For many Australians, the family home is their largest financial asset. With an increasing variety of ways to tap into home equity, the temptation to access this wealth is ever growing.

Homeowners increase the debt owed on their home when they borrow against their equity. Standard mortgage home loans now provide facilities for relatively cheap or free withdrawals of equity from the home.

This turns the home into an ATM, which borrowers can access when they choose.

Our new study asks what motivates Australians to tap into their home equity, and how does this behavior change with age?

Surprisingly, despite having much lower housing equity levels, younger homeowners borrow often, and borrow more, than their Boomer parents.

How common is equity borrowing?

Using 15 years of data from the government-funded Household, Income and Labor Dynamics in Australia (HILDA) survey, we tracked the mortgage debt and repayments of homeowners aged 35 and over.

The chart above shows younger owners are far more likely to engage in equity borrowing.

In 2006, nearly 39% of the youngest homeowners, aged 35–44, borrowed against their home equity. By 2021, this number had dropped to 29%. Despite the decline, it’s still 24 percentage points more common than those aged 65 and over. The older group has remained steady at about 5% over the years.

How much do equity borrowers withdraw from their home?

Among those who use their home like an ATM, younger borrowers now withdraw larger amounts than older borrowers.

In 2006–07, equity borrowers aged 35–44 and 45–54 withdrew on average $43,000 and $57,000, respectively (expressed in real values set at 2022 price levels). By 2021, the amount withdrawn by these two age groups had climbed to $70,000 and $100,000.

On the other hand, the amount withdrawn by borrowers aged 55 or older fell from more than $50,000 to less than $40,000.

What motivates equity borrowing?

Young homeowners’ equity borrowing behaviors are sensitive to changes in house prices and debt values, and their financial risk preferences. Among those aged 35–44, a $10,000 increase in the primary home value raises the likelihood of equity borrowing by 10 percentage points.

Every $10,000 in debt against the primary home reduces the likelihood by 2.8% percentage points. Those willing to take substantial financial risk are eight percentage points more likely to borrow against their home than those who are risk-averse.

Those aged 65+ are not inclined to borrow, and exhibit little change in equity borrowing behavior with variations in asset, debt, income or financial risk preferences.

Why borrowing practices differ between age groups

As well as being more likely than older homeowners to borrow against equity, the younger group also withdraws higher amounts than their Boomer parents.

This is despite younger borrowers already carrying much higher debt against their primary home. Among those in our study who engaged in equity borrowing in 2021, the median debt before borrowing was $401,000 for 35–44 year-olds compared to $0 for those aged 65+.

As real house prices have risen over decades, the current generation of young homeowners has had to invest more money into purchasing their first home than previous generations.

It’s therefore not surprising the primary home is now widely viewed as a financial resource to be tapped into to meet spending needs.

On the other hand, most Baby Boomers bought their first home at more affordable prices than their children, and at lower levels of debt. Now they don’t appear to be spending their kids’ inheritance by drawing down housing wealth.

In fact, older parents may shy away from equity borrowing to bequeath wealth to children. Some also dislike passing debt on to their children.

Older people may also avoid equity borrowing due to concerns about aged care costs. Some may be hampered by poor financial literacy.

More debt ahead without policy changes

Present trends suggest young homeowners will remain indebted for longer periods, and more and more will retire with mortgage debt.

For indebted retirees, there are real prospects of drawing down of superannuation to pay off mortgages in retirement.

This may impose extra burdens on the age pension system. Another unwelcome consequence, which may add to health costs, is the prospect of debt-related psychological distress among those who can’t pay off their mortgage in old age.

If the current trends continue, the great wealth transfer that has already begun looks set to further entrench inequality between those who have access to the bank of mum and dad and those who do not.

Encouraging older people to use their housing equity to fund their needs in old age may lighten fiscal burdens on younger generations. But policy reforms will be needed to relieve concerns about the risks of equity borrowing in old age.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

TikTok headed to court on Sept. 16, 2024, in a bid to overturn a law that would force the video app to divorce from its China-based parent company or be banned in the U.S.

During the appearance before a panel of judges at the U.S. Court of Appeals for the District of Columbia Circuit, layers for TikTok said imposing such a prohibition would have “staggering” consequences for free speech.

The court hearing is the latest development in a lengthy saga over the fate of an app that is widely popular, especially among young Americans, but that many politicians in Washington fear poses or is a security risk.

Whatever the outcome of the oral arguments presented by lawyers from the U.S. government on one side and TikTok and parent company ByteDance on the other, it’s unlikely to be the end of the story. Many analysts expect the case will head to the Supreme Court.

