An analyst says more and younger homebuyers could finally enter the market soon, and one non-traditional lender with an A.I. chatbot that "never sleeps" is shaking up the process to make it easier for them.
First-time purchasers only made up about one-quarter of those who bought homes last year — compared to 34% the year before that — and the typical buyer was 36 years old, an all-time high, according to the National Realtors Association.
"It's not surprising that the share of first-time buyers shrank to the lowest level ever recorded given the housing market's combination of historically low inventory, persistently high home prices, and rapidly escalating interest rates," said Jessica Lautz, the association's vice president of demographics and behavioral insights.
A former Oppenheimer analyst dubbed the "Oracle of Wall Street" after she wrote an accurate research report sounding the alarm over Citigroup's risk before the financial crisis predicted a correction in the market — and an "in" for younger buyers.
A former Oppenheimer analyst dubbed the "Oracle of Wall Street" after she wrote an accurate research report sounding the alarm over Citigroup's risk before the financial crisis predicted a correction in the market — and an "in" for younger buyers.
Meredith Whitney, chief executive officer of Meredith Whitney Advisory Group, told Insider that she expects housing prices to decline for the first time in over a decade due to an aging Baby Boomer population. Whitney said that a surge in downsizing would ease housing shortages.
"I expected this to happen," Whitney said. "If you look at it historically, 50% of those over 50 typically sell and downsize (their homes), and that's expense driven."
Only 10% of homeowners are under 35, according to U.S. Census data.
"I'm always data-driven, so it's just the math," Whitney said. "If you look at the percentage of homeowners that are 50 and up, that's a staggering amount."
Whitney predicted that Pennsylvania, Connecticut, New Jersey, and Illinois had the biggest chance of seeing falling housing prices.
The Catalysts: Low Affordability, Shrinking Supply, 'Golden Handcuffs'
Housing affordability has reached its worst level since 2006 in August, according to the Atlanta Federal Reserve.
The National Association of Realtors' Housing Affordability Index sank nearly 50% from 169.9 at the start of the pandemic in 2020 to 91.7 this past August.
A value of 100 on the index means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home, the association said. An index level below 100 means that median-income families will come up short.
New data from property portal Zillow suggested the situation may be easing for first-time homebuyers. The data show that 9.2% of listings slashed their asking prices during the week up to September 23, compared to 6% in April and 7.9% during the same week in September 2019 before the pandemic.
Most homeowners right now have mortgages as low as below 4% or even below 3% after refinancing with record-low rates during the pandemic, according to CNBC.
A so-called "golden-handcuff effect" now has 82% of home shoppers feeling "locked in" by those low rates, Realtor.com reported.
Low inventory has kept prices high — they've risen 42% since March 2020 — and rising interest rates have lessened the pool of qualified homebuyers. Pending home sales fell 7.1% in August, the National Association of Realtors noted.
"One positive aspect that came out of the pandemic was historically low mortgage rates — and many people took advantage of this opportunity to buy their first home, upgrade to a more expensive home, or refinance the home they were in," Realtor.com Chief Economist Danielle Hale said. "Unfortunately, this comes with a bit of a catch-22, as homeowners who locked in a 30-year fixed rate in the 2-3% range don't necessarily want to give that up in exchange for a rate in the 6-7% range."
'A Sweet Spot' in the Market
New data from property portal Zillow suggested the situation may be easing for first-time homebuyers. The data show that 9.2% of listings slashed their asking prices during the week up to September 23, compared to 6% in April and 7.9% during the same week in September 2019 before the pandemic.
A cooldown in the market occurs every year after the summer. But economists said the trend had accelerated this fall.
"For determined buyers, with enough budget room to accommodate the recent jump in mortgage rates, this fall is looking more and more like a sweet spot," Zillow senior economist Jeff Tucker wrote.
This Lender Is Gaining Traction
And for these new younger buyers (or others looking for a simpler process), some nontraditional mortgage lenders have been disrupting the industry, including a private company called Beeline Loans Inc. that hopes to do for the mortgage industry what Robinhood did for the stock market.
"While other mortgage lenders have been slumping, Beeline is gaining traction," Guy Bennett wrote for Yahoo Finance. "Beeline's mix of home investors is about 300% higher than the national average."
Beeline launched its platform in 2020 and closed about 2,000 loans by the end of 2021. It expects to close about 3,000 loans in 2024. The company has gained market share against other larger lenders despite being launched at the start of COVID-19 and seeing the highest increase in interest rates in 25 years while inventories and consumer confidence sunk near all-time lows.
Co.'s AI Bot 'Never Sleeps'
What's the secret? According to the company, it's "tech (and) old-fashioned warmth and responsiveness."
A 24-hour-a-day artificial intelligence chatbot named Bob sits on the front page of the company's website to answer customers' complex queries and give detailed quotes.
"Bob never sleeps," the company noted, "He's busy answering surprisingly complicated questions about Beeline's wide range of conventional and non-QM products with great speed and accuracy, even at 2 a.m. He then poses highly personalized product-specific questions to generate a quote in real-time."
Beeline said in a promotional video that its process is a "radically new way to apply, like five steps in 15 minutes radical. Do it from the sofa even."
The company said that instead of asking a long series of questions on your financial background, it gets the actual numbers from the sources, like banks and pay and tax info.
"While other mortgage lenders have been slumping, Beeline is gaining traction," Guy Bennett wrote for Yahoo Finance. "Beeline's mix of home investors is about 300% higher than the national average."
"We get it in seconds," the video said. "Aside from saving you a ton of work, a shorter path means our rates are low because we're not pushing 1,000 people to push paper. You've got a reliable purchase-ready approval that realtors will take seriously."
Beeline's application process includes direct links to your bank and pay info and a "smart journey" that adjusts to you, it said. Dozens of loan options are available.
The company also does not leave you with just one type of loan offering; it has dozens of options available. It provides FHA and VA loans while also providing popular Non-QM loans such as Debt Service Coverage Ratio (DSCR), bank statements, bridge, and fix-n-flip loans. Two of Beeline's customers who embody the gig economy, Kalli and Adrian, discuss how access to bank statements and DSCR loans made homeownership possible.
"Because of their very diverse set of product offerings, younger homebuyers have more options at Beeline vs. traditional mortgage lenders and a better chance to get financing," said Chris Connelly, a managing director at Ellington Financial Group and a Beeline shareholder.
Beeline is a private company with over US$40 million currently invested. Its largest shareholder is founder Nick Liuzza, who has over US$10 million invested in the company. Cavalry Investment Fund is a significant investor.
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