Earlier this year, MBA released a white paper on how best to reform the secondary mortgage market and create a stable and durable foundation for housing finance and the thirty year fixed rate mortgage that is so integral to the American dream of homeownership. Continue reading “The Benefits of Multiple Guarantors”
The Federal Reserve’s Federal Open Market Committee held its July meeting on Wednesday. That’s always a good time to take a breath and look at the state of the housing market. This past meeting more so than others.
With the administration and Congress both focusing on reforming Fannie and Freddie – the GSEs – the Senate Banking Committee will hold another hearing on the topic this week, with a focus on maintaining access to the secondary mortgage market for small lenders. This is welcome news. The secondary mortgage market affects millions of American homebuyers and is the lifeblood of small, independent lenders. MBA’s plan for GSE reform ensures equal access for lenders of all sizes and business models, a point I made in my testimony before the same committee last month.
Tomorrow, I am testifying before the Senate Banking Committee at a hearing entitled Principles of Housing Finance Reform. This will be an excellent opportunity for to discuss the merits of MBA’s recently released housing finance reform proposal, which addresses the future of the secondary mortgage market. Continue reading “Senate Banking Hearing: Principles of Housing Finance Reform”
Next week, hundreds of MBA members from across the country will come to Washington for MBA’s National Advocacy Conference (NAC). It’s an annual tradition that enables MBA members to speak directly to their elected officials as advocates for our industry – and their own businesses and customers. Last year’s conference was one of the most successful in recent years; this year’s program promises to be just as informative and engaging. Continue reading “What to Expect at NAC”
A core principle for MBA’s policy advocacy has been to promote a diverse and competitive mortgage market that allows banks and nonbanks, small lenders and large, to compete on a level playing field. Because we have a large, diverse membership, it is one of our association’s key pillars. Continue reading “Level the Playing Field for Lenders”
With the objective of ending the conservatorship of Fannie Mae and Freddie Mac and establishing a new, durable foundation for the secondary mortgage market, MBA has released the first of two papers outlining our recommended approach to GSE reform. MBA is uniquely positioned to present the most comprehensive approach to GSE reform as our expansive membership base represents lenders who are in the market every day representing every aspect of originating, selling and servicing single-family and multifamily mortgages in the United States. MBA members appreciate and understand the vital importance of a healthy secondary market for mortgages in a way that those outside the industry cannot.
I’ve been there. The industry has been there. Changes in the market are certain. As rates rise, the game changes. The difference in survival for mortgage lending firms as we transition from a refinance to a purchase market depends on how quickly and adeptly the lender supports the shift. If you haven’t done so already, now is the time to invest in training your sales team and to understand the data behind the production numbers. Doing so now could help identify cost reductions in sales operations that could make the difference to the bottom line by year end.
So much happened in 2016. Some good, a lot not so good. It might be one of the most unpredictable years in recent history. Whether it be the outcome of the Presidential election, or the fact the world lost so many legends – Muhammad Ali, David Bowie, Prince, Princess Leia and her mom, Debbie Reynolds as well as many, many others.
Much has been written about the impact of rising rates on mortgage volume but, more importantly, housing. To help think about the next year I would suggest we consider some of the facts about the market today. This starts with us focusing on just a few key variables that will likely be positive for all housing demand rental and owned. Please remember that the economy always has risk and uncertainty, but these variables are fact based and important elements for consideration as we look into the next year:
Perspective: While rates are rising from their lows, they will remain at the very low end when compared to a decades long historical look at 30 fixed rate mortgages. To highlight this, take a look at this historical perspective of Freddie Mac’s 30 year fixed rates going back to the 1970’s as tracked by the St Louis Federal Reserve. As you will see below, rates in the 4%-5% range still pose great opportunity for home buying when you compare to any historical perspective. In fact, looking at history, one could argue that rates have more risk of rising than declining, especially in this growing economy. My assumption – borrowing now is still a bargain and will remain so for this next year.
Demographics: As PEW Research showed in their April, 2016 release (Millennial overtake baby boomers) the Millenial generation is now larger than the baby boom generation and significantly larger than Gen X which created a more sluggish interlude between the two larger generations. The point here is this massive generation is here now and will dominate housing demand, new job formation, and spending in this country for the next couple of decades. Just look at this simple chart from Pew. Looking out to 2050, this younger generation will create a consistent demand for housing units, both rented and owned.
Homebuying sentiment: As many economists have proven through good research, Millenials want to own at some point. As an example, look at this research from Fannie Mae on homeownership sentiment for millenials. As of this survey in 2014, in an economy not as strong as 2016, 90% of young renters want to own at some point:
Conclusion? Low rates in historical terms, impacts on housing demand by the largest generation in history, and a desire to own, are all data points that lead to forecasts by the MBA and others for continued home purchase mortgage demand for the next decade, growing at a steady pace. MBA forecasts mortgage purchase volume growing from approximately $990 bb in 2016 to $1,245bb in 2019. Likewise we forecast annual appreciation at steady rate between approximately 5% – 3.5% each year.
The greatest element to all of this is that this demand cycle for housing will be built in a world of qualified mortgages; fully documented, sustainable homebuyers, will be completely unlike the housing bubble of a decade ago which was built on many unsustainable programs. This foundation should help comfort consumers considering homeownership that they are not buying into an irrational market. This cycle ahead starts with a strong, credible, foundation and simply good demographics. As a matter of fact, one of our greater concerns will be access to credit for entry level buyers and availability of affordable first time homebuyer housing stock, and affordable rental housing near key employment markets and mass transit, but that is for another discussion.
Some thoughts to consider as you look ahead to 2017. Happy Holidays!!