Realtors forecast ‘perfect storm’ if mortgage proposals are enforced
If you think Hurricane Irene put a dent in the economy, then listen to Susan Arnold, CEO of the Rhode Island Association of Realtors.
She is calling legislation that, among other things, would require a 20 percent down payment, a “perfect storm” that would set the nation’s economy in a tailspin.
To bring attention to the potential crisis, and what homeownership means to individuals and the economy, the “Home Ownership Matters Bus Tour” pulled into Warwick Tuesday morning. With the bus came Ron Phipps, president of the National Association of Realtors.
Phipps is no stranger to Warwick or the state.
He lives here and, as of Tuesday, he was still without power.
But there was plenty of juice in his message about the importance of home ownership.
“When the nation was founded, they talked about property rights as being part of our tradition,” he said.
“With the hurricane, we really understand self-reliance. I don’t have power at my house and I imagine most of you don’t have power, but you’re figuring out how to get through. But, when you step back and look at homeownership versus renting, even after all of the market corrections, the average family in the United States has a net worth of $180,000.”
By comparison, Phipps said the family that rents has an average of $4,600.
“Just on an economic point of view, it [homeownership] has an advantage for families. For society, neighborhoods and communities that have higher homeownership rates have better school results; low crime rates; and frankly, they are more dynamic and more creative. They have great opportunities,” Phipps said.
Stephen Antoni, president of the Rhode Island Association of Realtors, highlighted the mortgage interest deduction or MID that Congress is considering eliminating as part of deficit reduction.
“This year, more than any other years in the past, homeownership has been under attack,” he said addressing about 70 people gathered in the parking lot of Rhode Island association offices on Bignall Street. “It’s one of the key benefits of homeownership. It allows most people in the middle class the ability to buy a home.”
Antoni then moved on to down payment requirements.
“Congress wants to make it mandatory to put 20 percent down on every purchase of a home. If you can’t go that route, our price here in Rhode Island is $205,000 right now. That’s $40,000 you need to come up with as a down payment. I think you can easily see what that’s going to do to our economy’s recovery. That would be the quickest way to derail it at this point,” he said.
Arnold said saving a 20 percent down payment would take 17 years for most people.
“Those looking for average cost homes are going to be shut out,” she said.
The impact would reach beyond that, she contends.
Fewer home sales would directly impact the industry and the 4,200 realtors in the state. Also, she observed, that each home sale is credited with generating two jobs when all the factors, from moving to remodeling and financing, are considered.
According to the Rhode Island Association on Sept. 30, FHA loan limits may be allowed to revert to 115 percent of an area's median home price, down from a current 125 percent. In Rhode Island, the loan limit would be reduced by $48,350 – from a current limit of $475,000 to $426,650.
"Reducing the current loan limits means that fewer people would have access to mortgage loans," Antoni said in a statement. "In addition, the loans that would be available would also be more expensive, as many buyers would be forced into jumbo mortgages. Homeowners could also have a tougher time selling their homes because there would be fewer buyers who qualify to purchase those properties."
Arnold used the storm analogy to make her point.
“Just as we almost faced a perfect storm this weekend, we’re now facing a perfect storm, as far as people’s opportunity to own homes,” she said. “Without homeownership, you don’t have a middle class country. The way the middle class save their money is through their homes because it’s their biggest investment. It’s a message we need to get out before the budget commission decides homeownership isn’t important anymore.”