October 28, 2019
Orion’s brokers know that a down payment is one of the largest obstacles to otherwise eligible home buyers. Consumers are using credit and financing in new and different ways to navigate their financial lives. Many consumers prefer to have more savings when they buy even at the expensive of home equity. 0% down can be a good option for some of your clients that have reserves.
The first thing an experienced broker will explain is that, when looking at resources, there are really two different types of home buying assistance: grants to help with a down payment or closing costs and programs that give your client an actual discount on the property or loan. Many consumers do not know what options exist for mortgage products or assistance. Orion’s AEs are hearing more and more about tradeoffs between home equity versus liquidity. More data should also be helpful as we look at credit risk and collateral value in the future. The models are improving, and Orion is watching the trends. And we will educate our clients so you can educate yours regarding down payment assistance programs.
One explanation why first-time homebuyers are not finding homes is thought to be the competitive landscape. Lack of supply combined with increased participation from cash and iBuyers means fewer options for first-time homebuyers In September, 11% of offers written by Redfin, a national real estate brokerage, faced a bidding war. That is down dramatically from 41% a year ago, but up from the 10% reading recently. It could mean more cash and iBuyers winning homes outright or before financed offers could jump in. Some markets are slowing overall but would be interesting to see how shifts in the industry change indicators like this.
On the other hand, Orion and our brokers believe that it could mean that with the flattening of mortgage rates that home values are normalizing. “Right priced” properties do not need to be bid up. As data sources increase, one wonders if easier access to real estate data will improve competitive or quash it. For instance, fewer bidding wars could mean more accurate pricing or it could mean that computers bid on properties so quickly that financed buyers missed out altogether. How can a buyer compete with an investor’s supercomputer?
This trend will be one to watch for anyone focused on housing demand or real estate market data. And through it all, Orion continues to be here for our clients!