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20 NEW DIRECTOR, NEW DIRECTION e change in direction at the Federal Housing Finance Agency (FHFA) would be one of the most important things to happen in housing finance this year, according to experts at the Housing Finance Policy Center at the Urban Institute. "I'll be watching to see if whatever changes are made will bring more private capital into the market," said Laurie Goodman, VP, Housing Finance Policy Center at the Urban Institute. ese experts will closely follow the actions of Mark Calabria, who was nominated by President Trump to lead the FHFA. "ough he would be in a uniquely powerful position" to do "something" about the government's role in the housing finance system, Jim Parrott, Non-resident Fellow at the Urban Institute said. "But we'll be heading into an election year and possibly an increasingly weak housing market, so it will be interesting to see how that tension between ideology, politics, and economics plays out." Some of the other questions that these researchers would be seeking answers to during the year include, the future of the government-sponsored enterprises (GSEs) as well as the actions being taken by the Federal Housing Administration (FHA) to mitigate risks related to the risk profile of its book of business. at, apart from how the "various proposals and policies that are being introduced legislatively and administratively, will affect housing affordability," would be the key issues that the market will have its eye on in 2019, according to Alanna McCargo, VP, Housing Finance Policy Center at the Urban Institute. Ed Golding, a Non-resident Fellow at the Urban Institute and former Head of the FHA, said that 2019 could well be the year when home price appreciation "comes back down to earth." "ey can't continue to go up at 7 percent a year in an environment where interest rates and inflation rates are in the 2 percent range," Golding said. "e tax code increased the user cost of housing in some (upper-end) markets by as much as 30 percent but created little discernable change in house price momentum." In 2018, the housing market showed early signs of a slowdown in home price growth, softening of the housing markets, and rising inventory in even the hottest markets, like San Francisco and Seattle, according to Bing Bai, Research Associate at the Urban Institute who said that he was interested in seeing the shifting trends in the housing and mortgage market. "Rising interest rates cut down the refinance volumes, and a slowdown in the purchase mortgage market would put further volume pressure on the mortgage industry," he said. Senior housing would be another focus area that will be on their radar. "Not only are we about to have more senior renters (many on fixed incomes), but also fewer senior homeowners with any significant home equity (and some with large mortgages, especially compared with their incomes), more in need of structural modifications to be safe in their homes," said Ellen Seidman, Non-resident Fellow at the Urban Institute. REDFIN: "MARKET WILL COOL" Redfin's Chief Economist, Daryl Fairweather, predicts the housing market will continue to cool into the first half of 2019. Among the seven predictions for the year ahead, Redfin forecasts a rise in homeownership rates and rise in inventory to be back at 2017 levels. Price hikes will record the lowest numbers since 2014. Speaking of investors and house-flippers, Fairweather expects them to back away from the market. She noted that real estate companies that buy homes from consumers to quickly sell at a profit are likely to face challenges as the market cools. Local housing issues will have tech companies and local governments continue to "go head-to-head," she said. Redfin's 2019 predictions anticipate price growth to stay around 3 percent in the first half of the new year, a drop from the 7 percent recorded around the same period last year. ough a booming economy and increased access to credit will drive homebuyer demand, higher interest rates will make homeownership an expensive affair for many—creating doubts about the rebound of home sales next year, the report said. According to the report, more inventory and less competition will be key features of the market of 2019. Homeownership has been consistently growing from its post- recession valley of 63 percent in 2016 to above 64 percent this year. It pointed out that an increase in mortgage-rate to 5.5 percent by the end of 2019 would mean about a $100 increase in monthly mortgage payments on a $300,000 home. e heat of rising rates will affect lenders as their costs of lending will lead to flattened demand for services—compelling lenders to reach out to low-income borrowers and first- time homebuyers, Fairweather wrote. Redfin also predicts fewer homes to be built and an uptick in starter homes that are easier to sell than luxury homes. e per-unit values of building permits will also decline in 2019. Low unemployment is projected to increase the wages for low-income workers, impacting both demand and supply for housing, the report indicated. Institutional buyers will face their first serious test wherein buyers who made money from nearly every sale in a rising market with low-interest rates could start to face losses if homebuying demand falters on account of higher interest rates and stock-market volatility, the report stated.

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