DS News

34 FED CHAIR TALKS ECONOMIC UNCERTAINTY Despite announcements that the Fed would certainly be spiking interest rates, Federal Reserve Chair Janet Yellen delivered a speech providing more clarity to the current state of inflation and interest rate uncertainty. During her speech, Yellen focused on the uncertainty with inflation and monetary policy, stating that it would be "imprudent to keep monetary policy on hold until inflation is back to 2 percent." Yellen admits the Fed may have misjudged the strength of the labor market and the degree to which longer-run inflation expectations are consistent with its inflation objective, or even the fundamental forces driving inflation. "In interpreting incoming data, we will need to stay alert to these possibilities and, in light of incoming information, adjust our views about inflation, the overall economy, and the stance of monetary policy best suited to promoting maximum employment and price stability," she said. In addition, current inflation developments for both overall and core inflation have "slipped again in recent months" after moving up last year, according to Yellen. She continued to explain that sustained low inflation is undesirable because it leads to low settings of the federal funds rate in normal times, providing less scope to ease monetary policy to fight recessions. "A persistent undershoot of our stated 2 percent goal could undermine the Federal Open Market Committee's (FOMC) credibility, causing inflation expectations to drift and actual inflation and economic activity to become more volatile," Yellen said. Accordingly, she promised that the Fed would monitor incoming data closely and stand ready to modify its views based on what has been learned. "What are the policy implications of these uncertainties? For one, my colleagues and I must be ready to adjust our assessments of economic conditions and the outlook when new data warrant it," she said. FHFA'S STRATEGIC PLAN FOR THE GSEs e Federal Housing Finance Agency (FHFA) released its Strategic Plan for the fiscal years of 2018 through 2022 in which it outlined three strategic goals that it plans on implementing in its continued effort to serve the housing market. Strategic Goal 1: Ensuring Safe and Sound Regulated Entities According to the report, the FHFA uses a uniform risk-based approach in its supervision in which it examines regulated entities' activities and assesses the amount of financial risk that activity may hold for the institution. Examinations occur on an annual basis, as well as targeted examinations, and, if need be, off-site reviews. In this respect, two ratings are assigned: a composite rating on overall well-being of the institution, and individual rankings of components, including capital, asset quality, management, earnings, liquidity, sensitivity to market risk, and operational risk. Strategic Goal 2: Ensure Liquidity, Stability, and Access in Housing Finance e FHFA says it has "the statutory obligation to 'foster liquid, efficient, competitive, and resilient national housing finance markets." In the realm of Federal Home Loan Banks, the FHFA will ensure that these local branches will fulfill their obligation in providing liquidity to their members. e FHFA will also require both Fannie Mae and Freddie Mac (GSEs) to engage in actions that improve liquidity in the single-family housing market, improve servicing standards and expand foreclosure-prevention practices, and continue to serve in the multifamily and affordable housing market. Strategic Goal 3: Manage the Enterprises Ongoing Conservatorship In this respect, the FHFA will use its conservatorship over the GSEs to ensure that their infrastructure promotes maximum mortgage-credit availability and assist homeowners facing hardship, while minimizing taxpayer loss. It will also maintain clear standards and expectations for managing executives at the GSEs and ensure the replacement of exiting officials in a timely manner. REPORT SAYS FALL IS BEST SEASON FOR HOMEBUYERS ough many believe spring is the optimum time for homebuying, a report by Trulia said starter-home buyers should think again. According to the report, starter-home inventory increases by approximately 7 percent in the fall months compared to the spring, which leads to listing prices that are about 4.8 percent to 3.1 percent lower in the winter and spring than in the summer, respectively. Trulia found that 70 of the largest 100 metros experienced peak annual starter-home inventory between October and December, based on their Inventory and Price Watch data from 2012 to 2017. It also found that listing prices of starter homes dip between January and March annually as a result of the spike in inventory that happens at the end of each year. "Nationally, the number of starter and trade-up homes on the market has decreased substantially, falling 20.4 percent and 12.5 percent respectively, during the past year, while inventory of premium homes has fallen just 2.3 percent," Trulia reported. e share of starter homes dropped to 20.5 percent from 23 percent year-over-year and homebuyers will have to spend 2.3 percent more of their income in 2017 than they did in 2016. Trulia reported that inventory is at the lowest it has recorded since they began keeping track in 2012, but starter homebuyers should be able to find consolation at the end of the year. "at seasonal spike in inventory also tends to be followed by lower listing prices at the beginning of the year," Trulia reported. "As a result, fall and winter is prime hunting time for starter homebuyers to think about trying to bag that all-elusive starter home, rather than packing it in for the season."

• Cover