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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 78 December 2023 J O U R N A L risen over the last two years doesn't mean they'll continue to climb in 2024. On the contrary, there are encouraging signs, like cooling inflation, that could help bring down rates next year. If inflation continues to cool and the Fed starts cut- ting rates in 2024 (as they appear poised to do), rates should fall. They won't plummet, but they might end up closer to 6.00% or 7.00% than 8.00% or higher." Some Homeowners With Low Mort- gage Rates Are Feeling Stuck It's not just nonhomeowners strug- gling with rising rates—homeowners believe they have implications for them, too. Among this group, 50% say their cur- rent rate is keeping them in their houses and they don't want to get financing on a new house. That's especially true for homeowners with kids younger than 18 and millennial homeowners, at 64% and 61%, respectively. Overall, Americans believe 2020 and 2021, when mortgage rates were between 2.65% and 3.72%, was a once-in-a-lifetime opportunity for homebuying. Three- fourths (75%) of Americans say they aren't sure if they'll ever see rates as low as in 2020 and 2021—a figure that rises to 82% among those earning $50,000 to $74,999, 81% among women and nonhomeowners, and 78% among baby boomers and those without children. With these beliefs in mind, 11% of homeowners don't think they'll ever be able to buy a home again and 19% are unsure. "There's a chance that they could fall back to their 2020 and 2021 levels again at some point, just as there's a chance, they'll spike back up to their early 1980s levels," Channel said. "From where things stand, I'd say that either scenario is more unlikely than not." While Channel believes rates will come down over the next few years, he says he'd be genuinely shocked if they fall to their height-of-the-pandemic record lows: "Unless something cata- strophic—like another major pandemic or a meteor crashing into Manhattan—I think people are right to assume rates aren't going to fall to sub-3.00% levels anytime soon, if ever." SPOTLIGHTING REGIONS FACING HOMEOWNERSHIP BARRIERS Z illow Research has published new maps that shine a light on how a lack of credit access is keeping millions of people—particularly Black families—from homeownership, even as they pay relatively more each month in rent. "Lack of credit access keeps people in a cycle of paying more in rent than they would pay each month for a mortgage on that same home," said Nicole Bachaud, Senior Economist at Zillow. "Communi- ties of color, particularly Black families, see this play out, keeping a path to economic stability and wealth generation locked. Policymakers should take action to reasonably improve access to credit for millions of families." Credit insecurity refers to the chal- lenges individuals and households face in qualifying for credit, and is particu- larly prevalent in Black neighborhoods, where access to traditional and safe cred- it building is limited. As a result, many Black households are forced to remain renters in their communities, despite being able to afford a monthly mortgage payment. This is especially concerning considering that tenants nationwide spend $600 billion on rent each year, yet these payments often do not help build credit for those who need it most. In areas with more credit insecurity, homeownership rates are lower. Even so, a monthly mortgage payment would cost less than rent in these areas, even with mortgage rates at 22-year highs. This shows that a lack of credit access is as much a barrier to homeownership as affordability and highlights the urgent need to address disparities in credit access. Zillow's analysis includes maps that show how credit-insecure census tracts are directly linked to the share of the population that is Black and to the areas where rent is more expensive than mort- gage payments. New Orleans is the city that most reflects this phenomenon, according to Zillow's research. Looking only at census tracts deemed credit insecure by the Federal Reserve Bank of New York, the income-adjusted gap between the cost of a typical rental and a mortgage payment on a typical home is the widest in New Orleans. In New Orleans' credit-insecure cen- sus tracts—where 56.7% of the popula- tion is Black—a median renter house- hold would spend 77.5% of its income on a typical rental, but a median household that owns its home would spend only 28.6% on a mortgage payment on the typ- ical home. This means that residents in these areas, unable to secure the financ- ing they need to buy a home, are stuck paying more for rent each month than they would expect to pay for a mortgage. Zillow has also published a table that displays homeownership rate, the share of census tracts where it is cheaper to buy than rent, and the share of a typical homeowner or renter's income needed to pay for a typical mortgage or rental, sorted by the level of credit security. The disparities in credit access are particularly impactful for communities with higher rates of credit insecurity, which tend to have larger populations of color, in particular, Black households. The legacy of redlining practices, though prohibited by law, continues to impact communities today, perpetuating racial disparities in homeownership and finan- cial opportunities. Policymakers could explore a num- ber of solutions to help address this issue. Encouraging more financial institutions and landlords to report positive rent pay- ments—and for government-sponsored agencies to consider this data—would help renters build credit, especially in areas where building a credit profile is so difficult. Improving awareness of down payment assistance can help more renters overcome the cash barriers they face when trying to purchase a home. And supporting policies that build more homes can help open more doors to homes that are affordable and accessible.