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Housing: What’s Next

New College of Florida April 18, 2012 David Crowe Chief Economist


Builder Sentiment Up since September 2011 NAHB/Wells Fargo Housing Market Index 30

Index

25

20

10

0


What Else?


Improving Signs - Macro • GDP growth improving: • 11H1=0.8%, 11H2=2.3% • Employment gains improving: • 11Q2=97K, 11Q4=137K, Feb=227K • Unemployment dropped: • Sept=9.0%, Mar=8.2% • U-6 Sept=16.2%, Mar=14.5% • New unemployment claims falling: • Sept 4wk avg=418K, Recent 4wk avg=368.5K

• Consumer confidence recovering: • Sept=46.4, Mar=70.2 • Small business optimism increased: • Sept=88.9, Mar=92.5


Improving Signs - Housing • Mortgage distress remains high but is falling and is concentrated: • Seriously Delinquent: 09Q4=9.7%, 11Q4=7.7% • 5 states have 53% of foreclosures, 12 states have 72% • NAHB/Wells Fargo Housing Market Index up 11 points in seven months: • Sept=14; Apr=25 • Housing starts 3-month moving average up 9 consecutive months: • Apr=553K, Jan=706K, Feb=698K • Single-family permits 3-month moving average up 10 consecutive months: • Apr=390K, Feb=472K • New and existing single-family home sales up from Sept • New> Sept=302K, Feb=313K, Existing> Sept=3,800K, Feb=4,060K • Improving Markets Index up 7 consecutive months: • Sept=12, Apr=101


Household Shortfall Demographic Trends Are Positive 114

2.5%

Number of Households 1 to 2 million gap

(million households)

113 112

2.0%

111 110 Percentage Change

109

1.5%

108

1.0%

107 106

0.5%

105 104

% Chg HHLDS

# HHLDS

Linear (# HHLDS)

Linear (# HHLDS)

2011

2010

2009

2008

2007

2006

2005

2004

2003

0.0% 2002

103


Housing Fundamentals Remain Good Mortgage Rates 20

Percent

18 16

14 12 10

Fixed-Rate

8 6

5.2

Adjustable-Rate

4

3.2 2 0

78

80

82

84

86

88

90

92

94

96

98

00

02

04

06

08

10

12


House Prices Below Long-term Averages House Price-to-Income Ratio 6.0

5.5

Long-term 3.2 Peak 4.7 Current 3.2

5.0

U.S.

4.5

4.0

3.5

3.0

2.5

2.0 90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11


Seriously Delinquent Loans Trending Lower Mortgages 90+ days delinquent or in foreclosure, % of all loans 11 10 9 8 7 6 5 4 3

2 1 0 05

06

07

08

09

10

11


But Delinquency Inventory Varies by State Foreclosure inventory plus 90-day+ delinquencies month’s supply at annual sales rate

24 states with less than six months inventory of distressed

U.S. = 8.4 months Six states with more than one year’s inventory of distressed

FL NJ MD IL DE CT WA CA NY RI UT IN OR DC SC GA NC PA MI NV NM HI LA VA ME MA TN MN WI OH AZ NH MO CO MS AL KY ID TX IA OK KS VT AR WV WY NE MT SD AK ND

20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0


Markets Are Local


Increase in Employment Greater Than National Average

Change in Employment Below U.S. average

0.6% to < 0.9% 0.9% to < 1.3%

1.3% to < 1.8% 1.8% or greater


Increase in Building Permits Greater Than National Average

Change in Building permits Below U.S. average

6.7% to < 11.7% 11.7% to < 18.3%

18.3% to < 31.2% 31.2% or greater


Change in House Prices Relative to U.S.

