The Economy Drags Housing Upward - cdn.ymaws.com
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1 1 © 2011 Fannie Mae. Trademarks of Fannie Mae. The Economy Drags Housing Upward Doug Duncan Chief Economist, Fannie Mae April 30, 2015
Transcript of The Economy Drags Housing Upward - cdn.ymaws.com
1 1 © 2011 Fannie Mae. Trademarks of Fannie Mae.
The Economy Drags Housing Upward
Doug Duncan
Chief Economist, Fannie Mae
April 30, 2015
2
Disclaimer
Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
3
Macroeconomic Developments & The Fed
Check out Fannie Mae’s Economic and Housing Outlook at
http://fanniemae.com/portal/research-and-analysis/emma.html
4
Economic Activity Rebounding, but Advance Release Signals
Weakness
Source: Bureau of Economic Analysis, Fannie Mae Economic and Strategic Research April Forecast
0.1%
-0.1%
-0.1%
0.2%
0.6%
1.9%
2.5%
0.1%
-0.1%
0.0%
0.3%
0.4%
2.2%
2.8%
-0.3%
-0.1%
0.3%
0.1%
0.6%
1.5%
2.2%
-1.0% 0.0% 1.0% 2.0% 3.0%
Government Consumption and Investment
Net Exports of Goods and Services
Change in Private Inventories
Residential Fixed Investment
Nonresidential Fixed Investment
Personal Consumption Expenditures
GDP
Contribution to Real GDP Annualized % Change
2010-2014 Average
2015 Forecast
2016 Forecast
5
Lackluster Consumer Spending in the Current Expansion
Source: Bureau of Economic Analysis
Real Personal Consumption Expenditures (SAAR, Index, Recession Trough = 100)
95
100
105
110
115
120
125
130
-12 0 12 24 36 48 60 72
Months Before and After Cycle Trough
1973-1975
1980-1981
1981-1982
1990-1991
2001
2007-2009
6 Source: Census Bureau
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%Ja
n-1
4
Feb-1
4
Ma
r-14
Apr-
14
Ma
y-1
4
Ju
n-1
4
Ju
l-1
4
Aug
-14
Sep
-14
Oct-
14
No
v-1
4
Dec-1
4
Ja
n-1
5
Feb-1
5
Ma
r-15
SA
, M
on
thly
% C
ha
nge
Nondefense Capital Goods Orders ex Aircraft
Core Capital Goods Orders Post Minimal Drop
7
Government Spending Has Been Increasing
Source: Bureau of Economic Analysis
Year-over-Year % Change
-2%
0%
2%
4%
6%
8%
10%
'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
Government Consumption Expenditure/Gross Investment
8
Oil Prices Decline as Dollar Strengthens, Which Could Boost
U.S. Economy
Source: Energy Information Administration, Wall Street Journal, Federal Reserve Board
90
95
100
105
110
115
120
125
130
135$0
$20
$40
$60
$80
$100
$120
$140
$160
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
WTI Crude Oil ($/barrel, Left Axis)
US$ Trade-Weighted Exchange Value (Jan-97 = 100, Inverted, Right Axis)
9 Source: Census Bureau
Job Growth Has Seen Continued Increases
Source: U.S. Bureau of Labor Statistics, Current Employment Statistics
-900
-600
-300
0
300
600
900
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Cha
nge
in T
ota
l N
on
farm
Em
plo
ym
en
t (0
00
’s, S
A)
Total Nonfarm Employment (SA, Thousands, Left Axis)
3-Month Average Change
10 Source: Bureau of Labor Statistics
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Ave
rag
e H
ou
rly E
arn
ing
s
Year-over-Year % Change
3-Month Annualized % Change
Early Signs of Wage Growth?
