In this episode of the Top of Mind podcast, Mike Simonsen sits down with Clayton Collins, Founder and CEO of HW Media, to talk about the big trends shaping the 2023 real estate and mortgage markets. Clayton offers his vision for how real estate professionals can better access information, shares the inside scoop on what mortgage executives are preparing for in 2023, and tees up the key tech trends coming this year. He also explains why he’s optimistic for the second half of the year.
Clayton Collins is the Founder and CEO of HW Media. He leads HW Media’s corporate strategy and content roadmap while building a world-class team of business media professionals. He is also the Managing Partner of Riomar Capital, an entrepreneurial investment firm that acquired HousingWire in 2016. Prior to founding Riomar Capital, Clayton worked at RBC Capital Markets in the mergers and acquisitions group and served as Vice President of National Sales and Marketing at Citibank. Clayton holds a degree in business administration from Elon University and completed his MBA at The Fuqua School of Business at Duke University.
The Top of Mind Podcast is produced by Altos Research.
Each week, Altos tracks every home for sale in the country - all the pricing, and all the changes in pricing - and synthesizes those analytics to make them available before becoming visible through traditional channels.
Schedule a demo to see Altos in action. You can also get a copy of our free eBook: How To Use Market Data to Build Your Real Estate Business.
Intro 0:02
Welcome to Top of Mind, the show where we talk to real estate industry insiders and experts about the biggest trends impacting the market today. Enjoy the show.
Mike Simonsen 0:11
Mike Simonsen here. Thanks for joining me today. Welcome to the Top of Mind podcast. This is where I talk to the smartest leaders thinkers, doers in the real estate industry. For a few years now, we've been sharing the latest market data every week in our Altos Research weekly video series. With the Top of Mind podcast, we like to add context to the discussion about what's happening in the market and in the industry, from the leaders in the industry. Each week, of course, altos research tracks every home in the country, all the pricing all the supply and demand all the changes in that data and we make it available to you before you see it in a traditional channels. People desperately need to know what's happening in the housing market right now. It's been so crazy. It was so crazy to the hot side, and then it cooled off so fast, the landscape has changed so dramatically. Everybody is worried about what happens in 2023. So if you need to communicate about this market to your clients, your buyers and sellers, go to altos research.com book, a free consultation with our team, we can talk about local market, your local market, how to use the market data in your business, and we can help you communicate because everybody needs to know what's happening in the market right now. So And speaking of keeping your clients informed, I've got a terrific guest today. Clayton Collins, played as the CEO of HousingWire Media, HW media, the publisher of HousingWire, real treads, reverse mortgage daily. He leads HW Media's corporate strategy and content roadmap and build a while building a best in class, best best world class team of business media professionals building a media empire. And in case you missed it, my company Altos Research was acquired by Housing Wire HW Media earlier this month in December. So Clayton and I are now colleagues. So we're going to talk today a little bit about HW Media claims vision for the future and the things we get to accomplish together. So Clayton, welcome to the podcast.
Clayton Collins 2:22
Thank you, Mike. It looks I think we had to do a deal before I got an invitation to join Top of Mind. I feel like I bought my way into this interview.
Mike Simonsen 2:31
We have we have the only the best in the industry Clayton on the podcast. So clearly, you're above the bar.
Clayton Collins 2:37
Well, Mike, I'm thank you for that introduction. And I have to say, and we talk about the best in the industry, and our mission of building a world class team of housing professionals, you, my friend are part of that vision and a big part of why this combination of HW Media with HousingWire in real trends reverse mortgage daily and altos will be so successful because of the expertise and experience that that you bring to the table. So I'm thrilled to work with you.
Mike Simonsen 3:05
Yeah, me too. It's a it's an exciting next part of the journey for both of us. So that's really great. And well, we could sit here and talk about our company, our companies and our company for the whole time. I really want to hear your vision about the market, the changing market, the things that we talk about on this podcast. But before we get into those things, let's do a little bit about tell us about HW Media. I'm interested in your journey getting there. And then maybe we could talk about your vision for the future. So tell us about HW Media tell our listeners.
