Don’t Risk the American Dream

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Guest Commentary
By Patrick Sullivan

The American Dream of homeownership is very much alive in the minds of most Americans, according to a new poll commissioned by the National Association of Home Builders. The results from a survey of 2,000 likely voters in next year’s election reveals a disturbing disconnect between the average voter and members of Congress who have been developing new housing policies in the aftermath of the recession.

Conducted in early May by leading Republican and Democratic polling firms, Public Opinion Strategies and Lake Research Partners, the NAHB survey found that an overwhelming 75 percent of the people responding said that owning a home is worth the risk of the fluctuations in the market. The same share said owning a home is the best long-term investment a person can make, and 95 percent of those who were homeowners said they were happy with their decision to buy. Almost three-quarters of those who don’t currently own a home said that homeownership was one of their goals. For the younger voters who are most likely to be in the market for a home in the next few years, the percentages were even higher.

On the one hand, you have the majority of Americans who believe that owning their own home is as important in their lives as being successful at their job or being able to pay for a family member’s education. On the other hand, there are the policy makers who want to greatly reduce the federal government’s commitment to housing and turn its attention to other things. Those two views are on a collision course. It will be a real tragedy if Americans don’t wake up to the events that are unfolding until it is too late and they find themselves in a situation where it is tougher to buy a home than it has been for generations.

Unfortunately, the voters’ rampant enthusiasm for homeownership has gone largely unrecognized by those reframing the nation’s housing finance system. Obtaining a mortgage today is already more difficult than it was before the boom and bust period of the previous decade, and things could well get worse. A proposal by six federal agencies to set a minimum 20 percent down payment standard for the most favorable lending terms would consign first-time buyers without substantial savings to higher borrowing costs and require them to have higher credit scores.

Currently, mortgages insured by the Federal Housing Administration, with minimum down payments of 3.5 percent, are about the only game in town for typical buyers just coming into the market. While FHA financing is a good fallback for cash-strapped home buyers, it too is vulnerable and may not be as widely available in the future.

Learning from the mistakes and excesses of the housing boom, the regulators should be implementing underwriting standards that ensure the borrower is able to repay the mortgage. That is a common-sense approach to putting the housing finance system back on its feet. Over the years, the federal government has played an essential role in supporting the flow of housing credit to working middle-class families to enable them to own homes. Disengaging from that commitment, as many now propose, is hardly what the voters want or expect, and that is a good reason for not embarking upon a worrisome course away from homeownership.

Americans overwhelmingly believe that it is appropriate for the federal government to support and promote homeownership. This sentiment cuts across all partisan and regional lines across the country. Americans believe the government should promote policies that restore the health of the home building industry to put America back to work.

Patrick S. Sullivan is executive vice president of the Home Builders Association of St. Louis and Eastern Missouri, a local trade association of more than 700 member firms.

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