. Some may also charge other fees for such things as Errors & Omissions insurance, desk rental, technology, etc. In reality, agents are keeping somewhere between 92 to 98 cents on the dollar with these flat-fee firms. While not truly a 100% take, agents who hang their licenses with these firms are generally keeping more than agents listing and selling with firms that have the more traditional commission models. Flat-fee firms climbing up the brokerage rankings Interestingly, in 2013 only five of the top 100 firms in the nation, according to the RealTrends 500 rankings, were flat-fee firms. In 2023, 10 years later, flat-fee firms now account for 16 of the top 100. By transactions last year, flat-fee firms did 12% of the closed business of the top 100, compared to 5% back in 2013. Put another way, in just 10 years, flat-fee firms have more than tripled their presence among the nation’s top 100 firms, while growing their production by 129%.Incredibly flat-fee firms now account for six of the top 25 brokerage firms in the nation. United Real Estate, HomeSmart, Fathom, Realty ONE Group, West USA Realty and Samson Properties all have incredible growth stories since their respective beginnings.Not all industry stalwarts welcome this modelNot all in this industry are welcoming the burgeoning growth of flat-fee firms. Many of the incumbents do consider it an invasion, and the primary reason is the ‘flat-feers’ role in the wholesale margin compression that’s been whacking this industry.  Low-cost brokerage has kicked brokers in the teeth over the years. Before RE/MAX, brokers were keeping between 30% to 50% of every commission dollar earned. With the national average retained company dollar now well under 13%, according to RTC Consulting’s latest benchmark report, there’s no doubt it’s been a grind.With flat-fee firms retaining a lot less than traditional firms, they need to operate lean and quickly get to scale to be economically feasible. Indeed, the fast-growing flat-fee brokerages that are permeating this industry are showing they have what it takes.  I think the flat-fee model is here to stay, and I suspect we’ll continue to see this segment capture market share. Fortunately, this industry has room for every model, and if anything the flat-feer’s are forcing their competition to be better.Scott Wright is a partner with RTC Consulting.This column does not necessarily reflect the opinion of RealTrends’ editorial department and its owners.To contact the author of this story:Scott Wright at swright@realtrends.comTo contact the editor responsible for this story:Tracey Velt at tracey@hwmedia.com

The 30-year fixed mortgage rate continued its upward trajectory for the third consecutive week, rising to 6.96%, according to Freddie Mac. Since the last FOMC meeting in July, all eyes have been fixed on Thursday’s Consumer Price Index release. Another rate hike in September would move the target federal funds rate to its highest level since March 2001.According to Lawrence Yun, chief economist and senior vice president of research at NAR, “mortgage rates are likely to be past their peak and on the way downward.” Yun was pleased to see deceleration in the rent component, which contributed to pulling down the key core CPI in July.Freddie Mac’s Primary Mortgage Market Survey, which focuses on conventional and conforming loans with a 20% down payment, shows the 30-year fixed rate averaged 6.96% as of August 10, up from last week’s 6.90%. By contrast, the 30-year fixed-rate mortgage was at 5.22% a year ago at this time. The 15-year fixed-rate mortgage also rose this week to 6.34%, up 9 basis points from the prior week.Other mortgage rate indices showed higher rates on Thursday morning: HousingWire’s Mortgage Rates Center showed Optimal Blue’s 30-year fixed rate for conventional loans at 6.99% on Wednesday, compared to 7.02% the previous week. At Mortgage News Daily on Wednesday, the 30-year fixed rate for conventional loans was at 7.05%, down 8 basis points from the previous week.“For the third straight week, mortgage rates continued creeping up and are now just shy of 7%,” said Sam Khater, Freddie Mac’s chief economist. “There is no doubt continued high rates will prolong affordability challenges longer than expected, particularly with home prices on the rise again. However, upward pressure on rates is the product of a resilient economy with low unemployment and strong wage growth, which historically has kept purchase demand solid.”The economy, indeed, remains on strong footing. In spite of higher prices, consumer spending remains strong and consumer confidence has hit a two-year high. Job growth has slowed but wages are still rising and the unemployment rate is low. The second quarter GDP growth  exceeded expectations but manufacturing indices continue to show a slowdown. The economy remains strong for the real estate sectorAccording to George Ratiu, chief economist at Keeping Current Matters, real estate markets have benefited from more people gaining jobs and better paychecks this year. “While sales of existing homes have been lagging, the challenge comes mainly from too many buyers chasing not enough available properties,” said Ratiu. “Considering that prices have been rising over the past six months and mortgage rates have been pegged above 6.5% since May of this year, the 4.2 million annual sales pace is a highlight of solid demand.”Additionally, economists have observed a rebound in new home sales this year, with buyers seeking to leverage new construction options and any competitive builder incentives.When rates were around 7% in late October and November of 2022, demand for housing slowed down significantly, said Bright MLS Chief Economist Lisa Sturtevant. However, demand bounced back after the winter holiday, yielding a surprisingly strong spring housing market. Ratiu predicts that borrowing costs will stay high as long as financial markets are dreading the next Fed’s meeting.  At the moment, the spread between the 30-year fixed rate mortgage and the 10-year Treasury is significant — It hovers around 300 basis points, a level rarely seen in the past 50 years. Ratiu analyzes that without the elevated risk premium and with a spread closer to a historical average of 172 basis points, today’s 30-year fixed mortgage rate would be around 5.7%.Historically, mortgage rates tend to start cooling once inflation abates. There is typically a six-to-eight-month lag. If inflation maintains its current trajectory, homebuyers can expect to see rates slide back toward 6% in the Fall, concluded Ratiu.  

loanDepot has agreed to settle a securities class action lawsuit filed by shareholders that alleged the company, its executives and investment banks made false or misleading disclosures before and after the lender’s initial public offering in 2021. According to court filings, the parties agreed to settle and release all claims against the defendants in exchange for a cash payment of $3.5 million. However, the defendants deny any fault, liability, wrongdoing or damages.  “On July 26, plaintiffs filed a motion for preliminary approval of the settlement, which is pending approval,” loanDepot disclosed in a 10-Q filing on Thursday morning. loanDepot declined to comment on the case, which was filed in California. A representative for the shareholders did not respond to a request for comments.Defendants include loanDepot, its founder Anthony Hsieh, former chief financial officer Patrick Flanagan and former accounting officer Nicole Carrillo, among other executives. Bank underwriters of the IPO, such as Goldman Sachs, BofA Securities, Credit Suisse Securities, Morgan Stanley, Barclays Capital and Citigroup Global Markets, were also named. The class action was filed on behalf of investors who purchased loanDepot’s class A common stock in connection with the company’s initial public offering on February 16, 2021. It also includes investors who acquired company stock between March 16, 2021 and September 22, 2021.loanDepot debuted on the stock exchange in February 2021, raising $54 million. loanDepot stock was trading at $2.14 on Thursday around noon. The shareholders allege loanDepot improperly collected double daily interest from refi borrowers, inflating its interest income. The plaintiffs claimed the matter was brought to Hsieh’s attention in late 2019, but he returned improperly collected interest only to borrowers in states with active attorneys general. Ultimately, the lender misrepresented its compliance practices and omitted to disclose its “years-long improper collection of double interest payments,” the lawsuit alleges. In addition, the shareholders claimed that loanDepot’s registration statement for the IPO misrepresented to investors exactly when—and how quickly—the company’s “gain-on-sale margins” had begun to erode. The plaintiffs also alleged that loanDepot’s registration statement misleadingly omitted to disclose “Project Alpha” and “Project Beta.” These projects systematically violated mandatory loan origination and underwriting requirements to allow the lender to close loans as quickly as possible and boost the lender’s performance, capturing additional market share, shareholders alleged.The shareholders’ complaint mentions another lawsuit filed by Tammy Richards, formerly loanDepot’s chief operations officer. In September 2021 Richards alleged that loanDepot and its subsidiary Closing USA had engaged in interest overcharging between 2016 and 2019. Richards also claimed that the lender closed 8,000 loans without proper documentation, at the behest of Hsieh. loanDepot’s 10-Q filing says that the company deposed Richards and “anticipates filing its Motion for Summary Judgment, or in the alternative, Summary Adjudication on or before November 15, 2023.” Richards is seeking damages north of $75 million. A representative for Richards did not reply to a request for comments. Lawsuits had an impact on loanDepot’s financials in the second quarter. In a call with analysts on Tuesday, executives said the company sustained $8 million in costs related to the “settlement of legacy litigation” during the second quarter of 2023. “Excluding volume-related expenses, Vision 2025 related charges and the litigation settlement accrual, our adjusting operating expenses decreased by $10 million compared to the previous quarter, reflecting the ongoing benefits of our efficient improvements,” David Hayes, loanDepot’s Chief Financial Officer, told analysts.The lender narrowed its losses in Q2 2023. It recorded a non-GAAP adjusted net loss of $34.3 million, compared to a $60.2 million loss in the previous quarter.  There are two separate shareholders lawsuits still pending against loanDepot, in California and Delaware. Beginning in June 2023, three similar shareholder derivative complaints were filed in the Delaware Court of Chancery, and actions are in their preliminary stages.

