Macroeconomic View of the Housing Market. Frank Nothaft CoreLogic Chief Economist December 12 th 2018

Transcription

1 Macroeconomic View of the Housing Market Frank Nothaft CoreLogic Chief Economist December 12 th 2018

2 2019 Economic and Housing Outlook Economic growth continues, recession risk rises, interest rates increase Home equity gains, lower homeowner mobility add to remodeling spending South and West lead in new home building, material and labor costs rise 2

3 Economy Forecast to Grow 2.3% in When Will the Recession Hit? In what year do you expect the next recession to begin? Percent of respondents % economic growth in 2019 (IHS) Expansion becomes longest in U.S. history in July 2019 (NBER) 20% 1-year recession probability (WSJ) or Later Most economists expect recession starts 2020 or later (NABE) TCJA stimulus dissipates Higher interest rates Trade war uncertainty Source: IHS Markit (GDP growth 2018Q4 to 2019Q4), Wall Street Journal Economic Forecasting Survey (November 2018), National Association for Business Economics Outlook survey (October 1, 2018), National Bureau of Economic Research 3

4 Fed Increasingly Focused on Inflation Risk Congressional dual mandate: Maximum employment Price stability Unemployment rate 3.7% (Nov.) Lowest since 1969 Full employment : % Fed s price stability definition: 2% annual (PCE) Avg. inflation 1.9% since 2000 Oct. 2018: 2.0% annual Fed expected to raise fed funds target to % on Dec more quarter-point hikes expected in % 9% 8% 7% 6% 5% 4% November 2018 Unemployment 3.7%, 49-year low Forecast (IHS): 3.5% (2019 average) 3% Jan-00 Dec-03 Nov-07 Oct-11 Sep-15 Aug-19 4% 3% 2% 1% 0% October 2018 Inflation At Fed s 2% Target Forecast (NABE): 2.1% (2019 Q4/Q4) -1% Jan-00 Dec-03 Nov-07 Oct-11 Sep-15 Aug-19 Source: BLS (unemployment rate), BEA (PCE price index), IHS Markit (unemployment forecast), NABE (PCE forecast) % % 4

5 2019 Mortgage Rate Forecast: Highest Since year FRM at 4.9% (Nov. avg.); forecast: 5.2% by Dec & 5.3% by Dec % 6% 5% Interest Rate on 30-Year Fixed-Rate Mortgages June 2009: 5.4% April 2011: 5.1% Forecast Dec. 2020: 5.3% 4% Great Recession 3% Source: Freddie Mac Primary Mortgage Market Survey ; forecast is an average of MBA, Fannie Mae, Freddie Mac, NAHB, NAR and IHS Market projections. 5

6 Home Mortgage Origination Volume Steady Refinancing Continues to Shrink as Mortgage Rates Increase Single-family Mortgage Originations (Billions of U.S. dollars) $2,400 $2, Forecast--- Consensus 2018 to 2019: Total: - 1% Refi: - 13% Purch: + 4% $1,600 Refinance $1,200 $800 Purchase $400 $ Source: Originations for are from CoreLogic public records (benchmarked to HMDA through 2017); 2018 to 2020 are an average of the latest projections released by Mortgage Bankers Association, Fannie Mae, and Freddie Mac. Originations exclude HELOCs. 6

7 Home-Price Growth: Forecast To Slow in % 5% CoreLogic Home Price Index Growth for U.S. (annual, percent) 6.1% 5.4% Forecast 4.8% 4% 3% Oct Oct Oct Oct Oct Oct Source: CoreLogic Home Price Index and HPI Forecast for U.S. (December 4, 2018 release) 7

8 Price Growth Strongest For Lowest-Priced Houses Cumulative Price Growth Through October 2018 (percent) Since October 2017 Since March 2011 Trough 10% 100% 8% 80% 6% 60% 4% 40% 2% 20% 0% More Than 25% Below Median 25% or Less Below Median Up to 25% Above Median More Than 25% Above Median 0% Price Growth Since: One Year Ago Price Trough Source: CoreLogic HPI, Single-family Detached (December 4, 2018 release); National HPI trough occurred March

9 Average Equity Gain per Homeowner U.S.: $12,400 per home (September 2017 to September 2018) Wealth effect adds $50 billion to consumer spending next 2-3 years Q Source: CoreLogic Equity Report for 2018Q3 9

