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Elevated mortgage rates and home prices have had a chilling effect on home sales, but would-be homebuyers may face a host of other complex problems that they’ll need help from real estate agents and loan officers to navigate.
From the rising cost of building and insuring a home to the burden of property taxes, “we’re seeing an onslaught of these types of costs that make it more difficult to afford a home,” loanDepot President and CEO Frank Martell said. “So making the right decision on what home you can afford, getting the right mortgage — all those things are becoming increasingly more important.”
In a wide-ranging discussion at Inman Connect Las Vegas Wednesday with Era Ventures partner Clelia Peters, Martell said he sees technology making life easier for agents and loan officers — not putting them out of work.
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“I think we’re all at an inflection point,” Martell said. “There’s a lot of change coming down the pike and I think we have to take a deep breath and try to figure it out.”
In addition to commission lawsuits and changes coming under the implementation of terms of the National Association of Realtors settlement, real estate professionals are also keeping a wary eye on artificial intelligence and other technology.
Martell — who before taking the CEO reins at loanDepot in 2022 was at the helm of real estate data, intelligence and analytics giant CoreLogic — also serves on the boards of Compass and SmartRent Inc., so he’s heard the argument many times over the years, and isn’t buying it.
“When I came to the industry 25 years ago, one of the first meetings I had, somebody came to my office and told me there were going to be no more real estate agents … and clearly that hasn’t happened,” Martell recalled. “I think we’re at a very exciting point in time where we’re going to have different tools, different data and different platforms to enable the real estate agents who are fronting the transaction to add more value. And I don’t think that’s something that’s going to be disrupted, certainly not in my lifetime.”
While home prices have “escalated dramatically,” there’s also an onset of new factors contributing to affordability challenges, he said.
The rising cost of homeowners insurance and property taxes has made homeownership more costly — even for those who own their homes free and clear.
While lenders require homeowners who are still paying their mortgage down to have homeowners insurance, a recent analysis by the Consumer Federation of America (CFA) found that 14 percent of homeowners who don’t have a mortgage aren’t insured.
For those who do have a mortgage, lenders “have a tremendous issue” if a homeowner loses their insurance policy, Martell said. Force-placed insurance policies often protect only the lender, and it’s homeowners who are stuck with an insurance charge paid on their monthly mortgage bill, the CFA noted in its report.
With regulators turning their attention to so-called mortgage “junk fees,” lenders are “kind of stuck between the rock and the hard place” when a homeowner can’t afford insurance, he said.
State-run collectives are a potential short-term solution, but in the long run, Martell thinks public-private partnerships may be required to make homeowner’s insurance less of a burden.
“I think there are a lot of good intentions to get people into homes and promote affordability,” Martell said. “But a lot of the policies that we have in place today are the inverse of that. They’re driving higher costs. They’re driving higher complexity. And, you know, there’s a million examples at the local level, the county level, the state level and the national level.”
The lack of housing supply is another driver of affordability issues in many markets, and Martell thinks builders will have to construct about 6 million homes to restore the balance of supply and demand.
“That’s a decade, if we really put our shoulder into it, to fix that issue,” he said. “I don’t see any real plan on the horizon quite yet to deal with that. And if we’re six million short, that’s going to drive up home prices and a lack of shelter for people.”
Shifting demographics is another challenge for the real estate industry. The average first-time homebuyer is “31-ish” years old, but because people are waiting longer to get married and form households, Martell sees “a gradual aging of the first-time homebuyer.”
Most first-time homebuyers are nonwhite, come from “all kinds of different educational backgrounds,” and are increasingly likely to be gig employees rather than W2 workers, Martell said.
“A lot of homebuyers are either Latino or they’re Asian — English is not their first language,” Martell said. “Mortgage and real estate is really an English-driven platform, and that becomes an issue as that progresses. So we need to be ready to help on that score.”
While Martell said he’s heard a lot of talk about whether Realtors should also become mortgage lenders to augment their incomes, he “would recommend thinking long and hard before you do that.”
Mortgage lending is “a very complicated, highly regulated industry. So if you want to get into it, you better be prepared for all that.”
LoanDepot has 1,000 loan officers in local markets “that have deep relationships with many, many agents, and I think that that long-term relationship means everything,” Martell said.
“I think both the agent and the loan officer are so integral to making a successful transaction. That relationship is very key, and we work hard to try to keep that relationship going and support the real estate agents.”
At the end of the day, Martell said, “Real estate agents are the key value driver in this industry, and they’re enabled by all this other technology and data. All buying is complicated, and you need that human touch, so that will not change.”
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