Both reverse and traditional mortgage originators are feeling the crunch of appraisal turnaround times. RMD explains why and what HECM professionals have to say.
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The RMI Reverse Market Minute update
Us Existing-Home Sales Fell For The First Time In Over A Year, Price Growth Slows
If more than one-third of your reverse mortgage loans are HECM-to-HECM refinances you’re running out of time. Time to refurbish your loan pipeline. Time to build effective and productive referral relationships.
Without audience targeting are Google Ads Dead? Think again…
Early this month Google announced new restrictions for targeting specific audiences. The restrictions apply to content related to housing, employment, credit, and those who are disproportionately affected by societal biases. The news of these restrictions created quite a stir among industry brokers and lenders who heavily rely upon targeted Google ad campaigns.All which may have you asking if these changes will kill future reverse mortgage advertising on the world’s most popular search engine. In just a moment we’ll hear from our online SEO expert Josh Johnson to find out.
Google’s restrictions are not necessarily novel nor unexpected. It was just over two years ago Facebook faced scrutiny from federal regulators for allowing those offering credit or housing finance to restrict ad audiences by race or religion among other questionable metrics that would violate HUD’s fair housing rules. An investigation by ProPublica broke this news in October 2016. It was nearly two years later in August 2018 that HUD filed a formal complaint against the social media giant for discriminatory advertising practices. Seven months after HUD’s complaint Facebook announced sweeping changes. Both Facebook and later Google, took a blunt approach much to the chagrin of lenders and service providers.
What ad filters are going away? In its official release Google revealed, “credit products or services can no longer be targeted to audiences based on gender, age, parental status, marital status, or ZIP code.”
Is this the end of Google ads for reverse mortgages? To answer that question I reached out to Josh Johnson who heads up Reverse Focus’ Online Dominance SEO program and Google marketing. Here’s his explanation.
Here’s what makes Google unique from other platforms and why reverse mortgage Google ads will continue to reach the intended audience.
To summarize, older homeowners are intentionally seeking out reverse mortgage information on Google which means, yes-your ads will be seen by your target audience, even though you can no longer target specific age groups.
The government-sponsored loan that’s ignored
The appeal and eligibility of reverse mortgages for older homeowners are largely driven by home values and interest rates. And there are signs that the housing market may be beginning to falter. First new home sales rose in June and July but that’s only the second increase in the last six months. Second, new home sales have steadily fallen since March with only a modest increase in July. Third, housing inventory began steadily increasing this spring, a trend that’s expected to continue now that the eviction bans have ended. Keep in mind evictions and sales of rental properties will lag several months as landlords step through the arduous eviction process so don’t expect an immediate surge for several months.
What we are witnessing is an artificially inflated housing market spurred by slashing interest rates and government stimulus.The question is how long can this continue? After all, today’s low interest rates that have skyrocketed a homebuyer’s purchasing power are unlikely to go lower. So what happens when banks can foreclose, landlords can sell rentals, and banks increasingly tighten credit and strengthen their cash positions. Truth be told, this ‘irrational exuberance’ to quote Alan Greenspan will be paid for. So are we in a housing bubble or simply a boom in prices? Core Logic’s Chief Economist Frank Nothaft expects a boom rather than a bubble. Nothaft says I don’t expect we’re going to see a housing price crash. I don’t think we’re in a bubble.”
What would sustain today’s record home values? Continued constraints in housing supply, and continued low interest rates. What could trigger a housing bubble? CNBC real estate correspondent Diana Olick says “you need a catastrophic economic event to make a housing bubble pop. You can definitely have a pullback in the heat in the housing market. But to really have that market crash there needs to be that event”. In 2008 that catastrophic event was the failure of investment banks and investment losses from subprime-related investments to name a few.
So barring any sudden economic crisis or a sudden several of the Federal Reserve’s interest rate and inflation strategy we’re more likely to see the housing market cool down. And truth be told that would be the ideal outcome with far less damaging consequences for homeowners and the U.S. economy.
Certainly, evictions and foreclosures will increase overall inventory but not enough to offset a decade of lackluster new home construction. This is good news for reverse mortgage professionals and their future borrowers. Elevated home values and low rates will provide increased borrowing power allowing many homeowners to retire their existing mortgage and perhaps secure a line of credit for these most uncertain times.
It’s not boom or doom when it comes to the housing market. While Americans are getting priced out of the housing market millions of savvy older homeowners are sitting on a goldmine. Not just a motherlode of equity but a potential source of cash flow that could be mined to help temper the impacts of inflation and as a hedge against financial shocks.
Do you know who the biggest player in the housing market is today? Is it hedge funds, REITs, or the largest developers? If you answered the Federal Reserve, congratulations.
Some members of the Federal Reserve’s policy-setting committee want to end the Fed’s purchasing of $40 billion a month of MBS (mortgage-backed securities) sooner than later. The question is how much and how soon. In a presser following the Fed’s two-day meeting discussing how to reduce asset purchases Federal Reserve Chairman Jerome Powell said, “There really is little support for the idea of tapering MBS earlier than Treasuries. I think we will taper them at the same time.”
The wind-down of asset purchases will put pressure on yields. Today, with the Fed consistently purchasing most mortgage-backed securities lenders don’t have to offer higher yields to attract investors, this allows them to offer lower rates. When rates eventually do increase modestly homebuyers will have to reconsider the price range homes they consider for purchase. Sellers may also rethink their asking price as home affordability erodes. Both would cool the pace of housing appreciation and bring some modicum of normalcy to an overheated market.
