The shape of homeownership and housing markets has changed dramatically over time and will continue to change in the face of new housing opportunities and challenges. Panelists at the "Challenges and Opportunities in Housing and Homeownership" session during the recent REALTORS® 2013 Midyear Legislative Meetings & Trade Expo in Washington, D.C. presented various research and data illustrating the impact of shifting demographics, new mobility patterns and an uncertain interest rate environment on future housing prices, availability and affordability.
"The residential mobility rate in the U.S. has been falling steadily since the 1990s, when it was approximately 20 percent, to its current level of 12 percent," said National Association of REALTORS® chief economist Lawrence Yun. "Mobility is currently being impacted by the lack of housing inventory since fewer homes are available. In the future, proposed regulations requiring larger down payments could also significantly reduce mobility since fewer homeowners may be able to afford a home."
Lisa Sturtevant from George Mason University's Center for Regional Analysis said the two largest segments of the population – baby boomers and millennials – are delaying many major lifecycle events that have been traditional for their respective life stages, like marriage, children and retirement. That also means they are not moving as much as previous generations at the same life stages, which could be dragging down the overall residential mobility rate.
"Homeownership rates have declined fastest for millennials, most likely the result of fewer job opportunities and higher student debt; however, I believe they still want to become owners and will eventually make their way into the housing market," said Sturtevant. "I foresee more single people buying smaller homes in urban areas."
James D. Shilling from DePaul University's Institute for Housing Studies said higher home prices will unlock a large number of households with negative or low equity and incentivize them to get off the sidelines and into the housing market. "However, combined with future increases in interest rates, the net effect is likely an overall reduction in residential real estate transactions and household mobility," said Shilling.
Shilling anticipates the Federal Reserve will keep mortgage rates low through 2013 and most likely into 2014; consequently the majority of current homeowners will have mortgages with loans rates near record lows, and when rates start to rise they will not be incentivized to give up those low-rate loans to buy a new home with a higher rate mortgage.
Lucy Gorham from the Center for Community Capital at the University of North Carolina said while restrictive underwriting helps lower loan defaults, it disenfranchises a higher percentage of creditworthy borrowers. If 20 percent down payments were required, as many as 60 percent of current buyers could be outside of the qualified mortgage criteria and potentially face higher interest rates or fees.
"Despite the recent housing crisis, homeownership continues to help build wealth for lower to middle-income households. A safe mortgage product with good underwriting helps lower loan defaults. Requiring greater down payments simply closes off access to a greater percentage of borrowers," said Gorham.
Gorham said minority families tend to have lower wealth and greater need for access to mainstream sustainable loan products. Imposing higher down payment requirements would negatively affect low- and moderate-income households and disproportionately impact minority home buyers, who are expected to be the greatest source of future housing demand.
"As REALTORS®, we need to make sure all creditworthy families have the opportunity to purchase a home. Our goal is to make sure the American dream of homeownership is accessible to all families," said Carolyn Miller, president of the Silicon Valley Association of REALTORS® (SILVAR). Miller and other members of SILVAR joined 9,000 REALTORS® from across the nation at the NAR Midyear Legislative Meetings & Trade Expo on May 13-18.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.