Housing Facts For Advocates January 2010

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See also slides 5 & 6 Overall Housing Cost Burden Almost 13% of all households (over 1 in 8) were paying at least half their income for housing in 2008. This represents 266,000 households statewide, up from only 157,000 in 2002. Almost three-quarters of those paying too much for housing were in low-income households with incomes below $50,000 in 2008. Source: American Community Survey

See also slides 4 & 6 Overall Housing Cost Burden Source: American Community Survey

See also slides 4 & 6 Overall Housing Cost Burden Between 2000 and 2008, Minnesota had the fastest increase of any state in the proportion of households that paid 50% or more of their income for housing. The proportion of households paying more than they can afford for housing held steady from 1980-2000 at 1 in 4 or 4.5 households, but by 2008, 1 in 3 households was cost-burdened. Sources: American Community Survey (2008); US Census (2000); National Historical Geographic Information System (NHGIS) (1980-1990)

See also slides 7 & 8 Renter Cost Burden Almost half (46%) of the state’s 530,000 renter households pay more than 30% of their income for housing. More than one in five renter households pay more than HALF of their income for housing, which means these families struggle to cover the costs of other necessities, such as food and transportation. For low- and moderate-income renters (household income under $50,000), nearly 2 in 3 households are cost-burdened. Owner Cost Burden One in 10 of all homeowners, including those without mortgages, paid over half their income for their homes in 2008. In the five year period from 2002 to 2008, the number of mortgaged houses in which households were paying more than half of their income for housing increased from 1 in 18 to 1 in 9. Well OVER HALF (nearly 54%) of all homeowner households earning under $50,000 annually were cost-burdened (30% of income) in 2008. Sources: American Community Survey (2008); US Census (2000); National Historical Geographic Information System (NHGIS) (1980-1990)

See also slide 5 Renter Trends Renters have experienced gradual increases in housing costs since 1980. From 1980 to 2008, rental costs increased by about 19%, after adjusting for inflation. At the same time, renter incomes fell by 10%. Sources: American Community Survey (2008); US Census (2000); National Historical Geographic Information System (NHGIS) (1980-1990)

See also slide 5 Owner Trends While the income of homeowner households rose 26% between 1980 and 2008, home prices rose twice as fast (by 54%) in that same period, after adjusting for inflation. Sources: American Community Survey (2008); US Census (2000); National Historical Geographic Information System (NHGIS) (1980-1990)

Units Needed BBC (2003) study found that by 2010 , Minnesota would have a “new, unmet need” of 33,000 units of affordable housing, after accounting for public and private production of housing. The BBC study figure includes 22,000 units in the 7-county metro. Note: this does not include the tens of thousands households already living in unaffordable housing in 2000. [BBC study can be found at http://www.mnhousing.gov/idc/groups/secure/documents/admin/mhfa_004227.pdf ] The Metropolitan Council determined that the new, unmet need in 2011-2020 in the Twin Cities metropolitan area to be 51,000 units. [Met Council study can be found at http://www.metrocouncil.org/planning/Housing/HousingNeeds.htm ] The substantial increase in housing costs in Minnesota since 2000 means that the BBC study estimate of 33,000 units of new need is probably far too conservative.* The Metropolitan Council data may also be an underestimate.* A newer 2008 Wilder Research study of the East Metro shows much higher new, unmet need:* The Wilder study summary can be found at http://www.wilder.org/download.0.html?report=2088&summary=1 and the full report at: http://www.wilder.org/download.0.html?report=2088 Note: the East Metro includes Anoka, Dakota, Ramsey, and Washington Counties. The 2003 BBC study estimated that the new, unmet need in the East Metro in 2000-2010 to be 16,000 units (of the state’s 33,000). By contrast, a 2008 Wilder Research study found the unmet need for the same period in the East Metro to be over 68,000 units. The Metropolitan Council 2011-2020 study estimates an unmet need of for the East Metro of 22,000 (out of the 51,000 units) The East Metro Wilder study predicted 27,000 units of unmet need for this period. Sources: The Next Decade of Housing in Minnesota , 2003, BBC Research & Consulting; East Metro Housing Needs: Projections of low-income and cost-burdened households by 2010 and 2020 , July 2008, Wilder Research; Determining Affordable Housing Need in the Twin Cities 2011-2020 , Metropolitan Council, 2006.

