Structured Finance. U.S. RMBS Sustainable Home Price Report. First-Quarter 2017 Update Special Report RMBS / U.S.A.

Transcription

1 U.S. RMBS Sustainable Home Price Report First-Quarter 2017 Update Special Report RMBS / U.S.A. U.S. Prices Grow at a Sustainable Pace: National inflation-adjusted home prices continue to grow at a rate of approximately 3.5% annually. Home prices rose 1.1% in first-quarter Fitch Ratings views current price levels in most regions as sustainable and supported by improving unemployment and inflation-adjusted income growth. Some Western Areas Overheating: Rapid home price growth in some metropolitan areas in the West continues to exceed the level supported by economic fundamentals. Fitch s estimated overvaluation for home prices in Colorado, Nevada, Oregon and Washington increased from last quarter. Miami Prices Stabilizing: Although still estimated to be 5% 9% overvalued, prices in Miami appear to be stabilizing in first-quarter 2017 after the city s smallest quarterly home price appreciation since Slower rental growth is providing an alternative to purchasing, and rising income and falling unemployment are providing support for existing prices. Fitch s estimated overvaluation improved from last quarter. Weighted Average National Case-Shiller versus Sustainable Home Price (HPI) Weighted Average National Case-Shiller HPI Source: CoreLogic Case-Shiller and Fitch. Fitch Sustainable Home Price Related Research U.S. RMBS Sustainable Home Price Model (February 2016) Analysts Jian Mao jian.mao@fitchratings.com Bulin Guo bulin.guo@fitchratings.com Samuel So samuel.so@fitchratings.com

2 Miami Home Prices Stabilizing Although still estimated to be 5% 9% overvalued, prices in Miami appear to be stabilizing in first-quarter 2017 after the city s smallest quarterly home price appreciation since CoreLogic Case-Shiller Miami Home Price appreciated only 0.1% in March The slowdown in price growth appears to be driven in part by a recent slowdown in rent growth, which has provided an alternative to purchasing and an increase in the luxury condo inventory. The underlying fundamental factors have continued to trend positively, such as rising income, falling unemployment and a limited supply of nonluxury condos and single-family homes. The year-over-year change for single-family home inventory fell 1.3% in April These factors have helped Fitch s estimated overvaluation (shown in the chart below) steadily improved since Miami Overvalution Improving (%, Fitch Estimated Overvaluation) Source: CoreLogic Case-Shiller and Fitch. The rate of home price appreciation has been correlated with rent growth rates. In the postcrisis period, the rise in rent measured year over year reached its peak in 2015 but has since slowed to 3.4% as of first-quarter The slowdown in a rental increase appears to have helped take some pressure off home price appreciation by providing better relative alternatives to purchasing. Miami Rental Increases Cooling (%, Year-over-Year Rent Increase) (2.0) (4.0) (6.0) Related Criteria U.S. RMBS Loan Loss Model Criteria (July 2017) Source: Federal Reserve, 1010data and Fitch. While home price growth has slowed, income and unemployment have continued to improve, albeit at a slower rate. As shown in the chart below, inflation-adjusted income has returned to the pre-crisis level, while the area s unemployment rate has fallen to the lowest level since U.S. RMBS Sustainable Home Price Report 2

3 Miami Income and Unemployment Continue to Improve (000) 48 Inflation-Adjusted Income (LHS) Unemployment Rate (RHS) (%) Source: IHS Global Insight and Fitch. Tightening inventory provides another support to home prices. As we can see in the chart below, the year-over-year change of inventory has decreased for condo and has turned negative for single-family homes. Miami Year-over-Year Change in Inventory Tightening (%) (2) (4) Condo Year-over-Year Change Single Family Homes Year-over-Year Change 3/16 4/16 5/16 6/16 7/16 8/16 9/16 10/16 11/16 12/16 1/17 2/17 3/17 4/17 Source: Florida REALTORS. Home price trends in Miami have varied by pricing tier. The quarter-over-quarter price increase in mid- and high-tier-priced residences has decreased to less than 1%, while the home appreciation concentrated in the low-tier priced residences shows no sign of slowing, although prices remain below the pre-crisis peak on an inflation-adjusted basis. Miami Home Price Index by Tier (Home Price Index) Low Tier Mid Tier High Tier Source: S&P Dow Jones Indices LLC. U.S. RMBS Sustainable Home Price Report 3

