A weekend topic starting with the Oregonian. "Despite stay-at-home orders, the coronavirus pandemic, high unemployment and an unsure global economy, people are buying homes in Oregon. 'People are willing to overpay for what they want because of lending rates,' says Israel Hill, the office leader of John L. Scott Real Estate’s Portland Northeast office."

From Quartz. "The wave of evictions caused by the coronavirus could swamp even the massive dislocation caused by the collapse of the US housing bubble more than a decade ago. Right now, the CFPB is considering a rule that outlines what kind of underwriting banks must do for home loans to be considered 'qualified mortgages.' Banks want to deal with these 'qualified mortgages' because they are protected from legal challenges and are easier to package as securities that can be re-sold, particularly to Government-sponsored Entities (GSEs) that purchase home loans, Fannie Mae and Freddie Mac."

"As regulators developed the original QM rule, they sought a measure to determine if borrowers could repay a debt. They settled on requiring them to pay 43% or less of their monthly income to service debts after obtaining their mortgage. But the gap between slow-growing incomes and rising housing prices left many borrowers unable to meet that standard."

"Regulators solved this problem with something called 'the GSE patch,' which allowed the GSEs to set their own repayment standards for the next seven years; it expires in January 2021. If the patch expires without any action, these government agencies will have to start obeying the 43% debt-to-income (DTI) rule. That would also mean they could not make or purchase a significant share of the home loans they do now—some 16% of 2018 mortgage loans were only eligible as qualified mortgages because of the patch."

"Broad availability matters because 'there aren’t many leveraged investments available to low-income families,' says Eric Stein, a senior vice president at the community lender Self Help and former Obama administration Treasury official."

"Mehrsa Baradaran, a law professor at the University of California, Irvine is the author of the 2019 book The Color of Money, an examination of the racial wealth gap. She argues that trying to create incentives for banks to fix what is effectively a public policy problem just isn’t effective. Another issue is whether the gradual approach of generational asset building can close a yawning wealth gap, built over centuries, at any reasonable speed. Baradaran says a problem with regulating consumer loans, even predatory ones, is that people need credit, 'and there is a demand because people don’t make enough money.'"

From Mortgage Professional America. "Democratic lawmakers led by House Financial Services Chairwoman Maxine Waters are demanding that the Federal Housing Finance Agency set aside new capital requirements for Fannie Mae and Freddie Mac until after the COVID-19 crisis passes. The lawmakers also urged the FHFA to provide better analysis on how the proposed rule change would affect borrowers of color."

"In a report to Congress last month, FHFA Director Mark Calabria said that Fannie and Freddie were 'inarguably undercapitalized for their size, risk, and systemic importance,' and that the GSEs would not be able to withstand a serious economic downturn. Calabria said the new capital rule – outlined in a 424-page rule released for public comment May 20 – would require Fannie and Freddie to become 'safe and sound' financial institutions in order to exit conservatorship. This means they would be required to have enough capital to enable them to weather economic downturns."

"However, Waters, Rep. William Lacy Clay (D-Mo.) and Rep. Denny Heck (D-Wash.) said in a letter that the FHFA should prioritize economic recovery and delay the rule until after the pandemic has passed. The lawmakers said they were 'very concerned' that the new capital rule would slow the nation’s economic recovery from the COVID-19 crisis by increasing borrowing costs and hampering the GSEs’ ability to provide liquidity for the housing market."

From Bisnow on California. "Both Alicia John-Baptiste, the CEO of longtime urban policy think tank SPUR, and Eric Shaw, the director of the San Francisco Mayor's Office of Housing and Community Development, spoke about the need to frequently examine their respective organizations' policies and processes. Redlining, which, in general, is the denial of federal services like mortgage lending to minorities, thus denying people of color key avenues of wealth creation, has also had a major impact."

"San Jose Department of Planning, Building and Code Enforcement Director Rosalynn Hughey said facilitating homeownership for people of color needs to be a priority of Bay Area cities like San Jose. 'We know that that is an opportunity for people to begin to generate wealth,' Hughey said. 'To me, when we talk about racial equity, that is a key factor — this big divide that we have in wealth.'"

