With a turbulent housing market and volatile interest rate environment playing out over much of the past year, concerns about housing affordability have reached a boiling point. Recently, three housing policy experts joined HW Media COO Diego Sanchez to discuss potential changes to housing affordability in the next year.
The panel took place during HousingWire's Affordable Housing Mini-Con and featured Laurie Goodman of the Urban InstituteBelief Schwartz of Housing Finance Strategies and Jim Gray of the Lincoln Institute of Land Policy. When asked about "good news" regarding housing affordability, all three panelists described how encouraging the federal government's active work on affordability issues is.
"We have [seen] a major effort by the government, more than ever before, which makes this an absolute top priority for the administration, which is putting a lot of force and power into it HUD, Ginnie Mae, FHA, VAand the government to help the industry move forward," Schwartz said.
Goodman considered the trend in housing prices a generally positive sign and said that the "worst" of housing affordability is likely over due to moderate prices and the overall rising wage trend that seems to be outpacing the increase in housing prices.
"I expect wage growth to be well above HPA next year, which will bring affordability more in line," she said.
While interest rates are expected to continue to rise throughout the year, mortgage spreads are unusually high. Interest rates are tied to the 10-year Treasury rate plus mortgage spreads, which could lead to a more favorable interest rate environment, she explained.
"It's very possible that 10-year rates will actually rise a little bit and spread [contracting] to more normal levels and mortgage rates [could] actually fall in the course of next year," she said.
Gray agreed with Schwartz on the management of the housing system by Biden administration officials and highlighted efforts by FHA Commissioner Julia Gordon and Ginnie Mae President Alanna McCargo to increase affordability.
"I think people are starting to realize that really a lot more can be done if you can just make minimal changes to the credit box Fannie Mae And Freddy Mac have so much power over, " he said.
There is still room for more government action, Schwartz said, particularly because of its influence on housing policy. But adding more private dollars to the mix may also help improve the affordability situation for many Americans who feel shut out of the homebuying process.
"Private capital should be brought in at reasonable rates of return with guardrails to protect the consumer and help us implement some innovative programs," she said. "Underwriting, Trend-to-Data, Utilities [and more]. While we scratch the surface, it doesn't materially change things. But all these small additions can really make a significant difference for People of Color who don't have home ownership."
Goodman agreed, saying that expanding the loan box and keeping the default probability constant could be beneficial to improve affordability, while acknowledging that the loss mitigation options available to borrowers have grown significantly over the past two years.
She added that it could be beneficial for seniors who want to age in their own homes if Medicare were able to fund home modifications to better accommodate the naturally declining mobility that occurs as we age.
"Accidents are a big problem," she says. Few seniors have their homes fit for this stage of life. I actually think it could be […] It's very cost-effective for Medicare to pay for grab bars in particular so you don't trip over the shower and/or toilet seat extensions. There are certain things you can do very cheaply and easily, assuming people want to age in place."
Accessory dwelling units (ADUs) are also a potential solution to older housing issues, she said. Gray added that manufactured homes could, by and large, become a more prominent solution to impact housing affordability in the U.S. as long as four key issues are addressed: Financing, land issues, exclusion zones, and energy efficiency.