The American Dream (in Flames?

)
Why Homeownership Really
Matters

Mid-Year Lunch
May 3, 2018
Joel Singer
Chief Executive Officer
 The evolution of the American Dream

SOURCE: Storyboardthat.com
 Americans overall, and specifically Millennials, believe
owning a home contributes to financial stability
n=1000

All Millennials
100% 80%

80% 60%

42% 32%
60% 43%
40%
40%
34%

20%
20% 38% 29% 32%
28%
0% 0%
Owning a home I would feel less Owning a home I would feel less successful
increases a person's successful if I never increases a person's if I never owned a home
financial stability owned a home financial stability
Strongly Agree Somewhat Agree Strongly Agree Somewhat Agree

SOURCE: Neighbor Works America

 Seven out of ten still believe owning a home is
an important part of the American Dream
How Important a Part of the American
Dream Is Owning a Home?

The most important 18%

Very important 53%

Somewhat important 22%

Not very important 5%

Not at all important 2%

Don't know 1%

0% 10% 20% 30% 40% 50% 60%

n=1000

SOURCE: Neighbor Works America

 How America views homeownership

% Agree Gen. Pop. Latino African American

Base: All Respondents (n=1,005) (n=105) (n=105)

Homeownership is an achievement to be proud of. 93% 86% 96%
Owing a home is a good way to acquire 91% 95% 86%
equity/more assets
Homeownership is a dream come true. 86% 84% 90%
Owing a home is essential to building a family. 57% 60% 79%
Homeownership is a huge burden. 56% 63% 42%
Homeownership is not for me, I prefer renting. 27% 48% 22%

Q. Please indicate to what extent you agree or disagree with each of the above statements

SOURCE: Ipsos Public Affairs, Wells Fargo

 Owning a home is a goal for most renters
How important is homeownership to you?
n: 1663
Percent

29%
30%
27%
23%

20%
13%

10% 8%

0%

SOURCE: 2017 C.A.R. Renter Survey

 Latino hold strong positive views on home-
ownership
How important is homeownership to you?
n: 954

Non-Latino Latino
Percent

31%
30% 29% 28%
27%
25%

20% 18%
16%
11% 11%
10%

5%

0%

SOURCE: 2017 C.A.R. Renter Survey

 Homeownership update – CA inched up
from 2016 but remained at low level
California Vs. U.S. – 9.5% gap in 2017
75% CA US

70% Peak: 69.0%

64.5% 63.9%
65%

60%
Peak: 60.2%
54.4%
55%
53.7%
50%

45%

SERIES: Homeownership Rates

SOURCE: U.S. Census Bureau
 0%
10%
20%
30%
40%
50%
60%
70%
80%
New York
California

54.4%
Nevada
Hawaii
Rhode Island

SERIES: Homeownership Rates

Massachusetts
Texas
Oregon
North Dakota
Georgia
Washington
Colorado
Florida

SOURCE: U.S. Census Bureau (Current Population Survey)

New Jersey
Arizona
Arkansas
Illinois
Alaska
Kansas
Ohio
Connecticut
amongst all states

Louisiana
Nebraska
North Carolina
New Mexico
Maryland
Tennessee
Virginia
Missouri
Montana
Homeownership Rate

South Dakota
Wisconsin
Pennsylvania
Oklahoma
Idaho
Alabama
Delaware
Indiana
Iowa
Kentucky
California still ranked the 2nd lowest

Wyoming
Maine
Mississippi
Utah
Vermont
New Hampshire
Minnesota
South Carolina
Michigan
West Virginia
 Homeownership will deteriorate further if
the trend continues
California Homeownership Rate
70%
Despite the slight bounce back,
homeownership will remain low in
the next couple years due to:
60% 59.7%
• Interest rate hike 57.1%
56.1%

• Price growth 50% 47.3%

• Low turn-over rates 44.2%

40%
• Lack of new constructions 41.0%

• Short-term Costa-Hawkins Repeal

30%
Impact 2000 2005 2010 2015 2020 2025 2030 2035 2040
Fast Slow Avearge
SERIES: Homeownership Rate
SOURCE: U.S. Census Bureau, American Community Survey, C.A.R. projection
 Homeownership matters at the macro level

Homeownership is good for the economy.

Home buying contributes to economic growth
and job creation. With each home sale, there
are expenditures related to lawn care, home
remodeling, new furniture, mortgage
origination, moving, and an inducement to
build new homes. Some portions of these
earned incomes subsequently get spent in the
local economy in the form of eating at
restaurants, going to a ballgame, or buying a
car. In essence one new job is supported from
every two home sales, according to NAR
calculations.

