December 10, 2024 – The Picture Sharpens

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Economic Commentary

Last week we had the final published jobs report for the year. November’s report came in with a gain of 227,000 jobs. Because of the incomplete numbers of the previous month, the revision of October’s numbers was also an important area of focus. Originally reported at 12,000, October’s jobs gains were revised upward by 24,000. In addition, September was also revised upward by 32,000, totaling 56,000 additional jobs for the previous two months.

As a reminder, the previous months of data was considered sketchy because of two horrendous storms which hit the southern region and there were also major strikes taking place. The headline unemployment rate rose slightly to 4.2%. All in all, the report affirmed the fact that the economy is on solid ground heading into the new year, which is an important reason why the Federal Reserve has kept rates higher for the majority of the past two years. Just the fact that the conforming mortgage loan limits rose by 5.2% to $806,500 is very impressive considering the rate environment.

Also included in the report was the fact that wages rose 0.4% from last month and 4.0% year-over-year. Wage inflation has been a big part of the overall inflation picture and will be considered significantly when the Fed meets next week for the last time this year. With evidence increasing that the new Administration will be looking to get out the gate quickly with regard to implementing their economic policies, the question has arisen whether the Fed will take a wait and see attitude instead of lowering rates for the third meeting in a row. Of course, this is all speculation at this juncture.

Weekly Interest Rate Overview

According to Freddie Mac, mortgage rates decreased for the second consecutive week. We are approaching the Fed’s next scheduled meeting, and the markets are predicting another short-term rate decrease, though there have been mixed signals from Fed Governors. 30-year fixed rates decreased to 6.69% from 6.81% from the week before. In addition, 15-year loans decreased to 5.96%. A year ago, 30-year fixed rates averaged 7.03%, just over 0.25% higher than today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “This week, mortgage rates decreased to their lowest level in over a month. Despite just a modest drop in rates, consumers clearly have responded as purchase demand has noticeably improved. The responsiveness of prospective homebuyers to even small changes in rates illustrates that affordability headwinds persist.” Note: Rates indicated do not include fees and points and are provided for evidence of trends only. They should not be used for comparison purposes.

Real Estate News

Industry Briefs:  Existing home sales across the US jumped by 2.9% in October over the same time in 2023, marking their first annual increase for over three years. The National Association of Realtors (NAR) said that sales of existing homes hit a seasonally adjusted annual clip of 3.96 million and rising by 3.4% compared with September. Median existing home sales prices were also up, rising for the 16th month in a row with a 4% year-over-year increase to $407,200. Inventory ticked slightly upwards, increasing by 0.7% from September to 1.37 million – the equivalent of 4.2 months of supply…ATTOM reported nearly 1. 7 million residential mortgages were issued during the third quarter, a 1.9% increase on both a quarterly and an annual basis…A new survey from Kiavi revealed a slight retreat in market sentiment among home flippers during the third quarter relative to one quarter prior, although flippers remain rosy on their sales over the next six months. The Pittsburgh-based lender’s Fix-and-Flip Market Index backtracked from a reading of 63 in Q2 to 62 in Q3, though it remains up slightly from 61 in Q3 2023. An index reading higher than 50 indicates that home flippers perceive market expansion, while values below 50 mean that flippers believe the market is contracting…Demand for “have-it-all” properties and the “forever dream home” will shape this spring’s luxury housing market, according to the Coldwell Banker Global Luxury 2024 Mid-Year Trend Report, which forecasts growing optimism among affluent consumers and an influx of desirable inventory. The bi-annual report reveals a resilient luxury real estate market in the first six months of 2024 that is slightly outpacing performance from the equivalent period in 2023…Residential lenders originated $112.67 billion of FHA and VA loans in the third quarter — the highest quarterly volume for the government loan programs since the second quarter of 2022…Homebuyer affordability declined in October, with the national median payment applied for by purchase applicants increasing to $2,127 from $2,041 in September, according to MBA’s Purchase Applications Payment Index…Investor home purchases are now around pre-pandemic levels, reported Redfin, Seattle. The number of homes purchased by investors fell 2.3% year-over-year in the third quarter. That follows four years of dramatic swings in investor purchases, with numbers soaring as high as 144% year-over-year in 2021, then nearly 50% drops at points last year… FHA issued a proposal to update various loss-mitigation standards, making adjustments based on lessons learned from temporary policies established during the pandemic.

