Roy: Hi, good afternoon. This is Roy Oppenheim. This is our 15th week of “Zoom at Noon.” Back at where this all started and I wanna thank you all for joining us today. This is being sponsored, again, by our law firm, Oppenheim Law, as well as our title company, Weston Title & Escrow. Today we’re gonna be focusing on why is this the perfect time to sell or refinance your home. And we’ll be discussing a number of issues. The first thing we’ll be talking about as usual is the weekly unemployment and economic update, pandemic update, consumer behavior, how much cash is available…anything that has accumulated in the banks and the money markets. Then we’re gonna be talking about listings and sales, refinancing and then we’re gonna be talking about remote closing and buying site-unseen.
The first few topics, of course, correlate to what’s going on in the real estate and the refinance market because it has to do with consumer behavior and what’s going on on a macroeconomic basis. For those of you that are new, our firm was founded, our law firm was founded in 1989 by Ellen Pilelsky, my partner and my wife. Geoff Sherman, who’s here today, is our partner and has been with us for over…well over a decade. And collectively we have well over 75 years of legal experience and I wanna thank Paola Vergara also as well as Geoff and Ellen for helping put these presentations together week after week.
As many of you know, we were guides through the last economic crisis back in 2008 and we’re here again to guide ourselves through this mess. This mess, of course, is a little bit different than the one last time around which was really more of an economic crisis and this one’s kind of like a trifecta. You have a health crisis, an economic crisis as well as a remarkable amount of social and political upheaval. And it is through these three factors that we all have to figure out where we’re going, how we’re getting there and how we’re gonna survive and thrive during this crisis. And make no bones about it. There will be companies that thrive, there will be individuals who thrive and there will be individuals who don’t thrive and don’t do particularly well as well as companies. And it’s up to you to decide which group you’re going to be in. Clearly, we were in one group last time and we’re gonna be in that same group this time and those of you who join us and are a part of this journey, we welcome you.
So last week we talked about the unique opportunity, we got a unique opportunity to hear from Judge Dennis Bailey who is a member of our judiciary and he was talking about how during these unprecedented times, the legal system is starting to permeate and change both for good as well as some things not for good, but certainly a very interesting way to bring the courthouse closer to the community.
This week we’re gonna discuss the variables that make this particular time a unique opportunity to both sell your home or refinance your home. Glenn Kelman, the chief executive of Redfin said the following, “There’s an e-commerce mentality sinking into the American consciousness. People wanna be able to trade a house like they trade a stock.” And so we’re going to continue to talk about these particular issues.
Next page, please. Thank you. Okay. Let’s go over the weekly unemployment and economic update. People are telling me I’m not talking loud enough. I thought I was. I apologize. Okay, so let’s talk about the pandemic spike in terms of unemployment. There’s been a change in unemployment benefits as we know if we take a look at the big yellow thing. That’s the number of folks that have been applying for unemployment. That is now coming down. If we take a look at prior recessions, it’s not an incomparable but if we continue to drop quickly, we could end up being on those trend lines. But right now, the number of unemployed is quite remarkable. If we go to the next picture, the purple bar graph, we’re seeing the number of jobless claims and the number of jobless claims is starting to drop very precipitously if we go down the slide. Of course, it’s nothing like it was pre-coronavirus but we’re seeing that the number of claims is dropping. And so that, of course, gives people some sense of optimism in terms of a comeback.
Go to the next page. The next issue we have is permanent unemployment. If we go from January ’19 all the way to May ’20, right now, we’re seeing that the number of folks who are permanently unemployed is starting to increase from 4% to 5%. That becomes a big issue because these are people who will be institutionally and permanently displaced from the job market. As we take a look at the next slide, we’ll see that that’s very different than the headline unemployment. Right now we’re seeing it start to come down at the 13%, little arrow at the top there. It suggests that it’s coming down and, of course, the permanent unemployed is coming up to 5%. Those two will converge over time. They’ll probably converge somewhere around 2010, in that 10% range which is two notches below 13%, right around where the arrow is. And that’s very important because that’s gonna create headwinds in terms of the growth of our economy as well as the housing market.
