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Monthly Market Report - February 2018

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Monthly Market Report - February 2018

  1. 1. FEBRUARY 2018
  2. 2. “The pool of interested buyers at the end of the year significantly outweighed what was available for sale.” Lawrence Yun NAR Chief Economist
  3. 3. Wall Street Journal “The U.S. homeownership rate rose in 2017 for the first time in 13 years... The annual increase marks a crucial turning point because it comes after the federal government reined in bubble-era policies that encouraged banks to ease lending standards to boost homeownership. This time, what’s driving the market is a shift in favor of owning rather than renting. ”
  4. 4. U.S. Homeownership % Rates 65.4 65.7 66.4 66.9 67.5 68 68.3 68.6 69.2 69 68.9 67.8 67.5 67.2 66.5 66 65.4 65.2 64 63.8 63.7 64.2 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Census
  5. 5. Rent Cafe “Undoubtedly, the recession had a great impact on homeownership… However, it looks like it takes more to discourage Americans from buying a house than that. As the years go by, it seems more and more certain that the fact that renting has seen a sudden gain in popularity is more a reaction to the economic crisis than a paradigm shift in the Americans’ attitude toward housing.”
  6. 6. Census 63.6 63.7 63.9 64.2 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Homeownership Rates U.S. Percentage 2017
  7. 7. $300 $350 $400 $450 $500 $550 $600 $650 $700 $750 $800 $850 $900 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Median Asking RENT since 1988 Census
  8. 8. Peter Muoio Chief Economist, Auction.Com “Inventory should remain the most important housing market trend in 2018. With homeownership tenure on the rise and homebuilders facing challenges with construction costs, even an uptick in inventory will not provide much relief to the current shortage.”
  9. 9. -7.1% -6.4% -6.6% -9.0% -8.4% -7.1% -9.0% -6.7% -6.4% -10.4% -9.7% -11.1% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec HOUSING SUPPLY Year-Over-Year Last 12 Months NAR 2/2018
  10. 10. % Change in Inventory by Category 2017 4th Quarter compared to 2016 4th Quarter -10.5% -19.0% -11.4% -5.9% Total Homes Starter Homes Trade-Up Homes Premium Homes Trulia
  11. 11. “For-sale inventory is stuck at crisis levels in some of the nation's hottest housing markets…The number of homes for sale nationwide has declined on an annual basis for the past 35 straight months.” Zillow
  12. 12. “Homeowners received the gift of added equity this holiday season. With several years of growth, owners may have more equity than they realize. Many consumers use the tax season at the beginning of the year to reevaluate their entire financial life. It also provides a good opportunity for them to consider how best to take advantage of their equity while mortgage interest rates and borrowing costs are still near record lows.” Bill Banfield VP of Capital Markets at Quicken Loans
  13. 13. HOUSING Affordability
  14. 14. Fitch Report “Despite the increase in home prices, affordability in most areas of the U.S. remains relatively strong by historical standards. Nationally, the price-to-income ratio is near the 25-year average.”
  15. 15. Mark Fleming First American Chief Economist “Overlooked in the comparison of income growth and unadjusted house price growth is that a change in household income is not the only factor that influences how much home one can afford to buy. A consumer’s house-buying power, how much one can afford to buy, is also based on changes in mortgage interest rates. Even if one’s income doesn’t change, but interest rates go down, house-buying power increases.”
  16. 16. $1,000 $1,259 $550 $730 $803 $891 January 2000 June 2006 February 2012 October 2016 October 2017 October 2018 PROJECTED National Homebuyers’ “TYPICAL MORTGAGE PAYMENT” Inflation-Adjusted Monthly Mortgage Payment That Buyers Commit To CoreLogic
  17. 17. “Home buyers today have historically high levels of house-purchasing power and that’s one important reason why the talk of an affordability crisis is over-stated for now.” Mark Fleming First American Chief Economist
  18. 18. Andrew LePage CoreLogic Research Analyst “It can be misleading to simply focus on the rise in home prices when assessing affordability... while the inflation adjusted typical mortgage payment has trended higher in recent years, in October 2017 it remained 36.2 percent below the all-time peak of $1,259 in June 2006. That’s because the average mortgage rate back in June 2006 was about 6.7 percent, compared with an average rate of 3.9 percent in October 2017.”
