FHA Guidelines were updated this week to support the use of rental income generated from Accessory Dwelling Units (ADUs) on single-family homes. HUD’s stated goal is to increase the stock of affordable housing and to expand opportunities for wealth building. If a client is purchasing or refinancing a single family with a legal ADU they can now use the rents as qualifying income. If accessory unit was owned and leased previously, the recent 2 years of schedule E will be reviewed. If it is a unit on a new purchase an appraiser’s market rent survey will be used to determine the amount of rent that will be considered.

Mortgage Rates increased to a 23 year high as the price of Mortgaged Backed Securities continues to tumble. Rates are up approximately 1% from this time last year.

Home Values – Zillow revised their home value forecast last month due to increases in mortgage rates. They expect home prices to rise 3.3% in 2023 down from 4.3% in their previous forecast. Even 3.3% growth in home values is very meaningful!

Single Family RentsCoreLogic’s Single Family Rent Index showed that year over year rent increases moderated to 2.9%, the 16th consecutive months of declines. Rents are up 30% from February 2020. This should eventually reflect in inflation data and help mortgage rates.

Leading Economic Indicators the Leading Economic Index , a forward-looking indicator on the health of the economy, declined 0.7% in September marking 18 months of consecutive decline. Historically this report turns negative 22 months before a recession (on average).

Freight – the Cass Freight Index showed that peak shipping season is off to a muted start and shippers will be happy as the costs across all modes of transportation declined by 2% last month.

Fed – it is looking increasingly like the Fed will pause rate hikes on their Nov. 1st Meeting as the NY Fed Pres John Williams, Vice Chair Michael Barr, and Fed Governor Phillip Jefferson are all speaking in more dovish tones.

Mortgage Applications to purchase homes fell 6% last week and are down 21% year over year. Refinances fell 10% down 12% year over year.

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