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Charlie Glahe WIN Broomfield

Time to rethink this real estate term

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A quick Internet search of the term "affordable housing" brings up interesting results. However, deeper examination of the the facts reveals issues with that term. According to Rob Chrane, President of Down Payment Resource, it's time homebuyers and everyone else to rethink these two words.

When you hear term affordable housing, what is your first thought? If you're like Google, you most likely referenced housing for low-income individuals and families. Herein lies the problem with this term.

What affordable housing is
Subsidized housing programs are typically operated and maintained by federal, state and city governments. This type of housing is meant to be affordable for those with lower income levels. Some types of assistance include non-profit housing and rent supplements.

The issue, as raised by Chrane, is that recent economic struggles have stained such type of assistance. These programs therefore place a burden on middle-class citizens to build housing for those who can't afford it, wrote The New York Times opinion columnist Thomas Edsall. Therein lies the problem with the affordable housing term, as citizens may conjure up images of run-down infrastructure or complicated housing programs.

Current issues
The irony of the the term, as Chrane pointed out, is every homebuyer is technically looking for affordable housing. If you found two identical houses but one was $10,000 cheaper, and home inspection services OK'd both, you'd choose the house you'd save money on. You'll choose the cheaper option with full confidence, knowing you can afford the mortgage. According to Chrane, programs and affordable housing professionals have long helped families buy a house. Owning a home is a huge milestone, because it also helps build equity and wealth management. In essence, affordable housing is not meant to invoke political debate.

Some of these current mindsets are hurting the real estate market. However, what if the terms were flipped? Housing affordability brings back different results from a search engine. Chrane said everyone should start thinking about housing affordability, and not just the traditional costs. For instance, there is some misconception about the down payment, typically seen as a large entry level hurdle.

Why it matters
The U.S. housing market finds itself in an interesting place. Interest rates have never been lower and lenders are starting to gain confidence in lending, especially as the economy continues to grow. According to the July 2015 National Association of Home Builders, the housing market index increased to 60 on a scale of 0 to 100. Reuters reported the builders' confidence is at its highest level since November 2005.

"This is more evidence that housing is strengthening," said Jim O'Sullivan, economist at High Frequency Economics, in an interview with the Reuters.

Current images of affordable housing should seemingly change to help reverse a growing trend in the housing industry that is affecting homebuyers and renters. Rents in many of the largest cities have quickly outpaced income levels of young residents. According to Bloomberg Business, millennials are spending 30 percent of their income on rent in the first quarter of 2015. When this number first started to be tracked in 1979, residents were spending 23 percent of income on rent. Millennials are currently the second largest generation, according to The Pew Research Center.  The generation figures to be the most prominent homebuyers in the coming years, according to Zillow.

As a result, young workers are having more trouble saving money for a future mortgage. The generation is also dealing with stagnant wages according The Wall Street Journal. First-time homebuyers may also not want to become an owner due to their memories of the 2008 housing market crash.

However, because of the existing stigma surround housing affordability - affordable housing - many citizens may not realize they can actually benefit from such programs that will help them set them on the path toward affordable home ownership and the accompanying benefits.

It's up to real estate agents to make a strong pitch to renters that in the long term, they'll be better off buying a house. Brokers should not hesitate to talk about programs designed to make housing more affordable. Potential buyers may be hesitant to use the term affordable housing because they may believe it will be interpreted as something else.

As the housing market continues its recent growth, Realtors should push to inform current renters the benefits of affordable housing programs that can net them their dream house. In order to erase current stigmas, the conversation should change so homebuyers don't conjure up the wrong ideas.