Housing Finance - AEI

Housing Finance

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A panel of experts will debate the best path forward for Fannie Mae and Freddie Mac after a decade of government conservatorship.

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Imposing prudent underwriting standards will improve home affordability, head off a new wave of mortgage foreclosures, and protect the most vulnerable Americans.

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More leverage in the long-lasting seller’s market, now in its 67th month, is causing higher house prices concentrated at the lower end of the market where leverage has been increasing the most.

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The implications of leverage during a long-lasting seller’s market, now in its 67th month, are higher house prices concentrated at the lower end of the market where leverage has been increasing the most.

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Since their trough in 2012, home prices have risen at an annual average rate of 5.5%, far more rapidly than incomes or inflation. Ultimately, more supply is needed to bring the market back into equilibrium, but that takes time and is unlikely to happen soon.

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As the AEI Center on Housing Markets and Finance has been predicting, the national home purchase market continued its rally in 2017:Q4. Sales transactions increased 5.4% in the fourth quarter compared to a year ago, marking the 13th consecutive quarter of such increases.

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Don’t let the government housing lobby push policymakers away from ending any subsidies for very long-term fixed-rate mortgages.

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The Taxpayer Protection Housing Finance Plan describes how government-sponsored enterprises can be gradually eliminated over time through administrative action alone. Legislation will not be necessary.

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The trend toward higher first-time buyer risk continued this month primarily driven by higher debt-to-income ratios. As long as this trend continues during a very tight market, expect even higher house prices, especially for entry-level homes, and even greater first-time buyer risk.

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New research by the AEI Housing Center suggests that another cut to the FHA insurance premiums charged to homebuyers would reduce affordability and add few new homebuyers.

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Rather than promise the impossible—making housing affordable by decree—municipal governments should embrace practical solutions

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Moving forward, there will be even more risk as borrowers, especially first-time buyers, are forced to take on more leverage to buy.

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