Housing, H i Fannie F i and d Freddie F ddi and the Policy Shift Doug Duncan, Chief Economist Fannie Mae April 16 16, 2014 Š 2012 Fannie Mae. Trademarks of Fannie Mae.
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Di l i Disclaimer Opinions, p , analyses, y , estimates,, forecasts,, and other views of Fannie Mae's Economic & Strategic Research (ESR) group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many f t factors. Alth Although h the th ESR group b bases itits opinions, i i analyses, l estimates, ti t fforecasts, t and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
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Housing g Demand New Home Sales Have Leveled Off Too But Have An Upside Potential
The Resale Market Has Deteriorated Sharply Amid Higher Mortgage Rates 7,500
130
7,000
1,600
120
6,500 6,000
1 400 1,400 1,200
110
1,000
5,500
100
5,000 4,500
800 600
90
4,000
400
80
3,500
200
3,000
70 '01
'02
0
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Existing Home Sales (SAAR, Thousands, Left Axis) Pending Home Sales Index (2-Month Lead, SA, Right Axis)
'00
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
New Single-Family Home Sales (SAAR, Units)
Weather May Have Affected Existing Home Sales in the Midwest, But What Explains The Sharp Drop In The West? 5%
'01
Poor Weather Has Reduced Buyer Traffic 60 50
0% 40 30
-5%
20 -10%
10 0
-15% Aug-13
Sep-13
Northeast Region
Oct-13
Nov-13
Midwest Region
Dec-13
South Region
Jan-14 West Region
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
HMI: Traffic of Prospective Buyers of New Homes Index (SA, All Good = 100)
Sources: National Association of REALTORS速, Census Bureau, National Association of Home Builders
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Housing g Supply y Actual Listings Have Picked Up But Are Still At Low Levels
Rate Rise And Weather Caused A Pause In Construction 2,000
4,000
1,800 1,600
3 500 3,500
1,400
3,000
1,200
2,500
1,000
2,000
800
600 500 400 300
1,500
600
200
1 000 1,000
400
100
500
200 0
0 '00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
Housing Starts: 1 Unit (SAAR, Thous.Units) Housing Units Authorized: 1-Unit Structures (SAAR, Thous.Units)
Months Supply of Inventory Is Back Near Historical Norm
Owner-Occupant Vacancy Rate Is Above Its Long-Term Average
42%
0 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 NAR Single Fam Homes Avail for Sale at End of Period, United States (NSA, Thous.) (Left Axis) New 1-Family Houses For Sale: United States (NSA, Thous) (Right Axis)
18 16
40%
14 12
38%
10 36%
8 6
34%
4 32%
2 0
30% '85
'87
'89
'91
'93
'95
'97
'99
'01
'03
'05
'07
'09
'11
'13
Year-Round Held Off Market as a Share of Total Vacant Housing…
'00
'01
