KCM and DPR Realty January 2021 National Housing Market Update

JANUARY 2021

“Market data has always been a powerful tool for real estate, but 2020 marked a new high point for how data was leveraged to encourage informed decisions and to help real estate professionals reinforce their status as market experts…”

ShowingTime

Positive Takeaways from 2020

6.6%

2008

2001

3.5% 1991

-1.9%

1981

6.1%

1980

HOME PRICE CHANGE

During Last 5 Recessions -19.7% March 2020

CoreLogic National Home Price Index

7.3%

2020

6.6%

2008

2001

3.5% 1991

-3%

1981

6.1%

1980

HOME PRICE CHANGE

During Last 6 Recessions -19.7% CoreLogic National Home Price Index

THE GROWTH OF HOME EQUITY

“Over the past year, strong home price growth has created a record level of home equity for homeowners. The average family with a home mortgage loan had $194,000 in home equity in the third quarter. This provides an important buffer to protect families if they experience financial difficulties and is one reason for the generational-low in foreclosure rates.�

Frank Nothaft

Chief Economist at CoreLogic

American Home Equity Skyrockets

$17,000

$194,000

38.2%

10.8%

average gain in equity of mortgaged homes

of all homes are owned ‘free and clear’

current average equity of mortgaged homes

increase in equity totaling over $1 trillion American Community Survey, CoreLogic

YOY Equity Gains

CoreLogic

“The housing market has remained a strong pillar in an otherwise tumultuous economic year. A sharp rise in demand, spurred by record-low interest rates, continues to bolster homeowner equity. And with many people now spending more time than ever before at home, some homeowners have tapped into their strengthening equity to fund renovations.�

Frank Martell

President and CEO of CoreLogic

$54,221 $300,000

$313,200

potential growth in household wealth over the next five years based solely on increased home equity if you purchase a $300K home in January 2021

$324,162

$333,887

$343,903

$354,221

Based on price appreciation projected by the Home Price Expectation Survey

2021

2022

2023

2024

2025

2026

Home Price Expectation Survey 2020 4Q

WHATS AHEAD IN 2021…

“The surge in the work-from-home population has rewritten the playbook for many homebuying and rental decisions, from when and where to relocate, to what people are looking for in their next residence‌â€?

David Mele

President at Homes.com

“Despite the best intentions of home builders to provide more housing supply, the big short in housing supply will continue into 2021 and likely keep house price appreciation flying high.�

Mark Fleming

Chief Economist at First American

6%

6%

2021

5.7% 4.1%

Home Price Forecasts 2.6%

NAR

Zelman

realtor.com

CoreLogic

Freddie Mac

2.1%

Fannie Mae

2%

MBA

“The bright spot for buyers is that more homes are likely to become available in the last six months of 2021. That should give folks more options to choose from and take away some of their urgency. With a larger selection, buyers may not be forced to make a decision in mere hours and will have more time to make up their minds‌â€? realtor.com

THE ECONOMY

More Depth, Less Length -2 -3

Before

Start

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

-4 -5 -6 -7 -8 -9 -10 -11 -12 -13 -14

Great Recession 2006-2016 WSJ Survey of Economists The Fed Actual

-15

Years for unemployment rate to return to near pre-crisis level

Unemployment Projections WSJ Economists Survey Fed Projections

6.7% 5.6%

Current

2021

5%

4.8%

4.2%

2022

4.4%

3.7%

2023

BLS, Fed, & WSJ Survey of Economists Projections

“Renters are disproportionately hurt by the crisis…

A greater share of renters lost their jobs.

That meant losing savings that could have been used for a down payment, and falling behind on bills, which will hurt their credit and make it even more difficult for them to be future homeowners.”

Jung Hyun Choi

Research Associate with the Housing Finance Policy Center at the Urban Institute

For each of the following possible post-forbearance outcomes, what percentage of these 2.7 million homeowners do you estimate will...

18%

Receive a foreclosure notice within 1 year of exiting forbearance

(486K)

24%

List their home within 1 year of exiting forbearance

58%

Resume their mortgage payments and stay in their home for at least 1 year

(1.57M)

(648K)

Home Price Expectation Survey 2020 4Q

“Treasury rates have really been moving up since the election, but mortgage rates have kept going down...

