Last week remarked one of life’s momentous occasions. They occur for everyone, and in everyone’s life there are those we never forget. Mine? My daughter and her husband became first-time homebuyers.
“What’s the big deal”, you might be thinking. Thousands of former renters become new homeowners every day. Millions every year. Moreover, her father, me, is a mortgage guy. Of course my daughter bought a home. What else would she do?
Ten years ago I would have wholeheartedly agreed with you. Even seven years ago. Less than that, not so much. The truth is, as the housing crisis unfolded and the economy plunged deeply into recession, the American Dream became simply that for many people. The pundits thought, and there’s much been written over the past five years: we had seen the end of homeownership in the US. As the theory went, people would choose to rent instead, keeping their mobility and employment options open while incurring less financial risk.
Silly pundits. The American Dream is resilient. Also last week I had the pleasure of hearing Dr. Eric Belsky, managing director of the Joint Center for Housing Studies at Harvard, speak about the housing recovery. A truly informative presentation chock full of invaluable information for everyone involved in mortgage lending. One thing popped. One piece of information, more than any other, caught everyone’s attention: nearly all people under the age of 45 expect to purchase a home in the future.
Despite everything, despite foreclosures, underwater homeowners, unemployment and the economy in general, people still want to, and plan to, own homes. And why not? Housing values are beginning to rise in many parts of the country, off their lows and on to steady gains. Rents are rising, too. In many markets it is far cheaper to own a home than it is to rent. I had a chance to talk with several lenders last week who confirmed both these dynamics. First-time homebuyers are back. In many cases, when first-timers become owners, their monthly housing expense drops. On top of that, they now have an appreciable asset as opposed to a pure expense. Sorry, pundits. Owning a home is still a good deal, and a good idea.
What does this mean for credit unions? Opportunity. Even though mortgage rates are rising, it’s no time to panic. In fact, there are at least three better responses than panic. First, rising rates encourage buyers to take action. Who wouldn’t want a 30-year fixed rate loan in the low- to mid-4.00% range? Second, while rates are up off the bottom – may stay there or may continue rising– rates remain remarkably, historically low. The last time rates were in the 4.00s? The 1950s. There aren’t too many mortgage lenders left from those days. They are gone, but their rates are back.
The third response, if you are not doing so already, is to focus on first-time buyers. Another ahh hah moment from last week: first-time homebuyers do not have properties to sell, making them more agile, simpler to work with and easier to close. Not that credit unions should abandon those buying up or buying down, they are important too. It’s just that the lucky lender who has the opportunity to make a buyer’s first home loan is much more likely to make their next home loan, their other loans and provide all of their other financial service needs. Financing a first-time buyer is the start of a beautiful relationship.
As for my daughter and her husband, homeownership has consumed them. Painting, moving, decorating, mowing the lawn, oh, and having a beer on the back porch at the end of the day. The American Dream is very much alive, members are living it, and credit unions must be there to help. And, yes, they financed with their credit union.