@the horizon

Community Developments - May 17, 2013

A daily roundup of news affecting housing and  communities

By Allison Charette

 

• With tax reform on the horizon, it is crucial for lawmakers to understand the impact the Low Income Housing Tax Credit has on affordable housing development, write Enterprise’s Emily Cadik and Peter Lawrence in an article for Affordable Housing Finance.  Stakeholders and the public are encouraged to visit taxreform.gov and share stories of the Housing Credit’s significance to send a clear message to Congress. (Affordable Housing Finance, May 16)


• A new Urban Land Institute survey on housing, transportation, and community, assesses how satisfied Americans are with their quality of life and community options. According to the results, only 43 percent of Americans are satisfied with the level of public transit available to them. The survey also highlights potential changing preferences among younger generations. Generation Y respondents (18-34 years of age) were more likely than older respondents to value proximity to public transportation, live in apartments and in downtowns, and favor city living. (ULI: Terwilliger Center and The Wall Street Journal, May 15)


• The Center for Housing Policy (CHP) has released a report analyzing how state housing policies help children in poverty, offer families stability, and guide parents to educational opportunities and other amenities. The report highlights opportunities for intervention in existing programs and also presents the idea of unity among housing programs in regards to children. If the interests of children were brought to the forefront, a new coalition could be built and housing policies could have make a greater positive impact on children in poverty. (CHP, May 2013)


• In an issue brief, the Center for American Progress (CAP) provides a snapshot of the current economic climate. Included in its many points is that Americans, on average, own only 46.6 percent of their homes compared to 61 percent before the Great Recession. Also included are statistics of growing income inequality, homeowner distress, unemployment, and household debt. (CAP, May 13)


• The House Appropriations Committee has passed the Veterans Affairs bill as its first spending bill for Fiscal Year 2014. The committee passed the bill for $73.3 billion including a 33 percent increase in funding for programs targeting homeless veterans. (The Hill’s Defense Blog, May 15)

 

For the latest housing and community development news and notes, follow the Enterprise policy team on Twitter: @E_Housing Policy and subscribe to the Capitol Express Newsletter. 

Community Developments - May 15, 2013

A daily roundup of news affecting housing and  communities

By Allison Charette

 

• In remarks made to the 2013 Federal Home Loan Banks (FHLBanks) Directors Conference Tuesday, FHFA Acting Director Edward DeMarco discussed past and current difficulties due to the Great Recession. Recent bank failures, reduced member lending, and slow economic recovery have delayed the FHLBanks’ previously high profits. Despite slowed business, DeMarco expects improvements and emphasized the banks’ importance in future housing finance reform. (FHFA, May 14)


• In the first quarter of 2013, US households have reduced their collective debt by one percent to $11.2 trillion, the lowest level since 2006. Household debt declines were primarily driven by reduced mortgage and credit card debt; student debt, on the other hand, has risen to an all-time high of $986 billion. (DS news, May 14)


• Banks and the GSEs believe the supply of foreclosed homes and REOs peaked in 2012 and inventory will continue to fall throughout this year. CoreLogic and RealtyTrac have reported significant decreases in recent foreclosure activity resulting in fewer distressed properties. (Mortgage Servicing News, May 13)


• The Congressional Budget Office expects the US budget deficit to be $642 billion by the end of 2013 –$200 billion less than February’s projections. This marks the budget deficit’s smallest shortfall in five years, which will delay any vote on raising the debt ceiling until at least November. (Bloomberg, May 15)


• According to the National Association of Home Builders/Wells Fargo Housing Opportunity Index, 73.7 percent of all homes sold in Q1 2013 were affordable to households earning the national medium income of $64,400. While this news is encouraging, such affordability is not consistent across the US. Many low-income earners, particularly in urban settings, live in areas where home prices are rising significantly faster than incomes. (Mortgage Servicing News, May 14) 

 

For the latest housing and community development news and notes, follow the Enterprise policy team on Twitter: @E_Housing Policy and subscribe to the Capitol Express Newsletter. 