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Months' Supply of Existing Single Family Houses (Months) Months' Supply of Existing Condos and Co-ops (Months)
Sources: National Association of REALTORS®, Census Bureau, National Association of Home Builders
'14
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Housing g Starts and Permits Housing Starts Have Been Gradually Increasing In Thousands
Rental Share Of Construction Has Been Growing More Quickly
2,500
35%
3-Month Moving Average (SAAR)
4-Quarter Moving Average
30%
2 000 2,000
25% 1,500
20% 1,000
15% 10%
500
5% 0 91
93
95
97
99
01
03
Single Family
05
07
09
11
Multi-Family
South Region Dominates The Increase In Starts
In Thousands 1,200
13
0% 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Multi-Family Share (condos and apartments) Built-to-Rent Share (multi-family and single-family)
Permits Also Have Been Increasing In Thousands 2,500
3-Month Moving Average (SAAR)
1,000
2,000
800 1,500 600 1,000
400
500
200 0
0 91
93
95 97 Northeast
99
01 03 Midwest
05
07 09 South
11
13 West
91
93
95
97
99
01
Single Family
Source: Census Bureau
03
05
07
09
11
13
Multi Family
5
Home Prices Home Price Growth Estimates Vary Depending On The Source
One-Year Home Price Growth, as of 2013 Q4
14%
United States 8.8%
WA 1 0. 9%
Year-Over-Year Growth As of Dec 2013-Indices Based on a Variety of Methods and Input Data
MT 7 .3 %
OR 11 .9 %
12%
NH 7. 1 %
ND 7.7% MN 7 .3 % WI 2. 7 %
SD 4. 3%
ID 8. 9% WY 2. 6 %
10%
NE 5. 3 %
8% CA 25 .4 %
NV 2 7. 2%
UT 9. 4%
6%
CO 9. 3%
MI 12 .0 0%
OH 4 .3 %
MO 4 .1 % KY 2. 7 %
4%
AZ 18. 9 %
2%
OK 3. 2 %
NM 3 .0 %
TX 6 .8 %
0% to 5%
PA 3 .1 %
WV 1.1 %
TN 3 .3 %
AL 2. 5%
RI 4. 0% CT 2. 7 % NJ 4. 7 % DE 2. 7 %
VA 4 .6 %
MD 7. 0 %
DC 9 .3 %
NC 3 .9 %
AR 1 .7 % MS 2 .4 %
0%
MA 7 .7 %
NY 4 .8 %
IA 2. 9% IN IL 7 .8 % 3. 4 %
KS 3 .2 %
ME 4. 1 %
VT 1. 9%
SC 4 .6 6% GA 1 4. 6 %
LA 2 .8 % FL 17 . 0%
5% to 10% 10% and above
Home Price Growth, Peak*-to-Current to 2013 Q4 WA - 1 8. 0%
900 MT -1 .3 %
OR - 1 6. 9 %
ND 0 .0 %
WY -1 .5 % NE 0. 0 %
NV - 4 3. 7 %
UT - 11. 8%
CO 0. 0%
NH - 1 7 .5 %
MN -1 3 . 9 % WI -9 .9 %
SD - 0. 5 %
ID - 18 . 5 %
CA - 28 . 5%
R t Have Rents H C Continued ti d To T Grow G But B t the th Pace P Appears to Have Slowed
KS -0.6 %
VT - 7. 6 % MI - 21 . 8%
OK 0. 0 %
NM - 1 3. 3%
State Growth Rate Below -30% -30% to -15% -15% to -5% -5% to 0% 0%
OH -9 .9 % IL IN - 2 0. 6% - 2 . 0 %
PA -4 .2 %
WV 0. 0%
TN - 5 . 8% AR - 3 .2 %
LA 0 .0 %
RI - 2 9. 8 % CT - 19 . 6 % NJ - 23 . 5 % DE - 18 . 3%
MO -8.3 %
AL MS - 8 . 8 % - 8. 8 % TX 0 .0 %
MA - 1 2. 8%
NY - 8. 8 2%
IA - 0. 6%
KY -1 .0 % AZ - 33 . 4 %
ME -9 .5 %
VA - 15 . 5%
MD - 2 3. 4 %
800 700 600 500
DC -1.5 %
400
NC - 8 .1 % SC -9 .9 % GA - 18 . 6%
FL - 3 9. 3%
United States -13.5%
Note: Date of peak is determined for each state individually. States currently at peak prices show 0.0% change.
