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Average economic outcomes serve as important indicators of the overall state of the economy. However, they mask a lot of underlying variability in how people experience the economy across geography, or by race, income, age, or other attributes. Following our series on heterogeneity broadly in October 2019 and in labor market outcomes in March 2020, we now turn our focus to further documenting heterogeneity in the credit market. While we have written about credit market heterogeneity before, this series integrates insights on disparities in outcomes in various parts of the credit market. The analysis includes a look at differing homeownership rates across populations, varying exposure to foreclosures and evictions, and uneven student loan burdens and repayment behaviors. It also covers heterogeneous effects of policies by comparing financial health outcomes for those with access to public tuition subsidies and Medicare versus those not eligible. The findings underscore that a measure of the average, particularly relating to policy impact, is far from complete. Rather, a sharper picture of the diverse effects is essential to understanding the efficacy of policy.
James Conklin, W. Scott Frame, Kristopher Gerardi, and Haoyang Liu
Editor’s note: When this post was first published, the chart labels for “Non-Boom Counties” were incorrect; the labels have been corrected. (February 26, 12:00 pm)
The role of subprime mortgage lending in the U.S. housing boom of the 2000s is hotly debated in academic literature. One prevailing
narrative ascribes the unprecedented home price growth during the mid-2000s to an expansion in mortgage lending to subprime borrowers. This post, based on our recent working paper, “Villains or Scapegoats? The Role of Subprime Borrowers in Driving the U.S. Housing Boom,” presents evidence that is inconsistent with conventional wisdom. In particular, we show that the housing boom and the subprime boom occurred in different places.
Olivier Armantier, Andrew F. Haughwout, Gizem Kosar, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw
The New York Fed today held a press briefing on homeownership in the United States, in connection with its release of the 2019 Survey of Consumer Expectations Housing Survey. The briefing opened with remarks from New York Fed President John Williams, who provided commentary on the macroeconomic outlook and summarized the prospects for homeownership. He noted that the labor market remains very strong and that there seems to be little evidence of inflationary pressures, meaning that the economy is on a healthy growth path.
From the fourth quarter of 2017 through the third quarter of 2018, the average contract interest rate on new thirty-year fixed rate mortgages rose by roughly 70 basis points—from 3.9 percent to 4.6 percent. During this same period, there was a broad-based slowing in housing market activity with sales of new single-family homes declining by 7.6 percent while sales of existing single-family homes fell by 4.6 percent. Interestingly though, these declines in home sales were larger than in the two previous episodes when mortgage interest rates rose by a comparable amount. This post considers whether provisions in the Tax Cuts and Jobs Act of 2017 (TCJA) might have also contributed to the recent decline in housing market activity.
In this post we take up the important question of the sustainability of homeownership for first-time buyers. The evaluation of public policies aimed at promoting the transition of individuals from renting to owning should depend not only on the degree to which such policies increase the number of first-time buyers, but also importantly on whether these new buyers are able to sustain their homeownership. If a buyer is unprepared to manage the financial responsibilities of owning a home and consequently must return to renting, then the household may have made little to no progress in wealth accumulation. Despite the importance of sustainability, to date there have been no efforts at measuring the sustainability of first-time homeownership. We provide an example of a first-time homebuyer sustainability scorecard.
In our previous post, we presented a new measure of first-time homebuyers. In this post, we use this improved measure to describe the characteristics of first-time buyers and how those characteristics change over time. Having an accurate assessment of first-time buyers is important given that the aim of many housing policies is to support the transition from renting to owning. A proper assessment of these housing policies requires an understanding of the impact of these policies on the share of first-time buyers and the characteristics of these buyers. Our third post will directly examine the sustainability of homeownership by first-time buyers.
Much of the concern about affordable homeownership has focused on first-time buyers. These buyers, who are often making the transition from renting to owning, can find it difficult to save to meet down-payment requirements; this is particularly true in those areas where rent takes up a significant portion of a household’s monthly income. In contrast to first-time buyers, repeat buyers can typically rely on the equity in their current house to help fund the down payment on a trade-up purchase; they also have an easier time qualifying for a new mortgage if they’ve successfully made payments on a prior mortgage, thereby improving their credit score. Despite the policy focus on first-time buyers, reliable data on these buyers do not exist. In this first of three posts, we introduce a better measure of first-time buyers and examine the dynamics of this group over the past seventeen years. In our next post, we will describe the characteristics of first-time buyers. We will conclude this part of the housing series by examining the sustainability of homeownership for first-time buyers.
Gizem Kosar, Kyle Smith, and Wilbert van der Klaauw
Today we are releasing new data on individuals’ experiences and expectations regarding household spending. These data have been collected every four months since December 2014 as part of our Survey of Consumer Expectations (SCE). The goal of this blog post is to introduce the SCE Household Spending Survey and highlight some of its features.
Olivier Armantier, Joelle Scally, Kyle Smith, and Wilbert van der Klaauw
The Federal Reserve Bank of New York released results today from its October 2018 SCE Credit Access Survey, which provides information on consumers' experiences with and expectations about credit demand and credit access. The survey is fielded every four months and was previously fielded in June.
Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
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