11 Source: The National Federation of Independent Business
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
'86 '90 '94 '98 '02 '06 '10 '14
Percent Planning to Increase Employment, Net (SA, %)
Hiring Plans of Small Businesses Continue to Trend Upward
12
-20%
-10%
0%
10%
20%
30%
40%
'78 '79 '80 '81 '83 '84 '85 '86 '88 '89 '90 '91 '93 '94 '95 '96 '98 '99 '00 '01 '03 '04 '05 '06 '08 '09 '10 '11 '13 '14
Difference Between % Increase and % Decrease 6 Months Hence (Left Axis)
Income Growth Expectations Continue to Improve and Remained Positive Throughout 2014
Source: The Conference Board, NBER
1991-1996
Avg.=9.9
1982-1987
Avg.=18.7
2001-2006
Avg.=9.7 2009-2014
Avg.= -1.64
13
Household Debt-to-Income Ratio Normalizes to Trend
Source: Federal Reserve Board
Note: Household and Nonprofit Organizations: Total Liabilities include (1)Credit Market Instruments (Home Mortgages, Consumer Credit, Municipal Securities*,Bank Loans,
Other loans and advances, Commercial Mortgages*),(2)Security Credit, (3)Trade payables*, (4)Deferred and unpaid life insurance premiums
*denotes liabilities of nonprofit organizations
0%
20%
40%
60%
80%
100%
120%
140%
'70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
Household Debt to Personal Income
Total Household & Nonprofit Debt to Personal Income 1986-1999 Trendline
14
Revolving Consumer Credit Declined Sharply During the Great Recession, but Has Now Stabilized
Source: Federal Reserve Board, Bureau of Economic Analysis
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
'68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
Revolving Consumer Credit Outstanding as a Share of Total Personal Income
15
0%
2%
4%
6%
8%
10%
12%
'07 '08 '09 '10 '11 '12 '13 '14 '15
Personal Saving Rate (SAAR, %)
Source: Bureau of Economic Analysis
Consumers Increase Savings
16
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Credit Card Limit (Trillions US$)
Credit Card Balance (Trillions US$)
Even With Higher Credit Card Limits, Consumers are Keeping Their Balances Low
Source: Federal Reserve Bank of New York, Federal Reserve Board, S&P
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
'99
'00
'01
'02
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
'14
'15
Break-Adjusted Revolving Consumer Credit Outstanding(EOP, SA, $) % Change - Year to Year
US Bankcard Credit Cards: Outstandings ($) % Change -Year to Year
17
New Auto Delinquency Loan Balances Are Reaching 2008 Levels
Source: Federal Reserve Board
0%
1%
2%
3%
4%
5%
6%
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
% Auto Loan Debt 90+ Days Delinquent
0
1
2
3
4
5
6
7
8
9
10
'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
New Seriously Delinquent Auto Loan Debt (90+ Days) in Each Quarter ($B)
18
State Level Payroll Growth is More Geographically Concentrated than in Most Prior Recoveries
Source: Bureau of Labor Statistics, Fannie Mae Economic & Strategic Research projections
0
10
20
30
40
50
60
70
80
90
100
196
0Q
2
196
3Q
2
196
6Q
2
196
9Q
2
197
2Q
2
197
5Q
2
197
8Q
2
198
1Q
2
198
4Q
2
198
7Q
2
199
0Q
2
199
3Q
2
199
6Q
2
199
9Q
2
200
2Q
2
200
5Q
2
200
8Q
2
201
1Q
2
201
4Q
2
201
7Q
2Sta
te N
on
farm
Pa
yro
ll G
row
th D
iffu
sio
n (
Ind
ex,
0-1
00
)
Recession History Average, Economic Expansions Forecast
19
The Sharp Rise in Interest Rates in 2013 Sparked by Fed “Tapering” has Reversed
Source: Federal Reserve Board, Freddie Mac, Bloomberg
QE3 Announced Taper Hinted At QE2 Announced QE1 Announced
0%
1%
2%
3%
4%
5%
6%
7%
8%
'07 '08 '09 '10 '11 '12 '13 '14 '15
10yr Treasury Yield FRM 30 Rate Fannie Mae CCY 30
20
Real Interest Rates Have Trended Lower for Over Three Decades
Source: Federal Reserve Board, Freddie Mac, Bloomberg
-1.14%
-4%
-2%
0%
2%
4%
6%
8%
10%
