supply-side factors and housing affordability · residential construction roundtable december 12,...
TRANSCRIPT
Supply-Side Factors
and Housing AffordabilityCoreLogic-NAHB
Residential Construction RoundtableDecember 12, 2018
Robert Dietz, Ph.D.NAHB Chief Economist
Housing Affordability – NAHB/Wells Fargo HOI
Source: NAHB/Wells Fargo Housing Opportunity Index.
78
56
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
CoreLogic transaction data and NAHB estimates find significant declines
New Home Sales and Months’ Supply
0
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
0
2
4
6
8
10
12
14
Months Supply at Current Sales Rate, (mo. SA)
New Home Sales: New single-family houses sold, (Ths. #, SAAR)
Thousands, SAAR Months Supply, SA
Source: U.S. Census Bureau (BOC).
Household Formation
-1,000
-500
0
500
1,000
1,500
2,000Y/Y Change in Household Count, Thousands, NSA
Owner-Occupied
-1,000
-500
0
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 strengthened
Homeownership Rate
69.4%
64.4%
-
0.10
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.
Geography of Homeownership
Alaska
Hawaii
Homeownership Rates in the U.S. by County
Wide variation
Determinants of Homeownership
Modeling Results
Increase average age in county by 5 years
• Adds 3 percentage points to rate
Increase share of married households by 10%
• Added 5.1 percentage points to rate
Increase local incomes by $10,000
• Adds 0.6 percentage points to rate
Decrease housing costs by $75,000
• Adds 4.1 percentage points to rate
Share of Young Adults Living with Parents
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
Consumer DebtRise in student and auto loans
Source: Federal Reserve Bank of New York.
156%
98%
236%
9/30/2008, 100%
97%
0
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
GDP GrowthNear-term growth with slowing ahead
Source: U.S. Bureau of Economic Analysis (BEA) and NAHB forecast.
-10%
-8%
-6%
-4%
-2%
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 3.0%
2019f 2.6%
2020f 1.3%
30-Year Fixed Rate Mortgage and 10-Year TreasuryRates 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)
Rising Population Entering Housing Demand Years
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
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+
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
Head
sh
ip r
ate
s in
cre
ase f
rom
15%
to
45%
Greatest
Generation:
Born
Before 1928
Millennials:
Born 1981-1997
Supply-Side Factors
Building Materials – Lumber Prices
1/6/2017, 357
582
11/16/2018, 340
$250
$300
$350
$400
$450
$500
$550
$600
2015 2016 2017 2018
$ per thousand board feet
Since January 2017, lumber prices decreased 5%; 63% at peak
Source: NAHB Analysis; Random Lengths Composite Index.
Residential Construction Employment Continues to GrowEmployment gain of 873,500 since 2011; 175,900 increase since 2017
Source: U.S. Bureau of Labor Statistics (BLS).
0%
5%
10%
15%
20%
25%
0
500
1000
1500
2000
2500
3000
3500
4000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Residential Builders Residential Specialty Trade Contractors Construction Unemployment Rate
Employment, Thousands
LaborElevated count of unfilled construction jobs
-
0.10
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).
Labor ForceChanging labor force
-
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
0
10
20
30
40
50
60
70
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
Millions
Did Not Finish High School
Associate Degree and Other
Two Year Programs
High School Graduate
College Graduates
Source: U.S. Bureau of Labor Statistics (BLS).
Construction Sector ProductivityLagging 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).
Lending – AD&C Access
Source: Federal Deposit Insurance Corporation.
Loans growing but at a slower rate
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 18
1-4 unit Residential Construction Loans
Year-over-Year Growth Rates
Millions
LotsHousing Starts (Area) and Low/Very Low Lot Supply (bars)
0%
10%
20%
30%
40%
50%
60%
70%
0
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.
Median Lot Value and Size
8,560
$47,400
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
8,200
8,400
8,600
8,800
9,000
9,200
9,400
9,600
9,800
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Square Feet
Median Lot Size
(For Sale: Single-Family Detached)
Median Lot Value
(Single-Family Starts)
Lot size declining --- lot value increasing
Source: 2017 Survey of Construction (SOC) and NAHB Economics Estimates.
Regulatory Costs Rising – Up 29% over 2011-2016Total effect of building codes, land use, environmental and other rules
Regulations - 32% of Multifamily Development Costs
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 buildingcodes over the past 10 yearsDevelopment requirements that go beyondthe ordinaryFees charged when building construction isauthorizedCost of applying for zoning approval
Other (non-refundable) fees charged whensite work beginsCost 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.
NAHB-NMHC research
Construction
Outlook
NAHB/Wells Fargo Housing Market Index
60
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0
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
Declining builder confidence as housing affordability issue expands
Source: U.S. 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 884,000 4%
2019 917,000 4%
2020 933,000 2%
Single-Family StartsSlowing growth ahead
Trough to Current:
Mar 09 = 353,000
Oct 18 = 865,000
+145%
Source: U.S. Census Bureau (BOC) and NAHB Forecast.
0
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
2018Q3:
65% of
“Normal”
2020Q4:
69% of
“Normal”
Growth in Single-Family Permits
RankDecline in Growth rate
Growth rate < U.S.
Growth rate ≥ U.S.
September 2018 YTD vs. September 2017 YTD
Source: U.S. Census Bureau (BOC).
New NAHB Leading Markets Index
Source: NAHB Analysis of Census data (Building Permits and ACS)
New economic geography measure of building conditions
• First index metric is metro areas – third quarter data
Smaller metro areas – core counties (29% of single-family permits)
• Smaller towns like Xenia, Ohio and Darlington, South Carolina
• 9.8% annual growth rate, 7.4% year-over-year
Large metro areas – suburban counties (26% share)
• Fairfax, Virginia
• 4.1% annual growth rate, 3.2% year-over-year
Large metro areas – core counties (18% share)
• Columbus, Ohio and Orange County, California
• 6.5% annual growth rate, 6.8% year-over-year
Smaller metro, outlying areas (8% market share)
• Rural areas near small towns
• 2.7% growth rate, -2.4% year-over-year
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 18
SF Starts: Median Floor Area SF Starts: Median 1 Year MA
Square Feet
Decline after market shift
Source: U.S. Census Bureau (BOC).
Townhouse Market Expanding
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
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).
Multifamily Housing StartsLeveling off
1995-2003 331,000 “Normal”
2015 394,000
2016 393,000 0%
2017 356,000 -9%
2018 376,000 6%
2019 366,000 -3%
2020 364,000 -1%
Source: U.S. Census Bureau (BOC) and NAHB Forecast.
0
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
3rd Q 18 = 347,000
+324%
2018Q3:
105% of
“Normal”
Thousands of units, SAAR
76% fall
Avg=344,000
2020Q4:
109% of
“Normal”
Residential RemodelingGrowth ahead but slowing
0
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 10%
2017 19%
2018f 10%
2019f 4%
2020f 2%
Source: U.S. Census Bureau (BOC) and NAHB Forecast.