Thursday, January 18, 2018

Remodeling Market to March Higher in 2018

by Abbe Will
Research Associate
The coming year is expected to be another robust one for residential renovations and repairs with growth accelerating as the year progresses, according to our latest Leading Indicator of Remodeling Activity (LIRA). The LIRA projects that homeowner spending on improvements and repairs will approach $340 billion in 2018, an increase of 7.5 percent from estimated 2017 spending.

Steady gains in the broader economy, and in home sales and prices, are supporting growing demand for home improvements. We expect the remodeling market will also get a boost this year from ongoing restoration efforts in many areas of the country impacted by last year’s record-setting natural disasters.

Despite continuing challenges of low for-sale housing inventories and contractor labor availability, 2018 could post the strongest gains for home remodeling in more than a decadeAnnual growth rates have not exceeded 6.8 percent since early 2007, before the Great Recession hit.

For more information about the LIRA, including how it is calculated, visit the JCHS website.

Thursday, January 11, 2018

How Housing Counseling Creates More Neighborhood Choice for Buyers

by Marietta Rodriguez
The US housing system simultaneously is one of the most efficient markets in the world and one of the most complex.

While the efficiency offers consumers many opportunities, the complexity makes it more likely that consumers will make housing and mortgage choices that are not in their best interests. However, our experience at NeighborWorks® shows that housing counseling programs can greatly increase buyers' ability to find and finance homes that are right for them.

With transparent pricing, multiple participants, and regulations that help ensure its stability and strength, the US housing system has many of the attributes of an efficient market. Moreover, as the papers in this panel describe, new technologies are making it even easier to access information about both homes for sale and ways of financing the purchases of those dwellings.

However, many consumers find the home buying process to be daunting. Illustratively, a recent household survey conducted for NeighborWorks® America found 74 percent of Americans (and more than 80 percent of millennials) think that the home buying process is complicated. The survey also found that while the overwhelming share of Americans (including millennials) consider homeownership a key component of the American dream—especially people of color and millennials—thousands of would-be buyers are shut out of the market because of confusion about down payment requirements, lack of information about credit standards, and the burden of student loan debt. Moreover, the complexity of the housing system creates the possibility that consumers who are in the market may make housing and mortgage choices that are not in their best interests, including limiting their home choices without looking at all of the available options and selecting mortgage products that are unsuitable or too expensive.

Part of the problem may be that when seeking information on buying a home, Americans are most likely to consult a real estate agent, search the web, or talk with friends or family who are homeowners. In contrast, only about 40 percent of adults (and half of millennials) are likely to seek counsel from a non-profit organization, such as the many NeighborWorks® member organizations that provide advice on buying a home (and only a fifth said they were very likely to do so).

This is unfortunate because our experience at NeighborWorks® strongly suggests that working with certified housing counselors (at a NeighborWorks® Homeownership Center or other HUD-approved housing counseling agencies) can help consumers make good choices about whether and what to buy, how to finance those purchases, and how to maintain their new homes. Housing counselors do so by working one-on-one with potential homebuyers, helping them develop a budget and to strengthen their credit so they can maximize their chance of getting the lowest possible mortgage rate. Moreover, because they are tightly connected to the communities they serve, housing counselors are aware of  trends practically on a block-by-block basis, knowledge that can help a homebuyer sift through the mountains of data on everything from traffic patterns, crime statistics, and school ratings to which community is closest to the best green space and other amenities.

Housing counselors also can help consumers gain access to a myriad of down payment assistance programs and mortgage products that can make it possible to either spend less than they had planned on mortgage payments or to purchase higher priced homes in more desirable communities. The down payment assistance programs, for example, can not only reduce the time and amount of cash consumers must save on their own to buy a home, they can also reduce the amount they need to borrow, which can lover monthly mortgage payments. Knowing about these programs may be especially important for non-White consumers. According to the 2017 NeighborWorks® America Housing Survey, the average African-American and Hispanic consumer assumed that the minimum down payment generally was a little more than 20 percent, an amount substantially higher than the typical down payment made by first-time homebuyers or the 3.5 percent down payment requirement for an FHA loan.

Moreover, because the role of a housing counselor is to help a homebuyer make the right choice for themselves, a housing counselor is not limited to a small set of mortgage choices the way a mortgage officer at a particular lender would be. For example, the largest mortgage lenders originate very few loan products that are offered by state housing finance agencies (HFAs). These HFA mortgages often have strong, but more flexible underwriting criteria that can help overcome mortgage denial issues that may happen with standard mortgage products and underwriting policies.

