Ec Economic Update: Partly y Sunny y with Headwinds NAHB - - PowerPoint PPT Presentation
Ec Economic Update: Partly y Sunny y with Headwinds NAHB Building Systems Council October 10th, 2017 Robert Dietz, Ph.D. NAHB Chief Economist Hurricane E Hu e Effec ects ts Local impacts but smaller national effects Annual GDP Growth
NAHB Building Systems Council October 10th, 2017 Robert Dietz, Ph.D. NAHB Chief Economist
Hu Hurricane E e Effec ects ts
Local impacts but smaller national effects
0% 2% 4% 6% 8% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Annual GDP Growth
New Orleans Louisiana US
KATRINA BP OIL SPILL
Hu Hurricanes a es and S Sof
twood
Lumber er P Prices es
Small positive effects – larger drivers are economic cycles and trade policy
5 10 15 20 25 30 35 40 45 50 50 100 150 200 250 300 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Recessions All Hurricanes PPI: Lumber and wood products - Softwood lumber, (Index 1982=100, NSA)
Hu Hurricanes a es and R Roof
Mater erials
Asphalt shingles are tied to oil prices
5 10 15 20 25 30 35 40 45 50 50 100 150 200 250 300 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
GD GDP Gr Growth
Curb Your Enthusiasm
f
f
0% 2% 4% 6% 8% 10% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Q/Q Percent Change, SAAR Annual Growth LT avg (‘58-’07) 3.4% 2015 2.9% 2016 1.5% 2017f 2.2% 2018f 2.3% 2019f 1.9%
Re Recession In Indicator
100 200 300 400
0% 5% 10% 15% 20% 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 4 Quarter Change 10Yr-3M Treasury Spread Composite Index of Leading Indicators, (Index 2010=100, SA) Basis Points
Using Conference Board and bond spreads
Pr Probability of US Recession
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Aug 2018 = 9.9858%
Rates suggest recession probability small for 2018
Ti Tight Labor r Ma Mark rket
Rise of unfilled jobs
2% 4% 6% 8% 10% 12% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 06 07 08 09 10 11 12 13 14 15 16 17
Job Openings Rate Unemployment Rate
Percent, SA Percent, SA
Av Average Hourly Wages
2.5%
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 03/2007 03/2008 03/2009 03/2010 03/2011 03/2012 03/2013 03/2014 03/2015 03/2016 03/2017 Y/Y Percent Change, SAAR
Wages growing slowly
Ta Target Federal Fu Funds Rate
Fed will continue to raise rates
7.0% 4.0% 3.0% 3.0% 5.5% 5.5% 5.3% 5.5% 4.8% 5.5% 6.5% 1.8% 1.3% 1.0% 2.3% 4.3% 5.3% 4.3% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.2% 0.6% 1.1% 1.9% 2.4%
0% 1% 2% 3% 4% 5% 6% 7% 8% 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 16 17 18 19
Fe Federal Reserve Balance Sheet
Reduction in balance starts October 2017
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 $4.0 $4.5 $5.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
US Treasury Securities All Else
Federal Reserve Balance Sheet ($Tr.)
Agency- and GSE-MBS Share
30 30-Ye Year Fixed Rate and 10-Ye Year Treasury
Rates will rise due to Fed and if growth prospects improve
0% 2% 4% 6% 8% 10% 12% 0% 2% 4% 6% 8% 10% 12% 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 16 17 18 19
October 31, 2016
30-Year Fixed Rate Mortgage 10-Year Treasury Difference
Hou Househ sehol
Balance S e Shee eets: ts: L Loa
to-Va Value Ratio
$- $2 $4 $6 $8 $10 $12 $14 $16 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Percent Trillions
The Share of owners' equity in real estate Loan-to-value (LTV) Ratio Owners' equity in real estate
Aggregate market risk remains contained
Co Consumer Debt
147% 220% 92%
1 2 3 4 5 6 7 8
0% 50% 100% 150% 200% 250% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Auto Loans Student Loans Credit Cards Other
Rise in student and auto loans
Hou Househ sehol
For
tion
500 1,000 1,500 Y/Y Change in Household Count, Thousands, NSA
Owner-Occupied
500 1,000 1,500 2,000 2,500 2010 2011 2012 2013 2014 2015 2016 2017
Renter-Occupied
Source: U.S. Census Bureau (BOC): Housing Vacancies & Homeownership Rates.
