Published in The Hill
Americans overwhelmingly hold the belief that homeownership is a solid financial decision, and with good reason.
A fixed-rate mortgage offers protection against rising rents, and the tax advantages of owning a home are well known. Moreover, homeownership strengthens communities and offers people a place to build a future.
That’s why it’s important that mortgage credit is available to responsible borrowers who are ready to buy.
Unfortunately, many first-time buyers are held back from homeownership. According to the National Association of Realtors®’ Profile of Home Buyers and Sellers, the share of first-time buyers fell in 2015 for the third consecutive year to its lowest point in nearly three decades, even as home sales strengthened.
The topic of first-time buyers was front and center at the 2016 Realtors® Legislative Meetings, when nearly 9,000 Realtors® came to Washington, D.C. to visit leaders on Capitol Hill and within the Administration to call for changes that will help get more buyers into the market.
Among those changes is the need to address burdensome regulations that make it harder to purchase a condominium.
Condos represent an affordable option for first-time buyers who may have good credit but are struggling to make a down payment. But current regulations often make it hard for buyers – even those with strong credit – to qualify for financing.
For example, the Federal Housing Administration requires that no less than 50 percent of condo units are “owner occupied” before they’ll insure a building. Freddie Mac and Fannie Mae, however, have no such restriction as long as the home is a principal residence (another FHA requirement). Since FHA reviews the property to ensure it meets all other FHA requirements, owner-occupancy ratios should be irrelevant to the transaction.
We can do something about it.
Housing and Urban Development Secretary Julian Castro told Realtors® at their convention that changes to FHA condo rules have left the HUD building and are on their way to the Office of Management and Budget for review. That’s a significant step.
In addition, Realtors® continue to push for legislation, the “Housing Opportunity Through Modernization Act,” (H.R. 3700) to address these concerns. The bill was introduced by Reps. Luetkemeyer (R-Mo.) and Cleaver (D-Mo.), and passed the House unanimously in February.
H.R. 3700 addresses owner-occupancy rate concerns as well as makes improvements to FHA’s recertification process. It’s time for H.R. 3700 to get a vote in the Senate and head to the President’s desk.
Condo regulations, however, are far from the only issue holding back buyers.
NAR’s buyers and sellers survey found that student debt was listed as an important factor by the majority of buyers who say saving for a down payment is their biggest impediment to purchasing a home. Additionally, the median student debt for all buyers is $25,000, and for many it’s even higher.
Sen. Elizabeth Warren (D-Mass.) addressed Realtors® at their Washington convention and told them that their participation in addressing student debt is critical to success.
To that end, NAR recently adopted policy seeking to help more student borrowers refinance their debt and streamline income-based repayment programs. NAR also supports proposals that promote education and simplification of student loans, as well as steps to ensure that mortgage underwriting guidelines related to student loan debt are standardized in a way that supports homeownership.
What’s clear is that more needs to be done.
NAR data show that the share of first–time buyers declined to 32 percent in 2015, marking the second–lowest share since 1981. Historically, nearly 40 percent of primary purchases are from first–time home buyers, meaning this matters not just to them, but to the broader economy as well.
As we look to get more first-time buyers into the market, however, we need to ensure that homeowners have the tools to protect their investment.
Realtors® in Washington reminded lawmakers about the importance of extending the National Flood Insurance Program before it expires in September of 2017, while also making critical reforms and clearing the way for private options to enter the marketplace.
The fact that first-time buyers are stuck on the sidelines is a missing link to a housing recovery that has benefited so many other Americans, and it’s holding back further progress that would benefit all of us.
There are common-sense policy measures we can take to clear the way for creditworthy borrowers to make a purchase, protect homeowner’s most valuable asset, and help students make good financial decisions on their loans.
It’s time for us to get it done.