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Expert Update - 08.21.2020

Fannie and Freddie’s New Refinance Fees

Last week, Fannie Mae and Freddie Mac announced the addition of a 0.5% fee that will be applied to all mortgage refinances starting in September. Any refinance that is not already in process will be hit with this fee – an estimated $1,400 on the average mortgage originated today. This announcement was met with strong criticism from many in the mortgage industry as the housing market has been one of the sole bright spots in this pandemic economy. “This announcement is bad for our nation’s homeowners and the nascent economic recovery,” wrote Bob Broeksmit, CEO of the Mortgage Bankers Association, in a statement. “Requiring Fannie Mae and Freddie Mac to charge a 0.5% fee on refinance mortgages they purchase will raise interest rates on families trying to make ends meet in these challenging times.” This change is specifically designed to protect Fannie and Freddie from “market and economic uncertainty resulting in higher risk and costs” as noted in a letter Fannie Mae sent to lenders. There is also concern on whether the change was made because the FHFA is increasingly worried that Fannie Mae and Freddie Mac could face huge losses when the mortgage bailout program ends, and borrowers have to start making their payments again.1

Rural Home Prices Jump

The Coronavirus pandemic seems to be pushing homeowners from cities into rural and suburb areas. According to a July study by Redfin, before the pandemic 9% of homebuyers said they were looking for a home in rural areas. However, as the pandemic stretches into its 6th month in the U.S., 19% now say they are considering more rural options. Redfin Economist Taylor Marr notes, “Now we’re seeing concrete evidence that rural and suburban neighborhoods are more attractive to homebuyers than the city, partly because working from home means commute times are no longer a major factor for some people.” This increase in demand has driven up home prices in rural areas by 11.3% Y-o-Y and 9.2% in suburban areas.2

New Construction on the Rise

New construction of both single-family and multifamily homes jumped in July – up 23% Y-o-Y. This is almost back to pre-pandemic levels from the first quarter. The rise in multifamily units may lead to an oversupply of apartment buildings, especially in cities as consumers are looking to move to suburban and rural areas. This oversupply could lead to sluggish apartment rent growth moving forward. However, the rise in new single-family units is beneficial as inventory remains low – down 19% from a year ago. Inventory shortages should be expected for the rest of 2020 and if these trends continue, there may be a more balanced market in 2021.3

Movie Lover’s Dream?

Remember back when renting a movie required driving to your nearest Blockbuster store and walking through aisles of movies to find the one you wanted? Well, a few lucky residents in Oregon were able to relive those days in a big way. Sandi Harding, manager of the last remaining Blockbuster movie rental located in Bend, Oregon, has put her store up for rent on Airbnb. Beginning August 17th, residents of Deschutes County were able to book one of three nights available for a “totally rad, yet intimate slumber party at the world's last BLOCKBUSTER store.” Harding converted part of the store into a “living room” complete with a pullout couch and big screen TV, and, of course, the lucky renters were able to watch any movie in the store during their stay.4

 

Sources: 1CNBC, 2HousingWire, 3National Association of Realtors®, 4Fox News

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