Well, here we are at the beginning of another year. For those of us in housing finance, the calendar year change really does mean something. There is a mix of hope and uncertainty as we anticipate the potential increase of post-holiday volume and the proven run up to the spring and summer buying season.
However, all of the concerns from last year threaten to carry over — from the fear of recession to stubborn high home prices and the stickiness of sub 3% mortgage rates that keep future buyers firmly planted in their existing homes.
And yet the MBA Mortgage Finance Forecast for 2023 has some bright spots in it. If we can get past Q1 then things start looking up for the rest of the year, with rates expected to get down to 5.2%. There are also all those millennials reaching prime home buying age, and they have to live somewhere, right?
I’ve never been one for New Year’s resolutions or coming up with themes for each year, but much to my surprise when I sat down to write, a theme emerged from the holiday fog: 2023 is a “Year of Action.”
Of course, to seize the opportunity presented by any time period, action is necessary. But in 2023, action seems particularly needed because none of the greatest opportunities to move the ball forward in housing will come easy.
There is no federally funded wind at our back to drive consumer demand and no more cheap capital available to fund every good idea. Action will be required to do more with less and to convert the hard work of previous years into tangible benefits for consumers.
Let’s explore three areas that exemplify the need for action-oriented behavior.
Property Appraisal
I would be remiss not to choose appraisal as the first area that desperately needs action. The past couple years have seen an enormous amount of effort put into shining a spotlight on industry issues such as racial bias, the inability to scale with volume and inconsistent results.
Regardless of whether there is agreement on how to quantify evidence of the problem, there is certainly agreement that there is widespread concern. And yet, 2023 could prove to be one of the greatest turning points for appraisal in decades.
GSE modern appraisal programs are finally expected to transition from test-and-learns to policy, the FHFA appears ready to accelerate work streams and data after their fintech RFI, and the ASC will begin conducting public hearings on appraisal governance and bias starting January 24.
The most groundbreaking aspect of GSE appraisal modernization that gets overlooked is that there is now a tech-driven data standard for how a home should be documented in support of an appraisal. No more clipboards with notes that stakeholders will never see.
The requirement of a mobile app to collect data the same way in every home in every community adds a level of objectivity and consistency that so many consumer advocates have been demanding. The policy change is almost here, but it will require action from lenders, fintechs, appraisal management companies and appraisers to adopt the change.
And while there are substantial cost and time savings to be had, the true benefit is being able to give the consumer a consistent, transparent set of data about their house. A year from now, I would love to talk about the progress that has been made to make potential bias extremely difficult to perpetrate, as opposed to being stuck in debate on its existence.
Housing Affordability
The idea of a holistic approach to housing continues to resonate with me. From basic shelter to sustainable renting that leads to better opportunities for homeownership, it has never been more clear that it takes action to make room for innovation that achieves results.
The more I hang around proptech founders focused on affordability solutions and groups like Ivory Innovations, the more I realize that a holistic approach to housing is also about not staying in a silo.
Property data and valuation solutions are my primary areas of expertise, but housing affordability and increasing the number of people that are “well housed” (thanks to Jeremy Potter for that Dr. Raphael Bostic quote) is an all-hands-on-deck-sized challenge.
Proptech investment has pulled back due to market challenges, but the problems in housing don’t seem to pay much attention to that. They remain. So I am constantly seeking new ways to understand how my expertise can be a help or hindrance to potential solutions.
2023 will be a difficult year to fund every solution-oriented idea, but action can also be funded by an investment of time and collaboration with intent.
Stay the course on non-negotiables
In times like these, where cost-cutting is crucial and almost every company in housing finance is trying to do more with less, you find out quickly where priorities lie. It takes deliberate action to continue to make progress on areas that are perhaps more mission-based but harder to represent on a P&L.
I’ve been asking myself what my non-negotiables are this year. Despite the instability in real estate and mortgage, I really wouldn’t want to be in any other industry.
Borrowers still deserve to be treated equitably regardless of what community they live in or what race they are. The real estate transaction doesn’t have to be 45 days and filled with friction on top of a stressful purchase.
Homeowners should have direct access to accurate home value and equity data so they can make wise financial decisions. Automated valuation and underwriting models can and should create efficiency without increasing bias.
I plan on seizing opportunities to make progress even in the current market. Prioritizing my time, partnering with like-minded people across the industry and using my voice creates opportunity for change.
After furiously watching the World Cup in November and December, the saying “it’s the hope that kills you” is still rattling around in my brain. Fortunately, we don’t have to rely on hope to make an impact in housing.
So many transformative building blocks have already been put in place through years of effort by countless people. Visibility on issues of fairness, policy change for modernization and technology for innovation are all at our fingertips. We just have to take action to see the transformation through.
Bias to action!
Great line, Kenon. “ There is no federally funded wind at our back to drive consumer demand and no more cheap capital available to fund every good idea. Action will be required to do more with less and to convert the hard work of previous years into tangible benefits for consumers. ”