Most mortgage originators are worried that loan production expenses will increase while volume will decline, and they’ve pinpointed five areas of the market they think present the most opportunity in the year ahead. About 28% of LOs with 10 or more years of experience think construction loans present the most opportunity, followed by non-QM, not jumbo loans at 21%, renovation loans at 19%, jumbo loans at 16% and FHA loans at 15%, according to a recent survey by Altisource Portfolio Solutions,. The survey polled 202 decision makers working in mortgage origination.
Home equity business
PennyMac sees opportunity in home equity lending, announcing that its loan services subsidiary will now offer HELOCs. The company said its new HELOC product will roll out immediately in five states: California, Florida, Oregon, Virginia and Washington – with expansion on the horizon. The loan will only be available to existing PennyMac borrowers, but the company said it plans to increase availability once the program grows. PennyMac said its HELOC offering will help 1.4 million borrowers access their equity.
Zillow will begin buying and selling homes through its Zillow Offers program in nine new markets in 2019: Dallas; Houston; Raleigh, North Carolina; Riverside, California; Miami; Minneapolis-St.Paul; Nashville; Orlando and Portland. Sellers in these markets can request cash offers from Zillow to buy their home. Zillow announced it expects the program to be fully up and running in these markets by the fall. Zillow Offers allows homeowners to request a no-obligation cash offer from Zillow to buy their home. If they accept it, Zillow directly buys a seller’s house, prepares it for showings and quickly lists it for sale.
Redfin classifies luxury homes as those that sold among the top 5% most expensive in the quarter. According to the company, sales of homes priced at or above $2 million decreased 3.9%, the first time in more than two years that luxury home sales fell on an annual basis. Redfin Chief Economist Daryl Fairweather said this is due to economic headwinds. In fact, in the fourth quarter, luxury homes went under contract after an average of 74 days on the market, nine more days than in the third quarter of 2018.
Interest rate hikes
As 2019 begins, many experts and even Federal Reserve members are predicting that the Federal Reserve is done raising interest rates, at least for 2019. Federal Reserve Chairman Jerome Powell said the U.S. central bank can be patient when it comes to further rate hikes. Powell said since inflation is low, the Federal Reserve can be patient about its rate hikes, waiting to see how economics will play out in 2019. And St. Louis Fed President James Bullard said the Federal Reserve had “reached the end of the road” in this tightening cycle.
Home improvement and repair activity is going to slow considerably by the end of 2019, according to the Joint Center for Housing Studies of Harvard University. The center tracks the movement of this market through what it calls its leading indicator of remodeling activity index. The latest LIRA report projected that spending on renovations and repairs will decrease from 2018’s 7.5% to 5.1% in 2019. After several years of stronger-than-average increases, the pace of growth in remodeling activity is expected to fall back to the market’s historical average annual gain of 5.2%.