At Zillow Research, our days are fully consumed with bringing you the best, most interesting and most actionable real estate research around.
But to that end, we also find time to read a variety of reports, news stories and investigations, on any number of issues, from social justice, to economics, to real estate and sports. We read them for education, for entertainment and out of pure curiosity – and each one helps us discover new questions we want to answer and helps identify new trends worth following.
Zillow Reading List is a regular roundup of these interesting pieces we come across, with some thoughts about each and how it ties into our existing research and/or has spurred new questions. We’ll post these roundups regularly, and of course will continue to strive to publish research that is as enriching, thought-provoking and useful as these pieces have been to us.
Enjoy!
The Case for the Mortgage Interest Deduction
Tyler McKenzie in The Seattle Times
There is a case to be made for the mortgage interest deduction, and this piece argues it is a “middle-class tax incentive” primed to be increasingly important for millennials looking to buy in coming years. But for reasons laid out in detail in Zillow Talk, we remain unconvinced of the merits of the mortgage interest deduction. More than 70 percent of the $70 billion spent on this deduction goes to families in the top 20 percent of income – making this policy primarily a subsidy to help already wealthy families, and making affordability more challenging for less-affluent buyers.
Emily Badger in The Washington Post
The mortgage interest rate deduction not only helps more-affluent families, it also encourages Americans to buy bigger homes, contributing to sprawl and costing the U.S. economy a massive $1 trillion per year. Much of that cost comes from the personal and environmental toll of long commutes and the resulting pollution and traffic congestion. Yet many households remain willing to pay those costs for their stereotypical American Dream – white picket fence and all. How much of this is policy and how much is preference?
Michael Corkery in The New York Times
In an interesting legal tussle, some households who have missed mortgage payments in states with judicial foreclosure systems are claiming banks have waited too long to file for foreclosure, and statutes of limitation have expired. Negative equity has fallen by roughly half since peaking in early 2012, but even so, expect to see more news on homeowners who mailed in their keys at the start of the housing crisis. Foreclosed homeowners normally face a seven-year waiting period before getting another loan backed by Fannie Mae and Freddie Mac – a waiting period which is soon to expire for many of those who were foreclosed upon at the onset of the crisis in early 2008.
Kathleen Pender on SFGate
The increasing cost of housing in California’s Bay Area isn’t just because of high demand and a constrained supply of new developments. An inventory drought of existing homes for sale has also arisen. Homeowners may fear getting frozen out of the market if they sell and then re-enter the market as a buyer. With mortgage interest rates low and rents skyrocketing, many homeowners are finding it’s more advantageous to buy another home and rent out their former residence, rather than selling it. As homeowners age, they face increasingly steep capital gains taxes, or a much higher property tax burden in a different home, and may choose to stay put. Just as there are many different communities around the Bay, there are many different causes behind the area’s housing inventory drought.
The Dynamics of Housing Prices
Edward Glaeser and Charles Nathanson for the National Bureau of Economic Research
The dynamics of housing prices exhibit a few interesting features. Historically, if a home is increasing in value, it is likely to continue increasing in value over the next year (it has “momentum,” in financial-economist speak), but it is likely to decrease in value over the longer term (aka “reversal”). These facts are a bit puzzling to economists, especially those who forecast home values, and this paper tries to understand what might be causing those dynamics. The authors argue that homeowners place too much importance on past price movements, causing these dynamics and potentially the boom and bust we just experienced. Interestingly, recent results from Zillow’s Housing Confidence Index seem to fit with some of the implications from their model.
