The NAR reports existing home sales for December

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Article Highlights

  • Nearly half of all home purchase loans in December had a down payment of 5% or less.

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  • Loose lending combined with the Fed’s low interest rate policies are driving home prices up faster than fundamentals.

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  • While the NAR supports loose, unsustainable lending standards, working class home buyers would be better served by a “straight, broad highway to debt-free ownership.

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The National Association of Realtors (NAR) reported today that existing Home Sales for December came in at 4.87 million. The consensus was for sales of 4.94 million on seasonally adjusted annual rate (SAAR) basis. Sales in November were revised downward to 4.82 million SAAR. The inventory of homes for sale came in at 1.86 million, down 9.3% from November and represents a 4.6 month supply.

Sales for all of 2013 are at a healthy pace given sluggish job growth. It is the highest level since 2006 and near the 5.2 million average for 1998-2001. Sales are being helped by loose lending standards and interest rates still near their lowest level in decades.

For example, nearly half of all home purchase loans in December 2013 had a down payment of 5% or less and nearly a quarter of purchase loans had a debt-to-income ratio >43% – high by anyone’s measure. Loose lending combined with the Fed’s low interest rate policies are driving home prices up faster than fundamentals such as rents and consumer prices. Given the 4.6 month supply of homes for sale (down from 5.1 months in November), home prices can be expected to continue to outpace rents. This does not bode well for the middle class as government policies are once again driving an unsustainable increase in home prices.

While the NAR supports loose, unsustainable lending standards, working class home buyers would be better served by a “straight, broad highway to debt-free ownership” – the standard espoused and successfully implemented by FHA in 1935, but now long since abandoned.

Edward J. Pinto is a Codirector of AEI’s International Center on Housing Risk.

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About the Author

 

Edward J.
Pinto
  • American Enterprise Institute (AEI) resident fellow Edward J. Pinto is the codirector of AEI’s International Center on Housing Risk. He is currently researching policy options for rebuilding the US housing finance sector and specializes in the effect of government housing policies on mortgages, foreclosures, and on the availability of affordable housing for working-class families. Pinto writes AEI’s monthly Housing Risk Watch, which has replaced AEI’s FHA Watch. Along with AEI resident scholar Stephen Oliner, Pinto is the creator and developer of the AEI Pinto-Oliner Mortgage Risk, Collateral Risk, and Capital Adequacy Indexes.


    An executive vice president and chief credit officer for Fannie Mae until the late 1980s, Pinto has done groundbreaking research on the role of federal housing policy in the 2008 mortgage and financial crisis. Pinto’s work on the Government Mortgage Complex includes seminal research papers submitted to the Financial Crisis Inquiry Commission: “Government Housing Policies in the Lead-up to the Financial Crisis” and “Triggers of the Financial Crisis.” In December 2012, he completed a study of 2.4 million Federal Housing Administration (FHA)–insured loans and found that FHA policies have resulted in a high proportion of working-class families losing their homes.

    Pinto has a J.D. from Indiana University Maurer School of Law and a B.A. from the University of Illinois at Urbana-Champaign.

  • Phone: 240-423-2848
    Email: edward.pinto@aei.org
  • Assistant Info

    Name: Emily Rapp
    Phone: 202-419-5212
    Email: emily.rapp@aei.org

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