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But so do retained earnings, the instant recap may be further away than you think !
Great podcast: HousingWire Daily: Steve Murray on the importance of protecting property rights
Starts at minute mark 6:00...
www.housingwire.com
Louie: Trying to get high caliber Executive Talent by hoping they donate the loss of millions in opportunity costs is as stupid as running two $7T corporations with no capital! The saddest part is that THIS TOTALLY MAKES SENSE FOR THE GOVERNMENT!
Great point! Although would newly issued jps count towards the CET1 Capital Requirement?
"That was good for a $5.85 trillion increase, or 4.3% from the first quarter. Looking back to a year ago, when the nation was in the early days of the Covid-19 pandemic, the net worth total represents a 19.6% increase.
A large chunk of the new wealth came from stocks, which accounted for $3.5 trillion of the gain, while real estate appreciation was responsible for $1.2 trillion.
However, along with that increase came a big surge in debt.
Consumers debt totaled $17.3 trillion as of June 30, a quarterly gain of 7.9%. Consumer credit grew at an annual pace of 8.6%, while mortgage debt was up 8%."
https://www.cnbc.com/amp/2021/09/23/household-net-worth-rises-above-141-trillion-but-debt-up-sharply-as-well.html
https://www.cnbc.com/amp/2021/09/23/mortgage-market-is-unprepared-for-climate-risk-says-industry-report.html
"There are numerous stakeholders in housing finance, including consumers, landlords, homebuilders, appraisers, mortgage originators and servicers, insurance companies, mortgage investors, government agencies, and the government-sponsored enterprises that issue mortgages (Fannie Mae and Freddie Mac). That means climate change will send significant pressure down a long financial line."
"Not only is climate change putting more stress on the National Flood Insurance Program, it could increase mortgage default and prepayment risks, trigger adverse selection in the types of loans that are sold to the GSEs, increase the volatility of house prices, and produce significant climate migration, according to the report.
For instance, lenders who securitize their loans with the GSEs could face additional costs for representation and warranty insurance, which covers breach of contracts or warranties in large financial transactions, and higher risk as the GSEs revise their requirements in response to climate change.
More specifically, the GSEs might require lenders to perform additional due diligence to determine the need for flood insurance, and the lag in updating official flood maps may force lenders to incorporate additional sources of information on flood risk. As a result, the GSEs might not be allowed to buy loans on homes with higher flood risks."
I think even Mel Watt realized the MAJOR PROBLEM of trying to run 2 of the worlds largest financial intermediaries with very little capital and ZERO FINANCIAL INCENTIVES FOR TOP SHELF TALENT!
Let's see if Sandra L Thompson knows this or will figure it out!
"Nobody expected that the two mortgage titans would still be around so long after the government took them over at the height of the financial crisis in 2008. Watt says Fannie and Freddie’s CEO pay structure needs a makeover, in part to keep the chief executives from bolting and to better plan for their replacements should they choose to leave, Freddie Mac disclosed in a financial filing Tuesday.
Watt told Freddie and Fannie’s boards to limit any changes so that the CEOs’ pay would be within the bottom 25 percent of the market and would exclude bonuses. But executive pay at bailed-out banks and the housing finance giants became an explosive issue after the crisis and remains politically touchy. In 2012, the FHFA capped Fannie and Freddie CEO pay at $600,000 a year after Congress howled at lucrative pay packages being doled out."
https://www.politico.com/story/2015/05/600000-not-enough-for-fannie-freddie-ceos-117660
Tim Mayopoulous, "Brain drain is a problem @ gses", "The industry will regret endless conservatorship", "the government is not the best operators of these companies", starts at minute mark 28 on podcast at www.housingwire.com
Tim Mayopoulos on leading Blend after leaving Fannie Mae
https://www.housingwire.com/
Under latest podcast approximately 40 minutes
The problem is running/working at an ideological think tank that promotes a certain set of values and being the fhfa director are two different worlds.
We saw MC do a 180 on several occasions from what he espoused in his papers at CATO.
I think affordable housing advocates would trade off the twins long term profitability for low down payment high risk loans in a heartbeat.
They can force the gses to buy these high risk loans at low guaranty fees and the best way to do that is to be 100% in control and remember PEOPLE IN POWER RARELY WANT TO PART WITH THAT POWER!
