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Roadblocks in the purchase market could be the green light for other types of home financing. Annual spending for home improvement and maintenance is projected to grow to $477 billion on an annual basis in the next 12 months, according to the Joint Center for Housing Studies of Harvard University. That projection, while trailing recent heights for 12-month stretches, indicates signs of life for consumer spending on the home.Carlos Martin, director of the Remodeling Futures Program at the JCHS, said the remodeling uptick will stem from lagging construction and muted sales of existing homes – what the market has deemed the "lock-in" effect.  "Additionally, stronger gains in home values and thus home equity levels should boost both discretionary and 'need-to-do' replacement projects for owners staying in place," said Martin in a press release. Renovation spending could be a driver for refi volume expected to double next year. Economists at Fannie Mae forecast over $600 billion in refi volume in 2025, production expectations it said are still at risk of rate volatility. Mortgage rates are expected to drop to around 6% to end this year, and average 5.7% across 2025, according to the government-sponsored enterprise. Many borrowers appear to be hanging on to their ultra-low rates they secured during the pandemic, and refinance demand has wavered after a recent, short-lived boom. The Remodeling Futures Program's Leading Indicator of Remodeling Activity expects annual expenditures for renovations to grow by 1.2% through the third quarter of 2025. That would be far below the 17.2% growth in that metric in the third quarter of 2022, but still well above total spending levels of yesteryear. Lenders are keen on the apparent cash-out refinance opportunity, rolling out promotions to capture homeowners unmoved by rates still in the 6% range. Homeowners are also sitting on massive equity, built by the steady rise in home prices since the pandemic. Homebuilders are catching up to the nation's inventory shortage, and some green shoots in building statistics are emerging. The National Association of Home Builders recently put nationwide inventory at a relatively low 4.7 months worth of supply however, and experts emphasize the supply crunch is holding up the market.

Verus Securitization Trust is preparing to issue $593.5 million backed by a range of mortgages, and with significant amounts of home equity among the borrowers.Verus' series 2024-8 is made up of 10 tranches, where the three class A tranches will repay investors on a senior-pro rata basis; and a mezzanine tranche and three class B tranches will repay investors sequentially, according to S&P Global Ratings. The notes have a final payment date of Oct. 25, 2069.Barclays Capital is lead underwriter on the deal, while Shellpoint Mortgage Servicing, Lima One Capital and Nationstar Mortgage will service the notes, S&P said.The notes are supported by a pool of 1,229 mortgages, which are mainly newly originated, fixed- and adjustable-rate on first and second liens, the rating agency said. Also, some of the mortgages have an interest-only period.The pool does have several key strengths, S&P said. Underlying borrowers have accumulated significant amount of home equity in their homes, to a weighted average (WA) original cumulative loan-to-value (CLTV) ratio of 69.5%. Among the deal's strengths is the entire pool received a third-party due diligence from a series of providers that are on S&P's list of reviewed providers.Another strength in the deal structure is the credit support on classes A1, A2 and A3, which require principal to be repaid to the senior notes in full and for them to be retired, before the subordinate classes receive principal.Other characteristics present some weaknesses to the pool, however, including a significant number of business-purpose investors loans. Also there is a significant number of loans with alternative income documentation, which represents about 48.2% of the pool balance. Self-employed borrowers accounted for 51.5% of the pool, S&P said.Five hundred, nineteen loans in the pool are property-focused investor loans underwritten to borrowers in business, and did not consider their income or employment. They represent 32.04% of the pool balance. The pool had a 1.09x WA, non-zero debt service coverage ratio (DSCR).The rating agency assigns AAA, AA and A to the A1, A2 and A3 notes; BBB- to the M1 notes; and BB and B to the B1 and B2 notes.

