[Lisa Jones]

In this brief review, you will find important information regarding the news published on January 22, 2025.

News Summary

Striking New Trade Deal with Canada

In one of the sessions with Congress, President Trump delivered an address and offered in-depth details regarding their United Nations membership. The President revealed that the US economy predominantly relies on trade with Canada and tried to provide reasons for why the US should create strategic alliances. The goal is to increase international trade while decreasing domestic unemployment rates.

Bearish Sentiment Identified in the Market

This week, mortgage rates surged, and analysts attribute this to the market’s reactions to the President’s economic policies. Speculation reveals that things will become hectic due to the actions the Federal Reserve will take next.

Increasing the number of low-income units

The government has tried to provide financing for low-income projects and other proposals to change the current zoning laws to make more units available at a lower price. The reformation plans are meant to alleviate the situations affecting urban cities.

Boost in technology stocks.

Major technology companies increased in share value, supported by the announcement of new quarterly revenues from other high-value companies. Investors have not lost their trust in the sector’s ability to grow the economy’s value, regardless of economic expectations.

Hurricane-related dangers predicted in the Southeast region

Cloud warnings and flooding risks were issued for several states in the southeast, which are likely to bring heavy rains. Local state governments have advised people to stay alert and make safety preparations to combat any possible changes.

International Relations Tensions

The US entered diplomatic tensions with foreign countries after the latest trade policy reports. Emerging concerns surround the administration’s international relations strategies and their impact on global markets.

Healthcare Policy Discussions Continue

PrCongress has become more intense in its debates on health care reform. The White House has recently proposed changes to lower expenses and improve service availability. On January 22, 2025, changes in economic policy, housing matters, technology advancements, and international relations occurred, showing the administration’s effort to stimulate the economy’s growth and resolve the country’s challenges.

[Lisa Jones]

Here’s the summary related to mortgages, homes, and real estate for January 24, 2025.

Mortgage-Housing and Real Estate News

Important Takes

Market Movements in Response To Presidential Actions

Investors are paying close attention as the new President starts to act on his impressive promises to influence mortgage rates. There is guarded optimism in the air regarding potential industry changes. However, the actions of the Federal Reserve remain nebulous.

Current Trends in Mortgages

Investment banks that offer lending have made a few changes here and there, as some of them slightly raised or reduced mortgage rates with the shifting fiscal policies. They say rates could be reduced significantly should the Fed take a supportive stance toward the administration’s economic strategy.

For balance, the Trump administration has always shown concern about stability in the housing economy.

The housing market’s further separation from stabilization will stem from the policies enacted in the space of Fannie Mae and Freddie Mac, which are associated with advanced mortgage market securities and lending.

Development Aid

The recent natural disasters in North Carolina and California have pushed the government to focus more on directly granting funds for Development Aid for rebuilding. This will ultimately affect the local housing markets, stimulating supply and demand for housing in these areas.

Sentiments From Homebuyers

Homebuyers’ feelings remain mixed for now. Many appear hopeful about the potential of subdued mortgage rates. Efforts toward affordability are present, but many remain worried about market instability and surging home prices in multiple regions.

New Guidelines

Conversations regarding the housing finance system reform have picked up steam. Advocates are pushing for these reforms, but with a balance to ensure stricter credit supervision to prevent another market collapse.

Funding Sustainable Development

The focus is now on affordable housing initiatives. More proposals are focused on supporting first-time home buyers and low-income families. This is bound to increase funding for housing projects and incentives for developers.

The housing sector can benefit immensely from the new policies being rolled out by the present administration. Looming changes to mortgage rates, recovery from natural disasters, and more focus on regulation changes are set to take center stage for everyone buying homes and even realtors in the upcoming months. A call to action is sent out to all parties involved to remain alert as they have major positive changes.

[Lisa Jones]

Even though zoning changes aimed at increasing the supply of affordable housing can be beneficial, some of the negative aspects associated with positive changes pose worrying concerns. The following are key issues:

Gentrification

Displacement of Residents:

• New developments or increased density construction can lead to an escalation in property value and rent of particular areas, resulting in primary citizens being displaced, especially in areas with a history of oppression.

Cultural Changes:

• Gentrification changes the culture of neighborhoods as new wealthier communities move into them, resulting in conflict between varying groups in the particular locality.

