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A CHALLENGING AND TURBULENT TIME

NeighborWorks Homeownership Symposium Eric Belsky February 2012. A CHALLENGING AND TURBULENT TIME. A CHALLENGING TIME. Enormous Amounts of Home Equity Have Been Destroyed. Trillions of 2011 dollars. Recent home equity decline takes us back to 1984 levels.

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A CHALLENGING AND TURBULENT TIME

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  1. NeighborWorks Homeownership Symposium Eric Belsky February 2012 A CHALLENGING AND TURBULENT TIME

  2. A CHALLENGING TIME

  3. Enormous Amounts of Home Equity Have Been Destroyed Trillions of 2011 dollars Recent home equity decline takes us back to 1984 levels Note: Dollar values are adjusted for inflation by the CPI-U for All Items. Sources: Federal Reserve Board, Flow of Funds, Balance sheet tables.

  4. More than 11 Million Mortgaged Homeowners Are Underwater Source: CoreLogic

  5. Unemployment Rate Remains Elevated Unemployment rate (Percent) Note: Unemployment rates are seasonally-adjusted and for the month of December. Source: Bureau of Labor Statistics.

  6. Disparities in Unemployment By Age and Race Are Large Unemployment Rate, 2011:4 Source: Moody’s Economy.com and Bureau of Labor Statistics, Current Population Survey.

  7. Employment Has Started to RecoverBut Is Still in a Deep Hole Note: Quarterly values are three-month averages of seasonally adjusted annual rates. Official End of Recession quarters were 1975:1, 1982:4, 1991:1, and 2009:2. Sources: NBER; BLS, Establishment Survey

  8. Low-Tier Homes Have Been Hit Hardest by Price Declines Percent decline in home prices, peak to November 2011 Source: JCHS tabulations of S&P/Case-Shiller Tiered HPI data.

  9. High-Cost Lending Was Highest Among Low-Income and Minority Homeowners High-cost loans as a share of all loans originated in 2005 (Percent) Notes: Includes originations of conventional 1-4 unit owner-occupied home purchase loans. Low/middle/high income neighborhoods are census tracts with median family income in 2000 that is less than 80%/80-120%/greater than 120% of the 2000 area median family income. White/mixed/minority neighborhoods are tracts with a minority population share less than 10%/10-50%/greater than 50% of population in 2000. Source: JCHS enhanced HMDA database

  10. Foreclosures Have Been Concentrated In Low-Income Markets and Communities of Color Median Estimated 18-Month Foreclosure Rate, 2008 (Percent) Notes: Minority census tracts were more than 50% minority in 2000; mixed census tracts were 10–50% minority; white census tracts were less than 10% minority. Low-/moderate-/high-income census tracts had median family incomes is less than 80%/80–120%/more than 120% of the metropolitan area median. Estimates are based on a HUD model of the share of loans foreclosed from January 2007 to June 2008. Sources: JCHS tabulations of HUD 2008 Neighborhood Stabilization Program data and US Census Bureau, 2000 Decennial Census.

  11. Even With the Will, The WayTowards Homeownership is Tougher Credit Score Notes: High (low) risk loans are to borrowers with credits scores under 690 (above 750) and have loan-to-value ratios above 85% (below 75%). FHA data exclude records with no credit score information. Sources: Barclays Capital, GSEs: Back to the Future, US Interest Rates Strategy, 2009; US Department of Housing and Urban Development.

  12. A TURBULENT TIME

  13. Timing of Purchases Matters Median sales price (Thousands of dollars); Price index Notes: All values are seasonally adjusted and in nominal dollars. Sources: National Association of Realtors, Median Sales Price Existing Single-Family Homes; S&P/Case-Shiller Single-Family Home Price Index; and FHFA Purchase-Only Home Price Index.

  14. Price-to-Income Ratios Have Fallen Dramatically in Hardest-Hit States Price-to-Income Index (1990:1 = 100) Notes: Price-to-income ratios were calculated as the housing price index over median household income. House price values are from the fourth-quarter, except in 2011, which takes the latest-available third quarter values. Sources: FHFA Purchase-Only Home Price Index (NSA); US Census Bureau, Current Population Survey; Moody’s Analytics Income Forecast

  15. Over Long-Run Prices Tend to Rise With Average Household Incomes Multiples of 1975 Value Note: All values are in nominal dollars. Sources: NAR Median Sales Price, Existing Single Family Homes; Moody’s Economy.com tabulations of US Census Bureau CPS data

  16. Homeownership Is At Its Most Affordable Levels Since At Least 1971 NAR Affordability Index Source: NAR Composite Affordability Index.

  17. Yet the Share of Renters Intending to Buy Has Fallen Share of Renters Likely to Buy in Next Three Years (Percent) Source: Fannie Mae National Housing Survey.

  18. Still Homeownership Is Still VERY Favorably Viewed Share Stating Owning Makes More Sense Than Renting (Percent) Source: Fannie Mae National Housing Survey.

  19. And People Perceive that Now IS a Good Time to Buy Share Stating Now is a Good to Buy (Percent) Source: Fannie Mae National Housing Survey, Q3 2010.

  20. Credit Remains Tight

  21. Financing Constraints Weigh Heavily, Especially on Potential First-Time Buyers Percent of Respondents Source: Fannie Mae National Housing Survey, 2011:Q3.

  22. . . . And Those with the Lowest Incomes Most Keenly Feel the Challenges in Getting Mortgages Source: Fannie Mae National Housing Survey, 2011:Q3.

  23. Delinquencies Have Ebbed But Foreclosure Pipeline Near Record Levels Source: Mortgage Bankers Association of America

  24. The PATH FORWARD

  25. NWA Had it Right • Full-cycle lending and sustainability matters • Carefully educating and underwriting borrowers matters • Flexibility in underwriting low credit score and low wealth borrowers is possible when done properly and with the right products

  26. Seven-Point Plan • Dispel myths about what caused risks to homeowners to mount and about the role of low-income housing policy • Reassert evidence that shows can lend prudently to lower income/wealth/credit score borrowers • Continue to research what works and doesn’t • Show that full-cycle lending model is worth investing in • Continue to fight for homebuyer assistance programs and housing finance reform that preserves access • Remain flexible and responsive to housing demand in your markets • Explore collaborations with Housing Finance Agencies

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