Welcome to the Real Tea Podcast brought to you by Tennessee Realtors.
I’m your host, Angela Shields.
This podcast is created for Tennessee Realtors to get the tea on all things real estate in Tennessee.
We’ll bring you engaging conversations with esteemed guests in the real estate industry, and cover a wide array of topics including current events, governmental affairs, education, and legal updates.
We are excited to have Josh McKinney with us today.
Josh is a real estate industry advisor with Tennessee Housing Development Agency.
Welcome Josh.
Hey, thanks Angela.
Excited to be here.
Appreciate the invitation.
Well, you have a lot to offer us today, but before we dive in, I ask all my guests.
You know we are on the Real Tea Podcast.
So, I start out by asking what kind of tea do you drink?
Okay, so nothing exciting here.
I’m just a sweet tea with ice kind of guy.
So, yeah, sweet as it can get pretty much.
Very southern.
Yeah, very southern.
Very southern.
I love a good sweet tea, so that’s great.
That’s good.
That’s great.
Well, let’s start out by just giving me your elevator pitch on exactly what the THDA does.
Absolutely, Angela.
So we are your state housing finance agency.
Every state and US territory typically has one of those, and so we’re it for Tennessee.
And our mission is to create safe, sound, and affordable housing opportunities for moderate to low-income Tennesseans.
We do that through a number of programs and projects.
We have two mortgage programs I’m sure that we’ll talk about a little bit more that featured down payment assistance, low down payment requirements for buyers.
And then from the interest earnings from all those mortgage programs that we operate.
We fund many of the programs that we offer for renters and potential homeowners and home buyers all across the state.
So pretty much anything going on with housing in some capacity, THDA typically has a hand in it.
Very important to the state.
Sure.
Yeah, typically the legislature, when they get money, they just give it to us because they trust us to use it for the best interests of our citizens.
And so we take that very seriously.
We’re very proud that they put that trust in us.
And we’re very proud of the relationship that we have working with you.
So first of all, thank you for that.
Thank you.
We’re glad to be partners.
Yes.
So you’ve had a big announcement recently.
So let’s just jump in right there because I know our members will be very excited to hear about that.
So I’m going to let you make that announcement.
Okay.
So end of October, I think October 25th was the official rollout date.
We made some changes to our program.
So two mortgage programs, Great Choice, Freddie Mac, KJFA Advantage, both feature down payment assistance.
And obviously that down payment assistance can be used to help buyers pay their down payment closing costs.
But there’s obviously been a lot of questions.
Could that go further?
Could that assist some of our partners?
And we’ve been hearing that feedback and of course, been very concerned about our buyers needs.
So we announced October 25th that once our buyers who are taking advantage of our programs have used the down payment assistance that we provide to pay for their down payment, their closing costs, whatever money left over from that can be used to help pay commission fees for agents.
And so we’re hoping that that will assist our buyers to take advantage of the very vital service that your agents provide, because we don’t want them left in the lurch.
Yeah, and that is so important, because sometimes, if the commission is not being offered by this seller, that buyer does need some assistance.
So that is great news to be able to help them.
Yeah, absolutely.
We’re hoping it will go far to just, in the cases where we aren’t able to negotiate that with the seller, the buyers have this option.
Right.
And there could be some documentation that they’re asked to provide.
Correct.
Yeah, our lending partners who originate these loans for us are going to be in charge of doing that.
And these are just going to be some documents that are typically collected in the process of creating a relationship with a buyer for your agents.
And the purpose for that, even though we’ve never asked for them before, is we just want to make sure that as we institute this change, we are watching to see how it’s utilized.
And if it’s not enough, the money that we’re providing, if it’s not enough over for a majority of our clients, we’re certainly going to have conversations internally to see whether we need to up that or increase the assistance available.
Right.
So great new program.
So just make sure the message to the agent is just be patient whenever you’re asked for the documentations.
Correct.
Work with you because y’all are studying.
Correct.
And I’ll offer one final tip.
Obviously, the agent always wants to negotiate for a seller to pay closing costs.
But in this case, when someone’s using our down payment assistance, if the seller’s paying those closing costs, that means there’s more money left over in the down payment assistance to go toward the commission.
So a little bit of incentive there additionally for agents to work hard to get those closing costs paid by the seller.
Yeah, that sounds great.