The words “think” and “guess” have no place in your playbook for how to avoid margin compression and keep profits up in 2024. With regular reports and data coming out on what’s blocking inventory growth, the biggest factors impacting rates and the latest shifts in home sales, there’s a lot of information out there to help you inject more confidence into your business strategy. This is why we brought HousingWire Lead Analyst Logan Mohtashami, Kate Amor, senior vice president and head of enterprise products at Guaranteed Rate, and Arjun Dhingra, who lead sales and business development at All Western Mortgage, together for a preview of the information you can expect to hear at HousingWire Annual in Austin Texas, from Oct. 10-12. These three speakers, along with others in our agenda, are focused on providing the reassurance you need to be competitive next year through open conversations on how they’ve crafted their playbooks. Click the button below to register for HW Annual, and don’t forget to reserve a room in the hotel block before it closes in September. Spaces are limited and filling up fast! RegisterHousingWire: Logan, starting broad, I want to set up this discussion by starting with inventory and where it stands right now.Logan Mohtashami: Inventory is still savagely unhealthy. There are 484,000 active listings in the nation. We’re giving you the data for single-family homes, and  these are the homes that are just available for sale, not in pending status or anything of that nature.As of last week, that’s all we have in a country of 335 million people. But, the really painful trend is new listings data. That took another downfall toward the middle part of last year. New listings data is trending at the lowest levels ever recorded in U.S. history for the last 12 months. Last week there were only 62,000 new listings that came to the market. When you have a total lack of listings and new listings data at all-time lows, what happens is if demand is stable, like we’ve seen, it’s no longer the crashing market of 2022. Instead, homes get off the market very quickly. The National Association of Realtors (NAR) data for days on the market — to give you an example — is normally between 30 to 45 days. Back in 2011, it was 101 days. Just this last month it was 18 days. I have a rule of thumb that whenever the “days on the market” is a teenager, it’s not good.  You want people to have choices. And unfortunately, we just don’t have a lot of products out there. The new listings data trending at all-time lows does not help that at all. HW: Kate, switching now to you as a product expert at a big lender. What are you seeing on how the housing data Logan just covered is impacting affordability across all life stages? I also want to add that the meaning behind affordability has changed, and affordability goes way beyond describing homebuyers at a low- or moderate-income. It is about helping the average millennial or Gen Z wanting to get into a home. Kate Amor: Oh, I totally agree with you. I think affordability is really something that’s hitting everyday Americans and Main Street America. But, I would say there are three main groups. There’s obviously the first-time homebuyer who has been priced out, especially in the 50% median income segment. We’ve really seen that fall off a cliff, which has been unfortunate. The trade-up group who are locked in because they don’t want to do anything until rates get under 5%. Then of course, there are people who want to retire and are looking to downsize. There are all these different ways in which people are being impacted by affordability,  and we’re having to come up with creative solutions to help get them into houses. You’re seeing a lot of different people struggling to make those payments.  HousingWire Annual Get ready for HousingWire Annual 2023 Improving your bottom line at HW Annual Catch the No. 1 purchase mortgage originator on stage at HW Annual 2023 HW: Arjun, you have a specialty in taking the weekly data from Logan and distilling it so others can grow their business. So, how are you taking this data and communicating it to help change the narrative of the market? Arjun Dhingra: I think the common — and sometimes the more popular — route for people to create excitement online is to fearmonger. They don’t have anything backed by data or numbers. That’s how I actually got connected with Logan, through a mutual friend who’s in private capital. My friend said, “you need to follow this guy because he is literally the smartest man in the country when it comes to housing.” I had been in the business for a while, so I was just getting started with creating an online presence and putting out content. I started following Logan, and the first thing I noticed was that he has amazing hair. The second thing was that this guy is incredibly sharp. He very much sticks to data and he backs everything up. I’ll debate anyone, anytime, anywhere, bring your facts, bring your data and you won’t be able to stand up. HousingWire, Logan, and the resources available are able to provide that type of information to us as knowledge brokers. I want to try and get lenders to start viewing themselves as information brokers, taking the data and numbers that we all understand and love to geek out over. But then, how do we take that and translate it to the marketplace? How do we make this sexy? How do we make this appealing? That’s where science comes in, and I am by no means an expert. But, I’m fascinated by taking what people are afraid of, translating it and then addressing that it’s a massive opportunity for originators to become knowledge brokers because there’s so much BS out there. It’s absolute literal garbage. The audience is there because if you look at the garbage, you’ll see how many people are actually watching this stuff. There are people with their hands in the air who are thirsty for anything. If you step into a microphone, you can make things appealing, which is what I try to do, answering the question of what this means for you.I’ve got a phrase that I use when talking  to a lot of our fellow marketers and everyone. It’s that you don’t want to talk to a boardroom, you want to talk to a classroom, which is really dumbing this down.  Take all this high level information that is sophisticated and backed by numbers and  then translate it. HW Annual is HousingWire’s capstone mortgage event, connecting leading professionals from the housing economy seeking to grow, innovate and win market share. This is where strategies are formed, deals are inked and lifelong relationships are solidified. Remember, HW+ members receive special perks like 50% off your admission to HW Annual, so go here to become a member. Haven’t received a discount code yet? Reach out to us at events@hwmedia.com. Join us in Austin, Texas October 10-12 for community, content and commerce.

Wells Fargo rolled out a down payment grant program that will offer $10,000 to eligible buyers or homeowners who currently live in or are purchasing homes in underserved communities in eight metropolitan areas.The Homebuyer Access grant program is available to those who have a combined 120% or less of the area median income (AMI). The grant funds can only be used toward the down payment on a Wells Fargo fixed-rate conventional loan secured by a property that will be the purchaser’s primary residence.“Homeownership is central to building wealth but has been out of reach for many minority families as a result of systemic inequalities in housing and finance,” Kevin Reen, head of Wells Fargo Home Lending, said in a statement. “One of the biggest barriers to achieving homeownership is coming up with the down payment.”The property must be located in the following metropolitan areas: Minneapolis–St. Paul–Bloomington, MN-WI; Philadelphia–Camden–Wilmington, PA-NJ-MD-DE; Dallas–Ft. Worth–Arlington, TX; Washington–Arlington–Alexandria, DC-VA-MD-WV; Baltimore–Columbia–Towson, MD; Atlanta–Sandy Springs–Alpharetta, GA; Charlotte–Concord–Gastonia, NC-SC; New York–Newark–Jersey City, NY-NJ-PA.Eligible buyers can combine the bank’s grant with other programs including — Wells Fargo’s Dream. Plan. Home. Mortgage, and/or Closing Cost Credit. For eligible borrowers at or below 80% AMI, the mortgage program allows a 3% down payment on a fixed-rate mortgage and the closing cost credit program provides up to $5,000 to use toward closing costs. Home prices are on the rise again, mortgage rates are over 7% and the lack of existing homes for sale continues to put pressure on first-time homebuyers.Lenders — already struggling with the mortgage industry rightsizing — have rolled out down payment assistance programs in recent months.United Wholesale Mortgage (UWM) Rocket Mortgage and Guild Mortgage rolled out conventional 1% down mortgage loan programs in the second quarter of 2023. Generally, the programs allow eligible customers to buy a home with a minimum down payment of 1% of the purchase price and lenders provide 2% of the required 3% minimum down payment for a conventional loan.Wells Fargo’s Homebuyer Access grant program is an extension to the bank’s Special Purpose Credit Program (SPCP), announced in April 2022 – when the bank committed $210 million to help minority families at the time of the launch. Wells Fargo has been accelerating efforts to expand its SPCP to serve underserved communities this year following a series of consumer scandals. Following the bank’s announcement to exit the correspondent lending space in January, Wells Fargo invested an additional $100 million to advance racial equity in homeownership and deployed additional home mortgage consultants in local minority communities.Wells Fargo’s mortgage originations reached $7.8 billion in Q2 2023, down 77% year-over-year but up 18% from the prior quarter. The bank recorded $847 million in revenues related to its home lending business in the second quarter, a decrease from $863 million in the prior quarter (-2%) and $972 million in the same quarter in 2022 (-13%).

