The Evolution of the Housing Industry with Clayton Collins

EXIN 8 | Housing Industry   There are a lot of changes in the housing industry right now, and with all the layoffs and right-sizing going on, it’s easy to feel like the industry is going through a downturn. But reframe that and think about it as an evolutionary process. In this episode, Joe Welu and industry leader Clayton Collins discuss how the current adjustments are pushing mediocre players out and concentrating the market share to the top players, and how this will ultimately result in better service for the end customer. This is a sensitive topic to talk about as a lot of us know someone who has been affected by these cost structure adjustments. But in reality, lending and real estate companies who were quick to right-size their workforces will find themselves in a better position as the market comes back up. Tune in and learn what’s separating the wheat from the chaff and what essential elements you need to have to be included among the top players in the industry and ultimately the winners of this evolutionary process.

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The Evolution Of The Housing Industry With Clayton Collins

I’m excited to introduce our guest, Mr. Clayton Collins. He is the Founder and CEO of HW Media, the parent company of real estate media and data brands, HousingWire, RealTrends, Reverse Mortgage Daily, and Altos Research. Clayton formed HW Media in 2016 to acquire HousingWire and has grown the company to be the premier information resource for mortgage and real estate professionals across the real estate economy, reaching over 500,000 professionals each month. Clayton also serves on the board of directors for SLM, a real estate agent onboarding and technology support business, and a member of the President’s Young Leaders Council for Elon University and a member of the Young Presidents’ Organization. Please welcome, Clayton Collins. It’s good to be with you. It’s been a while. It’s good to have you on the show. How’s life? It’s wonderful to see you. Life is good. I have been busy working through this evolution of the housing industry that we’re going to talk about. I just got back from a trip to Portland where I had the chance to spend some time with some awesome real estate brokers and get some perspective from that side of the market. I’m gearing up to go to MBA Tech. I am excited to be face-to-face with many lending and real estate brokerage leaders as we kick off, what we hope to be a spring home buying and selling season that treats the mortgage and real estate world well. You have such a unique perspective because you guys are immersed so much in not just the real estate community, but the lending community, and the technology community and how all of those things weave together. Before we got on the show, we talked a little bit about all of the changes that are going on out there and how companies and brand practitioners are adjusting. I want to talk about the evolution of the industry because that’s the best way to describe what’s taken place. Let’s start there and give me your high-level thoughts. When people talk about what’s happening in housing, it’s easy to focus on some of the negative things like the increase in interest rates, which has resulted in a drop off in refi and purchase, and a lack of inventory. What’s ultimately going on here behind a confluence of challenging dynamics is an evolutionary process where the housing industry has an opportunity and honestly a responsibility to make itself better and build more efficient operations.   EXIN 8 | Housing Industry   I don’t exactly know what the impact of this will be, but we’re seeing such a flight to quality. When I talk about a flight to quality, I don’t just mean a flight to the most efficient lenders. I mean a flight to the best loan originators. We’re seeing volume start to consolidate to the top players. Mediocrity is not being rewarded.
EXIN 8 | Housing Industry
Housing Industry: What’s ultimately going on here behind a confluence of challenging dynamics is an evolutionary process where the housing industry has the opportunity and responsibility to make itself better.
