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
2. 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
3. Unconventional Monetary Policy Effects
What 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
5. Immediate Opportunity to Take Advantage of
Unconventional Monetary Policy Effects
Unconventional Monetary Policy Effects
What 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
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
6,000,000
130
132
134
136
138
140
142
144
146
148
150
January2010
March2010
May2010
July2010
September2010
November2010
January2011
March2011
May2011
July2011
September2011
November2011
January2012
March2012
May2012
July2012
September2012
November2012
ExistingHomeSales
Case/ShillerHousePriceIndex
Source: McGraw Hill Financial S&P/Case-Shiller House Price Index
National Association of Realtors Existing-Home Sales
6. Higher House Prices will Unlock Households with Low or
Mildly Negative Equity
Unconventional Monetary Policy Effects
What 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
0%
5%
10%
15%
20%
25%
30%
35%
40%
North West South North/West Far South
HouseholdswithNegativeEquity,%
Source: Institute for Housing Studies, DePaul University
Policy Simulation of Increase in House Prices
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
7. Likely to See Mortgage Rate Lock-in Effects Similar to
those Observed in Late 1960s and Early 1970s
Unconventional Monetary Policy Effects
What 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
0%
10%
20%
30%
40%
50%
60%
North West South North/West Far South
BorrowerswhoareLockedIntoTheirLoan,%
Source: Institute for Housing Studies, DePaul University
Policy Simulation of Increase in Mortgage Rate
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
8. Net Effect is Likely to Reduce Residential Transactions
Unconventional Monetary Policy Effects
What 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
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
North West South North/West Far South
Existing-HomeSales/TotalHousingUnits,%
Source: Institute for Housing Studies, DePaul University
Net Effect of House Price Increase and Interest Rate Increase on Trading Volume
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
10. I. Levels of Income that Affordable Programs
serve:
a. WorkForce Housing 80% - 120% AMI
b. Moderate Income 60% - 80% AMI
c. Low Income 50% - 60% AMI
d. Very Low Income 30% - 50% AMI
e. Extremely Low Income 0 – 30% AMI
11. II. Financing Programs for Affordable OWNERSHIP Housing
A. Income Tax Deduction (for Interest) (Federal/State)
1. Everyone Qualifies
2. 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 House
c. Required to sell to Moderate Buyers (80 – 120% AMI)
12. II. Affordable Homeownership (cont.)
C. Federal Government Insured Purchase Loans for Buyers (FHA/VA)
1. First Time Home Buyers Qualify
2. 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
13. II. AFFORDABLE OWNERSHIP MECHANISM (cont.)
E. Soft Second Loans (Grants) –
1. State and Local Government primarily offer
may 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 amount
4. 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 Loan
ii. 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
14. 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 Units
4. Applies if building more than 50 New Homes
5. Developer must build a Specified Percentages of "Affordable
Homes" (typically 10 – 15%)
6. May (or may not) be required to match other new homes built
7. Homes Can Only be Sold to Qualifying Buyers – 80 – 120% AMI
8. Homeowner Must Reside for (10/15/30 years) or "pay back
portion"
9. More recently, restrictions on resale
15. II. Affordable Ownership Mechanisms (Cont.)
G. Sweat Equity (Private Associations)
1. Habitat for Humanity
2. Build Houses for "deserving families"
3. No Government Regulation
4. Volunteer Labor to Build – New owner helps build
5. 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)
16. III. Financing Programs for Affordable RENTAL HOUSING
A. Construction and Permanent Loans INSURED by Federal Government (FHA)
1. RENTS Restricted
2. 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 VI
1. Redevelopment of old public housing sites
2. Demolition of former concentrated
low income housing apartments
3. 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
17. V. Affordable Rental Housing Programs (cont.)
F. Land Donation
1. Maryland state Partnership program
2. Federal Government (through HOPE VI)
G. PROPERTY TAX Reductions – PILOTS or Cancellation
(State/Local Government)s
1. Private Owners/Developers
2. Reduces cost of operating so rents are lower
3. Residents at 0 – 80% AMI
4. 30 Year restrictions
5. Must Take Rental Vouchers
6. Must provide Services
18. Generation Perspectives on Residential Mobility:
Implications for Housing Demand
Lisa A. Sturtevant, PhD
Deputy Director, Center for Regional Analysis
Associate Research Professor, School of Public Policy
George Mason University
May 17, 2013
19. 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?
20. Data Sources
• Current Population Survey
• Decennial Census
• American Community Survey
• American Housing Survey
22. 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
24. 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
25. Between 2001 and 2007, long-distance mobility
rates dropped sharply.
26. The decline in mobility can be partially explained
by the population’s age distribution.
1980 1990 2000 2010
Under 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 rate
Change (pp)
1980-90 1990-00 2000-10
0.67 -1.85 -3.59
U.S. Population Distribution by Age Group
Source: U.S. Census Bureau.
