Economic & Housing Market Forecast

Transcription

1 Economic & Housing Market Forecast Presented by Ryan Brault - Regional Director October 2 nd,

2 The Economy Overall US 2

3 State of the Economy Job Growth Rate Remaining Strong Unemployment Rate Holding at Low Levels Housing Production Continues to be Strong High Consumer Confidence Rising Interest Rates 3

4 Unemployment Rate Trend Unemployment Rate Trend 19.0% 17.0% 15.0% 13.0% 11.0% 9.0% Expanded Unemployment Rate (U-6) 7.7% 7.0% 5.0% 3.0% Official Unemployment Rate 3.9% Source: U. S. Bureau of Labor Statistics 4

5 ISM Purchasing Managers Index ISM - Purchasing Managers Index, GROWTH NO GROWTH RECESSION Source: Institute of Supply Management 5

6 Consumer Confidence Index Long Term Trend Consumer Confidence Index, 2001-Present GROWTH STATIC RECESSION Q01 2Q02 2Q03 2Q04 2Q05 2Q06 2Q07 2Q08 2Q09 2Q10 2Q11 2Q12 2Q13 2Q14 2Q15 2Q16 2Q17 2Q18 Source: Conference Board 6

7 Mortgage Rates Will Rise as Inflation Rises 7

8 Mortgage Rate Trend History 9% Key Interest Rate History, Yr Rate 10 Year T-Bill Fed Funds Rate 8% 7% 6% 5% 4% 4.57% 3% 2% 1% 0% Source: Freddie Mac Primary Mortgage Market Survey, Federal Reserve Bank of NY 8

9 30 Year Fixed Rate Mortgages - History and Forecast 9

10 Refinancing Trends Refinancing Percentage of All Mortgages 70% 65% 60% 67.0% 61.8% 65.3% 66.0% 59.4% 62.7% 55% 50% 51.6% 53.0% 54.8% 50.2% 45% 40% 43.2% 35% 36.7% 30% Source: Mortgage Bankers Association 10

11 Median Annual Home Price - History and Forecast 11

12 Median Annual Home Price Changes - History and Forecast 12

13 Median Household Income - History and Forecast 13

14 Median Home Price Affordability & Home Buyer Power Affordability & Home Buying Power $400,000 Existing Home Price New Home Price Existing Home Affordability New Home Affordability 80.0% $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50, % 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% % of Households That Can Afford Median Price Home $0 0.0% Source: Freddie Mac Primary Mortgage Market Survey, Metrostudy 14

15 Longest US Economic Expansions 15

16 Annual Residential Permit Activity 16

17 Year-over-Year Percent Changes of Major Housing Components 15.0% Improvement Deterioration Neutral 13.1% 10.0% 5.0% 7.8% 5.9% 6.7% 2.8% 3.1% 4.2% 10.2% 3.3% 1.7% 1.1% 0.0% -5.0% -5.2% -2.9% -2.4% -10.0% -15.0% -12.1% 17

18 Vacant Developed Lot Inventory & Annual Starts 1,400,000 1,200,000 1,000, , , , ,000 0 VDL Inventory Annual Starts 18

19 Annualized Starts & Closings 450, , , , , , , ,000 50,000 0 Annual Starts Annual Closings 19

20 Annualized Starts & Closings by Price Range 30% 25% 20% 15% 10% 5% 0% <$150k $150K- $250k $250k- $300k $300k- $400k $400k- $500k $500k- $600k $600k- $700k $700k- $800k $800k+ Annual Starts Annual Closings 20

21 Annualized Starts & Closings by State 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Annual Starts Annual Closings 21

22 Annual Starts and Closings by Market Dallas/Ft.Worth Houston Central Florida Atlanta Phoenix/Tucson Southern California Denver/Colorado Springs Northern California Austin Salt Lake City Raleigh/Durham Charlotte Central California San Antonio Philadelphia Region Las Vegas Tampa Seattle Suburban Maryland Northern Virginia Nashville Jacksonville South Florida Twin Cities Chicago Sarasota/Bradenton Indianapolis N Jersey-NY Suburbs Boise San Diego Portland Naples/Ft.Myers NC Triad Reno St.George/Mesquite Albuquerque South Florida Condo Annual Starts Annual Closings 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,

