Realtor - November/December 2016

top of mind A New Agenda for a New President

What should the new U.S. president focus on in the early months of 2017? Given the massive shortage of housing in many markets, a shortage that is making home ownership and renting una;ordable for many households, I would suggest several steps to spur housing construction.

Here are three ways the president and
Congress can proceed:
First, liberate community banks from
the onerous financial regulations that
arose out of Dodd-Frank, the banking re-
form law enacted after the financial crisis.

Without a doubt, there are good aspects
to the law, including safeguards against
systemic risks posed by big banks and
protections for consumers against abu-
sive lending. But let small banks compete
for customers based on how well they
serve their clients rather than their ability
to comply with complex rules that are
more appropriate for giant financial ser-
vices companies. Community banks are
the main source of funds to local builders
who historically have supplied the bulk of
our country’s housing, both for owners
and renters. They’re also a key source of
loans for small-business startups that are
essential to growth.

Second, provide more resources for community colleges and trade schools.

The country has a shortage of skilled
construction workers. Community col-
leges can help by training the electricians,
carpenters, welders, and other skilled
workers we need to produce houses,
apartments, and commercial buildings.
Third, expand tax credits and other
incentives for developers and investors
to support new a;ordable housing for
working households. Recall that the
major-party presidential candidates
agreed during the campaign on the need
to rebuild the nation’s failing infrastruc-
ture. It’s not a stretch to see a;ordable
housing as part of that equation.
These moves would be a boon for the
economy as they address the inventory
and a;ordability issues. An added benefit:
heading o; unwelcome calls for lawmak-
ers to take even more draconian action on
housing costs. Rent control, anyone?
Lawrence Yun is
NAR chief economist.

ECONOMY
HEFTY DOWN
PAYMENTS

Even though borrowers can get conventional loans backed by Fannie Mae and Freddie Mac for as little as 3 percent down and, from the FHA, 3. 5 percent down, almost 40 percent of borrowers put down 20 percent for their home purchase in August 2016. And that percentage shows no signs of falling. In fact, the trend is in the opposite direction. Back in early 2014, only 34 percent put down 20 percent. It’s been rising steadily ever since.

MARKET PULSE Jobs are growing, incomes are rising, and interest rates remain low, yet the home ownership rate of 63 percent is at a 50-year low. The reason is a lack of inventory in many U.S. markets. Home ownership isn’t likely to budge much, especially if interest rates start to rise, which NAR Chief Economist Lawrence Yun thinks is likely if the economy stays healthy.