A FOUR-POINT STRATEGY TO REVIVE HOMEOWNERSHIP
It’s not looking good for homeownership these days. According
to the U.S. Census Bureau, 63.7% of households owned their homes at the
end of 2016, down from a peak of
69.2% in 2004. While there have been small increases in recent quarters, the homeownership
trend since the financial crisis continues to veer downward. We need to
reverse this pattern, and these four strategies will help.
First, we have to demystify the process.
More than
two-thirds of adults in an Oct. 2016 national household opinion survey from
NeighborWorks America described the homebuying process as complicated. Our network’s
counselors report that a common refrain from customers they help to achieve
homeownership is, “I never thought I could do this.” Because the purchase process
is so complex, many potential homeowners don’t even try, essentially
self-selecting out of their piece of the “American Dream.”
Increasing the homeownership rate in New Haven, CT will energize the
local economy and create jobs from construction to retail.
Second, we have to return to rational credit standards.
We return
to the loose underwriting of the early 2000s. However, right now, credit
standards are too tight and thus reduce the prospects for homeownership for
many. A recent
article
by the Urban Institute noted that innovations in credit scoring practices could
help up to 3 million first-time homebuyers across the country. The lending industry must seriously pursue such modifications.
Third, we need to do a better job in reaching out to low-
and moderate-income consumers.
These are the first-time buyers of the future
and they are unsure about the path to homeownership. Nonprofits housing
organizations have had a “field of dreams” mindset: if we’re here, homebuyers
will find us. That’s not working. The NeighborWorks survey mentioned above also
found that fewer than 10% of consumers think of nonprofit’s like Neighborhood Housing Services of New Haven first when considering how to achieve homeownership. Our organization and
others working to increase homeownership, especially among first-time buyers, need
to behave more like businesses and seek out these types of customers. Word of
mouth isn’t enough.
Fourth, we must overcome financial obstacles.
Home prices
are increasing in nearly all markets. Here in New Haven, the median price is approximately $160,800,
and the stereotypical 20% down payment is out of reach for most
first-time buyers. However, the truth is, consumers don’t need a 20% down payment to purchase a home these days. In some cases, just a 3% down payment is required. However, not every lender offers flexible mortgages.
By working with Neighborhood Housing Services of New Haven and other housing nonprofits,
consumers will learn about the lenders who offer 3% down-payment
mortgages. In addition, they also will be made aware of the potentially
millions of dollars in down-payment assistance funds available in this
community and others. The NeighborWorks survey showed that only one-third of
consumers are aware of down- payment programs for middle-income buyers.
While there isn’t an unlimited supply of down-payment
assistance, if more consumers knew to seek it and sought information from
nonprofit organizations, the homeownership rate would increase. That’s good for
individuals, families and Greater New Haven.
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