Senior Housing Facing Affordability Crisis?

Millions of older adults struggle to find housing that is affordable and physically suits their needs, a new report by the Bipartisan Policy Center’s Senior Health and Housing Task Force, outlines recommendations for states and legislators to help alleviate the lack of suitable senior housing.

It’s also calling on state and local governments to allow for more permissive land-use policies to urge alternative housing structures for seniors, such as accessory dwelling units, micro-units, and congregate homes. It’s also calling for federal and state governments to provide greater support for home modifications so people may age in place, such as through property tax credits, grants, or forgivable loans.

Source: “Former HUD Secretaries: America’s Elderly Desperately Need More Affordable Housing,” HousingWire (5/22/16)

To Buyers, Mortgage Rates May Be Overrated?

Changes in down payment requirements have more influence over home buyers’ willingness to buy than changes in mortgage rates, according to a new study published by economists at the New York Federal Reserve.

The Fed’s survey of buyers and renters found that the impact of interest rates may be overrated compared to the even the smallest changes in down payment requirements. The study found that dropping the required down payment from 20 percent to 5 percent increases the willingness to purchase, on average, by 15 percent among buyers and 40 percent among renters.

On the other hand, decreasing the interest rate on a 30-year fixed-rate mortgage raised the willingness to purchase a home by only 5 percent, on average. Buyers showed more influence by down payment changes even though the mortgage rate change could save them more money than the lower down payment.

Source: “Down Payments Motivate Buyers More Than Interest Rates,” Real Estate Economy Watch (July 20, 2015)

Owners will be Focusing on Home Improvements

Home owners are expected to increase their home improvement spending expenditures in the next year, says a new study, and recent increases in home equity are partially behind that anticipated surge. Also, a rise in recent home sales activity is a good indicator for the home improvement market, since recent home buyers usually spend about a third more on home improvements than non-movers, even when controlling for age or income differences, according to Harvard University’s Joint Center for Housing Studies’ Leading Indicator of Remodeling Activity.

JCHS has predicted a surge in remodeling on the horizon in the coming years, driven by a rising number of older adults who will want to outfit their homes with more age-in-place home features as well as projects spurred by an aging housing stock.

Source: “Pick-Up Projected in Home Improvement Activity Moving into 2016,” Joint Center for Housing Studies of Harvard University (July 16, 2015)

Study: Student Debt Costs Housing $83B a Year

Rising student-loan debt is putting a dent in the housing market. A new report from John Burns Consulting estimates that 414,000 home sales — or 8 percent of all sales — won’t happen this year because more buyers are strapped with too much student-loan debt. That will cost the housing industry an estimated $83 billion a year, per the study.

About 5.9 million households under the age of 40 owe $250 or more per month in student loans, a number has nearly tripled since 2005. Every $250 in monthly student-loan payments lessens borrowing and purchasing power by $44,000, the study finds.

Rick Palacios, director of research at John Burns Consulting, says the research firm believes those estimates are “pretty conservative.”

“We’re only looking at people ages 20 to 40,” he says. “We know there’s a big chunk of households over age 40 who have student debt, too.”

Home sales have been dwindling among young adults in recent years. A study by the Federal Reserve Bank of New York now finds that young people with student debt are less likely to have a mortgage and own a house than those who never attended college. That’s a reversal of the traditional trend, where those with higher education and higher earnings tended to own.

Source: “Student Loan Debt Curbs Housing Market by $83 Billion, Study Says,” Los Angeles Times (Sept. 22, 2014)

U.S. in ‘Worst Rental Affordability Crisis’ Ever

As rental demand grows, about half of renters spend more than 30 percent of their income on rent, up from 18 percent a decade ago, according to newly released research by Harvard’s Joint Center for Housing Studies. Twenty-seven percent of renters are paying more than half of their income on rent.

“We are in the midst of the worst rental affordability crisis that this country has known,” says Shaun Donovan, U.S. Secretary of Housing and Urban Development.

Rising rents mixed with a stunted wage growth has created an affordability problem, the study notes. Between 2000 and 2012, real median rents rose nationwide by 6 %. However, over that same time period, the real median income of renters fell by 13 %.

“Over four years, [there’s been] a 43 percent increase in the number of Americans with worst-case housing needs,” says Donovan. “Let’s be clear what that means: They’re paying more than half of every dollar they earn for housing.”

“There is no question that the will toward home ownership remains there — [the problem is] the way,” says Eric Belsky, director of Harvard’s Joint Center for Housing Studies. However, rising home prices and mortgage rates, high student loan debt, and tightened credit is holding many back and forcing them to continue to rent.

Source: The Harvard Joint Center for Housing Studies and “Skyrocketing rents hit ‘crisis’ levels,” CNBC (Dec. 9, 2013)