But why is TikTok controversial? Are the claims of it being a national security risk valid? And what will the case mean for free speech? The Conversation’s contributors have been on hand to answer these and other questions.

1. An agent of the Chinese state?

Politicians who want to ban TikTok, or at least sever its links to China, fear that the app provides a way for the Chinese Communist Party to influence Americans or use their data for malicious purposes. But how much influence does the Chinese government have at TikTok? That question is addressed by Shaomin Li, a scholar of China’s political economy and business at Old Dominion University.

Li explains that the relationship between TikTok, ByteDance and the Chinese Communist Party is nuanced—it isn’t simply a matter of officials in Beijing telling ByteDance to jump and the parent company dictating how high its subsidiary will leap. Rather, as with all companies in China, employees are under certain obligations when it comes to advancing national interests. In China, private enterprises, such as ByteDance, operate as joint ventures with the state.

“Regardless of whether ByteDance has formal ties with the party, there will be the tacit understanding that the management is working for two bosses: the investors of the company and, more importantly, their political overseers that represent the party,” Li writes. “But most importantly, when the interests of the two bosses conflict, the party trumps.”

2. Exploiting user data

The risks TikTok poses to U.S. users are similar to the risks posed by many popular apps, principally that the app collects data about you. That data, which includes contact information and website tracking, plus all data you post and messages you send through the app, is available to use or misuse by ByteDance and any other entity that has or gains access to it.

Iowa State University cybersecurity researcher Doug Jacobson writes that U.S. officials and lawmakers are concerned that the Chinese government could exploit TikTok user data to spy on U.S. citizens. Government hackers could use the TikTok data to trick users into revealing more personal information.

But if the goal is to counter Chinese hackers, banning TikTok might prove too little, too late. “By some estimates, the Chinese government has already collected personal information on at least 80% of the U.S. population via various means,” Jacobson writes. “The Chinese government—along with anyone else with money—also has access to the large market for personal data.”

3. The security risks of a ban

Banning TikTok could also make U.S. users more vulnerable to hackers of all stripes. Rochester Institute of Technology computer security expert Robert Olson writes that many of the more than 100 million U.S. TikTok users could try to get around a ban on the app, with negative consequences for their digital safety.

If TikTok ends up banned from Apple’s and Google’s app stores, users could try to access the app elsewhere via sideloading. This practice of getting around Apple and Google app stores leaves users vulnerable to malware posing as the TikTok app. TikTok users might also be motivated to circumvent Apple and Google security controls in order to keep the app installed, a move that would make users’ phones more vulnerable.

“I find it unlikely that a TikTok ban would be technologically enforceable,” Olson writes. “This … legislation—aimed at improving cybersecurity—could motivate users to engage in riskier digital behavior.”

4. First Amendment concerns

In its legal challenge to the U.S. government, ByteDance claims the government is violating its First Amendment rights. Technology law scholars Anupam Chander of Georgetown University and Gautam Hans of Cornell University write that ByteDance has grounds for its claim, and that the implications go beyond this case.

TikTok is a publisher, an online publisher of users’ videos. Forcing ByteDance to divest TikTok is a form of prior restraint—the government preventing speech before it occurs.

“By forcing the sale of TikTok to an entity without ties to the Chinese Communist Party, Congress’ intent with the law is to change the nature of the platform,” they write. “That kind of government action implicates the core concerns that the First Amendment was designed to protect against: government interference in the speech of private parties.”

5. What about the others?

Security and legal issues aside, the forced sale to a U.S.-based company or ban of TikTok in the United States is a questionable approach to solving the problems the law aims to address: potential Chinese government influence in the U.S., harm to teens, and data privacy violations, writes Arizona State media scholar Sarah Florini.

The Chinese government—and other U.S. adversaries—has long used social media apps owned by U.S. companies to attempt to influence American public opinion. TikTok is hardly alone in posing harm to teens, as the Facebook whistleblower case amply demonstrated. And vast amounts of Americans’ personal data are already available to any buyer on the open and black markets.

“Concerns about TikTok are not unfounded, but they are also not unique. Each threat posed by TikTok has also been posed by U.S.-based social media for over a decade,” Florini writes.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Australia has long been one of the most expensive places in the world to buy a house. Now, it’s apparently also one of the costliest places to sell one.

Recent reporting in the Guardian has raised concerns about the market dominance of Australia’s two main real estate advertising websites, realestate.com.au and Domain.

Facing little competition, the largest—realestate.com.au—appears to have significantly increased its fees in recent years, while thwarting disruptive innovations from smaller competitors.

