Housing Recovery is Underway, But Not for Everyone

Transcription

1 Housing Recovery is Underway, But Not for Everyone Eric Belsky August 2013 Dallas, TX

2 Housing Markets Have Corrected In Significant Ways Both price and quantity reductions have occurred Even after price rebound over past year, national median existing home price to per capita income ratio is still near levels not seen since 1968 Steep production cuts brought national 10-year total housing production well below 10-year average trends

3 New Construction Over 10 Years Is Now at Its Lowest Point Dating Back to at Least Completions and Placements (Millions) Median 10-Year Total Note: Data go back to Source: JCHS calculations of US Census Bureau data Lowest, Pre-2010 ( )

4 Despite A Slowdown in Overall Household Growth in the 2000s, Falling Homeownership Rates Lifted Renter Household Growth to Record Heights Net Change in Households (Millions) 1950s 1960s 1970s 1980s 1990s 2000s Owners Renters Source: JCHS tabulations of US Census Bureau, Decennial Censuses.

5 With Strong Renter Household Growth, Rental Vacancy Rates Have Been Falling Since Rental Vacancy Rate (Percent) Q1 2006Q2 2006Q3 2006Q4 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 Overall Single-Family 10 or More Units Note: To reduce volatility and seasonality inherent in the series, rates shown are 4-quarter rolling averages. Source: US Census Bureau, Housing Vacancy Surveys via Moody s economy.com. 5

6 Nominal Rents are Rising Across the Country Percent Rent Change 2012:2 to 2013:2 Decline (Up to -3.7%) Less than 2.5% Increase % Increase Increase of 5% or More (Up to 7.8%) Notes: Estimates are based on a sample of investment-grade properties. Source: JCHS tabulations of MPF Research data.

7 The Housing Recovery Has Finally Reached the Single-Family Market Affordability (low interest rates and lower house prices) has created the necessary conditions Steady if slow job growth, low inventories of homes for sale, and a restoration of home price appreciation have created the sufficient conditions Rebound in sales remains weak in unit terms but significant in percentage terms 7

8 Homeownership is at its Most Affordable On Records Dating Back to Affordability Index 1971Q1 1972Q1 1973Q1 1974Q1 1975Q1 1976Q1 1977Q1 1978Q1 1979Q1 1980Q1 1981Q1 1982Q1 1983Q1 1984Q1 1985Q1 1986Q1 1987Q1 1988Q1 1989Q1 1990Q1 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 US - NAR JCHS-Dallas JCHS-Houston JCHS-San Antonio Notes: Historic metro-level NAR affordability index is not published. JCHS approximated the index mirroring NAR methodology. Payment assumes the effective interest rate from FHFA for that quarter, a 30-year fixed-rate mortgage, and a 20 percent downpayment. To mirror NAR, median family income was used. Median family income not available for 20012Q2-2013Q2; 2012Q1 income was used in these quarters. Values are 4-quarter rolling averages to smooth seasonal effects. Sources: NAR quarterly median house price; FHFA effective interest rate; Moody's Analytics Estimates of US Census Bureau Current Population Surveys and American Community Surveys median family income. 8

9 7,500 Existing Home Sales Showing Signs of Sustained Improvement, While New Home Sales Claw Back Single Family Home Sales (Thousands, SAAR) 1,500 6,000 4,500 3,000 1, Existing Homes [Left Axis] New Homes [Right Axis] 1, Note: Data through June 2013 Sources: US Census Bureau; Site: National Association of Realtors. Site:

10 Inventories of Homes on the Market Have Dropped Sharply 3,500 3,000 2,500 2,000 1,500 1, Single Family Homes for Sale (Thousands) Existing Homes [Left Axis] New Homes [Right Axis] 0 Sources: US Census Bureau, New Residential Sales; National Association of Realtors, Existing Home Sales via Moody s Economy.com.

11 With Sales Picking Up and Inventories Falling, House Prices Have Found a Floor 12-Month Change in House Price Index (Percent) Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 CoreLogic (All Transactions) CoreLogic (Excluding Distressed) FHFA Case-Shiller 20 Source: CoreLogic, FHFA, and S&P Indices. 11

12 12 10 Though Mortgages Delinquency Rates Have Fallen, They Remain Elevated Seriously Delinquent Rate (Percent) 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 US Texas Source: Mortgage Bankers Association: All Loans - Seriously Delinquent Rate, (%, NSA) 12

13 Housing Affordability Problems: Widespread, Worsening, and Creeping Up the Income Scale Share of Households with Cost Burdens (Percent) < $15,000 $15-30,000 $30-45,000 $45-60,000 $60-75,000 > $75,000 Real Household Income Percentage Point Change Notes: Cost-burdened households spend more than 30 percent of pre-tax income for housing. Income ranges are in 2009 dollars, adjusted for inflation by the CPI-U for All Items. Source: JCHS tabulations of US Census Bureau, 2001 and 2009 American Community Surveys. 13