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
4.13%
2.13%
0.83%
Inflation Adjusted 1-Year U.S. Treasury Yield
21 Sources: Freddie Mac, National Association of REALTORS®
Mortgage Rates and Home Sales
2,500
3,000
3,500
4,000
4,500
5,000
5,500
6,000
6,500
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
30-Year FRM Rate (%, LEFT AXIS) Single-Family Existing Home Sales (SAAR, Thous, RIGHT AXIS)
22 Sources: Freddie Mac, CoreLogic
Mortgage Rates and Home Prices
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
0%
2%
4%
6%
8%
10%
12%
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
30-Year FRM Rate (%, LEFT AXIS) CoreLogic HPI (YoY % Change, RIGHT AXIS)
23 Sources: Freddie Mac, Mortgage Bankers Association
Mortgage Rates and ARM Share
0%
10%
20%
30%
40%
50%
60%
0%
2%
4%
6%
8%
10%
12%
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
30-Year FRM Rate (%, LEFT AXIS) ARM Share of Dollar Volume of Loan Applications (%, RIGHT AXIS)
24
2015 Economic Outlook – Expectations
Source: Fannie Mae Economic & Strategic Research April 2015 Forecast
April 2015
Real GDP Annual Growth 2.8%
Unemployment Rate (Year-end) 5.2%
Core CPI (Year-end) 1.9%
10-Year Treasury Bond Yield (Year-end) 2.1%
Fed expected to make first rate move in September
Domestic Risks
Market reaction to Fed moves
Under/over estimation of oil price effects/duration
Dollar continues to strengthen
International Risks
China growth
Japan QM
European QM
War
25
Demographics & Consumer Attitudes
Check out Fannie Mae’s Consumer Research & Analysis at
http://fanniemae.com/portal/research-and-analysis/consumer-
research-analysis.html
26 Source: U.S. Census Bureau, Fannie Mae Economic & Strategic Research projections
Household Growth Has Been Severely Depressed, but is Projected to Rebound in the Second Half of the Decade
Historical data (blue) end in 2013 because that is the last full calendar year for which data are available.
27
Racial and Ethnic Minorities Should Continue to Account for the Bulk of Household Growth
Source: U.S. Census Bureau, Decennial Census; Fannie Mae Economic & Strategic Research projections
28
Minority Households Are More Financially Constrained
Source: U.S. Federal Reserve Board, Survey of Consumer Finances 2013
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
Median Pre-Tax Household Income Median Household Net Worth
White/Non-Hispanic Households Non-white/Hispanic Households
Total Households in 2013
29
As Baby Boomers Replace Smaller Cohorts in the Elderly Age Groups, the Ranks of Senior Households are Expected to Expand
Rapidly
Source: Fannie Mae Economic & Strategic Research projections
30
Baby Boomers: Huge Housing Footprint Presents Opportunities and Challenges
31
$6.3 Trillion 34 Million
Baby Boomers Have an Enormous Housing Market “Footprint"
Source: U.S. Census Bureau: 2013 Population Estimates, 2013 American Community Survey; Federal Reserve Board: 2013 Survey of Consumer Finances
80 Million
45 Million
32
Although Boomers are More Likely to Carry Mortgage Debt into Retirement, the Housing Wealth of “Free-and-Clear" Boomer
Homeowners is Immense
Source: U.S. Census Bureau, 2000 Census and 2013 American Community Survey Public Use Microdata Samples
33
Two Reasons Boomers Might Seek to Tap Accumulated Home Equity
To Replace Wage Income in Retirement To Fund Home Accessibility
Improvements Needed to Age in Place
Source: U.S. Census Bureau, American Community Survey Public Use Microdata Sample; Harvard Joint Center for Housing Studies; AARP
A 2010 AARP survey found that nearly nine in ten
Baby Boomers prefer to remain in their current residences
for as long as possible.
34
What Will Happen When Boomers Begin to Vacate their Owner-Occupied Units?
