Thursday, January 19, 2017

Housing: Part 201 - The new urbanization wave

A central theme that has developed in my research is a sort of unstoppable force meets immovable object story.  Technologically and culturally, we have entered a new wave of urbanization.  Whether one sees this as a net positive or negative, it seems inevitable.  We can't stop it any more than we could have stopped urbanization in the wake of mechanized agriculture.

But, politically and culturally, cities in the developed world are incapable of providing the residential density that this wave of urbanization demands.

Here is a graphic from this Bloomberg article by David Ingold.

The problem is that many of these cities cannot grow their populations as quickly as they grow their economies.  It's sort of a self-imposed Malthusianism.  Chicago, Dallas, Houston, Atlanta, Phoenix, Denver, and many of the Florida cities can grow.  Seattle and Portland still do ok, although there are local forces there that may lead them into Closed Access governance.  But, the California cities and the northeastern cities max out at about the national average.  They can grow their economies faster than the national average, but not their populations.

Since the mortgage market collapsed in 2007, population growth has been stifled across the country.  So, now, this problem affects the entire country.  We have had a decade of geographical employment shifts while households are stuck in place because we shut down the market that feeds the supply of homes.

So, now, for lower middle class households, cost is the marginal determinant for labor market shifts.  Strong local economies can't create a boost in housing that would accommodate the supply of labor that those economies demand, because working class households can't get mortgages.  So the whole country is now a Closed Access country where opportunity is locked behind a gate, and the highest bidder wins.  This creates a country of haves and have nots.  Your access to opportunity is governed by your pre-existing access to resources.  You don't pass up on that move to the city because there aren't opportunities there.  You pass it up because it's too expensive.

The problem at the heart of all of this is housing.  There is a consensus against solving that problem, because there is a consensus that low-tier mortgages are predatory.  Until we unlearn that false lesson, we will continue to impose this stagnation on the country's working class.

Here is a great paper (pdf) from Peter Ganong and Daniel Shoag on this problem.  In their conclusion: "First, we find that tighter regulations raise the extent to which income differences are capitalized into housing prices. Second, tighter regulations impede population flows to rich areas and weaken convergence in human capital. Finally, we find that tight regulations weaken convergence in per capita income... Indeed, though there has been a dramatic decline in income convergence nationally, places that remain unconstrained by land use regulation continue to converge at similar rates." (emphasis mine)

They find that historically households moved to income opportunities.  Households with high skills still do.  But, recently, there has been a shift in low-skill/low-income migration.  Those households now migrate to where costs are low.  This is because Closed Access housing policies create a self-imposed Malthusian limit on access to opportunity.  Housing policy - now both through local supply constraints and through mortgage rationing - is creating a Darwinian context.  This is the central problem.  Everything else is noise.

Wednesday, January 18, 2017

December 2016 CPI Inflation

More of the same.  Not much to report this month.  Shelter inflation continues its upward march.  Non-shelter core inflation held steady at about 1.2%.

Since last month, interest rates have been declining - a bearish signal.  Unless there is a bold and quick action on Dodd-Frank after the inauguration that removes liabilities for banks that would lend to the lower tier of the housing market, I still an leaning toward a bit of a bumpy patch ahead.

Monday, January 16, 2017

Housing: Part 200 - Dodd-Frank

In the previous post, Ben Cole referred to this recent Washington Post article.  The article is about research from Foote, Loewenstein, and Willen that finds that there is little evidence for blaming the housing boom on credit to low income households.

My research explains why Foote, Loewenstein, and Willen are right that marginal lending wasn't a cause of the boom, why Mian and Sufi were mistakenly led to think there was, and why, by ignoring the importance of rent and geographic exclusion through housing, they are all wrong to miss the importance of supply in the middle of all of it.

In short, Mian and Sufi focus on the difference between homes in the top tier and bottom tier of each city, and control away the differences between MSAs.  The difference between MSAs is the story.  FLW argue that since credit and the bust extended across the spectrum of households, that irrational exuberance and speculation must have also extended across the spectrum.  But, incomes and rents in the Closed Access cities where homes were bid up to the highest prices have continued to rise just as strongly as they had before, if not more strongly.  So, despite our national efforts to keep money out of housing, home prices in those areas have also been strong.  If the country was full of housing speculators, they were prescient speculators.

As Willen says in the article: “Our understanding of asset prices is still quite primitive,” he said. “We don’t have a really good explanation for why house prices went up as much as they did.”

