Latest news with #SusanWachter
Miami Herald
5 days ago
- Business
- Miami Herald
The Mortgage Rate Shift That Could Change the Housing Market
Owning a home remains prohibitively expensive for many Americans, but experts believe a modest decline in mortgage rates could inject much-needed momentum into home sales and help revive the broader U.S. housing market. According to recent analysis from the National Association of Realtors (NAR), were mortgage rates to drop to 6 percent, an additional 5.5 million households would be able to afford a home, including 1.6 million renters. Affordability remains one of the key issues threatening the stability of the U.S. housing market. As experts have warned, the rising costs of buying a home-which have dragged ownership rates to a post-pandemic low this year-are exacerbated by persistently high borrowing costs, preventing a large number of Americans from entering the property market. Economists have recently pointed to higher-than-usual mortgage rates as a critical drag on the U.S. housing market, and others are now dubbing a possible drop to 6 percent as a "magic" figure that would expand the number of Americans who are able to buy. According to data from key organizations within the housing and mortgage markets, including the Mortgage Bankers Association (MBA) and the Federal Home Loan Mortgage Corporation (Freddie Mac), 30-year fixed mortgage rates are currently hovering at around about 6.75 percent. While these are below the levels seen in October 2023, when 30-year rates surged to around 8 percent, they are a far cry from the lows of under 3 percent during the pandemic. The rates have pushed homeownership out of reach for many. According to Housing Market Trends Report for June, the number of homes for sale in the U.S. rose nearly 30 percent year over year, marking the 20th straight month of increases. The latest market report from Zillow similarly showed that housing inventory hit a five-year high in June. NAR's research found that even a modest drop in rates to 6 percent would boost home sales by an estimated 3 percent in 2025 and by 14 percent in 2026. It added that approximately 10 percent of the additional households now able to buy would do so over 12 to 18 months. According to Mortgage News Daily's loan calculator, a 6 percent rate on 30-year mortgages would lower the monthly payment on a $300,000 loan to $1,799 from $1,946 at today's rates. NAR said that Atlanta, Dallas, Minneapolis, Cleveland, and Kansas City would see the greatest increase in home sales activity if rates dropped to 6 percent. Susan Wachter, an economist and professor of finance and real estate at the University of Pennsylvania's Wharton business school, told Newsweek that 6 percent could prove "a magic mortgage number that will push Americans to buy." However, she added that this will depend on the direction of inflation, and the Federal Reserve's response in the form of lower interest rates. Alexei Morgado, real estate agent and founder of Lexawise, told "Many of my clients tell me the same thing: They want to buy, but they feel that mortgage rates are holding them back." "And it's not just about the number itself," he continued. "What I hear most often is the fear of making a bad decision, of getting into something they can't sustain or that will later make them think, 'I rushed into it.' That feeling of paying more for the same thing is frustrating, discouraging, and puts them on hold." Susan Wachter of theUniversity of Pennsylvania's Wharton School told Newsweek: "Six percent could be a magic mortgage number that will push Americans to buy, but only if it comes about because inflation declines, bringing interest rates down, without a recession. The fear of buyers' remorse in a housing slowdown is sidelining buyers, including those who would newly qualify for a mortgage with rate drops." NAR Chief Economist Lawrence Yun, speaking to real estate professionals at the Residential Economic Issues & Trends Forum last month, said: "Your past clients are all happy. But for new homebuyers, their monthly payment obligation has increased, and this is what's killing the housing market. Mortgage rates are the magic bullet, and we're waiting and waiting until those come down." NAR Chief Economist Yun forecasts that mortgage rates will average 6.4 percent in the second half of 2025, and 6.1 percent next year. Related Articles Map Shows Cities Where Residents Are Looking to Move AwayYou Can Now Co-Own a 6-Bed Montecito MansionHow Tax Breaks for Homeowners Can Affect Your 2025 ReturnsHow Much Boomers, Millennials and Gen Z Spent on Their Homes in 2024 2025 NEWSWEEK DIGITAL LLC.
