The federal government wants to make it easier for folks to buy condominiums.
And I’m not just talking about the Federal Reserve’s recent decision to lower interest rates. That alone has helped drive down the cost of borrowing below 4% in many U.S. markets.
But that’s not much help for young people looking to buy for the first time.
With real estate prices rising dramatically over the last five years, getting enough money together for a down payment has become more difficult.
Enter the Federal Housing Administration (FHA) and its recent decision to back condo loans for borrowers with lower credit scores but who can swing a 3.5% down payment.
That alone could quadruple the number of FHA-backed condo loans to 60,000 units a year.
That’s good news for savvy tech investors looking for a way to target the trend. And it’s also better than it sounds.
The tech firm I have in mind targets the nation’s $48 trillion markets for residential and commercial real estate.
Why Some Big Media “Experts” Are Dead Wrong
Now then, let’s clear something up right off the bat. I don’t see the FHA’s move in any way posing a threat to the nation’s financial system.
I bring that up because I did see some so-called “experts” quoted in Big Media as saying this could bring us back to the days of the 2007-08 financial crisis.
That event was historic because of the widespread use of subprime loans, mostly for single-family homes.
But the math doesn’t add up. Single-family homes make up the vast majority of the nation’s housing supply, valued at more than $32 trillion at the end of last year.
Not only that, but the FHA is only talking a maximum of 60,000 units a year. If every one of those went bust, which isn’t going to happen, it’s still barely a sliver of the nation’s total real estate market.
This data point is vital: Analysts say that in the first quarter of 2010, nearly 26% of all homes had negative equity. In this year’s first quarter, that had fallen nearly 85% to a total of 4%.
This much, however, is clear. The move to improve condo ownership is part of a very dynamic U.S. real estate market that has helped the economy’s historic 10-year rally. It’s an attempt to get folks a grubstake in the American dream of owning your own property.
Make no mistake. This is a very robust and active industry when you dig in and see all the real estate out there in the world’s largest economy.
We’re talking hundreds of millions of homes, condos, apartment projects, office buildings, factories, and warehouses, not to mention all that property used by the oil and gas industry.
What we are looking for is a tech leader that can capitalize on as much of that massive stock as we can.
Enter CoreLogic Inc. (CLGX).
Relationships with 1.2 Million Real Estate Agents, 9,000 Lenders, 4,500 Property Managers, and 21 Federal Agencies
This is a company with deep expertise and great tech that can take us well beyond the roughly 150,000 condo projects already out there.
Here’s the thing. CoreLogic’s robust database and analytics cover everything from single-family homes and apartment buildings to oil and gas exploration and telecommunications lines.
It’s popular with real estate investors, landlords, and banks. That’s because the firm does credit checks as well as search criminal records with a particular focus on those involving property damage.
As such, it is uniquely positioned to capitalize on the nation’s surging real estate market that includes rising rental demand that has resulted in housing inflation in many metropolitan areas.
Launched back in 2010, Southern California-based CoreLogic traces its roots back more than 50 years and has seen a lot of changes during that period.
Roughly nine years ago, it was spun off as a stand-alone, publicly-traded firm focused on providing data for real estate and increasingly financial services, including mortgages and consumer loans.
Indeed, the company ranks as one of the nation’s largest Big Data plays on the real estate industry.
Big Data refers to the technology of taking vast amounts of raw unstructured data and using computer tools to sift through it all and provide actionable analysis.
And that’s exactly what CoreLogic does…
Consider that the company operates databases that cover more than 4.5 billion records in the United States, Australia, and New Zealand.
But you don’t have to take my word for it that this is a great company. It has relationships with 1.2 million real estate agents, 9,000 lenders, 4,500 property managers, and 21 federal agencies.
CoreLogic maintains records on just about anything to do with property across the board as well as credit information used for auto loans and home mortgages. These include:
- Historical data on more than 795 million real estate transactions going back more than 50 years.
- Tax payment histories on more than 145 million parcels.
- More than 99% of all U.S. county, municipal, and special tax jurisdictions tax records.
- Approximately 23 million active tenant/landlord records representing roughly 70% of the rental market.
The timing here is good. The jobs climate is the best we’ve had since 1969. With an economic expansion that has lasted a historic 122 months, hundreds of thousands of folks are looking to get a home.
And that also means every sector in the economy from shipping to energy to manufacturing also needs real estate.
In other words, CoreLogic has a very target-rich market in its sights. But it’s hardly resting on its laurels.
Last year, it made several acquisitions to beef up its tech. For instance, last December it bought HomeVisit to add photography, videography, 3D modeling, and drone imagery to its offerings.
Just two months before that, it acquired Symbility to provide cloud-based services to the property and casualty insurance market. And in April 2018, it bought A La Mode Technologies to provide software solutions to the nation’s 40,000 real estate appraisers.
Add it all up and you can see this is a great backend play on the entire real estate market in the U.S and several foreign ones.
Priced below $50, the stock’s performance clearly shows what’s up for grabs here.
Since the market rebounded last Dec. 24, the S&P 500 is up about 21.5%. By contrast, CLGX has climbed 41.7%.
That means the stock beat the broad market by roughly 94%.
But given the market’s recent volatility, I think it’s best to provide a conservative forecast for future gains.
If we cut that back by half, it could still beat the market by 47%.
It doesn’t take many plays like this one to help you improve our net worth.
Cheers and good investing,
Michael A. Robinson