See also slide 12 Home Ownership Trends Home sale prices in the Twin Cities metro show that the bubble which began in the late 1990s is now deflating, but may not yet have reached pre-bubble levels. (If home prices rose at the rate of inflation, the line in the home sale price chart would be flat, much as it appears from 1980 through about 1996.) At the peak of the bubble in 2005, home prices were almost 75% higher than the average price from 1980-1996, after adjusting for inflation. While some recent homebuyers have been able to take advantage of the lower home prices of the past year or two, many homebuyers must still cover the same expensive mortgages acquired over the past decade. Source: Minneapolis Area Association of Realtors (bullets 1 & 2)

See also slide 11 Home Ownership Trends (cont) The homeownership rate in Minnesota reached historical highs in tandem with the housing bubble of the late 1990s and 2000s. After decades of a homeownership rate that hovered around 72%, by mid-decade, the rate climbed to 76-77%. 2008 data suggests that the rate may be declining again. Sources: National Historical Geographic Information System (NHGIS), 1980 & 1990; Decennial Census, 2000; American Community Survey, 2008.

See also slide 14 Affordability by Occupation Among 7 selected essential service and common occupations at median wage levels, only two (registered nurse and middle school teacher) could afford a median-priced apartment in Minnesota in 2008. Of the selected occupations, only a registered nurse could afford to own a median priced home in 2008. Nursing aides, office clerks, child care workers, cashiers, and office clerks typically cannot afford a median-priced apartment. Source: Minnesota Housing Partnership tabulation of Occupational Employment Statistics (OES), Minnesota DEED; American Community Survey, MN Revenue Department Sales Ratio Study, Federal Housing Finance Board Monthly Interest Rate Survey (MIRS).

See also slide 13 Affordability by Occupation In 2008, the median home in Minnesota was worth about $189,900 and the median rent was $734/month. These housing prices required incomes of $60,400 annually for home ownership and $29,400 for rental, based on paying no more than 30% of income for housing. (Owners costs are based on a down payment of 10% and 30-year fixed-rate mortgage.) Source: Minnesota Housing Partnership tabulation of Occupational Employment Statistics (OES), Minnesota DEED; American Community Survey, MN Revenue Department Sales Ratio Study, Federal Housing Finance Board Monthly Interest Rate Survey (MIRS).

Economic Benefits of Investing in Housing Housing construction, both new construction and rehabilitation, creates jobs and significant economic activity, generates a return on investment to the state and increases local tax bases, according to recent analyses by Donjek, Inc. and the Minnesota Housing Finance Agency. 1 MHP applied these analyses to state investments in housing affordable to Minnesota families. Investing $100 million in a mix of housing rehabilitation and new construction through Minnesota Housing’s Challenge Program is estimated to generate 2 : 4,000 units of housing affordable to families 4,100 jobs in housing development in the year of construction through direct spending and 1,700 jobs through indirect spending $49.5 million in state tax revenues in the year of construction At least $20 million in new property tax revenues over ten years for local units of government A total financial outlay of $720 million The state recoups half of its investment via sales, mortgage, deed, and income tax revenues during the first year, with additional tax revenues generated in coming years through sales and income taxes. MHP factsheet http://www.mhponline.org/files/econ_hsg_investment_Jan12.pdf 1 “Housing as a Lever for Economic Recovery”, Donjek Inc., Feb. 2009; “The Economic Impact of Minnesota’s Housing Investment”, MHFA, Jan. 2009; “Housing Trends in Minnesota”, Minnesota Housing Partnership, Jan. 2009. 2 Assumes a state investment of $25,000 per unit for units worth $180,000 each. Based on recent funding patterns for MHFA’s Challenge Program, a state investment of $25,000 is assumed to leverage $155,000 in other public and private investments. Producing 4,000 units at $180,000 each results in an outlay of $720 million.

See also slide 17 Housing and Jobs Residential housing construction employed about 8,500 Minnesotans in November 2009, about 10,000 workers fewer than in the November months of 2003-5. Source: Current Employment Statistics (CES), Minnesota DEED

See also slide 16 Housing and Jobs In the second half of 2009, wood products manufacturing employed 10-11,000 people per month, compared to 16-17,000 people through 2000, a loss of 6,000 jobs. This does not include jobs in forestry and logging. Source: Current Employment Statistics (CES), Minnesota DEED

Unemployment The seasonally adjusted unemployment rate in Minnesota was in the 7.4% to 8.4% range throughout 2009, after being in the 5% or lower range since the early 1990s through 2007. In December, 2009 Minnesota’s unemployment rate was 7.4%, and the US rate was 10.0%. The official unemployment measure (U-3) does not include unemployed people who have quit looking for work or those who are employed part-time only because they are unable to get full time work. The more comprehensive measure including those who have quit looking for work and people employed part time who would like full time work (U-6) is significantly higher. The U-6 unemployment rate in Minnesota was 13.6%, based on a 4-quarter average from the fourth quarter of 2008 through the third quarter of 2009. Source: Local Area Unemployment Statistics (LAUS)

