Business activity was up for the second year in a row following nine years of decline, according to the 2013 National Association of REALTORS® Member Profile which just released at the 2013 Midyear Legislative Meetings & Trade Expo last month.
With the overall economy showing a myriad of positive signs for the future, the group focused on how and why it’s so important to sustain a solid housing recovery.
With new housing opportunities and challenges constantly changing the shape of home ownership and housing markets over time, one of the expert panels presented details on the “Challenges and Opportunities in Housing and Homeownership.” For this session, leading academics presented research and data illustrating the impact of shifting demographics, new mobility patterns and an uncertain interest rate environment on future housing prices, availability and affordability.
To get things started, NAR Chief Economist Lawrence Yun explained how the residential mobility rate in the US has been falling steadily since the 1990s, from approximately 20 percent to the current level of 12 percent.
“Mobility is currently being impacted by the lack of housing inventory since fewer homes are available,” he stated. “In the future, proposed regulations requiring larger down payments could also significantly reduce mobility since fewer homeowners may be able to afford a home.”
Lisa Sturtevant from George Mason University’s Center for Regional Analysis was up next, showing how recent trends in residential mobility are also the result of changes in age distribution. With the two largest segments of the US population – Baby Boomers and Millennials – delaying the major life cycle events that have been traditional for their respective life stages - like marriage, children and retirement – as a result of the recent economic downturn, they have had a significant impact on the overall residential mobility rate.
James D. Shilling from DePaul University’s Institute for Housing Studies then shared his insights into recent trends and their potential future impact on the single-family housing market.
“Higher home prices will unlock a large number of households with negative or low equity and incentivize them to get off the sidelines and into the housing market,” he said. “However, combined with future increases in interest rates, the net effect is likely an overall reduction in residential real estate transactions and household mobility.”
Lucy Gorham from the Center for Community Capital at the University of North Carolina offered her perspective into housing policy implications for homeowners, including proposed regulations requiring higher down payments from home buyers, including the conclusion that while restrictive underwriting helps lower loan defaults, it disenfranchises a higher percentage of creditworthy borrowers - if 20 percent down payments were required, as many as 60 percent of current buyers could be outside of the qualified mortgage criteria and potentially face higher interest rates or fees.
“Despite the recent housing crisis, home ownership continues to help build wealth for lower to middle-income households,” she said. “A safe mortgage product with good underwriting helps lower loan defaults, while requiring greater down payments simply closes off access to a greater percentage of borrowers.”
Further, imposing higher down payment requirements would negatively affect low- and moderate-income households and disproportionately impact minority home buyers, with minority families expected to be a big part of future housing demand.
Margaret McFarland, Colvin Institute of Real Estate Development at the University of Maryland, agreed that excessive risk reductions requiring higher down payments and credit scores exclude too many well performing loans from the market.
“Federal Housing Administration (FHA) loans are an important financing option for affordable home ownership,” she said. “Veterans Affairs (VA) loans also perform very well in relation to other mortgage products, even with a zero down payment.”
Other sessions looked at projections for further increases in existing-home sales, the current effects of low inventories, how regulators may shape the future of mortgage finance and the importance of future tax policies.
Pillars of the Community: Northwest Indiana REALTORS® hit the hill. Members of the Greater Northwest Indiana Association of REALTORS® (GNIAR) visited with Pete Visclosky, Representative for Indiana’s 1st Congressional District (serving since 1985) and Joe Donnelly, Senator for Indiana (serving since 2012, previously the Representative for Indiana’s 2nd Congressional District in 2008 and 2010) to discuss both local and state housing issues. Talking points mirrored the general sessions and focused on preserving home ownership tax policies, preserving the mission and purpose of the FHA program and restructuring Fannie Mae & Freddie Mac while encouraging the return of private capital, according to GNIAR Immediate Past President India Castaneda, a Realtor Associate with Coldwell Banker Residential Brokerage.
“We had an extra badge to wear this year stating, ‘Homeownership is not a loophole,’” she said. “The goal was to make sure our legislators understand that some of the issues being discussed are of vital importance to a recovering but still fragile real estate market. We were there to basically ask them to do no harm.”
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