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China’s Economy is Sinking? How are Freddie and Fannie Poised to Handle A Crisis? Cyberattack on SanFran’s Market Feature Image
Posted on August 31, 2023 5 minute read

China’s Economy is Sinking? How are Freddie and Fannie Poised to Handle A Crisis? Cyberattack on SanFran’s Market

What's in this article?

Latest average U.S. Mortgage Rates 2023-08-17
Fannie and Freddie claim they can handle a market implosion
China’s real estate crisis deepens
Hackers cripple San Fran’s housing listing system
Explore Homefinity’s invaluable mortgage market insights. 

Lots of stuff happened this week in real estate and mortgage markets: 

  1. The average 30-year rate rose over 7%—some saying it hit 7.48% just today
  2. Though the FRED (Federal Reserve Economic Data) won’t update its data for another few days—China’s economy might be sinking due to its real estate market
  3. Hackers blew up San Francisco’s housing market listing software

Who says real estate is boring? 

Let’s look at Homefinity’s latest market insights for this week. 

Latest average U.S. Mortgage Rates 2023-08-17

  • 30-year fixed: 7.09% (previous week: 6.96%)
  • 15-year fixed: 6.46% (previous week: 6.34%)
  • 30-year FHA index: 7.055% (previous week: 6.965%)
  • 30-year fixed rate Jumbo index: 7.427% (previous week: 7.413%)

Stay informed with Homefinity about rate fluctuations that could impact your loan decision.

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Fannie and Freddie claim they can handle a market implosion

According to the results of their most recent stress test, Fannie Mae and Freddie Mac claim to have sufficient capital to withstand a theoretically severe adverse economic scenario. 

Background to the DFAST

The purpose of the Dodd-Frank Act stress tests—conducted by Fannie Mae and Freddie Mac—is to assess the capital capacity of these government-sponsored enterprises (GSEs) under different economic scenarios. 

The main purposes of these stress tests include assessing the capital impact on Fannie Mae and Freddie Mac caused by sudden financial shocks and a period of severe economic conditions—in this case, a term of nine quarters. 

Their objective is to determine if the GSEs possess ample capital to withstand adverse economic scenarios, hopefully ensuring their resilience.

These tests were mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010). The FHFA requires Fannie Mae and Freddie Mac to submit the results of these stress tests to assess their capital adequacy.

The results of the latest DFAST test

On August 10, 2023, the Federal Housing Finance Agency (FHFA) published the results of the ninth annual Dodd-Frank Act Stress Tests (DFAST) Results – Severely Adverse Scenario. 

Pointing to the stress test results, Fannie Mae and Freddie Mac say they would experience significant losses under the severely adverse scenario but that their capital levels would remain above the required minimums. 

Overall, the report states these recent stress test results show that Fannie Mae and Freddie Mac seem to be well-capitalized for now and capable of weathering severe economic conditions.

China’s real estate crisis deepens

The New York Times recently reported on how China’s real estate sector is grappling with a deepening crisis that is now threatening its entire economy. 

What initially began as a government effort to temper the overheated housing market and curb excessive borrowing by developers has spiraled into a more extensive problem. 

A major Chinese developer is on the brink of default, and a prominent asset manager has struggled to meet investor payments. Billions have fled China’s stock markets, reflecting a mounting sense of unease.

The foundations of China’s real estate market in its economic engine

For decades, China’s real estate sector was a key driver of economic growth, employing millions and propelling the economy forward. However, years of reckless borrowing and overbuilding have caught up with the industry, with more than 50 developers defaulting on debts over the past three years. 

The situation has been exacerbated by falling housing prices, eroding consumer savings tied to property values, and vanishing jobs in housing-related industries.

This crisis, the Times says, has far-reaching implications—impacting not just the real estate sector but the broader economy as well. Companies and small businesses are cautious about spending, while local governments, reliant on land sales, are cutting back on services.

Concerns growing

The concerns have rippled through financial markets, with Hong Kong stocks plummeting and investors pulling billions of dollars out of Chinese equities. 

Even China’s shadow banking sector, including financial trust companies that invested in real estate projects, is feeling the strain. The fallout is also affecting consumer confidence, with new-home sales dropping significantly.

As China’s economy struggles to regain its footing post-pandemic, the fate of its real estate sector will play a pivotal role in shaping its future trajectory.

Hackers cripple San Fran’s housing listing system

Hackers launched a cyberattack on San Francisco’s real estate market, crippling the primary property listings database. The attack targeted the company that operates the multiple listing service (MLS), causing subscribers to lose access to crucial information. 

The San Francisco Association of Realtors could not provide a timeline for when services would be fully restored. 

The hackers’ identity and motive remain unknown, and the software company running the MLS, Rapattoni, has yet to comment. 

With an estimated 56,000 subscribers solely relying on the platform, the incident has underscored the vulnerability of real estate databases.

Explore Homefinity’s invaluable mortgage market insights. 

Stay tuned for more compelling real estate and mortgage updates that you can rely on. 

Whether you’re a first-time homebuyer or an avid investor, Homefinity is your go-to source for industry knowledge and trends. 

Make informed decisions and elevate your real estate and mortgage ventures with us.

Get your rate quote for a home purchase or refinance with Homefinity today.

Photo by ActionVance on Unsplash

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