AUGUST 2019
RECESSION
When Will Next U.S. Recession Begin? 57%
Wall Street Journal Survey of Economists Pulsenomics survey of Analysts Duke Survey of CFOs National Association of Business Economics Members
50% 47% 42%
35%
33% 26%
25%
24%
17% 9%
10%
10%
9%
6% 0%
2019
2020
2021
After 2021 Pulsenomics, Duke, NABE and WSJ
When Will Next U.S. Recession Begin? 46%
24%
21%
10%
2019
2020
2021
After 2021 Pulsenomics, Duke, NABE and WSJ
“My results do suggest that, in the absence of the panic, the declines in employment, consumption and output in the early stages of the Great Recession would have been significantly less severe.� Ben Bernanke 2018
“Fear spread like a tsunami in 2008.” Warren Buffet in a 2018 WSJ interview
Recession DOES NOT equal Housing Crisis
re·ces·sion [rəˈseSH(ə)n] NOUN 1. a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. Merriam-Webster Dictionary
6.1%
6.6% 3.5% 1991
1980
1981
-1.9%
2008 2001
HOME PRICE CHANGE
during Last 5 Recessions -19.7% CoreLogic National Home Price Index
When Will Next U.S. Recession Begin? Pulsenomics Survey of Analysts
50% 35%
9% 2019
6% 2020
2021
After 2021 Pulsenomics
Top 3 Triggers for next Recession Trade Policy Stock Market Correction Geopolitical Crisis Coming in at #9 ‌ Housing Slowdown
4.1
PROJECTED Mean Percentage Appreciation
2.8
2019
2020
3.4
3.0 2.5
2021
2022
2023
Home Price Expectation Survey 2019 2Q
“An interesting thing is the widespread assumption that the next recession will be as bad as 2008. Natural to think that way, but, statistically, highly unlikely. Could be over before you realized it began.� Morgan Housel
Well-Renowned Financial Analyst
HOMEOWNERSHIP RATE
Homeownership Rates 64.8 64.4
Q3 2018
Percentage Last 4 Quarters
64.2
Q4 2018
Q1 2019
64.1
Q2 2019 Census 7/2019
U.S. Homeownership % Rates
Quarterly Results
The national homeownership rate has risen or remained the same year-over-year each of the last 12 quarters after starting its climb in 2016! 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Census 7/2019
AFFORDABILITY
The Leading Obstacle to Homeownership?
AFFORDABILITY
30.1%
2018
40%
2019
CoreLogic
Housing Affordability Index 1990 to Today
197
186
176 169
172 164
166 167 158
148
150
138 131
133 128
131
128
127 125 126
122
126
124
122
115
113 108
1990
110
1991
Years when distressed properties dominated the market
131
108
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018 Today
National Association of Realtors
National Homebuyers’ “TYPICAL MORTGAGE PAYMENT” Inflation-Adjusted Monthly Mortgage Payment That Buyers Commit To
$1,281 $1,100
*The typical mortgage payment used for this chart represents the inflationadjusted monthly payment based on U.S. median sales price and assumes a 20% down payment, a fixed-rate 30-year mortgage and Freddie Mac’s average monthly rate. It does not include taxes or insurance.
$877
$955
$878
$910
$550
January 2000 CoreLogic
June 2006
February 2012
March 2018
June 2018
March 2019
March 2020 Projected
18.2
Historic Norm
17.8
21.2%
17.6 17.3 17 17
17
16.4 16.4
Payment as a % of Income June
July
August
September
October
16.1
November December
January
16.6
16
February
March
April
May
National Association of Realtors
“When demand increases for a scarce (limited or low supply) good, prices will rise faster. The difference between houses and other goods is that we buy them with a mortgage. So, it’s not the actual price that matters, but the price relative to purchasing power.” Mark Fleming
First American’s Chief Economist
4.75% 4.54% 4.54%
4.41%
30 Year Fixed Mortgage Rate June 2018
September 2018
December 2018
3.75%
March 2019
July 2019 Freddie Mac
“If the 30-year, fixed-rate mortgage declines just a fraction more, consumer house-buying power would reach its highest level in almost 20 years.” Mark Fleming
First American’s Chief Economist
Resources Slide
https://pulsenomics.com/Q3_2018_HPE_Survey.php https://www.wsj.com/articles/economists-see-u-s-recession-risk-rising-11547132401 (subscription required) 4-5, 11-13
When Will Next U.S. Recession Begin?
