Homeownership hit the lowest level in almost 20 years in the first quarter of 2014. Why? Anthony Sanders, distinguished professor of real estate finance at George Mason University (my alma mater by the way), says on his blog Confounded Interest, that he knows exactly why. “Here is the reason why: declining real median household income, declining wage earnings growth, declining mortgage purchase applications. Banks, Fannie Mae, Freddie Mac and FHA can lower their credit standards, but without income growth it’s ‘Bye-Bye, Miss American Pie,’ he says.”
The mortgage industry is also taking a hit. Production is at a 17 year low and this morning the MBA announced that refinances are the lowest since 2008 and purchase applications are down 21% from 2013. The other thing hurting the mortgage application numbers are the percentage of cash purchases. Cash purchases are currently at an all time high mainly due to Wall Street investors buying up foreclosures.
So what else can be done to turn this around? As I’ve said numerous times in my blog, the answer is easy. GET SOME GOOD NO MONEY DOWN PROGRAMS FOR FIRST TIME HOMEBUYERS! Fannie and Freddie got rid of the zero down payment programs during the mortgage crisis. Along with that, FHA has increased their down payment to 3.5% and the FHA mortgage insurance is ridiculous. The first time homebuyers are also at historical lows. Until Fannie, Freddie, and FHA wake up and get the first time homebuyer back into the market, you will see the housing market and mortgage market continue to struggle.