A decade ago, the JPMorganChase Institute launched with a clear mandate to shed light on the economic realities of the American economy, its households, small businesses, and communities. From the outset, we recognized housing finance as a foundational research pillar because it is not only the single largest expenditure for most American families, but also the primary mechanism for wealth creation and a key determinant of financial stability.
With housing costs once again in the mainstream discourse, our latest research on homeownership affordability and the impact of inflation on renters builds on a decade of research that has delivered important insights into how consumers buy homes, cope with rising rents, and build wealth. In the years following the Great Recession, it became evident that the recovery, while measurable at the macroeconomic level, was deeply uneven. National statistics in income, employment, and housing prices often masked the unequal realities faced by households across different wealth levels, regions, and socioeconomic backgrounds. This is where the Institute stepped in – striving to answer not just what was happening in the financial lives of consumers, but how and to whom. These insights have provided an empirical bedrock for policymakers, business leaders, and community stakeholders.
Advancing the frontiers of housing research
Our housing work has been defined by a commitment to providing empirical answers to foundational questions through the unique lens of household financial flows. This approach has allowed us to uncover unexpected patterns and challenge prevailing industry wisdom about what truly drives housing stability, affordability, and wealth-building.
- Home equity and borrower stability: Our research challenged the long-held belief that home equity is the most critical factor in a borrower’s stability. In our 2019 report, “Trading Equity for Liquidity,” we found that having a liquid cash buffer was a much stronger predictor of avoiding default than a large initial equity stake. Borrowers with less than one mortgage payment in reserve had five times the default rate of those with three months’ reserve. This raised the possibility that allowing slightly smaller down payments, while requiring borrowers to retain emergency savings, could lower default rates. Our findings prompted discussions about underwriting models among the industry and housing advocates, and sparked debates about how to design effective relief for at-risk homeowners, as well as Mortgage Reserve Accounts.