23 Residential Remodeling Index Top 20 Remodeling Markets 2Q18 23

24 Residential Remodeling Index Bottom 20 Remodeling Markets 2Q18 24

25 Residential Remodeling Index One Year Forecast 25

26 Residential Remodeling Index Longer Term Outlook 26

27 Residential Remodeling Index National Index & Forecast 27

28 Conclusions 28

29 Conclusions THE RISING IMPACT OF TARIFFS 4Q 17 20%+ tariff imposed on Lumber imports. 1Q 18 10% tariff imposed on aluminum imports. 1Q 18 25% tariff imposed on steel imports. ECONOMIC IMPACT OF TARIFFS ON $150B IN CHINESE IMPORTS Increase in construction costs by at least $2,000 per house. Increase in construction timelines. 29

30 Conclusions THE HEADLINES 30

31 Conclusions INFLATION WILL BE IMPACTED BY DEBT, WHICH LEADS TO In Trillions of Dollars $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 Change in US Debt From Taking to Leaving Office $8.59 $8.28 $5.85 $1.86 $1.55 $1.40 $0.12 $0.22 $0.30 Nixon Ford Carter Reagan GHWBush Clinton GWBush Obama Trump* Reduced economic growth Higher interest rates Weaker Dollar Higher taxes Higher risk of financial collapse 31

32 Jun-76 Dec-76 Jun-77 Dec-77 Jun-78 Dec-78 Jun-79 Dec-79 Jun-80 Dec-80 Jun-81 Dec-81 Jun-82 Dec-82 Jun-83 Dec-83 Jun-84 Dec-84 Jun-85 Dec-85 Jun-86 Dec-86 Jun-87 Dec-87 Jun-88 Dec-88 Jun-89 Dec-89 Jun-90 Dec-90 Jun-91 Dec-91 Jun-92 Dec-92 Jun-93 Dec-93 Jun-94 Dec-94 Jun-95 Dec-95 Jun-96 Dec-96 Jun-97 Dec-97 Jun-98 Dec-98 Jun-99 Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18 Conclusions 2-10 YEAR TREASURY SPREAD AS PREDICTOR OF RECESSION TREASURY YIELD SPREAD (DIFFERENCE BETWEEN THE 2-YEAR AND 10-YEAR TREASURY YIELDS Source: FRED Economic Data (Federal Reserve Bank of St. Louis) 32

33 Conclusions Trade War Impacts 33

34 Conclusions Trade War Impacts 34

35 Conclusions NAFTA Breakup Impacts 35

36 Conclusions Homeownership By Age Group - US 36

37 Conclusions Population by Age & Generation - US 37

38 Conclusions Household Distribution & Buying Patterns by Generation 38

39 Population Growth Continuing Trend of Population Moving West and South Source: US Census Bureau 39

40 Population Growth 40

41 Conclusions 41

42 Case Schiller Market Comparison YOY Building Momentum Losing Momentum 42

43 HOUSING SUPPLY AND DEMAND TRENDS AND FORECASTS 155,000,000 HOUSING DEMAND AND SUPPLY PATTERNS United States 145,000,000 Units Demand/Supplied 135,000, ,000, ,000, ,000,000 95,000,000 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 prj Jan-20 prj Jan-21 prj Jan-22 prj Jan-23 prj Jan-24 prj Total Housing Supply Total Housing Demand * Over/Under supply measures based on current jobs-to-housing relationship relative to long-term relationship betw een jobs and housing. Source: Bureau of Labor Statistics; Moody's Analytics; Metrostudy 43

44 HOUSING VALUE AND AFFORDABILITY $350,000 HOUSING VALUATION PATTERNS United States $300,000 Median Housing Value $250,000 $200,000 $150,000 $100,000 $50,000 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 prj Jan-20 prj Jan-21 prj Jan-22 prj Jan-23 prj Jan-24 prj Historical/Forecast Home Price Income Supported Home Price Source: Bureau of Labor Statistics; Moody's Analytics; Metrostudy 44

