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Rising interest rates are making adjustable-rate mortgages an increasingly attractive alternative to common 30-year, fixed-rate home loans, the Associated Press reported. ARMs made up 13% of all home loans by dollar volume in March, their highest share since January 2020, according to CoreLogic. The increase coincides with a sharp rise in mortgage rates. The average weekly rate on a 30-year mortgage slipped this week to 5.25% from 5.3% last week, which was the highest level since 2009, according to mortgage buyer Freddie Mac. The average rate was 3% a year ago. Rising mortgage rates, in conjunction with sharply higher home prices, make homeownership less affordable. “It’s natural for homebuyers to be looking at ways to reduce that mortgage payment, and one of the ways is to use an adjustable-rate mortgage,” said Selma Hepp, deputy chief economist at CoreLogic. Such loans became less attractive the last couple of years as average long-term mortgage rates fell to an all-time low. ARMs’ share of all loans by dollar value sank to just 4% in January 2021 from 13% a year earlier, according to CoreLogic. ARMs have made up between 10% and 19% of all loans by dollar value over the last 12 years. At the height of the last housing boom in 2005 ARMs represented just under 45%, CoreLogic said.

The Biden administration today plans to announce steps aimed at addressing the U.S. shortage of entry-level homes, including expanding federally backed financing for affordable housing and directing grants toward localities that encourage construction, the Wall Street Journal reported. Each regulatory move is technical and modest, though the administration hopes they will collectively dent the estimated shortage of millions of homes over the coming years. “While the policies cover a wide range of issues and agencies, most are intended to do one thing: Make it easier and more economical to build affordable housing,” said Jim Parrott, a former Obama administration housing adviser, who had reviewed the proposal. “The total effect should be considerable.” The changes include encouraging greater land-use improvements at the local level by favoring jurisdictions that promote “density and rural main street revitalization” for funding from last year’s infrastructure bill, according to a fact sheet distributed by the White House. Two government agencies, the Federal Housing Administration and the Federal Housing Finance Agency, will explore test pilots to boost financing for tiny homes to increase housing supply. In another move to encourage construction, government-controlled mortgage company Fannie Mae will consider purchasing loans made to builders prior to construction of multifamily housing. At present, Fannie generally only buys mortgages for homes already built and certified for occupancy, which is too late for smaller builders that lack access to affordable financing.

The mortgage refinancing boom is winding down and household debt levels are creeping up as consumers edge past the worst of the pandemic’s economic shock, the New York Times reported. Mortgage originations dropped sharply in the first quarter of 2022 compared with their 2021 peak, according to a quarterly report on household debt that the Federal Reserve Bank of New York released Tuesday. Last year’s spike was fueled by refinancings from homeowners chasing exceptionally low rates; as rates have risen, demand has cooled. But the overall amount of mortgage debt for new purchases is generally rising, with soaring home prices forcing buyers to borrow more for their homes.

The path forward for the critical housing investments Democrats sought to protect in the Build Back Better Act (BBB) is getting murky, as uncertainty hangs over the party’s chances of passing its partisan package amid resistance from Sen. Joe Manchin (D-W.Va.), The Hill reported. Democrats garnered a wave of headlines last year after unveiling proposals for $300 billion in historic affordable housing investments seen by advocates as potentially transformative in combating the housing crisis, including boosting funding for rental assistance and public housing construction. But as intraparty disagreements arose over the size of the plan, an essential component of President Biden’s agenda, the price tag for housing investments began to fall sharply, just as in other areas of the far-reaching package. Funding set aside for housing was cut by almost half in the House-passed version of the climate and social spending plan last year. And it remains to be seen whether the same scope of housing investments will be in any other effort the party makes this year at a package passed via budget reconciliation, a complicated procedure that will allow Democrats to bypass a GOP filibuster in the evenly split Senate. “I think that the realistic pathway for a budget resolution is something more narrow, and we have to start telling the truth about that,” said Sen. Brian Schatz (D-Hawaii), who chairs the Senate Appropriations Subcommittee on Transportation, Housing and Urban Development. “I know nobody wants to be the bad guy and say, ‘It ain’t happening,’ but if we’re going to do a reconciliation vehicle, it’s going to be skinny,” he bluntly said. Pressed about potential talks on housing action through reconciliation, Sen. Sherrod Brown (D-Ohio), head of the Senate Committee on Banking, Housing, and Urban Affairs, said he and others are “continuing to push” for those investments, but wouldn’t divulge further where they fit in the current state of play.

Millions of American home shoppers have taken on risky and generally more costly alternative financing, in part because even creditworthy buyers may have trouble finding traditional mortgages for lower-priced properties, new research suggests, the New York Times reported. One in 15 current home borrowers, or about seven million Americans, uses alternative financing, including arrangements in which they make payments directly to the seller instead of to a lender, according to recent survey by the Pew Charitable Trusts. The survey also found that the use of alternative financing was highest among Hispanic borrowers and people with annual income below $50,000. The financing arrangements often lack consumer protections available with traditional home loans and are lightly regulated by a patchwork of federal and state rules, said Tara Roche, manager of Pew’s home financing project. Adding to buyer confusion, the arrangements may have different names in different parts of the country. The size of the alternative financing market is murky because there is no systematic national collection of data about such purchases, Ms. Roche said. In many states, the agreements don’t have to be recorded in a public registry, as conventional mortgage purchases do.