As much of the industry was in Las Vegas for MBA Annual this week, chatter (outside of AI) revolved cautious optimism amid continued affordability challenges. Rising insurance premiums, HOA fees, and property taxes, along with mortgage rates that continue to hover in the low-6 percent range, are keeping housing affordability strained. However, FHFA Director Bill Pulte announced a review of loan-level price adjustments, which could reduce fees for borrowers and potentially make conventional loans more accessible. This move comes as homebuyers navigate a market where prices continue to climb; existing-home sales rose 1.5 percent in September to their highest level since February, while median home prices increased 2.1 percnt year-over-year to $415,200, marking the 27th straight month of price gains.
Rates were a central focus again, with Freddie Mac’s latest survey showing both 30- and 15-year fixed mortgage rates slipping 8 basis points to 6.19 percent and 5.44 percent, respectively; the lowest levels in nearly a year. While many expect rates to ease modestly as the Fed proceeds with rate cuts, forecasts suggest they will likely remain between 6.2 percent and 6.4 percent over the next two years. This would continue to limit mobility among homeowners locked into ultra-low pandemic-era rates, capping the potential for a full housing rebound. Still, lower borrowing costs this week provided a glimmer of relief for potential buyers and a modest uptick in refinance activity.
Markets were also closely watching inflation and the Federal Reserve’s next policy steps. The September CPI report showed inflation largely in line with expectations, reinforcing bets that the Fed will deliver another quarter-point cut next week, along with another in December. However, any hotter-than-expected inflation in early 2025 could cause the Fed to pause its easing cycle. Persistent price pressures in core services remain a risk to how low rates can ultimately go in 2026, even as markets price in a long-term bottom near 3 percent. However, uncertainty from a prolonged government shutdown and weakening economic data continue to temper investor enthusiasm and borrowing activity.
At the Mortgage Bankers Association (MBA) Annual Conference, conversations centered on efficiency and cost control amid thin margins. Lenders discussed the potential for AI to reshape lending operations, from underwriting to customer engagement, though regulatory concerns persist, particularly as states begin introducing AI governance laws. Executives stressed the need for data integrity, compliance oversight, and thoughtful vendor selection as technology adoption accelerates. Meanwhile, the industry continues to adjust to regulatory shifts, including a softer capital rule proposal for large banks and the ongoing credit scoring overhaul involving VantageScore implementation.
Capital markets activity remained steady but cautious. Treasury yields dipped modestly as investors weighed both geopolitical tensions and inflation data, while mortgage spreads versus Treasuries stayed wide. Some industry groups proposed allowing Fannie Mae and Freddie Mac to repurchase up to $300 billion of mortgage-backed securities to compress spreads and lower rates, echoing the Fed’s pandemic-era interventions. Non-QM and non-Agency lending continued to grow, with lenders leaning into HELOCs, second liens, and niche products like doctor and jumbo loans to capture market share. What's it all mean? Despite incremental progress on affordability and policy flexibility offering hope for a gradual thaw, there's no “way out” yet from the industry’s broader affordability squeeze.