🚨HOUSING NEWS FROM THE WHITE HOUSE & RISING HOME PRICES🚨

INSIGHT FROM THE WHITE HOUSE

October 24, 2023
 

The Biden-Harris Administration is underscoring its commitment to strengthening Americans' access to homeownership, recognizing its significance in building personal wealth and stability. On October 16, 2023, the White House issued a statement unveiling fresh initiatives aimed at advancing homeownership.

Here's a summary of the key points highlighted in the article:

1. Federal Investments & Proposals:

·       The administration is emphasizing substantial federal investments in homeownership.

·       President Biden has put forward a $16 billion Neighborhood Homes Tax Credit proposal, with the potential to create or renovate over 400,000 homes.

·       A $10 billion down payment assistance program has been suggested, particularly to aid first-time homebuyers, especially those whose parents do not own homes.

·       A $100 million down payment assistance pilot program is intended to benefit first-generation and low-wealth first-time homebuyers.

2. Data on Homeownership Support:

·       The Treasury Department reports that the American Rescue Plan's Homeowner Assistance Fund has assisted approximately 400,000 homeowners at risk of foreclosure. By Q2 2023, $5.5 billion has been disbursed, showing a 32% increase from Q1 2023.

·       Over $6.6 billion has been allocated to support the creation of more than 17,000 units of affordable housing by June 30, 2023.

·       The Federal Housing Administration (FHA) has provided support to nearly 1.8 million homeowners, with 83.6% being first-time buyers, marking the highest rate since 2000.

·       The U.S. Department of Agriculture (USDA) has granted over 7,100 direct housing loans, primarily benefiting low-income households headed by females and Black or African American communities.

·       The Department of Veterans Affairs (VA) has aided 145,480 Veterans in maintaining homeownership or avoiding foreclosure in 2023.

3. New Initiatives for Homeownership:

·       The FHA has introduced a new policy permitting potential borrowers to include rental income from Accessory Dwelling Units (ADUs) when applying for a mortgage, which is expected to assist first-time buyers and promote affordable housing.

·       USDA is providing $9 million in loans to support homeownership for Native Americans on tribal lands.

·       USDA will initiate a pilot program targeting Community Land Trust Organizations to enhance access to affordable homeownership.

·       The FHA is refining its 203(k) Rehabilitation Mortgage Insurance Program, simplifying the process for individuals to finance home improvements.

·       The Consumer Financial Protection Bureau is implementing reforms to streamline procedures for homeowners facing payment difficulties.

·       In 2024, the VA will introduce the VA Servicing Purchase (VASP) program to assist Veteran borrowers dealing with mortgage payment challenges.

The Administration has taken prior steps to lower mortgage insurance fees and modify FHA loan requirements, with a focus on aiding first-time homebuyers, particularly those with student loans or a reliable rental history. Additionally, there are initiatives to enhance transparency in property appraisals and advance fair housing practices.

Lastly, the administration is calling on Congress to endorse these measures to make homeownership achievable for all Americans.

Some important considerations:

The CA Dream For All program garnered significant interest, with a $300 million allocation depleting in just 9 business days. If the proposed $10 billion national budget is approved, it could greatly benefit first-time homebuyers. It's important to note that these programs may have limitations and equity-sharing components. To be well-prepared, focus on saving money and improving your credit scores.

Rising mortgage rates, currently at their highest levels in 23 years, are impacting affordability. The key concern now revolves around the monthly payment rather than the home's price. Homeownership is now 70% less affordable compared to 2012. Despite interest rates exceeding 8%, home prices continue to rise. Without an increase in housing supply, prices are unlikely to decrease.

Recent changes in FHA and Conventional guidelines have made it easier to purchase homes with Accessory Dwelling Units (ADUs) and 2-4 unit properties. To include ADU income in an FHA loan, you must have 2 months of reserves after covering the down payment and closing costs. For 2-4 unit properties with only 5% down, you need a documented housing payment history for the most recent 12 months. Buying a primary residence that generates income is an effective strategy to offset higher monthly payments due to increased rates. Demand for such properties is rising, and inventory is limited, so be prepared for competition when making offers. Ensure your loan is fully documented and approved before entering into a contract.

Homeownership, a cornerstone of the American dream, is becoming a luxury. Early approval and planning are crucial for your success. You can begin your application today at www.ardorre.com.

REAL ESTATE TRENDS

Despite existing home sales reaching their lowest point since 2010, home prices have not followed the expected trend of declining. In fact, the median asking price for homes in the US has increased by 5% compared to the previous year. This resilience in home values is primarily due to the ongoing issue of low housing supply, which continues to keep prices strong. As of September 2023, the number of available homes is at its lowest for any September since 1999. While lower interest rates may potentially boost housing supply, there's a catch. Many prospective homebuyers are already approved for mortgages at current rates, waiting for an opportunity. This situation is likely to maintain strong demand despite potential supply increases.

The ideal time to purchase a home is when it aligns with your financial means. If you can comfortably afford the mortgage payment with today's rates, this presents an excellent opportunity to negotiate price and terms in a less competitive market.