45 RESIDENTIAL MARKET OPPORTUNITY/RISK INDEX United States 2nd Quarter 2018 Housing Housing Market is Over/ Median Ann. Price Equilibrium 30-Yr. Median Market is Over/ O/R Index Home Mkt. Land Mkt. Buy/Sell Year Demand Supply Underbuilt Home Price Change Home Price Mtg. Rate HH Income Undervalued (100=Equil.) Health Health Land ,002, ,734,934 2,732, % Overbuilt $99,635 - $88, % $31,468 $10, % Overvalued 94.9 Weak Weak Sell ,189, ,697,494 4,507, % Overbuilt $101, % $96, % $32,107 $4, % Overvalued 95.5 Weak Weak Sell ,707, ,810,312 5,103, % Overbuilt $104, % $106, % $32,662 $2, % Undervalued 97.3 Weak Weak Sell ,862, ,033,106 4,170, % Overbuilt $105, % $119, % $33,466 $14, % Undervalued Weak Stable Buy/Sell ,232, ,391,644 2,158, % Overbuilt $107, % $110, % $34,516 $3, % Undervalued 99.5 Weak Stable Buy/Sell ,222, ,711, , % Overbuilt $108, % $118, % $35,807 $10, % Undervalued Stable Stable Buy/Sell ,654, ,123, , % Underbuilt $113, % $123, % $37,266 $10, % Undervalued Stable Stable Buy/Sell ,745, ,551,380 2,194, % Underbuilt $118, % $132, % $39,097 $13, % Undervalued Stable Strong Buy ,935, ,148,108 3,787, % Underbuilt $125, % $147, % $41,110 $21, % Undervalued Stable Strong Buy ,031, ,796,260 5,235, % Underbuilt $132, % $147, % $43,315 $14, % Undervalued Strong Strong Buy ,862, ,374,142 6,488, % Underbuilt $143, % $142, % $44,521 $ % Overvalued Strong Strong Buy ,154, ,994,452 5,160, % Underbuilt $155, % $157, % $45,073 $2, % Undervalued Strong Strong Buy ,043, ,728,775 2,314, % Underbuilt $170, % $163, % $45,071 $6, % Overvalued Strong Stable Buy/Sell ,992, ,611, , % Underbuilt $186, % $177, % $45,657 $8, % Overvalued 98.8 Strong Stable Buy/Sell ,566, ,664,252 97, % Overbuilt $210, % $181, % $46,927 $29, % Overvalued 95.8 Stable Weak Sell ,941, ,790, , % Underbuilt $239, % $186, % $48,783 $53, % Overvalued 93.4 Stable Weak Sell ,455, ,614, , % Underbuilt $250, % $181, % $50,972 $68, % Overvalued 92.2 Weak Weak Sell ,158, ,005,330 1,153, % Underbuilt $249,635 (0.2%) $189, % $53,014 $59, % Overvalued 93.4 Weak Weak Sell ,698, ,903, , % Overbuilt $216,563 (13.2%) $197, % $53,746 $19, % Overvalued 97.3 Weak Weak Sell ,327, ,482,243 6,154, % Overbuilt $190,142 (12.2%) $216, % $53,084 $26, % Undervalued Weak Stable Buy/Sell ,671, ,082,274 7,410, % Overbuilt $195, % $219, % $52,492 $24, % Undervalued 98.9 Weak Stable Buy/Sell ,426, ,702,632 6,276, % Overbuilt $187,477 (4.2%) $225, % $52,793 $38, % Undervalued Stable Stable Buy/Sell ,798, ,527,203 4,728, % Overbuilt $194, % $251, % $53,640 $56, % Undervalued Stable Strong Buy ,080, ,512,560 3,432, % Overbuilt $215, % $247, % $54,809 $31, % Undervalued Stable Stable Buy/Sell ,539, ,554,511 2,014, % Overbuilt $227, % $246, % $56,205 $18, % Undervalued Strong Stable Buy/Sell ,289, ,725, , % Overbuilt $240, % $264, % $58,112 $24, % Undervalued Stable Stable Buy/Sell ,702, ,919, , % Underbuilt $253, % $280, % $60,011 $26, % Undervalued Stable Strong Buy ,873, ,189,153 1,684, % Underbuilt $269, % $277, % $61,962 $7, % Undervalued Stable Stable Buy/Sell 2018est 141,951, ,570,183 2,381, % Underbuilt $285, % $263, % $64,441 $22, % Overvalued 98.9 Strong Stable Buy/Sell 2019prj 143,653, ,036,076 2,616, % Underbuilt $291, % $248, % $66,661 $43, % Overvalued 96.9 Stable Weak Sell 2020prj 144,647, ,554,162 2,092, % Underbuilt $294, % $246, % $68,457 $48, % Overvalued 96.1 Stable Weak Sell 2021prj 144,471, ,996, , % Underbuilt $295, % $249, % $69,415 $45, % Overvalued 95.6 Weak Weak Sell 2022prj 143,505, ,294,303 1,788, % Overbuilt $290,871 (1.5%) $257, % $70,109 $33, % Overvalued 95.7 Weak Weak Sell 2023prj 142,009, ,397,569 4,387, % Overbuilt $284,472 (2.2%) $267, % $70,670 $16, % Overvalued 96.1 Weak Weak Sell 45

