Fannie Mae-Existing Home Sales Near 30-Year Low Despite Lower Rates

We are now past back to school season and formally entered fall on Sunday, 9.22.2024 at 12:45 PM. It is only weeks to Election Day on November 5 and early voting has begun. In Virginia where WMAL (105.9 FM) indicated from an early voting location last Saturday that there was a line of voters. WMAL’s staff said that while most Republicans traditionally vote on Election Day (i.e.: this year, 11.5.2024), in a possible shift in patterns and based on their engagement with those in line, sizable numbers of those early voters were apparently Trump supporters. Regardless of politics, elections in the U.S. for centuries come and go. In the 21st century, elections obviously influence jobs, the economy, and markets, housing sales and other economic metrics have had significant swings. Per a recent Fannie Mae Research group report to MHProNews, housing sales have hit a multi-decade low, even though interest rates were falling even before the Federal Reserve announced their 50-basis point (1/2 percent) rate cut.

The following in Part I is from Fannie Mae’s Economic and Strategic Research (ESR) Group most recent news release. Part II is additional information adapted with permission from MHProNews at this link here.

Part I

Existing Home Sales on Pace to Hit Nearly 30-Year Low, Despite Recently Lower Rates

Mortgage Rates Now Forecast to Average 5.7% by End of 2025

WASHINGTON, DC – September 18, 2024 – Despite a significant decline in mortgage rates and improved supply in some parts of the country, existing home sales are not expected to pick up meaningfully through the remainder of 2024, with the annual pace now forecast to be the slowest since 1995, according to the September 2024 commentary from the Fannie Mae (FNMA/OTCQB) Economic and Strategic Research (ESR) Group. Recent data, including softness in pending home sales and purchase mortgage applications, continue to suggest limited home-purchase demand at current affordability levels. According to the ESR Group, existing home sales have not grown despite a nearly 20-percent increase in homes available for sale from year-ago levels, in part due to geographic variations. Much of the increase in for-sale inventories has occurred in the Sun Belt and Mountain West regions, areas that also experienced some of the strongest home price growth in recent years, as well as robust new home construction. This creates both a large relative affordability shock in these states and greater competition for existing home sales stemming from the new construction. The ESR Group believes some combination of easing mortgage rates and soft home price growth relative to income growth in these regions will be needed before existing home sales begin to meaningfully rise.

The ESR Group’s economic growth outlook was mostly unchanged this month, as incoming data has been largely consistent with expectations. The ESR Group notes that the economy is likely shifting into a slower growth path, and as inflation moves closer to the 2-percent target, the Federal Reserve is poised to move monetary policy toward a more neutral stance. Still, the ESR Group believes the lagged effect of monetary policy is likely to keep real gross domestic product growth subdued in coming quarters before returning to the long-term trend by the end of 2025.

“Increasingly, regional variations in housing supply are creating divergent affordability conditions and experiences for consumers on both sides of the home sales transaction; however, taken as a whole, home sales activity, particularly on the existing side, remains near what we consider to be the floor of basic demographic and household mortgage demand,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “Supply has risen significantly in many Sun Belt states, where such factors as ease of new home development and increasing insurance costs are having an impact, but at the national level the supply shortage still very much applies. Although mortgage rates have fallen considerably in recent weeks, we’ve not seen evidence of a corresponding increase in loan application activity, nor has there been an improvement in consumer homebuying sentiment. We think it’s likely that many would-be borrowers are waiting for affordability to improve even further, and that some may be anticipating additional declines in mortgage rates given expectations that the Fed will lower the federal funds target rate. Others may be waiting for household incomes to improve further to offset some of the recent home price growth, or they may be thinking that future supply growth will ease affordability. Regardless of the lever, we expect affordability to remain the primary constraint on housing activity for the foreseeable future, and we now think full-year 2024 will produce the fewest existing home sales since 1995.”

Visit the Economic & Strategic Research site at fanniemae.com to read the full September 2024 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary.

About the ESR Group

Fannie Mae’s Economic and Strategic Research Group, led by Chief Economist Doug Duncan, studies current data, analyzes historical and emerging trends, and conducts surveys of consumer and mortgage lender groups to provide forecasts and analyses on the economy, housing, and mortgage markets. The ESR Group was awarded the prestigious 2022 Lawrence R. Klein Award for Blue Chip Forecast Accuracy based on the accuracy of its macroeconomic forecasts published over the 4-year period from 2018 to 2021.

Part II - Additional Information with More Facts, Analysis and Commentary

1) “Regardless of the lever, we expect affordability to remain the primary constraint on housing activity for the foreseeable future, and we now think full-year 2024 will produce the fewest existing home sales since 1995” (emphasis added) said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist.

Perhaps that key italicized phrase by Duncan might potentially be good news for producers of HUD Code manufactured homes.

However, HUD recently admitted that it took them decades to do an update that might have been accomplished in a fraction of that time. ICYMI, see that report and analysis on the Patch, which included HUD's press release, linked below.

https://patch.com/florida/lake...

For emphasis, that would arguably be: “we expect affordability to remain the primary constraint on housing activity for the foreseeable future.” At the Manufactured Housing Association for Regulatory Reform (MHARR), they may use a phrase like ‘inherently affordable mainstream manufactured housing.’

