Easier path to home ownership?
The National Association of Realtors and the Department of Housing and Urban development agree, the way credit scores are calculated needs updating. Credit scoring companies have already taken steps to broaden the criteria to include payments for utilities and rents. Also being considered is softening the credit score penalties often associated with large medical bills.
Many first-time buyers who usually pay cash or use debit cards for purchases find frustration when trying to finance a home because they do not have enough borrowing history to generate an attractive credit score. By looking at other measurements like on-time payments to a property manager, phone company or utilities under the proposed changes these folks could build a good score through the agencies adopting the proposed new standards. Recent research by Experian finds that the inclusion of utility payments in a credit-scoring model could reduce the number of borrowers considered to be subprime by half.
Other steps are being taken to make loans a bit easier to get while avoiding the trap of overzealous loose lending that led to the last housing bubble. Last week the House of Representatives passed H.R. 685, "The Mortgage Choice Act" by a vote of 286-140 with 45 Democrats joining the Republicans. H.R. 685 is bipartisan legislation which makes two adjustments to the Truth in Lending Act's definition of "points and fees" to ensure greater consumer choice in mortgage and settlement services under the Consumer Finance Protection Bureau's Ability to Repay/Qualified Mortgage rule. Companion legislation is being worked on in the Senate. NAR continues to work with coalition partners to advance this important legislation in the Senate.
While these things could help the housing market, we are seeing another challenge locally. With 54 percent of our residential sales selling for less than $200,000, a search of the Coeur d'Alene market revealed only 126 homes available below that price. Of that number, nearly half showed accepted offers already in place, waiting for financing or inspections before moving to closing and completing the transfer. This makes it pretty slim pickings for buyers trying to find affordable houses.
Post Falls showed a little better in available inventory with 147 homes. While less were under contract than in Coeur d'Alene, many of the advertised homes are yet to be built. With inventory constraints like these, restructuring loans and credit scores are not going to be the answer. Changes though, may drive builder confidence and compel builders to build more "spec" homes in anticipation of continued demand. As word spreads among homeowners reluctant to list their properties, more inventory should become available.
Shopping for homes may get a little bit easier in the near future but it still will not be easy for first-time buyers who have not seen a shortage of inventory. Their experience will be challenging, even frustrating, but those that persist can still enjoy the benefits of home ownership. The key word is "persist."
Trust an expert...call a Realtor. Call your Realtor or visit www.cdarealtors.com to search properties on the Multiple Listing Service or to find a Realtor member who will represent your best interests.
Kim Cooper is a real estate broker and the spokesman for the Coeur d'Alene Association of Realtors. Kim and the association invite your feedback and input for this column. You may contact them by writing to the Coeur d'Alene Association of Realtors, 409 W. Neider, Coeur d'Alene, ID 83815 or by calling (208) 667-0664.