Secondary mortgage market giants and Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac play an important role in the U.S. housing market and economy. As our nation recovers from the pandemic there is a growing demand for housing, material shortages such as lumber, and a dynamic job market. GSE economists Len Kiefer of Freddie Mac and Tatyana Zahalak of Fannie Mae shared their thoughts on the economy and the state of housing. Here are the highlights.
The economic future is promising, but the path to recovery is long and the impact on housing is complex. With more of the population getting vaccinated and consumer confidence returning, the GSE economists are estimating seven percent growth this year driven by consumer demand. During the pandemic, the savings rate doubled as people stayed home and limited their spending. Many homeowners were able to take advantage of low-interest rates and pay down — or pay off — their credit cards, improving their financial position.
Today, consumers have the means and confidence to remodel their homes, buy cars, and other goods and materials. This demand has created an inflationary environment that is currently around five percent, a level we haven’t seen since 2008. However, our state of inflation is temporarily driven by factors such as the disruption in the supply of goods, materials, and resources with factories, plants, and businesses shutting down or operating at reduced capacity. This has resulted in our current situation, where supply is unable to keep up with consumer demand.
There has been a growing imbalance in the supply and demand for housing in the U.S. that has existed long before the pandemic. However, the housing imbalance is more prominent today as the demand for homes greatly outpaces the supply. The high price of lumber and difficulties in sourcing other materials, combined with the lack of skilled workers, have significantly increased the cost to repair and renovate existing homes, in addition to building new ones. This imbalance creates competition for the available housing supply and has significantly driven up home prices. As home prices escalate, the consumer’s buying power is reduced and homes become less attainable and affordable unless wages adjust accordingly, which they haven’t.
Making a simple supply and demand issue more complex is the impact of employment. Despite competitive offerings, there are more job openings today than there are workers to fill them. This may be partly driven by a portion of the population still concerned about the pandemic and hesitant to rejoin the workforce. The inability for organizations to staff up to meet production demands further impacts supply. To reduce this gap, employers are offering remote work solutions, flexible schedules, and perks to attract talent. Other solutions may include technology, such as robotics and artificial intelligence, or self-service processing, which may play a larger role in replacing the workforce needed to operate. As the cost of materials and inventory supplies normalize, a sufficient workforce will still be needed to meet consumer demand. How U.S. businesses address the workforce imbalance will determine how smooth our economy recovers and the impact inflation will have.
Both GSE economists agreed that manufactured housing, including communities and subdivision development utilizing HUD code housing, will play an important role in addressing the ever-expanding gap of affordable and attainable housing. The manufactured/modular housing industry is no different from the others that make up the U.S. economy. The supply and pricing of production materials and the need for a greater, skilled workforce are key factors that will impact our ability to play a significant role in the housing market.
For more information or if you were unable to attend the webinar, watch our discussion with Fannie Mae and Freddie Mac.
Our next webinar will be on Thursday, July 1st at 11:00 AM PST / 2:00 PM EST. Our expert speakers include Tony Wicke, Executive Vice President of Retail at Land Home Financial Services, Paul Jackson, Certified Appraiser at STX Valuation Services, and Jed Lowman, Mortgage Broker at Nexa Mortgage. They will be discussing Appraising MH Advantage and ChoiceHome-eligible Homes. The webinar is free but you’ll need to register to attend.