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MReport April 2019

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62 | TH E M R EP O RT SECONDARY MARKET THE LATEST O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T Freddie Connects the Dots Just how big an impact are seniors who are aging in place having on the housing market? S eniors who are aging in place hold 1.6 mil- lion housing units off the market, according to the February Insight, released by Freddie Mac. The report sheds light on today's housing short- age and pointed out that seniors choosing to age in place is a key factor contributing to it. This has also been identified as a signifi- cant barrier to young adults buy- ing their first homes. "We estimate that approximately 1.6 million more senior households are staying in place than would have been the case if they had behaved like previous generations of homeowners," said Sam Khater, Chief Economist at Freddie Mac. "For scale, 1.6 million units is roughly the same as the number of new single-family and multifam- ily housing units built each year, and it represents more than half of the current shortfall of 2.5 million housing units that we estimated in our December Insight." Khater also indicated that the additional demand for homeown- ership from seniors will increase the relative price of owning vs renting, "making renting more attractive to younger genera- tions." "This further highlights the importance of addressing barriers to the production of new housing supply to help accommodate long- term housing demand," he added. Among the key highlights of the report, seniors born after 1931 were found to be staying in their homes longer leading to higher homeownership rates for this group compared to previ- ous generations. Freddie Mac estimates that 1.1 million existing homes have been held off the market through 2018 by those born between 1931 and 1941. Another 300,000 units are being held off the market by those born between 1942 and 1947, per the report estimates. Baby Boomers born between 1948 and 1958 hold another 250,000 off the market, the report revealed. Quoting data from the Urban Institute, the report stated that 3.4 million millennials are missing out on homeownership. The pro- jection is that the trend of seniors aging in place will continue to record an increase, as both the number of seniors increases and the barriers to aging in place are reduced. Community satisfaction and quality of life were cited as the two reasons keeping senior homeowners in a particular place. Taking the Lenders' Pulse Fannie Mae checked in with lenders to learn what their top market concerns were. I ncreasing the supply of housing stock is the key to making housing affordable to a larger population of home- buyers, according to the lenders who responded to Fannie Mae's Mortgage Lender Sentiment Sur- vey for the fourth quarter of 2018. Some of the other ideas put forth by them included offering consumer subsidies as well as more loan choices such as mortgages involv- ing low down payments or loans including renova- tion costs. According to Fannie Mae, home affordability continues to be a challenge across the country with rising interest rates and contin- ued home price appreciation discouraging both first-time and move-up homebuyers. As a result, through its quarterly lender senti- ment survey, Fannie Mae asked senior mortgage executives their views on improving housing af- fordability for low- and moderate- income homebuyers. The survey revealed that while 48 percent attributed the slow growth of home sales to an insuf- ficient supply of homes available for sale, they rarely attributed the slow growth to tight credit underwriting standards or lack of mortgage products for first-time low- and moderate-income buyers. Apart from increasing housing supply, some of the other ways that lenders thought would help more low- and moderate-income households achieve their dream of homeownership included improv- ing consumer readiness for owning a home that would help make housing more affordable for low- and moderate-income homebuyers (11 percent) and offering a wider array of loan prod- ucts (10 percent). Other approaches, such as lowering the total cost of homeownership or offering education or job training to raise income levels, were each selected by 8 percent and 6 percent of lenders, respectively. "In the face of the perceived impacts of non- mortgage supply constraints, it ap- pears that further easing of consum- er credit standards would be more likely to contribute to stronger home price appreciation than expanding sustainable homeown- ership," said Mark Palim, VP and Deputy Chief Economist at Fannie Mae in his Perspectives blog. Additionally, Palim said Fannie Mae's research indicated that an "inadequate level of new housing construction relative to growth and underlying demand has contributed to strong home price appreciation and ongoing afford- ability challenges for first-time and move-up homebuyers." For Q 4 2018, a total of 239 senior executives completed the survey during October 31-November 12, representing 212 lending institutions. "We estimate that approximately 1.6 million more senior households are staying in place than would have been the case if they had behaved like previous generations of homeowners." —Sam Khater, Chief Economist at Freddie Mac. According to Fannie Mae, home affordability continues to be a challenge across the country with rising interest rates and continued home price appreciation discouraging both first-time and move- up homebuyers.

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