News & Press: The Road Home Newsletter

It’s National Homeownership Month: Should We Be Giddy – or Gloomy?

Monday, June 25, 2018  
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June 25, 2018

It’s National Homeownership Month:  Should We Be Giddy – or Gloomy?

As we have discussed here many times, with the rate of homeownership at a 50-year low and with significant challenges to new homeowners (ranging from an inventory shortage of millions of units; mortgage credit constraints due to regulations and old practices such as prohibiting alternative credit scoring models that may expand opportunity for thousands of aspiring homeowners; to rising house prices and rising interest rates) there are plenty of reasons for concern.  So who is giddy in this environment?

Well, existing homeowners are pleased to see increasing home values that have lifted many out of underwater mortgages and/or are increasing the family net worth.  In addition, the Federal Reserve is acting “giddy” about finally increasing interest rate levels that have been at artificially low levels since the financial crisis.  (While this means higher rates on mortgage, car loans, credit card balances, etc., it also means higher yields on savings and investments.)  And landlords are very happy because the impingement of homeownership opportunity has increased demand for rental housing, which allows for rapidly escalating rents in most major markets. That makes landlords “giddy” and aspiring homeowners “gloomy”.

But, taking a slightly longer view of all of this “good news”, is it really time for celebration?  Consider this analysis from the Federal Reserve:  Housing Recovery without Homeowners

First, you will see that the last time in the past 35 years with a similar run-up in home prices immediately preceded the financial crisis of 2008; and second, it was during that time that the rate of homeownership was at an all-time high.  Today’s divergent trends cannot be sustainable.  We, of course, hope that the correction to these trends will not be as dire as what we experienced ten years ago, but it seems inevitable that there will be some level of correction.  Today, and during that period prior to 2008, the Fed was increasing interest rates. 

While today’s homeowners may be happy about higher home values (just as homeowners were in the 2004 – 2007 era) there may be no way to monetize that value if there are no buyers who can afford to buy -- or if tight credit standards eliminate a big segment of potential buyers.  So, perhaps it is only the landlords, of today and tomorrow, who have cause to celebrate (although recent trends in commercial MBS suggest that there may be cause for concern there, too).

June is National Homeownership Month.  At this time of recognition and celebration of the achievement represented by our nation’s homeowners, Your AHA remains committed to protect and promote sustainable homeownership for all segments of America.  We applaud today’s homeowners and will continue to work to ensure that opportunities for prospective homeowners remain accessible and affordable for all segments of the population, including those at lower and moderate income levels.


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 How to Stay Safe for July 4th Celebrations (and Summer Weekends Too!)

The Fourth of July is a great time to honor America’s independence with your family and friends, but it’s important to ensure their safety (and yours) during the celebrations.  Here are some tips to help your Fourth and other summer weekends to be safe and enjoyable. 

  • Federal Emergency Management Agency (FEMA).  “Ten Safety Tips for This Fourth of July”.  Article here.
  • American Red Cross. “Red Cross Safety Tips For 4th of July Holiday”.  Article here.
  • Mom 365.  “10 Tips for a Safe Fourth of July”.  Article here.

Summer Sales Are Here!

Whatever your summer needs don’t miss the sales on summer essentials with up to 60% off or 12% cash back.  Just click on AHA Member Rewards for the latest offers.

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