Archives October 2020

The Federal Reserve on Friday lowered the minimum loan size on its loans to small- and medium-sized businesses, in an effort to drive higher uptake of its Main Street Lending Program.

The smallest loan that businesses can get through the program is now $100,000, a significant reduction from the $250,000 minimum that the Fed had established in June.

The Fed says it has made almost 400 loans totaling $3.7 billion under the program. But the central bank’s facility can support up to $600 billion in total loans, raising questions about whether or not the Fed made the loan terms too restrictive.

In a statement, the Fed said the changes were designed “to better target support to smaller businesses that employ millions of workers and are facing continued revenue shortfalls due to the pandemic.”

The Fed will also adjust the fee structure for the new Main Street loans under $250,000. Lenders of the small loans will pay no transaction fee to the Fed’s facility, but will be allowed to charge the borrower up to 200 basis points to originate the loan.

For comparison, lenders of loans larger than $250,000 will pay up to 100 basis points in transaction fees to the Fed’s facility. Those lenders will be allowed to charge the borrower up to 100 basis points to originate the loan.

The Fed will also continue to offer incentives to continue servicing the loans, which remain five years in maturity. The Fed’s facility will pay lenders 50 basis points per year for servicing loans smaller than $250,000 and 25 basis points per year for loans larger than $250,000.

Large loans — those above $10 million — originated under the “expanded” version of the Main Street Lending Program have a separate fee structure, which remains unchanged under the announcement Friday.

The facility will be open for eligible loans for only another two months, through December 31, 2020. The Fed and the U.S. Treasury could extend the facility if needed.

No changes were made to the EBITDA requirements, despite calls from some members of Congress to use an asset-based standard.

Since announcing the novel Main Street facility in March, the Fed has regularly tweaked the terms and structure of the program — with varying degrees of success. In July, the Fed expanded the facility to cover nonprofits but as of September 30, not a single nonprofit had tapped the program.

U.S. Treasury Secretary Steven Mnuchin hinted weeks ago that the Fed could lower the minimum loan threshold as it did on Friday, telling the House Financial Services Committeeon September 22 that he would “be fine” lowering it to $100,000.

Fed Chairman Jerome Powell at the time had said there was little demand for loans below $1 million, suggesting that loans in “those small quantities would require a facility built from the ground.”

https://finance.yahoo.com/news/fed-lowers-minimum-loan-size-on-main-street-lending-program-150016390.html

Thirty-eight percent of homebuyers and sellers don’t want to see low-income housing in their neighborhood, according to an August Redfin survey of more than 1,400 U.S. residents who plan to buy or sell a home in the next 12 months. That’s roughly the same share as in November 2019, when 39% of respondents said the same thing. 

More people oppose low-income housing—which the survey question defines as “affordable housing in the form of mid-grade townhomes, apartments or similar”—in their neighborhood than any other type of building. Shopping centers, which 34% of all respondents oppose, and office buildings (32%) come next. 

President Trump suggested that people who live in the suburbs are opposed to low-income housing when his administration rescinded a 2015 federal rule called Affirmatively Furthering Fair Housing, meant to combat discrimination by requiring local governments to proactively ensure fair housing to receive federal housing funding. Joe Biden has pledged to reinstate the rule if he is elected. The Washington Post reportedthat in a town hall meeting aimed at Wisconsin voters, President Trump said Democrats would “eliminate single-family zoning, bringing who knows into your suburbs, so your communities will be unsafe and your housing values will go down.”

In addition to reinstating the rule discussed above, Biden’s $640 billion housing plan would combat discriminatory housing practices and support building more low-income housing and single-family homes in urban, suburban and rural areas. 

We broke out the survey results by respondents’ neighborhood type to see if rural and suburban dwellers are more likely than city residents to oppose low-income housing in their neighborhoods. 

While people who live in rural and suburban areas are more likely to oppose low-income housing in their neighborhood than city dwellers, less than half of people from each neighborhood type are opposed: Forty-five percent of rural residents and 44% of suburban residents oppose low-income housing, versus 31% of people who live in the city. Rural and suburban residents are also more likely than city residents to oppose nearly every other building type in their neighborhood. 