  19. 19. Mortgage Rates Freddie Mac 30 Year Fixed Rate 4.1 4.4 4.6 4.9 2018 Q2 2018 Q3 2018 Q4 2018 Q1 Where They Are Going This Year 2017 Actual Interest Rates
  20. 20. Len Kiefer Freddie Mac, Deputy Chief Economist “Some may be wondering if this is the last time we'll see a three handle on the 30-year mortgage rate…Never say never, but inflation is firming, the Federal Reserve’s Beige Book indicates broad-based economic growth and labor markets are tightening. This means upward pressure on long-term rates, like the 30-year fixed-rate mortgage, is building.”
  21. 21. 3.95 3.99 4.04 4.15 4.22 1/4 1/11 1/18 1/25 2/1 30 Year Fixed Rate Mortgages Freddie Mac 2/2018
  22. 22. The New Tax Code and its Impact on Residential Real Estate
  23. 23. CoreLogic Actual Year-Over-Year % Change in Price By State
  24. 24. 5.6% 5.8% 5.8% 6.2% 6.3% 6.4% Jun Jul Aug Sep Oct Nov Case ShillerYear-Over-Year Price Changes 20CityComposite S&P Case Shiller 2/2018
  25. 25. Lawrence Yun NAR Chief Economist “While tight inventories are still expected to put upward pressure on prices in most areas this year, we expect overall price growth to shrink, with some states experiencing decline because of the negative effects of the changes to the mortgage interest rate deduction and state and local deductions under the new tax law.”
  26. 26. CoreLogic Forecasted Year-Over-Year % Change in Price By State
  27. 27. NAR NAR’s 2018 Projected Price Changes By State 1.9% UNITED STATES
  28. 28. NAR NAR’s Projected Tax Reform Impact on Prices in 2018 By State
  29. 29. What is causing disagreement about the net effect of the new tax law among housing economists? 1.) What will be the strength of the income effect from the tax cut? 2.) How much of the savings will go to housing? 3.) How much tax incentives change people’s choice between owning and renting? Liu-Down, Genworth Mortgage Insurance Chief Economist
  30. 30. Ralph DeFranco Chief Economist, Arch Capital Services Inc. “It’s premature to worry about a housing bubble. The typical warning signs – excessive debt levels, poor quality loans, exponentially increasing home prices, rising vacancy rates and/or poor affordability compared to the past, and a high number of internet searches on house flipping – are not present.”
  31. 31. Liu-Down Genworth Chief Economist “My thoughts on many recent discussions of ‘housing bubble’ - the bar for a housing bubble is higher than just prices being above some fundamental value. There must be widespread behavior change as well such as higher levels of fraud and speculation.”
  32. 32. Fitch Report “US home prices are on track for a 5% nominal gain for the 4th consecutive year, returning national prices to their highest level since 2007. The growth has been driven by historically low mortgage rates and unemployment plus solid population and personal income growth rates. Fitch views several Western cities as overvalued, but a meaningful correction should only be triggered by an unexpected economic shock.”
