It might be more than hard times
WASHINGTON (FinalCall.com) – The largest drop in home sales on record, a 3.1 percent decrease in October, reported by the National Association of Realtors raised questions about whether the culprit is consumer hesitation or the cut in down payment assistance programs.
Lawrence Yun, the association’s chief economist, said consumer hesitation is understandable. “Many potential home buyers appear to have withdrawn from the market due to the stock market collapse and deteriorating economic conditions,” he said.
“We have favorable affordability conditions, but we need more than that to give buyers with jobs the confidence they need. This is why a housing stimulus is so critical now to encourage more buyers to draw down the inventory and stabilize home prices. Without home price stabilization, there will not be an economic recovery.”
Joy Jamison, president of the National Association of Black Mortgage Brokers, disagrees with that analysis.
“The grim 3.1 percent drop in existing-home sales in October released by the National Association of Realtors may be just the tip of the iceberg. There are an abundance of homes sitting on the market waiting to be purchased and there are hundreds of thousands of hardworking Americans, particularly minorities, who want nothing more than to be homeowners,” she said, in a prepared statement.
“The disconnect lies in a lack of available programs to bridge these people to access these homes. Seller-funded down payment assistance (DPA), one extremely successful program that accomplished this goal, was banned on Oct. 1 after helping more than one million Americans become homeowners.”
Stephen Syphax, head of the Nehemiah Corporation, the largest privately funded down payment assistance program agrees. “As we anticipated, the spike in September home sales was short-lived, driven by hardworking Americans racing to take advantage of seller-funded down payment assistance before it was eliminated on Oct. 1,” said Mr. Syphax.
“October housing sales tanked, clearly illustrating the reality we now face in a post-DPA market. Foreclosures are on the rise and banks maintain their stranglehold on credit while lawmakers continue to overlook a simple solution that enables eager families to take advantage of depressed home prices, reducing the glut of homes on the market without spending a single taxpayer dollar.”
He added, “We call on Congress to revisit the important role that DPA has played in providing access to homeownership, and urge them to remove the ban.”
On Oct. 1, as part of the Housing and Economic Recovery Act of 2008, seller-funded down payment assistance programs were banned. Many felt the assistance was a sign that borrowers would have trouble making their loan payments.
According to Federal Housing Administration commissioner Brian Montgomery last June, “Data clearly demonstrates that FHA loans made to borrowers relying on seller-funded down payment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own down payments.”
Marcia Griffin, president of HomeFree USA, a nonprofit homeownership advocate and financial empowerment organization, thinks the drop in home sales is a combination of hard times and the end of the assistance program.
“There are many people who want to buy homes but can’t get approved. The credit restrictions are so strict now. Many with decent credit can’t even get a loan. You need a higher credit score in the 700s and you have to bring money to the table,” she told The Final Call.
“People are scared to death to purchase now. People with good credit question whether or not to wait for the prices to go lower and wait for a better deal. In D.C., the Home Purchase Assistance Program used to give people $70,000 toward the purchase of a home. That’s been dramatically cut.”
“Cities need families to buy homes right now. Every foreclosure costs a city about $50,000 in lost tax revenues.”