Weekly update from the National Housing Conference |
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In this issue
March 20, 2022
Issue 91-11
• Senate Banking Committee advances Thompson and Fed nominees
• HUD announces funding awards for addressing homelessness
• SAHF seeks Policy and External Affairs Associate and Office and Program Administrator
• NAHREP releases 2021 State of Hispanic Homeownership report
• Fed Board raises rates, pushing mortgage rates above 4%
• CFPB targets discrimination, HAF compliance
• NAR and VA partner for video series on veteran homeownership
• Ginnie Mae announces new staff
• Chart of the week: Housing supply shortages shown in YOY data
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NHC Annual Member Meeting Info
Proxy Ballots Emailed
March 15, 2022
Board of Governors’ Elections
March 29, 2022
Annual Meeting (online)
June 14, 2022 12:00 p.m. ET
Questions?
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What if rising interest rates make inflation worse?
By David Dworkin, NHC president and CEO
This week, the Federal Reserve Board announced the first of what is likely to be a series of increases in short-term rates to bring down inflation. But what if rising rates don’t impact inflation? Higher mortgage interest rates help slow down the economy as housing demand is reduced, creating downward pressure on prices. However, in this pandemic-driven economy, supply is the biggest driver of housing prices, and demand is already constrained by record-low inventories of available and affordable homes. One possibility is that rising rates could add to inflationary pressures by increasing the cost of buying and renting a home, inflating the shelter cost number in the Consumer Price Index (CPI) because there is not an adequate decrease in demand. Since housing price increases lag CPI, shelter could become an even larger driver of inflation as other pandemic-related supply chain back-ups resolve. The less supply, the more likely this outcome becomes.
First, let’s look at how the Fed’s decision impacts housing and inflation during normal times. Interest rate increases are decided by the Federal Open Market Committee (FOMC), comprised of the members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining eleven Reserve Bank presidents, who serve one-year terms on a rotating basis. They vote on changes to the Federal Funds Rate, the interest rate banks charge each other to lend Federal Reserve funds overnight. This overnight interest rate is used as a benchmark for other short-term rates like the Prime Rate, which have a more direct impact on mortgage rates.
So, while the Fed is not directly increasing mortgage interest rates, it is increasing the cost of funding most mortgages. Anticipation of rising short-term rates can increase long-term rates as investors prepare for increased funding costs. As a result, we have already seen mortgage rates increase from less than 3% a year ago to more than 4% today.
Higher interest rates impact housing in two ways. First, the cost of buying a home increases, making homeownership more expensive. Second, the cost of new homes increases with the cost of financing new construction.
But today’s housing market is different in some significant ways that could alter these assumptions. First, housing inventory is at record lows while housing starts are near capacity. Housing inventory has more than halved since the start of the pandemic, from 1 million active listings in January 2020 to a little over 400,000 in January 2022, according to data from the Federal Reserve.
Builders are already constructing as many homes as they can. Privately‐owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,859,000. The capacity to build more is constrained by a tight labor market, housing supply shortages, and local zoning restrictions that continue to keep land costs high. Yet many of these projects have yet to break ground due to supply chain problems, and material and labor costs.
If higher interest rates reduce production more than demand, prices will remain high. Mortgage rates rose from less than 10% in 1978 to nearly 18% in 1981. Production plummeted.
While home prices remained fairly stable, the US suffered two massive recessions in three years, which broke the back of more...
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News from Washington | By Luke Villalobos
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Senate Banking Committee advances Thompson and Fed nominees
The Senate Banking Committee advanced President Biden’s nomination of Sandra Thompson as FHFA Director on Wednesday, along with several of his nominees for positions on the Federal Reserve Board of Governors. The nomination of Thompson, who has served as Acting FHFA Director since last summer, was advanced by a vote of 13-11, with all the committee’s Democrats plus Sen. Mike Rounds (R-S.D.) voting in favor.
The committee also advanced Biden’s nominations of Jerome Powell as Fed Board Chair, Lael Brainard as Vice-Chair, and Philip Jefferson to replace the outgoing Richard Clarida. However, the panel deadlocked 12-12 on Biden’s nomination of Lisa Cook to replace the Fed Board seat vacated by Treasury Secretary Janet Yellen. Democrats will need to initiate a discharge petition to bring her nomination to a floor vote.