So we’re kind of focusing right now on the first time home buyer.
Are there other programs that that you have that might help the first time home buyer be a little bit more competitive?
Sure.
Yeah.
So we have a pretty comprehensive program.
Our down payment assistance is the same for both of our mortgage programs.
It’s 5% of the sales price maxing out at $15,000, or we have a no payment, 0% interest, $6,000 loan that comes with the mortgage, that they can use that $6,000 for down payment or closing cost.
And so both of our programs, great choice, which features a rate reduction for many of the folks in our community serving as first responders and prison systems, veterans.
They can take advantage of that rate reduction to get a better interest rate.
We feature no loan level price adjustments, so everyone who comes to apply for our mortgages, they don’t have to worry about paying extra points to get their rate down or anything like that.
Everybody who’s eligible gets the same rate, so that makes that go a little further.
And then with our Freddie Mac conventional mortgage program, and I’ll highlight that conventional, that’s a 97% financed loan.
And so it’s only requiring 3% down, and then you’ve got a 97% financed conventional loan featuring private mortgage insurance cancelization, you know, something that a lot of times our FHA buyers can’t take advantage of, they can get that canceled.
And so in addition to that, we require homebuyer education for all of our mortgage programs, and the homebuyer education network that we’ve cultivated is truly stellar.
There are a number of organizations all across the state of Tennessee, part of our network, who are providing really awesome housing counseling, housing education services.
And so anyone can go to our website, thda.org, even if you’re not in the process of currently buying a home, find those counseling organizations, those counselors who are near you, and then get enrolled in their services, maybe even take that homebuyer education class, because once you’re ready to purchase a home, you’ll have that certificate that you would need already, right?
And so all of these different services kind of work together to create a scenario where folks who need that additional helping hand, who need that additional leg up into the market, hopefully they can find support for that.
Yeah, great.
And so those are the classes for the first time homebuyers.
You also have the classes for the realtors, the agents to be able to learn about all those different programs.
Yeah, absolutely.
We partner with every local association in the state.
And so annually we provide a number of CE classes, district-certified classes, covering our mortgage programs.
And I’ll just go ahead and take this opportunity to mention this.
This is new for 2025.
We’ve got a new three-hour CE class covering that homebuyer education that we just talked about.
We get the feedback a lot that realtors want to know what’s in that homebuyer education class.
Why are they having to go?
What do they experience?
And so we took that to heart and this past year developed a three-hour class that first of all explains how beneficial homebuyer education can be for the client, what the process is for signing up for the class, and then we actually take the agents through a mini in-person homebuyer education seminar so that they get to experience exactly what their clients would experience in that class.
And then finally, we give them access to a free demo of the online version of the training, because you can do it either way.
You can do it in person or online.
And so we give the realtors access to a free demo.
They can take the whole online course, the whole thing, for free.
And that way, if they want to know more, they want to know why it’s so beneficial, they’ve got all that knowledge.
And I guarantee, once somebody has gone through that class and really seen the breadth of things that are covered in a homebuyer education class and how beneficial it is, they’re gonna be bought in, they’re gonna be sold.
They’re gonna love it.
And so we’re gonna be launching that.
We’ve done it a couple times as a test.
We did it here in Nashville a couple of weeks ago.
It went really well.
And so we’re ready in 2025 to roll that out to all of our associations.
So we’re looking forward to seeing some agents in that class soon.
Yeah, that sounds exciting.
Great.
So let’s turn now to just trends in general.
What types of trends are you seeing that you kind of are tracking or you think you’re gonna see next year?
Sure.
So 2024, obviously coming out of 2023, was a challenging year.
I guess that’s a good way to say it, right?
We have seen an overall decline in mortgage originations, refinances, which we don’t do, but we still track, obviously.
In fact, from our numbers, 2023 was the lowest number of originations, both purchase and refinance, in two decades in the state of Tennessee.
And so obviously with that lowered amount of mortgage production, that’s going to have an effect on both this industry and individuals who are trying to purchase homes.
I think we saw a 19% decrease in home purchase mortgage originations in 2023.
And so our numbers, going into 2024, they’re still pretty encouraging.
We’ve seen a renaissance here in the last 10 years at THDA, just a period, with a lot of additional production, more production than we’ve ever had in our 51-year history.
