PHOENIX – Standing at the epicenter of the nation’s recent housing crisis, President Barack Obama on Thursday promoted plans to lower some mortgage insurance premiums, a move the White House says could save homeowners $900 a year and attract 250,000 first-time buyers.
The housing market in Arizona is drastically different than it was when Obama first visited the state weeks after taking office in 2009. The state’s foreclosure crisis has evaporated. Home prices have soared and are nearing pre-crisis levels.
“This progress is not an accident, it’s not luck,” Obama said. “It’s what happens when you have policies that put middle-class families first.”
Despite the rebound in the housing market, nationwide home sales slowed in 2014, as rising home values pushed many would-be buyers to the sidelines.
The rate cut Obama announced Thursday is aimed at getting more buyers into the market and helping homeowners who refinance save money. At the end of this month, the Federal Housing Administration mortgage premium will drop from 1.35 percent to 0.85 percent.
In addition to the 250,000 new homebuyers the White House hopes to attract – a figure that marks a modest increase in sales – administration officials said the rate cut would help 800,000 homeowners who refinance their mortgages.
The president is in the midst of a three-state swing to preview his upcoming State of the Union address. Obama, who has often been cautious in taking credit for economic gains in order to avoid appearing tone deaf to struggling Americans, is now talking more confidently. He said his goal this year is to make “everybody feel like things are getting better and we are moving in the right direction.”
Obama spoke at Central High School, a few blocks from the hospital at the center of last year’s controversy over patient care at institutions run by the Department of Veterans Affairs. The president’s motorcade sped past the hospital, and he left the state without visiting. Aides have noted that other senior administration officials already have made stops at the hospital.
Throughout Obama’s presidency, Arizona has served as a symbol of the nation’s housing crisis and its recovery.
The state’s home ownership rates have dropped by more than 6 percent from their 2006 peak. New home construction also remains well below what economists believe is a healthy level, with many buyers shut out of the market because of tougher loan standards, higher prices and lingering fears from the foreclosure crisis.
Arizona-based economist Elliott Pollack said the move would “help on the margins, but it really isn’t a game-changer.”
Still, the savings would be meaningful for individual homeowners. The National Association of Realtors estimates that a homebuyer with 5 percent down and a $175,000 mortgage would save $818 per year, or $14,079 over the life of a 30-year mortgage.
Even with the reduction, the new 0.85 percent premium is higher than historic norms. The rate was initially increased to raise FHA capital reserves, which took a hit during the housing crisis and are still not back to their required minimums.
House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said Obama’s move was a “grave mistake that will end up hurting hardworking taxpayers” and worsening the FHA’s financial condition. He said taxpayers spent nearly $2 billion to bail out the agency two years ago and that a recent audit revealed that the FHA has insufficient capital reserves.
“A fiscally sound FHA, with a clearly defined mission, ensures homeownership opportunities for creditworthy first-time homebuyers and low-income families,” Hensarling said.
Administration officials said FHA will be able to replenish its reserves even with the rate cut, and that eligibility requirements for FHA loans will not change.
“Our action is not a return to the past,” said Housing and Urban Development Secretary Julian Castro, who joined the president on the trip.
Before the speech, Obama and Castro visited a model home at a housing development that was affected by the economic downturn. A redevelopment project begun about two years ago and aided by nearly $2 million in federal funding is replacing the subdivision’s once weedy and garbage-strewn lots with single family homes. Obama said after the tour that lower mortgage premiums “could make all the difference for a family that’s owning its first home.”
Obama is expected to promote the housing announcement in his State of the Union address. In a strategy shift, Obama has begun unveiling proposals from the address before the Jan. 20 speech rather than follow the usual practice of keeping policy announcements secret until he speaks to Congress.
The president is making pre-State of the Union announcements during a series of stops around the country this week. He visited Michigan on Wednesday and closes out the week in Tennessee, with additional travel expected next week.
