MReport July 2021

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M R EP O RT | 17 COVER FEATURE so many jobs still remote, we see many people taking advantage of those opportunities." Millennials tend to be focusing their homebuying in the more affordable areas—the Midwest and Mid-Atlantic, Butler said. According to a Zillow report, people who moved to a different city in 2020 ended up in a ZIP code where average home values were nearly $27,000 lower than their previous ZIP code, even though the home they moved to was an average of 33 square feet larger. The Zillow findings were based on analysis of nationwide data from North American Van Lines. "What that suggests to me is more movement away from the more expensive housing markets in the country," said Jeff Tucker, Zillow Senior Economist, in a prepared statement. Others are not moving between states but rather are using the increasing equity in their homes to renovate those properties. Many older homeowners are also using equity to make renovations so they can age in place, Trott added. Another way people are moving up from one level of home to the next is by combining the resources of generations, with two to three (if there are non- adult children) generations of a family moving together, combin- ing the resources of the two older generations for the home pay- ments, Fazio said. Up, Up, and Away? T here are three major levels of homes—the starter home, move-up, and "dream" home— though there are certainly some lesser levels in-between. Increasing home prices means increasing the gaps between the prices of vari- ous levels of homes. Home prices have risen sharply for the past few years, but there will eventually be a levelling off, experts agree. "The market may be reaching the top end of what is reason- able," Clarke said. "It's going to take a resurgence of the new home starts and people being willing to sell their homes for it to loosen up. Construction prices are just out of whack right now due to the cost of materials, and people have hunkered down in their homes for the last 18 months. My guess is that, over the next 12 to 18 months, we will see that soften a bit, and with that, home prices leveling off or even moving back to more reasonable levels." Melchiorre agreed: "You're start starting to see those signs where the demand curve is changing." Melchiorre added that there are some areas of the country that have yet to see the curve begin to flatten. The critical element in a levelling of home prices will be additional inventory hitting the market, particularly at the lower end of the market, experts agree. "It's a question of getting enough houses online, so that the bidding wars stop and the houses are going for what they can ap- praise for," Trott said. That will take a while, as lumber prices escalated in the first quarter of the year. Even though they leveled off at the beginning of June, the increased cost of lumber and other raw materials meant any new inventory was still going to be expensive for new homeowners. The rising cost of the raw ma- terials has pushed some first-time homebuyers out of the market, at least for the time being, Tobias added. Programs to Keep Homeownership Affordable W hile affordability, inven- tory shortages, and other hurdles complicate the modern path to homeownership, there are numerous programs designed to help prospective buyers, but with- out the risk-heavy dangers that presented problems in the past. Melchiorre noted that housing counselors could be integrated "into both sides (origination and servicing) of the business, and we see some rather creative ways to support affordable lending." He added that IndiSoft utilizes "a fully integrated platform where the lender, counselor, and consumer could all work together" on a single national housing advocacy platform, "to execute on deals from application through closing and with the counselor providing the post-purchase counseling through our housing counselor portal." And, of course, there are a number of additional counseling options available from the govern- ment. The American Rescue Plan Act, signed into law in March, includes $100 million to con- gressionally chartered nonprofit community development organi- zation NeighborWorks America to administer a national housing counseling program across the United States and Puerto Rico. Lenders and governmental agencies including FHA, VA, and HUD also offer several programs designed to help consumers pur- chase homes. Fairway Independent Mortgage saw a 25.9% increase in loans including down payment as- sistance between the January-May period in 2021, compared to the same period in 2020, according to Tobias. The lender participates in 84 different affordable lending programs. "There are wonderful programs out there for first-time homebuy- ers," Fazio said. . PHIL BRITT started covering mortgages and other financial services matters for a suburban Chicago newspaper in the mid-1980s before joining Savings Institutions magazine in 1992. When the publication moved its offices to Washington, D.C., in 1993, he started his own editorial services room and continued to cover mortgages, other financial services subjects, and technology for a variety of websites and publications. AFFORDABLE LENDING PROGRAM OPTIONS Shared Equity Programs: These programs enable the buyer and the equity partner to share in any home price appreciation. The borrower gives up some of the potential gain in exchange the shared-equity lender (or inves- tor), providing part of the down payment. The borrower and lender share in the home's upside value or downside value at the time of the sale of the property. USDA: These loans, with nothing down, are available to some rural and suburban homebuyers. USDA Home Loans are issued by qualified lenders and guaranteed by the United States Department of Agriculture (USDA). The Freddie Mac Programs: Home Possible mortgage permits a down payment as little as 3%, as well as the ability to include co-borrowers who do not live in the home. Also permitting a down payment of as little as 3% is the Freddie Mac HomeOne, with more flexibility for extended financing. The GSE's CHOICERenovation al- lows lenders to deliver loans to Freddie Mac where the borrower uses the loan proceeds to pay for the renovations. State, Municipal Assistance Programs: Several states, mu- nicipalities and local organiza- tions have a variety of programs designed to assist (primarily first-time) prospects buy their first homes. Many of these organizations also aid if the home buyer runs into financial difficulty once in the home. Though not a formal program, Fazio works with Continental Credit to help homeowners with low credit scores boost them enough to qualify them for some mort- gages. Other lenders said they help advise consumers in similar situations so they can boost their credit scores.

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