Change is coming to the home mortgage market and the philosophy of homeownership next year. The changes will be debated in Washington over the coming months and the conversation will spark intense debate by both parties, the Administration, Wall Street and most importantly the American homeowner. Last week, the Administration announced a summit on August 17 entitled, “Conference on the Future of Housing Finance” that will address the future of the housing finance market. The conference will begin to address what actions will be required to restructure the housing finance market, namely the role of Fannie Mae and Freddie Mac and the future of affordable rental housing.
The changes will be both philosophical and practical with respect to the housing market and the agencies themselves. The infrastructure that Fannie and Freddie have provided over the course of their existence will be difficult to unwind and transform in the short term. The hardest part of the change maybe the philosophical (and policy) change that will reduce the emphasis on homeownership rates.
The policy change will need to place greater emphasis on the creation of affordable rental housing stock and will take on significant importance for the growing elderly population. Reverse mortgages are not for all homeowners and some seniors may need to sell their home as they don’t qualify for a reverse mortgage or cannot afford the mortgage payments. Some independent and assisted living options that exist that are exclusively private pay are priced out of the market for other seniors and the shifting philosophy may indirectly lead to higher interest rates and down payments making “downsizing” more difficult for some seniors than originally anticipated.
Homeownership used to be part of the iconic American dream. But not all dreams come true and we’ll be faced with a new normal in housing: It’s OK to be a renter.