“Although research indicates that low-income housing doesn’t increase crime or substantially reduce nearby property values, there’s still a misconception that housing for low-income people degrades a neighborhood,” said Redfin chief economist Daryl Fairweather. “People who live in urban areas are less likely to harbor the misconception, likely because they already live among a more economically diverse population.”

“Building different types of housing in suburban, urban and rural neighborhoods alike helps to desegregate communities, which is one of the first steps in combating systemic racism and other inequalities,” Fairweather continued. “Passing national zoning reform and requiring all neighborhood types to allow affordable housing could help close the gaps in education, homeownership and wealth.” 

Residents of all three neighborhood types are more likely to oppose low-income housing than any other building type. But for rural residents specifically, nearly as many are opposed to shopping centers (43%) and office buildings (42%) as low-income housing. Rural residents were also most likely to say they wouldn’t mind any of the building types listed in their neighborhood, with 24% selecting that option. 

People who live in swing states are most likely to oppose low-income housing in their neighborhood

Forty-three percent of swing-state residents don’t want to see low-income housing in their neighborhood, versus 41% of people in red states and 33% of people in blue states.* 

“Biden has focused his housing policies on supporting low-income Americans who have been excluded from certain neighborhoods because they can’t afford housing,” Fairweather said. “In contrast, President Trump is responding to the anxiety some people feel about low-income housing entering their neighborhoods, which may be a bigger issue in red states and the collection of swing states that matter most in this year’s election, according to the survey results.”

White people are most likely to oppose low-income housing in their neighborhood

When broken down by race, white respondents are most likely to oppose low-income housing in their neighborhood and Black respondents are least likely. Forty-one percent of white people are opposed, followed by 35% of Asian people, 33% of Hispanic people and 26% of Black people. 

Thirty percent of Asian respondents said they wouldn’t oppose any building types in their neighborhood, more than any other race, followed closely by 29% of Black respondents.

https://www.redfin.com/news/suburban-urban-low-income-housing-survey/

Our research team releases regular monthly housing trends reports. These reports break down inventory metrics like the number of active listings and the pace of the market. In light of the developing COVID-19 situation affecting the industry, we want to give readers more timely weekly updates. You can look forward to a Weekly Housing Trends View near the end of each week along with weekly coverage from our Housing Market Recovery Index and a weekly video update from our economists. Here’s what the housing market looked like last week.

Weekly Housing Trends Key Findings

• Median listing prices grew at 12.9 percent over last year, marking the 21st week of accelerating prices and a new high-mark for price growth in our weekly data which goes back to 2017. During a normal year, asking prices begin to dip going into the fall as the types of homes for sale shift and sellers have to do more to attract a buyer from a smaller pool of shoppers, but 2020 is not following this usual seasonal trend, and the typical September asking price remained at $350,000, on par with peak summer home prices. 
• New listings were down 7 percent. The number of sellers deciding to put their home on the market remains limited, but the drop in new sellers is not as large as the overall decline in inventory, which means new listings are a growing share of total listings–providing some small relief for option-starved buyers.
• Total inventory was down 38 percent. With high interest from buyers and limited flow of new listings, the total number of homes available for sale continues to shrink. For the third week in a row the pace of decline was even or improving. We’re a long way from a buyer’s market, but this is a buyer-friendly shift. 
• Time on market is now 13 days faster than last year. With low inventory and a large pool of buyers, homes sell much faster than a year ago. The rapid turnover reflects the unseasonable excess of buyers in the housing market this fall, and will likely persist until sellers come back in a bigger way.

Data Summary

	First Two Weeks March	Week ending Sep 19	Week ending Sep 26	Week ending Oct 3
Median Listing Prices	+4.5% YOY	+11.1% YOY	+12.4% YOY	+12.9% YOY
New Listings	+5% YOY	-15% YOY	-6% YOY	-7% YOY
Total Listings	-16% YOY	-39% YOY	-39% YOY	-38% YOY
Time on Market	4 days faster YOY	12 days faster YOY	13 days faster YOY	13 days faster YOY

You can download weekly housing market data from our data page.

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