Where are the Missing Households and When Will They Show Up?

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1 Where are the Missing Households and When Will They Show Up? April Calvin Schnure Senior Economist and Vice President, Research and Industry Information National Association of Real Estate Investment Trusts REITs: Building Dividends & Diversification 1875 I St, NW Suite 600, Washington, DC

2 Analysis of Household Formation: Fundamentals and History Household formation is driven by three forces: Demographics Business cycles Pent-up demand All three forces would normally be supporting household formation right now but there s no sign of acceleration. There are as many as 3 million missing households. Where are they? When will they show up? Charts on historical and geographic patterns of household formation I have more questions than answers! 1

3 Household formation remains far below population trends 3 Percent change over year ago Household Formation: Recent Data and Long-Term Trends 2 1 Shaded areas indicate recessions Source: U.S. Census Bureau, Haver Analytics, NAREIT

4 Headship rates fell most sharply among the young Change in headship rate, Percentage points Source: U.S. Census Bureau, American Community Survey 3

5 Employment changes show a similar pattern across age groups Percentage points Change in employment/population, Source: U.S. Bureau of Labor Statistics, Haver Analytics 4

6 but the past two years show some improvement in the prime age groups for household formation Percentage points Change in employment/population, and Source: U.S. Bureau of Labor Statistics, Haver Analytics 5

7 Models of household formation that used to fit well just don t Percent change over year ago Household Formation Household Formation Fitted REG output REG2 output Source: U.S. Bureau of Labor Statistics, Haver Analytics 6

8 Many of the missing households are concentrated in a few cities 200, ,000 Change in households , by metro areas, Sorted by change in Single Family Owner Occupied 100,000 50,000 - (50,000) (100,000) (150,000) Phantom hhlds dshared dmfr dsfr dmfo dsfo (200,000) Source: U.S. Census Bureau, American Community Survey 7

9 Where are the unusual changes in household patterns? The usual suspects. Rank by Change in SFO Level Change in SFO ('000) Level Change in SFR ('000) Level Change in MFO ('000) Level Change in MFR ('000) Level Change in Shared ('000) Level Change in Phantom ('000) Metro Area 1 Detroit, MI Atlanta, GA Los Angeles-Long Beach, Chicago-Gary-Lake, IL Phoenix, AZ Miami-Hialeah, FL Fort Lauderdale-Hollywoo Minneapolis-St. Paul, MN Tampa-St. Petersburg-Cle Oakland, CA Orlando, FL Portland-Vancouver, OR Jacksonville, FL Orange County, CA Seattle-Everett, WA Pittsburgh-Beaver Valley, Birmingham, AL San Jose, CA Norfolk-VA Beach-Newp Fort Myers-Cape Coral, F Source: U.S. Census Bureau, American Community Survey 8

10 Disclaimer NAREIT is the worldwide representative voice for REITs and listed real estate companies with an interest in U.S. real estate and capital markets. Members are REITs and other businesses that own, operate and manage income-producing real estate, as well as those firms and individuals who advise, study and service those businesses. NAREIT is the exclusive registered trademark of the National Association of Real Estate Investment Trusts, Inc., 1875 I St., NW, Suite 600, Washington, DC Follow us on REIT.com. Copyright 2012 by the National Association of Real Estate Investment Trusts, Inc. All rights reserved. This information is solely educational in nature and is not intended by NAREIT to serve as the primary basis for any investment decision. NAREIT is not acting as an investment adviser, investment fiduciary, broker, dealer or other market participant, and no offer or solicitation to buy or sell any security or real estate investment is being made. Investments and solicitations for investment must be made directly through an agent, employee or representative of a particular investment or fund and cannot be made through NAREIT. NAREIT does not allow any agent, employee or representative to personally solicit any investment or accept any monies to be invested in a particular security or real estate investment. All REIT data are derived from, and apply only to, publicly traded securities. While such data are believed to be reliable when prepared or provided, such data are subject to change or restatement. NAREIT does not warrant or guarantee such data for accuracy or completeness, and shall not be liable under any legal theory for such data or any errors or omissions therein. See for important information regarding this data, the underlying assumptions and the limitations of NAREIT s liability therefore, all of which are incorporated by reference herein. Performance results are provided only as a barometer or measure of past performance, and future values will fluctuate from those used in the underlying data. Any investment returns or performance data (past, hypothetical or otherwise) shown herein or in such data are not necessarily indicative of future returns or performance. Before an investment is made in any security, fund or investment, investors are strongly advised to request a copy of the prospectus or other disclosure or investment documentation and read it carefully. Such prospectus or other information contains important information about a security s, fund s or other investment s objectives and strategies, risks and expenses. Investors should read all such information carefully before making an investment decision or investing any funds. Investors should consult with their investment fiduciary or other market professional before making any investment in any security, fund or other investment. For more information please visit: 9 9