Change in House prices Below U.S. average

-4.2% to < -2.8% -2.8% to < -1.7%

-1.7% to < -0.6% -0.6% and greater


NAHB/First American Improving Markets Index â&#x20AC;&#x201C; The Number of Markets is Improving 120

98

100

80

99

101

Mar 12

Apr 12

76

60

41

40

30 23 20

12

0 Sep 11

Oct 11

Nov 11

Dec 11

Jan 12

Feb 12


101 Improving Metropolitan Areas AR Little Rock

FL Tampa

CA Fresno

GA Rome

CA Merced

IA

CO Boulder

MD Cumberland Hagerstown

NC Charlotte

OH Springfield

TX College Station

Goldsboro

OK Tulsa

Dallas

Ames

ME Lewiston

Greensboro

OR Corvallis

Laredo

Des Moines

MI Detroit

Greenville

OR Portland

Longview

PA Altoona

McAllen

Erie

Midland

Denver

Dubuque

Flint

Rocky Mount

Fort Collins

Iowa City

Grand Rapids

Winston-Salem

Greeley

Sioux City

Lansing

ND Bismarck

Lancaster

Odessa

CT New Haven

Waterloo

Monroe

Fargo

Pittsburgh

San Antonio

Muskegon

Grand Forks

Williamsport

Tyler

DC Washington FL Cape Coral Crestview

ID Boise City Coeur dâ&#x20AC;&#x2122;Alene IN Elkhart

Saginaw

NE Lincoln

MN Minneapolis

NJ Ocean City

MO Columbia

NY Buffalo

SC Charleston Spartanburg SD Sioux Falls

Victoria UT Provo

Deltona

Evansville

Jacksonville

Indianapolis

Jefferson City

Glens Falls

TN Chattanooga

VT Burlington

North Port

Lafayette

Joplin

Rochester

Kingsport

WV Huntington

Kansas City

Utica

Nashville

WY Casper

Orlando

KY Louisville

Panama City LA Lake Charles MS Jackson Punta Gorda

Monroe

NC Burlington

OH Columbus Dayton

TX Amarillo Brownsville

St. George

Cheyenne


101 Improving Metropolitan Areas Improving Markets


Forecast


Real GDP Growth â&#x20AC;&#x201C; Hesitated but Improving Q/Q Percent Change, SAAR

10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% 90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13


Sales Dipped, But Due to Recover New and Existing Single-Family Home Sales Million

Million

1.6

8

1.4

7

1.2

6

1.0

5

Existing (R) 0.8

4

New (L) 0.6

3

0.4

2

0.2

1

0.0

0 90

92

94

96

98

00

02

04

06

08

10

12


Single-Family Starts â&#x20AC;&#x201C; Waiting for Job Recovery Thousands 2,000

1995-2003

1,256,000

2010

471,000

2011

433,000

-8%

2012

506,000

17%

2013

660,000

30%

1,800

1,600 1,400 1,200 1,000 800 600

Trough to Current: Mar 09 = 353,000 Feb 12 = 457,000 +28%

400 200 0 90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13


Multifamily Housing Starts Healthy Response from Growth in Renters Thousands 600

1995-2003 2010 2011 2012 2013

450

331,000 114,000 177,000 216,000 235,000

55% 22% 9%

300

Trough to Current: 4th Q 09 = 82,000 4th Q 11 = 204,000 149%

150

0

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13


Residential Remodeling â&#x20AC;&#x201C; Continuous Improvement Owner-Occupied Improvements 150

Billions 2005 $, SAAR

YR 2011 2012 2013

140 130 120

4Q/4Q Chg 3.5% 12.0% 7.9%

110 100 90 80 70 60 93

94

95

96

97

98

99

00

01

02

03

04

05

Source: U.S. Census Bureau, NAHB Economic and Housing Forecast.

06

07

08

09

10

11

12

13


Long Road Back to Normal* for Single-Family Housing Starts â&#x20AC;&#x201C; Q4 2013

Single-Family Housing Starts Relative to Normal Less than 51% 51% to 60% 60% to 67% 67% to 76% Greater than 76%

* Normal Production is measured as SingleFamily housing starts between Q1 2000 and Q4 2003

* Normal is the average from Q1 2000 to Q4 2003


Questions? Answers: www.housingeconomics.com eyeonhousing.wordpress.com

Housing: What's Next?  

David Crowe's Presentation at GIC and New College "Housing: What's Next?" Conference