We’re back after attending two excellent real estate conferences. Not surprisingly, the major concern permeating each was the future of housing finance and especially, what the real estate industry and consumers have to look forward to regarding down payment requirements.
At the NAR Midyear Legislative Conference in Washington, D.C., we held dozens of meetings with key multiple listing services (MLS) and REALTOR® Association executives. Their number one concern is how confident their members, as well as buyers and sellers, can be that the homes they buy or sell will be financed and closed.
This is understandable given the current challenges of financing home sales. However, issues today may look like child’s play compared to what could happen if certain measures proposed in Congress and the U.S. Treasury are enacted. Here’s what the real estate industry knows today:
- Rapidly changing credit and collateral standards over the last few years have reduced the percentage of homes closed in relation to the number of sales contracts written.
- The move-up market remains grid-locked without more first-time homebuyers.
- The May 19 Campbell/Inside Mortgage Finance HousingPulse Survey showed the proportion of first-time homebuyers in the housing market fell to 35.7% in April compared to 43.4% a year earlier.
- Despite a historically high housing affordability index, the number one obstacle to homeownership remains lack of funds for a down payment
- The Treasury Department has proclaimed 90% LTV financing as “affordable.”
- The Qualified Residential Mortgage issue (QRM) spells more potential trouble with proposed down payment requirements of up to 20%.
- Some believe that the 30 year fixed-rate mortgage is an unnecessary and quaint relic from bygone days.
- Calls to disband Fannie Mae and Freddie Mac persist despite the facts that:
- Fannie and Freddie funded 75% of all home loans in Q-1 2011
- Freddie Mac provided affordable single family financing for more than 700,000 low- and moderate- income families in 2010
Last week we traveled to San Francisco to attend National Association of Local Housing Finance’s (NALHFA) 2011 Educational Conference, “Transformative Change in Affordable Housing”. Naturally, we stay close to what’s going on in this segment of housing, yet even to us, this was a dramatically sobering event. Speakers and panelists representing many Housing Finance Agencies (HFAs), Fannie Mae, Freddie Mac, the Federal Reserve, HUD, U.S. Department of Treasury, several bond firms and large banks shared their latest insights. While there are some “green shoots” of optimism, this is no time to be complacent.
We’ll explore the specific issues discussed during the conference soon. In the meantime, whether you’re a tea party-er or a left-winger (some from both sides of the spectrum are supporting ill-informed proposals), we believe it’s time for us to all put aside our ideologies and ask ourselves:
- What are the hopes for an economic recovery if the real estate market becomes further depressed?
- Can a real estate recovery wait another 8-10 years while first time homebuyers save to meet proposed down payment requirements of 10-20%?
- How will more unsold homes and more rental housing help stabilize neighborhoods and real estate values…including yours?
- If a home is the largest financial asset for most Americans, what will happen if fewer Americans own homes due to new policies? What asset will replace the home?
Do not despair; there is hope. Consider the following:
- Some members of Congress are asking if the more radical proposals really make sense. (they need your encouragement more than ever)
- Fannie Mae has expanded its credit policies including a new acceptance of high loan-to-value ratio loans based on carefully researched historical data
- New ways of providing down payment assistance are in development
- 81% of adults surveyed in March by the Pew Research Center say that owning a home is the best long-term investment one can make
- Freddie Mac reported its first profit since it went into conservatorship
- The New Issuance Bond Purchase Program (NIBP) was highly successful in allowing HFAs to fund affordable mortgages while the credit markets for such finding were not functioning
Let your representatives in Congress know immediately what you want America’s housing policy to be for the sake of our communities and our economy!
Stay tuned! Now that we’ve laid out the issues threatening the future of housing finance and homeownership, we’ll be diving into each of these in more detail as well as updating you on how it’s all playing out.
In the meantime, please let us hear your thoughts and comments! What are you hearing in your market?