TheMReport — News and strategies for the evolving mortgage marketplace.
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26 | M R EP O RT FEATURE Anywhere. Anytime. MReport Digital theMReport.com Bringing Today's Lending Headlines into Focus, MReport Digital Puts Mortgage Banking News at Your Fingertips Experts you trust. People you know. News you want. MReport is putting essential mortgage market news at your fingertips with our new digital edition, now available online via your smartphone, tablet, or computer. Enjoy the magazine at your desk, and tap into MReport Digital's easily accessible platform anywhere, anytime. Committed to giving originators, servicers, and all lending professionals access to smarter perspectives, MReport believes it's time to think differently about the mortgage industry. Because the American Dream is evolving . . . are you? Subscribe to MReport and MReport Digital now! Call 800.856.8060 or connect with us online at themreport.com to take advantage of our special introductory offer! digital.themreport.com help many potential first-time homebuyers get their careers back on track, which would not only be a win for 2021, but for years to come. Additionally, the COVID-19 pandemic has disrupted commercial real estate in a number of industries significantly—retail, entertainment, and tourism, to name a few. Because of this, investors have started to move away from those segments and are looking upon the housing sector a bit more favorably. That's important because more capital in the housing sector will likely lead to an increase in housing supply, which has been slimmer throughout 2020 than previous years. Additionally, there could be a push for land to be repurposed from commercial real estate to residential housing to meet that demand. Lastly, we can expect that, while many employees will likely move back to working from offices and resume some sense of normalcy as it relates to the professional work environment, em- ployers may also be more apt to adjust their own policies to accommodate flexible work locations since working from home or remotely has gained much greater acceptance over the past year. This less frequent (or complete absence of) commute could put a significant portion of the workforce in a more realis- tic position to consider purchasing a more affordable home further away from urban centers. 2021 Headwinds When it comes to headwinds that are making growth a bit harder for the first-time homebuyer market, affordability tops the list. The historically low mortgage rates we saw in 2020 have been a significant boost to affordability for first-time homebuyers. According to data from our Chief Economist Tian Liu's 2Q20 First-Time Homebuyer Market Report, however, those low interest rates have not been able to offset higher home prices that resulted when that strong first- time homebuyer demand meets inadequate increases in housing supply. In fact, between January 2013 and now, the monthly principal and interest cost for first-time homebuyers has increased by 55%, almost entirely due to higher home prices. In 2021, as the economy is expected to start to recover, interest rates may slowly increase as a vaccine or multiple vaccines move closer to distribution and economic recovery gains mo- mentum, thereby potentially increasing pres- sure on affordability for all homebuyers, but especially younger homebuyers who typically have to borrow more of the purchase price. Additionally, the economic recovery has been uneven so far, hurting employees in industries like service, tourism, travel, entertainment, and energy, more than other sectors. These sectors are typically where you'll find a large portion of the first-time homebuyer segment. While there will likely be some improvement in these sectors over time, it is highly likely those employees will face greater employment challenges, encour- aging career transitions to different employ- ers and industries, and likely delaying their homeownership. As we've seen it, 2019 was a banner year for first-time homebuyers, 2020 was a year of disruption and correction, and 2021 remains to be seen. Whatever the new year brings, the housing finance industry would be well- served to understand how best to support and enable this very important segment. ROHIT GUPTA is President and CEO of Genworth's U.S. Mortgage Insurance Business, working with lenders, regulators, and policy leaders to advocate for the value of mortgage insurance for a sustainable housing finance system. Additionally, Rohit is a catalyst for community change and serves as a board member of the Genworth Foundation Board, American Cancer Society Triangle Leadership Council, and Pratham USA. The statements provided are the opinions of Rohit Gupta and do not reflect the views of Genworth or its management. Whatever the new year brings, the housing finance industry would be well-served to understand how best to support and enable this very important segment.