Rising Ris isks for th the Housing Outlook LMC Forest Products - - PowerPoint PPT Presentation
Rising Ris isks for th the Housing Outlook LMC Forest Products & Building Materials Expo October 24, 2018 Danushka Nanayakkara, NAHB AVP, Forecasting and Analysis Economic ic and Housin ing Outl tlook Tax Reform Economic
LMC Forest Products & Building Materials Expo October 24, 2018 Danushka Nanayakkara, NAHB AVP, Forecasting and Analysis
Stronger growth expected post-tax reform
Source: U.S. Bureau of Economic Analysis (BEA) and NAHB forecast.
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 20 Q/Q Percent Change, SAAR Annual Growth LT avg (‘58-’07) 3.4% 2016 1.6% 2017 2.2% 2018f 2.9% 2019f 2.6% 2020f 1.8%
1 2 3 4
2 4 6 8 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 New England Mideast Great Lakes Plains Southeast Southwest Rocky Mountain Far West United States Percent Change, SAAR Source: U.S. Bureau of Economic Analysis (BEA)
Current expansion is 113 months old – second longest
106 92 120 73 20 40 60 80 100 120 Dec 1854 Dec 1858 Jun 1861 Dec 1867 Dec 1870 Mar 1879 May 1885 Apr 1888 May 1891 Jun 1894 Jun 1897 Dec 1900 Aug 1904 Jun 1908 Jan 1912 Dec 1914 Mar 1919 Jul 1921 Jul 1924 Nov 1927 Mar 1933 Jun 1938 Oct 1945 Oct 1949 May 1954 Apr 1958 Feb 1961 Nov 1970 Mar 1975 Jul 1980 Nov 1982 Mar 1991 Nov 2001 Trough to Peak, Months Source: National Bureau of Economic Research (NBER).
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 125 129 133 137 141 145 149 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
+1%
138.4
94%
108%
Millions
Payroll Employment
Source: Bureau of Labor Statistics (BLS).
Source: U.S. Bureau of Labor Statistics (BLS) and NAHB forecast. 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
Job Openings Rate Unemployment Rate
Percent, SA Percent, SA
How low can unemployment go?
Improving labor force participation key to future growth
Source: U.S. Bureau of Labor Statistics (BLS). 78% 79% 80% 81% 82% 83% 84% 85% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 59% 60% 61% 62% 63% 64% 65% 66% 67% 68% Percentage, SA
Overall Age 25-54
Western and Southern Regions above national level
M/M Percent Change (annualized), SAAR : August 2018 Source: Bureau of Labor Statistics (BLS). 1.6% 1.3% 1.2% 2.1% 2.4% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% United States Midwest Northeast South West
Recovery < 100% Recovery ≤ U.S. Recovery > U.S. Rate
Source: Bureau of Labor Statistics (BLS).
Q2.14 Q2.15
0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 $0 $20 $40 $60 $80 $100 $120 $140 $160 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 Expectations of slower global growth lowers
OPEC maintains
face of soaring US production $ per Barrel (Spot)
Trending higher
0% 2% 4%
0.0 0.4 0.8 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 20 21 22 Government Deficit (End of Fiscal Year) Government Deficit as a Share of GDP (End of Fiscal Year) $ Trillion Share of GDP, Percent
Post-tax reform deficits add up to 30 basis points to 10-year Treasury rate
Source: U.S. Treasury Department and Bureau of Economic Analysis (BEA) and NAHB forecast.
Fed will continue to raise rates
Source: Federal Reserve data and NAHB forecast.
6.5% 5.3% 2.0% 2.8% 3.1% 6.0% 4.8% 2.9% 3.3% 3.3%
0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 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 10-year Treasury
Federal Funds Rate
Rates will rise due to Fed policy and tight labor markets
Source: Federal Reserve and Freddie Mac data and NAHB forecast. 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 20
October 31, 2016
30-Year Fixed Rate Mortgage 10-Year Treasury Mortgage Risk Premium (Difference)
0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
20 40 60 80 100 120 140 160 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Index 1985=100, SA Source: The Conference Board.
