Virtual Hearing - Boom and Bust: Inequality, Homeownership, and the Long-Term... (EventID=114971)

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On Wednesday, June 29, 2022, at 12:00 p.m. (ET) full Committee Chairwoman Waters and Ranking Member McHenry will host a virtual hearing entitled, “Boom and Bust: Inequality, Homeownership, and the Long-Term Impacts of the Hot Housing Market."

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Witness for this one-panel hearing will be:

• Michael Calhoun, President, Center for Responsible Lending

• Sam Chandan, Professor of Finance & Director of Stern School of Business, New York University

• Jung Hyun Choi, Senior Research Associate for Housing Finance Policy Center, Urban Institute

• Lydia Pope, President, National Association of Real Estate Brokers

• Norbert Michel, Vice President and Director of the Center for Monetary and Financial Alternatives, Cato Institute
Background

For decades, homeownership has been the primary driver of household wealth in the United States with homeowners holding over 40 times the median net worth of renters in 2019. Homeownership not only financially outperforms stocks and bonds in terms of an investment vehicle, but it has a practical utility of housing families, and its returns make it more beneficial than renting for most. The economic security obtained through owning a home can serve as a cushion in a time of crisis, like during the COVID pandemic, as home equity reached a record $27.8 trillion in 2022.

Mortgage rates have increased significantly this year due to Federal Reserve interest rate hikes. Earlier in the pandemic, however, interest rates were historically low. Many homebuyers and owners were able to take advantage of low rates to refinance into lower monthly payments or purchase a new home, while people of color were disproportionately denied refinance applications or remained locked out of homeownership due to a lack of downpayment or other barriers.

Homebuying During the Pandemic

When the pandemic hit the U.S. in March 2020, the country and the economy were brought to a halt. As COVID infection and death rates began to skyrocket, families across the country were forced to for many, especially among lower income households and households of color.

In order to jumpstart an unstable economy at the outset of the pandemic, the Federal Reserve lowered already historically low interest rates, and while many families struggled to make ends meet, others were able to take advantage of the low-interest rate environment. Due in part to the aggregate trends of increased consumer purchasing power driven by historically low mortgage interest rates, a buildup in demand, a more mobile workforce, and a worsening housing supply shortage, home prices began to skyrocket during the pandemic and the U.S. housing market quickly turned red hot. quarantine and businesses shut their doors, leading to a significant loss of work, pay, and financial stability for many, especially among lower income households and households of color.

In order to jumpstart an unstable economy at the outset of the pandemic, the Federal Reserve lowered already historically low interest rates, and while many families struggled to make ends meet, others were able to take advantage of the low-interest rate environment. Due in part to the aggregate trends of increased consumer purchasing power driven by historically low mortgage interest rates, a buildup in demand, a more mobile workforce, and a worsening housing supply shortage, home prices began to skyrocket during the pandemic and the U.S. housing market quickly turned red hot.

Mortgage originations reached record highs in 2021 at $4.8 trillion, surpassing the previous record of $4.1 trillion in 2020 and more than doubling 2019 pre-pandemic levels ($2.4 trillion). Leading up to the pandemic, home prices were rising at an average of 5.9% annually between 2014 and 2019, with a 64.1% national homeownership rate in 2019. In stark contrast, home prices increased by 10.8% between the fourth quarters (Q4) of 2019 and 2020 and increased another 17.5% between Q4 2021 and 2022. The pace of home sales also accelerated; in 2020, homes tended to stay on the market for about 17 days, decreasing by nearly a month between December 2019, when homes were on the market for approximately days, and December 2020. As of mid-May 2021, half of all homes in the U.S. sold for above the listing price and the number of homes selling for more than $100,000 over the listing price increased by more than 260% from 2021 to 2022. Many borrowers were driven into intense bidding wars, and in many cases, homebuyers either fully or partially waived contingencies.

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Hearing page: https://financialservices.house.gov/events/eventsingle.aspx?EventID=409521

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