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Mortgage Industry Roundtable: Inventory Woes

shutterstock_511292173DS News and MReport sat down with Jorge Ponce, Director of Business Development & Implementation at FirstClose; Joey McDuffee, Director at Wipro Gallagher Solutions; and Kevin Watson, District Manager, Middle Tennessee at Churchill Mortgage to discuss inventory woes and the future of the market in this exclusive three-part roundtable.

M Report: What do you think the largest reason is for the inventory shortage?

Watson: I was a combination of three factors that caused a perfect storm, in a way. Of course, the financial crisis in 2007. I was working with a lot of builders and Realtors at that time. Everyone just slowed down—or stopped—building and just tried to survive and tried to just get the inventory that was on their boats off. They didn't build new specs, they were just trying to survive and make it through that crisis. I feel at the same time, consumers were doing the same thing. The only business I was getting in were talking about short sales or refinancing at that point.

Then another factor that contributed was the ensuing regulatory environment that we followed the bubble. Commercially, the builders couldn't get development land and lots because that's a risky environment. They didn't have land to start building. And then, residentially, it made it tougher for customers to be able to buy homes.

Then last is population—with the millennials starting to enter the marketplace and with strong economic growth, these two factors have caused the supply and demand problem, especially for the first-time buyer price point. We've got a lot of first-time buyers that are out there looking, but they're making multiple offers and still losing on the home.

Ponce: I also think you have to take into consideration another piece. There are certain areas where the home price indices have shot up. That means that if you look at couple that's in their starter home and they've knocked out, they got a pretty decent rate, they got in about five or six years ago, there's not much incentive for them to go out there and upgrade. But, I wouldn't even call it a matter of incentive. I would call it a matter of affordability. If these price indices high, and prices coupled with an increased interest rate, there's no incentive for them to move or to upgrade their home. They got a pretty good interest rate, they have a pretty decent home, so they're not taking that next step.

McDuffee: I think that's occurring, as far as with upgrading. To follow on that: folks are looking to remodel versus relocate. So, what is the incentive to go out and compete? Especially if I'm a baby boomer and I have built up an equity cash position, why should I want to go out and get in a bidding war?

Back in the downturn, there was the influx of foreclosed homes that were snapped up by investors, and now some of those properties, especially here in Nashville, have increased in price. That cashflow is not going anywhere. So, all of those homes that were kind of taken out of the market during the downturn are being used as rentals, further putting pressure on the inventory.

About Author: Joey Pizzolato

Joey Pizzolato is the Online Editor of DS News and MReport. He is a graduate of Spalding University, where he holds a holds an MFA in Writing as well as DePaul University, where he received a B.A. in English. His fiction and nonfiction have been published in a variety of print and online journals and magazines. To contact Pizzolato, email joseph.pizzolato@thefivestar.com.
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