Remote-Work Boom During Covid-19 Pandemic Draws Real-Estate Startups

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Park in San Francisco social distancingDavid Paul Morris/Bloomberg via Getty Images

A group of real-estate startups is aiming to cash in on the remote-work phenomenon.

With many corporate offices closed because of the pandemic, many young professionals have left cities like New York and San Francisco for warmer, cheaper places. A number still plan to return after their offices reopen, leaving them reluctant to buy homes or sign long-term apartment leases.

That situation is creating fresh demand for furnished housing on a short-term basis, a fast-growing niche that many property startups and their venture-capital backers are rushing to fill.

One of them is Landing, which runs a network of furnished apartments across the U.S. When it launched in 2019, the Birmingham, Ala., and San Francisco-based company initially planned to operate in about 30 cities last year. Instead, it expanded to 75, largely because demand grew much faster than expected, said Landing Chief Executive Bill Smith.

“Covid has taken a decade of change that I was thinking was going to happen between now and 2030 and kind of compressed it into a year,” he said.

Legions of remote workers also offer these firms a chance to make up for reduced tourist and corporate business. San Francisco-based Sonder, which rents out furnished apartments by the night, ramped up its marketing of extended stays during the pandemic, according to Chief Executive Francis Davidson. Stays of longer than 14 days now account for about 60% of the company’s business, up from less than a quarter before the pandemic, he said.

Kulveer Taggar, CEO of corporate-housing operator Zeus Living, said his firm experienced a steep drop in demand as companies hit the pause button on employee travel and relocations. But he was able to make up some ground by renting apartments to individuals. People working from home now account for about a quarter of the company’s business, Mr. Taggar said, up from virtually nothing before the pandemic.

Unlike Sonder and Zeus, remote workers were a key part of Landing’s business before the pandemic. Its customers pay an annual membership fee, which gives them the right to rent furnished apartments in any city. The minimum length of stay varies from 30 to 60 days, and the company asks for a month’s notice before a customer moves out.

The company is popular with college-educated young professionals who don’t want to be tied to a single location. Since the start of the pandemic, it has seen a growing number of customers leave New York and San Francisco and move to cities like St. Petersburg, Fla., and Denver, Mr. Smith said.

In November, Landing raised $45 million in venture funding from a group of investors led by Foundry Group and including Greycroft and Maveron, along with $55 million in debt. Mr. Smith said he hopes to expand to 25,000 apartments by the end of this year, up from around 10,000 today.

That growth carries risk if demand from remote workers were to disappear again after the pandemic is over. Still, Chris Moody, a partner at Foundry Group, said the number of furnished apartments available under flexible terms is still so small that he doesn’t worry about a lack of customers.

“Even at the end of 2021, we won’t really have scratched the surface,” he said.

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Source: realtor.com

Orchard expands to Houston, East Coast

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Orchard announced Tuesday its immediate availability to consumers in Houston, as well as future expansion into Charlotte, Raleigh-Durham, and the Washington, D.C. suburbs in the upcoming months.

Court Cunningham, chief executive officer and co-founder, said he’s excited for Orchard to help consumers in the new markets, where demand has outpaced inventory.

“We’ll make it easier for home buyers in these markets to secure their dream home as soon as they see it, while still selling their old home for top dollar,” he said.

Cunningham added that the Move First initiative, Orchard’s program allowing homeowners to buy their next home before selling their old one, proved popular during the COVID-19 pandemic because it let consumers avoid living in their old home while potential homebuyers toured it.

“Buying and selling homes the traditional way isn’t sufficient in today’s hyper-competitive market,” he said. “With demand at an all-time high, people need to make offers – ideally in cash – without contingencies.”

Houston, according to multiple listing service data, is selling homes above price at triple the rate of 2019, and Cunningham added that the number of homes going under contract within 30 days of listing has increased by 50%.

Orchard adds Houston to a service area that includes Austin, Dallas-Fort Worth, San Antonio, Denver, and Atlanta.

Originally called Perch, Orchard branched into the lending business in July. This followed the creation of a title and escrow unit, dubbed Orchard Title, in the fall of 2018. It also closed on a $69 million Series C round led by Revolution Growth in September.

In October, Orchard announced the launch of a digital platform that enables homeowners to manage the entire real estate transaction in one place.

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Source: housingwire.com

Mortgage rates remain at record-low levels

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After falling to the lowest rate in Freddie Mac’s Primary Mortgage Market Survey’s near 50-year-history last week, the average U.S. mortgage rate for a 30-year fixed loan remained at a survey-low 2.67% this week.

Last week’s announcement of a 2.67% rate broke the previous record set on Dec. 3, and was the first time the survey reported rates below 2.7%.

The average fixed rate for a 15-year mortgage also fell this week to 2.17% from 2.19%. One year ago, 15-year average fixed rates were reported at 3.16%.