Next. In terms of the pandemic, you know, we all know what’s going on. The reality is that cases keep going up, the number of deaths keep going up but what’s interesting is that in the United States, it keeps going up and in Europe, it’s starting to go down. A lot of this may have to do with just the fact that they were able to tamper it down earlier than we were or that they had more social distancing. It’s unclear why, but the next slide is very interesting. It’s that even though our cases are still going up, the number of deaths as a percentage of cases is dropping precipitously. If we go to the trend line, we’re seeing that real divergence on the right side there. We’re seeing that new cases are up 20% on a 14-day moving average but the number of deaths are down 43%. And so this kinda goes to our thesis that, ultimately, the economy’s probably gonna remain open. More people are gonna contract it and less and less people as a percentage are going to die. Notwithstanding the fact that some immunologists are suggesting that you’re looking at well over 500,000 or a million people could easily die over the next few years depending on when the vaccine is developed, if a vaccine is ever developed and then you’ll end up possibly with herd immunity. But the good news is that if we can come up with therapeutic care and these kinds of diseases can be treated in such a way that they’re not something that is perceived as an automatic death wish on someone, you will be able to survive and keep the economy open. If that doesn’t happen, the economy likely will get shut down again.
Consumer behavior, very interesting. Consumer spending has declined to 1959 numbers which is unbelievably, arguably, the sharpest decline in history apart maybe from the Great Depression. Restrictions on mobility and business closures, of course, have limited spending. Restrictions in travel has redirected use of vacation savings to home improvement which is absolutely critical. And then after months of staying at home, people with income or receiving government benefits are spending on big-ticket items related to family entertainment, pools, boats, RVs, house renovations. Those that do not…sorry. Those that do not have a house are now looking for a house because they have some money saved in the bank and this is, well, part of what we’re talking about.
Consumer spending behavior during the pandemic. If we look at the top 25% which is the bottom blue, we’re seeing that their changing consumer habits have changed the most and has then rebounded the least. And in part, that’s because they have more discretionary consumption habits and thus, they can regulate how much they’re gonna spend. Folks at the bottom 25% drop precipitously but they’re very close back to where they were. Their consumer spending habits are only down 5% versus someone in the top 25% is still down 20% when they were previously down as far as maybe 35% or whatever that number is there. So that’s also an interesting issue.
Next page. So retail sales, May 2019 to May 2020. You can look at it two ways. On the left, the light blue is change from a year ago. The dark blue is change from the previous month. Clothing is coming back now since people are out and about again. Furniture is increasing which suggests that people are either remodeling or thinking of buying new homes or they are buying new homes or they’re getting refis and using the cash to redo their homes. Sporting goods are up both at month-to-month and year-over-year because a lot of people were buying sporting goods when they were home to stay fit. Motor vehicles, up substantially. People are buying either new cars, new used cars and, of course, parts to fix their cars. Department store sales are coming back a little bit but they’re way off from a year ago. Bars and restaurants, the same. Gas stations, coming back a little bit, and then online, of course, is up from a month and up from a year ago for obvious reasons. And we can [inaudible 00:08:57].
So the spending behavior not only changed between industries but also between types of products within the same industry. Spending on clothing increased, as we said, 188%. People bought sports attire and tennis shoes, designer clothing and accessory sales did not benefit from the increase of those sales. Furniture sales increased close to 90%. Sales on patio furniture, bookcases, home offices and kids’ furniture soared. Those items were not in high demand before the lockdown.
Cash available. This is kind of interesting. So on the left here, we’re seeing huge stores of cash, people putting cash in the bank. This is month…this is, I guess, every quarter, how much cash is going into the banks. We’re seeing the last three bars for…I guess it’s every month since 2020 have increased substantially. There is now over $4 trillion in cash sitting in bank accounts or money markets and that’s because of this additional cash that’s coming in every month right now. A focus on home. Consumers sharply have cut spending during the pandemic in some sectors while boosting outlays for groceries and items from home. Changes from a year earlier in the U.S. retail spending for the week ending June 6, as we can see, still groceries are way up, home improvements are up, furniture’s up, and, of course, the usuals are down. Restaurants, apparel, department stores, jewelry, lodging. I’m sure travel also.
