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.
All prior editions of the Zillow Reading List can be found here.
Enjoy!
Monica Potts in the Washington Monthly
Is the sharing economy pulling up the traditional ladder towards homeownership and financial security? This article explores how the shift towards flexible and contract work by urban millennials, and the rise of non-traditional sources of income (selling trinkets on Etsy or renting out a room on AirBnB), have made achieving a more stable financial life more difficult. It is true that pockets of urban housing affordability have become increasingly hard to find, making it hard for early career professionals to manage rent without stretching to make ends meet. But if millennials really do want to own a home (as they keep saying they do), they might have to start skimping on the ‘$10 Negronis’ and the private car services, or even (gasp) give up their walkable hip neighborhood and move to a more affordable area while they save for a down payment. There has been a noticeable decline in homeownership among younger Americans, but what remains to be seen is if this shift away from ownership is about millennials’ preferences or the constraints of their budget. If homeownership and a stable financial life is what millennials what, they may have to start sacrificing to achieve that dream.
A Surprisingly Clear Crystal Ball
Rosanna Xia in the LA Times
Forecasting is a tough and complicated business, so it always warms our heart when we hear stories of people who managed to gaze into their crystal ball and come up with a reasonably accurate prediction of how things actually turned out – especially when those predictions were used to plan for the future. Such was the case in 1988 when Los Angeles planning experts nailed what would become many of the key demographics of the city in 2010. Their only major miss was on the employment front, where they forecasted more than 20 percent more jobs in LA than there actually are currently. But we’re inclined to give them a pass for not calling the housing recession 20 years before it happened, and hope they can continue to be as prescient over the next 20.
House Price Volatility and the Housing Ladder
James Banks, Richard Blundell, Zoé Oldfield, James Smith in the National Bureau of Economic Research
Should people living in areas with riskier housing markets be more or less willing to buy a home? The obvious answer here is that the extra risk should give them pause, and likely make buying a home a less attractive investment. But this paper pushes back against that view and develops a nice theoretical model arguing that there are benefits to buying early if you live in an area where housing markets are prone to wild swings. The intuition behind the model is actually quite simple: The longer you wait to buy, the longer you are potentially exposed to those wild swings. Everyone needs to live somewhere, so if you think you might eventually buy, doing it sooner protects you against a large increase in home prices that might make a home unaffordable for you. And if the value of your home declines, you still get to live there rent free. Interestingly, the authors find that the predictions of their model are borne out in data from the U.S. and U.K. – people living in places with higher housing price risk own their first home at a younger age, live in larger homes and are less likely to refinance.
Noah Smith in Bloomberg View
Almost all of the news we hear about inequality is of the doom-and-gloom variety. But it is important to keep in mind that when talking about trends in inequality, your frame of reference determines what you see. While the trends in the United States are worrying (though less so in housing), broadening your view and taking a more global perspective reveals a rosier picture. After centuries of the rich getting richer, over the past decades we have seen the poorest nations and communities start to catch up. That may be small consolation to Americans acutely feeling the hollowing out of the middle class, but it is reason for optimism that there doesn’t have to be a tradeoff between growth and inequality.
Emily Badger in The Washington Post
Harvard’s Joint Center for Housing Studies produces some of our favorite housing research, and this article provides a great overview of highlights from their most recent report on the State of the Nation’s Housing. Much of the article focuses on how we are on pace for the strongest decade of renter growth in history, and the strains that is putting on the nation’s stock of rental housing (creating the worst rental affordability crisis we have ever seen). They argue that demographics and debt have set us well on our way to becoming a nation of renters. On this front, we are more hopeful that if you build it (single family starter homes) they will come (and buy those homes).