Newsweek
5 days ago
- Business
- Newsweek
The Mortgage Rate Shift That Could Change the Housing Market
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Owning a home remains prohibitively expensive for many Americans, but experts believe a modest decline in mortgage rates could inject much-needed momentum into home sales and help revive the broader U.S. housing market. According to recent analysis from the National Association of Realtors (NAR), were mortgage rates to drop to 6 percent, an additional 5.5 million households would be able to afford a home, including 1.6 million renters. Why It Matters Affordability remains one of the key issues threatening the stability of the U.S. housing market. As experts have warned, the rising costs of buying a home—which have dragged ownership rates to a post-pandemic low this year—are exacerbated by persistently high borrowing costs, preventing a large number of Americans from entering the property market. Economists have recently pointed to higher-than-usual mortgage rates as a critical drag on the U.S. housing market, and others are now dubbing a possible drop to 6 percent as a "magic" figure that would expand the number of Americans who are able to buy. What To Know According to data from key organizations within the housing and mortgage markets, including the Mortgage Bankers Association (MBA) and the Federal Home Loan Mortgage Corporation (Freddie Mac), 30-year fixed mortgage rates are currently hovering at around about 6.75 percent. While these are below the levels seen in October 2023, when 30-year rates surged to around 8 percent, they are a far cry from the lows of under 3 percent during the pandemic. The rates have pushed homeownership out of reach for many. According to Housing Market Trends Report for June, the number of homes for sale in the U.S. rose nearly 30 percent year over year, marking the 20th straight month of increases. The latest market report from Zillow similarly showed that housing inventory hit a five-year high in June. In an aerial view, single family homes on April 19, 2025 in Thousand Oaks, California. In an aerial view, single family homes on April 19, 2025 in Thousand Oaks, research found that even a modest drop in rates to 6 percent would boost home sales by an estimated 3 percent in 2025 and by 14 percent in 2026. It added that approximately 10 percent of the additional households now able to buy would do so over 12 to 18 months. According to Mortgage News Daily's loan calculator, a 6 percent rate on 30-year mortgages would lower the monthly payment on a $300,000 loan to $1,799 from $1,946 at today's rates. NAR said that Atlanta, Dallas, Minneapolis, Cleveland, and Kansas City would see the greatest increase in home sales activity if rates dropped to 6 percent. Susan Wachter, an economist and professor of finance and real estate at the University of Pennsylvania's Wharton business school, told Newsweek that 6 percent could prove "a magic mortgage number that will push Americans to buy." However, she added that this will depend on the direction of inflation, and the Federal Reserve's response in the form of lower interest rates. What People Are Saying Alexei Morgado, real estate agent and founder of Lexawise, told "Many of my clients tell me the same thing: They want to buy, but they feel that mortgage rates are holding them back." "And it's not just about the number itself," he continued. "What I hear most often is the fear of making a bad decision, of getting into something they can't sustain or that will later make them think, 'I rushed into it.' That feeling of paying more for the same thing is frustrating, discouraging, and puts them on hold." Susan Wachter of the University of Pennsylvania's Wharton School told Newsweek: "Six percent could be a magic mortgage number that will push Americans to buy, but only if it comes about because inflation declines, bringing interest rates down, without a recession. The fear of buyers' remorse in a housing slowdown is sidelining buyers, including those who would newly qualify for a mortgage with rate drops." NAR Chief Economist Lawrence Yun, speaking to real estate professionals at the Residential Economic Issues & Trends Forum last month, said: "Your past clients are all happy. But for new homebuyers, their monthly payment obligation has increased, and this is what's killing the housing market. Mortgage rates are the magic bullet, and we're waiting and waiting until those come down." What Happens Next? NAR Chief Economist Yun forecasts that mortgage rates will average 6.4 percent in the second half of 2025, and 6.1 percent next year.