By the way, I forgot to mention for those of you who are new at this, this is supposed to be interactive. If you have questions, please email them. Do we have any questions yet, by chance? If there are, I’ll take one or two before we continue.
Man: If the government instituted a WPA…
Roy: Yeah, okay, okay. “If the government instituted a WPA program, wouldn’t that lower the unemployment number?” You know, that’s a great question. Obviously, people are referring back to the Great Depression when the government created the Work Projects Administration. I think that’s what the “WPA” stands for. And a lot of bridges, infrastructure, and parks and bridges were built. And built the roads, of course, that were built during that time. And so I guess that would be one option. I think right now they’re looking at it more as trying to keep small businesses intact and have the small businesses hire people as opposed to government. It’s really a question of which way you wanna go on that and probably going both ways would make some sense.
Okay. Let’s talk about listings and sales. It is clearly a seller’s market right now. Zillow’s reported a decrease of 39% of new listings. Redfin reported a 25% increase on buyers. But obviously, the real issue is that you have far too few listings for the number of buyers that you have. There’s a clear shortage in the housing inventory. New builders are reporting month-over-month record sales for their inventory and they’re running out of inventory also. Interest rates, of course, are at a record low. And so with that, you have sellers who are in control of the market and Realtors who are looking for listings and are having trouble finding listings because many people are still sheltering in place and they’re not in a position to want to relocate at this time. They also don’t necessarily want people coming through their homes. And so until the virus situation gets more under control, that will probably be a static issue. The interesting part, of course, is that you have people buying homes site-unseen with 3D imaging and very sophisticated simulated walkthrough technology. People are able to actually see a home as if they’re almost physically there even if they put on a headset, an Oculus headset. They can almost feel like they’re sitting in the home and get a feel for the home. And so I think we’re gonna see more and more of technology being infused into the market and less people actually tangibly walking through a home before they buy it. I mean, a lot of times when people rent homes, they don’t really see it much before they move in and I think we’re gonna start to see that mentality also as we proceed through this evolution in society that we’re all going through right now.
Next slide. Three generations under one roof. The search for more space. Telecommuting is becoming permanent and families need more space to accommodate home offices. High school graduates have shifted their attention from elite schools to local colleges and are opting for staying at home for the fall or certainly staying closer to home in the fall. Most families are still hesitant on returning aging parents to assisted living senior facilities and that is…you know, all gonna be issues and so you have, in many cases, three generations, kind of like it was a hundred years ago, living together and in some ways, that’s, you know, not bad but it is what it is. In many cases, it’s almost like a kibbutz where everyone chips in and does their share to live together. Next page. Oh, we have a question. Excuse me. Okay.
“If people are afraid of the economy going down and if more jobs are lost, then why buy? Should we just continue to rent?” First of all, the rental market may not provide as much opportunity currently as the purchase market does as the homebuilders that we’ve talked about in the past are shifting towards building a rental housing market. Those opportunities will come about, but right now, if you are looking for space to commute from home, if you have a multigenerational home, typically most apartment builders have built mainly one-bedrooms. This is, of course, the biggest number. They’ve built a fair number of two-bedrooms. And the three-bedrooms is the smallest inventory and the reason is they don’t make as much money per square foot on a three-bedroom as they would on a one or two-bedroom. So the reality is you don’t have as many three-bedrooms out there and so if you’re a family, you end up having to buy a home just because you need the space. You want the backyard and you wanna maintain some social distancing even among the family so you can work and not get in each other’s hair and each other’s nerves. So in a perfect world, renting may be good but the reality is that if you’re looking for space right now, buying a home is probably your best option.
