Housing and Mortgage Market Update

Transcription

1 Housing and Mortgage Market Update Views from the Top Frank E. Nothaft Vice President and Chief Economist January 8, 2015

2 Summary: Housing & Mortgage Market Outlook for 2015 Interest rates expected to rise.» 30-year FRM projected to rise slowly to 4.8% by end of 2015.» Economic growth (3.0%) in 2015 drives borrower income gains. Buyer affordability will remain strong in most metro areas. Home sales: 2015 expected to be best since 2007.» Inventory-for-sale remains low. Home values projected to rise in most metro areas.» U.S. house-price index projected to be up 3% in Originations: More Single-family Purchase, less Refi; and more Multifamily Our Multi-Indicator Market Index (MiMi) can be a local market gauge. 2

3 Most Metro Areas Are Affordable Today (Mortgage Rate at 4¼%) Source: Moody s Analytics (2014Q2 median household income), National Association of Realtors (2014Q2 median price), Freddie Mac, American Housing Survey. Calculations assume a family earning the median income purchases the median priced home with a 10% down payment and a 30-year fixed-rate mortgage of 4.25%. Affordability is calculated by requiring that principal, interest, taxes, and insurance not exceed 28% of gross monthly income. We estimate annual taxes and homeowner s Insurance based on the American Housing Survey to be 1.68% of the purchase price and private mortgage insurance to be 0.5% per annum. ( Metro Affordability tab) At 4¼% Rate: Affordable Not Affordable 3

4 Most Metro Areas Are Affordable Today (Mortgage Rate at 4¼%) Charleston metro area Not Affordable: index value of 84 (Median household income of $51,800) (Median price = $233,600 Atlanta metro area Affordable: index value of 131 (Median household income = $58,000) (Median price = $167,500 Source: Moody s Analytics (2014Q2 median household income), National Association of Realtors (2014Q2 median price), Freddie Mac, American Housing Survey. Calculations assume a family earning the median income purchases the median priced home with a 10% down payment and a 30-year fixed-rate mortgage of 4.25%. Affordability is calculated by requiring that principal, interest, taxes, and insurance not exceed 28% of gross monthly income. We estimate annual taxes and homeowner s Insurance based on the American Housing Survey to be 1.68% of the purchase price and private mortgage insurance to be 0.5% per annum. ( Metro Affordability tab) At 4¼% Rate: Affordable Not Affordable 4

5 Home Sales: 2015 Projected Up 4% from 2014 (2015 Expected to Have Most Sales Since 2007) U.S. Existing Home Sales (Thousands) 7,500 U.S. New Home Sales (Thousands) 1,400 6,500 5,500 Forecast 1,100 4,500 3,500 Peak-to-2014Q3: Existing Down 32% New Down 68% ,500 Jul-15 Jan-15 Jul-14 Jan-14 Jul-13 Jan-13 Jul-12 Jan-12 Jul-11 Jan-11 Jul-10 Jan-10 Jul-09 Jan-09 Jul-08 Jan-08 Jul-07 Jan-07 Jul-06 Jan-06 Jul-05 Jan-05 Jul-04 Jan-04 Jul-03 Jan-03 Jul-02 Jan-02 Jul-01 Jan-01 Jul-00 Jan Sources: US Census Bureau, National Association of Realtors ; Peak is 2005Q3. 5

6 October Home Sales Up Compared to Last Year Home Sales Rebound Home sales picked up October over October in Georgia at a 9 percent clip, outpacing U.S. growth of 3 percent. Georgia also has about 0.7 months more inventory than the rest of the country as of October Single-Family Home Sales Year-Over-Year Percent Change U.S. 3% Georgia 9% Months Supply of Inventory U.S. Georgia Sources: National Association of Realtors, Georgia Association of Realtors 6

7 For-Sale Inventory of Homes Has Recently Been Very Low Homes-For-Sale Inventory as a Percent of Households 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 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

8 Vacancy Rate Back to Normal Rental is Tight, For-Sale Close to Average Excess Vacant Homes (Numbers in Millions) Excess for-rent Inventory Excess for-sale Inventory Source: Freddie Mac calculations using U.S. Census Bureau data. Negative values reflect undersupply. The under/oversupply of vacant housing was estimated based on the average vacancy rate from 1994Q1 to 2003Q4. 8