Yahoo
29-06-2025
- Business
- Yahoo
Against the odds, Gen Z is breaking into the housing market
Despite daunting market conditions, America's youngest generation of adults is managing to break into the housing market in growing numbers. Members of Generation Z, the cohort between the ages of 13 and 28, came of age during the economic upheaval of the Covid-19 pandemic. In the years since, home prices have surged and the nation's housing shortage has deepened — conditions that risk leading some young adults to give up on the dream of homeownership altogether. Still, many in Gen Z are forging ahead with homeownership. The generation now accounts for one in four loans issued to first-time home buyers, according to data from financial services company Intercontinental Exchange. And a Redfin report from January 2024 found that Gen Z's homeownership rate is outpacing that of Millennials and Gen Xers when they were the same age. There's a growing divide within Gen Z between those with stable jobs or financial support who can afford to buy a home in today's expensive market, and those who are priced out — not just of homeownership, but also the rental market, said Susan Wachter, a professor of real estate at the Wharton School of the University of Pennsylvania. Wachter recently authored a study exploring why there has been a sizable uptick in the number of young adults living with their parents in recent years and found that affordable housing issues disproportionately impact minority groups. 'There are difficulties and challenges to buying a home,' Wachter said. 'Some of which are more burdensome than on previous generations.' Still, CNN spoke with several Gen Zers who recently bought homes and found that their paths to homeownership varied widely. Some received financial help from family, while others did it all on their own. Some carried student loan debt from four-year colleges, while others skipped college altogether. What they all had in common, though, was the determination to own a home and the discipline to start saving early. Such long-term planning may have been essential for these young buyers to build the wealth necessary to break into today's high-cost housing market. Samantha Garcia, 23, and her fiancé recently bought a 3-bedroom, 2-bathroom home for $335,000 in Redding, a small town in Northern California. She had been setting aside $1,000 per month since 2022 to save up. Garcia was willing to move from her home city of Los Angeles to Redding, a more affordable city where she had never lived, to achieve her goal of homeownership. 'I knew I was never going to buy in LA. There are hardly any single-family homes there for under $1 million,' she said. When it came time to close on the home, Garcia's fiancé's parents surprised them with $25,000 toward the down payment. 'We actually weren't expecting them to help,' Garcia said. 'But it will help us keep our savings a little bit more afloat.' Adriana Moorman opted out of attending a traditional four-year college, instead finding steady work in human resources. At 21, she was debt-free and had been saving up to buy a home since high school. Aside from a small inheritance she said was worth a few thousand dollars, she was able to secure a $202,000 Baltimore condo on her own. 'I think I lucked out by being financially aware at such a young age,' Moorman said. Emily Blaylock, a real estate agent in St. Louis, said the post-pandemic rise of hybrid and remote work has meant that more Gen Zers are willing to move further into the suburbs, away from city centers. She said she often works with buyers in their 20s, due to the relative affordability of her city. 'It's true overall with all age groups right now, but especially with younger people, they're OK with driving 25 minutes to downtown to get something they can live in comfortably and affordably,' Blaylock said. 'A lot of young people don't have to go into the office five days a week, so we're seeing more people spread outside the St. Louis radius.' Dominic Azpeitia, 26, was willing to move away from home to achieve homeownership. Although he hopes to return to Southern California one day to be near his family, he moved to Phoenix for its more affordable cost of living. Azpeitia said he and his wife had been casually looking for the past few years and began to notice the rapid rise in home prices. 'I just decided last year, there is no point in waiting anymore,' Azpeitia said. 'In my opinion, housing prices aren't going to go down.' Azpeitia said that while he had saved the money for a down payment, he worked out a deal with his lender and the home seller that meant he didn't have to pay any money towards the down payment or closing costs. He said he sees his Phoenix home, which was purchased for $520,000, as a long-term investment and that he hopes to rent it out to tenants in a few years. While the housing market has been exceptionally tight for the last few years, there have been signs it may be softening. An analysis released last month by Redfin found that home sellers now vastly outnumber buyers, an early indication that negotiating power may be shifting back into buyers' hands. Some young Americans are taking advantage of that shift. Rylee Arnold, 28, recently purchased a home in Salt Lake City and was pleasantly surprised when her seller offered to cover many of the closing costs. 'I probably wouldn't have been able to purchase the house if the seller hadn't given me so many credits toward the house,' Arnold said. 'They kept fixing things for me too. Everything I asked for, they granted, so that was really nice.' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CNN