Billions, 2009 USD, SAAR Source: U.S. Bureau of Economic Analysis (BEA) and NAHB forecast.
2.1% annual growth rate
Bonuses and wage growth will drive gains
8,000 9,000 10,000 11,000 12,000 13,000 14,000 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20
2.4% annual growth rate
5.8% 7.2% 5.0% 4.4% 6.7% 6.3% 6.0% 4.9% 5.8%
1 2 3 4 5 6 7 8
4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Mortgage Consumer
Source: U.S. Board of Governors of the Federal Reserve System (FRB). % of Disposable Inc., SA
A shift in debt away from mortgages
Rise in student and auto loans
Source: Federal Reserve Bank of New York.
153% 97% 230% 95%
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 2018
Auto Loans Student Loans Credit Cards Other
9% 11% 13% 15% 17% 19% 21% 23% 25% 40% 42% 44% 46% 48% 50% 52% 54% 56% 58% 60% 1990 2000 2002 2004 2006 2008 2010 2012 2014 2016
Ages 18 to 24 Ages 25 to 34
Source: US Census 1990, 2000, PUMS, 2000-2016 ACS, PUMS, NAHB Estimates.
Almost doubled
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 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+ Avg=4.3 Millions Gen Z: Born After 1997 Gen X: Born 1965-1980 Baby Boomers: Born 1946-1964 Silent Generation: Born 1928-1945
v
Headship rates increase from 15% to 45% Greatest Generation: Born Before 1928 Millennials: Born 1981-1997
500 1,000 1,500 2,000 2,500 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 2018
Renter-Occupied
Source: U.S. Census Bureau (BOC): Housing Vacancies & Homeownership.
Demand for home ownership strengthening
69.4% 64.4%
0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 61% 62% 63% 64% 65% 66% 67% 68% 69% 70% 71% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Percentage, Quarterly, SA Source: U.S. Census Bureau (BOC): Housing Vacancies & Homeownership.
Alaska Hawaii Homeownership Rates in the U.S. by County
2 4 6 8 10 12 14 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Existing Home Sales: Single-Family & Condo & Co-op, (Ths., SAAR) Number of homes available for sale: Single-Family & Condo & Co-op, (Ths., NSA) Thousands Months’ Supply (Months, NSA)
Months’ Supply Existing Home Sales Existing Home Inventory
Low inventory
Source: National Association of Realtors (NAR).
Source: S&P Dow Jones Indices LLC; CoreLogic, Inc. and NAHB forecast.
Prices growing faster than income
5 10 15 20 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 Percent Growth, SAAR
Metro Monthly Change (June vs May) 12-month change
Atlanta 0.70% 5.70% Boston 0.90% 7.10% Charlotte 0.60% 5.70% Chicago 0.80% 3.30% Cleveland 1.00% 5.10% Dallas 0.40% 5.20% Denver 0.60% 8.30% Detroit 1.00% 6.40% Las Vegas 1.40% 13.00% Los Angeles 0.50% 7.40% Miami 0.70% 5.20% Minneapolis 1.00% 6.40% New York
3.80% Phoenix 0.70% 7.20% Portland 0.70% 5.80% San Diego 0.60% 6.90% San Francisco 0.50% 10.70% Seattle 0.70% 12.80% Tampa 0.60% 6.90% Washington 0.50% 2.90%
Source: NAHB/Wells Fargo Housing Opportunity Index.
78 57
20 30 40 50 60 70 80 90 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
National
Source: NAHB/Wells Fargo Housing Opportunity Index.