We’re going to start to see mortgage rates drift up with Treasury rates, as opposed to moving in the opposite direction.”

Michael Fratantoni Chief Economist at MBA

Date

Mortgage

Interest Rate

P&I*

Today

$300,000

2.7%

$1,216.79

2021 4Q

$317,100**

3.4%**

$1,406

Difference in Monthly Payment The difference in the life of the loan (30 Yrs.) *Principal and Interest Payment

$189.21 $68,115.60

** 2021 Mortgage Rate and Home Price increase of 5.7% forecasted by realtor.com

“I do believe that the American dream of homeownership is very strong. It's very much alive from all of the survey data that I've seen. If you're not a homeowner, you want to be one in the future, whether that's a shortterm or a long-term goal.�

Jessica Lautz

VP of Demographics and Behavioral Insights at NAR

Resources Slide

Slide Title

Link

2

ShowingTime Quote

https://www.showingtime.com/blog/positive-takeaways-from2020/?utm_source=feedotter&utm_medium=email&utm_campaign=blog_digest&utm_conten t=httpswwwshowingtimecomblogpositivetakeawaysfrom2020

4-5

Price Change During Recessions

https://www.corelogic.com/blog/2019/03/housing-recessions-and-recoveries.aspx https://www.corelogic.com/news/gaining-momentum-annual-u.s.-home-prices-appreciated7.3-in-october-corelogic-reports.aspx

7

Nothaft Quote

https://www.corelogic.com/insights-download/homeowner-equity-report.aspx

8

American Home Equity Skyrockets

https://www.corelogic.com/insights-download/homeowner-equity-report.aspx https://data.census.gov/cedsci/all?q=mortgage

9-10

YOY Equity Gains Map, Martell Quote

https://www.corelogic.com/insights-download/homeowner-equity-report.aspx

11

Potential Growth in Wealth

https://pulsenomics.com/surveys/#home-price-expectations

13

Mele Quote

https://atlantaagentmagazine.com/2020/12/10/remote-workers-could-continue-to-drive-thepost-pandemic-market/

14

Fleming Quote

https://blog.firstam.com/economics/why-the-big-short-in-housing-supply-will-remain-in-2021

Resources

Slide

Slide Title

Link

15

2021 Home Price Forecasts

https://www.corelogic.com/insights-download/home-price-index.aspx nar.realtor www.mba.org www.freddiemac.com www.fanniemae.com https://news.move.com/2020-12-02-Realtor-com-R-2021-Housing-Forecast-Sellers-Will-Get-Top-DollarAs-Buyers-Struggle-with-Affordability http://zillow.mediaroom.com/2020-12-18-Home-Value-Growth-Breaks-Records-as-Rents-Stabilize https://www.nar.realtor/newsroom/top-economic-and-housing-experts-predict-post-pandemicrebound-with-continued-job-growth-stable https://www.redfin.com/news/housing-market-predictions-2021/

16

realtor.com Quote

https://www.realtor.com/news/trends/housing-market-2021-forecast/

More Depth, Less Length

www.thebalance.com/unemployment-rate-by-year-3305506 www.wsj.com (subscription required) https://www.bls.gov/news.release/pdf/empsit.pdf

19

Unemployment Projections

https://www.thebalance.com/unemployment-rate-by-year-3305506 https://www.wsj.com/graphics/econsurvey/ https://www.bls.gov/news.release/pdf/empsit.pdf https://twitter.com/Neil_Irwin/status/1339284909580574720

20

Choi Quote

https://time.com/5917894/evictions-housing-market-covid/

21

Post-Forbearance Outcomes

https://pulsenomics.com/surveys/#home-price-expectations

22

Fratantoni Quote

https://www.bankrate.com/mortgages/why-rates-are-still-falling-despite-improving-economy/

23

Difference in Monthly Payment

http://www.freddiemac.com/fmac-resources/research/pdf/202010-Forecast-03.pdf https://news.move.com/2020-12-02-Realtor-com-R-2021-Housing-Forecast-Sellers-Will-Get-Top-DollarAs-Buyers-Struggle-with-Affordabilityhttps://www.mortgagecalculator.net/

