HOUSINGNEWS REPORT
RECESSION FEARS RISING: HOW HOUSING WILL HOLD UP
THE NEW HOME PRICE PREMIUM
NEW HOME PREMIUM EXISTING HOME MEDIAN PRICE
NEW HOME MEDIAN PRICE
else. Perhaps the failure of wages to keep up with prices will stall consumer purchasing. Maybe we will again see errant Fed decisions such as those which contributed to the 1980 recession. There could be a trade war or wars, something much larger than the squabble with Canada over lumber imports. Or, once again, we could see massive hurricanes, earthquakes and fires, events which in 2017 caused damage worth more than $400 billion. Real estate won’t be immune if there’s a recession. There will be an impact on home sales and mortgage rates, but severity will vary from market to market. Unlike the last recession, toxic loans will not be a factor. Fixed-rate mortgages with low interest levels will protect millions of owners from rising costs. The movement of home prices up or down won’t significantly impact owners who simply stay put. The lack of meaningful new construction coupled with longer ownership terms will perpetuate the inventory problem. Ownership will provide a financial haven while renters — faced with few choices and little new development — will bear the brunt of rising rental rates in many markets. “Real estate won’t be immune if there’s a recession. There will be an impact on home sales and mortgage rates, but severity will vary from market to market. Unlike the last recession, toxic loans will not be a factor. Fixed-rate mortgages with low interest levels will protect millions of owners from rising costs.”
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
in subprime financing. Fannie Mae at the same time had subprime and Alt-A securities worth $1.3 billion and total assets of $50.2 billion. Even if all GSE nonprime loans go bad, a practical impossibility, the systemic damage would be marginal. The toxic loans marketed in the run- up to the mortgage meltdown would never pass muster today. Residential loans without documentation are gone. Prepayment penalties are allowed
with QM mortgages but only with strict limitations. The bulk of QM mortgages — conforming, VA and FHA financing — do not have prepayment penalties. For non-QM residential loans such as jumbo mortgages, the standard is different: prepayment penalties are simply prohibited. Looking forward, if there’s a recession it won’t be because of the housing sector. Instead, it seems likely that a recession will emerge from something
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AUG 2018 | ATTOM DATA SOLUTIONS
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