DS News - U.S. Bank

60 C O V E R S T O R Y / D A V I D W H A R T O N 60 THE SKIES AHEAD As we enter the final days of 2018, the industry is taking stock of the year behind us and charting a course for the one to come. What were the trends and challenges that defined 2018, and what lessons should companies carry with them into the months ahead? DS News spoke to a collection of industry experts to try and gauge the state of the market as 2018 draws to a close. "It's an interesting and dynamic time in the industry, for a whole host of reasons," said Brian O'Reilly, President and Managing Director of e Collingwood Group. "You have market volatility to the likes of which you haven't seen in some time. Refinances have largely gone away. e distressed-servicing market is substantially smaller than what it was only a few short years ago. e business is in a period of real change." Many Americans are also facing significant economic pressure as consumer debt levels continue to climb alongside interest rates. ere is good news in the mix, however. "e silver lining for millions of Americans is that their homes continue to be a source of wealth that can help them strengthen their balance sheets," said Mike Rawls, EVP of Servicing, Mr. Cooper. "However, we need to help homeowners become smarter about managing their balance sheet to avoid a repeat of the last down cycle." Echoing the topic of DS News' August cover story, "e Big Short," Tendayi Kapfidze, Chief Economist, Lending Tree, said that 2018 was largely defined by the twin factors of decreasing affordability and insufficient housing inventory. Will that remain the case in 2019? "Affordability will remain a challenge as rates are likely to rise further and prices register more modest increases," Kapfidze said. "Inventory has been improving, in part because affordability is weakening demand. Delinquencies are unlikely to increase as long as the labor market remains robust, which we expect to be the case. Low delinquencies will also be supported by home prices, which we expect to continue rising, though at a slower pace." In early November, CoreLogic's Home Price Index Report forecast that home-price growth was projected to slow 4.7 percent by September 2019. CoreLogic's data also revealed that 40 percent of younger millennials said they wanted to purchase a home, but 73 percent cited affordability as a barrier to entry. Doug Duncan, SVP and Chief Economist, Fannie Mae, said that there could be some relief ahead in 2019. "One thing that you might notice retrospectively is that 2017 will be recognized as the year at which the pace of price appreciation in housing peaked," Duncan said. TAXES AND TARIFFS, LEGISLATION, AND REGULATION e Trump administration passed its $1.4 trillion tax-reform bill in the final days of 2017. While true perspective on the long-term impact of that bill is likely still months or years down the line, it nevertheless contained several provisions that are already touching some corners of the market, including limits on property-tax deductions and tax-break stays for homesellers. "e changes to federal tax law haven't resulted in a middle-class wave of homebuying activity," said Rick Sharga, EVP, Carrington

• Cover