Julián Castro touts Federal Housing Administration measures at Realtor.com event hosted by GW.
By Nic Corbett
Massive student loans. Inconsistent income. Rising rent. A daunting down payment. Millennials face several challenges to achieving the American dream of owning their own home.
But millennials, people born between 1981 and 2000, make up about 27 percent of the U.S. population and the largest share of homebuyers in the market—32 percent, said George Washington University School of Business Dean Linda Livingstone.
Just under half of millennials are looking to buy their first home over the next two years, according to a recent survey.
At a virtual town hall meeting Monday night, U.S. Secretary of Housing and Urban Development Julián Castro sat down with Realtor.com Chief Economist Jonathan Smoke and Wall Street Journal Economics Correspondent Nick Timiraos to talk about the state of the housing market for millennials.
About 40 percent of all millennials in the United States own homes, Mr. Smoke said.
Mr. Timiraos read off questions submitted over Twitter and Facebook via the hashtag #HousingForMe. One cited “absurd mortgage rules” as making it difficult for first-time homebuyers to be able to get a loan. Another mentioned feeling “gun shy” about taking out a mortgage since the housing crash and following a layoff.
The Federal Housing Administration, under the purview of HUD, enables borrowers with less-than-perfect credit to take out a home loan and to purchase with a smaller down payment—the average is 4 percent of the sale price, said Mr. Smoke. It also accommodates millennials who have student loan debt, which affects their debt-to-income ratio.
“The nation just came out of a significant housing crisis,” Secretary Castro said. “At FHA, the concern has been to make sure that we learn the lessons of the past so that we don’t slide back to where we were before, but at the same time ensure that we offer a great opportunity for responsible folks to be able to own a home.”
Another challenge, Mr. Smoke pointed out, is the process for determining credit scores was defined before many millennials were born and ignores some bills they’re paying consistently—such as rent, utilities and cell phone service.
Secretary Castro touted President Barack Obama’s announcement in January to lower the mortgage insurance premium that people pay when the FHA backs their loan. That is estimated to save the average borrower about $900 a year. Also, last year FHA announced steps it was taking to work with lenders to expand access to credit. A condo “rulemaking process” is also on the agenda this term, Secretary Castro said.
“If it was true that a few years ago it was too easy to get a home loan, the story of the last couple of years has been that for middle-class folks, whether they’re a first-time homebuyer or not, responsible folks, it has been too difficult to get a home loan,” he said. “So the question is: How do we maintain the safeguards that we have in place but also open up the credit box?”
Secretary Castro said strong, sensible policies helping responsible borrowers—particularly those in poor and minority communities—are a way to counter income inequality and close the wealth gap in the country.
“Generation after generation, the primary vehicle to create wealth in our country has been through homeownership, and today we have the lowest homeownership rate that we’ve had in 48 years,” he said.
Secretary Castro said he applauds the D.C. government for taking steps to help ensure that people of a wide range of incomes could afford to live in the District.
“D.C. is a very expensive market—I found that out myself,” said Secretary Castro, the former mayor of San Antonio. “My family and I—what we’ve paid today for a two-bedroom apartment is way higher than what we would be paying back in San Antonio. I can only imagine for folks who are of modest means how that can cause them to stretch their resources.”
Secretary Castro has been suggested as a possible vice presidential pick for Hillary Clinton, who is campaigning for the Democratic nomination. After the event, when asked what he would do if asked to be her running mate, Secretary Castro said, “I don’t believe that that’s going to happen. I’m convinced that the best way to create a great future for yourself is not to forget about what you’re doing now. So, I’m just trying to do a great job.”
The event was presented by Realtor.com, the online real estate listings portal, and hosted by GW. GW was a great place to have this discussion, Dr. Livingstone said, and not just for the obvious reason—that its students are millennials. The university also houses the Center for Real Estate and Urban Analysis.