See also slide 20 Number of Foreclosures (Sheriffs’ Sales) From 2005-2009, there were over 80,000 foreclosures in Minnesota (up through the 3 rd quarter of 2009), as measured by sheriffs’ sales. Source: HousingLink

See also slide 19 Number of Foreclosures (Sheriffs’ Sales) In Hennepin County, there were about 1,000 foreclosure sheriffs’ sales annually from 1988 through 2004. In recent years in Hennepin County, sheriffs’ sales totaled 5,561 in 2007; 7,348 in 2008, and about expected to be about 5,500 for 2009, based on January through November data. Source: Hennepin County

Mortgage Delinquency Rates The 60+ day mortgage delinquency rate reached 7.7% in the third quarter of 2009, continuing a three year trend of steady increase. Nationally, delinquency rates continue to break record highs going back to 1972 when the Mortgage Bankers Association began collecting data. 17,500 pre-foreclosure notices were issued to Minnesota homeowners in the third quarter of 2009, as reported to the MN Home Ownership Center. Sources: National Delinquency Survey, Mortgage Bankers Association (bullets 1 & 2); Minnesota Home Ownership Center (bullet 3)

See also slide 24 Future Mortgage Rate Re-sets The primary cause of foreclosures may be shifting from the use of higher-risk, mortgages to the loss of jobs or income. While the default of subprime mortgages has received considerable attention, prime fixed-rate loans now represent 40% of delinquent loans in Minnesota (as of quarter 3 2009). No other loan type comprises as big a proportion of delinquencies. Similarly, in 2008, 59% of homeowners receiving foreclosure counseling by the Home Ownership Center had prime, fixed rate loans. Credit Suisse data looking back through 2007 shows that the subprime mortgage rate resets are waning while Alt-A and option adjustable mortgages will be facing resets in the near future. Credit Suisse data shows that the foreclosure crisis is not yet over, with rate resets and loan recasts a risk through 2012. However, the future of interest rates and how resets and recasts will play out in Minnesota is unclear. * Minnesota Housing has purchased data on all types of resets that will occur by zip code in Minnesota and is in the process of analyzing it. Sources: Mortgage Bankers Association’s National Delinquency Survey (second bullet); 2008 Foreclosure Counseling Program Report, MN Home Ownership Center, 2009 (third bullet); Credit Suisse http://www.calculatedriskblog.com/2009/05/new-mortgage-loan-reset-recast-chart.html and calculatedriskblog.com (fourth bullet)

See also slide 23 Future Mortgage Rate Re-sets Credit Suisse data shows that the foreclosure crisis is not yet over, with rate resets and loan recasts a risk through 2012. However, the future of interest rates and how resets and recasts will play out in Minnesota is unclear. * *If interest rates remain low, loan resets will not be a major problem, but Option ARMs, which include both loan resets and recasts, may continue to be a risk regardless (yellow in the Credit Suisse chart). Loan resets involve rate changes, and depend on interest rates. Recasts involve payment changes. Recasts and resets may occur together with Option ARMs. Option ARMs allow borrowers to choose a minimum payment that may be less than interest owed, and may have been used disproportionately in California; Minnesota usage is not clear. Credit Suisse http://www.calculatedriskblog.com/2009/05/new-mortgage-loan-reset-recast-chart.html and calculatedriskblog.com

See also slide 26 Sales of Foreclosed and Short Sale Homes In general, short sales and foreclosures accounted for a decreasing proportion of the inventory of homes for sale through most of 2009. The inventory of lender-owned (foreclosed) homes for sale in the Twin Cities fell by nearly two-thirds from November 2008 to November 2009 (from 4,936 to 1,808). The short sale inventory fell by only a modest 5% over the same period. In November 2009, there were 1.4 months of lender-owned foreclosure inventory (low supply) but 12.8 months of short sale inventory (high supply) available. (A balanced market between buyers and sellers has 5 or 6 months of supply.) Source: Minneapolis Area Association of Realtors “Foreclosures and Short Sales Report” http://www.mplsrealtor.com/downloads/market/FSS/fss.pdf

