When the housing sector slows down or stalls (see: The Great Recession), it drags down the health of the overall economy. The debate now among economists and industry advocates, like Stevens, is whether millennials will eventually enter the housing market as they age, or whether there's been a permanent shift that has young people no longer interested in buying homes as prolifically as their parents did.
Stevens does not count himself among the pessimists, who assume that millennials will never want to buy. His personal test case, his daughter, wants to purchase a home eventually, he says--just not yet. Instead, Stevens views the millennials' reluctance as response to the weak economy and increased financial pressure. After all, they "watched the Great Recession from the doorsteps of their universities or their first jobs," he says. "The impact of seeing friends or family members lose their jobs and, potentially, lose their homes or go through the restructuring of mortgage debt has to have affected some of their decisions."
So do the tough economic conditions that millennials continue to face: from ongoing career instability to significantly higher unemployment rates to student debt. It's hard to conceive of buying a house if you're worried about, say, finding a job or holding onto it.
We won't know the outcome of the debate over millennials and their approach to housing until more time has passed and more data is gathered. Until then, Stevens keeps pitching a handful of ideas, from both the public and private sectors, to help more millennials access the housing market. As a former community bank executive and HUD official, he's quick to stress that there's not one solution to the slowdown in the housing market. "There may be ways to get 10,000 borrowers into the market here," he says. "Collectively, that can create a million new home sales, and all of these ways can contribute to provide greater access."
Among Stevens' ideas:
"¢ LOOSEN CREDIT STANDARDS, JUST A LITTLE. Right now, it's tough to borrow money for a mortgage because banks and lenders only want to hand out loans to those with top-notch credit scores. Mark Zandi, chief economist for Moody's Analytics, has estimated that dropping required credit scores by just 50 points would give 12 million more people access to credit and, potentially, the ability to buy homes. "There are a lot of young people who don't have a lot of credit experience, who may have stumbled on a car payment, but who are still good, creditworthy borrowers--and you can still validate that," Stevens says. "We need to give some guidance back to the lending industry that enables them to use judgment in underwriting a mortgage."
"¢ PILOT PROGRAMS, LIKE HUD'S HAWK PROGRAM. HUD is in the process of kicking off a pilot program that would allow homeowners to save on their FHA-insured loans, provided they first go through counseling on budgeting and homeowner decisions. The four-year national pilot, known as Homeowners Armed with Knowledge, would save the average homebuyer, who goes through the counseling and secures a FHA-backed loan, about $325 a year, or roughly $9,800 over the loan's lifetime. Plus, it gives more education in financial literacy to potential homebuyers.