9 Rental Vacancy Rates in Atlanta Lowest Since 2000; Owner Vacancy Rates Remain High Rental Vacancy Rate 20% 18% 16% 14% Vacancy Rates in Atlanta Metropolitan Area (Percent) Homeowner Vacancy Rate 10% Rental (Left Axis) 9% 16.6% 8% 7% 12% 10% 8% 6% 4% 2% 9.3% 1.7% 4.1% Homeowner (Right Axis) 9.2% 2.6% 6% 5% 4% 3% 2% 1% 0% * Source: U.S. Census Bureau: Current Population Survey (CPS) - Housing Vacancy Survey NSA; Data through 2004 are based on 1990 metropolitan definitions and from 2005 are based on 2000 metropolitan definitions. *Average of first three quarters 0% 9

10 Apartment Building Values Near Prior Peak, House Values Remain Well Below U.S. Property Value Index (December 2000 = 100) Freddie Mac House Price Index 1 11% Down 3% Down NCREIF Apartment Index The Freddie Mac House Price Index for the U.S. is a value-weighted average of the state indexes where the value weights are based on Freddie Mac s single-family credit guarantee portfolio. Other indices of home prices may have different results, as they are determined using different pools of mortgage loans and calculated under different conventions. Source: Freddie Mac House Price Index, National Council of Real Estate Investment Fiduciaries data as of September 30,

11 Atlanta and Charleston: House Price Boom, Bust, and Recovery Freddie Mac House Price Index (December 2000=100) United States Charleston Atlanta Source: Freddie Mac House Price Index (January 2000-September 2014) 11

12 Vacancy Decline Has Led to Real Rent Growth in Atlanta Rent (in 2013 Dollars) 1100 Real Effective Rent Vacancy Rate 12% Vacancy Rate 11% 10% 9% 8% 7% 6% 5% 4% 3% 780 2% Sources: REIS (Atlanta Metro), Bureau of Labor and Statistics (CPI-Less shelter annual average, NSA Q3 data

13 Multifamily Properties Remain An Attractive Investment Multifamily Investment Index for U.S. (2000Q1=100) 160 Multifamily Mortgage Rate (percent) 10% 140 9% 8% 120 7% 100 6% 80 5% 4% 60 3% 40 2% Source: Freddie Mac, American Council of Life Insurers 13

14 Purchase-Money Will Dominate Origination Mix Single-Family Mortgage Originations ($ Billions) $2,122 $1,925 $370 $1,492 $355 $286 $1,312 $990 $856 (38)% $1,200 $1,100 $240 $220 $380 $220 $350 $440 $580 $580 $660 (8)% Lowest Level Since Conventional Purchase Conventional Refi FHA & VA Origination Activity Projected to Decline by Almost One-Half 2012 to 2015 Sources: Freddie Mac s November 2014 Economic Outlook, HUD, VA 14

15 Multifamily Mortgage Originations Multifamily Mortgage Originations (Billions of Dollars) $220 Forecast $200 $180 $160 $175 $185 $210 $140 $120 $134 $133 $144 $150 $100 $80 $60 $73 $83 $104 $108 $101 $70 $115 $40 $50 $56 $20 $0 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 15 Sources: FFIEC (HMDA), OTS Thrift Financial Report, ACLI Investment Bulletin, MBA Commercial Mortgage Banker Origination Survey, Freddie Mac. 15

16 What is MiMi? The Multi-Indicator Market Index (MiMi) provides monthly insights into the stability of the housing market Available at: 16

17 Four Indicators of a Stable Housing Market Purchase Applications Solid home sales that match demographics Payment-to-Income Mortgage payments in-line with income Current on Mortgage Few defaults Less foreclosures 1 3 Employment Low unemployment More jobs 2 4 Rising salaries and wages 17

18 Unemployment Rate Remains Elevated October 2014 Unemployment Rate (%) Average Unemployment Rate ( ) Percentage Points Above Average United States Georgia Atlanta Source: U.S. Bureau of Labor Statistics 18

19 Four Indicators Drive Monthly Composite MiMi MiMi is the average of the four indicators Of the MiMi indicators, zero is in range and four are weak. Atlanta is declining largely due to the 7.89% decrease in the Employment indicator over the last three months 19

20 MiMi Allows Pairwise comparisons of Metros and/or States Source: Freddie Mac Multi-Indicator Market Index (MiMi) for September

21 Where to Get More Information Look for regular updates to our economic forecast, commentary and data at Contact us at Opinions, estimates, forecasts and other views contained in this document are those of Freddie Mac's Office of the Chief Economist, do not necessarily represent the views of Freddie Mac or its management, should not be construed as indicating Freddie Mac's business prospects or expected results, and are subject to change without notice. Although the attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. Information from this document may be used with proper attribution. Alteration of this document is prohibited by Freddie Mac. 21