Wednesday, December 17, 2014

3 Facts about Marriage and Homeownership

by Rachel Bogardus Drew
Post-Doctoral Fellow
In conversations about the declining homeownership rate in the U.S., some commentators have pointed to declines in the share of married people as an important contributing factor. To be sure, married couples are much more likely to be homeowners than unmarried individuals, due to their generally better socio-economic status. Married couples are also more likely to have children, and therefore more likely to want larger homes in areas with more family-friendly amenities such as safe neighborhoods and good schools. And these features are more often found in suburban neighborhoods where a larger percentage of the housing stock is available to own rather than rent. A decrease in married couples, goes the argument, should reduce the share of households that own their homes. While this is true, all else equal, this rationale fails to consider three important facts about marriage and homeownership that suggest this effect is not as large as many people imagine, and that recent trends are not necessarily indicative of a fundamental shift in demand for owned homes.

Fact #1: Marriage rates have been declining for decades.

While concern over the connection between declining marriage rates and declining homeownership has gained traction in recent years, the share of households headed by a married couple has actually been on a steady downward trend since the 1960s when over 70 percent of adults ages 18 and older were married (Figure 1). Declines since 1960 in the married share have been dramatic, falling fully 17 percentage points from a half-century earlier. The time frame of this decline, however, coincides with a period of steady increases in the national homeownership rate, from 62 percent in 1960 to 66 percent in 2000. Indeed, only during a brief period in the early 1980s did the homeownership rate decline slightly, at the same time that marriage rates were falling (though moderating somewhat from more dramatic decreases during the 1970s).

Since the turn of the century, of course, the homeownership rate has declined from a peak of 68 percent in 2004 to 64 percent earlier this year. In that time, the married share of the population has also fallen slightly, thus fueling the argument that the two trends are linked. Yet these recent declines in homeownership and marriage rates have also been greatly impacted by conditions in the macro economy, particularly the slow pace of earnings growth and high unemployment. The decline in marriage rates is also clearly a continuation of a long-term trend related to socio-demographic changes in the population and shifting social norms around relationships and cohabitation. The fall-off in homeownership, meanwhile, is largely viewed as a reversion to conditions that existed prior to the late 1990s and early 2000s spike in home buying, rather than purely a reflection of changing household compositions. This is not to say that there is no connection between marriage and homeownership, only that there is more to this story. As the statisticians say, correlation is not causation, so looking at recent changes in marriage and homeownership does not necessarily mean that one fully explains the other.

Note: The homeownership rate from 2000-2014 is calculated by using the Decennial Census rate from 2000 and adjusting annually by the change in the homeownership rate reported by the Housing Vacancy Survey.
Sources: U.S. Census Bureau’s Decennial Census and Housing Vacancy Surveys.

Fact #2: People are still marrying, just later.

The share of married adults in the U.S. only tells part of the story about the marital status of Americans. A better indicator may be the share that have ever been married, observed in mid-life when most people are settled and those who will marry have likely done so. By their late 40s, more than 85 percent of Americans report having been ever married, with that share leveling off over the last decade (Figure 2). Even by their late 30s, nearly 80 percent of people have tied the knot. The big change over the last 30 years, however, has been in the share of young adults aged 25-34 who have not married, which rose from 25 percent in the mid-1980s to almost 50 percent today, with notable acceleration over the last 10 years. The driving force behind this trend has been a steady increase in the age at first marriage, from 20 years old for women and 22.5 for men in the late 1950s, to 26.5 and 29 years old, respectively, in 2011. Young adults are more likely today to pursue post-secondary education, to relocate to a new area for employment, and to live with partners before marrying, all of which combines to delay the trip down the aisle. Again, these trends are not new, but have been gaining momentum for the past half-century.

Source: U.S. Census Bureau’s Decennial Census and Current Population Surveys.

It is worth noting that most young adults today still expect to marry eventually. The Pew Research Center reports that 66 percent of never-married adults under age 30 say they would like to get married someday. And even higher shares of young adults say they want to own a home; recent research published by the Joint Center shows that 88 percent of renters ages 25-34 plan to buy a home, and that their intentions are not influenced by their current marital status. It appears that, like marriage, many of these young adults are not rejecting homeownership, but rather delaying their purchase until they are more personally and financially settled.

Fact #3: It’s not only the current marriages that drive homeownership.

