Housing Supply and Affordability Consumer Federation of America - PowerPoint PPT Presentation

Housing Supply and Affordability Consumer Federation of America November 30, 2018 Robert Dietz, Ph.D. NAHB Chief Economist

Ris isin ing Population Entering Housing Demand Years: : 2017 Millions 5.0 Headship rates increase from 15% to 45% v Avg=4.3 4.5 4.0 3.5 Silent 3.0 Greatest Generation: Generation: Born 1928-1945 2.5 Born Before 1928 2.0 1.5 1.0 Gen Z: Millennials: Gen X: Baby Boomers: Born After 1997 Born 1981-1997 Born 1965-1980 Born 1946-1964 0.5 0.0 0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100+

Share of Young Adults Liv ivin ing wit ith Parents Almost doubled 60% 25% 58% 23% 56% Ages 18 to 24 21% 54% 19% 52% 50% 17% Ages 25 to 34 48% 15% 46% 13% 44% 11% 42% 40% 9% 1990 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: US Census 1990, 2000, PUMS, 2000-2016 ACS, PUMS, NAHB Estimates.

Housing Affordabil ility – NAHB/Well lls Fargo HOI 90 80 78 70 National 60 56 50 40 30 20 Q1_04 Q1_05 Q1_06 Q1_07 Q1_08 Q1_09 Q1_10 Q1_11 Q1_12 Q1_13 Q1_14 Q1_15 Q1_16 Q1_17 Q1_18 Source: NAHB/Wells Fargo Housing Opportunity Index.

Supply-Side Factors

Labor Elevated count of unfilled construction jobs 5.0% 1.00 Job openings rate - Construction 4.5% 0.90 12-month moving average 4.0% 0.80 3.5% 0.70 3.0% 0.60 2.5% 0.50 2.0% 0.40 1.5% 0.30 1.0% 0.20 0.5% 0.10 0.0% - 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: U.S. Bureau of Labor Statistics (BLS).

Buil ildin ing Materials ls – Lumber Pric ices Since January 2017, lumber prices decreased 5%; 63% at peak $ per thousand board feet $600 582 $550 $500 $450 1/6/2017, 357 $400 $350 $300 11/16/2018, 340 $250 2015 2016 2017 2018 Source: NAHB Analysis; Random Lengths Composite Index.

Lots Housing Starts (Area) and Low/Very Low Lot Supply (bars) Starts (Thousands) Low Supply 2,100 70% 1,800 60% 1,500 50% 1,200 40% 900 30% 600 20% 300 10% 0 0% 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: Census Bureau and NAHB/Wells Fargo HMI survey.

Regulatory ry Costs Ris isin ing – Up 29% Over Last 5 Years Total effect of building codes, land use, environmental and other rules

Regulatio ions - 32% of Mult ltif ifamil ily Develo lopment Costs NAHB-NMHC research Government Regulations as a Share of Multifamily Development Costs 42.6%* Cost increases from changes to building 7.1% codes over the past 10 years 32.1% Development requirements that go beyond 8.4% the ordinary 7.0% Fees charged when building construction is authorized 5.4% 5.9% Cost of applying for zoning approval 5.3% 3.9% Other (non-refundable) fees charged when 21.7%* 4.0% 5.5% site work begins 5.2% Cost of complying with OSHA requirements 4.2% 2.3% 2.3% 7.3% Others 4.8% Lower Quartile Average Upper Quartile Note: * For quartiles, all types of costs do not sum to the total. Source: NAHB/Wells Fargo HMI survey.

Construction Outlook

Sin ingle le-Famil ily Starts Slowing growth ahead Thousands of units, SAAR 1,343,000 “Normal” 2000-2003 2,000 2015 713,000 1,800 2016 785,000 10% 2017 852,000 9% 1,600 2018 884,000 4% 2019 917,000 4% 2020Q4: 1,400 2020 933,000 2% 69% of “Normal” 1,200 2018Q3: 65% of 80% fall “Normal” 1,000 800 Trough to Current: 600 Mar 09 = 353,000 400 Oct 18 = 865,000 +145% 200 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Source: U.S. Census Bureau (BOC) and NAHB Forecast.

Typic ical l New Home Siz ize Decline after market shift Square Feet 2600 2500 2400 2300 2200 2100 2000 1900 1800 1700 SF Starts: Median Floor Area SF Starts: Median 1 Year MA 1600 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Source: U.S. Census Bureau (BOC).

Townhouse Market Expanding Thousands, NSA 70 16% SF Starts: Attached Townhouse Share: 1-Year Moving Average 60 14% 50 12% 10% 40 8% 30 6% 20 4% 10 2% 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 16 17 18 Source: U.S. Census Bureau (BOC).

Mult ltif ifamil ily Housin ing Starts Leveling off 331,000 “Normal” 1995-2003 Thousands of units, SAAR 550 2015 394,000 2016 393,000 0% 500 2017 356,000 -9% 2018 376,000 6% 450 2019 366,000 -3% Avg=344,000 2020 364,000 -1% 400 350 300 2020Q4: 2018Q3: 250 109% of “Normal” 105% of 76% fall “Normal” 200 Trough to Current: 150 4 th Q 09 = 82,000 100 3 rd Q 18 = 347,000 +324% 50 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Source: U.S. Census Bureau (BOC) and NAHB Forecast.

Thank you Questions? rdietz@nahb.org @dietz_econ eyeonhousing.org housingeconomics.com

Household Formatio ion Demand for home ownership strengthening 2,000 Y/Y Change in Household Count, Thousands, NSA Owner-Occupied 1,500 1,000 500 0 -500 -1,000 2,500 Renter-Occupied 2,000 1,500 1,000 500 0 -500 -1,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: U.S. Census Bureau (BOC): Housing Vacancies & Homeownership.

In Interest Rates – In Increases Ahead Percent 20 18 16 30 Year FRM 14 10 Year Treasury 12 Fed Funds 10 8 6 4 2 0 79 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 08 09 10 11 12 13 14 15 16 17 18 19 20 Source: U.S. Board of Governors of the Federal Reserve System (FRB) and NAHB forecast.