Housing 2020 : What is Shaping the Future of Housing in Virginia

Problems emanating from the housing market forced financial institutions to take massive write-downs on their mortgage portfolios, igniting a broader banking crisis. Amid fears about the strength of banks and severe losses of both housing and stock wealth, consumer confidence plunged 41 percent below its lowest previous trough. Households slashed their spending and—for the first time on record—cut their net borrowing. State of the Nation’s Housing 2009

Where we’ve been in the last 5 years Our housing market has been defined by the housing crash over the past 5 years. Over 100,000 homes foreclosed in Virginia Construction of new homes nearly came to a halt Sales of existing homes dipped to record lows Nearly 25% of mortgages in Virginia are underwater or near underwater The homeownership rate began to decline for the first time

After several false starts, there is reason to believe that 2012 marks the beginning of a true housing market recovery. State of the Nation’s Housing 2012

We’re beginning to hear noises that we’ve reached a major turning point in the housing market — and that, with interest rates so low, this is a rare opportunity to buy. But are such observations on target? It would be comforting if they were. Yet the unfortunate truth is that the tea leaves don’t clearly suggest any particular path for prices, either up or down. Robert Schiller, NYT, January 26, 2013

Housing 2020: Why? We need to look beyond recovery from the Housing Crash There are sweeping trends that are re-shaping housing in seismic ways. Our housing markets and products will be widely affected. Understanding these trends and their impacts will help us prepare our communities.

THINK BIG: What is shaping the future of housing in Virginia in the next decade?

Demographics Economics Finance Green/Sustainable

Part 3: Finance Housing 2020

Finance What went wrong with housing finance? Capital sources for housing / secondary market Interest rates Underwriting standards Impact of mortgage product changes Rental housing finance

Finance Ethan Handelman at National Housing Conference Ethan Handelman directs NHC's policy and advocacy agenda focused on strengthening the nation's housing finance system Ethan authored Government Sponsored Enterprises and Multifamily Housing Finance: Refocusing on Core Functions.

Mortgage rates will stay low… assuming

What went wrong ?

The role of finance in the crash

Housing Virginia Video Presentations “Role of Finance in the Housing Crash” by Eric Handleman Click to view videoClick to view video - Internet connection is required. Disclaimer: Videos in the PowerPoint will not play on a mobile device. Please access these documents from a laptop or desktop to enjoy the complete presentation.

What is in the future – short term: Is systematic change possible?

Housing Virginia Video Presentations “The Potential for Systematic Change” by Eric Handleman Click to view videoClick to view video - Internet connection is required. Disclaimer: Videos in the PowerPoint will not play on a mobile device. Please access these documents from a laptop or desktop to enjoy the complete presentation.

What are the GSEs?

Housing Virginia Video Presentations “Salvaging the GSEs” by Eric Handleman Click to view videoClick to view video - Internet connection is required. Disclaimer: Videos in the PowerPoint will not play on a mobile device. Please access these documents from a laptop or desktop to enjoy the complete presentation.

Who was Making Mortgages: Before, During and After the Crash Source: Bipartisan Policy Center Housing Commission, 2013

The future of GSEs: The Federal Housing Finance Agency (FHFA) today announced that it has directed Fannie Mae and Freddie Mac to raise guarantee fees on single-family mortgages by an average of 10 basis points. The changes to g-fee pricing represent a step toward encouraging greater participation in the mortgage market by private firms… “These changes will move Fannie Mae and Freddie Mac pricing closer to the level one might expect to see if mortgage credit risk was borne solely by private capital. Edward J. DeMarco, Acting Director of FHFA August 31, 2012

The future of GSEs: A permanent solution for beleaguered mortgage giants Fannie Mae and Freddie Mac, which the government took over in 2008, might not be achieved before Obama leaves office. Geithner said it could take three to five years to reduce the dominant role the two companies play in mortgage financing to the point where their role could be handled by some new enterprise Congress might decide to create. He said that time should be used for a debate over what Fannie’s and Freddie’s future should be. Boston Globe January 26, 2013

What’s next for homeownership?

The future of home ownership

Housing Virginia Video Presentations “Future of Home Ownership” by Eric Handleman Click to view videoClick to view video - Internet connection is required. Disclaimer: Videos in the PowerPoint will not play on a mobile device. Please access these documents from a laptop or desktop to enjoy the complete presentation.

Changes to mortgage products…

Housing Virginia Video Presentations “Future of Mortgage Products” by Eric Handleman Click to view videoClick to view video - Internet connection is required. Disclaimer: Videos in the PowerPoint will not play on a mobile device. Please access these documents from a laptop or desktop to enjoy the complete presentation.

LMI households: the need for new policy solutions

Credit Requirements post Crash

Housing Virginia Video Presentations “Policy Solutions for LMI HHs” by Eric Handleman Click to view videoClick to view video - Internet connection is required. Disclaimer: Videos in the PowerPoint will not play on a mobile device. Please access these documents from a laptop or desktop to enjoy the complete presentation.

Rental financing: it works

Housing Virginia Video Presentations “Rental Financing Works” by Eric Handleman Click to view videoClick to view video - Internet connection is required. Disclaimer: Videos in the PowerPoint will not play on a mobile device. Please access these documents from a laptop or desktop to enjoy the complete presentation.

Affordable rental housing: where we need to improve

Housing Virginia Video Presentations “Barriers to Affordable Rental Housing” by Eric Handleman Click to view videoClick to view video - Internet connection is required. Disclaimer: Videos in the PowerPoint will not play on a mobile device. Please access these documents from a laptop or desktop to enjoy the complete presentation.

Finance is about more than just money…

Housing Virginia Video Presentations “Housing Finance More Than Just Money” by Eric Handleman Click to view videoClick to view video - Internet connection is required. Disclaimer: Videos in the PowerPoint will not play on a mobile device. Please access these documents from a laptop or desktop to enjoy the complete presentation.

Takeaways: Finance Interest rates will remain low by historical standards Mortgage product variety will be limited; long term fixed rate is the standard Underwriting criteria are set – will be slow to expand Lenders will “stay inside the box” Secondary market reform progress will be slow – costs will rise States must play a larger role in meeting affordable housing needs as Federal role shrinks.

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