24

Lautz Quote

https://dsnews.com/news/12-10-2020/the-american-dream-of-homeownership-is-very-much-alive

18

Resources Slide

Slide Title

Link

31, 51, 63

Confidence Index

https://www.nar.realtor/research-and-statistics/research-reports/realtors-confidenceindex

32-34, 42, 5156

Existing Home Sales

https://www.nar.realtor/topics/existing-home-sales

35-38

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

39

Total Home Sales

http://www.census.gov/construction/nrs/pdf/newressales.pdf https://www.nar.realtor/topics/existing-home-sales

40,41

Pending Home Sales

https://www.nar.realtor/research-and-statistics/housing-statistics/pending-homesales

46-48

Case Shiller

https://www.spglobal.com/spdji/en/indices/indicators/sp-corelogic-case-shiller-20city-composite-home-price-nsa-index/#news-research

49

CoreLogic Forecasted YOY % Change in Price

https://www.corelogic.com/insights-download/home-price-index.aspx

52-58

Inventory

https://www.nar.realtor/topics/existing-home-sales http://www.census.gov/construction/nrs/pdf/newressales.pdf

Resources Slide

Slide Title

Link

60-62

Foot Traffic

http://nar.realtor/infographics/foot-traffic

65,66, 68,69

Mortgage Rates

http://www.freddiemac.com/pmms http://www.freddiemac.com/pmms/pmms_archives.html

67

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-andeconomics/forecasts-and-commentary https://www.nar.realtor/research-and-statistics

71,72

Mortgage Credit Availability

https://www.mba.org/news-research-and-resources/newsroom https://www.mba.org/news-research-and-resources/research-and-economics/singlefamily-research/mortgage-credit-availability-index

73-77

Days To Close, FICO Scores, DTI

http://www.elliemae.com/resources/origination-insight-reports

Average Days on the Market

NAR

EXISTING Home Sales

Since January 2014 Jan 2014

Jan 2015

Jan 2016

Jan 2017

Jan 2018

Jan 2019

Jan 2020

NAR

EXISTING Home Sales Y-O-Y by region

27.3%

25.8%

25.9%

25.7%

24.2%

U.S.

Northeast

Midwest

South

West NAR

Existing Home Sales in thousands

January

February

March

April

May

June

2018

July

2019

August

September October November December

2020 Census & NAR

New Home Sales in thousands

January

February

March

April

May

June

2018

July

2019

August

2020

September

October

November December

Census & NAR

New Home Sales annualized in thousands

jun-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan 2020

Census

New Home Sales 37%

% of sales by price range

27%

14%

2% Under $150K

12%

5% $150-$199K

5% $200-299K

$300-$399K

$400-$499K

$500-$749K

Over $750K Census

New Homes Selling Fast (median months from completion to sold)

4.5 4.5 4.2 3.9 3.7

3.8

3.7

3.3

3.6 3.6 3.4

3.3

3.5

3.6

3.2 3.2

3.1

3.2

2.9 2.9

3.4 3.4 3.4 3.1

3.0

4.1

3.6

3.6

3.5

3.4

4.3

3.2

3.3

3.0

2.7

Jan-18 Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec Jan-19 Feb

Mar

Apr

May

Jun

Jul

Aug

sep

Oct

Nov

Dec 20-Jan Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Census

Nov

Total Home Sales in thousands 682 641 598

594 586

595

589

520

506

468 475 376 334

January

368

426

398

February

March

April

551

517 454

436

May

649

640

June 2019

July

August

483

September October November December

2020 Census & NAR

PENDING Home Sales since 2014

100 = Historically Healthy Level

NAR

Pending Home Sales Year-Over-Year By Region 21.3%

16.4%

15.3%

14.1% 10.4%

U.S

Northeast

Midwest

South

West

NAR

35%

Percentage of Distressed Property Sales Distressed sales – foreclosures and short sales – represented less than 1% of sales in November

4%

January 2012 - Today Jan 2012

Jan 2013

Jan 2014

Jan 2015

Jan 2016

Jan 2017

Jan 2018

Jan 2019

1% Jan 2020

NAR

Home Prices

EXISTING Home Prices Y-O-Y by region

17.4% 14.6%

U.S.

