Other analyses, however, are less optimistic
and suggest we are headed toward a “new
normal” in which the national homeownership rate continues its decline and will fall
well below 63 percent. For example, the
Urban Institute projects that, by 2030, the
homeownership rate could drop to as low as
60.3 percent and barely exceed 62 percent
even under the most favorable scenario.13
Homeownership Headwinds
Moderate- and lower-income families face
a number of powerful headwinds in today’s
homeownership market. In the short term,
more conservative underwriting standards
in the form of higher down payment and
tougher credit score requirements will
continue to make achieving homeownership
more difficult, even for those creditworthy
households who are prepared to assume
the obligations and risks that come with
owning a home.
ownership opportunities for many young
adults. The Consumer Financial Protection
Bureau reports that student loan debt is
approaching $1.2 trillion, an all-time high
and the second highest form of consumer
debt behind mortgages.14 In 2013, nearly
70 percent of graduating college seniors
carried student loans, with the average
borrower owing more than $28,000.15 With
so many young adults burdened with so
much debt as they enter the job market and
start their careers, it is not surprising that in
2014 the share of first-time homebuyers fell
To promote more mortgage lending, the
Federal Housing Administration (FHA) and
the Federal Housing Finance Agency (FHFA)
are attempting to reduce the use of “credit
overlays” by lenders who are concerned
about being held responsible by the agencies for loan defaults when there are minor
defects in underwriting. To help expand
access to mortgage credit, the FHFA – along
with Fannie Mae and Freddie Mac – have
initiated low down payment programs for
first-time homebuyers. The FHA has also
proposed to reduce the insurance premiums
it charges, which have been cited as a major
homeownership obstacle for moderate- and
lower-income families. Even if successful,
these efforts are unlikely to unleash a wave
of new mortgage lending to those households with average credit records. In the
short term at least, caution will continue to
dominate the underwriting process.
Student loan debt is undermining home-
The Silent Housing Crisis: A Snapshot of Current and Future Conditions
9