Infrastructure Strain

Overburdened Services:

• Sudden spikes in the population of particular regions can result in dilapidated public services and infrastructure in the area, including schools, transportation facilities, and utility services, ultimately deteriorating the living standards of citizens.

Traffic Congestion:

• An increase in the construction of residential facilities without parallel provision of transit facilities is bound to escalate traffic issues and congestion.

Quality of Development

Compromised Standards:

• The rush to increase the number of low-cost houses available can lead to poorly established buildings and improper amenities being provided.

Neglect of Existing Housing Stock:

• Overemphasis on the construction of low-cost affordable housing can result in failure to maintain the current housing facilities, leading to a rapid deterioration in living conditions.

Community Opposition

NIMBYism (Not in my Back Yard):

• Some residents will not allow new projects to commence even when new infrastructures are intended to build affordable housing.
• This is because they are concerned with the existing neighborhood structure, changes in traffic patterns, and the loss of parks.

Political Pushback:

• New zoning policies are likely to be politically contentious, which creates a political burden on the policy’s goal of making affordable housing accessible.

Economic Inequality

Benefits for Developers:

• Some policy shifts, like regulation on area density, would give Developers and investors merit at the expense of income-deprived people.

Inadequate Affordability:

• Inclusionary zoning practices will likely create affordability gaps because they will not be intestate to the lowest income families, making these reforms ineffective.

Regulatory Complexity

Increased Bureaucracy:

• While some of the reforms propose to simplify the procedures, putting in place fresh rules could cripple small developers and non-profits.
• This is because it adds another wrinkle of bureaucratic red tape to the existing hierarchy.

Compliance Costs:

• New zoning regulations may change the cost burden on developers, so if the goals are set unreasonably low, affordable housing goals may not be addressed effectively.

Even though there may be some challenges associated with it, zoning adjustments can help resolve the lack of housing and the high cost of living. Community character, the capacity of infrastructure, and the health of the present residents all need to be balanced to meet the new housing needs. Community participation and good policy design make it easier to reach just results.

[Lisa Jones]

Here are examples of cities where zoning reforms have spurred affordable housing development:

Minneapolis, Minnesota

Upzoning:

• Single-family zoning was abolished across all Minneapolis neighborhoods in 2018, allowing for greater construction of duplexes and triplexes.
• Minneapolis is one of the first major cities in the United States to adopt this zoning reform policy, which aims to increase the supply of affordable housing.

Los Angeles, California

Accessory Dwelling Units (ADUs):

• The creation of secondary housing units on rental properties has increased the availability of ADUs in Los Angeles.
• The city has simplified the process of acquiring permits, which has led to the availability of hundreds of new rental properties.

Seattle, Washington

Inclusionary zoning:

• In Seattle, residential unit developers in selected city areas must reserve some units at reduced rates, which helps lower-income households.
• This policy greatly adds affordable housing to Seattle’s ever-increasing ever-increasing.

San Francisco, California

Density bonuses:

• This policy fuels affordable housing development by setting aside a portion of affordable units for low—to middle-income residents.
• In exchange, developers are granted additional units to build on the same property.
• The city of San Francisco is well known for awarding density bonuses, and many developers take advantage of this policy.

Portland, Oregon

• This multifaceted civic approach is reflected in Portland’s lively neighborhoods, where residential, commercial, and retail spaces have been integrated, resulting in modest neighborhoods with reduced car dependency.

Mixed-Use Zoning:

• Portland opted for mixed-use zoning, which enabled the development of residential, commercial, and retail space in a single area.
• This has reduced car reliance and enabled the development of vibrant, well-rounded neighborhoods.

Austin, Texas

• Au, Austin, Texas, has adopted measures to streamline permitting processes to facilitate affordable housing development.
• This is complemented by a program that lowered parking availability for new developments close to transit, further facilitating affordable house development.
• Streamlining Permitting:
• Measures to streamline the permitting procedure for equipping affordable houses have been enacted in Austin.

New York City, New York

• New York City mandates the inclusion of affordable units in remodels of multi-dwellings as long as affordable housing is within certain zones.
• Regulations have created over a thousand affordable units throughout the mandatory institution.

Inclusionary Housing:

• New York City made it impossible for developers in certain areas only to build market-priced units, which has ensured that all residents have some level of affordable housing.

