What’s Feeding the Affordability Perception?

Affording a mortgage payment is possible for many prospective homeowners. Why then, by all accounts, is unaffordability plaguing the market?

Researchers at Freddie Mac offered several answers to that question in its latest Insight, the first one being perception. Home buyers struggling to find reasonably-priced listings perceive the housing market in general as unaffordable — a reasonable conclusion, if their only options to date have been out-of-reach stock. 

Secondly, the high likelihood for competition (i.e., bidding wars) is off-putting, both for first-time homebuyers and for sellers re-entering the ma

rket. The latter's hesitation is notably tamping down already tight inventory.

"Thanks to very low mortgage rates, monthly mortgage payments are affordable for the average household despite currently high house prices," says Sean Becketti, chief economist at Freddie Mac. "Nevertheless, hurdles to home ownership arise from the difficulty of finding a house. The supply of homes for sale is very tight, especially starter homes, and underwriting requirements are more rigorous than they were in the past."

Would-be homeowners are also not confident about their prospects because their incomes have stayed relatively flat compared to home prices. Incomes have grown by an average 2.4 percent annually since 2012; home prices, however, have grown an average 6 percent.

"Many potential first-time borrowers are stymied by variable employment and income histories and the challenge of accruing a down payment while simultaneously paying down their student loans," Becketti says. "In fact, a high level of household debt, particularly student debt, poses perhaps the largest obstacle to first-time homebuyers."

Homeownership — stripped down to just the mortgage payment — is affordable, the researchers concluded, but challenged by barriers that play a hefty role in the home-buying process. Perception, after all, is reality.

Source: Freddie Mac 

The Housing Market Update

The Mortgage Bankers Association of America along with HUD and FHFA are all working together to offer financial relief to homeowners with mortgages.

Currently the affected area is limited to damaged caused by Harvey, however with an even powerful "Irma" on the way, there could be many more states added to the "disaster area" list:

The following forms of relief are available to people in impacted counties (Aransas, Atascosa, Austin, Bee, Bexar, Brazoria, Brazos, Caidwell, Calhoun, Cameron, Chambers, Colorado, Comal, DeWitt, Fayette, Fort Bend, Galveston, Goliad, Gonzales, Grimes, Guadalupe, Hardin, Harris, Jackson, Jasper, Jefferson, Jim Wells, Karnes, Kerr, Kleberg, Lavaca, Lee, Leon, Liberty, Live Oak, Madison, Matagorda, Montgomery, Newton, Nueces, Refugio, San Patricio, Tyler, Victoria, Walker, Waller, Washington, Wharton, Willacy and Wilson counties.)

Foreclosure Relief.  HUD is granting a 90-day moratorium on foreclosures and foreclosure forbearance on Federal Housing Administration (FHA)-insured home mortgages located within the geographic boundaries of the disaster area.  A borrower can also qualify for foreclosure relief if he or she is a household member of someone who is deceased, missing or injured directly due to the disaster, or if his or her financial ability to pay mortgage debt was directly or substantially affected by  the disaster.  Separately, VA, Freddie Mac and Fannie have all announced a 90-day moratorium on Foreclosures.

Mortgage Insurance.   HUD’s Section 203(h) program provides FHA insurance to disaster victims who have lost their homes, enabling them to finance the purchase or rehabilitation of a home. Borrowers working with participating FHA-approved lenders may be eligible for 100% financing.  Additionally, HUD’s Section 203(k) loan program enables the purchase, refinance, and rehabilitation of a home that has been lost or damaged.

Wells Fargo, the nation's largest mortgage lender, said Monday that it was suspending all negative reporting to credit bureaus, collection calls and foreclosure procedures against customers in the impacted communities at least through the end of September.

Fannie and Freddie have also announced a Disaster Relief Forbearance Plan where homeowners do not have to make any mortgage payments during the forbearance period without any negative impact to their mortgage or credit rating.  Homeowners can request a second or extended forbearance term if they need it.

In order to get a forbearance, you must first contact your mortgage servicer. You can visit the MBAA.org website here for a contact list ofmortgage servicers.