President Trump’s 2020 housing moves

President Trump’s housing moves
by Brad Cartier, posted in Newsletter

Last week we outlined policy proposals of Democratic presidential candidates related to housing. This week, we will look at some recent announcements and analysis of President Trump’s housing-related moves.

Greg B. Smith of The City reported last week that the fiscal 2021 budget proposed by the Department of Housing and Urban Development (HUD) virtually eliminates all funding for big-ticket capital projects in public housing. “It also seeks a 10% cut to federal funds for public housing operating budgets nationwide to $3.5 billion, and trims the Housing Choice Voucher rental subsidy, also known as Section 8, by $5 billion.”

That said, Rob Astorino of The New York Postnotes that “gone is the federal mandate dictating the modeling of communities based on statistical formulas. Restored to local officials is the power that gives them the flexibility to weigh real-world factors in making housing decisions…And builders are now more likely to build affordable housing, since the attached strings have been removed.”

David Jeans of The Real Deal reported on President Trump’s comments about his Opportunity Zone policy: “Jobs and investments are pouring into 9,000 previously neglected neighborhoods thanks to Opportunity zones,” Trump said. “Wealthy people and companies are pouring money into poor neighborhoods or areas that haven’t seen investment in many decades.”

See Emily Disalvo’s recent The Hill article outlining the different pictures lawmakers are painting of the President’s Opportunity Zone policy.

The President is also weighing in on rate decisions, with Jeff Cox of CNBC reporting that due to the coronavirus impact, the President recently noted, “I hope the Fed gets involved, and I hope they get involved soon.” Although the President didn’t mention a rate cut, he did state that the U.S. central bank should “follow its global counterparts who are putting in a lot of money.” to combat coronavirus and the ensuing economic slowdown.

Finally, from our good friend Brandon Hall over at BiggerPockets, here is an excellent article describing how the GOP tax bill affects us and our businesses.

Stock correction and interest rates

We have been in the midst of the worst stock dip since 2008. This has sent mortgage rates to new lows, prompting many questions from investors concerning the benefits of refinancing. We’ve discussed what investors should do in a low-interest rate environment, and we even have a feature that connects investors directly with lenders—just a simple survey and then get your rate quote.

In fact, just yesterday CNN reported that the Fed cut interest rates by 0.5% in an emergency rate cut. Jack Hough of Barron’s also released this week an aptly titled article that reiterates these pressing points for investors: Don’t Panic — Unless It’s to Refinance Your Mortgage.

In the meantime, Julian Hebron of The Basis Point notes that according to the Mortgage Bankers Association (MBA), 30-year rates were supposed to be around 3.6% in Q1 2020, but are now sitting at 3.375%.

For a better perspective, here is what the average 30-year fixed rate has done since 2018 according to the Federal Reserve Bank of St. Louis:

average 30 year mortgages rates since 2018

Source: Federal Reserve Bank of St. Louis

Indeed, Diana Olick of CNBC highlights that coronavirus fears have spooked the markets and sent interest rates tumbling. However, what struck me as I read this article was the following quote, which puts refinancing into a better perspective for investors: “Unlike Treasuries, which can’t be paid off early by the government, mortgages can be paid off early, when borrowers refinance. When that happens, investors [in those mortgages] lose those monthly interest payments, and years of potential profit.” Refinancing at this time can save you thousands per property.

Sam Goldfarb of The Wall Street Journal (subscription required) reports that Federal-funds futures—where traders bet on central-bank policy—shows that investors believe there is a 72% chance the Fed will lower its policy rate by 0.25% during its March 17-18 meeting.

Coronavirus and housing market: An update

Further to my recent analysis of the ongoing impact of coronavirus on housing, there were a few noteworthy updates worth highlighting this past week. First, the MReport highlights some interesting takeaways to date, noting that Chinese home-price growth slowed to an 18-month low this past January, but that this may send more Chinese investors to seek U.S. real estate as a hedge or store of money during this difficult time. In a housing market that is starving for inventory, this could push prices higher.

Paige Austin of Patch reports on the L.A. market, noting that “Home sales and prices dropped last month in Los Angeles County, and authorities think the worldwide onset of the novel coronavirus may have rattled the market.”

Professional Builder focuses on the rate impact of the virus, reporting that mortgage interest rates will continue to fall “as investors take their money out of the stock market and put the cash into safer U.S. Treasury bonds.” Mortgage rates typically go down when bonds are strong.

Striking a more practical chord, Jennifer Geddes of SF Gate released an article last week titled How to Coronavirus-Proof Your Home—and Your Life.