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Moderator: NAR Chief Economist Lawrence Yun Panelists: James Shilling, PhD, Institute for Housing Studies, DePaul University Lisa Sturtevant, PhD, Center for Regional Analysis, George Mason University Margaret McFarland, JD, Colvin Institute of Real Estate Development University of Maryland Lucy Gorham, PhD, Center for Community Capital, University of North Carolina
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Challenges & Opportunities in Housing and Homeownership
James Shilling, PhD, Institute for Housing Studies, DePaul University
Lisa Sturtevant, PhD, Center for Regional Analysis, George Mason University
Margaret McFarland, JD, Colvin Institute of Real Estate Development University of Maryland
Lucy Gorham, PhD, Center for Community Capital, University of North Carolina
This Morning’s Panel
Unconventional Monetary Policy EffectsWhat Does this Mean for REALTORS?
The Longer Term
Patric H. Hendershott, Jin Man Lee, and James D. Shilling Mobility in the Single-Family Housing Market
Mobility in the Single-Family Housing Market
Patric H. Hendershott, Jin Man Lee, and James D. Shilling
DePaul University
May 17, 2013
January
2005
April 2005
July 2005
October
2005
January
2006
April 2006
July 2006
October
2006
January
2007
April 2007
July 2007
October
2007
January
2008
April 2008
July 2008
October
2008
January
2009
April 2009
July 2009
October
2009
January
2010
April 2010
July 2010
October
2010
January
2011
April 2011
July 2011
October
2011
January
2012
April 2012
July 2012
October
2012
January
2013
April 2013
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
Source: Fannie Mae PMMS Data
Mtg Rate Sprd
Month
30-y
r FRM
Rat
e, %
Spre
ad, %
Quantitative Easing has Resulted in Record-Low Interest Rates
Unconventional Monetary Policy EffectsWhat Does this Mean for REALTORS?
The Longer Term
Patric H. Hendershott, Jin Man Lee, and James D. Shilling Mobility in the Single-Family Housing Market
Immediate Opportunity to Take Advantage of Unconventional Monetary Policy Effects
Unconventional Monetary Policy EffectsWhat Does this Mean for REALTORS?
The Longer Term
Patric H. Hendershott, Jin Man Lee, and James D. Shilling Mobility in the Single-Family Housing Market
Janu
ary
2010
Febr
uary
201
0M
arch
201
0Ap
ril 2
010
May
201
0Ju
ne 2
010
July
201
0Au
gust
201
0Se
ptem
ber 2
010
Oct
ober
201
0No
vem
ber 2
010
Dece
mbe
r 201
0Ja
nuar
y 20
11Fe
brua
ry 2
011
Mar
ch 2
011
April
201
1M
ay 2
011
June
201
1Ju
ly 2
011
Augu
st 2
011
Sept
embe
r 201
1O
ctob
er 2
011
Nove
mbe
r 201
1De
cem
ber 2
011
Janu
ary
2012
Febr
uary
201
2M
arch
201
2Ap
ril 2
012
May
201
2Ju
ne 2
012
July
201
2Au
gust
201
2Se
ptem
ber 2
012
Oct
ober
201
2No
vem
ber 2
012
Dece
mbe
r 201
2
130
132
134
136
138
140
142
144
146
148
150
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
6,000,000
Source: McGraw Hill Financial S&P/Case-Shiller House Price IndexNational Association of Realtors Existing-Home Sales
Case
/Shi
ller H
ouse
Pric
e In
dex
Existi
ng H
ome
Sale
s
Higher House Prices will Unlock Households with Low or Mildly Negative Equity
Unconventional Monetary Policy EffectsWhat Does this Mean for REALTORS?
The Longer Term
Patric H. Hendershott, Jin Man Lee, and James D. Shilling Mobility in the Single-Family Housing Market
North West South North/West Far South0%
5%
10%
15%
20%
25%
30%
35%
40%
Source: Institute for Housing Studies, DePaul UniversityPolicy Simulation of Increase in House Prices
Hous
ehol
ds w
ith N
egati
ve E
quity
, %
t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5
Likely to See Mortgage Rate Lock-in Effects Similar to those Observed in Late 1960s and Early 1970s
Unconventional Monetary Policy EffectsWhat Does this Mean for REALTORS?
