Recently, the Administration has been talking loud about programs which can help more people realize their dream of home ownership. In a recent speech in Arizona, the President announced the cut in the annual FHA premium for 30 year loans of 50 basis points, explaining how this would reduce a borrower’s monthly mortgage payment when financing their home purchase with an FHA insured loan.
So, why then during Tuesday’s State of the Union Address was very little mentioned about housing and housing initiatives (Speech). Maybe, regardless of premium cuts or reduced down payments people will not buy homes until they are comfortable that they can afford them.
The economic recovery is somewhat dependent on a housing recovery. Housing drives the markets and employs many. When homes are being bought, sold and financed ancillary industries benefit. This helps to restore the economy which helps everyone.
Unfortunately, we keep hearing about how well the economy is doing but it seems consumers are not yet convinced and confident enough to go out and buy homes. Many recently refinanced their home and restructured their debt so they are not quite ready to go through it all again and take on the additional debt for a new house. They’ll just stay where they are for now. Safe and sound.
The hope is that the Millennials will come to the table and start buying homes in 2015. Maybe…but they too depend on a strong economy and a stable job environment. With the weight of their student debt they need to have a good job, with potential for increased income before they jump into home ownership.
Millennials are a careful group having seen what can happen when you bite off more than you can chew. They lived through the housing crash of 2008 and it is very fresh in their minds. They do not want to repeat the mistakes of their parents. Smart thinking.
Hopefully, a strengthening economy (or so we’re told) coupled with some easing of credit standards (hopefully not too much) , the FHA premium cuts and a lower down payment requirement, we’ll see this generation come into the home buying and home financing market. When they do, we need to be ready, willing and able to service them. But, that’s a story for another day.