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Economic Growth Forecast Downgraded as ‘Soft Landing’ Appears Increasingly Unlikely

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Higher Mortgage Rate Environment Expected to Slow Housing Activity Expectations of aggressive monetary policy tightening through 2023 by the Federal Reserve are likely to further soften economic output already being weighed down by decades-high inflation and the ongoing effects stemming from the Russian invasion of Ukraine, according to the April 2022 commentary from the Fannie Mae (OTCQB: FNMA) Economic and Strategic Research (ESR) Group. The ESR Group’s latest forecast includes downgrades of 0.2 and 2.4 percentage points, respectively, to 2022 and 2023 real GDP growth, including an expectation of a period of modest contraction in the second half of 2023. The forecast notes that the projected downturn is not expected to resemble the severity or duration of the Great Recession due to multiple factors, including, from a housing market perspective, stronger mortgage credit quality, a far less-leveraged residential real estate and mortgage finance system, and a better equipped mortgage servicer and public policy apparatus, as well as ongoing housing supply constraints relative to demographic demand for housing. “We continue to see multiple drivers of economic growth through 2022, but the need to rein in inflation, combined with other economic indicators, such as the recent inversion of the Treasury yield curve, led us to meaningfully downgrade our expectations for economic growth in 2023,” said Doug Duncan, Fannie Mae Senior Vice President and Chief Economist. “The tight labor market and continued demand for workers, the need for firms to rebuild inventories, and the slowing of some transitory inflation impulses all suggest to us that 2022 will grow a bit faster than long-run trend growth. However, as the remaining fiscal policy stimuli fade and the predicted tightening of monetary policy works its way through the economy, we expect the impact of these factors to diminish. Data from U.S. economic history suggest that successfully negotiating a ‘soft landing’ requires monetary tightening to be pre-emptive rather than responsive. As such, we’ve updated our 2023 forecast to include a modest recession, but one that we do not expect to be similar in magnitude or duration to the recession of 2008.” Duncan continued: “We expect housing to slow over our forecast horizon, as well. Mortgage rates have ratchetted up dramatically over the past few months, and historically such large movements have ended with a housing slowdown. Consequently, we expect home sales, house prices, and mortgage volumes to cool over the next two years. In particular, we expect house price growth to decelerate to a pace more consistent with income growth and interest rates. Households with a 3-percent, 30-year, fixed-rate mortgage are unlikely to give that up in favor of a mortgage closer to 5 percent, and we expect this so-called ‘lock-in’ effect to weigh on home sales. Moreover, if mortgage rates remain relatively elevated, we expect the added affordability constraint to price out some would-be first-time homebuyers and contribute to the slowing of demand.” Visit the Economic & Strategic Research site at fanniemae.com to read the full April 2022 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae’s Economic & Strategic Research Group, please click here.

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WORD OF THE DAY: Approbate

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[AP-rə-beyt] Part of speech: Verb Origin: Latin, 15th century Definition: Approve formally; sanction. Examples of Approbate in a sentence “In order to build a shed, the city council needed to approbate my project with a building permit.” “My boss approbated my expenses from my trip to the trade show.” About Approbate “Approbate” is derived from Latin, mingling “ad-” (meaning “to”), “probare” (meaning “try” or test”), and “approbat,” meaning “approved.” Together the term suggests the kind of approval that can stand up to tests of its legitimacy. Though the term was common among English-speaking countries, it fell out of use in Europe in the 17th century and has continued to be used primarily in the United States. Did you Know? “Approbate” is often used in the context of legal wills, where it is frequently paired with the contrary verb “reprobate,” meaning (in the legal context) “to reject.” In legal discussions, “approbate” often means “accept” rather than “formally approve.” The most common pairing of these verbs is used to suggest a person cannot approbate a will while also reprobating it. In plainer language, that means someone cannot accept the terms of some part of a will (for example, the part in which they receive inheritance) while also denying the legitimacy of other parts of the will — perhaps to argue another person should not receive an inheritance.