Source: Fannie Mae National Housing Survey, November 2013 to October 2014
If you were going to move, would you be more likely to:
•Rent
•Buy
•Don’t know
Older generations portend Boomers' eventual move away from owner-occupancy
35
GenXers: Tapped Out on Household Growth, But Still A Force in Today’s Mortgage Market
36
GenX Household Growth Has Slowed
Source: U.S. Census Bureau, American Community Survey; Fannie Mae Economic & Strategic Research projections
Compared with Millennials, future growth expected to be modest
GenX Household Growth Has Slowed During the Next Five Years, Millennials Are
Projected to Far Outpace GenX Household Growth
37
Despite Slow Household Growth, GenXers are a Large Source of Mortgage Demand
Source: Fannie Mae
Fannie Mae single-family mortgage acquisitions in 2013
Purchase Money Mortgages Refinance Mortgages
First number in data label is the unpaid principal balance of Fannie Mae conventional single-family acquisitions in billions of dollars.
Excludes loans for which borrower age was missing.
38
Millennials: Enormous Demographic Potential
39
But Millennial Housing Demand has been Subdued Compared with Previous Generations
Source: U.S. Census Bureau, Decennial Census and American Community Survey
Millennials Are Less Likely to Form
Households Than Their Predecessors
When They Do Form Households, They Are More
Likely to Rent, Particularly Single-Family Homes
The headship rate, a commonly used metric of household formation, is the proportion of the population in a given age group that is a
householder, i.e., the person, or one of the persons, in whose name a housing unit is owned, being bought, or rented. “Single-family” is
1 to 4 units in structure, “multifamily” is 5+ units in structure, and “Other” is predominantly manufactured/mobile homes.
40
Despite Millennials’ Greater Propensity to Rent, Most Still Think Owning Makes Good Sense
Source: Fannie Mae National Housing Survey, November 2013 to October 2014
Which is closer to your view?
•Renting makes more sense because it protects you against
house price declines and is actually a better deal than owning.
•Owning makes more sense because you’re protected against
rent increases and owning is a good investment over the long term.
•Don’t know.
Which is closer to your view?
•Renting makes more sense because it is less stressful and
gives you more flexibility in future decisions.
•Owning makes more sense because you have more control over
where you live and a better sense of privacy and security.
•Don’t know.
41
Obstacles to Unlocking Millennial Housing Demand
42
High Unemployment and Low Real Incomes
Source: U.S. Bureau of Labor Statistics, Current Population Survey; U.S. Census Bureau, Current Population Survey (CPS-ASEC)
Despite Substantial Improvement, Young Adult Unemployment Rate
Remains Above Pre-Recession Levels
Real Household Incomes of Today’s Young Adults
Are Well Below Those of Predecessors
43
Millennials Without a College Degree are Much More Likely to be Unemployed
Source: U.S. Census Bureau, Current Population Survey
Unemployment Rate by Age and Education (%)
44
Strained Household Balance Sheets
Source: Brookings Institution; Fannie Mae Economic & Strategic Research
*Up-front costs based on a 3 percent down payment and 3 percent in closing costs
for the median-priced home purchased by first-time buyers in 2012-2013.
**Financial assets include transaction accounts, certificates of deposit, savings
bonds, other bonds, stocks, pooled investment funds, retirement accounts,
cash value life insurance, and other managed assets.
Data are for households for which the average age of adults is 20-40 years old.
Even With Low Down Payment Loans, Modest Assets Make Up-Front Costs a Significant Hurdle
Student Loan Debt Mounts, But Payments Remain Modest Relative to Incomes
45
Net Worth and Income are Substantially Different for Millennial Renters vs. Homeowners
Source: U.S. Federal Reserve Board, Survey of Consumer Finances 2013
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
Median Pre-Tax HouseholdIncome
Median Household Net Worth
25-35 Year Old Owner Households in 2013
White/Non-Hispanic Households
Non-white/Hispanic Households
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
Median Pre-Tax HouseholdIncome
Median Household Net Worth
25-35 Year Old Renter Households in 2013
White/Non-Hispanic Households
Non-white/Hispanic Households
46
Homeownership is Primarily a Function of Graduation rather than Presence of Student Debt
Source: Fannie Mae National Housing Survey
Ages 25-39
*Sample is from Fannie Mae book only
Have student loan debt Last level of education completed
47
Challenges to Obtaining a Mortgage
Credit and Up-Front Costs of Buying Are Perceived as Big Obstacles to Qualifying Constrained Credit Supply Remains an Issue
Sources: Fannie Mae National Housing Survey; CoreLogic, Housing Credit Index
“What would be your biggest obstacle to getting a mortgage to purchase or refinance a
home today?” Sum of responses exceeds 100 percent because respondents were allowed
to select up to three obstacles.