I'd rather see Mike in there BUT JB has really pressed the accelerator to the floor on filing head of governmental positions with diverse people and it will be interesting to see what happens.
Remember the current administration can choose to do nothing BUT if they don't get their big housing spending bills through Congress, they seem likely to try to monetize their positions in the gses and perhaps come to a settlement with the litigating shareholders.
https://fortune.com/2021/09/21/home-prices-forecast-models-2022-predictions/amp/
“Annual home price growth was the most that we have ever seen in the 45-year history of the CoreLogic Home Price Index. This price gain has far exceeded income growth and eroded affordability, wrote Frank Nothaft, chief economist for CoreLogic, in his latest market outlook report. “In the coming months this will temper demand and lead to a slowing in price growth.”
https://www.housingwire.com/articles/renter-market-picks-up-in-suburbs/
30 yr frm: The 5th Circuit EnBanc Panel decision gave an excellent analysis of why the US Congress in drafting HERA did NOT grant the FHFA all encompassing sweeping powers under the Incidental Powers provision. BUT their well reasoned legal opinion was ignored by the SCOTUS with zero explanation as to why the EnBanc Panel decision got it wrong.
Talk about letting the tail wag the dog...
"Steven Mnuchin, who served as Treasury secretary under former President Donald Trump, did not sign the letter."
https://www.cnbc.com/2021/09/22/debt-ceiling-six-former-treasury-secretaries-urge-congress-to-move-swiftly.html
"Their original flagship fund’s (2004 inception) track record is excellent with annualized returns of ~16.7% compared to ~10.4% for the S&P 500 index."
https://seekingalpha.com/amp/article/4456478-bill-ackmans-pershing-square-portfolio-q2-2021-update
9/22/2021
HUD and FHFA Announce Clarifications to Freddie Mac's Policies on Purchasing Mortgages Secured by Group Homes
Joint Release
Department of Housing and Urban Development
Federal Housing Finance Agency
WASHINGTON, D.C. – The U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Finance Agency (FHFA) on Tuesday announced important clarifications to Freddie Mac's policies that make clear it will purchase mortgages secured by a property owned by an individual and rented to a group home for persons with disabilities.
"Clarifying these policies regarding the eligibility of group homes for the secondary mortgage market is an important step to fulfilling the Fair Housing Act's promise of providing individuals with disabilities equal access to housing opportunities," said HUD Secretary Marcia L. Fudge. "We appreciate our colleagues at FHFA who share our goal of advancing fair housing and collaborated closely with us and Freddie Mac in helping to clarify these policies."
"Group homes provide opportunities for persons with disabilities to live in the community among neighbors and access important opportunities for independent living," said FHFA Director Sandra L. Thompson. "We are proud to stand with HUD to ensure that all people are afforded fair access to housing, recognizing that diverse experiences contribute to communities that thrive."
Group homes, which are protected under the Fair Housing Act, are dwellings occupied by unrelated persons with disabilities and can provide them opportunities for ongoing interaction and socialization in a familial setting. This assurance that Freddie Mac will purchase mortgages secured by group homes, where the property is owned by an individual, should encourage lenders in extending credit for such mortgages, thus providing more community-based living opportunities for persons with disabilities. These clarifications were included in Freddie Mac's September 1 update to Freddie Mac's Seller/Servicer Guide.
The clarifications follow a HUD investigation of a mortgage lender who had refused to lend to a homeowner that was renting their property to a company that was operating a group home. The lender's refusal was based on the incorrect belief that Freddie Mac would not agree to buy the mortgage. After HUD reported this misunderstanding to Freddie Mac and FHFA, Freddie Mac worked with both agencies and ultimately agreed to revise its policies and make this announcement to clarify that Freddie Mac has always been willing to buy these mortgages secured by a group home.
HUD and FHFA recently signed a Memorandum of Understanding (MOU) to cooperate on fair housing and fair lending matters and strengthen oversight of Fannie Mae and Freddie Mac (the Enterprises) and the primary mortgage market.
Group homes must still meet other eligibility requirements applicable to other transactions to be eligible for purchase by Freddie Mac.
###
The Department of Housing and Urban Development's mission is to create strong, sustainable, inclusive communities and quality affordable homes for all. More information about HUD and its programs is available on the internet at www.hud.gov and http://espanol.hud.gov.