INDICATION OF RATE HIKE PAUSE

 

A notable contingent of Federal Reserve members, which includes prominent figures such as New York Fed President John Williams and Vice Chair Michael Barr, are currently inclined towards maintaining the existing interest rates during the upcoming November 1 meeting. This leaning stems from their success in managing inflation and dealing with a tightening economy.

The Federal Reserve has been gradually increasing the Federal Funds Rate, which is an overnight borrowing rate for banks, to moderate economic growth and keep inflation in check. By July, they had raised this rate eleven times since the previous year's March, marking the highest level in 22 years. Notably, there was no rate hike during their September meeting as they sought to further assess key economic indicators, notably inflation and labor market conditions.

Federal Reserve Chair Jerome Powell has stressed the cautious approach that the Fed is currently taking. Although their primary focus remains on managing inflation to meet the 2% target, Powell has not ruled out the possibility of future rate increases if upcoming economic data suggests risks to their inflation control efforts. He has made it clear that further rate hikes could still be on the horizon if robust economic data threatens the progress achieved in stabilizing inflation.

The latest data on jobless claims and employment indicates some noteworthy trends:

1. Initial Jobless Claims have recently decreased by 13,000, with reported filings at 198,000. This marks the second-lowest figure for the year and is the first time since January that claims have fallen below the 200,000 mark. This suggests that businesses are actively retaining their employees, which is positive news for the labor market.

2. In contrast, Continuing Claims have risen by 29,000, indicating that a total of 1.734 million individuals are still receiving benefits following their initial claims. This upward trend suggests that people are facing increased challenges when it comes to finding new job opportunities after being initially laid off.

3. While the number of Initial Jobless Claims has been on a declining trend since reaching a peak of 250,000 in August, there is a new concern arising from a surge in "WARN" notices. These notices require companies with 100 or more employees to provide a 60-day advance notice before implementing mass layoffs. This surge in such notices could be a sign of potential future increases in unemployment claims, which warrants close attention.

Overall, the data reflects a mix of positive and concerning signs in the job market, with a decrease in initial claims indicating improved job retention, but a rise in continuing claims and WARN notices suggesting ongoing challenges for job seekers.

"Inflation is in effect a hidden tax. The money that people have saved is robbed of part of its purchasing power, which is quietly transferred to the government that issues new money."

— Thomas Sowell

THE FUNDAMENTAL CAUSES OF INFLATION

Please take a moment to view the linked 3-minute clip. It features Milton Friedman, a renowned American economist and statistician who was honored with the Nobel Memorial Prize in Economic Sciences in 1976 for his groundbreaking work in consumption analysis, monetary history and theory, and the intricacies of stabilization policy.

The clip highlights some significant economic concerns:

1. Over the past five years, there has been a substantial 47% increase in the money supply and a 54% increase in the national debt. The national debt represents the total amount of money that the federal government has borrowed to cover ongoing expenses. Currently, this debt stands at $33.5 trillion and continues to grow.

2. An increase in interest rates has the potential to escalate borrowing costs for the U.S. government, leading to a larger budget deficit. In fact, interest expenses on the U.S. public debt are projected to exceed $1 trillion this year, costing Americans approximately $4 billion each month.

3. The clip argues that government spending poses the greatest risk of inflation, though it acknowledges that it's not the sole factor. The assertion here is that increasing the money supply without corresponding economic growth devalues the currency. Furthermore, the growing national debt is seen as unsustainable, as it's rising more rapidly than the country's overall economic growth.

4. There's a concern that a forced recession or an escalation in military conflicts could prompt the Federal Reserve to lower interest rates sooner than expected, potentially as a measure to mitigate economic challenges.

DOES IT MAKE SENSE TO BUY NOW?

In every market, and for each individual, the answer varies. Schedule a meeting with me to assess the cost of delaying your decision in your specific market. We'll consider factors like inflation and tailor our analysis to homes within your price range. Additionally, we can evaluate the expenses associated with waiting, such as comparing renting costs to buying, even with slightly higher interest rates.

It's important to recognize that real estate remains a secure long-term investment. One of the primary advantages of owning a home is the opportunity to accumulate equity. With each mortgage payment, you chip away at the principal balance of your loan. Furthermore, if your home's value appreciates over time, your equity can grow even more. This equity serves as a valuable asset, accessible through home equity loans or lines of credit or realized when you sell the property.

Homeownership offers a sense of stability and control that renting often lacks. When you own a home, you have greater autonomy to personalize and utilize the space according to your preferences. You don't need to worry about landlords increasing rent or imposing restrictions on your living arrangements. Additionally, owning a home fosters a sense of community and belonging, as you become an integral part of a neighborhood and can establish enduring relationships with neighbors.

It's essential to understand that the current interest rate environment is temporary, whereas the scarcity that makes real estate a sound investment is not. Homeownership is becoming a luxury, and there's no immediate solution to housing affordability. Inventory cannot magically increase to drive prices down. I encourage you to do the math, and if it aligns with your financial goals, consider taking the leap into homeownership.