The nominees’ advancement concludes a weeks-long standoff over the nomination of Lisa Bloom Raskin for the Fed Board Vice Chair for Enforcement, whose nomination was being considered jointly with Thompson and Biden’s other Fed Board nominees. Republican Committee members raised ethics concerns stemming from Raskin’s tenure on the board of a fintech company and boycotted her committee vote, delaying votes on the entire slate of nominees. The committee remained at an impasse until Senator Joe Manchin (D-W.V.) said Monday that he would vote against Raskin should her nomination come to the floor, dooming her chances in the evenly divided Senate. Biden withdrew Raskin’s nomination the following day.
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NAHREP releases 2021 State of Hispanic Homeownership report
The National Association of Hispanic Real Estate Professionals (NAHREP) released their annual report, 2021 State of Hispanic Homeownership Report, last week. The report shows an increase in overall Hispanic/Latino homeownership from 47.5% in 2019 to 48.4% in 2021. This positive growth came despite a tight housing market constrained by supply shortages and competitive markets pricing out first-time homebuyers. The report highlights the supply-side challenges of housing that have been discussed by housing groups in recent months, noting that Hispanics/Latinos are disproportionately impacted by the lack of housing supply due to shortages in areas that are heavily populated by Hispanics/Latino populations. The supply shortage has been felt particularly hard in states like Arizona and Florida which have high rates of home price appreciation. Additionally, in the 10 most populous Latino housing markets, underproduction of housing worsened from 2012 to2019.
According to the analysis, in 2021, 40.8% of Latino adults aged 45 and under are considered mortgage ready, based on information from Freddie Mac. The report predicts that these numbers will increase as younger Hispanics/Latino populations age into their home buying years, stating that over the next 20 years, 70% of homeownership growth and 53% of new household formations will come from Hispanic/Latinos.
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HUD announces funding awards for addressing homelessness
On Monday, the Department of Housing and Urban Development (HUD) announced $2.6 billion in awards to Continuums of Care (CoC) for FY 2021. The awards will go to about 7,000 local housing and service programs across the country to help people experiencing homelessness gain housing and support services for long-term stability. These awards include $102 million in funds dedicated to domestic violence support projects and a focused effort to add permanent housing to communities alongside rapid rehousing and transitional housing. A breakdown of the awards was also published with the announcement.
HUD also issued two new disaster assistance announcements for winter storms in Virginia and Tennessee.
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SAHF seeks Policy and External Affairs Associate and Office and Program Administrator
Stewards of Affordable Housing for the Future (SAHF) is seeking two additional staff members for its Washington, D.C., office: a Policy and External Affairs Associate and an Office and Program Administrator.
The Policy and External Affairs Associate is an entry-level position focused on monitoring housing policy news, creating newsletters, supporting appropriations advocacy, and helping to coordinate SAHF communications. SAHF notes that this position is ideal for recent graduates with minimal prior professional experience in housing.
The Office and Program Administrator position involves front-end financial management, event planning, and general office management. SAHF is seeking an individual with at least five years of administrative experience for this position.
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CFPB targets discrimination, HAF compliance
On Wednesday, the Consumer Financial Protection Bureau (CFPB) announced changes to its supervisory operations with respect to discrimination in lending and services. The CFPB seeks to protect families from illegal discrimination even when fair lending laws may not apply, and says it will scrutinize discriminatory conduct that amounts to unfair practices. An updated exam manual, Unfair, Deceptive, or Abusive Acts or Practices was published alongside the announcement. Under the new unfair practices definition, unintentional discriminatory practices and practices that fall outside of the Equal Credit Opportunity Act can now be deemed unfair by the watchdog.
“When a person is denied access to a bank account because of their religion or race, this is unambiguously unfair. We will be expanding our anti-discrimination efforts to combat discriminatory practices across the board in consumer finance,” said CFPB Director Rohit Chopra.