I do.  I hope they believe it when they see it.  It confirms their findings.  Notice that even the heterodox researchers of the housing bubble, when left with a gap in understanding, default to the speculation thesis.  This bias is deep and broad.

The article ends:
Alan Blinder, the former vice chairman of the Federal Reserve under President Bill Clinton, said that the decisions made on Wall Street merit scrutiny, even if subprime lending was only one aspect of the broader problems in the market.“There was a big housing bubble, a craze, and house prices just went through the roof,” Blinder said. “That by no means exonerates Wall Street.”
Contrary to Rep. Jeb Hensarling (R-Tex.), chairman of the House Financial Services Committee, and his Republican allies on Capitol Hill, Blinder warns that another major financial overhaul could give bankers too much leeway.
“It would be a horrible mistake to dismantle Dodd-Frank,” he said.

I think I have posted a version of this graph before.  It compares the relative home prices of the top and bottom quintile zip codes of each group of MSAs since 1999.  I had been concentrating on the divergence between the top and bottom quintiles after the GSEs were taken over and the Fed finally messed up badly enough that even they started providing nominal support in early 2009.  Top tier homes stabilized after that, but bottom tier homes continued to fall.  The GSEs basically stopped lending to the bottom tier.

But, I had neglected to pay much attention to that odd false nadir in relative home prices in mid 2010.  Guess what was passed in July 2010?  Notice the difference between top and bottom tier home prices before and after July 2010.

Beware the public official seeking "prudence" in the midst of a crisis.

Tuesday, January 10, 2017

JOLTS and Flows update

November JOLTS data is out, so I thought it might be a good time to revisit these numbers.

In general, I think this data is telling a similar story to other data that has been coming in.  We are at the top of a recovery phase.  This could last 5 years or 1 year, and probably the difference comes down to whether the Fed pulls back too much.  Since sentiment appears to be strongly on the side of Fed hawkishness, the risk here is heavily weighted toward too much pull back, I think.

We're probably back to some point in 2007 now, in terms of labor markets, etc.  And, some timely accommodation would be helpful, but as in 2007, instead of accommodation, the Fed is worried about inflation.  Also, like in 2007, the inflation is all coming from a supply problem in housing, so that (1) there is little justification for inflation worries on monetary grounds and (2) accommodation does not have a large inflation risk because, to the extent that inflation would help to continue healing lower tier housing markets, it might lead to more housing starts, which would be disinflationary.  Since we learned all the wrong lessons from the housing boom and bust, we have collectively started doing some strange things, like associating real investment with inflation.  The first graph should worry people more than it does.

Next are weighted moving averages of the JOLTS measures.  Openings and hires have topped.  Quits and layoffs still look good.  Again, we could probably push along these plateaus for years, but I think we will inadvertently choose not to, unless a quick and substantial overhaul of Dodd Frank by the Trump administration leads to a strong rebound in mortgage credit growth.  That might cause natural interest rates to rise quickly enough that the Fed's inherent inertia will have more power than its current hawkish bias, keeping it below the neutral rate long enough to trigger some more expansion in housing.  As a citizen, I hope that's what happens.  As a trader, the bearish position that will pay off if that doesn't happen seems a little more straightforward and easier to step in front of.

The slopes of the weighted moving averages help to see the current trends a little better.  Quits are OK.  Openings and hires are in early recession territory.

Flows tell a similar tale. Net flows are marginally into early recession territory.  Net flows from unemployment to employment certainly are.  Flows from "not in the labor force" (N) to employment were strong, but they have pulled back to normal levels.  Is this a permanent pullback or noise?  And, Flows from unemployment to N continue to move along with no trend.  A downward tick in any of these net flows would be bearish.

Gross flows have all taken a bearish turn.  During recoveries, gross flows flow down in pairs and during contractions they flow up in pairs (except flows between employment and N are reversed).  All three pairs of flows have taken bearish turns.  Note that the employment to not in labor force flow (E to N) is a flow that, when it decreases, is associated with rising employment, even though that would be a bearish indicator.  That measure has been high the past two months.  These would tend to be voluntary exits from the labor force, which suggests economic confidence.  Whether these two months are noise or a reversal of trend might be an important indicator to watch.

A strong flow from N to E might go along with that E to N flow.  But, the turn in flows between U and N suggests that the last two months are noise and that the trend is toward more of the flows into and out of the labor force moving through unemployment, which is not a good sign.

