Local News

The housing domino effect

RV living has become a reality for many. Photo: Brooke Geery

By Julia Purdy

“Nearly 1 in 500 Americans is homeless, mostly on the West Coast and in the Northeast, according to estimates. Homeless advocates say people without permanent housing are chronically undercounted,” USAToday reports.

One temporary albeit less-than-ideal solution can be seen in the explosion of older model RVs as primary residences. … if you can spring the cash for one. In the still-developing West, mobile home communities and RV parks are a common sight. In the densely settled East, however, they tend to be frowned upon as lowering property values around them. But when RV parks charge $7,000-$8,000 for long-term stays, as in West Barnstable on Cape Cod, the only choice is to find a parking lot to overnight in … as long as it is safe and legal. And many are neither.

Trucking plazas and some big-box stores allow overnight stays in the parking lot, but the practice is not okay with many municipalities and businesses in the Northeast, with its quaint New England village brand. Caitlin Frumerie is executive director of the Rhode Island Coalition for the Homeless. She told USAToday that no business she spoke to was willing to accept residents living in their vehicles. Her budget now provides for the cost of towing and storage of impounded vehicles.

So far, one way to stop the domino effect is to raise mortgage interest rates. Fannie Mae and Freddie Mac (federal agencies that back mortgage portfolios) have begun to do just that. Much of the feeding frenzy has been fueled by speculation buying, vacation home purchases and warehousing (holding onto property to create an artificial shortage that drives prices upwards). YouTuber “Matt the Mortgage Guy” reports that mortgage lenders just received a “lender letter” from FNMA, aimed at slowing risky investment lending and consequently buying, by limiting the attractiveness of super-low rates.

The letter outlines the new rule for underwriters: as of April 1, 2021, investment loans must not exceed 7% of the total loan portfolio of underwriters.

As Yahoo! Finance reports, “It was the Fed that delivered a fifth consecutive weekly rise in mortgage rates.” Forty years ago, mortgage interest rates soared to 18% or even 20%, almost rendering the real estate industry dead on arrival. The challenge today is to fine-tune rates to balance affordability with buyers’ interest, which remains high. “It is a challenging reality, especially for first-time buyers,” writes Freddie Mac.com.

The strategy seems to be working. According to the Mortgage Bankers’ Association, the number of new mortgage loan applications had fallen by 2% as of the week ending March 12, and refinances were dropping steadily, to 39% lower than one year ago.

Whether these adjustments at the federal level will alleviate the actual affordability of housing in either the short or long term depends, as always, on supply and demand.

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