For the past two weeks, DS News sat down with Jorge Ponce, Director of Business Development & Implementation at FirstClose; Joey McDuffee, Director at Wipro Gallagher Solutions; and Kevin Watson, District Manager, Middle Tennessee at Churchill Mortgage to discuss inventory woes in the housing market. In the final installment of this three-part series, these housing experts share their thoughts on the future.
DS: Given everything that has been said so far, do you think we're going to continue to see a steady increase in home prices, or are they going to flatten out?
Ponce: The market has probably over-corrected and now it needs to re-correct itself by bringing some of these values down. I think ultimately, that's what's going to happen.
Watson: There's one more factor that needs to be addressed: the amount of debt that people are getting out of college is a lot higher than it used to be. A great long-term fix is more financial literacy, especially in schools. There's only five out of 50 states that require that in schools. Tennessee is one of them, fortunately.
I really think that a lot of times education is a big hurdle. I have a customer now—he's VA qualified. We could get a great loan for him, but his student loans are so massive that we can't get him qualified. I think that we've got to start, as a country, looking at financial literacy and addressing that front, or we're going to have a bigger situation in the future.
McDuffie: I know one of the things in talking to some of the folks in the industry, especially with millennials, the education isn’t there. Young people don’t understand that they don't have to have 20 percent down. They have had issues with student loans; they are wanting to get out from underneath their parents' basement and get their own place. But in some cases, they think that the down payment is insurmountable in some cases.
As far as home prices: they will taper off and I think it's due to a number of factors. Wage growth and volatility of the job market will come into play. I think, again, education is a big piece, to let everybody know what products are out there. I think that all comes back to making sure you select a good mortgage lender or broker that understands your situation or your needs.
DS: My last question for you gentlemen is the question of the hour. Are we on the verge of another bubble?
Ponce: I think there's bubbles that are happening, I just don't think you're going to have the deflation rate that was present in 2008. The financial crisis in 2008 was partially driven by home prices skyrocketing, but a lot of that was "financial fraud," which I don’t think is nearly as prevalent today.
Watson: We are starting to see some loosening of credit guidelines. More institutions are moving some of those loans to portfolio instead of using agency loans. We are not to where we were in 2008, but we're seeing some lenders actually offer buy downs and some of the other specialized products that we saw back around the crisis. However, the level of compliance and regulatory scrutiny that we have today is a little bit different today than it was before.