WASHINGTON (April 14, 2015) – The following is a statement by National Association of Realtors® President Chris Polychron in response to leadership changes at the U.S. Department of Housing and Urban Development Office of Community Planning and Development:
“NAR looks forward to working with Harriet Tregoning in her new position as HUD’s principal deputy assistant secretary for community planning and development. Tregoning’s extensive experience at the local, state and national levels helping communities and regions build diverse, prosperous and resilient economies makes her an ideal appointee to guide the office’s comprehensive vision for housing and community development.
“We commend Secretary Julián Castro on his selection.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the presidential and commercial real estate industries.
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Read more: Realtors® Show Support for New HUD Appointee Harriet Tregoning
NAR President Chris Polychron with HUD Secretary Julián Castro.
WASHINGTON (April 1, 2015) – A diverse group of housing industry stakeholders participated in a credit access symposium today to discuss how alternative credit scoring models could expand access to mortgage credit for responsible borrowers who may have thin credit histories or extenuating circumstances like medical debts.
The event, co-hosted by the National Association of Realtors®, the Asian Real Estate Association of America and the National Association of Hispanic Real Estate Professionals, included two roundtable discussions and a keynote address from Secretary of Housing and Urban Development Julián Castro.
“Realtors® support safe, responsible access to mortgage credit for borrowers who can show they are ready and able to own a home and keep up with monthly payments. Unfortunately, overly restrictive lending, except to buyers with near-pristine credit scores, prevents many otherwise qualified buyers from entering the housing market,” said NAR President Chris Polychron, executive broker with 1st Choice Realty in Hot Springs, Ark.
NAR first called on federal regulators and the credit and lending communities in 2011 to reassess the entire credit structure and look for ways to increase the availability of credit to qualified borrowers who are good credit risks.
Work by the Harvard University Joint Center for Housing Studies indicates that borrowers with lower incomes as well as minorities face higher rejection rates on their mortgage applications. NAR analysis of mortgage data from 2007 to 2013 indicates that the share of rejected loans due to credit scores was significantly higher for African Americans and American Indians.
“If lenders and the government-sponsored enterprises were to adopt alternative credit scoring methods, such as FICO 9 and VantageScore 3.0, they could expand access to mortgage credit without dramatically increasing risk in the housing market,” said Polychron.
The newer credit scoring models put less emphasis on the impact of unpaid medical bills, and the effect of missed payments on debts that have subsequently been paid off is eliminated. FICO 9 and VantageScore 3.0 incorporate public utility and rental housing payments, information that helps lenders to evaluate younger persons and minorities who might not have a history of credit use. FICO estimates that its new model could improve scores by 25 to 100 basis points.
“The biggest limitation to borrowing is tight credit standards,” said NAHREP Past President Jerry Ascencio. “These conditions are exacerbated by outdated credit scoring models that don't take into account the unique spending and savings patterns of Hispanic borrowers. Alternative credit scoring models need to consider these patterns so creditworthy borrowers are not turned away from the American Dream of homeownership.”
Jim Park, AREAA past chair, noted that there was a clear consensus from all of the symposium’s participants that the government-sponsored enterprises should update their scoring models and also create added market competition in the credit evaluation system.
“These critical efforts will expand credit to more minority and immigrant consumers and reverse the unfortunate trend of homeownership decline in America,” he said.
Donnell Spivey, president of the National Association of Real Estate Brokers and who also attended the event, commented that, “Higher credit scores for mortgages have forced many of our buyers into renting. While good for the rental market, these trends are making it more difficult for Americans to own homes. If a person can pay high rent then they can also pay a mortgage. But, paying high rent hinders them from saving money for a down payment on a home.”
He added that other issues related to costly mortgages must be addressed, particularly onerous Federal Housing Administration requirements. “NAREB doesn’t believe that it is fair or reasonable for FHA mortgages to require homeowners to have mortgage insurance for the life of their loan. FHA mortgages are used more by people of color; this policy disproportionately impacts black homeowners,” said Spivey.
At the event, Secretary Castro underscored the agency’s commitment to widening the circle of opportunity for responsible families by making homeownership more affordable and accessible.
“FHA’s work alone will not solve all the industry’s challenges, which is why I appreciate this focus today on out-of-the-box thinking,” he said. “I know that new credit scoring models are being developed so that non-traditional factors can be considered when determining creditworthiness.”
Castro said FHA is exploring the use of new credit scoring models. “We’ll look at every option that brings housing opportunities within reach of more Americans,” he said.
NAR will continue to work with Secretary Castro and housing industry stakeholders to identify solutions to the mortgage credit crunch so that individuals who are ready to own a home are not unnecessarily shut out of the market.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
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WASHINGTON (April 1, 2015) – Vacation home sales boomed in 2014 to above their most recent peak level in 2006, while investment purchases fell for the fourth straight year, according to an annual survey of residential homebuyers released today by the National Association of Realtors®.
NAR’s 2015 Investment and Vacation Home Buyers Survey,* covering existing- and new-home transactions in 2014, shows vacation-home sales catapulted to an estimated 1.13 million last year, the highest amount since NAR began the survey in 2003. Vacation sales were up 57.4 percent from 717,000 in 2013.
Investment-home sales in 2014 decreased 7.4 percent to an estimated 1.02 million in 2014 from 1.10 million in 2013. Owner-occupied purchases fell 12.8 percent to 3.23 million last year from 3.70 million in 2013. The sales estimates are based on responses from nearly 2,000 U.S. adults who purchased a residential property in 2014, and exclude institutional investment activity.
