The Best Opportunities the Trump Administration Brings to Housing

Feb 19, 2017 by

For the first time in history, the United States elected a president without any political or military experience. For some, this means a promising departure from the status quo and the rapidly increasing feelings of disenfranchisement from our political system. For others, a Trump presidency encourages apprehension, as his directives are considerably less predictable than those of a seasoned politician. The actuality of a Trump Administration still prompts more questions than clear policy directives; however, the new president’s lifelong career as a builder and real estate investor could provide some fresh prospects for a growing, but fragile, housing industry. While fumbling GSE reform or following through on his promise for mass deportations would cause major setbacks to the housing market, below are where some of the best opportunities might exist.

Housing Supply
Trump likes to build things, and if you ask 100 real estate agents from around the country what is the one thing that would help them sell more homes, the most common answer would be increasing available housing inventory, especially in the affordable price ranges. The home-building industry was nearly decimated during the housing crisis. New-home construction was almost non-existent between 2008 and 2013. During that same period of time, the country added nearly five million new households. The net result of this shortage of housing supply has been a sharp increase in home prices and an equally sharp decrease in affordability, leaving millions of would-be homeowners on the sidelines.

This has proven to be a difficult problem to solve, as rising construction costs and an increasingly complicated regulatory environment have made the business prospect for the construction of affordable homes unviable in many markets. The Trump Administration could, by providing supply-side solutions to our housing inventory challenges, inject a powerful boost to the industry and go a long way toward reversing the trend of decreasing homeownership rates across the country.

Financial Regulations
Members of the new administration have promised, and have already begun, an overhaul of our financial regulations. Many leaders in the housing finance industry, regardless of their political leanings, believe the market would benefit by some selective regulatory relief. While nobody wants a return to the irresponsible lending that proliferated in the last decade, pulling back on a few regulatory levers would stimulate demand, especially in a number of markets where an increase in qualified buyers is most needed.

Consumer Confidence
In the years following the Great Recession, many would-be homebuyers have been understandably cautious to leap back into the housing market. This has been especially true for our minority and millennial populations, whose introductions to the housing market were likely during the worst market conditions in a century. While the shortage of housing inventory has made this issue less noticeable, as the market continues to normalize, a shortage of buyers will become more problematic.

The new president could help improve this perspective by using his formidable promotional talents to advise the country that it is safe to get back into the housing market, and that purchasing a home is still one of the best ways to build wealth and improve your quality of life. Because purchasing a home is as much about emotion as anything else, one of the best things our new commander-in-chief can do for the housing industry is to also be the “cheerleader-in-chief” for buying a home. Given that housing represents about 16 percent of our overall economy, President Trump should have the appropriate motivation to do exactly that.

Gary Acosta is co-founder and CEO of the National Association of Hispanic Real Estate Professionals (NAHREP) and co-founder of The Mortgage Collaborative.

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Trump Administration ‘Indefinitely’ Suspends FHA Mortgage Insurance Premium Cut

Jan 23, 2017 by

The recent reduction in annual mortgage insurance premiums for Federal Housing Administration (FHA)-backed mortgages has been “suspended indefinitely,” the U.S. Department of Housing and Urban Development (HUD) announced in a mortgagee letter on Friday. The cut would have lowered premiums to 0.60 percent, saving FHA-insured borrowers with a closing date on or after Jan. 27, 2017 an average $ 500 this year.

“More analysis and research are deemed necessary to assess future adjustments while also considering potential market conditions in an ever-changing global economy that could impact our efforts,” the HUD letter read.

HUD Secretary nominee Ben Carson suggested the Trump Administration would address the reduction during his confirmation hearing earlier this month, telling a Senate committee the Obama Administration did not consult the Trump Administration about the cut until just prior to its announcement.

“Certainly, if confirmed, I am going to work with the FHA administrator and other financial experts to really examine that policy,” Carson said at the hearing.

The suspension—one of the first acts by the Trump Administration—is a setback for the housing industry, which welcomed the reduction as an opportunity to extend homeownership to 1 million conventionally uncreditworthy homebuyers.

“According to our estimates, roughly 750,000 to 850,000 homebuyers will face higher costs and 30,000 to 40,000 new homebuyers will be left on the sidelines in 2017 without the cut,” says National Association of REALTORS® President William E. Brown. “We’re disappointed in the decision but will continue making the case to reinstate the cut in the months ahead.”

