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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 68 September 2024 J O U R N A L Research (ESR) Group, strong growth in Q2 home prices was higher than expect- ed but is expected to slow, ending 2024 and 2025 at annual rates of 3% and 6.1%, respectively. Additionally, some measures of hous- ing activity are still weak despite a more than 30% increase in listings of homes for sale compared to a year ago. Anoth- er indicator is the decrease in existing home sales in May compared to the same month last year. "The housing market continues to wait for affordability to improve," said Doug Duncan, Senior VP and Chief Economist at Fannie Mae, "even as the supply of new and existing homes for sale slowly rises." Fannie Mae Insights: 2024 Home Price Forecast According to the Fannie Mae Home Price Index, home prices were up 3% on a non-seasonally adjusted basis in the second quarter. Going forward, howev- er, this dynamic of steadily increasing supply and affordability-constrained demand is projected to cause home pric- es to decline. The ESR Group also points out the recent regional fluctuations in listings and property prices. For instance, many major metro areas in the Sunbelt now have inventory levels that are comparable to or higher than those of the 2019 for-sale invento- ries. Due to a somewhat lower mort- gage rate trend, the ESR Group revised upward its existing home sales prediction while downwardly adjusting its starts and new home sales forecasts. "The slight decline in mortgage rates of late, following data pointing to grad- ually slowing economic growth, has not been enough to overcome the significant affordability constraints imposed on would-be homebuyers," Duncan said. "As such, despite more homes being listed for sale, actual home sales have not picked up. We continue to expect home price growth on a national level to decelerate—but remain positive—over the near term, but it should be noted that conditions often vary by region, particu- larly as it relates to supply." Duncan continued, "For instance, many Sunbelt metros are currently see- ing significant increases in for-sale inven- tories, in part due to new construction, while supply in much of the Northeast and Midwest remains extremely tight. In aggregate, we expect these varied market conditions to lead to a slight decline in total new home sales nationally for the full year 2024, but a slight increase in existing home sales." Since incoming data have mostly confirmed expectations for slower growth, the ESR Group has only slightly revised its outlook for economic growth. Notably, the ESR Group revised its inflation forecasts downward and now projects that the Consumer Price Index (CPI) will end the year at 2.9%, while the core Personal Consumption Expendi- tures (PCE) Index—the Fed's preferred inflation gauge—will end the year at 2.5%. This is due to two consecutive low- er-than-expected prints of the PPI. As a result of improving inflation data and indications of a labor market slowdown, the ESR Group has revised its prediction that the Federal Reserve would lower interest rates in September and December. NEW WHITE HOUSE UPDATE AIMS TO BOOST HOUSING SUPPLY T he U.S. Department of Housing & Urban Development (HUD) and the U.S. Department of the Treasury have jointly taken action to provide more interest rate certainty for state and local Housing Finance Agen- cies (HFAs) that use the Federal Housing Administration's (FHA) risk-sharing initiative with the Federal Financing Bank to finance new construction of affordable housing. Today's actions were implemented to foster and increase the construction of affordable, new homes. "Let's face it—we don't have enough affordable homes. Here at HUD, we are making changes to build new, quality, af- fordable homes like never before," HUD Acting Secretary Adrianne Todman said. "Today, alongside our colleagues at the Department of the Treasury, we are an- nouncing a crucial move that will enable our partners to use our financing to build tens of thousands more rental homes for the families we serve." Outlining the Plan FHA and the Federal Financing Bank will implement a floor and a cap, called an interest rate "collar," on the bench- mark Treasury rate used to calculate the all-in rate provided to Housing Finance Agencies (HFAs). This update to the Section 542(c) Housing Finance Agency Risk-Sharing Initiative will make it easier to use the program, thereby increasing the number of new, affordable multi- family properties that can be developed using risk-sharing program financing. The Section 542(c) Housing Finance Agency Risk-Sharing Initiative allows el- igible HFAs to enter contracts with HUD through which FHA insures multifamily mortgages originated by an HFA that are used to finance the construction or reha- bilitation of properties with affordable housing units. Under these contracts, HUD and the HFA share the risk of any potential loss resulting from a default of the insured mortgage. With the FHA insurance credit enhancement in place, the Federal Financing Bank will pur- chase the mortgage, enabling the HFA to recoup their capital and make other investments in their communities. "The Biden-Harris administration knows the key to reversing the affordable housing crunch is to take actions that increase housing supply. The Trea- sury-HUD rate collar initiative will help reduce the cost to construct more afford- able housing that is so urgently needed in neighborhoods across the country," U.S. Deputy Secretary of the Treasury Wally Adeyemo said. "Treasury will continue to do everything in our power to make housing more affordable for Americans and unlock greater economic prosperity." The interest rate collar will be avail- able for Housing Finance Agency-orig- inated mortgages used to finance new construction or substantial rehabilitation of multifamily affordable housing for low-income individuals and families. It