In this week’s Hot Sheet recap, we review three of the biggest topics covered by host Byron Lazine

The first is home price predictions from the industry’s top analysts—including a forecast by Zillow of what could happen if the U.S. defaults on its debt. Plus, the FHFA rescinds its DTI LLPA fee and a dip in spring housing inventory.

What will happen to home prices if the U.S. defaults on its debt (and if it doesn’t)?

A new Zillow analysis shows what could happen to the housing market if the U.S. defaults on its debt. If the U.S. does not intervene and come to an agreement about the debt (which is unlikely), Zillow analysts would expect mortgage rates to increase to over 8%.

We already saw what happened when mortgage rates topped 7%—both buyers and sellers became more hesitant. If the U.S. defaults and mortgage rates rise over 8%, Zillow projects a deficit of up to 23% fewer sales as buyers would back away from their search and sellers would stay put. 

Home price predictions

Fortunately, it’s highly unlikely the U.S. will completely default on its debt. So, what are home price predictions if it doesn’t? Lance Lambert wrote an article sharing housing market predictions from some of the industry’s top analysts. 

Here’s a quick breakdown of home price forecasts:

  • Case Shiller: 4.6% increase from March 2023 to March 2024
  • Zillow: 1.7% increase from March 2023 to March 2024
  • Bank of America:  0% increase in 2023
  • Mortgage Bankers Association: -0.6% decrease in 2023
  • Fannie Mae:  -1.2% decrease in 2023
  • Mortgage Stanley: -4% decrease in 2023
  • Moody’s: -4.4% decrease from Q4 2022 to Q4 2023
  • Goldman Sachs: -6% decrease in 2023
  • KPMG:  -8% decrease in 2023

Watch the breakdown of home price predictions (with and without a debt default) here.

FHFA Rescinds DTI LLPA Fee

Political pressure caused the FHFA to crack, with the announcement on Wednesday that it was rescinding upfront fees based on DTI ratios for Fannie Mae and Freddie Mac loans. 

While non-DTI LLPAs are still in effect, as of May 1, 2023, the DTI loan-level pricing adjustments (LLPAs) were one of many changes the FHFA planned to go through with. After pushback from industry stakeholders, the FHFA first delayed implementation before canceling it altogether.

Watch the full breakdown of the FHFA’s decision here.

A Dip in Spring Housing Inventory

Housing Wire reported a housing inventory dip for the week of April 28th-May 5th. Total active listings fell by 2,545 week to week, from 422,270 to 419,725, “continuing the streak of lowest new listing data ever recorded in history.”

housing inventory

Source: Altos Research, as on Housing Wire

The dip comes after two weeks of inventory rises—and many were hopeful this meant inventory would continue to increase through the spring market as it typically does. The same week in 2022 saw an inventory increase from 287,821 to 300,481. 

Watch the full breakdown of spring housing inventory here

For more industry news, look back at this week’s Hot Sheet episodes.

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