Working families grow house poor
Sunday August 7, 10:27 pm ET
Though homeownership is at a record level, affordability is a growing problem.
Home prices rose 78% from 1994 to 2004, not adjusted for inflation, while personal incomes rose 64%, according to the Federal Reserve Bank of Richmond's Region Focus magazine. The number of middle-income families spending more than 30% of their income on housing - a benchmark of affordability - rose from 3.2 million in 1997 to 4.5 million in 2001.
"The market isn't going to self-correct," says Nicholas Retsinas, director of Harvard's Joint Center for Housing Studies. "We are not going to return to a day where the housing market is in synch with our labor market and issues of affordability are restricted to the very poor."
Non-profit housing groups say that makes it even more important that manufactured housing become a viable, appreciating asset. One big hurdle? Financing.
Though nearly all manufactured homes are never moved once delivered to a lot, many states consider them personal property, like cars. More than 60% of manufactured homes were titled as personal property in 2003, forcing buyers to turn to higher-interest loans that lack the consumer protections of mortgages.
Pricing is not transparent. The Southwest regional office of the Consumers Union found prices for the same model of manufactured home fluctuated widely, with first-time home buyers paying 8% more on average than more experienced buyers. Those financing through dealers paid 11% more than those using outside lenders or cash.
In 2003, Fannie Mae tightened standards for buying manufactured housing loans. Chuck Rumfola, Fannie Mae vice president for manufactured housing, says loan-to-value ratios have since gone down, credit scores moved up and loans have shifted to 20-year terms from 30 years, helping borrowers build equity faster.
The Manufactured Housing Institute has also developed best-lending practices, including employee training, underwriting standards and consumer protections.
"If it's done right, it has a lot of potential. The problem has been that it hasn't been done right," Rumfola says. |
