Researchers at Hudson Valley Pattern for Progress analyzed the sluggish housing market recovery with new post-recession numbers and found that residents are starting to show confidence in home financing again, but are paying more than what is considered affordable for their homes.
The authors of the new report arrived at those conclusions about the Hudson Valley housing market ”“ nine counties comprised of Columbia, Dutchess, Greene, Orange, Putnam, Rockland, Sullivan, Ulster and Westchester ”“ from two distinctive data sets.
The first group of data breaks down the number of loan applications for mortgages, refinancing and home improvement.
Trends in these loan documents are highlighted during three individual years over a six-year period. More specifically, Pattern”™s authors analyzed the fluctuations in loan applications starting in 2007, or the pre-Great Recession period, followed by 2010, the Great Recession, and 2013, the post-Great Recession.
Though each county”™s mortgage application numbers wavered uniquely during the six-year period, all nine regions revealed two overall trends: From 2007-10, the number of conventional mortgage loan applications decreased significantly and during the post-recession period, from 2010-13, the number of applications for the same loans increased, but not quite to pre-recession levels.
Coming out of the recession in Sullivan County, the number of mortgage loan applications filed in 2013 was 435, a fraction of the 2,022 submitted pre-recession in 2007 and only 16 more than the 419 filed during the recession in 2010.
Westchester County, on the other hand, saw 11,315 applications filed in 2013. Up 38 percent from 2010 when 8,226 were filed, but still not close to pre-recession levels when 21,317 mortgage loan applications were submitted.
The authors observed that regionally, “The 23,208 conventional loan applications in 2013 is not even half (just 44 percent) of the 52,609 such applications in 2007.”
Joseph Czajka, senior vice president of Pattern for Progress, said the slow increase in conventional mortgage applications is an indication of general stagnation, but that the increase in applications from recession levels shows that people are beginning to have more confidence in the economy again.
“There”™s a combination of things that happened here. One of the items is that housing prices have fallen, interest rates are still at historic lows right now and although the pendulum hasn”™t swung to pre-recession underwriting it has swung back a bit,” Czajka said.
The rate of government loan program applications fluctuated in the reverse as mortgage applications during the six-year period, meaning homeowners were seeking more government help in 2013 than before the recession.
The other application data that Pattern, which is based in Newburgh, looked at is refinancing and home improvement loans.
Applications to refinance declined during and after the recession in the nine-county region, which the report”™s authors said is likely because interest and mortgage rates have stayed low.
Changes in home improvement loan submittals varied greatly by county. However, across the Hudson Valley, the number of applications was still significantly lower in 2013 compared with 2007. More specifically, the number of applications for loans to update homes was 77 percent lower overall in 2013, at 3,999 applications, than in 2007 when 17,503 applications were submitted.
Czajka said this illustrates that the economy is still in recovery mode.
“We are looking at wages being a bit more stagnant and not rising that much,” he said, adding “although the unemployment rate is low, it”™s not indicative of what”™s going on in the market. There are a lot of people who are underemployed or who have stopped looking and the unemployment rate doesn”™t capture those.”
The second data set, which uses U.S. Census Bureau numbers, determined that low-income individuals in the Hudson Valley are renting or owning homes beyond their means.
The authors assumed that affordable home costs, like rent or mortgage payments, should be less than 30 percent of an individual”™s monthly income. Up to 50 percent of monthly income that goes toward home payments is considered unaffordable and more than 50 percent is severely unaffordable.
In the nine-county region, low-income renters or owners ”“ those who make 80 percent or less of the median income in their area ”“ are paying far more than they can afford for housing.
This is especially true in Westchester, Rockland and Putnam counties where at least 50 percent of each county’s low-income renters and homeowners, averaged together, were severely burdened by home living costs.
Czajka said this is in part because there”™s not enough affordable housing in those three counties.
“A majority of the new rental developments in the southern part of the Hudson Valley are geared toward luxury and high-end, but I would not say that (the market is) becoming saturated” with those kinds of homes, he said.
However, if more affordable housing does not become available, Czajka said extra spending could become restricted for many people, which would affect local and regional economies.
Czajka said municipalities that have turned down housing developments could also start to see a decrease in population, which would impact school enrollment.
“When the enrollment in schools drops to a certain level you now have a school building that”™s empty, less residents, less taxes are being collected,” he said. “When you have population decline, businesses don”™t do as well, less people shopping, less people on the main street,” therefore, Czajka said, “The region has to pay attention to that.”
