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This report is available on wellsfargo.com/research and on Bloomberg WFEC
September 15, 2010
E co n o m ics Gr o u p
Record Low Mortgage Rates Are Not Yet Enticing Many BuyersRecord low mortgage rates have not yet produced much of a lift for home sales. Sales of both newand existing homes appear to have risen modestly following their sharp declines in July in the
wake of the expiration of the homebuyer tax credits. With the declines, the supply of unsoldhomes remains uncomfortably high relative to sales. Sales normally weaken during the fall on a
non-seasonally adjusted basis. Because sales are already so low, however, they probably will notfall as much as they normally would, which means the seasonally adjusted data may show modestgains. No significant improvement in sales or construction is expected to take place until thespring homebuying season. By then, the economy should have put up a fairly lengthy string ofmodest private-sector job gains, which should bolster confidence and household formations.
While sales and new home construction may rise on a sequential basis, year-to-year comparisonswill be unusually tough because they will be compared with the run-up in sales and starts, whichpreceded the initial expiration of the homebuyer tax credits. Buyer traffic has stalled in recent
weeks, as the potential buyer is running into roadblocks in selling their current home andqualifying for a mortgage. Closings have also been held up by tougher appraisals and larger downpayment requirements.
The threat of foreclosures is again taking center stage, with anecdotal reports showing a surge in
foreclosures occurring in August. The increased number of foreclosures and short sales isexpected to pull prices lower during the second half of 2010, with price declines most problematicin the nations most overbuilt markets. The large number of homes currently in foreclosure andthe high percentage of homes with negative equity and/or seriously delinquent mortgages iskeeping homebuyers and builders on the sidelines until they better understand the impact of thisshadow inventory on prices, appraisals and mortgage underwriting.
Figure 1
MBA Seriously Delinquent Mortgage RatesForeclosures and 90 Days Past Due Mortgages, Percent
0%
2%
4%
6%
8%
10%
79 85 91 97 03 09
0.0%
0.4%
0.8%
1.2%
1.6%
2.0%
Seriously Delinquent Loans: Q2 @ 9.1% (Left Axis)
Foreclosures Started During Quarter: Q2 @ 1.2% (Right Axi s)
Figure 2
Inventory of New Homes for SaleNon-Seasonally Adjusted - In Thousands
0
150
300
450
600
89 93 97 01 05 09
0
150
300
450
600
Inventory: Jul @ 209,000
Completed New Homes: Jul @ 80,000
Source: Mortgage Bankers Association, U.S. Department of Commerce and Wells Fargo Securities, LLC
Special Commentary
Mark Vitner, Senior [email protected] 704- 383-563
Anika R. K han, [email protected] 704- 715-057
Hou sing Chartbook: Septem ber 2010
No s i gn i f i can t
im p r o v em e n t i n
sa l e s o r
c o n s t r u c t i o n i s
e x p e c te d t o t a k ep l ace un t i l t he
s p r in g h o m e b u y i
s e a s o n .
mailto:[email protected]:[email protected]:[email protected]:[email protected]8/4/2019 WELLS FARGO SECURITIES- Housing Chart Book Sep 2010
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Housing Chartbook: September 2010 WELLS FARGO SECURITIES, LLCSeptember 15, 2010 ECONOMICS GROUP
While most of the housing data has turned negative in recent weeks, we continue to believe that agenuine recovery in home sales and new home construction will begin next spring. By genuine, wemean a recovery driven by improving underlying economic fundamentals rather than governmentprograms designed to incentivize buyers through tax incentives or relaxed underwritingstandards. Such a recovery in home sales will likely be very slow because the underlying economicrecovery is producing only modest gains in employment and income and the unemployment rate
remains uncomfortably high.