The Federal Housing Administration (FHA) released its Annual Report to Congress, which details the financial status of FHA’s Mutual Mortgage Insurance Fund (MMI Fund) covering its Title II Single Family Mortgage Insurance programs for fiscal year (FY) 2024. As detailed in the report:

  • FHA’s insured portfolio contained approximately 7.81 million single family forward mortgages and 287,000 Home Equity Conversion Mortgages (HECMs) at the end of fiscal year 2024, underscoring FHA’s substantial role in the housing market.
  • The percentage of first-time homebuyers using FHA insurance in FY 2024 was 82.64 percent of total single family forward mortgage purchase endorsements.
  • The share of FHA-insured mortgages made to borrowers of color reached 31.66 percent of all forward mortgage insurance endorsements, an increase of more than one percent over FY 2023.
  • The MMI Fund showed very strong performance in fiscal year 2024, with an overall capital ratio of 11.47 percent as of September 30, 2024, an increase of 0.96 percentage points from fiscal year-end 2023.
    • The stand-alone capital ratio of the forward mortgage portfolio stood at 10.88 percent.
    • The HECM portfolio stand-alone capital ratio stands at 24.50 percent, an increase of 7.78 percentage points from FY 2023.
  • FHA’s serious delinquency rate as of September 30, 2024, remained consistent with pre-pandemic levels at 4.15 percent, down 7.75 percentage points from its high of 11.90 percent in November 2020. Source: FHA

MBA’s President and CEO Bob Broeksmit, CMB, issued the following statement regarding the Federal Housing Administration’s release of its annual report to Congress: “Quality underwriting and effective risk management and loss mitigation efforts by HUD, FHA lenders, and mortgage servicers continue to support a healthy FHA program that has a high capital reserve ratio and low delinquency levels. “With mortgage rates well above 6%, MBA and its members remain very concerned about the constrained affordability conditions for qualified first-time homebuyers and low- and moderate-income households. “At 11.47%, the Mutual Mortgage Insurance Fund is more than five times the statutory minimum reserve ratio. While it is sensible to have a healthy cushion above the 2% minimum reserve, qualified borrowers should not be charged higher mortgage insurance premiums (MIP) than necessary. In addition to pursuing more program enhancements to boost housing supply and affordability, such as this year’s 203(k) program updates, borrowers would see meaningful payment relief from FHA eliminating its life of loan premium requirement and making another reasonable cut to the MIP. “MBA will review the report in greater detail and looks forward to working with the Trump administration and Congress in 2025 on policies and program enhancements to increase housing supply and lower costs for consumers while protecting taxpayers.” Source: MBA

Officials at the Department of Housing and Urban Development are reviewing the potential to reduce FHA pricing following strong results from FHA’s Mutual Mortgage Insurance Fund for fiscal year 2024. “The strength of the [MMIF] is only one of the factors that [FHA] would consider when evaluating its premium levels or the ability to modify its current life-of-loan requirements,” HUD’s press office said in a statement to IMFnews Tuesday. “Other factors that go into that determination include macroeconomic trends, loan performance, loss severities, prepayment speeds and other metrics.” FHA Commissioner Julia Gordon suggested it looks like there’s room for an FHA pricing reduction, which could take the form of a cut to the annual or upfront mortgage insurance premium or an end to FHA’s life-of-loan requirement, and that FHA is analyzing its options. Her comments came during a Mortgage Pros 411 podcast. However, given the limited time before Donald Trump is inaugurated on Jan. 20, Gordon suggested that any decision on an MIP cut would likely wait for the Trump administration. Source: Inside Mortgage Finance

The Federal Housing Administration (FHA) posted draft Mortgagee Letter (ML), Revisions to Policies for Rental Income from Boarders of the Subject Property, on FHA’s Office of Single Family Housing Drafting Table (Drafting Table) for industry feedback. This draft ML proposes greater flexibilities for borrowers using income received from individuals who rent space in borrowers’ homes, referred to as boarders in Single Family Housing Policy Handbook 4000.1, to qualify for an FHA-insured mortgage. These proposed flexibilities include revisions to the required underwriting standards for documenting and calculating this type of income. FHA remains committed to extending affordable housing opportunities to its core constituency of first-time and low- to moderate-income homebuyers, including those in underserved communities. In doing so, it recognizes that rental income received from individuals renting space in borrowers’ homes is a stable and viable source of income that increases housing affordability and allows borrowers to better manage housing costs. FHA’s proposed underwriting guidance would:

