Welcome to the Center for Housing and Tax Research

As of August 11, 2022, action by the Federal Reserve to slow the economy has pushed the 30-year fixed rate mortgage up to 5.22%. At the end of Nov-21 it was 3.07%. This is an increase of 215 bps. Fear of additional mortgage rate increases and stock market gains from 2021 have kept the demand for SFR homes very strong. Nonetheless, the Case-Shiller 20 city home price index which did increased by 19.7% YOY for May-22 is likely to slow. After initially reducing the demand for apartments in multi-unit buildings, rental rates for apartments in several cities are rising almost as quickly as home prices (see Jun-22 Blog). Rents for detached rental properties in most cool-weather cities have stabilized in the single digits, but remain accelerated in warm-weather cities. These three forces could add to U.S. overall inflationary pressures. 

Investor Impact on the SFR MKT

Do Investors Compete Against Home Buyers Who Intend to Live in the Property and Thus Raise Prices?

Recent research shows that investor purchases impact owner occupied purchase prices at time t – the time when the investor purchase the property.  The CHTR research shows that each one unit higher share of investor purchases in a CBSA raises HPA on owner occupied properties by 2.5 bps. In a city like Chicago, IL with an investor share during Mar-21 of 32 percent, potential homebuyers paid 80 bps more to own their home had investors not participated. This would have added an extra $1,600 to house that was selling in 2020 for $200k and sold for $211.4k in 2021 but might have sold for $209.8k.

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The Impact Of A 1% Increase In State Income Tax Rates On Net-outmigration Of High-Income Taxpayers In The Initial Year:

TCJA is a national law which does not change a state’s stated marginal tax rate. The impact, however, is to raise taxpayer’s income tax burdens in high SALT states. This negative financial change could motivate some high-income taxpayers to leave the state. We look at the experience of three states which raised their marginal income tax rate during some point in the years 2012 – 2018 to guage the impact of a 1% tax rate increase on net-outmigration.

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Rent vs. Buy & Rent vs. Income

The Impact Of Credit Score On The Rent/Buy Ratio

Recent research shows that low credit scores can raise the rent that renters have to pay relative to cost of owning a home. If rents are higher than the cost of owning and the renter does not /can not buy, then there is a wealth transfer from the renter to the landlord. If the landlord does not live in that same city, then wealth is transfered out of the city and the city becomes poorer had the transfer not taken place.

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The Impact Of Interest Rate Changes On Rent/Income Ratio

Since Dec-18, the Federal Reserve initiated a series of interest rate changes to bolster economic activity. In response, the 30-year mortgage rate fell from 4.87% on Nov-18 to 2.87% on Jul-21. This 200 bps decline in mortgage rates made homebuying cheaper, and caused home prices to rise. All of these rate declines kept businesses strong which had a positive impact on income. Rents also increased in many cities over this time. Did the interest rate changes cause incomes to increase more than rents? In other words, are renters better off in 2022 than they were in 2018?

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