“All eyes have been on mortgage rates this year, especially the 30-year fixed-rate, which has dropped more than one percentage point over the last twelve months, driving housing market activity in 2020,” said Sam Khater, Freddie Mac’s chief economist. “Heading into 2021 we expect rates to remain flat, potentially rising modestly off their record low, but solid purchase demand and tight inventory will continue to put pressure on housing markets as well as house price growth.”

Freddie Mac has reported survey-low rates 16 times in 2020, proving beneficial to borrowers looking to buy or refinance a home amid economic turmoil outside of the industry.

Mortgage spreads continue to compress, per Freddie Mac officials, with the 10-year Treasury yield remaining at or above 90 basis points through the beginning of December.

This week’s 5-year Treasury-indexed hybrid adjustable-rate mortgage averaged 2.71%, down from last week when it averaged 2.79%. That’s another sharp drop-off from this time last year, when the 5-year ARM averaged 3.46%.

The Federal Open Market Committee revealed earlier this month that the Federal Reserve plans to keep interest rates low until labor market conditions and inflation meet the committee’s standards. Overall, Fed purchases have helped to drive mortgage rates and other loan interest rates to the lowest level on record by boosting competition for bonds.

Higher rates may be around the corner, as the calendar flips to 2021 and the promise of a second COVID-19 stimulus check along with a vaccine reaches consumers. The Mortgage Bankers Association has forecasted rates for 30-year fixed-rate loans rising to an average of 3.2% by the end of 2021.

But if the virus is not controlled in the new year, investors may remain cautious and consumer confidence could wane – keeping rates low, according to the MBA.

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Source: housingwire.com

2021 means new challenges for mortgage lending

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For many of us, the start of a new year is usually synonymous with a renewed sense of professional self, focusing on new goals, new prospects for the year and, of course, the excitement for the upcoming spring real estate market. As we think about coming out of this first month of the year, we’ve quickly realized this year is going to be anything but planned or what we in the mortgage lending industry are used to.

While the mortgage lending industry has always been an ever-changing profession, we as loan originators have entered a very unprecedented market, with a new landscape paved by uncertainty and a level of anxiety that could easily cripple the most seasoned originator.

With the current global pandemic, we have found ourselves in an increasingly volatile financial system and quickly having to learn how to adapt to the changing environment from one day to the next. The current financial state of our country has caused us to now rely heavily on the opening exchanges and the market forecast to determine how our rates will be impacted, thus giving way to a new line of thinking – Where and how can we effectively close loans?

For some, the refinance “boom” has been their bread and butter over the past year and a way to build up their pipelines. But for others, low mortgage rates gave way to pre-approved borrowers struggling in a very competitive seller’s market. It is even more important then ever to stay in front of your borrowers and referral partners so that they understand the changes that ultimately affect us all.

The way we as mortgage lending originators conduct our business has quickly taken on a new form during these times of uncertainty. 2020 proved that we all need to work to find new ways to generate business. While working double time to save the business we had, it was very easy to find ourselves thrown into a game of what to do next? The country was paralyzed amid the current health crisis and many borrowers and sellers alike are frightened to enter purchase contracts and move forward with transactions already in progress.

We found ourselves acting as an empathetic ear to those who are on the verge of potential economic hardship and constantly reassuring those in process that we are all in this together.

Fast forward to 2021 and expanding our mortgage lending business has taken on a new form as the inventory in many markets have taken a sharp downturn during the pandemic, pushing it into some of the lowest availability in history. Buyers are being outbid, above asking price has become the normal in many areas and the trajectory of the market seems to be moving in a much different direction than many are used to.

Even some of the most seasoned real estate agents have had to slow down in their current business model. By acting in accord with our referral partners, we too as originators have had to find new ways to prospect for new business and remain relevant in a challenging environment. Marketing material has quickly evolved from our traditional “Why Rent When You Can Own” to educating on the effect of the Federal Reserve’s action of cutting interest rates and how this has impacted inventory.

This is now more than ever a time of understanding, patience and resilience.

The face of mortgage lending has changed from the recognition of the big-name banks to the individual brand that we have all built for ourselves. Many have established a presence within their markets by hosting local happy hours, attending networking events, and attending their closings. Face-to-face coffee meetings are a staple to beginning new relationships among referral partners, causing many loan originators to halt business dealings and struggle to stay relevant during this crazy time.

Zoom meetings have spiked across the country and even the most seasoned sales professionals have been taking advantage of the short face-to-face time to ensure their partners and clients keep them top of mind.

Business as usual has certainly taken on a new meaning as many of us try to keep up on borrower demands and field questions during the day while juggling working from home, which sometimes involves the occasional screaming child in the background.

It is a great time to revamp our CRMs, organize our past and current clients, and more importantly, try to find ways to slow down and reconnect with family and friends. The mortgage lending business has never been for the faint of heart, but I believe this will certainly separate the lions from the cubs. Buckle up lending community — this may be only getting started!

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author of this story:
Tracy Chongling at [email protected]

To contact the editor responsible for this story:
Sarah Wheeler at [email protected]

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Source: housingwire.com