Happy National Homeownership Month

On June 1, 2017, U.S. Department of Housing and Urban Development (HUD) kicked off National Homeownership Month with the “New Era of Homeownership” panel discussion. Keynote speaker, Secretary Ben Carson, described homeownership as “security, certainty, a path forward, and a place to live with loved ones”. He stated, “after all we’ve been through, homeownership remains an American value and the cornerstone of our economy,” and noted that  63.6 percent of Americans are homeowners. Based on research from Harvard Joint Center for Housing Studies, homeownership has increased since 2016 and is projected to increase within the next eight years by 13.6 million households.

Diana Olick, CNBC Real Estate Reporter, facilitated the panel by asking questions to encourage analysis of the shifts in homeownership since the steady increase since 2004.

Panelist include:

•        Joel Kan, Associate Vice President of Industry Surveys and Forecasts, Mortgage Bankers Association
•        Christie Peale, Executive Director, Center for NYC Neighborhoods
•        Jon Spader, Senior Research Associate, Harvard Joint Center for Housing Studies
•        Lawrence Yun, Chief Economist and Senior Vice President of Research, National Association of Realtors

Homeownership month was created to reflect, as the panel emphasized, the several benefits of owning a house. Benefits include increasing wealth and stability, higher SAT and ACT scores, and equal access to social benefits compared to renters. Peale highlighted how essential buying a home is to build wealth and create a positive long-term investment for community stability.

Since the passing of the Federal Housing Administration (FHA), 46 million citizens are able to purchase or refinance their homes annually and 40 percent of first-time homeowners have used FHA.  “To put the impact into perspective, about 4,000 new homeowners will be assisted today alone will be able to use FHA,” stated Carson. Kevin Kane, acting director of the program monitoring and research division stated, the delinquencies and foreclosures are down to 2.5 percent from 3.2 in 2016. However, the national vacancy rate remains unchanged from when the market rent peaked at 69 percent in 2004.

Panelists deliberated that despite the success, homeownership is still difficult because rental market conditions are tight or slightly tight in many markets. Rental rates increased more than 3 percent and vacancy rates have remained stable. Sales markets remain balanced throughout most of the country with some areas of tightness. In the first quarter of 2017, home prices increased six to seven percent and total sales increased by one percent. Affordability continues to be the greatest barrier to homeownership

There was a strong advocacy for HOME Investment Partnerships Program (HOME) and Community Development Block Grants (CDBG), as they stressed the importance of a flexible source of income for private and public ownership, but described the need for government assistance as well. Both the Housing Choice Voucher and Public Housing programs provide PHAs with optional homeownership programs that can provide affordable homeownership solutions.

Kane discussed the generational differences of homeownership with baby boomers, Generation X, and Millennials. Throughout the dialogue, the panelists each gave their perspectives about why Millennials are renting their homes and not buying. In majority consensus, it is due to increasing home prices. Spader stated, “a fundamental change within the different generations is not conclusive.” In several of his studies he found that several young Americans expect to get a home in the future, but the main struggles are building credit, student debt, and saving  money for a down payment. Yun stated that, “80 percent of millennials want to own a house, so there is not a lack of buyers, but lack of supply in affordable housing.” He also mentioned that within the past five years housing prices have increased by 50 percent, while income wages have only increased by 10 percent.

Panelists agreed that the mortgage market is another factor depressing young homeownership rates as there needs to be more effective guidance tools. Kan underlined the need to modernize the process of credit scores and investing money in greater technology. Olick said that she receives multiple advertisements for an application on “how to get a mortgage in seven seconds, which is what the millennials need.” Counseling was a large suggestion from panelists to ensure future and potential homebuyers are getting the correct information. Kan indicated that it’s important to protect taxpayers and have private funds to keep the market going. To have private investors there needs be compelling incentives and good credit, Kan stated.

Another suggestion is to change how credit scores are determined. For example, building credit scores through services that require monthly payments, like cell phone bills, opens up credit market for the 40 million adults who currently do not have credit scores.

Questions and comments highlighted some of the housing crisis issues, even farther back than the 2004 housing crisis. One of the largest ones being the 30 percent decrease in minorities homeownership. Answers responded to the issue starting even before redlining and panelist stated the Fair Housing Act as a resource.  Another question raised was on interest rates if a millennial should buy now, panelist urged buying now since interest rates have not increased.

To read the posted questions or follow the panel, search the hashtag on Twitter: #FindYourPlace or follow @HUDUSERnews and @HUDgov.