NEWS FROM THE WHITE HOUSE 

The Biden-Harris Administration is emphasizing its dedication to bolstering homeownership for Americans, as it considers homeownership to be crucial for many in terms of personal wealth and stability. On October 16, 2023, the white house released a statement to announce new actions on homeownership. 

Here is a summary of the key points mentioned in the article:

1. Federal Investments & Proposals:

• The administration has released data indicating a significant federal investment in homeownership.

• President Biden has proposed a $16 billion Neighborhood Homes Tax Credit, which could lead to the construction or refurbishment of over 400,000 homes.

• A $10 billion down payment assistance program has been proposed to help first-time homebuyers, especially if their parents don't own homes.

• Additionally, a $100 million down payment assistance pilot program is designed to benefit first-generation and low-wealth first-time homebuyers.

2. Data on Homeownership Support:

• The Treasury Department reveals that the American Rescue Plan's Homeowner Assistance Fund has aided approximately 400,000 homeowners at risk of foreclosure. By Q2 2023, $5.5 billion has been spent, a 32% increase from Q1 2023.

• More than $6.6 billion has been allocated to assist in creating over 17,000 units of affordable housing until June 30, 2023.

• The Federal Housing Administration (FHA) has supported nearly 1.8 million homeowners, with 83.6% being first-time buyers, marking the highest rate since 2000.

• The U.S. Department of Agriculture (USDA) has provided over 7,100 direct housing loans, benefiting mostly low-income, female-headed households, and Black or African American communities.

• The Department of Veterans Affairs (VA) has supported 145,480 Veterans in retaining homeownership or avoiding foreclosure in 2023.

3. New Initiatives for Homeownership:

• The FHA has a new policy allowing prospective borrowers to include rental income from Accessory Dwelling Units (ADUs) when applying for a mortgage. This will aid first-time buyers and promote affordable housing.

• USDA is granting $9 million in loans to promote homeownership for Native Americans on tribal lands.

• USDA will introduce a pilot program aimed at Community Land Trust Organizations to improve affordable homeownership access.

• The FHA is refining its 203(k) Rehabilitation Mortgage Insurance Program, making it easier for individuals to finance home improvements.

• The Consumer Financial Protection Bureau is enacting reforms to streamline processes for homeowners facing payment issues.

• For 2024, the VA is introducing a program, the VA Servicing Purchase (VASP), to assist Veteran borrowers with mortgage payment challenges.

The Administration has previously reduced mortgage insurance fees and adjusted FHA loan qualifications to benefit first-time homebuyers, especially those with student loans or a solid rental history. There are also efforts to provide transparency in the property appraisal process and promote fair housing.

Lastly, the administration is urging Congress to approve these proposals to make homeownership attainable for all Americans.

Some facts to consider: 

The CA Dream For All program was a big hit. With high income limits and lenient guidelines, $300M was reserved in 9 business days. A $10B national budget will help many first time homebuyers if approved. Keep in mind, these programs come with limitations and equity share features. To be prepared, save money, and improve your credit scores. 

As mortgage rates have reached their highest levels in 23 years, affordability is deteriorating. The issue today is less about price, and more about the monthly payment. Homeownership is 70% less affordable today than it was in 2012. Home prices are rising despite interest rates coming in over 8%. Without more supply, home prices are not expected to decline. 

Changes to the FHA and Conventional guidelines making it easier to buy homes with an ADU and 2-4 units are helpful. To use ADU income on an FHA loan, you must have 2 months of reserves (savings after you pay the down payment and closing costs). To use income from a 2-4 unit property, with only 5% down, you must have a documented housing payment history for the most recent 12 months. Buying a primary residence that produces income is the best way to offset the increase in monthly payments due to higher rates. Demand for these home types are rising and inventory is low. Expect competition when offering on income producing homes, and make sure your loan is fully documented and approved before going into contract. 

Homeownership is the foundation of the American dream and its becoming a luxury. Getting approved early, to plan ahead is critical to your success. You can apply today at padigoodspeed.com.

 HOME PRICES

Existing home sales are at the lowest rate since 2010. It would be reasonable to expect home prices would decline with demand and sales volume, but they haven’t. The median asking price for homes in the US are 5% higher than they were last year. Low supply has been the saving grace for homeowners, keeping the values strong. As of September 2023, there are fewer homes available than in any other September on record since 1999. Lower rates will increase supply, and we need that. Many think this will drive home prices down. The only problem with that argument is that we have many prospective homebuyers approved to buy at current rates, waiting to strike when rates drop. Demand will continue to outpace supply. 

The best time to buy, is when you’re buying within your means. If you can afford the mortgage payment with today’s rates, it would be a good time to negotiate on price and terms and take advantage of a market with less competition. 

SIGNS OF A RATE HIKE PAUSE

A significant number of Fed members, including prominent figures like New York Fed President John Williams and Vice Chair Michael Barr, are leaning towards maintaining the current interest rates in the upcoming November 1 meeting. This inclination is due to achievements in controlling inflation and a tightening economy. 

The Fed has been raising the Fed Funds Rate (an overnight borrowing rate for banks) to temper the economy and manage inflation. As of July, the rate had been raised eleven times since March of the previous year, making it the highest in 22 years. No hike was made in their September meeting to further evaluate economic indicators like inflation and the labor market.

Fed Chair Jerome Powell emphasized the cautious approach the Fed is adopting. While the focus is on managing inflation to reach the 2% target, Powell did not rule out potential rate hikes if upcoming economic data shows risks to inflation control. He made it clear that additional rate hikes could still be ahead if strong economic data undermines the progress made on inflation.

Jobless Claims and Employment:

Initial Jobless Claims recently dropped by 13,000, with filings recorded at 198,000. This figure is the second-lowest this year and is the first instance since January where claims were under 200,000, indicating companies are retaining employees.

On the other hand, Continuing Claims rose by 29,000, suggesting a total of 1.734 million people are still receiving benefits post their initial claims. This trend has been growing, pointing to increased challenges for individuals to secure jobs after being laid off.

While the trend for Initial Jobless Claims has been declining since August's 250,000 peak, a recent surge in "WARN" notices, which mandates companies with 100 or more employees to provide a 60-day notice before mass layoffs, suggests potential increases in unemployment claims.

"Inflation is in effect a hidden tax. The money that people have saved is robbed of part of its purchasing power, which is quietly transferred to the government that issues new money." 

— Thomas Sowell

THE ROOT CAUSE OF INFLATION 

Watch this 3 minute clip linked below. Milton Friedman was an American economist and statistician who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the complexity of stabilization policy. 

The Fed never mentions we’ve had a 47% increase to the money supply and 54% increase to the national debt over the last 5 years. The national debt is the amount of money the federal government has borrowed to cover the outstanding balance of expenses incurred over time. Current debt: $33.5T and growing.

A hike in interest rates boosts the borrowing costs for the U.S. government, fueling an increase in the deficit. Interest expense on US public debt will surpass $1T this year costing Americans $4B dollar a month. 

Government spending is the greatest threat to inflation. It’s not the only cause, but the main one. Printing money simply devalues it. The US National Debt is not sustainable. We can’t have debt rising faster than our growth as a country. A forced recession, or further escalation in the war could force the Fed to lower rates sooner than expected.