Let’s talk about refinancing because this is one reason why it’s a seller’s market because prices are certainly not coming down on homes. I wouldn’t say that they’re necessarily going up but there have been bidding wars in terms of people buying homes. If the prices are listed right by good Realtors, these homes are sometimes on the market for less than 48 hours before they…someone gets an offer.
In terms of mortgage refinancing activity, we had hit a peak earlier in the cycle here, maybe in April or May. Many of the banks and mortgage companies couldn’t handle the volume so they actually had to artificially increase interest rates. Interest rates are historically at a very, very low rate. The Federal Reserve has stated they plan on keeping interest rates very low for the foreseeable future until these crises have abated. And that could take some time. So in the meantime, we’re seeing millions and millions of refis. Much higher than we’ve had in the past. Right now, we’re back to where we were in 2012, 2013 and it probably will stay at that level for an extended period of time until there’s no one left to refinance because everyone will have a lower interest rate and that will take probably a good six months to a year [inaudible 00:16:29] to accomplish and then you’ll have, of course, new people buying homes that will continue to keep the market active.
Next. In terms of interest rates, interest rates now for a 30-year fixed are well below 3.5%. You know, and I’ve always not been a big proponent of a 30-year fixed. I think you’re always paying extra interest for a home that you’re likely not gonna be in for 30 years. The average homeowner still only stays in their home between six and seven years. And so if you had a 7-year or a 10-year fixed that then became an adjustable, you probably are in the high twos right now and it may well be worth it. And you could always refinance in three or four years if you thought you were gonna be staying there longer and still save a lot of money. But certainly a 30-year fixed below 3.5% at around 3.25% or whatever it is right now is…as we can see, something that we haven’t seen in a very long time and we’ll probably remain at this level for some time.
So I wanna talk a little bit about remote closing and buying site-unseen. Are there any questions?
Man: Yeah, there’s two questions.
Roy: Let me do another question if I may. “Are housebuilders in a better position than they were entering the 2008 financial crisis?” I think homebuilders are in a much better situation. I think their access to capital, their access to cash, the value of their stocks is giving them the ability to get very inexpensive money right now and because the government is supporting that, they will have access to the Federal Reserve to issue bonds that the Federal Reserve will purchase and that bond money can then be used to purchase homes which will then in theory help homebuyers buy a home at a competitive market rate and then also get a mortgage at also a competitive rate. So, homebuilders, I think, are in much better shape than they were 12 years ago. Another question?
“In the age of social distancing, how do Realtors sell houses? Is electronic selling a viable option?” And the answer which I briefly addressed is that through technology and through videoing and through 3D imaging, there’s going to be remarkable opportunities to sell homes virtually site-unseen. And we’re seeing a lot of folks from New York and the Northeast who wanna be permanently down here. Maybe they can telecommute, maybe they’re partially retired and they feel that they’ll just have more space and be able to be outdoors more. I mean, the reality is this virus seems to impact those people who spend more time indoors. If you’re spending more time outdoors, it’s likelier that you’re getting the viruses less. And even in Florida, if it’s spiking, it’s spiking because obviously people aren’t social distancing but it’s also because people are spending more time in the summer indoors like the folks up north spend time indoors during the winter. And so in a perfect world, you wanna be in an environment where you are spending less time indoors with other people that you’re not cocooning with, not bubbling with, not hibernating with in such a way that you can be outdoors. And so, Florida does provide that opportunity. Of course, if too many people are in one location outdoors whether it’s a concert or at the beach, that becomes an issue. But in terms of buying a home, people relish the idea of having their own backyard, their own pool and their own little area where they can spend time outdoors. So I do think that there’ll be remarkable opportunities to sell to folks site-unseen or virtually site-unseen during this crisis.
Anything else? Okay, let’s go to the next question. I mean, the next slide. So, I wanna talk a little bit about remote closings and how that is working because it’s really very, very important. But before we do that, I wanna talk a little bit more about buying site-unseen. Buyers are more willing to make offers on places that they’ve only visited virtually. Why? There’s an e-commerce culture in place. Online shopping is ingrained in our minds and buying a house online was the last step to complete the e-commerce cycle. There are not many properties on the market and it’s causing bidding wars, as I’ve said, and families are moving to other locations but traveling is still somewhat restricted. There’s no chance to make trips for touring properties. And so that’s why we have to rely more on technology.
