Major Updates to FHA & FHFA, Median Price vs. Appreciation

Federal Housing Financing Agency (FHFA) – after a supreme court ruling this week President Biden removed previous director Calabria and appointed Sandra Thompson as the new director of the FHFA. Since his appointment in 2019 Calabria, a libertarian economist, had been working to re-privatize Fannie and Freddie which the FHFA placed in government conservatorship in 2008. Recently he had drawn ire from many consumers and real estate industry folks by placing extra fees on most conventional refinances as well as purchases and refinance of second homes and investment properties. We will see if these fees are reversed. New appointee Thompson​ has served as Deputy Director of the Division of Housing Mission and Goals (DHMG) at FHFA since 2013. From her initial remarks she looks to place an emphasis on affordable and fair access to credit for all communities.

“There is a widespread lack of affordable housing and access to credit, especially in communities of color,” she said. “It is FHFA’s duty through our regulated entities to ensure that all Americans have equal access to safe, decent, and affordable housing”

Rates – moved horizontally this week. Mortgage Backed Securities continue to trade below their 25 & 50 day moving averages after breaking below them mid-June. Rates are down approximately 1/8% from this time last year.

Inflation – the Personal Consumption Expenditures (PCE) index decreased 0.2% month over month but is up year over year 3.4% (when you strip out the more volatile food and energy figures). This year over year increase is one of the hottest readings in 13 years but the data must be taken in context. This time last year the economy was hamstringed by covid. While incomes decreased 2.0%, this is primarly due to a decrease in government social benefits – private sector incomes are up 0.8% from the previous month and 16% year over year.

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Jobs – the number of people filing for unemployment for the first time increased marginally to 411K – still double pre-pandemic levels. 15M individuals continue to receive some type of unemployment benefits (pre-covid this number was 2M).

FHA Guideline Update: FHA has announced a change in student loan calculations making it easier for folks to qualify. Instead of using 1% of the loan balance for the monthly payment for student loan we can now use the actual payment (if in income based repayment) or if the loans are deferred we will use 0.5% of the outstanding balance. This is a big update. If you had $100,000 in student loans this would change the purchase price you could qualify for by approximately $80,000.

Mortgage Applications – purchase applications were up 0.6% from the previous week – down 14% from this time last year. Refinances rose by 5% from the previous week and are down 27% year over year.

Median Price vs. Appreciation – news organizations are having a hay day showing the 24% increase in median home price to a record high of $350,300. Remember that median sale price is simply the middle price in a list of homes sold and does not measure home value appreciation. Value indexes (which measure the value of same homes as sold over time) show appreciation closer to 13% year over year – still very hot. The reason the median home price has increased so dramatically is due to the mix of sales: sales of homes worth ≤ $250K are down year over year due to supply while sales of $750K – $1M homes are up 178% and sales of $1M+ homes are up 245%

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