Called the Payment Supplement, the option allows mortgage servicers to decrease a borrower’s mortgage payment by using funds from a “partial claim” — an interest-free second lien from the U.S. Department of Housing and Urban Development (HUD) to help homeowners catch up on their past due payments and get back to good standing. The partial claim, which would be for up to 30% of the outstanding balance of a borrower’s FHA loan, would be paid back when the homeowner sells the home, refinances or otherwise terminates the mortgage.

Funds from the partial claim would first be used to pay any overdue payments on the original mortgage. Any remaining funds in the partial claim would then be deposited in an FHA custodial account managed by the mortgage servicer, who would use those funds to temporarily supplement the monthly payments the borrower would make.

The goal, according to the FHA, is to reduce the borrower’s monthly principal and interest (P&I) payments by 25% for as long as the partial claim payment supplement is active. Per a mortgagee letter from HUD released on Wednesday, payment supplements will be active for a period of three years, after which the borrower resumes responsibility for paying the full monthly P&I amount.

“HUD uses every tool in our toolkit to ensure we can help struggling borrowers avoid foreclosure,” said HUD Secretary Marcia L. Fudge. “Today’s new policy will enable the families we serve to get back on their feet while staying in their homes.”

The rapid rise of interest rates for more than a year provided the impetus for the new program, according to FHA Commissioner Julia Gordon. The program was first discussed and publicized last spring, coming to fruition after a lengthy review process.

“FHA developed this innovative tool because after interest rates rose, the FHA Recovery Modification could no longer reliably provide payment reduction to borrowers facing a hardship,” she said. “Payment Supplement will bring borrowers current and temporarily reduce their monthly payments for up to three years, which we hope will enable them to weather their hardship and once again begin making their full mortgage payments.”

Servicers may begin implementing the Payment Supplement option on May 1, but must implement the solution for all eligible borrowers by Jan. 1, 2025.

The new plan has drawn praise from industry stakeholders, including Scott Olson, executive director of the Community Home Lenders of America (CHLA). The CHLA has long advocated for a similar program, sending a letter to the FHA requesting one in August 2022.

“CHLA applauds FHA Commissioner Gordon for instituting a new payment supplement partial claim,” Olson said. “This will help struggling homeowners who are behind on their mortgage payments to stay in their homes.”

“Prioritizing payment relief and reducing operational complexities were imperative, and we believe the improvements made following multiple rounds of feedback will ensure mortgage servicers have a new effective and efficient way to help struggling borrowers stay in their homes,” said Bob Broeksmit, president and CEO of the Mortgage Bankers Association. “As recommended, a longer implementation period of January 2025 … will further support servicers’ implementation efforts.”

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Thirty-two percent of respondents to the survey, which more than 5,000 consumers participated in between Oct. 31 and Nov. 6, said that they could make buying a home work if interest rates slid under that threshold. Twenty-two percent — just over one-fifth — said they deem buying a home possible if rates dropped below 6%.

Mortgage rates, according to the latest Primary Mortgage Market Survey (PMMS) from Freddie Mac, are currently averaging about 6.77%. They’ve recently risen after Consumer Price Index data revealed that inflation rose more than expected in January, though their general trajectory has shown a downward bent since the Federal Reserve has eased off its rate-hiking policy late last year.

“Small changes in mortgage rates indeed have an outsized impact on monthly mortgage payments. For first-time homebuyers, if mortgage rates drop in the [5% range], that will boost their purchasing power. For a lot of repeat buyers who already own a home, the lower rates go, the less of a jump they will take in their mortgage payments,” said Danielle Hale, chief economist at Realtor.com.

“Mortgage rates are down more than a whole percentage point from their peak,” Hale added. “For the same monthly payment, you can afford to purchase a more expensive home or you have a lower monthly payment at the same home price. Either way, it’s a win for the homebuyer.”

That’s not to say that the current rate environment — or even the recent zenith of interest rates — is a deal breaker for homebuyers. Obviously, the high rate environment has made a significant impact. But 47% of millennials would still buy a home even if mortgage rates exceed 8% again, according to Realtor.com’s survey. So would 37% of Gen Z.

Young buyers are also the most optimistic, according to Realtor.com’s survey, with almost half of Gen Z buyers indicating that they expect to be able to afford a home in the next five years, compared with 32%  of millennials, 36% of Gen Xers and 26% of baby boomers.

“It makes sense that younger buyers are more optimistic,” Hale said. “There are certainly more challenges; they tend to have lower incomes and lower savings. But they’ve also got a lot of life in front of them. With incomes now outpacing inflation, we’re looking at real increases in their purchasing power.”