Community Developments - May 14, 2013

A daily roundup of news affecting housing and  communities

By Allison Charette

 

• This year’s proposed farm bill would reduce farm spending by $39.7 billion over ten years, $21 billion of which would be from the Supplemental Nutrition Assistance Program (SNAP). This cut would eliminate food assistance to 2 million low-income households, including working families with children and senior citizens. Additionally, several hundred-thousand children would lose their free school meals. (CBPP, May 13)


• A new survey commissioned by the Consumer Federation of America and VantageScore Solutions has found that one in four Americans have serious misconceptions of how credit scores are calculated and used. Two-fifths of respondents were unaware that credit card companies and mortgage lenders use credit scores to determine credit availability/pricing, while one-quarter did not know keeping credit card balances low improves scores. (American Banker, May 13)


• The DC Council has voted to remove Mayor Gray’s changes to the Homeless Services Reform Act for the Fiscal Year 2014 budget. The proposed changes would have given homeless families “provisional” placement in shelters, then required them to move to their own apartment with temporary rental assistance. According to the Washington Post, city officials support “rapid re-housing” because of shelter overcrowding, while many homeless family advocates believe such changes would only reduce access to shelters. Cities across the US are dealing with similar difficulties as shortages in affordable housing continue and budgets are cut. (The Washington Post, May 13)


• Part of Fannie Mae’s $58.7 billion first-quarter income this year came from the rising prices of REO properties. Fannie sold almost 43,000 foreclosed properties in the first-quarter alone. (Mortgage Servicing News, May 13)


• Freddie Mac’s new streamlined loan modification program became available to delinquent borrowers yesterday, nearly three months ahead of schedule. Eligibility for the program has been extended to all Hurricane Sandy victims, who can begin the loan modification process immediately. (Housing Wire, May 13)

 

For the latest housing and community development news and notes, follow the Enterprise policy team on Twitter: @E_Housing Policy and subscribe to the Capitol Express Newsletter. 

Community Developments - May 13, 2013

A daily roundup of news affecting housing and  communities

By Allison Charette

 

• The National Housing Conference and Center for Housing Policy have released a report that identifies elements of successful veteran supportive housing and outlines recommendations to improve veterans housing. Successful programs include property-based rental housing, the Low Income Housing Tax Credit, and HOME loans while recommendations include expanding those programs and making FHA multifamily financing more compatible with property-based services. (NHC & CHP, May 2013)


• According to the President’s April Housing Scorecard, released on Friday, nearly 1.6 million homeowners have been assisted by the Home Affordable Modification Program (HAMP) since 2009. The report finds that mortgage modifications through HAMP have lower delinquency and re-default rates than private industry modifications. (Housing Wire, May 10)


• Fannie Mae is planning to make a $59.4 billion dividend payment to Treasury bringing its total dividends made to $95 billion. When submitted, 81 percent of Fannie’s owed $116.1 billion will be paid off. (Fitch Wire, May 10) 

 

For the latest housing and community development news and notes, follow the Enterprise policy team on Twitter: @E_Housing Policy and subscribe to the Capitol Express Newsletter. 

Community Developments - May 10, 2013

A daily roundup of news affecting housing and  communities

By Allison Charette

 

• In a Huffington Post blog post, Enterprise’s CEO and President, Terri Ludwig has written about the difficulty for domestic violence victims to leave abusive situations without access to stable housing. The Violence Against Women Act’s (VAWA) reauthorization earlier this year has expanded a rule preventing landlords from evicting domestic violence survivors from publicly-supported housing. VAWA provided resources and programs for over 750,000 women last year but the “sequestration” could cut housing resources to over 70,000 women. (Huffington Post, May 9)


• In cities across America, public housing buildings are being replaced with lower-rise, mixed-income apartments (with 20 percent of units reserved for lower-income households). New York City has taken that model a step further and is attempting to develop entire communities around the rental units with schools, parks, healthcare, and other amenities. (The Atlantic Cities, May 9)


