Overview of the State of U.S. Housing

Abstract

Topics covered in this panel discussion included the potential for another housing bubble, prospects for government-sponsored enterprise (GSE) reform, the issue of eminent domain in such cities as Richmond, CA, and investments in REO-to-rental markets. The panel generally agreed that the recent rise in house price indices is not leading to a new housing bubble, but is rather more reflective of a rebound from the previous overadjustment, emphasizing that recent trends are well below dangerous peaks and affordability remains high. The panel was generally skeptical on legal and logistical grounds of Richmond’s plans to use eminent domain to buy mortgages from underwater borrowers at a discount and refinance smaller amounts. Investors have been buying large amounts of residential houses, with this asset class somewhat replacing high-yield mortgage products, but the risk of large-scale dumping by institutional investors is considered to be low. “Securitization 2.0” brought forth an improvement in origination data, but disclosure of servicer behavior is still deficient and further disclosure and standardization of data at the back end is still needed. Future homebuyer-borrowers will include more minority and multi-income households and lower credit scores and require a reevaluation of mortgage lending criteria.