The Longer Term
Patric H. Hendershott, Jin Man Lee, and James D. Shilling Mobility in the Single-Family Housing Market
North West South North/West Far South0%
10%
20%
30%
40%
50%
60%
Source: Institute for Housing Studies, DePaul UniversityPolicy Simulation of Increase in Mortgage Rate
Borr
ower
s who
are
Lock
ed In
to T
heir
Loan
, %
t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5
Net Effect is Likely to Reduce Residential Transactions
Unconventional Monetary Policy EffectsWhat Does this Mean for REALTORS?
The Longer Term
Patric H. Hendershott, Jin Man Lee, and James D. Shilling Mobility in the Single-Family Housing Market
North West South North/West Far South0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Source: Institute for Housing Studies, DePaul UniversityNet Effect of House Price Increase and Interest Rate Increase on Trading Volume
Existi
ng-H
ome
Sale
s/To
tal H
ousin
g Un
its, %
t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5 t+1 t+2 t+3 t+4 t+5
AFFORDABLE HOUSING IN THE US
May 17, 2013
I. Levels of Income that Affordable Programs serve:
a. WorkForce Housing 80% - 120% AMIb. Moderate Income 60% - 80% AMIc. Low Income 50% - 60% AMId. Very Low Income 30% - 50% AMIe. Extremely Low Income 0 – 30% AMI
II. Financing Programs for Affordable OWNERSHIP Housing
A. Income Tax Deduction (for Interest) (Federal/State)1. Everyone Qualifies2. No Income Limits on Who Qualifies
B. Government Insured Construction Loans to Developers (FHA)
a. Lower Risk to Lender (if loan defaults, Government picks up)b. Reduces the Cost of Construction – Lower Cost of the Housec. Required to sell to Moderate Buyers (80 – 120% AMI)
II. Affordable Homeownership (cont.)C. Federal Government Insured Purchase Loans for Buyers (FHA/VA)
1. First Time Home Buyers Qualify2. Restrictions
i. Buyer is required to RESIDE in home (no investors)ii. Can RESELL to anyone without restriction
D. Private Bank/Government Insurance for Loans for Buyers (FHA/VA)1. Private Banks make the most loans
i. Federal Government insures loan so Private Banks will make at reduced loan requirements
II. AFFORDABLE OWNERSHIP MECHANISM (cont.)E. Soft Second Loans (Grants) –
1. State and Local Government primarily offermay be using federal pass through funds (HOME CDBG)
2. Who Qualifies: a. Income Restrictions vary depending on Local Program
3. First loan from Bank – much lower amount4. Can be Done in Form of a Grant or Soft Loan
5. Repayment Terms on Soft Loan (lots of variations)A) Pay back the loan when SELL
i. split profit by percentage with the Local government 60/40)
B) Repay nothing if reside for specified number of years –i. Burn Off Loanii. Typicall 10% per year, so if live there for 10 years
the loan is "forgiven"iii. If sell before the 10th year, then pay back
percentage out of proceeds of sale
IV. Affordable Housing Mechanisms (cont.)F. Required New Construction [MDPUs]
1. To Obtain Zoning/Planning/Building Permits for New Construction
2. Imposed by Local Governments (County/City) 3. Moderately Priced Dwelling Units4. Applies if building more than 50 New Homes5. Developer must build a Specified Percentages of "Affordable
Homes" (typically 10 – 15%)6. May (or may not) be required to match other new homes built7. Homes Can Only be Sold to Qualifying Buyers – 80 – 120% AMI8. Homeowner Must Reside for (10/15/30 years) or "pay back
portion"9. More recently, restrictions on resale
II. Affordable Ownership Mechanisms (Cont.)G. Sweat Equity (Private Associations)
1. Habitat for Humanity 2. Build Houses for "deserving families"3. No Government Regulation4. Volunteer Labor to Build – New owner helps build5. Often donated land/lots and Materials
