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National Mortgage Professional
Sep 12, 2005

Down payment assistance essential to bridging national homeownership affordability gap John McDonald and Mary Ann KellyStatistics,Down-Payment-Assistance Programs,DAP Down-Payment-Assistance Programs (DAP) have become vital economic tools for helping low- to moderate-income families become homeowners, according to the first study in the U.S. of the economic impact of privately funded down-payment-assistance programs. Conducted by the Milken Institute and sponsored by the Nehemiah Corporation of America, a privately funded down-payment-assistance provider, the study examined down-payment-assistance recipient families to quantify the impact of DAP on individuals, cities and communities. During the past 12 years, home prices have risen 30 percent faster than wages and salaries for low- to moderate-income families, creating a growing "homeownership affordability gap." The study found that between 1992 and 2003, the median sale prices of single-family homes increased by about 68 percent, while wage growth for low- to moderate-paying occupations increased by 38 percent, making the typical low- to moderate-income homebuyer face a 30 percent affordability gap. The study used data on 36,240 Nehemiah gift recipients in six observed regions, primarily low- to moderate-income households typically earning a median income of $40,764 and who purchased a home with a median value of $116,750. Home prices grow faster than wages As the rate of wages falls far behind the average increase in home prices, the homeownership affordability gap for low- to moderate-income families is constantly growing, making DAP gifts instrumental in keeping home buying affordable for families that can afford monthly mortgage payments, but are unable to save for a down payment. This gap is making it increasingly difficult for lower-income families to purchase a home without down-payment assistance. DAPs are proven to bridge the "homeownership affordability gap" and have put hundreds of thousands of hard-working families in homes. "Despite a low-interest-rate environment over the past several years, accelerating home prices are far ahead of the gains in wage income," said director of regional economics at the Milken Institute, Ross DeVol. He noted that of the more-than-36,000 area families in the study, many "would have been excluded" from homeownership had they not received a DAP gift. The study also found that between 1997 and 2003, more than 115,000 primarily low- to moderate-income families nationally--representing about 70 percent of Nehemiah's total DAP program portfolio--reported an aggregated rise of more than $2.2 billion in home equity value, or an average of more than $18,000 per family. Equity gains by Nehemiah DAP families Homeownership has been a receding dream for most low- to moderate-income families, and without down-payment-assistance programs, these families would never be able to buy a home and receive all the benefits that homeownership brings. According to the Milken Institute study, down-payment assistance has helped bridge the affordability gap, provided badly needed private funds and helped families generate real wealth through home equity appreciation, providing the families and communities with the economic stability they have always sought. John McDonald is a principal of McDonald, Head & Associates and area manager for The Nehemiah Program, covering the Utah and Nevada housing markets. He may be reached by phone at (801) 897-5646 or e-mail [email protected] Mary Ann Kelly is the outreach manager for the Nehemiah Corporation of America. She can be reached at (916) 231-5232 or e-mail [email protected]
Published
Sep 12, 2005
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