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Retail net absorption logged a 37.2% quarter-over-quarter leap in Q4 2023, growing to 17.6 million square feet, the highest level for the year. The fourth-quarter total was buttressed by a substantial jump in mall demand as such facilities have benefited from the rebound in physical retail post-COVID. According to a June report from Coresight, top-tier malls saw traffic grow from 2022 compared to 2019, while lower-tier mall traffic was up 10%—and mall absorption is starting to pick up in kind.

Meanwhile, overall deliveries of new retail space fell 5.1% quarter over quarter. The pickup in absorption coupled with the lack of offsetting supply pushed vacancy down 20 basis points to 4.0%, lowest since 2007. High costs are still holding back retail construction, presenting a challenge to retailers on the expansion track.

That challenge could turn out to be a big one if demand continues to outperform, with 2023 another active year for retail sector expansion. Per JLL’s figures, retailers announced 6,617 new store plans in 2023 (regardless of opening date). On the other end of the spectrum, just 4,412 store closures were announced.

Discount retailers are among the most active among expanding tenants, with Dollar Tree, Five Below, Burlington and TJ Maxx all among the top 10 retailers in new square footage signed. Dollar Tree tops the list by a considerable margin with 1.27 million square feet leased in 2023, handily exceeding second-place Target’s 761,800 square feet of new commitments.

Discounters are benefiting from bargain-hunting Americans’ response to ongoing inflation, with the Consumer Price Index (CPI) some 19% above its level in 2019. Discount retailers — chiefly dollar stores — announced  over 2,300 store openings in 2023.

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According to the latest iteration of First American’s Home Price Index (HPI) report, prices increased 0.3% month over month, hitting a 10^th consecutive peak in January. But Mark Fleming, chief economist at First American, appears confident that while more new highs may be on the way, the rate of gains is cooling.

“The pace of annualized home price appreciation peaked in December, as buyers rushed to take advantage of falling mortgage rates,” he explained. “In January, the preliminary estimate of annualized appreciation cooled modestly by half a percent and is likely to slow down further in the coming months. Despite concern that house prices could decline significantly at the beginning of 2023, rate-locked potential home sellers kept supply tight, maintaining pressure on prices. Optimism that mortgage rates will fall in 2024 may incent more homeowners to sell, boosting supply and, in turn, improving affordability for buyers.”

Annual price growth in January was at a rate of 7.2% — down, as Fleming mentioned, by 0.5% from December’s 7.7% peak.

The deceleration in home price gains is evident in First American’s metropolitan-level data. None of the 30 core-based statistical areas (CBSAs) tracked by First American posted a year-over-year decrease in HPI. Of the markets within those CBSAs, Nassau County saw the largest annual HPI increase at 10.7%, followed by Anaheim, California, at 10.2%; Warren, Michigan at 9.6%; and Miami at 9.4%.

But the vast majority of those CBSAs have already left their price peaks in the rearview, Fleming noted.

“While house prices increased in all 30 markets tracked by our index over the last year, this rising tide hides the change in market prices since their peak,” he said. “Measuring the price change in each market from their post-pandemic peak reveals that house prices are below their prior peaks in 23 of the top 30 markets. Notably, house prices are currently 6% or more below their prior peak in six markets, with the largest price declines from peak in Oakland (-13.5 percent); Austin (-9.9 percent); and Seattle (-9.2 percent).”

Fleming projected hope that, after a few turbulent years, discovery of the housing market’s elusive Goldilocks price point isn’t too far at hand.

“While more supply and improved affordability should cool post-pandemic hot house price appreciation, 2024 may still be the year that house price appreciation doesn’t get too cold, but closer to just right.”

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According to Yardi Matrix, the average asking rent for the month was $1,710, flat from December and up 0.5% year over year. It’s a tepid annual gain, but one that remains nonetheless notable given the recent surge of new apartment space in many areas, an influx attributed in large part to multifamily’s resilience even in the choppy commercial real estate environment of the past few years.

With more deliveries set to hit the market soon, Yardi anticipates another weak rent growth year in 2024. The analytics company is forecasting 540,000 deliveries this year, which would be a new record high if realized. Completions are expected to peak in 2024, though the pipeline remains busy with another 460,000 deliveries predicted in 2025.

The ongoing surge of supply, however, isn’t geographically consistent. Expanding secondary markets in the West and Sun Belt, like Austin, Miami, Charlotte, Denver, Nashville and Phoenix, are seeing the largest number of deliveries, as are fast-growing tertiary cities in the same regions, like Huntsville, Alabama; Port St. Lucie, Florida; Colorado Springs, Colorado; and Boise, Idaho. Even with absorption sturdy in such markets, their rent growth projects most weakly while tenants lease up the newly added space. Charlotte, Nashville, Phoenix and Austin all saw year-over-year decreases in rent, with Denver and Miami logging gains below the national 0.5% figure.

