This may not be a popular story for Policy Makers and the “old guard” legacy groups in Washington DC. But we’re not trying to win a popularity contest with them. We’re trying to win an advocacy battle for all aspiring and existing homeowners. If you are in that category of aspiring or existing homeowner – you’re in a CRISIS. But nobody in Washington apparently wants you to know that truth. If you want the real truth – read on. The facts are the TRUTH SERUM. If you don’t want the truth, stop here and keep believing the Washington DC spin. Something like this… ”housing is roaring, leading America back to vitality.” The truth: Things aren’t so rosy for aspiring and existing homeowners. Let’s start by delivering what is mostly positive news.
Good News for Existing Homeowners
If you own a home –- your home value has likely increased substantially. Much of that is due to you taking good care of your home and also because unprecedented low levels of single-family homes available for sale have driven up home values. There is an overwhelming Demand matched against limited Supply. That’s positive news for existing home values. On top of that, we have historically low mortgage interest rates. That’s positive news for aspiring homeowners. But that’s where the good news stops – because most other news is really deceptive about the “health” of the housing market. Unfortunately, the National Association of Homebuilders just published their “priced out” index. It shows that 75.1 million households in America can no longer afford to buy a median-priced new single-family home. That’s 60% of American Households. Yikes!
The New Decree:
Buying Your First Home Is Now More Difficult
But there’s more. In January, the Treasury Department and the Regulator of Fannie Mae and Freddie Mac (the Federal Housing Finance Agency [FHFA]) issued a new decree – kind of what we imagine one of the decrees issued by Julius Caesar to the Romans might have said…something like this: “Hear ye – hear ye… if commoners in America have any two of the following three criteria, ye shall be hereby discouraged from pursuing homeownership.
• If you have a credit score of 680 or less
• If you have a debt to income ratio of 45% or greater
• If you have less than 10% down payment… don’t bother shopping for a home – you are destined to be a renter for most of your life!”
First-time Home buyers are Frequently Challenged With All 3 of the above
Most times in the past when there were gnarly restrictions like these imposed in the conventional mortgage arena – the accommodation window would just open wider at the government mortgage program – FHA. But recent delinquency numbers just reported by FHA indicate that about 17% of FHA loans are delinquent and nearly 12% of them are seriously delinquent. With these kinds of performance indicators, the likelihood of FHA expanding its window of accommodation seems highly unlikely.
Results of Restrictions on Aspiring Homeowners
One result of these product and credit restrictions imposed on aspiring homeowners is the homeownership rate for African Americans – which just tumbled to its lowest level since the Civil Rights Act of 1964. Hence - more TRUTH SERUM.
And that’s not all. Mostly due to bad housing policy, builders have been unable to build enough homes to keep up with the growth of new households, so we are about 5 million new homes short of meeting new household formation over the past 10 years. Additionally, the total available number of single-family homes for sale in America has been dwindling each quarter since December 2010. It recently reached the lowest level ever recorded. That’s TRUTH SERUM. And it’s not a good “serum” for aspiring homeowners.
If you’re an existing homeowner and need to sell your home, start wondering where any of these aspiring homeowners are going to get financing with these awful constrictions. Maybe a “cash buyer” will come along and save the day for you – but the overwhelming majority of those aspiring to be homeowners might find it difficult to obtain a mortgage.
Crucial Policy Decisions
If we don’t reverse these terrible policy decisions in Washington, we’re going to end up with a society of “Involuntary Renters”. And massive new rental demand will lead to rent saturation… and then a cry for broad rent subsidies. Who do you think will pay for those – yep, you guessed correctly – homeowners!
The Harsh and Bitter Truth
This TRUTH SERUM may seem harsh and bitter to swallow. We coined a phrase about 10 years ago that fits perfectly today. In terms of policy in Washington – “you are either at the table… or on the menu”. Sorry – more TRUTH SERUM - YOU are “on the menu”! The only thing that will make Members of Congress and other Policy Makers pay attention is the voice of existing and aspiring homeowners. Because you vote! And you pay most of the taxes in America as well. We built America’s Homeowner Alliance to offer you a voice in Washington. If you’re an existing or aspiring homeowner and you haven’t yet joined – please join now! Your lifetime membership will be FREE.
Help Give Us the Strength to Change This Mounting Bad News
America is recovering from the pandemic and the resulting economic fallout. But we won’t recover from these really bad homeownership trends unless we bond together and take action. We’ve simply got to get more aggressive – and bold – and demanding. We want to be your voice. Give us a chance to deliver Washington a dose of TRUTH SERUM. Please join America’s Homeowner Alliance today – so we can sustain homeownership opportunities in America for tomorrow. Use the browser on your phone to join at “aha.rocks” – or visit our website at www.myaha.com.
Tino Diaz is Managing Director of America’s Homeowner Alliance. He has served in multiple leadership roles in the mortgage industry since 1975, amongst which are as past Chairman National Association of Hispanic Real Estate Professionals®, and as a member of the Consumer Advisory Council, Federal Reserve Board of Governors.