A strange time.  Cyclically things don't look great.  And the range of potential policy outcomes, good and bad, from the incoming administration is probably greater than any previous transition in my lifetime.  Regulatory shocks are not the sort of context that favor either passive asset management or attempts at high expected value speculation, even if some of those shocks might not be so bad from a structural standpoint.

Sunday, January 1, 2017

Housing: Part 199 - More on extreme risk aversion in the early housing bust

One of the late conclusions I have come to in my research on the housing boom and bust is that most of the period during the private securitization boom was a period where investors were risk averse, and this was consistently misinterpreted as risk-seeking behavior.

The most obvious case of this is how, perversely, the intensive demand for AAA securities has been universally taken as a sign of excess, because the institutions that are organized around meeting that demand happen to have financially leveraged business models.  But, most of the owners of that debt aren't leveraged.  In fact, this is acknowledged in parts of the conventional narrative about the period.  The global savings glut wasn't about leveraged savers.  Even domestic money markets were not leveraged.  Remember how it was a big deal that some funds were down by a percentage point or two and "broke the buck"?  There was trillions worth of savings that was not leveraged at all, and this is simply thrown into the memory hole whenever it needs to be ignored in order to keep believing that everything was about excess and recklessness.

As I have pointed out, homeownership peaked in early 2004.  I have tried to demonstrate in various ways how there was a massive outflow of home equity into low risk securities.  The appearance of synthetic CDOs in 2006 and 2007 should have been a stark warning that accommodation was desperately needed.  But, this also was misinterpreted as excess and speculation.


Maybe this is the graph that finally presents the point as I see it.  Here, both the change in home equity and the change in homeownership rate (right scale) are inverted.  From 2005 to 2007, there was a massive outflow of unencumbered and lightly encumbered homeowners from the housing market.  And they piled all of their cash into things like money market funds.

The reason is that risk aversion had become so strong that savers weren't even willing to take on home equity.  New homebuyers tended to be leveraged.  This is partly because lifecycle effects create a natural stable flow of first time homebuyers in all markets.  But, also, because of risk aversion home buying with leverage is basically a form of call options.  And, again, call options can be framed as a tool of speculation or of insurance.  We chose to view it as speculation.  I have come to see it as insurance.

In this graph, we can see the parallel movements out of homeownership (and home equity) and into money markets in 2006 and 2007.  The housing ATM idea has it backwards.  Homeowners weren't using their homes to make withdrawals.  They were using their homes to make deposits.

After 2007, we wiped out homeowners, so since then homeownership has continued to fall, but former homeowners have nothing to show for it.

Wednesday, December 28, 2016

Housing: Part 198 - Bank Credit through the recession

I think this graph is useful in thinking about the recession and housing.

Excess reserves really can be thought of as treasury bills.  If the Fed unwound the entire mass of excess reserves simply by exchanging it for treasury bills so that instead of reserves, the banks held treasury bills, would anything change?  It seems to me that this would be functionally equivalent to what we have today.

So, really, interest on reserves, the QEs, etc. can all be thought of as ways to maintain deposit levels at the banks while the banks accumulate treasuries and agency securities.

This might be all well and good in a crisis (notwithstanding the question of whether the crisis could have been averted in the first place).  But, the natural market demand for mortgage debt will be high as long as our geographical centers of economic opportunity are governed by limited housing.  Since we blamed credit itself for the problem of high home prices, we developed a national policy framework of smashing down the level of mortgages outstanding.  But, we never actually tackled the real source of the problem, which is the Closed Access cities.

So, since 2008, regulatory pressures and federal control of the GSEs have been the main tools for suppressing mortgage growth.  So, we have basically diverted 10% of bank assets out of residential investment and into treasuries.  (Did I hear somewhere there was a problem with a savings glut and low interest rates?)

So, since 2007 (2006, really) we have had recession level GDP growth and recession level residential investment.

One other item that I think is of interest here is that real estate lending began to drop at the banks by early 2007.  When the private securitization market collapsed in summer 2007, real estate lending also stopped growing at banks.

I used to think that the collapse of private securitizations was due to a liquidity crunch and was the cause of subsequent dislocation.  To some extent, it was.  But, I think the chain of events was a little more complicated, and the collapse of private securitizations was actually more of an effect than a cause.  In fact, the drop in mortgage lending was a lagging factor.  Total mortgages outstanding didn't peak until 2Q 2008.  By then, home prices had collapsed by more than 10% and homeowners had lost trillions in home equity.