The Globe and Mail in Canada. "It was only a couple of years ago that Vancouver’s presale condo market was so hot that you could flip a unit before it was even built, avoiding the closing costs and scooping up a tidy profit in the process. Now the condo market has cooled, however, and some of those presale owners who expected to make money are cutting their losses."

"Vancouver realtor Ian Watt says the presale condo market is officially dead, at least compared to what it was. He recently received an e-mail from another realtor about two units at the four-tower development Lumina, in Burnaby’s Brentwood neighbourhood, close to the SkyTrain. The listing agent is looking to sell two contract assignments in the Starling tower at a discount of $50,000 each. Unit 1504 had been reduced from $788,900 to $738,900, and unit 2504 on the 25th floor had gone from $838,900 to $788,900. The tower is scheduled to complete this summer."

"'All we’re seeing right now are end user buyers and maybe investors buying a small studio or one-bedroom, which is the way it should be,' Mr. Watt says. 'The presales are so far above market value now that nobody in the local market will buy them.'"

"The discounted presale units in the e-mail are likely owned by someone who paid too much, he says. 'They bought thinking they would flip out, and they know they can’t complete on this. If they do, it would cost them at least $50,000 in GST and closing costs, and all those other things, why not take a loss now and get rid of it?'"

"Cam McNeill, executive director of MLA Canada, says the hot market of a few years ago turned investors into speculators. Many of those flippers had originally intended to hang onto the properties, he says, but because the market was so strong, they ended up flipping, often encouraged by their realtors. He’s seeing some desperate sellers in the current market, including people who’ve lost their jobs due to the pandemic."

"Not all developers can convert from condo to rental. Mr. McNeill says it’s a prohibitive process if the project has already been designed. And for developers who paid too much for a property, converting to a rental won’t make sense financially, Mr. Nagle says. In that case, he says, values will have to adjust. 'If you were halfway through a luxury condo building in 2018 and it’s now not selling very well – that’s an uncomfortable moment,' he says."

From Yahoo Finance Canada. "The growing wealth gap between homeowners and renters is an issue that the Canadian Mortgage Housing Corporation (CMHC) is striving to solve, especially with the economic impacts from COVID-19 widening the divide. For the organization, that means tackling the country’s obsession with homeownership and promoting alternatives. Even before the pandemic, Canada’s compulsion towards homeownership worsened housing affordability for young renters and kept values high for owners."

"'The problem is promoting home ownership for its own sake, is just inflationary to pricing,' Evan Siddall, the CEO of the CMHC told Yahoo Finance Canada. 'We spend a lot of time as a group trying to figure out with our legislation how we could reconcile these things and that was the core idea behind CMHC.'"

"For younger Canadians who have managed to purchase their first home in recent years, the CMHC is warning about the current risks in the housing market. In its forecasts, the organization warned that house prices could fall between nine and 18 per cent over the next 12 months, which Siddall says would put young first-time home buyers at a disadvantage."

"'When the value of one asset outpaces the economic production of an economy, at some point, it has to end,' Siddall said, 'The dream will become a nightmare.'"

"He argues that the wrong policy response would be to continue fuelling the housing market so that prices have further to fall. 'The problem is that we're in a game of musical chairs and when the music stops playing, it'll be young first-time homebuyers who are holding the bag.'"

"The economic impacts of COVID-19 could widen these gaps, with the 5.5 million job losses impacting accommodation and food service sectors as well as wholesale and retail trade the most between March and April, according to Statistics Canada. An RBC Economics report in May found that these losses disproportionately affect renters."

"Disparities like these are reasons why Eric Swanson, executive director of Generation Squeeze, is pushing for a post COVID-19 'return to something that was better than normal, because normal wasn't working very well for a lot of people in Canada.' The ‘normal’ Swanson is referring to was the run-up in housing prices and tax-free profit that prompted a rush of ‘toxic demand’, such as speculation."

"'We can't make homeownership profitable and make housing affordable at the same time,' Swanson explained, 'I think those two things are mutually exclusive they pull in opposite directions.'"