Realtors with a complete portfolio of trustworthy networking partners, whether they’re inspectors, contractors, cleaning companies, lawyers, etc., will be the big winners.
So now we’ll talk about online notarization and talk about how that plays into buying virtually. So we’ve had situations where people up north have sold or purchased homes down here and they were not here and they didn’t need to be here because of this new technology and new legislation that has come about. So in terms of the online notary requirements, the first thing is that the acknowledgement of electronically signed documents are done through what’s called RON, Remote Online Notarization. And they are done through unique, special technology platforms that are created specifically for this purpose that have been approved by each state. Let me talk about the conditions and the restrictions because this is really the most important, especially if you’re a Realtor. You typically have to be a U.S. citizen with an established credit history to pass a knowledge-based authentication protocol. So that means you could be an American in Japan or anywhere else in the world and you wanna buy something back in the United States or sell something and we could do online notarization. You also could go to the U.S. Consulate if it’s open. You could also go to a private notary if they were available. Sometimes they’re not and sometimes they’re too expensive. So you would be able to use Remote Online Notarization overseas right now. Historically, in the past, you could’ve used a civil law notary such as myself. You could’ve sent me to Japan or anywhere else in the world, to Central America, to actually take a notarization in person, but unfortunately because of travel restrictions, that, too, now has become rather improbable.
Right now online notarizations are allowed for transactions up to $3 million and they have to be approved by your lender in writing. The process typically needs to be completed within 48 hours and the notary must be affiliated with a particular title agency. There are approved vendors such as Pavaso Essential, notarize.com, NotaryCam. Zoom or FaceTime or anything like that are not approved. Those are just social portals, but they are not legitimate e-notarization portals that can perform e-notarization. So if someone’s telling you that they’re gonna use Zoom or FaceTime, you need to find someone else who does this for a living. Any questions? Okay, next page.
So I wanna talk about the procedures for Remote Online Notarization. Now I wanna be clear that there’s two kinds of online notarization. You have Remote Online Notarization and you have what’s called a RIN, Remote Ink Notarization. And I’m gonna talk now first about the online notarization and that is where there are closing documents that are uploaded by the notary or title company to an approved RON platform. The principal then creates an account, meaning the person who’s gonna be signing the documents, on the platform, they have to review all the documents prior to closing and then they go through a verification process. Assuming they have been verified and that we can identify who they are by their driver’s license and having asked the right questions, at closing, the individual then will sign all documents electronically with an electronic pen while a notary witnesses the notarization typically online. The notary could physically be there but if they were physically there, you wouldn’t need to do this. So they’re presumably gonna be…like I’m on screen right now watching you sign a document and we would be in two-way communication. I would be able to see you. Funding then happens when the title agent receives the fully executed digital closing package back, it’s been reviewed, approved. And then funding occurs.
So that’s Remote Online Notarization. Any questions on that before we do Remote Ink Notarization? So…and by the way, obviously Weston Title, which is our sister company that we’ve been involved with for almost 30 years, is heavily involved with this. I’m personally involved with it. Geoff Sherman is. Ellen is. My entire staff is and we were one of the first title companies to embrace remote online and Remote Ink Notarization. Now in all candor, Remote Ink Notarization seems to be the way that the banks favor, you know, are favoring. There are very few banks that are willing to do a remote online notarization because they still want a wet ink note presumably because of the foreclosure crisis that occurred 12 years ago and they were accused of forging their wet ink notes and photocopying them and destroying them and they didn’t have original copies. So they’ve been shellshocked and want a wet ink note. Don’t blame them. In addition, some banks still want a wet ink mortgage. That, I don’t fully understand because once the mortgage is recorded in the public records electronically, having a wet ink mortgage is immaterial but I guess they’re concerned again about maybe some…the fact that maybe someone didn’t sign it and they still want a wet ink. But assuming you have just a cash deal, a remote online notarization is a no-brainer. The banks aren’t involved. You have a buyer, a seller, no bank, and both can sign remotely and we have done those closings many times already and they’ve gone over very smoothly. Remote online notarization for…including banks is probably the holy grail in the title industry and there are very few banks and very few title companies I can say that they have done Remote Online Notarization when a mortgage and note was involved.
