Mortgage Costs Research Articles

How Does Real Estate Investor Ownership Mediate Accessory Dwelling Unit (ADU) Asking Rents? Evidence from Austin, TX

Scholarly and popular discourse often describe accessory dwelling units (ADUs) as one of the last bastions of housing affordability, framing “mom and pop” landlords as historically renting out ADUs as a means to earn a passive income, offset mortgage costs, or age in place. As real estate investors enter the market for ADUs, this raises the question of whether ADUs will continue to represent relatively affordable housing packages. Despite growing interest in ADUs among real estate investors, research to date has not examined how investor ownership impacts ADU affordability. This paper investigates how real estate investor ownership mediates unit-level asking rents for ADUs advertised online on the “open market” in Austin, Texas. This analysis finds that owner-occupied and investor-owned ADUs are not listed for significantly different amounts at vacancy, all else equal. However, these results might not translate to the “closed” market for ADUs, which continues to represent a critical source of below-market rate housing. Further, the gap between investor and owner-occupied rents could widen over time, as owner-occupiers provide deeper discounts to tenants they wish to retain. After conducting interviews with owner-occupiers and real estate investors that own ADUs, this research identifies that the rent-setting strategies of the two groups both diverge and converge, further shedding light on findings from the empirical analysis.

Mortgage Costs as a Share of Housing Costs—Placing the Cost of Credit in Broader Context

Housing affordability is a key policy concern and an important component of sustainable homeownership. It follows that reducing housing costs without increasing the risk of mortgage default is a critical approach to sustaining homeownership for current and future generations. In this paper, we break down the different elements of housing costs, specifically focusing on the nuances of mortgage costs. We use internal Fannie Mae data to establish a pro forma of housing costs for different owner-occupant borrower profiles over a typical ownership period (all homebuyers, first-time homebuyers [FTHBs], and low-income first-time homebuyers [LI FTHBs]). We find that the biggest contributors to overall housing costs are transactions costs, ongoing utility expenses, property taxes, home improvement costs, and the component of the mortgage interest rate that compensates investors for the time value of money, with utilities and home improvement costs particularly conspicuous for FTHBs and LI FTHBs. The guaranty fees charged by the government-sponsored enterprises and private mortgage insurance are estimated to be less than 6% of the cost of homeownership. These general patterns hold across racial and ethnic groups, although mortgage insurance alone is roughly 6% of total costs for Black and Hispanic FTHBs and LI FTHBs compared to 2% for white FTHBs and LI FTHBs. Overall, our findings suggest that nonmortgage housing costs are key areas that policymakers should focus on to reduce housing costs and foster sustained homeownership rates.

The Development Of The Human Potential In Russia: Establised Trends And New Challenges

The article is dedicated to the analysis of the dynamics of indicators characterizing the development of human potential in Russia, such as educational level of the employed population, training and retraining of personnel, the opportunities offered in the field of technological innovation, household incomes and their differentiation, employment and housing in Russia in 2000-2022. A number of problems are identified associated with the discrepancy between personnel training and demand in the labor market, falling interest of the business sector in the field of research and development, a decrease in real incomes of the population and their growing interregional differentiation, an increase in consumer prices and mortgage costs. The need for a comprehensive solution to the problems of personnel training, employment, housing and incomes of the population is substantiated; measures are proposed for the interaction of the state and business in order to solve them.

