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69 69 INVESTMENT GOVERNMENT PROPERTY PRESERVATION FANNIE MAE REVISES HOUSING OUTLOOK, ADJUSTS RECESSIONARY PREDICTIONS e current state of the real estate market—which is now adapting to record high inflation and higher interest rates—is giving real estate companies and experts a run for their money as the continued pressure of these forces is causing problems for those making predictions for the future. e latest forecast to be downgraded comes from Fannie Mae as the July 2022 commentary from the Economic and Strategic Research Group (ESR) who made the changes due to "softening consumer spending" and new business inventory investment data. All-in-all, the ESR is now forecasting that real GDP will increase by 0.1% by the end of the calendar year and will move into negative territory in 2023 predicting a decrease of 0.4%. ey previously predicted these numbers to be an increase of 1.2% in 2022 and a 0.1% decrease in 2023. In no uncertain terms, the ESR states they are expecting recession conditions to begin occurring in the first quarter of 2023, a prediction that has been moved up from the second quarter, due to the aggressive monetary policy response required of the Federal Reserve to bring inflation down from its current decade-high levels. By the fourth quarter of 2022, inflation, as measured by the Consumer Price Index, to moderate to 5.7% annually, down from the 9.1% recorded in June. Further, they predict inflation to sink to 1.6% by the end of 2023, well under the Federal Reserve's target of 2%. Looking at home sales, the ESR also revised down its forecast for total home sales growth in 2022 to a decline of 15.6%, compared to a decline of 13.5% predicted the previous month. However, it adjusted upwards its home price appreciation forecast to 16% year over year in 2020 from the previously projected 10.8%. e group stated that it "continues to anticipate strong deceleration in home price growth going forward due to the lagged effects of higher mortgage rates and the slowing economy weighing on purchase demand." "e economy slowed significantly, though unevenly, in the first half of 2022 on the expectation that the Fed will aggressively raise interest rates," said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. "With inflation running well above the target rate, the market's expectation that further, substantial monetary tightening is needed has driven interest rates even higher, and interest rate-sensitive sectors, including housing, are slowing in response. Homes listed for sale are increasingly seeing asking-price reductions, and both construction and home sales—both existing and new—are slowing." Duncan continued: "Consumer confidence measures increasingly indicate dissatisfaction with current levels of inflation, offering support to the Fed's aggressive posture. We continue to believe that it's unlikely the economy will avoid a modest recession, but given recently released consumer spending and business investment data, we currently anticipate that it'll begin in the first quarter of 2023, slightly earlier than we previously predicted." e ESR now projects that existing home sales to end the year with around 4.57 million units on an annualized basis, down from a forecast of 4.83 million units. Existing sales for 2023 are targeted at 4.55 million units. Also, offsetting factors have led to changes in originations outlooks. Total market mortgage originations are projected to top $2.53 trillion by year end, a downward revision of $71 billion from the last forecast. Purchase volumes were also revised downward by $30 billion to $1.78 trillion while refinance volume also got its forecast cut to $756 billion. "In 2023, we expect total originations to fall to $2.22 trillion, but this is still an upward revision of $19 billion from last month's forecast, entirely due to an upward revision to purchase originations," the ESR said. "is is because higher home prices outweigh the down revision to home sales." Journal of color in and around Philadelphia that have historically experienced racial discrimination. Along with our federal and state law enforcement partners, we are sending a powerful message to lenders that they will be held accountable when they run afoul of our fair lending laws." e proposed order, if entered by the court, would be CFPB's first nonbank mortgage redlining resolution, and it would require Trident to: » Pay $18.4 million into a loan subsidy program: To increase nondiscriminatory access to credit, Trident will establish a loan subsidy program. A lender it contracts with will offer loans to qualified applicants on a more affordable basis when borrowing to purchase properties in majority-minority neighborhoods in the Philadelphia MSA. e loan subsidies can include closing cost assistance, down payment assistance, and payment of mortgage insurance premiums. rough the lender it contracts with to make loans under the subsidy fund, Trident will ensure the lender has four offices located in majority-minority neighborhoods. ese lending offices will provide similar services to those provided through Trident's offices. » Pay a $4 million fine: Trident will pay a $4 million penalty to the CFPB, which will be used for the CFPB's victims' relief fund. » Pay an additional $2 million: Trident must spend $2 million to fund advertising to generate applications in redlined areas as well as to take other steps to serve the credit needs of majority-minority neighborhoods in the Philadelphia MSA. In addition to the CFPB and DOJ's enforcement action, Pennsylvania, New Jersey, and Delaware have entered into concurrent agreements with Trident and its real estate services affiliate, Fox & Roach LP. "With housing costs so high, it is critical that illegal discrimination does not put homeownership even further out of reach." —Rohit Chopra, Director, CFPB

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