Job growth is expected to strengthen over the next few years. We are expecting around 1.5 millionprivate-sector jobs to be created in 2011, which should allow housing starts to rise to around a810,000-unit pace. Job growth should strengthen further in 2012 and starts will likely rise backabove the million-unit mark. A return to the 1.55 million-unit pace averaged from 1985 to 2005
will most likely not be seen until 2015 at the earliest.
N e w h o m e
c o n s t r u c t i o n i s
b e in g li m i t e d b y t h e
s t i ll e n o r m o u s
s u p p l y o f v a c a n t
h o m e s fo r r en t a n d
for sa le .
New home construction is being limited by the still enormous supply of vacant homes for rent andfor sale. We continue to believe this measure is the best gauge of the oversupply of housing on themarket. The current inventory totals 4.4 million vacant homes for rent and 2.0 vacant homes forsale. The normal inventory would be around 3.2 million vacant for rent and around 1.3 million
vacant for sales. As sales recover over the next two or three years, this excess supply will graduallydissipate. During this period, new home construction will remain constrained relative to job
growth and household formations.The housing market is also fraught with structural impediments to a strong recoveryHomeownership was pushed beyond sustainable limits between 1995 and 2005. Gains inhomeownership were achieved through the loosening of underwriting standards, the increaseduse of leverage and more generous tax treatment for residential real estate. Homeownershiptopped out at around 67 percent in 2005 and appears headed back toward 65 percent.
Not only was there a surge in homeownership but there was also an increase in demand for largerhigher-priced homes. Many of these homes were financed with little money down and interest-only payments. Such arrangements only make sense when housing prices are expected toincrease. Following the most recent experience, with prices plunging 30 percent or more, neitherlenders nor borrowers are interested in entering such relationships. As a result, there is a hugeexcess supply of higher-priced homes on the market and few potential buyers waiting in the wingsto snatch up any bargains. Taken together, the overhang of vacant units, the expected decline inhomeownership and the glut of large, higher-priced homes means the housing recovery will likelydrag on for the next several years.
Figure 3
Homeownership RatePercent
60%
62%
64%
66%
68%
70%
65 70 75 80 85 90 95 00 05 10
60%
62%
64%
66%
68%
70%
Homeownership Rate: Q2 @ 66.9%
Figure 4
Housing StartsMillions of Units
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2.1
2.4
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2.1
2.4
Forecast
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
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3
RealGDP,percen
tchange
1.9
0.0
-2.6
2.7
2.2
Nonfarm
Employm
ent,percentchange
1.1
-0.6
-4.3
-0.5
0.7
UnemploymentRate
4.6
5.8
9.3
9.7
9.6
HomeConstruction
TotalHousingS
tarts,inthousands
1341.8
900.0
554.3
591.0
810.0
Single-FamilyS
tarts,inthousands
1035.8
616.3
442.3
491.0
680.0
Multi-FamilyStarts,inthousands
306.1
283.7
112.0
100.0
130.0
HomeSales
New
HomeSale
s,Single-Family,inthousand
s
768.7
482.2
373.9
365.0
475.0
TotalExistingH
omeSales,inthousands
5674.7
4892.0
5157.9
4960.0
5180.0
ExistingSingle-
FamilyHomeSales,inthousa
nds
4959.2
4337.5
4566.7
4350.0
4500.0
ExistingCondom
inium
&TownhouseSales,in
thousands
715.5
554.5
591.3
610.0
680.0
HomePrices
MedianNew
Ho
me,$Thousands
243.7
230.4
214.5
205.4
211.2
PercentChan
ge
0.3
-5.5
-6.9
-4.2
2.8