See also slide 25 In November 2009, foreclosures sold over twice as frequently as short sales. Many consumers report delays and inability to close deals on short sale homes. However, over time there has been a substantial increase in the number of successful closings on short sales. Source: Minneapolis Area Association of Realtors “Foreclosures and Short Sales Report” http://www.mplsrealtor.com/downloads/market/FSS/fss.pdf

Homelessness The best estimate of statewide homelessness is from 2006, when Wilder Research estimated that there were 9,200-9,300 homeless Minnesotans. More recent statewide data is not yet available, but Wilder will release new data in 2010 providing an October, 2009 count. More recent trend data is available from Hennepin County: Family homelessness in Hennepin County has risen steadily since 2006. Contracted family homeless numbers were 50% higher in 2009 than in 2006. 2009 had the highest number of families sheltered in contracted shelters in Hennepin County since 2001. Sources: Wilder Research, Homelessness in Minnesota, 2006 (first bullet). Hennepin County, unduplicated count of families seeking shelter through county-contracted shelters (second set of bullets).

See also slide 31 Rents and Rental Vacancy Rates Metro rents, already very high, were about 7% higher in 2008 & 2009 than during the 2004-5 period. Source: GVA Marquette Advisors

See also slide 30 Rents and Rental Vacancy Rates In the 3rd quarter of 2009, rental market vacancy rates trended to 6.4%, the highest rate in over 4 years, and well above the balanced level of 5%. Rental vacancy rates typically rise during a recession due to people doubling up with friends or family to conserve money. Many former homeowners who have experienced foreclosure are now renters (or in some cases, have become homeless). However, rising rental vacancy rates suggest that this new demand for rental housing is weaker than the fall in demand due to unemployment and the recession. Recent measures of rental vacancy rates are available only in the Twin Cities metro. Source: GVA Marquette Advisors

Renters and Foreclosure Renters make up a large proportion of households that have experienced foreclosure. Since 2007, 43% of residential properties that foreclosed in Hennepin and Ramsey counties (53% in Minneapolis and St. Paul) were not homesteaded. Non-homestead status is a rough indicator of rental properties. However, some non-homesteaded properties are not rented, and some homesteaded properties are rental properties. In the first half of 2009, 889 households (comprised of nearly 3,000 individuals) were assisted in the “Tenants-in-Foreclosure Project.” This project is a combined effort between HOME Line, Legal Aid Society of Minnesota and Southern Minnesota Regional Legal Services to provide tenant counseling to renters living in 1 to 4 unit properties that face foreclosure. 64% of the households served included children. Sources: Hennepin County and Ramsey County for first two bullets. Zagaria, Pam. Tenants-In-Foreclosure Project Six-Month Report (2009) for last bullet.

Foreclosures and Income Loss/Reduction 50% of homeowners who sought foreclosure counseling assistance from the MN Homeownership Center in 2008 attribute their mortgage default primarily to the reduction or loss of income. Reduction in income, which was the main reason for default 35% of the time, is typically caused by fewer hours available for work, a reduction in government assistance, or loss of a part-time job. Loss of income, which was the reason for default 15% of the time, is caused by loss of a job and resulting unemployment. Source: 2008 Foreclosure Counseling Program Report, MN Home Ownership Center

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Housing Facts For Advocates January 2010 - Presentation Transcript

