Housing Conditions in the Region & Potential Impacts of Sandy Jaison Abel, Senior Economist

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1 Housing Conditions in the Region & Potential Impacts of Sandy Jaison Abel, Senior Economist November 29, 2012 The views expressed here are those of the presenters and do not necessarily represent the views of the Federal Reserve Bank of New York or the Federal Reserve System.

2 Overview of Regional Housing Conditions Many of the region s housing markets have begun to recover Home prices reached a bottom in late 2011 Home sales and building activity have stabilized Signs of housing related stress have eased somewhat Negative equity share has edged down remains below national levels Fewer homeowners are becoming delinquent on their mortgages Challenges remain going forward The hardest hit places in the region continue to struggle A large and growing backlog of foreclosures exists in the region FEDERAL RESERVE BANK OF NEW YORK 2

3 The Geography of the Housing Bust Change in Home Prices, March 2006 April 2009 Decline more than U.S. Decline less than U.S. Increase Source: CoreLogic Home Price Index (including distressed sales). 3

4 Measures of Housing Activity

5 Regional Home Prices CoreLogic Single Family Home Price Index, Seasonally Adjusted Index (U.S. Peak of March 2006 = 100) Bust Continued Decline Recent Upstate NY 4.1% Downstate NY Northern NJ United States Percent Change 65 Dec11 Sep12 Shading indicates NBER recession Apr09 Dec11 60 Mar06 Sep06 Mar07 Sep07 Mar08 Sep08 Mar09 Sep09 Mar10 Sep10 Mar11 Sep11 Mar12 Sep12 2.3% 1.3% Sep 6.2% Source: CoreLogic Home Price Index (including distressed sales); Aggregation and seasonal adjustment by FRBNY staff. 5

6 Home Price Changes in the Region CoreLogic Single Family Home Price Index, Dec11 Sep12 Rochester Syracuse Utica Glens Falls Buffalo Ithaca Albany Elmira Binghamton Kingston United States = 6.2% 0% or Less 0% to 3% 3% to 6.2% 6.2% or More Newark Edison NYC NYC Fairfield Source: CoreLogic Home Price Index (including distressed sales); Seasonal adjustment by FRBNY staff. 6

7 Regional Home Sales Index of Single Family Repeat Sales, Four Quarter Moving Average 110 Index (2006Q1 = 100) Upstate NY United States 40 Q2 30 Downstate NY Northern NJ Shading indicates 20 NBER recession Source: CoreLogic. Note: Data trimmed to Q2. 7

8 Regional Home Building Activity Index of Total Residential Home Permits, Four Quarter Moving Average 110 Indexed to U.S. Peak (2006Q1 = 100) Dotted line smoothes fluctuations caused by regulatory change in NYC Upstate NY Northern NJ Downstate NY United States 20 Shading indicates 10 NBER recession Q3 Source: U.S. Census Bureau and Moody s Economy.com. 8

9 Mortgage Originations by Credit Score Share of First Mortgages 90% 80% 70% 60% Q3 50% 40% 30% 20% NY NNJ Region 760 or More United States 760 or More 10% Shading indicates NBER recessions 0% Source: FRBNY Consumer Credit Panel/Equifax. 9

10 Measures of Housing Stress

11 Negative Equity Share of Mortgages with Amount Owed Greater Than Home Value 70% 60% 2011Q4 2012Q2 65% 59% 50% 47% 51% 40% 43% 40% 32% 30% 25% 29% 20% 22% 20% 18% 10% 8% 8% 0% United States New York New Jersey Nevada California Florida Arizona Source: CoreLogic Negative Equity Report (with revised historical data). 11

12 0.9% Pipeline of New Delinquencies Share of Mortgages Entering Severe Delinquency (90+ Days) Since Previous Month 0.8% 0.7% United States 0.6% 0.5% Downstate NY Northern NJ 0.4% 0.3% 0.2% Upstate NY Aug 0.1% Shading indicates NBER recession 0.0% Source: CoreLogic LoanPerformance (LP) and Lender Processing Services Mortgage Performance data (LPS) as of Sep 1,

13 Backlog of Foreclosures Share of Mortgages in Foreclosure 9% 8% 7% Northern NJ 6% 5% 4% Downstate NY United States Aug 3% 2% Upstate NY 1% Shading indicates NBER recession 0% Source: CoreLogic LoanPerformance (LP) and Lender Processing Services Mortgage Performance data (LPS) as of Sep 1,

14 Average Number of Days in Foreclosure 2010 to 2012Q2 600 Days United States Judicial Judicial Judicial New York New Jersey Nevada California Arizona Florida Source: CoreLogic. 14

15 Geography of Regional Housing Stress Percent of Mortgages in Foreclosure Glens Falls Rochester Syracuse Utica Albany Buffalo Ithaca Elmira Binghamton Kingston 5% or Less 5% to 7.5% 7.5% to 10% New York City Newark Fairfield 10% or More Edison Source: CoreLogic LoanPerformance (LP) and Lender Processing Services Mortgage Performance data (LPS) as of Sep 1,

16 Summary Like the nation, housing conditions in the region have shown steady signs of improvement Home prices have generally increased throughout the year Other measures of housing related activity have stabilized Indicators of housing related stress have eased somewhat However, many of the hardest hit places in the region continue to struggle Housing stress is concentrated in northern New Jersey, parts of the Hudson Valley, and Long Island Going forward, a large and growing backlog of foreclosures presents a challenge to broadening and strengthening the region s housing recovery FEDERAL RESERVE BANK OF NEW YORK 16

17 Potential Impacts of Sandy A large number of homes were damaged or destroyed by Sandy, particularly along the coasts of NY, NJ, and CT NY: +300,000 (~4% of housing stock) NJ: +70,000 (~2% of housing stock) No doubt, rebuilding will be difficult and costly Research indicates that housing markets impacted by severe storms see a temporary dip in home prices and sales activity followed by a rebound If enough homes are destroyed, prices may increase immediately Longer run questions following Superstorm Sandy: Will demand for coastal properties fall? Will costs of homeownership increase? FEDERAL RESERVE BANK OF NEW YORK 17