There's not too much that happened in 2023 that the housing industry wants to look back and dwell on. These two predictions pretty much say it all: Fannie Mae expects 2023's existing home sales will be the lowest since 2010 and the Mortgage Bankers Association (MBA)'s December market forecast showed originations will come in at $1.6B for 1-4 units. Interest rates got most of the blame for the sluggish production: Rates started the year at 6.48% and finished at 6.61% according to Freddie Mac, but it was the wild ride in between that kept buyers on the sidelines and made refinances almost irrelevant. With the Fed taking a pause in December and signaling cuts to come this year, we can all hope that the 7.79% rates hit in October was the peak and better days are coming soon. At InGenius, we found that 2023 also brought some interesting developments that could lay great groundwork for the future of the market - especially for first-time home buyers and low-to-moderate income (LMI) consumers.
Acronyms to the rescue?
We heard more about down payment assistance (DPA) and special purchase credit programs (SPCPs) during a year where interest rates kept pricing potential buyers out of the market.
Down Payment Resource (DPR) reported that 50 new agencies began offering DPA in the third quarter of 2023, bringing the total to 1,373. Last reported in October 2023, there are 2,256 DPA programs available, 54 of which were introduced during Q3. Additionally, DPR said that 82% of DPA programs had available funding for eligible home buyers.
Created to specifically help underserved market segments, SPCPs provide unique standards to make qualifying and obtaining mortgages easier for target groups. Government-sponsored entities Fannie Mae and Freddie Mac both purchase loans facilitated by SPCPs and each have programs of their own. Wholesalers and IMBs touted access to SPCPs through their organizations throughout the year, helping to raise awareness and interest in the concept.
Lenders have their work cut out for them to educate consumers and their real estate partners about the availability of DPA and SPCPs, as well as how to navigate their usage.
The GSEs were busy:
Introduced in 2022, Fannie Mae extended its Positive Rent Payment reporting program through December of 2024. Fannie said that reporting on-time rent payments to the credit bureaus can help renters establish, maintain, and improve their credit scores, which in turn can help them on the path to becoming qualified home buyers. Freddie Mac also has credit building initiatives that allow rent payment history to be included in loan purchase decisions.
Freddie Mac contributed a great deal to 2023's DPA movement: Freddie launched an online resource called "DPA One" that sorts and shows up to three DPA programs at a time so lenders and borrowers can compare them and find their best-match programs. Freddie also worked with Fannie Mae to introduce standardized documents for mortgages using DPA. Freddie said the new lien docs will "increase clarity, consistency and accessibility of DPA programs."
Fannie Mae also built resources for a major demographic last year: Hispanic homeownership has grown for eight consecutive years according to the National Association of Hispanic Real Estate Professionals' 2022 State of Hispanic Homeownership Report released in 2023. Fannie Mae reached out to the Latino community by rolling out its HomeView en Español digital platform to help educate Spanish-speaking consumers.
Good news to share - and build on:
There's more work to do, but the National Association of Realtors released its "Wealth Gains by Income and Racial/Ethnic Group" in April and the results were encouraging. NAR found that low-income homeowners were able to build $98,900 in wealth from home price appreciation alone over the last decade, while middle income homeowners accumulated an average of $122,000 and upper-income households saw an increase of $150,800. NAR's wealth gains report reinforced what the industry knows: Homeownership is how most Americans build worth and wealth. Although the housing gap persists, many of the programs that emerged in 2023 to offset the difficult market conditions could benefit LMI consumers, renters in majority minority census tracts (MMCTs) and other underserved communities for years to come.
Jeff Walton is CEO of InGenius. With over 35 years in home mortgage and as a CEO and President of large national mortgage companies, Jeff is focused on helping the industry achieve high performance using actionable intelligence. Interested in learning more? Book an intro call with InGenius Data.