Second Home Markets and FHFA Changes as of April 1st
A look at South Lake Tahoe
Earlier this year the FHFA announced “Targeted Increases to Enterprise Pricing Framework”. Effective April 1st (just over a week ago), these higher fees applied to certain high balance loans, and to second home loans (for Fannie and Freddie). Excerpt:
the Federal Housing Finance Agency (FHFA) announced targeted increases to Fannie Mae and Freddie Mac's (the Enterprises) upfront fees for certain high balance loans and second home loans. High balance loans are mortgages originated in certain designated areas above the baseline conforming loan limit. The new fees will go into effect for deliveries and acquisitions beginning April 1, 2022 …
In April, upfront fees for high balance loans will increase between 0.25 percent and 0.75 percent, tiered by loan-to-value ratio. Fannie Mae and Freddie Mac refer to these mortgages as high balance loans and super conforming loans, respectively. For second home loans, upfront fees will increase between 1.125 percent and 3.875 percent, tiered by loan-to-value ratio.
The recent increase in mortgage rates will have a larger impact than this fee increase, but this will also increase borrowing costs, especially for second homes.
South Lake Tahoe: Second Home Market
With the pandemic, there was a surge in second home buying. One of the second home markets I’ve been tracking is South Lake Tahoe.
The following graph is for single family homes in South Lake Tahoe since 2004 through March 2022, and shows inventory (blue), and the year-over-year (YoY) change in the median price (12-month average).
Note: The median price is distorted by the mix, but this is the available data.
Following the housing bubble, prices declined for several years in South Lake Tahoe, with the median price falling about 50% from the bubble peak.
Currently inventory is just above the record low set in February, however inventory is up slightly year-over-year (YoY). Prices are up 13.9% YoY (but the YoY change has been trending down).
This will be interesting to watch over the next several months, but so far there isn't any evidence of a second home slowdown in these numbers.