1. The Fannie Mae Nationwide Housing Survey: Constructive Developments in Housing Market Sentiment Regardless of Persevering with Challenges
In a promising flip of occasions, the Fannie Mae Dwelling Buy Sentiment Index® (HPSI) climbed 3.5 factors in January to achieve 70.7, marking its highest stage since March 2022. This uptick might be attributed to a surge in client confidence relating to job safety and a notable enhance within the variety of shoppers anticipating decrease mortgage charges. A big 82% of shoppers expressed confidence of their job safety for the following 12 months, up from 75% within the earlier month. A record-high 36% of respondents anticipate mortgage charges to lower over the following 12 months, whereas solely 28% anticipate a rise, and 35% foresee charges remaining unchanged.
Regardless of these optimistic indicators, sentiment relating to homebuying situations stays predominantly pessimistic, with solely 17% of shoppers contemplating it a very good time to buy a house. However, the general index has seen a noteworthy 9.1-point enhance 12 months over 12 months.
Doug Duncan, Fannie Mae’s Senior Vice President, and Chief Economist, highlighted the importance of those findings, stating, “Mortgage price optimism elevated markedly once more in January, with a survey-high proportion of shoppers anticipating mortgage price declines over the following 12 months.”
Nevertheless, Duncan additionally identified persistent challenges within the housing market. Whereas decrease mortgage charges are a boon for affordability, different elements comparable to dwelling costs, stagnant family incomes, and restricted housing provide proceed to pose limitations to homeownership.
In abstract, whereas the sentiment round housing market situations is exhibiting indicators of enchancment, there are nonetheless hurdles to beat. The gradual enhance in housing demand and gross sales exercise forecasted for 2024 could also be supported by favorable mortgage price tendencies, however significant progress in addressing affordability and provide points stays essential for sustainable development within the housing market.
2. Fed Mortgage Officer Survey: Tightened Lending Requirements and Weaker Demand in Fourth Quarter 2023
The Federal Reserve’s January 2024 Senior Mortgage Officer Opinion Survey on Financial institution Lending Practices (SLOOS), which covers the fourth quarter of 2023, reveals a notable tightening of requirements and a lower in demand throughout numerous mortgage classes.
For companies, the survey signifies that banks, on steadiness, tightened requirements for business and industrial (C&I) loans to companies of all sizes. Moreover, there was weaker demand reported for C&I loans in addition to for all business actual property (CRE) mortgage classes.
On the family entrance, lending requirements tightened throughout all classes of residential actual property (RRE) loans, besides for presidency residential mortgages and government-sponsored enterprise (GSE)-eligible residential mortgages, which remained largely unchanged. Demand for RRE loans additionally weakened, together with decreased demand for dwelling fairness strains of credit score (HELOCs). Moreover, requirements reportedly tightened for bank card, auto, and different client loans, with a lower in demand noticed throughout these classes.
Regardless of the tightening of lending requirements throughout most mortgage classes within the fourth quarter, the survey notes that the online shares of banks tightening lending requirements have been decrease in comparison with the third quarter for all mortgage classes.
The January SLOOS additionally featured particular questions relating to banks’ expectations for lending requirements, borrower demand, and mortgage efficiency all through 2024. Banks, on steadiness, anticipate lending requirements to stay steady for C&I and RRE loans however foresee additional tightening for CRE, bank card, and auto loans. Moreover, expectations level in direction of strengthened demand throughout all mortgage classes, coupled with a decline in mortgage high quality throughout most mortgage varieties.
General, the report underscores a cautious stance amongst lenders, with tightening requirements and subdued demand noticed throughout numerous mortgage segments, indicating potential shifts within the lending panorama within the coming months. A lot will rely on the actions of the Federal Reserve, which—regardless of aggressive signaling about price cuts final quarter—appears decided to carry charges regular till “one thing breaks.” They appear set on ready until unemployment ticks up over 5% (maybe effectively over); hopefully.
Written by Franklin Carroll. February 12, 2024
Franklin Carroll is Kukun’s VP of Modelling and Analytics; After ending his research on the College of Chicago, he labored at Fannie Mae the place he helped construct Collateral Underwriter, roll out the Worth Confirm initiative, and specialised in collateral associated and credit score associated coverage.