Combined, all this assistance can help ensure that homebuyers are more likely to choose affordable homes and mortgages, according to a 2013 study done for NeighborWorks® by Neil Mayer and Associates. The study, which looked at 75,000 homeowners who received housing counseling from NeighborWorks® organizations, found that compared to similar homeowners who did not receive counseling, homeowners who received counseling were one-third less likely to fall seriously behind on their mortgages. Such data, and other findings from the study, confirm that housing counseling allows consumers—particularly low and moderate-income and minority consumers—to access and remain in affordable homes in a wider and more diverse array of neighborhoods and communities.

Papers from the A Shared Future symposium are available on the JCHS website

Wednesday, January 3, 2018

Low-Cost Rental Housing Increasingly Difficult to Find

by Elizabeth La Jeunesse
Research Analyst
While rental markets are cooling nationally, market conditions remain extremely tight at the low end of the market, offering little relief to affordability pressures faced by renters with the lowest incomes, according to our new report, America’s Rental Housing 2017.

In fact, by several metrics, lower-priced housing is increasingly hard to find not only in high-cost coastal areas but also in many inland areas where rents are generally lower. Illustratively, vacancy rates for less expensive units – those with rents below the median for their metropolitan area – were below those for more expensive units in 42 of the nation’s 50 largest metros, including all but one of the nation’s largest 15 metros. Moreover, in 14 of the 50 largest metros, vacancy rates for less expensive units were less than or equal to 5 percent last year, compared to 2006, when just three metros had such tight conditions. The tightest markets were in San Francisco, Los Angeles, Seattle, and Portland, where vacancy rates for less expensive units were under 3 percent (Figure).

Notes: Less (more) expensive units are defined as those below (above) the area median contract rent in the same calendar year. Source: JCHS tabulations of US Census Bureau, 2016 American Community Survey.

Such ultra-low vacancy rates are unusual, at least compared to a decade ago. In San Francisco and Denver, for example, vacancy rates for units renting for less than the area median were closer to 8.5 percent in 2006 (a similar period of relative market strength), but by 2016, they had fallen to 2.0 and 3.4 percent, respectively. Similarly, in Seattle and Portland, vacancy rates for less-than-median-rent units were 5.8 and 5.6 percent respectively in 2006. However, in 2016, the vacancy rate for these units had fallen to just 2.9 percent. In fact, the only major metro to see consistently low vacancy rates in the lower-cost segment during both periods was Los Angeles, where the rate declined from 3.4 percent in 2006 to 2.9 percent in 2016.

Metro areas with the steepest drops in the vacancy rate for less expensive units from 2006 to 2016 generally had high vacancy rates to begin with. For example, in Cincinnati and Kansas City lower-rent vacancy rates declined from 16.7 and 14.2 percent, respectively, in 2006 to 7.5 and 6.7 percent in 2016. The Nashville and Detroit rental markets were also transformed over this period, with vacancy rates for low-rent units dropping from 10.0 and 10.9 percent, respectively, to 4.7 and 6.1 percent.

Data from RealPage, Inc., which classifies professionally managed apartment markets into three segments (according to quality and cost for the area) confirm these trends. Within the 100 markets they track, vacancy rates in the highest-priced Class A segment rose 1.5 percentage points over the past year to 6.0 percent while those in the mid-priced Class B segment rose 1.0 percent to 4.6 percent. In contrast, vacancy rates in the low-cost Class C segment remained relatively unchanged from the past year at 4.1 percent in the third quarter of 2017—their lowest level since the early 2000s. Moreover, in a handful of markets, including Miami, San Jose, Honolulu, San Diego, Sacramento, Minneapolis, Portland, and Orlando, vacancy rates in the Class C segment were below 1.5 percent.

The bottom line is that while rental markets are cooling nationally, households in need of modestly-priced rental housing still face challenging conditions in many areas. Many previously low-demand markets heated up over the past decade, while markets for less-expensive units tightened further in metros that were already expensive. With vacancy rates for less expensive units at rock-bottom levels, relief from market cooling is unlikely to be felt soon by low-income families.

Full data for all metro areas, including median rents, is available in Table W-19 of the report’s appendix tables.

Wednesday, December 27, 2017

Taking it to the House: Our Most Popular Blogs of 2017

by David Luberoff, Deputy Director

As we turn the calendar to 2018, we took a moment to look back at the past year to see what were the most popular articles in our Housing Perspectives blog.  

