Weekly Economic Update

Economic News:

Big Changes From Fannie Mae

Lower down payment requirements.

Fannie Mae unveiled a new policy that will significantly reduce down payment requirements for owner-occupied 2-, 3-, and 4-unit homes. Set to be effective from the weekend following Nov. 18, 2023, the down payment will now be 5%, a stark decrease from the previous 15-25% requisite for duplexes, triplexes, and four-plexes. This policy shift presents an exciting opportunity for individuals aspiring to invest in multifamily residences, blending the advantages of property investment with homeownership perks. By diminishing the down payment barrier, Fannie Mae has paved the way for prospective owner-landlords to afford these properties more seamlessly. Fannie Mae declined to comment further on why it made the decision, but it’s a decision being praised by some in the industry. Thrive Mortgage’s Chief Operations Officer Donielle Geiser said they are thrilled about the announcement. “Lowering the down payment threshold on 2–4-unit properties is such a critical enhancement to the guidelines for a host of reasons. Predominantly, it immediately becomes a golden opportunity for increased affordability due to the potential income generating possibilities,” Geiser said. “Especially for younger and prospective homeowners looking to engage in a smart way of not only building equity, but also adding an additional revenue stream. One of the surest ways to build wealth over time is to offset a liability with an income-producing asset.” (Source: National Mortgage Professional)

Fannie: Purchase Sentiment Continues to Wallow

Sluggish home sales to continue.

The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased by 2.4 points in September to 64.5, as elevated mortgage rates further dampened already-pessimistic consumer housing sentiment. Five of the HPSI’s six components decreased month over month, including the components measuring perceived homebuying and home-selling conditions. In September, 16% of consumers reported that it’s a good time to buy a home, matching the all-time survey low set last year. Additionally, 63% said it was a good time to sell a home, down 3 percentage points compared to the prior month. Only 17% of consumers indicated that they expect mortgage rates to go down over the next 12 months. Overall, the full index is up 3.7 points year over year. “Mortgage rates persistently over 7 percent appear to be deepening the malaise consumers feel about the home purchase market,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “In fact, high mortgage rates surpassed high home prices as the top reason why consumers think it’s a bad time to buy a home, a survey first. Notably, the share of consumers expressing pessimism about homebuying conditions hit a new survey high in September, with 84% now indicating that it’s a bad time to buy a home. On the sell side, respondents also listed unfavorable mortgage rates as the top reason why they believe it’s a bad time to sell a home. This indicates to us that many homeowners are probably not eager to give up their ‘locked-in’ lower mortgage rates anytime soon, but it also may reflect the worry of some homeowners that sale values might be suppressed slightly if the pool of qualified homebuyers is constrained by elevated mortgage rates.” Duncan continued: “Consumers are also not seeing much affordability relief in sight, as they continue to expect home prices to increase in the next 12 months. They also indicated that their personal economic situations are showing signs of strain, including lower year-over-year household incomes and a reduced sense of job security. In our view, all of this points to home purchase affordability remaining a problem for the foreseeable future, which we forecast will keep home sales sluggish into next year.” (Source: Fannie Mae)