Post on 21-Dec-2015
Virginia Housing Development Authority
Virginia Housing MarketOverview
Virginia Association of RealtorsOctober 2, 2010
2
vhda.com | 800-227-VHDA
Current Market Conditions
3
vhda.com | 800-227-VHDA
• The Northern Tier is Virginia’s portion of the multi-state greater Washington region.
• Rapid growth and very high housing costs made it a hot “bubble” market during the boom.
• This region has been hit hard by foreclosures, and continues to struggle with a large inventory of distressed homes.
• Downstate regions are less impacted by problem loans and have fewer “underwater” owners.
• But, they are being far more impacted by the recession that resulted from the housing bust.
Northern Tier
Downstate Regions
Regionally, Virginia is experiencing two different market dynamics.
4
vhda.com | 800-227-VHDA
The Northern Tier has led other regions in the downturn and recovery.
Source: VAR
Virginia Existing Home Sales4-Quarter Rolling Average
5,000
10,000
15,000
20,000
25,000
00-2
00-4
01-2
01-4
02-2
02-4
03-2
03-4
04-2
04-4
05-2
05-4
06-2
06-4
07-2
07-4
08-2
08-4
09-2
09-4
10-2
Calendar Year Quarter
2nd Qtr '05
1st Qtr '08
2nd Qtr '09
- 52%
2nd Qtr '06
Northern Tier
Downstate Regions
- 42%
5
vhda.com | 800-227-VHDA
Prices in the Northern Tier fell quickerand harder than in Hampton Rds.
Source: Federal Housing Finance Agency (FHFA)
Hyper Inflated MarketsAnnual Change in FHFA Home Price Index
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%Washington-Arlington-Alexandria MSA
Winchester MSA
VA Beach-Norfolk-Newport News MSA
6
vhda.com | 800-227-VHDA
Hampton Rds prices have fallen in tandem with more moderately inflated markets.
Source: Federal Housing Finance Agency (FHFA)
Moderately Inflated MarketsAnnual Change in FHFA Home Price Index
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%VA Beach-Norfolk-Newport News MSA
Richmond MSA
Charlottesville MSA
Harrisonburg MSA
7
vhda.com | 800-227-VHDA
Prices in lesser inflated marketshave only recently declined.
Source: Federal Housing Finance Agency (FHFA)
Lesser Inflated MarketsAnnual Change in FHFA Home Price Index
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%Roanoke MSA
Lynchburg MSA
Blacksburg-Christiansburg-Radford MSA
Kingsport-Bristol MSA
8
vhda.com | 800-227-VHDA
Foreclosure sales at distressed prices stimulated the initial sharp rebound in Northern Tier sales.
Source: MRIS
Peak to Trough Decline in Median Price
-36%
-44%
-46%
-51%
-57%
-59%
No. Virginia
Loudoun
Fredericksburg
Blue Ridge
Gtr. Piedmont
Pr. William
9
vhda.com | 800-227-VHDA
Sales to investors rose substantiallyand continue to support the market.
Source: MRIS
Cash Sales Share of Total Existing Home SalesNorthern T ier Region
0%
5%
10%
15%
20%
Aug '10 13.4%
Jan '10 17.1%
Jun '062.9%
10
vhda.com | 800-227-VHDA
Now, the Northern Tier is strugglingto sustain sales as prices recover.
Source: VAR
Annual Change in Northern Tier Region
-30%
-20%
-10%
0%
10%
20%
30%
40%
08-1
08-2
08-3
08-4
09-1
09-2
09-3
09-4
10-1
10-2
Calendar Year Quarter
Existing Home Sales
Average Price
11
vhda.com | 800-227-VHDA
Falling listings have contributed more to inventory reduction than rising sales.
Source: MRIS
Existing Home Sale ActivityNorthern Tier Region
(12-month rolling averages)
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
Jan-01Jul-0
1
Jan-02Jul-0
2
Jan-03Jul-0
3
Jan-04Jul-0
4
Jan-05Jul-0
5
Jan-06Jul-0
6
Jan-07Jul-0
7
Jan-08Jul-0
8
Jan-09Jul-0
9
Jan-10Jul-1
0
New Listings
Sales
12
vhda.com | 800-227-VHDA
With the federal tax credit ended,a new demand driver is now needed.
Source: MRIS
Annual Change in Existing Home SalesNorthern Tier Region
-50%
-25%
0%
25%
50%
75%
100%Housing Boom
TraditionalCorrection
REO Flood
Bottom Feeding
Fed. TC
13
vhda.com | 800-227-VHDA
Factors ImpactingMarket Recovery
14
vhda.com | 800-227-VHDA
The metro core of the Northern Tier has recovered lost jobs, but downstate regions lag.
Northern Tier
Downstate Regions
Unemployment is the key factor in downstate market weakness.
Change in Employment July 2008 to July 2010
-5.0% -4.0% -3.0% -2.0% -1.0% 0.0% 1.0%
Northern Tier -- Washington Metro Area
Virginia
Hampton Roads-Chesapeake Bay
Charlottesville-Central Valley
Roanoke-Blacksburg-Lynchburg
Northern Tier -- Outer Part of Region
Greater Richmond
U.S.
Southern Tier
Virginia
U.S.
Source: Virginia Employment Commission (VEC)
15
vhda.com | 800-227-VHDA
Unemployment has replaced problem loans as the driver of foreclosures.
