February 15, 2016
Happy Presidents Day!
“If your actions inspire others to dream more, learn more, do more and become more, you are a leader.” – John Quincy Adams
February 15, 2016 | Permalink | No Comments
February 12, 2016
Homeowner Nation or Renter Nation?
Arthur Acolin, Laurie Goodman and Susan Wachter have posted a forthcoming Cityscape article to SSRN, A Renter or Homeowner Nation? The abstract reads,
This article performs an exercise in which we identify the potential impact of key drivers of home ownership rates on home ownership outcomes by 2050. We take no position on whether these key determinants in fact will come about. Rather we perform an exercise in which we test for their impact. We demonstrate the result of shifts in three key drivers for home ownership forecasts: demographics (projected from the census), credit conditions (reflected in the fast and slow scenarios), and rents and housing cost increases (based on California). Our base case average scenario forecasts a decrease in home ownership to 57.9 percent by 2050, but alternate simulations show that it is possible for the home ownership rate to decline from current levels of around 64 percent to around 50 percent by 2050, 20 percentage points less than at its peak in 2004. Projected declines in home ownership are about equally due to demographic shifts, continuation of recent credit conditions, and potential rent and house price increases over the long term. The current and post WW II normal of two out of three households owning may also be in our future: if credit conditions improve, if (as we move to a majority-minority nation) minorities’ economic endowments move toward replicating those of majority households, and if recent rent growth relative to income stabilizes.
This article performs a very helpful exercise to help understand the importance of the homeownership rate. This article continues some of the earlier work of the authors (here, for instance). I had thought that that earlier paper should have given give more consideration to how we should think about the socially optimal homeownership rate. Clearly, a higher rate, like the all-time high of 69% that we had right before the financial crisis, is not always better. But just as clearly, the projected low of 50% seems way too low, given long term trends. But that leaves a lot of room in between.
This article presents a model which can help us think about the socially optimal rate instead of just bemoaning a drop from the all-time high. It states that
Equilibrium in the housing market is reached when the marginal household is indifferent between owning and renting, requiring the cost of obtaining housing services through either tenure to be equal. In addition, for households, the decision to own or rent is affected by household characteristics and, importantly, expected mobility, because moving and transaction costs are higher for owners than for renters. Borrowing constraints also affect tenure outcomes if they delay or prevent access to homeownership. (4-5)
This short article does not answer all of the questions we have about the homeownership rate, but it does answer some of them. For those of us trying to understand how federal homeownership policy should be designed, it undertakes a very useful exercise indeed.
February 12, 2016 | Permalink | No Comments
Friday’s Government Reports Roundup
- The Center on Budge and Policy Priorities (CBPP) released report on the Housing Opportunity Through Modernization Act of 2015, finding that the bipartisan housing bill would make rental assistance programs more effective.
- The National Housing Conference released a report, How Investing in Housing Can Save on Health Care.
February 12, 2016 | Permalink | No Comments
February 11, 2016
Reverse Mortgage Lowdown
Athene quoted me in Is a Reverse Mortgage Right for You? It opens,
Experts weigh the pros and cons of this loan—to help you make a smart choice.
For homeowners age 62 and older who have a significant amount of equity (appraised value minus mortgage balance) in their homes, a reverse mortgage can seem like an attractive option. Simply put, a reverse mortgage allows you to convert a portion of the equity in your home into cash, without having to sell your home. But this type of loan isn’t right for everyone. Here’s help determining if a reverse mortgage is the smart choice for you.
Pros: A reverse mortgage is a loan against your home equity, which you can take as a lump sum payment, a monthly payment, or a line of credit. The loan is paid off when you no longer live in the home. “It allows a homeowner to access home equity in the present in order to supplement current income,” says David Reiss, a professor of law at Brooklyn Law School who teaches residential real estate courses.
Consider this loan if you would like to stay in your current home and
- Have lived in your home for a long time and plan to use the equity to supplement Social Security and other investment income streams
- Have other assets and are not using this as a loan of last resort
- Might not be able to access the cash you need in emergencies
Cons: These loans aren’t cheap, says Scott Withiam, housing counseling supervisor at American Consumer Credit Counseling, Inc. Plus, the industry that sells them has been under scrutiny from the Consumer Financial Protection Bureau for deceptive practices. “The reverse mortgage industry has had more than its share of shady operators who are drawn to all that equity that seniors have amassed,” says Reiss. “Homeowners considering a reverse mortgage should make sure to review the terms of the transaction with someone whose financial judgment he or she trusts.”
February 11, 2016 | Permalink | No Comments
Thursday’s Advocacy & Think Tank Roundup
- The Urban Institute released a report, Helping Families Involved in the Child Welfare System Achieve Housing Stability, which examines how the Family Unification Program is implemented.
- Enterprise Community Partners released An Investment in Opportunity, establishing a long-term platform for policy changes at all governmental levels in order to tackle the growing rental housing crisis in America.
