All the elements are in place for a potential housing crash – but it is avoidable, says BlueHub CEO Elyse Cherry in an op-Ed published in Commonwealth Magazine.
Over the last few years, Americans have faced countless challenges we couldn’t have easily predicted: a global pandemic, war in Ukraine, supply chain issues, a roiling economy, and skyrocketing housing costs.
But we could have predicted what followed: a volatile housing market and inflation at levels unseen since the 1970s. Household budgets are strained, and many homeowners are turning to credit cards to sustain their expenses. Home foreclosure stats are on the rise nationwide.
For many Americans, especially in communities of color, hard work alone is no longer enough to maintain homeownership. Inflation has increased household spending by an average of $445 more per month. Higher energy prices are driving up the costs of heating a home by 27 percent nationwide, with steeper increases in Massachusetts, Illinois, and New York City. The number of households applying for utility bill assistance is the highest in over 10 years.
The once-booming housing market, fueled by real estate investors and limited supply, is on the decline. If investors and remote workers who fled larger cities sell en masse, we may see new home price volatility.
Sharp decreases in property values limit homeowners’ ability to tap into home equity. Thousands of homeowners are just one financial hardship away from foreclosure, and now is the time to ensure resources are available. Americans working hard to pay their mortgage should not have to live with the constant uncertainty of losing their homes.
The housing crash of the late aughts doesn’t exactly mirror today’s market, but it taught us significant lessons. In 2008, the government was slow to respond to damage by predatory lenders. Trapped in underwater mortgages, many homeowners had no solutions other than defaulting. Recently, the government has taken steps to protect struggling homeowners, but it hasn't been enough.
In 2020, Congress approved the Homeowner Assistance Fund (HAF), distributing over $9 billion to help homeowners cover housing expenses. A federal foreclosure moratorium also protected homeowners during the pandemic, but the moratorium is over and HAF funds have run out in many states, leaving some homeowners without vital resources.
In the absence of government assistance, nonprofits can help. BlueHub SUN, for example, refinances or buys homes and resells them back to homeowners with affordable mortgages. Such solutions are desperately needed, as inquiries into BlueHub SUN are rising, especially in New Jersey, Michigan, and Ohio.
There’s no time to waste on government action, but in the meantime, we must rely on nonprofits. As Americans with lower incomes stretch their budgets to deal with inflation, rising energy costs, and higher interest rates, people are already losing their jobs and homes.
All the elements are in place for a potential housing crash, but it is avoidable. Congress needs to act quickly to support homeowners on the brink of eviction. To prevent mass foreclosures in 2023, Congress must approve new legislation and funding to help Americans maintain homeownership during this turbulent time. New funding can create lifelines that will stop evictions before they happen.
Elyse Cherry is CEO of Boston-based BlueHub Capital, a nonprofit community development financing organization that operates BlueHub SUN, serving 11 states, including Massachusetts.