Key Findings from Recent Joint Center Research Chris Herbert Real Estate Trends in Central Ohio January 26, 2017

Key Findings from Recent Joint Center Research Chris Herbert Real Estate Trends in Central Ohio January 26, 2017

Outlook for Household Growth Through 2035

Millennials and Baby Boomers Will Drive Coming Shifts in Population Age Structure and Household Growth 26 24 22 20 18 16 14 12 10 8 6 4 2 0 Population (Millions) Under 5 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 2015 2025 2035 60-64 65-69 70-74 75-79 80-84 85-89 90 and Source: US Census Bureau, 2014 Population Projections. 3

New JCHS Household Projections Factor in Changing Household Formation Rates 4

Latest Population Projections Boosted by Upward Adjustment in Immigration Levels 1.75 Net Annual International Immigration (Millions) 1.50 1.25 1.00 0.75 0.50 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2012 Projections 2014 Projections Historic Population Estimates Source: US Census Bureau, Population Estimates and 2014 Population Projections. 5

JCHS Projections for 2015-2025 Fall In Between Others Estimates, and are Consistent with Historic Growth Levels from the 1990s 18 16 14 12 10 8 6 4 2 0 Household Growth (Millions of Households) 16.9 11.6 13.5 1970-1980 1980-1990 1990-2000 Decennial Census 11.2 11.0 2000-2010 2015-2025 Urban Instutute 13.6 2015-2025 JCHS 15.9 2015-2025 MBA* 11.5 2025-2035 JCHS Note: MBA Projections are for 2014-2024. Sources: Urban Institute (2015) Headship and Homeownership, What does the Future Hold; Mortgage Bankers Association (2015) Housing Demand: Demographics and the Numbers Behind the Coming Multi-Million Increase in Households; and JCHS tabulations of 2016 JCHS Household Projections. 6

Implications for Housing of a Rapidly Aging Population

By 2035 One in Three Households Will be 65+ and One in Ten Will be 80+ 18 16 14 12 10 8 6 4 2 0 Households (Millions) Under 25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-plus 2015 2025 2035 Source: 2016 JCHS Household Projections 8

Numbers of Owner and Renter Households Over 80 Will Double Projected Older Households by Age Group (Millions) 45 40 35 30 25 20 15 10 5 0 2015 2025 2035 2015 2025 2035 Owners Renters 65 69 70 74 75 79 80 and Over Source: 2016 JCHS Household and Tenure Projections. 9

Disability Prevalence Increases with Age 70 60 50 40 30 20 10 0 Share of Population with Disabilities by Age Group (Percent) 50 54 55 59 60 64 65 69 70 74 75 79 80 and Type of Disability Over Mobility Self-Care Household Activity Notes: Mobility disability is defined as difficulty walking, getting in and out of bed, and climbing one flight of stairs; self-care disability as difficulty eating, dressing, toileting, and bathing; and household activity disability as difficulty with meal preparation, food shopping, using the telephone, taking medication, money management, housework, and driving. Source: JCHS tabulations of University of Michigan, 2014 Health and Retirement Survey. 10

The Number of Households With a Disability Will Increase Substantially by 2035 Number of Disabled Households Aged 65+ in 2014 and 2035, by Type of Disability (Millions) 30 25 20 15 10 5 0 2015 2025 2035 2015 2025 2035 2015 2025 2035 Mobility Disability Self-Care Disability Household Activity Disability Owner Households Renter Households Notes: Mobility disability includes difficulty walking, getting in and out of bed, and climbing one flight of stairs. Self-care disability includes difficulty eating, dressing, toileting, and bathing. Household activity disability includes meal preparation, food shopping, using the telephone, taking medication, money management, housework, and driving. Source: JCHS tabulations of 2014 Health and Retirement Survey data and JCHS Household and Tenure Projections. 11