Необходимость и возможность совершенствования жилищной политики в России в условиях санкций

The article provides a brief overview of the situation in the Russian economy after the imposition of sanctions by the United States and European countries. The assessment is given of a hard situation in the housing construction sector because of the high discount rate of the Central Bank, which affects corporate loans, mortgage loans, destruction of logistics supply chains of materials, significant increase in prices for materials and services, physical absence of foreign materials, departure of migrant workers and satisfaction of future demand in 2021. Assuming a long period of sanctions, the author presents a set of measures to change housing policy, which can become one of the main drivers of Russia’s social and economic development under sanctions, including a change in the emphasis in housing policy from high-rise to low-rise individual housing construction, which will allow maintaining the volume of production of industries connected with housing construction and developing regions by merging of urban districts into an agglomeration. In addition to preferential mortgage programs for the construction of individual low-rise houses and for the purchase of secondary housing, the municipal and private partnerships and construction savings banks are suggested, also it is suggested to use digital technologies to create ecosystems in housing construction, combination and process of big data of citizens’ assets, incomes and expenses in order to reduce the cost of mortgages and the selection of specific organizations and products for the solution of the housing issue. The author’s four-level methodology of integrated assessment of efficiency of regional housing policy is suggested for setting strategic goals and monitoring, which is based on the methodological approach of S.A. Ayvazyan and on the methodology of the urban digitalization index “IQ of Cities”, which was developed by the Ministry of Construction of Russia in cooperation with Lomonosov Moscow State University.

Mortgage Costs as a Share of Housing Costs—Placing the Cost of Credit in Broader Context

Mortgage Costs as a Share of Housing Costs—Placing the Cost of Credit in Broader Context

Understanding the Economic Situation of People Who Took a Foreign Currency Mortgage in Hungary and Poland

In this article we show that significant differences between the foreign currency mortgage agreements in Hungary and Poland led to significant differences in monthly mortgage payments after the Global Financial Crisis (GFC) erupted. Hungarian banks were able to add a variable markup to the LIBOR3M that was connected to bank risk on top of the usual fixed markup. We compare the monthly mortgage payments and LTV levels of people who took out a CHF mortgage with those who obtained a local currency mortgage during the mortgage boom years of 2006–2008. We find that in the initial years of the mortgage CHF mortgages were cheaper than local currency mortgages, which allowed more people to buy housing. However, the GFC led to a deterioration of the exchange rate, and monthly payments and LTV levels (consequently?) increased. We analyse the mortgage costs and LTV levels of the 2006-2008 foreign currency (FX) mortgage vintages in Hungary and Poland between 2006 and 2020 and compare them to local currency mortgages. We also simulate the effects of changing housing prices and wages on mortgages in the cities of Budapest and Warsaw.

Consumer Choice in Residential Mortgage Market: An Islamic Mortgage Contract

This paper examines the Islamic mortgage contract of Diminishing Musharakah and its impact on consumer welfare, house purchase, and mortgage payments. We build both static and dynamic models to study a homeowner’s decision-making. We pay special attention to expectation formations and simulate the model to analyze both Islamic and Conventional mortgage holders’ responses to changes in income growth, house prices, and interest rates. Estimates of the model, using housing data set of U.S. economy (1990–2018), indicate that Diminishing Musharakah contract holders achieve 2.5 to 4% higher discounted utility under constant and declining learning expectations. The reducing balance feature of the Diminishing Musharakah contract provides relative protection to a consumer from adverse income shocks and high-interest rate environments. Simulation results suggest that under dynamic conditions, the Diminishing Mushrakah provides 3.4% lower mortgage cost per housing unit. It prevents consumers of average and low-risk appetite from relatively riskier housing decisions. We learn that consumer chooses a 2.5% smaller house size under Diminishing Musharakah. The model also examines consumers with vector autoregressive (VAR) based expectations. We find that homeowners with optimistic forecasts may achieve a higher utility in a conventional mortgage.