Clayton Collins 3:34
Yeah, so Mike, I founded HW Media in 2016 when I led a group of investors and myself to acquire HousingWire from the founders, Paul and Richard who started the business back in Oh 607 And really turned it into an actual media brand and in oh eight and ran hard for eight years. But it was a, an opportune time for me to come in, help them transition out of the housing, wire business and start HW Media. And I thought it was kind of I still kind of chuckled to myself when people kind of misspeak and call us HousingWire versus HW Media back and forth. Because the story is like it's not that strategic. So like, we'll see, when we bought HousingWire from Paul and Richard was HW publishing, and we're doing an asset deal and my lawyers need a new name, what do you got, and like, I don't know, HW Media, and just like change publishing and media and like it was supposed to just be kind of a, an LLC on the paperwork, like assuming that everything we do be under the HousingWire, brand name. But as our strategy has played out, which you know, from the beginning has been to be acquire, operate and grow. Like we know that we have some DNA in the m&a space. It's my background as an m&a banker and I believe it's a way that we can build the company we want to build on a faster trajectory and also bring together the people we want to bring together on a faster trajectory than going straight organic. So when we acquired real trends that was kind of like alright, we kind of have like a portfolio approach a family of brands approach here and we need a built to build a brand around this LLC that I found and we bought HousingWire. So he immediately right let's make let's make a logo and stand up a website and I wouldn't I'd be lying if I didn't tell you I'm not sitting on three dozen domain names that like could be like a future like consolidated brand, but we're pretty happy with was what we the brand we take to market today, which is HW Media, which is the parent CO for HousingWire, real trends, Altos Research, reverse mortgage daily, and hopefully more as we continue this growth strategy of serving the housing market and housing professionals with news and information data.
Mike Simonsen 5:52
That's great. It was a creative leap and branding. When you I started Altos Research, people, like where did that name come from? And I was like, I lived in Los Altos, California. And it was Altos Research, and that was it. And it was a placeholder name 17 years ago, and yet, here we are.
Clayton Collins 6:08
So it's amazing what placeholders can become. Yeah.
Mike Simonsen 6:13
I have Yeah, grown fond of the brand. So that's great. And I actually do that a lot of the I did it a couple times in my little intro that that switch HousingWire and HW Media use it sort of interchangeably, but then we'll talk about HW Media in this conversation and your role leading that and into the future. So So HW Media publishes publisher and its media data. And the audience is tell me about like your vision of the audience and who you're informing and reaching.
Clayton Collins 6:42
So part of the founding vision of HousingWire was that housing market focus news and information was relatively disjointed, and housing wires sought to bring together mortgage and real estate and loan servicing and capital markets news all under one brand. And there's a bit of a really admirable vision there. And there's some belief that from the founders of Housing Wire that a lot of the factors that led to the great financial crisis could have been avoided, to some extent, with better information flow across different professional categories. In Home Builders knew what was happening in the real estate sales market. If loan originators and mortgage executives more importantly, knew what was happening in the real estate sales market and the homebuilding market, as secondary markets desk and Wall Street capital markets firms understood kind of the junk that was coming up the pipe. If loan servicers knew the impact that changes in home prices, or black swan events could have on total portfolios. If all that information the housing market was understood at as kind of a sector wide level across the leaders of each respective subcategory, a healthier housing market could have evolved. And our belief with HousingWire is that connecting housing professionals across ecosystem from homebuilding to real estate to mortgage origination to capital markets Loan Servicing appraisal title, like all of these ecosystems can come together and work together and learn together, we will build a healthier, more sustainable housing market, that's a better place for you and I to work and the audience's that we serve to work and build careers and build net worth, but also for home home owners, the American people to have a more sustainable housing economy that's more functional and you can act and don't have this fear that we do right now that like it's a bad time to sell and also bad time to buy. And we really believe that access to information across the industry. It's not just it's not just the business we run, but it's also there's a mission that we can build something better for the housing industry and for American families that that own and rent real estate. So that's the big vision from an audience perspective and be a little more granular Mike, we have always focused on serving executives across the housing industry. We want to make sure that every independent mortgage bank, C suite executive and depository bank executive and credit union executive, anybody that has a mortgage business reads us every day, we want the leaders of loan servicing shops and capital market stats to read HousingWire every day. We want real estate agents and brokers and team leaders to read HousingWire and real trends and engage in the community. We are there to serve those professionals. And through that, we built really large audiences of title professionals, appraisers and other folks across the housing ecosystem, from home builders to investors that value housing information to do their job better. And so we seek to serve the housing professional across those subcategories. And we also attract an audience of kinda like the beltway audience. We always like unknown and not really strategic like audience of people inside of Washington DC from the White House. was to Congress, the Senate to the Federal Reserve and all the different fed banks across the country that read Housing Wire, which we are proud of, but also means we have a high bar to clear in terms of the quality and timeliness of the information because we information is driving policy.
Mike Simonsen 10:16
That's great. That's that is says a lot. Right as it is that audience says a lot about the content that you're creating the media, the journalism that you're doing, but also good, because that audience is there. It says a lot about the kind of journalism you want to do. Yeah, yeah,
Clayton Collins 10:33
no, I mean, media is a kind of joke. And we bought HousingWire, we had 14 People are based in Irving, Texas, I were just 14 people out here and suburb of Dallas, doing our thing, but even at that time, had a massive audience from coast to coast and in big, big shoes to fill big expectations to serve in a big responsibility to play for our audience. And as we've grown, that responsibility has grown. So I still like that we're still a small business. But man does running like a media publishing and information business come with a lot of responsibility.
