[Dolley]

GCA FORUMS HOUSING AND MORTGAGE NEWS

February 18, 2023

Market Updates – Mortgage Rates and Economy

Mortgage Rates:

• Average 30-year fixed mortgage rates today are approximately 6.5%.
• This is lower than the previous weeks, which may motivate some homebuyers to take advantage of the market despite the economic uncertainties.

10-Year Treasury Yield:

• At approximately 4.537%, the 10-year Treasury note yield impacts mortgage rates and investors’ inflationary and growth expectations, providing insight into future economic progress.

Gold and Silver Prices:

• Gold is approximately $2,950.20 per ounce, and silver is around $33.38 per ounce.
• Economic volatility is making these precious metals preferred safe-haven commodities.

Housing Market Overview

Home Prices:

• The median home price has increased by around 9%.
• In addition, the most populated cities continue to add more dollars, which makes it difficult for some buyers.

Inventory vs. Demand:

• Competition for homes has increased due to low inventory and high demand.
• Entry-level houses are particularly in high demand and are being sold even with higher mortgage rates.

Consequences of the Department of Government Efficiency

Oversight and Audits:

• The Department of Government Efficiency is executing audits to uncover inefficiencies within housing programs and agencies.
• Such scrutiny may contribute to reforms that increase resource availability for affordable housing initiatives.

Policy Advice:

• Changes within the department may help formulate policies favorable to the construction of affordable houses, positively impacting supply and stabilizing prices in the long term.

Consequences of the Structural Changes to a Federal Government Agency

Dissolution of The Federal Reserve Board, IRS, and CFPB:

• Rumor has it that some agencies may cease to exist, creating uncertainty in the financial markets.
• Should such changes take place, we may expect:

Wider Ranges in the Mortgage Rate:

• Uncertainty may cause investors to change their expectations, leading to fluctuations in the amount of mortgages available.

Regulatory Changes:

• The absence of the CFPB may increase the chances of lowering some consumer protections in the mortgage market and opening the gates for more manipulation and aggression toward borrowers.
• However, the CFPB has done absolutely nothing to protect consumers and has been protecting big banks.

Tax Risks:

• Could the IRS’s dissolution be an end to tax policy as we know it today?
• Such a shift could hinder funding for housing programs and thus limit the availability of affordable housing.

Current Economic Conditions

Policies of the Federation:

• Always pay attention to the current disputes with the Federal Reserve.
• Any shifts in the policy will affect the servicing of the mortgage debt.
• Most recently, an approach that promises the least volatility has been signaled cautiously.
• In this scenario, the looming rate increases may be softened.

Market Sentiments:

• Inflation and employment rates, as economic indicators, continue to work against the buyer’s will.
• Buyers’ willingness is suppressed by higher prices and increasing interest rates.

The dynamics of housing and mortgages are delicate, owing to the economic uncertainty underlying high prices and nominal inventory levels. The Department of Government Efficiency’s actions appear driven by the need to engineer change. However, the changes that the federal agencies propose may cause a storm. These factors are enough to wash investors and homebuyers off their feet; hence, they need to stay alert.

[Brandon]

GCA FORUMS HOUSING AND MORTGAGE NEWS

Tuesday, February 18, 2025

Government and political changes have occurred alongside the mortgage and housing markets as the economy shifts. My update today explains how proposed government reforms are currently influencing the development of our market, the concerning effects created by the Department of Government Efficiency’s meddling within the real estate domain, and various other crucial market indicators.

Market Overview Mortgage Rates and Treasury Yields:

• For the last couple of months, mortgage rates have fluctuated rather unpredictably.
• Due to fiscal spending policies changing for the worse and constant uncertainty from investors, the average rate for a 30-year fixed mortgage has been uptick, currently staying at approximately 6.5%.
• Inflation and changes in sentiment have led to an increase in the 10-year treasury note value, which now sits at 4.3%.
• As investors grow more cautious, these pointers will be extremely destructive for the economy, drastically shaping long-term home financing conditions and the cost of borrowing.

Precious Metals – Gold & Silver

The economic transitions and geopolitical uncertainties have caused a commendable transformation in the prices of gold and silver over the years. As the primary haven asset, gold remains priced near $2,950.20 per ounce, while silver sits at roughly $33.38 an ounce.

Housing Prices, Inventory, and Demand

The housing market is still volatile because of higher demand but lower inventory. While home prices have appreciated in most markets, the median price increased 4 to 6 percent compared to last year. Suburban and rural areas have been experiencing high demand, which is further amplified by constricted supply. Though some urban centers appear to be cooling off, strong demand in outlying areas continues to be a trend. Even with increasing mortgage rates, buyer activity and the lack of inventory drive up prices.

The Influence of Government Policy And Regulatory Proposals

Eliminating Important Financial Institutions

• Some political movements come to mind, like those aimed at eliminating the Federal Reserve Board, the IRS, and the CFPB.
• To gain support, advocates suggest that this would reduce bureaucratic overreach and enhance economic participation.
• However, the prevailing financial market sentiment remains highly cautious.
• This is because of the uncertainty brought about by these changes.

Mortgage Rates:

• The possibility of unwinding the Federal Reserve and other regulatory entities contributes to elevated mortgage loan risk premiums and the subsequent market panic.

Investor Sentiment:

• The changes have increased the risk level of mortgage lending, and banks and investors are tracking these developments closely.
• This has also resulted in the deterioration of lending standards and increased the cost of borrowing.

Department Office of Government Efficiency (DGE) Audits

The DOGE separate audit of USAID has extended to a wider range of government activity. While there is no formal notice to the public for any other agencies being added to the list, there are rumors among political circles that the DOGE is looking into various departments’ spending and operational waste for further investigation.

Market Impact:

• Those changes have shifted the government’s balance of power and responsibility, resulting in increased debates about accountability and government spending.
• There has been a subtle decline in investor confidence in mortgage and housing markets.
• Some increase in consumer confidence created a zone of uncertainty, which, in turn, influenced real estate investments.

Political and Enforcement Dynamics

Consequences of Uncertainty Within Regulation:

• With the planned political reforms, particularly the proposed elimination of relevant agencies, DOGE investigations have also shifted the time horizon for most regulatory issues.
• This new environment has been adverse not just to financial markets.
• Still, it has also changed the attitude of lenders and investors to be more cautious.

Lending Standards:

Some lenders have responded to heightened uncertainty by restricting their lending criteria, leading to tougher credit evaluations and more stringent documentation demands.

Market Volatility:

• The housing sector is expected to have long-term positive outcomes.
• However, in the short term, there is bound to be some volatility as market players adjust to changes in policies and strategies.
• As of February 18, 2025, the national mortgage and housing environment is in limbo.
• Mortgage rates continue to rise, treasury yields are volatile and high, and demand is strong.
• However, supply is tight for now.
• On the other hand, bold proposals to abolish large-scale financial institutions have created uncertainty, which has caused lenders and investors to adopt a wait-and-see approach.
• Furthermore, broadening the scrutiny by the Department Office of Government Efficiency adds to the scrutiny, which could change the perception and management of government spending.

To thrive as a homebuyer or a professional in this field, staying on top of the news and being flexible enough to adapt to changes is crucial. GCA FORUMS is dedicated to ensuring you have the information you need well in advance to take advantage of emerging opportunities and tackle any challenges.

While we monitor changes in the country’s housing and mortgage market, we will continue to provide updates and analyses regarding these shifts in trends.