Feds may scale back Housing Mortgages in 2019
The federal government may scale back its mortgage market role in 2019. Mark Calabria was nominated to lead the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac. He wants Uncle Sam out of the market.
Two big steps he could take: Raise lender fees, Cut conforming loans’ size. The GSEs charge lenders a fee to back their mortgages on the secondary market. Upping those could make other financial institutions more attractive buyers for lenders. The GSEs can buy only loans of a certain dollar amount, known as conforming loans. Private lenders try to stay below that limit, as they want to sell their loans to the GSEs. Lowering the maximum and increasing the fees would reduce Uncle Sam’s exposure to the housing market and maybe attract private capital, letting him step further back.
Single Family Rentals on the Rise
Construction of single-family homes intended to be rentals is on the rise. Last fiscal year, 43,000 single-family rentals were built … up 30% from 2017 and the most since 2004. Single-family homes comprise half the rental market …two-thirds of all rentals in rural areas. In the-five biggest metro markets – New York, Los Angeles, Chicago, Philadelphia and Dallas – the typical size in 2017 was 1,463 square feet, 66% smaller than the median size of all new single-family home construction that year.
Individuals and small investors dominate the market. Most own between one and 50 such rentals. Collectively they own 21 million properties … 95% of all available inventories. Institutional investors are getting in on the game, owning about 2% of all such rentals. Large investors are concentrating on Atlanta, Chicago, Dallas and Indianapolis. Bonds backed by single-family rentals are on the rise, allowing big investors to expand.
Housing is more expensive today than it was at the peak of the 2006 bubble. Steep prices, rising interest rates and low inventories are squeezing home affordability. The National Association of Home Builders (NAHB) estimates that a $1,000 bump in the median price of new homes would price about 128,000 households out of the market this year.
A quarter-point mortgage rate increase would put a home out of reach for 1 million people. Enough folks have felt the pinch to finally start forcing home prices down, however. Renting is cheaper than buying in big cities, including Houston, Lost Angeles, Phoenix and San Diego. But, rents are climbing, too…faster than wages in many areas.
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