SERIES: Homeownership Rate

SOURCE: U.S. Census Bureau, American Community Survey, C.A.R. projection
 Homeownership really matters because it
provides more than just a roof and a shelter
Homeownership enhances quality of life in Spill-over Benefits of Homeownership
a variety of ways:

• Homeownership leads to better health

• Homeownership results in higher

educational achievement

• Homeownership lowers crime rates and

improves safety
Homeownership Leads to
Better Health
 Homeowners are better off- health wise,
when compared to renters
Predicted Probability of Good Health by
Race/Ethnicity and Homeownership

• A study done in 2014 found that

n= 71,874
homeowners have a significant health
advantage over renters in general.
Based on the analysis homeowners are
2.5 percent more likely to have good
health.

• The advantage for homeowners is even

larger – 3.1 percent, when adjusting for
an array of demographic,
socioeconomic, and house-related
characteristics.

SOURCE: Racial and ethnic stratification in the relationship between

homeownership and self-rated health (Social Science & Medicine), NAR
 Health is positively influenced in different
ways by homeownership/affordable housing
• Homeownership provides greater residential stability, and by doing so reduce stress
and related adverse health outcomes

• Affordable housing improve health outcomes by freeing up resources for nutritious

food, health care, and health insurance expenditures

• Housing insecurity and lack of safe and sanitary shelter are associated with a variety
of poor mental and physical health outcomes.

• Homeless children are more vulnerable to developmental delays, depression, and

mental health problems

• Homeownership fosters greater self-esteem

 Homeowners have fewer physical problems
as they invest more in future health
Medical Screenings of Renters vs. Homeowners (2012)

• Results from a study done using data for

the case of Japan, show that the rates of
% underwent medical screenings

n= 14,928
undergoing medical screenings are higher
among homeowners, which suggests that
homeowners are more likely to invest time
and money in their future health through
medical checkups.

• Regression analysis on the same study

further confirms that owning a home is
positively correlated with attitudes toward
preventive health care.

SOURCE: Asian Development Bank Institute

 Homeowners have fewer physical problems
as they invest more in future health
Medical Expenditure of Renters vs. Homeowners
(2004 - 2012)

• Based on the same study, the monthly

CI = Confidence Interval
n= 20,513 medical expenditures for renters and
homeowners also differ, with homeowners
consistently spending more on medical
than renters.

• Positive correlations continue to exist

between homeownership and health care
expenditures, even after controlling
variables such as income, debt, and other
financial assets.

SOURCE: Asian Development Bank Institute

 Affordable housing improves health
outcomes by freeing up resources
Share of Expenditures of working families (2002)
• Families living in affordable housing
have more funds left over to pay for
food and health care expenditures

• Working families paying 30 percent

or less of their income for housing
were able to dedicate more of their
income to health care and
insurance as those paying 50
percent or more for housing

• The same could be said for food

expenditures

SERIES: Share of expenditures of working families

SOURCE: The Economic Policy Institute, Center for Housing Policy, Lipman
 Homeownership/affordable housing help to
improve health by easing other issues
• The shortage of affordable housing limits families’ and individuals’ choices about where they
live, often relegating lower-income families to substandard housing in unsafe, overcrowded
neighborhoods with higher rates of poverty and fewer resources for health promotion (e.g.,
parks, bike paths, recreation centers and activities).

• People make trade-offs when trying to obtain affordable housing. Many live far away from
their work, requiring them to spend more time and money commuting and less time engaging
in health-promoting activities.

• Residential instability is associated with emotional, behavioral and academic problems

among children, and with increased risk of teen pregnancy, early drug use, and depression
during adolescence. These impacts in turn can have longer-term health consequences.

SOURCE: NAR, HCD

Homeownership Leads to Greater
Educational Achievement
 Positive impacts of homeownership on
educational attainment
• Children of homeowners are more likely to stay in school than children
of renters

• Children in homeowning families outperform children in renting families

in both math and reading achievement tests

• Children of homeowners are more likely to acquire some

postsecondary education than children of renters

SERIES: Share of expenditures of working families

SOURCE: The Economic Policy Institute, Center for Housing Policy, Lipman
 Lower dropout rates for children of
homeowners
Average Dropout Rates for 17-Year-Olds
(1980-2007 Panel Survey of Income Dynamics)
• Study shows that children of
homeowners are more likely to remain
All 17-year-olds 5.1% in school than children of renters

• Owning produce better educational

achievement for children than renting
Homeowners 2.8% partly because owners generally move
less frequently

