Dive Brief:

• In one of his first moves as president, Donald Trump issued an executive action suspending a recent 25-basis-point decrease in the Federal Housing Administration's mortgage insurance premium, a change that the National Association of Realtors said could keep as many as 40,000 homebuyers out of the market this year.

• The reversal, administered by the U.S. Department of Housing and Urban Development in an industry letter, could leave 750,000 to 850,000 homebuyers facing higher costs, according to the NAR.

• The decision was somewhat expected amid concerns that the previously issued cut could have impacted the solvency of the Mutual Mortgage Insurance Fund, according to HousingWire.

Dive Insight:

While the move was not entirely unexpected, the act of stonewalling the proposed cut will reverberate throughout the housing industry. It was previously forecast that the drop in the rates would save new FHA-insured homeowners $500 on average this year.

The original plan to lower the premium had largely been applauded by the industry as a way to bring first-time buyers who may not be able to afford a large down payment off the sidelines and into homeownership.

With the new Trump administration pulling the reduction back, concerns are set to deepen over the growing affordability divide that exists in markets across the U.S. amid severe inventory shortages, which is causing home prices to climb.

Mortgage rate hikes in late 2016 are already raising fears that many new buyers could remain shut out of the market at a time when purchasing activity is critical to generating new residential construction demand among builders. Meanwhile, a decision by the Federal Reserve Board in December to raise interest rates by 25 basis points hasn’t allayed concerns of more increases.

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