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Archive for the ‘Housing Sustainability’ Category

Transition to a Sustainable Housing Market

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The residential housing market in the United States has experienced a significant recovery after the housing bubble burst in 2006 – 2007. Leading the way to recovery were the Home Buyer Tax Credit, Residential Investors and Local Home Buyers taking advantage of the historical low interest rates, thanks to the Mortgage Bond Purchase Program by the U.S. Federal Reserve.

This now poses the question of how is the U.S. Housing Market is going to transition from the Recovery Phase to a Sustainable Housing Market. With higher prices and the Federal Reserve starting to back off of Mortgage Bond Purchase Program, (creating higher mortgage interest rates) what will it take to have a strong foundation for a healthy market?

There are many major indicators that make up the environment of a Healthy Housing Market.


Indicator Condition Sales Activity
Home Prices Appreciation has spiked the last two years, price increases will start to moderate next year Lower Sales Activity
Interest Rates May 2013 appears to be the low point. Interest Rates heading higher Lower Sales Activity
Job Growth #1 Factor to Healthy/Strong Market Healthy Sales Activity
Residential Investors Sales activity headed back down toward normal level Lower Sales Activity
Household Formations Returning back up to normal after 5 Low Years Healthy Sales Activity
Down Payment Requirements #1 Factor for many Home Buyers FHA-VA-USDA-GSE’s Healthy Sales Activity
Underwater Sellers Price Appreciation unlocking many Sellers. Additional Inventory and Sales Activity Healthy Sales Activity
Homeowners who Refinanced Have very low interest rate. Restriction of Housing Supply. Lower Sales Activity
New Construction Selling out of lots. Few new condominiums. Restriction of Housing Supply

The Most Important Factor that will help Transition to a Sustainable Housing Market:

Home Financing

1)    Down Payment Requirements for Credit Worthy Home Buyers

The housing bubble was caused by lax Mortgage Underwriting Standards, not by the amount of down payment. The problem was fixed six years ago in 2007. The new vintage of loan portfolios are performing according to plan.

2) Keep FHA – 3 ½ % Down Program for Credit Worthy Borrowers

This is the #1 item for a Healthy Housing Market.

3) Need credit score requirements to return back to normal

Once QM (Qualified Mortgage) rules are implemented, credit scores should return back to normal for QM Qualified Mortgages.

4) U.S. Government backing of GSE Loans

This is the reason why we have Low Home Mortgage Interest Rates and have the availability of 30 Year Fixed Rate Mortgages. Without this backing, interest rates would fluctuate wildly and put housing on Shorter Term Mortgages. This could cause more frequent boom/bust cycles, with deeper/longer recessions.

Written by Lennox

June 24, 2013 at 2:42 pm

New Solutions for America’s Housing Crisis

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I’ve recently had the honor of participating in the New Solutions for America’s Housing Crisis conference back in Washington, DC.  The conference was co-hosted by E21 and the Progressive Policy Institute, two economic policy organizations looking for resolutions to get America out of our current fiscal turmoil.   In attendance were strategic business leaders from the real estate and mortgage industries as well as key federal government policy makers.

The purpose of the conference was to discuss real solutions to the housing crisis and its effect on the economy.  Read the rest of this entry »

Written by Lennox

October 18, 2011 at 2:07 pm

First Time Buyers Are Key To Housing Market Recovery

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*This is a reposting to correct a graph within the blog.

The mid-term elections are finally over so it’s time to re-focus on the economy and housing market. In my travels around the country everyone wants to know what I think it will take to get the housing market moving again. The answer is simple: first time homebuyers. Read the rest of this entry »

Written by Lennox

November 19, 2010 at 11:52 am

Talking Real Estate With Seattle Rotary

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On October 13, I had the immense honor of addressing the Seattle Rotary Club as a part of their weekly luncheon program.  This club is the largest in the world with 675 members, as well as the fourth oldest, founded in 1909. The last time I spoke to this esteemed audience I discussed technology and its impact on the real estate business. This time, I was asked to address the state of the residential real estate market – past, present, and future. The club was kind enough to record my presentation – which I will post below (entire presentation is broken out into 3 parts). A special thanks to Phil Smart for his witty commentary at the end of the Q & A – leave it to Phil to end it all on a high (and humorous) note.