Racial Discrimination in the U.S. Housing and Mortgage Lending Markets: A Quantitative Review of Trends, 1976–2016

We examine trends in racial and ethnic discrimination in U.S. housing and mortgage lending markets through a quantitative review of studies. We code and analyze as a time series results from 16 field experiments of housing discrimination and 19 observational studies of mortgage lending discrimination. Consistent with prior research, we find evidence of a decline in housing discrimination from the late 1970s to the present. Our results show that this trend holds in both the national audits sponsored by the U.S. Department of Housing and Urban Development (HUD) and in non-HUD studies. The decline in discrimination is strongest for discrimination that involves direct denial of housing availability, for which discrimination has declined to low levels. The downward trend in discrimination is weaker for measures reflecting the number of units recommended and inspected, and significant discrimination remains for these outcomes. In the mortgage market, we find that racial gaps in loan denial have declined only slightly, and racial gaps in mortgage cost have not declined at all, suggesting persistent racial discrimination. We discuss the implications of these trends for housing inequality, racial segregation, and racial disparities in household wealth.

IMPROVEMENT OF STATE MORTGAGE HOUSING DEVELOPMENT PROGRAMS IN UKRAINE

The article clarifies that the evolution of the mortgage housing market in Ukraine is complicated by the lack of relevant market mechanisms. Therefore, the formation of a residential mortgage exclusively under the conditions of a free market is related to the risks of uneven development of both the mortgage housing market and its related elements. In order to avoid deformations in the formation of the relevant markets, ensuring their comprehensive accelerated development, a number of incentive measures should be applied by the government. The government-sponsored mortgage lending programs have been analyzed. The positive influence of these programs on the activation of housing construction, stimulation of economic development and satisfaction of households’ needs have been established, as well as deficiencies in their implementation. It was found out that the excessive number of government-sponsored housing promotion programs diffuses a limited financial resource of the government and causes their chronic underfunding. It is proposed to abandon the implementation of a large number of government-sponsored programs, assigned between the various departments, which are aimed at stimulating the development of the national mortgage housing market, in favor of one or two, but fully funded. This article defines the government support for the functioning of construction and savings companies as a priority mechanism for stimulating the development of the residential mortgage market in order to develop the most effective ways to stimulate the development of the mortgage housing market in Ukraine. We have paid much attention to the necessity of government support for the construction of social housing by means of public-private partnership activation. In addition, we have substantiated the reasonability of the development of state institutions operating in the market environment and capable of implementing the relevant social and economic tasks aimed at reducing the cost of residential mortgages for the end users.

Working U.S. Adults without Paid Sick Leave Report more Worries about Finances

Using the National Health Interview Survey 2015 data release, an analytic sample of 17,897 working U.S. adults in current paid employment were examined to determine if there was a relationship between not having paid sick leave and worry about finances. A series of nine indicators of financial worry were regressed on paid sick leave status with ten control variables. U.S. workers who lack paid sick leave are more likely to report worry about: medical bills from a potential future sickness or accident, retirement, current medical costs from an illness or accident, maintenance of standard of living, medical costs for normal health care, normal monthly bills, rent, mortgage, or other housing costs, and credit card payments. Based on this set of nine multinomial multivariable regressions equations, findings indicate a positive association between not having paid sick leave and reporting financial worry after controlling for gender, age, marital status, education level, race and ethnicity, personal health status, full time work status, insurance coverage, family size, and annual family income. Implications for policy, practice, and future research are set forth.

Regional Development of Residential and Commercial Real Estate in Poland and the Risk of Real Estate Cycles

The property market is local and thus regional factors have a very important impact on its evolution. However, global factors also have an impact. This paper explains that fast economic growth can lead to strong cycles in the market and also cause problems for the stability of the economy. With a case study of the housing market in Warsaw we show that very different economic and regulatory factors can create cycles which look quite similar at first sight. We conclude that one needs to understand the fundamentals of a given cycle to be able to smooth it. The main driver of the cycle in Poland is the significant shortage of housing units, and thus people react very strong to any possibility of improving their living conditions. Rises in income or declines of mortgage costs trigger a demand boom, while the supply side is constrained by regulations and increasing construction costs. The excessive demand leads to quite strong cycles which could be smoothed with a large amount of rental housing.