Mike Simonsen 11:07
Yeah. Yeah. All right, that's a great place to stick it about the responsibility for the market. And so the big thing on the minds out of mind, so it's right at the end of December, the soul go out that next week at the first week of January, I'm sure what the and so we're looking at 2023. And you have a perspective on the market, from the perspective of your audience and your advertisers different from which might be different from my perspective down in the data. What's your view on the housing and mortgage markets for 2023? What should we be expecting?
Clayton Collins 11:47
So we do this, everybody does it. But everyone talks about like predictions for 2023. And as a business operator and investor, I run up an annual budget that starts January 1, and ends December 31, as do everybody that we serve inside of our professional audience. December 31. Is this like, hard cut off date and something new starts on January 1, the thing I've been reminding myself and watching for in the data and the coverage is that cycles and markets don't necessarily follow fiscal years. And 2022 was definitely a tale of two halves. We started 2022 In this low rate environment, incredibly competitive home buying market where homes were still getting dozens of offers or hundreds in certain parts of the country. And then we saw rates start creeping up, and demand pulled back, and prices stabilized. And then the last few months have declined. And we've seen this like incredible shift. And I would, it's almost better talking about the New Year is like July 1 to June 30. And so but I'm really excited for 2023. But I'm not anticipating like this page turn and like we start a new chapter in the housing market in January. Interest rates are still in the sixes that's keeping buyers on the sidelines, prices are still high sellers don't want to sell for anything less than a neighbor's sold for and May and June. And I don't know that they've come to terms with that they're not in a competitive bids scenario where they're going to list and have dozens of offers a matter of days or weeks. And I don't think that changes in January. But I think we do have something to look forward to in in 2023. And like I there's a little like hesitant optimism that like starts in kind of the late spring, selling season buying season and goes into the second half of the year. The economists that I follow are all kind of guiding toward interest rates that stabilise in the fives in the second half of 2023. The NBA has who's right sometimes and sometimes not. I guess that's the challenge of being a forecaster is forecasting rates to more 30 year fixed rate mortgages to average 5.2 come December of 2023, which is a really healthy housing market. And I know there's homebuyers out there and loan originators and real estate agents who were are hungry for rates in the threes or fours again, I was gonna say high twos, but let's not even talk about that. But the reality is what it takes for us to see mortgage rates in the threes again, is a global pandemic. Not like lockdowns across the United States, the economy halting and the threat of World War Three all happening at the same time. And that is not a scenario I hope for and I believe that our housing economy homes can buy can can trade homes can be sold and be bought very healthily and in the fives. So there is This vision for the second half of 2023, where we start to see rates trickled down beneath six and kind of bounce between five and six for the second half of the year, in that will trump activity movement and rates prompts activity. And I think that's going to be an important part of the narrative that we're watching for. And in 2023,
Mike Simonsen 15:20
that's a great vision. It's very clear. And I'm, I'm aligned with you, like I've said that five and a half that we saw in August, we could really this year, we could really see activity. And then when rates in the first week of September spiked above six and a half, you could see things just the brakes hit really, really dramatically. Is there in your vision? Is there anything or your view? Is there anything in the in the like in your set of people you're talking to, like insight of executives or things like that, that, that give you a view of people preparing or what they're expecting beyond things like rates? Yeah, I mean, so
Clayton Collins 16:06
I mean, rates matter. We're watching the economic indicators to figure out what's gonna happen with rates. I was joking with Diego, RCO and Logan last week that I've never felt this like, dynamic before where we're rooting for bad economic data to come out. You want a low like a negative CPI read and like you want job growth the hall and see unemployment starts to pop up, like we're rooting for bad data, which the whole market is right, like the stock market, not just housing, like the stock market is rooting for bad data, because they know it will influence Federal Reserve decision making. So that's one that's kind of influenced by some of the folks I've had a lot of conversations with, but going like a little bit deeper into other conversations I've had with smart people we respect I am hearing that narrative that I started with, like hesitant optimism for the back half of 2023. Last week, we interviewed Ruben Gonzalez, Chief Economist at Keller Williams and he was sharing a view that he sees like the slowness we're seeing right now and like Keller sees a lot of transactions will lead to supply having a chance to kind of normalize or come back to normal a little bit in the first half of this year, which which will kind of create a slightly better inventory metric than we're looking at right now. Which I think is like 1.6 nationally, which which you have a much better tighter pulse on than I do on the real time office mic, but I think Reubens view of like kind of seeing supply normalized in the first half of the year is a relatively obvious one if we keep watching transaction days on market kind of tick up and new listings like slowdown, but that's one interesting perspective. Another perspective that's kind of on the positive side, Rose colored glasses from Jessica lots at National Association of Realtors. And it's kind of sees over the last two years first time homebuyers have all been squeezed out of the market. They were not competitive and multiple offer scenarios. They were not in they could not afford the rapid rise in home prices compounded with rising interest rates. And 2023 might actually bring a market where first time homebuyers have an opportunity to be competitive. And we could see so that household formation that that Logan has been talking about and writing about for several years, actually come to fruition and come to the housing market with first time homebuyers who can be competitive in the space.