14.6%

Northeast

Midwest

15.0%

South

13.8%

West NAR

% Change in Sales from last year by Price Range

84.9%

88.1%

64.9% 37.3% 1.1% -21.7%

%

$0-100K -21.7%

$100-250K 1.1%

$250-500K 37.3%

$500-750K 64.9%

$750K-1M 84.9%

$1M+ 88.1% NAR

Case Shiller

Year-Over-Year

PRICE

CHANGES

Jun 2012

Jan 2013

Jan 2014

Jan 2015

Jan 2016

Jan 2017

Jan 2018

Jan 2019

Jan 2020

S&P Case Shiller

Jan 2014 Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan 2015 Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan 2016 Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan 2017 Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan 2018 Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan 2019 Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Jan 2020 Feb Mar Apr May Jun Jul Ago Sept Oct

Case Shiller Year-Over-Year PRICE CHANGES 20 City Composite

S&P Case Shiller

Case Shiller

7.9%

Year-Over-Year PRICE CHANGES 20 City Composite

6.6%

5.3%

3.9% 4.0% 3.5% 2.6%

2.8%

4.1% 3.6% 3.5%

3.1%

2.2%

Oct

Nov

Dec

Jan 2020

Feb

Mar

Apr

May

Jun

Jul

Aug

Sept

Oct

S&P Case Shiller

Year-Over-Year % Change in Price 8.2%

2.5%

Current

Forecast CoreLogic

HOUSING INVENTORY

Seller Traffic Index

NAR

Months Inventory of HOMES FOR SALE 2011 - Today

Januar y 2011

Januar y 2012

Januar y 2013

Januar y 2014

Januar y 2015

Januar y 2016

Januar y 2017

Januar y 2018

Januar y 2019

Januar y 2020

NAR

Months Inventory of HOMES FOR SALE last 2 years

4.2

4.3 4.3 4.3

4.4

4.3

4.2 4.0

4.3 4.3

4.2 4.0 4.0

3.8 3.6

3.8 3.6

4.8

4.0

3.9

3.9

3.7 3.4 3.0

3.1

3.0

3.1

3.0 2.7 2.5 2.3

NAR

Months Inventory of HOMES FOR SALE Last 12 Months

4.8

4.0

3.9

3.7 3.4 3.0

3.1

3.1

3.0

3.0 2.7

Nov

Dec

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

2.5 Oct

2.3 Nov NAR

Year-over-Year Inventory Levels January 2014

January 2015

January 2016

January 2017

January 2018

January 2019

January 2020

% 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. -1 -2 -2 -4 -5 -9 -1 -9 -1 -1 -1 -1 -2 -1 -1 -1 -2

