By Rob Chrane, CEO, Down Payment Resource
Affordable housing is one of the most misunderstood terms in real estate and community revitalization. True, we need affordable housing, but, what does that mean to most people? Low income households? Low cost housing structures? Complicated homebuyer programs?
The fact is affordable housing has often felt like something we have to talk about, rather than something we want to discuss. It’s ironic of course because affordable housing professionals and programs have helped many families get on a path towards homeownership and wealth creation–benefiting entire communities.
But, what if we flip those words and say housing affordability? Every homebuyer is looking for a home that’s affordable to them. That’s precisely the job of lenders – ensuring the home loan is affordable to the specific buyer. It makes homeownership sustainable.
My point here is that we should all care about housing affordability. All homebuyers need advocates to help them find resources that make their purchase affordable to them.
Let’s rethink affordability. Instead of the traditional measures of sales price and interest rates, what about the entry cost? The down payment is still the biggest hurdle and the challenge is growing.
A survey from Wells Fargo found that 36 percent of consumers believe that a 20 percent down payment is always required. Even more troubling, a higher proportion of African-Americans and Hispanics hold this belief, at 58 percent and 55 percent respectively. Buyers continue to do more research before engaging real estate professionals, yet knowledge about mortgage products is actually decreasing.
Our joint report with housing data experts at RealtyTrac, found that when you consider access to homeownership programs available, 90 percent of markets analyzed were still more affordable than historic averages. In fact, across 370 counties in the U.S. analyzed, the average amount of down payment help was more than $10,000—that’s an average of nearly 7 percent of the median home sales price in April. In metro Atlanta, there are 63 homeownership programs available with an average down payment program benefit of more than $13,000.
Unfortunately, the lack of discussion about what is affordable with homebuyers leads hundreds of thousands of eligible buyers to self-select themselves out of the marketplace. Homeownership programs come in all shapes and sizes, designed to meet the housing needs of individual communities and buyers. There are ways to increase housing affordability for a much larger proportion of homebuyers—they include saving on a down payment, getting a lower interest rate and/or an annual tax credit.
Let’s open the discussion and talk about why affordability matters to all buyers. Instead of delaying their purchase, buyers may find real resources that can help them take action sooner, improving our communities one house at time.