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Property Taxes on Single-Family Homes Rise Across U.S. in 2021, to $328 Billion

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Average Property Tax Also Up 2 percent, to $3,785, as Effective Rate Declines Slightly; Highest Effective Tax Rates in Illinois, New Jersey, Connecticut, Vermont, Pennsylvania ATTOM, a leading curator of real estate data nationwide for land and property data, released its 2021 property tax analysis for almost 87 million U.S. single family homes, which shows that $328 billion in property taxes were levied on single-family homes in 2021, up just 1.6 percent from $323 billion in 2020. That was well down from the 5.4 percent increase seen from 2019 to 2020 and marked the second smallest rise over the past five years. Meanwhile, the average tax on single-family homes in the U.S. in 2021 increased at the smallest pace in the five years, rising 1.8 percent from $3,719 in 2020 to $3,785 last year. The latest figures resulted in an effective tax rate of 0.9 percent, down from 1.1 percent in 2020. The report analyzed property tax data collected from county tax assessor offices nationwide at the state, metro and county levels, along with estimated market values of single-family homes calculated using an automated valuation model (AVM). The effective tax rate was the average annual property tax expressed as a percentage of the average estimated market value of homes in each geographic area. “It’s hardly a surprise that property taxes increased in 2021, a year when home prices across the country rose by 16%,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “In fact, the real surprise is that the tax increases weren’t higher, which suggests that tax assessments are lagging behind rising property values, and will likely continue to go up in 2022.” In 2021, effective rates declined even as total taxes rose because home values went up far faster than taxes around the country. Median values spiked by more than 10 percent in most of the U.S., as a glut of home buyers kept chasing a tight supply of homes, pushing the nation’s decade-long market boom onward. The buyer surge continued as home-mortgage rates hovered around 3 percent and many households continued to trade congested areas more susceptible to the two-year-old Coronavirus pandemic, for the relative safety and larger spaces offered by houses and condominiums. Property taxes increase faster than national average in 74 percent of markets Despite the national increase in the average property tax of just 1.8 percent from 2020 to 2021, larger gains were seen in 163, or 74 percent, of the 220 metropolitan statistical areas analyzed in the report. That happened as taxes rose far less than the national figure across major metros with populations of at least 1 million last year. Those areas had about three-quarters of the population of all metros in the report, which helped keep the national increase low. Among metro areas with a population of at least 1 million that had the largest increases in average property taxes last year, were Nashville, TN (up 27 percent); Milwaukee, WI (up 18.6 percent); Baltimore, MD (up 12.3 percent); Grand Rapids, MI (up 12.3 percent) and Louisville, KY (up 11 percent). Major markets with the largest decreases in average property taxes included Pittsburgh, PA (down 35.1 percent); New Orleans, LA (down 20.2 percent); Houston, TX (down 18.7 percent); Dallas, TX (down 12.2 percent) and Austin, TX (down 7.7 percent). Highest effective property tax rates in Illinois, New Jersey and Connecticut States with the highest effective property tax rates in 2021 were Illinois (1.86 percent), New Jersey (1.73 percent), Connecticut (1.67 percent), Vermont (1.55 percent) and Pennsylvania (1.37 percent). Other states in the top 10 for highest effective property tax rates were Nebraska (1.36 percent), New Hampshire (1.35 percent), New York (1.35 percent), Texas (1.31 percent) and Iowa (1.31 percent). Hawaii, Alabama, Utah, Arizona and Nevada post lowest effective rates The lowest effective tax rates in 2021 were in Hawaii (0.27 percent), Alabama (0.37 percent), Utah (0.39 percent), Arizona (0.41 percent) and Nevada (0.41 percent). Other states in the top 10 for lowest effective property tax rates last year were Idaho (0.43 percent), Colorado (0.43 percent), Tennessee (0.45 percent), West Virginia (0.5 percent) and South Carolina (0.5 percent). Average tax up to 10 times higher in most expensive versus least expensive states New Jersey’s average single-family-home tax of $9,476 in 2021 again led the nation. That amount was roughly 10 times more than the average of $901 in West Virginia, which had the nation’s smallest average levy. Others states in the top five last year were Connecticut ($7,464), Massachusetts ($6,777), New Hampshire ($6,698) and New York ($6,617). Others in the bottom five were Alabama ($905), Arkansas ($1,195), Mississippi ($1,243) and Louisiana ($1,248). Northeastern and midwestern metro areas have highest effective tax rates Among 220 metropolitan statistical areas around the country with a population of at least 200,000 in 2021, 19 of the 20 highest effective tax rates were in the Northeast and Midwest. Nine of the top 10 were New York, Connecticut and Illinois. Metro areas with the highest effective property tax rates in 2021 were Rochester, NY (2.22 percent); Rockford, IL (2.16 percent); Syracuse, NY (2.16 percent); Binghamton, NY (2.1 percent) and Trenton, NJ (2.07 percent). Aside from Rochester, the highest rates among metro areas with a population of at least 1 million in 2021 were in Hartford, CT (1.98 percent); Chicago, IL (1.84 percent); Philadelphia, PA (1.6 percent) and Cleveland, OH (1.56 percent). The lowest effective rates in 2021 were in Honolulu, HI (0.25 percent); Daphne-Fairhope, AL (0.27 percent); Montgomery, AL (0.31 percent); Tuscaloosa, AL (0.35 percent) and Prescott, AZ (0.35 percent). The lowest rates among metro areas with a population of at least 1 million in 2021 were in Phoenix, AZ (0.38 percent); Nashville TN (0.41 percent); Las Vegas, NV (0.41 percent); Salt Lake City, UT (0.42 percent) and Denver, CO (0.48 percent). Average annual property taxes top $10,000 in 16 counties Among 1,481 U.S. counties with at least 10,000 single-family homes in 2021, 16 had an average single-family-home tax of more than $10,000, including 12 in the New

