Market Insights – week of March 13, 2023

Homefinity is here to deliver you the latest updates on the mortgage and real estate markets and homebuying happenings across America.

Reach out to us today and get started with your dedicated loan officer. 

Whether you’re purchasing a home or refinancing, we’ll discuss your needs, how the current market will affect you, and provide our recommendations on the most affordable loan for your situation.

The connection between SVB’s downfall and the housing market

On Monday, March 13, the Federal Deposit Insurance Corporation (FDIC) announced the appointment of Tim Mayopoulos as CEO of Silicon Valley Bank, a subsidiary of SVB Financial Group. 

Mayopoulos took over the position after the bank was closed down due to a run on its deposits, leaving it with insufficient capital. 

Mayopoulos had previously worked with the fintech company Blend and is the former President and CEO of Fannie Mae—the largest provider of mortgage credit in America. 

The bankruptcy of SVB means this is the largest bank to fail since the 2007-2008 financial crisis. The fall has frazzled the stock market and raised concerns about a potential global financial contagion that could affect many banking and lending sectors. 

SVB failed to raise enough capital to cover a $1.8 billion loss from selling a $21 billion portfolio of available-for-sale securities, which triggered significant deposit outflows. 

The regulator has transferred all deposits, including insured and uninsured, and most of its assets to a newly established bridge bank.

What this means for homebuyers

According to Lawrence Yun, the chief economist for the National Association of Realtors (NAR), the SVB failure along with the other banks that have fallen in the last week, means the Federal Reserve “cannot be so aggressive” in terms of raising short term interest rates. “Therefore,” Yun says, “mortgage rates will decline.”

NAHB reveals more families are saying goodbye to cities

According to a new press release from the National Association of Home Builders, the Home Building Geography Index (HBGI) revealed that the biggest dip in single-family housing starts is centered around the most densely populated areas. 

These areas, like metro and city centers, have the highest housing costs and have also seen a drop in multifamily construction. 

As for the rest of the country, less densely populated areas saw robust construction of multifamily units. 

NAHB Chairman Alicia Huey noted that the share of the single-family market in urban core markets had fallen from 47.2% to 44.5% in the fourth quarter of 2022 versus 2019. 

The single-family market saw its highest increase in rural areas (micro and non-metro micro counties). Between the end of 2019 and 2022, that market area rose from 9.4% to 11.8%.

HUD releases their 2024 Budget in Brief

In the 2024 Budget in Brief, the Department of Housing and Urban Development (HUD) has requested $73.3 billion—$1.1 billion more than the funding level for 2023. The budget also proposes $104 billion for new mandatory affordable housing investments.    

The 2024 budget brief goes on to specifically point out that they are “pursuing equity-focused housing” as well as “community-building policies and programs” that are designed to:

• Enable greater access to rental assistance and affordable housing
• Increase the housing supply via building, innovation, and preservation
• Combat the urgent problem of homelessness
• Increase homeownership opportunities 
• Help ensure communities can “equitably prepare for a changing climate” and “recover from disaster and extreme weather”
• Make HUD easier to navigate

First-time homebuyer? Having a hard time qualifying for a conventional mortgage? Contact an experienced loan officer at Homefinity to see if an FHA loan is right for you. 

FTC looks to block LOS merger

Last week, the Federal Trade Commission made moves to prevent the proposed merger between the country’s largest home mortgage loan origination system providers. The two companies are Intercontinental Exchange, Inc. (ICE) and its rival, Black Knight, Inc. 

According to the FTC, this merger would lead to increased costs, less innovation, and fewer options for lenders who require tools to generate and service mortgages. 

Loan origination systems (LOS) are software used to manage the documents and workflow required to generate a mortgage. Encompass, owned by ICE, is the largest LOS in the United States, while Empower, owned by Black Knight, is the second largest. 

The FTC filing claims that this merger would lead to higher costs for lenders, which would ultimately be passed on to homebuyers.