Are There Any Rungs Left on the Housing Ladder?

A new report from PIMCO highlights some of the demographic changes that are helping to swing the preference of Americans from home owners to renters. The report, Are There Any Rungs Left on the Housing Ladder?, suggests graduates with large student loans and older Americans retiring may not hold the idea of owning a home in high esteem. They also simply may not be able to afford it.

Rod Dubitsky, an analyst with PIMCO, says first-time homebuyers are struggling financially and are likely to be long-term renters. At the same time older homeowners are less likely to upgrade into larger homes or invest in second properties. "All of this suggests downsized housing choices — one home instead of two, rent rather than own, smaller place rather than large. These choices could serve to reduce the dollars committed to housing investment," Dubitsky says.

Mortgage Bankers Say Homeownership Rates Could Drop Further After "Unsustainable Jump" During Last Decade

The drop in the homeownership rate from an all-time high of 69.2 percent in 2004 to 66.4 percent in the first quarter of 2011 reflects a decline from unsustainable levels to something closer to historical averages, according to a study released today by MBA's Research Institute for Housing America (RIHA). While the homeownership rate may have bottomed out, it could fall another one or two percentage points because of tightened credit and other factors, the paper says.

Titled "Homeownership Boom and Bust 2000 to 2009: Where Will the Homeownership Rate Go from Here?," the study was conducted by professors Stuart Gabriel of UCLA's Anderson School and Stuart Rosenthal of Syracuse University. They found that the increase in the homeownership rate in the middle of the last decade extended to all age groups but was most pronounced among individuals under age 30. These increases coincided with looser credit conditions that enhanced household access to mortgage credit, along with less risk-averse attitudes toward investment in homeownership. Following the crash, these trends have reversed and homeownership rates have largely reverted to the levels of 2000.

"The question of why homeownership rates are falling now is really a question of why they were so high during the middle of the last decade," said Gabriel. "From the late 1960s to the mid-1990s, U.S. homeownership rates were relatively stable between 64 and 65 percent. Our findings suggest that the boom and bust in homeownership rates over the last decade was driven in part by an initial relaxation of credit standards followed by a tightening of credit with the onset of the 2007 financial crash. Evidence also suggests that households headed by people in their 20s and 30s were willing to take more risk with respect to homeownership in the boom years, followed by a return to a more conservative approach after the crash."

"How much more might the homeownership rate fall? The answer depends on uncertain forecasts of attitudes towards homeownership and changes in the credit market and economic conditions," concluded Rosenthal. "If underwriting conditions and attitudes about investing in homeownership settle back to year-2000 patterns and, if the socioeconomic and demographic traits of the population look similar to those of 2000, then the homeownership rate may have bottomed out and will not decline further. If, instead, household employment, earnings and other socioeconomic characteristics over the next few years remain similar to those in 2009, then homeownership rates could fall by up to another 1 to 2 percentage points beyond 2011. Those declines are likely to be greatest in cities and regions in which house prices were most volatile in the last decade."

Key findings from the study include:

-A combination of changes in mortgage credit standards and attitudes towards investment in homeownership likely contributed to much of the boom and bust in homeownership over the decade. As credit conditions loosened in the first part of the decade, many people of all ages who would have remained renters instead became homeowners. With the financial crash, the recession, and tighter credit conditions, homeownership rates have fallen back to levels close to those of 2000 for most age groups.

-Changes in the population's socio-demographic composition and economic attributes also served to lower homeownership rates between 2000 and 2009. For all household heads age 20 to 80, demographic-socioeconomic shifts pushed homeownership rates down by roughly 2 additional percentage points over the period. These effects were notably different across demographic groups, however. For example, among individuals 25-35 years old, shifts in their demographic-socioeconomic attributes pushed homeownership rates down by nearly 5 percentage points over the 2000-2009 period. For African Americans the analogous value was only roughly 1 percentage point.

-Individuals appear to have been more risk-seeking in their approach to home buying in the first half of the last decade. This changed to a more risk-averse posture following the real estate meltdown.

-Between 2000 and 2009 there was a one percentage point increase in the homeownership rate. But, were it not for the shifts in access to homeownership through easier credit and the changes in socioeconomic conditions, the homeownership rate would have actually fallen between 2000 and 2005, rather than increasing.

-Homeownership is deeply embedded in American culture and long has been a symbol of economic achievement in the United States. The recent sharp decline in the homeownership rate has symbolic as well as tangible adverse effects on the economy, with home sales and construction activity remaining near all-time lows," said Michael Fratantoni, Executive Director of RIHA and MBA's Vice President of Research and Economics. "This is another in a series of studies that RIHA has issued on the issues of household formation, borrower attitudes after the recession and homeownership. Single- and multifamily lenders, other participants in the real estate finance industry, and policymakers can utilize this research and assumptions on homebuyer behavior and credit availability to form their own forecasts regarding the likely path of the homeownership rate and implications for the mortgage market going forward."