On Monday, the CFPB published a blog post outlining its expectations of servicers of the Homeowner Assistance Fund (HAF). The post makes clear that the CFPB is “closely monitoring servicer conduct” and reminds participating servicers that they are responsible for maintaining compliant policies and procedures as they evaluate loss mitigation applications. The CFPB will also be monitoring complaints against servicers that are not giving applicants the option or time to apply for HAF funds. The reminder is a callback to the CFPB’s January 2021 alert to the industry that it would be watching how mortgage servicers were helping borrowers with COVID-19 forbearance.
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NAR and VA partner for video series on veteran homeownership
The National Association of REALTORS (NAR) and the Department of Veterans Affairs (VA) released a series of videos on Thursday aimed at helping realtors better serve veterans looking to achieve homeownership through VA loans. The series is split into two parts, one covering the basics of the VA’s Home Loan Guaranty Program and the other examining misconceptions that can prevent veterans from benefiting from the program.
NAR President Leslie Rouda Smith noted that veterans are one of the groups negatively impacted by the current housing crisis, which has pushed affordable homeownership out of reach for many former servicemembers. “We will continue to work with the VA and policymakers to make the path to homeownership easier for those who have selflessly served our country,” she said.
John Bell III, acting executive director of VA’s home loan program, said that he was glad NAR was focusing on the issue of veteran homeownership and hoped that the videos would increase realtors’ understanding of the program. "The Department of Veterans Affairs remains steadfast with our Home Loan Guaranty Program being the product of choice for veterans seeking homeownership," he said. "We were glad to sit down with the National Association of Realtors to discuss how to remove barriers and eliminate misperceptions about the program to better serve veterans pursuing that goal."
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Ginnie Mae announces new staff
Ginnie Mae President Alanna McCargo announced Wednesday the appointments of Sam Valverde as the agency’s Executive Vice President and Felecia Rotellini as Senior Advisor and Chief of Staff to the President. Valverde was most recently Supervisory Attorney Advisor at FHFA’s Division of Conservatorship Oversight and Readiness, where he worked to expand mortgage access for members of underserved groups. Rotellini is a former leader in financial services compliance and supervision with expertise in bank regulation and consumer protection.
McCargo announced the appointments at the National Association of Hispanic Real Estate Professionals’ (NAHREP) National Policy Conference in remarks that emphasized her efforts to diversify Ginnie Mae’s ranks. “We must have leaders that look like and understand the communities we ultimately serve,” she said, noting that Valverde would be the corporation’s first Hispanic vice president.
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Chart of the week: Housing supply shortages shown in YOY data
A blog post from CalculatedRISK Finance & Economics discussed year-over-year (YOY) changes in housing inventory based on new data from the National Association of Realtors®. The data shows that existing inventory is down 15.5% YOY in February 2022 compared to February 2021, demonstrating the overall supply shortages within the housing market.
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The Local Initiatives Support Corporation (LISC) and the Urban Institute released a report examining the effectiveness of LISC’s New York State Vacants Initiative, which aimed to reduce the impact of vacant properties on surrounding communities following the Great Recession. The report finds that the initiative reduced the number of vacant properties by 43%. The reduction was primarily driven by a drop in the number of "zombie" properties—houses in the foreclosure process that can be significant contributors to blight.
The Terner Center for Housing Innovation released a new report on California’s HomeKey initiative, which converted hotels and motels into housing developments for people experiencing homelessness. Among the findings from the successful initiative are the benefits of streamlined funding in getting units online quickly and more affordably than other development plans. Homekey is seen as a model program for adaptive reuse and a simplified structure of financing for new housing projects.
An article in The Wall Street Journal reports on a renewed interest in rent control laws as rent prices around the country continue to rise and hit new records, outpacing income growth. The article notes that shelter costs are the largest component of the consumer price index, pushing inflation rates and impacting the overall economy. The article surveys several rent control policies in cities like Boston, St. Paul, and Miami.
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Monday, March 21
Tuesday, March 22
Wednesday, March 23
Thursday, March 24
Friday, March 25
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The National Housing Conference is a diverse continuum of affordable housing stakeholders that convene and collaborate through dialogue, advocacy, research, and education, to develop equitable solutions that serve our common interest. |
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