Mo Modular r Homes Start rted in 2016
U.S. Total: 15,140 80% east of the Mississippi
Source: NAHB tabulation of data from the Survey of Construction, U.S. Census Bureau.
Ma Mark rket Penetration of Mo Modular r Constru ruct ction by Di Division
Modular Share of All Single-family Homes Started in 2016
8.2% 5.5% 3.4% 2.7% 2.1% 1.4% 0.8% 0.5% 0.2% New England Middle Atlantic East North Central East South Central South Atlantic West North Central Mountain West South Central Pacific
U.S. Overall: 15,140/779,082= 1.9%
Source: NAHB tabulation of data from the Survey of Construction, U.S. Census Bureau.
Pa Panelized/Precut Homes Started in 2016
Source: NAHB tabulation of data from the Survey of Construction, U.S. Census Bureau.
U.S. Total: 12,058 60% in 3 Eastern Divisions
Ma Mark rket Penetration of Pa Panelized Co Construction by by Division
Panelized/Precut Share of All Single-family Homes Started in 2016
4.5% 2.2% 1.8% 1.2% 1.0% 1.0% 1.0% 0.9% 0.6% Middle Atlantic South Atlantic Pacific West North Central East South Central New England East North Central Mountain West South Central
U.S. Overall: 12,058/779,082 = 1.5%
Source: NAHB tabulation of data from the Survey of Construction, U.S. Census Bureau.
2016 S 2016 Single-fa family Starts Inside and Outside Metro Ar Areas
681,451 67,396
Site Built
8,243 6,882
Modular
In a Metropolitan Statistical Area (MSA) Not In a MSA 10,637 1,409
Panelized
Source: NAHB tabulation of data from the Survey of Construction, U.S. Census Bureau.
Siz Size of New ew Homes St Star arted d in in 2016 2016
Median Square Footage of Finished Floor Space 2,430 1,728 2,847
Site Built Modular Panelized/Precut
Source: NAHB tabulation of data from the Survey of Construction, U.S. Census Bureau.
Fo Foundation Ty Type
Single-family Homes Started in 2016
27% 42% 42% 15% 26% 15% 57% 15% 43% 1% 17% 1%
National Modular Panelized/Precut Full or Partial Basement Crawl Space Slab Other
Large share
and panelized new homes in northeastern divisions where basements are common
Source: NAHB tabulation of data from the Survey of Construction, U.S. Census Bureau.
Bu Builders Cu Currently y Using Various Co Construction Methods
1% 3% 4% 7% 12% Log Home Modular Whole House Concrete Whole House Panelization Timber Frame
Source: Survey for the NAHB/Wells Fargo Housing Market Index (HMI), September 2015
Bu Builders Cu Currently y Using Pre-fa fabricated Components
9% 6% 9% 13% 95% Other pre-fabricated components Floor panels SIP's Wall panels Engineered roof trusses
Source: Survey for the NAHB/Wells Fargo Housing Market Index (HMI), September 2015
Po Potential Single-fa family Market
12% 7% 4% 3% 1% 3% 2% 2% 2% 2% 6% 14% 6% 6% 5%
Timber Frame Whole House Panelization Whole House Concrete Modular Log Home
Somewhat Likely Extremely Likely Currently Using 21% 23% 12% 11% 8%
Single-family Builders Currently Using or Likely to Use…
Source: Survey for the NAHB/Wells Fargo Housing Market Index (HMI), September 2015
Po Potential Single Family Market by Size of Builder
Builders Currently Using or Likely to Use…
18% 18% 15% 10% 9% 14% 25% 5% 8% 3% 35% 36% 6% 13% 8%
Timber Frame Whole House Panelization Whole House Concrete Modular Log Home
<25 Starts 25-99 Starts 100+ Starts
Source: Survey for the NAHB/Wells Fargo Housing Market Index (HMI), September 2015
Se Sele lected d Reas asons ns for Not Us Using ing Modular dular Cons nstruc uctio ion
By Size of Builder
14% 15% 10% 29% 43% 36%
Insufficient manufacturing capacity to supply needed components Worried about cost and reliability of delivery
< than 25 Starts 25 to 99 Starts 100+ Starts
Source: Survey for the NAHB/Wells Fargo Housing Market Index (HMI), September 2015
Se Sele lected d Reas asons ns for Not Us Using ing Pane aneliz lized d Cons nstruc uctio ion
13% 22% 17% 37% 25% 38%
Insufficient manufacturing capacity to supply needed components Think it costs too much
< than 25 Starts 25 to 99 Starts 100+ Starts
By Size of Builder
Source: Survey for the NAHB/Wells Fargo Housing Market Index (HMI), September 2015
Ce Census Data on Co Construction Time
Average Time from Start to Completion for Single-family Homes Completed in 2016
Source: NAHB tabulation of data from the Survey of Construction, U.S. Census Bureau.
