Rocket Fuel Newsletter – Is the government getting ready to step back from housing?

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This week: Home listings reach a record high, Americans react to extreme weather, one state experiences the benefits of stronger home construction, and questions arise about Fannie and Freddie.

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Sellers are sitting on a record number of home listings

The housing market is shifting, and right now, it's neither a buyer's nor a seller's market. Home prices are still rising, even as housing supply reaches a 5-year high and the value of unsold inventory hits a record number. Read the full article from Redfin.

The impact of extreme weather on housing

As billion-dollar climate disasters become increasingly common, Americans are grappling with how to respond. A recent Pew Research Center survey found that 77% support stricter building standards in high-risk areas, with 64% backing government financial assistance for rebuilding after extreme weather events.

While Americans show strong support for proactive and recovery measures, they are more divided on insurance support, with only 41% favoring government aid for rising insurance costs.

Here’s the full article from the Pew Research Center.

The University of Alabama reports benefits from fortifying homes

A new report from The University of Alabama’s Center for Risk and Insurance Research shows that fortifying homes against extreme weather significantly reduces damage, saves money, and leads to lower insurance claims.

After devastating hurricanes in 2004 and 2005, Alabama began offering grants and insurance discounts to encourage homeowners to strengthen their homes. The study found that houses built or retrofitted to higher resilience standards suffered less damage in Hurricane Sally, resulting in faster recovery, reduced financial disruption, and a more stable insurance market. These efforts benefit both homeowners and the broader state economy.

Check out the Marketplace article and full University of Alabama report.

Are changes coming to Fannie and Freddie?

Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are two critical components of the U.S. housing market and overall financial system. These government-sponsored enterprises (GSEs) buy mortgages, package them into mortgage-backed-securities (MBS), and sell them to investors.

Around 70% of the U.S. mortgage market is supported by Fannie and Freddie, and their efforts help to provide liquidity and stability to the financial system.  

The structure of these GSEs is unique – they are in a hybrid status, meaning they are not fully public or private. While they are technically private, publicly traded companies, they operate under government conservatorship. This means that the government controls many aspects of their operations, and formal control over the GSEs belongs to the Federal Housing Finance Agency (FHFA) with the U.S. Treasury having powerful influence, including veto power over key actions.

The hybrid structure was put into place back in 2008 during the financial crisis as an emergency measure. Prior to 2008, Fannie and Freddie operated independently as publicly traded companies. However, their exposure to subprime loans put them on the brink of insolvency. By placing them into a conservatorship, the government was able to help stabilize the housing market and prevent further collapse.

The structure of the GSEs has been basically unchanged since then. However, there have been ongoing discussions about changing that and privatizing them again, returning them to a similar structure to before the financial crisis.

The current administration has been outspoken about its goal to privatize Fannie and Freddie again. Supporters believe that this could:

  • Generate revenue for the government
  • Reduce risk to taxpayers
  • Reward investors

On the downside, many fear this could lead to:

  • Higher mortgage rates
  • Reduced access to housing for low-income borrowers
  • Greater instability in the housing market, especially during economic downturns

The future of Fannie Mae and Freddie Mac remains a hotly contested debate. Lawmakers on both sides have expressed differing views on the future of the GSEs and whether they should remain under government oversight or transition back to private ownership, reducing the government's involvement in the housing market.

As of now, a decision has not been reached – and it may be some time before one is made. What is clear, however, is that any changes to the GSEs would have sweeping impacts to the housing market as well as the broader U.S. economy.

Purchase season is in full swing. Stay prepared by engaging with industry leaders and discovering what’s next. We’ll be at these top events – let’s connect.

Join us for meaningful conversations, valuable insights, and new opportunities to drive your business forward. We look forward to seeing you there.

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