Monday Federal Reserve Bank of Atlanta President Raphael Bostic said the central bank should move to taper asset purchases in light of recent strong employment gains. Speaking of the timing of tapering Bostic said, “Right now I’m thinking in the October-to-December range, but if the number comes back big” as with the last report “or maybe even a little bigger, I’d be open to moving it forward. If the number really explodes, I think we would have to consider that.”
While employment gains are substantial, many economists are concerned as millions of small businesses cannot fill open positions. Employer-mandated vaccinations or mask-wearing may further strain the rate of employment growth when coupled with the $300/week federal unemployment bonus. Both could postpone the Fed’s tapering of asset purchases. However, inflationary concerns could also spur the central bank to accelerate its timeline. The central banks’ mantra is they see the surge of inflation as merely transitory. Time will certainly tell.
For now, even a moderating seller’s market still will benefit reverse mortgage applicants in the short term when coupled with historic low interest rates significantly increasing their available loan proceeds. While it’s uncertain how long the market will continue its run, reverse mortgage originators couldn’t ask for a more ideal market.
Without audience targeting are Google Ads Dead? Think again…
Early this month Google announced new restrictions for targeting specific audiences. The restrictions apply to content related to housing, employment, credit, and those who are disproportionately affected by societal biases. The news of these restrictions created quite a stir among industry brokers and lenders who heavily rely upon targeted Google ad campaigns.All which may have you asking if these changes will kill future reverse mortgage advertising on the world’s most popular search engine. In just a moment we’ll hear from our online SEO expert Josh Johnson to find out.
Google’s restrictions are not necessarily novel nor unexpected. It was just over two years ago Facebook faced scrutiny from federal regulators for allowing those offering credit or housing finance to restrict ad audiences by race or religion among other questionable metrics that would violate HUD’s fair housing rules. An investigation by ProPublica broke this news in October 2016. It was nearly two years later in August 2018 that HUD filed a formal complaint against the social media giant for discriminatory advertising practices. Seven months after HUD’s complaint Facebook announced sweeping changes. Both Facebook and later Google, took a blunt approach much to the chagrin of lenders and service providers.
What ad filters are going away? In its official release Google revealed, “credit products or services can no longer be targeted to audiences based on gender, age, parental status, marital status, or ZIP code.”
Is this the end of Google ads for reverse mortgages? To answer that question I reached out to Josh Johnson who heads up Reverse Focus’ Online Dominance SEO program and Google marketing. Here’s his explanation.
Here’s what makes Google unique from other platforms and why reverse mortgage Google ads will continue to reach the intended audience.
To summarize, older homeowners are intentionally seeking out reverse mortgage information on Google which means, yes-your ads will be seen by your target audience, even though you can no longer target specific age groups.
Eviction Ban Drama & the signs of a cooling housing market
As the housing market goes, so goes our industry. And a shift in the U.S. housing market has begun. Before we dive into the data showing why let’s discuss the most recent breaking news- eviction bans.
In a 5-4 decision on June 29th, the U.S. Supreme Court put the Centers for Disease Control on notice saying the agency overstepped its statutory authority in issuing a nationwide eviction ban. However, with the ban’s expiration of July 31st fast approaching the high court allowed the ban to remain in place another month. The CDC argued the eviction moratorium was warranted to prevent homelessness which they argued would lead to further spread of COVID-19.
First, once the bans actually expire available housing inventory would increase as rental properties are sold increasing inventory which could slow the pace of red-hot home values. That means slightly reducing the available proceeds for future reverse mortgage borrowers. Second, the White House under increasing and unrelenting pressure from top House and Senate Democrats directed the CDC to extend the deadline again despite the Supreme Court’s warning. On August 3rd the CDC issued another temporary order for an eviction ban, however, this time is limited to renters in counties with a high level of COVID-19 community transmission. The new ban is to expire on October 3rd.
While the moratorium drama played out a significant shift in the housing market was largely underreported and generally unnoticed. In fact, the market is at a tipping point. Consider these statistics. In June the pace of homes under contract fell 1.9%. “Buyers are still interested and want to own a home, but record-high home prices are causing some to retreat,. The moderate slowdown in sales is largely due to the huge spike in home prices”, said Lawrence Yun, Chief Economist for the National Association of Realtors. You can’t blame potential homebuyers for standing back since median home prices have increased for over 112 months. According to a U.S. Census Bureau report, sales of new single-family homes dropped by 6.6% in June compared to May. Annually, sales of newly constructed houses were down by more than 19% compared to a year ago.
In their July 2021 report, Zillow said, “for-sale inventory saw meaningful recovery for the second month in a row, improving 3.1% over May”. Realtor-com reports a 10.9% increase of newly-listed properties from May to June. Perhaps the housing market shift has already begun.
While the eviction bans will prevent some rental properties from going on the market, homebuyer fatigue from a hyperactive market appears to be slowing home purchases and relieving some pressure on housing inventory. The means future reverse mortgage borrowers are likely to see their home appreciation slow or even plateau in several markets. A gradual slowdown or soft-landing of the real estate market is not only more likely but also much more preferable to reset in home values. In the meantime, older homeowners are poised to get the most with a reverse mortgage with robust home prices and a Federal Reserve that’s reluctant to tinker with today’s low interest rates.
How COVID-19 Vaccines will Upset the Housing Market
The coronavirus pandemic has dramatically changed the landscape of the housing market- especially in urban areas. Here’s how COVID-19 vaccines in 2021 are poised to upset housing trends once again.
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COVID has slowed but hasn’t stopped FHA’s search for a new servicer