Over the past year the U.S. housing market has made significant strides. A look ahead, however, shows a number of regulatory issues left unresolved that could potentially harm the industry in 2013.
Several regulations on the horizon stemming from the Dodd-Frank Wall Street Reform and Consumer Protection Act could affect housing, mortgage finance, and homeownership. In addition, the question of how to reform Fannie Mae and Freddie Mac still remains unclear. As the leading advocate for homeownership, Realtors® want to make sure these changes will not harm the progress already experienced in the housing market or make mortgage lending more challenging.
One regulation that stems from Dodd-Frank is Qualified Mortgage. This regulation requires that no lender make a mortgage loan without making a reasonable and good faith determination that the borrower has the ability to repay the loan. The full rule for QM has not been determined yet, but depending on the definition, this regulation could reduce many consumers’ access to credit. The National Association of Realtors® supports a definition of QM that establishes strong consumer protections, promotes mortgage liquidity, and offers lenders a safe harbor to reduce litigation.
“Dodd-Frank was created to address abuses in the industry. While Realtors® recognize the need for additional regulation, regulators must avoid adopting unrealistic requirements that will affect homeowners and potential buyers, as well as do harm to the recovering housing market,” said Donald Byrd, President of the Johnston County Association of REALTORS®.
What potentially could be another burdensome regulation is the Qualified Residential Mortgage. This requires that financial institutions retain 5 percent of the risk on loans they securitize. Exempt from the requirement are mortgages that meet the QRM definition, as well as FHA and VA mortgages. Currently, the proposed rule narrowly defines QRMs as requiring an 80 percent loan-to-value, which would require a 20 percent down payment. The rule would also limit mortgage payments to 28 percent of gross income – a very tight standard, according to Realtors®.
“The definition of QRM is important because it will determine the types of mortgages that will be available to borrowers in the future,” said Byrd. “NAR firmly believes Congress intended to create a broad QRM exemption - strong evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk, and not high down payments.”
GSE reform is also likely to come up this year. Fannie Mae and Freddie Mac were placed under conservatorship by the Federal Housing Finance Agency in September 2008 and the debate continues over how to reform them. A number of comprehensive plans have been introduced to the public, as well as comprehensive legislation aimed at reforming the secondary mortgage market. Currently, there is no proverbial favorite, and discussion surrounding the GSEs is expected to continue through 2013.
NAR supports a comprehensive GSE reform strategy. Realtors® believe the new system must involve some government presence to ensure a continual flow of capital at all times and in all markets. Also, the secondary mortgage market model must ensure that mortgages are affordable and always available to creditworthy buyers, require sound underwriting standards, and provide for rigorous oversight.
“Issues like affordable financing and available credit doesn’t just affect people who own a home – homeownership shapes communities and strengthens the nation’s economy,” said Byrd. “We need to ensure that any regulations and reforms do not jeopardize a housing recovery and ensure the dream of homeownership is available to all Americans.”
Hurricane Sandy’s destruction left hundreds of thousands of homes and businesses destroyed along the east coast, leaving many Americans without a place to call home. While the full impact of Sandy won’t be known for weeks or months, there are a few things we can count on.
While Sandy has left significant impact on individual homeowners, she is not expected to affect overarching trends in the real estate market. According to the National Association of Realtors®, temporary disruptions in sales closings from major weather events will sometimes cause a dip in monthly regional sales but are usually followed by a bounce over the next few months with no impact to underlying demand.
The Johnston County Association of REALTORS® uses another devastating hurricane as an example, Hurricane Katrina in 2005. “After Katrina there was a surge in sales in areas that survived serious damage,” said Denise Pilkington, President. “People who lost their homes to the hurricane relocated and sales in unaffected areas rose above expected levels.”
Another thing we can predict as a result of this devastation is that the mid-Atlantic will likely see a boost in home construction, as well as jobs. “The need to rebuild businesses and homes will create jobs, thus making the impacted regions stronger,” said Pilkington. “And rebuilding communities is something Realtors® are very familiar with.”
For more than 11 years the Realtor® Relief Foundation has provided housing-related assistance to victims of natural disasters and is now working with state Realtor® associations in affected areas to distribute funds as quickly as possible.
“Realtors® help build and maintain communities and it’s only natural that we come together when so many communities are in need right now,” said Pilkington. “Donations from Realtors® across the country will go to those affected by Hurricane Sandy and will help rebuild thousands of homes along the East Coast.”
Formed in response to September 11, 2001, the foundation has assisted with more than 30 disasters and provided more than $22 million in emergency housing assistance. One hundred percent of the money donated by Realtors® goes directly to help the victims of natural disasters.
