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Realtor.com economist talks millennials, mortgages and affordability

Republic 3.0 lands solid Q&A with Jonathan Smoke

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A new centrist political blog – Republic 3.0 – is hitting the housing industry right where it lives, starting with its interview with realtor.com’s new chief economist, Jonathan Smoke.

It’s especially laudable that this new blog, headed up by editor Anne Kim, isn’t focusing on high-click, low-real impact stories that tear up the news sites but have little lasting impact.

Instead, they appear to be focusing on issues that have serious impact, and one of those of course is housing, and how the challenges facing first-time homebuyers is dragging on the economy as a whole.

The Q&A, which HousingWire previewed Monday, is heavy on meat and potatoes and light on filler, which is nice.

Smoke talks about why those Americans age 34 and younger are having more trouble becoming first-time homebuyers (we’re trying to avoid using the M-word more than once a day at HousingWire; I’ve used my daily quota) – for instance, how most in that younger demographic have FICOs below 620, and yet half in that group were looking at buying real estate in July alone.

It’s an important challenge the industry is facing.

Smoke also talks to Republic 3.0 about how lenders need to be more innovative without going down the path that led to the last housing bubble, affordability challenges in general, and much more.

Here's a short excerpt; go to Republic 3.0 for the full piece.

If you’re trying to encourage ownership, there needs to be innovation that ultimately helps consumers make the best financial decision for them and gives them the most buying power.”

One could argue that finance innovation is what caused the bubble to begin with – meaning the innovations that happened around “no-doc” loans – but I would argue that there wasn’t a whole lot of real innovation. We still largely gravitated around 30-year mortgages.

People who pay attention to making the best economic decisions from a personal economic perspective will tell you that a 30-year-fixed[-rate mortgage] isn’t the best mortgage decision an individual household can make because their tenure normally never breaks even on the fixed 30-year rate. But at the same time, it’s the 30-year amortization – and the government guarantee on these mortgages – that has made housing more affordable.

The innovations that I would like to see are things that keep that amortization and the government backstop but also enables people not to make that stark decision of locking down a rate for 30 years even though there’s no way they’re going to be in that house for seven years, let alone 30 years. But the amortization is absolutely key.

If you’re trying to encourage ownership, there needs to be innovation that ultimately helps consumers make the best financial decision for them and gives them the most buying power.

Their politics may or may not agree with yours, but this is a site that appears to be taking a smart approach on the issues of the day, and trying hard to keep their promise of being centrists on policy and politics.

Definitely worth a look at the interview, and probably a whole lot more.

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