MedianExisting
Home,$Thousands
215.5
195.8
172.5
170.2
173.0
PercentChan
ge
-2.9
-9.2
-11.9
-1.4
1.7
FHFA(OFHEO)
HomePriceIndex,PercentChange
1.7
-3.1
-4.0
-1.3
1.4
Case-ShillerC-10HomePriceIndex,PercentChange
-4.4
-16.7
-12.9
-1.4
1.5
InterestRates-
AnnualAverages
PrimeRate
8.05
5.08
3.25
3.25
3.31
Ten-YearTreasuryNote
4.63
3.66
3.26
2.98
2.98
Conventional30-YearFixedRate,Commitme
ntRate
6.34
6.04
5.04
4.65
4.70
One-YearARM,
EffectiveRate,Commitment
Rate
5.56
5.18
4.71
3.85
3.70
Forecastasof:Sep
tember15,2010
Source:FederalReserveBoard,FHFA,MBA,NAR,S&
PCorp,U.S.DepartmentofCommerce,U.S.DepartmentofLabor
andWellsFargoSecurities,LLC
NationalHousingOutlook A
ctual
Forec
ast
2011
2010
2009
20
08
2007
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Housing Chartbook: September 2010 WELLS FARGO SECURITIES, LLCSeptember 15, 2010 ECONOMICS GROUP
MortgagesMortgage Rate
Average Conventional 30-Year Commitment Rate
4%
5%
6%
7%
8%
9%
10%
93 95 97 99 01 03 05 07 09
4%
5%
6%
7%
8%
9%
10%
30-Yr Conventional Mortgage: Aug @ 4.43%
Mortgage purchase applications are now down37 percent after peaking in late April. The pullback
in purchase applications likely signals residentialoutlays will fall further in the third quarter.
Purchase applications bounced back a bit during thesecond half of August, but fell during the most
recent week. Low mortgage rates are enticing a
handful of buyers back into the market, but the
response so far has been disappointing.
Refinance applications are beginning to lose steam,even with mortgage rates remaining at historic lows.
Many mortgages are currently underwater and
borrowers are unable to take advantage of todays
low rates.
Mortgage Applications8-Week Moving Average, Seasonally Adjusted
0%
10%
20%
30%
40%
50%
60%
2005 2006 2007 2008 2009 20100%
10%
20%
30%
40%
50%
60%ARMs Percent of Loan Applications (Value): Sep 10 @ 10.5%
ARMs Percent of Loan Applications (Volume): Sep 10 @ 5.9%
Mortgage Applications for Purchase8-Week Moving Average, Seasonally Adjusted
0
100
200
300
400
500
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10
0
100
200
300
400
500
Weekly Figure: Sep-10 @ 183.7Down From 184.5 on Sep-3Mort. Appl.: 8-Week Average: Sep 10 @ 175.58-Week Average Down 36.0% From Same Period Last Year
New Home Sales vs. Mortgage Applications
Month-over-Month Percent Change
-45%
-30%
-15%
0%
15%
30%
Jan-09 Jul-09 Jan-10 Jul-10
-45%
-30%
-15%
0%
15%
30%
New Home Sales: Jul @ -12.4%
Mortgage Applications for Purchase: Sep @ -9.3%
Mortgage Applications for Refinancing4-Week Moving Average, Seasonally Adjusted
0
2,000
4,000
6,000
8,000
10,000
12,000
94 96 98 00 02 04 06 08 10
0
2,000
4,000
6,000
8,000
10,000
12,000Weekly Figure: Sep-10 @ 4,396
Down from 4,927 on Sep-3
4-Week Average: Sep-10 @ 4,838
4-Week Average Up 114.3% from Same Period Last Year
Source: Mortgage Bankers Association, FHLMC, U.S. Department ofCommerce and Wells Fargo Securities, LLC
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5
Single-Family ConstructionPrivate Single-family Construction Spending
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
94 96 98 00 02 04 06 08 10
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
3-Month Annual Rate: Jul @ -15.0%
Year-over-Year Percent Change: Jul @ 13.8%
Single-family construction spending got a boostfrom the homebuyers tax credit through April as
builders rushed to meet increased demand. With the expiration of the tax incentive, outlays
have fallen in each of the past three months.
Worries that sales were pulled forward by the tax
incentives appear to be well placed. Buyer traffic
remains weak across much of the country.