“When natural disasters strike and we see individuals and families losing their homes we are reminded that homeownership really does matter,” said Pilkington. “Realtors® are helping those who have lost their homes get back on their feet and rebuild a stronger community and place to call home.”
For more information about the Realtor® Relief Foundation, visit www.realtor.org/programs/realtors-relief-foundation.
If you’re in the market for a home and you’ve been playing the wait-and-see game, now may be the time to step off the fence, because the buyer’s market may be turning. According to data from the National Association of Realtors®, houses are selling faster as supply struggles to meet demand in many areas of the country.
“Recent data shows that housing inventory is tightening and homes are selling much more quickly,” said Denise Pilkington, President of the Johnston County Association of Realtors®. “We first noticed this short amount of time on market during the spring and it has created more of a balance between home buyers and sellers in Johnston County. This balance is reinforcing price growth in the market because correctly priced homes usually sell more quickly.”
NAR data shows that at the end of August, national housing inventory was at a 6.1-month supply. This is 25.6 percent below a year ago when the supply was 8.1 months. In contrast, during the peak of the boom in 2004 and 2005, inventory levels averaged 4.3 months and the median selling time was four weeks. And in 2009 during the economic downturn time on market peaked at 10 weeks with a 10-month annualized supply.
“For some time now, home buyers have had numerous advantages such as low interest rates and historic affordability,” said Pilkington. “With homes beginning to sell more quickly than before, it’s evident that home buyers are taking advantage of these opportunities. This is good news not just for buyers, but also for sellers. These market conditions are creating a tremendous balancing act between buyer and seller, and thus helping to create a healthy housing market.”
Johnston County Association of REALTORS® expects the fall season to be a busy one for the area’s housing market. “Whether you are a buyer or a seller, the best move you can make it to contact a Realtor®,” said Pilkington. “Working with a Realtor® can really give you the advantage you need in this competitive market. Buying or selling a home is an important decision, and Realtor® are trusted resources who can help you navigate that process.”
Realtors® have always been politically engaged, whether they’re making their voices heard in the voting booth or getting involved on a grassroots level. An overwhelming majority of NAR members – 93 percent – voted in the last national election, and earlier this year nearly 14,000 of them gathered in our nation’s capital for the Rally to Protect the American Dream. Through the years the National Association of Realtors® has remained vocal and active in protecting the rights of the nation’s 75 million homeowners and those who aspire to homeownership.
During this election season, Realtors® aren’t the only ones defending homeownership. Housing is a top-of-mind issue for voters. In a recent national survey by the Woodrow Wilson International Center for Scholars, 62 percent of voters rated the importance of homeownership as a 10 on a scale of 0–10. A majority of respondents also believed that increasing homeownership should be a national priority.
“Issues like the mortgage interest deduction, foreclosures and short sales, and access to affordable financing don’t just affect people who own a home – homeownership shapes communities and strengthens the nation’s economy,” said Denise Pilkington, President of Johnston County Association of REALTORS®. “As the leading advocate for homeownership and housing issues, Realtors® want our country’s current and future leaders to understand the vital role real estate plays in both the long- and short-term health of this nation.”
Johnston County Association of REALTORS®. says housing is a key driver in our national economy. Housing accounts for more than 15 percent of the U.S. Gross Domestic Product and home sales in this country generate more than 2.5 million private-sector jobs in an average year. And for every two homes sold, a job is created.
“The housing market plays an essential role in the future of our nation’s economy,” said Pilkington. “While the housing market and the economy are continuing to recover we need to focus on doing no harm to the market and ensuring public policies that promote responsible, sustainable homeownership.”
Another housing issue Realtors® are fighting to protect is the mortgage interest deduction. This important benefit allows homeowners to deduct the interest paid on a mortgage during tax time, which can reduce the carrying costs of owning a home and provide significant savings for many American families.
“The mortgage interest deduction makes a big difference for middle- and lower income families,” said Pilkington. “Sixty-five percent of families who claim the MID earn less than $100,000 per year. Reducing or eliminating the mortgage interest deduction would hinder the fragile housing market, as well as the broader economy, and Realtors® remain strongly committed to ensuring that all homeowners continue to receive this important benefit.”
“The decision to become a homeowner is a very personal one, but anyone who is willing and able to assume the responsibilities of owning a home should have the opportunity to pursue that dream,” said Pilkington. “As the leading advocate for homeownership, Realtors® will continue to urge lawmakers to make sure housing and homeownership issues are a top priority in this year’s important election.”
Johnston County Association of REALTORS®
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