H. Property Tax Credits (State and Local Government)1. Limited Income Seniors (Over 65 usually)2. Sometimes for Low Income (60% or below)
I. Maintenance Grant Programs (State Local/Private) 1. paint Up/Fix UP Repairs 2. (Seniors/Very Low Income)
III. Financing Programs for Affordable RENTAL HOUSING
A. Construction and Permanent Loans INSURED by Federal Government (FHA)1. RENTS Restricted2. Rent only to Low and Moderate Income Buyers (60% – 80% AMI
B. Operating Subsidy Contract for a Property (Section 8 HAP contract)
C. Individual Rent Vouchers (Subsidy to the Tenant) D. Public (Government built/owned/operated ) Rental Housing
E. Federal GRANTS (and some state and local) – HOPE VI1. Redevelopment of old public housing sites2. Demolition of former concentrated low income housing apartments3. Replaced with Mixed-Income Apartments serving:30% low income (under 30% AMI) 30% Moderate income (50- 60% AMI)30% work force or Market (60 – 120%+) AMI
V. Affordable Rental Housing Programs (cont.)
F. Land Donation1. Maryland state Partnership program2. Federal Government (through HOPE VI)
G. PROPERTY TAX Reductions – PILOTS or Cancellation (State/Local Government)s
1. Private Owners/Developers2. Reduces cost of operating so rents are lower 3. Residents at 0 – 80% AMI4. 30 Year restrictions5. Must Take Rental Vouchers6. Must provide Services
Generation Perspectives on Residential Mobility: Implications for Housing Demand
Lisa A. Sturtevant, PhDDeputy Director, Center for Regional Analysis
Associate Research Professor, School of Public PolicyGeorge Mason University
May 17, 2013
Research Questions• How do current and historic mobility rates vary by age cohort
and are these differences supported by the life-cycle theory of residential mobility and migration?
• Are life-cycle events associated with residential mobility shifting to later years?
• Can lower U.S. mobility rates be decomposed into overall lower propensities to move, changes in the sizes of the most and least mobile age cohorts, and different residential mobility processes for generational cohorts?
• Will the Echo Boomers and Baby Boomers make different choices about moving and homeownership compared with the predecessor generations?
Data Sources• Current Population Survey • Decennial Census • American Community Survey• American Housing Survey
Residential mobility rates in the U.S. have been falling since the 1960s…
Life-Cycle Theory of Residential Mobility
• The process by which families and individuals change their housing to meet housing needs that are generated by shifts in family composition and economic situation that accompany life-cycle changes (Rossi 1954, 1980; Greenwood 1975)
• Major life-cycle events: Marriage, childbearing, job change, retirement
• Age is strongly related to life-cycle events
Younger people are consistently more likely to move.
Younger people are not more likely to make long-distance moves.
Age State-to-state
Same state, different county
Within county
From abroad
20 to 24 years 15% 20% 61% 4%25 to 29 years 16% 20% 61% 4%30 to 34 years 16% 19% 62% 4%35 to 39 years 16% 19% 61% 4%40 to 44 years 17% 19% 61% 3%45 to 49 years 17% 19% 61% 3%50 to 54 years 18% 20% 59% 3%55 to 59 years 22% 22% 53% 3%60 to 64 years 20% 22% 55% 2%65+ years 17% 20% 60% 3%
Proportion of Moves by Distance and Mover Age Group: 1986-2012
Source: Current Population Survey
Between 2001 and 2007, long-distance mobility rates dropped sharply.
The decline in mobility can be partially explained by the population’s age distribution.