300 200
Nominal Asking Rents
Sources: CoreLogic, Zillow, Census Bureau, National Association of REALTORS速, FHFA, Fannie Mae
Real Asking Rents
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Rentals Price-to-Rent Ratio Is At Its Long-Term Average
Rental Vacancy Rate Has Continued To Decline Percent
30.0
14.0 13.0
25.0
12.0
20 0 20.0
11.0
15.0
10.0 9.0 8.0
10.0
7.0
5.0
6.0 5.0
0.0
4.0
Price to Rent Ratio, National, NSA Average (1988-now)
Rent Growth Varies By Region
Single-Family Rental Vacancy Rate
Multi-Family Rental Vacancy Rate
C Composition iti off R Rental t l St Stock kB By T Type off St Structure t
8.0% 7.0%
4.6%
6.0% 11.6%
5.0%
28 5% 28.5%
4 0% 4.0% 3.0%
8.4%
2.0% 1.0% 0.0% 22.3%
-1.0%
6.3% 18.3%
As of end of 2012 Annual growth at end of year 2013
Sources: Census Bureau, CBRE Econometric Advisors
1, Detached
1, Attached
2-4
5-19
20-49
50+
Other 7
Demographics
Demographics g p Household Formation Remains Below Long-term Average
The Share of Young Adults Living at Home Has Continued To Edge Higher 25-34 Year Olds Living at Home with Parents* (%)
Household Growth (Thousands of Households, Year-over-Year)
15%
2,500
12%
2,000
9%
1,500
6%
1,000
3%
500
0%
0 '00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
US Homeownership p Rate Has Declined Toward “Normal�
'13
'60 '65 '70 '75 '80 '85 '90 '95 '00 *Values from 1960, 1970, and 1980 are from the Decennial Census.
'05
'10
Immigration g Reform Implications p Are Greater For Border States
Homeownership Rate (%) 70 69 68 67 66 65 64 63 62 '65
'70
'75
'80 HVS
Source: Census Bureau
'85
'90
'95
'00
'05
'10
Decennial census
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Mortgage g g Credit Declining Housing Affordability Hurts Potential Homebuyers 250 200
Mortgage Purchase Applications Have Trended Down 600
12%
500
10%
400 8%
150
300 6%
100
200 4%
100
50
0
0 '81
'86
2% '90
'91 '96 '01 '06 '11 Housing Affordability Index - Composite (Fixed + ARM) First-time Homebuyer Affordability Index
'95
'00
'05
'10
MBA Purchase Applications Index (SA, Mar-16-90=100, Left Axis)
MBA 30-Year FRM Contract Interest Rate (%, Right Axis)
Loan Officers Report Tighter Lending Standards And Significantly Reduced Demand 100% 80% 60%
ARM Share of Mortgage Production Unlikely to Reach Levels Witnessed In Prior Cycles Of Rate Increases 12% 60% 10%
50%
20%
8%
40%
0%
6%
30%
4%
20%
2%
10%
40%
-20% -40% -60% -80% '00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
Banks Tightening Standards Residential Mortgages to Individuals (Net, %) Banks Reporting Stronger Demand for Residential Mortgages to Individuals (Net, %)
*Note: Includes all types of residential mortgages
0%
0% '90
'92
'94
'96
'98
'00
'02
'04
'06
'08
'10
'12
30-Year FRM Rate (%, LEFT AXIS) ARM Share of Dollar Volume of Loan Applications (%, RIGHT AXIS)
Sources: National Association of REALTORS速, Mortgage Bankers Association, Federal Reserve Board
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Loan Quality y and Portfolios Conventional And Non-Conventional SDQ Loans Have Declined At A Similar Pace But From Different Levels 6.0% As of Q4 2013 5.0%
Share Of Non-Conventional Loans That Are 3059 Days Delinquent Have Declined 8.0%
As of Q4 2013
7.0% 6.0%
4.0%
5.0%
3.0%
4.0% 3.0%
2.0%
2.0% 1.0%
1 0% 1.0% 0.0%
0.0% '00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'00
'13
'01
'02
Conventional Share of Loans that are 90+ Days Past Due Non-Conventional Share of Loans that are 90+ Days Past Due
Holders of Single-Family Mortgages (As A Percent Of Single-Family Mortgage Debt Outstanding, $ Volume)
'03
'04
'06
'07
'08
'09
'10
'11
'12
'13
