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34 ASK THE ECONOMIST HEAR DIRECTLY FROM TODAY'S LEADING MARKET EXPERTS. As the co-editor of the Liberty Street Economics blog and the Federal Reserve Bank of New York's Economic Policy Review, Andrew Haughwout, SVP, Microeconomic Studies Department in the Research and Statistics Group at the New York Fed has been at the forefront of policy research for the housing industry and microeconomic studies published by the bank. Haughwout is also a Penn Institute for Urban Research Scholar and serves on the Advisory Board of the Journal of Regional Science. Before joining the New York Fed, Haughwout served as Assistant Professor and Director of the Urban and Regional Planning program at Princeton University. He holds a bachelor's from Swarthmore College and a doctorate from the University of Pennsylvania. The latest New York Fed Survey of Consumer Expectations said that the median home-price change expectations of consumers retreated from a recent high. What were the factors impacting this consumer sentiment? My colleagues on the Survey of Consumer Expectations (SCE) team point out that while there has been a recent small reduction in house-price expectations, current readings remain above the average of the previous year. Changes in consumer expectations of housing supply and demand conditions have contributed to these fluctuations in expectations in the latest SCE. Can you tell us more about the role of mortgage and HELOC balances in the increase in household debt? Do you see this trend continuing? Total household debt grew by about $80 billion in the second quarter of 2018 and is now approximately $600 billion higher than the previous cyclical peak in 2008. What's surprising is that this new record has been accomplished without much impetus from housing debt. Mortgages, while still the largest form of household debt, have grown only slowly in this cycle, having risen just 14.7 percent in the five years since the mid-2013 trough. HELOC balances are down 20 percent over that same period. However, nonhousing debt has grown much faster in this cycle. What economic factors should the market watch for to predict the health of the housing market towards the end of 2018 and going into 2019? After falling over 30 percent between 2006 and 2011, house prices began a sustained rise in 2012. ey are now more than 50 percent above their previous level. Starts of new single-family units have meanwhile been sluggish, contributing to tight for-sale inventories across many parts of the nation. Going forward, a growing economy and strong labor market will support continued growth in housing demand. How this demand will translate into prices versus quantities of housing will depend on supply and how much new housing will be built and offered for sale over the next few years. Inventory shortage and squeeze on affordability have been the two major challenges for the housing market this year. Do you see these continuing into the next year? In the very short run, it seems likely that tight inventories will continue, which, if demand remains strong, will probably translate into higher prices. In the longer run though, we may see some loosening of supply, which will relieve the upward pressure that rising demand puts on prices. Despite being one of the largest groups of homebuyers, millennials seem to be holding back from investing in home purchases. What are the drivers to get more millennials into the housing market? Several factors seem to have kept millennials on the sidelines of homeownership, but recent data indicate an uptick in homeownership among people under the age of 35—that is, people born after 1983. Evidence suggests that this group has considered homeownership a good investment, but tight credit conditions have made buying difficult for them. Andrew Haughwout SVP, Microeconomic Studies Department, Research and Statistics Group, Federal Reserve Bank of New York "Mortgages, while still the largest form of household debt, have grown only slowly in this cycle, having risen just 14.7 percent in the five years since the mid-2013 trough. HELOC balances are down 20 percent over that same period. However, nonhousing debt has grown much faster in this cycle."