Job creation and access to credit are two key components that need to improve if the housing market is to recover from a bust that has coincided with the recession, the National Association of Realtors said in an analysis this week.
The 1.1-million member strong trade group said in a statement that although rising mortgage rates for long-term fixed-rate loans would undoubtedly harm market demand, potential homebuyers still would need access to cash and credit to be enticed into buying and taking out a mortgage.
“Modest changes in mortgage rates are less important to a housing market recovery than the number of people who are able to obtain mortgages,” NAR Chief Economist Lawrence Yun in a statement.
Yun and the NAR’s Board of Directors cited strict underwriting policies of mortgage lenders as a hindrance to a potential housing recovery, and advised the lending industry in a statement last week to lower their qualifications for the access of credit for mortgages.
“Currently, the overly tight underwriting standards are holding back the pace of housing market recovery,” Yun said in the statement. “In particular, creditworthy small business owners and those who want to purchase investor properties have encountered extreme difficulties in obtaining a mortgage.”
“Additional creditworthy borrowers who are willing to stay well within budget and meet reasonable underwriting criteria should be able to obtain a loan to help speed the housing and economic recovery,” Yun added.
In regards to job creation and other economic indicators that would affect the housing market, the NAR said that an extension of the Bush’s tax cuts would spur job growth, and low inflation would stifle steep mortgage rate increases.
“If the Bush tax cuts were extended for everyone across the board, an additional 400,000 additional jobs could be created in 2011, with home sales rising by an additional 60,000 to 80,000,” Yun noted.
“Mortgage rates are expected to rise to 5.4 percent by the end of 2011 … provided the inflation rate stays manageable at near 2 percent. If the Consumer Price Index inflation rate was to reach 3 percent, then mortgage rates could rise to 6 percent by the end of 2011, cutting home sales to 5.2 million,” the NAR wrote in its report.