11 Mortgage Bankers Association Multifamily Lending Overview April 23, 2014 Presented by Jamie Woodwell Vice President, Commercial Real Estate Research Mortgage Bankers Association

12 Multifamily Lending, ,106 multifamily loans closed $ billion Average Loan Size $3.6 million 2,803 multifamily lenders Average of 15 loans per lender 2

13 Multifamily Lending in 2012, By Lender Average Loan Size Number of lenders, by lender average loan size Number of loans by lender average loan size $millions of loans, by lender average loan size ,556 6,200 69, ,799 6,364 34, ,387 35,842 Lender Avg Loan > $10 million Lender Avg Loan $3 - $10 million Lender Avg Loan $1 - $3 million Lender Avg Loan <= $1 million Source: Mortgage Bankers Association, Annual Report on Multifamily Lending 3

14 Largest and (almost) Smallest Multifamily Lenders in 2012, by dollar volume Source: Mortgage Bankers Association, Annual Report on Multifamily Lending 4

15 Multifamily Lending, 2012 Number of Loans Dollar Volume ($millions) 25,000 $160,000 20,000 15,000 $140,000 $120,000 $100,000 $80,000 10,000 $60,000 5,000 $40,000 $20,000 0 $500,000 or less $500,000 to $1 million > $ 1 million $0 $500,000 or less $500,000 to $1 million > $ 1 million Loan Size Loan Size Source: Mortgage Bankers Association, Annual Origination Summation and Annual Report on Multifamily Housing 5

16 MBA Estimate of Total Multifamily Mortgage Originations by Investor Group ($millions) $160,000 $140,000 $120,000 Bank Other CMBS Life companies FHA GSEs $100,000 $80,000 $60,000 $40,000 $20,000 $0 Source: Mortgage Bankers Association, JP Morgan Securities, ACLI, HMDA 6

17 Multifamily Lending Volumes and Loan Size, by Investor Group 60,000 50,000 40,000 30,000 20,000 10,000 $25 $20 $15 $10 $5 0 Life Cos Freddie Mac CMBS FHA Fannie Mae Banks $0 $Amount 2012 (millions) Number 2012 Average Loan Size 2012 ($millions, right) Source: Mortgage Bankers Association 7

18 Total and Institutional Multifamily Lending ($Millions) $160,000 Total multifamily lending Institutional multifamily lending $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $ Source: Mortgage Bankers Association, Annual Origination Summation and Annual Report on Multifamily Housing 8

19 Multifamily Properties, by Number of Units and Presence of Mortgage 1,000s of Median Purchase Properties Unmortgaged Mortgaged Median Purchase Price $4,000,000 Price $4,500,000 $4,000,000 $3,500, $1,200, $201, units units 50+ units $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 Source: HUD, US Rental Housing Finance Survey 9

20 Multifamily Properties, by Number of Units by Term of Mortgage Share of Properties 45% 40% 40% 38% 35% 32% 34% 30% 25% 22% 26% 25% 20% 17% 18% 15% 12% 12% 13% 10% 5% 0% 1% 7% 5% 5 to 24 Units 25 to 49 Units 50+ Units < 5 years 5-10 years years years 30+ years Source: HUD, US Rental Housing Finance Survey 10

21 Multifamily Mortgage Debt Outstanding ($millions) 1990Q1 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1 $450,000 $400,000 $350,000 $300,000 Agency and GSE portfolios and MBS Bank and Thrift - adj Bank and Thrift - unadj. CMBS, CDO and other ABS issues State and local government Life insurance companies $250,000 $200,000 $150,000 $100,000 $50,000 $0 Source: Mortgage Bankers Association, Quarterly Analysis of Commercial/Multifamily Mortgage Debt Outstanding 11

22 Contact Information & MBA Resources Jamie Woodwell Vice President Commercial Real Estate Research Mortgage Bankers Association 1919 M Street NW, 5 th Floor Washington, DC MBA research page: Research Institute for Housing America: MBA Newslink: 12