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Determinants Of Home Price Appreciation In The Community Advantage Secondary Mortgage Market Demonstration Program

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Prepared with the support of:

The Ford Foundation


In an early analysis of homes purchased in a national pilot called the Community Advantage Program (CAP), homes purchased between 1998 and 2002 are found to have appreciated on paper at a median annual rate of 5.4% between the time of purchase and spring 2003. This is less than the national house price appreciation index of 7.0% (covering 1998-2003) but higher than other types of investments such as the Dow Jones Index (2.78% annual growth rate over the same time period) and

the average rate on a 6-month CD (4.34% over the same time period). This impressive performance holds across different regions and states, with Community Advantage homes outperforming the 1998-2003

statewide averages in 4 of the 10 states with a substantial number of Community Advantage homes

These robust price increases mean that there have been even greater annual returns to initial homeowner equity due to the leveraging power of very low down payments. The median increase in net housing wealth of the Community Advantage homeowners is $17,492. Returns have been particularly impressive for the lowest-income borrowers. Borrowers with less than $20,000 in annual household income at the time of purchase had a median down payment of $1,790 and have experienced

a median equity increase of $24,724. Price and equity appreciation rates for African Americans are solid but are about 10 percent lower than for whites. Homes owned by borrowers with blemished credit also realized significant gains. These preliminary findings illustrate the powerful wealth creation potential of homeownership for low- and moderateincome families through initiatives like the Community Advantage program.

Several local factors (mostly measured at the zip-code level) are found to relate to price appreciation rates. Appreciation rates are greater for lower-priced properties. The mean interest rate and mean unemployment rate since purchase are negatively associated with price appreciation. The median value of houses in the zip code and the homeownership rate are positively associated with price appreciation. Finally, while black homeowners fared less well than whites, we found no

association between appreciation and the racial composition of the zip code once other variables were controlled for.

Just been looking on what the Community Advantage Program is/was as I was reading something mentioning it and then found this paper from 2005. I thought some of you may appreciate it.

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