housing units with negative equity, 1997-2009 george r. carter iii, ph.d. u.s. census bureau hud...
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Housing Units with Negative Equity, 1997-2009
George R. Carter III, Ph.D. U.S. Census Bureau
HUD Data Users ConferenceWashington, DCMarch 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.
2
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
3
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
4
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
5
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
6
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
7
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)
8
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)
9
S&P / Case-Shiller 10 City Index, 1987-2010
10
0
50
100
150
200
250
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: Standard & Poor's / Case-Shiller 10 City Index
Trends in Home Value and Outstanding Principal, 1997-2009
11
0
50000
100000
150000
200000
250000
Dol
lars
AHS Survey Year
VALUE
OTPIN
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009Note: VALUE = Home Value. OTPIN = Outstanding Principal. Both measures are self reported.
Percent Underwater Overall, 1997-2009
12
0
2
4
6
8
10
12
14
Per
cen
t U
nd
erw
ater
AHS Survey Year
Overall
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Percent Underwater by Region, 1997-2009
13
0
2
4
6
8
10
12
14
16
18
Per
cen
t U
nd
erw
ater
AHS Survey Year
Northeast
Midwest
South
West
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Percent Underwater by Race of Householder, 1997-2009
14
0
2
4
6
8
10
12
14
16
Per
cen
t U
nd
erw
ater
AHS Survey Year
White OnlyBlack OnlyAsian OnlyOther
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Percent Underwater by Hispanic Origin of Householder, 1997-2009
15
0
5
10
15
20
25
Per
cen
t U
nd
erw
ater
AHS Survey Year
Hispanic
Non-Hispanic
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Percent Underwater by Age of Householder, 1997-2009
16
02468
101214161820
Per
cen
t U
nd
erw
ater
AHS Survey Year
<35
35-44
45-54
55-64
65+
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Percent Underwater by Marital Status of Householder, 1997-2009
17
0
2
4
6
8
10
12
14
Per
cen
t U
nd
erw
ater
AHS Survey Year
Married
Not Married
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Percent Underwater by Education Level of Householder, 1997-2009
18
0
2
4
6
8
10
12
14
16
Per
cen
t U
nd
erw
ater
AHS Survey Year
Less than High School
High School
Some College
College
Advanced Degree
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Percent Underwater by Household Income Quintile, 1997-2009
19
0
2
4
6
8
10
12
14
Per
cen
t U
nd
erw
ater
AHS Survey Year
First Quintile
Second Quintile
Third Quintile
Fourth Quintile
Fifth Quintile
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Percent Underwater by Interest Rate of First Mortgage, 1997-2009
20
0
2
4
6
8
10
12
14
16
18
20
Per
cen
t U
nd
erw
ater
AHS Survey Year
<5%
5-6%
6-7%
7-8%
8+%
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Percent Underwater by Mortgage Type of First Mortgage, 1997-2009
21
0
5
10
15
20
25
Per
cen
t U
nd
erw
ater
AHS Survey Year
ARM
Fixed
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Percent Underwater by First Time Homeowner Status, 1997-2009
22
0
2
4
6
8
10
12
14
16
Per
cen
t U
nd
erw
ater
AHS Survey Year
First Time Homeowner
Owned Home Before
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
Percent Underwater by Building Type, 1997-2009
23
0
5
10
15
20
25
30
35
Per
cen
t U
nd
erw
ater
AHS Survey Year
One-unit detached
One-unit attached
2+ apartments
Manufactured/mobile home
Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
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 28.21Source: 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 12.83Source: U.S. Census Bureau, American Housing Survey, National Sample, 1997-2009
25
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
26
Future Research
• Model Distressed Sales on Negative Equity and Housing Burdens in Prior Survey Year
• Longitudinal Weighting
• Longitudinal Editing
27