Mike Simonsen 18:29
Yeah, first time homebuyers is a really interesting opportunity. They've been so squeezed out with cash heavy repeat buyers, investors. And so at the very least they have they have a less competitive environment that they can go start and make some offers and not just get destroyed in every direction. And that's pretty interesting. There's also some incentives or programs like government programs to help first time homebuyers. So there's some of those programs that buy down the rate for first time homebuyers. So all of a sudden, it's in the fours like there's some real opportunity first time homebuyers in there for the first time in a few years. So maybe that's like a little confirmation bias that we're looking for. We're looking for some good news.
Clayton Collins 19:17
Yeah, we're looking at we're looking for Rose colored glasses, I guess. But I mean, it's not all rosy. So on the negative side, I we're seeing it play out in the second half of this year. And I think this trend will continue pretty strongly in the first half of 2023. Is there just there's going to be lower employment levels in the housing industry. And there's going to be real estate agents and realtors who have not done a transaction and in months, or a year and they're gonna choose to seek employment elsewhere choose other means of income. That's also happening in the loan originator side transactions are down 50 to 65%, depending on exactly how you look at it. But headcount in the mortgage industry is only down 15 to 20%. So is there another shoe to drop on industry mortgage industry employment in the first half of 2023? One of the things that's been notable to me through my podcast housing news, right, interview executives across the housing industry is a relative comfort level with right sizing kind of workforces in the mortgage industry. There's what sounds like the first time I hear it, it's feels pretty callous, but the operators who have been through multiple cycles and like you look at the top 10 lenders, the top 10, humble lenders, the top 2500 lenders, many of them are led by seasoned executives who have been through 34567 cycles. And unfortunately, our industry, the mortgage industry, is not elastic. And when we have booms and volume, whether it's purchase or refi, or both at the same time, like we saw in the last two years, there's only one way to ramp up and that is rapid hiring and what the mortgage industry did over the last two years was recruit like Mad Men, but also pay up for a lot of talent. We saw wages for processors and underwriters and loan loan officer assistants shoot through the roof underwriters were getting double their salary in many scenarios to switch firms. And now those same people who recruited 1218 24 months ago, at record high compensation levels are at risk if they're not already gone from their current employer. And those jobs aren't available elsewhere in the mortgage ecosystem right now, which is putting pretty like large number of unemployed former mortgage professionals in ecosystem without a new lender to turn toward the same time this is going like the opposite and support side loan officer recruitment is still running at full speed. But it's highly focused on loan originators, who have a specialty in purchase mortgage origination, and have either a really strong local community presence with really strong refer realtor referral sources, or be incredibly the new breed of loan originator incredibly strong social media presences and there's a new breed. It's a small breed of loan originators, who have massive followings on Tiktok, and Instagram that are getting a lot of purchase volume through those channels, despite the fact that the industry has taken a massive downturn. So those are like some of the trends we're seeing. So I started off like talking about the executives comfort level with changing headcount. It's it feels funny, like you usually think of firms that do massive layoffs is having a scarlet letter. But like the executives making these decisions and making the tough calls to right size their organizations to maintain profitability, or at least have a shot at profitability looks pretty good. It looks like they know what they're doing, despite the fact that it comes with a pretty high burden on the people that once worked for them.
Mike Simonsen 22:58
Yeah. Do you suppose that the change in the volume, the volume is way down? It was high at the beginning of the year, way down? So the year over year comparison is really tricky. Yep. And we know at the end of last year, the volume was too high. You couldn't be like that. It was like people were overwhelmed. So now do you suppose that the reason that I hadn't thought about it this way, but that mortgage headcount is only down maybe 15%? Where the volume is at 50%? Do you? Do we have another? Like year to go? What's the comparison at the end of next year? Do we get a little bit of volume back and get it to a normal level? And so we actually don't have to drop 50% of honor? Yeah,
Clayton Collins 23:45
I mean, yeah, I mean, I think there's a like the age old adage, if you're cutting like fat or muscle, I think a lot of lenders are thinking about it. Through that vantage point. They worked incredibly hard to recruit the teams they have both in operations and in origination or sales, every type of business we're talking about in the housing industry. And people don't necessarily just want to let all that talent go, they worked so hard to recruit and train and retain. So there are still lenders that are holding on to staffing levels. That might not be logical if you just look at the origination volume and divide by the number of employees look at origination per headcount, but it is preparation for a healthier market if you are optimistic about the second half of 2023.
Mike Simonsen 24:31
Yeah. What's your view on recession coming?
