February 25, 2025 – The Fate of the CFPB

Economic Commentary

The Consumer Financial Protection Bureau was created by the Dodd-Frank Act in the wake of the financial crisis which spawned the Great Recession of 2008. Unlike the pandemic-induced recession of 2020, the recovery of the economy from the Great Recession was long and painful, especially within the real estate industry which is this commentary’s main focus. Housing prices fell significantly and took years to recover.  The secondary market for mortgages collapsed and the Dodd-Frank Act put regulations in place, such as verifying the ability to repay a mortgage, in order to restore faith in these markets which serve to make sure that money to finance homes is available.

Another factor affecting real estate during this time was the government take over of the giant mortgage agencies – Fannie Mae and Freddie Mac.  Though this move was intended to be temporary, they exist today, some 15 or so years later, under a government conservatorship after repaying billions of dollars back to the government to repay the cost of bailing them out. Today we face the real possibility of a curtailed or even eliminated CFPB and a re-privatization of these mortgage agencies. The question is—what would that world look like?  What happens to the regulatory aspects of the CFPB? How would the government assure that there would not be another bailout of the agencies?

Of course, we don’t have the answers to these questions. Nor do we have a crystal ball to see where these entities will land and what shape they will be in when they do land. We do know that confidence in the secondary markets is essential.  The interest rate spread between mortgages and treasuries is wider than it has historically been for the past few years. Whatever changes are made need to make sure the spreads don’t widen, but narrow to help ease the real estate affordability challenges we currently face.

Weekly Interest Rate Overview

The Markets. The Freddie Mac rate survey indicated that mortgage rates were slightly lower again in the past week. They have moved within the same range during the past month or so. According to the survey, 30-year fixed rates decreased to 6.85% from 6.87% the week before. In addition, 15-year loans fell to 6.04%. A year ago, 30-year fixed rates averaged 6.90%, very close to the same rate as today. Attributed to Sam Khater, Chief Economist, Freddie Mac, “Mortgage rates decreased slightly this week. The 30-year fixed-rate mortgage has stayed just under 7% for five consecutive weeks and in that time has fluctuated less than 20 basis points. This stability continues to bode well for potential buyers and sellers as the spring homebuying season approaches.”  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

Home prices finished 2024 strong, NAR data shows, and in the last five years alone, median home prices have jumped 50%.  Property owners are getting richer as home prices prove resilient against lower home sales. Nearly 90% of metro areas registered home price increases in the final quarter of 2024, according to the latest housing data from the National Association of REALTORS®. Fourteen percent of the 226 metros NAR tracks posted double-digit price gains, up from 7% in the third quarter.  “Record-high home prices and the accompanying housing wealth gains are definitely good news for property owners,” says NAR Chief Economist Lawrence Yun. “However, renters who are looking to transition into homeownership face significant hurdles.” The high home prices are making it difficult for real estate newcomers to save up for a down payment. Still, FOMO may be setting in for those would-be homeowners as wealth accumulation for homeowners far outpaces that of renters. The spread in median net worth between homeowners and renters stands at $415,000 for homeowners versus $10,000 for renters, NAR has previously reported.  The national median price for a single-family existing home rose nearly 5% in the fourth quarter of last year compared to a year earlier, settling in at $410,100, NAR’s fourth-quarter data shows. In the last five years alone, median home prices have jumped 50%.  Despite the widespread home price gains, housing affordability “marginally improved” in the fourth quarter, according to NAR. The monthly mortgage payment on a typical existing single-family home was $2,134 (assuming a 20% down payment). That is down by 1.7%, or $37 compared to a year ago, NAR reports.  Source: NAR

Clever Real Estate recently conducted a survey on home renovation trends, finding 63% of homeowners would prefer to remodel their existing home than move to one that has already been renovated.  In terms of why owners are renovating their homes, 35% reported it was to repair damage and 35% pointed to increasing comfort. Other popular answers included improving the livability of their homes, enhancing its aesthetic appeal, personalizing their home and increasing value. However, the cost of these renovations are weighing heavily–78% of homeowners report having gone over budget on their last renovation, and 41% report significant delays. A majority–55%–say they need to save for at least a month to pay for a home improvement project, 34% say they’d need to save for at least three months and 20% say they’d need to save for at least six months. Almost three-quarters–74%–have regrets about their renovation project, but 92% also say their home improvement projects have had at least one positive impact on their life. Concerningly, 63% have taken on debt to pay for their home renovation projects. In addition, 87% report facing challenges during their last renovation, including budget constraints at 27%, managing stress at 26% and making decisions at 24%. Simultaneously, 90% of homeowners say they’ve put off some renovations, with 42% saying they made that choice due to costs. Some of these renovations aren’t exactly by choice–85% have spent money on unplanned repairs this year.  Timing also affects owners’ perceptions of renovations. About 58% agree that the projects took longer than expected.  Source: Clever Real Estate

More homeowners appear willing to sell their homes, a recent Zillow survey of homeowners suggests. Nearly one in five respondents indicated their homes were already listed for sale or they would consider selling their home within the next three years, Zillow reported.  Among respondents who indicated they might sell, some 15% said their home was already listed, while 48% indicated they would consider selling within the next year. A further 36% said they would consider doing so in the next two or three years.  The overall number willing to sell ticked up from summer and fall surveys but remains below the percentages in most of the 2023 surveys, Zillow said. The share of homeowners with no intention of selling also shrunk from prior surveys, Zillow reported. Some 42% of respondents in the latest survey indicated they had no intention of selling. In 2021 and 2022, that share was above 50% in surveys, Zillow said. Respondents listed a desire for an upgraded home as the top reason for moving. Almost half said they plan to sell their home for a profit or use the equity for another purpose, Zillow said. Others cited a change in their household size as a factor. Zillow also asked people who have no intentions of selling why they want to stay in place. More than 70% said they love their current home. Concerns about the price of homes was another major reason cited by respondents. Zillow also asked about the impact of mortgage rates on decision making. It found that homeowners with rates between 4%-4.99% were the most likely to sell.  Some 11% of mortgaged homeowners have a rate above 6%, Zillow said. That percentage has doubled in two years.  Source: Scotsman Guide