Market Update as of April 26, 2019

Home Sales Sluggish
U.S. home sales fell more than expected in March, pointing to continued weakness in the housing market despite declining mortgage rates and slowing house price gains. The National Association of Realtors said on Monday existing home sales dropped 4.9 percent to a seasonally adjusted annual rate of 5.21 million units last month. February’s sales pace was revised down to 5.48 million units from the previously reported 5.51 million units. Economists polled by Reuters had forecast existing home sales would fall 3.8 percent to a rate of 5.30 million units last month. Existing home sales, which make up about 90 percent of U.S. home sales, declined 5.4 percent from a year ago. That was the 13th straight year-on-year decrease in home sales. Falling mortgage rates, strengthening wage growth and slowing house price inflation have improved affordability, but housing supply remains tight, especially at the lower end of the market as land and labor shortages are making it difficult for builders to ramp up construction in this market segment

Fannie Says Rent That Second Home
Second-home mortgage closings just got less stressful for borrowers. On April 3, Fannie Mae updated a document called the “Second Home Rider.” The previous version of the rider, in force since 2001, was interpreted by many lenders and homeowners as completely prohibiting second-home owners in mortgages backed by Fannie Mae or Freddie Mac from renting the property. The rider’s new language now explicitly allows homeowners to rent a second home after one year of ownership, and it allows short-term renting in the first year under certain conditions. A Fannie Mae spokesman said the new rider language was triggered by calls from lenders asking whether borrowers could put their second homes on Airbnb and similar services. This was always allowed, said the spokesman, even though the old rider appeared to prohibit it, and was interpreted by many lenders that way.

US GDP Grows 3.2% in Q1
The U.S. economy roared back in the first quarter, growing at a rapid pace despite multiple headwinds, suggesting the current expansion has more room to run amid its 10th year. Gross domestic product—the value of all goods and services produced in the U.S., adjusted for inflation—rose at a 3.2% annual rate from January through March, the strongest rate of growth for the first quarter in four years. Compared with the first quarter a year ago, the economy grew 3.2%. Helping drive growth were a rise in exports, a decline in imports and higher inventory investment that helped offset weaker growth in consumer spending and business investment, the Commerce Department said Friday. Imports fell following a jump in the second half of last year in anticipation of potential tariffs the Trump administration had threatened to impose. Those tariffs haven't gone into effect due to continuing trade talks between Washington and Beijing. Net exports—exports minus imports—added 1.03 percentage points to the quarter’s 3.2% GDP growth rate. That was the category’s largest boost to growth since the second quarter of last year.

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Courtesy of Sotheby's International Realty's in-house Lender Simon Atik, 310.880.8414, Simon.Atik@grarate.com, Vice President of Mortgage Lending, Guaranteed Rate Affinity.

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