Areas with Population of 500,000 or more in 2017 10 Most Affordable Metro Areas 10 Least Affordable Metro Areas
1 Syracuse, NY 1 San Francisco-Redwood City-South San Francisco, CA 2 Scranton--Wilkes-Barre--Hazleton, PA 2 Los Angeles-Long Beach-Glendale, CA 3 Harrisburg-Carlisle, PA 3 Anaheim-Santa Ana-Irvine, CA 4 Indianapolis-Carmel-Anderson, IN 4 San Jose-Sunnyvale-Santa Clara, CA 5 Youngstown-Warren-Boardman, OH-PA 5 San Diego-Carlsbad, CA 6 Camden, NJ 6 Oakland-Hayward-Berkeley, CA 7 Toledo, OH 7 Santa Rosa, CA 8
8 Oxnard-Thousand Oaks-Ventura, CA 9 Pittsburgh, PA 9 Stockton-Lodi, CA 10 Rochester, NY 10 Modesto, CA
Top 10 Significant Problems Faced in 2017 and Expect to face in 2018
38% 42% 42% 45% 42% 42% 60% 62% 84% 84% 38% 39% 40% 40% 44% 47% 57% 58% 77% 82%
0% 20% 40% 60% 80% Development standards (parling, setbacks, etc.) Gridlock/uncertainity in Washington making… Difficulty obtaining zoning/permit approval Local/state environmental regulations and policies Federal environmental regulations and policies Inaccurate appraisals Impact/hook-up/inspection or other fees Cost/availability of developed lots Building material prices Cost/availability of labor
Faced in 2017 Expect in 2018
Source: HMI Special Survey, NAHB EcHp.
582 405
$250 $300 $350 $400 $450 $500 $550 $600 2015 2015 2016 2016 2017 2017 2018 $ per thousand board feet
Since January 2017, lumber prices increased 13%; 63% at peak
Source: NAHB Analysis; Random Lengths Composite Index.
Elevated count of unfilled construction jobs
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 18 Job openings rate - Construction 12-month moving average Source: U.S. Bureau of Labor Statistics (BLS).
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 17 Construction Worker Productivity Overall Worker Productivity Index, 1993 = 1 Source: U.S. Bureau of Labor Statistics (BLS).
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 18 Starts (Thousands) Low Supply Source: Census Bureau and NAHB/Wells Fargo HMI survey.
Total effect of building codes, land use, environmental and other rules
4.8% 7.3% 2.3% 2.3% 4.2% 5.5% 4.0% 5.3% 3.9% 5.4%
5.9% 8.4% 5.2% 7.0% 7.1%
Lower Quartile Average Upper Quartile
Cost increases from changes to building codes over the past 10 years Development requirements that go beyond the ordinary Fees charged when building construction is authorized Cost of applying for zoning approval Other (non-refundable) fees charged when site work begins Cost of complying with OSHA requirements Others 21.7%* 32.1% 42.6%*
Government Regulations as a Share of Multifamily Development Costs
Note: * For quartiles, all types of costs do not sum to the total. Source: NAHB/Wells Fargo HMI survey.
New NAHB-NMHC research
Surpassing prior cycle peaks
16,193 27,223 31,757 33,562
500 1000 1500 2000 2500 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 2,000 7,000 12,000 17,000 22,000 27,000 32,000 37,000 Millions 2012$, SAMR
Furniture, Furnishings, Electronics and Appliance Stores Building Material and Garden Equipment and Supplies Dealers
Source: U.S. Bureau of Economic Analysis (BEA).
0% 10% 20% 30% 40% 50% 60% 70% 200 400 600 800 1,000 1,200 1,400 1,600 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Single-Family Multifamily Multifamily Share Thousands, SA Source: U.S. Census Bureau (BOC).
67
200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 10 20 30 40 50 60 70 80 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Index Thousands, SAAR
Single-Family Starts HMI
Nearly two-decade high for builder confidence
Source: Census Bureau and NAHB/Wells Fargo HMI survey.