Why does that matter? Because when it comes to selling a house, Australia stands out globally. In most other countries, any advertising costs are tiny or bundled in with agent fees.

Here, along with only Sweden and New Zealand, home sellers pay their own advertising costs in addition to real estate agent fees and commissions.

This advertising can be expensive—up to several thousand dollars for a single property listing. But it also seems necessary, with a lack of alternative platforms offering comparable reach.

Setting aside the problems of monopolistic pricing behavior, what are the economics of high and rising real estate advertising fees? Do home sellers get value for the money they spend on advertising? And what might be the impacts of these fees on the Australian housing market?

Is advertising on big platforms worth it?

First, it’s worth asking whether real estate advertising is actually effective and whether bigger platforms are better.

To explore these questions, a group of US-based economists studied the outcomes of advertising on a large platform favored by real estate agents in the United States called the “multiple listing service,” compared with a smaller for-sale-by-owner platform.

The study found no differences in eventual home sales prices between the two platforms. But properties on the multiple listing service were more likely to sell and spent less time on the market.

However, the size of the advertising platform didn’t explain these benefits. Rather, the different platforms appealed to buyers and sellers with varying patience levels. This variation in willingness to “wait-and-see” affected the time it took to sell.

Translated to the Australian context, that raises questions about the value for money of advertising on a larger platform—which here, unlike the US, attracts significant fees.

Housing markets are ‘search markets’

Next, we need to consider how high costs of advertising property might affect the housing market more broadly.

Housing markets fall into a category called “search markets” within economics. Sellers seek buyers, and buyers seek sellers offering up properties that meet their required criteria.

The economics of search markets have been extensively studied by the likes of Nobel laureates Peter Diamond, Dale Mortensen and Christopher Pissarides. Their insights highlight the key factors that determine search market outcomes.

Sellers consider the costs of listing an item for sale (such as advertising) and the time it takes to find a buyer. Buyers, on the other hand, consider their alternatives to buying (such as renting) and the time it might take to find a suitable seller.

The likelihood of a sale—and how long everything will take—depends on the number of potential buyers relative to sellers. The sales price is then negotiated after meetings between the two.

This gives us a framework to speculate about how Australia’s high—and increasing—costs of advertising real estate could be affecting the broader housing market on both sides of this equation.

Costs can affect both supply and demand

On the supply side, high fees reduce the net financial benefit of selling a home, which could discourage homeowners from listing their properties. All else being equal, this could lead to fewer properties on the market, shorter selling times, and higher prices for the properties that are listed.

But we can predict some effects on the demand side, too.

High fees also reduce the net benefit of buying a home, as current buyers expect to be sellers in the future. These costs are likely to be even more pronounced for property investors, who buy and sell property more frequently than homeowners.

Anticipation that selling costs will be high in the future could suppress the demand for housing, reducing prices and increasing the time it takes to sell a property.

Interestingly, recent research from the US suggests that these demand-side effects might outweigh the supply-side effects.

Economists studied the impact of a series of court decisions that forced the National Association of Realtors to reduce real estate agent fees. They found lower fees increase the lifetime benefits of homeownership, which leads to a significant increase in house prices.

Significantly, that suggests lowering the costs of selling property—including advertising—could increase property values.

Just one part of the housing story

High prices in any area of economic life are likely to rankle our sense of a fair deal. High fees for advertising real estate have an obvious immediate impact on a home seller‘s wallet.

But the nuanced flow-on effects to the broader housing market are harder to tease out. They are also likely to vary across different property markets within Australia. Commentators and policy makers should think carefully before leaping into action in this area.

In the meantime, advertising fees are one more thing to keep an eye on as Australian housing costs continue to rise.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Machine learning algorithms significantly outperform human judgment in detecting lying during high-stakes strategic interactions, according to new research from the University of California San Diego’s Rady School of Management.

The study can have major implications for the spread of misinformation, as machine learning could be used to bolster efforts to reduce fictitious content on major platforms like YouTube, Tik-Tok and Instagram.

The study, to be published in Management Science and available as a working paper, focused on participants’ ability to detect lying on the popular British TV show “Golden Balls,” which aired from 2007 to 2010. It finds that while humans struggle to predict contestants’ deception behavior, algorithms perform much better.

“We find that there are certain ‘tells’ when a person is being deceptive,” said Marta Serra-Garcia, lead author of the study and associate professor of behavioral economics at the UC San Diego Rady School of Management.

