Potential Speed Bumps for Housing in 2016

The National Association of Realtors recently released its 2016 housing outlook. They provided a simple graphic that makes it easy to understand that for many homebuyers the future is optimistic.


However, for HOME Inc. it represents bad news for low-income homebuyers.  With all of these factors, it will make a competitive marketplace so competitive that it will be harder, if not impossible, for the many to complete a housing purchase. 


Why? Most importantly, we are not seeing any income growth among our clients. With rising purchase prices, the ability to purchase a home becomes more remote.  Then there is the ability to actually borrow money for a mortgage.  Underwriting is a significant hurdle that many cannot overcome. Lenders require potential first-time homebuyers to have a 680 credit score and at least a 3% downpayment from their own funds.  The families we work with struggle with both, but particularly with the credit score.  It takes time to clear credit report and to build a good score.  It isn’t just bad credit holding them back, but some have low credit scores because they lack traditional credit (car loans, credit cards).  

Accessing downpayment assistance is difficult. Average out of pocket cost for our clients for closing costs and insurance ranges from $2,500 - $4,000. Most traditional lenders don’t provide these type of funds, and grants from other sources are at an all-time low.  

 

There is good news.  Nonprofits like HOME, Inc. can help.  In the past six months, we counseled 41 people as they began their homeownership journey. At this time, only three families were able to buy due the factors listed in the graphic.   Last year we developed the Clark Commons project to help provide alternatives, and we continue to seek development opportunities.  In fact, in 2016, we plan to complete 9 new homes for low-income families.  And, for those we cannot place in our units, we’ll continue to work with so they will be ready to go when the right opportunity comes along.





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