Source: Mortgage Bankers Association (MBA)
Subprime Foreclosures
Prime & Govt. ARM Foreclosures
Prime & Govt. Fixed Rate Foreclosures + 7,700
Virginia Foreclosures
Change 2008 to 2010- 3,100
+ 2,300
2nd Qtr. 201027,200 Active Foreclosures
43%
28%
29%
Prime &Govt. Fixed Rate Loans11,700
Prime & Govt. Adjustable Rate Loans
7,600
Subprime & Alt-A Loans
7,900
2nd Qtr. 200820,300 Active Foreclosures
20%
26%
54%
Prime &Govt. Fixed Rate Loans4,000
Prime & Govt. Adjustable Rate Loans
5,300
Subprime & Alt-A Loans
11,000
16
vhda.com | 800-227-VHDA
Foreclosures may have peaked in Virginia, but their decline will be slow.
Source: Mortgage Bankers Association (MBA)
Virginia Mortgage Loans in Foreclosure
0
8,000
16,000
24,000
32,000
Prime & Govt.Fixed Rate
Prime & Govt. ARM
Subprime
17
vhda.com | 800-227-VHDA
High foreclosure rates arerelated to two combined problems:
1. High unemployment2. A large inventory of distressed properties
and/or a large share of homeowners who are “underwater”
• Areas with foreclosure rates above the state average exhibit both problems.
• Where unemployment is lower—e.g., inner parts of the Northern Tier, including Pr. William Co.—foreclosures rates are stable or declining even where distressed inventories remain high.
• Likewise, where unemployment is very high—e.g., the Martinsville area—but where few homeowners are “underwater”, foreclosure rates are lower.
18
vhda.com | 800-227-VHDA
• In mid 2008, foreclosure activity was heavily concentrated in the Northern Tier Region.
Source: RealtyTrac and Census Bureau
Northern Tier
Downstate Regions
• As economic factors have increased in importance, downstate foreclosures have risen steadily.
• In contrast, foreclosure activity is declining in the Northern Tier where unemployment is lower.
The regional distribution of foreclosures is shifting.
*Trustee sales and lender repossessions
Foreclosure Activity*
0.00% 0.25% 0.50% 0.75%
August 2010
August 2009
August 2008
Share of Homes with a Mortgage
Downstate Regions Northern Tier
19
vhda.com | 800-227-VHDA
Source: RealtyTrac and Census Bureau
Foreclosure Activity* May 2010
0.00% 0.25% 0.50% 0.75%
Southern Tier
Roanoke-Blacksburg-Lynchburg
Charlottesville-Central Valley
VIRGINIA
Greater Richmond
Northern Tier -- Inner (PD 8)
Hampton Rds-Chesapeake Bay
Northern Tier -- Outer
Share of Homes with a Mortgage
VIRGINIA
Northern Tier -- Outer
Northern Tier -- Inner (PD 8)
*Trustee sales and lender repossessions
Foreclosure rates are mostsevere in the outer partof the Northern Tier.
Northern Tier
Inner
Outer
20
vhda.com | 800-227-VHDA
The stock of lender-owned homes is large and will take time to deplete.
Source: RealtyTrac
Inventory of Lender-Owned Homes
0
5,000
10,000
15,000
20,000
25,000
Northern Tier Downstate Regions
21
vhda.com | 800-227-VHDA
Demand factors remain weak.
• By traditional measures, the cost of home purchase has dropped.
• However …
1. Access to favorable mortgage terms and underwriting standards remains a challenge.
2. Consumer purchasing power and confidence remain weak.
22
vhda.com | 800-227-VHDA
By traditional measures, homes in most markets are again affordable.
Source: MRIS, VAR and Census Bureau
Ratio of Median Home Price to Median Household Income
Northern Tier Region Downstate Regions
0.0 1.0 2.0 3.0 4.0 5.0 6.0
Spotsylvania
Stafford
Pr. William
Frederick
Fauquier
Loudoun
Fairfax
Arlington
Alexandria
Pre-Boom: April2000
Peak of Boom:May 2006
Price Trough: Feb/Mar 2009
Current: June 2010Traditional
affordability range
0.0 1.0 2.0 3.0 4.0 5.0
Danville
Roanoke
Richmond
Lynchburg
HamptonRoads
Charlottes-ville
Pre-Boom: April 2000
Peak of Boom:2nd Qtr 2007
Current: 2nd Qtr 2010
Traditional affordability range
23
vhda.com | 800-227-VHDA
Nonetheless, traditional buyers arestill struggling to enter the market.
• Young households are especially impacted by unemployment and under-employment.
• Access to mortgage credit remains a barrier due to ongoing tightening of lending standards.
• In some areas 1st-time buyers have had trouble competing against investors with cash.
• Would-be repeat and “trade-up” buyers are holding back due to significant loss of equity—prices must recover in order to restore mobility opportunity for current owners.
24
vhda.com | 800-227-VHDA
Funds for down payment is agrowing barrier for first-time buyers.
• Higher minimum loan-to-value ratios have significantly increased down payment requirements.
• Young households lack the savings needed to cover down payment and closing costs.
• Parents are less able to assist with these costs due to loss of income, home equity and the value of stock holdings.
25
vhda.com | 800-227-VHDA
Burdensome debt is another major obstacle for young households.
Source: Survey of Consumer Finance
• Young households are carrying far higher debt loads than in the past.
• Both credit card and student loan debt are serious problems.
• Acquiring financial management skills and paying down debt are essential for successful home purchase, and will take time.
Average Credit Card DebtAmong Households Age 25 to 34
with Credit Card Debt(2004 dollars)
$2,873
$4,358
1989 2004
+52%
26
vhda.com | 800-227-VHDA
In Summary:
• Market conditions will remain challenging for the next several years until the foreclosure problem is resolved and economic recovery takes fuller hold.
• Continued high levels of distressed sales coupled with weakened demand among traditional buyers will restrain prices and could result in a “double dip” in prices in some markets.
• Long-term home appreciation will depend on employment and income growth.