The paper relies on individual-level data from the 2000 census and the 2005 and 2009 American Community Surveys (ACS) to assess housing choice and uses 34 control variables to analyze the underlying drivers of homeownership. The paper is divided into three parts: an assessment of the underlying drivers of homeownership, an ex-post analysis of the boom and bust in homeownership during the 2000s, and a discussion of what may lie ahead for U.S. homeownership rates.

Residential Construction Numbers Up

The Commerce Department’s U.S. Census Bureau today released data on new residential construction for June 2011. Housing starts surged 14.6 percent in June, easily surpassing private-sector expectations of a 2.7-percent increase. Permits for new housing units also beat expectations, increasing 2.5 percent in June following an 8.2-percent jump in May. Private-sector analysts had expected a 2.3-percent drop in permits from May to June.

“While today’s new construction report is encouraging, the housing market remains fragile,” U.S. Commerce Secretary Gary Locke says. “If America fails to meet its obligations, it would lead to a sharp decline in household wealth and higher mortgage rates, which would profoundly damage the housing market’s recovery. Now is the time for members of both parties to make tough choices and take a balanced approach to solve this problem, so we can focus on getting more Americans back to work.”

Zaguan on a Sunday

Brunch at Zaguan Latin Bakery and Cafe provides a good change of pace for a Sunday morning. Located on Oak Lawn Avenue in a strip plaza, Zaguan also provides outdoor seating which some were taking advantage of despite the high temperatures. The picture menu was helpful for first timers like us not knowing what to order. We also asked the waitress and both ended up with what she says is one of the most popular items, the Cachapa with beef and cheese. Served with plantain chips or a fruit cup, I could see why this would be popular- it's delicious! We also had to try a bakery item and chose the cherry pasteles. You may also note the free samples of bread provided on the counter.

2604 Oak Lawn Avenue

Another Downside to the One Story Town

One of the things I've noticed at my new place in Dallas is the pain in my leg muscles. I'm finding the difference between living in a one-story home in suburbia and a three level condo in the city is this unwitting exercise.

One-floor living has its appeal, and certainly such real estate is also available in the city, primarily in high-rise buildings. With one floor, everything is pretty accessible. Leave your keys or wallet on the third floor and you'll discover how convenient one-floor living was.

But there's also this notion of exercise. We hear a lot about how living in a dense urban environment with amenities accessible by walking is good for the waist line and for health, but what about living where you're forced to go up and down stairs on a regular basis? I do remember reading somewhere that every flight of stairs climbed adds the time it takes to climb them to your life span.

Okay, so what if you are spending the extra time climbing stairs?

The notion of aging in place has also entered my stream of thought on this. Working in real estate, I've gone into many homes where you can see through the furnishings and objects how the physical range has gotten smaller and smaller as time went on. On one hand, choosing to live on a single level can insure the ability to stay in a home longer as we age, but what if those stairs keep us healthy longer?

Which is better, staying somewhere longer or staying healthy longer?

Grub: Ideas for an Urban Organic Kitchen

Public Transportation in Dallas: Not There Yet

Until I moved to DFW area, I had always been using public transportation.

There were not many people who could afford owning a car when I grew up in China. True, in the 90’s almost everyone rode a bicycle for commuting. Almost, as I said here because my mom is one of few in China who doesn't know how to ride a bike. But she has been fortunate to always live within walking distance of work. I remember the excitement when waiting for the bus with my mom to go shopping on those Sunday mornings. Occasionally the bus was so crowded that nobody could walk around without pushing others. You handed out a dime to someone next to you and he relayed to the next and so on and on until the money reached the bus assistant and then the fare ticket came back in the same manner. 

When buses are the only means to transport people from point to point, you don’t complain about the service – you deal with it and it is part of your life.

For a short period of time, I lived in a small town in Japan and worked in a neighboring city. The on-time performance of my daily commuter bus was so stunning that the difference between the actual arrival time and the schedule could be counted in seconds. Every regular commuter had their own seat and we greeted each other with a nod and rode the next 30 minutes or so together in silence.

In the next stop of my life journey, Pittsburgh provided a public transportation service that paled in comparison. The wait for the next bus could feel excruciating on dark winter nights. And rivers, bridges and meandering roads made a seemingly close destination much further away. It was on those buses that I finished reading many New Yorker Articles, including “The Climate of Man”, a three-part article that made me aware for the first time that riding a bus helps reduce a carbon footprint.

But it went deeper than my newly converted greenness. Using public transportation gives me the freedom to either retreat into my own world or diligently observe the sights and sound of the city, or glimpsing at other anonymous passengers. The sub-consciousness pulls on me and out between solitude and interaction within a small public space that moves through different neighborhoods and has had a great positive boost to my productivity. By the time that I got off the bus in Pittsburgh, I always felt I had rested enough and was eager for the next task.