Clayton Collins 24:34
I mean, so this is like the odd part of being a housing professional like a an economic recession for the broader US housing and or broader US economy may very well be a good thing for the housing market. When you look back historically reset we often see or I think, almost always with the exception of one recession GFC see home prices maintain or grow during recession. nary periods, and housing has often been seen as a recessionary and inflationary hedge for a lot of consumers. So that's one dynamic, their dynamic is a recession, a an economic recession or a job loss recession will be the trigger point for the Federal Reserve to take their foot off our damn throats. And that is like, literally, when I talk to executives in the housing industry, that is how they feel. They feel like the Federal Reserve, put a foot on their throat. And like the people who want to look back at the last three years, there's a it's always like in mortgage lending, nobody wants to be the lender that's like majority refi volume like purchases, purchases healthier, but in this industry did not step up to the plate and higher, and probably originate and process millions of refi loans and 22nd, half of 2020 2021 and 2022. There'll be millions of American homeowners sitting out there with interest rates in the five sixes, sevens, eights, instead of this average rate we see now that's less than 4%. And the mortgage industry did its job. It lowered the cost of homeownership for millions of Americans. And I think that's something that a lot of executives and originators should be proud of, even if it means now we're going into this blight period where there's no refi volume, and the industry has to make massive changes to be healthy into the future.
Mike Simonsen 26:30
That's great. So a view that a recession could be good for housing, or at the very least, that housing is good for the recession, like helps. Yeah.
Clayton Collins 26:39
So I know, tell me if you agree on this, but also Logan made a call back in June that like the June 2022, the housing recession has begun. And from the metrics I've seen that played out like, perfectly well. So I see perfectly accurate to be our heat, but housing entered a recession before the broader economy has or will. And I watch history, you watch the data you listened to economist, it feels like we will be a leading sector on the way out of any period of economic turmoil, how long that turmoil is to be determined, do we actually enter recession in q2 of this year 2023 To be determined. But if anything, a recession, a global economic or national economic and job loss recession, will bring some repeat reprieve to mortgage interest rates.
Mike Simonsen 27:30
Yeah, and I think that's seems likely, it seems even if we escape recession, it seems likely that we have economic slowdown, that therefore at the very least we stop our rate hikes, the Fed is working on some of the more real time data, they're paying attention to what's actually happening, especially since housing has been a driver of the inflation numbers. That like paying attention like that we have some change in that view.
Clayton Collins 27:59
mean, that's one thing I've heard you talking about for months is the lag and home prices, and maybe more importantly, rental prices on CPI. And I think it was it I don't think it was until the last Fed meeting, where pals minutes actually reflected an understanding that we wouldn't see housing, rent specifically reflected in CPI for a 12 month lag period. Is that right?
Mike Simonsen 28:25
Yeah, I think they have acknowledged it. And there's also a latest, because the Cleveland fed published a new rent index that is less lagging. And so it feels like they the decision making apparatus is aware of that challenge. And so even if the CPI is going up, that's driven by rents that rose in May or April of 2022 that we would have, we should be able to see that and hopefully the policymakers will be able to take that into account understand what's actually happening and make start to make some new decisions on it. Yeah, it does sound like though that they're more interested in watching the jobs numbers than that inflation, per se. Yeah, it's, it's interesting,
Clayton Collins 29:12
like the inputs to inflation and like how in the sights, wage growth is, which is something that American people, aka voters usually appreciate when their wages grow up. And yeah, the Federal Reserve, not an elected body, but an appointed body. Oh, I'm always wondering if they'll start to feel the pressure from their counterparts on the elected side of the house.
