National economist highlights housing market trends

Housing is slowly improving, but some aspects of the economy are having a grinding effect on the overall health of the real estate industry, according to Dr. Elliot Eisenberg, a former senior economist with the National Association of Home Builders.

Eisenberg, who addressed the Pennsylvania Housing Finance Agency’s (PHFA) Housing Forum in Harrisburg yesterday, named several issues that have negatively impacted housing. He said student loan debt and low-income growth have made it difficult for young people to enter the housing market. “It’s also impossible to get credit if your score is below 640, so we’ve knocked 20 percent of buyers out of the market,” he said, attributing the negative credit issue to the Dodd-Frank legislation.

“The median price gap between new and existing homes is huge and unsustainable,” Eisenberg said. “People are getting priced out of the market.” According to his research, the national median existing home sale price is approximately $210,000, while the median new home price is $280,000.

He said that single-family housing starts in Pennsylvania are weak and builders have been building larger homes that are not meeting the demand for first-time homebuyers.

He said rental prices continue to climb and low-income growth have made it increasingly difficult for renters to maintain housing.

Eisenberg noted the Pennsylvania housing market is improving, but growth is below the national average. He pointed out the Pittsburgh market appears to have not been affected by the boom, but has seen a steady increase throughout the last several years even as other Pennsylvania markets saw a decrease.

“We’ve seen credit is getting easier to obtain and the Federal Housing Administration (FHA) lowering the annual mortgage insurance premiums on home loans has also made things easier for homebuyers,” he added. “If Fannie Mae and Freddie Mac adopt the FICO 9, it would expand access to mortgage credit within the housing market as well.”

The National Association of Realtors® supports lenders and the government-sponsored enterprises adopting alternative credit scoring methods like FICO 9, which incorporate public utility and rental housing payments. These allow lenders to evaluate younger people and minorities who might not have a history of credit use. FICO estimates that its new model could improve scores by 25 to 100 basis points.