Like a bride preparing for her wedding, the residential real estate industry is slimming down, primping up, and generally working hard to reinvent itself in anticipation of the day when long-absent consumers will return to the marketplace.
Whenever that day comes, buyers and sellers will find new online functionality that empowers them to take on even more of the transaction, transparency that may reveal more of the process of real estate than consumers really want to know, leaner and meaner brokerages, an avalanche of information that may or may not enlighten, and new technology to speed the process of closing. There will be fewer sales agents but those who remain will be able to blog and twitter with the most adept teenage Facebooker.
Those are some of the takings from Inman’s Connect Conference in San Francisco this week, a semi-annual celebration of real estate technology. Yet beneath the shiny surface of new sites and techno-talk, not all is well. Recovery is still an abstraction, not a reality. Foreclosures remain unpredictable, unpreventable and unmanageable. The future shape of mortgage finance is still a mystery. Ninety percent of transactions are financed by government entities, either by the FHA or the GSE’s. No one yet knows what will replace the old system, which died on that day last September when Treasury took over Fannie and Freddie.
“It’s unclear what will happen but it’s not good to have one third of all loans come from FHA,” said Joel Singer, executive vice president of the California Association of Realtors during a panel Thursday morning.
The entire process of creating, counting and marketing foreclosures?the critical, single force keeping the real estate markets pinned to the mat even as the overall economy struggles to its knees?seems rooted in the 19th century, virtually untouched by the blessings of technology so proudly displayed elsewhere at the Inman conference. While buyers can choose from hundreds of bids based on the very latest rates on Zillow’s mortgage platform, real estate markets and policy makers rely upon 90 day-old data on foreclosures, data gathered by hand from courthouses across the land.
In a grim session on foreclosures, Sean O’Toole of ForeclosureRadar, the comprehensive California foreclosure site designed for professionals, and David Schubb, a California broker specializing in distress sales, summed up the state of homeownership in their state: 15 to 25 percent of borrowers are underwater, 10 percent are not making payments, 3 percent are in the process of foreclosure and 100,000 are being foreclosed on every month.
Of all the problems plaguing distress sales–overwhelmed servicers lacking incentive, moratoria, a fragmented marketing process where 90 percent of properties are not even listed during the pre-foreclosure period, distrust between bankers and brokers, lack of standards among different players in the REO process, and the complexities confounding short sales?the greatest problem is lack of transparency. When it comes to making critical decisions on loan modifications or short sales, finding out who actually owns the loan can require serious detection. Servicers? Underwriters? GSEs? Investors in China? Some or all of the above?
As for the government foreclosure program?what government foreclosure program? It has yet to appear on the radar screens of those fighting on the front lines of the foreclosure war.
“Every level of government sees the problem differently and comes up with a different solution. Just let the market work,” pleaded Schubb. “The market will work if you let it.”
“Think about it this way,” said O’Toole. “Ten percent of all California homeowners are in default ninety days or more. It takes so long for lenders to foreclose on a home that most of them will live in their homes without fear of foreclosure for months to come, maybe longer. That’s a multi-billion dollar stealth subsidy that we are all paying.”