At the recent 2019 EPIQ client conference, CoreLogic President and CEO Frank Martell and Managing Director of Property Intelligence and Risk Management Olumide Soroye shared their vision of what primary forces are driving disruption and change in the housing industry. They outlined the top five drivers that professionals should watch to stay relevant in our constantly evolving housing ecosystem.
1. Changing Needs of Homebuyers
Millennials have entered the age of peak first-time homebuying, and catering to this demographic means understanding their unique needs and expectations. Millennials have grown up in a world of instant data accessibility. With the immediacy provided by online transactions, which already make up 50% of mortgage transactions, Millennials are making decisions differently than previous generations. In hot markets, they may buy a home before ever setting foot into it. As a result, lenders need to provide an end-to-end digital experience that ensures precision and accuracy in every step of the origination process.
2. Affordability and Housing Supply
The United States has seen a consistent shortfall in home production relative to demand over the past decade, particularly among entry-level homes, making it more difficult for first-time homebuyers to enter the market and achieve their dream of homeownership. Older generations are increasingly opting to "age in place" rather than trade up, preventing new, affordable homes from entering the market. Home builders face headwinds from local regulations, expensive construction materials and labor shortages, all of which dampen the number of new homes built each year. In addition, Builders tend to focus on higher-priced homes, perpetuating the scarcity of affordable housing stock.
3. Cost Pressures on Lenders
Profit margins on mortgage originations have grown slimmer for lenders, with the average originated loan netting less than $300 in profit. Costs that have increased beyond an average of $9,000 per loan, as well as tightening competitive pressures from various sources, are squeezing lenders on all sides. Lenders will have to stay nimble and take advantage of every cost-saving innovation to remain profitable.
4. Growing Impact of Natural Disasters
Natural hazards are getting more plentiful and destructive. The average cost of natural disasters has reached almost $200 billion, which is quadruple what it was in the 1980s. About half of those losses are uninsured. This causes havoc in the lending market, driving up delinquencies and prices not just in disaster-struck communities, but in surrounding communities as well. With no end in sight to this trend, the industry must increasingly rely on data analytics to effectively predict and respond to natural hazards.
5. Housing Finance Reform
There are several unresolved issues in housing finance that will have tectonic ramifications for everyone in the ecosystem. One of the most pressing includes the future of GSE conservatorship. While a lot has gone well under this system, it was never intended as an end state, so what will the future hold? Related to this issue is the impending end of the QM patch, which could have significant consequences for the market share of GSEs and the private mortgage market. Depending on how GSE conservatorship and the QM patch pan out, the FHA may have greater weight in the housing sector, so that organization's efforts to embrace modern tech advances and address issues with the False Claims Act become very important.
©2019 CoreLogic, Inc. All rights reserved.