Weekly update from the National Housing Conference |
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In this issue
September 18, 2022
Issue 91-34
· Mortgage Rates surpass 6 percent
· Despite falling fuel costs, inflation remains high, driven by food and shelter
· USDA accepting applications for high-speed internet program
· Civil Rights groups call for appraisal reform
· Chart of the week: NAHB reports on women working in construction
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Student loan debt and housing
by David Dworkin, NHC President and CEO
The student loan debt forgiveness decision provoked a broad range of reactions in the media, on the Hill, among elected officials and candidates, and many of my friends and family. Some thought the forgiveness was too much, a betrayal of all of those who paid for college or repaid their loans. Those who called for all student debt to be forgiven thought it was too little. A few were in the middle, saying the President got it right by capping eligible annual income at $125,000 per individual, or $250,000 per family, but doubling the benefit for those who received Pell grants, targeted to low-income students.
The National Housing Conference did not advocate for the change. Given the opportunity, it isn’t how we would allocate up to nearly a trillion dollars in federal funds. But there is no question that decision will significantly impact housing, particularly for low- and moderate-income first-time homebuyers and cash-strapped renters. So, let’s examine what that impact could be and how student loan debt – and debt forgiveness – impacts housing.
According to a study conducted by the National Association of REALTORS®, “nearly half of student loan debt holders say debt is delaying them from buying a home because they can’t save for a down payment (47 percent) and don’t think they qualify for a mortgage (45 percent).” And student loan forgiveness targeted to Pell Grant recipients will significantly impact borrowers of color.
In a National Center for Education Statistics report, 72 percent of Pell Grant recipients were Black. Black Americans have significantly lower homeownership rates, and there is a significant correlation between multigenerational homeownership and successful first-time homeownership. Millions of Black and brown veterans were denied their education and housing benefits under the GI Bill of Rights following World War II, and the impact of this discrimination has a multigenerational legacy. The Black homeownership rate is as low today as it was in 1968 when housing discrimination was still legal. NHC’s commitment to closing the racial homeownership gap is a major multi-year priority and disproportionate levels of student loan debt has been identified as a major factor working against this effort. more...
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News from Washington | By Luke Villalobos
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Mortgage Rates surpass 6 percent
Freddie Mac released data on Thursday showing that the 30-year fixed-rate mortgage reached an average of 6.02 percent, the highest level since 2008. One week ago, it was 5.89 percent, which was double the average rate of a year ago., then 2.86 percent. The rise in rates has caused home affordability to fall to a new low for first-time homebuyers, with homes listed for sale at 6.5 times the typical first-time buyers' income in 50 U.S. metro regions.
“Mortgage rates continued to rise alongside hotter-than-expected inflation numbers this week, exceeding six percent for the first time since late 2008,” said Freddie Mac Chief Economist Sam Khater. “Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large.”
The Federal Reserve’s anticipated 75-100 basis point interest rate increase, expected next week, is helping push mortgage rates higher. The Fed has been steadily raising interest rates throughout the year to reduce inflation.
Higher interest rates are pushing would-be homebuyers out of the market. But they are also increasing the cost of construction loans, reducing supply along with demand, and discouraging current homeowners with low-cost mortgages from listing their homes for sale. Refinance lending has been hardest hit. “Higher mortgage rates have pushed refinance activity down more than 80 percent from last year,” said Joel Kan, Associate Vice President of Economic and Industry Forecasting at the Mortgage Bankers Association. The Fed’s August Beige Book shows home sales falling across all 12 Federal Reserve districts.
The severe cost hurdles for new homeowners prompted the MBA, Manufactured Housing Institute, NAHB, and NAR to send a letter to the National Economic Council urging a reduction of annual mortgage insurance premiums for FHA-insured loans. The letter notes that FHA’s Mutual Mortgage Insurance Fund capital reserve ratio stands at over 8 percent, four times the statutory minimum.
“Sharply higher mortgage rates and rising home prices mean the time to act is now,” the letter states. “Home prices have continued to show strong year-over-year increases, with the existing home sales price reaching $410,600, up 11% from one year ago. New home prices have also reached record levels in 2022, climbing to $439,400. In addition, since the beginning of this year, mortgage rates have climbed sharply – this week’s rate for a 30-year fixed rate mortgage is 5.89%, 267 basis points higher than in January. The combination of higher prices and rates has put severe stress on prospective LMI and first-time homebuyers.”
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Despite falling fuel costs, inflation remains high, driven by food and shelter
The Consumer Price Index, released Tuesday, shows a 0.1 percent raise in August, marking an 8.3 percent increase on all items over the last 12 months. The gains were mainly due to shelter, food, and medical costs contributing to overall inflation. The shelter index has risen 6.2 percent over the last year and accounts for about 40 percent of the total increase in all items, less food, and energy. Housing advocates have been sounding the alarm for months that the lack of affordable housing supply has added pressure on the market and contributed to inflation as home buyers compete for the limited inventory of affordable homes.
