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Additional research supports ‘State of Homeownership’ in Minnesota

UnevenRecoveryIn June, the Center released our “State of Homeownership” report, sharing information on the importance of homeownership, the latest data on the uneven housing recovery and expressing our hopes for smart, sustainable homeownership in Minnesota.

Recent research from the geography program at Macalester College shares similar findings on the aftermath of the crisis, showing an unequal recovery among neighborhoods hit hardest by foreclosure.

The project, “A Dream Foreclosed: The Uneven Geography of the Foreclosure Crisis in the Twin Cities,” by student Zach Avre, looks at the Twin Cities housing market leading up to the mortgage crisis and the impact of the resulting rise in foreclosures, particularly on historically marginalized communities.

Avre’s research found “Communities with high concentrations of people of color and low-income residents witnessed the greatest levels of housing value appreciation leading up to the housing crash. However, low-income communities of color and renters across the metro region experienced disproportionately higher rates of foreclosure and housing value depreciation than more affluent, white homeowners in the aftermath of the crash.”

Even today, the Center writes in its report, “Foreclosures continue to weigh heavily on the neighborhoods predominantly of color like Near North and Phillips in Minneapolis, and the Payne-Phalen and Thomas-Dale in St. Paul. In each of these neighborhoods, nearly half of all homes sold in 2013 had been foreclosed upon. Median home sale prices are also low – as low as $81,000 in Near North. Home values have improved in recent years, but 2013 sales prices must still increase by anywhere from 74 percent (Payne-Phalen) to 110 percent (Phillips) to reach peak home values recorded in 2006.”

In conducting his case studies of these areas, Avre uses urban housing submarket theory – in short, the idea that home values tend to appreciate most quickly at the edges of suburban development, and most slowly in the city core. “Yet,” he writes, “not only did a housing bubble develop within North Minneapolis before 2006, but the tracts in the central city also witnessed the most substantial declines in home values following the crash.”

Delinquency rates – a sign of foreclosures to come – are also high in predominately minority and low-income neighborhoods, ranging from 5 to 8 percent of all mortgaged homes. Affluent, mostly white neighborhoods reviewed are seeing the opposite trend. In Southwest Minneapolis, average home sale prices reached $306,000 and distressed homes made up only 9 percent of sales in 2013. There, just 8 percent of homes are underwater and home values have exceeded 2006 peak prices.

TodaysBuyersAreCautiousThough Avre states homeownership has traditionally been a goal in the working class and lower middle class submarkets, today’s homebuyers of all incomes are more cautious. In fact, more than 3 in 4 Americans believe the housing crisis isn’t over, according to a 2013 survey sponsored by the MacArthur Foundation.

This caution is playing out in Minnesota, where more first-time homebuyers are taking steps to make thoughtful and informed purchases. Overall, homebuyer education is expected to play a greater role in the home buying process in the years to come as lenders, consumer advocates and local governments recognize that education is a significant deterrent to foreclosure. One 2013 analysis by Freddie Mac even found mortgage delinquency dropped by nearly one-third when first-time homebuyers participated in education or counseling.

If you are purchasing your first home – or working with clients that are in the buying process – make sure you avail yourself of one of the best deterrents to future foreclosure… additional information about homebuyer education in Minnesota is available, here.

Posted on: Monday, August 25th, 2014

HAWK Sighting… Big Change for FHA Proposed

HAWK_CaptureOn Tuesday May 13th, the Federal Housing Administration released its “Blueprint for Access” in which the FHA outlines a number of proposed plans to expand access to affordable mortgages for underserved borrowers.

Here at the Homeownership Center, we know that stable homeownership is an enormous benefit both for families and their communities, and that successful homeownership is possible through smart choices based on solid information and applaud the FHA for proposing the pilot program Homeowners Armed with Knowledge, or HAWK for short, which seeks to integrate housing counseling into the homebuying process for borrowers using an FHA-insured mortgage.

The HAWK program will offer buyers savings on their FHA-insured loans if they complete housing counseling provided by independent nonprofit organizations like the Homeownership Advisors Network here in Minnesota.

Quoting directly from the proposed HAWK plan: “To increase access, we must identify and implement responsible ways for creditworthy borrowers to obtain mortgage credit. This includes encouraging housing counseling. Responsible access can be enhanced by ensuring borrowers are well-educated about the home-buying and mortgage finance process.”

So what does HAWK mean for buyers?

If the proposed plan is enacted, buyers who complete Homebuyer Education and Counseling before signing a purchase agreement, and also complete a pre-closing counseling session, will qualify for a substantial savings on the Mortgage Insurance Premium (MIP) of their FHA-Insured loans. The proposal calls for a reduction of 50 basis points on the cost of the upfront MIP and a 10 basis point reduction in the annual MIP. PLUS, if buyers complete post-closing counseling and maintain their payments, with no delinquencies, for a minimum of two years after closing, they will see an additional 15 basis points reduction in their annual MIP.

According to FHA, the average FHA loan is about $180,000. These reductions could save buyers over $300 per year, and almost $9,800 over the life of the loan.

What happens next?

The entire HAWK program is, at this point in time, just a proposal and will be open to comment as part of the upcoming Federal Register Notice… so many parts of the program, especially the MIP savings, could change.

If the program proceeds past the comment period, which seems likely, FHA will begin to pilot the program in the fall of 2014. The Minnesota Homeownership Center, as a HUD-Approved Intermediary, looks forward to working with FHA on this program to more-fully integrate Housing Counseling into the homebuying process. We’ll keep you up to date as details of the program become available.

If you are interested in learning more about OTHER affordable mortgage options, some with low down-payment options or options for people with less than perfect credit, speak with a Homeownership Advisor today! Counseling is FREE and available to everyone in Minnesota.

 

Posted on: Wednesday, May 14th, 2014

Emerging Markets, Homeownership and Olmsted County

The Federal Reserve Bank of Minneapolis, Greater Minnesota Housing Fund and the Minnesota Homeownership Center invite you to attend:

EMERGING MARKETS HOMEOWNERSHIP INITIATIVE
LUNCH & LEARN:
Emerging Markets Opportunities in 
Rochester and Olmsted County



SPEAKERS

  • Michael Grover, Community Development Manager for the Federal Reserve Bank of Minneapolis will share information on current demographics and homeownership rates in Olmsted County, 
  • Umbelina Cremer, will provide insight into programming that Three Rivers Community Action has used to successfully transition emerging markets clients to homeownership. 
  • Paul Wilson, Olmsted County Commissioner, will share information on the results of the Rochester Housing Summit.

 

Click For PDF Version To Share


DATE & TIME: Wednesday, October 30th, 2013 11:30am – 1pm

LOCATION: Rochester Event Center

AGENDA:
     11:00    Registration and lunch*
     12:00 – 1pm   Speakers and small group discussion
     1:00   Wrap-up
     * Lunch will be provided by the Federal Reserve Bank of Minneapolis
  
COST: Free

AUDIENCE: This Lunch and Learn opportunity – including a free lunch! – is open to all homeownership stakeholders, including: real estate, lending, government and non profit leaders working on Emerging Markets and affordable homeownership issues. 

PARKING: Free, Onsite.

RSVP TODAY:  http://RochesterEMHI.eventbrite.com/

Posted on: Thursday, October 10th, 2013