U.S. housing starts eased in September as a drop in multifamily projects outweighed a pickup in construction of single-family dwellings.Housing starts decreased 0.5% last month to a 1.35 million annualized rate, according to government data released Friday, after a big rebound in August. The September figure was in line with the median projection in a Bloomberg survey of economists.READ MORE: Where new homes are being built, according to NAHBStarts of single-family homes climbed 2.7% to an annualized 1.03 million, the strongest in five months. Construction of multifamily homes slumped 9.4% to a four-month low.The number of overall building permits, a proxy for future construction, fell 2.9% to a 1.43 million annualized rate. Permit applications for single-family home construction rose 0.3% to a 970,000 pace.Even with the rise in single-family home construction, the rate is down from the furious pace seen in late 2021 and early 2022, when mortgage rates were close to 3% and a historic dearth of existing homes for sale propelled demand for new houses. However, after the Federal Reserve boosted interest rates to the highest level in two decades, demand weakened and ultimately left homebuilders with the largest supply of new homes in 16 years.Home construction is seen shaving the most from third-quarter gross domestic product since 2022. Before the figures, the Atlanta Fed's GDPNow forecast saw residential investment subtracting 0.43 percentage point after a 0.11 point reduction in the second quarter. By RegionStarts of one-family homes rose in two of four regions, including a 6.6% increase in the South to a five-month high, and a 10.6% gain in the Northeast.A sustained housing recovery will take time as mortgage rates, which hit a two-year low in mid-September, have recently picked up. Nonetheless, builders on recent earnings calls have been upbeat about the prospect of cheaper home financing costs after the Fed cut interest rates by a half-point last month. "With affordability still a pressing issue in many regions, home building will likely remain stagnant until the Fed is well into its easing cycle and mortgage rates have fallen another one percentage point," Sal Guatieri, senior economist at BMO Capital Markets, said in a note.Lower borrowing costs should revitalize the resale market, which will filter through into firmer demand for new homes, according to Jeffrey Mezger, chief executive officer of KB Home.READ MORE: Homebuilders see a changing customer profile emerge"There's a lot of people that are locked out of moving up because there's not enough product, or they don't want to sell their current home, but they need to move up," Mezger said on the company's earnings call last month. "I think the whole thing opens up. What we call the housing food chain will unlock if inventory would come up a little bit."The starts report showed completions of new single-family homes decreased 5.7% to a 1.68 million annual pace, while the number of projects under construction slid nearly 2% to an almost three-year low, the government data show.The new residential construction data are volatile, and the government report showed 90% confidence that the monthly change ranged from a 13.5% decline to a 12.5% gain.

Fifth Third Bancorp expects half of its branch network to be based in the Southeast by 2028.Courtesy of Fifth Third UPDATE: This story includes information and quotes from Fifth Third's call with analysts on Friday morning, as well as additional commentary from analysts.Even as the banking industry faces a potential one-two punch, with economic uncertainty contributing to stalled loan growth and falling interest rates weighing on yields, Fifth Third Bancorp expects its net interest income to hit "record results" in 2025.In an environment where the upcoming election is contributing to unpredictability, the Cincinnati-based bank plugged away at its long-term strategies during the third quarter. Fifth Third beat expectations on core operations by pulling fee-income levers and using its market expansion in the Southeast to bulk up both its retail franchise and its pipelines for middle-market lending.CEO Tim Spence said in an interview that loan growth will pick up as outcomes around interest rates and the upcoming election become more clear, and that how those events turn out will make a difference.Commercial clients will start utilizing their lines of credit more frequently once they have more information, which will allow them to make business decisions, he said."When we get clarity on who won," Spence said, "and the Fed starts to lower interest rates, as long as the economy holds up, you get an environment where people feel more confident about investing."Fifth Third doesn't need "heroic" loan growth to deliver on its revenue goals, said Chief Financial Officer Bryan Preston on a Friday call with analysts, as lower interest rates mean the bank doesn't have to pay as much on deposits, and fixed-rate assets from the zero-rate