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Opinion, commentary and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.
Investments Lending Real Estate

Monday Morning Cup of Coffee: PulteGroup CEO says access to credit a headwind to housing

SoFi starting a REIT?

March 7, 2016

Monday Morning Cup of Coffee takes a look at housing finance news coming across HousingWire’s weekend news desk.

With housing inventory a hot-button topic right now, it’s only fitting to hear what the CEO of top homebuilder PulteGroup, Richard Dugas, had to say about the biggest challenges to the housing market, along with how the company plans to serve Millennials.

Jarred Schenke interviewed Dugas in a BISNOW article about what the homebuilder is witnessing in housing.

According to Dugas in the article, access to mortgages and a shortage of labor are two headwinds facing PulteGroup.

Even as PulteGroup reported profits approaching $500M on revenues of nearly $6B last year, Richard says limited mortgage availability, particularly for entry-level buyers, remains a headwind to overall housing demand. He also says finding labor for new construction can be constrained at certain times during the year.

When asked about Millennials and their tendency to rent rather than buy a home, Dugas said:

We are focused on serving the Millennial buyer who is looking for a more urban-like location, specifically targeting older Millennial buyers who are seeking closer-in locations and comfortable with a townhome or condo product. While the entitlement/development process is often more challenging, the high returns which can be realized make this is an attractive product category, and one we can develop in many markets throughout the country.

SoFi is supposedly working on plans to start a real estate investment trust that would buy the mortgages the startup lender makes, Matt Scully said in a Bloomberg article, citing two people with knowledge of the matter as his sources.

The article stated that this idea could be a new way to raise money at a low cost to lend out long term.

From the article:

The company makes home loans as big as $3 million, focusing on borrowers with stronger credit profiles. Many of its customers are seeking mortgages that are too big to be funded through government housing finance companies like Fannie Mae and Freddie Mac.

SoFi recently explained in an interview with HousingWire that its surprising entrance into the Super Bowl-commercial world was only the beginning of a major brand push, shedding light on other changes coming to the alternative lender.

Meg Ciarallo, vice president of brand marketing at SoFi, said, "We’re expanding beyond lending to help financially responsible people reach their money, career and relationship goals.”

“For example, we’ll soon launch wealth management services, and we are significantly scaling our entrepreneurship and career services programs,” she added. “While the marketing campaign is a large investment, now is the right time for SoFi to be increasing consumer awareness at a large scale  – we have 120,000 members who want to SoFi, who don’t want to bank. We’re confident there are millions more like them.”

Before Zillow Group transformed into a mega online real estate conglomerate, it was a small company with only 26 employees. The company had a plan to create a website that allowed people to find descriptions and estimated market values of houses throughout the U.S, an article by Rachel Nielsen, a staff writer with the Puget Sound Business Journal, said.

The article talks about how the founding concepts that Zillow laid down are still around today.  

The idea was to take information that was available only to a select few – real estate brokers – and make it available to the general population. It was not dissimilar to Expedia's business model, which took airline pricing information and made it available to people who wanted to buy tickets.

The estimated home value was key to Barton's and Frink's new website: The so-called Zestimate was and still is Zillow’s own calculation of a home’s market value based on public real estate records; other public information like the home's location; and house details inputted by visitors to Zillow.com.

Stan Humphries, Zillow’s chief analytics officer and the creator of the Zestimate, said that in 2005, as Zillow’s first employees were envisioning the company, they decided that number crunching “would be really central.”

Now Zillow is called Zillow Group and is a family of websites, which includes consumer brands Zillow, TruliaStreetEasyHotPads and Naked Apartments.

Zillow Group CEO Spencer Rascoff said during its fourth-quarter investor call that the Zillow Group websites saw approximately 150 million users in July 2015, when real estate searches typically peak due to the seasonality of the market.

"Last year was a strategically exciting one for Zillow Group," Rascoff said.

"Through our acquisition of Trulia, we formed the largest real estate media company in the world and have now established the foundation for our long-term growth and category leadership,” Rascoff said.

“This year we'll be focused on the strategic priorities of growing our audience, growing our agent advertiser business, growing our emerging marketplaces and continuing to maintain our extraordinary company culture which attracts, retains and motivates extraordinary people to do their best work,” he said.

Despite concerns about how the oil industry is impacting Texas, the Lone Star State still managed to add 23,600 jobs in January, according to seasonally adjusted and benchmarked payroll employment numbers released today by the Federal Reserve Bank of Dallas.

And in 2015, jobs grew at an annualized pace of 1.5%, the report said.

“Despite the continued drop in oil prices and strength in the U.S dollar in December and early January, the Texas economy continued to add jobs,” said Keith Phillips, Dallas Fed assistant vice president and senior economist. “Job growth remains strong along the Interstate 35 corridor of Dallas, Austin and San Antonio.”

Looking ahead, the report stated that the Texas Employment Forecast stands at 0.9% growth for 2016, suggesting 110,600 jobs will be added in Texas this year. 

No banks were reported closed for the week ending March 4.

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