Housing Market Update. September 23, 2013

Transcription

1 Housing Market Update September 23, 2013

2 Overview Housing market gradually recovering from the deepest and longest downturn since the Great Depression. Excess supply of housing largely worked off. Underlying demographic demand for housing remains relatively strong. Stock of loans in serious delinquency and in foreclosure now declining. Large discrepancy between judicial and nonjudicial states. 2

3 Real Private Residential Investment Average of 2001 & Average of 1973 & Business Cycle Peak 3

4 Household Formations 2 Year Avg. Change 2 Year Avg. Change Renter Occupied Total Owner Occupied Source: Bureau of the Census

5 Units (Thousands) Housing Starts Units (Thousands) Unit (Right Scale) Multifamily (Left Scale) Source: Census Bureau 0 5 5

6 Headship Rate Headship Rates 3 Year Moving Average (by Age) 3 Year Moving Average

7 Age Specific Headship Rates and Population Growth Rates Headship Rate-Under 25* Population Growth Rate-Under % 0.57% 0.28% 0.25% Headship Rate Population Growth Rate % 0.28% 1.11% 1.06% Headship Rate Population Growth Rate % -1.09% -0.82% 0.25% Headship Rate Population Growth Rate % 1.78% 0.35% -1.07% Headship Rate Population Growth Rate % 4.40% 3.17% 1.71% Headship Rate Population Growth Rate % 1.33% 3.84% 4.38% Headship Rate Population Growth Rate % 1.14% 1.22% 1.80% Headship Rate-Total Population Growth Rate-Total % 0.91% 0.89% 0.79% Annual Average Household Formations Actual Projected** *Headship Rates are presented for the year (i.e. 1997), and population growth rates are compounded yearly growth rates over the previous 5 years ** Based on average headship rates

8 Cumulative Housing Production and Household Formations Relative to Trend Thousands 4000 Thousands Cumulative Housing Starts Relative to Demographic Trend Cumulative Household Formations Relative to Demographic Trend Source: Census Bureau and author s calculations

9 Thousands of Units 3500 Excess Supply of Housing Thousands of Units Excess Units: Total Held Off Market Renter (For Rent) Owner (For Sale) Source: US Bureau of the Census, Housing Vacancy Survey, and author s calculations. Note: Shading represents NBER recessions. 9

10 Index 230 Single Family Housing Market Months Supply NAR Months Supply of Single Family Homes on the Market (Right Axis) CoreLogic Single Family Detached House Price Index (Left Axis) Sellers Market Source: CoreLogic, National Association of Realtors

11 Rent of Primary Residence and Owner s Equivalent Rent % Change Year to Year % Change Year to Year Rent of Primary Residence (6.5%) Owner s Equivalent Rent (22.5%) Source: Bureau of Labor Statistics 11

12 Transition of Mortgage Accounts from Days Late Percent 60 Percent To Current To 90+ Days Late Source: FRBNY Consumer Credit Panel

13 Percent 6% Percentage of U.S. Properties Ninety-Plus Days Delinquent, in Foreclosure, and in REO Percent 6% 5% 5% 4% Foreclosures 4% 3% 90+ days delinquent 3% 2% 2% 1% REO 1% 0% % Note: Shaded areas denote NBER recessions. Data from CoreLogic and Lender Processing Services. 13

14 Percentage of Properties Ninety-Plus Days Delinquent, in Foreclosure, and in REO by Foreclosure Status Percent Percent 8% 8% 7% Foreclosures 7% 6% 6% 5% 4% 90+ days delinquent 5% 4% 3% 3% 2% 2% 1% REO 1% 0% % Note: Solid line represents judicial and usually judicial foreclosure states; dashed line represents non-judicial and usually non-judicial foreclosure states. Shaded areas denote NBER recessions. Data from CoreLogic and Lender Processing Services. 14

15 National Peak 90+ Days Delinquency Rate (2010:Q1) National Peak 90+ Days Delinquency Rate (2010:Q1) Percent 10% 9% The Foreclosure Pipeline: Judicial vs. Non-judicial States NV Percent 10% 9% 8% 8% 7% 6% CA AZ FL 7% 6% 5% IL NY NJ 5% 4% 4% 3% 3% 2% 2% 1% ND 1% 0% 0% 0% 2% 4% 6% 8% 10% 12% Percent of serviced loans in foreclosure (June 2013) Non-Judicial and Usually Non-Judicial Foreclosure States Judicial and Usually Judicial Foreclosure States USA Sources: CoreLogic data; Lender Processing Services data. 15

