What happened to the ownership rates for low income families with children between 1960-1989?
In contrast to the resurgence in the U.S. economy, homeownership rates were flat for the entire decade of the 1980’s.The homeownership rate had peaked at a historic high of 65.6 percent in 1980 from which it drifted back to 64.1 percent by 1991. Housing prices have risen faster than real wages since the 1970’s and have made homeownership less ‘affordable’ to prospective buyers. Real prices for median priced homes increased 41% between 1960 and 1989. The majority of lower income and younger households were shut out of the housing market. Homeownership for low-income families with children fell by almost a third (from 39% to 27%). Homeownership among moderate-income households declined by 10%. What was the MBS’s projection about consumer debt to liquid assets as the US population started aging? Was it correct?
At the end of the 80’s housing affordability problems and the low savings rates were projected to ease as the US population aged. In “Toward The Year 2000”, written in the late 1980’s, the Mortgage Bankers Association of America (MBA) expected that, “As the bulge in the US population grows older, it will shift from credit using non saving young people to credit supplying net savers. This could prove a powerful shift that lowers demand for consumer durables and housing, slows credit growth relative to employment and income, and raises the national savings rate”. Ironically, the MBA’s projection could have not been more incorrect. In 1989 consumer debt to liquid assets was 60%; by 1999 that debt would be almost 96%.Between 1990 and 1992 the Fed Funds rate declined by 400 basis points, stimulating banks to lend capital. Lower rates invited the largest residential mortgage refinancing ‘boom’ America had, until that point, ever witnessed. Refinancing originations, which had averaged $114.2BB annually between 1986 and 1991, grew to $429BB in 1992 and $560BB in 1993. While these were record levels of refinancing, by the end of 1998 the levels of refinancing would reach $751BB.
Be able to name and explain 2 causes that stem from the change in US government policy that contributed to an increase in homeownership in the 1990s (all the causes are listed on pages 7-13) By how much did the housing prices go up between 1995-2000? 2001? The requirement that homebuyers make significant down payments was eliminated in the 1990’s. The NPH urged and approved increasingly larger reductions in requirements. In 1989 only 7 percent of home mortgages were made with less than 10 percent down payment. By August 1994, low down payment mortgage loans had increased to 29 percent”. This trend continued unabated throughout the 1990’s so by 1999, over 50 % of mortgages had down payments of less than 10%. In 1976 the average down payment by first time homebuyers was 18%, by 1999 that down payment had fallen to 12.6%. In 1999, more than 5% of all residential mortgages had no equity or had negative home-equity. Eliminating down payment barriers has created a homeownership option for Americans who previously were forced to rent, due to savings or credit issues
Private Mortgage Insurance requirements were Relaxed PMI is a method by which non federally guaranteed (FHA or VA) homebuyers can, with monthly insurance premium payments, forgo the 20% down payment requirement. Just as the government insures the FHA or VA lender on FHA or VA in the event of default, PMI protects the lender if a conventional borrower
