The head of the nation’s most prominent mortgage professional trade group has acknowledged that the state of housing is not at the level where it should be. However, he stressed that dramatic changes in U.S. demographics will create a “significant shift” in how the housing finance world operates.
In an exclusive interview that will run in the October 2014 edition of National Mortgage Professional Magazine and be broadcast on The Housing Show, a new weekly series set to debut on the Mortgage News Network, Mortgage Bankers Association (MBA) President and CEO David H. Stevens noted that the fast-rising number of non-whites is going to require a new consideration of housing finance solutions for new homeowners. Citing demographic data released by Harvard University’s Joint Center for Housing Studies, Stevens observed that the texture of U.S. homeownership is poised for a major realignment.
“If you look at existing housing stock in this country, 70 percent of it is occupied by white non-Hispanics,” Stevens said. “That is probably the nature of homeownership and housing today. If you look over the next decade, in terms of new housing stock being created and new household formation, only about a third of that is going to be white non-Hispanic, and the remainder is going to be minority. We’re moving to a country that is going to be majority minority. But in terms of home sales, it is going to be vastly majority minority by about two-thirds.
“It changes a lot of things,” Stevens continued. “[For instance], the type of housing. It impacts things like standardized qualification measures and a qualified mortgage rule—it makes you question whether that type of square peg-square hole thinking is going to be work for the new type of homebuyer coming into the marketplace.”
Stevens noted that the households that will dominate the near-future of housing are structured in a manner that will require a new approach to mortgage origination.
“[We have] self-employed buyers, family members living together, [people with] multiple jobs, overseas sources of funds: It puts a lot of new issues into the limelight when it comes to thinking about how we think about financing new types of homeownership,” Stevens said.
Stevens added that one demographic sector that should be helping to boost housing—the so-called “Millennials”—have yet to make their presence felt in the market.
“The percentage of 30-year-olds that have mortgage debt today is down about 10 percent from where it has been traditionally,” Stevens said. “First-time homebuyers are not coming into the market right now.”
On the current state of housing, Stevens acknowledged that the market could be in a healthier place.
“Clearly, the housing market is not recovering the way we would have expected,” he said. “We have a market that is probably going to be flat or down over last year in terms of total home sales. We’re seeing strength at the higher end of the market—anyone who is involved in the jumbo or wealthy communities, those markets are recovering a lot more faster than the entry points for first-time homebuyers. The entry-level price point is down fairly significantly from over a year ago. There’s a lot of work to be done.
“But if you juxtapose that against a recovering economy,” Stevens continued, “you have interest rates still near record lows, you have the home affordability index that groups like the National Association of Realtors produce that show the rent-versus-buy scenario has almost never been better. It defies what most expectations were from a year ago, when economic forecasts where home sales growth was going to be—we’re not meeting those expectations.”