era reprice at higher yields. The bank is modeling for the Federal Reserve cutting interest rates by 50 basis points over the next two months.Preston added, though, that he thinks the bank is past the days of tepid commercial loan demand, for the most part.Net interest income of $1.4 billion in the third quarter came out better than analysts expected, and was down 1% from the same period a year prior. In the fourth quarter, Fifth Third predicts that figure will increase roughly 1% sequentially.But top-line revenue is still projected to get a boost in the last three months of 2024 from the fee-driven businesses where Fifth Third has grown in recent years. The bank anticipates noninterest income to increase 3% to 4% from its third-quarter total of $748 million, which marked a 2% rise from the year-ago quarter, excluding one-time charges.Fifth Third is also taking advantage of its Newline payments product, which helps businesses launch card and deposit services. Revenue from the business rose 10% from the same period last year. Spence said in the interview that he feels "confident" Fifth Third can sustain its growth rate in the payments business.In the bank's wealth and asset management business, assets under management grew 21% from the year prior.Spence said on the call that the bank will keep investing in growth businesses and market expansion as it aims to drive performance."Cincinnati invested hustle," he said — a reference to a slogan from the days of the recently deceased Cincinnati Reds star Pete Rose. "That ethos is part of the way that we try to run the company, is to sprint to first on a walk. We try to work on next year's problems and the year after that this year."The bank's build-out in states like Florida, Tennessee and North Carolina has boosted its middle-market loan pipeline, which Spence told analysts is at an "all-time record level."He added in the interview that the growing loan pipeline in the Southeast is partially due to higher economic activity in the region, compared with the Midwest. The sectors that are driving production are similar to those in Fifth Third's legacy businesses, like manufacturing, logistics and health care, though with less exposure to metals and mining, he said.Fifth Third has increased its relationship manager headcount in the Southeast by 20% in the last year. The bank plans to open 19 new branches in the fourth quarter across the region, and will accelerate the pace of openings so that its branch network is split roughly evenly between the Midwest and the Southeast by 2028.Spence told analysts that the bank is growing that presence organically, adding that the branches break even on their cost after a few years, and have subsequently been running returns of roughly 20%.The bank reeled in $573 million of net income in the third quarter, marking a 13% drop from the year prior. Although Fifth Third's earnings per share of 78 cents missed consensus analyst expectations of 83 cents, per S&P data, the bank beat forecasts when excluding expenses related to legal fees, a swap of Visa shares and the costs of layoffs.Analysts at both Piper Sandler and Citigroup wrote in Friday notes that Fifth Third's third quarter was solid, due to better-than-anticipated fee income and net interest income. Its stock closed down 1.54% on Friday, ending the day at $44.67. "In our view, the story we hoped would manifest itself continues to do so: improving NII outlook, conservative/do-able assumptions, and solid credit backdrop," wrote Piper Sandler analyst Scott Siefers.David Chiaverini, an analyst at Wedbush, maintained Fifth Third at an "outperform" rating, writing in a note that the bank's balance sheet should benefit from lower rates.

New York Community Bancorp's Flagstar Bank is eliminating 700 jobs, or 8% of the workforce, as part of the lender's effort to turn around its business.The company, which plans to take the Flagstar name later this month, also expects that a previously announced sale of its residential mortgage servicing business will reduce its workforce by an additional 1,200 employees when the transaction is completed this quarter."While these strategic actions involve difficult decisions, including impacts on jobs, we believe they are essential for strengthening our financial foundation and building a more agile, competitive company," Chief Executive Officer Joseph Otting said Thursday in a statement that disclosed the figures. Otting, a former comptroller of the currency, is overhauling the bank after concerns about its exposure to New York commercial real estate sent the stock swooning this year. He took over as the company got a capital injection from a group of investors led by former Treasury Secretary Steven Mnuchin.In July, NYCB announced an agreement to sell mortgage-servicing rights and the third-party origination platform to Mr. Cooper. Most of the employees affected by the sale will be offered opportunities to transfer to the buyer, NYCB said in Thursday's statement.

