🌱 Spring ushers in housing market optimism

👋 Welcome to Friday. Today’s newsletter looks at the Fed and new White House initiatives — it's 876 words, a 3.5-minute read.

1. Powell says Fed on track to cut rates this year

Federal Reserve Chair Jerome Powell suggested the central bank is getting close to the confidence it needs to start lowering interest rates, bolstering the idea that such a move could come in the next few months.

He told lawmakers that rate reductions “can and will begin” this year, adding that policymakers are well aware of the risks of cutting too late. Powell’s comments sent benchmark 10-year Treasury yields to a one-month low.

The Fed Chair also told Congress that the threat to the US banking system from mounting bad commercial real estate loans is manageable. He noted the Fed is talking with lenders to make sure they are on top of potential losses.

2. Powell’s take on the U.S. housing market.

Speaking before the Senate Banking Committee on Thursday, U.S. Senator Jon Tester of Montana asked Powell for his take on the U.S. housing market.

Powell told him that, “There are two big things going on. One is we have this big underlying shortage of housing and it’s due to things like difficulties in zoning… it’s more difficult for builders to get labor and materials. Then there are a ton of things happening because of the pandemic and because of inflation, because of higher rates, and those in the short-term are weighing on the housing market. But as mortgage rates come down, and that all goes through the economy, we’re still going to be back to a place where we don’t have enough housing.”

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3. Catch up quick

📈 Purchase mortgage application volume increased 11% as of March 1, compared to the week before. The Refinance Index increased by 8%. (MBA)

👏 Homebuying and homeselling sentiment rises ahead of the spring homebuying season, reaching its highest point in almost two years. (Fannie Mae)

👀 Coming Up: The jobs data is the main focus today, with eyes also on any potential downward revisions from January’s hot print. (Follow here)

4. Biden to call for first-time homebuyer tax credit

On Thursday, the White House proposed a $10,000 tax credit for first-time homebuyers and home sellers.

Here’s how the two credits would work, according to the White House:

1. “Middle-class” first-time homebuyers would get an annual tax credit of $5,000 a year for two years. The White House didn’t specify what “middle class” means.

2. A one-year tax credit of up to $10,000 to “middle-class families who sell their starter home, defined as homes below the area median home price in the county, to another owner-occupant.”

To take effect, the proposal would require Congressional approval. As of today, neither Democratic nor Republican leadership in the House or Senate has come out to support the measure.

5. Location, location, location? Wait. Buyers care more about this

Price (56%) is more important than location (50%) to surveyed consumers when choosing a home, according to the latest nationwide survey from Coldwell Banker Real Estate.

• The survey also found that women value price more than men – 60% to 48%, respectively.

The old adage “Location, location, location” is still important, but with high home prices and mortgage rates, it’s lost some of its power.

Higher mortgage rates, Coldwell Banker’s agent told Boston News, are affecting buyers’ purchasing power, and an inventory shortage is making them expand their search.

6. Mortgage rates fall for the first time in five weeks

Mortgage rates ticked down slightly this week, a tiny boon to buyers eager to make a move with newly listed homes coming to market.

The 30-year fixed-rate mortgage averaged 6.88% in the week ending March 7, down from 6.94% the previous week, according to data from Freddie Mac released Thursday. A year ago, the average 30-year fixed-rate was 6.73%.

“Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates,” said Sam Khater, Freddie Mac’s chief economist.

7. Fannie Mae: Less paperwork, faster loans

Fannie Mae announced enhancements to its Desktop Underwriter that will streamline originations for lenders and buyers.

• The new capability automates the validation of borrowers’ assets, income, and employment and produces a 12-month report. Bank statements, information about assets, and other data from third-party vendors become available in just one step.

The report can then also be used to consider positive rent payment and cash flow history, a feature that supports borrowers with little or no credit history.

Fannie Mae says lenders can “achieve Day 1 Certainty” when with validated information, potentially increasing loan quality and reducing repurchase risk.

“With this new update in Desktop Underwriter, we are removing a hurdle from the loan application process and bringing greater speed, simplicity, and certainty to both lenders and borrowers.”

You’re all caught up. See you on Monday!

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