1980 1990 2000 2010Under 5 years 7.2% 7.5% 6.8% 6.5%5 to 9 years 7.4% 7.3% 7.3% 6.6%10 to 14 years 8.1% 6.9% 7.3% 6.7%15 to 19 years 9.3% 7.2% 7.2% 7.1%20 to 24 years 9.4% 7.7% 6.7% 7.0%25 to 29 years 8.6% 8.6% 6.9% 6.8%30 to 34 years 7.8% 8.8% 7.3% 6.5%35 to 39 years 6.2% 8.0% 8.1% 6.5%40 to 44 years 5.2% 7.1% 8.0% 6.8%45 to 49 years 4.9% 5.5% 7.1% 7.4%50 to 54 years 5.2% 4.5% 6.2% 7.2%55 to 59 years 5.1% 4.2% 4.8% 6.4%60 to 64 years 4.5% 4.3% 3.8% 5.4%65+ years 11.3% 12.5% 12.4% 13.0%Mobility rateChange (pp)
1980-90 1990-00 2000-100.67 -1.85 -3.59
U.S. Population Distribution by Age Group
Source: U.S. Census Bureau.
The relationship between the age distribution of the population and mobility rates changed in the
last decade.
Overall State-to-state mobility
Same state, different county
Within county
20 to 24 years 0.4142 0.4021 0.5327 -0.110225 to 29 years -0.8596 -0.9068 -0.7677 0.140730 to 34 years 0.8251 0.9258 0.7122 -0.242835 to 39 years 0.8247 0.8765 0.7884 -0.260340 to 44 years 0.9178 0.9702 0.9327 -0.309145 to 49 years -0.0751 -0.1801 0.1577 0.007650 to 54 years -0.9175 -0.9682 -0.9104 0.272155 to 59 years -0.7845 -0.8971 -0.7172 0.327660 to 64 years -0.9007 -0.9448 -0.9215 0.307365+ years -0.8658 -0.8706 -0.9589 0.2871
Correlation CoefficientsShare of Population in Each Age Group to Overall Population Mobility Rates:
2001-2010
Echo Boomers are much less mobile than previous generations were when they were in
their 20s.
The drop in mobility rates between 2001 and 2007 was due to less long-distance migration…
Time Period
Overall mobility (%
change)
State-to-state(% change)
Same state, different county
(% change)
Within county
(% change)
From abroad(% change)
1986-2001 -23.7% -5.6% -26.3% -29.8% 23.7%2001-2007 -6.6% -41.2% -7.3% 8.2% -36.1%2007-2012 -9.4% -0.1% -12.4% -10.5% -7.0%
Changes in Mobility Rates by Distance
…and less moving by people in their 20s.
Time Period
Overall mobility
(% change)
Age Group (rate % change)
20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65+
1986-2001 -23.7% -10.2% -12.5% -10.8% -17.7% -21.9% -18.8% -22.3% -13.3% -24.0% -22.3%
2001-2007 -6.6% -17.7% -12.9% -4.9% -1.4% -1.8% -4.4% 5.5% -15.4% 7.9% -9.4%
2007-2012 -9.4% -8.6% -4.3% -8.2% -7.0% -13.4% -5.7% -5.2% -5.5% -17.1% -9.5%
Changes in Mobility Rates by Age Group
Echo Boomers are delaying life-cycle events…
1990 2000 201120 to 24 years 28.3 26.0 12.725 to 29 years 61.7 56.3 40.330 to 34 years 78.6 74.2 63.435 to 44 years 88.8 84.4 78.845 to 54 years 94.1 91.2 85.655 to 59 years 95.2 94.3 89.760 to 64 years 95.2 95.2 92.4
Percentage of Individuals Who Are Married or Have Ever Been Married by Selected Age Group
Source: 1990 Census 5% sample IPUMS; 2000 Census, Summary File 3; 2011 American Community Survey
1990 2000 200820 to 24 years 116.5 109.7 103.025 to 29 years 120.2 113.5 115.130 to 34 years 80.8 91.2 99.335 to 39 years 31.7 39.7 46.940 to 44 years 5.5 8.0 9.8
Source: U.S. National Center for Health Statistics, Centers for Disease Control.
Birth Rate (per 1,000 Women)
…and so are Baby Boomers
Homeownership rates have declined fastest for Echo Boomers.
Reasons for moving have also changed.