10 Americans Are Keeping Their Homes Longer Number of Years A Home Is Owned (Median) Owner Occupants Home Sellers Source: American Housing Survey for the United States, various years (difference between survey year and median year owneroccupant moved into unit), CoreLogic public records for United States (length of time between recorded sales on same home). 10

11 Longer Homeowner Duration and Growth in Home Equity Spurs Remodeling Expenditures Homeowner Improvements and Repairs (Billions) $400 Forecast 6.6% growth $300 $200 $ Source: Harvard University Joint Center for Housing Studies 11

12 Cash Out Refinancing Reemerging In 2012, 10% of refinances were cashout; in 2018Q3, 40% were Cash out refinances as a share of $ refinance originations 40% October 41% 30% 20% 10% Refi Boom Refi Boom 0% Source: CoreLogic Public Records (first liens) 12

13 HELOC Volume Projected to Hold Steady Home Improvement HELOC gain in 2019 expected to offset part of decline in other HELOCs Billions of Dollars Authorized $400 $350 $300 $250 $200 Forecast $150 $100 $50 $ Source: CoreLogic Public Records; second-lien HELOCs placed more than 60 days after first lien; 2018 reflects first eight months, annualized. 13

14 Most Construction Material Costs Up A Lot Since 2013 Percent Change in Material Cost since March % 30% 20% 10% 0% -10% Lumber Drywall Masonry Insulation Steel Electrical Roofing Plumbing -20% -30% Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Source: CoreLogic Quarterly Construction Insights, 2018Q3. 14

15 Material Cost Increases Vary Widely by Region States with Highest Cost Increase relative to YOY National Average Change: Alaska (29% above) Hawaii (28%) Maine (6%) New York (6%) States with Lowest Cost Increase relative to YOY National Average Change: Wisconsin (6% below) Indiana (5%) Nebraska (5%) Ohio (5%) Source: CoreLogic Quarterly Construction Insights, 2018Q3; percentages are based on material cost compared to the national average from Sep to Sep

16 Labor Costs Up, and Many Jobs Unfilled Labor Cost by Occupation (percent change Sep to Sep. 2018) Source: CoreLogic Quarterly Construction Insights, 2018Q3. 16

17 New-Home Sales Levels Highest in the South Houston TX Dallas TX Atlanta GA Phoenix AZ Orlando FL Tampa FL Austin TX Charlotte NC San Antonio TX Las Vegas NV Denver CO Raleigh NC Washington DC Fort Worth TX Nashville TN Riverside CA Jacksonville FL New York NY Monthly Number of New Home Sales (Average) ,000 1,500 2,000 2,500 Source: CoreLogic, average monthly new homes sold September 2017 through August 2018 in the 100 metropolitan areas with the largest number of home sales 17 17

18 South & West Lead New-Home Growth Metros with: good affordability, good job growth, good weather have had the highest growth in new-home sales over the last year Source: CoreLogic, percent change in number of new-home sales Sep 2017 to Aug 2018 vs. Sep 2016 to Aug 2017, for CBSAs with a year-over-year increase of at least 200 new home sales. Lafayette LA Merced CA Ocala FL Lakeland FL Tacoma WA San Diego CA Atlanta GA Raleigh NC Tampa FL Louisville KY San Jose CA Boise City ID Salt Lake City UT Las Vegas NV Charleston SC Fort Worth TX Jacksonville FL Denver CO Orlando FL Houston TX Highest Growth New-Home Metros 0% 10% 20% 30% 40% 50% 18 18

19 Mortgage Financing for New Home Buyers All New Home Sales Financing by New Home Sales Price Jumbo 6% FHA 16% VA 12% Other 1% Conventional Conforming 65% 100% 80% 60% 40% 20% 0% Other VA FHA Conventional Conforming Jumbo Source: CoreLogic public records, new home settlements January-August 2018 (Number of mortgages) Sales Price 19

20 2019 Economic and Housing Outlook Economic growth continues, recession risk rises, interest rates increase Home equity gains, lower homeowner mobility add to remodeling spending South and West lead in new home building, material and labor costs rise 20

21 Where to find more information Look for regular updates to our housing forecast, commentary and data The views, opinions, forecasts and estimates herein are those of the CoreLogic Office of the Chief Economist, are subject to change without notice and do not necessarily reflect the position of CoreLogic or its management. The Office of the Chief Economist makes every effort to provide accurate and reliable information, however, it does not guarantee accuracy, completeness, timeliness or suitability for any particular purpose. CORELOGIC and the CoreLogic logo are trademarks of CoreLogic, Inc. and/or its subsidiaries. 21