This last point about marriage and homeownership is one that does not get a lot of attention, but is very important to conversations about homeownership rates going forward. Among the unmarried population in the U.S. are a large number of previously married adults – those who are divorced or whose spouse has died – who have very different homeownership experiences from those who have never been married. Indeed, even as married households have been on the decline in the U.S., the share of householders who report being previously-but-not-currently married has remained steady at around 30 percent (Figure 3). The effect of these prior marriages on homeownership is profound, as previously-married householders are much more likely to own than never-married householders. Many of these are ‘legacy’ homeowners who bought while still married and remained in the home after becoming single, although some likely bought homes without a spouse, using proceeds from a home they owned when married. Previously-married householders have also seen a smaller decline in their homeownership rate, relative to currently-married householders, since the end of the housing boom a decade ago. All of these groups, moreover, have homeownership rates today that are at or above their pre-boom levels from the mid-1990s, suggesting that homeownership has been an important and popular choice for all households regardless of their marital status.

Note: Data are share of householders, not persons, by marital and tenure status. Households who report being separated from their spouse are not considered to be currently married.
Source: U.S. Census Bureau’s Current Population Surveys.

These facts make clear that recent concerns about the decline in marriage leading to less demand for homeownership are perhaps overstated. While married couples continue to own homes at higher rates than unmarried individuals, there is more to this relationship. Only recently have shares of married couples and shares of home-owning households both been declining, due mostly to economic factors, while vast majorities of the population still aspire to both marriage and homeownership. Nor are married couples the only ones owning homes, as both previously-married and never-married householders significantly increased their homeownership rates during the housing boom, with only small declines since the peak in 2005.

Finally, it is worth noting that most discussions of the role of marriage in housing decisions fail to consider the importance of other changes in household demographics that have had an impact on homeownership rate; the increasing share of minorities in the population, for example, can have a lowering effect on homeownership rates, while higher rates of college educated adults in the population should increase the share that own. The most important factors in recent declines in homeownership rates, however, are the performances of the housing market and economy, which determine whether households of all types are able to purchase homes. Stagnant incomes and constrained credit have had greater impacts on homeownership rates since the end of the housing boom than long-term demographic changes, and will likely continue to drive homeownership trends in the near future.

Wednesday, December 10, 2014

Survey: Many Homeowners Concerned about Invisible Health Risks

by Elizabeth La Jeunesse
Research Analyst
What makes a home healthy or unhealthy?  As Mariel Wolfson illustrated in her recent blog, this question is a multifaceted one. Old hazards persist, including lead paint, combustion pollution, formaldehyde, and radon. There is also growing awareness of other invisible pollutants, including volatile and semi-volatile organic compounds and endocrine disrupting chemicals. These elements enter homes not only through household products and goods but, as research from the Healthy Building Network shows, through building materials themselves. Achieving optimal ventilation remains essential to healthy indoor air quality. Attention should also be paid to the surrounding neighborhood, including access to health services and healthy food, walkability and accessibility, and levels of outdoor air pollution. Some communities are disproportionately affected by polluting industries and waste disposal sites in their neighborhoods, making it even more difficult for residents to enjoy a healthy home environment.

Households’ perceptions of health risks influence behaviors and in turn affect the home environment, so the Joint Center recently surveyed homeowners to learn about their ‘healthy housing’ concerns. These include but are not limited to worries about mold/moisture, indoor air quality, chemicals at home, and noise and lighting issues which might affect household health.

We found that roughly one out of four homeowners expressed some level of concern about an aspect of their home negatively impacting their household’s health. One out of ten households described their concerns as ‘moderate’ or ‘major’. High income households (earning $100K or more) were slightly more likely to express concern, as were households with one or more children.

By far the most frequently cited problem was indoor air quality, with more than two thirds of the concerned households identifying it as an issue. Water quality and harmful chemicals/materials followed, with around 30-40 percent of households citing them. As the chart below shows, these indoor health risks ranked even above basic safety issues. Least commonly cited problems were light and noise issues. 

Notes: Sample size is 529.  Households that expressed some basic level of healthy housing interest/concern were asked, “Which general category(ies) best describes your concern about the impact of your home on your household’s health?” Safety or comfort of the structure includes trip hazards, inadequate heating/cooling etc. Other basic safety issues include pests, lack of smoke detectors/locks/child safety features, etc.
Source: JCHS tabulations of Healthy Home Owner Survey, The Farnsworth Group.

