Transcript Presentation

Housing Units with Negative
Equity, 1997-2009
George R. Carter III, Ph.D.
U.S. Census Bureau
HUD Data Users Conference
Washington, DC
March 8, 2011
1
Disclaimer
This presentation is intended to inform
interested parties of ongoing research and to
encourage discussion of work in progress.
The views expressed on methodological,
technical and operational issues are those of
the author and not necessarily those of the U.S.
Census Bureau.
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Introduction
•
•
•
•
Homeownership rates rose in the US until 2004
Home prices peaked in the US in 2006
Home prices have since fallen at the National level
An increasing number of homeowners are
“underwater”
– First American CoreLogic estimates 24% of residential
properties with mortgages were “underwater” at the end of
the first quarter of 2010
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Research Study
Study Goals
1. Cross Sectional Analyses
–
Trends in negative equity since 1997
2. Longitudinal Analyses
–
–
Persistence of underwater status over time
Prevalence of distressed sales since 1999
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Data
• American Housing Survey (AHS)
– National Internal Files
– Cross-Sectional: 1997-2009
– Longitudinal: (1997,1999); (1999,2001); (2001,2003);
(2003,2005); (2005,2007); and (2007,2009)
• Variables of Interest
– Home Value
– Mortgage Characteristics
• Number of mortgages and loans
• Year mortgage obtained
• Original amount borrowed
• Term
• Current interest rate
– Purchase Price
– Housing and Householder Characteristics
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What does it mean to be “underwater”?
•
Measurement of home equity
– Home Equity = Home Value – Outstanding Principal
• Self-reported in the AHS
– “Underwater” homes have negative equity
• Home Value < Outstanding Principal
•
Effect of “underwater” homes on housing market
–
–
–
–
Reduced wealth accumulation
Reduced household mobility
Mortgage default
Continuing price declines
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What is a distressed sale?
• From Bank’s Perspective
– Sale that doesn’t cover existing mortgage debt (short sale)
• From Owner’s Perspective
– Sale that doesn’t cover existing mortgage debt and
downpayment
• Measurement of distressed sales
– Purchase price of new owner ≤ outstanding principal of prior
owner
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Literature-Home Value
– AHS collects self-reported home values
– Validity and Reliability
• Home values in AHS are 5.1 percent higher than actual
sales prices
• Estimates are reliable, but consistently overestimate
home value
(Kiel and Zabel 1999)
– Overestimates of home value could depress
estimates of negative equity
• May be less of a problem for respondents who
purchased during soft housing markets
(Benitez-Silva et al. 2008)
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Literature-Negative Equity,
Mobility, and Distressed Sales
• Negative Equity and Household Mobility
– Owners with negative equity one third less mobile than
owners with positive equity
(Ferreira, Gyourko, and Tracy 2010)
• Negative Equity and Default
– Negative equity positively correlated with default
(Van Order and Zorn 2000)
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S&P / Case-Shiller 10 City Index, 1987-2010
250
200
150
100
50
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0
Source: Standard & Poor's / Case-Shiller 10 City Index
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Trends in Home Value and Outstanding
Principal, 1997-2009
250000
Dollars
200000
150000
VALUE
100000
OTPIN
50000
0
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Note: VALUE = Home Value. OTPIN = Outstanding Principal. Both measures are self reported.
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Percent Underwater Overall, 1997-2009
Percent Underwater
14
12
10
8
Overall
6
4
2
0
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Percent Underwater by Region, 1997-2009
18
Percent Underwater
16
Northeast
14
12
Midwest
10
South
8
6
West
4
2
0
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Percent Underwater by Race of Householder,
1997-2009
Percent Underwater
16
14
White
Only
Black
Only
Asian
Only
Other
12
10
8
6
4
2
0
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Percent Underwater by Hispanic Origin of
Householder, 1997-2009
Percent Underwater
25
20
Hispanic
15
NonHispanic
10
5
0
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Percent Underwater
Percent Underwater by Age of Householder,
1997-2009
20
18
16
14
12
10
8
6
4
2
0
<35
35-44
45-54
55-64
65+
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Percent Underwater by Marital Status of
Householder, 1997-2009
Percent Underwater
14
12
10
Married
8
6
Not
Married
4
2
0
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Percent Underwater
Percent Underwater by Education Level of
Householder, 1997-2009
Less than
High School
16
14
12
10
8
6
4
2
0
High School
Some College
College
AHS Survey Year
Advanced
Degree
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Percent Underwater by Household Income
Quintile, 1997-2009
Percent Underwater
14
12
First Quintile
10
Second Quintile
8
Third Quintile
6
Fourth Quintile
4
Fifth Quintile
2
0
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Percent Underwater by Interest Rate of First
Mortgage, 1997-2009
20
<5%
Percent Underwater
18
16
5-6%
14
12
6-7%
10
8
7-8%
6
4
8+%
2
0
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
20
Percent Underwater by Mortgage Type of First
Mortgage, 1997-2009
Percent Underwater
25
20
15
ARM
10
Fixed
5
0
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Percent Underwater by First Time Homeowner
Status, 1997-2009
Percent Underwater
16
14
First Time
Homeowner
12
Owned
Home
Before
10
8
6
4
2
0
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Percent Underwater by Building Type, 19972009
35
One-unit
detached
Percent Underwater
30
25
One-unit
attached
20
15
2+ apartments
10
5
Manufactured/
mobile home
0
AHS Survey Year
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Negative Equity Persistence
Years
Percent of Units Underwater at
First Survey Year That Are
Underwater Two Years Later
2007,2009
36.91
2005,2007
21.90
2003,2005
26.80
2001,2003
23.44
1999,2001
20.21
1997,1999
28.21
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Prevalence of Distressed Sales
Years
Percent of Sales Distressed Two
Year Later
2007,2009
21.10
2005,2007
11.73
2003,2005
11.21
2001,2003
13.77
1999,2001
13.12
1997,1999
12.83
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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Summary
• Across-the-board increases in underwater units in 2009, except
for manufactured/mobile homes
• Higher persistence of underwater status in 2009 than 2007
• Higher percentages of distressed sales in 2009 than 2007
• Estimates of underwater units lower than CoreLogic’s estimates
– AHS
• Self-reported home value and mortgage data
• Owner-occupied homes
– First American CoreLogic-Value and Outstanding Principal
• Automated Valuation Models (AVM) and public record
data on mortgage debt outstanding
• Single family properties
• Owned and rented
• Occupied and vacant
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Future Research
• Model Distressed Sales on Negative Equity and
Housing Burdens in Prior Survey Year
• Longitudinal Weighting
• Longitudinal Editing
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Contact Information
George Carter:
[email protected]
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