  Mediocrity gets punished. The same thing’s happening in real estate brokerage where we dropped our RealTrends rankings of the top agents, teams, and brokerages in the country. The volume continues to consolidate and concentrate with the top performers. That’s a tough thing if you’re mediocre, a loan originator, or a part-timer on the real estate side. It’s a good thing if you’re a consumer because when volume starts to concentrate, the best get better. I saw a great line, “Nobody needs advice from a part-timer.” That’s something homeowners should take into account as they’re thinking about who they work with from a loan origination or real estate sales perspective.   EXIN 8 | Housing Industry   If you think about how many people were dabbling in the industry, they were looking to make easy money. What you’re describing to me is, ultimately, those people are not going to be relevant anymore. We’re seeing it show up in the data. Drill into that a little bit for me from your seat, which I think you have such a depth in perspective. What is the difference between these people where the volume is consolidating across the industry in both sectors or segments and from the real estate side and the lending side? What do you see? It’s been a good thing that the real estate and loan origination industry has a relatively low bar to enter. It means that people from a diverse array of backgrounds can enter the housing industry in some capacity. They don’t have to go to college, Ivy League school, some long training program, medical residency, or graduate degree program. You can come from different walks of life in different backgrounds. One of the reasons that are important is because American homeowner comes from many walks of life and many different diverse backgrounds. When you create high bars to enter a profession, you end up with a much more homogenous category of workers. The housing industry, by not having this extremely high bar, allows people from all walks of life to enter. The challenge is, do you stay once you’re in the industry? If you stay, it doesn’t necessarily depend on the fact of where your education is from. It depends on what you give. Do you dabble or do you commit? The National Association of Realtors is projecting a pretty big drop off in membership from 2022 to 2023. We’re seeing projections that loan originator headcount is going to go down to a degree in 2023. Is that necessarily a bad thing? No. It’s pushing out the dabblers. It’s rewarding the people who have committed to building careers as housing professionals. Those are the people who can provide the best advice to homeowners. Those are the people that work well with their counterparts. It still blows my mind how many realtors don’t think highly of loan originators and vice versa. Their vision is anchored in a dabbler or a part-timer. Working with a realtor who’s working ten hours a week is not going to be a good experience for an LO. A realtor who’s working with an LO who’s built his or her whole pipeline on a refi or isn’t a fully committed professional is going to be a bad experience too. As we go through this kind of cleansing period and reward the people who are committed to building careers in the housing industry, we’re going to create better working relationships across the industry. We’re going to reward the originators who are doing the volume to have the resources to invest in technology. The people that are left in the industry and that side will be closer to their highest and best use. As we go through this cleansing period and reward the people who are committed to building careers in the housing industry, we're going to create better working relationships across the industry. Click To Tweet I think their highest and best use, if you’re a tip of the spear person in the housing industry, working with consumers, is working with consumers and building relationships and giving advice, not inputting data a dozen times and not repeating processes or spending all your time on paperwork. It is working with consumers and giving advice. From our perspective, technology should enable them to do more of that. It sounds like you believe the same thing. I’ve never believed the rhetoric that the loan originator replaces the real estate agent. It’s going to help them be their highest and best and be better advisors and sellers on behalf of their clients. Technology can replace some of the checker checking checkers’ jobs in the operations side of the housing industry. That’s tough to see. We hate to see the reduction in forces and the headcount reductions that we’ve seen. Ultimately, that might help those people get to their highest and best use too, and figure out where their intellect and skills can be rewarded. The environment where we came from in 2020 and 2021 was exuberant that it wasn’t a necessity to have those efficiencies and businesses optimized it. It feels like organizations are being forced in that direction. The ones that are making the choices to optimize workflow and performance are being rewarded. I had a senior mortgage bank CEO on my Housing News Podcast back in Q2 in 2022. This is an organization that some other industry participants has criticized for being refi heavy in a time period when the industry was shifting to an entire focus on purchase. One of the comments that stuck with me that was shared is that if we hadn’t pivoted to refi and other lenders hadn’t pivoted to refi, millions of American homeowners would be sitting in mortgages at rates significantly above market. Because of the mortgage industry’s ability to quickly pivot to serve consumers to refinance their loans at 2.75%, 3% to 3.5%, the American consumer and economy were served well. There is some power in that statement, but to fulfill that statement, it required throwing human capital into the ecosystem. To quick pivot, ramp up technology, and handle refi volume when that opportunity presented itself would have left money on the table for the mortgage originators and consumers on the sidelines that weren’t able to be served because it takes time to improve processes and implement technology. The question is as lenders have had more time, have they invested in technology and started to build more elastic and efficient lending ecosystems that can scale as volume ebbs and flows and as interest rates move? I want to talk a little bit about the elastic sustainable business models that we believe you have to get to. Are you seeing the organizations making the investments from the conversations you are having? Going back to the same talking points we