https://www.cfosurvey.org/wp-content/uploads/2018/12/Q4-18-US-Toplines.pdf#page14 https://files.constantcontact.com/668faa28001/286fb75e-4f63-46ac-b351-7f6e78c57f67.pdf https://pulsenomics.com/surveys/#home-price-expectations
6
Ben Bernanke Quote
https://www.brookings.edu/bpea-articles/the-real-effects-of-the-financial-crisis/
7
Warren Buffet Quote
2018 WSJ Interview
9
Recession Definition
Merriam Webster Dictionary
10
Home Price Change During Recession
https://www.corelogic.com/blog/2019/03/housing-recessions-and-recoveries.aspx
14
Morgan Housel Quote
https://mobile.twitter.com/morganhousel/status/1100084994809180161
16-17
Homeownership Rates
https://www.census.gov/housing/hvs/files/currenthvspress.pdf
19-20
Housing Affordability
https://blog.firstam.com/economics/the-unexpected-surprise-boosting-demand-and-supply-in-2019 http://economistsoutlook.blogs.realtor.org/
21-22
Typical Mortgage Payment
https://www.corelogic.com/blog/2019/06/homebuyers-face-much-slower-growth-in-the-typical-mortgagepayment-this-year.aspx http://economistsoutlook.blogs.realtor.org/2019/03/11/wealth-gains-from-homeownership-across-metroareas-in-2018/
23
Mark Fleming Quote
https://blog.firstam.com/economics/expect-the-unexpected-faster-house-price-appreciation
24
30 Year Fixed Mortgage Rate
freddiemac.com
25
Mark Fleming Quote #2
https://blog.firstam.com/economics/why-consumer-house-buying-power-may-reach-a-record-in-2019
You will learn: •
How to own the market and not let the market own you…
• Why the second half of 2019 will be more active than the first…
• 4 key questions consumers will ask you over the next 6 months… • How your production in Q4 2019 determines your success in 2020…
Resources Slide
Slide Title
Link
32, 53, 66
Confidence Index
https://www.nar.realtor/reports/realtors-confidence-index
33-35, 43, 45-46
Existing Home Sales
https://www.nar.realtor/topics/existing-home-sales
36-39
New Home Sales
http://www.census.gov/construction/nrs/pdf/newressales.pdf http://www.census.gov/newhomesales http://www.census.gov/construction/nrs/pdf/newressales.pdf
40
Total Home Sales
http://www.census.gov/construction/nrs/pdf/newressales.pdf
41-42
Pending Home Sales
https://www.nar.realtor/research-and-statistics/housing-statistics/pending-home-sales
47-49
Case Shiller
http://us.spindices.com/indices/real-estate/sp-case-shiller-20-city-composite-home-price-index
50
CoreLogic YOY % Change in Price
https://www.corelogic.com/downloadable-docs/marketpulse/the-marketpulse-vol-8-issue-7-july-2019-screen-072519.pdf
51
Quicken Loans
https://www.quickenloans.com/press-room/2019/07/09/quicken-loans-owner-perceptions-of-home-values-improves-for-second-straight-monthas-spring-homebuying-season-ends/
54-61
Inventory
https://www.nar.realtor/topics/existing-home-sales http://www.census.gov/construction/nrs/pdf/newressales.pdf
63-65
Foot Traffic
http://nar.realtor/infographics/foot-traffic
68-69, 72-73
Mortgage Rates
http://www.freddiemac.com/pmms/pmms_archives.html http://www.freddiemac.com/fmac-resources/research/pdf/20190730-Forecast-02.pdf
70
Mortgage Rate Projections
http://www.freddiemac.com/research/forecast/ http://www.fanniemae.com/portal/research-insights/forecast.html https://www.mba.org/news-research-and-resources/research-and-economics/forecasts-and-commentary https://www.nar.realtor/sites/default/files/documents/forecast-08-2019-us-economic-outlook-07-30-2019.pdf
74-75
Mortgage Credit Availability
https://www.mba.org/news-research-and-resources/newsroom https://www.mba.org/news-research-and-resources/research-and-economics/single-family-research/mortgage-credit-availability-index
76-80
FICO Scores
http://www.elliemae.com/resources/origination-insight-reports https://assets.contentstack.io/v3/assets/blt47a327ac368e22cd/blt040b93ded869de38/5d2e84e11b987e46ddec7401/EM_OIR_J UNE2019.pdf KEEPINGCURRENTMATTERS.COM
Average Days on the Market
NAR
EXISTING Home Sales
Since January 2014 Jan 2014
Jan 2015
Jan 2016
Jan 2017
Jan 2018
Jan 2019 NAR
EXISTING Home Sales U.S.
