From floridarealtors.org
The homeownership rate in America continues to hover around a 50-year low, but experts gathered for an event in the Washington, D.C., offices of the National Association of Realtors said there also are real-world opportunities to turn that trend around.
“It’s tough out there right now for buyers, especially in many of the red-hot markets around the country where competition is the fiercest,” says NAR President William Brown. “Thankfully, we know there are ways to help consumers.
“Addressing the growing student loan burden, widening the credit box for strong buyers, building more homes that meet the demand of lower and middle-income buyers — these are among the many steps we can take to clear the pathway to homeownership,” he said.
Nobel Prize-winning economist Robert Shiller, who headed the housing and homeownership event, offered his take on the housing market’s history and possible future.
Oil price trends, building costs and other factors play a role in driving demand, Shiller told the audience, but public sentiment clearly plays its own role in driving the housing market.
“It’s kind of obvious that home prices have been rising at a good clip (since the Great Recession) … But it’s not because of building costs, population trends or interests rates.” he said. Instead, “It’s the changing narrative and the stories that go along with it.”
To make his point, Shiller showed data on the expected average annual increase of homebuyers from 2002 to 2016.
He noted that in the run-up to the Great Recession, homebuyers expected an average annual increase in home values as high as 13 percent.
Since then, that expectation has fallen, changing the narrative of the housing market.
“That’s why I don’t think we’re in a bubble now,” Shiller said. “It’s not as it was in 2004.”
Following Shiller’s remarks, CNBC real estate correspondent Diana Olick moderated a panel that included NAR’s Chief Economist Lawrence Yun; Beth Ann Bovino, chief U.S. economist at S&P Global; Susan Wachter, Albert Sussman professor of real estate, Wharton School of Business; and John Weicher, director of the Center for Housing and Financial Markets, Hudson Institute.
The economists focused on the homeownership rate and its importance to the broader economy.
Yun, in particular, talked about challenges to homeownership that include rising rents and student debt loads, noting the difficulty in purchasing a home has led to a growing wealth inequality between generations.
“There is a tremendous wealth buildup among people who are 65 and older,” Yun said. “They have essentially paid off their mortgages.”
For the younger generation, including those under 35, Yun said, “They feel that they are being left out.”
While the pendulum swung too far toward loose underwriting before the Great Recession, it has since swung in the other direction, Yun added, leading to what he described as “overly strict underwriting standards” that can put homeownership out of reach for even strong buyers in some circumstances.
“We do expect to see some improvement (in the homeownership rate), but it’s going to take some time,” Bovino said. “Rents are increasing and interest rates are low, so there is an interest in getting back into homeownership.”
NAR reported last month the median existing-home price for all housing types was up 6.0 percent from the previous year, marking the 56th consecutive month of year-over-year gains — a finding that coincided with a 4.3 percent year-over-year decline in inventory levels.
The audience also heard from U.S. Reps. Frank Lucas, R-Okla., and Brad Sherman, D-Calif., who are members of the House Financial Services Committee.
In a panel moderated by Politico financial services reporter Lorraine Woellert, the congressmen discussed the likelihood that significant reforms to tax policy may come before Congress this year.
They agreed eliminating the mortgage interest deduction would likely meet strong public opposition.
Brown thanked participants for their expertise.
“I’m pleased we could highlight these issues with today’s event and reiterate the importance of protecting and defending incentives for homeownership and real estate investment,” he said.