?The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 11 Federal Home Loan Banks. These government-sponsored enterprises provide nearly $7.2 trillion in funding for the U.S. mortgage markets and financial institutions. Additional information is available at www.FHFA.gov, on Twitter, @FHFA, YouTube, Facebook, and LinkedIn.
Contacts:
From todays WSJ: "Startups with cash-offer programs are expanding quickly. Companies like Ribbon, HomeLight Inc. and Orchard unveiled new funding rounds this month. Knock said this spring it is exploring plans to go public. Opendoor Technologies Inc., a house-flipping company that went public in late 2020, launched a cash-offer program in March. Real-estate brokerage Redfin Corp. is piloting a cash-offer program in some markets, a spokeswoman said.
Cash-offer companies are paid through commissions, fees or both. In some cases, the companies act as the buyer's real-estate agent or mortgage lender and are paid through sales commissions or origination fees. Other companies charge a flat fee, often between 1% and 3% of the purchase price.
One advantage for companies offering these programs is it helps them connect with consumers early in the home-buying process, said Guy Cecala, chief executive of industry-research firm Inside Mortgage Finance.
"The reality of the situation is it is very, very hard to shop for a house now unless you can put in an all-cash offer," Mr. Cecala said. "The question is, what kind of strings and everything else do they have attached to it?"
Cash-offer companies are taking a risk. If a home buyer's financing falls through, the company could end up owning the house and needing to resell it.
There also might be limited demand for these programs in a less frenzied market."
Thanks for taking the time to respond. As I recall the Washington Federal case was recently this Summer arguing in the COFC Appealate Division.
It will be interesting to see how these cases end up and whether or not the Plaintiffs will be able to go to trial to expose the governments bad actions in this unprecedented 13+ year 'conservatorship'.
I don't think anyone could have foreseen this most bizarre story of two of the world's largest financial intermediaries unfolding the way it has.
Good luck with your shares!
Right now the government is still after 13 YEARS in total control of two of the largest secondary mortgage market buyers. They probably won't give that up to get an unknown figure for their affordable housing goals. Plus all the litigation will likely need to be resolved before they try to monetize anything.
I don't think the new bill allocated one thin dime to compensate the 'evil landlords' for the politicians grants of 'free housing' to their base did they?
What do you think will be the response from those providing affordable housing in the marketplace?
The one prevalent theme is the instant recap and dilution solution.
The damage that these Eviction moratoriums do to the supply of the already strained affordable rental housing supply and the higher credit scrutiny of prospective tenants is a huge disservice to hard working low and middle income Americans across the nation.
Maybe that is their plan, to force the federal government to play MORE of an already outsized role in the rental housing market and make hard working Americans more dependent on the government so they can get reelected.
Well, I think, AND THIS IS IMPORTANT, that when the SCOTUS held that the eviction moratorium was illegal, the majority specifically stated that the problem was that the enabling CDC statute was not broad enough to include evictions.
Senator Warren picked up on this and that's why her new law WOULD GIVE THE CDC PERMISSION TO PROCLAIM AND ENFORCE EVICTION MORATORIUMS!
So, JUST LIKE IN COLLINS WERE THE SCOTUS SAID, "SURE FHFA CAN DO A NWS, IT IS IN THE INTERESTS OF THE PUBLIC IT SERVES" THAT DOESN'T MEAN THAT IT MAY NOT VIOLATE THE SHAREHOLDERS CONSTITUTIONAL RIGHTS UNDER THE 5TH AMENDMENT OF THE US, DE, AND/OR VA CONSTITUTIONS!
This Takings Clause issue is yet another legal battle for another day.
Isn't there a Takings Clause case in Litigation Land somewhere out there?
https://www.cnbc.com/2021/09/21/eviction-moratorium-cori-bush-elizabeth-warren-want-to-reinstate-ban.html
The legislation, led by Rep. Cori Bush of Missouri and Sen. Elizabeth Warren of Massachusetts, would give the Department of Health and Human Services permanent authority to enact an eviction ban during public health crises.
https://www.cnbc.com/video/2021/09/21/housing-starts-up-3-point-9-percent-vs-1-point-0-percent-estimate.html
https://www.housingwire.com/articles/august-housing-starts-better-than-expected/
Plus they help out the normally powerless voices in our democracy from abusive local, state, and federal government bureaucratic overreach and oppression of their property!