Washington, D.C.

Zoning Regulations for ADUs and Density Bonuses:

• D.C. has relaxed zoning regulations concerning ADU development and implemented density allowances for affordable housing projects.
• This greatly improves the availability of housing.
• These examples clearly show that highly innovative zoning reforms can effectively tackle the problem of housing affordability.
• Streamlining the processes for incorporating affordable units and enhancing construction regulatory density fosters the creation of an equitable housing market.

[Lisa Jones]

The following are supplementary zoning reforms that are believed to improve affordable housing construction:

Better Unrestricted Density Limits

Upzoning:

• Residential regions can raise the density to develop more units on land, creating more affordable units.
• Mixed-use zoning combines residential, commercial, and retail development in one area to provide more housing options.
• This improves affordability by decreasing overdependence on transportation.

Loosen Restrictions for Multi-Family Housing

Multi-Family Units:

• Eliminating restrictions on the construction of triplexes, apartment buildings, duplexes, and other multi-family structures will increase the availability of affordable rental properties.

Accessory Dwelling Units (ADUs):

• Less complicated regulations on in-law suites and garage apartments enable homeowners to set up more rental units.

Make The Funding Application Process More Efficient

Fast-Track Approvals:

• Change permitting processes to allow quicker funding approval for affordable housing projects to decrease the time spent developing these structures.

Standardized Codes:

• Streamline building code regulations and zoning to make it easier for developers to receive approvals from local governmental authorities.

Reducing Restrictions for Parking Spaces

Performance Parking:

• New developments tend to be more expensive, but allowing modifications or canceling the need for new construction parking spaces can significantly reduce costs in urban areas that benefit from good public transport, lowering housing prices.

Joint Use of Parking:

• Businesses and Residential units may share parking spaces, which optimizes land utilization and lowers the development cost.

Mandatory Inclusionary Policy

Low-Income Targeted Units:

• To guarantee that new constructions aid low to medium-income families, a portion of the new development shall be distributed as affordable housing.

Bargaining for Building Lower Income Apartments

Offering perks like increased construction area or exemption from some taxes to housing builders in exchange for lower-income households’ apartments.

Giving Increased Construction Area In Return For Charity

Permitting the construction of additional units and buildings on the condition that a sum of affordable apartments, social amenities, public parks, or other benefit items are offered.

Tracking Developments:

• The construction area for built-to-rent units or regions with high opportunities for amenity use has been increased.

Focused Reforms Per The Community

• Implement zone changes that consider the characteristics of each area’s need so that housing strategies address the local context.

Community Engagement:

• Include the residents and other concerned parties in the planning stage to consider their concerns and preferences about housing development.

These zoning reforms attempt to relax the regulatory framework concerning affordable housing development. Changing tight zoning regulations and encouraging local governments’ imaginations help provide affordable housing to various communities. Most of these changes have been implemented successfully. Still, they require effort from local authorities, builders, and citizens.

[Lisa Jones]

The administration’s affordable housing initiatives aim to help resolve the problems surrounding housing affordability and access, especially for lower and middle-income families.

The following highlights summarize some of the main features of these initiatives:

Funding Increase For Affordable Housing

Investment

• Proposals may suggest higher federal direct investments in affordable housing, leading to the construction or rehabilitation of low-income housing units.

Grants and Subsidies:

• Subsidies and grants are provided to local governments and nonprofit organizations to encourage the development of affordable housing units to help address the problem.

Tax Incentives

Policy Changes for Developers:

• The Low-Income Housing Tax Credit (LIHTC) program should be expanded to provide additional LIHTC value to incentivize private developers to build affordable housing units.

Homebuyer Tax Credits:

• More tax credits should be provided to enhance the chances of first-time homebuyers obtaining a home.

Assistance Programs For First-Time Homebuyers

Down Payment Help:

Initiatives aimed at providing financial assistance for down payments to make it easier for first-time buyers to enter the housing market.

Affordable Mortgage Products:

• Allow lenders to offer interest rates and reduced fees to qualifying buyers more easily.

Zoning Regulation Changes

Local Reforms:

• Encourage states and local governments to change zoning regulations to allow the construction of more affordable housing by easing restrictions on multi-family and accessory dwelling units (ADUs).

