What the Government Shutdown means for Real Estate and Housing

NFIP National Flood Insurance Program

An extension of the National Flood Insurance Program (NFIP) was attached to the CR that Congress failed to pass. This means that for the duration of the shutdown, the NFIP will not be able to issue new or renew flood insurance policies. However, existing policies will not be affected until 30 days after their expiration date. Homebuyers will also be able to assume existing policies and claims will continue to be processed and paid as usual. For more detailed information, FEMA’s latest guidance to insurance companies can be found here (link is external).

Federal Housing Administration

HUD’s Contingency Plan states that FHA will endorse new loans in the Single Family Mortgage Loan Program except for HECM loans. It will not make new commitments in the Multi-family Program during the shutdown. FHA will maintain operational activities including paying claims and collecting premiums. FHA Contractors managing the REO/HUD Homes portfolio can continue to operate. Loss mitigation programs will continue to operate. You can expect some delays with FHA processing due to short staffing. (See the HUD Contingency Plan for Possible Lapse in Appropriations (link is external) for more info.)

Government Sponsored Enterprises

During previous shutdowns, Fannie Mae and Freddie Mac have continued normal operations, just as their regulator, the Federal Housing Finance Agency, since they are not reliant on appropriated funds. Fannie and Freddie are expected to announce relaxed procedures that would permit closings to go forward without federal verification of Social Security numbers and IRS tax transcripts. However, lenders would still have to obtain federal verification of both before the GSE’s will accept loans for purchase. Any relaxed requirements would not apply to loan modification re-financings.

Rural Housing Programs

The U.S. Department of Agriculture will not issue new rural housing Direct Loans or Guaranteed Loans. Scheduled closings of Direct Loans will not occur. Scheduled closings of Guaranteed Loans without the guarantee previously issued would be closed at the lender’s own risk.

VA Loan Guaranty Program

The VA loan guaranty program will be operational. The VA has determined that housing is an "essential service.” In addition, VA projects that "95.5% of VA employees would either be fully funded or required to perform excepted functions during a shutdown” (Download the VA Contingency Plan here (link is external) for more info.)

Internal Revenue Service

The IRS is closed and has suspended the processing of all forms, including requests for tax return transcripts (Form 4506T). While FHA and VA do not require these transcripts, they are required by many lenders for many kinds of loans, including FHA and VA, so delays can be expected if the shutdown is protracted. We have received indications that many loan originators are adopting revised policies during the shutdown, such as allowing for processing and closings with income verification to follow, as long as the borrower has signed a Form 4506T requesting IRS tax transcripts. On loans requiring a Form 4506T Fannie Mae and Freddie Mac are expected to adopt relaxed provisions allowing closings but subject to tax transcript verification before the GSE’s purchase the loans.

Social Security Administration

The Social Security Administration is closed and has suspended most customer service functions. According to the SSA Contingency Plan, verifying Social Security numbers through the Consent Based SSN Verification Service will also be suspended during the shutdown, a further complication for mortgage processing. As with IRS income verification, policies vary among lenders, with many choosing to exercise forbearance during the shutdown period subject to subsequent verification. Fannie Mae and Freddie Mac are expected to adopt policies to allow for closing subject to subsequent verification and before GSE purchase of the loan.

Rates dip and quickly rebound!

Mortgage rates this week edged up slightly as Federal Reserve officials charted a course for 2018 that will likely lead to still higher rates. The average for the benchmark 30-year fixed-rate mortgage rate rose 1 basis point, or 0.01 percent, from the previous week in Bankrate’s weekly survey of lenders.The rate, at 4.09 percent, is still below the 52-week high of 4.44 percent, so it’s worth looking into a mortgage or refinance before rates are expected to rise on the heels of the Federal Reserve’s latest action.

- Bankrate.com

How are Americans feeling about the real estate market this summer?

Well, as good as ever.

Consumers' attitudes about home prices, buying and selling, mortgage rates, etc. - in June, was at an all-time high. 

Americans are feeling optimistic overall but particularly about selling a house. 

Consumers are also growing more optimistic about their ability to get a mortgage.

Lenders expect credit standards to ease further going forward.

Fewer home are for sale this season, and easing credit standards could have the unintended consequence of pushing home prices higher. 

Still, even with the challenges today's market presents, buyers remain eager. 

In fact, the number of respondents who said now was a good time to buy a house was up 3 percent in June. How are Americans feeling about the real estate market this summer? 

Well, as good as ever.

Consumers' attitudes about home prices, buying and selling, mortgage rates, etc. - in June, was at an all-time high. 

Americans are feeling optimistic overall but particularly about selling a house. 

Consumers are also growing more optimistic about their ability to get a mortgage.

Lenders expect credit standards to ease further going forward.

Fewer home are for sale this season, and easing credit standards could have the unintended consequence of pushing home prices higher. 

Still, even with the challenges today's market presents, buyers remain eager. 

In fact, the number of respondents who said now was a good time to buy a house was up 3 percent in June. 

The vast majority of surveyed Americans say they believe owning a house is a solid investment.

83% of renters agreed with current homeowners who said that buying a house was a good investment. 

The fact that the American dream of owning a home is once again considered a smart investmentsuggests the housing market has years of strong performance ahead of it.

But though overwhelming numbers say they think buying a house is a good financial move, renters also face some challenges when making the jump. 

Among them, insufficient income and not being able to save enough for a down payment rank high. 

Still, the fact that homeownership has regained it's reputation as an essential part of the American Dream and a good way to build wealth is a good indication that, despite those challenges, Americans will continue to aspire to homeownership. 

Buying a home is no small transaction and the potential for stress is high

Buying a home is no small transaction and the potential for stress is high,  here are purchaser's top three concerns:

1.  They will lose their earnest money deposit.   One way to avoid problems with this is to make your offers subject to earnest money being deposited after inspection issues have been resolved.

2.  Becoming house poor or financially burdened by the costs of homeownership.  Fortunately, this is a risk that can be easily avoided by having a firm budget beforehand and sticking to it. 

3,  Getting into a bidding war that drives up the price of their desired home.     Explain to your clients in detail your techniques and strategies for avoiding this issue.

Demand is up!

Demand for loans to buy homes is now 8% higher than it was at the same time last year.

Last week, for example, average mortgage rates fell again and are now at seven-month lows. 

From a borrower's perspective, rates held steady at seven-month lows last week providing some borrowers an opportunity to refinance.

Over the last two weeks applications have increased 13 percent and the average loan size increased to its largest since September 2016, reflecting the tendency for jumbo borrowers to be more sensitive to rates.

Size of American Home grows...

American homes are generally getting bigger and adding more rooms. 

A look at the numbers shows our living spaces have changed over the years. 

For example, numbers from the U.S. Census Bureau's 2016 Characteristics of New Housing show that the number of homes under 1,400 square feet has fallen 9 percent just since 2000. 

At the same time, the percentage of homes over 4,000-square feet has doubled. 

Sure, the majority of homes still fall somewhere between 1,800 and 2,400 square feet, but there is clearly a trend toward larger houses. 

Another way to look at it is the number of rooms. For example, 59 percent of homes now have three or more bathrooms. In 2000, it was closer to 20 percent. 

During the same time, most homes also upgraded from three bedrooms to four. 

Of course, along with the extra space, bedrooms, and bathrooms, the median sales price has also risen.

 Americans clearly think the extra expense is worth the luxury of not having to schedule who gets the first shower in the morning.