The impact of inflation on the cost of adjustable-rate mortgages

Aim: To assess how inflation affects the cost of adjustable-rate mortgage from the perspective of personal finances.Design / Research methods: Adjustable-Rate Mortgage simulations were carried out, showing both the nominal and real costs of a mortgage loan. The behavior and the relationship between the inflation rate and WIBOR 3M rate were compared.Conclusions / findings: The analysis shows that the real cost of mortgage decreases with an increase in inflation. During the period under review, inflation declined, reducing both the real and nominal cost of the loan. There was a strong positive correlation between the WIBOR 3M rate and the inflation rate. Equally strong, although a negative correlation was observed between the inflation rate and the real interest rate. With the decline in inflation, real mortgage rates increased, and vice versa. Particular attention was paid to the periods in which inflation was rising. WIBOR 3M rate reacted to this increase to a much lesser extent and with a lag compared to the inflation rate.Originality / value of the article: Considering that forecasts presented by the National Bank of Poland predict inflation growth in the coming years, a thorough examination of the inflation impact on the mortgage costs is an important issue for risk management in households with mortgage.

The Effects of Product Diversity on the Cost of Mortgages in Australia

The Effects of Product Diversity on the Cost of Mortgages in Australia

No Shopping in the U.S. Mortgage Market: Direct and Strategic Effects of Providing Information

We document and analyze price dispersion in the U.S. mortgage market. We find significant price dispersion in posted prices in the retail channel: for example, a consumer with a prime credit score and with a 20% down payment for a conforming loan might see a spread in interest rates of 50 basis points, controlling for all relevant consumer/property characteristics, including discount points. This amounts to extra 342 dollars per year, for every 100,000 of the loan. We also show, from survey evidence, that close to half of consumers did not shop before taking out a mortgage, and that most consumers do not seem to realize that there is price dispersion. Using a proprietary dataset of lenders' ratesheets, we estimate an equilibrium model of costly search where majority of consumers hold incorrect beliefs regarding price dispersion. In addition to search costs, we show that non-price factors, such as consumer preference of one lender over another, also play an important role in preventing consumers from searching more. In one of our counterfactuals, we show that if 20% of consumers had obtained one extra quote, consumers would save $4 billion dollars a year, most coming from the indirect/equilibrium effect of firms lowering prices in response to more shopping. In another counterfactual, we show that if consumers were to focus on mortgage cost only, they would save about $9 billion dollars a year.

Unintended Consequences of Risk Based Pricing: Racial Differences in Mortgage Costs

The following analysis focuses on the role that risk pricing has had in the allocation and access to mortgage funds, specifically how it results in cost differences by race. Using a sample of fixed-rate first lien mortgages, we control for the risk characteristics of borrowers and assets. We find that borrowers with comparable credit quality experience significantly higher costs for mortgages in neighborhoods with a high density of minority households. Further, when the pricing differential is controlled for in a model of mortgage default, there is no support for neighborhood price differences. This finding illustrates a potential inequity that results from efficient/risk pricing in mortgage underwriting.

“There's a Difference—I Own This”: Negotiating Social and Financial Services under Threat of Mortgage Foreclosure.

Although national housing markets have recovered from the Great Recession, communities hardest hit by the foreclosure crisis remain immersed in mortgage trouble. Nineteen percent of homeowners are underwater on their mortgages and communities of color are overrepresented among zip codes still experiencing default in rising numbers. The social services needs of homeowners at risk of foreclosure show few signs of abating. High levels of market risk, asymmetrical power relationships, and the assumption that rational action can protect homeowners mark the climate in which households and social workers operate while attempting to halt foreclosure. The research described in this article draws on in-depth interviews conducted with homeowners at risk of default to examine the strategies they used to alleviate their mortgage strain. These strategies included seeking aid from financial and social services institutions while living under threat of default. As homeowners experienced mortgage strain they engaged in recommended rational market actions such as negotiating with lenders, increasing work hours, practicing strict household budgeting, and seeking aid from social work agencies to offset mortgage costs. The gathered data suggest that some social workers responded with poorly contextualized treatment plans and language characterized by disrespect, shame, and blame; others responded with mental health assistance, referrals to legal aid, and a helping relationship characterized by a sense of mattering that seemed to buffer against the psychosocial stressors associated with foreclosure.