Home equity investment platform Splitero announced $300 million in new funding, adding its name to a growing list of similar fintechs recently garnering interest from investors.The multimillion dollar raise comes from alternative asset investment firm Antarctica Capital and will help support Splitero's efforts to scale growth, according to the platform's CEO, Michael Gifford. Growth in home equity investment products continues to ramp up with interest rates currently above levels most homeowners currently hold on their existing mortgages. Sometimes referred to as shared appreciation platforms, they are touted by the businesses offering them as a means for homeowners to tap into accrued equity without the need to refinance at a higher rate. "Americans have substantial trapped equity in their homes. Splitero provides a means to access this equity in a financially prudent manner is a critical need for many Americans today," said Chandra Patel, managing director at Antarctica Capital, in a press statement."Splitero is a fast-growing and innovative company with a strong and experienced leadership team," he added. The strategic investment in Splitero arrives more than a year after an $11.7 million Series A funding round. Prior to the latest announcement, the San Diego-based fintech had raised $17.5 million in total, according to Crunchbase. The company was founded in 2021 and currently operates in five Western states: California, Colorado, Oregon, Utah and Washington. The cash infusion also comes weeks after similar capital funding announcements for other HEI platforms, including Unison and Unlock Technologies, as the combined effect of elevated rates and rapid growth of home equity over the last few years leads some consumers to seek lending alternatives.A recent report from Intercontinental Exchange found Americans sitting on a record $11.5 trillion of tappable home equity, with at least $100,000 available to three in five homeowners. Meanwhile, secondary market interest in home equity loans and products is rising in tandem with increasing origination volumes. Hometap and Point, both active originators, issued rated securitizations in recent months. Alongside the growing potential for new customers, though, scrutiny of shared home appreciation products is also making news. Many platform offerings do not require regular payments as loans would, with customers, instead, owing the percentage of equity originally drawn at time of repayment. Acceleration of home equity since 2020 has left some customers with unpleasant surprises upon realization of the amount due. Multiple businesses currently face consumer lawsuits, while calls for the platforms to be regulated similar to home lenders are coming from a range of stakeholders, including legal advocacy groups and mortgage bankers. 

Mortgage stakeholders spent approximately 42% less on lobbying in 2024 compared to two years earlier, according to data from Open Secrets, a nonprofit that tracks money in politics.In total, mortgage participants—including influential trade groups, insurance companies, and lenders—spent $6.7 million on lobbying this year, a decrease from $12 million in 2022. The 2024 figures are based on Federal Election Commission data released on Sept. 22, 2024. The Mortgage Bankers Association, the Council of Federal Home Loan Banks, Federal Home Loan Bank, Housing Policy Council, and Pennymac were the top spenders on advocacy this year.The MBA spent $1.8 million on lobbying, down from $2.6 million two years ago.The Housing Policy Council, another influential trade group, spent $310,000, nearly halving its lobbying expenditures compared to 2022. The Community Home Lenders of America also reduced its lobbying budget, spending only $94,000, down from $280,000 two years prior.Mortgage lenders and servicers including United Wholesale Mortgage, Pennymac, NewDay USA, Mr. Cooper, Veterans United Home Loans and Freedom Mortgage funded advocacy efforts this year.Among these companies, Pennymac, Veterans United Home Loans and  NewDay USA were the top spenders on lobbying, doling out $290,000, $220,000 and $220,000, respectively. Two years prior, Veterans United and NewDay spent $460,000 and $600,000 in lobbying efforts.READ MORE: The mortgage professional's guide for the 2024 electionMortgage insurance companies and their main trade group significantly decreased lobbying efforts. Enact Holding, NMI Holdings and U.S. Mortgage Insurers spent $60,000, $60,000 and $160,000. Comparatively, in 2022 the three companies spent $130,000, $120,000 and $390,000.MGIC Investment's spending remained unchanged, with the mortgage insurer investing $220,000 this year, the same amount spent two years ago.Separately, Open Secrets' analysis found that mortgage industry stakeholders contributed slightly more to the Democratic party from 2023 to 2024. The nonprofit's data shows $2.75 million was contributed to Democratic members in Congress compared to $2.71 million to Republican politicians. A survey conducted by Arizent, the parent company of National Mortgage News, reveals that most participants favor more conservative policies and are skeptical about a Kamala Harris presidency.Among the 98 mortgage professionals surveyed, nearly 92% expressed some level of dissatisfaction with the current political climate, while 56% believe that a second Donald Trump presidency would positively affect the mortgage industry.In contrast, only 32% of respondents think that a Harris presidency would benefit the mortgage sector.The same 56% think that a Republican majority in the Senate would be advantageous for the mortgage industry, whereas 36% prefer a Democratic presence in Congress.Key issues that those surveyed want the next administration and Congress to tackle include high interest rates (73%), the economy (60%), affordable housing (56%), and immigration (40%).

