Hurdles to Homeownership:

Understanding the Barriers

Kenneth T. Rosen

Sustainable Homeownership Conference

June 9, 2017
 U.S. Homeownership Rate
Peak Historical Average Current
70% 69.2% 65.3% 63.6%

69%
68%
67%
66%
65%
64%
63%
62%
61%
60%
59%
1965 1968 1971 1974 1978 1981 1984 1987 1991 1994 1997 2000 2004 2007 2010 2013 2017

Note: Data not seasonally adjusted, latest data as of 1Q17

Source: Census 2
Hurdles to Homeownership

Tight Mortgage Credit Conditions

Post-Foreclosure Lending Aversion

Student Debt Burden

Post-Foreclosure Stress Disorder

Affordability

Supply Barriers

3
Change in Private Debt Balances
since Q4 2007
Billions
$900

$700
+796 bil.
$500
+352 bil.
$300

$100

-$100
-75 bil.
-$300
-474 bil.
-$500 Mortgages
Auto Loans
-$700 Credit Cards
Student Loans
-$900
Total
-$1,100

-$1,300
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Note: Latest data as of 1Q17
Sources: FRBNY Consumer Credit Panel/Equifax, RCG 4
Fannie Mae GSE FICO Scores
Average FICO

770

760

750

740

730

720

710

700
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Note: Latest data as of 1Q17
Sources: Inside Mortgage Finance, FNMA 5
Share of Total Mortgage Origination by
Credit Score
100%

80%

60%

40%

20%

0%
03 04 05 06 07 08 09 10 11 12 13 14 15 16
>760 720-759 660-719 <660

Sources: Federal Reserve Board of New York, RCG 6

FHA Share of Purchase Mortgage
Origination Volume
30%
28%
27%
25%
25%

21% 21%
20%
20%
17% 17%
16%
15% 14%
12%
11%
10% 10% 10%
10% 9%
6%

5% 4% 4%
3% 3%

0%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Note: Latest data as of 1Q17
Source: HUD 7
Impact of Regulation on Banks

22%
18%

Moderate Negative Impact

Extreme Negative Impact 5%

Small Negative Impact

No Negative Impact

55%
Note: Data is from a 2017 survey of 159 banks
Source: American Bankers Association 8
Primary Drivers of Increased
Compliance Costs
Time Allocation

Personnel Costs

Technology Costs

Costs for Third-Party Vendors

Loss of Efficiency

Customer Loss - Lengthy Approval

Customer Loss - Complex Approval

Loss of Profitable Business Lines

Other

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Note: 2017 survey of 159 banks
Source: American Bankers Association 9
Share of Borrowers with $50,000+ in
Student Debt Loan
16%

14%

12%

10%

8%

6%

4%

2%

0%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Federal Reserve Board of New York Consumer Credit Panel 10
Share of Renters Who Would Like to
Own a Home at Some Point
95%
89% 90%

80%
80%

68%
65%

50%
All Ages Millennials Generation X Baby Boomers
(Ages 18-34) (Ages 35-49) (Ages 50-68)
Note: Latest data as of March 2017
Source: Freddie Mac 11
Share of Renters Who Can Afford
to Own, Yet Continue to Rent
18%
17%
16%
16%

14%
14%

12%

10%
10%

8%
All Ages Millennials Generation X Baby Boomers
(Ages 18-34) (Ages 35-49) (Ages 50-68)
Note: Latest data as of March 2017
Source: Freddie Mac 12
Housing Affordability
United States and Bay Area
% Able to Afford Median-Priced Home
70%

60%
United States
50%

40%

30%
Bay Area
20%

10%
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
Note: RCG Universe of MSAs; latest data as of 1Q17
Sources: RCG, CAR, NAR, FAR, Census 13
Existing Median Home Price
Appreciation - United States
Annual % Change
15% 13.6%

10.0%
10.1%
10% 8.2% 8.5% 8.8%
7.4%
6.7% 6.6% 6.9%
6.0% 6.1% 6.7%
5.8% 5.9% 6.1%
4.5% 4.5% 4.7% 4.8% 4.6%
5% 3.8% 4.4%
3.2%
3.7% 3.5%
2.8% 2.4%

0.2%
0%
-0.8%
-2.8%

-5% -4.7%
-5.5%
-6.1%

-10%

-12.4%
-15%
83

85

87

89

91

93

95

97

99

01

03

05

07

09

11

13

15

17
Note: Latest data year-over-year as of April 2017
Sources: NAR, RCG 14
 U.S. Existing Single Family
Housing Inventory
Units (Millions)
3.5

3.0

2.5

2.0

1.5

1.0
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
17
Note: Latest data as of April 2017
Source: NAR 15
 U.S. Single Family Housing Starts
Units (Millions)

2.0
1.8 1.7
1.6
1.6 1.5
1.4 1.4 1.5
1.4
1.4 1.3 1.3 1.3
1.2 1.2
1.2 1.2 1.2 1.2 1.21.1
1.2 1.1
1.1 1.1 1.1 1.1 1.1 1.0
1.0 1.0
1.0 0.9
0.9 0.8
0.8
0.8 0.7 0.7
0.7 0.6
0.6 0.6
0.6 0.5
0.4 0.50.4
0.4
0.2
0.0
76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

Sources: Census, RCG 16

Rosen Consulting Group

www.rosenconsulting.com