The 2017 Economic Outlook Summit Southeast Fairfax Development Corporation Mount Vernon-Lee Chamber of Commerce Frank Nothaft, CoreLogic SVP & Chief Economist April 6, 2017
2017 Market: Less Affordability 1. Mortgage rates rise (but historically low) 2. Prices up in 2017 (US 5%, Fairfax County 3-4%) 3. Rents up too (US 3%) 4. Originations: Purchase up, Refi down 5. Loan quality high (new credit lower risk )
Short-term Interest Rates Heading Up Federal funds target as of March 15, 2017: 0.75% to 1.00% Federal funds target projected for December 31, 2017 (based on FOMC member projections): Federal Funds Target Number of FOMC Members Same as today 2 1.00% to 1.25% 1 1.25% to 1.50% 9 1.50% to 1.75% 4 Higher than 1.75% 1 Source: Federal Open Market Committee projections released March 15, 2017 (individual FOMC participant s judgment of the appropriate level of the target federal funds rate at the end of 2017).
Short-term Interest Rates Heading Up Federal funds target as of March 15, 2017: 0.75% to 1.00% Federal funds target projected for December 31, 2017 (based on FOMC member projections): Federal Funds Target Number of FOMC Members Same as today 2 1.00% to 1.25% 1 1.25% to 1.50% 9 Median 1.50% to 1.75% 4 Higher than 1.75% 1 Source: Federal Open Market Committee projections released March 15, 2017 (individual FOMC participant s judgment of the appropriate level of the target federal funds rate at the end of 2017).
Mortgage Rates Heading Up Rates are still historically low Interest Rate on 30-Year Fixed-Rate Mortgages (percent) 7% 6% Forecast 5% Dec. 2017: 4.6% 4% Great Recession 3% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Freddie Mac Primary Mortgage Market Survey, IHS Markit March 2017 projection.
Mobility Rate by Year After Purchase Percent of home buyers that sell by length of ownership, 1976-2016 7% 6% 5% 4% 3% 2% 1% 0% 0 3 6 9 12 15 Number of Years Source: CoreLogic
Mobility Rate by Year After Purchase Percent of home buyers that sell by length of ownership, 1976-2016 7% Rates down 1.5% 6% 5% 4% 3% 2% 1% Rates up 1.5% 0% 0 3 6 9 12 15 Number of Years Source: CoreLogic
Mobility Rate by Year After Purchase Percent of home buyers that sell by length of ownership, 1976-2016 7% Rates down 1.5% 6% 5% 4% 3% 2% 1% Rates up 1.5% 0% 0 3 6 9 12 15 Number of Years Source: CoreLogic
Fairfax County Completed Foreclosures and Short Sales (Thousands) 7 6.6 6 5 5.5 4.5 Short Sales Completed Foreclosures 4 3 3.0 3.2 2.3 2 1.5 1.0 1.0 1.1 1 0 0.4 0.1 0.1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: CoreLogic MarketTrend 9
Low For-Sale Inventory: Part of a New Normal? 4% Homes-For-Sale Inventory as a Percent of Households 3% 2% 1% 0% 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 Sources: National Association of Realtors, U.S. Census Bureau (New Residential Sales and Housing Vacancy Survey). Note: Existing home inventory excludes Condo & Co-op Inventory before 1999. 10
Fairfax County Home Prices: 3-4% Growth Projected CoreLogic Home Price Index (January 2000 = 100) 260 - Forecast - 240 10% 220 200 32% 180 160 140 120 100 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: CoreLogic Home Price Index (April 4, 2017 release) 11
Local Home Price Growth Lags National Gain Home Price Growth, annual percent (January and February average) 7% 6% 5% 4% 3% 2% 1% 0% United States Washington, DC Fairfax County Source: CoreLogic Home Price Index (April 4, 2017 release) Alexandria City Arlington Montgomery 12
26K CA 27K OR 0K AK Average Equity Gained per Homeowner Fourth Quarter 2015 to Fourth Quarter 2016 31K WA 15K NV 17K ID 13K AZ 21K UT 9K MT 19K* HI United States $13.7K 24K CO 10K NM Source: CoreLogic Negative Equity (March 9, 2017 Release), Louisiana, Maine, Mississippi, South Dakota, Vermont, West Virginia and Wyoming have insufficient equity data to report, Hawaii average equity gain is from Q3. 1K ND 7K NE 11K KS 13K TX 5K OK 10K MN 3K IA 9K MO 6K AR 6K WI 8K IL 7K MI 8K IN KY 8K TN 12K 8K AL 6K OH 12K GA 5K PA NC 8K 11K SC 17K FL 23K NY 5K VA NH 11K 20K RI 15K CT 4K NJ 7K DE -1K MD 16K DC 13K MA 15K 8K to 14K 4K to 7K 3K Fairfax County: $7.1K 13
Since 2010, Rent Rising Faster Than Income, Inflation Single-Family Rent Index Year-over-Year Percent Change 8% 6% 4% 2% 2017 forecast 3% 0% -2% -4% -6% January 2005 January 2007 January 2009 January 2011 January 2013 January 2015 January 2017 Source: CoreLogic Single-Family Rent Index (through March 2017), 21 markets for 2004-2005, 27 markets for 2006-2009, 40 markets for 2010-2017 14
Refi Booms End Quickly As Rates Come Off Lows Cash-out refi and FHA-to-conventional refi continue Refinance Share of Lending (Percent) 90 80 1992-93 Boom 1998 Boom 2001-04 Boom 30-Year Fixed-Rate Mortgage Rate (Percent) 2009-13 Boom Forecast 11 10 70 60 50 40 30 9 8 7 6 5 20 Refinance Share of Lending (Left) Fixed Mortgage Rate (Right) 10 1988 1993 1998 2003 2008 2013 2018 Source: Home Mortgage Disclosure Act, Freddie Mac Primary Mortgage Market Survey, CoreLogic; 2017-2018 forecast is average of MBA, Freddie Mac, Fannie Mae and IHS Markit (FRM rate only) projections. 15 4 3
Mortgage Originations: Drop in 2017 and Stable in 2018 Single-family Mortgage Originations (Billions of U.S. dollars) $2,400 ---Forecast--- $2,000 $1,600 $1,200 2016 to 2017: Total: - 19% Refi: - 47% Purch: + 6% Refinance $800 $400 Purchase $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Originations are an average of the latest projections released by Mortgage Bankers Association, Fannie Mae, Freddie Mac and Zelman & Associates. Forecasts as of March 2017. 2009-2015 are benchmarked to HMDA. Originations exclude HELOCs.
More Risk 2001-2003 Benchmark Less Risk 2016 Loans Have Less Credit Risk Than Pre-2009 Loans CoreLogic Housing Credit Index (2001 = 100) 140 120 100 80 60 40 20 0 2001 2003 2006 2008 2011 2013 2016 2001-03 mean +1 s.d. Source: CoreLogic Housing Credit Index (through 2016Q4) 17
Mortgage Credit Risk Along Six Dimensions First-Lien Purchase Money Originations Credit Score Less Than 640 150 125 Low & No Doc Share 100 75 50 25 0 LTV Share 95 And Above Condo Co-op Share DTI Share 43 And Above Non-Owner Occupancy Share Benchmark (2001 and 2002 Originations) Current (2016:Q4) Source: CoreLogic Housing Credit Index 18
Where to find more information Look for regular updates to our housing forecast, commentary and data at http://www.corelogic.com/blog @CoreLogicEcon @DrFrankNothaft 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. 19