DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/1517420
March 2024 » thefivestar.com 39 March 2024 F E A T U R E S T O R Y access to a broader range of borrowers, "including those with non-traditional credit histories or lower credit scores." Affordable housing solutions were also on the list of potential efforts that could address the changing nature and demographics of the American home- buyer. Isern said that in order to fund affordable housing projects and provide creative financing options, mortgage lenders can collaborate with government agencies, nonprofits, and developers. Through these initiatives, ongoing af- fordability challenges may be addressed, and low-income or underserved cohorts can access education and programs needed to help them determine if home- ownership is right for them—and if so, how they may best access it. "We must continue empowering our communities by actively engaging with them, trying to understand their unique housing needs, and tailoring our offer- ings to serve them better," Isern added. For many, there are countless hurdles along the path to attaining the Ameri- can Dream, but what does the future of homeownership look like for aspiring homeowners? She added that increasing credit availability and providing cheap housing are two factors to consider when painting the future of homeownership—both of which she says could ultimately help minority communities. She added, "It is imperative that specific mortgage products, initiatives to support affordable housing developments, and programs for down payment are developed." "The future of homeownership is influenced by so many factors, includ- ing economic trends, policy initiatives, cultural shifts, and efforts from the real estate and mortgage industries to address historical disparities," Isern said. Financial education designed to empower individuals and communities of color, as well as financial literacy education and homeownership coaching can help potential homeowners make wise financial decisions and successfully complete the homebuying process if it is right for them. Promoting education on topics such as credit management, budgeting, and mortgage options can also help remove obstacles and provide necessary context and insight about whether homeownership is a responsible and achievable goal. "Interest rates are still high; affordabil- ity is still stretched," said Tim Ray, Co-Founder and CEO of VeriFast. "We're seeing people's overall ability to cover the cost of shelter stretched with inflation and the cost of living. I think that, over the next year, [we will see] a softening in rates that's going to make affordability better. This should help [aspiring homeowners in minority or underserved cohorts] as the market improves and rates soften for them to be able to then afford houses." Generational Disparities and "the Great Wealth Transfer" B aby boomers currently own an estimated 38% of homes nationwide despite comprising just over 20% of the entire U.S. population, according to the U.S. Census Bureau, with boomers hav- ing historically benefitted from factors such as being able to refinance their houses at historically low interest rates. In 2023, Census data found that just 52% of the millennial cohort, however, are homeowners, compared to a whopping 78% of boomers and 70% of Gen Xers. "Baby boomers and Gen Xers have higher homeownership rates when compared to millennials and Gen Z," Christensen said. "As the millennial and Gen Z generations continue to mature, the rising cost of housing, stagnant wages, and student loan debt continue to make it increasingly difficult for them to enter into homeownership. In contrast, older generations have enjoyed far more affordable housing markets earlier in their lives, allowing them to build equity and wealth over the decades." That said, Isern explained how the housing market can significantly affect the generational gap in different ways. » Homeownership rates: For instance, newer generations may find it difficult to purchase a property in periods of sharply increasing housing appreci- ation, which will result in a growing divide between older homeowners and younger renters. » Wealth accumulation: One of the main avenues for accumulating wealth is homeownership. It's possible that generations that were able to buy homes when they were more afford- able will have more money and pos- sessions to leave for their offspring. » Geographic mobility: Younger generations' ability to move around will be restricted in high-cost housing locations. Their professional pros- pects and standard of living may be negatively impacted if they are unable to purchase homes in sought-after neighborhoods. "Baby boomers are downsizing at a slower rate than past generations, which is contributing to the inventory issue," said Jeff Leinan, Co-President of Plaza Home Mortgage. "Over the next decade or so, the greatest wealth transfer in history is expected to occur. More than $70 trillion will pass on from baby boomers to Gen Xers and millennials. That comes up to about $320,000 per millennial. So, this is potentially a very strong tailwind for homeownership." In what is being called "the great wealth transfer" (forecast in 2019 via research by Coldwell Banker), Newsweek recently reported that millennials are expected to hold five times as much wealth as they do today by 2030. While medical costs for aging boomers are also projected to eat into this so-called "great wealth transfer," what remains will still likely make the difference for many mil- lennials between, for instance, being able to afford a down payment or not. But for those already benefitting from that theoretical influx of wealth, the housing market is still rife with headwinds rang- ing from affordability to inventory and simple education about the process and responsibilities of homeownership, and even as those factors change, they are certainly not likely to vanish entirely. Ray Leinan