4 Appendix Overvaluation over Time Metropolitan Regions (Overvaluation As of First-Quarter 2017) CSW YoY smvd smvd smvd City MSA/Division Change (%) 3/1/17 3/1/16 3/1/15 Atlanta Atlanta-Sandy Springs-Roswell, GA 4.0 5% 9% Sustainable Sustainable Boston Boston-Cambridge-Newton, MA-NH 5.6 Sustainable Sustainable Sustainable Charlotte Charlotte-Gastonia-Concord, NC-SC 4.4 Sustainable Sustainable Sustainable Chicago Chicago-Naperville-Elgin, IL-IN-WI 2.4 Sustainable Undervalued Sustainable Cleveland Cleveland-Elyria, OH 2.3 Undervalued Undervalued Undervalued Dallas Dallas-Fort Worth-Arlington, TX % 14% 10% 14% 5% 9% Denver Denver-Aurora-Lakewood, CO 6.7 Sustainable Sustainable Sustainable Detroit Detroit-Warren-Livonia, MI 4.7 Undervalued Undervalued Undervalued Las Vegas Las Vegas-Henderson-Paradise, NV % 19% 10% 14% 10% 14% Los Angeles Los Angeles-Long Beach-Anaheim, CA 3.7 Sustainable 5% 9% 5% 9% Miami Miami-Fort Lauderdale-West Palm Beach, FL 3.6 5% 9% 5% 9% 5% 9% Minneapolis Minneapolis-St. Paul-Bloomington, MN-WI 4.8 Sustainable Sustainable Sustainable New York New York-Newark-Jersey City, NY-NJ-PA 3.5 Undervalued Undervalued Undervalued Phoenix Phoenix-Mesa-Scottsdale, AZ % 14% 10% 14% 10% 14% Portland Portland-Vancouver-Hillsboro, OR-WA % 14% 10% 14% 5% 9% San Diego San Diego-Carlsbad, CA 4.5 Sustainable Sustainable Sustainable San Francisco San Francisco-Oakland-Hayward, CA 3.4 5% 9% 5% 9% 5% 9% Seattle Seattle-Tacoma-Bellevue, WA % 9% Sustainable Sustainable Tampa Tampa-St. Petersburg-Clearwater, FL 3.2 5% 9% 5% 9% Sustainable Washington Washington-Arlington-Alexandria, DC-VA-MD-WV 2.6 Sustainable Sustainable Sustainable CSW Case Schiller Weiss. smvd Sustainable market value decline. Source: CoreLogic Case-Shiller and Fitch. U.S. RMBS Sustainable Home Price Report 4

5 Overvaluation over Time States (Overvaluation As of First-Quarter 2017) OFHEO smvd smvd smvd State YoY (%) 3/1/17 3/1/16 3/1/15 AK 1.0 Sustainable Sustainable Sustainable AL 4.9 Sustainable Sustainable Sustainable AR 4.0 Sustainable Sustainable Sustainable AZ % 14% 5% 9% 5% 9% CA 7.3 5% 9% 5% 9% 5% 9% CO % 9% Sustainable Sustainable CT 0.5 Undervalued Undervalued Undervalued DC 13.8 Sustainable Sustainable Sustainable DE (0.1) Sustainable Sustainable Sustainable FL 9.2 5% 9% 5% 9% 5 9% GA 6.6 Sustainable Sustainable Sustainable HI % 14% 10% 14% 10% 14% IA 4.5 Sustainable Sustainable Sustainable ID % 19% 10% 14% 5% 9% IL 5.7 Sustainable Sustainable Sustainable IN 4.6 Sustainable Sustainable Sustainable KS 5.3 Sustainable Sustainable Sustainable KY 6.4 Sustainable Sustainable Sustainable LA 2.1 5% 9% 5% 9% Sustainable MA 6.6 Sustainable Sustainable Sustainable MD 3.9 Sustainable Sustainable Sustainable ME 4.6 Undervalued Undervalued Undervalued MI 7.9 Undervalued Undervalued Undervalued MN 6.1 Sustainable Sustainable Sustainable MO 3.9 Sustainable Sustainable Sustainable MS 1.6 Sustainable Sustainable Sustainable MT 3.8 Sustainable Sustainable Sustainable NC 6.4 Sustainable Sustainable Sustainable ND (0.1) 10% 14% 10% 14% 5% 9% NE 7.3 Sustainable Sustainable Sustainable NH 9.6 Undervalued Undervalued Undervalued NJ 2.7 Undervalued Undervalued Undervalued NM 5.7 Sustainable Sustainable Sustainable NV % 19% 10% 14% 10% 14% NY 4.9 Undervalued Undervalued Undervalued OH 4.5 Undervalued Undervalued Undervalued OK 3.9 Sustainable Sustainable Sustainable OR % 14% 5% 9% Sustainable PA 4.0 Sustainable Sustainable Sustainable RI 6.5 Undervalued Undervalued Undervalued SC 3.5 Sustainable Sustainable Sustainable SD 5.6 Sustainable Sustainable Sustainable TN 7.9 Sustainable Sustainable Sustainable TX % 14% 10% 14% 5% 9% UT 8.8 5% 9% Sustainable Sustainable VA 3.8 Sustainable Sustainable Sustainable VT 7.5 Sustainable Sustainable Sustainable WA % 9% Sustainable Sustainable WI 5.7 Sustainable Sustainable Sustainable WV 0.1 Sustainable Sustainable Sustainable WY 1.8 Sustainable Sustainable Sustainable OFHEO Office of Federal Housing Enterprise Oversight. smvd Sustainable market value decline. Source: OFHEO and Fitch. U.S. RMBS Sustainable Home Price Report 5

6 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY Telephone: , (212) Fax: (212) Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third-party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided as is without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no ) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act U.S. RMBS Sustainable Home Price Report 6