Implications for the Future of the U.S.

Housing Market

Presented by:
LaVaughn M. Henry, PhD, CBE
1
October 20, 2017
 Income Patterns of the Young Adult Generation

Saving Patterns of the Young Adult Generation

Debt Patterns of the Young Adult Generation

Implications for the Future of the US Housing

Market

Wrap-up

2
 Cohort Populations
post-Millennial Millennial Gen X
Baby Boomer Silent Generation Greatest Generation
1%
8% 24%
23%

24%
20%

3 Source: U.S. Census Bureau, Pew Research Center

4
 Median Total Income Median Wage Income
$46,000
$44,000
$42,000
2016 Dollars

$40,000
$38,000
$36,000
$34,000
$32,000
$30,000
1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

5 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 18-34 Avg. 35-64
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
1992 1995 1998 2001 2004 2007 2010 2013 2016

6 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 36%
34%
32%
30%
28%
Some College
26% College Degree
24%
22%
20%

7 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 200 35
30
150 25
000s, 2016 Dollars

20
100
15

50 10
5
0 0

Mortgages Education Loans

8 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 Despite recent recovery, real median wage levels
for young adults remains below 1990s levels.

Having experienced the greatest declines during

the period of the Great Recession, Young Adults
have experienced the largest recovery in real
wages since 2013.

Young adults have invested heavily in education

since 2007 and, significantly, grown their
holdings of education loans, thus impacting their
consumption of other goods and services.

9
10
 $19,000
$17,000
$15,000
2016 Dollars

$13,000
$11,000
$9,000
$7,000
$5,000

11 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 7%
6%
5%
4%
3%
2%
1%
0%
1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

12 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 14%
12%
10%
8%
6%
4%
2%
0%
1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

13 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 50%
Liquidity/The
40%
Future
30% Home Purchase

20%
Education
10%
Family
0%
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016

14 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 All Respondents All Respondents
Very Knowledgeable Very Knowledgeable
80% 15%

60%
10%
40%
5%
20%

0% 0%

Unwilling to take a Willing to take a

Financial Risk Financial Risk

15 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 In response to a dramatic decline in Net Worth as a result of
the Great Recession, Young Adults have significantly
increased their financial savings as a percent of their total
assets.

Recently, a greater percentage of Young Adults are saving for

their first home, but a much greater percentage are
increasing their saving rate for precautionary purposes
liquidity and unknown future events.

Young Adults who classify themselves as very

knowledgeable about personal finance, are no more likely
than most other age groups to take a significant financial
risk, despite having more time to recover from potential
negative returns.

16
17
18
10.00
12.00
14.00
16.00
18.00
20.00

0.00
2.00
4.00
6.00
8.00
1980Q1
1981Q2
1982Q3
1983Q4
1985Q1
1986Q2
1987Q3
1988Q4
1990Q1
1991Q2
1992Q3
1993Q4
1995Q1
1996Q2
1997Q3
1998Q4
2000Q1
2001Q2
2002Q3
Financial Obligation Ratio

2003Q4
Consumer Debt Service Ratio

2005Q1
2006Q2
2007Q3
2008Q4
2010Q1
2011Q2
2012Q3
2013Q4
2015Q1
2016Q2
Source: Federal Reserve Board of Governors
 25%

20%

15%
Total Debt
10% Revolving Debt
Mortgage Payments
5%

0%
1989
1992
1995
1998
2001
2004
2007
2010
2013
2016

19 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 3

2.5

1.5

0.5

0
1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

20 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 Hold No Household Debt
No Credit Card Balance
Turned Down or Fear Being Turned Down for Credit
80%

60%

40%

20%

0%
1989 1992 1995 1998 2001 2004 2007 2010 2013 2016

21 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 Balance sheets improved significantly for
Young Adults since the end of the Great
Recession.

Debt to Income ratios are at levels at or below

the late 1990s.

Fear of negative credit application outcomes

has declined.

22
23
 70.0
60.0
All Less than 35
50.0 years
40.0 Married Couple
30.0 with Families

20.0 Single Male

Householder
10.0
Single Female
0.0
Householder

24 Source: U.S. Census Bureau

 175
170
165
160
155
150
145
140
135
130
Apr-2017
Nov-2016

Aug p-2017
Jun-2017
Oct-2016
Aug-2016

Jan-2017
Feb-2017
Mar-2017
Sep-2016

May-2017

Jul r-2017
Dec-2016

NAR Housing Realtors Affordability

Affordability Index Distribution Score

25 Source: National Association of Realtors

 Reason for Saving Rank % Stating this Reason
Liquidity/The Future 1 36.95%
Retirement 2 14.59%
Purchases 3 13.25%
Family 4 11.54%
Home 5 10.86%
Education 6 10.07%
Investment 7 2.13%
No Particular Reason 8 0.37%
Cant Save 9 0.25%

Survey Size = 42,682

26 Source: Federal Reserve Board Survey of Consumer Finances, 2016

 Source: National Association of Realtors,
2014 Home Buyers/Sellers Generational Trends Survey
27
 Source: National Association of Realtors,
2014 Home Buyers/Sellers Generational Trends Survey
28
 Thank You.

29