They DO GET TO CHERRY PICK THEIR CASES, SO THAT PROBABLY CONTRIBUTES TO THEIR STELLAR COURT WIN RECORD!
Nice find, Navy and thanks for the TH UPDATES!
The granny flat law was passed several years ago in California and I don't think it was earth shaking in moving the needle on more affordable housing!
I think the vast majority of Americans really enjoy their Single family detached homes and many consistently show up to thwart any increased zoning density near their 'castle'.
Imagine telling your neighbor, "Hey I just got zoning approval to split my lot in half and build 2 duplexes!"
As I understand it the state law OVERRIDES THE LOCAL ZONING AUTHORITY AND IT MAY AS WELL OVERRIDE ANY RESTRICTIONS AND COVENANTS THAT RUN WITH THE LAND SUCH AS THOSE PESKY HOMEOWNERS ASSOCIATION RULES AND LIMITATIONS!
We'll see what happens...
Just a general piece espousing their Libertarian ideology... But one thing is for sure, THE PACIFIC LEGAL FOUNDATION HAS BEEN KICKING THE GOVERNMENTS A*S AT THE SCOTUS WITH RESPECT TO PROPERTY OWNERS RIGHTS AND GOVERNMENTAL OVERREACH FOR THE LAST 2 DECADES!
"About Pacific Legal Foundation
Pacific Legal Foundation is a nonprofit legal organization that defends Americans’ liberties when threatened by government overreach and abuse. We sue the government when it violates Americans’ constitutional rights—and win!
Each year, PLF represents hundreds of Americans, free of charge, who seek to improve their lives but are stymied by government. We give them their day in court to vindicate their rights and set a lasting precedent to protect everyone else."
https://pacificlegal.org/about/
https://www.inman.com/2021/09/20/home-sales-will-cool-off-for-the-rest-of-this-year-and-next-fannie-mae/amp/
https://www.hud.gov/house_america
https://designandbuildwithmetal.com/industry-news/2021/09/16/fastest-home-building-activity-continues-in-suburban-exurban-communities
Mmmmm doughnuts....https://www.foxbusiness.com/markets/krispy-kreme-added-russell-2000.amp
https://nahbnow.com/2021/09/builder-confidence-steadies-as-material-and-labor-challenges-persist/
"But the package of housing reforms passed in California over the past four years, including these two latest measures, “is probably the biggest change in housing in 50 years or more,” Conor told me."
From todays NYT: Gov. Gavin Newsom has signed two bills aimed at easing the state’s housing crisis.
No matter where you live, you’re probably familiar with the exorbitant cost of housing in California.
The state’s median home price has crept above $800,000, more than double what it is nationwide. Among the 50 biggest cities in the country, we’re home to the top four most difficult places to afford a mortgage. And half of all Americans experiencing homelessness live in California.
Our housing crisis has a seemingly simple solution, according to the laws of supply and demand: Build more housing.
But for decades, resistance from suburban homeowners has stalled development as the problem has only gotten worse.
On Thursday, the state took a step toward creating higher-density neighborhoods as Gov. Gavin Newsom signed two high-profile housing bills.
Though the bills, Senate Bills 9 and 10, endured intense opposition in recent months, neither is all that revolutionary, said Conor Dougherty, a reporter for The New York Times who writes about economics in California.
But the package of housing reforms passed in California over the past four years, including these two latest measures, “is probably the biggest change in housing in 50 years or more,” Conor told me.
What the new laws will do
S.B. 9 allows duplexes to be built in most neighborhoods across the state, including places where apartments have long been banned. S.B. 10 reduces environmental rules on multifamily housing and makes it easier for cities to add high-density development.
The former has been the more controversial proposal, spurring angry opposition from homeowners and local government groups who have called it “the beginning of the end of homeownership in California.”
The classic California suburb — rows of houses, each with their own yard and fence — is largely a product of something called single-family zoning, a regulation that dictates that there can be only one house per parcel of land. These laws prohibit, say, building a high-rise in a residential cul-de-sac.
