Supply-Side Factors and Housing Affordability

Transcription

1 Supply-Side Factors and Housing Affordability CoreLogic-NAHB Residential Construction Roundtable December 12, 2018 Robert Dietz, Ph.D. NAHB Chief Economist

2 Housing Affordability NAHB/Wells Fargo HOI CoreLogic transaction data and NAHB estimates find significant declines National Q1_04 Q1_05 Q1_06 Q1_07 Q1_08 Q1_09 Q1_10 Q1_11 Q1_12 Q1_13 Q1_14 Q1_15 Q1_16 Q1_17 Q1_18 Source: NAHB/Wells Fargo Housing Opportunity Index.

3 New Home Sales and Months Supply 1,600 Thousands, SAAR Months Supply, SA 14 1, , , Months Supply at Current Sales Rate, (mo. SA) New Home Sales: New single-family houses sold, (Ths. #, SAAR) Source: U.S. Census Bureau (BOC). 2 0

4 Household Formation Demand for home ownership strengthened 2,000 Y/Y Change in Household Count, Thousands, NSA 1,500 Owner-Occupied 1, ,000 2,500 2,000 1,500 1, ,000 Renter-Occupied Source: U.S. Census Bureau (BOC): Housing Vacancies & Homeownership.

5 Homeownership Rate 71% Percentage, Quarterly, SA % 69% 68% 67% 66% 69.4% % 64% 63% 62% 61% 64.4% Source: U.S. Census Bureau (BOC): Housing Vacancies & Homeownership.

6 Geography of Homeownership Wide variation Homeownership Rates in the U.S. by County Alaska Hawaii

7 Determinants of Homeownership Modeling Results Increase average age in county by 5 years Adds 3 percentage points to rate Increase share of married households by 10% Added 5.1 percentage points to rate Increase local incomes by $10,000 Adds 0.6 percentage points to rate Decrease housing costs by $75,000 Adds 4.1 percentage points to rate

8 Share of Young Adults Living with Parents Almost doubled 60% 58% 56% 54% 52% Ages 18 to 24 25% 23% 21% 19% 50% 48% 46% 44% 42% 40% Ages 25 to Source: US Census 1990, 2000, PUMS, ACS, PUMS, NAHB Estimates. 17% 15% 13% 11% 9%

9 Consumer Debt Rise in student and auto loans 250% 236% 8 200% Student Loans % 100% Other 9/30/2008, 100% Auto Loans 156% 98% 97% % Credit Cards 2 1 0% Source: Federal Reserve Bank of New York.

10 GDP Growth Near-term growth with slowing ahead 10% 8% 6% Q/Q Percent Change, SAAR Annual Growth LT avg ( 58-07) 3.4% % % 2018 f 3.0% 2019 f 2.6% 2020 f 1.3% 4% 2% 0% -2% -4% -6% -8% -10% Source: U.S. Bureau of Economic Analysis (BEA) and NAHB forecast.

11 30-Year Fixed Rate Mortgage and 10-Year Treasury Rates will rise due to Fed policy and tight labor markets 12% 12% 10% 30-Year Fixed Rate Mortgage October 31, % 8% 8% 6% 6% 4% 10-Year Treasury 4% 2% Mortgage Risk Premium (Difference) 2% 0% % Source: Federal Reserve and Freddie Mac data and NAHB forecast.

12 Headship rates increase from 15% to 45% Rising Population Entering Housing Demand Years Millions Avg=4.3 v Silent Generation: Born Greatest Generation: Born Before Gen Z: Born After 1997 Millennials: Born Gen X: Born Baby Boomers: Born

13 Supply-Side Factors

14 Building Materials Lumber Prices Since January 2017, lumber prices decreased 5%; 63% at peak $600 $550 $ per thousand board feet 582 $500 $450 $400 1/6/2017, 357 $350 $300 11/16/2018, 340 $ Source: NAHB Analysis; Random Lengths Composite Index.

15 Residential Construction Employment Continues to Grow Employment gain of 873,500 since 2011; 175,900 increase since Employment, Thousands Residential Builders Residential Specialty Trade Contractors Construction Unemployment Rate 25% 20% % % % % Source: U.S. Bureau of Labor Statistics (BLS).

16 Labor Elevated count of unfilled construction jobs 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% Job openings rate - Construction 12-month moving average % Source: U.S. Bureau of Labor Statistics (BLS). -

17 Labor Force Changing labor force 70 Millions High School Graduate College Graduates Associate Degree and Other Two Year Programs Did Not Finish High School Source: U.S. Bureau of Labor Statistics (BLS)

18 Construction Sector Productivity Lagging overall economy Index, 1993 = Construction Worker Productivity Overall Worker Productivity Source: U.S. Bureau of Labor Statistics (BLS).