So what we have is this hybrid, this hybrid which is called Remote Ink Notarization and that’s when the paper version of the docs are sent overnight to the person who has to sign the documents and then they are also uploaded by the notary or the title company to the RON platform. So you really have two things going on. you’re sending the original documents to the buyer or the seller and at the same time, you’re uploading the documents to the notarization platform. The principal, the person who signs the documents with both electronic and wet signatures, so they sign it twice. They sign the promissory note once, like wet, and another time just to be held in the system online. And then the notary is, like, here watching…like I’m watching you or you’re watching me right now, there to approve the transaction. And then all wet signed documents are sent overnight to the title agent to be physically notarized because then basically you have to stamp the note, the wet ink documents, and then they’re submitted for reporting and then forwarded to the lender. Funding happens when the title agent is in physical possession of the fully executed wet ink documents. So RIN, Remote Ink Notarization, is also frequently called by mortgage brokers and Realtors as a hybrid remote closing. So they’re different terms and I just want you all to remember what they are because they’re really important if you’re in the industry. You have remote online which is called RON. RIN is Remote Ink Notarization. And finally, remote ink is sometimes also called a hybrid remote closing. Are there any questions because we’re literally almost out of time?
Any questions? Yeah, we have two questions left. Okay. Okay. “When are we likely to see…” No, I’m not gonna answer that. “On the online notary, who would you recommend for remote closing?” As I mentioned, I mean, we have Weston Title. I mean, you know, we’re good at this. This is what we do, but, you know, there are tons of other folks who probably are as good but we’d like to think that we’re as good if not better and provide better value and also help sponsor “Zoom at Noon.” What’s the next question?
“Is RON just Florida closings or nationwide?” Each state has its own RON type of statute and not every state has it. Some have emergency orders. But what’s interesting is that you could in theory use a Florida RON closing notarization process to close in other states. It depends if those states have lesser restrictions than Florida has. Assuming that they don’t, you could do it. You could also do…use a civil law notary in the state of Florida and that would have to be accepted by every state in the Union because of the way civil law notary works around the world.
Okay. “What recourse does one have if having purchased a house by virtual reality find a different reality with opening the front door?” Well, that’s a great question. I mean, if you’re buying it as is and you’re buying it virtually, you know, I think you’re gonna be talking to your Realtors, you’re gonna be talking to your inspectors, and you’re gonna be talking to your lawyer. So, I mean, those are issues and you really have to be very thorough and have good people on the ground who can do the walkthroughs for you.
Okay, I have one more question. “Do you think that closings will ever return to the traditional closing table?” Probably not. Probably not. I don’t think that you will have as many traditional closings as we had in the past. It’s kinda like asking me do I think retail’s going back to the malls and the stores, and the answer is probably not. People are so accustomed to having packages delivered…you know, calling up on a Sunday or a Monday and having the stuff delivered Monday night or Tuesday. People are just so accustomed to that happening. I think they’re gonna become very accustomed to the luxury of being able to close, you know, from the beach, from their car, from their office, from their home as they have in the past.
And I’m being written a note so let’s just see what the note says. Thank you. And finally, as you know, we have been constantly updating our COVID-19 page. And it provides very useful information about unemployment, the PPP, the EIDL loan and other useful information, and that’s being kept up by Paola Vergara and by Ellen. And so, I do recommend it. It’s on our webpage at oppenheimlaw.com. [inaudible 00:30:22]. We’re out of time but thank you all. I’m Roy Oppenheim on behalf of Oppenheim Law and, of course, also Weston Title. And we look forward to seeing you next week at “Zoom at Noon.” Have a great one. Thank you.