S.B. 9 essentially ends single-family zoning, but with a modest shift: Under the bill, property owners can build up to three additional units on their land, allowing single-family homes to be transformed into as many as four units.
A recent analysis by the Terner Center for Housing Innovation at University of California, Berkeley, found that S.B. 9 would most likely lead to 714,000 new homes across the state over the next several years.
What previous housing laws did
Though symbolically significant, S.B. 9 may not actually be as impactful as changes to housing policy that have already been enacted, Conor told me.
State lawmakers have been passing numerous housing reforms over the past four years in an effort to boost housing production. (Gov. Jerry Brown signed 15 housing bills in 2017, and Newsom signed 18 in 2019.)
Perhaps most significantly, California in 2017 relaxed laws to make it easier for homeowners to convert and rent out accessory dwelling units, the technical term for backyard homes — think “granny flats” or “in-law apartments.” Those rules have been further loosened since.
So even before S.B. 9 appeared on the scene, homeowners in California were allowed to have two units on a single-family lot — a main house and a separate guesthouse.
As these backyard dwellings continue to pop up, “people are going to complain that S.B. 9 is ruining their neighborhoods, when in fact they are actually unhappy about laws that passed semi-quietly several years ago,” Conor told me.
For more:
Newsom can now take the housing crisis into his own hands.
Nowhere in America do homes sell for more over asking price than in Berkeley.
https://www.housingwire.com/articles/fannie-mae-cuts-origination-forecast-for-2022/
https://www.housingwire.com/articles/homebuilders-are-targeting-the-exurbs-and-inner-suburbs/
He looks like the Pacific Legal Foundations head litigation guy. This Californian Libertarian Property Rights Nonprofit Organization was started around the same time as RR became popular in California (what an actor Governor and then POTUS!)
The PLF COULD have delivered gses shareholders a significant win this past Summer with the Cedar Point Nursery case, which sent the case back to the California court to determine damages for the temporary taking of Plaintiffs property by the governmental agency allowing access to a 3rd party (union organizers) on his business property.
Time will tell...
Fannie Mae posted this economic update/forecast today:
Economic & Housing Outlook
Continued Supply Constraints Inhibiting Economic Growth and Housing
September 20, 2021
We revised downward our forecast for 2021 real gross domestic product (GDP) from 6.3 percent to 5.4 percent on a fourth quarter-over-fourth quarter (Q4/Q4) basis, while we revised upward our growth outlook for 2022 to 3.8 percent from 3.2 percent. These revisions reflect the persistence of supply chain disruptions and labor market tightness that are, in part, due to continuing COVID-19 dynamics, pushing more of our growth projection into a later time frame. Although we expect these constraints to lessen over time, they are likely to drag significantly on economic activity well into 2022 and exert additional upward pressure on prices. Additionally, we have revised upward our inflation outlook through mid-2022. As measured by the Consumer Price Index (CPI), we forecast annual inflation to end 2021 at 5.4 percent and remain above 5 percent until the second quarter of 2022, and we project the Federal Reserve’s preferred measure of inflation, the PCE deflator, to be 4.6 percent at year end. While we do expect substantial deceleration later next year, we anticipate inflation to remain elevated, with the core CPI and core PCE both remaining near 3 percent through our forecast horizon.
Revisions to our home sales forecast were modest. We now expect 2021 total home sales to be 3.3 percent higher than in 2020, compared to a prior forecast of 3.1 percent. A lack of homes available for sale, relative to demand, remains the key constraint limiting sales growth and driving home price appreciation. We have also adjusted our housing construction forecast such that some of the housing starts that we had previously expected would occur later this year are now projected to happen in 2022. We modestly adjusted our 2021 mortgage originations forecast to $4.3 trillion, down from $4.4 trillion, while our forecast of 2022 originations remained unchanged at $3.3 trillion.
In our view, the principal risks to our economic forecast come from the varying responses of consumers, the labor market, and policymakers to the evolving health risks created by the pandemic, as well as the related speed at which global supply chain disruptions are resolved. Additionally, we have not yet incorporated any potential fiscal package into our outlook due to uncertainty over details and timing. Still, regarding the infrastructure bill passed in the Senate, due to a limited net change in expenditures through 2022 and considering that infrastructure benefits typically occur over the long run, we expect only a minimal impact on our outlook. In contrast, the much larger proposed budget reconciliation bill could have a meaningful impact. The key additional risk to our housing forecast is a possible rise in mortgage rates precipitated by a more persistent increase in inflation or inflation expectations.