Even before the recent back-to-back catastrophic hurricanes Helene and Milton, property-related losses from natural disasters and other risks rose for the seventh consecutive year in 2023, LexisNexis Risk Solutions found.Lost cost from all perils, including hail; wind, water, fire and lightning; and non-weather related claims such as water leaks, thefts or liability, increased by 4.1% over 2022, while frequency rose 52%.Since 2019, the increases were 11% and 16.9% respectively. Loss severity compared with that year was up 28.9%, although it was down by 6.3% versus 2022."In the last year, the U.S. saw several historic-level weather disaster events and the highest level of catastrophic claims across all perils we've seen in the past seven years, which contributes to rising premiums that consumers across the country face right now," said Cole Winans, vice president, home insurance, LexisNexis Risk Solutions, in a press release.Homeowners insurance costs have been on the rise, and that affordability problem has become a concern for mortgage lenders and servicers.The impact of these events are likely to impact availability of property coverage."Even as more insurers are likely to see rate increases approved in certain states in the coming months, they will need to be discerning in writing new business only in those pockets where they can do so profitably and that will be on a carrier-by-carrier and state-by-state basis," Winans said.A recent Weiss Ratings analysis claimed insurers are already looking to cut costs for reasons relating to climate change, with 13 of the largest denying more than half of their claims last year.During 2023, the U.S. suffered 28 weather and climate disasters, with each surpassing $1 billion in damages, LexisNexis said. Of that total, 17 were attributed to severe weather or hail events.Last year, the U.S. experienced 6,962 hail events, That was an increase of 57.3% from 2022, with 71% of the related claims deemed catastrophic.Wind peril frequency rose 14.8%, with the loss cost increasing 0.7% year-over-year. Severity for that period fell 12.3% with the highest loss cost and frequency related to March events.In addition, 62% of wind claims were considered to be catastrophic claims, up from 52% the year prior.Weather-related water perils trended in the opposite direction, down 51.4% in loss cost, 25.5% in frequency and 34.8% in severity, with 61% of claims considered catastrophic. "When we look at peril data over a seven-year span, it's increasingly clear that home insurers cannot rely on short-term trends alone to make fully informed decisions about their books of business and operational strategies," said George Hosfield, associate vice president, home insurance, LexisNexis Risk Solutions. "For example, while hail loss cost surged by 57.9% in a one-year observance, the longer-term trend shows consistent increases across all perils year-over-year."Regarding those more recent events, Selma Hepp, chief economist at CoreLogic feels those will have a long-lasting impact on housing in Florida, up the east coast into the Carolinas.Florida is already experiencing weakness in its real estate market, she said in an Oct. 10 comment."Rising insurance costs are a prominent concern for homeowners and potential buyers," Hepp said. "Homeowners in any affected markets who didn't have appropriate insurance damage coverage may be losing all of their hard- and long-earned home equity on which they relied for a financial buffer in times of economic hardship."Property investors are also affected, and will be more cautious regarding doing business in areas that are perceived to be at an increased risk of negative climate events, Hepp said. That could further weaken any struggling markets.