  33. 33. Arch By State Average Probability of Home Price Declines
  34. 34. Average Days on the Market By State NAR
  35. 35. Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Since January 2012 NAR 2/2018 EXISTING Home Sales
  36. 36. 1.1% [VALUE] [VALUE] 3.1% -0.8% U.S. West South Y-O-Y by region NAR 2/2018 MidwestNortheast EXISTING Home Sales
  37. 37. January February March April May June July August September October November December 2016 2017 Census & NAR Existing Home Salesin thousands
  38. 38. January February March April May June July August September October November December 2016 2017 New Home Sales Census & NAR in thousands
  39. 39. New Home Sales Annualized in thousands Census
  40. 40. 4% 13% 25% 22% 11% 16% 9% Under $150K $150-$199K $200-299K $300-$399K $400-$499K $500-$749K Over $750K % of sales by price range New Home Sales Census
  41. 41. 3.3 3.7 4.0 4.1 3.8 4.0 3.6 3.2 3.0 3.1 3.2 3.3 3.2 3.4 3.6 3.7 3.1 2.9 2.8 3.1 3.2 3.2 3.4 3.2 New Homes Selling Fast (median months from completion to sold) Census
  42. 42. 341 359 471 525 578 632 567 585 530 491 458 476 364 366 516 503 612 656 561 580 512 505 474 470 January February March April May June July August September October November December 2016 2017 Census & NAR Total Home Salesin thousands
  43. 43. January February March April May June July August September October November December Pending Home Sales NAR 2/2018 2014 2015 2016 2017
  44. 44. January 2012 January 2013 January 2014 January 2015 January 2016 January 2017 100 = Historically Healthy Level PENDING Home Sales since 2012 NAR 2/2018
  45. 45. 0.5% -2.7% 0.3% 4.0% -3.1% U.S. Midwest South PENDING Year-Over-Year By Region West NAR 2/2018 Northeast West Home Sales
  46. 46. Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Percentage of Distressed Property Sales 35% January 2012 - Today 5% 7% NAR 2/2018
  47. 47. Home Prices
  48. 48. 5.8% 3.0% 7.8% 5.8% 7.3% U.S. Northeast South West Midwest Y-O-Y by region EXISTING Home Prices NAR 2/2018
  49. 49. [VALUE] -4.1% 5.1% 5.4% 3.2% 12.9% $0-100K $100-250K $250-500K $500-750K $750K-1M $1M+ % -16.0% -4.1% 5.1% 5.4% 3.2% 12.9% % Change in Sales from last year by Price Range NAR 2/2018
  50. 50. June 2012 January 2013 January 2014 January 2015 January 2016 January 2017 Year-Over- Year PRICE CHANGES Case Shiller S&P Case Shiller 2/2018
  51. 51. 13.2% 12.9% 12.4% 10.8% 9.3% 8.1% 6.7% 5.6% 4.8% 4.5% 4.3% 4.4% 4.6% 5.0% 5.0% 4.9% 4.9% 5.0% 5.0% 4.7% 5.4% 5.5% 5.7% 5.7% 5.7% 5.4% 5.5% 5.4% 5.1% 5.0% 5.0% 5.1% 5.0% 5.1% 5.2% 5.5% 5.7% 5.9% 5.9% 5.8% 5.7% 5.6% 5.8% 5.8% 6.2% 6.3% 6.4% Jan 2014 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2015 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2016 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2017 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Year-Over-Year PRICE CHANGES 20CityComposite Case Shiller S&P Case Shiller 2/2018
  52. 52. Jan 2014 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2015 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2016 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 2017 Feb Mar Apr May Jun Jul Aug Sep Oct Nov S&P Case Shiller 2/2018 Year-Over-Year PRICE CHANGES 20CityComposite Case Shiller
  53. 53. CoreLogic Forecasted Year-Over-Year % Change in Price By State
  54. 54. -1.47 -1.69 -1.77 -1.90 -1.93 -1.70 -1.55 -1.35 -1.14 -0.99 -0.67 -0.50 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan % -1.47 -1.69 -1.77 -1.90 -1.93 -1.70 -1.55 -1.35 -1.14 -0.99 -0.67 -0.5 Quicken Loans Appraiser Home Value Opinions Compared to Homeowner Estimates Last 12 Months
  55. 55. HOUSING INVENTORY
  56. 56. NAR Seller Traffic By State
  57. 57. January 2011 January 2012 January 2013 January 2014 January 2015 January 2016 January 2017 Months Inventory of HOMES FOR SALE 2011 - Today NAR 2/2018
