HOUSING TRENDS, FACTORS, AND FORCES By: Andy Carswell, University of Georgia Georgia Institute for Community Housing Tifton, GA February 26, 2008
Single-Family Housing Starts 1,900 (Thousands of Units, SAAR) 1,700 1,500 1,300 1,100 900 700 500 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Source: NAHB 12
Multifamily Housing Starts 500 (Thousands of Units, SAAR) 450 400 350 300 250 200 150 100 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Source: NAHB 13
Housing Starts Per Capita 0.010 0.009 CA, AZ, NV, FL 0.008 0.007 0.006 All Other States 0.005 0.004 MI, IN, OH 0.003 0.002 0.001 0.000 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: New York Federal Reserve, Economy.com, Mortgage Bankers Association of America 0.010 0.009 0.008 0.007 0.006 0.005 0.004 0.003 0.002 0.001 0.000
New Home Sales 1,400 (Thousands of units, Seasonally Adjusted) 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Source: NAHB 11
Prime Conventional Conforming Home Mortgage Rates 12 Percent 10 Fixed-Rate Mortgages 8 6 4 2 Adjustable Rate Mortgages 0 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Source: NAHB 10
Real GDP Forecast 4.5% 4.0% 3.5% 3.0% 3.8% 3.9% % Change 2.5% 2.0% 2.3% 2.4% 2.5% 2.6% 2.6% 2.6% 2.6% 2.6% 1.5% 1.5% 1.0% 0.5% 0.6% 0.0% 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 Source: NAHB
Unemployment Forecast 5.0% 4.9% 4.9% 4.9% 4.9% 4.9% 4.9% 4.9% Unemployment Rate 4.8% 4.7% 4.6% 4.5% 4.5% 4.5% 4.6% 4.7% 4.8% 4.8% 4.4% 4.3% 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 Source: NAHB
Vacant Year-Round Housing Units on the Market 6500 6000 (000s) (Percent) 6 5500 5000 4500 4000 3500 3000 2500 2000 No. of Units (left scale) % of Housing Stock (right scale) 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 5 4 3 2 6
Georgia and Projected Household Growth Top 5 Counties Chattahoochee (+58%) Barrow (+32%) Newton (+31%) Paulding (+30%) Forsyth (+29%) Bottom 5 Counties Butts (-30%) DeKalb (-19%) Liberty (-18%) Taliafero (-13%) Ware (-13%)
Percent of Defaults Due to Non-Owner Occupied Loans Prime Loans Percent of prime defaults due to non-owner occupied loans as of June 30, 2007 Share of prime home purchase loan originations for nonowner occupied properties in 2005, based on HMDA Nevada 32% 29% Arizona 26% 29% Florida 25% 32% California 21% 14% All other 13% 15% states Total US 16% 17% Subprime Loans Percent of subprime defaults due to non-owner occupied loans as of June 30, 2007 Share of subprime home purchase loan originations for nonowner occupied properties in 2005, based on HMDA Nevada 24% 14% Arizona 18% 14% Florida 14% 15% California 15% 7% All other 11% 10% states Total US 12% 10% Source: MBA, Home Mortgage Disclosure Act 2005 Report
Mortgage Delinquency Data Source: Equifax/Moody s Economy. COM
Historical Data Patterns
Industry and Market Determinants of Foreclosure LTV Ratios (+) House Price Appreciation (-) Sub-Prime Lender (+) Mortgage Type Non-FRM (+) Savings Rate (-) Servicing by Primary Lender (-) Interest Rates (+)
Human/Individual Factors Associated with Foreclosure Divorce (+) Health Care Exps. (+) Unemployment (+) Seasonal Nature of Job (+) # of Dependents (+) Non-Housing Wealth (-) FTHB Status (+) Gambling (+)
Pre-purchase Homeownership Counseling s Effects on Default and Foreclosure Positive effect overall as a risk mitigator Little in the way of followup procedures Questionable purchasing behavior of FTHB More vulnerable to predatory lenders after origination than before
Community Costs of Foreclosure Fire Risks Increasing Crime Administrative/Municip al Costs Property Value Effects
Foreclosure and Mortgage Fraud Fraud-for-property schemes vs. fraud-forprofit schemes Clustering effect Adverse community effects Difficulty in researching fraud effects on foreclosure
Mortgage Fraud Case Study
Concentration of Mortgage Fraud
So, Who s To Blame for the Affordability Problem? Land as a finite resource Government infatuated with homeownership Liberalized financing of mortgages Building codes Mortgage fraud Suburbanization Housing norms Inflexible nature of market rents Lack of availability of Section 8 Growth of subprimes The dominance of the stick-built market
Possible Solutions to Affordability Problem Solid, yet realistic, homeownership counseling programs Reducing the stigma of manufactured housing Reducing the influence of the sub-prime market Living wage campaigns Land trusts Housing trust funds
Other Housing Items Dominating My World Predatory lending and anti-fraud legislation Rise of gated communities Rise of New Urbanism Effects of foreclosure laws on bankruptcy behavior Housing (in)equality Appraisals, assessments, and proper valuation Residential property management Employer-assisted housing
Any Questions? Andrew T. Carswell, Ph.D. Assistant Professor Dept. of Housing & Consumer Economics University of Georgia 109 Dawson Hall Athens, GA 30602 Ph: (706) 542-4867 Fax: (706) 542-4397 carswell@fcs.uga.edu