Single-family permits have also declined in each ofthe past four months, but remain well above their
historic lows reached in early 2009.
We expect residential investment could tumble toaround a 30 percent annual rate in the third quarter,
but should rise modestly in subsequent quarters.Single-family Housing Starts
SAAR, In Millions, 3-Month Moving Average
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
90 92 94 96 98 00 02 04 06 08 100.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Single-family Housing Starts: Jul @ 447K
Single-family Building PermitsSAAR, In Millions, 3-Month Moving Average
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
90 92 94 96 98 00 02 04 06 08 10
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Single-family Building Permits: Jul @ 421K
NAHB/Wells Fargo Housing Market Index
Diffusion Index
0
10
20
30
40
50
60
70
80
90
87 89 91 93 95 97 99 01 03 05 07 09
0
10
20
30
40
50
60
70
80
90
NAHB Housing Market Index: Aug @ 13.0
Single-family Housing CompletionsSeasonally Adjusted Annual Rate, In Millions
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
87 89 91 93 95 97 99 01 03 05 07 09
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Single-family Housing Completions: Jul @ 490K
Source: The National Association of Home Builders, U.S. Departmentof Commerce and Wells Fargo Securities, LLC
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Multifamily ConstructionMultifamily Housing Starts
SAAR, In Thousands, 3-Month Moving Average
0
50
100
150
200
250
300
350
400
450
90 92 94 96 98 00 02 04 06 08 10
0
50
100
150
200
250
300
350
400
450
Multi-family Housing Starts: Jul @ 110K
Multifamily outlays are now at their lowest level in16 years. Declines have largely been due to
competition from the oversupply of for-sale housingthat has been put up for rent. The expiration of the
homebuyers tax credit and modest job growth
should fuel multifamily demand in coming quarters.
Multifamily building permits have increased for fourstraight months on a three-month moving average
basis, which suggests at least a gradual increase in
multifamily outlays is on the horizon.
Apartment property fundamentals are showingsigns of stabilization. Net absorption outpaced
completions in the second quarter, and effective rent
growth rose for the second quarter in a row.
Multifamily Building PermitsSAAR, In Thousands, 3-Month Moving Average
0
100
200
300
400
500
600
90 92 94 96 98 00 02 04 06 08 10
0
100
200
300
400
500
600
Multi-family Building Permits: Jul @ 151K
Private Multifamily Construction Spending
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
94 96 98 00 02 04 06 08 10
-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
3-Month Annual Rate: Jul @ -24.2%
Year-over-Year Percent Change: Jul @ -51.6%
Apartment Supply & Demand
Percent, Thousands of Units
-15%
-10%
-5%
0%
5%
10%
15%
05 06 07 08 09 10
-60
-40
-20
0
20
40
60
Apartment Net Completions: Q2 @ 29,161 Units (Right Axis)
Apartment Net Absorption: Q2 @ 46,246 Units (Right Axis)
Apartment Vacancy Rate: Q2 @ 7.8% (Left Axis)
Housing VacanciesMillions of Units
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
00 01 02 03 04 05 06 07 08 09 10
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Vacant for Sale: Q2 @ 2.0M
Vacant for Rent: Q2 @ 4.4M
Source: U.S. Department of Commerce, REIS Inc. and Wells FargoSecurities, LLC
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Buying ConditionsHousing Affordability, NAR-Home Sales
Base = 100
90
110
130
150
170
190
92 94 96 98 00 02 04 06 08 10
90
110
130
150
170
190
Housing Affordability Index: Jul @ 161.8
6-Month Moving Average: Jul @ 167.4
Homebuying conditions remain favorable, withmortgage rates near their historic lows and prices
down 28.3 percent from their 2005 peak. Many borrowers are unable to take advantage of todays
lower prices and low mortgage rates, however, due
to higher down payment requirements, tougher
appraisals or simply the inability to sell their current
homes.