And so this year, I think, will end somewhere around probably 600 million financed, probably around 2,500 loans lent.
But that’s not as much as last year, but still it would be in our top probably six or seven years production ever.
So I guess all that to say, the industry itself seems to be in a little bit of a decline for things I’m sure we’ll talk about in a moment.
But overall, first-time home buyers, individuals needing down payment assistance, they’re still out there.
They’re still wanting to purchase homes, and they’re still able to take advantage of these programs.
So I guess, I didn’t want to plug THDA here, but I think it is important that agents have a wide breadth of tools, right?
So THDA is not the fix-all tool, but it is one of the tools, right?
And if you have access to as many tools in your toolbox as possible, then you’re able to address the situations as they come and hopefully help your clients get through.
So with the overall decline that we’re seeing in mortgage production, that might change next year with interest rates dropping.
Who knows?
But if it continues the way that it’s continuing, you know, it’ll be a generally cooler industry as compared to recent years.
Sure.
Are your numbers showing that it’s because of housing inventory?
Is it the interest rates?
What are you seeing?
Yeah, I think it’s a combination of things.
I think the inventory, what we’re seeing, inventory is catching up, it’s going up, you know?
And I think I review the individual data, which you all provide to all your associations.
So I review that quite often, and I think inventories in each markets are catching up.
But I think it’s the combination.
And, you know, the folks have been around.
I go around all across the state, and we talk about high interest rates, and some of the, we won’t say old timers, we’ll say the veterans, okay?
The season.
The season.
The season, I love that, yeah, season.
I’m a pastor, I’m an other life, so I call season saints, right?
Our season saints, they kind of roll their eyes, like, ah, I remember when the interest rates were really high, right?
But there’s a little bit more to the story, right?
So obviously interest rates have been higher in our history, but house prices have never been this high, right?
And so you know that, your listeners know that, that a combination of the two, right?
Interest rates plus really, you know, top, top of the industry house prices, never, never, historic, right?
That is leading to a situation where the market itself is struggling.
So, you know, that’s something I’m sure that your, your agents are having to work with and deal with, you know, on an individual basis.
Right.
Yeah.
And that leads me to the next question.
How are you feeling about the market in general?
Do you feel like Tennessee is in a housing crisis?
So, so I don’t think there’s anyone in this space who would deny that we’re in a crisis of some sort.
We’ve been in a crisis, it seems like, for a decade or more now, but the crisis has changed its texture, I guess.
We were talking a little bit before we got on the, the interview here, that we, reviewing these numbers from year to year, our renters in Tennessee are in a really precarious situation, right?
So we track who is cost burden in the state of Tennessee, and we’ve got two maps in our report, and I’ll go ahead and plug this real quick.
This report, you can find it on our website, thda.org.
It’s our annual Housing at a Glance or Tennessee Home Loan Trends, and we publish that every year.
So the newer one will be coming out first of 2025 for 2024, but really excellent data, totally free for anyone, but especially your agents might want to be interested in looking at that.
But we track the housing cost burden, cost burden for individuals in the state of Tennessee.
And so there’s two maps, and the top map shows the cost burden is for homeowners.
And cost burden means that you pay more than 30% of your income towards your housing costs.
Severely, how cost burden means you pay more than 50%.
And for homeowners, there’s not really an issue for cost burden.
They are paying under 30% of their income, which would suggest, even though we’re in a tough economy right now, they have the money they need in order to afford everything else they need to live.
But the bottom map shows the renters in Tennessee.
And that’s a different story, right?
The majority, it seems, of renters in every one of our counties in the state of Tennessee are cost burdened or severely cost burdened.
And a lot of that goes back to the economy and the way, the price of goods going up and raises and things remaining flat in the face of inflation.
But what it translates into for housing, right?
Rents go up and the resources don’t go up for the individuals renting.
And so usually the exit ramp from that, obviously, you know, this is home ownership, right?
And you get a home ownership.
As I said earlier, you’re not cost burdened more typically.
But 2022, you know, from 2022 to 2023, our report showed that interest rates doubled from 3% to 6.
something percent in 2023.
The total housing payment then goes up about a third from 2000 to about $3,000 a month for Tennessee homeowners.
And the needed income to be able to afford a house, in 2022, it was $78,000.
In 2023, at the end of 2023, it was $118,000.
So it went up $40,000.