Data from November 2013 to October 2014 Fannie Mae National Housing Surveys.
An index value of 100 is assigned to 1998, which is the earliest year for which
data are available and is assumed by CoreLogic to represent a period of
relatively "normal" underwriting practices. Values less than 100 for a given
dimension suggest tighter credit.
48
Source: Fannie Mae National Housing Survey
Consumer Optimism Toward the Economy is Growing
Source: Fannie Mae National Housing Survey
0
10
20
30
40
50
60
70
80
90
Ju
n-1
0
Aug
-10
Oct-
10
Dec-1
0
Feb-1
1
Apr-
11
Ju
n-1
1
Aug
-11
Oct-
11
Dec-1
1
Feb-1
2
Apr-
12
Ju
n-1
2
Aug
-12
Oct-
12
Dec-1
2
Feb-1
3
Apr-
13
Ju
n-1
3
Aug
-13
Oct-
13
Dec-1
3
Feb-1
4
Apr-
14
Ju
n-1
4
Aug
-14
Oct-
14
Dec-1
4
Feb-1
5
Respondents Who Think the Economy is on the Right Track (%)
Respondents Who Think the Economy is on the Wrong Track (%)
49
94% 94% 92% 92% 92% 88% 90% 92% 94%
91% 90% 91% 89%
96%
88%
94% 93% 95% 90%
87%
6% 6% 8% 8% 8% 12% 10% 8% 6%
9% 10% 9% 11%
4%
12%
6% 7% 5% 10%
13%
Jan-10 Jun-10
Q3-2010
Q4-2010
Q1-2011
Q2-2011
Q3-2011
Q4-2011
Q1-2012
Q2-2012
Q3-2012
Q4-2012
Q1-2013
Q2-2013
Q3-2013
Q4-2013
Q1-2014
Q2-2014
Q3-2014
Q4-2014
Younger Renters - % Likely To Buy At Some Point Younger Renters - % Likely To Always Rent
The Vast Majority of Younger Renters Still Plan to Buy a Home at Some Point in the Future
Q31. If you were going to move, would you be more likely to: Rent / Buy
Q50. [IF Q31=RENT] In the future, are you more likely to: Always rent / Buy at some point in the future
Younger renters likely to buy at some point: Q31= Buy or Q50 = Buy at some point in the future
Younger renters likely to always rent: Q50 = Always Rent
Lifetime intentions to own a home among younger renters
Ages 25-39
Q4 2014: Younger Renters – n=351; MOE +/- 5.23%
Source: Fannie Mae National Housing Survey
50
Implications for the Mortgage Market
Millennials and Boomers, the two largest generations in American history, are at very different points in the housing life cycle, giving rise to rapid growth in very different types of housing and mortgage finance needs.
The Millennials, who are early in their housing careers, have high propensities to rent, and therefore a need for affordable rentals. Increasing affordable rentals could also help to boost lagging rates of household formation among Millennials.
Millennials’ suppressed incomes, strained balance sheets, and perceived and real challenges in accessing mortgage credit suggest the need for expanding first-time home buying opportunities through renewed mortgage product innovation.
Much of Millennial household growth is expected to be driven by racial/ethnic minorities, suggesting the need for efforts to expand access to first-time homeownership through trusted channels that are adept at reaching them.
Boomers, who are approaching the end of their labor market careers, are expected to have a growing need to access home equity to replace wage income as they retire.