Economic and market uncertainty have helped drivethe 10-year Treasury yield below 3 percent, pulling
mortgage rates below 4.50 percent for 30-year
conventional fixed-rate mortgages.
Buyer traffic remains stuck at historic low levels, butlower rates are beginning to revive buyer interest.
Net Percent of Banks Tightening Standards
Mortgages for Individuals
-20%
0%
20%
40%
60%
80%
100%
1990 1994 1998 2002 2006 2010-20%
0%
20%
40%
60%
80%
100%
All Mortgages (Through Q1-2007)Prime Mortgages: Q3 @ -5.5%Nontraditional Mortgages: Q3 @ 4.5%Subprime Mortgages: Q1 @ 50.0%
U. Michigan Sentiment Home Buying ConditionsPercent Reporting Good Conditions
50%
60%
70%
80%
90%
100%
1986 1990 1994 1998 2002 2006 2010
50%
60%
70%
80%
90%
100%
Good Home Buying Conditions: Aug @ 76.0%
10-Year Treasury Yield
Percent
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
2004 2005 2006 2007 2008 2009 2010
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
10-Year Yield: Sep @ 2.71%
NAHB Expected Buyer TrafficPercent
0%
10%
20%
30%
40%
50%
60%
70%
87 90 93 97 00 03 07 10
0%
10%
20%
30%
40%
50%
60%
70%
Traffic of Expected Buyers: Aug @ 10.0%
Source: Federal Reserve Board, NAHB, NAR, University of Michiganand Wells Fargo Securities, LLC
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Housing Chartbook: September 2010 WELLS FARGO SECURITIES, LLCSeptember 15, 2010 ECONOMICS GROUP
New Home SalesNew Home Sales
Seasonally Adjusted Annual Rate - In Thousands
100
300
500
700
900
1,100
1,300
1,500
89 91 93 95 97 99 01 03 05 07 09
100
300
500
700
900
1,100
1,300
1,500
New Home Sales: Jul @ 276,000
3-Month Moving Average: Jul @ 290,667
Giving back much of their tax incentive inducedgains, new home sales have plunged a cumulative
33.3 percent since April. The absolute level of salesdropped to a record low of 276,000 units in July.
The sharp decline follows the expiration of
homebuyer tax credits. Growing worries about a
double dip may be sidelining potential buyers as
well.
Sales have averaged a 290,667-unit pace over thepast three months and will likely remain around
this level over the next few months.
Inventories of new homes available for sale remainat their lowest level in over 40 years, at just 210,000
units. Due to the sharp decline in sales, however,
months of available supply surged to 9.1 months. Inventory of New Homes for SaleNew Homes for Sale at End of Month - In Thousands
200
250
300
350
400
450
500
550
600
97 98 99 00 01 02 03 04 05 06 07 08 09 10
200
250
300
350
400
450
500
550
600
New Homes for Sale: Jul @ 210,000
Percentage of New Homes Completed in InventoryNon-Seasonally Adjusted
20%
25%
30%
35%
40%
45%
50%
90 92 94 96 98 00 02 04 06 08 10
20%
25%
30%
35%
40%
45%
50%
New Homes Completed in Inventory : Jul @ 38.3%
Months' Supply of New Homes
Seasonally Adjusted
2
4
6
8
10
12
14
90 92 94 96 98 00 02 04 06 08 10
2
4
6
8
10
12
14
Months' Supply: Jul @ 9.1
Inventory of New Homes for SaleNew Homes for Sale at End of Month, 2002=100
40
60
80
100
120
140
160
180
200
220
97 98 99 00 01 02 03 04 05 06 07 08 09 10
40
60
80
100
120
140
160
180
200
220
Northeast: Jul @ 92.6
Midwest: Jul @ 43.7
South: Jul @ 74.5
West: Jul @ 64.3
Source: U.S. Dept. of Commerce and Wells Fargo Securities, LLC
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9
Existing Home SalesExisting Home Resales
Seasonally Adjusted Annual Rate - In Millions
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
1999 2001 2003 2005 2007 2009
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
Existing Home Sales: Jul @ 3.83 Million
Existing home sales also fell sharply following theexpiration of the homebuyer tax credit. Sales fell to
just a 3.83 million unit pace in July, but showedsome tentative signs of improvement in August.
