Federal Housing Finance Agency (FHFA) Director Change

In June, Mark Calabria stepped down as Director of the FHFA. This change  is seen as positive in the Real Estate and Lending communities.  Calabria was dedicated to bringing Fannie Mae and Freddie Mac, the two largest federal backed home mortgage companies, out of Government Conservatorship and making them private again. In order to do this, FHFA imposed additional costs on both borrowers and lenders. The new Acting Director, Sandra Thompson, will instead focus on making access to credit easier and more affordable to consumers. Additionally, FHFA will look to better assist first-time homebuyers and low-to-moderate income families.

Second Home and Investment Properties

Under the previous FHFA Director, FHFA took the stance that Fannie Mae and Freddie Mac had too many loans for second homes and investment properties in their “inventory” and believed Fannie Mae and Freddie Mac were created to promote homeownership in the form of primary residences. It was the belief that secondary and investment property  loans should be handled in the ‘private’ sector for securities.  As such, they again increased rates – considerably in many cases for these types of loans. We are hopeful that under new direction, FHFA will reverse this stance and make it more affordable for consumers to purchase second homes and investment properties, as these segments do significantly help the housing market.

Federal Housing Administration (FHA) Changes

FHA loans are federally backed loans targeted towards first time homebuyers. Requiring as little as a 3.5% down payment and low credit score requirements, this loan option can make it easier for first time homebuyers to achieve homeownership.

FHA has announced updated student loan calculation requirements that benefit consumers. Previously, on a student loan the Loan Officer was required to count 1% of the outstanding student loan balance in the Debt to Income Ratio. Now, FHA is only requiring Loan Officers to include 0.5% of the outstanding balance.

What does this mean for you and why should you care about the guideline change? If you were on the cusp of qualifying or didn’t qualify for the amount you were hoping for, you now have more buying power.

 Mortgage Interest Rates

Ok, now let’s talk about everyone’s favorite topic, mortgage interest rates. As you likely know, interest rates were at record lows in 2020. Overall, the outlook on interest rates is favorable.  At the beginning of 2021, we shared that many experts projected an increase in interest rates as things began reopening and the economy rebounded from the COVID-19 pandemic. The predictions did hold true and many are continuing to project a continued slow rise in interest rates through 2022. The Feds have gone on record saying that any increase in rates will be gradual and focused on ensuring a stable housing market.   The latest Quarterly Forecast from Freddie Mac states:

“We forecast that mortgage rates will continue to rise through the end of next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022.”

While this is a projected increase in interest rates, for perspective, the average 30-year fixed mortgage rate in 2019 was 3.94% and in 2018 was 4.54%. When looking at rates through a historical lens, they remain incredibly low. The same report from Freddie Mac goes on to say:

“While higher mortgage rates will help slow the pace of home sales and moderate house price growth, we expect overall housing market activity will remain robust. Our forecast has total home sales, the sum of new and existing home sales, at 7.1 million in 2021...”

 Inventory

While 2020 brought record low interest rates it also brought significant inventory challenges which drove competition in the market. Here’s the good news! According to George Ratiu, Senior Economist at realtor.com, there are signs that inventory challenges may begin to ease up. He states,  “We have seen more new listings this year compared with 2020 in 11 of the last 13 weeks.” 

Additionally, new construction has picked back up. Robert Dietz, Chief Economist at the National Association of Home Builders writes, “As an indicator of the economic impact of housing, there are now 652,000 single-family homes under construction. This is 28% higher than a year ago.”

While competition remains high and we persist through a hot seller’s market, the projected steady increase in inventory coupled with growth in home construction could open the market up and allow more families to find the home of their dreams. 

If you are ready to start your home buying process or have questions about your current situation, please reach out to our team of experienced loan officers for a consultation. Fairway Mid-Atlantic is dedicated to serving you and your family no matter your situation.