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34 MOYNIHAN: "HOUSING DEMAND WILL EBB AND FLOW A LITTLE DIFFERENTLY" A number of factors are affecting the housing market. Despite these changes, one needs to keep perspective when analyzing this industry, according to Brian Moynihan, Chairman and CEO of Bank of America, who recently spoke about the changes in mortgage interest caps and the macrofactors affecting housing at CNBC's Net/Net event in New York. Speaking about the changes to the cap in the mortgage interest that homeowners could write off implemented in the Tax Cuts Act, Moynihan said that it was unchartered territory for many homeowners, as well as financial institutions, because the home mortgage-interest deduction was "so jealously protected for so many years. And $10,000 is a pretty healthy amount of interest." However, he said that these changes wouldn't have a huge effect on homeowners, because to qualify for that kind of cap on a mortgage, "a household's probably got to have a $100,000 to $125,000 of income, a little bit more. So a couple hundred dollars a month isn't going to make the decision different." At the most, Moynihan said it would slow down a homeowner's decision to upgrade. "But I think we've got to be careful about overestimating across the 60 million households that have debt out of 130 million households in America." Touching upon the high interest-rate environment and the health of the housing market, Moynihan said, "Housing is at tails," as a number of factors were affecting the housing market, but they should be kept in perspective, especially since the rising rates will not change the market in any major way. "We still did around 10.5 billion of mortgage loans this quarter. Last year, we probably did 13 billion," Moynihan told the audience. Looking at the effect of population on housing, Moynihan said, "At the end of the day, without population growth that we had in the mid-2000s at 1.5 percent, the demand for housing is going to sort of ebb and flow a little differently." Looking at the larger market, Moynihan said that housing construction was growing evenly because of locational problems. He explained, "It's really tight in cities like Charlotte where we're trying to build tens of thousands of units for workers because we're short. In other places, there's an excess of supply," especially in cities that are still recovering from the Great Recession. Despite rising home prices and inventory remaining down, for the most part, Moynihan said that they were fine for now. "But we got to watch it, because it'll be a leading indicator of people's belief in their wealth if we see housing prices tip over," he said. HOUSING CHOICES OF OLDER AMERICANS Is it possible to pay off a mortgage before one retires? As older American homeowners grapple with this question, a Federal Reserve Survey of Consumer Finances revealed that 35 percent of households headed by homeowners in the 65 to 74 years age group have a mortgage. e recent tax cuts won't help much either, according to Liz Weston, a columnist for the personal finance website NerdWallet. "Congress' Joint Committee on Taxation estimates 13.8 million households will benefit from the mortgage-interest deduction this year, compared to more than 32 million last year," she wrote in a recent article for e Washington Post. "Even before tax reform, people approaching retirement often got less benefit from their mortgages over time as payments switched from being mostly interest to being mostly principal." On the other hand, rising home equity among this age group is likely to get more homeowners looking at reverse mortgages to pay off debts. In fact, the latest National Reverse Mortgage Lenders Association (NRMLA)/RiskSpan Reverse Mortgage Market Index for the second quarter of 2018 revealed that housing wealth for homeowners 62 years and older grew to $6.9 trillion in Q2, an increase of $130 billion in senior home equity over the previous quarter. "Today's retirees are more likely to leave the workforce with a mortgage and other debts that can put stress on monthly cash flow," said Peter Bell, President and CEO of the National Reverse Mortgage Lenders Association (NRMLA). Another reason is the fact that many older American homeowners are choosing to stay in their existing home rather than upgrading to a new home. According to a study by Zillow, 87 percent of people who are 55 years or older and 91 percent of retirees would renovate their homes instead of using the money for a down payment on a new one. For retirees living on a fixed income, home equity, therefore, becomes their biggest asset and go-to resource for cash. "In these situations, financial products that convert home equity to cash could be used to pay off revolving debt from credit cards and reduce or defer monthly mortgage payments," Bell said. It's worth doing the math to find out if a mortgage refinance, home equity line of credit, or reverse mortgage loan can help increase financial security during retirement." Quarter-over- quarter of mortgages have average rates below 5 percent. Source: "Housing Finance at a Glance: A Monthly Chartbook" by the Urban Institute STAT INSIGHT 91%

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