As mortgage rates soar and home prices remain high, many may wonder if the American dream is officially dead.
But Priscilla Almodóvar, CEO of Fannie Mae, insists that it is still possible for most young people, although they will have to be patient.
“The American dream is still very much alive, but it may take a little longer,” he said. Fortune’s Upcoming Leadership Podcast.
Almodóvar, who grew up in rented houses, added: ‘Did my parents dream of having a house? Was it that home that changed the trajectory of our lives? Absolutely.
“And today, homeownership remains the primary way families build generational wealth.”
Prospective buyers are currently facing one of the least affordable real estate markets in recent times. The median home price in the US is currently $412,219, 6.5 percent more than last year, according to the real estate portal. Red fin.
Priscilla Almodóvar, CEO of Fannie Mae, insists that the American dream is still achievable for most young people, although they will have to be patient.
Prospective buyers are currently facing one of the least affordable real estate markets in recent times. The average rate on a 30-year fixed mortgage is currently 6.87 percent
Meanwhile, data from the government-backed lender freddy mac shows that the average rate on a 30-year fixed mortgage is 6.87 percent.
This is more than double what they were three years ago, when they were around 3.17 percent.
It means that a buyer who purchases a $400,000 property today faces monthly payments of $2,495. This analysis assumes a 5 percent down payment.
However, if they had purchased in March 2021, this figure would be only $1,637, a difference of $800 per month.
Despite these prohibitive costs, Almodóvar insists: ‘Millennials still want to own a home and start a family. “Millennials continue to drive that demand.”
He also gave his number one advice for renters looking to become homeowners.
He recommended that tenants ask their landlords to report positive rent payments to credit agencies such as Equifax, Experian and Transunion.
‘Fix your credit. Having little or no credit is a hindrance,’ he said.
‘If you are a tenant, see if your landlord will report your positive rent. Fix all that. I think it’s job number one.
He added that potential buyers should educate themselves about home ownership and “really understand the cost” involved.
The average credit score in the United States was 715 in 2023, according to a January report from Experian. Millennials have an average score of 690, while Generation Z has 680.
Rocket Mortgage says the qualifying credit score for most conventional loans is 620.
Almodóvar’s comments come after President Biden unveiled plans to increase housing affordability during his State of the Union address.
Almodóvar’s comments come after President Biden unveiled plans to increase housing affordability during his State of the Union address.
At the center of the housing initiatives were two tax credits. The first would help mitigate the current cost of a mortgage, the other would aim to increase the supply of housing.
Biden also discussed reducing the cost of refinancing a mortgage by eliminating lender title insurance on some refinances.
The plan, which would require congressional action before taking effect, could allow millions of homebuyers to receive $10,000 tax credits spread over two years.
Among those who will benefit will be first-time buyers. The money will reduce your mortgage by 1.5 percentage points over two years, the White House said.
Biden is also calling on Congress to provide a one-year tax credit of up to $10,000 to families who sell their so-called “starter home.”
This is defined as a property that is valued below the median home price for its area in the county.
The White House also did not provide further details on what is meant by “up to $10,000.”