Mike Simonsen 29:36
Yeah, I did. One of the Top of Mind podcast interviews with Nick Timiraos from the Wall Street Journal and he has a real pulse on the Fed and has some really great insights in his book trillion dollar triage is the book that about how the Feds period of being politically independent was for a while and it sort of evaporated a little bit post Trump. So we'll see how that plays So you mentioned of minutes ago about changes in things like days on market. I've heard you talk about the sort of hypothesis you have about how the market itself changes in the next decade, like, from the 20 TADS, into the 2020s. Specifically with like days or longer, like time to sell a house. You want to share that with us? And let me know what you're thinking about, like,
Clayton Collins 30:25
Yeah, I mean, you can see this in the Altos data. If you look back for several decades, we have this 30 or 40. Year, as long as the data is available trend where it takes some cycles and like odd market dynamics out of it. But multi decade trend, we're days on market has been getting lower, kind of similar to the multi decade trend of seeing mortgage interest rates go lower, which is that we're an odd period of that right now. But a multi decade trend of cheaper, more efficient capital, and more efficient housing markets. And I use efficient as a as a signal toward how easy it is to buy and sell a home. And when you have days on market, average days on market, that is 5060 100 150. That is not efficient. If it takes 100 days to sell your house, like after you prep it hire agent stage. And all this stuff to do to prep for listing like half a year is not a reasonable amount of time. And this is not a happier market. But like when you go back to the old days, like it could take a half a year to hire an agent and sell a home. So we have to be excited about efficiency, it should be efficient to buy and sell anything. That is why markets exist. And one of the things that has helped other markets become more efficient. Like maybe the best examples. The stock market has been technology, available technology that helps people discover assets, discover pricing, and transact. And that is something that we've seen happen in a big way in the housing industry in the last several decades. Probably the most notable part is listings coming online, and not waiting for your Sunday paper. Or I mean, I am not all Mike. But I still remember along with my dad to pick up like the little like flyer and I'll see he's my dad's a mortgage originator, they'll see the listings in our hometown in Florida. And that's not efficient. Like right there just by waiting for print, you're losing like seven to 14 days of days on market and urgency. And now people are using Zillow and realtor.com. And if you're anything like me, you set your screens till the last 24 hours or last seven days to see the new listings do want the new inventory there. And they don't pay much attention to the stale stuff unless they're they're looking for values. So we've seen technology make discoverability happen. Then we saw the scope, technology Bring, bring pricing transparency, the Zestimate was huge in the evolution of housing price discoverability. And then over the last decade, we've started to see the mortgage and transaction side of the industry start in the 2000 10s we saw Digital Point of Sale really become an expectation in mortgage origination. I've had three or four guests on housing news in the last quarter, who mentioned that how much despite being competitors, how much they appreciate rockets, push button, get mortgage campaign, because it forced technology into the mortgage ecosystem and Digital Point of Sale has become no longer a differentiator, but a must have. And then COVID came innovation shifted to the back half of the transaction, we saw much bigger emphasis on the closing processes, title title innovations, like I closed the loan during the first few months of COVID and had to do a drive by closing and another one that had to do front porch closing. And now we're actually seeing ie closings with digital notarization happen, which is a really good thing. It's not universal yet. There's still a lot of adoption and a lot of state level winds that have to happen for complete e closing to be a market standard. But we're moving in that direction. And as we move into this phase of the housing economy and every economic wave brings a new incentive to innovate in different parts of the economy. The incentive right now is cost efficiency. And that cost efficiency is coming out of the center of the mortgage process. So Digital Point of Sale a decade ago, e closing and digital notarization during COVID. And now we're finally squeezing some technology into processing, underwriting servicing capital markets, all the things that have to happen to have in efficient loan closing and then efficient loan management and servicing and capital markets after the loan is closed. All of these things bring positive outcomes to homeowners and real estate agents who are looking for more certainty, more transparency and better communication and shorter timelines during the closing process and IBM Miss if I didn't talk about some of the innovation on the valuation side of the house, which is also changing really quickly, as we start to see remote that owl and some other technologies come front and centre to make appraisers more efficient and help them operate at their highest and
Mike Simonsen 35:17
best. That's great. So you mentioned a few sort of pass through benefits to the consumer. Yep. reiterate, the biggest complaint
Clayton Collins 35:27
consumers and real estate agents have in the home financing process in the transaction is transparency. And like seeing like we don't expect, like, five years ago, people you see is that the Domino's analogy of being able to see like your like loan move through a pipeline, and some of those tools are out there now. But ultimately, consumers don't want to wait around until a week before closed to find out if their home appraised out. Like how miserable is that, like you go through this whole application and underwriting process like you're planning movers, and hopefully you didn't buy furniture, but you're thinking about it. After that move in day, and a week before clothes, you find out your your home than the praise out. Now we're actually seeing valuation technology come in at the front end of the mortgage process, which helps the consumer so they understand if their offer is over market or over value, and they're not actually going to praise out me to get financing, it was also really helps mortgage lenders and real estate agents use their time more effectively. As much as the consumer hates the experience, the agent hates, and even more, they're not getting paid a commission, and also the loan originator or the mortgage bank is sucking down costs during that whole underwriting process when they wait for an appraisal at the very end. And ultimately, that's very inefficient to banks that are already operating on very thin, if not negative margins in this current market. So it's important place to innovate and one that had to happen for us to step forward into a true digital mortgage ecosystem. And we're on the precipice here, Mike, like digital clothes is not universally valuation at the front end of the application or underwriting process is not universally, but it's happening. And there's lenders that have these tools in place, and technology solutions providers that are putting these tools in place and helping their clients like step forward into the 21st century. And it also like it's not just the lenders adopting, it's getting the regulators and the GSEs and the capital markets to adopt and recommend and approve. And it's it's fascinating to talk to some of these tech entrepreneurs, you not only have to build a great product, teach a team how to sell it, adopt clients. Oh, yeah, before that, you have to win the government over and get the GSEs to say, yes, you can do this. It's a massive hurdle to innovation, but one that is necessary in a regulated market that affects nearly every single American citizen.