Boomers have expressed a desire to age in place, which should generate a need to access home equity to finance accessibility-enhancing home improvements.
GenXers represent a lull in mortgage volume growth because they are nearly at their peak in household formation and are a smaller population cohort. They represent a similar lending pattern to what lenders have been accustomed to but that will not generate the high-quality loan growth lenders expect.
51
Housing/Mortgage Market
Check out Fannie Mae’s Economic and Housing Outlook at
http://fanniemae.com/portal/research-and-analysis/emma.html
Check out Fannie Mae’s Mortgage Lender Sentiment Survey
http://fanniemae.com/portal/research-and-analysis/mortgage-lender-
survey.html
52
Mortgage Payment-to-Income Normalizes
Source: IHS, Freddie Mac
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
Mo
rtg
ag
e P
aym
en
t/In
co
me
Mortgage rate (30-yr FRM) = 16%
( 1992 - 2002 Avg = .25 )
Note: Data is mortgage payment (principal and interest with a 30-year FRM) on the median single family property over median household income.
53
Aggregate Mortgage Debt-to-Income Remains Above
Pre-Bubble Period
Source: Federal Reserve Board, Census Bureau, Bureau of Economic Analysis
* Ratio = Total Mortgages on 1-4 Family Structures (NSA, Bil.$) / Personal Income (SAAR, Bil.$)
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
'70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
SF Mortgages to Income Ratio (Left Axis) *
( 1992 - 2002 Avg = .55 )
( 1970 - 2002 Avg = .45 )
54
While Home Equity has Risen with Price Appreciation, it has
Not Returned to Levels Seen in the Early 2000s
Source: Federal Reserve Board
36
41
46
51
56
61
66
71
76
'70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14
Households: Owners' Equity in Real Estate as a % of Household Real Estate (%) *
* Calculated by taking the owner’s equity position divided by the market value of owner-occupied real estate held by U.S. households
55
Recovery in Single-Family Construction is Sluggish
Source: Census Bureau
SAAR, Thousands of Units
0
100
200
300
400
500
600
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
'90 '95 '00 '05 '10 '15
Single-Family Housing Starts (Left Axis)Multifamily Housing Starts (Right Axis)
56
While Both Short-Term and Seriously Delinquent Mortgages Trend Downward, Seriously Delinquent Mortgages Remain
Elevated
0.00
1.00
2.00
3.00
4.00
5.00
6.00
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Mortgage Payments Past Due 90+ Days: U.S. (NSA, %)
Mortgage Payments Past Due 90+ Days: U.S. (NSA, %)
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14
Mortgage Payments Past Due 30-59 Days: U.S. (NSA, %)
Mortgage Payments Past Due 30-59 Days: U.S. (NSA, %)
Source: Mortgage Bankers Association
57
Delinquency Rates Have Fallen Considerably Since the Crisis, but Over 2 Million Mortgages Remain Seriously Delinquent
0
1
2
3
4
5
6
7
8
9
'06 '07 '08 '09 '10 '11 '12 '13 '14
Pro
pe
rtie
s (
mill
ion
)
SDQ Not On Mkt REO Not On Mkt REO On Mkt Inventory Of Existing Homes On Mkt
Note: Fannie Mae and market data indicate that about 50% of REO are assumed to be on the market. Using MLS data it has been
determined that 23% of SDQs are on the market (slice is not shown). Inventories are of existing homes.