• Other research suggest that wealth

Renters 11.7% accumulation - another benefit of
homeownership, could be another
reason for children’s success
0% 5% 10% 15%

SOURCE: Measuring the Benefits of Homeowning: Effects on Children Redux

 Homeownership helps to improve children’s
grades
Ratings of Children‘s Grades Before and After
Moving into Habitat Home
• Results from a survey study done by 60%
55%
Habitat for Humanity of Georgia
50% 49%
suggest that homeownership, in
general, improves children 42%
39%
educational achievements. 40%

• The study shows that 93 percent of the 30%

respondents believed their children’s

20%
grades were either “excellent” or
“good” after owning their home, as 9%
10%
compared to 90 percent before
3% 3%
homeownership 1%
0%
Excellent Good Fair Poor

SOURCE: : Habitat for Humanity of Georgia

 How parents’ decisions to own vs. rent affect
their children’s behavior?
• Homeowners have a larger financial stake in their neighborhoods, as their wealth is
tied up in their residences. As such, homeowners have a stronger incentive than
renters to monitor their children to prevent them from engaging in behaviors that
would reduce the attractiveness of the neighborhood and have a negative impact
on their property values.

• People learn many new skills in personal finance and home maintenance as they
become homeowners. These transferrable skills may also help them better manage
their home environments, including taking better care of their children.

• Homeowners in general have higher costs of moving and tend to remain in the same
neighborhoods longer than renters. The residential stability allows their children to
develop close ties with others in school and in their community
Homeownership Lowers Crime
Rates and Improves Safety
 Homeownership lowers crime rates
Impact of House Ownership on Crime
(Regression Analysis) • A study using county-level
data and Uniform Crime
Property Crime Violent Crime Reports for the U.S. shows
1991 1992 1991 1992 that homeownership has a
strong negative effect on
Log of Homeownership Residual -1.253 -1.516 -1.041 -1.127 both violent and property
Log of the Unemployment Rate 0.320 0.315 0.311 0.0191 crime rates
Log of Poverty Rate -0.004 -0.034 0.393 0.419
• Results from the study also
2001 2002 2001 2002 suggest that the rate of
Log of Homeownership Residual -1.191 -1.049 -0.792 -0.769 increase in criminal activity
is significantly slower in
Log of the Unemployment Rate 0.232 0.241 0.187 0.312
areas with higher
Log of Poverty Rate 0.143 0.217 0.549 0.574 homeownership rate

SOURCE: University of Nebraska at Omaha

 Homeownership lowers crime rates

Effect of increasing the • Another study focuses on California and San

homeownership indicator Bernardino County also yields similar results
on sociological Factors in
California • Increasing homeownership rates are
correlated with crime reductions: increasing
Crime Decrease homeownership rate by 1 percent would
Property Crime Decrease reduce property and violent crime rates per
Violent Crime Decrease 1,000 people by 0.35 percent and 0.1 percent
respectively
Poverty Rate Decrease
• Higher homeownership rates are associated
with lower poverty rates: a 1-percent
increase in the homeownership rate is
associated with a 0.16 percent decrease in
poverty

SOURCE: California State University, San Bernardino

 Homeownership makes people feel safe
Q. Since moving into your Habitat home, do you Q. Since moving into your Habitat home, do you
personally feel more or less safe? feel your children are more or less safe?

3% 2% 4% 1%
Much more Much more
safe safe
A little more 12% A little more
17%
safe safe
There was no There was no
change 20% change
58%
20% A little less safe 62% A little less safe

N=398 Much less safe N=385 Much less safe

Results from a survey study done by Habitat for Humanity of Minnesota suggest that
homeownership, in general, makes people feel safer.

SOURCE: Habitat for Humanity of Minnesota

 Homeownership makes people feel safe
Q. Since moving into your Habitat home, do you Q. Since moving into your Habitat home, do you
personally feel more or less safe? feel your children are more or less safe?

3% 2%
Much more Much more
5% safe 6% safe
A little more 11% A little more
16%
safe safe
There was no There was no
change change
56% 21%
A little less safe 60% A little less safe
21%

N=398 Much less safe N=385 Much less safe

Similar results were found when another survey study was done in Georgia, with
about four of five Habitat homeowners feeling safer now than before, both for
themselves and for their children.

SOURCE: Habitat for Humanity of Georgia

 How homeownership reduces crime rates
and creates a safer community
• Homeowners have more to lose financially than renters, and criminal activities can
impact the property values of their neighborhood. Homeowners have more incentive o
deter crime by taking preventive measures.