6.6 months 5.1 months 5.8 months Site built Modular Panelized/Precut
La Labor
Unfilled construction jobs rising
0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Job openings rate - Construction 12-month moving average
Agi Aging g Labor Force ce for Co Construction
Co Construction Sector Productivity
Lagging overall economy
0.4 0.6 0.8 1.0 1.2 1.4 1.6 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Construction Worker Productivity Overall Worker Productivity
Index, 1993 = 1
Lo Lots
Housing Starts (Area) and Low/Very Low Lot Supply (bars)
0% 10% 20% 30% 40% 50% 60% 70% 300 600 900 1,200 1,500 1,800 2,100 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Starts (Thousands) Low Supply
Le Lending – AD AD&C &C Acce Access
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% $- $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 $200,000 07 08 09 10 11 12 13 14 15 16 17 1-4 unit Residential Construction Loans Year-over-Year Growth Rates Millions
Re Residential AD&C Lending
A slowdown in loan volume growth
5.3%
6.8%
0% 5% 10% 15% 2011 2012 2013 2014 2015 2016 2017
Assets Less Than $10B Assets at or Above $10B Overall
Quarterly Percent Change
01/01/14 01/01/15 01/01/16 01/01/17 180 190 200 210 220 230 240 270 290 310 330 350 370 390 410 430 14 15 16 17 Producer Price Index: Softwood Lumber (monthly) Random Lengths Framing Lumber Composite Index (weekly) Source: Random Lengths; Bureau of Labor Statistics
Framing Lumber Index Softwood Lumber PPI
Bu Building Materials – Wo Wood Products
Re Regulatory Costs Rising – Up Up 29% Over Las ast 5 Year ars
Total effect of building codes, land use, environmental and other rules
2000-2003 1,343,000 “Normal” 2014 647,000 2015 712,000 10% 2016 784,000 10% 2017 841,000 7% 2018 900,000 7% 2019 962,000 7%
Sing Single le-Fa Family Starts
Growing trend
Trough to Current: Mar 09 = 353,000 Aug 17 = 851,000 +141%
200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Thousands of units, SAAR
80% fall
2017Q2: 61% of “Normal” 2019Q4: 73% of “Normal”
Ty Typical New Home Size
1600 1700 1800 1900 2000 2100 2200 2300 2400 2500 2600 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
SF Starts: Median Floor Area SF Starts: Median 1 Year MA
Square Feet
Decline after market shift
Lo Long Road Ba Back k to No Normal
Relative to Normal
Rank Q4 2019
Bottom 20% 20% to 40% 40% to 60% 60% to 80% Top 20% < 68% 68% - 77% 78% - 86% 87% - 96% 96% <
This map shows how the states rank in the return to more normal levels of single family housing production. By the end of 2019, the top 20% will be above 96% of normal production levels. The bottom 20% will be below 68% of normal production.
Mu Multifamily Housing Start rts
Leveling off
1995-2003 331,000 “Normal” 2014 355,000 2015 395,000 11% 2016 393,000
2017 362,000
2018 346,000
2019 337,000
50 100 150 200 250 300 350 400 450 500 550 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19
Trough to Current: 4th Q 09 = 82,000 2nd Q 17 = 342,000 +317%
2017Q2: 103% of “Normal” Thousands of units, SAAR
76% fall Avg=344,000
2019Q4: 101% of “Normal”
Re Residential Re Remodeling
Growth ahead
25 50 75 100 125 150 175 200 225 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Billions, SAAR
Adjusted Actual
Year Percent Change 2016 11% 2017 14% 2018 3% 2019 4%
Ri Rising Population Entering Housing Dema mand Years
4.7 3.9
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100+
Avg=4.3
Millions
Born 1980 or later Born 1966-80 Born 1948-65 Born 1947 or earlier
Headship rates increase from 15% to 45%
Questions? rdietz@nahb.org @dietz_econ eyeonhousing.org housingeconomics.com