Renters and First Time Homebuyers Continue to Face Difficulties during Recovery

First-time homebuyers and renters, especially those with low incomes, continue to face many challenges in today’s housing market, mainly because the historic “affordability” of today’s housing market is largely inaccessible to low-income buyers (as renters are more likely to be) and first-time homeowners. A recent report by Mark Fleming, chief economist at CoreLogic, suggested the degree to which a homebuyer can afford a house depends greatly on whether the buyer already owns a home, leaving first-time homebuyers often on the sidelines. He also noted that renters, who spend a disproportionate amount of their income on rent these days, are likely to find themselves priced out of the market or unable to access a home loan in many markets across the country.

The report suggests that affordability, the measure of buyers’ ability to purchase a home and make a down payment given their income and the prevailing interest rate, was low in the early 2000s, especially from 2003 to 2007. Affordability increased from 2007 to 2013 as home prices declined, interest rates reached historical lows, and the Great Recession wreaked havoc on the economy. Fleming said that those events created a market that first time buyers could take advantage of, but with home prices rising again in most markets, those conditions are changing. However, Fleming also notes that while affordability is down 22 percent from its January 2013 peak, it remains much higher than in the early 2000s, giving first-time buyers opportunities they did not have in the early part of the decade.

Renters are also facing difficulties in today’s housing market. A recent report from the Joint Center for Housing Studies at Harvard showed that more than seven million low-income households spend more than half their income on rent, leaving little for utilities, food, clothing, or anything else. Additionally, Housing Landscape 2014, a report issued by the Center for Housing Policy, the research division of the National Housing Conference, finds that the share of working households with severe housing cost burdens fell from 2011 to 2012, the period during which housing prices and interest rates were dropping. However, even in 2012, 22.1 percent of working households continued to face severe housing cost burdens. As incomes dropped, the numbers got worse as well, with nearly eight in ten extremely low-income working households, defined as those earning 30 percent or less of the area median income, facing severe cost burdens.

All the news is not bad, though, says Chris Estes, President and CEO of the National Housing Conference. “While the cost burden faced by many renters and homeowners are significant, America’s housing affordability obstacles are not insurmountable. Preserving federal assistance for the lowest income renters, protecting and expanding housing production programs like the Low-Income Housing Tax Credit and the National Housing Trust Fund, and ensuring that low-and-moderate-income first-time homebuyers have access to affordable, safe mortgages are clear ways to improve stability of families and our economy.”

*GOD Speed*


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