Is the Housing Crisis Over?
Rory Doyle / There Is More Work To Be Done
Rory Doyle / There Is More Work To Be Done
Today, the housing crisis is defined by different factors
For more on this topic, read the July 2014 issue of
Chuck Wehrwein, Acting President & CEO, NeighborWorks America
Do you believe that the housing crisis is over?
While it is true that there are a lot of signs of recovery for the nation as a whole, the housing crisis is not over in many communities around the country. Many of the communities that we work in are still dealing with a backlog of vacant and abandoned properties.
For more on this topic, read the July 2014 issue of .
In 2008 the U.S. economy fell off a cliff. Depending on your perspective it either slipped or was pushed from that precipice by the housing markets. But after six years where are we? How were rural Americans impacted, and are there lingering effects from the crisis? Rural Voices assembled four of the most knowledgeable experts in the affordable housing world to help answer these complex questions and provide insights on how to improve rural housing conditions in the wake of the housing crisis.
Chuck Wehrwein, Acting President & CEO, NeighborWorks America
Do you believe that the housing crisis is over?
While it is true that there are a lot of signs of recovery for the nation as a whole, the housing crisis is not over in many communities around the country. Many of the communities that we work in are still dealing with a backlog of vacant and abandoned properties.
Particularly feeling the brunt are families who are still under water on their mortgages and younger people who are unable to buy their first home because that can’t qualify for a loan or can’t find an affordable house – often due to crushing student debt.
To put it in perspective, in April there were 46,000 completed foreclosures, according to CoreLogic. That represents a significant decline year over year, and foreclosures have been falling for two and a half years. But, it is also important to note that the monthly number of completed foreclosures is still almost double what it was in the average pre-crisis month between 2000 and 2006. The Urban Institute estimates that, mostly because of tight credit, as many as 1.2 million loans that would have been made in 2001 are “missing” from today’s market.
And let’s not forget the families who can’t even afford to think about buying, yet are paying more than 50 percent of their incomes on rent or are homeless.
All of that points to a housing crisis that is not over yet.
What factors defined the “housing crisis?”
Five or six years ago, the “housing crisis” that was in the news every day was defined by foreclosures. People were losing their homes to foreclosure at a truly alarming pace.
Today, the housing crisis is defined by different factors. One is the lack of affordable rental housing, another is housing affordability, a third is tight lending standards, and a fourth is home values that is still leaving many borrowers underwater.
Of course, there other severe housing challenges that are much more long-standing, particularly in rural areas. These include a general lack of affordable housing and, historically, widespread poor housing conditions.
How, was the housing crisis different for rural areas than the nation as a whole?
Most rural areas didn’t see the wild price fluctuations that we saw in urban and suburban areas during the boom and bust years. So, while families lost value in their homes, they probably didn’t lose as much equity as urban and suburban residents.
But that is not to say that the housing crisis—and the foreclosure crisis—didn’t impact rural areas. There certainly was—and is—a housing crisis in rural areas – although it hasn’t been as well covered by the media. NeighborWorks has seen firsthand through our administration of the Foreclosure Mitigation Counseling (NFMC) program the impact of foreclosures in rural areas and the need for education and counseling. Through July 2013, almost 180,000 families in rural areas had received foreclosure counseling through NFMC.
Five or six years ago, the “housing crisis” that was in the news every day was defined by foreclosures. People were losing their homes to foreclosure at a truly alarming pace. Today, the housing crisis is defined by different factors.
What are some of the indirect or secondary impacts of the housing crisis?
At NeighborWorks America, we definitely see some of the impacts of the housing crisis on NeighborWorks organizations and the residents they serve, including those in rural areas. The decrease in government funding for housing—both from UDSA and HUD—has meant they are able to develop fewer new rental housing units, and that they are concerned about finding the resources to preserve existing units.
Homeownership has also been impacted. NeighborWorks organizations tell us anecdotally that it is harder for their customers to get mortgage loans due to tightened lending standards.
The Center on American Progress reported recently that nearly half of all mortgages made today go to borrowers with credit scores of more than 750, compared to 2001, when more than two-thirds of mortgages went to borrowers with scores lower than 750. That means more customers are looking to FHA and USDA loans for help. In addition, some of our organizations say the consolidation of USDA offices are leading to longer processing times for mortgage loans issued by the agency – a mainstay in rural communities. NeighborWorks organizations who have CDFIs are working hard to fill in the gaps in the mortgage market.
Photo: Empty – Ruin Raider – Creative Commons
What are the long term ramifications for affordable housing?
Let me start by saying that it is our experience at NeighborWorks that nonprofit community development organizations serving rural areas are some of the most creative groups out there. I am very confident they will continue to go a long way toward serving the housing needs of their rural communities.
However, there still are many people in rural areas who are in need decent, affordable housing. Additional resources are needed to expand opportunities on a broader scale, and given the current funding environment, that will be very challenging.
But there is always a silver lining. The quality and energy efficiency of new manufactured housing have improved greatly and this type of construction could help serve some of the unmet needs if ramped up. Some states and organizations are working to improve the energy efficiency by doing replacements of older manufactured homes as well. And we have seen in the NeighborWorks network and through ROC USA, the value that resident-owned manufactured housing communities bring to residents and to communities. It is my hope that the challenging funding environment will lead local policy makers to, for example, reconsider their ownership laws for manufactured housing, and lenders to find new ways to finance them.