16 Percent Change From HPI Trough to June 2013 Percent Change From HPI Trough to June 2013 Percent 40% Home Price Recovery: Judicial vs Non-Judicial States Percent 40% 35% NV AZ ND 35% 30% CA 30% 25% 25% 20% FL 20% 15% 15% 10% IL NY 10% 5% NJ 5% 0% 0% -70% -60% -50% -40% -30% -20% -10% 0% Percent Decline From HPI Peak to Trough Non-Judicial and Usually Non-Judicial Foreclosure States Judicial and Usually Judicial Foreclosure States USA Sources: CoreLogic data; Lender Processing Services data. Notes: Regression line for judicial and usually judicial foreclosure states excludes North Dakota. HPI is the Corelogic Home Price Index. 16

17 Regional Home Prices CoreLogic Single-Family Home Price Index, Seasonally Adjusted 110 Index (U.S. Peak of March 2006 = 100) Upstate NY Downstate NY Northern NJ United States Jul Shading indicates NBER recession Dec11 60 Mar06 Mar07 Mar08 Mar09 Mar10 Mar11 Mar12 Mar13 Source: CoreLogic Home Price Index (including distressed sales); Aggregation and seasonal adjustment by FRBNY staff. 17

18 Regional Home Sales Index of Single-Family Repeat Sales, Four-Quarter Moving Average 110 Index (2006Q1 = 100) Upstate NY United States Q1 30 Downstate NY Northern NJ Shading indicates NBER recession 20 Mar06 Mar07 Mar08 Mar09 Mar10 Mar11 Mar12 Mar13 Source: CoreLogic. Note: Data trimmed to 2013Q1. 18

19 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 Q2 Shading indicates NBER recession 10 Mar06 Mar07 Mar08 Mar09 Mar10 Mar11 Mar12 Mar13 Source: U.S. Census Bureau and Moody s Economy.com. 19

20 Mortgage Originations by Credit Score Share of First Mortgages 80% 70% 60% 50% 40% New York State New Jersey Connecticut 760 or More Q2 30% 20% United States 760 or More 10% Shading indicates NBER recessions 0% Source: FRBNY Consumer Credit Panel/Equifax. 20

21 Negative Equity Share of Mortgages with Amount Owed Greater Than Home Value 70% 60% 2011Q4 2013Q2 65% 50% 40% 47% 51% 36% 30% 32% 32% 20% 10% 0% 25% 25% 20% 15% 15% 15% 8% 6% US NY NJ NV CA FL AZ Source: CoreLogic Negative Equity Report. 21

22 Negative Equity Share of Mortgages with Amount Owed Greater Than Home Value 40% 2013Q2 35% 36% 30% 32% 25% 25% 20% 15% 15% 15% 15% 10% 5% 6% 0% US NY NJ NV CA FL AZ Source: CoreLogic Negative Equity Report. 22

23 0.9% Pipeline of New Delinquencies Share of Mortgages Entering Severe Delinquency (90+ Days) Since Previous Month 0.8% 0.7% 0.6% 0.5% United States Downstate NY Northern NJ 0.4% 0.3% Upstate NY Jun 0.2% 0.1% Shading indicates NBER recession 0.0% Source: CoreLogic LoanPerformance (LP) and Lender Processing Services Mortgage Performance data (LPS). 23

24 Backlog of Foreclosures Share of Mortgages in Foreclosure 9% 8% 7% Northern NJ 6% 5% 4% Downstate NY United States 3% 2% Upstate NY Jun 1% Shading indicates NBER recession 0% Source: CoreLogic LoanPerformance (LP) and Lender Processing Services Mortgage Performance data (LPS). 24

25 Average Number of Days in Foreclosure 2010 to 2012 Q2 600 Days United States Judicial Judicial Judicial New York New Jersey Nevada California Arizona Florida Source: CoreLogic. 25