“We hope HUD and the Trump Administration will make it a priority to quickly review the reduction in the FHA mortgage insurance premium,” says Geoff McIntosh, president of the California Association of REALTORS®. “FHA’s single-family home portfolio is financially sound as it has ever been, and we hope that once the new administration has thoroughly reviewed the merits of the premium reduction, the suspension will immediately be lifted.”

“We recognize the Administration’s need to examine the overall health of the insurance program and weigh that against the benefits of lowering mortgage insurance premiums,” says David H. Stevens, president and CEO of the Mortgage Bankers Association (MBA). “Given that lenders have already started preparing for the MIP decrease, it is important that any new policy be implemented in a way that minimizes disruption for borrowers and lenders. MBA looks forward to working with the new administration to ensure the long-term stability of the FHA program, creating an environment that provides clarity in regulations for lenders while at the same time promoting access to credit and protecting consumers.”

Suzanne De Vita is RISMedia’s online news editor. Contact her with your real estate news ideas at

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Hopes High as Home Builders Encouraged by New Administration

Jan 18, 2017 by

Home builders have high hopes for the year ahead, anticipating a solid real estate market while being encouraged by the promises of a new administration.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) posted 67 this month, a decrease of only two points from December 2016, with the measure of “buyer traffic” at 51, the measure of “current sales conditions” at 72, and the measure of “sales expectations” at 76. An above-50 reading indicates more builders have a positive outlook than a negative one.

“Builders begin the year optimistic that a new Congress and administration will help create a better business climate for small businesses, particularly as it relates to streamlining and reforming the regulatory process,” said Granger MacDonald, NAHB chairman, in a statement on the Index.

The current cost of complying with regulations is constraining construction businesses to the detriment of new housing stock, which remained severely limited at the beginning of the year. The shortage is especially pronounced in the starter home segment, which is preventing first-time homebuyers from entering the market. Lessening the burden could open up more build opportunities, alleviating demand.

Still, approximately 40 percent of those recently surveyed by the Associated General Contractors of America organization are “worried” that regulations will bear down further in the future.

“While the new administration and its stated policy objectives offer many reasons for optimism, there is a significant risk to the industry if the new Congress and administration under-deliver,” Stephen Sandherr, CEO of the organization, said in a recent statement. “If plans to invest in infrastructure, reform healthcare laws and roll back regulations are delayed, many contractors will likely scale back their plans to expand headcounts.”

Nearly three-quarters of construction businesses expect to hire more contractors in 2017, according to the AGCA, with the majority planning to grow between 1 and 25 percent. A lack of younger contractors is a factor, with the NAHB estimating the median age in the sector at 42.

“Concerns going into the year include rising mortgage interest rates, as well as a lack of lots and access to labor,” said Robert Dietz, NAHB chief economist.

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Foreign Real Estate Investors Not Dissuaded by Interest Rates, New Administration

Jan 3, 2017 by

Foreign investors continue to view U.S. real estate as a sound investment, with an astounding 95 percent of those recently surveyed by the Association of Foreign Investors in Real Estate (AFIRE) reporting they plan to “maintain or increase their investment” in 2017. U.S. real estate was ranked No. 1 by respondents for both security and stability, as well as opportunity for capital appreciation.

Foreign investors’ perceptions of U.S. real estate, with the incoming administration and rising interest rates, are overwhelmingly positive: 60 percent of survey respondents reported an unchanged opinion about the market from last year, citing its stability and security. The top five cities for real estate investment this year, according to the survey, are New York, N.Y., Los Angeles, Calif., Boston, Mass., Seattle, Wash., and San Francisco, Calif. 2017 marks New York’s seventh year at the top of the list.

Washington, D.C., notably, slipped from the top five for the first time since 1992—a misleading move, according to Catherine Pfeiffenberger, AFIRE chairman.

“Washington, D.C. is a global gateway city with good leasing activity and a growing economy bolstered by a young workforce,” says Pfeiffenberger. “The combination of those stable fundamentals will continue to attract capital from around the world. The new administration’s focus on the defense and aerospace industries is also expected to benefit the D.C. area in the coming years.”

Investment opportunity in U.S. real estate has widened, according to the survey, with industrial properties moving ahead of multifamily properties as the No. 1 investment type. Multifamily, office, retail and hotel round out the top five. The shift has strengthened foreign investors’ confidence in emerging markets, such as Charlotte, N.C. and Nashville, Tenn.

Fifty percent of respondents, in addition, believe Brexit will be beneficial for U.S. real estate. (London fell to the No. 3 spot globally in the survey, as a result.) The most secure and stable countries this year behind the U.S., according to respondents, are Germany, Canada, Australia and the U.K; the countries with the best opportunities for capital appreciation are Brazil, Germany, the U.K. and Australia.