The Labor Market Will Be Key
The August employment report was disappointing. While the unemployment rate fell two-tenths to 5.2 percent, only a net 235,000 jobs were added to payrolls following growth of over a million in July. This slower pace occurred despite job openings jumping 7.4 percent in July to a record 10.9 million, higher than the total number of officially unemployed persons. This disconnect was echoed by the recent National Federation of Independent Businesses’ (NFIB) survey that showed a near-record share of small businesses continue to report difficulty filling positions. While a single month’s report may prove to be a blip, especially at a time when abnormal seasonal patterns are likely distorting reported numbers, a tight labor market continues to drag on further economic expansion. We downgraded our near-term employment forecast, though we still anticipate an acceleration to an average of over 600,000 monthly job gains through Q4. While some of the labor market tightness is likely due to a jump in retirements and other more permanent job exits, we still view much of it being due to a mix of temporary factors. However, we now expect many of these drivers to persist in the near term; specifically, COVID-related health concerns and partial or inconsistent reopening of schools, offices, and many high-contact service industries. Additionally, while unemployment claims have fallen more rapidly in the states ending expanded benefits in June, state-level employment data for July did not show a convincing divergence. Therefore, even with expiration nationally this month, it is uncertain how much of that will translate into a faster hiring pace.
Job openings exceed number of unemployed persons as hiring struggles persists
Supply Chain Constraints Persisting
Ongoing supply problems show little sign of improvement. The Federal Reserve’s Beige Book, a survey of firms, showed a record number of references to shortages. The NFIB survey also showed a new high for the share of firms indicating below-desired inventory levels, consistent with near record low inventory-to-sales ratios. Meanwhile, shipping rates and port congestion measures are hitting new highs. The most evident example of disruptions dragging on output is in the auto space. Auto sales fell 11.1 percent in August on lack of inventory. Most large automakers, citing continued chip shortages, have announced temporary plant shutdowns for parts of September. These constraints are also continuing to drive upward pricing pressure. The producer price index (PPI) rose 0.7 percent over the month of August and was up 8.3 percent from a year prior, the fastest annual growth pace on record.
Retail inventory to sales ratio remains near historical low as inventories remain sparse
In contrast, the CPI was tamer, decelerating to 0.3 percent month over month compared to 0.5 percent in July and 0.9 percent in June. The core index, which excludes volatile food and energy prices, rose by a smaller 0.1 percent, suggesting that many of the recent drivers of inflation, such as used autos, are indeed transitory. However, we believe declines over the month in the prices of travel-related components, which took about two-tenths off the core CPI (which includes airlines, rental cars, and hotels), are likely to be temporary. The end of the summer leisure travel season has likely weighed on prices, but we expect it to rebound as the holiday season approaches and leisure travel resumes. Early fall is typically dominated by business travel, which has yet to recover and may dampen price growth in the near term.
Looking at less transitory drivers, food service prices continued to rise, a sector sensitive to both rising commodity prices and tight labor markets. While broader wage measures have recently shown strength, gains in the hospitality and food service sectors have been particularly robust and are now clearly above the pre-COVID trend. This suggests a longer-lasting price gain, and thus increased risk of a wage-price spiral developing. Additionally, the large housing-related components of rent and owners’ equivalent rent each rose 0.3 percent. As we’ve discussed in our previous commentaries, there is a delay between house price and rent growth and the corresponding CPI measures. Given strong appreciation and robust rent growth to date, we expect the housing measures in the CPI to accelerate over the next year. Combined with upward wage pressures, we expect these drivers to replace many of the transitory factors that have more recently driven inflation measures.
