Top markets for affordable renovated housing inventory

Despite the rapidly deteriorating affordability, there is some hope for homebuyers in the form of renovated homes: properties that have been rehabbed into move-in ready condition after being purchased at auction.

HousingWire Magazine: December 2021/ January 2022

AS WE ENTER A NEW YEAR, let’s look at some of the events that we can look forward to in 2022. But what about what’s next for the housing industry?

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Logan Mohtashami on Omicron and pending home sales

In this episode of HousingWire Daily, Logan Mohtashami discusses how the new COVID variant, Omicron, will impact inflation and whether or not it will send mortgage rates lower.

Mortgage

Alternate equity companies see a lot of potential in senior citizens

The resurgence of alternative home equity tapping companies in the past few years has been of interest to the reverse mortgage industry due to the potential that business has to compete for seniors’ business. Whether discussing arrangements like sale leasebacks or shared equity investments, such products could serve as an alternative to a debt-based option for those looking to unlock a portion of their home’s equity and gain access to additional cash flow.

To gauge how that business is performing particularly among seniors after the COVID-19 coronavirus pandemic, Reverse Mortgage Daily reached out to leaders at three companies: Point, QuantmRE (which both offer shared equity investment products) and EasyKnock (which offers a sale leaseback). While the average customer age of these leading alternative equity tapping companies has remained stable over the past 18 months since the onset of the pandemic, all of the companies see both heightened awareness from the senior demographic, as well as interest in catering to them.

Seniors’ response to alternative equity tapping since COVID-19 onset

At each of the three companies RMD spoke to, most agree that interest in their alternative products has increased universally, as opposed to an increase among one single demographic.

“Over the past 18 months, we have seen a significant increase in inquiries from all homeowners, including inquiries from seniors who now realize there are alternative non-debt financial tools available to them,” said Matthew Sullivan, founder and CEO of QuantmRE. “These Home Equity Agreements allow them to access their increased home equity without monthly payments or taking on additional debt.”

At Point, CEO Eoin Matthews notes that the company is on track for a year of explosive growth in 2021 which is due in no small part to seniors’ interest in the company’s offerings.

Eoin Matthews, CBO and co-founder of Point

“Demand for Point’s Home Equity Investment (HEI) has grown immensely over the past 12 months, and seniors are a big part of that,” Carr said. “This has been particularly true in 2021 where we’re on track for 400% growth since the start of the year.”

For EasyKnock, the company declined to share specifics regarding a demographic breakdown, but instead reported that its sale leaseback offerings are of particular interest to seniors when compared to other equity tapping options. This is according to EasyKnock CMO Jeff Carr.

“They really love the product, have the flexibility to stay but enjoy life is paramount,” Carr told RMD. “For seniors, our product can be especially meaningful. More often than not, we’re helping them unlock the ability to stay in the home that they know and love, where they’ve invested their time and money, where they’ve raised their kids, where they’re comfortable.”

In terms of the awareness that seniors demonstrate of these alternative options, both QuantmRE and EasyKnock describe that the increased interest in their offerings is up uniformly across multiple demographics, since these products do not come with an age restriction, though QuantmRE notes that it has seen additional applications from seniors. However in the case of Point, the overwhelming majority of customers that it serves are at or near the reverse mortgage demographic, according to Matthews.

“Over 65% of Point’s customer base consists of seniors and older adults (50+) so there’s certainly strong uptake with older homeowners,” he explained. “As seniors explore equity release solutions, HEIs are increasingly an attractive option, especially for those seniors looking to retain a low-cost first mortgage or those outside the Home Equity Conversion Mortgage (HECM) box.”

While seniors are more likely to be approved for a reverse mortgage when compared to more traditional equity tapping options according to recent Urban Institute research, Matthew Sullivan of QuantmRE notes that over 8 million homeowners were declined a home mortgage in 2020, and that an average FICO credit score among most borrowers of 760 may increase the difficulty of qualifying for mortgage financing.

“Home Equity Agreements may assist homeowners with sufficient equity to become eligible for a reverse mortgage if they have been previously rejected due to credit score issues,” Sullivan said.

As pandemic relief programs end, seniors may seek more alternatives

As both the federal government and those at the state, county and local levels begin to phase out certain relief programs designed to assist homeowners with financial hardships created by the pandemic, the availability of equity tapping options outside of the debt-based mortgage realm is something that these companies all feel varying degrees of anticipation for.

Matthew Sullivan

“With many pandemic aid programs coming to an end, homeowners who have not yet financially recovered from the impact of the pandemic are looking for solutions,” Matthews said. “Whether it’s pandemic-related or not, we’re seeing a lot more homeowners come to us having been referred by family or friends, and having reviewed the HEI product extensively online.”

Similar trends are observed at QuantmRE, according to Sullivan.

“We have found that more people have responded to our advertisements and marketing and are willing to learn more about Home Equity Agreements as their other options have become limited,” he said. “As the pandemic has forced more people to get accustomed to doing their research online, we have seen a greater response to our online advertising and podcasts.”

Part of that new motivation may stem from higher home prices now compared with the pandemic’s onset, he said.

“Homeowners appear more motivated to take advantage of the increased equity in their homes since the start of the pandemic and are attracted to the prospect of being able to receive a cash lump sum without any corresponding monthly payments. As a result, we believe the take-up of Home Equity Agreements across all demographics is at historic highs.”

The future of seniors and alternative equity tapping

While the reverse mortgage industry continues to explore ways it can innovate in terms of product development and consumer education to bring greater awareness for reverse mortgage products to American seniors, alternative equity tapping companies appear poised to increase focus on seniors as a tool for potential growth.

“76% percent of households aged 50 and over own their homes. Thanks to home appreciation and years of mortgage principal paydown, these homeowners have significant equity,” Matthews said, citing data from Harvard University’s Joint Center of Housing Studies describing a median of $115,000 in equity for households age 50 and over, and a median of $143,500 for households age 65 and over.

For EasyKnock’s sale leaseback offerings, seniors remain a powerful demographic for potential growth, Carr said.

“As our senior population grows and more and more are looking to age in place, EasyKnock is an attractive option enabling them to convert equity to cash while remaining in the comfort of their homes,” he said. “Every homeowner searching for a solution is important to us, but we certainly recognize that our product can be particularly helpful among the senior population. Making sure we’re aptly serving the needs of seniors is a constant priority.”

Similarly at QuantmRE, seniors will be a major focus of the company’s business in the future, Sullivan said.

“The senior demographic has and will be a significant part of the company’s future,” he explained. “Usually the senior demographic indicates a higher equity ownership compared to other age groups, but […] this is changing. As the level of education among seniors increases (as a result of direct marketing or via trusted third parties such as financial intermediaries) we expect to see an increasing uptake of Home Equity Agreements from seniors.”

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