Mike Simonsen 37:55
Yeah, that's amazing. What a great overview there. Yeah, I know, I bought my bought a house last time I bought a house that's like, self employed, you know, do I gotta get a mortgage? Like, what does that even gonna be? Like, I think I can afford it. But no idea.
Clayton Collins 38:11
If you've been like a self employed buyer or borrower during those really competitive periods and 2021, you would have been Sol like the loan, the buyers that were being preferenced were conventional borrowers with full pre approvals and conventional products. The latter end of this 2022 cycle and something we're seeing right now are more acceptances and more focus on serving kind of the non QM the non Qualified Mortgage buyer, which a large percentage of those people are self employed borrowers. So just like we might see a first time homeowner wave in 2023, we might actually see some more non QM come to market. That's a tough prediction, though, because the non QM market has been heavily affected by swings and mortgage interest rates. It's a very challenging to operate private capital, business when rates are changing so quickly. So we need that market, that private investor pool to have demand for non QM product for non QM and the self employed borrower and credit blemish products to operate effectively in 2023. So watching that one closely, but seeing some really positive indicators for some of the big players out there.
Mike Simonsen 39:24
That's interesting. That's an interesting prediction that the non QM mortgages get a little room to grow, meaning that our rate volatility mellows out. Yeah. If we stay around six, then we know what it is that volatility goes. Yep. And that those non QM buyers are like first time buyers were squeezed out in the most competitive times. And so now there's some opportunity around the edges.
Clayton Collins 39:48
Yep. In an efficient market would serve those people in all cycles. But in the last few years, where it was a year where people were forced to pick the path of least resistance and for agents and loan originators, a lot of that that like focus on the easy approvals and focus on the reef eyes and stuff that moves fast. But ultimately, it was the originators who stayed true to serving purchase buyers and took time to work with real estate agents on the harder loans that will get the referrals and 2023 and beyond so double edged sword.
Mike Simonsen 40:17
Yeah. Wow. Okay, let's switch gears. And let's talk about the longer term future, your view of the next 10 years in the housing market.
Clayton Collins 40:29
So the bet I made when we bought Housing Wire that we make every single day is that over centuries or generations, people have decided they like living in shelter more than the alternative. So we're bullish long term bullish on housing, we think that housing will continue to exist, and people are going to need to finance it and use advisors to buy and sell real estate. So we need to take all the cycles out of it. We're long term bullish on the fact that American citizens want to live in houses. And overall, they've shown a preference for burning those houses and the independence that brings, that's a jokey answer. But the reality is, I have come into this industry knowing that we operate in a cyclical space. And that we have to build businesses that are resilient to cycles and know how to navigate know how to when to put your foot on the gas and when to be aggressive on the organic side and when to be aggressive on the acquisition side. And ultimately, I think we stay really true to our vision of serving housing professionals and helping them be more efficient in all market cycles. We will grow with them and we'll make this market healthier. So So Mike, I think, as we like, think about the next decade we entered this decade, with Logan Mota Shami shouting from the rooftops that the average age of the first time homebuyer and 2020 was 32 years old. And more people turn age 32 in 2020, than any year in history, and guess what year that was beat 2021. And what year was that beat again 2022. And we'll also be beaten 2023 and 2024. Like demographics are our friend, home price appreciation and expensive or high mortgage rates have made this market harder for household formation. But ultimately, we still have a very large population of sidelined 30 to 35 year olds or 30 to 40 year olds, who will enter the housing market either as owners or renters. And ultimately we need to serve the builders, the real estate agents, loan originators, who are going to serve that ownership market. And we also want to serve those multifamily developers and property managers and SFR owner operators. So we're going to serve the folks that choose to rent. And if we do that by covering the right news and economic data, the right housing market information, the right technology innovators that are helping make this market work, then we will serve the entire housing economy and hopefully build an ecosystem that serves the homeownership or living desires of the American people.