Streamlining Approval Processes:

• Our aim is to simplify and expedite the process of issuing permits for affordable housing developments to cut costs and timeframes.

Community Development Initiatives

Revitalization of Distressed Areas:

• Investment is being targeted in economically distressed communities to improve the conditions of housing and neighborhoods.

Partnerships with Nonprofits:

• These strategies focus on planning and development in partnership with nonprofit organizations and local community corporations to provide affordable housing.

Focus on Homelessness Prevention

Supportive Housing Programs:

• More funding is being allocated to supportive housing programs, which provide housing and services for people who are or may be homeless.

Emergency Rental Assistance:

• Expanding programs that utilize rental assistance to stave off eviction and homelessness during economic downturns is needed.

Sustainability and Resilience

Green Building Initiatives:

• Affordable housing units with energy-efficient features and sustainable green building strategies are needed to reduce residents’ long-term cost burden.

Disaster-Resilient Housing

Investment in disaster-resilient housing is required, particularly in areas prone to hurricanes and wildfires.

The administration’s affordable housing programs seek to promote equity within the housing sector by overcoming challenges encountered by families with low or moderate income. These initiatives aim to make affordable housing accessible and serve economic stability by focusing on funds, taxes, zoning changes, and community development. These programs can succeed in providing cooperation between the federal, state, and local governments and community participation.

[Lisa Jones]

Discussions surrounding reforms regarding Fannie Mae and Freddie Mac (government-sponsored enterprises, or GSEs) have been prominent in the reform of housing financing. Let’s take a look at the important aspects and proposals discussed:

Privatization

Transition into Private Entities:

• One of the most notable ideas is the complete privatization of Fannie Mae and Freddie Mac.
• This would require moving them from government-supported agencies to private businesses, thus lessening the risk borne by taxpayers through their operations.

Impact on Risk:

• A more investor-friendly approach to privatization would shift the risk to private investors.
• Consequently, there might be a change in the way loans are underwritten.

Capital Requirements

Increased Capital Reserves:

• One of the proposals is increasing the capital requirements for Fannie Mae and Freddie Mac so that they can withstand potential losses due to greater capital reserves.
• This will surely increase their stability and mitigate the need for a government bailout.

Stress Testing:

• Lastly, utilizing robust stress testing like that of large banks could help ensure that the GSEs are prepared for down economies.

Scaling Back The Role Of The Government

• Government insurance covers an allotted percentage of the MBS parcel purchased by GSE.
• Reducing limits on government debt guarantees could make the bond market more attractive to private insurers.
• With a decline in government aid, the market could become more competitive, allowing private insurers to dominate.

Market Competition:

• For the Government-Sponsored Enterprises (GSEs) to cope, the reforms would decrease the government’s support for boosting competition in the mortgage sector amongst lenders.
• This would serve consumers well, enhancing the available services in the market.

Credit Opportunities

Encouraging Homeownership:

• All reform strategies must mitigate risk while providing available credit to needy homebuyers, predominantly first-time buyers and families earning moderate to low incomes.

Targeted Programs:

• Some proposals suggest that a program targeted heavily towards affordable housing in areas of high need would be kept and enhanced.

Regulatory Framework

Including a New Regulator:

• For the GSE to be restructured properly, some arguments would make it simpler to create a new branch of the government that focuses solely on overseeing them rather than adding it to an already overbearing bureaucratic structure.

Intensified supervision means that more regulations and conditions are designed, which the GSE is expected to meet to account for how they run and diversify their risks.

Market Stability

Preventing Future Crises:

• The main intention of these reforms is to create a housing finance system that can endure economic shocks without leaving taxpayers to deal with the mess as they did in 2008.
• The proposed reforms to Fannie Mae and Freddie Mac aim at developing a competitively sustainable housing finance market that minimizes taxpayer exposure.
• Whether such reforms could succeed would have to be judged upon how well they balanced access to credit, market stability, and the government versus private sector roles in housing finance.

These discourses persist as complex and nuanced, like the U.S. housing market and its surrounding economic conditions.

[Lisa Jones]

Although policies designed by former President Trump to control mortgage rates may differ according to statements and campaign platforms, some of the things he has worked on that may impact mortgage rates are the following:

Control Over the Federal Reserve

Direct Communication:

• Since taking office, Trump has stressed the importance of the Federal Reserve in setting interest rates.
• He has previously advocated for the Fed to decrease rates, which indicates how central he thinks the Fed is to achieving the economic goals during his presidency.