A little over a month after filing an agreement in one of the ongoing buyer broker commission lawsuits, New England’s largest multiple listing service (MLS), MLS Property Information Network (MLS PIN)’s attempt to settle the Nosalek case, has hit a snag.Originally filed in December 2020, the Nosalek lawsuit alleges that the broker-owned MLS PIN is not directly required to abide by the National Association of Realtors (NAR) rules. However, it has nonetheless adopted a rule similar to an NAR rule requiring listing brokers to offer a blanket, unilateral offer of compensation to buyer brokers in order to submit a listing to MLS PIN, which has over 46,000 subscribers.Nosalek is one of three ongoing class action lawsuits deal with buyer broker commissions. However, unlike Moehrl and Burnett, NAR is not named as a defendant.Judge Patti Saris, the U.S. District Court judge in Boston presiding over the Nosalek case, expressed skepticism over the financial portion of the proposed agreement during a preliminary hearing to consider approval of the agreement on Wednesday.“I’ve never seen a settlement agreement like this in my 30 years,” Saris said.In the proposed agreement MLS PIN said it would pay $3 million, change its commission policies, and cooperate against the remaining defendants in the suit, which include Anywhere, RE/MAX, Keller Williams and HomeServices of America.According to the proposed settlement, of the $3 million MLS PIN has agreed to pay in the settlement, up to $900,000 will go toward attorney’s fees, up to $200,000 will go toward expenses, $250,000 will go toward notifying settlement class members, and each of the three named lead plaintiffs will get up to $2,500 for being class representatives. The remaining $1.6425 million would be used to pay for further expenses for the litigation against the remaining defendants “for the benefit of Settlement Class Members,” according to the filing.With this payment structure, class members in the case will not be getting any money from the settlement agreement, however the plaintiffs’ class-action attorneys, “get fully funded for expenses to date, and they basically get a litigation fund open-ended for the future for as long as it takes, which may be another three to five years,” Saris said.Saris asked the Robert Izard, an attorney for the plaintiffs, if there was a way to give some of the $3 million paid by MLS PIN to class members. She said that this was the part of the settlement she is “struggling with.”According to Izard, there are well over 300,000 class members and if the court awarded the plaintiffs’ attorneys their expenses to date, plan a 30% fee that would add up to between $1.5 million and $2 million, meaning that class members would get less than $5 each.While Saris said she found the argument “persuasive,” she questioned why the settlement would cover plaintiffs’ attorneys’ fees for dealing with all of the defendants and not just their costs for dealing with MLS PIN. In his response, Izard said it was unclear if there would be a way to fairly divide the time the plaintiffs attorneys spent with just MLS PIN.Moving forward, Izard said the money would be held in an attorney trust account until his firm asked the court to approve the expenses at “an appropriate time.”Saris said that she had never done something like that before, but said it was “very creative.” She also noted that she “loves” the proposed rule changes in the settlement, which would make the offering of compensation to buyer brokers optional. The changes are contingent on the settlement’s approval.“I do love what you’ve accomplished,” Saris said. “I had problems with that [rule], so I denied the motion to dismiss and I think two other courts did as well.”Saris added that she also “loves” the idea of ending the practice of requiring listing brokers to offer compensation to buyer brokers “so that at least it stops the damages. The other defendants might like that, too. It sort of caps it, if you will. I do think the rule change is important and congratulations. I’m just worried here about the fairness … of how you’ve structured it, which is the individual plaintiffs get no dollars.”Instead of the proposed financial arrangement, Saris suggested that the plaintiffs’ attorney get paid some of their fees to date and take the rest of the money and put it in a pot. If the plaintiffs won the case, the post would grow and then it would be divided among the plaintiffs, and if the plaintiffs lost, the pot from the MLS PIN settlement would be what the plaintiffs received minus a “fair” attorney fee.The plaintiffs’ attorneys have until September 5 to either redraft the settlement agreement or brief Saris on cases with similar settlements.“I do ideally want to do this as quickly as possible because I actually think that the rule change is a good thing,” Saris said. “I don’t want to be the person who blows that up.”

Has the recent inflation data given the Federal Reserve a pathway for a 2024 pivot? The Fed has whispered about what can happen if the inflation growth rate falls more into 2024 and it’s a positive take. Some have thought the Fed would need to keep the fed funds rate elevated for years until they see 2% core PCE data. However, I believe there could be another path for 2024. First, let’s look at today’s CPI inflation data. It came in a bit lighter than expected — no real surprise here.From BLS: The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.2 percent in July on a seasonally adjusted basis, the same increase as in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all-items index increased 3.2 percent before seasonal adjustment. However, once you strip out rent — which is what the Fed has told us they want to focus on because of the lag in rent data — the growth rate of inflation is falling more noticeably. The Fed is focused on core service inflation less shelter. If you take CPI data in total and subtract the shelter data, inflation data has collapsed.90% of the inflation growth came from the shelter data, which we know needs to catch up to the reality that the data line below is much lower in real terms.How can this lead to a 2024 pivot if we don’t have a job-loss recession? This is a good question, as I am not a Fed pivot person until the labor market breaks. For me that means jobless claims data gets above 323,000 on the four-week moving average. Today we did see a spike in claims data. However, the four-week moving average is still 231,000, far from my Fed pivot level. So why would we see a Fed pivot if labor is still good? In a recent interview with the New York Times, the Fed mentioned something that can set the groundwork for the Fed to cut rates without a job-loss recession. They talked about real yields being restrictive. A simple way to think about this is that with inflation falling and rates up as much as they are now, the Fed believes their Fed Funds rate is at restrictive levels currently. At first, that could make it sound like they don’t want to hike again. However, if the growth rate of inflation falls even more, then the Fed can change its tune in 2024, even cutting rates next year to make policy less restrictive.  Of course, economic data matters here; if the economy picks up steam and inflation picks up again, this variable changes. However, if the labor market weakens, they have given the marketplace a signal that fed rate cuts will happen. Even if the labor market stays firm, cuts could happen next year if inflation’s growth rate falls. This doesn’t mean we will see massive rate cuts soon, but it does lay the foundation for a less hawkish Fed going into 2024.So far the bond market has had a mild response to today’s data. Even with the weaker jobless claims data, we haven’t seen any significant moves this morning. As of this second, the 10-year yield is at 4%.My 2023 forecast range for the 10-year yield was 3.21%-4.25%, meaning mortgage rates between 5.75%-7.25% for 2023, and that the labor market would be the big driver on bond yields, not inflation. As we can see in the chart above, the growth rate of inflation has fallen, but bond yields are near the highs, not the lows. The economy has stayed firm, and labor hasn’t broken. So far in 2023, my premise of bond yields and labor has held as the economy has stayed firm.The inflation report was slightly better than expected: we see how much rent inflation now holds up the core side of the CPI data. However, I believe the more critical storyline here isn’t the inflation report today, it’s what it can mean next year if this trend continues. I discuss this topic with HousingWire Editor in Chief Sarah Wheeler on today’s HousingWire Daily podcast. One of my economic themes over the past year is that you don’t need a job-loss recession to have the growth rate of inflation fall — this isn’t the 1970s. We had a global pandemic, and historically global pandemics are very inflationary early on and then things get better over time. I hope the Fed sticks to this theme for next year and that we don’t need jobless claims to get worse for the Fed to pivot.

The Consumer Price Index climbed 3.2% in the year through July, the first acceleration in 13 months. But that figure requires a closer examination. Inflation soared in June 2022 and was slightly slower the following month. When this year’s figures were measured against last year’s readings, June looked lower and July appeared higher.After recording a 3.0% annual increase in June, the CPI rose just 3.2% year over year in July, before seasonal adjustment, according to data released Thursday by the Bureau of Labor Statistics (BLS). Excluding food and energy, the CPI rose 0.2% from the prior month.Core inflation, which removes food and energy prices, rose 4.7% on a yearly basis. The energy index decreased 12.5% for the 12 months ending July. It helped balance out the overall index, noted George Ratiu, chief economist at Keeping Current Matters.Fed officials in July lifted interest rates to a 22-year high, hoping to cool the economy. Chairman Jerome Powell reiterated that the Fed would be watching inflation and other economic readings as the FOMC weighs raising rates again in mid-September. Indices that increased in June include shelter, motor vehicle insurance, education, and recreation. The indices for airline fares, used cars and trucks, medical care, and communication were among those that decreased over the month.The index for shelter was by far the largest contributor to the monthly all items increase, rising 0.4% month-over-month, similar to June. Overall, it accounted for over 90% of the total increase in the all items less food and energy index. According to the CPI data, the inflation rate excluding shelter was just 1.0% in July, said Bright MLS Chief Economist Dr. Lisa Sturtevant.Simultaneously, the index for rent rose 0.4% in July, and the index for owners’ equivalent rent increased 0.5% over the month. The index for lodging away from home decreased 0.3% in July after falling 2.0% in June.The shelter inflation figure is highly imperfect. The BLS’s CPI metric only measures in-place rent and not asking rents. Since most renters see a change only once per year, the index lags significantly from asking rents on new leases. “There’s more shelter inflation deceleration in the pipeline this year, which bodes well for a continued slowdown in inflation,” said First American Deputy Chief Economist Odeta Kushi.According to data from Apartment List, monthly rent growth already peaked this year. Average rents in August fell from where they were last year, announcing the first year-over-year decline since early in the pandemic. Meanwhile, vacancy rates are rising to more typical levels. To Bright MLS Chief Economist Dr. Lisa Sturtevant, these changes are not the result of the Fed’s action but rather the consequence of more new residential construction coming on the market.The Fed’s decision-making is getting more complicatedAnother hike in September would move the target federal funds rate to its highest level since March 2001. This scenario remains likely since inflation is still above the Fed’s 2% target. But economic data is providing mixed signals. In fact, while prices keep on rising, consumer spending is still strong and consumer confidence has hit a two-year high. Wages are still rising and the unemployment rate is low, but job growth has slowed. The second quarter GDP growth exceeded expectations but manufacturing indices continue to show a slowdown. Over the past year, housing data taught us two important facts, noted Sturtevant. First, an increase in supply, not Federal Reserve actions, drives housing costs down. Second, changes in shelter costs take a while to appear in overall inflation measures.  In Minneapolis, regional inflation is tracking below the Fed’s 2% target. Minneapolis enforced policies designed to significantly increase the housing supply in the region. As a result, rent growth stayed far below the national pace, allowing inflation to be tamed in the city.Timing matters too, insists Sturtevant. She expects to see declining rents bring inflation down over the coming months, independently from any Fed’s decision.“There is typically a nine-to-12 month lag between when rents moderate and when the decline in housing costs makes it into the consumer price index,” noted Sturtevant. “Owners’ housing costs are approximated by an ‘owners’ equivalent rent’ metric which tracks closely with rent trends. Based on this data, and given how important shelter costs are to the overall inflation measure, we should expect to see declining rents bring inflation down over the coming months—with or without another Fed rate increase.” Home prices, which are still rising in many markets, are not part of the CPI calculation. 

