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The results of a survey conducted in February and March of this year by Hart Research Associates on behalf of the MacArthur Foundation have led researchers at the foundation to conclude homeownership is no longer synonymous with the American Dream. Three in five adults—61 percent— believe "renters can be just as successful as owners at achieving the American Dream," the pollsters report. This sentiment is broadly felt among both owners and renters, and across all regions of the country. According to Peter D. Hart of Hart Research Associates, "America is going through a transformational period in which the old forms and systems are changing." Hart points to "changing perspectives on housing" as "a prime example." "While the desire to own a home remains a bedrock principle in American life, this survey demonstrates that the American public's views about housing are changing, in part due to the hangover from the housing crisis," Hart said. The national homeownership rate has discernibly declined, falling from a peak of 69 percent in 2004 to under 66 percent by 2011—a level not seen since the early years of the housing boom—and 65.4 percent as of the fourth quarter of 2012. Yet, as surveys show, aspirations of homeownership still burn strong, carrying a sense of social status and self-accomplishment for most potential homebuyers. One important notion regarding homeownership, however, has done an about-face. Privilege, Not Entitlement The federal government has been criticized for pushing homeownership as the optimal path for all Americans and aggressively working toward making homeownership available to everyone. That type of thinking during the pre-crisis days painted homeownership as an entitlement, or an inherent right for anyone who desired it. Housing policy positioned homeownership as part of the American way. It was just what one did, and it was supported and promoted by everyone from the government down. But just because you want to buy a home, doesn't mean you can. Homeownership as a privilege instead of an entitlement has begun to creep back into the consumer psyche in the aftermath of the crisis. Mortgage lenders stress that borrowers have to "earn the right" to own a home; it's not a given. While a homebuyer on the hunt in the pre-crisis era first contacted a real estate agent or broker, industry practitioners in the field say the first stop for many is now the bank, to find out where they stand financially and what they can or can't afford. The turbulence and instability that accompanied the Great Recession severely diminished household incomes, eroded families' savings, and took a toll on credit scores. 50 Conditions of the time essentially locked a number of otherwise credit-worthy borrowers out of the ownership market, and for the 5-million-plus Americans who emerged from the crisis with a foreclosure notation on their credit reports, homeownership remains out of reach for two to seven years. First-Time Buyers Recent college graduates may be one group that hasn't shed that homeownership entitlement mentality. "The buying demographic has changed," one lending professional explained at a recent industry conference. "It's almost an entitlement. People right out of college feel like it's what they have to do." One area of concern when focusing on this demographic is that most leave college with a significant financial burden already: student loans. Information from the CFPB shows outstanding student loan debt totals $1.1 trillion, making it the largest consumer debt class after home mortgages. At its March meeting, the Federal Reserve's Open Market Committee warned Americans' "high level of student debt" could negatively impact household spending over the next three years. "Higher student debt loan burdens impair the ability of recent college graduates to qualify for a loan, thereby increasing the time required for such new households to become homeowners," the National Association of Home Builders stressed in a letter sent to the CFPB last month. "Anecdotal evidence from our members suggests that this issue is a concern and has been increasing in terms of impact." One demographic shaping up to be a strong contributor of first-time buyer activity is immigrant households. According to a report issued in March by the Research Institute for Housing America (RIHA), immigrants have, and will continue to play a large role in the housing market. The number of new foreignborn homeowners has risen steadily throughout the nation over the past three decades and is expected to continue, with some areas of the country owing most of their homeownership growth to this demographic, RIHA notes. "Immigrants are an important and growing source of demand that has bolstered housing markets in recent decades," according to RIHA researcher Dowell Myers, a member of the Population Dynamics Research Group at the University of South Carolina. In fact, Myers points out that "growth in housing demand in recent decades has been more stable among foreign-born than native-born households." From 1980 through 1990, 0.8 million new homeowners in the country were immigrants. From 1990 to 2000, this number increased to 2.1 million, and over the following decade the number reached 2.4 million. RIHA anticipates new immigrant homeowners will contribute to homeowner growth in the amount of 2.8 million in the current decade ending in 2020. Pricing Homeownership The ratings agency DBRS says despite the economy's "lackluster recovery" in employment, recovery in median income and low interest rates are benefitting today's consumers. Data gathered by the agency's analysts show that at the height of the recession, nominal median income declined for the first time since it has been tracked, decreasing in 2009 and again in 2010. However, in 2011 (the most recent year currently available), nominal income reversed the slide of the previous two years and increased to $49,103, up from $48,340 in 2010 and $48,855 in 2009. Underwriters note that it's no longer the asset-based lending of the past; instead, it's now income-based lending, and everything for qualifying borrowers has to be fully documented and verified. At the same time, interest rates are the lowest they've been in recent history. Rates for mortgages have declined steadily from 2002 and, for most terms of loans, are approximately half of what they were at the beginning of the recession. "Overall, while the economic environment is not as robust as it was pre-recession, the combination of low interest rates, low inflation, a slightly improved job market, and a mild recovery in median income have combined to provide the average consumer with a somewhat stronger credit profile," according to DBRS. Turning Point The average FICO scores at Fannie Mae and Freddie Mac are approximately 760, according to analysis released by FBR Capital Markets. Data from the Federal Housing Finance Agency (FHFA), however, indicates the average original credit score for borrowers with GSE loans is 660. Both GSE's regularly tout the strength and stability of their "new book of business," referring to loans originated in 2009 or later. Analysis by Lender Processing Services (LPS) confirms recent vintages are performing better. For GSE loans originated in 2011, LPS reports a weighted average credit score of 762 and weighted average loan-to-value (LTV) ratio of 69 percent. LPS says 2011 loans insured by the Federal Housing Administration (FHA), have a weighted average credit score of 707 and LTV of 92 percent. All other mortgage loans from the 2011 vintage carry a weighted credit score of 765 and weighted LTV of 63 percent, on average.

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