The busiest season for buying homes is already here, with a strong spring performance leading into the summer. In fact, homes sold more quickly in April than at any other time in the two years prior. According to data released by the National Association of Realtors, sales for existing homes this year are expected to bring in more than $5 million.
Part of the reason for this jump in the current housing market has to do with the Federal Housing Administration’s determination to reduce mortgage insurance premiums by .5% earlier in 2015. This reduction could affect home-buyers significantly, by saving as many as 2 million homeowners up to $900 every year. In addition to the beneficial savings, it will also allow a quarter of a million homeowners to make their first purchase. Along with these changes in the housing industry that have positive outcomes for buyers, builders are also encouraged to generate more housing, which has a strong impact on the economy overall.
Those in the know argue that regulators and lenders should continue to support fair and reasonable lending standards for homeowners so as to allow for a more prosperous American economy. In the past, home-buyers were restricted by tight lending requirements such as mortgages insured by the federal government and higher fees. This impacted how many home-buyers were eligible to move forward with a home purchase. While these restrictions might have been well-meaning, they were so strict that many individuals opted out of buying a home at all. This is a big part of the reason why insurance premiums have dropped recently, with the belief being that more families will be able to afford purchasing a home.
Many of the conservative standards that affected the performance of the home lending market were tied to strict regulations following the great recession. This made it hard for even Americans with good credit to obtain housing loans. Unfortunately, this most strongly impacted younger home-buyers and minorities. In fact, only 32% of all home sales in 2014 were tied to the millennial generation. Looking back at historical data, this represents a number 10% below the nationwide average. These standards had ripple effects across the housing industry.
The Federal Housing Administration has reported decreased numbers of mortgage applications as a result of high insurance rates and fees. Many of these home-buyers have resorted to finding cheaper mortgages from somewhere else or avoiding buying a home entirely as a result of these challenges. This goes against the general purpose of the Federal Housing Administration, which was created to expand access to home ownership for Americans.
Reducing those insurance premiums is believed to be a first step in bringing the agency back to its mission of making home-ownership affordable and achievable for individuals across the country. Regulators are arguing that this needs to be done with balance so as to guard against future problems while also allowing individuals and families to purchase homes.