The drop in mortgages didn't happen because there was a lack of money.  It happened because there was a lack of faith in home equity.  The first collapse was in home equity.  More than $1 trillion of that collapse happened before 1Q 2007 when home prices were still basically at their peak.  This was a shift of existing homeowners out of the market.

It's ironic that every guy at the end of the bar knows that what happened is that all those silly, greedy speculators thought that home prices could never fall, and that they kept pushing prices up when the drop was inevitable.  On the contrary, for more than a year before prices collapsed, home owners were fleeing the market in anticipation of a price collapse.  When the collapse in mortgages finally happened, it wasn't because mortgage originators ran out of suckers.  It was because rating agencies, lenders, and qualified home buyers all became convinced that housing was doomed to collapse.  The Fed's response was, "Yeah.  Probably right.  We'll be letting that happen."  And the collapse was the last thing to happen.

So, originations from both the banks and from private securitizations were drying up by early 2007, because nobody was willing to be a lender or a borrower with those expectations.  When private MBS securities collapsed later in the year, it was because of expected future defaults that were presumed to be inevitable because of those expectations.  The Fed confirmed that they would enforce, or at least allow, those expectations to come to fruition.  Because we all just knew that supporting anything short of a complete collapse would be irresponsible.  We have come to conceive of systematic instability as a public good.

Notice that graph of GDP and residential investment.  They collapsed together by mid 2006, even though mortgage growth was still healthy.  The first collapse was a real collapse - an unnecessary real collapse.  And the real collapse is what eventually led to the nominal collapse.

I happen to think that the market monetarists are on to something, and that nominal instability can create instability in real production.  But, in this particular case, the real economy was the first mover.  This was still a monetary phenomenon in many respects.  Bernanke himself takes "credit" for that drop in residential investment because the Fed had raised rates into mid 2006, which we might call the interest rate channel of monetary policy.  Then, the Fed clearly signaled in 2007 and 2008 that they were willing to watch the bottom drop out of housing.  That is what we might call the expectations channel.  And even after the disaster of September 2008 when the Fed finally committed to stability - still over the objections of many flavors of liquidationists - most of the collapse in the low end of the housing market was imposed through punitive and erroneous regulatory policies.

But, all that being said, much of the damage might have been avoided with a simple NGDP growth peg.  If the Fed had had an NGDP growth target, they would have had to support the nominal economy despite themselves.  It's possible, I think, that the effect this would have had on expectations might have been enough to prevent the collapse in home price expectations that had caused the initial collapse in home equity to begin with.

Now, the lack of housing is the main source of inflation, so we could functionally cut inflation by encouraging investment or we could dysfunctionally cut inflation by taking away money.  In a regime of excess reserves, I think this means cutting deposit growth.  That seems to be happening since the first rate hike.  Housing starts seem to be leveling off while shelter inflation increases while non-shelter inflation is falling back toward 1%.  Will it continue now that we have had another rate hike, or will the surprising financial optimism that has accompanied the Trump election overcome it?

Monday, December 26, 2016

Inflation expectations

CPI rent inflation has spent 2016 slowly climbing from 3% toward 4%.  In the meantime, Zillow's rent measure has cooled off.

Is this a signal that CPI rent inflation might cool off as well?  CPI core inflation outside of rent is already on its way down to 1%.  If rent inflation joins it, then core inflation would start moving down away from the Fed's target levels.

This certainly isn't due to overbuilding.  Housing starts have leveled off in the past year at levels typical of recessions.  This seems like a potential sign of declining demand.

On the other hand, inflation expectations have been rising since August.  Will inflation expectations turn back down as a result of the recent rate hike?  That's my expectation.  The question is how much will economic activity turn down?  How much will this effect homebuilding?  How quickly would the Fed reverse course if, say, 10 year treasuries fall back toward 2%?

I am fairly sanguine about the potential for a deep contraction now, but on the other hand, the answer to that last question plainly seems to be, "not very", in which case I do worry that the downsides here are bad.

I think the long term play these days is to be long on homebuilding with a long bond position as a hedge.  But, I wish there was better visibility about the short term.  A post-inauguration announcement about weakening some of the more damaging aspects of Dodd-Frank would be great.  In some ways, the direction it looks like things are going is somewhat positive - better than I had expected.  But, it's not so great that tactical positions are so dependent on political developments, even if that is necessary to a certain extent.

