ned meyers #genyhousing 6.4.15
TRANSCRIPT
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Millennials: The Issues Facing Emerging U.S. Homebuyers
Ned Myers, Black Knight Financial Services
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National & State Level Affordability
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Nationally, homes remain more affordable than pre-bubble “norm”
~26% pre-bubble “norm”(2000-2002)
Max in July 2006 at 34.7%
Trough in Oct 2012 at 17.6%
Currently ~21%
Payment to Income Ratio = macro level DTI ratio wherein the numerator is the median household income and the mortgage payment is calculated by using the median home price and the Freddie Mac 30 year interest rate
Interest Only and NegAm originations contributed to an inflation in buying
power during the housing bubble
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Varying affordability trends seen across the country
Payment to Income Ratio = macro level DTI ratio wherein the numerator is the median household income and the mortgage payment is calculated by using the median home price and the Freddie Mac 30 year interest rate
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AL24.1%
AR18.2%
AZ18.6%
CA32.5%
CO19.8%
CT16.9%
DC39.9%
FL19.3%
GA16.8%
IA13.5%
ID16.8%
IL16.4%
IN12.6%
KS19.8% KY
17.3%
LA21.7%
ME25.9%
MI13.3%
MN16.5%
MO15.5%
MS24.1%
MT24.6%
NC20.4%
ND30.0%
NE13.7%
NH14.8%
NJ22.4%
NM20.8%
NV20.2%
NY28.4%
OH13.9%
OK17.4%
OR21.1%
PA17.6%
SC18.9%
SD21.7%
TN18.0%
TX17.1%
UT16.9%
VA20.8%
WA21.3%
WI14.0%
WV28.0%
WY18.2%
DC, HI, CA currently have least affordable housing nationwide
Payment to Income Ratios as of December 2014
Payment to Income Ratio = macro level DTI ratio wherein the numerator is the median household income and the mortgage payment is calculated by using the median home price and the Freddie Mac 30 year interest rate
State Payment to Income RatioDC 39.9%HI 35.4%AK 21.1%
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DC, HI, AK currently less affordable than in 2000-2002; CA nearing pre-bubble levels
Change in Payment to Income Ratio (Current vs. 2000-2002)
State Affordability RatioDC 5.2%HI 7.5%AK 1.1%
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IL-10.8%
MS-10.6%
AR-7.1%
AZ-5.7%
CA-1.3%
CO-8.3%
CT-7.2%
AL-6.2%
DE-0.5%
FL-5.3%
GA-7.6%
IA-7.2%
ID-6.2%
WY-2.2%
IN-6.4%
KS-7.0% KY
-5.6%
LA-3.8%
ME-7.5%
MI-9.6%
MN-4.8%
MO-6.0%
MT-2.4%
NC-5.5%
ND-3.0%
NE-6.1%
NH-7.0%
NJ-3.5%
NM-5.1%
NV-2.7%
NY-2.7%
OH-6.9%
OK-5.2%
OR-4.7%
PA-4.1%
SC-6.5%
SD-7.9%
TN-6.4%
TX-6.5%
UT-5.9%
VA-6.4%
WA-6.5%
WI-6.3%
WV-9.1%
As Payment to Income Ratios represent a synthetic DTI, a lower payment to income ratio represents more affordable home purchases
State Change in Payment to Income RatioDC 4.3%HI 6.9%AK 0.6%
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AL-3.2%
AR-4.8%
AZ-3.3%
WA-3.8%
CO-5.8%
CT-5.1%
IL-8.8%
WI-4.5%
FL-2.9%
GA-5.5%
IA-5.5%
ID-4.1%
WV-5.6%
IN-4.8%
KS-4.5% KY
-3.5%
LA-1.1%
NM-2.5%
ME-4.3%
MI-7.9%
MN-2.7%
MO-4.1%
MS-7.6%
UT-3.7%
NC-2.9%
NE-4.4%
NH-5.1%
NJ-0.6%
NV-0.2%
OH-5.1%
OK-3.0%
OR-2.1%
PA-1.9%
SC-4.2%
SD-5.2%
TN-4.1%
TX-4.4%
VA-3.8%CA
2.8%
DE2.3%
ND0.7%
NY0.9%
MT0.6%
WY0.1%
1% interest rate increase would push 7 additional states above 2000-2002 payment to income levels
Change in Payment to Income Ratio (Current with 1% rate increase vs. 2000-2002)
As Payment to Income Ratios represent a synthetic DTI, a lower payment to income ratio represents more affordable home purchases
With a 1% rate increase DE, CA, MD, NY, MT, ND, and WY would be less affordable than pre-bubble “norms”
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National Affordability
200001 200011 200109 200207 200305 200403 200501 200511 200609 200707 200805 200903 201001 201011 201109 201207 201305 201403 2015010%
5%
10%
15%
20%
25%
30%
35%
40%
Estimated Payment to Income Ratio by Age Group Over Time25-24 35-44 45-54 55-64
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A Comparison of Popular Millennial Metros
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Median Home Prices in Subject Markets
United States Austin, TX Denver, CO Houston, TX San Francisco, CA Washington D.C.0
100000
200000
300000
400000
500000
600000
700000
800000
Bubble Max Crisis Min Current
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Median Home Prices over Time
United States Austin, TX Denver, CO Houston, TX San Francisco, CA Washington D.C.0
100000
200000
300000
400000
500000
600000
700000
800000
200003 200606 201201 201503
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Mortgage Payments by Price Tier
United States Austin, TX Denver, CO Houston, TX San Francisco, CA Washington D.C. $-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$90
9
$99
9
$1,
140
$78
3
$2,
529
$1,
433
$38
5
$54
3
$60
6
$42
1
$1,
111
$69
8
$61
1
$72
1
$88
4
$54
7
$1,
823
$1,
056
$85
6
$91
5
$1,
119
$70
0
$2,
557
$1,
399
$1,
246
$1,
265
$1,
428
$97
1
$3,
466
$1,
872 $
2,47
8
$2,
192
$2,
246
$1,
874
$5,
791
$3,
123
Median Home Tier 1 Tier 2 Tier 3 Tier 4 Tier 5
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Payment on Median Homes over Time
United States Austin, TX Denver, CO Houston, TX San Francisco, CA Washington D.C. $-
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
$3,500.00 $
921.
