American Dream remains an illusion for some who want to own a home
Housing experts descended on Dallas for the Bipartisan Policy Center’s
Housing America’s Future conference Tuesday, addressing the appetite many
taxpayers have for homeownership, but the various roadblocks that remain.
President Barack Obama reaffirmed
the American Dream of home-ownership last week, as he pointed out that one of
the main principals of the middle class is to bring back equal chances of home-ownership. In planning to offer a single application for the 30-year mortgage, the
administration appears to tacitly support the product. The private market, has
it turns out, isn't all-in on the 30-year mortgage as is the President.
While the vast majority of American households want to own a home in the
future, but with a shifting market dynamic, the key is to find a product that
can fulfill the function of providing someone a home and also maintain home-ownership, explained Michael Lea of San Diego State University.
The group of taxpayers facing the biggest challenges is first-time home-buyers due to tight credit standards, student loan debt and limited
inventory.
For instance, first-time home-buyers accounted for 29% of units in June, down
from 32% a year earlier, according to Leslie Smith of the National
Association of Realtors.
"First-time buyers have suffered under an overly restrictive lending
environment. More than 90% of new home-buyers had to use a mortgage to purchase
their first home," Smith said.
While the 30-year, fixed-rate mortgage is the product currently in place for
the majority of Americans to have access to home-ownership, the majority of the
panelists agreed that it’s not a prerequisite for home-ownership and other
products could and should be introduced into the market.
From an investor standpoint, the 30-year FRM is a difficult instrument to
fund and hedge, Lea stated.
Furthermore, as policymakers continue to roll out various options for a new
structure to the mortgage finance system, one of the main changes is the need
for a healthy secondary market that uses government guarantees.
As a result, various policymakers on Capitol Hill are aware of the needed
government guarantees and have worked such a product into propped legislation —
the Housing Finance Reform and Taxpayer Protection Act
of 2013.
Thus, it’s inevitable that a higher degree of private sector participation
will lead to an increase in the cost of mortgages and as a result, many are hopeful
the government will price accordingly, noted Ronald Rosenfeld of the Federal
Housing Finance Board.
Overall, access to affordable housing is critical for equal opportunities
and while the 30-year, FRM was a tool kept in the government’s toolbox to provide home-ownership; many market experts are open to the introduction of new mortgage
products.
By Christina
Mlynski August 13, 2013
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