Home Construction Held Back as Well
Existing home sales came in stronger in July than expected, increasing 2.0 percent to 5.99 million annualized units. However, other indicators, such as purchase mortgage applications and pending home sales, which lead closings by 30-45 days on average, point to near-term softening. As such, we upgraded our Q3 2021 sales forecast to reflect the July print but left our near-term expectation for further softening intact. We believe home purchase demand is cooling somewhat as the housing market normalizes. According to Redfin, the share of homes with offers written by their agents with multiple bidders fell to 59 percent in August. While still high, this was down from 74 percent this past spring. Still, we continue to see the primary impediment to sales being a lack of homes for sale. Months’ supply was 2.6 in July, a record low for the month, and, while the pace of new listings has trended near its 2019 rate, it remains too low to sustain the current sales pace. In August, the Fannie Mae Home Purchase Sentiment Index® (HPSI) moved downward for the third consecutive month, indicating softening homebuyer sentiment. However, the primary reason stated for why it is not a good time to buy a home continued to be high home prices, as opposed to demand factors.
While we continue to expect this supply tightness to persist over coming quarters, we anticipate a modest increase in the number of homes placed on the market as the foreclosure moratorium ends. In part due to an improving labor market and high levels of home equity, we do not expect a large increase in foreclosures. Of course, some share of homes in forbearance will likely end up listed for sale, but given existing supply tightness, we do not believe the end of the moratorium will fundamentally change the sales pace or the path of house price appreciation over the next year.
While single-family starts pull back the number of homes under construction continue to rise
After falling over the first half of the year, new home sales appear to have leveled out, rising 1.0 percent in July to 708,000 annualized units. While this is a pace similar to that of 2019, it is below the recent peak of 993,000 units sold in January 2021. The lack of existing homes for sale is continuing to bolster demand for new homes; however, homebuilders continue to face their own supply constraints. Lumber prices have pulled back greatly from their peak this past spring, but high costs and supply shortages of various other materials continue to contribute to construction bottlenecks. Labor scarcity, particularly within the skilled trades, is also ongoing. Despite single-family starts drifting downward since the start of the year (including a 4.5 percent July decline), the number of units under construction continues to rise, reaching a level in July not seen since 2007. However, it is taking longer for builders to complete homes, leading to a large construction backlog. Therefore, we modified both our new home sales and single-family starts forecasts, pushing some activity previously expected to occur in the fourth quarter into 2022.
Low vacancy rates will likely continue to support multifamily construction
Multifamily starts pulled back by 13.1 percent in July, but this data series is notoriously volatile. Multifamily permits, in contrast, rose 10.2 percent to a level slightly above what was typical pre-COVID. Surging rent growth and historically low vacancy rates are supporting demand for construction. This is especially true due to a geographic mismatch in demand. Rent growth has been exceptionally strong in many of the less expensive and smaller metro areas, as well as suburban locations. While rents are generally recovering now in many large urban cores, these areas of comparative softness tend to be where a disproportionate number of new deliveries are occurring, reflecting projects that began pre-COVID. The expiration of the eviction moratorium, combined with new supply coming online, will likely lead to some modest upward pressure on vacancy rates, but we expect demand in these “hot” markets to remain intact. Assuming multifamily builders can work out supply chain issues, there is ample support for a heightened level of construction. We therefore upgraded our multifamily starts forecast in 2022 by 4.6 percent to 425,000 units.
For more on multifamily market conditions please see the September 2021 Multifamily Market Commentary.
Mortgage Rates Hold Steady as Fed Tapering Is Coming into Focus
Concern regarding the prospect for economic growth continues to weigh on interest rates, counteracting ongoing inflation concerns. As of this writing, the 10-year Treasury yield sits at 1.28 percent. While yields have moved upward recently, this followed a period of decline, which in effect led to a static September outlook for interest rates relative to August. Our forecast for the 10-year Treasury is unchanged at 1.3 percent by year-end 2021 and 1.5 percent by year-end 2022. Our forecast for mortgage rates is also unchanged at 2.9 percent by year-end 2021 and 3.2 percent by year-end 2022.
Fed Chairman Jerome Powell’s speech at Jackson Hole indicated that the Fed could begin to taper this year. While the Federal Open Market Committee (FOMC) has been adamant that “substantial progress” in terms of labor market recovery needs to be made to change their policy stance, market consensus continues to expect tapering in the coming months, even in spite of the disappointing August employment figure. We expect an acceleration in payroll growth, but further inflationary pressure may move the Fed to begin tightening with only comparatively modest employment gains.
