National Association of Realtors Reflects on 2010

by Chicago Agent

2010 was a year of real estate contrasts. While many consumers took advantage of historic buying opportunities and the market saw a gradual stabilization of sales and prices, other challenges facing the nation led some to question the value of homeownership for families, communities, and the country.

“People are passionate about the American dream of homeownership, and this passion underscores how important homeownership is to our nation,” says National Association of Realtors President Ron Phipps. “Owning a home has long-standing government support in this country because homeownership benefits individuals and families, strengthens our communities, and is integral to our economy. As we begin a new year, Realtors remain committed to ensuring that our public policies promote responsible, sustainable home ownership for all of our futures.”

In the first half of the year, the extended $8,000 first-time homebuyer tax credit and expanded home $6,500 tax credit for repeat buyers helped encourage sales and stabilize home prices. Homebuyers in 2010 have also benefited from historic affordability levels, with the combination of record low mortgage rates coupled with rising household incomes. The NAR Housing Affordability Index currently shows that a median-income family with a down payment of 20 percent has 184.2 percent of the income required to purchase a median-priced home.

“Low interest rates mean real money for today’s homebuyers,” says Phipps. “Buyers who purchased a median-priced home five years ago with an FHA mortgage requiring a 3 percent down payment would have a monthly mortgage payment of $1,650. With today’s interest rates and median home prices, that same buyer would pay $1,150 per month – a $500 savings. That’s a savings of $6,000 per year.”

Despite record affordability and buyer incentives, rising foreclosure rates and concerns about proper foreclosure procedures led some to question whether owning a home was a good personal decision.

“Homeownership didn’t create the foreclosure crisis – Wall Street greed and irresponsible lending practices did,” says Phipps. “The decision to own a home is a very personal one, but over the long term, owning a home is one of the best ways to build long-term wealth, in addition to providing numerous social benefits that include reduced crime rates, improved childhood education, and increased stability. After all, a fixed-rate mortgage might last 15 to 30 years; renting is forever.”

Government support of programs and initiatives that encourage homeownership have also been called into question. The deductibility of mortgage interest is one example, with critics suggesting that the mortgage interest deduction primarily benefits the wealthy, while in fact, the MID benefits primarily middle- and lower income families – almost two-thirds of those who claim the MID are middle-income earners. Sixty-five percent of families who claim the MID earn less than $100,000 per year, and 91 percent who claim the benefit earn less than $200,000 annually.

Despite current economic challenges, most Americans still aspire to the dream of homeownership. According to a survey conducted earlier in the year by Bankrate.com, 90 percent of respondents said they had no regrets buying their current home. And just this month, a Fannie Mae survey found that most Americans – both those who currently own their homes and those who rent – strongly aspire to own a home and to maintain home ownership.

“We believe that anyone who is able and willing to assume the responsibilities of owning a home should have the opportunity to pursue that dream, and looking forward, Realtors will continue to engage policymakers and industry leaders on behalf of consumers in pursuit of that goal,” says Phipps.

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