The top five articles of 2017 were:
  1. When Do Renters Behave Like Homeowners?
    In high-housing cost cities, renters and homeowners both oppose new residential developments proposed for their neighborhoods. (Written by Michael Hankinson, a Joint Center Meyer Doctoral Fellow)

  2. Wait... What? Ten Surprising Findings from the 2017 State of the Nation’s Housing Report
    There were a number of surprises in our annual report, including the fact that fewer homes were built over the last 10 years than any 10-year period in recent history and that the homeownership gap between whites and African-Americans widened to its largest disparity since WWII. (Written by Daniel McCue, a Senior Research Associate at the Joint Center)

  3. Are Home Prices Really Above Their Pre-Recession Peak?
    While nominal home prices were above their mid-2000s heights in 48 percent of the nation’s 951 local markets, in real dollars, prices reached their peaks in only 15 percent of those markets. (Written by Alexander Hermann, a Research Assistant at the Joint Center)

  4. Projection: US Will Add 25 Million Households by 2035
    Revising previous estimates, the Joint Center now predicts that the United States will add 13.6 million households between 2015 and 2025, and another 11.5 million households between 2025 and 2035. (Also written by Daniel McCue)

  5. Our Disappearing Supply of Low-Cost Rental Housing
    The number of units renting for $2,000 or more per month (in constant, inflation-adjusted dollars) nearly doubled between 2005 and 2015, while the number of units renting for below $800 fell by 2 percent. (Written by Elizabeth La Jeunesse, a Joint Center Research Analyst)

Thursday, December 21, 2017

What Would it Take to Make Neighborhoods More Equitable and Integrated?

by Katie Gourley, Graduate Research Assistant

How do household decisions about where to live perpetuate residential segregation, and what would it take for such choices to result in more inclusive neighborhoods? Three papers released today by the Joint Center for Housing Studies explore these questions from somewhat different perspectives. The newly released papers, which were presented at A Shared Future: Fostering Communities of Inclusion in an Era of Inequality, a symposium hosted by the Joint Center, include an overview paper by the panel’s moderator and two papers by panelists examining key issues in more detail. The papers are:

Household Neighborhood Decisionmaking and Segregation, an overview paper co-authored by Justin Steil, the panel’s moderator, and Reed Jordan, investigates what we know about households’ decisionmaking processes and explores the ways that technology and other interventions might help create more integrated places. They note that notwithstanding the significance of schools and other local amenities, the racial composition of a neighborhood is a significant determinant in the residential decisionmaking process. Moreover, they add, while homeseekers increasingly rely on the internet, it is not yet clear how that reliance impacts the makeup of neighborhoods. However, they note, it seems clear that different sources of information have implications for segregation and may serve as points of leverage for pro-integration interventions.

Data Democratization and Spatial Heterogeneity in the Housing Marketby Ralph McLaughlin and Cheryl Young, argues that improved access to residential real estate data has the potential to affect residential settlement patterns in two countervailing ways. On the one hand, it could expand individuals’ housing search choice to include properties in more diverse neighborhoods. Alternatively, it could increase the demand to live in amenity-rich locations, which might price out existing and future residents (unless the supply of housing in those locations grew at a similar rate). However, they argue, the extent to which households might be priced out of a neighborhood is not primarily influenced by data availability but rather by the ease with which housing supply can be increased to meet demand in those areas. They therefore recommend three policy approaches: reducing exclusionary and restrictive zoning policies in expensive, amenity-laden markets; giving housing choice voucher (HCV) recipients the option to conceal their voucher status from landlords during the application process; and requiring that some available Low Income Housing Tax Credit funds be used in “high-value” Census tracts.

Tarry Hum,
Queens College
Minority Banks, Homeownership, and Prospects for New York City's Multi-Racial Immigrant Neighborhoodsby Tarry Hum, focuses on the role of Asian minority banks in in lending to Asian borrowers for residential property purchases in Queens and Brooklyn. Established to counter financial exclusion resulting from discrimination and linguistic and cultural barriers, these banks historically have been a key source of credit, especially for Asian immigrants who may not qualify for conventional loans. However, using data sets from 2010 and 2015, Hum shows that there was a significant rise in lending by these banks to investors rather than owner-occupants. She concludes by exploring how these changes may be driving up prices, displacing low- and moderate income renters, and spurring illegal conversions – changes that together may be destabilizing many of the neighborhoods where the loans are being made.

The three papers build on previously released papers from the symposium that discuss the nature of residential segregation in the US, its consequences, rationales for public policies to address those consequences, and priorities for action. Over the next several months, the Joint Center will be releasing additional papers from the symposium that will focus on promising strategies in a variety of areas that would help foster more inclusive residential communities. The papers also will be collected into an edited volume that will be published in 2018.

Additional papers from the A Shared Future symposium are available on the JCHS website