14 Dozens of Hard Hit Counties (With One in Five or More Units Vacant) Are Still Reeling Vacant Housing Units in Distressed Neighborhoods (Thousands) COUNTY, STATE (METRO AREA) Wayne, MI (Detroit) Cook, IL (Chicago) Harris, TX (Houston) Cuyahoga, OH (Cleveland) Baltimore, MD (Baltimore) Fulton, GA (Atlanta) Philadelphia, PA (Philadelphia) Orleans, LA (New Orleans) Marion, IN (Indianapolis) Shelby, TN (Memphis) Hamilton, OH (Cincinnati) Maricopa, AZ (Phoenix) Clark, NV (Las Vegas) St. Louis, MO (St. Louis) Allegheny, PA (Pittsburgh) Franklin, OH (Columbus) Jackson, MO (Kansas City) Note: Distressed neighborhoods have vacancy rates of 20% or higher, excluding seasonal, recreational and occasional-use units. Source: JCHS tabulations of US Census Bureau, Five-year American Community Survey.

15 Nearly All People Under Age 45 Expect to Buy in the Future % Who Expect to Buy a Home at Some Point in the Future Under to to 44 Source: Drew and Herbert, Based on Fannie Mae National Housing Survey

16 But Underwriting Has Tightened Dramatically Share of Freddie Mac and Fannie Mae Originations (Percent) Share of FHA-Insured Mortgages by Dollar Volume (Percent) Higher Risk Medium Risk Credit Score Lower Risk Below Notes: Higher (lower) risk loans are to borrowers with credits scores under 690 (above 750) and have loan-tovalue ratios above 85% (below 75%). FHA data exclude records with no credit score information. Sources: Amherst Securities; US Department of Housing and Urban Development.

17 Finally Rebounding After an Unprecedented Slowdown, Household Growth Still Below Trend Change in Households (Millions) JCHS Low JCHS High Note: JCHS low (high) projection assumes that immigration in is 50% (100%) of the US Census Bureau s 2008 middle-series population projection. Sources: US Census Bureau, Housing Vacancy Survey; JCHS 2010 household growth projections. 17

18 Housing Recovery is Underway, But Not for Everyone Eric Belsky August 2013 Dallas, TX

19 SUPPLEMENTAL SLIDES 19

20 Price-to-Income Ratios Still Near Early 1990s Levels Even in Hardest-Hit States Price-to-Income Index (1990:4 = 100) (e) United States Arizona California Florida Nevada Texas Notes: Price-to-income ratios were calculated as the housing price index over median household income. House price values are from the fourth quarter incomes were estimated using Moody s Analytics Income Forecast applied to CPS income data. Sources: FHFA Purchase-Only Home Price Index (NSA); US Census Bureau, Current Population Survey; Moody s Analytics Income Forecast

21 Despite Recent Price Gains, Hardest-Hit Metros Remain Far From Peak Trough-Current Rebound Percent Off Peak (May2013) NV-Las Vegas 27% -51% FL-Miami 20% -42% AZ-Phoenix 35% -41% FL-Tampa 17% -39% MI-Detroit 31% -33% IL-Chicago 15% -30% CA-San Diego 24% -28% CA-Los Angeles 24% -28% MN-Minneapolis 22% -24% NY-New York 5% -23% CA-San Francisco 43% -23% TX-Dallas 14% At New Peak CO-Denver 17% At New Peak Source: S&P Case/Shiller HPI, NSA

22 The Share of Renters with Affordability Problems Has Doubled in the Last 50 Years Shares of Cost-Burdened Renter Households (Percent) Moderately Burdened Severely Burdened Notes: Rent includes tenant-paid utilities. Moderately (severely) cost-burdened renters pay 30-50% (more than 50%) of pre-tax household income for housing. Renters with zero or negative income are assumed to be severely burdened, while renters not paying cash rent are assumed to be unburdened. Source: JCHS tabulations of US Census Bureau, Decennial Censuses and 2010 American Community Survey.

23 Since the Peak in US Employment, Total Job Growth in Texas Has Outpaced that of the US 110 Total Nonfarm Employment Relative to Jan 2008 Level (Percent of Jan-2008 level) Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Texas US Source: JCHS tabulations of BLS total nonfarm employment. 23

24 22 The Echo-Boom Generation Is Even Larger Than The Baby Boom Was At Similar Ages Population (Millions) Age Baby-Boom Generation in 1970 Echo-Boom Generation in 2005 Notes: Members of the baby-boom generation were born Members of the echo-boom generation were born Source: US Census Bureau, Population Estimates.

25 Generations Following Baby Boomers Are Large and More Diverse Number of People (Millions) Echo Boom Baby Buster Baby Boom Note: Members of the baby-boom generation were aged in 2011, the baby bust generation aged 26-45, and the echo boom aged Source: JCHS tabulations of US Census Bureau, Population Projections for July 1, Minority Share of Population (Percent) Echo Boom Baby Buster Asian/Other Black, Non Hispanic Hispanic Baby Boom

26 Minorities Will Drive Household Growth Households Household Growth, % 100% 80% 80% 60% 60% 40% 40% 20% 20% 0% ACS 2011 White, Non Hispanic Black, Non Hispanic Asian / Other Hispanic 0% JCHS Low Projection Sources: JCHS 2010 Household Growth Projections and US Census Bureau, 2011 ACS