Industry Watch: Homeownership Advances on All Fronts

Survey finds significant gains in homeowneship among minorities and lower income groups.

February 1, 2001

Homeownership has increased dramatically during the last seven years, according to a recent survey report from the Consumer Federation of America. Overall, the percentage of Americans owning their own homes reached a record of slightly more than 67.5 percent in 2000. The breadth of the advance in certain categories of owners is even more impressive.

  • From 1994 to 2000, the percentage of citizens with annual incomes beneath the national median who own homes rose from 48 percent to 51 percent. Homeownership climbed to 82 percent in 2000 from 78 percent in 1994 for those with incomes above the national median.
  • Forty-seven percent of African-Americans owned their residences in 2000, compared with 36 percent seven years earlier. During the same period, homeownership among Hispanics also rose 11 percent from 45 percent to 56 percent. Seventy-four percent of Non-Hispanic whites owned homes in 2000, compared with 69 percent in 1994.

But if homeownership is up, equity in a home is more fragile. Another study conducted by Opinion Research Corporation International for the Consumer Federation of American found that 20 percent of homeowners said they had borrowed against the equity in their property during the last five years.

The loans averaged $36,000. Nearly one-third of these borrowers used the money to refinance their consumer debt. One-quarter of the group said they were concerned about repaying their home mortgages.

When it comes to technological advancements, “you ain’t seen nuthin’ yet,” if the products on exhibit at the recent Consumer Electronics Show in Las Vegas are any indication. Many of these new devices could have a direct effect on you. Among them:

  • A “watch phone” straight out of Dick Tracy will allow you to tell time, save voice memos, and dial phone calls with voice commands.
  • Satellite car radios will let you tune into more than 100 radio stations via satellite, in addition to local AM and FM broadcasts coming through traditional radio signals. XM Satellite Radio, one of two manufacturers offering this service, promises that soon 18 models of car radios will feature satellite capabilities.
  • “The Truster,” a small, portable lie detector, enables you to use voice recognition technology to analyze if a person is telling a lie. Imagine the real estate applications for this one.
  • Car stereos that can store enough digital music files to drive from Los Angeles to New York City more than 10 times without repeating a song will be a boon for real estate salespeople who spend long hours in their cars.

A law passed in December 2000, provides significant new tax relief and incentives to the real estate industry. Among the provisions contained in the act was an increase in the low–income housing tax credit to $1.50 in 2001, $1.75 in 2002. Starting in 2003, increases will be indexed to inflation. The law also speeds up the increase in the private activity bond cap to $75 per capita and a $225 million minimum per state by 2002. Both of these measures will increase funding for low- and moderate-income housing and should spur more construction.

The law also provides tax incentives for 40 renewal communities, starting July 1, 2001, and extending until December 31, 2009. Among other benefits, designated communities will be eligible for a 15 percent wage credit for the first $10,000 of wages paid to employees who live and work in the renewal community, an extension of the work-opportunity tax credit for hiring youth in renewal communities, and an exemption from capital-gains tax on sales of qualified community assets acquired after December 2001 and held more than five years.

Still another provision benefiting the real estate industry is the extension of brownfields legislation that encourages site cleanup. The provision, which was extended until January 1, 2004, will provide nearly $500 million in credits to encourage the redevelopment of lightly contaminated urban and commercial sites. The credit will allow all brownfields cleanup costs to be deducted when incurred, including those incurred outside federal empowerment zones. These deductions should help to encourage redevelopment of valuable, in-infill sites for new uses such as housing.

The new alliance between Fleetwood Homes, the manufactured housing specialist, and Wal-Mart has some industry observers wondering what might come next. Fleetwood has announced that it’s initiating a program in conjunction with Sam’s Club, a division of Wal-Mart Stores, through which club members can buy a Fleetwood manufactured home at a pre-negotiated, discounted price and receive a “rebate” in the form of a gift certificates redeemable for home products at a Sam’s Club facility. The program is being introduced in February in Houston, Jacksonville, and the state of Arkansas.

The state of California is in the midst of a housing affordability crisis, according to the California Association of REALTORS. In presenting its 2001 legislative initiatives, the association noted that “with less than one-third of California families able to purchase a home, the lack of affordable housing threatens to derail the state’s booming economy and unravel its diverse social fabric, relegating California to a society of housing haves and have-nots.” Currently, according to CAR economists, only 34 percent of families in Los Angeles can afford to buy a medium-priced home. In San Francisco that figure drops to 10 percent.

CAR’s legislative package includes proposals for three major bills to counter this trend

  • A mortgage loan insurance bill, which would benefit first-time homebuyers who don’t have a 20-percent downpayment.
  • A housing reform and incentives bill, which would make it difficult for a local government to deny housing development projects for low, very low and moderate-income households.
  • A security deposit guarantee bill, which establishes a voluntary program for landlords and tenants to assist tenants who do not have the requisite security deposit needed to move into rental housing.

In introducing the legislation proposals, CAR President Gary Thomas said, “The inability of California residents to purchase homes of their own could be the Achilles’ heel of economic development. Even if the economy continues to forge ahead with productivity gains and low inflation, California is vulnerable to other areas of the country where housing is more affordable.”

The Appraisal Institute is concerned that its members are being pressured to overvalue property and has asked Congress to investigate alleged attempts by mortgage creditors, lenders, and real estate salespeople and brokers to unduly influence appraisers’ professional judgments on value. Institute President Brian A. Glanville said that these groups can apply pressure on appraisers to overvalue properties by threatening to withhold future business.

Veteran industry observer Tom Dooley is president of TWD Associates, a real estate consulting firm in Arlington Heights, Il., and editor of two monthly newsletters. Contact him at 847/398-6410;

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