see with loan originators and real estate agents, there’s a bifurcation. The bifurcation sits with the resources in the organization. Did lenders preserve cash on their balance sheet in 2022? Did they access the public markets, which gives them some public market pressure but also access to capital to invest in their business, or did they distribute all their cash or pay ridiculous sign-on bonuses at the wrong time? There’s a bifurcation in resources. The lenders on the right side of bifurcation came into the second half of 2022 with cash on the balance sheet. This is the callous side, but I think the lenders who weren’t afraid to act quickly and right-size their workforces are in a significantly better position. Lenders who weren't afraid to act quickly and right-size their workforces are in a significantly better position. Click To Tweet Those are the lenders that, even though they’ve right-sized certain roles, improved their resources and their ability to invest in technology. I see a clear bifurcation. There were still lenders that are sitting on the sidelines unable to invest because they don’t have the cash and their cost structure is not in the right place. Those are the lenders who are losing market share and are likely going to be consolidated in, in some form or fashion, or they keep their head in the sand and keep costs low until the market returns. That will be a time when their competition is far ahead because they’ve been investing in technology for two years while the guys who didn’t have cash, a balance sheet, or access to credit sat on the sidelines. It’s almost like a slow death for the half, the quarter, or whatever the industry that didn’t take action quickly, the right size of the business, didn’t or is not making the investments for whatever reason. Whether they hang on for a bit or not, your statement on the people that have, as the industry volumes come back to more normal levels, are going to be far ahead with data and technology that they’re going to continue to take market share. That’s been my observation. You’re selling enterprise technology. What do you see? I see the same thing. I’ve been on-site with a lot of customers. There are two camps. You have the camp where, in some cases, they are paralyzed by fear or by an inability to take action because of ownership structure or executive teams. The companies that cut early in the cycle and right size their cost structure as much as they could early in the cycle have gotten to within striking distance of profitability, we’re seeing great momentum in those organizations and in their ability to be strategic and identify deal flow, new referral opportunities, ways to optimize their middle performers and get them up, all of the above. It seems to be the ones that were taking action early, now you’re seeing them starting to make progress in a lot of ways.  
  Isn’t that such a phenomenal entrepreneurial operator case study in that? You go back to the summer of 2022. You see some of the headlines and reduction in forces, those organizations and leaders at the time looked a little bit weak and had made a strategic misstep. I remember a lot of those people were like, “You guys made so much money, and now you’re laying people off.” That’s not fun to do, but you got to hand it to them at this point. It looks like they were thinking long-term and are like, “If I don’t do this, the health of my company and my ability to serve consumers is going to be in jeopardy.” It’s such a tough topic to talk about. I know when you publish this and our Housing News episodes, there’s someone in the audience that’s been impacted by a reduction in force. It’s important to talk about this topic with humility and knowing that they’re people at all levels from the most juniors to very senior roles that have been negatively impacted here. You and I sit here from a fortunate position both leading our organizations, still employed and propelling in the right direction. I know there are people who aren’t as fortunate as where you and I sit, but there’s the whole lens of looking at this through the entrepreneur and business operator perspective. Those leaders who acted swiftly and made smart decisions for their organizations are in a better position. Ultimately, that creates a better company for the people that are still part of it. Those companies will hire again and will grow again. Hopefully, they do it more efficiently and are more focused on the right roles and people that can implement technology and build more efficient, sustainable ecosystems. There are two very different lenses. Neither is wrong. It’s two things you have to think about.  
  These environments, as you see layoffs, it’s never lost on any of us that lead organizations that when those things happen, you’re impacting people’s lives, and it’s the last thing anybody wants to do for the most part. For the leaders that I talk to that have been through those significant things, you can tell it’s heavy. They wear that on their shoulders in a lot of cases. At the end of the day, it’s about the long term. We’ve clearly identified some of what we’re seeing out there. Another thing that’s worth paying attention to is not just capital and cash that are differentiating players in the industry. It’s also a mindset. All the way from the C-Suite, the originator to the broker across the organization that faces tough markets with the right mindset that there’s market share to be, and this is when companies and professionals differentiate themselves, is important. In running a news org, we cover the good and the bad. There have been some bad headlines. It’s not just capital and cash that are differentiating players in the industry. It's also mindset. Click To Tweet Sometimes you might get some nastygrams from that post or piece that you did, but you cover all of it. You can’t pick and choose. How much worse this industry would be if everyone stuck their head in the sand and didn’t ignore some of the negative economic news or challenging industry news? You get the nastygrams, but I strongly believe that we’re playing a role. Our mission is moving markets forward and arming people with information to make better decisions. I do like to think that when we were pointing at some of the inventory challenges and the rate challenges, we were cited in a board deck when people were talking about their strategy for the next six months. We helped our audience make better decisions.
EXIN 8 | Housing Industry
Housing Industry: Our mission is moving markets forward and arming people with information to make better decisions.