What Does a Swiss Franc Mortgage Cost? The Tale of Polish Trust for Foreign Currency Denominated Mortgages: Implications for Well-Being and Health

It is commonly agreed that excessive household financial debts are detrimental to psychological and physical health. Research also demonstrates that housing instability, mortgage indebtedness and mortgage foreclosure negatively influence subjective well-being. In Poland at the beginning of 2015, homeowners with Swiss franc denominated mortgages suffered from an abrupt swing in the Swiss franc/Polish zloty (CHF/PLN) exchange rate, which resulted in considerable increase in the local currency value of their mortgages. These adverse financial circumstances were hypothesised to affect not only household finance but also negatively affect the psychological well-being and physical health of peoples. The 2013 and 2015 waves of the Polish representative household panel ‘Social Diagnosis’ were used to examine impact of the abrupt change in the CHF/PLN exchange rate in Jan. 2015 on well-being and health. Causal inference was investigated using a difference-in-differences matching estimator. Results showed that although impact of Swiss franc appreciation on the mortgage related financial burden was considerable, it did not affect well-being or health outcomes. Any manifestation of adverse effects was absent in the short term, which does not however preclude their long term existence.

The Exposure of Mortgage Borrowers to Interest Rate Risk and House Price Risk — Evidence from Swiss Loan Application Data

Summary We study the exposure of mortgage borrowers in Switzerland to interest rate and house price risks and examine how the households' choice of risky mortgages is related to individual interest rate expectations and risk-aversion. Our analysis is based on a unique data set of household mortgage applications from September 2012 until January 2014. Our assessment of risk exposure among mortgage borrowers in Switzerland is highly sensitive to the underlying assumptions on mortgage costs, household income and house value. Our main results suggest that the exposure of mortgage borrowers to interest rate and house price risks is limited in the medium term. We further document that the choice of mortgage contract seems to be more influenced by affordability concerns than risk concerns. In particular, individual interest rate expectations hardly affect mortgage contract choice.

<p>Assessing the Cost Effectiveness of LEED Certified Homes in Kentucky</p>

The purpose of this study was to analyze the cost effectiveness of building new-construction single-family homes through the Leadership in Energy and Environmental Design (LEED) program in six counties of Kentucky. The estimated added LEED construction cost was calculated as well as its respective payback period based on the expected utility savings of LEED certification. A mortgage cost comparison was also performed comparing traditional code built to non-LEED single-family homes. Using descriptive statistical analysis on the simple payback period, mortgage costs were compared internally and by county. This study found that The LEED Certified and Silver level had payback periods less than 30 years, and the total 30 year net difference between non-LEED and LEED certified ranged from $-1,193.20 to $1,667.64.

The impact of the GST on mortgage pricing of Australian credit unions

Purpose– The purpose of this paper is to investigate the impact of the Goods and Services Tax (GST) on mortgage pricing and to measure the GST shifting ratio of Australian credit unions.Design/methodology/approach– Using the proprietary data from 79 credit unions in Australia, we perform multivariate regression analysis on the effect of the GST on mortgage effective yield spreads and interest margins, respectively. We also introduce a model that is used to measure the GST shifting ratio.Findings– We document that the introduction of the GST in July 2000 led to the substantial rise in mortgage costs charged by credit unions in the post-GST periods. Overall, the GST alone contributed to the increase of effective yield spreads and interest margin by 65.3 and 70.1 basis points, respectively. As measured by the GST-shifting ratio, credit unions passed more than twice of the GST rate. This suggests GST over-shifting, and it is generally consistent with tax over-shifting literature.Originality/value– This is the first time the GST shifting ratio has been robustly measured with the use of multivariate models on mortgage costs.