Mike Simonsen 43:03
That's great. You mentioned the road. Yeah, they so far, the single family rental, the investors have big hedge funds and Wall Street money has gone into buying and owning a lot of rentals, single family rental properties. Do you have a take on that space, both about like its utility in the world, and also about where it goes in the future? Do they deserve that group of money in a cyclical downturn? Do they get afraid pull back and accelerate our downturn? Or do they say this is our opportunity, and then take that arbitrage away and put a floor on the downturn? I mean,
Clayton Collins 43:41
institutional capital cometh and institutional capital capital go if I don't know if he didn't start and stop really quickly, like like when we saw institutional buyers come in and sweep up inventory in 2009 to 2012. It was a godsend if the institutional buyers were not there to buy foreclosed, foreclosed properties and REO from lenders sitting on big REO balance sheets, like this market would still be screwed like 15 years later, and they played a really important role. I have been shocked, like honestly shocked to see that SFR market continue forward from that like post GFC era. Like I honestly fully believe that like all those single family rental houses that were purchased, and that nine through 12 or nine through 14 period will be flooding back in the market and 14 1516 But no, instead they stayed they operated and then they came back to market to buy more and when they realized they couldn't buy fast enough they started building I still remember our Housing Wire I think it was like April or May 2017 In a build the rent like story and talked about the home builders who are shifting strategy to building for the SFR landlords. So a industry has emerged here is an asset class that works. I don't know if the economics are as promising as multifamily. But the difference is SFR has a saleable asset where if the single family rental rental income the NOI isn't isn't where these owners want to be, they can sell the assets were like a multifamily building is a multifamily building. It's not as like easily repurposed or sold often in pieces to the homeownership market. So there is a an interesting safety net there for the Wall Street firms who, who liked this asset class, and we talked about releasing inventory, and could that deteriorate the market? It depends on what your definition of deteriorate in the market is. We're sitting at record low inventory right now. And I know the second the Big B word that Blackstone backed investors, they released inventory, the Wall Street Journal headlines will be brutal, and the consumer perception will be negative. The reality is it will add inventory to a heavily inventory constrained market. Now, that's not my prediction. I don't know if that's gonna happen. I don't think that's gonna happen. But it doesn't scare me. And I think it gets. Partially, that's because I look at things at a national level. I know there's markets like the Phoenix and Scottsdale area, we're starting to feel some of those impacts already, not the release of inventory. But just the whole in buying, it has a negative impact on some markets that have heavy SFR percentages. But at a national level. It's not the biggest fear I have I don't think it's a huge negative if we see inventory, come back to market and inventory in an industry that operates off of volume, seeing home prices come down a pointer to is not actually not the most negative thing that we could see for our professionals in the real estate brokerage or loan origination ecosystems.
Mike Simonsen 46:53
Yeah. So that's a great way to think about it. So if I had to have a binary view of the if those investors stop investing and want to unload that now we add inventory, and we drop our demand and that exacerbates pricing downturn, but in a lot of senses, that is what frees up for first time homebuyers or non QM people like other opportunities there to get us back to a normal
Clayton Collins 47:19
rental, real estate's a long tail sectors, like we just it just started getting headlines when you put Wall Street money on it. But there has always been eye buyers operating in the market, what eyebrows were just aggressive real estate agents who wanted to build up an intimate rental portfolio and their home market. And like it's those people who have really been squeezed out of getting in on this like building a big rental portfolio game. It's still an extremely long tale, like the single family rental market is extremely longtail most rental homes are owned by local mom and pop like small portfolio investors. Now do all those people decide they're going to sell them sell their houses? That's probably more painful than Wall Street deciding?
Mike Simonsen 48:00
Yeah, that's 94% of the market is owned by individuals. And I would wonder for doors
Clayton Collins 48:05
is a definition of a longtail market 94% or one to four doors.
Mike Simonsen 48:09
I mean, yeah, that says a lot. And I wonder. So some of those folks were over overbought over financed 11 months ago, and they're gonna get they're gonna have a hard time, especially ones who were levering up right at the end of that cycle. On the other hand, and so in normal parts of the cycle, then you watch them get crushed really quickly. They had a lot of them have such low rates, and everybody else has such low rates. Like I still wonder if that's going to keep us out of any massive exodus. Even if you're in a you've got a house in Austin, and you and your rental market starts to crater in a big recession. You still do bite to hold on to that because you've got a 2.8% mortgage other thing.
Clayton Collins 48:59
Yeah, okay. variables there.
Mike Simonsen 49:01
Yeah, lots of variables. And it'll be interesting to see where it plays out. I really appreciate your view on a lot of the technology and the players and the the executives in the space. So that's a great a great way to leave it for the day. Tell me so where do people find you? You're on Twitter.
Clayton Collins 49:16
Yep. On Twitter at Clayton A Collins and I just started a new Instagram account was more like housing focus. So housing Clayton, you can find me on Instagram. I'd appreciate some follows there because I'm feeling pretty lonely and my new account so follow me on Instagram at Housing Clayton shipping.
Mike Simonsen 49:29
All right. Yeah, I noticed you've done a couple of like the stories that yeah, maybe some reels. Yeah. Pull up
Clayton Collins 49:37
pull in Logan on camera on the real still. We got a decent little system set up. I just need to do it every day, which is, which is great.
Mike Simonsen 49:43
All right. Well, we're gonna get some mileage on Clayton's Instagram account to talk about housing every day. So terrific. Clayton, thank you so much for taking the time with us today. We explored a lot of the things in the market that like your perspective, which I like to get like that's why I do these conversations. So I really appreciate Hey, everybody. This is the Top of Mind podcast. I'm Mike Simonsen. I'm the Founder of Altos Research, and we're now part of HousingWire and HW Media. So, thank you all.
Outro 50:15
Thanks for listening to Top of Mind. See you again next time and be sure to click Subscribe to get future episodes