So all that leads to a situation where our renters, in 2022, about 21% or one out of every five renters could afford a home, could afford a mortgage.
In 2023, only 8% of renters in the state of Tennessee.
So less than one out of 10, right?
And so that’s a tough situation.
And I think what you’re seeing then is we have homes, the inventory is catching up.
Home buyers, as far as the pool of home buyers, that’s depressed.
And that’s because people who are homeowners currently, who could afford to buy a house, want to remain in their home because they want to keep their interest rates.
And the ones who would really would be our pool of home buyers, the renters, they can’t afford it.
They can’t afford it.
And so now, I mean, that sounds like a crisis to me, right?
You know?
And if that continues to escalate, that’s going to have longer reaching ramifications.
And so difficult time for sure.
But the silver lining is that if interest rates were to cool, the demand is going to be there, right?
But if inflation goes down, if pay goes up, you know, these different things, there’s the potential to see a boom, like we saw, you know, in immediately falling COVID.
It’s just, you know, right now the interest rate really is keeping it down, along with the high cost of homes, which is only even more severe here in Nashville, and the major metropolitan areas of the state.
Right, because then you’re talking about affordability.
We just got back from the National Association of Realtors Conference in Boston, and they gave a really interesting statistic when you talk about the renters and the home owners when it comes to wealth, net worth.
And in 2024, they predict that if you own your home, your net worth is, on average, $415,000.
So the renters, they predict, in 2024, the net worth is $10,000.
So it’s a huge gap when you think about that.
So owning a home is so much better for you than…
Every economic indicator suggests that the key to building wealth in America is homeownership.
And that’s for every demographic.
It’s for every background.
It’s that.
And so without that, your options or your opportunities to build wealth are severely limited.
Yes.
And then you touched on it, but in certain markets, we have an affordability issue.
So we keep pushing people further and further out.
Are you tracking any numbers with any of the big cities with the affordability issue?
So we’re seeing full transparency.
Our acquisition cost limits for both of our mortgage programs are 400,000 max purchase price, which in certain parts of the state is great.
Northeast Tennessee, where I’m from, I’m from Kingsport.
I live in Kingsport.
There’s a lot of room to work there.
But when you start to get into places like Knoxville, even Chattanooga now, definitely Nashville, Williamson County, Franklin, you know, the average home cost is 440,000 in Williamson County.
So I taught a class over at Williamson County Association of Realtors here recently, and love the members there.
You all have some great realtors.
I don’t know if you know that, but I’ll tell you, you’ve got some really great realtors.
And so I really had the privilege to talk to them about our Great Choice program.
And then we got to the acquisition cost limit and they were like, That’s not going to work here.
What are you talking about?
And so that’s when we have to have hard conversations, like, okay.
So I don’t want to be too provocative, but we want to help people buy houses, and we want to help them afford houses, and it’s not as easy as just raising our acquisition cost limit.
If we put the limit up, go up to 500,000, now we’re good, right?
We can raise the acquisition cost limit because we know what the average cost of a home in a community is, but that doesn’t affect how much money and how many resources the actual people have access to, right?
And so just raising that limit doesn’t fix that.
It just creates a more pronounced problem where the people who live in your communities who need to purchase a home, but they can’t afford it, but they still can’t afford it, right?
And so as professionals in this space, and ultimately we had a long conversation at Williamson County to try to walk through it.
And I won’t throw them on the bus.
We take that, obviously, all that feedback.
That’s important.
That’s why I have a job, so that I can talk to our realtor partners and I can get that feedback and I can address their concerns and give that feedback back to my team.
And so we’ve raised income or acquisition cost limits across the state every year since like 2021.
So we are responding as best we can, right?
But at the end of the day, people need to be able to afford the homes in the places where we live.
And so that might be more than just raising limits or making more money available, right?
It’s going to be more of a concerted effort on a community level.
And so that’s the sort of things that we want to try to spur and help as best we can.
And of course, I’m sure Tennessee realtors feel the same way.
Right.
Yeah, it’s definitely something we keep an eye on is affordability.
And our Governmental Affairs Committee is always looking at what’s going on legislatively with that.
Yeah, definitely.
Yeah.
So what are some of the long term consequences that you see as far as housing, affordability and just anything?
Sure.
So I’ll attempt to prognosticate.
I am not an economist.
All right.