  That’s one of the veins I was going down. The vein that I was focused on is how you take information and use it to motivate your team, keep people in the right mindset, and talk about the challenging market so people don’t fall into the USA Today headlines and think the world is crashing and don’t have the context that we do as market professionals. In my opinion, if you can get the context that will help inform your mindset and we both agree strongly and see this, in addition to the other trends we talk about the difference, between the half or the top quarter that’s winning right now is they’ve got that growth mindset. They’re driving that into their organizations and saying, “I know things are on fire and burning, but there’s an opportunity,” and there’s a big opportunity on the backside of this. You put out so much education-centric content that provides context. How important do you believe it is that that context layer is for professionals and companies to translate that down to the consumer? Our strategy is to provide information, news, data, and research for the housing professional. We don’t write it through the lens of like, “Copy and paste this. Screenshot it. Share it with the consumer.” Some of our folks do that. We love and appreciate it, but we want to give the professional context so they can flip it into the story that their consumer needs to hear. I got back from the 1000watt Turn On Conference in Portland. The 1000watt team was creative. They prepared a video that was from the vantage point of a consumer. The video said, “I am not the lead. I am not a contact. I don’t know what HMDA is. Don’t talk to me about amortization. I’m a human. I’m unique. I have a financial world that’s unique to me. The most important person is me. I’m buying a house. I’m going to live in it.” There’s another speaker who talked about less facts and more feel and how contact makes people feel. I’d see our vantage point as HousingWire and RealTrends. We’re going to give you the facts now. It’s your job to turn that into a message that helps your consumer feel about the decisions they’re going to make in their housing journey.  
  They need to humanize it. One of your guests on this show talked a lot about education and how he, as a top originator in the country, leverages information and knowledge to educate not only his originators and team but the real estate agents and consumers that do business with him. I know this gentleman well. He’s a master at bringing feeling and context to the information. The gentleman we’re talking about is Shant Banosian. He is world-class at that. His phrase on the show was, “Education attracts.” We were talking about marketing and growing the business. He made it clear. I’m like, “There’s a reason that he’s the best in the country, and you can clearly see that.” It resonates. A lot of people can learn from those types of statements and how they approach the industry. Let’s bring it back to the beginning where we kind of talk about consolidation of market share to the full-timers, not the people who dabble. Shant lives in this industry. He is a housing professional. It’s a big part of his identity. I see that across top performers across this industry. I consider myself a housing professional. There is no personal Clayton and housing Clayton. This is me. There are a lot of people in this industry who’ve dedicated themselves to selling houses, financing houses, and participating in some way. Those people embrace the message Shant shared that education attracts. You have to know this industry inside and out to understand how each economic move is going to impact your clients and how it’s going to make your clients feel. I heard someone joke, “I missed the days when the Fed chair’s name wasn’t on the tip of my tongue.” Ninety percent of the country should not know who Jerome Powell is, but now a lot of people do.   EXIN 8 | Housing Industry   He’s one of the most famous people in the country. That should not exist. We should not know who the Fed chair is. Maybe you and I Joe, but 99% of the country should not know who Jerome Powell is. We definitely shouldn’t tell our consumers about him. We shouldn’t be telling consumers about a 25% rate increase because it does not mean a 25% mortgage rate increase, which we all know. Everyone reading this understands the difference between the Fed Funds Rate and mortgage rates. In our company, when you see a 25 basis point increase from the Fed, they automatically assume that their mortgage rates are going to go up. You have to get the context and connect at a human level with people to help them understand. I saw a real estate agent post on Instagram that consumers should have locked over the weekend because rates went up 25%. I’m like, “It’s not my job to correct you, but you dabble or mess somebody up.” Give me your perspective on the amount of consolidation that you’re seeing on the originator side and the real estate side if you have data you’re willing to share or a thesis. We published an article with a source from a couple of investment banks that IMB consolidation could range from 30% to 40% in 2023. That thesis was a little bit flawed, the assumption that consolidation would be the result of mergers and acquisitions. As fast as this market changed, the definition of consolidation and real estate brokerage and mortgage origination has changed. There’s a term that’s being used regularly in real estate. They’re called walkover acquisitions where you’re consolidating to local independence or independent and a franchise. No one’s getting paid. You’re getting a new home. In the tech world, we call it an acquihire or a rescue. That’s happening in real estate and seems to be the trend that’s happening in the mortgage. I got up behind the scenes to look at an IMB acquisition. The headline might look okay, but the reality is all of the comps are deferred and contingent. The retention agreements and agreements that LOs have to sign to come over are hairy. They’re not pretty. Some of the M&A that gets announced isn’t what it looks like. The packaging around it doesn’t tell the full story in many cases. There might be a few good more deals to be had, but there will be a lot of consolidation as a result of failed shops and acquihiring over the origination of talent and bringing that volume into a lender who prepared their balance sheet in 2022 to muscle through the hard times. There’s consolidation through recruitment. There are some fierce recruiters out there who are pinning down their competitors through recruiting efforts. A lot of the consolidation will be the result of the strongest players out competing with their competition.