29-06-2025
- Business
- CNN
Against the odds, Gen Z is breaking into the housing market
Despite daunting market conditions, America's youngest generation of adults is managing to break into the housing market in growing numbers. Members of Generation Z, the cohort between the ages of 13 and 28, came of age during the economic upheaval of the Covid-19 pandemic. In the years since, home prices have surged and the nation's housing shortage has deepened — conditions that risk leading some young adults to give up on the dream of homeownership altogether. Still, many in Gen Z are forging ahead with homeownership. The generation now accounts for one in four loans issued to first-time home buyers, according to data from financial services company Intercontinental Exchange. And a Redfin report from January 2024 found that Gen Z's homeownership rate is outpacing that of Millennials and Gen Xers when they were the same age. There's a growing divide within Gen Z between those with stable jobs or financial support who can afford to buy a home in today's expensive market, and those who are priced out — not just of homeownership, but also the rental market, said Susan Wachter, a professor of real estate at the Wharton School of the University of Pennsylvania. Wachter recently authored a study exploring why there has been a sizable uptick in the number of young adults living with their parents in recent years and found that affordable housing issues disproportionately impact minority groups. 'There are difficulties and challenges to buying a home,' Wachter said. 'Some of which are more burdensome than on previous generations.' Still, CNN spoke with several Gen Zers who recently bought homes and found that their paths to homeownership varied widely. Some received financial help from family, while others did it all on their own. Some carried student loan debt from four-year colleges, while others skipped college altogether. What they all had in common, though, was the determination to own a home and the discipline to start saving early. Such long-term planning may have been essential for these young buyers to build the wealth necessary to break into today's high-cost housing market. Samantha Garcia, 23, and her fiancé recently bought a 3-bedroom, 2-bathroom home for $335,000 in Redding, a small town in Northern California. She had been setting aside $1,000 per month since 2022 to save up. Garcia was willing to move from her home city of Los Angeles to Redding, a more affordable city where she had never lived, to achieve her goal of homeownership. 'I knew I was never going to buy in LA. There are hardly any single-family homes there for under $1 million,' she said. When it came time to close on the home, Garcia's fiancé's parents surprised them with $25,000 toward the down payment. 'We actually weren't expecting them to help,' Garcia said. 'But it will help us keep our savings a little bit more afloat.' Adriana Moorman opted out of attending a traditional four-year college, instead finding steady work in human resources. At 21, she was debt-free and had been saving up to buy a home since high school. Aside from a small inheritance she said was worth a few thousand dollars, she was able to secure a $202,000 Baltimore condo on her own. 'I think I lucked out by being financially aware at such a young age,' Moorman said. Emily Blaylock, a real estate agent in St. Louis, said the post-pandemic rise of hybrid and remote work has meant that more Gen Zers are willing to move further into the suburbs, away from city centers. She said she often works with buyers in their 20s, due to the relative affordability of her city. 'It's true overall with all age groups right now, but especially with younger people, they're OK with driving 25 minutes to downtown to get something they can live in comfortably and affordably,' Blaylock said. 'A lot of young people don't have to go into the office five days a week, so we're seeing more people spread outside the St. Louis radius.' Dominic Azpeitia, 26, was willing to move away from home to achieve homeownership. Although he hopes to return to Southern California one day to be near his family, he moved to Phoenix for its more affordable cost of living. Azpeitia said he and his wife had been casually looking for the past few years and began to notice the rapid rise in home prices. 'I just decided last year, there is no point in waiting anymore,' Azpeitia said. 'In my opinion, housing prices aren't going to go down.' Azpeitia said that while he had saved the money for a down payment, he worked out a deal with his lender and the home seller that meant he didn't have to pay any money towards the down payment or closing costs. He said he sees his Phoenix home, which was purchased for $520,000, as a long-term investment and that he hopes to rent it out to tenants in a few years. While the housing market has been exceptionally tight for the last few years, there have been signs it may be softening. An analysis released last month by Redfin found that home sellers now vastly outnumber buyers, an early indication that negotiating power may be shifting back into buyers' hands. Some young Americans are taking advantage of that shift. Rylee Arnold, 28, recently purchased a home in Salt Lake City and was pleasantly surprised when her seller offered to cover many of the closing costs. 'I probably wouldn't have been able to purchase the house if the seller hadn't given me so many credits toward the house,' Arnold said. 'They kept fixing things for me too. Everything I asked for, they granted, so that was really nice.'