Conventional Share of Loans that are 30-59 Days Past Due Non-Conventional Share of Loans that are 30-59 Days Past Due
D ll Volume Dollar V l Of VA Loans L Are A An A Increasing I i Share Of Ginnie Mae’s Portfolio
90%
40% 3-Month Moving Average
80%
35%
70%
'05
30%
60% 25%
50% 40%
20%
30%
15%
20%
10%
10%
5%
0% 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
Commercial Banks
Thrifts
0% '01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
GSEs VA Share of Ginnie Mae
Sources: Mortgage Bankers Association, Fed Flow of Funds, FDIC, S&L Fact
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GSEs Fed Is Slowing Its Purchases
Fed Is The Second Largest Holder Of MBS
Mill US$ 130,000
Other, 4.2%
110,000
Nonbanks , 1.5%
State & Local Govts, 6.1%
Foreign Sector 11 4% Sector, 11.4%
Mutual Funds, 10 7% 10.7%
90 000 90,000 70,000
GSEs, 3.8% 50,000 30,000
Pension Funds, 5.6%
10 000 10,000
Insurers 6 1% Insurers, 6.1%
Federal Federal Reserve, 19.9%
Fannie Mae
Freddie Mac
Jan-14
Jul-13
Oct-13
Apr-13
Jan-13
Jul-12
Oct-12
Apr-12
Oct-11
Jan-12
Jul-11
Apr-11
Oct-10
Jan-11
Jul-10
Apr-10
Jan-10
Jul-09
Oct-09
Apr-09
Jan-09
-10,000
Ginnie Mae
Note: As of March 2014
Single-Family MRS Issuance Has Declined
2 0% 2.0% 1.5% 1.0%
($BN) QE3
QE1
2.5%
QE2 - Treassuries only
Fed Policy Moves Mortgage Rates & Spreads 3.0%
Depository Institutions, 22.1%
140 120 100 80 60 40 20
0.5%
0
0.0% '95
'97 '99 '01 '03 Primary Spread Primary-Secondary Spread
'05
'07 '09 Secondary Spread
'11
'13
Fannie Mae
Sources: Mortgage Bankers Association, Freddie Mac, Fannie Mae, Federal Reserve Board
Freddie Mac
Ginnie Mae
Private Label 11
S Speaker k Bi Biography h Douglas G. Duncan is Fannie Mae’s Senior Vice President and Chief Economist. He is responsible for managing Fannie Mae’s Economic & Strategic Research Group and oversees corporate t strategy. t t In I this thi leadership l d hi role, l D Duncan provides id allll economic, i housing, and mortgage market forecasts and analyses, and serves as the company’s thought leader and spokesperson on economic and mortgage market issues. Prior to joining Fannie Mae, Duncan was Senior Vice President and Chief Economist at the Mortgage Bankers Association. His experience also includes service as a LEGIS Fellow and staff member with the Committee on Banking, Finance, and Urban Affairs for Congressman Bill McCollum in the U.S. House of Representatives, and work on the Financial Institutions Project at the U.S. Department of Agriculture. He has been elected to the Board of Directors for the National Association of Business Economists,, is a member of the American Economics Association and the American Real Estate and Urban Economics Association, and is past president of the Housing Statistics Users Group. Named one of Bloomberg / BusinessWeek’s 50 Most Powerful People in Real Estate and one of Inman News’ 100 Most Influential Real Estate Leaders for 2013, Duncan is a frequent speaker on national and state economic economic, housing housing, and mortgage market conditions. Duncan received his Ph. D. in Agricultural Economics from Texas A&M University and his B.S. and M.S. in Agricultural Economics from North Dakota State University.
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C t t IInformation Contact f ti fanniemae.com/portal/research-and-analysis/
Doug Duncan, Senior Vice President & Chief Economist Fannie Mae 3900 Wisconsin Avenue, NW Mail Stop 1H-2N/01 Washington, DC 20016 (o) 202-752-0160 (c) 202-409-5913 (f ) 202 (fax) 202-752-4441 2 4441 douglas g duncan@fanniemae.com douglas_g_duncan@fanniemae.com
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