• A recent Mortgage Marketplace Survey by Zillow has found that many homebuyers and owners are uninformed of basic mortgage options and facts. Thirty-four percent of prospective buyers were unaware of down-payments below 5 percent while 20 percent of current homeowners did not know underwater mortgages could be refinanced. Survey participants answered nearly one-third of the questions incorrectly. (DS news, May 9)


• According to a RealtyTrac study, foreclosure filings have dropped 5 percent since March and over 23 percent since April 2012. The 144,790 filings in April represent a 74-month low in foreclosures. (Housing Wire, May 9) However, while a Mortgage Bankers Association (MBA) survey has similarly found foreclosure rates to have fallen, they also found that first-quarter mortgage delinquency rates actually increased slightly from last year’s fourth quarter. (MBA, May 9)


• Recipients of Mortgage Settlement checks are expected to be given additional payments next week by lenders Morgan Stanley and Goldman Sachs. According to the Fed, nearly 100,000 checks were less than their agreed-upon amount leaving borrowers millions of dollars short. (DealBook: NYTimes, May 8)

 

For the latest housing and community development news and notes, follow the Enterprise policy team on Twitter: @E_Housing Policy and subscribe to the Capitol Express Newsletter. 

Community Developments - May 9, 2013

A daily roundup of news affecting housing and  communities

By Allison Charette

 

• In an American Banker op-ed, Enterprise’s Andrew Jakabovics and John Griffith describe why a limited government guarantee is critical to a well-functioning U.S. rental market, in response to the release of a FHFA report on the potential consequences of multifamily mortgage market privatization. (American Banker, May 8) Jakabovics and Griffith argue that a government backstop provides necessary liquidity into the market (particularly to affordable properties and in smaller towns and rural areas), countercyclical support during downturns, and a financial return to the taxpayer.


• Earlier today, Chairman of the House Ways and Means Committee Dave Camp (R-MI) and Chairman of the Senate Finance Committee Max Baucus (D-MT) launched an online tax-reform campaign. The new website, taxreform.gov, provides a forum for the American public to share their thoughts on reforming the current tax code. (Wall Street Journal, May 9)


• The Center for American Progress (CAP) has highlighted housing assistance, Head Start, and Meals on Wheels as programs being hit the hardest by the sequestration cuts. In some states rental housing vouchers have been cut, exacerbating the already long waiting lists. (CAP, May 7)


• The Homeless Veterans Prevention Act was introduced in the Senate April 25 in an effort to meet the Department of Veterans Affairs’ goal of eliminating veteran homelessness by 2015. According to the National Alliance to End Homelessness (NAEH), 29 out of 10,000 veterans are homeless and there are 62,000 homeless veterans on any given night. (NAEH, April 24)


• Long waiting lists for public housing have driven President Obama’s Administration to propose in its FY 14 budget an expansion of a public housing demonstration program that would allow work requirements and time limits. However, some affordable housing advocates are concerned that these types of initiatives fail to address the larger issue that there are not enough resources to house all of the families in need. (ABC News, May 8)

 

For the latest housing and community development news and notes, follow the Enterprise policy team on Twitter: @E_Housing Policy and subscribe to the Capitol Express Newsletter. 

Community Developments - May 8, 2013

A daily roundup of news affecting housing and  communities

By Allison Charette

 

• As announced last month, HUD’s Office of Multifamily Housing will undergo both external and internal changes in the next two years. Structurally, 17 hub offices will be consolidated into five, each with a satellite office. Operationally, multifamily is planning to replace its outdated system including implementing risk-based processing across its multifamily housing platform. (Affordable Housing Finance, May 6)


• Freddie Mac has released its second largest profit in its history: $4.6 billion in this year’s first quarter. The GSE did not draw any Treasury funds this quarter and has paid back $29.6 billion in cash dividends since conservatorship began. (Housing Wire, May 8)


• According to CoreLogic’s Home Price Index, March’s year-over-year prices increased 10.5 percent – the largest yearly increase since 2006. March 2013 also marks the thirteenth consecutive month of price improvements. (DS news, May 7)


• Higher incomes are associated with better measures of human well-being, and it has been assumed that those measures level-off when a certain income is reached. However, a Brookings paper has found no evidence that “well-being” improvements diminish as income increases - the relationship stays linear regardless of how high incomes climb. (Brookings, April 29)

 

For the latest housing and community development news and notes, follow the Enterprise policy team on Twitter: @E_Housing Policy and subscribe to the Capitol Express Newsletter. 