  58. 58. Jan-16 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-17 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Months Inventory of HOMES for SALE last 2 years NAR 2/2018
  59. 59. 3.5 3.8 3.8 4.1 4.2 4.2 4.2 4.2 4.2 3.9 3.5 3.2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Months Inventory of HOMES FOR SALE Last 12 Months NAR 2/2018
  60. 60. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % - -20. -16. - - -7.6 -5% -6.2 1.8 0.9 5.0 1.6 7.3 5.3 3.2 6.5 6% 5.5 5.8 4.5 6% 5.2 5% -0.5 -0.5 -0.5 2.0 -0.9 1.8 0.4 -4.7 -1.7 -3.1 -4.5 -1.9 -3.8 -2.2 -1.1 -1.5 -3.6 -9.6 -5.8 -5.8 -10. -6.8 -10. -9.3 -6.3 -7.1 -6.4 -6.6 -9.0 -8.4 -7.1 -9.0 -6.7 -6.4 -10. -9.7 -11. Year-over-Year Inventory Levels NAR 2/2018
  61. 61. 5.5 5.5 5.5 5.1 5.2 5.2 4.5 5.1 5.1 5.2 5.1 5.6 5.2 5.1 5.0 5.4 5.4 5.3 5.9 6.0 5.3 5.7 4.9 5.7 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec 2016 2017 Census New Home Inventory months supply
  62. 62. 5.2 5.1 5.0 5.4 5.4 5.3 5.9 6.0 5.3 5.7 4.9 5.7 Jan-17 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Census New Home Inventory months supply Last 12 Months
  63. 63. BUYER DEMAND
  64. 64. NAR Buyer Traffic By State
  65. 65. Jul 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 Foot Trafficindicator of future sales NAR 2/2017
  66. 66. Jan 2017 Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Last 12 Months NAR 2/2017 Foot Traffic indicator of future sales
  67. 67. January February March April May June July August September October November December 2016 2017 NAR 2/2017 Foot Trafficindicator of future sales
  68. 68. INTEREST RATES
  69. 69. 1/7 2/4 3/3 4/7 5/5 6/2 7/7 8/4 9/1 10/6 11/3 12/1 1/5 2/2 3/2 3/30 4/27 5/25 6/22 7/20 8/17 9/1410/1211/9 12/7 1/4 30 Year Fixed Rate Mortgages from Freddie Mac 4.22 3.97 Freddie Mac 2/2018
  70. 70. Mortgage Rate Projections 2/2018 Quarter Freddie Mac Fannie Mae MBA NAR Average of All Four 2018 1Q 4.1 4.0 4.2 4.2 4.13 2018 2Q 4.4 4.0 4.4 4.3 4.28 2018 3Q 4.6 4.1 4.6 4.4 4.43 2018 4Q 4.9 4.1 4.8 4.5 4.58
  71. 71. 4.1 4.4 4.6 4.9 Mortgage Rates Freddie Mac 30 Year Fixed Rate 2018 Q2 2018 Q3 2018 Q4 2018 Q1 Where They Are Going This Year 2017 Actual Interest Rates
  72. 72. 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 2018 Q3 2018 Q4 Rate 3.7 3.8 4.0 3.9 3.7 3.6 3.5 3.8 4.2 4.0 3.9 3.9 4.1 4.4 4.6 4.9 Freddie Mac Mortgage Rates Freddie Mac 30 Year Fixed Rate - Actual - Projected 2015 2016 2017 2018
  73. 73. Mortgage Credit Availability YES NO MAYBE
  74. 74. Apr 2013 Jan 2014 Jan 2015 Jan 2016 Jan 2017 MBA Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association Mortgage Credit Availability
  75. 75. June 2004 June 2005 June 2006 June 2007 June 2008 June 2009 June 2010 June 2011 June 2012 June 2013 June 2014 June 2015 June 2016 June 2017 Dec 2017 Historic Data for the MORTGAGE CREDIT AVAILABILITY INDEX (a report from the Mortgage Bankers Association) MBA
  76. 76. [VALUE] 45 43 42 42 43 43 43 44 44 45 46 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average Days To Close A Loan All Closed Loans as per Ellie Mae Last 12 Months
  77. 77. 722 720 721 722 723 724 724 724 724 724 722 722 Jan-17 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec FICO® Score Requirements Last 12 months All Closed Loans as per Ellie Mae
  78. 78. 0.05% 0.6% 9.1% 20.1% 24.3% 33.3% 12.5% 500-549 550-599 600-649 650-699 700-749 750-799 800+ FICO® Score Distribution 53.5% All Closed Loans as per Ellie Mae
  79. 79. 722 [VALUE] 680 708 All Loans Conventional FHA VA Average FICO® Score All Closed Loans as per Ellie Mae for Closed Purchase Loans by Loan Type
  80. 80. 39 [VALUE] 43 42 All Loans* Conventional FHA VA Average Back End DTI for Closed Purchase Loans by Loan Type All Closed Loans as per Ellie Mae
