The Week Ahead: Housing Policy and the State of the Union Address

Here’s a look at the news and events that will shape housing and mortgage finance in the week ahead for DS News.

On Tuesday, January 12, President Barack Obama will deliver his eighth and final State of the Union Address as he heads into the home stretch of his administration. In last year’s address, he merely glossed over the subject of housing policy, nearly avoiding the topic completely except for mentioning the FHA’s lowering of the mortgage insurance premiums that occurred last January. Instead, he focused the speech mostly on job creation.

The Obama Administration has been self-congratulatory when it comes to the housing industry recovering from the devastation of the 2008 crisis despite the fact that the homeownership rate fell to its lowest level in nearly five decades during the summer of 2015. Not only that, but housing affordability is a major concern for housing heading into 2016 as prices draw closer to their pre-recession peak, the inventory of available homes for sale is low, student debt continues to mount, and wage growth has been slow.

Various top officials in the administration have stated that housing policy will not be a priority in Obama’s last year as President. Some, such as Counselor to the Secretary of the Treasury Antonio Weiss, have come right out and said the administration will not recap and release Fannie Mae and Freddie Mac from the FHFA’s controversial, now more than seven-year-old conservatorship as Obama heads into his final year in office.

For the broader economy, data shows this has been the slowest recovery since World War II. GDP growth has fallen short of expectations. The Fed finally began tightening last week, noting on several occasions that they would not do so until they had seen sufficient economic growth to warrant raising the short term rates.

Given the Obama Administration’s position on economic and housing recovery, it is unlikely that the President will spend any length of time talking about it during Tuesday’s speech. One economist noted last year that one of the major reasons the President barely mentioned housing in last year’s State of the Union address is that the urgency has faded, since many (though not all) housing metrics and default numbers are “back to normal.”

That does not mean there is nothing to talk about in the housing industry heading into 2016, however. Many within the industry believe that 2016 will bring more positives for housing despite the headwinds that persist.

“I believe 2016 will see continued improvement in the housing market with the 30-year mortgage rate staying below 4.5 percent, and continued low unemployment and declining underemployment resulting in increases in the first time buyer,” said Patrick Stone, Chairman and CEO of Williston Financial Group, based in Portland, Oregon. “With growth in first time buyer participation, move up buyers will increase and new residential construction will increase….the net result being improved inventory and an overall increase in purchase transactions of up to 10 percent.”

Matt Martin, CEO of Dallas-based Chronos Solutions, stated: “It’s easy right now to get caught up in the reaction to some of the more turbulent developments in the industry, such as the impact of TRID or the Fed’s interest rate hike. But when I step back, I see some real positives for the year ahead. There are enough positive indicators right now, such as improved employment and salary figures, to suggest the purchase market will continue to grow. We’ve also seen a lot of M&A activity recently.  While that means consolidation, I also see hungrier, more innovative players in the market competing for share.  Once the initial gloom and doom response to the interest rate increase dissipates, we will realize that it remains historically low. It’s even quite possible we’ll see some increased HELOC activity later this year.”