26 Reference Charts Table 1. State Foreclosure Laws Foreclosure Laws State Judicial CT, DE, FL, IL, IN, IA, KS, KY, ME, NJ, NM, ND, OH, PA, SC, WI Both, usually judicial NY, VT Non-Judicial DC Both, usually non-judicial AK, AZ, AR, CA, CO, GA, ID, LA, MN, MT, NV, NH, OR, RI, TN, UT, WA Both AL, HI, MD, MA, MI, MS, MO, NE, NC, OK, SD, TX, VA, WV, WY 26

27 Regulatory Issues Qualified Mortgage (QM) On 1/10/2013 the Consumer Financial Protection Bureau (CFPB) issued the Qualified Mortgage rule, which was a requirement of the Dodd-Frank legislation. In effect, the rule creates a set of minimum underwriting standards which, if met, provide lenders with some legal protections. A Qualified Mortgage is generally defined as: Product features: Excluding loans with negative amortization, interest-only payments, and balloon payments. Terms cannot exceed 30 years. Points & fees for loans greater than $100,000 are capped at 3%. Excludes bona fide third party fees such as appraisals. Includes maximum prepayment penalty. There are no maximum loan to-value ratios. 27

28 Regulatory Issues (cont.) Qualified Mortgage (QM) (cont.) Ability-to-repay requirement The lender must make a reasonable and good faith effort to establish that the borrower has a reasonable ability to repay the loan by verifying, from reasonably reliable third-party records, the borrower s income, assets, employment status, monthly payments on the loan in question, monthly payments on any other loans, other housing related obligations such as property taxes and insurance, other debt obligations, alimony, child support, monthly debt-to-income ratio, and credit history. Maximum total obligations ratio (back end ratio) set at 43% of gross income. For computation of this ratio, mortgage payments are to be calculated at the highest possible interest rate over the first five years of the loan and by assuming roughly equal, fullyamortizing payments. 28

29 Regulatory Issues (cont.) Qualified Mortgage (QM) (cont.) Dodd-Frank amended the Truth in Lending Act such that borrowers can file suit against lenders within three years of an alleged violation of the ability-to-pay requirements. In addition, a borrower can assert an ability to pay violation in a foreclosure proceeding, including against an assignee of the lender, without time limit. Safe Harbor for non-higher-priced QMs. QMs with interest rates no more than 150 basis points above the prime offer rate on comparable loans for first liens and no more that 350 basis points for junior liens are provided a safe harbor against ability-to-pay litigation. Rebuttable Presumption for higher-priced OMs. Rebuttable presumption is a weaker legal shield. Borrower must prove that lender failed to make a reasonable and good faith determination that of ability to pay by showing that residual income was insufficient to meet living expenses, including any recurring and material nondebt obligations of which the lender was aware at the time of consummation. 29

30 Percent of First Mortgage Loans with CLTV>100 State 2013Q2 State 2013Q2 State 2013Q2 State 2013Q2 Alabama 10.4% Indiana 6.6% Nebraska 8.1% South Carolina 10.5% Alaska 3.9% Iowa 7.8% Nevada 36.4% South Dakota NA Arizona 24.7% Kansas 6.3% New Hampshire 14.2% Tennessee 10.4% Arkansas 8.3% Kentucky 7.5% New Jersey 14.9% Texas 4.3% California 15.4% Louisiana 13.4% New Mexico 11.9% Utah 8.1% Colorado 9.5% Maine 5.5% New York 6.1% Vermont NA Connecticuit 10.9% Maryland 17.3% North Carolina 7.9% Virginia 12.1% Delaware 12.3% Massachusetts 11.5% North Dakota 4.5% Washington 10.0% Florida 31.5% Michigan 22.5% Ohio 18.8% Washington, DC 6.0% Georgia 20.7% Minnesota 12.6% Oklahoma 5.7% West Virginia 6.9% Hawaii 6.0% Mississippi 18.3% Oregon 10.2% Wisconsin 12.2% Idaho 11.6% Missouri 10.3% Pennsylvania 7.3% Wyoming 4.2% Illinois 20.0% Montana 3.8% Rhode Island 18.8% US 14.5% 7.1 million property owners are underwater. Another 1.7 million are near negative equity, meaning 95 < CLTV <100. Source: CoreLogic 30