Some conclusions
• The life-cycle theory is a good—though not perfect—model for residential mobility trends.
• The long-term decline in residential mobility can be partially explained by changes in the age distribution of the population.– Other factors: increased availability of information, convergence of state
economies• Echo Boomers have been making different mobility and housing choice
decisions than prior generations.– The recession and housing market downturn is likely more important than
changing preferences.– The delay in marriage and childbearing is also related to the delay in moving
and homeownership.• Baby Boomers also are delaying moving.
– The economic downturn has led to a delay in retirement.
Challenges and Opportunities for Housing and
HomeownershipLucy Gorham, Senior Research AssociateNational Association of Realtors Meeting
Washington, D.C. May 17, 2013
38
Despite Crisis, Homeownership Builds Wealth for LMMI Households When “Done Right”
CAP Owners’ and Renters’ Median Net Worth in 2011, by Net Worth in 2005
<$0 $0-$10,000 $10,000-$20,000 $20,000-$30,000 >$30,000$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
Own-ownOwn-rentRent-rentRent-own
Net worth in 2005
Med
ian
net w
orth
in 2
011
39
Risk of Serious Delinquency Varies by Mortgage Product
Note: CAP delinquency rate taken from a portfolio of CAP loans managed by Self-Help Credit Union. Sources: Mortgage Bankers Association; Fannie Mae Credit Supplements; Center for Community Capital
Restrictive Underwriting Lowers Default But Closes Off Access to A Higher Percentage of Borrowers
8
LTV
97
%
LTV
90
%
LTV
80
%
FIC
O>
60
0
FIC
O>
66
0
FIC
O>
69
0
DTI
45
%
DTI
36
%
DTI
30
%
DTI
27
%
Universe: QM Loans
0
10
20
30
40
50
60
70
80
Perc
en
t of
Loan
s Excl
ud
ed
Excessive Risk Reduction Would Exclude Too Many Performing Loans from the Market
11
Alternate Underwriting Criteria
Exclusion Ratio (Number of QM Performing Loans Excluded
per Prevented Default)
Universe: QM Loans LTV 97% 6:1LTV 90% 9:1LTV 80% 10:1 FICO < 600 5:1FICO < 660 6:1FICO < 690 7:1 DTI 45% 9:1DTI 36% 10:1DTI 30% 11:1DTI 27% 12:1 LTV 97%, FICO 600, and DTI 45% 8:1LTV 90%, FICO 660, and DTI 36% 10:1LTV 80%, FICO 690, and DTI 30% 12:1
Low- and Moderate-Income Households Significantly Affectedby Large Down-payment Requirements
12
3% Downpayment 10% Downpayment 20% Downpayment0
10
20
30
40
50
60
70
Low-Income Moderate-Income Middle-Income Upper-Income
Perc
en
t of
Perf
orm
ing
Loan
s
Exclu
ded
Measure: % of Performing Loans Excluded
More Restrictive Down Payment Requirements Will Have A Disproportionate Impact on Communities of Color
12
3% Downpayment 10% Downpayment 20% Downpayment0
10
20
30
40
50
60
70
80
90
Non-Hispanic White African American Latino Asian
Perc
en
t of
Perf
orm
ing
Loan
s
Exclu
ded
Measure: % of Performing Loans Excluded
44
New Housing Demand Will Increasingly Come From Minority Families Who Tend to Have Lower Wealth and Need Access to Mainstream, Sustainable Loan Products
Source: Population figures from Taylor and Cohn, Pew Research Center: Social and Demographic Trends, 2012; Wealth figures from McKernan, Ratcliffe, Steuerle, Zhang, The Urban Institute, 2013
White Hispanic Black
-60
-40
-20
0
20
40
60
80
Changes in Population Share and Wealth
Pop Share 2011
Pop Share 2050 (pro-jected)
Δ Wealth 2007-10
Contact Us Lucy Gorham
Senior Research Associate
UNC Center for Community Capital
919.843.3976 ▪ [email protected]
www.ccc.unc.edu
45