27. 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 -0.1102
25 to 29 years -0.8596 -0.9068 -0.7677 0.1407
30 to 34 years 0.8251 0.9258 0.7122 -0.2428
35 to 39 years 0.8247 0.8765 0.7884 -0.2603
40 to 44 years 0.9178 0.9702 0.9327 -0.3091
45 to 49 years -0.0751 -0.1801 0.1577 0.0076
50 to 54 years -0.9175 -0.9682 -0.9104 0.2721
55 to 59 years -0.7845 -0.8971 -0.7172 0.3276
60 to 64 years -0.9007 -0.9448 -0.9215 0.3073
65+ years -0.8658 -0.8706 -0.9589 0.2871
Correlation Coefficients
Share of Population in Each Age Group to Overall Population Mobility Rates:
2001-2010
28. Echo Boomers are much less mobile than
previous generations were when they were in
their 20s.
29. 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
30. …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
31. Echo Boomers are delaying life-cycle events…
1990 2000 2011
20 to 24 years 28.3 26.0 12.7
25 to 29 years 61.7 56.3 40.3
30 to 34 years 78.6 74.2 63.4
35 to 44 years 88.8 84.4 78.8
45 to 54 years 94.1 91.2 85.6
55 to 59 years 95.2 94.3 89.7
60 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 2008
20 to 24 years 116.5 109.7 103.0
25 to 29 years 120.2 113.5 115.1
30 to 34 years 80.8 91.2 99.3
35 to 39 years 31.7 39.7 46.9
40 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)
35. 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.
37. Challenges and Opportunities
for Housing and
Homeownership
Lucy Gorham, Senior Research Associate
National Association of Realtors Meeting
Washington, D.C. May 17, 2013
38.
39. Risk of Serious Delinquency Varies by
Mortgage Product
39
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
40. Restrictive Underwriting Lowers Default But Closes Off Access to
A Higher Percentage of Borrowers
8
0
10
20
30
40
50
60
70
80
LTV97%
LTV90%
LTV80%
FICO>600
FICO>660
FICO>690
DTI45%
DTI36%
DTI30%
DTI27%
PercentofLoansExcluded
41. 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% 6:1
LTV 90% 9:1
LTV 80% 10:1
FICO < 600 5:1
FICO < 660 6:1
FICO < 690 7:1
DTI 45% 9:1
DTI 36% 10:1
DTI 30% 11:1
DTI 27% 12:1
LTV 97%, FICO 600, and DTI 45% 8:1
LTV 90%, FICO 660, and DTI 36% 10:1
LTV 80%, FICO 690, and DTI 30% 12:1
42. Low- and Moderate-Income Households Significantly Affected
by Large Down-payment Requirements
12
0
10
20
30
40
50
60
70
3% Downpayment 10% Downpayment 20% Downpayment
PercentofPerformingLoans
Excluded
Low-Income Moderate-Income Middle-Income Upper-Income
Measure: % of Performing Loans Excluded
43. More Restrictive Down Payment Requirements Will Have A
Disproportionate Impact on Communities of Color
12
0
10
20
30
40
50
60
70
80
90
3% Downpayment 10% Downpayment 20% Downpayment
PercentofPerformingLoans
Excluded
Non-Hispanic White African American Latino Asian
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, T
he Urban Institute, 2013
44
-60
-40
-20
0
20
40
60
80
White Hispanic Black
Changes in Population Share and
Wealth
Pop Share
2011
Pop Share
2050
(projected)
Δ Wealth
2007-10
45. Contact Us
Lucy Gorham
Senior Research Associate
UNC Center for Community Capital
919.843.3976 ▪ Lucy_Gorham@unc.edu
www.ccc.unc.edu
45
Editor's Notes
Question: Is homeownership still a pathway to building assets compared with renting?Were renters able to build significant wealth by other means during the housing crisis?What about the assets of people who were no longer homeowners and transitioned to being renters?
What does your research show about the importance of products and underwriting for avoiding delinquency and default?Do you see very different results for similar homeowners based on the mortgage products they used?
Q: Given the new QM regulations issued by the Consumer Finance Protection Bureau, what does your research tell us about the potential impacts of adding more restrictive underwriting standards on top of them?
Q: Since more restrictive underwriting closes off access to some borrowers but also lowers the risks of default, how would you characterize the tradeoffs between risk and access?
Q: Down-payment requirements are one restriction often discussed in the context of QRM. What are the implications for helping low and moderate-income families achieve homeownership?
Qs: 1. And can you discuss the implications of down-payment requirements on communities of color?2. What would be the impact on efforts to close the racial wealth gap?3. If communities of color can’t get access to QM loans, where would they look for mortgage lending?
Questions:How do we balance risk and access given the current discussion around QM and QRM regulations?Do you believe that underwriting restrictions are needed beyond QM?