46 MARKET OPPORTUNITY RANKINGS SELECT METRO AREAS IN THE UNITED STATES 2nd Quarter Est. Jobs & Housing 2018 Jobs-to-Housing 2018 Home Prices Median Year 2018 Year 2018 Near- Year 2006 Non-Farm Equili- Equili- H.Hold Under/(Over) Under/(Over) Term Under/(Over) REGION Jobs Housing Ratio brium Median brium Income Supplied Valued Risk Valued - United States 148,823, ,570, to to 1.0 $285,347 $263,113 $64, % -7.8% Moderate -27.4% 1 San Luis Obispo-Paso Robles-Arroyo Grande, CA CBSA 119, , to to 1.0 $612,604 $597,362 $75, % -2.5% Low -38.6% 2 Trenton, NJ CBSA 272, , to to 1.0 $274,192 $282,867 $82, % 3.2% Low -25.6% 3 San Francisco-Redwood City-South San Francisco, CA MD 1,135, , to to 1.0 $1,450,825 $1,291,039 $117, % -11.0% Low -22.6% 4 Riverside-San Bernardino-Ontario, CA CBSA 1,496,161 1,553, to to 1.0 $344,400 $284,060 $61, % -17.5% Low -40.7% 5 West Palm Beach-Boca Raton-Delray Beach, FL MD 635, , to to 1.0 $359,011 $342,061 $66, % -4.7% Low -39.9% 6 Merced, CA CBSA 68,308 86, to to 1.0 $253,978 $217,047 $51, % -14.5% Low -47.5% 7 New York-Newark-Jersey City, NY-NJ-PA CBSA 9,783,262 8,063, to to 1.0 $479,285 $519,691 $79, % 8.4% Low -33.3% 8 Stockton-Lodi, CA CBSA 238, , to to 1.0 $367,955 $314,125 $63, % -14.6% Low -45.1% 9 Modesto, CA CBSA 177, , to to 1.0 $312,372 $260,990 $57, % -16.4% Low -43.9% 10 Miami-Fort Lauderdale-West Palm Beach, FL CBSA 2,678,205 2,601, to to 1.0 $350,286 $326,858 $56, % -6.7% Low -41.0% 11 Fresno, CA CBSA 352, , to to 1.0 $265,008 $234,771 $52, % -11.4% Low -40.4% 12 Cape Coral-Fort Myers, FL CBSA 265, , to to 1.0 $250,119 $212,158 $56, % -15.2% Low -41.8% 13 Oakland-Hayward-Berkeley, CA MD 1,183,076 1,036, to to 1.0 $813,278 $743,169 $98, % -8.6% Low -36.6% 14 San Antonio-New Braunfels, TX CBSA 1,065, , to to 1.0 $214,873 $187,532 $60, % -12.7% Low -9.3% 15 Baltimore-Columbia-Towson, MD CBSA 1,413,085 1,204, to to 1.0 $269,852 $290,196 $85, % 7.5% Low -32.4% 16 Boston-Cambridge-Nashua, MA-NH NECTA 2,786,673 1,970, to to 1.0 $484,207 $466,413 $90, % -3.7% Low -22.1% 17 Atlanta-Sandy Springs-Roswell, GA CBSA 2,814,512 2,458, to to 1.0 $199,198 $174,685 $68, % -12.3% Low -19.1% 18 Salinas, CA CBSA 141, , to to 1.0 $602,684 $523,799 $68, % -13.1% Low -40.7% 19 Deltona-Daytona Beach-Ormond Beach, FL CBSA 205, , to to 1.0 $200,422 $172,048 $49, % -14.2% Low -40.2% 20 North Port-Sarasota-Bradenton, FL CBSA 309, , to to 1.0 $285,105 $273,870 $56, % -3.9% Low -42.2% 21 San Diego-Carlsbad, CA CBSA 1,476,536 1,218, to to 1.0 $624,545 $577,027 $75, % -7.6% Low -35.0% 22 Chicago-Naperville-Elgin, IL-IN-WI CBSA 4,755,211 4,001, to to 1.0 $258,411 $257,874 $72, % -0.2% Low -27.8% 23 Detroit-Warren-Dearborn, MI CBSA 2,044,839 2,020, to to 1.0 $185,703 $161,795 $62, % -12.9% Low -13.1% 24 Provo-Orem, UT CBSA 258, , to to 1.0 $341,036 $293,616 $77, % -13.9% Low -5.7% 25 Cincinnati, OH-KY-IN CBSA 1,113, , to to 1.0 $170,036 $160,705 $64, % -5.5% Low -10.6% 46