Lawrence Yun, NAR chief economist, says vacation sales in 2014 showed astonishing growth, nearly doubling the combined total of the previous two years. “Affluent households have greatly benefited from strong growth in the stock market in recent years, and the steady rise in home prices has likely given them reassurance that real estate remains an attractive long-term investment,” he said. “Furthermore, last year’s impressive increase also reflects long-term growth in the numbers of baby boomers moving closer to retirement and buying second homes to convert into their primary home in a few years.”
Vacation-home sales accounted for 21 percent of all transactions in 2014, their highest market share since the survey was first conducted. The portion of investment sales fell to 19 percent (20 percent in 2013); owner-occupied purchases declined to 60 percent (67 percent in 2013).
“Despite strong rental demand in many markets, investment property sales have declined four consecutive years to their lowest share since 2010 as rising home prices and fewer distressed properties coming onto the market have further reduced the number of bargains available to turn into profitable rentals,” says Yun.
The median sales price of both vacation and investment homes declined in 2014. The median vacation home price was $150,000, down 11.1 percent from $168,700 in 2013. The median investment-home sales price was $125,000, down 3.8 percent from $130,000 a year ago.
According to Yun, the decrease in vacation and investment sales prices is likely due to the increase in vacation and investment buyers purchasing condos and townhouses, which contributed to a decline in the median size of 200 square feet for both. Additionally, the rise in vacation buyers purchasing distressed properties and buying in the South, where home prices are often lower, contributed to the overall decline in the sales price of vacation homes.
The share of vacation buyers who paid in cash fell to 30 percent from 38 percent in 2013. Investment buyers who paid in cash decreased to 41 percent from 46 percent a year ago. Of buyers who financed their purchase with a mortgage, nearly half (48 percent) of vacation buyers and 41 percent of investment buyers financed less than 70 percent of the purchase price.
Forty-five percent of vacation homes and 44 percent of investment homes purchased in 2014 were distressed properties – either a home in foreclosure or a short sale. In 2013, 42 percent of vacation homes and 47 percent of investment home purchases were distressed.
Characteristics of Vacation-Home Purchases
The typical vacation-home buyer in 2014 had a higher median household income ($94,380) than those in 2013 ($85,600) and purchased a property that was further away (median distance of 200 miles) than a year ago (180 miles). Buyers plan to own their property for a median of 6 years, unchanged from 2013.
Although a majority (54 percent) of vacation buyers bought a single-family home, the share of those buying a condo (27 percent) or a townhouse or row house (18 percent) increased from a year ago. Forty-percent of vacation buyers purchased in a beach area, 19 percent purchased in the country and 17 percent purchased a vacation home in the mountains.
One-third of vacation buyers plan to use their property for vacations or as a family retreat, 19 percent plan to convert their vacation home into their primary residence in the future, and 13 percent bought for potential price appreciation; the same share purchased because of low real estate prices and because the buyer found a good deal.
Forty-six percent of vacation homes purchased last year were in the South (41 percent in 2013), 25 percent in the West (28 percent in 2013), 15 percent in the Northeast (18 percent in 2013) and 14 percent in the Midwest (unchanged from a year ago).
NAR released a study in late-2014 that identified the top housing markets likely to see a boost in home sales to leading-edge baby boomers1. The findings revealed that metro areas – including many in the South and Southwest – with a lower cost of living and sunnier weather are poised to see an increased number of baby boomers moving in and buying a home in coming years.
Characteristics of Investment-Home Purchases
Investment-home buyers in 2014 had a median household income of $87,680 ($111,400 in 2013) and typically bought a detached single-family home (61 percent) that was a median distance of 24 miles from their primary residence (20 miles in 2013).
Thirty-seven percent of investment buyers last year purchased a property in the South, 26 percent in the West, 20 percent in the Midwest and 17 percent in the Northeast. Investors were most likely (32 percent) to buy in a suburban area, followed by an urban or central city (26 percent), rural area (21 percent) and small town (16 percent). Five percent of investment buyers bought in a resort area.
Investment buyers purchased property for a variety of reasons, including for rental income (37 percent), because of low prices and the buyer found a good deal (17 percent) and for potential price appreciation (15 percent). Overall, investment buyers plan to hold onto the property for a median of five years (unchanged from a year ago), and a majority (68 percent) are very or somewhat likely to buy another investment property in the next two years.
The bulk of investment buyers (86 percent) and vacation buyers (85 percent) reported that now is a good time to purchase real estate.
NAR’s 2015 Investment and Vacation Home Buyers Survey, conducted in March 2015, surveyed a sample of adults that had purchased any type of residential real estate during 2014. The survey sample was drawn from a representative panel of U.S. adults monitored and maintained by an established survey research firm. A total of 1,971 qualified adults responded to the survey. Consumers were sampled to meet age and income quotas representative of all home buyers drawn from NAR’s 2014 Profile of Home Buyers and Sellers.
The 2015 Investment and Vacation Home Buyers Survey can be ordered by calling 800-874-6500, or online at www.realtor.org/prodser.nsf/Research. The report is free to NAR members and accredited media and costs $149.95 for non-members.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
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*Vacation homes are recreational property purchased primarily for the buyer’s (or their family’s) personal use, while investment homes are residential property purchased primarily to rent to others, or to hold for other financial or investment purposes.
Home sales were calculated based on a proportion of buyers who bought each respective home type—vacation, investment, and primary residence. The number of purchases for each housing type were calculated using the total number of existing home sales and new homes in 2014. To calculate the difference in the number of purchases in 2013 to 2014, the percent change of each housing type purchased was calculated.
1Baby boomers are generally categorized as those born in the U.S. between 1946 and 1964. NAR’s research analyzed leading-edge baby boomers (ages 60-69).
Read more: Vacation Home Sales Soar to Record High in 2014, Investment Purchases Fall