The number of homes for sale rose to almost 4million in July. The combination of high inventories,
increasing distressed transactions and declining
home sales is causing sellers to reduce asking prices.
Home prices will likely fall during the second half of
2010.
Pending home sales have picked up following asharp slide earlier this summer. The correlation
between sales and pending sales has broken down
recently, however, as more buyers are having
trouble closing on purchases. Existing Single-Family Home ResalesSeasonally Adjusted Annual Rate - In Millions
2.0
3.0
4.0
5.0
6.0
7.0
86 88 90 92 94 96 98 00 02 04 06 08 10
2.0
3.0
4.0
5.0
6.0
7.0
Existing Home Sales: Jul @ 3.4 Million
Pending Home Sales IndexYear-over-Year Percent Change
-30%
-20%
-10%
0%
10%
20%
30%
40%
2002 2003 2004 2005 2006 2007 2008 2009 2010
-30%
-20%
-10%
0%
10%
20%
30%
40%
Year-over-Year Change: Jul @ -19.1%
Existing Condominium ResalesSeasonally Adjusted Annual Rate - In Thousands
400
500
600
700
800
900
1,000
99 00 01 02 03 04 05 06 07 08 09 10
400
500
600
700
800
900
1,000
Condo Sales: Jul @ 460,000
Inventory of Existing Homes for SaleExisting Homes for Sale at End of Month, In Thousands
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
1999 2001 2003 2005 2007 2009
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Total Inventory: Jul @ 3,984
Source: National Association of Realtors and Wells Fargo Securities,LLC
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Home PricesS&P Case-Shiller Home Prices
Percent Decline from Local Market Peak
4.2%
7.9%
13.1%
13.5%
13.7%
19.6%
20.0%
20.3%23.6%
25.9%
26.0%
26.4%
34.6%
34.7%35.9%
41.8%
44.9%
47.7%
51.2%
56.7%
28.8%
28.4%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65%
Dallas
Denver
Cleveland
Boston
CharlotteAtlanta
New York City
PortlandSeattle
Chicago
Washington
Minneapolis
San Diego
San Francisco
Los AngelesTampa
Detroit
Miami
Phoenix
Las Vegas
C-10
C-20
Many of the closely followed home price measureshave posted monthly or quarterly increases,
suggesting the worst of the price declines are likelybehind us. Recent gains, however, have been driven
by a rise in sales volume fueled by the tax credit. A
similar pattern occurred in October and November,
when the initial tax credit was scheduled to expire.
Home prices will likely come under pressure in thecoming months as foreclosures and distressed
transactions account for a larger proportion of total
sales. Sellers are already slashing asking prices.