• There is also the neighborhood effect of homeownership on crime. Homeowners are

more attached to their communities and more active in community affairs. As they get
more involved with their neighbors, their individual behavior depends not only on
individual incentives, but also on the behavior of peers and neighbors. An individual is
less likely to commit a crime if his/her peers do not do so.

• A neighborhood with a higher homeownership rate tends to have lower residential

mobility, which typically means a more stable housing environment. A stable
neighborhood is likely to reduce crime, as it is easier to recognize a perpetrator of crime
in such an environment where extensive social ties frequently exist.

SERIES: Share of expenditures of working families

SOURCE: The Economic Policy Institute, Center for Housing Policy, Lipman
Immigrants Matter to the
American Dream
 Growth in number of immigrant or
native born owner (millions)
12
forecast
10

4 Native-Born

Immigrants
0
1980-90 1990-00 2000-10 2010-20

Source: Dowell Myers and John Pitkin, “Immigrant Contributions to

the Housing Market…” RIHA, Mortgage Bankers Association, 2013
 Foreign immigrants play an important role in
population growth in California
California Migration Trends - 2016
California receives by far From Other Countries 332,197
the highest number of From Other States 514,758
foreign immigrants New York 40,877
Texas 39,109 Coming to California -
Arizona 33,757 States with highest number of
Washington 27,973 residents relocating to
Florida 25,354 California in 2016
Nevada 24,656
Illinois 21,539

Colorado -26,909
Florida -28,420
California lost residents in 2016 in Oregon -43,804 Leaving California -
domestic migration, but gain Nevada -45,482 States receiving the highest
from foreign immigration more Washington -51,485 number of residents leaving
than made up for the loss Arizona -64,756 California in 2016
Texas -69,945
To Other States -657,690

SOURCE: U.S. Census, Paragon Real Estate Group

 CA population continued to Increase, but due
entirely to immigrants moving from other countries

SERIES: Immigration and domestic migration

SOURCE: U.S. Census, First Tuesday Journal
 Immigrant share of growth in
home owners
2010-2020
100%
90%
West Midwest South Northeast
80%
71.3%
70%
60%
50%
40% 35.7%
30%
20%
10%
0%

Source: Dowell Myers and John Pitkin, “Immigrant Contributions to the

Housing Market…” RIHA, Mortgage Bankers Association, 2013
 More immigrants in California fulfilling
their American Dreams

Source: Dowell Myers and John Pitkin, “Immigrant Contributions to the

Housing Market…” RIHA, Mortgage Bankers Association, 2013
 Millions of immigrants are active in the
CA housing market
California Households California Homeowners
16,000 8,000
Thousands

Thousands
14,000 7,000

12,000 6,000

10,000 5,000 5,281

9,155 5,120
8,000 8,645 4,000 5,033
8,288
4,868
6,000 8,185 3,000

4,000 2,000

2,000 3,932 4,545 1,000 2,313

3,215 1,915
1,513
2,198 1,011
0 0
1990 2000 2010 2020 1990 2000 2010 2020
(projection) (projection)
Foreign Born Native Born Foreign Born Native Born

Source: Dowell Myers and John Pitkin, “Immigrant Contributions to the Housing
Demand in the United States” RIHA, Mortgage Bankers Association, 2013
 California is becoming more diverse…
Racial/Ethnic Composition in CA, 1980-2040

SERIES: Ethnic Composition in California

SOURCE: CA HCD, PolicyLink, USC Program for Environmental and Regional Equity
 … and the housing market needs to get
more inclusive
California Homeownership Rates by Race and Ethnicity (2010-2014 Average)

SERIES: Homeownership rate by ethnicity

SOURCE: CA HCD, PolicyLink, USC Program for Environmental and Regional Equity
Importance of Fair Housing Act
 What is the Fair Housing Act?

• A federal legislation in the U.S. intended to protect the buyer or

renter of a dwelling from seller or landlord discrimination

• It outlaws the refusal to sell, or rent to, or negotiate with any person
because of race, color, disability, religion, sex, familial status, or
national origin

• The goal is to establish an equal opportunity housing market, in

which a person’s background does not arbitrarily restrict access

• The Act was enacted a week after the assassination of Martin Luther
King, Jr. in April 1968. 2018 is the 50th anniversary of the Fair Housing
Act.

SOURCE: C.A.R, NAR, HUD

 Housing inequality before the Act

Map of Housing Inequality in L.A.