As always, thanks for reading,



Written by Lennox

October 17, 2010 at 10:39 pm

Shop Talk With U.S. Housing Sec. Shaun Donovan

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Last week I had the great honor of being invited to meet with U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan and Assistant Secretary for Housing and Commissioner of the Federal Housing Administration (FHA) David Stevens. The meeting took place on September 23 at the HUD offices in Washington D.C.

The meeting was arranged by Sen. Patty Murray’s office for the purpose of discussing the systemic problems facing the housing market and ideas to stimulate recovery. The meeting was also attended by Travis Lumpkin, Sen. Murray’s legislative assistant on housing issues. We discussed the concept of an urban down payment assistance program similar to the USDA’s program which currently helps households purchase homes in rural areas with no required down payment (more details about the program can be found in this previous blog).

Secretary Donovan and Commissioner Stevens acknowledged that one of the biggest challenges facing qualified first time buyers is not affordability, but rather having the down payment. We also discussed the importance of State Housing Finance Agencies and the need to renew high balance loan limits – which Secretary Donovan stated HUD has just come out in support of. The maximum $729,750 loan limit for Fannie Mae, Freddie Mac, and Federal Housing Administration-backed loans in high-cost areas will expire at yearend unless policymakers act.

Without an extension, the maximum loan limit would drop back to $625,500 on Jan. 1, which would cause a significant drag on the fragile market. According to NAR’s deputy chief lobbyist Jamie Gregory, Sen. Murray, chair of the Housing and Urban Development Appropriations subcommittee, has inserted language into a HUD appropriations bill to extend the current limits.

This meeting could not have happened without the direct support of Sen. Murray and her staff and I am very thankful to them for providing me with this unique opportunity. Sen. Murray continues to be an advocate for housing and she is one of the few in Congress that understands housing issues. It is my opinion that losing her presence in the Senate would be a huge loss to our industry.

On the flight back to Seattle I reflected on the significance of this meeting and any results that may come from it. Then I decided that the ultimate outcome would be if President Obama turned to Secretary Donovan during a Cabinet meeting and asked him what his plan is for re-establishing a healthy housing market, and Secretary Donovan responds with “down payment assistance for urban markets”.

As always, thanks for reading.


Written by Lennox

September 30, 2010 at 10:53 am

Funding For Guaranteed Home Loan Program Available 9-8-2010

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The following is very good news for homebuyers who qualify for the USDA’s loan program.

Rural Development’s interim systems enhancements will be complete on September 8, 2010, at which time the Agency will begin obligating Section 502 Single Family Housing Guaranteed Loans. See the link to the notice below for more details.

Single Family Housing Guaranteed Loan Program

Section 502 loans are primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.

Eligibility: Applicants for loans may have an income of up to 115% of the median income for the area. Area income limits for this program are here. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories. Approved lenders under the Single Family Housing Guaranteed Loan program include:

  • Any State housing agency;
  • Lenders approved by:
    • HUD for submission of applications for Federal Housing Mortgage Insurance or as an issuer of Ginnie Mae mortgage backed securities;
    • the U.S. Veterans Administration as a qualified mortgagee;
    • Fannie Mae for participation in family mortgage loans;
    • Freddie Mac for participation in family mortgage loans;
  • Any FCS (Farm Credit System) institution with direct lending authority;
  • Any lender participating in other USDA Rural Development and/or Farm Service Agency guaranteed loan programs.

Terms: Loans are for 30 years. The promissory note interest rate is set by the lender. There is no required down payment. The lender must also determine repayment feasibility, using ratios of repayment (gross) income to PITI and to total family debt.