Cost Burdens are Lowest among Owners without Mortgages Share of Households by Age Group (Percent) 70 60 50 40 30 20 10 0 65 79 80 and Over 65 79 80 and Over 65 79 80 and Over Owners without Owners with Renters Mortgages Mortgages Severely Burdened Moderately Burdened Notes: Moderately / severely cost burdened is defined as paying 30 50% / over 50% of income on housing. Source: JCHS tabulations of US Census Bureau, 2014 American Community Survey 1-Year Estimates. 12

More Older Households are Carrying Higher Amounts of Mortgage Debt into Retirement 40 35 30 25 20 15 10 5 0 Share with Mortgage Debt (Percent) Median Mortgage Debt (Thousands of 2013 dollars) 1995 1998 2001 2004 2007 2010 2013 80 70 60 50 40 30 20 10 0 Share of Owners Aged 65 and Over with Mortgage Debt [Left scale] Median Value of Mortgage Debt for Owners With Debt Aged 65 and Over [Right scale] Notes: Mortgage debt is debt on a primary residence. The share with mortgage debt is among owners only. Median value of mortgage debt is among owners with mortgage debt only and in constant 2013 dollars adjusted for inflation using the CPI-U-RS. Source: JCHS tabulations of US Federal Reserve Board, 2013 Survey of Consumer Finances. 13

By 2035 17 Million Older Households Will Be Cost Burdened, 8 Million Severely So Households (Millions) 12 10 8 6 4 2-2015 2025 2035 2015 2025 2035 Owners Source: JCHS projections. Moderate Severe Renters 14

Potential Future Paths for Owning and Renting

The National Homeownership Rate Has Fallen Back to Early 1990s Levels and Beyond 70 Homeownership Rate (Percent) 69 68 67 66 65 64 63 62 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 Source: JCHS tabulations of US Census Bureau, Housing Vacancy Surveys. 16

But Rates Have Fallen Well Below Early 1990s Rates for All But Oldest Age Groups 10 8 6 4 2 0-2 -4-6 -8-10 Change in Homeownership Rate Since 1990 (Percentage Points) 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Age of Household Head 25-34 35-44 45 54 55 64 65-74 75 and Over Note: Based on 3-year annual average rates. Source: JCHS tabulations of US Census Bureau, Current Population Surveys.

Foreclosure-Related Exits Account for Most of the Decline in Owning Among Older Households 12% Homeownership Rate Decline & Foreclosure Exits by Age Group 10% 8% 6% 4% 2% 0% 18-25 26-35 36-45 46-55 56-65 66-75 >75 Homeownership Rate Decline, 2005-2015 Estimated Foreclosure Rate Source: JCHS tabulations of CPS ASEC and CoreLogic data on foreclosure completions. 18

Homeownership Rate Projection Scenarios 1. Base Scenario: 2015 constant rates by age, race/ethnicity, & family type 2. Low Scenario: Continue 2010-15 cohort trend through 2020 Constant 2020 rates thereafter 3. High Scenario: Rates rebound to higher of 1995 vs. 2015 rate 19

Scenarios Differ Most at Middle Ages 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Projected Homeownership Rate by Age in 2025. Scenario 1 Scenario 2 Scenario 3 2005 Actual Source: JCHS projections based on CPS ASEC and Census population projections. 20

Projection Scenarios Produce a 2025 Range from 61 to 65 Percent 66% 65% 64% 63% 62% 61% Projected Homeownership Rate, 2015-2035. 60% 2015 2020 2025 2030 2035 Scenario 1 - Base Scenario 2 - Low Scenario 3 - High Source: JCHS projections. 21

Three Scenarios Present Very Different Trajectories for Future Homeownership Rates by Age Homeownership Rate 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80Plus 1995 Age Curve 2015 Age Curve 22

Three Scenarios Present Very Different Trajectories for Future Homeownership Rates by Age Homeownership Rate 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80Plus 1995 Age Curve 2015 Age Curve 1971-75 Birth Cohort Trajectory 23

Three Scenarios Present Very Different Trajectories for Future Homeownership Rates by Age Homeownership Rate 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80Plus 1995 Age Curve 2015 Age Curve 1971-75 Birth Cohort Trajectory Projection: 5-yr Cohort Trends Projection: 2015 Constant Rates Projection: 1995 Constant Rates 24