98
$96
4.04
$1,
178.
13
$83
7.58
$1,
943.
53
$1,
115.
04
$1,
144.
70
$88
6.18
$1,
178.
94
$78
0.23
$2,
947.
68
$1,
894.
16
$92
5.10
$91
3.56
$1,
011.
36
$74
6.71
$1,
984.
96
$1,
466.
78
$90
9.13
$99
8.86
$1,
140.
17
$78
3.41
$2,
529.
07
$1,
432.
74
200003 200503 201003 201503
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Estimated Mortgage Payments by Price Tier
United States Austin, TX Denver, CO Houston, TX San Francisco, CA Washington D.C. $-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$90
9
$99
9
$1,
140
$78
3
$2,
529
$1,
433
$38
5
$54
3
$60
6
$42
1
$1,
111
$69
8
$61
1
$72
1
$88
4
$54
7
$1,
823
$1,
056
$85
6
$91
5
$1,
119
$70
0
$2,
557
$1,
399
$1,
246
$1,
265
$1,
428
$97
1
$3,
466
$1,
872 $
2,47
8
$2,
192
$2,
246
$1,
874
$5,
791
$3,
123
Median Home Tier 1 Tier 2 Tier 3 Tier 4 Tier 5
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County Level Opportunities Exist: DC
1996011998102001072004042007012009102012070
100000
200000
300000
400000
500000
600000
700000
Alexandria city, VA Arlington County, VACalvert County, MD Charles County, MDClarke County, VA Culpeper County, VADistrict of Columbia, DC Fairfax city, VAFairfax County, VA Falls Church city, VAFauquier County, VA Frederick County, MDFredericksburg city, VA Jefferson County, WVLoudoun County, VA Manassas city, VAMontgomery County, MD Prince George's County, MDPrince William County, VA Rappahannock County, VASpotsylvania County, VA Stafford County, VAWarren County, VA Washington-Arlington-Alexandria, DC-VA-MD-
WV
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County HPI: San Francisco
1996011997071999012000072002012003072005012006072008012009072011012012072014010
200000
400000
600000
800000
1000000
1200000
Alameda County, CAContra Costa County, CAMarin County, CASan Francisco County, CASan Francisco-Oakland-Fremont, CASan Mateo County, CA
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MLS Sales % of Monthly Inventory by Price Tier
2014
12
2015
01
2015
02
2014
12
2015
01
2015
02
2014
12
2015
01
2015
02
2014
12
2015
01
2015
02
2014
12
2015
01
2015
02
Austin-Round Rock, TX Denver-Aurora-Lakewood, CO
Houston-The Woodlands-Sugar Land, TX
San Francisco-Oakland-Hayward, CA
Washington-Arlington-Alexandria, DC-VA-MD-
WV
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
12345
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How much house can one buy?
New Yor
k-New
ark-Je
rsey C
ity, N
Y-NJ-P
A
Miami-For
t Lau
derda
le-W
est P
alm B
each
, FL
Los A
ngele
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g Bea
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nahe
im, C
A
Philad
elphia-C
amden
-Wilm
ington
, PA-N
J-DE-M
D
Riversi
de-S
an B
ernar
dino-O
ntario
, CA
Phoen
ix-Mes
a-Sco
ttsda
le, A
Z
Chicago
-Nap
erville
-Elgin,
IL-IN
-WI
Tampa
-St. P
etersbur
g-Clear
water, F
L
Orlando
-Kiss
immee
-San
ford, F
L
Austin
-Rou
nd Rock
, TX
Denver-A
uror
a-La
kewood
, CO
San Fra
ncisc
o-Oak
land-H
ayward
, CA
Housto
n-The
Woo
dlands-S
ugar L
and, T
X
Washin
gton-Arlin
gton-
Alexan
dria,
DC-VA-M
D-WV
0
200
400
600
800
1000
1200
1400
1600 $1,466
$458 $428
$237 $184 $155 $140 $131 $127$207 $262
$513
$153$260
MLS Inventory - Price Per Square Foot
*Top 10 MSAs by Inventory in Blue
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REO Sales are a declining % of total sales
200501 200508 200603 200610 200705 200712 200807 200902 200909 201004 201011 201106 201201 201208 201303 201310 201405 2014120%
10%
20%
30%
40%
50%
60%
United States Austin, TX Denver, COHouston, TX San Francisco, CA Washington D.C.
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But the REO discount is less pronounced in hot markets
200501 200508 200603 200610 200705 200712 200807 200902 200909 201004 201011 201106 201201 201208 201303 201310 201405 2014120%
5%
10%
15%
20%
25%
30%
35%
United States Austin, TX Denver, COHouston, TX San Francisco, CA Washington D.C.