When asked to be more specific about the source of their indoor air quality concerns, top issues cited by owners included managing household dust and/or pet dander, air pollution from indoor cooking/heating, and lack of sufficient ventilation. Over half of households concerned about residential indoor health risks identified these as problems. Just under half of those worried about indoor health cited chemicals from interior furnishings and from the building/structure itself as a source of concern.

Among all homeowners expressing concerns related to indoor health, more than half took at least one specific action to remediate their concern. Most frequent actions completed or planned in the near future included water filter installation, choice of paint with no or low airborne toxins, mold removal, and installation of room darkening curtains/shades. Less frequent actions included removal of asbestos and lead paint. 

Over the coming months, the Joint Center will analyze results from similar surveys of renter households, as well as of remodeling contractors, to better understand how healthy housing concerns and behaviors are playing out in the current residential remodeling market.

Friday, December 5, 2014

Expanding Asset-Building Opportunities Through Homeownership

by Jeffrey Lubell
Guest Blogger
From time to time, Housing Perspectives features posts by guest bloggers. Today's post, written by Jeffrey Lubell, Director of Housing and Community Initiatives at Abt Associates, reflects thoughts from a book launch & panel discussion he participated in at the Harvard Kennedy School on October 30, 2014. The panel was entitled "The Future of Homeownership in America", was moderated by NPR Reporter Chris Arnold, and also included panelists Chris Herbert (Joint Center for Housing Studies), Marsha Courchane (Charles River Associates), and Patricia McCoy (Boston College).

In a recent editorial titled "Homeownership and Wealth Creation," the New York Times highlighted an analysis by Chris Herbert, Dan McCue, and Rocio Sanchez-Moyano of the Harvard Joint Center for Housing Studies that re-examined whether homeownership contributes to individual wealth creation in light of the experience of homeowners during the housing bust of the late 2000s. Building on the findings of this analysis, the Times emphasized that homeownership remains a critically important vehicle for the accumulation of wealth and expressed support for policies that make mortgage products safer and boost Americans’ incomes to expand their purchasing power.

The paper by Herbert, McCue and Sanchez-Moyano was originally presented at a symposium in 2013 and recently published as a chapter in a new Joint Center book, Homeownership Built to Last.  Earlier this fall, the Joint Center hosted a book launch that included presentations by authors of four of the chapters in the book.  As a contributing author and participant in the book launch, I am pleased to see the New York Times utilize the research in Homeownership Built to Last for its intended purpose: to draw lessons from the foreclosure and housing crises and other recent experience that can help us develop policies to support sustainable homeownership. 

I would take the Times’ recommendations one step further, however.  In my chapter and presentation at the book launch, I urged us to take the additional step of working to expand the supply of homeownership opportunities affordable to low- and moderate-income households by investing in shared equity homeownership.  Shared equity homeownership represents an alternative to down payment grants and forgivable loans that enables asset-building homeownership opportunities to be provided to many more families with the same amount of government investment.  Under this approach, a government subsidy (or an inclusionary housing policy) is used to reduce the purchase price of a home.  In exchange for a more affordable purchase price, the homebuyer agrees to sell the home to the next buyer at an affordable price, set by formula to balance wealth creation by the homeowner with ongoing affordability to the next owner.

The result is the preservation of the initial subsidy to help one homebuyer after another.  While the shared equity homeowner gives up the opportunity to make a killing if the market goes through the roof, the homeowner nevertheless has the opportunity to build sizable and potentially life-altering wealth through the combination of the forced savings of a fixed-rate mortgage and a generally predictable amount of home price appreciation.  As an added bonus, shared equity homeownership may help reduce the incidence of foreclosure and provides some protection from modest declines in the market.

Shared equity homeownership is not for everyone.  But it does fill an essential market niche.  If we want to expand asset-building opportunities through homeownership to the low- and moderate-income households that really need them, we’re going to need to both expand the credit box so that more families can access reasonably priced mortgage capital AND expand the supply of homes low- and moderate income households can afford through strategies like shared equity homeownership.

My essay on shared equity homeownership may be found in Chapter 6 of Homeownership Built to Last.  (An earlier version of the chapter was published as a working paper by the Joint Center.)