During a Bipartisan Policy Center forum Tuesday, experts generally agreed the housing market is on the path to recovery, but the strength of the national recovery remained in question.
According to Douglas G. Duncan, chief economist at Fannie Mae, we may be in a recovery, but it has been the “weakest recovery since World War II” when considering income growth.
Richard Smith, CEO and president of Realogy, took a more optimistic approach and stated we are in the early stages of a “fairly strong recovery,” with prices reacting to inadequate supply.
Even if the recovery is happening, Paul Weech, EVP for policy and external affairs at the Housing Partnership Network, stated he does not want to see policy makers take their foot off the gas just yet since work still needs to be done.
An area of concern the panel addressed included the difficulty in obtaining housing when considering weak income growth and lending restrictions.
According to the Bureau of Labor Statistics, the unemployment rate fell to 7.4 percent in July, but average hourly earnings and average weekly hours worked also decreased.
However, Smith pointed out that the housing market isstill managing a recovery in spite of the fact that lenders don’t know all the rules (such as the still undefined QRMrule) and income growth is limited. Adding to that is the unemployment rate, which is actually closer to 15 percent when considering the underemployed, Smith stated.
“Given a little nudge from regulators and Congress, I think housing will become even stronger than it is now,” he added.
Although rising mortgage rates might cause some potential buyers to reconsider the option of pursuing homeownership, panelists generally agreed rates aren’t the biggest threat in comparison to strict underwriting standards and weak incomes.
The panelists tended to agree that housing is still a good investment.
Kent Conine, owner of Conine Residential Group, described a home as one of the largest assets one will typically ever own, adding that a home is also “supposed” to appreciate.
Even with the recent spike in mortgage interest rates, Smith noted buyers are still purchasing an undervalued asset with cheap money.
In fact, the National Association of Realtors’ (NAR) housing affordability index showed housing is still very affordable. In the second quarter, the index stood at 175.4. An index reading of 100 is defined as the point where a median-income household has exactly enough income to buy a median-priced home.
by Esther Cho