Housing Facts for Minnesota Advocates January, 2010
Usage, Sources & Contact Information
- The slides are provided for use in education and advocacy for affordable housing in Minnesota. Slide content can be mixed and matched to provide information for legislators and the public.
- The “notes” section for each slide contains key information bullet points pertaining to slide content.
- To ensure accuracy and retain source information, please:
- For more information, contact: Leigh Rosenberg, Minnesota Housing Partnership (MHP), 651-925-5543 or [email_address] and
- Craig Johnson, Metropolitan Consortium of Community Developers
- (MCCD), 612-789-7337 x 17 or [email_address] .
Contents I. NEED FOR HOMES PEOPLE CAN AFFORD III. FORECLOSURES AND HOMEOWNERS AT RISK Overall Housing cost burden 4-6 Number of Foreclosures 19, 20 Renter Cost Burden 7, 8 Vacant Residential Properties 21 Owner Cost Burden 7, 9 Mortgage Delinquency Rate 22 Units Needed 10 Future Mortgage Rate Re-Sets 23, 24 Long Term Trends 6-9, 11, 12 Sales of Foreclosed and Short Sale Homes 25, 26 Occupations and Housing Cost 13, 14 Foreclosures and Income Loss/Reduction 27 II. HOUSING, ECONOMY, AND INVESTMENT Crime and foreclosures/vacant properties 28 Economic Benefits of Investing in Housing 15 IV. HOMELESSNESS 29 Jobs Lost 16, 17 V. RENTERS Unemployment 18 Rents &Vacancy Rates 30, 31 Renters and Foreclosure 32
Units Needed See notes for additional details.
- BBC (2003) study: by 2010 , Minnesota would have “new, unmet need” of 33,000 units of affordable housing, after accounting for public and private production of housing.
- The Metropolitan Council: new, unmet need in 2011-2020 in the Twin Cities metropolitan area = 51,000 units.
- Increase in housing costs since 2000 means that the BBC estimate is likely too conservative. Metropolitan Council data may also be an underestimate.
Profile of Housing Affordability in 2008: Nursing Aide Based on HUD guidelines that households should pay no more than 30% of income for housing. *Assumes 10% down payment & 30-year fixed rate mortgage, with no more than 28% of income for principal, interest, taxes and insurance and 2% of income for maintenance & repairs. Source: Minnesota Housing Partnership tabulation of Occupational Employment Statistics (OES), Minnesota DEED; American Community Survey, MN Revenue Department Sales Ratio Study, Federal Housing Finance Board Monthly Interest Rate Survey (MIRS). Nursing aide median income, Minnesota: $26,160 Home Ownership Median home price, Minnesota (Jan.-Sep. 2008): $189,900 Income required:* $60,418 Difference: -$32,258 Rental Median rent, Minnesota: $734/month Income required: $29,360 Difference: -$3,200
Economic Benefits of Investing in Housing
- Investing $100 million in rehabbing and building housing through Minnesota Housing’s Challenge Program is estimated to generate:
Assumes state investment of $25,000/unit for $180,000 owner and rental units . A $25,000 state investment is assumed to leverage $155,000 in other public and private funds. Based on Minnesota Housing Partnership analysis of “Housing as a Lever for Economic Recovery”, Donjek Inc., Feb. 2009; “The Economic Impact of Minnesota’s Housing Investment”, MHFA, Jan. 2009.
Vacant Properties
- Over 33,000 vacant residential properties were vacant in September, 2009 in the Minneapolis-St. Paul metro area.
- Vacant properties in other metropolitan areas of the state include:
- 6,200 in Duluth
- 5,400 in St. Cloud
- 1,500 in Mankato
- 1,900 in Rochester
- Source: HUD tabulation of US Postal Service data
Credit Suisse: Loan Resets of 2007 through 2016
Credit Suisse: US Loan Resets Remain a Risk through 2012
Foreclosures and Income Loss/Reduction
- 50% of homeowners who sought foreclosure counseling assistance from MN Homeownership Center in 2008 attribute mortgage default primarily to reduction or loss of income.
- Reduction in income was the main reason for default 35% of the time (typically fewer hours available for work, reduction in government assistance, or loss of part-time job)
- Loss of income was the reason for default 15% of the time, usually caused by loss of a job.
- Source: 2008 Foreclosure Counseling Program Report, MN Home Ownership Center
Crime and foreclosures/vacant properties
- Study: Foreclosure related to significant increase in violent crime. 1% increase in foreclosure rate of a census tract related to 2.3% increase in violent crimes. The impact on property crime was statistically inconclusive.
- Source: “The Impact of Single-Family Mortgage Foreclosures on Neighborhood Crime”, Immergluck and Smith; Housing Studies, November 2006, p. 863.
- Other studies: Vacant properties related to increases in crime, including prostitution, drug dealing, and property crime, arson and fires.
- Source: “Vacant Properties: The True Costs to Communities.”
- National Vacant Properties Campaign (2005) http://www.vacantproperties.org/latestreports/True%20Costs_Aug05.pdf
22
Residential Foreclosures, 2007 through 2009, Hennepin & Ramsey Counties Source: Hennepin & Ramsey Counties Includes residential homes and apartment parcel (not unit) counts. Hennepin and Minneapolis numbers are through June, 2009 only. Homesteaded Properties Non-Homesteaded Properties Total foreclosures Percent Non-Homesteaded Hennepin County 8,877 6,162 15,039 41% Ramsey County 3,792 3,402 7,194 47% Total - Counties 12,669 9,564 22,233 43% Minneapolis 3,214 3,734 6,948 54% St. Paul 2,650 2,846 5,496 52% Total- Cities 5,864 6,580 12,444 53%
Accessing Slides and Notes Slideshow and notes can be accessed without downloading through the link at www.mhponline.org/policy/state To download, click slideshow link at above page. When you reach the slideshare.net website, use: Username = MHPPPT Password = download