Market Recap: New Administration Overturns Mortgage-Fee Cut

Blog posted On January 20, 2017

The Federal Housing Administration had planned to reduce annual Mortgage Insurance Premium starting January 27th.  However, the new Trump administration suspended this change.  Still, homebuilders remain confident, and housing starts are up but building permits dropped slightly. 

In December, the consumer price index is up 0.3%.  Excluding food and energy, prices are up 0.2%.  For the year 2016, consumer inflation rose at the fastest pace in five years, triggered by rising rents, increased medical expenses, and higher gas prices.  Inflation is up by 2.1% for the full year, the most rapid increase since the 3% gain in 2011.  If inflation continues at this rate, these numbers support the projected Federal Reserve interest rate hikes in 2017.

The NAHB’s homebuilders’ index is down from December to 67, but still a positive reading, as any reading above 50 indicates builder confidence.  NAHB Chairman Granger MacDonald said, “builders begin the year optimistic that a new Congress and administration will help create a better climate for small businesses, particularly as it relates to streamlining and reforming the regulatory process.  For current sales conditions, the index measures 72, sales expectations for the next six months are 76, and buyer traffic is 51.

Housing starts exceeded expectations in December, rising 11.3%.  The increase is driven by multi-unit starts up 57%.  Single-family units actually saw a decline, down 4%.  In the last three months, housing starts have been volatile down 19%, up 27%, and down 10% since September.  Building permits dropped somewhat, down 0.2%, below projections.  

Mortgage rates are up following initial discussion to suspend the FHA MIP cut. House Financial Services Committee Chairman Jeb Hensarling said, “it seems the Obama administration’s parting gift to hardworking taxpayers is to put them at a greater risk of footing the bill for yet another bailout.”  As of this afternoon, the Trump administration overturned the mortgage-fee cut, according to a letter from HUD. 

Sources: Mortgage News Daily, Bloomberg, Bloomberg, Business Insider, HousingWire, MarketWatch, CNBC