The share of distressed property auction buyers who say they are owner-occupants nearly doubled over the last year, boosted by a game-changing government policy that took effect last August.The increasing share of owner-occupant buyers is also evidence that extremely tight housing inventory is prompting more retail buyers to take on the additional challenges that come with buying a distressed property at auction. Meanwhile, innovation-driven transparency is helping to make distressed property auctions more accessible for these owner-occupant buyers as well as for local community developer buyers who, it turns out, sell most of their renovated foreclosures to owner-occupants.Fifteen percent of distressed property buyers described themselves as owner-occupants, according to a March 2023 survey of nearly 450 buyers using the Auction.com platform. That was nearly double the 8% of buyers who described themselves as owner-occupants in a February 2022 Auction.com buyer survey.“My wife and I currently live in an Auction-purchased home,” said Dwayne, a survey respondent from Maryland. “We also have a very happy renter of half of our home.”The highest share of distressed auction owner-occupant buyers was in the Central region: 18% of buyers in this region described themselves as owner-occupants, followed by the Northeast region, which includes Maryland, at 17%, and the West region at 16%. The lowest share of owner-occupant buyers was in the Southeast region, where 8% of survey respondents described themselves as owner-occupants.The power of policyMuch of the jump in owner-occupant buyers can be attributed to a policy enacted by the U.S. Department of Housing and Urban Development (HUD) in August 2022. That policy required a 30-day “first look” auction during which only qualified nonprofits, government entities and owner-occupant buyers could bid on foreclosed properties with loans insured by the Federal Housing Administration (FHA).“This policy change is critical as the nation continues to address the challenges of a real estate market in which home prices are high and the availability of affordable housing supply is low, making it difficult for individuals and families to achieve the dream of homeownership,” said Lopa P. Kolluri, Principal Deputy Assistant Secretary for HUD and FHA, in a press release published when the policy change was announced.Auction.com implemented the first look auctions for FHA-insured properties in August 2022 and saw an immediate impact: from nothing to 8.2% of all properties available for the first-look auctions during the quarter.The number of first-look auction sales nearly doubled in the fourth quarter compared to the third quarter and has increased in every successive quarter since, representing 11.5% of all available first-look properties in the second quarter of 2023.Nearly all first-look auction sales (95%) went to owner-occupant buyers, with that share hitting as high as 99% in the fourth quarter of 2022 and the first quarter of 2023.The power of incremental changeMost properties available for first-look auctions still end up selling to nonowner-occupant buyers after the first-look auction is over, but the incremental lift in owner-occupant buyers was anticipated by Laurie Goodman, founder of the housing finance policy center at the Urban Institute. Goodman and her colleagues recommended an expanded first-look auction program for distressed properties in a report published by the Urban Institute in February 2022.“One could envision a first-look REO auction for properties that do not sell at foreclosure auction,” wrote Goodman and her colleagues in the report, which also recommended expanding the first-look to “mission-driven nonprofits and mom-and-pop investors who agree to provide high-quality affordable housing for low- and moderate-income families.”The report concludes that an expanded first-look auction could, at least incrementally, lift the percentage of distressed homes sold at foreclosure auction that end up in the hands of owner-occupants.“This would likely increase the share of homes owner-occupants who could purchase directly, or indirectly through a nonprofit or local community developer,” the report said. “Although a first-look auction may not be helpful for all distressed properties, Jakabovics and Sanchez (2021) have shown that first-look policies result in higher owner-occupancy rates, particularly in low-income minority census tracts.”The power of a transparent platformThe report’s mention of first-look auctions not being helpful for all distressed properties is referencing the additional obstacles buyers often face when purchasing a distressed property: extremely poor property condition, the lack of traditional financing and the difficulty of dealing with current occupants. Those obstacles make distressed property purchases problematic for some owner-occupant buyers.Despite these obstacles, innovation-driven transparency in the distressed auction marketplace is helping more owner-occupant buyers to feel comfortable with the process — especially given the more affordable prices available.“The homes are reasonably priced for the normal family,” said Jennifer, an Auction.com survey respondent from Wisconsin who described herself as an owner-occupant buyer. “The online bidding experience was simple and safe process and I highly recommend Auction.com to other buyers.”The power of local community developersThe innovation-driven transparency on sites like Auction.com is not just attracting more owner-occupant buyers; it’s also helping to attract local community developer buyers who are willing and able to take on the distressed properties that may not be a good fit for owner-occupants. They are able to pay with cash, take on bigger renovations and provide current occupants with a graceful exit.More than three-quarters (77%) of all Auction.com buyers surveyed in March described themselves as local community developers. Among those respondents, 91% said they budget at least $10,000 on renovations while 71% said they budget at least $20,000. By comparison, 75% of owner-occupant buyers surveyed said they budget at least $10,000 for renovations while 52% said they budget at least $20,000.Local community developers are also more willing than owner-occupants to buy occupied properties and to offer current occupants a graceful exit.According to the March 2023 Auction.com survey, 30% of owner-occupant buyers said they were willing to purchase an occupied property compared to 52% of local community developers.Furthermore, among the owner-occupant buyers who purchased an occupied property, 35% said they offered the current occupant a graceful exit in the form of transition assistance, a leaseback option or a buyback option. By comparison, 78% of local community developers who purchase occupied properties said they offer the current occupant a graceful exit.“I rented back to the previous owner, and they are still the tenant. It has been five years,” said Han Zhang, an Auction.com buyer in Southern California, relaying the story of one of his Auction.com purchases. “I keep the rent low so he is comfortable with the rent. … The return rate is still very good.”Multiple paths to owner-occupancyEven though some local community developers hold and rent the properties they purchase — sometimes back to the current occupant as Zhang did — most distressed properties purchased at auction end up in the hands of owner-occupants after they have been renovated.An Auction.com analysis of public record data for more than 175,000 properties sold on the Auction.com platform since 2018 shows that 77% of those that were renovated and resold went to owner-occupants. Combined with the properties sold directly to owner-occupants, that adds up to more than 101,000 previously distressed homes that are now owner-occupied. More than 40,000 of those owner-occupied homes are in low-income or minority Census tracts.The renovated foreclosures are selling, mostly to owner-occupants, at affordable prices. The average resale price of a renovated foreclosure was $256,040 over that five-and-a-half-year span. The estimated monthly mortgage payment — including property taxes and insurance — required just 22.7% of the median family income in the surrounding Census tract on average.And while the percentage of income to buy a renovated foreclosure increased to just over 31% in 2022 and so far in 2023, that share of income to buy is still well below the 36.4% of income to buy an averaged-priced home nationwide, according to Black Knight’s June 2023 Mortgage Monitor report.

