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Tariff plan has mixed implications for mortgages, builders
Plans for record-setting tariffs retain some breaks for lumber and have lowered mortgage rates, but they've increased uncertainty about the housing market's future and hurt homebuilders' shares.While President Trump's base 10% tariff with additional duties for many countries does protect some home materials like steel, aluminum, copper and softwood lumber, there could be more changes in the future and some countries are taking countermeasures.Builders' shares lost as much as 5 to 10% of their value on the day by late morning, according to a Seeking Alpha report, which also noted that trade investigations into lumber and copper could mean they face other duties later. Mortgage-related stocks were mixed.Mortgage insurers with credit sensitivities and some companies with commercial exposures like title firms were weaker, while originators showed stronger performance based on the immediate rate outlook, said Bose George, managing director, Keefe, Bruyette & Woods."Some of those names are holding up reasonably well, but it's varied," he said.The implications for ratesWhat the tariffs mean for the housing finance market in the short-term is uncertainty. While that is a challenge, it also has an upside, said Melissa Cohn, regional vice president at William Raveis Mortgage."The biggest problem a homebuyer will have today is really understanding what the future is going to hold," she said. "We don't know how long these tariffs will last for. They were only announced yesterday, and they actually haven't gone into effect yet."When the crystal ball is hazy, investors tend to get risk averse and buy bonds conservatively in ways that lower interest rates."For right now, mortgage bonds, the flight to safety and the 10-year Treasury are the beneficiaries of a really depressed stock market," said Barry Habib, founder and CEO, Highway.ai, in a daily update.Consumers have cited low rates, not tariffs, as being the main consideration in the borrowing activity Cohn's seen recently, but she cautions both consumers and mortgage professionals not to necessarily think they're going to last."Tariffs could be inflationary long term, and that would push rates back up again," Cohn warned. While financing costs have initially fallen and could be inflationary long term, what happens in between and at the road remains to be seen."There are a few forces pushing mortgage rates in different directions," said Chen Zhao, head of economics at real-estate brokerage Redfin, in a report on the implications of recent tariffs."Mortgage rates fell following the announcement and will remain volatile as more details emerge and negotiations take place ahead of April 9, when the tariffs will go into effect," she predicted.Although rates have been lower on a net basis, there's been quite a bit of variation in what different mortgage companies have been offering consumers, Cohn said."Some are going to be concerned about the volatility in the economy and the tariffs, and others are thinking it's the beginning of the spring selling season and they need to fill their quotas for the year, so they're going to be more aggressive," she said.Lender competition has been particularly intense in the nonqualified mortgage market for borrowers who can't qualify for lower-cost more traditional home loans because they need to do things like prove income with bank statements, Cohn said.Whether the current low rates mean now is a good time to buy for consumers depends on how well equipped they are to handle current rate, home price or economic uncertainties, she said."If you have financial security, don't have to take money out of the stock market for a down payment, have savings and find a house that you love, now is a good time to buy because you'll be able to take advantage of lower interest rates in the near term," said Cohn. Building material conditions varyAs the slump in the builder stocks suggests, there's also the consideration that waiting could be a risk if higher cost of materials boosts home prices, but there's also the possibility the tariffs could be effective or not as tough on materials as expected.The impact on materials and supply is nuanced, said Selma Hepp, chief economist at Cotality, noting that lumber price issues have been a long-running concern. U.S. production has improved over time, and the supply-demand mix has shifted, she also said."There's been a persistent push towards more domestic supply of lumber," she said. "To me, what seems to be the biggest one is the cost of appliances, especially with homes being more computerized. That's the biggest component we're worried about."Roofs, which rely on oil as a key material, could become more favorably priced from a push to develop more domestic production in this area, Hepp said.While there's been talk about the commercial market being exposed to tariffs due to increased use of steel and aluminum there, there's also been a slowdown in demand in sectors like multifamily."What I heard from some of the commercial real estate economists is that construction has been pulled back," she said.Canada provides around one-third of U.S. lumber, and Chile is the larger provider of copper to the United States, according to Seeking Alpha. China and Mexico are two other countries that play a key role in materials used for building and home goods in the U.S.