Thursday, December 22, 2016

Housing: Part 197 - It's barriers to trade that are hurting rural workers, not free trade

Tim Duy has recent comments on a popular recent topic - the supposed problem of free trade.
Was this “fair” trade? I think not. Let me suggest this narrative: Sometime during the Clinton Administration, it was decided that an economically strong China was good for both the globe and the U.S. Fair enough. To enable that outcome, U.S. policy deliberately sacrificed manufacturing workers on the theory that a.) the marginal global benefit from the job gain to a Chinese worker exceeded the marginal global cost from a lost US manufacturing job, b.) the U.S. was shifting toward a service sector economy anyway and needed to reposition its workforce accordingly and c.) the transition costs of shifting workers across sectors in the U.S. were minimal.
He concludes that a & b were right, but that c was wrong, and this has had disastrous results.   A couple of other comments from the post:
My take is that “fair trade” as practiced since the late 1990s created another disenfranchised class of citizens. 
The damage done is largely irreversible. In medium-size regions, lower relative housing costs may help attract overflow from the east and west coast urban areas.
Housing costs are an effect, not a cause.  Lower housing costs do not attract overflow.  Lower housing costs are the result of a lack of demand.  But, the thing is housing costs aren't low anywhere.  Rents are high across the board today because we killed the mortgage market and the homebuilding market a decade ago.  They only look low because the coastal urban areas are high.  The reason those areas are high cost is because "fair trade" doesn't include free movement of capital and labor within our own country.

We don't need new federal subsidy programs or job training programs.  We need to let people take the jobs that are already there.  Practically every article on this problem - including Duy's post here - notes the issue of housing affordability.  There would be no great obstacle to the shifting of workers across sectors.  The obstacle is that when they try to make that shift, the gates are closed.  It is expressed through cost, because we still let supply and demand determine the price of housing in the Closed Access cities.  But, at its base, this is a problem of inelastic supply.  The house that worker needs won't get built.  It won't be built because the voters in New York City, Boston, and California make sure it won't get built.

The price, in that context, simply reflects the value that worker is being kept from.  The more opportunities there are in those cities, the higher the price of the housing stock has to be bid to in order to keep those workers out.  The scale of the excess price of a house in coastal California and the northeast is sort of a measure of how much opportunity those workers are getting screwed out of.

Manufacturing employment hasn't been declining any faster than it had for decades before.  Why are things so tense now?  The consensus now seems to be that the housing "bubble" covered up this problem until 2007, and now it has been laid bare.

Actually, the housing "bubble" was just a reflection of the blocked opportunity.  Homes were built outside the Closed Access cities as a second-best alternative.  There was nothing unsustainable about that.  In fact, opening up the Closed Access cities would have provided even more opportunities for growth.  When we killed the housing market, we created a dislocation that continues today.  The stress isn't from a decline in manufacturing.  That's not new.  It's that we have stopped allowing what little bit of that natural transition we were allowing before 2007.  Now, we've got our thumbs down on the whole country, not just the Closed Access cities.

We don't need to fear free trade.  We actually need to try it for a change - in our own country.  California.  New York.  Tear down this wall.

Tuesday, December 20, 2016

Housing: Part 196 - Observations on the GSEs as a housing subsidy

The GSEs (Fannie & Freddie) are frequently blamed for feeding the housing bubble.  This is strange, since their behavior was countercyclical.  When home prices were rising the fastest and were at their highest, GSE growth was slowing.  From 2003 to 2006, total mortgages outstanding that were issued through the GSE conduit only grew at an annual rate of about 5%.  And total GSE book of business plus private MBS held by the GSEs only grew at 6% annually over that time.  From the end of 2003 to the end of 2006, they lost a fifth of their market share.  That's not even in terms of originations - that's based on mortgages outstanding.

Another cited source of excess from the GSEs is the lower interest rate that is facilitated by the low cost of debt that comes from the government's guarantee - explicit or implicit.  Before the crisis, this amounted to about 0.25% if we compare it to the typical spread between conforming loan rates and jumbo rates.

Let's compare this to income tax benefits to homeowners, which, according to the White House, amounted to about $218 billion in 2015, including tax savings from imputed rent, mortgage interest, capital gains, and property tax deductions.

About $5 trillion in GSE facilitated mortgages were outstanding in 2015.  A rate reduction of 0.25% on $5 trillion is equal to $12.5 billion - roughly 6% of the value of income tax benefits.

In 2015, net income to homeowners after expenses and depreciation but before interest expense was $748 billion.  Comparing these numbers, as a first estimate, income tax benefits were equal to 29% of the net income value of owned homes.  The GSE subsidy amounts to less than 2% of the net income value of owned homes.

