Big Idea 2013: Fighting to Protect Homeownership

As we prepare to close the book on 2012, it's time to think about where real estate is heading in the new year. Who better to ask than NAR's 2013 President, Gary Thomas? Here's his response:

When President Franklin Roosevelt said that a “nation of homeowners is unconquerable,” he was connecting the dots for a nation preparing for World War II. He was correlating the role homeownership plays in developing a strong, sound economy with our ability to support the war effort.

Sadly, today, after the real estate downturn, the war has been on homeownership itself. With skyrocketing foreclosure rates and many homeowners underwater on their homes, critics argue that homeownership is a relic from another era.

Just as President Roosevelt connected the dots in the late 1930s about homeownership, so now it is time again to redraw the picture for new generation of consumers, policy makers and media about the cause of housing downturn, identify current problems and why homeownership is still central to a sound economy.

First, we need to understand the causes of the downturn. The main contributing problem was lax lending standards for unqualified buyers. As a result, housing prices increased so fast, an outsized bubble mentality spread though the real estate sector. Inevitably, this created consequences on a scale that was once unimaginable.

We cannot afford to go back to easy underwriting of the past, but at the same time, me must not put in place lending standards that do not meet the current market’s needs. Sadly, though,lenders are overcorrecting for past mistakes, and unfortunately is it now restricting capital from solid qualified buyers.

Even worse, the lending environment could take another plunge if draconian regulations are implemented, requiring a minimum of 20 percent of the purchase price be paid at the time of closing.Since 87 percent of homebuyers financed their recent home purchase, and of those who finance, they typically only put down approximately 10 of the purchase price, this is a direct attack on homeownership. Any federal regulations that would restrict lending would have a serious impact on the housing market’s fragile recovery.

Third, because of the nation’s debt crisis, federal policy makers are looking to limit or eliminate tax expenditures as a way to close the budget deficit hole. One of the most vital housing incentives, the mortgage interest deduction, could be a top target. Even entertaining the idea about modifying this cherished tax benefit could have a chilling effect on home sales. Homebuyers don’t want to purchase a home if they are uncertain about the tax implications of a purchase that will affect their lives for the next 30 years, which is the standard term of a mortgage loan.

So why does any discussion of slowing down the housing market’s recovery matter in the great scheme of things? The reason is simple: Housing’s contribution to our national economy. Historically, residential investment has averaged roughly five percent of Gross Domestic Product, while housing services have averaged between 12 and 13 percent, for a combined 17 to 18 percent of GDP.

With nearly one fifth of the America economy dependent on the housing sector, our lives and livelihoods are inextricably woven into the success of the real estate market. In 2013, housing will be at the top of the incoming Congress’s legislative agenda. We need to ensure that Congress looks at ways to solve the problems in the housing market, not make them worse.

That is our challenge. When we succeed, I can assure you that we will proudly be able to say that a nation of homeowners is once again unconquerable.

Want to learn more about issues affecting home ownership? Click here to visit HouseLogic.com's Support Home Ownership page.


Thanks for putting this out there. Those who make their living in the Housing Industry need sites that air issues of the day. I agree with a lot of what NAR says (don't overreact and over regulate, don't eliminate the home mortgage interest deduction). There also is recognition that lenders themselves are overreacting. I heard recently about someone with $200k income and 800 FICO score being turned down on a refinance, which seems absurd. Anecdotal to be sure, but it underscores that government still has a role to play as prod and regulator. The private sector left to its own devices does not always get it right, as we have seen these past five years and counting. That may be the weakness of the piece, the trope that 'unqualified buyers' brought down the housing market tells only part of the story. Collateralized Mortgage Obligations, Swaps, and the packaging and reselling of suspect mortgages, colluded in at every level of the industry--Bank CEO's, appraisers, mortgage brokers, and yes, even Realtors, all played a role in crashing the market and the economy. Let's not compound the error. Re-regulate sensibly, use the Fed and government to induce some liquidity into the market and prod sound and sensible lending back to the fore. And I agree with the comment that the mortgage interest deduction will likely not be eliminated entirely which if it was would change the rules in the middle of the game and likely cause million of new foreclosures, short sales, and keys left on the kitchen table. But even capping at $500,000 would hammer those of us on the coasts. Who in California owns a home under $500k? Not many, I would imagine. Thanks again for a thought provoking post.

Like
Reply
Neil Raymond MORRELL

Independent Real Estate Professional

11y

HI Heather. Have you seen the Kindle eBook - 'The Realtor. Friend or Foe' by Neil Raymond? Something thoughtful for your Members?

Like
Reply
Peter Hickey

Director of Credit at Gulf Oil Limited Partnership

11y

It's not "affordable" housing it's taxpayer-funded housing. The government should stay out of the housing (and other) markets as much as possible. Housing subsidies are generally regressive as people who rent subsidize people who own. Low down payments, particularly in a subsidized environment, are also a bad idea as it rewards those who take riskier actions at the expense of those who act more prudently. The free market should be allowed to determine the value of, and hence the price of, home ownership.

Like
Reply
Peter Davies

Independent Music Professional

11y

Add a comment

Like
Reply

To view or add a comment, sign in

Insights from the community

Explore topics