To the surprise of virtually no one, loan officer commissions started to head south in the third quarter, dropping 17% year-over-year, according to SimpleNexus’ third-quarter mortgage loan compensation report. We hope you enjoyed last week’s edition where we talked about How Much Could Wire And Title Fraud Cost Lenders? This week we’re bringing you:
Zillow to kill its iBuying program*
Zillow plans to lay off 25% of workers due to wind down
Zillow CEO Rich Barton announced Tuesday that his company is exiting the iBuying business, a mind-boggling about-face that completely changes Zillow’s business model and will result in the loss of about 1,605 jobs.
The wind-down of “Zillow Offers” is expected to last several quarters and will reduce the Seattle-based company’s workforce, reported at 6,420 employees as of June 30, by 25%. Barton did not specify beyond the percentage how many people might lose their jobs on a dramatic and at times surreal earnings call Tuesday afternoon.
Zillow reported a brutal net income loss of $328 million in the third quarter, mostly due to a $421 million net loss before taxes on Zillow Offers. The company reported $1.73 billion in total revenue with 68% of the total coming from Zillow Offers, through which the company sold 3,036 homes in the third quarter.
However, Zillow also purchased 9,680 homes for cash in Q3. The company had already announced Oct. 17 that it was pausing iBuying purchases for the rest of 2021, citing operational capacity constraints.
The prior announcement was stunning in its own right, and led to revelations that the company bought homes for well above market value, and re-listing homes for less than what they were bought for.
But it was nothing compared to Tuesday’s news, particularly since during the company’s prior earnings call, Barton discussed Zillow Offers in purely glowing terms. He said then that the program was “more than durable” and planned to accelerate its expansion.
Barton, who took over Zillow from Spencer Rascoff in early 2019, and spurred Zillow’s reinvention as an iBuyer, was evidently rattled during Tuesday’s call. He acknowledged that ending Zillow Offers and laying off a quarter of the company’s workforce affected his emotions.
Residential Construction Spending Fades for Second Month*
Construction spending decreased 0.5 percent from August to September according to data released by the U.S. Census Bureau. Total spending was at a seasonally adjusted annual rate of $1.574 trillion, 7.8 percent more than was spent in September 2020. Residential construction spending eased back slightly in September, but it and its single- and multifamily components are still running ahead of any 2020 comparisons by double digits.
Total construction spending on a non-adjusted basis was $143.642 billion compared to $147.622 billion in August. For the year-to-date (YTD) construction has consumed $1.178 trillion, 7.1 percent more than the $1.100 spent during the first nine months of last year.
Construction put in place in the private sector was at a seasonally adjusted $1.230 trillion, down from $1.236 trillion the prior month, an 0.5 percent decline. Private spending across all project types was 11.1 percent higher than the previous September.
Spending in the private sector was $110.060 billion in September compared to August when $112.953 billion in private construction was put in place. YTD spending, $917.323 billion is up 11.3 percent year-over-year.
Residential spending dipped 0.4 percent from the prior month to a seasonally adjusted $773.5 billion and was 19.3 percent higher than in September 2020. The changes were similar for single-family and multifamily construction, down 0.6 percent and 0.3 percent, respectively, while remaining 30.4 percent and 10.5 percent higher year-over-year.
Loan officer wallets flatten as refis dry up*
As refi volume dries up, loan officer commissions have too, declining by 17% year-over-year
To the surprise of virtually no one, loan officer commissions started to head south in the third quarter, dropping 17% year-over-year, according to SimpleNexus’ third-quarter mortgage loan compensation report.
The reason? Yep, you guessed it: waning refi volume.
From July to September, monthly refi commission dipped by 37%, whereas monthly purchase loan commission rose by a slight 2%, the report found.
Concurrently, per-loan commission rates have started falling, decreasing to 100.372 basis points in Q3 2021 from 102.878 bps in Q3 2020, a 2.44% decline, SimpleNexus said.
The report added that lenders on average have started to “dial down” per-loan commission rates on refis by 7.17% from 95.210 basis points last year to 88.384 bps in the third quarter of 2021.
On the purchase loan side of things, per-loan commissions also took a dive by 1.58% year-over-year, to 108.102 bps in Q3 2021 from 109.838 bps in Q3 2020.
The report also stated that LO funded volume per month stumbled to $2.2 million, a decrease of 14.9% from the third quarter 2020. Refi volume funded by individual LOs declined to $0.9 million in Q3 2021 from $1.3 million in Q3 2020, a 32% drop. At the same time, purchase volume increased 4% to $1.5 million in Q3 2021 from $1.4 million in Q3 2020.
“The heyday of ultra-low rates and enormous refinance volume is over, and compensation is starting to settle back to pre-pandemic levels,” said Lori Brewer, EVP and general manager at SimpleNexus, which recently acquired her former company, LBAWare.
On a happy note, Brewer remarked that “2021 is still shaping up to be the second-highest production year in the last decade, with modest growth in the purchase market helping take the edge off declining refinance volumes.”
Meanwhile, loan officer staffing levels have remained steady year-over-year, falling by a mere 2%, with LOs averaging 7.0 loans per month in Q3 2021, versus an average of 9.0 loans a month in Q3 2020.
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