Impending economic and political changes in the U.S., still, have given some foreign investors pause, the survey shows—a cue for real estate professionals to offer comprehensive data to their investor clients.

“As uncertainty rises with a new government in Washington and interest rates that have risen dramatically, it is no surprise that investors have signaled a note of caution,” says James A. Fetgatter, CEO of AFIRE. “Previous, comfortable spreads between cap rates and interest rates have narrowed, making the investment criteria more selective and difficult. Increased market research and discipline will be required.”

Source: Association of Foreign Investors in Real Estate (AFIRE)

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What Will a Trump Administration Mean to the Housing Finance Industry?

Nov 14, 2016 by

After Donald Trump’s stunning victory on Election Day, many of us are wondering what his election might mean to the residential mortgage industry, especially considering the Trump team provided few details on housing during the campaign. The following are some perspectives:

Reduced Regulations
This is the one area where the Trump campaign did provide some indication of what the president-elect would do. Trump’s transition team has recently indicated that it would like to see a full repeal of the Dodd-Frank law, which would include the abolishment of the CFPB.  Many people think this is unlikely, but most in the mortgage industry would welcome a broad rollback of regulations. Reduced regulation would provide a number of things, some good and some not so good, depending on where you work and where you stand on issues such as subprime lending.

First, reducing or eliminating the detrimental usage of enforcement tools such as the False Claims Act could lure large lenders back to the FHA program. It would also cause many lenders to reduce underwriting overlays and open the credit box, which is needed. Secondly, reducing regulation could reverse the trend of swelling loan manufacturing costs by lowering mortgage origination expenditures associated with compliance. In theory, this would improve pricing for consumers. Finally, reducing regulations could spur a resurgence of subprime and Alt-A lending. This could be good or bad, depending on who you ask.

Subprime lending has all but vanished from the mortgage market, leaving consumers with less-than-stellar credit with few options. The reemergence of subprime lending would definitely increase overall mortgage volumes, but it could also lead to increased foreclosures and larger and more frequent real estate bubbles. Large lenders, who will be unlikely to move towards subprime, will probably counter by creating products that leverage their ability to hold certain proprietary loans on their balance sheets. This would obviously favor larger depository institutions that have the capacity to hold loans on their books. In terms of marketshare, reduced regulations will also favor big banks.

Higher Interest Rates
Higher interest rates were already in motion before Trump was elected, but the upward trend accelerated in the days following, although it’s not yet clear why. Economists generally believe that most of Trump’s stated ideas on immigration, trade, infrastructure, and tax rates will lead to bigger deficits and higher inflation. While a deficit-hating Congress could keep some of this in check, inflation and deficits equate to sharply higher interest rates.

This obviously would not be good for mortgage originations and could lead to further consolidations in the industry. Higher interest rates also favor big money-center banks, which have diversified income streams and mortgage servicing units that will see their MSR values increase. Lenders with deep pockets are in the best position to weather any downturn.

GSE Reform
This, in my view, is the biggest wild card. Some believe that Rep. Jeb Hensarling, R-Texas, chairman of the House Financial Services Committee, finally has an ally in the White House who will support his desire to dismantle Fannie Mae and Freddie Mac and eliminate any further government guarantees of conventional mortgage loans. This would be catastrophic for mortgage lending in America, causing thousands of independent lenders to go out of business and making mortgage loans available only to a relatively miniscule segment of our population. But others believe the GSEs provide billions of dollars to the Treasury each year and that Congress would never support a policy that would harm homeowners and turn off the spigot of free cash to the government.

It is difficult to anticipate how this one will play out. If Fannie Mae and/or Freddie Mac need to take a draw from the Treasury, which is likely to happen at some point, some members of Congress might see that as an indicator that it is time for the government to get out of the mortgage business. Let’s hope that cooler heads will prevail. Reforming the GSEs and creating a permanent source of liquidity for the mortgage lending industry would be good for everyone, especially independent lenders. Trump is a real estate man; he may see homeownership as a way to build communities and support our economy. He’s not someone who believes that most of us should be renters.

There is no doubt that there are a lot of questions that will remain unanswered in the coming weeks and months. What will be Trump’s position on affordable lending or FHA reform? Will he take a page from the Bush Administration and see homeownership as a vehicle to engage with minority and other underserved communities? His appointments to key housing positions at HUD and inside the White House will begin to give us some indication of what is likely to occur.

Gary Acosta is the CEO of the National Association of Hispanic Real Estate Professionals (NAHREP) and co-founder of The Mortgage Collaborative.

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