The Week Ahead 

 Upcoming Hearings

Upcoming Conferences

  • #NEXT19DC, 11/18-19
  • NRMLA Annual, 11/18-20
  • MBA Accounting, 11/19-21
  • NAHB IBS 2020, 1/23-25
  • MBA IMB, 2/3-6
  • MBA Servicing, 2/23-26
  • #NEXTWinter20, 2/24-25

FHFA to ‘Press Pause’ on Appraisal     

We attended and spoke at this week’s National Mortgage Policy Summit jointly hosted by the Conference of State Banking Supervisors (CSBS) and the American Association of Residential Mortgage Regulators (AARMR).

While much was made about FHFA Director Calabria’s comments regarding a potential 2022-23 GSE exit from conservatorship, we found his remarks on the future of the appraisal industry to be especially newsworthy.

In this regard, Director Calabria said: “I think that it’s critical that the steps that Fannie and Freddie will be taking or could take over the next couple of years will completely determine the landscape of the appraisal industry. Because of that, I think it’s important that we press pause, that we do a request for information, that we hear from stakeholders such as those in the appraisal industry, or in other industries, and that we are thoughtful about how this transpires without simply saying go.”

In our work on transforming the mortgage industry toward process digitzation, we have followed closely the recent advances in appraisal, such as 3D scanning. We see tremendous value that private capital brings to bear in this segment of the market that has largely lagged credit and capacity. And we expect to fully engage as FHFA seeks industry input on moving valuation forward.

Markets Yawn at ‘Impeachment Inquiry’

In times of national crisis, the stock market has served as a barometer of sorts measuring the implied significance of uncertainty in the financial markets.

As House Intelligence Committee Chair Adam Schiff (D-CA) gaveled in the public view of the Impeachment Inquiry and introduced the opening day witnesses, the Dow Jones Industrial Average gained 92 points to settle at 27,783.59, a new 52 week high.

While a 92 point gain is an insignificant move for the Dow, the broader implication is that the financial markets have largely looked past the inquiry as politics of the day in a hyper-partisan politically charged Trump era. 

Powell Appears before Joint Economic Committee                                                  

In an appearance before the Joint Economic Committee this week, Federal Reserve Chairman Powell provided a State of the State of the Economy.

In a largely bullish update, the chairman said: “Our economy is in a strong position. We have growth, we have a strong consumer sector, we have inflation…” before going on to say the impact of the three rate cuts this year are still to be felt in supporting household and business spending. He said the Fed is not likely to make any further changes unless there is a “material” change in the economy.       

Powell added that “Debt loads of businesses are historically high, but the ratio of household borrowing to income is low relative to its pre-crisis level and has been gradually declining in recent years. The core of the financial sector appears resilient, with leverage low and funding risk limited relative to the levels of recent decades.”

“Looking ahead, my colleagues and I see a sustained expansion of economic activity, a strong labor market, and inflation near our symmetric 2 percent objective as most likely. This favorable baseline partly reflects the policy adjustments that we have made to provide support for the economy.”

Fannie HPSI Edges Lower  

Fannie Mae’s Home Purchase Sentiment Index edged lower by 2.7 points in October to 88.8, further retreating from the survey high set in August. Five of the six HPSI components decreased month over month, including a net 7-percentage point drop in the “Good Time to Buy” component and a net 5-percentage point drop in the “Household Income is Significantly Higher” component.

“Consumer home purchase sentiment remains robust, with the HPSI still near its survey high despite dipping for a second consecutive month,” said Doug Duncan, Senior Vice President and Chief Economist. “The ‘good time to buy’ component has declined notably, despite low mortgage rates, due in part to the persistent challenge of a lack of affordable housing supply…

Still, low mortgage rates and a strong labor market are supporting the index’s overall strength.”

NAHB Reports Lot Values Hit Record Highs     

According to NAHB’s analysis and reporting of the Census Bureau’s Survey of Construction data, median single-family lot prices outpaced inflation once again (4.4% vs 2.4%) and reached a new record high in 2018, with half of the lots selling at or above $49,500. The most dramatic rise in lot values is observed in the West South Central division where median lot values more than doubled since the housing boom years.