Yahoo
10-06-2025
- Business
- Yahoo
Fannie and Freddie could make hedge funds a huge payday if they go public. One expert wants a ‘utility model' for the Fortune 500 giants
President Donald Trump has long wanted to reprivatize Fannie Mae and Freddie Mac, which have been under government control ever since they needed a $191 billion bailout during the Global Financial Crisis. For Wharton finance and real estate professor Susan Wachter, heavy regulation of utilities and insurance carriers is the best model for the mortgage giants. No members of the Fortune 500 saw their shares surge last year like Fannie Mae and Freddie Mac did. Hedge funds who bought nearly worthless stakes in the mortgage giants after the Global Financial Crisis could stand to make billions if President Donald Trump fulfills his goal to take both firms public. Several experts, meanwhile, remain focused on how to free Fannie and Freddie from government control without repeating the mistakes that helped lead to the 2008 meltdown. Uncle Sam bailed out both government-sponsored enterprises, which provide crucial liquidity to housing markets, when both teetered on the brink of insolvency. After being delisted from the New York Stock Exchange in 2010, their shares continued to trade over the counter. Billionaire hedge fund owners Bill Ackman and John Paulson are among those who snapped them up, betting the U.S. government would eventually make good on its pledge to reprivatize both agencies. With Trump raising the issue on his social media platform last month, it hasn't gone unnoticed that both men have backed the president. 'The subtext of the media stories is that [Fannie and Freddie] shareholders, which include many supporters of [Trump], are looking for a gift from the President,' Ackman wrote in a lengthy post on X last week. 'Nothing could be further from the truth.' Paulson did not respond to a request for comment. Ackman, the CEO of hedge fund Pershing Square, has said ending government conservatorship could reward taxpayers while maintaining widespread home availability and affordability. A host of thorny issues need to be sorted out before executing what would be the largest public offerings in history, many experts warn. Those debates aside, however, there's an even weightier question about how the biggest players in American mortgage markets should operate as private companies. For Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School, the heavily regulated model for utilities—where state agencies decide how much companies can charge consumers—has proven its worth. She also sees parallels to the insurance industry, where regulators oversee rates to protect customers while also preventing risk from being underpriced. 'It helps insure against another bailout,' she told Fortune, 'and it helps maintain profits in the long run.' Fannie and Freddie support 70% of America's mortgage market, according to the National Association of Realtors, by purchasing mortgages from lenders and packaging them into mortgage-backed securities, freeing up originators to make more loans. They also guarantee payment on those securities if borrowers default, charging a premium for providing that insurance. There are many explanations floated for why the housing bubble spelled doom for Fannie and Freddie's balance sheets. The main problem, Wachter said, is that when housing prices tanked by about 20% in 2008, many of the loans Fannie and Freddie insured were 'underwater,' meaning the value of the homes securing those packaged loans had fallen below the amount borrowers owed. As they competed for business, Fannie and Freddie had not collected adequate fees to compensate for taking on this risk, Wachter said. 'If these entities go private without oversight, there is a risk of a race to the bottom,' she said. Both institutions also got into trouble by buying large amounts of riskier, private-label mortgage-backed securities to hold as investments. They financed these purchases with cheap debt accessible thanks to the so-called 'implicit guarantee,' or the belief among investors—which ultimately proved correct—that the government wouldn't let the enterprises fail. In short, Fannie and Freddie both juiced profits by 'chasing yield,' becoming what many commentators called the world's largest hedge funds helped by what was, in effect, a government subsidy. Taxpayers paid the price when these bets on risky assets collapsed. Wachter believes reforms instituted under conservatorship have made Fannie and Freddie much more resilient while remaining relatively effective at encouraging middle-class homeownership. The early days of the COVID-19 pandemic provided a major test, she said, when a massive spike in unemployment briefly sparked fears of another mortgage market collapse. 