Source: National Association of REALTORS®, LoanPerformance, Fannie Mae Estimates
Properties On The Market (Inventory Of Existing Homes = 1.9 Million) And Over-Hang Of Properties That Could Go
On The Market (310,000 REO & 2.4 Mil. SDQs (on+off Mkt)
58
0
5
10
15
20
25
30
35
Mo
nth
s O
f O
verh
an
g
SDQ Not on Mkt REO Not on Mkt Inventory Of Existing Homes On Mkt
I/S >7
Dec 2014, Market Absorption Rate (In Months) At Current Sales Rate Measured by Total Market Inventory/Sales
Many Ex-Bubble States Have Rebounded, but the Housing Market in Many States Throughout the Northeast Remains Anemic
(Market = Inventory of existing homes for sale+REO not on Mkt+SDQs not on Mkt)
Source: National Association of REALTORS®, LoanPerformance, Fannie Mae Estimates
59
Homeownership Rate Continues to Decline as the Market Remains Dominated by Renter Households
-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Total Renter-Occupied Housing Units
Total Owner-Occupied Housing Units
Change in Units from Prior Year, Thousands of Units
60.0
61.0
62.0
63.0
64.0
65.0
66.0
67.0
68.0
69.0
70.0
'90 '91 '93 '94 '96 '97 '99 '00 '02 '03 '05 '06 '08 '09 '11 '12 '14
Homeownership Rate, %
Source: Census Bureau
60
Home Sales Diverge, but Trend Upwards
Source: National Association of REALTORS®, Census Bureau
0
200
400
600
800
1,000
1,200
1,400
1,600
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
NAR Total Existing Home Sales, United States (SAAR, Thous, Left Axis)
New 1-Family Houses Sold: United States (SAAR, Thous, Right Axis)
61
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
FHFA House Price Index (Purchase Only, United States)
CoreLogic National House Price Index
S&P/Case-Shiller Home Price Index: Composite 20
Source: S&P/Case-Shiller, CoreLogic, Federal Housing Finance Agency
Home Price Growth Moderates…
Year-over-Year % Change
62
…as Tight Supply Continues to Support Growth
Source: CoreLogic, National Association of REALTORS®
2
3
4
5
6
7
8
9
10
11
12-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
'91 '95 '99 '03 '07 '11 '15
CoreLogic House Price Index (Year-over-Year % Change, Left Axis)
Months' Supply of SF Existing Homes (4-Month Lead, Inverted, Right Axis)
63
Housing Activity Mixed in 2014, but Measured Recovery Continues Year-over-Year % Change
-5%
0%
5%
10%
15%
20%
25%
30%
Existing Home Sales New Single-Family HomeSales
Single-Family Housing Starts Multifamily Housing Starts
2014
2015 Forecast
2016 Forecast
2013 2014
2015
Forecast
2016
Forecast
Thousands of Units
Existing Home Sales 5,090 4,940 5,092 5,268
New Home Sales 429 436 541 622
Single-Family Housing Starts 618 648 748 921
Multifamily Housing Starts 307 355 384 398
Source: National Association of REALTORS®, Census Bureau, Fannie Mae Economic & Strategic Research April 2015 Forecast
64
Lenders Plan to Increase Their Marketing Investments Into First-Time Homebuyers and Move-Up Homebuyers
[If YES, firm develops or implements Direct-to-Consumer marketing programs] Listed below are some possible mortgage consumer segments. For
each consumer segment, please indicate whether your firm plans to make marketing investments in 2015 to increase your firm’s penetration into the
consumer segment as part of your firm’s 2015 mortgage origination strategy. (Q4 2014)
In addition, larger institutions are more likely to invest in affluent consumers and mid-sized and smaller lenders are more
likely to invest in lower-then-median income consumers.
L/M/S - Denote a % is significantly higher than the annual loan origination volume group that the letter represents at the 95% confidence level
Please note that percentages are based on the number of financial institutions that gave responses other than “Not Applicable.” Percentages may add to under or over 100% due to rounding.