- The Urban Institute released a report, Health Conditions in Five Choice Neighborhoods, finding that residents, especially those living in public housing, face significant health challenges.
February 11, 2016 | Permalink | No Comments
February 10, 2016
Making the Switch to Dirt Law
Lawyer & Statesman quoted me in Real Estate Lawyers in Demand about how lawyers can make the transition to a dirt law practice. It reads, in part,
Real estate is one of the most fickle industries around — hot when the economy is growing and cold when it is not. The good news is that real estate is growing again and that means more jobs for attorneys.
Robert Half Legal, a legal staffing agency, reports that the real estate lawyer is the third most in-demand legal position in the South Atlantic region. Real estate is the second-fastest-growing legal industry in the South Atlantic region and the fourth fastest in the Mountain and Pacific regions.
At Brooklyn Law School, real estate law has become the most popular specialization. Graduates are finding more jobs in the specialization’s niche areas such as cooperative and condominium representation, said Professor David Reiss, who also serves as the academic program director of the Center for Urban Business Entrepreneurship.
If you have the time and money, Reiss thinks additional training in real estate can certainly help attorneys specialize their experience in the law. Course and certificates seem to be the best option in regards to both time and money.
“Taking a few relevant courses might make sense for most people instead of devoting the time and money that an LL.M. in real estate would entail,” he said. “Certain kinds of certificates can also help you stand out from other candidates, like the Leadership in Energy and Environmental Design (LEED) certificate. It does not involve nearly as much time or money as an LL.M. degree would, but it does signal a level of knowledge and commitment to a particular practice area.”
Don’t worry about getting your real estate license (unless you already have one). Spreading yourself too thin will be more harmful than productive, Reiss said. Attorneys also need to consider the requirements and restrictions of their individual jurisdiction.
“In some jurisdictions, such as New York, members of the bar are exempt from the various requirements necessary to become a licensed real estate broker,” he said. “But in my experience, lawyers are better off doing one thing well — being good lawyers — rather than being a jack of all trades.”
As with a lot of specialized areas of the law, real estate law has plenty of niche areas in which lawyers can further delve into. This can make you more attractive to clients and employers.
“Specializing in areas of the law relating to real estate can make a lot of sense — co-ops, condos and HOAs; construction law; land use; finance; affordable housing; and foreign investment programs, to name a few,” Reiss said.
* * *
While real estate can be up and down, Reiss said real estate law could be a good field even during slower economic times.
“No matter what the economy as a whole is doing, clients are still buying and selling properties, financing and refinancing them, and entering into property leases,” he said.
To prepare for careers in real estate law, Brooklyn Law School encourages job applicants to have very focused resumes, which increases their marketability.
“We find that students with focused resumes can make a compelling case to a range of real estate employers, even if their overall GPA is not high,” Reiss said.
Participating in bar association committees is also highly recommended for networking and learning purposes. Reiss says it is important to notify your network that you are transitioning into a new specialization.
“A good word about your work ethic and ability to learn can help compensate for a lack of direct experience,” Reiss said.
All that said, Reiss recommends attorneys be sure of their specialization interests before getting too far into the field.
“You should keep in mind that once you specialize, many people will pigeonhole you in that area,” he said. “So you want to make sure that you like the practice area and that there is a sufficient flow of work to keep you busy.”
February 10, 2016 | Permalink | No Comments
Wednesday’s Academic Roundup
- Multiple Job Holding, Local Labor Markets, and the Business Cycle, Barry T. Hirsch, Muhammad M. Husain & John V. Winters, Andrew Young School of Policy Studies Research Paper Series No. 16-01.
- A Renter or Homeowner Nation?, Arthur Acolin, Laurie S. Goodman & Susan M. Wachter, Cityscape, Forthcoming.
- Borrowing Constrains and Homeownership, Arthur Acolin, Jesse Bricker, Paul S. Calem & Susan M. Wachter, American Economic Review: Papers and Proceedings, Forthcoming.
- Maximizing Capital Gains in Real Estate Transactions, Bradley T. Borden & James M. Lowy, N.Y.U. 73d Ins. Fed. Tax’n (2015); Brooklyn Law School, Legal Studies Paper No. 436.
- The Effect of Relisting on House Selling Price, Karen M. Gibler, Velma Zahirovic-Herbert & Patrick S. Smith, Journal of Real Estate and Economics, Vol. 52, No. 2, 2016.
- Certifications Matters: Is Green Talk Cheap Talk?, Shaun A. Bond & Avis Devine, Journal of Real Estate Finance and Economics, Vol. 52, No. 2, 2016.
- Green Buildings: Similar to Other Premium Buildings?, Spenser J. Robinson & Andrew Sanderford, Journal of Real Estate Finance and Economics, Vol. 52, No. 2, 2016.
- Infrastructural Entitlements and the Civil Right to Technology, Sonia Katyal, UC Berkeley Public Law Research Paper No. 2716368.
- Zoning and Market Externalities, Amnon Lehavi.
February 10, 2016 | Permalink | No Comments
