Mark Fleming is the chief economist at First American

Every week, we ask a real estate professional for their thoughts on the top three stories from the week before. This week, we spoke with Mark Fleming, the chief economist with First American. 

Boston Agent (BA): If a lack of equity is the primary reason existing-home sales are down, then what steps can homeowners, agents, lenders, lawmakers and anyone else involved in the process, take in order to help replenish those levels?

Mark Fleming (MF): The market is resolving the issue through sustainable growth of house prices. There is a virtuous cycle at the moment as pent up supply, caused by insufficient equity, is being released as prices rise. The availability of affordable low down payment mortgages is also helpful as it allows sellers to enter the market sooner, with minimal equity, knowing that once they sell they will be able to finance their mortgage on the next home with a small amount of equity. Access to credit reduces the constraint of insufficient equity.

BA: The group of homeowners who underwent foreclosure proceedings from 2007-2014 is expected to soon return to the market – hence the term “boomerang buyers.” Do you expect their return could help bolster the lower-end of the market and shore up equity deficiencies? Why or why not?

MF: It’s true that boomerang buyers may be returning, but I’m not convinced that there are enough to have meaningful impact in the market. There may be a little more competition in lower price segments, which would accelerate prices and improve the equity situation, but keep in mind we sell about 5 million homes a year and the number of boomerang buyers will be small in comparison. Even if they can, many may not, given their past experiences.

BA: What do you see as the biggest roadblock to the market normalizing in a sustainable way?

MF: While I believe the market has actually done very well at normalizing and getting back to sustainable practices of its own accord, there is opportunity to improve. Sales are underperforming capacity as we have discussed, but more remains to be done to improve access to credit and efficiently and sustainably incent homeownership. These are the biggest roadblocks to provisioning the American Dream for the majority of Americans.