2) For example, per an after-midnight Google search for “inherently affordable mainstream manufactured housing” on this date: “At a time when housing affordability in the United States has reached an all-time low according to press reports, the production of inherently affordable, mainstream manufactured housing, costing, on average, less than 25% of the price of an average site-built home, according to the most recent available annual U.S.” That statement found on Google was posted MHARR’s website at the linked article below, but is also found on MHLivingNews, MHProNews, and several other mainstream news sites that picked up that phrasing from MHARR’s press release at that time.

https://manufacturedhousingassociationregulatoryreform.org/bottlenecks-suppressing-manufactured-housing-industry-continue-unabated/

MHLivingNews reported on related concerns, but other than that trade media, MHARR, and MHProNews, the bulk of the balance of manufactured housing linked trade media have been curiously quiet about issues MHARR has raised.

https://www.manufacturedhomelivingnews.com/manufactured-housing-production-rises-in-april-2024-per-manufactured-housing-association-but-bottlenecks-continue-as-mharr-exposes-federal-officials-role-in-affordable-housing-crisis/

3) It seems that the Manufactured Housing Institute (MHI) website, and often those non-MHProNews/MHLivingNews publishers, meaning those operating in the MHI orbit, are often averse to publishing news that may run counter to the desired MHI narrative.

Curiously, that apparently includes these monthly reports from Fannie Mae’s ESR Group. Only MHProNews has periodically published articles from Fannie’s ESR Group since 2019, per the search linked here.

MHI, or any news source, could freely distribute content like the monthly report offered from Fannie Mae ESR Group. That Fannie Mae report routinely offers useful insights into general housing market conditions from an operation, i.e.: Fannie Mae, that MHI claims to be engaged with. Fannie Mae has even co-sponsored MHI events. Finance is a post-production issue, not a production issue (which production is MHARR’s focus and is the sector where they collect members’ dues).

4) Among the MHProNews headlines for the week in review are the latest in our posts on the Patch. Those Patch posts cover affordable housing along with other topics too. It is now one month since we began these Patch posts. There is an evidence-based case to be made that those news posts indexed by Google or other search engines on the Patch represent more content on third-party sites than MHI CEO Lesli Gooch, Ph.D., has produced. The ratio appears to be about 5 posts by a Kovach on a manufactured housing topic to 1 involving MHI CEO Gooch, based on Google news searches documented by screen captures found at this link here.

That sheds light useful for better understanding the debate challenge linked below.

https://patch.com/florida/lake...

MHI CEO Gooch was recently involved what has been labeled as an “interview” with that involved reported Manufactured Housing Institute member Yardi-linked Multi-Housing News (MHN). That interview has drawn criticism in some manufactured housing circles because Gooch failed to mention key legal solutions available that Copilot and other sources have said they are oddly not pursuing.

Yet, as a trade group, MHI is paid to promote the industry and the industry’s interests, MHProNews and MHLivingNews aren’t.

Compare the content involving Gooch and the content involving this writer for the Patch. Which begs the question. What are MHI’s staff doing with their time? Planning the next events so consolidators can mingle with prospective targets for acquisition?

MHProNews has issued an invitation to Mark Weiss, J.D., President and CEO of MHARR to respond to the same questions that Gooch did in her interview with MHN. The initial feedback from MHARR was positive. More on that Weiss interview as the timing on that is developed.

5) Note that while each produces unique data sets and remarks, the Fannie Mae ESRG report is broadly consistent with what the National Association of Realtors (NAR) recently reported to MHProNews and was published by this writer for the Patch about the existing sales housing market (see headlines below).

https://patch.com/florida/lake...

Since there is a widespread thirst for affordable housing, and record homelessness in the U.S. despite record ‘peacetime’ spending by the federal government, why is manufactured housing underperforming during an affordable housing crisis? Answers to that question are explored, directly and obliquely, in many of the headline reports linked here and that follow on the Patch linked below. ##

> Orlando RE Agent Smith-Younger Adults Will Need $8500 Monthly for Rent
> TARK-‘I’m a Teen and Know the Solution to Affordable Housing Crisis’

> ‘Mobile Home Values Rising Faster Than Single-Family’ House-Wow Fact$
> Realtor-What Is a Manufactured Home? The Next Step Beyond Mobile Homes
> Realtor? Journalist? Affordable Manufactured Home Production Jumps
> Blankley-Goodbye American Dream? Only 10% Polled Can Buy a House; But
> Waiting for Fed Rate Cut Before Buying a Home? Experts Say Think Twice

> Frank Rolfe-Special Interests ‘Don’t Want to Solve Affordable Housing'
> Renting? Rent too High? Odds Are DOJ Suit vs RealPage Matters to You
> New-Certified “Half Price Homes” - Affordable Housing Solution Redux
> Solution: “Would-Be Homebuyers Need 80% More Income Than 4 Years Ago” ###

L. A. “Tony” Kovach and his family live in a manufactured home on private property in Winter Haven, FL. He is the co-founder of ManufacturedHomeLivingNews.com and

ManufacturedHomeProNews.com, trade publications serving segments of the manufactured home industry. Having worked in several segments of the manufactured home industry for over 3 decades, Kovach is a widely acknowledged and often praised expert on manufactured housing.