  81. 81. Resources KEEPINGCURRENTMATTERS.COM Slide Slide Title Link 4, 27 Lawrence Yun Quote https://www.nar.realtor/newsroom/existing-home-sales-fade-in-december-2017-sales-up-11-percent 5 Wall Street Journal Quote (subscription required) https://www.wsj.com/amp/articles/homeownership-rate-rises-in-2017-for-first-time-since-2004-1517334537 ( 6, 8, 9 Homeownership Rate, Median Rents https://www.census.gov/housing/hvs/files/currenthvspress.pdf 7 Rent Café Quote https://www.rentcafe.com/blog/rental-market/market-snapshots/change-renter-vs-owner-population-2006-2016/ 10 Peter Muoio Quote http://www.foreclosurenewsreport.com/ (subscription required) 11, 62-65 Housing Supply https://www.nar.realtor/topics/existing-home-sales 12 Change in Inventory https://www.trulia.com/blog/trends/inventory-q42017/ 13 Zillow Quote http://zillow.mediaroom.com/2018-01-18-Inventory-Shortage-at-Crisis-Levels-in-Nations-Hottest-Housing-Markets 14, 59 Bill Banfield Quote, Appraisals http://www.quickenloans.com/press-room/2018/01/09/end-of-2017-sees-homeowners-and-appraisers-more-in-agreeance-than-in-the-past-two- years/ 16, 35 Fitch Report https://www.fitchratings.com/site/re/914286 (registration required) 17, 19 Mark Fleming Quotes http://blog.firstam.com/economics/the-affordability-crisis-that-isnt 18, 20 Typical Mortgage Payment, Andrew LePage Quote http://www.corelogic.com/about-us/researchtrends/the-marketpulse-report.aspx 21,23,76,77 Interest Rate Projection http://www.freddiemac.com/research/outlook/20180118_maintaining_momentum.html 22 Len Kiefer Quote https://www.housingwire.com/articles/42316-freddie-mac-mortgage-rates-exceed-4-for-first-time-since-july 25 CoreLogic Appreciation http://www.corelogic.com/about-us/researchtrends/corelogic-home-price-insights.aspx 26, 55-57 Case Shiller http://us.spindices.com/indices/real-estate/sp-case-shiller-20-city-composite-home-price-index
  82. 82. Resources KEEPINGCURRENTMATTERS.COM Slide Slide Title Link 28 CoreLogic Price Changes http://www.corelogic.com/about-us/researchtrends/corelogic-home-price-insights.aspx 29, 30 NAR Projected Price Changes https://www.nar.realtor/research-and-statistics/tax-reform-impact-and-home-price-outlook 31, 34 Liu-Down Tweet https://mobile.twitter.com/LiuEcon/status/956286171449053185 33 `Ralph DeFranco Quote https://mi.archcapgroup.com/Portals/1/Documents/hammr/HaMMR_Winter2018.pdf 36 Average Home Price Declines https://mi.archcapgroup.com/News-Resources/Housing-and-Mortgage-Market-Review 39, 61, 69 Average Days on Market, Buyer & Seller Traffic Maps https://www.nar.realtor/reports/realtors-confidence-index 40-41, 51, 53-54 Existing Home Sales Report http://nar.realtor/ 42, 43, 47 Freddie Mac Home Sales http://www.census.gov/construction/nrs/pdf/newressales.pdf http://nar.realtor/ 44-46, New Home Sales, Inventory http://www.census.gov/construction/nrs/pdf/newressales.pdf 48-50 Pending Home Sales Report http://nar.realtor/ 58 CoreLogic Price Changes http://www.corelogic.com/about-us/researchtrends/corelogic-home-price-insights.aspx 70-72 Foot Traffic http://nar.realtor/ 74 Freddie Mac Rates http://www.freddiemac.com/pmms 75 Mortgage Rate Projections http://www.freddiemac.com/research/outlook/20180118_maintaining_momentum.html http://www.fanniemae.com/resources/file/research/emma/pdf/Housing_Forecast_012218.pdf https://www.mba.org/Documents/Research/Mtg%20Fin%20Forecast%20Jan%202018.pdf https://www.nar.realtor/sites/default/files/documents/forecast-02-2018-us-economic-outlook-01-31-2018.pdf 79-80 Mortgage Credit Availability https://www.mba.org/news-research-and-resources/research-and-economics/single-family-research/mortgage-credit-availability-index 81-85 Ellie Mae Report https://static.elliemae.com/pdf/origination-insight-reports/Ellie_Mae_OIR_DECEMBER2017.pdf
  83. 83. FEBRUARY 2018

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