Mortgage tech firm Blend Labs narrowed its financial losses in the second quarter on the strength of its platform business as well as cost-cutting measures. Blend, whose white-label software processes billions in mortgage transactions for lenders, reaffirmed its goal of reaching profitability by 2024.The San Francisco, California-based company reported a non-GAAP net loss of $22.7 million in the second quarter, compared to $35.6 million in Q1 and $45.1 million in Q2 2022. The company’s GAAP net loss in Q2 was $41.5 million, down from a GAAP net loss of $66.2 million in the previous quarter, according to the documents filed with the Securities and Exchange Commission (SEC) on Wednesday. Nima Ghamsari, head of Blend, said Q2 results exceeded expectations for the second quarter in a row largely driven by its resilient customer base.“We’re driving adoption and utilization growth of our value-add features, maintaining strong retention, and growing mortgage market share – all while continuing to set the foundation for our next-generation mortgage products on our Blend Builder platform,” Ghamsari told analysts. The company posted $42.8 million in revenues in Q2, above the guidance provided by executives of between $39.5 million and $41 million. Blend Builder — a cloud banking platform designed to help businesses in the financial services industry streamline processes for mortgages, loans, deposits and accounts – is a “key driver of the company’s growth strategy,” Ghamsari noted. Blend’s platform segment — which includes the mortgage suite, consumer banking suite and professional services under the changed reporting structure — came in at $30.3 million in revenues. The Title 365 segment revenue posted $12.5 million.The mortgage banking suite revenue declined by 17% year-over-year to $22.3 million, performing better than a 37% mortgage market volume decline over the same period as reported by the Mortgage Bankers Association (MBA), the company said.Blend’s white-label technology powers mortgage applications on the websites of major lenders such as Wells Fargo and U.S. Bank. With client’s increases in adoption of add-on products and renewals, mortgage suite revenue per transaction increased from $77 to $93 from the same period in 2022. Add-on products released in Q2 include a soft credit inquiry function for lenders that would save them about $50 per file. The company previously noted that lenders that adopted soft credit into their workflows saved up to 71% compared to lenders utilizing all hard inquiries. Blend deployed 18 consumer banking products this year, bringing in $5.8 million revenue in its consumer banking suite – a 27% increase from Q2 2022.Professional services revenue increased 10% year-over-year to $2.2 million.Ghamsari’s priorities for the rest of the year is to roll out value-add features like soft credit pulls and add-on products such as Blend Close and Blend Income.Blend’s cutting costs, accelerating path to profitability On the expenses side, non-GAAP operating costs in Q2 totaled $41.7 million compared to $65.3 million in the same period of 2022. As part of the internal efficiencies gained with Blend Builder, the company announced Wednesday that it streamlined its workforce, positioning its customers and Blend for more efficient growth and value creation.Blend’s fifth round of layoff affected 150 positions, about 19% of the company’s current onshore workforce and about 20 vacancies across the firm, according to its 10 Q filing with the SEC. The company conducted three workforce reduction initiatives in 2022 and two in 2023. “The restructuring initiatives are expected to reduce Blend’s operating expenses an additional $33 million on an annualized basis,” Amir Jafari, Blend’s new CFO, told analysts.​​As of June 30, 2023, Blend has cash, cash equivalents, and marketable securities, including restricted cash, totaling $277.9 million with total debt outstanding of $225.0 million in the form of the company’s five-year term loan. Going forward, Blend will be charging customers a recurring Software as a Service (SaaS) fee to increase the stability of its future cash flow.Blend’s $25 million revolving line of credit remains undrawn.“We are increasing the stability of our future cash flows by adding a recurring SaaS-like fee while retaining the upside associated with our consumption based model,” Jafari said. “We believe this shift in payment terms should improve our overall free cash flow with more fees being paid in advance.”Despite the challenging mortgage environment, Blend reiterated its goal in reaching its non-GAAP profitability goal by 2024 from the originally planned timeline of 2025. Since going public in July 2021, Blend is yet to turn a profit.In Q3, the mortgage tech firm expects its Q3 revenue to be between $38 million and $42 million. Platform revenue is projected to post between $27 million and $30 million. Its title business revenue is forecast to come in between $11 million and $12 million. The company estimates a non-GAAP net operating loss between $17.5 million and $15.5 million in Q3. 

Forest Heights Boulevard is a tony residential street in Toronto’s St. Andrew-Windfields area.

There are thousands of methods to motivating a team. Today’s leaders have been inundated with resources centered on various approaches, doctrines, mantras, etc. advising them on how best to influence and empower. Authoritative, collaborative, transactional, democratic or laisses-faire, it must align with a leader’s working style as well as the working styles that exist within their respective cohorts. The tricky part is that different team members respond differently to different tactics. One might prefer a more hands-off methodology whereas another might need some degree of micro-management. The best leaders are those who operate with agility and adaptability, maintaining a stronghold on their style but also adhering to various needs in the spirit of setting the team and its members up for sustainable success.At Brooke Team, we’ve found that our team members are particularly inspired by tactics that are rooted in group dialogue, reflection and experience sharing. We’ve created the structure and the space necessary for operating with transparency while breaking down the silos that organically and not-so-organically take form when we’re all so focused on our own clients and books of business. First things firstOur morning “Pump Up Calls,” are a facet to this strategy that has been designed to align the professional with the personal, to engage hearts knowing that they will lead to engaged minds and ultimately, engaged actions.  We start every session with a quick roll call. We ask attendees about their goals, wins and struggles. From there, we lean into a theme, one that feels relevant based on where we’ve been, where we are and where we each hope to be. Facilitators rotate but their objective remains the same: inspire conversation through the sharing of experiences. Attendance is not a requirement. The turnout ebbs and flows but participation has gained consistent momentum as our agents become increasingly comfortable with sharing. Themes and topics are all over the board. We’ve covered professional development, the importance of attitude and making big leaps, to name a few. We’ve developed a more informed perspective about not just where we are as a team but who we are as a team. We’ve created a direct line of sight into what matters to our agents and in that, a sense of compassion as we all work to navigate both our professional and personal lives as the very best version of ourselves. While the last thing we wanted to do was take up even more space on our agents’ already stacked schedules, we found that the appetite to share and vent far outweighed the dread that often coincides with yet another meeting taking up precious calendar space. Folks dial in during their morning commutes, pup walks, school drop offs — the intention is to enhance our day-to-days, not to complicate them. We’ve all embraced a “come as you are,” mentality around these sessions, striking a critical chord between structure and authenticity. We want to see and hear it all. Nothing is off limits.Learning from the prosWe’ve taken a page from “The 15 Commitments of Conscious Leadership” by Jim Dethmer, Diana Chapman and Kaley Warner Klemp. Great leaders learn to access three centers of intelligence: the head, the heart and the gut. By creating intentional space and sharing across all compartments of our lives, we’ve found that we’re no longer operating as strictly colleagues but instead, as human beings who share opinions, perspectives, hurdles, joys and ambitions. We’ve broken down barriers through conversation and in that, the team members who continue to show up have started to decipher and build upon their own leadership capabilities. They’re learning from their seasoned and green colleagues alike how best to handle business but also how to manage relationships while effectively functioning like true collaborators. We haven’t necessarily attached any KPIs to these calls. Right now, the focus is simply to hold space as we continue to talk shop and share parts of ourselves that were once upon a time checked at the office door. Perhaps the proof will remain in the new buzz that seems to be permeating our workspace. Perhaps results will forever be gauged by the newly formed synergies that exist between agents. Maybe I can track the effectiveness by keeping tabs on how many members of my team are now taking the initiative to track me down and ask questions. Regardless of how formal these Pump Up Calls become or informal they remain, one thing feels true — we all feel pretty dang motivated by the time we hang up.

Fast-growing The Real Brokerage posted a $3.97 million net loss during the second quarter of 2023, but revenues shot up from a year ago. “During the second quarter, Real once again delivered best-in-class growth with our agents closing a record number of transactions,” said Tamir Poleg, the CEO of Real. He described the second quarter as an inflection point for Real, as the company achieved adjusted EBITDA profitability earlier than anticipated.Poleg acknowledged the headwinds faced by the industry, telling analysts that elevated mortgage rates are stifling sales activity. Like many other brokerages, the firm is still in the red (it lost over $20 million last year). Its nearly $4 million loss in the second quarter was a big improvement from the first quarter’s $7.4 million loss, but only marginally better than its $4.2 million loss year over year. Real recorded $185.3 million in revenue in the second quarter, up 65% year over year. The company added nearly 1,500 agents during the second quarter, achieving a total headcount of 11,500 agents as of June 30. That was up 105% from the second quarter a year ago.  While agent productivity still lags compared to where it was in the first half of 2022, Poleg said that more agents helped propel the brokerage record a 72% annual increase in transaction sides for the quarter — at 17,537 — and a 66% annual increase in volume to $7.0 billion.  Meanwhile, executives noted that agent churn was down to 6.5% compared to 8.3% the prior quarter and 7.2% in Q2 of 2022. The company kept expanding its geographic footprint. During the second quarter of 2023, they opened in Delaware, in South Dakota for the U.S. and in Manitoba, Canada. The brokerage now operates in 47 states in the U.S. and four Canadian provinces. Real expects to be in all 50 states by the end of the year, Poleg said. The virtual brokerage in March disclosed that it is raising fees on agents. New agents pay $249, up from $149, and all agents pay an annual fee of $750, up from $500. Increased fees from agents are being put toward tech offerings. Last May, the brokerage launched Leo, an Chat GPT-powered assistant integrated with Real’s proprietary transaction management platform, reZEN. Lastly, the company is expected to release its new consumer-facing app, with an integrated mortgage application process, at the  annual RISE conference in October 2023. Poleg said the firm is also looking to expand its core services, which include Real Title and LemonBrew Lending, which currently don’t provide meaningful contributions to Real’s revenue. Poleg insisted that they were “essential building blocks,” paving the way for the creation of a “one-stop-shop homebuying experience.”