NAR

HOUSING SUPPLY Year-Over-Year

Dec

Jan 2020

-9.0%

Feb

Mar

-9.8%

-10.20%

-11.3%

Last 12 Months

Apr

-19.70%

May

-18.8%

June

Jul

-18.2%

Aug

-18.6% -21.1%

Sept

-19.2%

Oct

Nov

-19.8% -22.0%

NAR

New Home Inventory months supply

Last 12 Months 6.8 6.5

5.5

5.3

5.3

5.0 4.3

4.1 3.6

Dec

20-Jan

Feb

Mar

Apr

May

Jun

Jul

3.5

3.5

Aug

Sept

3.6 Oct Census

New Home Inventory months supply

2019 6.8

6.5

6.5 6.1

6.7

6.1

5.9

5.8 5.5

2020

5.7 5.3

5.3

5.0

5.6

5.5

5.3

5.0

4.3

4.1 3.6

Jan

Feb

Mar

Apr

May

Jun

Jul

3.5 Aug

3.5 Sept

3.6

Oct

Nov

Dec Census

BUYER DEMAND

Foot Traffic indicator of future sales

Jul 2013 Jan 2014

Jan 2015

Jan 2016

Jan 2017

Jan 2018

Jan 2019

Jan-20

NAR

Foot Traffic Last 12 Months Indicator of future sales

60.9

47.3

46.5 41.8

40.7

35.6

39.8

32.9 29.4

13.5 6.8 1.8 Dec

Jan

Feb

Mar

Apr

May

June

July

Aug

Sept

Oct NAR

Foot Traffic indicator of future sales

2019 2020

January

February

March

April

May

June

July

August

September

October

November December

NAR

Buyer Traffic Index

NAR

INTEREST RATES

1/7

12/3

11/5

10/1

9/3

8/6

7/2

6/4

5/7

4/2

3/5

2/6

1/2

12/5

11/7

10/3

9/5

8/1

7/3

6/6

5/2

4/4

3/7

1/31

1/3

12/6

11/1

10/4

9/6

8/2

7/5

6/7

5/3

4/5

3/1

2/1

1/4

Mortgage Rates Freddie Mac 30-Year Fixed Rate

3.95%

2.65%

Freddie Mac

1/7

11/5 12/3

8/6 9/3 10/1

5/7 6/4 7/2

2/6 3/5 4/2

11/7 12/5 1/2/2020

9/5 10/3

6/6 7/3 8/1

3/7 4/4 5/2

12/6 1/3/2019 1/31

9/6 10/4 11/1

6/7 7/5 8/2

4/5 5/4

1/5/2017 2/2 3/2 3/30 4/27 5/25 6/22 7/20 8/17 9/14 10/12 11/9 12/7 1/4/2018 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

3.97%

2.65%

Freddie Mac

Mortgage Rate Projections Quarter

Freddie Mac

Fannie Mae

MBA

NAR

Average of All Four

2021 1Q

3.0

2.7

2.9

2.9

2.87%

2021 2Q

3.0

2.7

3.0

3.0

2.92%

2021 3Q

3.0

2.8

3.2

3.1

3.02%

2021 4Q

3.0

2.8

3.2

3.2

3.05%

Mortgage Rates Freddie Mac 30-Year Fixed Rate

2019

2018

- Actual - Projected

2017 2020

2016

2021 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 Q1 Q2 Q3 Q4 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

3.7

3.7

3.5

3.2

3.0

3.0

3.0

3.0

3.0

3.0

Freddie Mac

Mortgage Rates

Freddie Mac 30-Year Fixed Rate

Where Are They Going?

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 8/1 9/5 10/3 11/7 12/5 1/2 2/6 3/5 4/2 5/7 6/4 7/2 8/6 9/3 10/1 11/5 12/3 1/7

January 2018 – Today Actual Interest Rates

3.0

3.0

3.0

3.0

2021 Q1

2021 Q2

2021 Q3

2021 Q4

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

Jan 2020

MBA

900

800

Historic Data for the

700

MORTGAGE CREDIT AVAILABILITY INDEX

600

500

(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

June 2020

November

MBA

Average Days To Close A Loan

54 55

Last 12 Months

48 48 45

43 40

Dec

Jan

Feb

Mar

47 47

49

51

42

Apr

May

June

July

Aug

Sept

Oct

Nov

All Closed Loans as per Ellie Mae

® FICO

Score Requirements

Last 12 months

752 753 753 752 751 750 749 750

735

Dec

738 738

Jan

Feb

742

Mar

Apr

May

Jun

Jul

Aug

Sept

Oct

Nov

All Closed Loans as per Ellie Mae

® FICO

37.45%

Score

Distribution

23.16% 17.11%

16.38%

5.68% 0.01%

0.21%

500-549

550-599

600-649

46.17%

650-699

700-749

750-799

800+

All Closed Loans as per Ellie Mae

Average 752

758

® FICO

Score

for Closed Purchase Loans

by Loan Type

724 683

All Loans

Conventional

FHA

VA All Closed Loans as per Ellie Mae

Average Back End DTI for Closed Purchase Loans by Loan Type

44 35

35

All Loans*

Conventional

FHA

41

VA All Closed Loans as per Ellie Mae

CONTACT US TO DISCUSS YOUR LOCAL ARIZONA REAL ESTATE MARKET

Peter Shambreskis, REALTOR®, ABR, CRS, GRI, SFR 480-229-6468 Corinne Howard, REALTOR®, ePRO, GRI, SFR, SRS 480-229-6467 info@ShambreskisAndHoward.com www.ShowScottsdaleHomes.com DPR Realty, LLC