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A recent National Association of Realtors (NAR) study found that areas with declining homeownership have a higher rate of wealth inequality (Inequality).
It indicates that in the markets where fewer people are buying homes, people have less money than in areas with a higher home-ownership rate. Makes sense, people with better incomes and more savings are buying homes in markets where there is a higher homeownership rate, which continues to maintain, or increase the homeownership rate in those markets. People with lower income cannot afford to buy homes.
Seems logical. So, what does this report tell us? According to NAR chief economist, Lawrence Yun, this situation may be rectified by increasing access to mortgage products and increased new home construction in these low home-ownership areas. Fannie and Freddie are attempting to do so with their low down payment loan programs and Federal Housing Authority has reduced their required annual mortgage insurance premiums to help make FHA loans more affordable. According to a recent report from Fannie Mae, this is helping to spur homeownership in all markets. Is this good for the housing market? Maybe short term, but only time will tell in the long run. Does this help balance wealth inequality?
Is the real problem of wealth inequality and these declining homeownership rates, the job market and not the mortgage market? Do these declining areas offer the job opportunities and other amenities needed to attract and retain homeowners? Things like employment within a reasonable commuting distance, adequate shopping, schools, playgrounds, parks, local restaurants, safety and, of course, available medical facilities?
If not, why would anyone want to live there? It’s no wonder the home-ownership rate is declining. As soon as someone can make enough money to buy a home, they look for areas where these things exist. That is usually areas with a higher home ownership rate.
Mortgage Lenders make money by making loans. We would all like to see home-ownership rates increasing in all areas. But, we know that is not realistic. There are only so many consumers who can afford to buy and own a home. Those consumers will look to buy in those areas best suited to fit their needs and the needs of their family. It’s only logical.
In most cases, these are areas with a higher rate of homeownership. Lenders will continue to do everything possible to assist all people in realizing their dream and desire of homeownership, wherever they decide to buy.
The answer does not lie in the mortgage markets, nor with builders. Why would anyone build new homes in a market without the amenities desired by consumers to support homeownership, and why would anyone lend there? They wouldn’t.
It’s time to stop looking for answers in all the wrong places. It’s the old “chicken and egg” syndrome.
It’s quite simple. People don’t buy or stay, in areas without adequate amenities and those amenities won’t stay, or come, to those areas where people aren’t buying. Trust me, the answer doesn’t lie in providing more access to mortgages. To do that, we would need to reduce the standards for loan qualifications which in the end would cause more harm to these areas than good. Been there, done that. It didn’t work.
It’s time do something about fixing the communities with homeownership problems. Once that is done, the financing for buyers in those markets will come. If you fix it; they will lend.
Wealth inequality or community inequality? You decide.
