Friday, January 20, 2017

Housing: Part 202 - FHA insurance rate

Hm.  One of Trump's first acts is to overturn a planned cut in mortgage insurance rates at the FHA.  Reactions:

  • Housing apparently will be a focus, but this, plus Mnuchin's expressed support for the CFPB, suggest that these actions aren't geared toward re-establishing access to mortgages for low tier buyers.  I think that access is central to our ability to extend the recovery and to continue healing labor markets.  I think this is a bearish development.

  • I'm not sure how much this matters, in and of itself.  Implied yields on home ownership are much higher than yields on mortgages.  Affordability is not the problem right now.  Access is.  I don't think millions of lower-middle class households are turning down mortgages because the rates are too high.

  • Notice the difference in reactions to this versus private markets.  This is no different than subprime mortgages that have higher rates in exchange for riskier terms.  Notice how you react to the FHA raising fees versus a private mortgage originator raising fees.  Notice the difference in broad rhetorical reactions to these two similar events.

2 comments:

  1. The mortgage insurance reversal seems a little peevish, but hardly a major policy change.

    So far, Trump has said little about housing, and even less about property zoning, and one could posit, "Well, zoning is a local issue."

    What I find interesting about Trump is he is turning his back on decades of establishment orthodoxy that labor markets should be loosened by policy.

    Open borders, and offshoring factories for example.

    Trump has not yet discussed monetary policy, or the fact the Fed explicitly targets a goal of keeping unemployed one out of every 20 Americans who want work.

    Sadly, we have a generation of orthodox macroeconomists who frame monetary policy in the "employment vs inflation" argument, and never mention property zoning.

    It will be interesting to see if Trump can bring about tighter labor markets, or will be foiled by the Fed and monetary offset, or if Trump is all hot air, and the borders will remain open both for trade and labor.

    Maybe Trump will read you book and devise federal plans to loosen up property zoning to hold down inflation, and not labor markets.

    Well, we can hope...

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