Community Developments - May 7, 2013

A daily roundup of news affecting housing and  communities

By Allison Charette

 

• New York Attorney General Eric Schneiderman announced yesterday he will file suit against Wells Fargo and Bank of America. According to Schneiderman, the financial institutions have failed to comply properly with the 2012 Mortgage Settlement and have not improved their mortgage servicing practices. (The New York World, May 7)


• Within the President’s FY 2014 budget is a provision to expand a program allowing select public housing agencies to set work restrictions and time limits on public housing residents. According to the Wall Street Journal, housing agencies have been lobbying for expansion of this 1996 project in an effort to encourage self-sufficiency among tenants. (WSJ, May 6)


• Commissioner Carol Galante reports that FHA’s multifamily refinancing volume is currently at its peak due to low interest rates and little private capital in the market. Despite limited options, the FHA is likely the best option for multifamily refinancing because the newly released FHFA multifamily report states, “Without a government guarantee a fully private company may not provide the same level and scope of services in the marketplace…at current prices.” (Housing Wire, May 3)


• Of the 165,000 jobs created in April, mortgage companies added 1,600 new jobs while multifamily and single-family builders hired 13,000 new construction workers. (National Mortgage News, May 3)


• In this week’s installment of the Center for American Progress’ “Sequestration Nation,” the focus is on future losses in innovation and economic competiveness. Between 2013 and 2021, over $95 billion in Research and Development funding will be lost to the sequestration cuts. According to the Information Technology and Innovation Foundation, these cuts will result in a $203 billion reduction in GDP. (CAP, May 6)


• From the @the Horizon blog: Big investors are buying distressed single-family properties in the thousands with the goal of transforming them into rental housing. However, do investor property purchases mean faster economic recovery or future problems?

 

For the latest housing and community development news and notes, follow the Enterprise policy team on Twitter: @E_Housing Policy and subscribe to the Capitol Express Newsletter. 

Do Investor Property Purchases Mean Faster Economic Recovery or Future Problems?

By Allison Charette

Home values have shown significant increases of over eight percent in the last year indicating, a steady recovery of the housing market.  Buyers, sellers, and market experts alike have been encouraged by the rising trend of home prices.  In the last month, a great deal of attention has been brought to increased investor presence in the distressed housing market and its role in driving up the prices of homes.  Big investors (including hedge funds, specialty real estate funds, institutional investors, and banks) are buying distressed single-family properties in the thousands with the goal of transforming them into rental housing.  The Washington Post reports that seriously distressed markets in states like Florida are seeing 70 percent of their properties sold to such investors.  This substantial involvement in distressed housing markets has incited reactions ranging from encouragement to concern.

According to The Wall Street Journal, there are two potentially positive results from the flood of investor purchases: price stabilization and financially-secure buyers.  Price stabilization is based on the premise that properties drop in value the longer they are on the market.  Investors buying distressed homes in bulk not only stops prices from decreasing further, but also creates a price floor for surrounding areas.  While logically sound, this argument assumes there are no other buyers in the market for these homes, which is untrue.  In the last few months, traditional homebuyers have been losing bids to big investors for these inexpensive homes.  Not many low-moderate income families are able to qualify for mortgages in today’s financial market, and those who do are having difficulty competing against these large companies.  If there are other buyers in the market also able to pay for distressed properties, are investors stabilizing home prices or are they pushing prospective homeowners out of the market?

