For first-time homebuyers entering a market where the supply is far below the demand, the National Association of Realtors (NAR) presented a five-point plan designed to increase the number of African-American homeowners in the U.S. and help close the gap in homeownership rates between whites and African-Americans.
“Before the pandemic, America faced a housing shortage of around five to six million homes due to multiple years of underproduction of new homes,” said NAR Chief Economist Lawrence Yun. “Now, in the middle of 2020, the housing shortage has intensified. Consequently, home prices will be pushed higher thereby making ownership opportunities for first-time buyers more difficult. More homes need to be built.”
As explained by Yun, NAR’s plan aims to execute the following:
►Build more homes to increase supply: The lack of housing supply makes converting from renting to owning very difficult. The lack of viable purchase options and resulting competition rapidly pushes up home prices, precluding some potential first-time buyers from entering the market.
►Build more homes in Opportunity Zones: NAR strongly supports Opportunity Zones as a means by which to invest in the revitalization of economically-distressed areas.
►Increase access to down payment assistance: Saving for a down payment can be the biggest hurdle for renters wanting to become homeowners. In recent years, a growing number of first-time buyers received help from family members with their down payments. However, due to historical gaps in accessing and accumulating wealth, it’s much more difficult for African-Americans to obtain substantial financial assistance from family members. Therefore, increased access to federal down payment assistance based on a certain income threshold is vital, particularly for African-Americans.
►Strengthen FHA’s loan program: FHA loans have been an important source of financing for first-time buyers and minority households. Shifting federal dollars to strengthen the FHA program could lower mortgage insurance premiums and monthly mortgage payments.
►Expand alternative credit scoring models: Expanding credit scoring models to include rent and utility payments–and thereby adding more positive payment histories to better demonstrate financial responsibility–can help increase homeownership opportunities for minority and first-time buyers.