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Financing Program Created to Alleviate Housing Crisis Provides Homebuilders with Increased Access to Capital

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Homepoint New Build partners mortgage brokers with regional independent builders to accelerate new construction A new partnership in the wholesale mortgage lending industry is aimed at sparking more widespread development of new homes, alleviating the inventory woes that currently plague the real estate market. The Homepoint New Build program connects thousands of regional homebuilders throughout the country with increased access to capital through its nationwide network of local independent mortgage brokers to accelerate new home construction. The program is offered by Ann Arbor, Michigan-based Homepoint, the nation’s third-largest wholesale mortgage lender, in partnership with Level Capital, a national private portfolio lender. “The housing supply shortage that we’re experiencing nationwide can’t singularly be attributed to supply chain issues or even the time-consuming process required to build a home. The reality is that there are thousands of smaller home builders that have been effectively sidelined or restricted to a few builds each year because they’re under-supported in terms of financed capital,” said Phil Shoemaker, President of Originations at Homepoint. “We’ve partnered with Level Capital to build a stronger foundation of capital for those builders to drastically increase their workload capabilities, which will ultimately increase the pace and abundance of new home builds throughout the country.” Homepoint New Build connects builders with business purpose construction financing through in-region independent mortgage brokers that is less expensive and more accessible than through banks, credit unions or hard-money lenders. Under this program, Brokers can help builders close new construction loans for single-family residences, multifamily homes, condos, and townhomes. Loan amounts can be as much as $4 million per unit or $25 million per project. “There is tremendous opportunity for small to midsize home builders throughout the country to boost the nation’s housing supply which could have a leveling effect on housing prices,” said Brady Yeager, President of Level Capital. “We strongly believe that mortgage brokers can provide builders with a more efficient process, better technology, market and project risk analysis via our Level Tech platform.” Homepoint New Build is currently available in 10 states: Arizona, California, Colorado, Florida, Idaho, Montana, Oregon, Texas, Utah, and Washington. Three additional states – Nevada, New Mexico and North Carolina – are coming soon. About Homepoint  Homepoint, a subsidiary of Home Point Capital Inc. (NASDAQ: HMPT), is one of the nation’s leading mortgage originators and servicers, putting people front and center of the homebuying and homeownership experience. The company supports successful homeownership as a crucial element of broader financial security and well-being through delivering long-term value beyond the loan. Founded in 2015 and headquartered in Ann Arbor, Michigan, Homepoint works with a nationwide network of more than 8,500 mortgage brokers and correspondent partners with deep knowledge and expertise about the communities and customers they serve. Today, Homepoint is the nation’s third-largest wholesale mortgage lender and the 7th-largest non-bank mortgage lender. Home Point Financial Corporation d/b/a Homepoint. NMLS No. 7706 (For licensing information, go to: nmlsconsumeraccess.org). Home Point Financial Corporation does not conduct business under the name, “Homepoint” in KY, LA, MD, NY, or WY. In these states, the company conducts business under the full legal name, Home Point Financial Corporation. 2211 Old Earhart Road, Suite 250, Ann Arbor, MI 48105. Toll-Free Tel: 888-616-6866. Media Contact: Brad Pettiford                                                            Director of Public Relations                                      (734) 356-3092bpettiford@hpfc.com

