The government-sponsored enterprises will begin accepting loans with smaller down payments for homebuyers, according to an announcement.
Fannie Mae and Freddie Mac will back loans with as little as 3 percent down payments, down from 5 percent, to help bolster the housing market, said Federal Housing Finance Agency Director Mel Watt at the annual Mortgage Bankers Association convention in Las Vegas.
Most industry officials aren’t worried about losing renters to home sales. Recently, moveouts for homeownership has hovered between 10 and 12 percent on average, according to Dallas-based research firm Axiometrics. And there’s wiggle room: that rate can rise to between 18 and 20 percent and still be considered a healthy balance, according to the firm.
Here’s how some of the multifamily industry’s leading economists reacted to the news:
“While the affordability challenge is a factor holding back home purchase by first-time buyers, it isn’t the only factor. Simple demographics probably are more important. The oldest Millennials are just now reaching the age when home purchase has been typical historically, and the group is waiting longer to marry, have kids and make other lifestyle changes that tend to trigger purchase. Plus, renting offers mobility in a shifting economy where job change is routine among young adults. We haven’t changed the world for the apartment industry by slightly tweaking mortgage lending standards. To the slight extent that home purchase could accelerate, the impact on apartments appears likely to be neutral. Yes, some renters will be lost to purchase, but an improving for-sale market will support job formation that could spur additional renter household formation.” Greg Willett, MPF Research
“I don’t think it will have a huge impact. Most people make the rent-vs-own decision based on where they are in their lives, not the relative economics. That said, this will likely enable some who are renting that prefer to buy a home to finally be able to do so. But it shouldn’t be that disruptive to the market.” Ryan Severino, Reis
“We want the single-family markets to do well. When single family is strong, it creates jobs. That, in turn, helps the apartment market. Those working on single-family homes are more likely to rent. A healthy single-family market means other secondary effects into the economy. There is construction. People buying homes will buy furniture and appliances. Basically, a healthy single-family market creates jobs and boosts demand for apartments.” KC Sanjay, Axiometrics
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Lindsay Machak is an associate editor in the Residential Construction Group. She has past experience working as a reporter covering crime and business in various cities across the country after graduating from Michigan State University. Connect with her on Twitter @LMachak.