Price declines vary across regions. States with thehighest proportion of seriously delinquent
mortgages and high vacancy rates are tending to see
the largest price declines. S&P Case-Shiller National Home Price Index, NSA
Bars = Q/Q % Change Line = Yr/Yr % Change
-24%
-18%
-12%
-6%
0%
6%
12%
18%
88 90 92 94 96 98 00 02 04 06 08 10
-8%
-6%
-4%
-2%
0%
2%
4%
6%
National Home Price Index: Q2 @ 4.4% (Right Axis)
National Home Price Index: Q2 @ 3.6% (Left Axis)
Average and Median New Home Sale PriceIn Thousands
$100
$150
$200
$250
$300
$350
97 98 99 00 01 02 03 04 05 06 07 08 09 10
$100
$150
$200
$250
$300
$350
Average Sales Price: Jul @ $235,300
Median Sales Price: Jul @ $204,000
FHFA Home Price Indices
Non-Seasonally Adjusted, Year-over-Year Percent Change
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
92 94 96 98 00 02 04 06 08 10
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
Home Price Index: Q2 @ -4.9%
Purchase-Only Index: Q2 @ -1.6%
Existing Single-Family Home PricesIn Thousands
$50
$100
$150
$200
$250
$300
93 95 97 99 01 03 05 07 09
$50
$100
$150
$200
$250
$300
Average Sale Price: Jul @ $233,400
Median Sale Price: Jul @ $183,400
Source: FHFA, NAR, S&P Corp, U.S. Department of Commerceand Wells Fargo Securities, LLC
10
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Housing Chartbook: September 2010 WELLS FARGO SECUR ITIES, LLCSeptember 15, 2010 ECONOMICS GROUP
11
Renovation & RemodelingResidential Investment
Year-over-Year Percent Change
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
1996 1998 2000 2002 2004 2006 2008 2010
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Improvements: Q2 @ 0.3%
Res. Investment Ex. Improvements: Q2 @ 8.3%
Home improvements likely reached a cycle peak inJanuary and have moved sideways in recent
months. Recent activity is largely due to taxincentives for the purchase of energy-efficient
appliances and weatherization improvements.
The energy incentives are state administered andavailable on a first-come, first-served basis. Many
states, such as Florida, depleted their funds well
before the expiration date.
Another boon to improvements has been the surgeof foreclosure sales that have produced a steady
stream of homes in need of repair or being
converted into rental units.
Residential Investment
New Building
38.1%
Improvements
43.2%
Brokers'
Commissions
18.3%
Other0.4%
Q2-2010
Residential InvestmentBillions of Dollars
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
Other: Q2 @ $1.3
Brokers' Commissions: Q2 @ $63.8
Improvements: Q2 @ $150.8
New Building: Q2 @ $133.1
Residential Investment
New Building
62.3%
Improvements
21.6%
Brokers'
Commissions
14.8%
Other
1.2%
Q2-2005
Residential ImprovementsYear-over-Year Percent Change
-30%
-20%
-10%
0%
10%
20%
30%
40%
94 96 98 00 02 04 06 08 10
-30%
-20%
-10%
0%
10%
20%
30%
40%
Residential Improvements: Jul @ 12.4%
Source: Joint Center for Housing Studies, U.S. Department ofCommerce and Wells Fargo Securities, LLC
8/4/2019 WELLS FARGO SECURITIES- Housing Chart Book Sep 2010
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Housing Chartbook: September 2010 WELLS FARGO SECURITIES, LLCSeptember 15, 2010 ECONOMICS GROUP
Regional Housing TrendsNegative Equity Mortgages - By State
Percent of Mortgages Outstanding
15.7%
16.3%
18.4%
19.7%
19.7%
19.7%
20.3%
20.4%
22.2%
22.7%
23.7%
28.1%
32.8%
38.0%
46.4%
50.0%
68.1%
23.0%
0% 20% 40% 60% 80%
Oregon
Minnesota
New Hampshire
Colorado
Illinois
Ohio
Rhode Island
Utah
Maryland
Virginia
Idaho
Georgia
California
Michigan
Florida
Arizona
Nevada
US
As of August 26, 2010
States like Nevada, Arizona, Florida, Michigan andCalifornia, which tend to lead the nation in
foreclosures and the share of homes with negativeequity, are most at risk for additional price declines
during the second half of the year.
Nevada in particular seems to be the hardest hit with nearly 70 percent of homes underwater.
According to FHFA, homes prices in this state have
plunged upward of 50 percent and the foreclosure
rate is the highest in the country.
The prospect of additional price declines is makingthe appraisal process more perilous and may freeze
up the sales process in many challenged markets.