Appointments:

• By appointing certain people to the Federal Reserve Board, Trump, who shares his economic outlook, could expand the board’s functions, which may have led to a decrease in interest rates.

Reforms On Taxation

Tax Cuts and Jobs Act:

• The tax changes discussed in 2017 aimed to enhance economic development, which, in turn, might impact mortgage rates through the economy’s general performance. Lower rates would benefit the economy, but the act caused concerns about raising the federal deficit.

Deregulation Changes

Reducing Regulatory Burdens:

• Trump argued that the regulations on lenders and financial organizations must be relaxed.
• This is because doing so would reduce banks’ costs, lowering mortgage rates for the public.

Housing Finance Reform

Fannie Mae and Freddie Mac:

• Trump has proposed reforms to government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, which are vital in the scope of mortgage finance.
• Changes to their structure or business tactics can impact the supply and pricing of mortgages.

Increased Competition:

• Increasing competition in the mortgage market should be a policy goal since it is likely to improve the market’s price terms.

Infrastructure Investment

Economic Stimulus:

• Enhanced infrastructure development project spending will create new jobs and indirectly support the economy, which can impact mortgage rates in the long run.

Promoting Homeownership

Incentives for First-Time Buyers:

• Emerging strategies, such as offering tax benefits or help with deposits, can increase the number of first-time homebuyers and consequently alter market prices and mortgage rates.

In theory, Trump’s statements and policies can impact mortgage rates. Still, this impact will depend on how the economy functions, what the Federal Reserve does, and what other regulations are in place. All of these factors combined make it very difficult to predict consequences accurately.

[Lisa Jones]

The lowering of mortgage rates comes with a multifaceted and nuanced promise.

Here are some thoughts on the reality of this promise:

Federal Reserve Independence

Monetary Policy Control:

• The Fed works separately from the executive branch.
• The president may participate in discussions regarding economic policy.
• However, the Fed has the sole power to determine interest rates based on varied factors such as economic activity, inflation, and employment.

Rate Decisions:

• Mortgage rates, especially the federal funds rate, are a product of the Fed’s action.
• A president cannot unilaterally set these rates.

Economic Conditions

Inflation Rates:

• When inflation persists, the Fed is likely to increase interest rates, which will increase mortgage rates.

The reverse is also true:

• The Fed may reduce interest rates in low inflation, which might benefit mortgage rates.

Economic Growth:

• Economic variables, like GDP growth rate or employment level, also affect mortgage rates differently.
• A vigorous economy could raise rates due to increased demand for credit.

Market Factors

Investor Sentiment:

• The bond market also significantly influences rates, particularly the yields on ten-year Treasury notes.
• Market movements can impact investor sentiment, which in turn can lead to fluctuations in mortgage rates.

Interest Rate Fluctuations:

• As is often the case in the real estate market, the demand for homes and the availability of products in mortgage banks will determine interest rates.
• Interest rates often rise when the demand is high and the supply is low.

Policies of the Government

Changes in Rate:

• Changes in housing rules, tax rates, or government-funded mortgage loans may affect the rate indirectly.
• Still, such moves are more easily done through executive orders than legislation.
• Some changes like these require bipartisan agreement, which can take considerable time to draft.

Change in Policies:

• The government also deals with housing finances and regulation, which can dictate the cost of lenders, affecting the mortgage rate.

Context of the Issue

Recent Mortgage Memorandum:

• Over the years, the world’s economic situation has greatly influenced its mortgage rates.
• These days, people have seen rates inch up from previously set low thresholds, and estimating where they go from here fluctuates is a very difficult obstacle to overcome.
• As much as Trump can call for any change that could affect the rates, he knows that the Federal Reserve, in conjunction with various economic variables, has already given him the power to reduce them.
• The plausibility of his vow relies on a mix of economic status, market behavior, and whichever policies make the housing market healthier.

Regarding the housing industry, the parties involved should be wary and track the economy’s performance and the Federal Reserve’s moves more closely to predict what will happen with rates.

https://www.youtube.com/watch?v=MjZvksi3o2Q