Economic and Housing Update

Transcription

1 Economic and Housing Update Mark Palim Vice President, Applied Economic and Housing Research Fannie Mae January 14, Fannie Mae. Trademarks of Fannie Mae.

2 Economic Activity Rebounding Solidly SAAR, Quarterly Annualized % Change 6% 5% 4% 3% 2% 1% 0% -1% -2% GDP Final Sales to Private Domestic Purchasers -3% Q1 Q2 Q3 Q4 Q1 Q2 Q Source: Bureau of Economic Analysis 2

3 Decline in Unemployment is Good News; However, Labor Force Participation Continues to Fall 84% 12% 80% 10% 76% 8% 72% 68% 6% 64% 4% 60% '48 '53 '58 '63 '68 '73 '78 '83 '88 '93 '98 '03 '08 '13 Labor Force Participation Rate: Yr (12-month rolling ave, %, Left Axis) Unemployment Rate: Yr (SA, %, Right Axis) 2% Source: Bureau of of Labor Labor Statistics Statistics 3

4 Year-over-Year % Change Diminishing Labor Market Slack Has Not Yet Led to Stronger Wage Growth 7 Job Openings per Unemployed 4.5% Wage Growth 6 4.0% 3.5% 5 3.0% 4 2.5% 3 2.0% 2 1.5% 1.0% 1 0.5% 0 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Total Number of Unemployed per Job Opening Expansion Average: 2.1 Source: Bureau of Labor Statistics 0.0% '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 Total Private Employees Total Private: Production & Nonsupervisory Employees 4

5 Leading Indicators Point to Coming Wage Inflation Pressure as Job Gains Continue 24% 38% 20% 30% 16% 23% 12% 15% 8% 8% 4% 0% 0% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Percent Planning to Raise Worker Compensation (Left Axis) Percent Raising Worker Compensation Over Past 3-6 Months (Right Axis) -8% Source: National Federal Federation Home Loan of Independent Mortgage Business Corporation 5

6 Home Sales Finish 2014 on a Soft Note Despite Declining Mortgage Rates 1, , , '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 New Single-Family Home Sales (SAAR, Thousands of Units, Left Axis) Existing Home Sales (SAAR, Millions of Units, Right Axis) 2.0 Source: National Association of REALTORS, Census Bureau 6

7 Underwater Borrowers are Becoming Increasingly Concentrated 30.00% Q % 20.00% 15.00% Negative Equity Share: U.S. 10.7% 10.00% 5.00% 0.00% Negative Equity Share Near Negative Equity Share * Only 12 States have a higher negative equity share than the U.S. average *Borrowers with less than 5% home equity Source: CoreLogic 7

8 Major Measures of Home Prices Show Moderating Growth Year-over-Year % Change 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 FHFA House Price Index (Purchase Only, United States) CoreLogic National House Price Index S&P/Case-Shiller Home Price Index: Composite 20 Source: S&P/Case-Shiller, Core CoreLogic, Federal Federal Housing Finance Housing Agency Finance Agency 8

9 ...as Tight Supply Continues to Support Growth 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% '91 '95 '99 '03 '07 '11 ' CoreLogic House Price Index (Year-over-Year % Change, Left Axis) Months' Supply of SF Existing Homes (4-Month Lead, Inverted, Right Axis) Source: CoreLogic, National Association of REALTORS 9

10 Recovery in Single-Family Construction is Sluggish 2,000 SAAR, Thousands of Units 600 1,800 1, ,400 1, , '90 '95 '00 '05 '10 0 Single-Family (Left Axis) Multifamily (Right Axis) Source: Census Bureau 10

11 Homeownership is Primarily a Function of Graduation Rather than Presence of Student Debt Have student loan debt Last level of education completed 39% 27% 24% 23% 7% 78% College / Grad School Some College Technical School High School Younger Renters 2013 First-Time Homebuyers* 30% 15% 11% 3% 4% Younger Renters 2013 First-Time Homebuyers* Less than High School Ages *Sample is from Fannie Mae book only Source: Fannie Mae National Housing Survey, Jan-Mar 2014 Source: Fannie Mae National Housing Survey 11

12 Trouble Accessing Credit is Not the Primary Consideration in the Decision to Continue Renting What is your primary reason for renting now? Q Younger Renters Q Younger Renters Q Younger Renters Ages Younger Renters Q n=328; MOE +/- 5.41% Younger Renters Q n=346; MOE +/- 5.27% Younger Renters Q n=325; MOE +/- 5.44% * Denotes a statistically significant difference between younger renters in Q and Q at the 95% confidence level Source: Fannie Mae Mae National National Housing Housing Survey Survey 12

