2014 could be summed up as a year of shaking off most of the debris caused from the housing crisis of 2008. While there are still some remnants of issues which crippled the U.S. economy, the year saw the implementation of several critical policy measures. From borrowers to home builders, market uncertainty has been minimized and consumers have more optimism.
Interest rates remain at their lowest levels as we end 2014. However, borrowers are still confronted with qualifying issues, although a small population will be able to take advantage of lower down payments and less stringent credit guidelines. 2014 volumes can be summed up as strong so home prices are headed higher projecting less demand for the upcoming months.
The Consumer Finance Protection Agency and its Dodd-Frank regulation took center stage this year as lenders adopted many key changes in dealing with consumers.
On the leadership level perhaps the biggest news of the year was in December former Congressman (D-NC) Mel Watt was confirmed to lead FHFA (Federal Housing Finance Agency) which oversees all mortgage issues at the federal level. The importance to borrowers is his commitment to make home ownership more affordable through various policy initiatives.
In May Julian Castro took over the reins as Secretary of HUD (Housing and Urban Development). His mandate is to continue to grow policies adopted from his predecessor Shawn Donovan. During the housing crisis it was the FHA (Federal Housing Authority) loan program which rose out of the ashes to become the program of choice for many borrowers. In 2014, its popularity continued and is expected in the years to come.
Mortgage rates remained affordable throughout 2014. They were down 65 basis points year over year. The challenge for many homeowners is meeting the credit qualifying guidelines. This is more apparent when you look at the employment data. Even though it has showed steady improvement, the types of employment continue to be a factor for many deciding to make a commitment or not?
Mortgage applications end the year down. Year over year they were down 15%, however for the year a reduction was projected so the result was not a surprise. The importance is even though rates remain affordable the population of those who can qualify has shrunk. On another front, mortgage rates crept up last week and throughout the year investor activity or those purchasing non-owner properties declined.
“Fannie Mae and Freddie Mac’s new low down payment program should improve access to credit for responsible buyers. “NAR applauds Fannie and Freddie’s commitment to homeownership by serving creditworthy borrowers who lack the resources for substantial down payments plus closing costs with its new down payment program,” NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark.
New Home Starts
New home starts end the year down. However, throughout the year there was positive resale activity. Stable mortgage rates led many to complete a transaction. However the affordable index (supply and demand) increased which resulted in housing activity declining. On another front 2014 saw the investor community retreating from the market due to the increase in prices.
Furthermore, rising home values are causing more investors to retreat from the market.” Lawrence Yun, NAR chief economist.
2014 can be summed up as a good year for the housing sector. Rates were flat, housing stock was available and the economy allowed millions to take advantage of completing a home purchase or refinancing their existing mortgage. The biggest challenge as we get ready to open the door for 2015 is how more borrowers can enter the market, which will allow for more growth?