Meanwhile, rents in large hubs in the Northeast and Midwest are seeing the strongest gains. New York (up 5.5% annually); New Jersey (4.4%); Columbus, Ohio (4.2%); Kansas City, Missouri (3.4%); and Indianapolis (3.0%) posted the largest annual increases in January, while Columbus (up 0.8% from December), Indianapolis (0.6%) and Minneapolis-St. Paul (0.5%) saw the largest upticks month over month.

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American Financial Resources (AFR) has announced that it completed the sale of 100% of the company to an investment group led by Proprietary Capital.  The transaction was previously announced in August, and the transaction was completed on Feb. 8.  AFR is a full-service mortgage banking company with direct, wholesale and correspondent lending divisions that offer products ranging from agency, non-agency, and government lending, with a niche in construction and manufactured home mortgage programs. Proprietary Capital is a fund manager based in Denver, providing an institutional platform for investors to gain exposure to the residential mortgage market and housing-related assets.

Better has announced the launch of Better Mortgage VA Loans, a fully digital VA loan program available to eligible veterans, service members, National Guard and Reserve members, and, in some cases, veterans’ spouses. The offering, available in all 50 states, allows qualified individuals to secure a primary residence mortgage for up to 100% of the purchase price with no downpayment requirement.

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At a seasonally adjusted annual pace of 1.33 million units, January’s rate of starts was down 14.8% from December and 0.7% from January 2023. The slowdown was likely propelled in large part by the frigid weather that gripped much of the country during the month, making it harder to break ground on new construction. Economists polled by Reuters had predicted a rate of 1.46 million starts, leaving January’s actual figure far short of expectations.

Both single-family and multifamily starts declined, although the month-over-month single-family backtrack of 4.7% paled in comparison to the stark 35.6% plummet in multifamily building. Multifamily starts are notoriously volatile on a month-to-month basis, but Robert Dietz, chief economist at the National Association of Home Builders (NAHB), said that the sector looks due for more of the same throughout the year.

“Multifamily construction is forecasted to post a large decline in 2024 as the number of units currently under construction is near the highest level since 1973,” Dietz said. “Meanwhile, single-family production, which is currently running at a 1-million-unit annual rate, is roughly in line with builder sentiment that remains right below a breakeven level, according to our latest surveys.”

The NAHB/Wells Fargo Housing Market Index, which tracks builder confidence in the market for new single-family homes, rose four points to a reading of 48 in February — the index’s highest level since August of last year. The stubborn shortage of listings that has held back the resale market continues to boost new home demand, and expectations of an eventual interest-rate lowering cycle are fueling optimism.

“The improvement in builder sentiment has been driven by the gradual decline in mortgage rates since the fall of last year,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “Additionally, builders continue to benefit from a lack of resale inventory. They also can offer incentives, such as mortgage rate buydowns or even price cuts, to entice buyers. When there are no suitable existing homes for sale, a new home at the right price can be a good alternative.”

The NAHB forecasts a “modest” gain in single-family starts for full-year 2024, Dietz said. Thus far, that prediction is supported by early-year permitting data, with authorizations of new single-family construction at a pace of 1.02 million units in January, up 1.6% from December.

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A&D Mortgage has announced the appointment of Rebecca Chaney as its new general counsel. Chaney brings over 17 years of experience to her new role at A&D Mortgage, including previous roles as general counsel at Atlantic Coast Mortgage; senior vice president of mortgage regulatory compliance and administration at LenderSelect Mortgage Group; and senior executive vice president of legal affairs, regulatory compliance and administrative control at Atlantic Bay Mortgage Group. Her role will involve overseeing all legal, regulatory, and compliance aspects of A&D Mortgage’s operations. Chaney holds a juris doctor degree from The Catholic University of America.

Logan Finance Corporation has announced a pair of leadership additions: Sarah Gonzalez as chief operating officer (COO) and Ryan Rathert as chief of staff. Gonzalez, who will lead corporate strategy and national fulfillment as well as spearhead corporate initiatives, was previously at Panorama Mortgage, where she held the positions of president and COO. Prior to Panorama, she also served as COO at First Guaranty Mortgage Corp.; senior vice president of strategic business operations at Stearns Lending; and vice president of correspondent operations at Nationstar Mortgage. Rathert’s background includes eight years with Stearns Lending in a variety of positions, most recently as chief financial officer of Panorama and COO/CFO of the company’s wholesale mortgage channel. He was also previously production CFO an head of private label operations with Stearns Lending, Wells Fargo and Mr. Cooper.

Embrace Home Loans has promoted Buddy Hardiman from senior vice president of retail and direct sales to president. Hardiman, who is based in Middletown, Rhode Island, will oversee the company’s lending operations and fulfillment areas, as well as continue to head Embrace’s financial services division. He joined Embrace Home Loans in 2008 as a project manager, holding various roles before being promoted to vice president of sales strategy and recruiting in 2016 and senior vice president of retail and direct sales in 2019.