New York is the only city I've lived in where schedule brochures for subways systems seem unnecessary. Riding a train was never as quiet as a bus ride in Japan or as mind-soothing as in Pittsburgh. It is a platform where arrays of commuters, with occasionally real entertainers, absorb other fellows into a kaleidoscopic assembly of colors, smells, sounds, languages and motions. I have learned those rats living underground are deaf from train noises, at least that's how conventional wisdom has it, and the tricks of which train car to get on in order to get out quickly.

Moving from New York City, it was natural for me to hop on a commuter train the first day I moved to a new place in Dallas that enabled me to use public transportation for work. Trinity Railway Express, a commuter rail line which connects Dallas with Fort Worth through many of the Mid-Cities, has something even New Yorker may envy: A bi-level cab car with free internet.

On my first morning ride, the train was empty, partially because that particular one only went to DFW airport, which is still 30 minutes away from Fort Worth. A guy in security uniform fell asleep. And a woman was playing with her smart phone all the time. After all, the route is not scenic. Named after the Trinity River, which also links Dallas with Fort Worth, most of the sections between Dallas and DFW airport are in the southern part of Irving, which alternates between isolated shopping plazas, desolate houses and industrial warehouses.

There is a streamlined shuttle connecting TRE Centerport station (DFW airport) with nearby corporate headquarters during rush hour. I felt like having a chauffer service even though the ride was merely one mile long.

Yet it was a totally different story on the way back. After getting off at Medical/Market Center station, I was instructed by Google Map to either walk or wait for a free shuttle bus in order get to another bus for transfer near Parkland Hospital. The walk was not long, in fact merely 0.7 mile; yet it was more than 100 degrees at 5:20 p.m.

I decided to walk. Luckily I was wearing a polo shirt. However, right after I turned around at the Children’s Hospital, I realized that I made a mistake. The walk involved crossing Harry Hines Boulevard, a major six-lane alternative highway (to I35) in rush hours. According to Wikipedia, the boulevard is regarded as the very first “highway” in Texas. Normally it takes some courage to cross such a monstrous road, yet I was lucky that road construction slowed traffic dramatically at the intersection.

Fifteen minutes later, I was outside the Parkland Memorial Hospital’s new site (under construction) where 11 different bus lines plus two different DART light rail lines merge (sort of).

All bus stops are scattered around a wasteland with overgrown grass big enough to fit in a basketball stadium. It was very hard to tell what bus stops are where from distance and there is no map for guidance. Worst of all, there was no shade at all. Just as I was wondering where was the bus stop for my bus to Oak Lawn, a 409 bus circled around and stopped on the other side of the grass dune. I decided not to run to save my dress shoes and myself from a heat stroke. So it left without waiting for me. The next 20 minutes was long. I didn’t melt, but I expected to. The only relief that I got was from the shade of the small bus sign. The bus ride was merely 12 minutes yet the waiting (plus walking) part cost me 35 minutes, all directly under the sun.

By the time that I got home, it was one hour twenty minutes later from when I stepped out of the office.

Neither the TRE ride nor bus ride was bad at all, yet Dallas public transportation system fails to connect people point to point. It is, instead, designed for interconnecting regions; yet without point to point coverage, public transportation cannot be a feasible solution for most of residents.

For example, TRE Medical/Market Center station is NOT anywhere nearby DART Southwest Medical District/Parkland station. If one prefers light rail and trains for connection, they have to take TRE to the next stop (Victory Station) and then ride a DART train back to one kilometer.

It is probably too late to change the route of either rail system to make them connect, then an alternative solution is to have most of the buses which stop at Southwest Medical District/Parkland station take a three minutes detour to the TRE station so that anyone who needs a transfer does not have to relay on a particular free shuttle.

Lastly, it is understandable that buses may have some delay and a maximum twenty-minute wait can occasionally occur, yet it is important to at least make such a wait tolerable. A shelter with a full partial roof helps. For a big transport hub with many bus stops clustered, a center passenger wait room with detailed bus route/connection and schedule information is more attractive.

Recently, the Dallas Morning News published an article about the DART ridership. It puzzles many that less people are using DART now even though gas prices are at historical high. Yet without being able to connect people to where they want to go and without consideration of daily commuter’s basic needs such as route, time, frequency and a simple shelter, it won’t win their hearts, easily.  

Morning in Dallas

Sunrise in Lee Park

If you've followed this blog, you will note the first post was about moving to the Dallas Fort-Worth area, settling into Grapevine and then discovering we'd rather be in Dallas. That move is for the most part complete now and today was the first day I could take some time in the morning to walk around Lee Park and onto the Katy Trail! 

To be fair, Grapevine has some nice trails too- with soft surface and lake views even. It makes some what of a difference, however to be able to walk out of the door and onto the trail without the short drive in between. For me that usually would have also meant lifting the bike into and out of the car (and now it will mean carrying it up the steps leading to the trail).

None of this in itself is reason enough to move here or there. Rather, it's a cumulative effect that culminates in a lifestyle. Enjoy the photos, I look forward to providing additional updates.