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The Current Status and Outlook for the U.S. The Current Status and Outlook for the U.S. and state of Texas and state of Texas Economies, Housing, and Mortgage Markets Economies, Housing, and Mortgage Markets Specially Prepared for: The Texas Mortgage Bankers The Texas Mortgage Bankers Association Association Southwest Secondary Marketing Southwest Secondary Marketing Conference Conference Presented by: LaVaughn M. Henry, Ph.D. Director, U.S. Economic Analysis The PMI Group, Inc. February 11, 2009

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Presented to the TMBA on 2/11/09 on the state of the Texas and US housing markets

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Page 1: Texas Mortgage Bankers Association

The Current Status and Outlook for the U.S. The Current Status and Outlook for the U.S. and state of Texasand state of Texas

Economies, Housing, and Mortgage MarketsEconomies, Housing, and Mortgage Markets

Specially Prepared for:

The Texas Mortgage Bankers The Texas Mortgage Bankers AssociationAssociation

Southwest Secondary Marketing Southwest Secondary Marketing ConferenceConference

Presented by:LaVaughn M. Henry, Ph.D.

Director, U.S. Economic AnalysisThe PMI Group, Inc.

February 11, 2009

Page 2: Texas Mortgage Bankers Association

The General EconomyThe General Economy

The Housing MarketsThe Housing Markets

The Mortgage MarketsThe Mortgage Markets

ConclusionConclusion

Page 3: Texas Mortgage Bankers Association

Source: Bureau of Economic Analysis

Page 4: Texas Mortgage Bankers Association

Source: U.S. Census Bureau

Page 5: Texas Mortgage Bankers Association

Source: U.S. Conference Board

Page 6: Texas Mortgage Bankers Association

Thousands Percent

Source: Bureau of Labor Statistics

Page 7: Texas Mortgage Bankers Association

Source: Bureau of Labor Statistics

Page 8: Texas Mortgage Bankers Association

Source: Bureau of Labor Statistics

Page 9: Texas Mortgage Bankers Association

Source: Federal Reserve Bank of Dallas

Page 10: Texas Mortgage Bankers Association

Current Status and Outlook

Page 11: Texas Mortgage Bankers Association

Source: NAR / U.S. Census Bureau

U.S. Single Family Home Sales

Page 12: Texas Mortgage Bankers Association

Source: NAR / U.S. Census Bureau

Page 13: Texas Mortgage Bankers Association

Source: First American CoreLogic, LoanPerformance

Page 14: Texas Mortgage Bankers Association

Proprietary econometric model developed by The PMI Group, Inc. that estimates the probability that prices will fall in each of the nation’s 381 MSAs by the end of the next two years.

Based on OFHEO’s quarterly house price index for conventional, conforming loans.

Considers factors including price movement, housing affordability, local employment conditions, housing supply and foreclosures.

• Utilizes more than 30,000+ observations of MSAs and quarterly combinations

• All of the Model’s Primary Econometric Determinants are Statistically Significant at the 99% level or greater

Page 15: Texas Mortgage Bankers Association

What is the U.S. Market Risk Index Saying What is the U.S. Market Risk Index Saying about Future Price Movements?about Future Price Movements?

0.0 to 10.0 10.0 to 30.0 30.0 to 50.0 50.0 to 70.070.0 to 100.0

Page 16: Texas Mortgage Bankers Association

Historical Accuracy Rate of the PMI Risk IndexSample Period: 1st Quarter 1985 – 3rd Quarter 2006

1.7%

17.5%

25.6%

33.8%

44.7%

53.3%

66.8%

82.1%

88.2% 87.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0-10% 10-20%

20-30%

30-40%

40-50%

50-60%

60-70%

70-80%

80-90%

90-100%

Assessed Risk Score

% o

f M

SA

s E

xper

ien

cin

g P

rice

Dec

lin

es

Source: The PMI Group, Inc.