We made only minor revisions to our outlook for purchase mortgage originations given the modest changes to the housing forecast. We now expect 2021 purchase volume to total $1.8 trillion, a slight downgrade from last month’s forecast resulting from weaker-than-expected incoming data. We expect purchase volumes to grow by 6.3 percent in 2022 to a total $1.9 trillion. Updates to our refinance forecast were modest this month, too. Specifically, we are expecting $2.5 trillion in refinance volume in 2021, $11 billion lower than last month’s forecast, while our 2022 forecast is $1.3 trillion, a downward revision of $29 billion from last month. At the current mortgage rate of 2.87 percent, we estimate that approximately 47 percent of outstanding mortgage loans have at least a 50-basis point incentive to refinance.
Economic & Strategic Research (ESR) Group
September 14, 2021
For a snapshot of macroeconomic and housing data between the monthly forecasts, please read ESR’s Economic and Housing Weekly Notes.
Larry Salzman is director of litigation at Pacific Legal Foundation, a nonprofit legal organization that defends Americans’ liberties when threatened by government overreach and abuse.
"It remains true that the affordability crisis is almost entirely a function of regulation. We do not need rent controls, subsidies, or more government mandates to make housing more affordable. We need freedom in land use. Conservatives may find a path forward on the issue by looking back to the Reagan administration’s past, ignored ideas."
https://thedispatch.com/p/want-affordable-housing-build-more
Nice job Guido! What's troubling about Sandra is just like Mel Watt, she seems to be clueless of the reasons that the financial establishment wants crts and to prolong the 'conservatorship' for as long as possible.
Watch for MORE manipulation and industry self serving benefits down the road...
ANOTHER WIN FOR THE FINANCIAL ESTABLISHMENT! WAY TO GO SANDRA!
The court is suppose to be narrowly focused on the limited question of law in front of them. While the SCOTUS decided WITHOUT HEARING THE FACTS BEHIND THE ACTUAL REASONING OF THE FEDERAL GOVERNMENT'S DECISION TO IMPLEMENT THE NWS, they said that it was okay because it "may be in the interests of the public the FHFA serves."
I think that there is a Takings Case floating out there in litigation land and it will be interesting to see how the federal Judge in that case comes up with a reason to deny the shareholders any relief from a CLEAR VIOLATION OF OUR CONSTITUTIONAL RIGHTS!
Sad, but at some point the federal government may finally realize that by keeping its fat thumb on the scales of the Secondary Mortgage Market that they are doing a tremendous disservice to the Americans they are suppose to be serving and housing costs continue to sky rocket.
Eventually the MBA, NAR, and NAHB will realize that they are better off with private corporations calling the shots and not the latest whim of the latest political party in power.
You must need a yuge tax loss because this continues to drop like a rock: https://finance.yahoo.com/quotes/fmcc,fnma,fmckj,fmcki,fmccm,fmcck,fmcct,fmcci,fmckk,fmccg,fmcch,fmccl,fmccn,fmcco,fmccp,fmccj,fregp,fmckp,fmccs,fmcko,fmckm,fmckn,fmckl,fnmap,fnmao,fnmfo,fnmam,fnmag,fnman,fnmal,fnmak,fnmah,fnmai,fnmaj,fnmas,fnmat,fnmfm,fnmfn/view/v1
Clearly multi billion dollar Litigation against the federal government takes years and years and a big bankroll, but even the Winstar cases were eventually resolved and although we may receive a pyrrhic victory, the courts will be forced to strain credulity to justify the outrageous stealing of our private property at the hands of the Judges Paymaster, Uncle Suggy.
In the meantime earnings will be retained and within the next 22 years, Uncle Suggy may get distracted and bored and want to screw over someone else
I don't see the immediate recap happening until the litigation ends. MC seemed to think, "the litigation can go away.". But can the federal government, in a partnership that requires NEW PRIVATE CAPITAL IN A 1ST LOSS POSITION, really anticipate in good faith that sophisticated institutional investors will rush in after OVER 13 YEARS OF THE FEDERAL GOVERNMENT ABOLISHING PRIVATE SHAREHOLDERS RIGHTS?
I think we would have been treated better by the CCP than the US GOVERNMENT!
Perhaps the financial advisors told MC, "The only way new institutional money is going to come in is to remove any shadow of a doubt as to capital adequacy and therefore you need to jack up the capital requirements AS HIGH AS POSSIBLE!"