  • Reduce the acceptable rental income history from two years to 12 months from individuals renting space inside the borrower’s home;
  • Allow borrowers with a 12-month rental history to qualify for an FHA-insured mortgage using income from renters living in the home, provided the income has been received for at least nine of the most recent 12 months, is currently being received, and is averaged over a 12-month period;
  • Establish that rental income from individuals renting space inside the home that is used to qualify borrowers for an FHA-insured mortgage cannot exceed 30 percent of their total monthly effective income;
  • Expand the types of acceptable income verification documentation for individuals renting space inside the home to include bank statements, canceled checks, and/or deposit slips showing rental payments received.  Source: FHA


Housing markets across the country have stalled since mortgage rates began to rise in 2022, but relief may be on the way. That’s according to Lawrence Yun, chief economist for the National Association of Realtors (NAR), whose latest forecast calls for a 9% increase in home sales in 2025 and a further boost of 13% in 2026. Underpinning these numbers are Yun’s belief that broader macroeconomic trends will boost the housing market. Yun’s comments came at the annual NAR NXT conference in Boston, during which he noted the benefits of homeownership. “When more people work, they have the capacity or they’re in a better position to buy a home,” Yun said. “Home sales depend mainly on jobs and mortgage rates.” Yun’s forecast comes at the same time that the Mortgage Bankers Association (MBA) released a macroeconomic forecast that predicts a sluggish economy over the next few years. While gross domestic product rose 3.2% in 2023, MBA’s outlook is that 2024 will finish at 2.3%, followed by three years of growth of 2% or less. Residential investment — which boomed in the years following the COVID-19 pandemic — will be more mixed after hitting 2.5% growth in 2023. The MBA forecast shows a 0.1% gain in 2024, followed by more volatile growth of 1.1% to 3.3% in the next three years. It also shows stabilizing inflation, with consumer price appreciation pinging between 1.9% and 2.3% per year. Mortgage rates will play a huge part in where the housing market goes from here, and Yun expects four separate rate cuts in 2025. The elephant in the room for any current economic forecast is incoming President-elect Donald Trump, who has criticized Federal Reserve Chair Jerome Powell for his interest rate policies and has signaled his preference for rates to come down. Source: HousingWire

It takes more than just ‘fast and fancy’ to please mortgage borrowers, according to the latest J.D. Power study Hillary Clinton’s “It Takes a Village,” published almost 30 years ago, was about raising children. But it also could just as well be the title of J.D. Power’s latest mortgage origination satisfaction survey, especially in today’s housing market where rising loan rates and ever higher prices are befuddling many would-be buyers. The study finds that it takes more than just fancy, fast electronics to please borrowers. Not that artificial intelligence in and of itself doesn’t suffice. But today’s borrowers often need a little hand holding, too. Those lenders which recognize that fact are doing better than those who don’t. “Consistently, we’re seeing that lenders that play an active advisory role in helping their clients navigate the current market are earning significantly higher customer satisfaction, loyalty and advocacy scores that those who are treating mortgage lending as a transactional process,” said Bruce Gehrke, director of wealth and lending intelligence at the Power firm. Mortgage rate volatility, particularly when they shoot up after being told costs are going to fall, is playing hell with potential buyers. Or, as the survey says, “put(s) a strain on mortgage customers.” But lenders who used those challenges to their benefit by playing a more hands-on, advisory role are earning the highest marks for customer satisfaction, according to the survey. “Other lenders have struggled,” the report says. The study measures satisfaction in six factors: communication, digital channels, level of trust, loan offering meets my needs, made it easy to do business with, and people. The findings are an affirmation of sorts of what the advisory company found in the 2023 survey – that some borrowers require more personal service. “It’s something we started to see last year,” Gehrke told NMP. “This year solidified it. Borrowers expect more and the lenders who are going that way are getting the benefit.” Source: National Mortgage Professional

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