The year of 2012 saw record-low mortgage rates, a fledgling recovery and a historical presidential election. Looking to 2013 and beyond, those who seek to buy or sell their homes should keep an eye on these government policies and proposals that may directly affect them.
Interest rates & Credit
Gloria Shulman, founder of Beverly Hills, Calif., mortgage brokerage Centek Capital Group, predicts, “With stable policy from the Federal Reserve, interest rates will almost certainly stay low through 2014.”
However, these low rates aren’t easy to obtain. “The rigid [credit] requirements have been brutal on responsible homebuyers with established credit histories,” Shulman says.
Jerry Howard, CEO of the National Association of Home Builders, agrees. “The process for qualifying for a mortgage has become so difficult that even people with high credit scores and longstanding job histories are still not qualifying,” and the government should push housing financial reform to remedy this, he says.
There have also been proposals to alter or eliminate the mortgage interest deduction. Howard says, “Homeowners should keep a close eye on the mortgage interest deduction to ensure that their voices are heard.”
Lending & Banks
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act enacted tighter restrictions on lending, says Matthew Hars, managing director of Manhattan Spaces in New York, a commercial and residential real estate firm. But an amendment to Dodd-Frank is necessary, Hars says, because “a good majority of provisions don’t stop predatory lending – they just make the loan process more grueling for the consumer and more expensive to the bank.”
To protect borrowers, politicians could push for legislation that penalizes banks that foreclose or rewards lenders that delay foreclosure, says Danielle Babb, professor of economics at American Military University, Charles Town, W.V., and author of “The Accidental Landlord” (Alpha, 2008).
Babb also predicts that policymakers may push for homebuyer credits if numbers look weak in the spring buying season.
NAHB’s Howard says that underwater homeowners especially need assistance so they can remain in their homes and stem the tide of foreclosures.
These policies are part of the larger “debate about the role of government and the extent to which it should encourage and promote homeownership,” Howard says.
He says, “That debate will go a long way toward determining the value of most of the baby boomers’ nest eggs as well as future opportunities for homeownership for America’s young people.”
It’s difficult to predict the direction of the housing market solely based on policy proposals, but there are market trends that are worth noting.
Babb says, “[Home sellers] may wish to consider renting out their home instead of selling it to potentially profit month-to-month as well as enjoy some [price] appreciation.”
As the market gains some steam, Howard expects to see an increase in demand. “There’s a lot of pent-up demand out there that will spur the sales of existing homes and bring buyers back into the marketplace,” he says.
“In fact, I can make a heck of a case that, all things being equal, [when] the market returns to some sense of normalcy, the next big problem in housing will be supply shortages,” Howard says.