Page 17: Texas Mortgage Bankers Association

RateMSA 3rd Qtr '08 2nd Qtr '08 Volatility 3rd Qtr '08 3rd Qtr '07 Difference 3rd Qtr '08 2nd Qtr '08 Difference 3rd Qtr '08 3rd Qtr '08 2nd Qtr '08Abilene TX 1.6 1.0 5.2 0.38 6.74 -6.36 139.23 140.53 -1.31 4.17 -0.71 -1.27Amarillo TX <1 <1 2.2 2.60 3.75 -1.15 121.95 124.89 -2.94 3.83 -0.60 -1.19Austin-Round Rock TX 5.4 2.3 7.1 5.81 9.88 -4.06 107.29 110.62 -3.33 4.53 -0.91 -1.53Beaumont-Port Arthur TX <1 <1 4.3 2.64 8.72 -6.08 124.54 124.37 0.17 6.80 -1.39 -2.09Brownsville-Harlingen TX <1 <1 2.8 -0.60 5.93 -6.52 134.71 133.94 0.77 7.33 -1.26 -2.47College Station-Bryan TX <1 <1 2.1 6.71 4.47 2.24 136.43 141.13 -4.70 4.33 -0.43 -0.93Corpus Christi TX <1 <1 2.7 -0.62 6.18 -6.80 134.94 134.98 -0.04 5.13 -1.16 -1.77Dallas-Plano-Irving TX <1 <1 1.0 2.95 3.44 -0.49 129.85 132.16 -2.31 5.20 -0.86 -1.56El Paso TX <1 <1 8.2 1.90 8.29 -6.39 129.58 131.82 -2.23 6.43 -1.45 -2.21Fort Worth-Arlington TX <1 <1 1.2 1.44 4.11 -2.67 132.60 134.02 -1.42 5.00 -0.66 -1.19Houston-Sugar Land-Baytown TX <1 <1 1.7 5.07 4.55 0.52 130.14 133.98 -3.84 5.00 -1.14 -1.62Killeen-Temple-Fort Hood TX <1 <1 2.2 1.87 9.01 -7.14 151.34 157.72 -6.38 5.27 -0.50 -1.05Laredo TX <1 <1 3.9 2.19 1.52 0.67 143.87 147.98 -4.11 5.77 -0.94 -1.97Longview TX <1 <1 4.3 4.04 8.14 -4.10 136.07 133.06 3.01 4.43 -1.66 -2.18Lubbock TX <1 <1 1.4 3.19 1.79 1.41 132.00 134.60 -2.60 4.13 -0.52 -0.93McAllen-Edinburg-Mission TX <1 <1 1.8 2.99 4.90 -1.91 145.29 148.36 -3.07 7.83 -1.50 -2.92Midland TX 11.6 6.4 14.0 2.75 18.93 -16.19 123.91 123.86 0.05 3.13 -1.29 -1.64Odessa TX 9.4 3.8 13.7 7.98 18.04 -10.06 120.61 126.37 -5.76 3.73 -2.03 -2.62San Angelo TX 2.4 1.0 5.1 1.91 11.31 -9.40 122.32 123.89 -1.57 4.30 -0.38 -1.01San Antonio TX 1.0 <1 3.6 2.16 8.13 -5.98 120.62 122.51 -1.90 4.93 -0.71 -1.34Sherman-Denison TX 1.0 <1 3.7 8.56 1.17 7.39 118.87 120.82 -1.95 5.30 -1.01 -1.47Texarkana TX-Texarkana AR <1 <1 2.2 -1.59 7.82 -9.41 144.16 146.87 -2.70 4.73 -0.91 -1.25Tyler TX <1 <1 2.4 -0.56 5.42 -5.98 132.02 130.28 1.75 5.03 -0.50 -0.94Victoria TX <1 <1 4.2 8.34 7.53 0.81 135.37 141.19 -5.82 4.30 -1.20 -1.87Waco TX <1 <1 2.2 2.43 3.90 -1.47 129.68 132.51 -2.83 4.80 -0.92 -1.51Wichita Falls TX <1 <1 2.3 -3.02 5.36 -8.37 146.56 145.07 1.49 4.90 -0.37 -1.14

RISK INDEX PRICE APPRECIATION AFFORDABILITY INDEXUNEMPLOYMENT

Demeaned Rate

Source: The PMI Group, Inc.

Page 18: Texas Mortgage Bankers Association

012345678

Dallas Texas

-505

101520

El Paso Texas

02468

10

Houston Texas

02468

1012

San Antonio Texas

Source: First American CoreLogic, LoanPerformance

Page 19: Texas Mortgage Bankers Association

Index of Excess Housing Supply

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

Source: The PMI Group, Inc.

Page 20: Texas Mortgage Bankers Association

Dallas

-0.6-0.4-0.20.00.20.40.60.81.0

2000Q1

2001Q2

2002Q3

2003Q4

2005Q1

2006Q2

2007Q3

El Paso

-0.50

0.00

0.50

1.00

1.50

Houston

-0.5

0

0.5

1

1.5

2

San Antonio

-0.8-0.6-0.4-0.2

00.20.40.6

Source: The PMI Group, Inc.

Page 21: Texas Mortgage Bankers Association

Source: Mortgage Bankers Association

Page 22: Texas Mortgage Bankers Association

Dallas

-2-101234

El Paso

-5

-4-3

-2-1

0

Houston

-2

-10

12

3San Antonio

-2

-10

12

3

Source: BLS / The PMI Group, Inc.

Page 23: Texas Mortgage Bankers Association

Current Status and Outlook

Page 24: Texas Mortgage Bankers Association

Source: Federal Reserve Board

Consumer Installment Credit

Page 25: Texas Mortgage Bankers Association

PrimeLoans

Source: Federal Reserve Board

Nontraditional Loans

Subprime Loans

Senior Loan Officer Survey on Bank Lending Practices

Page 26: Texas Mortgage Bankers Association

Source: Mortgage Bankers Association

Page 27: Texas Mortgage Bankers Association

Source: Freddie Mac

Page 28: Texas Mortgage Bankers Association

Source: Freddie Mac

Page 29: Texas Mortgage Bankers Association

Source: Freddie Mac

Page 30: Texas Mortgage Bankers Association

The national economy remains at substantial risk of going deeper into recession

The Texas economy is likely to get weaker in the short run, but is unlikely to feel the full brunt of the national downturn

The housing market remains oversupplied and thus any substantial price recovery is unlikely in 2009

The residential mortgage market has shown some recent signs of life, but remains at risk of getting worse if foreclosure issue remains unaddressed and credit remains tight.

Page 31: Texas Mortgage Bankers Association

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