Under Base Projections Owner and Renter Growth Would be Similar to 1985-1995 Period 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0-0.2 Historical and Projected Average Annual Household Growth (Millions) 1995 1985-1995- 2005 Owners 2005-2015 2015-2025 1995 Low Base High 1985-1995- 2005 Renters 2005-2015 Low Base High 2015-2025 Source: JCHS projections. 25

Rethinking How We Measure Housing Affordability

Number of Cost-Burdened Renters Still Near Record High while Number of Cost-Burdened Owners Continues to Fall 24 Number of Cost-Burdened Households (Millions) 22 20 18 16 14 12 10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Owners Renters Note: Cost burdens are defined as housing costs (rent and utilities) that are more than 30 percent of household income. Source: JCHS tabulations of US Census Bureau, American Community Surveys. : 27

Even Moderate Income Renters Struggle to Afford Housing, Particularly in High-Cost Metros 100 90 80 70 60 50 40 30 20 10 0 Share of Cost-Burdened Renter Households (Percent) Less than $15,000 $15,000 29,999 $30,000 $44,999 $45,000 74,999 $75,000 and Over All Renter Households Household Income Cleveland Phoenix Los Angeles Notes: Cost burdens are defined as housing costs of more than 30% of household income. The top ten high-cost metros are based on metro rankings by median monthly gross rents. Source: JCHS tabulations of the American Community Survey, 2013. 28

A Residual Income Approach to Assessing Cost Burdens Illuminates Extreme Challenges Facing Lowest-Income Households 6,000 Average Monthly Income and Costs in 2015 (Dollars) 5,000 4,000 3,000 2,000 1,000 0 (1,000) Household Income Category Under $15,000 $15,000-$29,999 $30,000-$44,999 $45,000-$74,999 Household Income Non-Housing Expenses Residual Income Available for Housing Costs Gross Rent Notes: Extremely (Very Low, Low and Moderate) incomes are defined as less than 30 percent of area median income (30-49..9%, 50-79.9%, 80-99.9%). Residual income is household income less non-housing expenses. Renters include only households with up to four members. Sources: Harvard Joint Center for Housing Studies tabulations of data from US Census Bureau, American Community Survey 2015, Center for Women s Welfare self-sufficiency standards, Urban Institute and Brookings Tax Policy Center. 29

Share of Cost Burdened Renters in Cleveland Based on 30% of Income Standard and Residual Income Approach 100 80 60 40 20 Cost Burdened Renters in 2015 (Percent) 0 <$15K $15-29.9K $30- $44.9K Household Income $45- $74.9K Single Persons Families with Children Couples Household Type 30% of Income Standard Residual Income Standard All Renters Notes: Extremely (Very Low, Low and Moderate) incomes are defined as less than 30 percent of area median income (30-49..9%, 50-79.9%, 80-99.9%). Residual income is household income less non-housing expenses. Sources: Harvard Joint Center for Housing Studies tabulations of data from US Census Bureau, American Community Survey 2015, Center for Women s Welfare self-sufficiency standards, Urban Institute and Brookings Tax Policy Center. 30

A Residual Income Measure Produces a Different Pattern of Affordability in Low and High Cost Areas Impact of Switching to Residual-Income Method on Renter Cost Burden Rates (Percent) 20 15 10 5 0-5 -10-15 -20-25 -30 <$15K $15-29.9K $30-$44.9K$45-$74.9K Single Persons Los Angeles Phoenix Cleveland Families with Kids All Renters Notes: Differences in burdens are relative to those using the traditional 30% of income standard. Extremely (Very Low, Low and Moderate) incomes are defined as less than 30 percent of area median income (30-49..9%, 50-79.9%, 80-99.9%). Residual income is household income less non-housing expenses. Renters include only households with up to four members. Sources: Harvard Joint Center for Housing Studies tabulations of data from US Census Bureau, American Community Survey 2015, Center for Women s Welfare self-sufficiency standards, Urban Institute and Brookings Tax Policy Center. 31