Northeast
Midwest
Y-O-Y by region South
-0.4%
West
-1.6% -2.2%
-4.2% -5.2% NAR
Existing Home Sales
in thousands
January
February
March
April
May
June
2017
July
2018
August
September October November December
2019 Census & NAR
New Home Sales in thousands
January
February
March
April
May
June
2017
July
2018
August
2019
September October
November December
Census & NAR
New Home Sales annualized in thousands
Jun-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Census
New Home Sales % of sales by price range
21% 15%
7%
6%
5%
2% Under $150K
$150-$199K
$200-299K
$300-$399K
$400-$499K
$500-$749K
3% Over $750K Census
New Homes Selling Fast (median months from completion to sold) 3.9 3.7 3.4 3.1
3.2 3.2
3.2
3.8
3.7
3.3
3.6 3.6 3.4
3.3
Jul
3.4
3.2 3.2
3.1
3.0
2.9 2.9
2.8
3.5
2.7
Aug
Sep
Oct
Nov
Dec Jan-18 Feb
Mar
Apr May
Jun
Jul
Aug
Sep
Oct
Nov
Dec Jan-19 Feb
Mar
Apr May Census
Jun
Total Home Sales in thousands 597 600
500
626 575
586
521 522 472
467
489 450 415
361
373 368 334
January
February
March
April
May
June 2018
July
August
September October November December
2019 Census & NAR
PENDING Home Sales since 2014
100 = Historically Healthy Level
January 2014
January 2015
January 2016
January 2017
January 2018
January 2019
NAR
Pending Home Sales Year-Over-Year By Region
2.5% 1.7%
1.6% Northeast
South
1.4%
0.9%
U.S.