When I began this series, which I thought would last maybe a dozen posts or so, that tax effect was the question I was trying to answer.  I ended up chasing this topic down several other rabbit holes, although ironically, I think I have been led back to a confirmation of the distortions created by those income tax benefits.  That confirmation itself backs up the other findings I ended up with.

The owner-occupier from much of the bottom tier of the housing market was effectively locked out of the homebuyer market from 2007 on.  We can basically use the 1st quintile of zip codes, by home price, as a proxy for housing markets that lost their owner-occupier demand, and the 5th quintile as a proxy for housing markets that didn't lose their owner-occupier demand.

Across the board, prices diverged at that point.  The market bottomed in 2012, and since then prices have rebounded in the new normal.  It seems that, relative to 1999, prices in the 1st quintile are tracking about 10% to 20% below 5th quintile prices.

This is probably a very low estimate of the effect of income tax policy on home prices, because 1st quintile homes never internalize much of the potential tax benefits.  Looking across zip codes at Price/Rent ratios, even in 1999, P/R in 1st quintile zip codes was much lower than in 5th quintile zip codes.

Between the collapse of private securitizations and tightening standards at the GSEs, the market for mortgages in the bottom tiers of the housing market dried up in 2007.  The gap of more than 10% between the value of a home for a landlord and the value for an owner-occupier meant that we created a context where the bottom had to drop out of home prices at the low end before a new equilibrium could be found.  We killed the mortgage market and that created the drop in home prices at the low end - not the other way around.

One other point here, looking back at the jumbo spread graph:  The shock in 2007 was not limited to private subprime securitizations.  There was a shock in jumbo spreads at the same time.  This is because it was a liquidity shock.  Not a liquidity shock from a lack of cash, per se.  But, a liquidity shock from a lack of mortgage borrowers.  And the reason is that the country lost faith in the housing market.  Buyers and lenders were convinced that home prices were about to plunge in an unprecedented way, and the Fed confirmed that they intended to let this happen.

This caused credit risk to shoot up across buyers, because the credit risk wasn't coming from buyer characteristics.  It was coming from housing expectations.  Thus jumbo loan markets were just as stressed as subprime.

And, the one set of institutions that were immune to this shock were the federal agencies - the GSEs and FHA - since their investors didn't take on credit risk.  Since the GSEs were semi-private, they were derided as being greedy and reckless.  Since FHA was public, they were able to go about the business of supporting the mortgage market, and continued to expand.

Monday, December 19, 2016

Housing: Part 195 - More on homeownership, income, and wealth

Here are a few more charts on homeownership from the Survey of Consumer Finance.

First, the mortgage debt and home values as a proportion of total assets.  For the lower income quintiles, debt is less important and home values are more important.  As incomes rise, homes comprise a smaller portion of total assets and households hold more mortgage debt.

This is just another way of repeating that the rise in mortgage debt was not a low income phenomenon.  On the other hand, changing home values have more of an effect on low income balance sheets, on average, than they do on high income balance sheets.

But, there is a caveat.  The second graph compares the relative changes in the value of homes, arranged by household income.  This shows how the housing price boom was concentrated at higher incomes.  When you look at home prices within each MSA, there are many MSAs with relatively little difference between low income and high income zip codes.  But, in the Closed Access cities, home prices in low income zip codes increased significantly more than in high income zip codes.

Yet, here we see the opposite pattern.  This country has segregated by income, so measures of the top income quintile are largely measures of Closed Access cities.  The 2nd income quintile is mainly a measure of non-urban incomes and home values.  The bottom quintile includes a lot of retirees and idiosyncratic households.  As I look at this a second time, I'm surprised by the sharp relationship.  Home values in the 2nd income quintile rose by less than 50%.  Homes for top decile families rose by nearly 150%.

The last chart shows homeownership rates by net worth.  I have pointed out that higher homeownership during the boom was among households with high incomes and young households.  Here we can see that among high net worth households, homeownership has always been nearly universal.  Credit access during the boom was mostly a way to increase ownership of households with high incomes but not as high net worth.

We can also see here how our fears of credit and our over-reaction, have led to mortgage markets that are very unfriendly to households without the means to make a large down payment.  The boom helped high income, middling net worth households.  The bust has hurt low income, middling net worth households.  And many households have been pushed to the bottom net worth quartile because they owned homes.