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WORD OF THE DAY: Bailiwick

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[bay-li-wik] Part of speech: Noun Origin: Middle English, 15th century Definition: A bailiff’s jurisdiction; a person’s specific area of skill, knowledge, or ability Examples of Bailiwick in a sentence “Criminals who find themselves tried in his bailiwick can expect stern courtroom rules.” “I’m a novice at science, but literature is my bailiwick.” About Bailiwick Bailiwick has been in use in English since the 15th century, but only in the 1800s did it begin to be used to describe a person’s area of expertise or study. A biology professor would most definitely be an expert on the classification of mammals. Did you Know? We use bailiff to describe something very specific today — the official who oversees the security of a courtroom. But in Middle English, it referred to the sheriff of a town or region, and their bailiwick was their area of jurisdiction.

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Spruce Announces Enhanced Bulk Transaction Capability

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Centralized Tech Solution Lowers Costs, Adds Certainty Spruce, the proptech company powering online real estate transactions, formally announced its industry-leading bulk transaction capability, bringing its unique, centralized operating model to large-scale investors to lower costs and add certainty to an otherwise obtuse process. As a national company with local expertise, Spruce offers a one-stop shop for bulk title and closing services, all with a custom approach to pricing–specifically designed for the sector’s unique needs. Its centralized bulk translation capabilities integrate seamlessly with investors’ multi-state strategies and remote acquisitions, resulting in a more efficient process for one or multiple portfolios nationwide. Managing some of the largest transactions in the country for the nation’s top portfolio buyers, Spruce performed title and closing services on over $100 million of bulk transactions in 2021, demonstrating true expertise within the sector. Benefits include: Lower transaction costs: Spruce can lower costs up to 20% with customized pricing for each portfolio. Niche expertise: Seasoned title and closing professionals with 125+ years of industry experience handling bulk transactions. Fast quotes: Guaranteed responses within one business day. On-time closings: Spruce can close transactions 40% faster than the industry average. Centralized team: Eliminate the lag of coordinating with a distributed title network. Benefit from a single point of contact with real-time transaction updates. Tech-forward solutions: Automated earnest money deposits and deal tracking via proprietary dashboards. Access to digital dashboards, online closings, remote online notarization, and more. Doing business in 48 U.S. states, Spruce’s industry advancements to date include up to 40% faster closing times, with Spruce’s automated underwriting model further reducing title search and closing processes from the industry average of two weeks to as little as 48 hours or less. Spruce’s offerings include nationwide title insurance, closing, escrow, and recording services through proprietary technology and centralized teams, adding transparency and speed to an otherwise opaque and time-consuming process. Combining machine learning technology with a team of experts, Spruce’s scalable model serves forward-thinking lenders, real estate investors, and proptech companies. ABOUT SPRUCESpruce is digitizing real estate transactions for forward-thinking real estate companies and mortgage lenders. By leveraging proprietary technology and best-in-class operations, Spruce provides a seamless, affordable solution. Spruce was founded by Andrew Weisgall and Patrick Burns in 2016, and is headquartered in New York with hubs across the U.S. Learn more about how Spruce can bring your business digital: www.spruce.co.

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