Investment firms are outbidding individual buyers, in part, because they are more financially-secure and are therefore viewed as safer buyers.  The Wall Street Journal proposes that cash purchases by big investors is the less risky option compared to mortgage-holding households that are vulnerable to financial difficulties.  While such a comparison might seem safer in the short-term, the long-term implications are largely unknown.  The success of investor purchases is entirely dependent on the demand for single-family rental properties – a market in which such companies are inexperienced and untried.  These homes were meant for single-family ownership and have not been maintained or managed as rental homes.  If the owners are unable to rent the houses for the prices they want, then costs will have to be cut, and properties could fall into disrepair.  While a low-moderate income family is less financially stable than a large investment firm, family owners have a personal incentive to maintain the house so that it may grow in value over time.

While the single-family rental market is untried on such a large-scale, some investment companies have found participants in the Section 8 Housing Choice Voucher Program to be their most common renters.  According to one real estate firm in Florida, more than 60 percent of its profits come from the Section 8 program subsidizing rents for its lower-income tenants.  The current affordable housing shortage makes these rental homes a viable option but not necessarily a stable one.  Federal funding for housing assistance has significantly decreased in past years – and the latest sequestration cuts (in which 140,000 Section 8 vouchers could be cut) make program participants an unreliable market.

A primary point of concern for housing experts is that investor activity is contributing to home prices growing faster than incomes.  Current housing costs for mortgage-holders are around 22.5 percent of buyer incomes – a comfortable ratio considering the historical average is 33 percent.  However, this is only the case because of the low mortgage rates in place today.  If those rates move back up to six-eight percent, then incomes will not be high enough to purchase a home with a mortgage, and investors will continue buying distressed properties without competition.  A more alarming concern regarding bulk, distressed-property purchases is the creation of another unsustainable housing bubble.  Big investors could be moving the housing market in a direction it cannot maintain and consumers will be unable to support.  If the single-family rental market does not behave the way big investors expect it to, then artificially high home prices could plummet like they did six years ago. 

The unprecedented nature of this scenario makes outcomes difficult to predict for stakeholders and the larger housing industry.  It is unlikely that impacts from investor purchases in distressed markets will be all-positive or all-negative, but perhaps the unknowns and delicate state of the housing market should call for more cautious behavior.

Community Developments - May 6, 2013

A daily roundup of news affecting housing and  communities

By Allison Charette

 

• The FHFA announced this morning that Fannie Mae and Freddie Mac will limit any future mortgage acquisitions to those that meet “qualified mortgage” (QM) requirements starting in 2014, despite the GSEs’ and FHA’s statutory exemption. (FHFA, May 6)


• FEMA has announced the release of five Recovery Advisories (RAs) pertaining to communities still recovering from Hurricane Sandy. These documents, written by the FEMA Mitigation Assessment Team (MAT), are meant to help buildings prevent any further flood damage. (HUD, May 3)


• Enterprise’s President and CEO, Terri Ludwig, wrote in the Huffington Post last week about the “hidden housing crisis” of Indian Reservations across the country. There are currently 90,000 homeless or under-housed people every night on reservations, and one in four Natives live in poverty – nearly twice the national average. Unfortunately, existing programs meant to mitigate this crisis have had their budgets cut.  (Huffington Post, May 2)


• The April employment number (released by the US Bureau of Labor Statistics) show that 165,000 jobs were created, bringing unemployment down 0.1 percent to 7.5 percent. Additionally, March’s job numbers were revised from the disappointing 88,000 up to 138,000. (Businessweek, May 3)


• Reports on the viability of the FHFA multifamily portfolio find that the government guarantees are necessary for the business to have any value to Fannie Mae and Freddie Mac. If the businesses were to be sold, the US Treasury and the taxpayer would not experience a high return. These implications must be considered with any affordable housing reform. (FHFA, May 3)


• A real estate company, Doorsteps, has developed an info-graphic showing demographic and financial information on first-time homebuyers using National Association of Realtors’ (NAR) data. According to the data, first-time buyers have an average income of $61,800 and represent 39 percent of all homebuyers. To pay for their first homes, buyers are most likely to reduce luxury and entertainment spending. (NAR, April 30)

 

For the latest housing and community development news and notes, follow the Enterprise policy team on Twitter: @E_Housing Policy and subscribe to the Capitol Express Newsletter.