Standards: Under the Section 502 program, housing must be modest in size, design, and cost. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards. New Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards. Existing manufactured housing will not be guaranteed unless it is already financed with an HCFP direct or guaranteed loan or it is Real Estate Owned (REO) formerly secured by an HCFP direct or guaranteed loan.

Approval: Rural Development officials have the authority to approve most Section 502 loan guarantee requests.

For more information contact your lender – or visit www.responsemortgage.com to connect with someone from our mortgage partner.

Written by Lennox

September 7, 2010 at 11:12 pm

The Road To A Sustainable Housing Market

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The highly anticipated restoration of the USDA’s single-family rural housing program that guarantees home loans for rural buyers was passed by the Senate on July 28 and is on its way to President Obama’s desk for signature. With the support of its members, the National Association of REALTORS® has vigorously lobbied to restore funding for the rural program since last March, and hailed this development as a great victory for rural home buyers.

I couldn’t agree more.

But before I go into why I support this legislation, I’d like to provide a little background on the USDA’s Single-Family Housing Guaranteed Loan Program and why I believe it can serve as a successful model for a much needed urban down-payment assistance program.

According to Wikipedia, the United States Department of Agriculture was established by President Abraham Lincoln on May 15, 1862 in order to help out the United States economy. Through Federal funding, its purpose was the collection of agricultural statistics and other agricultural purposes; President Lincoln called it the “people’s department.” For many years, the Department of Agriculture was crucial to providing concerned persons with the assistance they needed to make it through difficult periods, such as the Great Depression; this included loans for rural landowners.

Fast forward 148 years and what we have now is a robust program that in 2009 provided over 140,000 loans and $16.6 billion in grants to achieve homeownership and improve housing in rural areas. They also funded $11.2 billion for direct and guaranteed single-family housing loans to provide additional credit for affordable home loans. USDA loans used to be considered “farmers’ loans” but that is no longer the case. Rural America is home to about 50 million people, but only 6.5 percent of the rural work-force is directly employed in farm production. This means that USDA must support not only the farms, but also the communities that surround and support them.

In 2009, the USDA enacted changes that provided assistance to millions of homebuyers who did not have the down-payment funds required by conventional loan programs. USDA loans currently stand alone as the only zero-money-down program available to borrowers who have not served in the military. And like their conventional counterparts, the USDA program adheres to strict underwriting standards, assessing each borrower’s credit, income, and cash flow. As a result, the agency’s portfolio of loans has a low default and delinquency rate of 1.72% (compared to a 2%- 5% default rate for conventional loans and 15% for subprime).

Earlier this year, the USDA exhausted its $13.1 billion funding, leaving many qualified homebuyers with few-to-no financing options and putting a squeeze on our nation’s economy. Thankfully, the Federal Government recognized this fact and responded by passing legislation that increases the Rural Housing Service (RHS) commitment authority allowing guaranteed loans. The RHS is expected to announce new guidelines shortly after the president signs the bill; one anticipated change is a higher “guarantee fee” of 3.5% that can be folded into the mortgage and will enable the program to be self-sufficient.  

Homeownership is historically an instrumental part of the U.S. economic engine, so it’s critical that we take measures to ensure that the housing market has a strong foundation for sustainability. I would argue that by creating a program similar to the USDA’s for city dwellers, there is the potential to bring in hundreds of thousands of homebuyers annually and billions of dollars in state and local taxes every year, as well as higher Federal Income Tax revenue (click here to read a detailed analysis).

The success of the USDA’s Single-Family Housing Guaranteed Loan Program proves that alternatives to conventional loan products can be successful and result in responsible, long-term homeownership with low delinquency rates.  Now is the time to expand the market and create a down payment assistance program for urban homebuyers who face similar challenges to their rural counterparts. Perhaps it could be called the United States Down Payment Assistance program—or USDPA. Has a certain ring to it, doesn’t it?

As always, thanks for reading.


Written by Lennox

August 3, 2010 at 3:03 pm

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