19 Lending AD&C Access Loans growing but at a slower rate Millions $200, unit Residential Construction Loans $180,000 Year-over-Year Growth Rates $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% $ Source: Federal Deposit Insurance Corporation. 0%

20 Lots Housing Starts (Area) and Low/Very Low Lot Supply (bars) 2,100 Starts (Thousands) Low Supply 70% 1,800 60% 1,500 50% 1,200 40% % % % Source: Census Bureau and NAHB/Wells Fargo HMI survey. 0%

21 Median Lot Value and Size Lot size declining --- lot value increasing 9,800 Square Feet $55,000 9,600 Median Lot Value (Single-Family Starts) $47,400 $50,000 9,400 $45,000 9,200 $40,000 9,000 $35,000 8,800 8,600 Median Lot Size (For Sale: Single-Family Detached) 8,560 $30,000 $25,000 8,400 $20,000 8, $15,000 Source: 2017 Survey of Construction (SOC) and NAHB Economics Estimates.

22 Regulatory Costs Rising Up 29% over Total effect of building codes, land use, environmental and other rules

23 Regulations - 32% of Multifamily Development Costs NAHB-NMHC research Government Regulations as a Share of Multifamily Development Costs 42.6%* 21.7%* 5.2% 32.1% 7.0% 5.9% 3.9% 4.0% 4.2% 2.3% 4.8% 7.1% 8.4% 5.4% 5.3% 5.5% 2.3% 7.3% Cost increases from changes to building codes over the past 10 years Development requirements that go beyond the ordinary Fees charged when building construction is authorized Cost of applying for zoning approval Other (non-refundable) fees charged when site work begins Cost of complying with OSHA requirements Others Lower Quartile Average Upper Quartile Note: * For quartiles, all types of costs do not sum to the total. Source: NAHB/Wells Fargo HMI survey.

24 Construction Outlook

25 NAHB/Wells Fargo Housing Market Index Declining builder confidence as housing affordability issue expands 80 Index Thousands, SAAR 2, HMI 60 1,800 1,600 1, Single-Family Starts Source: U.S. Census Bureau and NAHB/Wells Fargo HMI survey. 1,200 1,

26 Single-Family Starts Slowing growth ahead 2,000 Thousands of units, SAAR ,343,000 Normal ,000 1, ,000 10% 1,600 1,400 1,200 1,000 80% fall ,000 9% ,000 4% ,000 4% ,000 2% 2018Q3: 65% of Normal 2020Q4: 69% of Normal Trough to Current: Mar 09 = 353,000 Oct 18 = 865, % Source: U.S. Census Bureau (BOC) and NAHB Forecast.

27 Growth in Single-Family Permits September 2018 YTD vs. September 2017 YTD Rank Decline in Growth rate Growth rate < U.S. Growth rate U.S. Source: U.S. Census Bureau (BOC).

28 New NAHB Leading Markets Index New economic geography measure of building conditions First index metric is metro areas third quarter data Smaller metro areas core counties (29% of single-family permits) Smaller towns like Xenia, Ohio and Darlington, South Carolina 9.8% annual growth rate, 7.4% year-over-year Large metro areas suburban counties (26% share) Fairfax, Virginia 4.1% annual growth rate, 3.2% year-over-year Large metro areas core counties (18% share) Columbus, Ohio and Orange County, California 6.5% annual growth rate, 6.8% year-over-year Smaller metro, outlying areas (8% market share) Rural areas near small towns 2.7% growth rate, -2.4% year-over-year Source: NAHB Analysis of Census data (Building Permits and ACS)

29 Typical New Home Size Decline after market shift 2600 Square Feet SF Starts: Median Floor Area SF Starts: Median 1 Year MA Source: U.S. Census Bureau (BOC).

30 70 60 Townhouse Market Expanding Thousands, NSA SF Starts: Attached Townhouse Share: 1-Year Moving Average 16% 14% 50 12% 40 10% % 6% 4% 2% % Source: U.S. Census Bureau (BOC).

31 Multifamily Housing Starts Leveling off Thousands of units, SAAR Avg=344, ,000 Normal , ,000 0% ,000-9% ,000 6% ,000-3% ,000-1% % fall 2018Q3: 105% of Normal 2020Q4: 109% of Normal Trough to Current: 4 th Q 09 = 82,000 3 rd Q 18 = 347, % Source: U.S. Census Bureau (BOC) and NAHB Forecast.

32 Residential Remodeling Growth ahead but slowing Billions, SAAR Year Percent Change % % 2018 f 10% 2019 f 4% 2020 f 2% Actual Adjusted Source: U.S. Census Bureau (BOC) and NAHB Forecast.

33 Thank you eyeonhousing.org housingeconomics.com