Since she has worked in housing policy for 20 years, Priscilla Almodovar knows very well the problems the U.S. has with housing.
The man from Brooklyn became head of the New York State Housing Finance Agency in 2007. This was during a financial crisis caused by the collapse of subprime mortgages. Buyers today have the opposite problem: they can’t get enough homes. There is such a strong demand for homes that prices keep going up, even though mortgage rates are still high and home insurance costs are skyrocketing.
Almodovar, 57, is the CEO of Fannie Mae FNMA 1.54%, a government-backed company that backs one in four U.S. home mortgages. He sees it all firsthand as the CEO. That makes her one of the MarketWatch 50 most important people in the market.
“Right now the market is very expensive.” “Things we have never seen before are under our watch and attention,” Almodovar told MarketWatch in an interview.
She said, “Home prices there are the highest we’ve seen in twenty years.”
It’s going to be the worst year for home sales since 1995.
The cost of living has reached an all-time high for both buyers and renters. The problem has become so important to regular Americans that the presidential candidates are all coming up with different ways to make home ownership more affordable.
Some renters are taking matters into their own hands by going on rent strikes, and some people who want to buy a home have given up on the idea and chosen to rent forever instead because it’s cheaper than buying.
The 30-year rate went up a lot to 8% in October 2023, but mortgage rates have gone down since then. However, the average mortgage payment, which includes principal and interest, property taxes, and homeowners insurance, hit a new high of $2,070 in August, according to Intercontinental Exchange. Over the past year, that number has grown by 24%.
Almodovar said that mortgage rates probably won’t go back to where they were before the pandemic any time soon. She said that the 3% rate seen during the pandemic was likely something that would never happen again in our lives.
People can only buy a few homes, even if they can pay the real estate prices. The market is still experiencing the lock-in effect, which means that buyers don’t see much reason to sell their current home and buy a more expensive one with higher interest rates.
The lock-in effect is a strange effect that has stopped the home market in its tracks. The Federal Housing Finance Agency predicted in March that home sales were 57% lower in the fourth quarter of 2023 than in the same quarter the previous year. This was because homeowners were unwilling to sell.
In other words, the lock-in “stalled” the sales of 1.33 million homes, the agency said.
Getting the country’s housing problems fixed probably won’t just be the job of the winner of the presidential race. Almodovar said that policymakers at the federal, state, and local levels will also need to work together to lower the cost of housing.
“Today, everyone agrees that more supply is part of the answer,” she said. She also said that this meant preserving the country’s old houses and building new ones.
She said that many of the things that make it hard to build more homes are controlled at the local level.
“It’s zoned.” “NIMBYism” stands for “not in my backyard.” Almodovar said. “The most important thing is the local.” That’s where important choices are made.
Part of the American dream is still to own a home.
The home market has stopped moving because of the stress of high rates and prices. Economists at Fannie Mae think that the U.S. will only sell 4 million current homes by 2024. This is the lowest number of sales since 1995.
Still, most Americans want to own their own house. A study by LendingTree in 2023 found that 84% of people said that owning a home is part of the American dream.
It was in New York City that Almodovar grew up. When she was 5, her parents bought their first house. She remembered that when they reached that goal, they felt like they had reached the American dream. She also said that the idea is still “very much ingrained in what we think and the mindset of our country.”
In light of this, Almodovar said that housing has become “one of the most important domestic policy issues that we have to tackle.”
Costs of housing are going up because of unstable factors
Not only is it hard to save for a down payment and deal with high mortgage rates, but many Americans also can’t afford to buy their own homes. More people are having trouble making their monthly mortgage payments because insurance costs are going up.
A fixed-rate loan means that the monthly mortgage payment stays the same over the life of the loan. However, insurance costs have gone through the roof in the last few years, making a 30-year loan that was otherwise stable less stable.
Some of the most recent natural disasters, like hurricanes Milton and Helene, did a lot of damage in the southeastern U.S. These events show how climate change is affecting homeowners and the housing business.
Almodovar said that Fannie Mae is keeping a close eye on climate risk.
Real estate companies are rushing to give climate-risk information to people who want to buy homes and people who already own homes. At the same time, government agencies are working hard to help homeowners who have been affected and to stop foreclosures on mortgages backed by the Federal Housing Administration.
To stay ahead of the risk, they are also telling people how to make their homes more resistant to natural disasters.
Fannie Mae has a stake in the game because it backs up one in four homes in the U.S., and officials there are worried.
Almodovar said that there is a difference between how much danger homeowners know and how much private companies know.
While the federal government puts out images of areas that are likely to flood, Hurricane Helene showed that areas further inland that have not usually been prone to flooding can get flooded. Almodovar said, “So it’s something that worries us.”
In the end, she said, “climate is one of those things where there’s no one silver bullet.” This is what it really means: “all sectors working together and all industries working together.”