So make sure I point that out.
My background is in housing counseling.
And I started out in this industry as a housing counselor.
Eventually, I had a certified housing counselor, which I still am.
Also was a foreclosure intervention counselor.
And I don’t want to ring the bell of housing crisis 2008.
But that’s when I was doing housing counseling, and foreclosure image counseling was 2010, 2011, in the wake of the housing crash.
Obviously, a lot of people lost their homes.
But more than that, the general economic despair, you know what I mean, is difficult.
You know, that’s why I had to get out of that.
I did it for two or three years, and it takes a toll on you emotionally.
So I’m not saying that that’s what’s going to happen in this situation, because again, we’ve already talked about it.
I think of those interest rates change, or if home prices, well, we don’t want to talk about that, but if home prices do cool as well, you know, some combination of that, you know, the desire to be a homeowner.
We’re not in the same situation where we were concerned that a certain generation doesn’t want to be homeowners.
You know, the millennials, are they going to buy homes?
We didn’t know that for a while, but they’ve told us now, they’re more than half of the home purchases now since 2020 is a millennial home buyer.
So, millennials want to buy homes.
I believe the next generation is going to see that benefit too.
So the demand is there, and that’s encouraging.
But how long can an economic system experience the effects of a crisis before there are longer lasting ramifications?
And again, I don’t know what those are, because that’s not my expertise, but I know I’ve experienced sitting down with someone in the worst situation they can possibly imagine.
And a foreclosure is not that far off from a person who can’t afford their rent, and they don’t have any other option.
They can’t buy a house either, so what are they going to do?
You know what I mean?
Those are similar spaces to exist in, in level of difficulty and despair.
And so I guess you didn’t ask me for a takeaway, but I’ll give a takeaway.
In this space, I talked to lenders and realtors all across the state, and I just want to encourage you to continue working hard for your clients, obviously they do.
But especially those with these challenges that we’re talking about, you know, try to do more than just say, well, I can’t help you right now.
You know what I mean?
I know we are, but I want to encourage you not to lose your resilience in that, because that means when you’re in a situation like I’ve described, but then you’ve got somebody on your side fighting for you, that is what makes the difference in someone falling to the wayside or actually being able to achieve their goals.
That’s great advice.
Before we wrap up, I want to give you the opportunity to plug.
I know you have a conference, an annual conference, and that’s a great opportunity for agents, realtors to be able to come and deep dive in, learn, and a lot of people I don’t think know you do that.
I appreciate you.
I guess I’m going to do that.
Yeah, go for it.
Sure.
So we have the Tennessee Housing Conference.
We view it as one of Tennessee’s premier housing conference now.
Y’all might have something to say about that because y’all put on some good conferences as well.
Well, yours is different.
You focus on something different than we do.
Yeah, we try to bring together every stakeholder, right?
So secondary market investors, government entities, mortgage loan providers, home builders, nonprofits, and realtors, just to name a few.
And we want them to come together, hear what’s going on across the state, as far as what’s successfully happening, and then also recognize some folks for their good work, and bring nationally recognized speakers to share a lot of information data.
So some of that stuff I’ve shared today, I learned at last year’s housing conference.
And so it’s a really great opportunity.
I think Regina, your immediate past president now, Regina Hubbard, attended last year, and she loved it.
And we were so glad to have her.
And I hope Will, if Will’s listening, I want to invite you.
I hope you’ll come this year, too.
But apart from just your leadership, yeah, all realtors are welcome to come.
And it is in Nashville.
We’ve changed the date this year.
It’s going to be at the end of April this year.
And so you can go to our website, thda.org.
It’s usually in February, March.
But we’ve moved it to April.
End of April, it is thda.org.
You’ll find some information about the Tennessee housing conference there.
And you’re welcome to register.
If you want help with that, reach out to me.
I’m happy to provide that.
We’re going to hopefully have some really focused topics this year that will be beneficial to your realtor partners, including some maybe panels that will have some really good information pertaining to them.
So we’d love to see you.
Great opportunity to expand more on what we’re talking about today.
Absolutely.
Absolutely.
Yeah.
Well, thank you so much for being here.
Again, we appreciate everything that you do in your partnership with us.
And I think what you do for the state is amazing.
So thank you.
Thank you, Angela.
Thank you all for joining us today on the Real Tea Podcast.
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