Please enjoy this comprehensive daily analysis of the real estate and mortgage markets prepared by our AI platform ALFReD. Know Better. Work Smarter. Be More Successful. Tim

Opening Summary

As we approach the end of 2024, the real estate market is experiencing significant shifts across various sectors. The recent election of Donald Trump as the 47th President continues to reverberate through the industry, with notable impacts on builder confidence and potential changes for the GSEs. Residential real estate is showing signs of renewed optimism, while the commercial sector anticipates policy shifts. In the mortgage market, we’re seeing interesting developments in forbearance rates and credit availability, alongside a cautiously optimistic Federal Reserve outlook. Today’s newsletter delves into these critical developments, offering a comprehensive overview of the residential and commercial real estate markets, mortgage trends, and the CMBS/REIT sector.

Key Takeaways

• Builder confidence has surged following the resolution of election uncertainty, reaching its highest level since July 2024.
• The GSEs are poised for potential changes under the new Trump administration, with implications for multifamily and affordable housing initiatives.
• Mortgage rates remain stable, with the 30-year fixed rate averaging 6.78% as of November 19, 2024.
• Mortgage credit availability increased in October, potentially opening up more opportunities for borrowers.
• The share of mortgage loans in forbearance has seen a slight increase, though it remains at historically low levels.
• The Federal Reserve indicates that the current policy rate is likely at or near its peak, with potential rate cuts in 2025 if inflation remains low.
• Commercial real estate, especially the office sector, continues to face challenges with rising delinquency rates.

Residential Real Estate Markets

Builder Confidence Surges Post-Election

In a significant development for the housing market, builder confidence has risen sharply following the resolution of election uncertainty. According to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI):

• Builder confidence in the market for newly built single-family homes rose five points to 55 in November, reaching its highest level since July 2024.
• All three major HMI indices posted gains in November:
• The component charting current sales conditions increased six points to 61.
• The gauge measuring traffic of prospective buyers rose five points to 40.
• The component measuring sales expectations in the next six months increased five points to 62.

NAHB Chairman Alicia Huey noted, “The rise in builder sentiment reflects optimism following the election and a growing sense of stability in the housing market.” This surge in confidence could potentially lead to increased construction activity, helping to address the ongoing housing supply issues [Builder Confidence Moves Higher as Election Uncertainty is Lifted](https://eyeonhousing.org/2024/11/builder-confidence-moves-higher-as-election-uncertainty-is-lifted/).

Trump’s Victory: Potential Impacts on the Housing Market

The recent election of Donald Trump as the 47th President of the United States continues to be a focal point for the real estate industry. Potential impacts include:

• Possible rollback of Biden-era housing policies: Trump may seek to reverse some housing initiatives implemented during the Biden administration.
• Changes to mortgage regulations: The Trump administration might revisit mortgage regulations, potentially easing some restrictions on lenders.
• Impact on interest rates: Trump’s economic policies could affect interest rates, impacting mortgage rates and housing affordability.
• Focus on deregulation: A renewed emphasis on deregulation in the housing sector could lead to increased construction activity [4 Ways Trump’s Win Could Affect the Housing Market](https://finance.yahoo.com/news/4-ways-trump-win-could-120027327.html).

Housing Market Update: Inflation and Housing Costs

Recent data indicates that core inflation has ticked up, primarily driven by housing costs. Key points from Realtor.com‘s weekly housing market update include:

• Mortgage rates have shown some stability, with a slight decrease to 6.78%.
• Mortgage applications have seen a modest increase, hovering just above their year-ago level.
• The inventory of homes for sale continues to climb, with more new sellers entering the market compared to last year [Weekly Housing Market Update: Inflation Ticks Up—Driven by Housing Costs](https://www.realtor.com/news/trends/weekly-housing-market-update-november-15/).

Mortgage Markets

Current Mortgage Rates and Trends

As of November 19, 2024, mortgage rates have remained relatively stable:

• The average rate for a 30-year fixed mortgage is 6.78%, unchanged from last week.
• The average rate for a 15-year fixed mortgage is 6.13%, up slightly from 6.12% last week.
• The average rate for a 5/1 ARM is 6.02%, down from 6.04% last week Today’s Mortgage Rates: November 19, 2024.

Mortgage Credit Availability Increases

In a positive development for potential homebuyers, mortgage credit availability increased in October 2024. According to the Mortgage Bankers Association’s (MBA) Mortgage Credit Availability Index (MCAI):

• The MCAI rose by 1.5% to 96.7 in October.
• The Conventional MCAI increased 3.0%, while the Government MCAI decreased by 0.2%.
• Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 4.1%, and the Conforming MCAI rose by 1.1%.

Joel Kan, MBA’s Vice President and Deputy Chief Economist, stated, “Credit availability increased in October to its highest level since May 2024, driven by more availability of conventional and jumbo loan programs.” This increase in credit availability could potentially open up more opportunities for borrowers, especially in the higher-end market segment [Mortgage Credit Availability Increased in October](https://www.mba.org/news-and-research/newsroom/news/2024/11/15/mortgage-credit-availability-increased-in-october).

Slight Increase in Mortgage Forbearance Rates

The MBA’s latest Loan Monitoring Survey revealed a small uptick in the share of mortgage loans in forbearance:

• The total number of loans now in forbearance increased by 1 basis point from 0.26% of servicers’ portfolio volume in June to 0.27% as of July 31, 2024.
• By investor type, the share of Ginnie Mae loans in forbearance increased relative to the prior month from 0.51% to 0.54%.
• The share of Fannie Mae and Freddie Mac loans in forbearance increased relative to the prior month from 0.14% to 0.15%.