“Life is all about transitioning from one stage to the next. Everything is always a transition,” said Chad Hedrick, founder of the Gold to Sold Group and former Olympic speed skater. Hedrick and his team provide the best possible service to the luxury real estate market in Houston, Texas. He founded the Gold to Sold Group in 2017, and the organization now represents the “gold standard” in the Houston housing market. Below, Hedrick spoke with HousingWire about his gold medal career in speed skating, career jump to real estate and how the leadership skills learned from athletics prepared him for leading a team of all-star agents better than anything else could have. HousingWire: Before we discuss your current career in real estate, can you tell me a bit more about your past experience as an Olympic speed skater? Chad Hedrick: I grew up skating a lot because my parents owned the roller rink in our town. I found that I had a knack for it at a really young age and spent many hours at the rink. I was a “rink rat,” and I decided at a young age that I wanted to be the fastest skater in the world. When I first started skating, I was on conventional skates — ones with two wheels in the front and two wheels in the back. When I was 14, in-line rollerblades came out, and I started racing on rollerblades. We traveled all across the country competing. At 16 I turned professional and started getting paid as an athlete. For 10 years I competed and had endorsement deals, but at the end of the day, I would tell people what I did and they wouldn’t know what in-line speed skating was. So, I decided I wanted to try something that people would recognize.I packed everything up from Texas, moved to Utah and pursued an Olympic career in ice-speed skating. That journey started in 2003. About one year later, I became the world champion. And, two and a half years after my first day on the ice, I won the first U.S. gold medal at the 2006 Winter Olympics in Torino, Italy. My story is similar but also different from many other people’s stories because life is all about transitioning from one place to the next. Whether it be a position at a company or the growth of your personal company, everything is always a transition. You have to accept the challenge and not be frustrated with change. You’ll face adversity that could be discouraging, but there is a light at the end of the tunnel. I was so glad that I was able to prevail in accomplishing this challenge of mine.  HW: How did you make the transition into real estate? What motivated that move? CH: I didn’t find real estate, real estate found me. I relocated from Salt Lake City, Utah, back to Houston with my wife, and I really went through a bit of an identity crisis. I had done one thing my whole life and I had sharpened this one skill and not really paid attention to anything else, which if you’re going to be the best in the world, then that is what you have to do. At 32 years old, my skating career was over because I was competing against athletes who were 10 to 14 years younger than me, so it came to an end. But, when I came home to Houston, everyone who was successful was in the oil and gas industry. I didn’t have any formal education, but I weaseled my way into the oil and gas business. What I discovered was that I was starting a new career, working for people my own age who had already spent 10 years after college building their careers. It was difficult for me to go from being the best in the world at something to answering people my own age. I really floundered for quite a while. It got to a point where I knew I had to do something else. I had to take control of my destiny. And, one of the biggest real estate brokers in our town at that point gave me an opportunity. HW: What was the greatest learning curve getting into the new industry? CH: Originally, it was just me. Serving clients, showing up to the closing table and getting paid were all great, but it was a lonely business for me. I was used to traveling with a team: a sports psychologist, a coach, all of these people were always around and we would celebrate the wins or work to understand what we needed to do to get better if we came in second or last. I realized that having a team was really fulfilling to me and I wanted to be able to use these leadership skills that I developed as an athlete. Now, we have a team here in Houston and it’s been incredible to use the competitive spirit — lessons my father and coaches taught me — to be able to challenge and inspire my team and enjoy this business. HW: You mentioned leadership skills and a competitive spirit, how have those attributes from your prior experience in athletics helped you become a better real estate agent?CH: I’m wired to win. Winning could mean a lot of different things to a lot of people. When you’re winning, it may not be closing the most deals, it could be developing relationships along the way. It may be helping others to grow in this business. You have to find what really pushes you. For some people, it is all personal and financial gain, but for me, I realized that I needed more than that. To me, it’s about nurturing and building the relationships around me. HW: What does the market look like in your area? CH: Houston has always been a more stable market. We don’t see the fluctuation that other parts of the country do. We’ve seen a lot of growth, of course, over the past two or three years like everybody else. But, it is still a seller’s market. Everything that is priced correctly sells within a week or so. I put up three homes last week and one sold in three days, the other two sold in a single day. It is all about supply and demand, but we feel like rates are going to come down in the next 18 to 24 months. Once rates are back in the four to five range, real estate is going to be going gangbusters again. HW: Gold to Sold has quite the team of agents, how has the team atmosphere enhanced your real estate experience? Is it at all similar to the team environment in athletics? CH: Before creating the team, I felt like a man on an island, selling homes by myself. It’s a business where you’re with someone new every day. If you want to do great, then every day you have to go after it again and again. I didn’t have a team or coaches at first, so it was so important to me to establish that environment. I started with my wife’s aunt, she came in as my partner. And quite honestly, we haven’t really pursued people or recruited them. Our team attracts people who want to be a part of a team because it’s been such a great experience. I want to help someone be the best they can be and to see an agent that you brought into the business close 30 deals in their second year, which is unheard of in this business, it makes you feel really respected as a leader. 

The advent of artificial intelligence (AI) has been sending shockwaves across nearly every industry, and real estate is no exception. While our industry is notorious for its lethargic adoption of new technologies, it is inevitable that AI will reshape many of the traditional and archaic processes that exist today. Those unwilling to embrace and adopt these cutting-edge tools will likely be left behind. Unfortunately, the hype and frenzy surrounding the AI explosion has spurred a deluge of gimmicks from companies looking to get eyeballs on their brand, with little to no value being created. At the same time, there are numerous examples of ground-breaking implementations of this transformative technology that are already being used today. This piece will explore some of the key domains where AI is having the greatest impact for real estate agents, brokers and the innovative companies leading the charge.Scaling lead generation with AIIn the fast-paced and competitive market we’re experiencing today, effective lead generation can be the make or break of a brokerage. Maintaining a consistent pipeline of potential buyers and sellers ensures the business’s sustainability and growth, but it requires an immense amount of work and marketing expertise, which is often outside an agent’s core competencies. One example of a company looking to crack the lead gen code is Addressable. Their all-in-one platform allows agents to send out mailers to leads at scale, with personalized copy developed by AI and hand-written notes produced by robots. The result is a highly-efficient, optimized outreach campaign that never loses the valuable “human” touch. Since 2020, Addressable has facilitated nearly $2 Billion in home sales across 44 states. As this space continues to evolve, real estate agents utilizing technologies like Addressable’s will be able to gain a significant strategic advantage in capturing potential leads at a scale and converting them into clients.Automating client engagementLead engagement is another crucial element of any real estate business. It’s imperative that agents and brokers nurture their leads in order to build trust, stay top of mind, and demonstrate their expertise which ultimately increases the likelihood of conversion from prospect to client. However, “it takes between 6 to 8 touch points to get in contact with a potential client,” says David Tal, CEO of AI proptech startup, Verse. “The vast majority of real estate agents do not make it past the first touchpoint before they drop off, leaving an immense amount of opportunity on the table.” Acting as a virtual assistant, Verse’s AI system takes charge of interacting with, qualifying, and following up on consumer inquiries at any time of the day via SMS. In a fast-paced industry like real estate, time is of the essence and the vast majority of unrepresented buyers and sellers will work with the first agent that reaches out. Therefore, an agent’s ability to respond promptly can often mean the difference between winning and losing a potential client. On top of closing the gap on “speed-to-lead”, Verse’s AI learns and evolves with every interaction, refining its approach, and delivering increasingly personalized responses, thus fostering a deeper connection with clients. So far, Verse has reported conversion multiples of nearly 3x that of normal human nurturing efforts, a clear indicator that AI’s role in lead engagement may be here to stay. Streamlining property research and diligence with AIThroughout the home buying journey, the sheer volume of property information that needs to be accessed and analyzed is immense. However, real estate data remains extremely fragmented, expensive, and time-consuming to collect. Enter RealReports, like a supercharged Carfax for homes which harnesses the power of AI to simplify and expedite the entire research and diligence process from days into seconds. By aggregating a wide array of data from dozens of best-in-class providers, RealReports provide comprehensive property reports with deep insights for every home in the U.S., including permits, zoning, climate risk, rental potential, crime, demographics, financial history, and much more. Central to each report is an AI copilot named Aiden, which analyzes tens of thousands of data points from within each RealReport to answer any property question in real-time.Whether at a showing, open house, or putting together an offer, agents or their clients can ask any question they have about a property and Aiden will deliver an immediate and sophisticated answer in seconds. Aiden can tell you whether a property has a better short or long-term rental potential, if you can build an ADU in the backyard, what permits are open, the various climate risks and environmental hazards, whether the home is in a good area to raise your kids–anything you can imagine. It can even write you an original poem about the property to flex its creative prowess and data-crunching might. This breakthrough considerably shortens the time spent on research, reduces liability exposure, increases transparency, and allows agents to provide immense value for their clients throughout the most important purchase of their lives. Predictive agent recruitingRecruiting and retaining top-tier talent is critical for a brokerage to survive. By expanding their workforce, a brokerage increases their capacity to manage more clients and listings, which directly translates to business growth. Additionally, recruiting high-performing agents brings in diverse skill sets and market knowledge, enhancing the brokerage’s reputation and competitive advantage in the market. Realcruit AI offers a compelling evolution for recruitment by providing a centralized solution that consolidates the disparate workflow silos, while harnessing advanced AI to optimize every step of the process. The platform sifts through mountains of MLS data such as the velocity between listings and sales to identify potential hires at the optimal time, taking much of the guesswork out of recruiting. Realcruit AI’s enables recruiters to, “hunt with a rifle, not a shotgun,” says CTO Ryan Rexroad, “which has tripled our team’s hiring success rate.” Additionally, the platform helps foster agent retention and prevent churn by equipping managers with actionable insights related to agents who may be primed for poaching by other brokers or firms. By tapping into AI’s ability to discern patterns and trends that may go unnoticed in manual analysis, Realcruit AI allows managers to make data-driven decisions that can significantly impact their recruitment strategies and ultimately, their business success.Navigating the future of real estate with AIThe rise of AI in the real estate industry represents an exciting new frontier for agents and brokers. By capitalizing on the technology’s vast potential, they can streamline, augment, and optimize some of the most critical processes across the home-buying journey and lifecycle. Innovative solutions like Addressable, Verse, RealReports, and Realcruit AI stand as testaments to the revolutionary power of AI in the industry. As the landscape of real estate continues to evolve, embracing AI is no longer just an option but a necessity to stay competitive and achieve long-term success. The future of real estate will be shaped by the dynamic capabilities of artificial intelligence, and those who seize the opportunity to integrate AI into their operations today will undoubtedly lead the field in the years to come.Zach Gorman is co-founder of RealReports.