A 1939 map of central Los Angeles

showing redlining of lower-income
neighborhoods. Areas coded in red
were considered hazardous.
Households and businesses in the red
zones could not get mortgages or
business loans. The ratings were
supposed to be based on objective
criteria, but racism probably played a
role. Those communities depicted in
“red” usually contained minorities.

SOURCE: KCET, Home Owner Loan Corporation (HOLC)

 Why is the Fair Housing Act necessary?

• Discriminatory housing policy and actions by individuals in the real

estate world create residential segregation.

• Residential segregation result in negative outcomes around

education, health and well-being, and criminal justice

• Residential segregation contributes to racial and ethnic wealth gap

• Integrated neighborhoods provide an equal opportunity for

everyone to succeed in life and create better outcomes for
everyone
 Still more work to be done
• Fair Housing Act improved
Percentage point change in homeownership by homeownership for African American,
race/ethnicity Latino, and other ethnic groups in the
three decades after the act was enacted

• But from 2000-2015, all gains in African

American homeownership have been
erased. White and Latino
homeownership also dropped, but less
than that of African American
homeowners

• One reason for the bigger decline:

African American and Latino homebuyers
bought homes shortly before the housing
crisis, and many were offered subprime
loans even when they qualified for prime
loans
SOURCE: Urban Institute
 Housing discrimination still exists

# of Complaints Complaint by Type • There were 28,181 reported

35,000
complaints of housing
30,000 28181 Mortgage
Homeowner
Harrassment discriminations in 2016.
Insurance
Lending 3%
Transactions Other Housing -
2%
25,000 Real Estate 0% Related • 55 percent of these complaints
Sales Transactions involved discrimination on the
2% 2%
20,000 basis of disability; 19 percent
based on racial discrimination,
15,000
and 8.5 percent based on
discrimination against family with
10,000
kids.
5,000 Rental Market
Transactions • 91.5 percent of all acts of
91%
0 housing discrimination reported
in 2016 occurred during rental
transactions.

SOURCE: U.S. Census Bureau/Spatial Structures in Social Sciences, Brown University

 Latino and African American are
underrepresented in mortgage lending
California Demographics Home Loans in California Home Loans in California
Population Home Purchase Refinance

White 40% White 49% White 51%

Latino 38% Latino 21% Latino 17%

Asian 13% Asian 15% Asian 13%

African African African

6% 3% 3%
American American American

Native Native Native

1% 0% 0%
American American American

SOURCE: 2015 HMDA data, the Greenlining Institute

 The REALTORS®’ perspective: 1 of 5 agents report
either they or a client has been discriminated
In which area of the housing market have you or
Yes, 21% your client faced discrimination?*

Home sales/HOA/CC&Rs/etc 55%

Mortgage lending 34%

Appraisals 13%

City ordinances 8%

Other 39%
No, 79%

Q. Have you or your clients ever been discriminated against in the *CAUTION: Small sample size (n=71)
housing market? (n=365)

SOURCE: 2018 C.A.R. Hot Issues Survey (March 2018)

 The REALTORS®’s perspective: Ethnicity is the
most common type of discrimination
Ethnicity 38%
National origin 16%
Sexual orientation 13%
Age 12%
Class 9%
Familial status 9%
Military or veteran status 8%
Sex/Gender 6%
Ancestry 6%
Religion 5%
Disability 5%
None 34%
Other 5%

Q. What type(s) of discrimination in housing have you or your clients experienced? (n=212)

SOURCE: 2018 C.A.R. Hot Issues Survey (March 2018)

 The REALTORS®’ perspective: Concrete steps
have been taken to reduce discrimination
Steps that have been taken:
No, 22%
Laws/regulations 37%

Education/training 16%

Never a problem/not a problem 13%

More awareness and

acceptance/discrimination not… 11%

Fair Housing Act 8%

Yes, 78%
Accountability/report to board or BRE 2%

NA/Don't know 3%

Other 9%
Q. In your view, have concrete steps been taken to reduce discrimination in housing?
(n=376)
Q. What steps have been taken and what effect have they had? (n=175)

SOURCE: 2018 C.A.R. Hot Issues Survey (March 2018)

 The REALTORS®’ perspective: Suggestions on
how to improve the situation
More education/awareness 24%

Place to report experiences 10%

Encourage diversity 10%

Enforcement of rules/harsher
8%
consequences

Affordable housing 7%

NA/Nothing 24%

Other 17%

Do you have any suggestions on how to improve

the situation on discrimination in housing? (n=59*) *CAUTION: Small sample size
 Still more work to be done …

To fulfill the American Dream

 Thank You

This presentation can be found on

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