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54 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST DATA A Long-Term View A study examines how housing has played a part in what is now the longest economic expansion on record. A ccording to a Core- Logic special report, titled "The Role of Housing in the Lon- gest Economic Expansion," the United States' economic expan- sion reached 121 months in July 2019. The economy has contin- ued to grow since the recession ended in 2009, and with hous- ing comprising approximately 15% of GDP since 2010, the real estate market is an important indicator of economic health. "During the last nine years, the expansion has created more than 20 million jobs, raised family incomes, and rebuilt consumer confidence," said Frank Nothaft, Chief Economist, CoreLogic. "The longest stretch of mortgage rates below 5% in more than 60 years has supplemented these factors. These economic forces have driven a recovery in home sales, construction, prices, and home equity wealth." In Q1 2019, the total percentage of homes underwater went from 25.9% in the first quarter of 2010 to 4.1% in the first quarter of 2019. Meanwhile, home equity reached $15.8 trillion up from $6.1 trillion in 2019. Additionally, CoreLogic notes that home flipping has increased significantly since the recession, reaching its highest point, 11.4%, in 2018. The number of homes underwater dropped by over 21 percentage points to 4.1% in the first quarter of 2019, while the big- gest drop (6.2%) occurred between 2012 and 2013 when the share of homes with negative equity went from 22.4% to 15.5%, driven in part by a 10.2% rise in home prices. "Home prices have increased steadily since 2011, creating record amounts of home equity and putting homeowners in a good position to weather future downturns," said Molly Boesel, Principal Economist, CoreLogic. According to CoreLogic, con- cerns over an imminent recession have been rising as the economy continues to progress. In the housing economy, while home prices are still growing, they are doing so at a slower pace. Home prices increased just 3.6% year- over-year in May 2019, down from 4.1% in January. Additionally, housing starts in May 2019 under- performed, dropping 0.9% below the revised April estimate. "We expect the housing market to enter a normalcy phase over the next 24 months," said Ralph McLaughlin, Deputy Chief Economist, CoreLogic. "With prices neither rising too fast nor too slow, and with a growing stream of young households look- ing to buy homes over the next two decades, the long-term view looks healthy." Full of Potential An analysis examined the gap between homeownership and demand for housing. P otential homeowner- ship demand in 2018 increased by just 0.66% when compared to 2017, but the homeownership rate underperformed potential de- mand by 8.7%, according to the First American Homeownership Progress Index (HPRI). "The homeownership rate is influenced by shifts in underly- ing demographic and economic factors, as well as housing market conditions. Close examination of these underlying forces can provide a more in-depth look into the changes in the homeownership rate over time," said Mark Fleming, Chief Economist, First American. The HPRI report- ed declines in un- employment rates, income growth, rising educational attainment, and a higher share of married households all aided growth in potential homeownership. Factors that contributed to the decline of homeownership demand, though, included the number of children per house- hold, and an increase in the 30- year fixed-rate mortgages. "Historically, potential home- ownership demand as measured by the HPRI has mostly outpaced the actual homeownership rate, meaning the actual homeowner- ship rate should have been higher based on the lifestyle, societal, and economic trends influencing the demand for homeownership," said Fleming. "This was largely due to demographic trends as baby boomers settled down to form households of their own." Fleming added that there were a few distinct periods where the homeownership rate exceeded po- tential homeownership demand, according to the HPRI. "From 1984 to 1986 and again in 1992, the actual homeownership rate outperformed or equaled the potential demand, most likely a result of innovations in mortgage finance, and the economic boom of the 1990s," Fleming said. "The hous- ing crisis is also an exception to this trend, where speculation, easy access to credit, and exuberance caused the actual homeownership rate to exceed potential demand as measured by the HPRI," said Fleming. The actual homeowner- ship rate, even while it was falling, still exceeded potential homeowner- ship demand by nearly 7% in 2010." The group mostly driving demand for homeownership in 2017 and 2018 was millennials (ages between 23-37). Fleming, though, added the lifestyle choices of millennials can help explain why the homeownership rate remained below potential demand. "Millennials are more diverse, more educated, and tend to marry later in life than previous genera- tions," Fleming said. "Many mil- lennials have prioritized furthering their education, thus delaying get- ting married and having children, which are critical lifestyle triggers to buying a first home." The group mostly driving demand for homeownership in 2017 and 2018 was millennials.