Source: Fannie Mae Mortgage Lender Sentiment Survey – Q4 2014
65
Reported Credit Tightening for GSE-Eligible Loans Continues to Trend Down Gradually Each Quarter
Ease
Remain Unchanged
Tighten
* Denotes a statistically significant change since Q4
Q: Over the past three months, how did your firm’s credit standards for approving consumer applications for mortgage loans change (across both purchase
mortgages and refinance mortgages)? “Ease” = Eased considerably + Eased somewhat, “Tighten” = Tightened somewhat + Tightened considerably
Q: Over the next three months, how do you expect your firm’s credit standards for approving applications from individuals for mortgage loans to change
(across purchase mortgages and refinance mortgages)? “Ease” = Ease considerably + Ease somewhat, “Tighten” = Tighten somewhat + Tighten considerably
Source: Fannie Mae Mortgage Lender Sentiment Survey – Q1 2015
66
The Share of Lenders Reporting Increased Profit Margin Outlook Over the Next Three Months has Increased
Significantly this Quarter
* Denotes a statistically significant change since Q4
Q: Over the next three months, how much do you expect your firm's profit margin to change for its single-family mortgage production? [Showing: (Substantially Increase (25+ basis points) +
Moderately Increase (5 - 25 basis points)), About the same (0 - 5 basis points), (Moderately Decrease (5 - 25 basis points) + Substantially Decrease (25+ basis points))]
Q: What do you think will drive the increase (decrease) in your firm’s profit margin over the next three months? Please select up to three of the most important reasons.
Source: Fannie Mae Mortgage Lender Sentiment Survey – Q1 2015
67
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
$4.0
'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
Purchase
Refinance
Mortgage Production Expected to Be Little Changed in 2015 Amid
Shift to Purchase Market
Source: Fannie Mae Economic & Strategic Research Forecast
Mortgage Originations (1-4 Unit, Trillions of $)
Source: Fannie Mae Economic & Strategic Research Forecast April 2015 Forecast
68
2015 Housing Outlook – Expectations
Source: Fannie Mae Economic & Strategic Research April 2015 Forecast
April 2015
Housing Starts 1.131 million
New Single-Family Home Sales (% Change Year-over-Year) Up 24% to 541 thousand
Total Existing Home Sales (Single-Family, Condos, and Co-Ops) Up 3.1% to 5.092 million
FHFA Purchase-Only Index (Annual Percent Change Q4/Q4) Up 4.5%
Purchase Mortgage Originations $742 billion
Refinance Mortgage Originations $609 billion
30-Year Fixed Rate Mortgage (Year-end) 3.8%
69
Appendix
70
Definitions of Generations for Household Projections
Source: Fannie Mae Economic & Strategic Research; U.S. Census Bureau, 2013 Population Estimates and 2013 American Community Survey
Baby Boomers GenXers Millennials
Birth Years 1946 to 1965 1966 to 1980 1981 to 2000
Age in 2013 (years) 48 to 67 33 to 47 13 to 32
Population in 2013 (millions) 80.3 61.2 86.7
Households in 2013 (millions) 45.1 31.3 18.4
71
Douglas G. Duncan is Fannie Mae’s Senior Vice President and Chief Economist. He is responsible for managing Fannie Mae’s Economic & Strategic Research Group and oversees corporate strategy. In this leadership role, Duncan provides all economic, housing, and mortgage market forecasts and analyses, and serves as the company’s thought leader and spokesperson on economic and mortgage market issues.
Prior to joining Fannie Mae, Duncan was Senior Vice President and Chief Economist at the Mortgage Bankers Association. His experience also includes service as a LEGIS Fellow and staff member with the Committee on Banking, Finance, and Urban Affairs for Congressman Bill McCollum in the U.S. House of Representatives, and work on the Financial Institutions Project at the U.S. Department of Agriculture. He has been elected to the Board of Directors for the National Association of Business Economists, is a member of the American Economics Association and the American Real Estate and Urban Economics Association, and is past president of the Housing Statistics Users Group.
Named one of Bloomberg / BusinessWeek’s 50 Most Powerful People in Real Estate and one of Inman News’ 100 Most Influential Real Estate Leaders for 2013, Duncan is a frequent speaker on national and state economic, housing, and mortgage market conditions.
Duncan received his Ph. D. in Agricultural Economics from Texas A&M University and his B.S. and M.S. in Agricultural Economics from North Dakota State University.
Speaker Biography
72
Contact Information fanniemae.com/portal/research-and-analysis/
Doug Duncan, Senior Vice President & Chief Economist
Fannie Mae
3900 Wisconsin Avenue, NW
Mail Stop 1H-2N/01
Washington, DC 20016
(o) 202-752-0160
(c) 202-409-5913
(fax) 202-752-4441