13 000 s, SAAR, Quarterly Annualized % Change Multifamily Starts Now Slightly Ahead of Historical Average Levels... 1,200 Multifamily (5+ units) Starts 1, Average 0 Source: U.S. Department of Commerce, Census Bureau 13

14 000 s and Multifamily Projects Underway are Rising Quickly National Condo and Apartment Completions and Units Underway Apartments Condos NOTE: Pipeline data is not an actual forecast of activity, it is a monitor of activity reported on to-date. As more projects are planned and tracked, figures in future periods might go up. * Anticipated completion date Source: CBRE-EA/Dodge Pipeline, October

15 Estimated National Vacancy Level Remains Near Historic Lows While Estimated Effective Rents Slightly Increased 9.0% $1,125 Rent Level Vacancy Rate 8.0% $1, % $1, % 5.0% $ % $ % * Preliminary estimate Sources: National Association of REALTORS, Census Bureau, Fannie Mae ESR Forecast Source: Fannie Mae Multifamily Economics and Market Research 15

16 Cap Rate Spreads Have Stayed Wide % Treasuries and Multifamily Cap Rates 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 10-Year Treasury Cap Rate 0.0% Source: Real Capital Analytics, and Federal Reserve 16

17 Billions as Investors Have Increasingly Turned to Buying Existing Apartment Buildings $35 $30 $25 National Apartment Sales Volume and Cap Rates Sales Cap Rate 7.5% 7.3% 7.1% 6.9% $20 $15 $10 $5 $0 6.7% 6.5% 6.3% 6.1% 5.9% 5.7% 5.5% Source: Real Capital Analytics Note: Chart excludes $22 B Tishman-Speyer transaction in October

18 Is the Fed Behind the Curve? (SA, $/Hour Year-Over-Year % Change) 5% 12% 4% 10% 3% 8% 6% 2% 4% 1% 2% 0% '85 '89 '93 '97 '01 '05 '10 '14 Average Hourly Earnings: Prod & Nonsupervisory: Total Private (Left Axis) Federal Funds Target Rate (Right Axis) 0% Source: Bureau of Labor Statistics, Federal Reserve Board 18

19 We Expect Mortgage Production to Increase Only Modestly in 2015 Amid Declining Refinance Share Mortgage Originations (1-4 Unit, Trillions of $) $4.0 $3.5 Purchase Refinance $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Source: Fannie Mae ESR Forecast 19

20 Year-over-Year % Change 25% Housing Activity Mixed in 2014, but Measured Recovery Continues 20% 2014 Year-to-Date 2014 Forecast 2015 Forecast 15% 10% 5% 0% -5% -10% Existing Home Sales New Single-Family Home Sales Single-Family Housing Starts Forecast 2015 Forecast (Thousands of Units) Existing Home Sales 5, ,138 New Home Sales Single-Family Housing Starts Multifamily Housing Starts Multifamily Housing Starts Sources: National Association of REALTORS, Census Bureau, Fannie Mae ESR Forecast Source: National Association of REALTORS, Census Bureau, Fannie Mae December Forecast 20

21 Speaker Biography Mark Palim Vice President of Applied Economic & Housing Research Dr. Mark Palim is Vice President of Applied Economic and Housing Research at Fannie Mae. He is responsible for overseeing the Economic and Strategic Research Group s forecasting functions and manages multi-disciplinary partnerships across the company to address specific business issues facing Fannie Mae. Dr. Palim is a key spokesperson on economic and banking trends and a frequent speaker at national mortgage finance and housing industry events. Prior to working at Fannie Mae, Dr. Palim was an economic consultant for PricewaterhouseCoopers and for LECG. His practice focused on applying economic and financial theory to a variety of business disputes and policy questions. He worked as a consulting and testifying expert in antitrust cases and disputes in the financial services industry. In addition, Dr. Palim led a team of 75 adjudicators charged with valuing claims for the Department of Justice and the Special Master administering the Federal September 11th Victim Compensation Fund. Dr. Palim was first involved with economic forecasting and mortgage securities in 1988 when he was as a portfolio manager and also reported to the Chief Economist at Mercantile Safe Deposit and Trust Company. Subsequently, he continued his work on macroeconomic and policy issues as a staff economist for the National Association of Federal Credit Unions (NAFCU). Dr. Palim has a Ph.D. in economics from George Mason University and a B.A. in international studies from the Johns Hopkins University. In addition to his academic training, Dr. Palim is a Chartered Financial Analyst charter holder (CFA). Dr. Palim is married to an attorney and has four children. He lives in Bethesda, Maryland and grew up in Brussels, Belgium. Dr. Palim is fluent in French. 21

22 Mark Palim, Vice President Fannie Mae 3900 Wisconsin Ave., NW Mail Stop 1H-2N/01 Washington, DC Contact Information fanniemae.com/media/economics/ (o)