Despite a 18% annual decline in purchase title orders opened per day in Q2 2023, Fidelity National Financial executives believe housing demand remains strong.“We’ve seen solid sequential growth with residential purchase open orders per day up in both Q1 and Q2 and even holding strong in the month of July, which is not a typical since orders usually crest heading into the back half of the year,” Mike Nolan, Fidelity’s CEO, told investors and analysts on the firm’s second quarter earnings call Wednesday morning. “We feel the resiliency of residential purchase volumes, which have held up in a weak market despite mortgage rates spiking to 7%, is a testament to the underlying demand for housing the exists in this country.”Even with the uncertainty of where the housing market and mortgage rates are headed in the next few months, Nolan said this underlying demand makes him feel cautiously optimistic about the future of the real estate industry as a whole.Nolan’s assertions about the housing market were underlined by the strong performance of Fidelity’s title segment during the quarter. While the title segment’s revenue dropped 27% year over year to $1.9 billion, which executives said is in line with revenue levels recorded in 2018 and 2019, net earnings for the quarter rose slightly year over year to $165 million compared to $164 million in Q2 2022.“So far, 2023 has been encouraging as we have found our footing in a more typical seasonal pattern, albeit in a weak market and with the cost structure that is aligned with this environment,” Nolan said.In addition to the 18% decline in purchase orders opened per day, dropping to an average of 5,400 orders, refinance orders opened per day dropped 36% and commercial orders opened per day dropped 22%. Fidelity did however note that on a sequential basis, purchase orders opened per day were up 12% compared to Q1 2023.Overall, Fidelity reported total revenue of $3 billion for the quarter, up from $2.635 billion in Q2 2022, as the firm’s total assets rose roughly $12 billion to $73.021 billion, but the firm’s net income for the quarter fell to $219 million from $537 million a year ago, as the F&G insurance solutions segment of the business saw its net income drop to $110 million from $385 million a year ago.“This strong performance really demonstrates our approach to running the business, highlighting our ability to manage economic cycles and react quickly to changing order volumes,” Nolan said. “Our performance this year is a direct result of the actions we took in the back half of 2022 when, in light of the steep decline in mortgage volumes, we reduced our field staff by 26% net of acquisitions. This positioned us well given the low inventory coming into 2023.”

Over the last year, the nation’s largest banks, spooked by surging rates and increased regulatory risks, have shied away from the jumbo mortgage market. A select group of regional bank challengers have suffered a worse fate: dead, sometimes directly because of their own calamitous jumbo strategies. And to compound matters, Wells Fargo, the biggest lender in the space, has exited the correspondent channel, which has resulted in pricing nightmares for bankers at hundreds of smaller lenders. It’s not pretty, and it won’t be getting better any time soon, HousingWire’s Flávia Furlan Nunes reported in our two-part data series examining the volatile — and rapidly shrinking — jumbo space. Economic conditions, however, are opening up space for new entrants eying market share.HousingWire crunched the numbers to reveal which lenders have pulled back or exited the jumbo market, which markets have been most acutely affected, and which nonbank lenders are jumping headfirst into the jumbo space.Our analysis of Home Mortgage Disclosure Act (HMDA) data — done by our newest hire, data journalist Will Robinson — focuses on conventional, non-conforming first-lien mortgages used to purchase or refinance single-family dwellings. Nunes also sought input from industry experts, lenders and loan officers. First, we have to talk about the exits. Robinson found that 3,122 lenders originated at least one jumbo loan in 2022, and that 138 lenders exited the space last year. In fact, more than 900 lenders have exited the jumbo marketplace since 2018. Early indications are plenty more will depart in 2023. Our HMDA analysis found that jumbo production fell to $377.9 billion in 2022, down 41.3% from $643.4 billion in 2021. Here were the top 10 jumbo lenders in 2022: var divElement = document.getElementById('viz1691515664784'); var vizElement = divElement.getElementsByTagName('object')[0]; vizElement.style.width='100%';vizElement.style.height=(divElement.offsetWidth*0.75)+'px'; var scriptElement = document.createElement('script'); scriptElement.src = 'https://public.tableau.com/javascripts/api/viz_v1.js'; vizElement.parentNode.insertBefore(scriptElement, vizElement); In the first quarter of 2023, jumbo production totaled just $37 billion, down 36% quarter over quarter and 72% year over year, according to Inside Mortgage Finance. By contrast, the overall mortgage market declined 61% year over year in Q1 2023.In California, jumbo volumes reached $117.5 billion in 2022, about 31% of all jumbo originations in the U.S., according to HousingWire’s analysis. Jumbos were also about 40% of all conventional loans originated in California last year.The two biggest jumbo lenders in California have either pulled back significantly (Wells Fargo), or gone belly-up entirely (First Republic) and another, California-based MUFG Union Bank, got absorbed by U.S. Bank and its wholesale mortgage operation shut down. These changes are affecting the whole jumbo ecosystem, and not just in California. Gregg Busch, a D.C.-based banker at First Savings Mortgage Corporation, told Nunes that underwriting on jumbos had tightened significantly over the last year, with depository lenders making fewer exceptions to their standard guidelines. Rates for jumbo loans at bank branches are also competitive compared to those offered to their correspondent partners. “At one of the biggest players in the secondary market for correspondent lending, if you go straight to the bank, you can get a mortgage on a 30-year fixed rate at 6.5%. For us, that same rate through their correspondent channel is 7%. When banks do jumbo loans, they want to have money from the client in the bank. It’s all about liquidity,” Busch said. First Republic Bank courted Silicon Valley’s millionaires with interest-only jumbo mortgage loans at rock-bottom rates, and it proved fatal when depositors freaked in the wake of Silicon Valley Bank and Signature Bank’s failures. The days of banks winning borrowers with extremely low jumbo rates to get their deposits on the books might be waning. The deposits at First Republic just weren’t ‘sticky,’ one banker told Nunes. Will it be worth the risk for other depositories?In response, nonbanks are positioning themselves to gain some market share left by depositories, though they aren’t expected to make major inroads anytime soon. Our analysis found that United Wholesale Mortgage, Guaranteed Rate and Rocket Mortgage were all active in the jumbo space, but on the fringes of the top 10. Alex Elezaj, chief strategy officer at UWM, said the new jumbo offerings are not “a big needle mover for UWM in terms of originations or profitability,” but help put brokers in a position to compete with big banks and retail lenders. UWM — like other IMBs — can’t beat the banks’ low cost of funds, which is their clients’ deposits, but the wholesale lender has its overall cost structure and competitive margin in its favor, he noted.There’s a ton more detail about different lender strategies, pricing challenges and emerging jumbo markets (hi Seattle, hi Denver!), so please check out part I here and part II here. In our weekly DataDigest newsletter, HW Media Managing Editor James Kleimann breaks down the biggest stories in housing through a data lens. Sign up here! Have a subject in mind? Email him at james@hwmedia.com.