Northeast
Midwest
South
West
NAR
35%
Percentage of Distressed Property Sales
4%
January 2012 - Today Jan 2012
Jan 2013
Jan 2014
Jan 2015
2% Jan 2016
Jan 2017
Jan 2018
Jan 2019
NAR
Home Prices
EXISTING Home Prices Y-O-Y by region
6.9%
5.1% 4.5%
4.5%
2.5%
NAR
1.0%
0.8% -2.4%
-7.2%
-10.0%
% Change in Sales
-18.7%
%
$0-100K -18.7%
from last year by Price Range
$100-250K -10.0%
$250-500K 1.0%
$500-750K 0.8%
$750K-1M -2.4%
$1M+ -7.2% NAR
Case Shiller
Year-Over-Year
PRICE
CHANGES
Jun 2012
Jan 2013
Jan 2014
Jan 2015
Jan 2016
Jan 2017
Jan 2018
Jan 2019
S&P Case Shiller
oc t no v en di e2 c 01 9 fe b m ar ab r m ay
ju l ag o se p
oc t no v en di e2 c 01 8 fe b m ar ab r m ay ju n
ju l ag o se p
oc t no v en di e2 c 01 7 fe b m ar ab r m ay ju n
ju l ag o se p
oc t no v en di e2 c 01 6 fe b m ar ab r m ay ju n
ju l ag o se p
oc t no v en di e2 c 01 5 fe b m ar ab r m ay ju n
ju l ag o se p
01 4 fe b m ar ab r m ay ju n
en e2
Case Shiller Year-Over-Year PRICE CHANGES 20 City Composite
S&P Case Shiller
Case Shiller
6.4%
Year-Over-Year PRICE CHANGES 20 City Composite
5.9% 5.5% 5.1%
5.0% 4.6% 4.2% 3.5% 3.0% 2.6%
jun
jul
ago
sep
oct
nov
dic
ene 2019
feb
mar
2.5%
abr
2.4%
may S&P Case Shiller
Forecasted Year-Over-Year % Change in Price
CoreLogic
Appraiser Home Value Opinions Compared to Homeowner Estimates
-0.28
-0.28
-0.29
-0.28 -0.36 -0.45
-0.47
-0.50
Last 12 Months
-0.71 -0.78
-0.79 -0.87
%
Aug -0.28
Sept -0.28
Oct -0.29
Nov -0.28
Dec -0.36
Jan -0.45
Feb -0.47
Mar -0.5
Apr -0.78
May -0.87
June -0.79
July -0.71 Quicken Loans
HOUSING INVENTORY
Seller Traffic
NAR
Months Inventory of HOMES FOR SALE 2011 - Today
January 2011
January 2012
January 2013
January 2014
January 2015
January 2016
January 2017
January 2018
January 2019
NAR
Months Inventory of HOMES FOR SALE last 2 years
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan-18
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan-19
Feb
Mar
Apr
May
June
NAR
Months Inventory of HOMES FOR SALE Last 12 Months
4.4 4.3
4.3
4.4 4.3
4.3 4.2 4.0 3.9 3.8 3.7 3.6
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
June NAR
Year-over-Year Inventory Levels
January 2014
January 2015
January 2016
January 2017
January 2018
January 2019
% 7. 5. 3. 6. 6. 5. 5. 4. 6. 5. 5. -0 -0 -0 2. -0 1. 0. -4 -1 -3 -4 -1 -3 -2 -1 -1 -3 -9 -5 -5 -1 -6 -1 -9 -6 -7 -6 -6 -9 -8 -7 -9 -6 -6 -1 -9 -1 -9 -8 -7 -6 -6 0. 0. 2. 1. 2. 4. 6. 4. 2. 2. 1. 2. 0.
NAR
Year-over-Year Inventory Levels NAR
HOUSING SUPPLY Year-Over-Year
6.2% 4.6%
4.2%
2.9%
2.8%
2.7%
2.4%
1.1%
1.9%
2.7% 0.0%
0.0% Jul Jul
Aug Aug
Sep Sep
Oct Oct
Nov Nov
Dec Dec
Jan Jan
Feb Feb
Mar Mar
Apr Apr
May May
June Jun
Last 12 Months NAR
New Home Inventory months supply
2018
6.5
6.4 6.1 5.7 5.7 5.4
Jan
Feb
6.2
7.2
6.3
6.5
6.4
6.0
5.9 5.6
6.3
7.4
2019
5.6
5.3
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec Census
New Home Inventory months supply
7.4
7.2
6.2
6.3
6.5
6.4
Last 12 Months 6.5
6.4 6.1 5.7