The Money Store has announced that Coleen Bogle has joined its team as chief marketing officer. Bogle has more than 15 years of experience leading marketing departments in the home financing industry, and in her new role, she will focus on enhancing the brand, expanding marketing services and attracting mortgage origination talent to the organization. Prior to joining The Money Store, Bogle served as the chief marketing officer at Draper and Kramer Mortgage Corp. for over eight years.

FirstFunding has announced the appointment of Matt Coles as national sales manager. Coles will lead the company’s sales strategy and operations, seeking to enhance the value FirstFunding delivers to existing customers and grow the sales team. Prior to joining FirstFunding, Coles led the sales organization at a national wholesale and correspondent lender.

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Twenty percent of commercial and multifamily mortgage balances are set to mature in 2024, the MBA reported in its latest Commercial Real Estate Survey of Loan Maturity Volumes. The organization revealed the data at its annual Commercial/Multifamily Finance Convention and Expo in San Diego.

That figure equates to roughly $929 billion of the $4.7 trillion in outstanding commercial property loans, a 28% increase from the $729 billion that matured last year. Many of the loans that were originally set to see maturation in 2023 were instead pushed to this year, ballooning the 2024 estimate.

“The lack of transactions and other activity last year, coupled with built-in extension options and lender and servicer flexibility, has meant that many loans that were set to mature in 2023 have been extended or otherwise modified and will now mature in 2024, 2026, 2028 or in other coming years,” said Jamie Woodwell, the MBA’s head of commercial real estate research.

“These extensions and modifications have pushed the amount of [commercial real estate] mortgages maturing this year from $659 billion to $929 billion.”

Some investor groups are set to see a large fraction of the outstanding balances they hold reach maturation this year. For example, 25% of the outstanding commercial property loan balances held by depository institutions — a share that equates to some $441 billion — will mature in 2024. So will 31% of balances (approximately $234 billion) in commercial mortgage-backed securities, collateralized loan obligations or other asset-backed securities, as well as 36% ($168 billion) held by credit companies, in warehouse or by other lenders. On the other end of the spectrum, just 3%, or $28 billion, of outstanding balances held or guaranteed by Fannie Mae, Freddie Mac, the Federal Housing Administration or Ginnie Mae are set to mature this year.

When it comes to property types, hotels have the largest share of loans coming due at 38%, followed by 27% of industrial loans and 25% of office mortgages. Just 17% of retail property balances and 12% of multifamily-backed loans are set to mature in 2024.

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The Seattle-based national real estate brokerage reported that investors bought 46,419 homes in the fourth quarter, down 10.5% year over year to reach the lowest fourth-quarter level since 2016. Home purchases by investors have ebbed because high capital costs have combined with a lethargic rental market to depress investment returns, with many investors instead putting their money toward lower risk, higher return arenas such as Treasury bonds.

But among homes priced among the bottom third of local sale prices, investors remain active. Real estate investors purchased 26.1% of such homes sold in the fourth quarter, up from 24% in the same period one year prior and the highest percentage on record.

The investing appeal of more affordable homes in an environment with high prices and high interest rates is obvious, but Redfin noted another advantage: the lowest price tier also offers more potential for home value increases and therefore more potential for building equity.

Notably, while investors acquired a larger share of low-priced homes in the fourth quarter, the share of low-priced homes as a percentage of all investor purchases has actually gone down. Homes priced in the bottom third of local sale prices made up 46.5% of all investor buys in Q4 2023, down from 47.2% year over year.

Investors also acquired a larger share of high-priced homes during the fourth quarter than they did one year earlier (15.9% of homes in the top one-third of local sales prices in Q4 2023, compared to 15.4% in Q4 2022). The share of high-priced homes as a percentage of investor purchases was also up, growing to 28.8% in the last three months of 2023, up from 26.5% in the same period of 2022.

Investors bought 13.6% of mid-priced homes sold in the fourth quarter, down from 14.3% one year prior. Mid-priced homes made up 24.6% of all investor buys, down year over year from 26.4%.

Carrie Caruthers, a Redfin agent in California’s Inland Empire, said that investors remain active — in fact, while the 10.5% annual drop in investor home purchases during the fourth quarter was the sixth consecutive decrease, it’s the smallest downshift since investor activity first began falling during Q3 2022.

“I get tons of emails every day from investors looking for properties, but of course, they only want homes that are under market value, which are hard to come by,” Caruthers said. “When they find those properties, they pile in. I’ve recently seen an uptick in foreclosures, which investors are interested in because they often sell at a discount.

“I just sold one foreclosed house to an investor for $400,000. It probably would’ve sold for around $500,000 if it hadn’t been a foreclosure, but the investor got a deal because foreclosure purchases come with risks.”

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