Mortgages 90+ Days Delinquent - By StatePercent of Mortgages Outstanding
3.7%
3.7%
3.7%
3.9%
4.0%
4.1%
4.1%
4.2%
4.3%
4.5%
4.8%
5.1%
5.4%
5.6%
5.6%
5.8%
7.3%
1.2%
0% 1% 2% 3% 4% 5% 6% 7% 8%
New York
Louisiana
Alabama
Massachusetts
Tennessee
Ohio
Rhode Island
Maryland
Illinois
Indiana
Georgia
Mississippi
Michigan
Arizona
California
Florida
Nevada
US
As of August 26, 2010
Mortgages in Foreclosure - By StatePercent of Mortgages Outstanding
5.5%5.7%6.1%
7.5%
9.8%
10.6%
13.9%
1.2%
0%
4%
8%
12%
16%
IllinoisGeorgiaMichiganCaliforniaArizonaFloridaNevadaUnited
States
0%
4%
8%
12%
16%
As of August 26, 2010
Homeowner Vacancy Rate - By StatePercent
2.6%
2.6%
2.7%
2.8%
3.0%
3.0%
3.0%
3.0%
3.2%
3.3%
3.3%
3.4%
3.4%
3.5%
3.7%
4.3%
4.5%
2.5%
0% 1% 2% 3% 4% 5%
Washington
Oklahoma
Idaho
Montana
Kansas
Alabama
South Carolina
Colorado
Ohio
Arkansas
Oregon
Michigan
Arizona
North Carolina
Georgia
Florida
Nevada
US
As of July 27, 2010
FHFA/OFHEO Home Price Index - By StatePercent Change, Peak to Trough
-44.7%
-49.1%-50.8%-50.8%-51.7%-52.4%-53.3%
-31.9%
-60%
-50%
-40%
-30%
-20%
-10%
0%
Rhode
IslandArizonaMarylandFloridaNevadaCaliforniaHawaii
United
States
-60%
-50%
-40%
-30%
-20%
-10%
0%
Source: FHFA, CoreLogic, Mortgage Bankers Association, U.S.Department of Commerce and Wells Fargo Securities, LLC
12
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W ells Fargo Secur ities, LLC Econom ics Group
Diane Schumaker-Krieg Global Head of Research& Economics
(704) 715-8437(212) 214-5070
John E. Silvia, Ph.D. Chief Economist (704) 374-7034 [email protected]
Mark Vitner Senior Economist (704) 383-5635 [email protected]
Jay Bryson, Ph.D. Global Economist (704) 383-3518 [email protected]
Scott Anderson, Ph.D. Senior Economist (612) 667-9281 [email protected]
Eugenio Aleman, Ph.D. Senior Economist (612) 667-0168 [email protected]
Sam Bullard Senior Economist (704) 383-7372 [email protected]
Anika Khan Economist (704) 715-0575 [email protected]
Azhar Iqbal Econometrician (704) 383-6805 [email protected]
Ed Kashmarek Economist (612) 667-0479 [email protected]
Tim Quinlan Economist (704) 374-4407 [email protected]
Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S broker-dealerregistered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and theSecurities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and throughsubsidiaries including, but not limited to, Wells Fargo & Company, Wells Fargo Bank N.A, Wells Fargo Advisors, LLC,and Wells Fargo Securities International Limited. The information and opinions herein are for general information useonly. Wells Fargo Securities, LLC does not guarantee their accuracy or completeness, nor does
Wells Fargo Securities, LLC assume any liability for any loss that may result from the reliance by any person upon anysuch information or opinions. Such information and opinions are subject to change without notice, are for generalinformation only and are not intended as an offer or solicitation with respect to the purchase or sales of any security oras personalized investment advice. Wells Fargo Securities, LLC is a separate legal entity and distinct from affiliated
banks and is a wholly owned subsidiary of Wells Fargo & Company 2010 Wells Fargo Securities, LLC.
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