47 MARKET OPPORTUNITY RANKINGS SELECT METRO AREAS IN THE UNITED STATES 2nd Quarter Est. Jobs & Housing 2018 Jobs-to-Housing 2018 Home Prices Median Year 2018 Year 2018 Near- Year 2006 Non-Farm Equili- Equili- H.Hold Under/(Over) Under/(Over) Term Under/(Over) REGION Jobs Housing Ratio brium Median brium Income Supplied Valued Risk Valued 76 El Paso, TX CBSA 318, , to to 1.0 $156,000 $148,687 $45, % -4.7% High -19.4% 77 Columbia, SC CBSA 401, , to to 1.0 $167,946 $166,117 $57, % -1.1% High -10.7% 78 Winston-Salem, NC CBSA 266, , to to 1.0 $156,072 $145,920 $50, % -6.5% High -10.9% 79 Dallas-Fort Worth-Arlington, TX CBSA 3,710,883 2,896, to to 1.0 $254,911 $198,228 $69, % -22.2% High -4.1% 80 Palm Bay-Melbourne-Titusville, FL CBSA 219, , to to 1.0 $221,584 $172,835 $54, % -22.0% High -36.8% 81 Waco, TX CBSA 123, , to to 1.0 $150,775 $127,632 $48, % -15.3% High -4.3% 82 Bakersfield, CA CBSA 261, , to to 1.0 $240,544 $216,295 $51, % -10.1% High -45.7% 83 Austin-Round Rock, TX CBSA 1,063, , to to 1.0 $306,537 $272,210 $77, % -11.2% High -4.5% 84 Memphis, TN-MS-AR CBSA 654, , to to 1.0 $172,611 $152,941 $54, % -11.4% High -14.9% 85 Baton Rouge, LA CBSA 409, , to to 1.0 $198,460 $191,770 $57, % -3.4% High -24.0% 86 Spokane-Spokane Valley, WA CBSA 250, , to to 1.0 $230,811 $213,853 $57, % -7.3% High -24.9% 87 Houston-The Woodlands-Sugar Land, TX CBSA 3,094,996 2,648, to to 1.0 $225,530 $199,818 $65, % -11.4% High -9.0% 88 Huntsville, AL CBSA 239, , to to 1.0 $199,066 $190,679 $61, % -4.2% High -10.7% 89 Virginia Beach-Norfolk-Newport News, VA-NC CBSA 793, , to to 1.0 $229,023 $225,937 $68, % -1.3% High -28.4% 90 Birmingham-Hoover, AL CBSA 540, , to to 1.0 $197,902 $179,207 $56, % -9.4% High -11.7% 91 Greensboro-High Point, NC CBSA 366, , to to 1.0 $164,074 $153,105 $48, % -6.7% High -13.5% 92 Des Moines-West Des Moines, IA CBSA 373, , to to 1.0 $200,889 $189,661 $70, % -5.6% High -9.9% 93 Albuquerque, NM CBSA 396, , to to 1.0 $207,430 $202,360 $55, % -2.4% High -17.9% 94 San Jose-Sunnyvale-Santa Clara, CA CBSA 1,119, , to to 1.0 $1,381,169 $1,022,838 $121, % -25.9% High -24.7% 95 Little Rock-North Little Rock-Conway, AR CBSA 363, , to to 1.0 $145,586 $140,957 $52, % -3.2% High -12.8% 96 Myrtle Beach-Conway-North Myrtle Beach, SC-NC CBSA 171, , to to 1.0 $212,722 $224,379 $50, % 5.5% High -27.4% 97 Tucson, AZ CBSA 384, , to to 1.0 $225,207 $207,429 $50, % -7.9% High -35.7% 98 Omaha-Council Bluffs, NE-IA CBSA 504, , to to 1.0 $180,774 $167,833 $64, % -7.2% High -12.8% 99 Killeen-Temple, TX CBSA 146, , to to 1.0 $163,085 $140,314 $56, % -14.0% High 4.7% 100 College Station-Bryan, TX CBSA 120, , to to 1.0 $210,928 $168,038 $45, % -20.3% High -0.1% 47

48 KEY TAKEAWAYS FOR 2018 AND BEYOND Tax reform is hurting high priced markets California, New York, Washington Tariffs hurt the economy especially the new home industry. Rising mortgage rates are just beginning, and inflationary pressures are slowly building. National debt will slow economic growth. The national housing market will continue to be significantly under supplied. The national housing market will become increasingly over valued, but the risk of a price collapse is small due to under supply. The surge in the remodeling/renovation market will continue. Uncertainty spawned by policies of the current administration may bring forward the pending recession. Overall, we re in the bottom of the 7 th inning of a challenging and rewarding housing market in an environment of under supply and increasing costs.

49 now you know 49

50 Follow Up Questions Ryan Brault Regional Director (480) John Ralston Director of Business Development (602) S. Alma School Rd, #9750 Mesa, AZ