In response, NHC released a statement noting that shelter costs are the primary reason inflation remains uncontrolled, urging Congress to take action by the end of the year. “There is no magic wand to solve the housing affordability crisis, but if we do not, it will continue to worsen next year and the year after that,” the statement says.
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USDA accepting applications for high-speed internet program
The USDA announced it’s now accepting applications for grants and loans through the ReConnect Program that will provide high-speed internet access to rural areas. The Department is making over $1 billion in funding available because of the Bipartisan Infrastructure Law. The new round of applications reflects several changes to the program, including allowing applicants to serve areas where at least 50 percent of households lack sufficient access to high-speed internet, adding a funding category for projects where 90 percent of households lack adequate access to high-speed internet, and waiving the matching funds requirement for certain entities, counties, and governments. Award recipients will be required to also participate in the Bipartisan Infrastructure Law’s Affordable Connectivity Program (ACP), which offers discounted internet service to low-income households.
“Ensuring that the people of rural America are connected with reliable, high-speed internet brings new and innovative ideas to the rest of our country,” said USDA Secretary Tom Vilsack. “That’s why high-speed internet is an important part of USDA Rural Development’s work with rural communities. Reliable high-speed internet opens the world’s marketplace to rural business owners. It enables them to expand their businesses and give more jobs and opportunities to people in their own community.”
The application deadline for the available funding is November 2.
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Civil Rights groups call for appraisal reform
Last week, the National Fair Housing Alliance (NFHA) and other leading civil rights groups sent a letter to the House Financial Services Committee, the Senate Banking Committee, and the Biden Administration urging appraisal reform legislation. The letter contained a key request for legislators to transfer rulemaking authority for the Uniform Standards of Professional Appraisal Practice and the Real Property Appraiser Qualification Criteria from The Appraisal Foundation to the Appraisal Subcommittee. According to the letter, “any other approach would be cumbersome, ineffective, and fail to provide meaningful reform.”
“As Fair Housing advocates, we urge Congress and the Biden Administration to reform the home valuation system to stop appraisal bias and the economic injury it causes,” said NFHA Executive Vice President Nikitra Bailey. “Removing The Appraisal Foundation’s ability to set appraisal standards and appraiser criteria while enhancing the power of the Appraisal Subcommittee will help create a fair appraisal system.”
The Administration and industry have shown considerable interest in modernizing the appraisal industry. NFHA released a report on appraisal bias earlier this year that offers detailed recommendations on making appraisals more equitable for consumers. The report provides reforms in governance, barriers to entry, fair housing training, appraisal standards, accountability and enforcement, and home valuation data and research. HUD also released its interagency Action Plan to Advance Property Appraisal and Valuation Equity report earlier this year. NHC is working with a group of external stakeholders that aims to move appraisal reform forward.
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NAHB reports on women working in construction
The NAHB released a new report on the number of women employed in construction, showing an increase of 1.24 million women working in the industry, a new high. The rise brings the number of women in the construction workforce to 11 percent. While only a modest increase from 9.3 percent in 2002, the new numbers show a rebound for the industry after the Great Recession caused a 30 percent decline in women participating. The industry, struggling with staffing shortages in recent years, has made efforts to fill positions by encouraging women to join the construction workforce.
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A blog post from Urban Institute’s Housing Matters examines how student loan debt exacerbates the racial homeownership gap. The post cites the White House’s recent decision to forgive $10,000 in student loan debt for qualified borrowers and $20,000 for Pell Grant recipients. As student loan debt increased, homeownership steadily decreased, particularly for people of color. The post notes that after graduation, Black borrowers owe more than they initially borrowed at higher rates than White borrowers, have higher debt burdens, and are more likely to default, ultimately impacting their ability to secure a mortgage.
Fannie Mae published a blog post outlining a proposed methodology for Single-Family social disclosure that aims to provide investors with insightful, socially oriented lending practices that can reduce housing inequities. The core of the design prioritizes the borrower, allows investors to identify pools with high concentrations of loans that meet certain social criteria and proposes a solution for the industry by modeling a methodology to be adopted. Fannie Mae is seeking market feedback on the proposed design.
The Government Accountability Office released a new report on flood mitigation and actions needed to improve the use of FEMA property acquisitions. The report finds that property acquisition permanently eliminates structures at risk of flooding and can lower disaster response costs as a benefit. Still, many stakeholders provided feedback that the process length can often lead homeowners to refuse to participate or drop out of projects. Therefore, it recommends that Congress consider giving FEMA authority to implement one or more of the four proposed options to address property acquisition challenges.
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Monday, September 19
Tuesday, September 20
Wednesday, September 21
Thursday, September 22
Friday, September 23
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The National Housing Conference is a diverse continuum of affordable housing stakeholders that convene and collaborate through dialogue, advocacy, research, and education, to develop equitable solutions that serve our common interest. |
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