2000-2003 1,343,000 “Normal” 2015 713,000 2016 785,000 10% 2017 852,000 9% 2018 885,000 4% 2019 927,000 5% 2020 979,000 6%
Modest growth ahead
Trough to Current: Mar 09 = 353,000 Aug 18 = 876,000 +148%
Source: Census Bureau and NAHB forecast. 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 20 Thousands of units, SAAR
80% fall
2018Q2: 67% of “Normal” 2020Q4: 74% of “Normal”
Rank
Decline in Growth rate Growth rate < U.S. Growth rate ≥ U.S.
Aug 2018 YTD vs. Aug 2017 YTD
Source: U.S. Census Bureau (BOC).
Source: Census Bureau. 200 400 600 800 1000 1200 1400 1600 1800 Thousands Number of Units
United States South West Midwest Northeast
Wide gap since 2012
$0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $0 $60,000 $120,000 $180,000 $240,000 $300,000 $360,000 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 Median Sales Price Difference
1990-2008 Avg: $20,000
New Homes Existing Homes
0% 2% 4% 6% 8% 10% 12% 14% 16% 10 20 30 40 50 60 70 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 SF Starts: Attached Townhouse Share: 1-Year Moving Average Thousands, NSA Source: U.S. Census Bureau (BOC).
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 20 40 60 80 100 120 140 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 Owner/Contractor Built Units Owner/Contractor Built Share: 1-year Moving Average Thousands, NSA Source: U.S. Census Bureau (BOC).
0% 1% 2% 3% 4% 5% 6% 7% 2 4 6 8 10 12 14 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 Built for Rent Built for Rent Share 1-Year Moving Average Thousands, NSA Share of Single-Family Year Built for Rent 2015 3.67% 2016 4.32% 2017 4.36% Percentage Source: U.S. Census Bureau (BOC).
Leveling off
1995-2003 331,000 “Normal” 2015 394,000 2016 393,000 0% 2017 356,000
2018 383,000 7% 2019 366,000
2020 364,000
Source: Census Bureau and NAHB forecast 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 20
Trough to Current: 4th Q 09 = 82,000 2nd Q 18 = 365,000 +345%
2018Q2: 110% of “Normal” Thousands of units, SAAR
76% fall Avg=344,000
2020Q4: 109% of “Normal”
Aug 2018 YTD vs. Aug 2017 YTD
Source: U.S. Census Bureau (BOC).
Rank
Decline in Growth rate Growth rate < U.S. Growth rate ≥ U.S.
Source: Census Bureau. 100 200 300 400 500 600 Thousands
United States
Number of Units
South West Northeast Midwest
Largest buildings recovered
36 28 34 35 32 23 37 40 31 23 14 9 9 9 9 9 10 11 11
56 50 44 36 43 35 38 42 33 21 14 10 10 12 11 11 21 15 16
200 208 179 186 151 176 150 145 125 134 129 69 81 92 100 118 144 137 143 43 46 58 66 66 75 70 97 95 122 117 67 39 53 75 127 146 159 187
50 100 150 200 250 300 350 400 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
2 to 4 5 to 9 10 to 49 50+
Thousands
315 323 292 309 295 324 284 300 274 155 139 166 195 265 321 322 357
Source: U.S. Census Bureau (BOC).
335 332
Growth ahead
25 50 75 100 125 150 175 200 225 250 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 Billions, SAAR
Adjusted Actual
Year Percent Change 2016 12% 2017 19% 2018f 9% 2019f 7% 2020f 5%
Source: U.S. Census Bureau (BOC) and National Association of Home Builders (NAHB) Forecasted.
Typical home is almost 40 years old
32% 12% 16% 15% 17% 9% 38% 15% 13% 15% 16% 3%
45 years old or more 35-45 25-35 15-25 5-15 5 years old or less 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 2005 2015
Questions? dnanayakkara@nahb.org eyeonhousing.org housingeconomics.com