While this constitutes a new nominal national record, lot values adjusted for inflation have not reached the housing boom peak levels. In the midst of the building boom – when twice as many single-family homes were started – half of the lots were going for over $43,000, which is over $53,000 when converted in $2018.

Given that the nation’s lots are getting smaller and home production is still significantly below the historically normal levels, it might seem surprising that lot values keep going up. However, the rising lot values are consistent with the persistent record lot shortages that NAHB has reported.

They are also consistent with significant and rising regulatory costs that ultimately increase development costs and boost lot values. It is also possible that home building shifted towards more urban and dense areas where land values are typically higher, and land development faces more stringent regulation requirements.

The West South Central division – that includes Texas, Oklahoma, Arkansas, and Louisiana – stands out as a division where new historical records were hit not only in nominal terms but also when adjusted for inflation. Compared to the peak years of the housing boom, lot values more than doubled in this division.

Historically, lot values in the West South Central division have been the lowest in the nation. They started rising in 2013 and by 2015 caught up with the national median. As of 2018, half of the lots in the West South Central division sells for more than $62,000, 25% above the national median lot value for single-family spec homes of $49,500. This represents a significant jump in the division lot values since the building boom when more than half of lots were priced under $30,000.

Faith’s Corner: #NEXTDC19 Set to Kick-Off

In my corner this week, I am all-in focused on next week’s big event: NEXTDC19!

We have a remarkable line-up that kicks-off this Monday, 11/18, afternoon with a Women’s Leadership Roundtable. I am so excited to moderate this session featuring Chris Boyle, Kris Kully, Marcia Davies, Lindsey Johnson and Alanna McCargo.

We wrap-up on Tuesday, 11/19, afternoon with Lorraine Woellert of Politico interviewing Bob Broeksmit, Eric Kaplan, Laurie Goodman and Rohit Gupta.

In between, we have housing, fintech, depository and non-depositories, credit counseling, non-profits, trades and think tank leaders, all of whom need no introduction.

When I first discussed the opportunity to form a strategic alliance between my firm, Housing Finance Strategies, and NEXT, I felt an instant pull to see what we could do here in Washington outside of the traditional NEXT mortgage summit.

In Jeri Yoshida and Molly Dowdy, I found the best of partners.  These two ladies have accomplished so much in just two short years, and let me be the first to say how meaningful their efforts have been to establish an executive mortgage summit where women leaders can share competitive intelligence, mentor peers and make business deals – all on terms hospitable and conducive to growth and excellence!

I am thrilled to have found such an important niche, a niche so valuable to the future of women leaders in housing and financial services.  And of course, we thoroughly appreciate and welcome all of the men who join us as well.

Government Officials Move to New Roles 

HUD Office of General Counsel political appointee, Eric Blankenstein, has taken on additional responsibility as Acting Executive Vice President of Ginnie Mae.  Blankenstein fills the leadership void of Maren Kasper and is seen as a placeholder.

Meanwhile, HUD’s Deputy Assistant Secretary for Single Family Housing, Gisele Roget, has moved to the Credit Union National Administration under Director Rodney Hood.

Apps Hit Monthly High

Mortgage applications increased by nearly 10% from one week earlier according to the MBA Weekly Mortgage Apps Survey

MBA said positive data on consumer sentiment and growing optimism surrounding the U.S. and China trade dispute, were behind last week’s rise in the 30-year fixed mortgage rate to 4.03 percent. Refinance applications jumped 13 percent to the highest level in five weeks, as conventional, FHA and VA refinances all posted gains.

Purchase applications were up 2% from the previous week and 15% higher than a year ago.

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Editor’s note: This is a compilation of industry periodicals (including American Banker, Bloomberg, Mortgage Bankers Association media, Politico and the Wall Street Journal among others) and is intended solely for the use of the addressee and not for further distribution without the sender’s permission.

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