Jul
Aug
Sep
Oct
Nov
Dec
Jan-19
Feb
Mar
6.3
5.9
Apr
May
Jun Census
BUYER DEMAND
Foot Traffic indicator of future sales
Jul 2013
Jan 2014
Jan 2015
Jan 2016
Jan 2017
Jan 2018
Jan 2019 NAR
Foot Traffic
Last 12 Months
indicator of future sales
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
June NAR
Foot Traffic indicator of future sales
January
February
March
April
May
June
2018 2019
July
August
September
October
November December NAR
Buyer Traffic
NAR
INTEREST RATES
Mortgage Rates Freddie Mac 30-Year Fixed Rate
3.95% 3.75%
1/4
2/1
3/1
4/5
5/3
6/7
7/5
8/2
9/6 10/4 11/1
12/6 1/3 1/31
3/7
4/4
5/2
6/6
7/3
Freddie Mac
3.97
6/6 7/3
3/7 4/4 5/2
12/6 1/3 1/31
9/6 10/4 11/1
6/7 7/5 8/2
4/5 5/4
1/5/20… 2/2 3/2 3/30 4/27 5/25 6/22 7/20 8/17 9/14 10/12 11/9 12/7 1/4/20… 2/1 3/1
10/6 11/3 12/1
7/7 8/4 9/1
4/7 5/5 6/2
1/7/16 2/4 3/3
30-Year Fixed Rate Mortgages from Freddie Mac
3.75
Freddie Mac
Mortgage Rate Projections Quarter
Freddie Mac
Fannie Mae
MBA
NAR
Average of All Four
2019 3Q
3.9
3.7
3.9
3.8
3.82%
2019 4Q
3.9
3.7
3.9
3.8
3.82%
2020 1Q
3.9
3.7
3.9
3.9
3.85%
2020 2Q
3.9
3.7
3.9
4.0
3.87%
Mortgage Rates Freddie Mac
- Actual - Projected
30-Year Fixed Rate
2017
2020
2018
2016
2019
2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Rate 3.7
3.6
3.5
3.8
4.2
4.0
3.9
3.9
4.3
4.5
4.6
4.8
4.4
4
3.9
3.9
3.9
3.9
4
4.1
Freddie Mac
Mortgage Rates
Freddie Mac
30-Year Fixed Rate
2020 Q1 2020 Q2
January 2018 – Today Actual Interest Rates
2019 Q3
Where Are They Going?
3.9 3.9 3.9 3.9 Q3
1/4 2/1 3/1 4/5 5/3 6/7 7/5 8/2 9/6 10/411/1 12/6 1/3 1/31 3/7 4/4 5/2 6/6 7/3
2019
2019 Q3
Q4
2019 Q4
Q1
Q2
2020
2020 Q1
2020 Q2 Freddie Mac
Mortgage Credit Availability YES
NO
MAYBE
Mortgage Credit Availability
Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association Apr 2013
Jan 2014
Jan 2015
Jan 2016
Jan 2017
Jan 2018
Jan 2019 MBA
900
800
700
600
500
Historic Data for the MORTGAGE CREDIT AVAILABILITY INDEX
(a report from the Mortgage Bankers Association) 400
300
200
100
0
June 2004 June 2005 June 2006 June 2007 June 2008 June 2009 June 2010 June 2011 June 2012 June 2013 June 2014 June 2015 June 2016 June 2017 June 2018 June 2019
MBA
Average Days
To Close A Loan
49
48
Last 12 Months
47
47
46 45 45
45
45
44
44 43
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
June
All Closed Loans as per Ellie Mae
® FICO
Score Requirements
Last 12 months
731 725 724
Jul
Aug
727 727 727 726
Sep
Oct
Nov
Dec
724
Jan
726 726
Feb
Mar
728 728
Apr
May
Jun
All Closed Loans as per Ellie Mae
® FICO
Score
35.8%
Distribution
23.4% 17.4%
14.6%
8.1% 0.03%
0.6%
500-549
550-599
600-649
49.53%
650-699
700-749
750-799
800+
All Closed Loans as per Ellie Mae
Average 731
754
® FICO
Score
for Closed Purchase Loans by Loan Type
711 675
All Loans
Conventional
FHA
VA All Closed Loans as per Ellie Mae
Average Back End DTI for Closed Purchase Loans by Loan Type
44 38
All Loans*
42
36
Conventional
FHA
VA All Closed Loans as per Ellie Mae