The Scotsman Guide - Victor Whitman - 06 December 2016
The power shift in Washington and the incoming Trump administration could bring big changes to housing policy. William Brown, an Alamo, Calif.-based Realtor and the new president of National Association of Realtors (NAR), spoke with Scotsman Guide News about the state of the housing market and NAR’s strategy and priorities in what is expected to be an active legislative year for Congress.
How is the housing market doing right now?
There is certainly reason for some optimism. Both homebuyers and sellers have a lot going for them right now. On the buyer’s side, interest rates are still low. The predictions from the experts is that interest rates will go up over the next year or two. We’re interested to see if that is going to affect homebuying. From the Realtor’s standpoint, even at 5 or 6 percent, interest rates are at historically low levels. When I refinanced my first house, I had a 9 percent mortgage, which I was fine with. And 1981 came about and that [house] refinanced at 19 percent. So, it is important that we put that into perspective.
Also, low unemployment is helping to bring wages up, which helps a homebuyer make a purchase. For those who don’t have 20 percent to put down, there is still a number of low-downpayment programs available to buyers who don’t have good credit.
From the sellers side, in a lot of hot markets, obviously, sellers still have an advantage just because of scarcity. There is not a lot of product for sale, especially on the coasts. East Coast and West Coast, we are still seeing homes sell for record numbers.
What are some of the major legislative priorities for NAR this year?
Reauthorization of the [national flood insurance program] is a NAR priority. In September of 2017, it will expire. We would like to see the program reauthorized, as well as reforms to help homeowners mitigate flood risk. Reform of the GSEs [government-sponsored enterprises] Fannie Mae and Freddie Mac will be on the table as well. While we are having that discussion, we feel it is very important that the GSEs maintain their government guarantee, which keeps interest rates down. When they go to securitize the loans, it adds confidence for the investors in the securities. That securitization helps provide liquidity to the market.
Another big deal for us is the mortgage-interest deduction. I know that both sides of the aisle have talked about reducing or eliminating it. We are not going to compromise on anything in terms of the deduction. It is important that we keep the ability to write off the mortgage interest on first homes, on second homes, as well as your property taxes on both your first and second homes. Also, it is extremely important on the investment side that we retain [the tax exemption on] like-kind exchanges [which investors in commercial real estate to defer federal taxes on capital gains on the sale of commercial property]. So, it is going to be a busy year.
What are measures that the government could take to strengthen the housing market?
On the condo side, we want them to reform some of the regulations [in the Federal Housing Administration, or FHA, loan program], in terms of projects' owner-occupancy requirements, the commercial space requirements and so forth. We have written a letter to the FHA, asking them to lighten up on some of those restrictions to enable more people to get a [FHA condo loan]. For a lot of people, a condominium is their first foot in the door of ownership, and they progress from there to buy a house. Condos are the first step in the housing ladder. If they can make it a little easier for that first-time buyer to buy a condo, it could create a domino effect for the whole market.
We also think it is time for FHA to lower its insurance premiums and eliminate the [requirement that borrowers hold FHA insurance] for the life of the loan. FHA [the insurance fund] is on a strong financial footing.
So, those are two examples of what government could do proactively to help out the market.
Are there any threats that might hurt the recovery of the market?
I would say elimination of the mortgage-interest deduction and elimination of the government guarantee on the GSEs.
Will the power shift in Washington have a big impact on the housing market?
Elections always bring change. You get different administrations and different ideas. Our strong point at NAR is that we are bipartisan. We have shown an ability to work on both sides of the aisle. We have actually gotten bills passed in this contentious environment of the last couple of years.
The other thing that is very important, in addition the legislative activities, is that the regulatory control over housing is also something that we are very aware of. Congress passed Dodd-Frank in very general terms, and then the regulators interpreted the bill and wrote most of the bill’s action items. So, we have a relationship not only on the Hill, but with the regulatory agencies in D.C.
Do you think the recovery will stall out or accelerate in 2017?
I am not an economist, but I know Lawrence Yun, our chief economist, anticipates that supply and affordability issues facing a lot of buyers should slowly start to abate because he anticipates an increase in housing starts. That should create more opportunities. All in all, there are good signs for housing, which could very well continue to improve despite some of the challenges that face us.