Fannie Mae, BNY accused of inflating rates on loan foreclosures
Home lenders and their partners have been cheating New Yorkers by inflating what they owed on home equity loans that fell into foreclosure, according to lawsuits filed Thursday.The systematic miscalculations diverted thousands of dollars from people who fell behind on loans, homeowners said in documents filed in federal court in Brooklyn, New York. The discrepancies allegedly stem from improperly charging compound interest instead of simple interest for the time span from when lenders ask the court to authorize a sale and when the motion is granted.Defendants named in the cases, which seek class-action status, include units of Fannie Mae, Deutsche Bank AG and the Bank of New York Mellon Corp., along with Mr. Cooper Group Inc. and Shellpoint Mortgage Servicing, which help lenders collect payments and handle foreclosures. The list also includes the State of New York Mortgage Agency, a public benefit corporation that offers low-interest loans to first-time home buyers."Countless mortgage holders were deprived of surplus funds as a result of the collective failures by foreclosing banks, loan servicing agents and their attorneys," according to a statement from Mark Anderson, a partner at law firm Anderson, Bowman, Wallshein, which filed the suits.Service penaltiesThe cases echo complaints that arose against the industry after the financial crisis of 2008, when U.S. homeowners fell behind on hundreds of thousands of home loans. Lenders and servicers wound up paying hundreds of millions of dollars to compensate customers for various missteps.Other defendants in the cases filed Thursday included five law firms and MTGLQ Investors LP, which specializes in buying pools of soured home loans.Deutsche Bank served as a trustee for a residential mortgage-backed security that held the loan, according to the company. "Loan-level matters, including foreclosure actions and subsequent purchases or sales of properties, are handled exclusively by mortgage loan servicers," a Deutsche Bank spokesperson said. A representative for BNY said its role was similar, with no responsibility for the foreclosure process.A spokesperson for Goldman Sachs Group Inc., which owns MTGLQ, and representatives for Shellpoint and law firm Eckert Seamans declined to comment. The rest of the defendants didn't immediately respond to messages.Lower priceOne of the cases cites Sheila Bidar, a class representative for one of the lawsuits filed against Deutsche Bank, Eckert Seamans and mortgage servicer Select Portfolio Servicing Inc. In that instance, the extra interest amounted to more than $13,300, according to Anderson.Bidar is the legal guardian for her 89-year-old mother, Ruth Athill, whose home was foreclosed. During the court-ordered auction in May 2023, she allegedly suffered an additional blow when the successful bidder initially offered $785,000 for Athill's home — and then assigned the bid to Athill's lender, Deutsche Bank. The home ultimately sold for just $207,071, according to Bidar's complaint.The balance on her loan was only $167,773, court papers show. The lower sale price and inflated interest totals about $591,000 that Athill should have received, according to Anderson."She's lost out on so much. It's really heartbreaking," Bidar said in an interview.
Spring home purchase market is one of cautious optimism
Monthly mortgage payments for recently purchased homes remain elevated, causing pending sales to decrease. But signs are emerging that consumers are starting to look at houses again, Redfin said.The typical monthly mortgage payment was $2,802 using a four-week calculation for the period ended March 30, up 5.2% over the same time frame in 2024. This compared with a revised $2,798 for the rolling four-week period ended March 23.Redfin reported a median sales price of $386,019 for the period, up 3.4% year-over-year. The median asking price increased even more, at 6.7% to $424,975.During March, 290,829 net new listings entered the market, a 10% annual increase, a Housecanary report said. Even though total inventory is now 21.9% higher than it was 52 weeks ago, it is still historically low.The median listing price was $452,886 for March, a 1.7% year-over-year increase, Housecanary said. February's median price was $444,264. The median closed price rose 4.8% year-over-year for March to $431,019.However, Redfin pointed to Showingtime data that touring activity was up 37% from the start of the year to the end of March; this compares with a 16% gain during the same time in 2024. Easter was occurring during the comparable period a year ago, likely keeping activity down, Redfin noted.Meanwhile, new listings did rise, by 12.7% compared with the same four weeks last year, and that was the biggest increase in 11 months, Redfin said."Supply is picking up; a lot of people I've spoken to over the last year or two are calling, saying they're ready to list their house," Matt Ferris, a Redfin agent from northern Virginia, said in a press release. "Some believe we're at the top of the market, and they want to get top dollar for their house."Others are doing so for the usual reasons: they want a bigger house, they've decided to retire, or they are relocating, Ferris said.However, the Housecanary data showed price reductions surged by 40.8% compared to last year. It is a signal sellers are responding to shifting affordability dynamics.This data shows the housing market is continuing toward a more balanced state. "Expanding inventory is shifting dynamics in favor of buyers, while steady contract volume signals continued demand," the Housecanary report said. "Though price growth persists, the rise in price cuts suggests sellers are adjusting to affordability constraints."With minimal relief coming in the future from mortgage rate declines, both buyers and sellers have adjusted their Spring purchase price season expectations, a report from Veros Real Estate Solutions added. It doesn't hurt that inventory is higher compared with 2024.Going forward, home prices are expected to grow by 2.4% in the next 12 months, Veros said in its first quarter 2025 forecast.It is a decline from the previous quarter's outlook of 2.7%.The underlying fundamentals will be unchanged from the period, Veros said. This includes mortgage rates, which have limited prospects for any near-term reduction.The 30-year fixed has averaged between 6.6% and 6.7% since the start of March, Freddie Mac found. This followed an approximate 40 basis point drop from mid-January to the first week in March."Inflation continues to be a significant concern, as evidenced by the recent increase in the core Personal Consumption Price Index for February 2025, and this is before the full impact of tariffs is felt," the Veros report said. "This stickiness in core inflation will likely prompt the Federal Reserve to keep interest rates at their present levels for the foreseeable future."Still, cautious optimism is the buzz right now. "The hope for easing interest rates and prices is tempered by concerns over tariffs, persistent inflation and broader economic anxieties that could hinder a more robust recovery," Veros said.
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