'Fannie and Freddie could go on, continue to lend,' said Wachter, co-director of the Penn Institute for Urban Research, 'even as it offered forbearance to borrowers.' Both enterprises remain central to a fixture of the American dream: the 30-year, fixed-rate, prepayable mortgage. Of course, some question whether continuing to favor that New Deal-era invention is still worth the cost. Last month, Trump said the U.S. government 'will keep its implicit GUARANTEES,' though what he exactly meant remains unclear. Continuing to federally back Fannie and Freddie as private firms would spark fears about a repeat of 2008. Put them completely on their own, however, and mortgage rates likely go higher as investors demand compensation for taking on more risk when buying both enterprises' packaged loans. 'But I think what that debate misses is that if you keep the government backing to these giants, you are going to restrict [the] private market and private competition,' Amit Seru, a professor of finance at the Stanford Graduate School of Business, told Fortune. 'And that means giving up on lots of innovative products.' For example, the U.S. housing market's pandemic boom eventually stalled, partially due to what has been dubbed the 'lock-in effect.' Existing homeowners who bought before mortgage rates skyrocketed in 2022, when the Federal Reserve dramatically hiked borrowing costs to fight inflation, have been reluctant to sell and take out a new mortgage at a higher rate. In many European countries, Seru noted, that's less of a problem thanks to products that allow people to sell their house, buy a new one, and take their existing mortgage with them. That's typically not possible in the U.S., he said, because Fannie and Freddie's dominance means originators can't stray too far from the industry standard. 'No one can compete with the government,' said Seru, a senior fellow at the Hoover Institution, a conservative-leaning think tank. Ackman, meanwhile, sees Fannie and Freddie remaining at the core of the American mortgage market. To facilitate a public offering, Ackman has suggested the Treasury cancel its roughly $350 billion worth of senior preferred shares, meaning it would forgive its right to repayment and dividends. That would remove a massive liability from the enterprises' balance sheets, making them much more attractive to private investors. But the government wouldn't get wiped out. Separate from the preferred shares, it also has warrants that give it the right to buy nearly four-fifths of Fannie and Freddie's common stock at one-thousandth of a cent, or $0.00001, per share. Fannie stock currently trades at about $9, and Freddie is around $7. If Washington cancelled its entire senior preferred stake, the value of the warrants would increase by roughly $280 billion. That would be the most lucrative outcome for Ackman, who alternatively could see the value of his common stock diluted to almost zero if Fannie and Freddie go public without the Treasury cancelling most of its senior stake. '[Fannie and Freddie] shareholders don't have their hands out,' Ackman wrote in his social media post last week. 'The opposite is the case. Hundreds of billions of dollars of funds that belonged to [Fannie and Freddie] were unilaterally taken by the government years ago, and the companies never received credit for these payments.' The U.S. government has collected at least $301 billion in profits from Fannie and Freddie, earning nearly 60% on the $191 billion it paid to bail the mortgage giants out in 2008. Ackman says his plan could pave the way for a similarly sized payday for Uncle Sam in a much shorter window. Wachter and Seru don't necessarily disagree. Still, they ultimately see the government's senior preferred shares as a sideshow compared to bigger questions about what Fannie and Freddie should look like as private enterprises. 'There is a lot at stake here,' Seru said, 'which I think goes well beyond Ackman's investments.' This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