The last few years have been a proving ground for lenders in a major way. The market has swung from record-low mortgage rates and high purchase volumes to a refi boom to lower volumes and rate increases alongside inflation. Lenders have had to adapt quickly not only to the market conditions but to adjust their company culture to survive, implementing policies like remote work.“The last four years, being flexible and adaptable has probably been one of the core pillars of the culture,” NRL Mortgage CEO Mewael Ghebremichael said. “[During] those swings or dichotomies — if your company was not adaptable or flexible, you’re probably not here today.”As lenders adjust to the current down market, they’ve taken a hard look at expenses and even layoffs. These topics can lead to issues with employee morale, which is why it’s more important than ever to focus on company culture and fostering a supportive environment.“You have to invest in your current employees that are still there,” Ghebremichael said. “If you’re not investing in your employees as much as you can, leaning into that culture, you’d be doing yourself a disservice. It’s really important to do that now.”ReconnectionWhen NRL Mortgage took a look at its culture this year, the first thing the leadership team decided to do was focus on reconnection. After a long period of everyone working from home, the company has moved to a hybrid model of working three days a week in-office and two days a week from home. As a result of the work-from-home policies, there were many people who worked together but hadn’t seen each other in person for years.NRL Mortgage decided to host a reconnection event in the second quarter of 2023, which was met with overwhelmingly positive feedback, despite some initial reluctance at the idea of returning to the office, Ghebremichael said.“It allowed everyone a moment or opportunity to reset, refresh and refocus,” he said. “It gave us the spark we needed for 2023.”The reconnect event highlighted the changes leadership needs to make to the work environment in the post-COVID-19 pandemic world.“How we worked pre-COVID is going to be different than how we work post-COVID,” he said. “We have to be a bit more focused and realize that instead of calling things meetings, maybe we’ll call them an event. We have to make it more interesting, fun and collaborative than we ever did before.”By creating these opportunities to reconnect, leadership can push the company culture, which will hopefully lead to growth.InclusivityThe second step to reconfiguring the company culture was to emphasize inclusivity and allow collaboration across the entire company.“Once you reconnect, you have to allow for a mechanism or an outlet to have your voice heard,” Ghebremichael said. “We asked our people what they would like to see in the future from the company and gave them a survey to be able to tell us.”The key to inclusivity is not only allowing feedback from employees but acting upon it, he said. Even if you can’t act upon some of the ideas that are presented, employees want to hear that you’ve at least considered it and even shared some reasons why it’s not feasible.“If you tell them that, you’ve really completed the loop of inclusivity. You’ve got to be able to close that loop,” he said. “Being able to hear suggestions and voices and then determine whether we are going to do that with reasons why kind of puts the bow on it.”TransparencyThe most important part of company culture, though, is transparency.“Transparency is the No. 1 thing that lenders have to do to push the ball forward, letting everyone know where we’re at,” Ghebremichael said. “It’s very easy to talk about the good times, and it’s obviously difficult to talk about the tough times, but you have to talk about both.”One way to promote transparency between leadership and employees is to create touchpoints throughout the year, whether that’s a quarterly email or monthly call. Employees want to hear from leadership about what’s going on with the company, especially during difficult times in the market.“If you’re open and honest — if you say, ‘Hey, the company is not doing well and here’s what we’re doing to fix it,’ or ‘The company is doing fine, we’ve made it through that quarter,’ or whatever it may be, I think that transparency resonates with a lot of folks,” Ghebremichael said.Ultimately, focusing on reconnection, inclusivity and transparency can help bolster employee morale during difficult times, which can improve productivity and lead to business growth.“It just goes back to being transparent and having your voice heard,” Ghebremichael said. “It’s really easy to [be negative] when it’s over the phone, email or chat — it’s a little more difficult to live in that world when we’re seeing each other face-to-face. You’re like, ‘Oh, it actually really isn’t that bad.’”

UWM Holdings Corporation, the parent of United Wholesale Mortgage (UWM), was another mortgage lender that returned to profitability in the second quarter of 2023, just like its primary competitor Rocket Companies and the origination segments of Mr. Cooper and Pennymac. UWM’s performance was boosted by an increase in the fair value of mortgage servicing rights (MSRs) and higher origination volumes, despite lower margins from April to June, per documents filed with the Securities and Exchange Commission (SEC) on Wednesday. The Pontiac, Michigan-based lender announced a non-GAAP adjusted net income of $175.9 million in the second quarter, compared to a $106.8 million net loss in the previous quarter. The company’s GAAP net income in Q2 was $228.8 million. “Unlike others that are more reactive to cyclical market conditions, we will continue to be aggressive in our technology and product investments. We are hiring right now, whereas the industry as a whole is continuing to cut back on capacity,” Mat Ishbia, chairman and CEO, said in a statement. UWM originated $31.8 billion in mortgage loans in the second quarter of 2023 “despite a historic decline in industry-wide origination volume during 2023,” according to Ishbia. The volume exceeds the expectation of a production between $23 billion and $30 billion in Q2. Originations in Q2 2023 came higher than the $22.3 billion in the previous quarter and $29.1 billion during the second quarter of 2022. To compare, Rocket Mortgage originated $22.3 billion from April to June.  UWM originated $28 billion in purchase loans in the second quarter, an increase from $19.2 billion in the first quarter of 2023 and $22.4 billion in the second quarter of 2022. Ishbia told analysts that UWM did more purchase business in Q2 than any other lender did in mortgages overall, and the company is on pace for an all-time record purchase year.  “Other management teams seem to have forgotten that during a mortgage boom, the majority of the opportunity is in the first six months. Companies that are not prepared for those events react late, hire late, train late and miss most of the opportunity,” Ishbia said. Ishbia said thousands of loan officers in the second quarter joined the broker channel, more than half of which left from the retail channel. UWM is recruiting new staffers, hiring hundreds of employees in June and July. These employees, however, are not contributing to the earnings now as they take six months to get ready, Ishbia said. The company’s total gain-on-sale margins decreased to 88 basis points in Q2 2023, compared to 92 bps in Q1 2023 and 99 basis points in Q2 2022. Andrew Hubacker, UWM’s Chief Financial Officer, told analysts, “Year to date, the gain-on-sale margin of 90 basis points is solid and right in the middle of what we continue to guide to in this competitive market.”“This is also a significant increase from the last half of 2022 when we had our Game-on pricing as we have transitioned from this more broad-based pricing strategy into a more targeted initiative,” Hubacker said. In April, UWM launched a 1% down payment program for conventional loans, in which the lender is paying a 2% grant up to $4,000 for a total down payment of 3%. Ishbia said initiatives like that have no date to end. After releasing its earnings, UWM announced it will remove loan-size pricing adjustments (LLPAs) on loans under $100,000. The company will also pay up premiums for market-based pay-ups on 30-year fixed conventional loans of $200,000 and below. New initiatives also include the Control Your Price program, which gives discounts for brokers to play with. UWM has increased the basis points limit that brokers can apply to loans over $1 million from 20 bps to 40 bps. UWM will also double or triple the Control Your Price basis points brokers apply on all non-agency jumbo loans, depending on their compensation plan, limited to 120 basis points.UWM anticipates the third quarter production to be between $26 billion and $33 billion. Gain-on-sale margins are expected to be between 75 bps and 100 bps.  Regarding its servicing business, second-quarter earnings were impacted by a $24.6 million increase in the fair value of MSRs. UWM had $294.9 billion in the unpaid principal balance of MSRs as of June 30, 2023, compared to $297.9 billion as of March 31, 2023.UWM plans to “opportunistically sell MSRs in 2023, as market conditions warrant to support the operating and capital liquidity needs of the business while maintaining a sizable and high-quality MSR portfolio that provides a recurring quarterly cash flow stream,” Hubacker said. During the 2Q 2023, UWM sold $28 billion in UPB. Additional bulk sales of loans with a total of $26.2 billion were completed after the quarter ended, resulting in total proceeds from MSR and excess sales year to date of nearly $1.4 billion, Hubacker said. UWM ended the second quarter with $900 million in cash and self-warehouse.  Looking ahead, Ishbia said a refi boom, whether a long and sustained or a mini refi boom, is “coming soon,” mainly if rates decline between 75bps and 100 bps. The opportunities are usually in the first three, six, or maybe nine months to make money, he said.“We are prepared for that now. Scale is the name of the game,” Ishbia said. UWM shares were trading at $6.71 on Wednesday afternoon, up 6.32% from the previous closing.