“For example, if someone is happier, they are telling the truth and there are other visual, verbal, vocal cues that we as humans all share when we are being honest and telling the truth. Algorithms work better at uncovering these correlations.”

The algorithms used in the research achieved an impressive accuracy rate, correctly predicting contestant behavior 74% of the time, compared to the 51%–53% accuracy rate achieved by the more than 600 humans who participated in the study.

In addition to comparing machine learning and human abilities to detect deception, the study also tested how algorithms could be leveraged to help people better tell apart those who lie and those who tell the truth.

In one experiment, two different groups of study participants watched the same set of “Golden Balls” episodes. One group had the videos flagged by machine learning before they viewed them. The flags indicated that the algorithm predicted the contestant was most likely lying.

Another group watched the same video and after they viewed it, they were told the algorithm flagged the video for deception. Participants were much more likely to trust the machine learnings’ insights and better predict lying, if they got the flag message before watching the video.

“Timing is crucial when it comes to the adoption of algorithmic advice,” said Serra-Garcia. “Our findings show that participants are far more likely to rely on algorithmic insights when these are presented early in the decision-making process. This has particular importance for online platforms like YouTube and TikTok, which can use algorithms to flag potentially deceptive content.”

Co-author Uri Gneezy, professor of behavioral economics at the Rady School added, “Our study suggests that these online platforms could improve the effectiveness of their flagging systems by presenting algorithmic warnings before users engage with the content, rather than after, which could lead to misinformation spreading less rapidly.”

Some of these social media websites are already using algorithms to detect suspicious content, but in many cases, a video has to be reported by a user and then investigated by staff who can flag the content or take it down. These processes can be drawn out, as employees at tech companies like TikTok get overburdened with investigations.

The authors conclude, “Our study shows how technology can enhance human decision making and it’s an example of how humans can interact with AI when AI can be helpful. We hope the findings can help organizations and platforms better design and deploy machine learning tools, especially in situations where accurate decision-making is critical.”

Volunteering used to be a mainstay of U.S. culture. But in recent years, giving back to their community hasn’t played as big a role in many Americans’ lives.

New research from the University of Georgia suggests the economy may be to blame.

The researchers found that people living in disadvantaged communities or areas that have high levels of economic inequality were less likely to volunteer.

“Historically, rural areas have had higher volunteering rates than urban ones,” said Rebecca Nesbit, lead author of the study and a professor in UGA’s School of Public and International Affairs.

“These communities often have closer ties and more social interaction with each other, and those close ties may make them more likely to volunteer. Because when you’re volunteering for the local food bank in these communities, you’re helping people that you have a personal connection to.”

The recession of 2008 didn’t help matters. And more than a decade and a half later, volunteering rates have yet to recover.

“Any advantage to volunteering afforded by good economic growth before the recession was wiped out after the recession, and that can lead people to change their behavior,” Nesbit said. “In poor economic conditions, people might take energy away from their voluntary activities to put it into more income-producing activities that create a greater sense of personal stability.”

Economically disadvantaged areas hit the hardest

The study is the first analysis of confidential level volunteering data in a secure U.S. Census Bureau Research Data Center, which is a nationally representative sample of 56,000 households interviewed each month. This data is considered the premiere source of information on national and state volunteering statistics.

The researchers relied on a dataset of about 90,000 individuals for each year of the survey.

The study examined effects of economic disadvantage and inequality, and how the Great Recession exacerbated existing differences in volunteering rates between rural and urban communities.

The researchers found that the recession had the biggest dampening effect on volunteering in areas with the most economic growth and above average income equality.

“What the decline in volunteering tells us is that there are a lot of communities that were hit by the recession and just haven’t bounced back,” Nesbit said. “Whether that decline is going to continue or whether these communities will rebound eventually, we don’t know yet.”

The demographics of rural communities are changing, with more youth leaving their hometowns for bigger cities while the population left behind ages. That shift in people’s sense of community may be one reason these communities’ volunteering rates dropped so significantly, the researchers said.

People who lived in areas with growing economies were more likely to volunteer, according to the study.

Even years after the recession ended, the negative effects persisted, which may indicate lingering social or psychological effects that make people more hesitant to invest time and resources into volunteer efforts, the researchers said.

“One general high-level finding is that local economic conditions matter for volunteering. That’s something we can’t ignore,” Nesbit said. “An implication of that is that as we talk about economic development for communities, we shouldn’t divorce that from the civic development of communities.

“Policymakers need to understand that if we want to strengthen communities, particularly these rural communities, we need a more holistic approach. It can’t just be about economic development, and it can’t just be about civic engagement. It has to be both.”