EXIN 8 | Housing Industry
Housing Industry: A lot of the consolidation will be the result of the strongest players outcompeting their competition.
  One thing I would mention that I see, and I’m curious as to your feedback, is people hyper-aggressive in recruiting. Some of them are successful at retaining those folks, but there was a gap that got masterful at the recruiting process and not masterful at onboarding, wrapping their arms around those people, making them successful once they moved over. We’re seeing a bifurcation there in some cases, and you’re starting to see some of those people go back in the other direction. Do you hear things about that? A lot of it comes back to the theme of technology. Some of the consolidated companies are lenders who had not invested in technology and are coming into organizations that had. You have originators who aren’t tech native or tech-centric, suddenly being asked to change their processes and use new tools they’ve never used before. The learning curve is steep. You look at this as a top perform origination shop, and you’re like, “This guy doesn’t know how to use our LOS. This guy won’t use our point of sale. She’s still using her own CRM. Come into the fold. We know how to do this.” In a market where there’s much pressure on volume and the divide between someone who’s a cost center and a profit center is a pretty thin divide and makes some of those recruiting conversations challenging. One reassuring thing I have seen in recruiting is some recruiters and origination shops are getting better at knowing who they are and who they work for. There are a few shops I’ve seen out there that said, “We are the home,” for the later career originator who wants to dabble and push a few loans through once a month. That’s okay. At least, they’re being honest and clear. We’re good at that like, “Come hang your license with us.” There are other shops that have more aggressive sales cultures, and mediocrity will be punished. As long as you know that going in, that’s a good thing. There needs to be a home for originators who have different aspirations, goals, and styles. The scary part is when people aren’t honest with themselves about their organization or their own skillset and join a company that has an entirely different culture than they’ve spent their career building. That’s such a great point. We see that all the time. People are not honest with themselves about their ability to change and evolve. This is an environment of rapid change and evolution. They’re not being honest with themselves like, “Am I willing to do the work to become a type of professional that I’ve never been before?” Ultimately, there are a lot of scenarios where they don’t maybe examine the company they’re at and say, “Is the investments they’re making a match to what I want to do with my career? Does it line up?” Clayton, I appreciate your perspective and the unique position you have in the industry. Thank you so much for the time. Thank you so much. I love the direction the conversation went and talking about how education attracts. It’s a big part of our mission here. I always encourage loan originators to check out our LendingLife Newsletter. You can find it easily on HousingWire, which we curate specifically for loan originators. We hope you, the team, and everyone who listens will join us at HousingWire Annual. We’re doing a lot of effort to bring together the mortgage and real estate ecosystem under one roof. It’s a big part of why I founded HW Media. It is to look at the housing sector in totality and help build relationships across this important sector. I want to make one more point on the fact that you guys are bringing lenders and real estate practitioners together in the same environment. Don’t you think there’s a tremendous unrealized opportunity for lenders and the real estate side to work better together to serve the end customer?   EXIN 8 | Housing Industry   As we keep coming back to that theme of consolidating the volume around the top performers, that will become more obvious. It shocked me how differently real estate and mortgage professionals think. They run at different paces and see themselves as part of different communities and different ecosystems. I have the thesis I’m making big bets that these two sectors are going to realize how much they mean to each other and how much the relationships can be improved by coming together under one roof, even if that’s once a year. We want to be a factor for change in that arena. Ultimately, the best part about it is the end consumer generally is going to have a better outcome if those two sides of the transaction are in sync. Thank you so much, Clayton. We’ll see you soon.  

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About Clayton Collins

EXIN 8 | Housing Industry
Clayton Collins is the founder and CEO of HW Media, the parent company of real estate media and data brands HousingWire, RealTrends, Reverse Mortgage Daily, and Altos Research. Clayton formed HW Media in 2016 to acquire HousingWire and has grown the company to be the premier information resource for mortgage and real estate professionals across the real estate economy – reaching over 500,000 professionals each month.
Clayton serves on the Board of Directors for SLM, a real estate agent onboarding and technology support business. He is also a member of the Presidents Young Leaders Council for Elon University and a member of Young Presidents Organization (YPO).