Fannie Mae foresees more competitive mortgage rates but a resilient "lock-in" effect to close the year. The 30-year fixed-rate mortgage will end the year at 6.0%, down from last month's 6.2% projection, according to Fannie's Economic and Strategic Research Group. Headwinds however remain in climbing home prices and a more recent uptick in rates for most home loan products.The government-sponsored enterprise didn't improve its origination outlook for the year, with an anticipated $1.67 trillion in loan volume for 2024, of which $1.3 trillion would be purchase activity. "The timing of the long-expected pick-up in home sales activity, as well as a further moderation in home price appreciation, will depend in part on the willingness of current homeowners to relinquish their low mortgage rates by offering their homes for sale," said Mark Palim, senior vice president and chief economist at Fannie, in a press release Thursday.The ESR Group's home sales prediction is also at risk of recent interest rate rises. Economists are predicting 4.77 million total homes sold in 2024 and 5.24 million next year, slight upgrades over past estimates. Home price appreciation in 2024 was slower than initially reported, according to revisions to the Fannie Mae Home Price Index. Economists still warned of a steady rise, mitigating the motivation to sell. The ESR Group expects home prices to rise 5.8% in the fourth quarter on an annual basis, and upwardly revised its 2025 forecast to 3.6% growth from 3.0%.The 30-year FRM may be a full percentage point lower than the same time last year, but analysts today put it squarely in the mid-6% range. As of Thursday afternoon, National Mortgage News' LenderPrice index showed a 30-year FRM over 6.8%."Rates have risen because of 'good' reasons, including better economic growth and above-consensus increases in payroll employment," wrote ESR Group authors. Among recent economic highlights was a "Quits Rate" falling to 1.9% in August, its lowest level since July 2015. The figure, Fannie explained, is a useful metric for future wage growth and confidence in the labor market. The 10-year Treasury, the more direct influence on mortgage rates, has jumped from 3.65% in mid-September to around 4.1% Thursday. ESR Group authors wrote they don't expect that rise to be a significant headwind for future rate growth. Fannie still expects an overall slowdown in economic growth, but consumer finances appear to be stabilizing. The government has made "sizable upward revisions" to personal income data and savings. A savings rate of 5.2% in Q2, authors wrote, is below the pre-pandemic level but represents more cohesion between income and spending levels."As such, we no longer believe that consumption growth will need to slow as much to bring this relationship into balance," the ESR Group said. Mortgage rates meanwhile should average 5.7% in 2025. Originations will surpass $2 trillion, but the projection was downgraded slightly this month to $2.14 trillion from $2.16 trillion. Refinance volume, which has already shown signs of life, should double to over $600 billion next year. Inventory remains the crux of the housing market. New home sales fell on a seasonally adjusted annualized rate to 716,000 in August. Despite a lack of available homes, starts had lagged this summer on weak demand off high rates. "Continued strong homebuilding activity will also play a significant role as the shortage of national housing stock remains the primary impediment to affordability," the economists said. 

Sentiment among U.S. home builders jumped to a four-month high this month, with the prospect of lower mortgage rates fueling optimism about demand for new houses in the coming year. A measure of housing market conditions from the National Association of Home Builders and Wells Fargo increased for a second straight month to 43 in October. That beat the median estimate of 42 in a Bloomberg survey of economists.The three components of the housing market index rose. The outlook for the next six months rose to the highest since April, while the gauge of prospective-buyer traffic and the index of present sales also improved.After the Federal Reserve lowered interest rates by half a percentage point last month, labor-market and inflation data have come in stronger than expected and policymakers have talked of a more gradual approach going forward. That's led to an uptick in mortgage rates, which have crept up from two-year lows they reached in September. "We are forecasting uneven declines for mortgage interest rates in the coming quarters, which will improve housing demand but place stress on building lot supplies due to tight lending conditions for development and construction loans," NAHB Chief Economist Robert Dietz said in a prepared statement. While new-homes sales have ebbed and flowed over 2024, the biggest builders have been solidly profitable and taken market share from smaller companies, who generally have higher borrowing costs. The iShares U.S. Home Construction exchange-traded fund, comprised of large builders and related companies, is at an all-time high.Builders are already looking forward to the vital spring selling season, with the expectation that lower borrowing costs will bring new customers into the market."With a lower rate environment, and given that the consumer has been a little more conditioned on these higher rates for the past couple of years or so, we're expecting to see a pretty strong spring selling season given the right conditions," KB Home Chief Financial Officer Jeff Kaminski said in an earnings call last month. In the NAHB data, the share of builders cutting prices was unchanged at 32% in October. The average price reduction increased to 6%, returning to the long-term trend after dropping in September.  And the share of builders that reported using sales incentives edged up to 62%.The gains in the index were broad-based. On a three-month moving average basis, a metric that helps smooth short-term volatility, the gauge improved in the Northeast, Midwest and the West increased, while was steady in the South.The government will give another snapshot of the new-home market on Friday, when it releases its residential construction report for September.