Hours after President Obama delivered his annual State of the Union address, HUD Secretary Julián Castro took a slightly smaller stage to discuss his department's efforts to boost homeownership in 2015.
In a live-streamed "fireside chat" with Zillow Chief Economist Dr. Stan Humphries, the secretary reiterated that 2015 will be a "year of housing opportunity," reusing a phrase he coined in a National Press Club appearance earlier this month.
Castro based his optimism on what he called a "confluence of factors" he believes will encourage more potential homebuyers to take the plunge this year, including a leveling off in home prices, lower entry barriers to mortgage credit, and falling costs—helped by an imminent reduction in Federal Housing Administration (FHA) annual mortgage insurance premiums and the Federal Housing Finance Agency's (FHFA) directive for Fannie and Freddie to accept mortgages with lower down payments.
"All of those things add up to greater opportunity to move from renting to buying in 2015," Castro said.
When it comes to making the transition from renting to owning a home, he acknowledged that there are challenges, particularly as rising rental costs make it difficult for consumers to save up for a down payment. Stagnant wages have also presented a problem in that area, though Castro asserted that they're "moving in the right direction."
Another major challenge the secretary addressed Wednesday morning was the issue of credit availability, which he said has kept a lot of mortgage applicants with "what historically would have been considered pretty good credit" from buying a home. Through November, the average FICO score for an approved loan application in 2014 was about 726, according to mortgage services provider Ellie Mae.
In addition to the FHA premium cut and the push for lower down payment options, Castro highlighted HUD's "Blueprint for Credit Access," an initiative to expand credit offerings to qualified borrowers through counseling programs and clarified lending rules.
Though some critics have argued that opening up mortgages to a larger pool of borrowers will degrade loan quality, Castro maintained that won't be the case.
"Policies have fundamentally changed to create safeguards so that we can offer the opportunity to own a home for people who are ready and responsible to buy," he said.
Regarding the government's role in the mortgage market, the secretary was hesitant to offer an idea of what he believes is an appropriate amount of presence, though he did say he supports efforts to bring in more private capital.
However, he added that he believes the government has a role to play, particularly in serving low- to moderate-income borrowers and in providing a backstop for the securities market, two functions he said are "vital pieces of housing finance going forward."
"We have to remember how we were able in the United States to build up the homeownership rate to where it is today," he said. "FHA certainly played a significant role in that, and for our part at HUD, we hope it continues to."