COVID-19 and its impact on the housing market and individual homeowners were front and center throughout 2020. Combined with existing affordability issues, some first-time homebuyers experienced rising debt burdens, housing inventory shortages and unequal access to resources and credit, according to panelists on the annual 2020 State of Affordability webinar presented by HousingWire in December 2020.

While these challenges are expected to continue well into 2021, deeper insights into the trends affecting future borrowers enables a better understanding critical for the housing ecosystem to step in with deliberate mitigation efforts and solutions.

The State of Affordability 2021


Among the issues discussed by the panelists, here are three trends to watch in the coming months.

1. The Affordability Gap

The state of the housing market during the pandemic—low mortgage rates offset by high house prices and limited supply—created an environment that will continue to fuel housing disparity.

“The COVID-19 pandemic will widen the housing affordability gap, particularly for communities of color,” said Sam Khater, Freddie Mac chief economist, during the discussion.

To address some of the affordability challenges facing potential first-time homebuyers, panelists suggested that mortgage and housing professionals should understand and consider:

  • Low down payment mortgage options—future borrowers often lack awareness of 3% down payment programs.
  • Down payment assistance programs—many homebuyers may be unaware of government and other non-profit organizations that provide first-time homebuyers with incentives to help fund down payment and closing costs to enable homeownership. These programs also offer supplemental resources to make saving easier, such as dollar matching, automated saving and financial counseling.
  • Financial education—helps future homeowners with a better understanding around how to prepare for homeownership and the mortgage process, which can open the door for generational wealth building.

2. Keeping Homeowners in their Homes

Wealth is critical to people’s ability to recover from economic setbacks. With homeownership being a primary source of wealth for many families, sustainability should be a top priority for the housing industry in 2021, according to the panelists.

“Keeping people housed should be our number one priority—we should treat loss mitigation as though we’re post-catastrophe,” said Alanna McCargo, vice president of housing finance at the Urban Institute.

“So much homeownership was lost in the last financial crisis among African Americans and Latinos because so many have higher loan-to-value (LTV) loans,” McCargo recalled. “We need to focus on sustainability and make sure they don’t end up in a lower equity position if home prices start to decline.”

Refinancing—which is consistently underused by low-to-moderate income and minority homeowners—can be critical in helping homeowners stay in their homes, panelists said.

“In a recession you often get very low rates and you have the ability to lower your carrying cost, which can be significant—several hundred dollars a month,” Khater said. “Many people who are lower income, and who are minorities, are not pulling the trigger on that.”

Lenders and housing professionals can help homeowners to dispel potential misconceptions regarding financing to ultimately lower their monthly mortgage payments.

3. Embracing Mortgage Innovation

2020 has escalated the need for innovative solutions that were just gaining traction in recent years, according to the panel. “Innovation is where we generate optimism—we need greater scale and acceptance in the market for some promising new tools,” said Christopher Herbert, managing director of the Harvard Joint Center for Housing Studies, during the discussion.

Promising solutions include:

  • Financing innovations like shared equity programs, which are onetime investments allowing buyers with low- to moderate-income to purchase and resell a home at a price below fair market value in order to keep the home affordable.
  • New housing options to drive down costs and increase supply, such as accessory dwelling units and manufactured homes.

While affordability issues surrounding homeownership have been exacerbated by the impacts of COVID-19, the challenges are not new, said Danny Gardner, Freddie Mac senior vice president of client and community engagement, who also moderated the discussion.  

“This is ...has always been a factor in our industry,” he said. “It’s something that we need to continue to work together and collaborate on so that we can help serve families not only today, but into the future.”