Marina Walsh, CMB, MBA’s Vice President of Industry Analysis, noted, “The overall forbearance rate remains low and is 26 basis points lower than one year ago. However, there was a small uptick in new forbearance requests and forbearance re-entries in July, particularly for Ginnie Mae loans.” This slight increase in forbearance rates, while still at historically low levels, warrants monitoring in the coming months Share of Mortgage Loans in Forbearance Increases to 0.27 Percent in July.

Federal Reserve Policy and Economic Outlook

In a recent speech, St. Louis Fed President James Bullard provided insights into the current monetary policy stance and the U.S. economic outlook:

• Inflation progress: The Fed has made substantial progress in returning inflation to the 2% target, with recent readings showing inflation at or below 2%.
• Labor market strength: The labor market remains strong, with the unemployment rate near 50-year lows and job openings still plentiful.
• Economic growth: Real GDP growth has been robust, with a 4.9% annual rate in the third quarter of 2024.
• Monetary policy stance: The current policy rate is likely at or near the peak for this cycle, with the Fed potentially beginning to lower the policy rate in 2025 if inflation remains low.
• Risks: The Fed remains vigilant about upside risks to inflation and is prepared to raise the policy rate further if necessary.

Bullard emphasized that the Fed’s actions have helped engineer a soft landing for the U.S. economy, with inflation returning to target while maintaining a strong labor market and robust GDP growth. This outlook has significant implications for the real estate market, potentially influencing mortgage rates and overall market activity in the coming months [Remarks on Monetary Policy and U.S. Economic Outlook](https://www.stlouisfed.org/from-the-president/remarks/2024/remarks-monetary-policy-and-u-s-economic-outlook).

Commercial Real Estate Markets (including Multifamily)

GSEs Under the New Administration: What’s Ahead

With the election of Donald Trump, the future direction of Fannie Mae and Freddie Mac is once again a topic of intense speculation. Key points to consider:

• Potential shift in focus: The Trump administration may prioritize different aspects of the GSEs’ mission, potentially impacting their role in supporting affordable housing and multifamily lending.
• Privatization discussions: There’s speculation about renewed efforts to privatize Fannie Mae and Freddie Mac, which could significantly alter the landscape of multifamily financing.
• Regulatory changes: The new administration might revisit regulations governing the GSEs, potentially affecting their operations and market presence.
• Affordable housing initiatives: The future of affordable housing programs supported by the GSEs remains uncertain, with potential shifts in priorities under the new administration.

Industry experts emphasize the need for stability and continuity in the multifamily sector, regardless of potential policy changes. The GSEs’ role in providing liquidity and supporting affordable housing remains crucial, especially given the ongoing challenges in the housing market [What’s Ahead for the GSEs Under the New Administration?](https://www.multihousingnews.com/whats-ahead-for-the-gses-under-the-new-administration/).

Expanded Support for Rental Housing

The Federal Housing Finance Agency (FHFA) has recently enabled Fannie Mae and Freddie Mac to expand their support for rental housing:

• The multifamily loan purchase caps for Fannie Mae and Freddie Mac have been increased to $75 billion each for 2025, a $5 billion increase from 2024.
• At least 50% of the GSEs’ multifamily business must be mission-driven affordable housing.
• At least 25% of the GSEs’ multifamily business must be affordable to residents at or below 60% of area median income [FHFA Enables Fannie Mae and Freddie Mac to Expand Support for Rental Housing](https://www.fhfa.gov/news/news-release/fhfa-enables-fannie-mae-and-freddie-mac-to-expand-support-for-rental-housing).

Office Sector Challenges

The office sector continues to face significant headwinds:

• The Trepp CMBS Delinquency Rate jumped to 5.98% in October 2024, up 135 basis points year-over-year, largely driven by the office sector.
• The office delinquency rate increased by 101 basis points in October, reaching 9.37%, the highest level since 2012-2013 [CMBS Surveillance: Four Loans to Watch as Office Distress Escalates](https://www.trepp.com/trepptalk/cmbs-surveillance-four-loans-to-watch-as-office-distress-escalates).

CMBS / REIT Markets

Delinquency Trends

The CMBS market continues to reflect the broader challenges in commercial real estate:

• The overall CMBS delinquency rate jumped to 5.98% in October 2024, driven higher by the office sector.
• Year-to-date 2024, there have been 94 CMBS loans disposed at a loss out of over 137,000 active securitized loans.
• The lodging sector provided the least amount of principal protection, while multifamily provided the greatest downside protection in terms of loan losses Embracing Market Reality: CMBS Loan Losses & Delinquency Rates Tell the .

REIT Performance

While specific REIT performance data wasn’t provided in the search results, the challenges in the commercial real estate sector, particularly in office properties, are likely to impact REIT valuations and performance. Investors should closely monitor sector-specific REITs, especially those with significant exposure to office properties.

Navigating the Evolving Real Estate Landscape

As we conclude our Daily Dose of Real Estate for November 19, 2024, it’s evident that the market is at a pivotal point. The recent election, coupled with the Fed’s cautiously optimistic economic outlook, sets the stage for potential shifts in the real estate landscape. Builder confidence is up, mortgage credit availability has increased, and the Fed’s stance suggests a possible easing of monetary policy in 2025. However, challenges persist, particularly in the commercial sector. As we move forward, adaptability and informed decision-making will be key. Industry stakeholders should closely monitor policy developments, economic indicators, and sector-specific trends to navigate the opportunities and challenges that lie ahead in this dynamic market environment.

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