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Housing Forum Offers Pessimism on Market and Reforms

Phil Hall
Apr 14, 2015

The Financial Services Roundtable hosted a forum under the banner, “The U.S. Housing Market: Ready to Bloom; Ripe for Reform?” The answer to the two-part question, according to the forum’s panelists, was not positive.

In regard to the state of the housing market and the level of participation by would-be buyers, the forum’s panelists repeatedly cited economic woes as the main factor that is holding back progress.

“The underlying factor of the housing market of 2015: It’s not a democratic one,” stated Nela Richardson, chief economist at Redfin. “People who are in the market now have stable incomes.”

David Crowe, chief economist at the National Association of Homebuilders (NAHB), agreed, noting many first-time homebuyers were being shut out.

“These people who can qualify for loans are those who are buying right now,” he said. “They are buying their move-up home or maybe their second or third move-up home.”

Crowe added that the geographical perspective of today’s national housing scene is lopsided. “Over half of new homes are sold in the South,” he said. “Between the South and the West, we have 60 percent of all homes sold.”

CoreLogic Chief Economist Frank Nothaft predicted up to 3.5 million new jobs being created this year, with the caveat that these new opportunities should come with healthy paychecks.

“Hopefully, they are better paying jobs that can provide the income and financial wherewithal for potential buyers to buy in the marketplace,” he said.

Yet Nothaft pointed out that many at-risk homeowners are struggling to make ends meet. “More and more homeowners still underwater—close to 11 percent,” he observed.

As for the houses that are being sold, Richardson pointed out that fewer houses were now selling above the list price.

“This is a deal,” she said. “Sixteen percent are selling above list prices. Sellers are slow to understand the prices are not as enormous as they were in 2013. Sellers were slow to adjust prices to the new buyers.”

Still, Richardson noted that demand has not abated—but the audience for homeownership is still limited.

“We’re seeing strong demand than ever before—house tours are up 40 percent,” she said. “But they are tied to [individuals with] high paying jobs.”

As for the question of the government-sponsored enterprises (GSEs), the situation could be compared to the old joke about the weather: Everyone talks about it, but no one seems to be able to do anything about it.

Michael Stegman, counselor to the Treasury Secretary for housing finance policy, acknowledged that the current federal housing policy system was “unsustainable” and that a vibrant private market needed to be revived.

“The only reason the market is functioning now,” Stegman admitted, “is because of the implicit guarantee comes at taxpayer expense.”

Yet Laurie Goodman, director of the Urban Institute’s Housing Finance Policy Center, stressed that change cannot come with congressional action.

“You cannot get a new system moving along the path we are moving along,” she said. “I don’t see it happening anytime in the near future.”

Goodman added that the status quo may be around longer than many people would like.

“In three years, I can see the FHA, the GSEs as the now are, bank portfolios, a PLS market and less-than-prime loans trading as whole loans between originators and investors,” she said.

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