Residential Economic Issues & Trends Forum
Residential Economic Issues & Trends Forum
Housing Market and Economic Outlook
Lawrence Yun, Ph.D. Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
PresentaAon in Washington, D.C.
May 15, 2014
U.S. Popula:on
0
50
100
150
200
250
300
350
1968 1973 1978 1983 1988 1993 1998 2003 2008 2013
In millions
Jobs in America – Less Smooth
0 20000 40000 60000 80000
100000 120000 140000 160000
1968 -‐ Jan
1969 -‐ De
c 1971 -‐ Nov
1973 -‐ Oct
1975 -‐ Sep
1977 -‐ Au
g 1979 -‐ Jul
1981 -‐ Jun
1983 -‐ May
1985 -‐ Ap
r 1987 -‐ Mar
1989 -‐ Feb
1991 -‐ Jan
1992 -‐ De
c 1994 -‐ Nov
1996 -‐ Oct
1998 -‐ Sep
2000 -‐ Au
g 2002 -‐ Jul
2004 -‐ Jun
2006 -‐ May
2008 -‐ Ap
r 2010 -‐ Mar
2012 -‐ Feb
2014 -‐ Jan
Jobs to Popula:on Ra:o (16 years and over)
50 52 54 56 58 60 62 64 66
1968 -‐ Jan
1969 -‐ Oct
1971 -‐ Jul
1973 -‐ Ap
r 1975 -‐ Jan
1976 -‐ Oct
1978 -‐ Jul
1980 -‐ Ap
r 1982 -‐ Jan
1983 -‐ Oct
1985 -‐ Jul
1987 -‐ Ap
r 1989 -‐ Jan
1990 -‐ Oct
1992 -‐ Jul
1994 -‐ Ap
r 1996 -‐ Jan
1997 -‐ Oct
1999 -‐ Jul
2001 -‐ Ap
r 2003 -‐ Jan
2004 -‐ Oct
2006 -‐ Jul
2008 -‐ Ap
r 2010 -‐ Jan
2011 -‐ Oct
2013 -‐ Jul
Sluggish Growth + Gap aXer Great Recession ($1.5 trillion gap … $4,700 per person)
0 5,000 10,000 15,000 20,000
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
GDP in 2009 Dollars
Real GDP Real GDP W/O Recession
3% Growth Line
2.2% Growth Line
Recent Year Ac:vity GDP Contrac:on in 2014 Q1
-‐10
-‐5
0
5
10
2007 -‐ Q1
2007 -‐ Q3
2008 -‐ Q1
2008 -‐ Q3
2009 -‐ Q1
2009 -‐ Q3
2010 -‐ Q1
2010 -‐ Q3
2011 -‐ Q1
2011 -‐ Q3
2012 -‐ Q1
2012 -‐ Q3
2013 -‐ Q1
2013 -‐ Q3
2014 -‐ Q1
GDP Annualized Growth Rate
But No Fresh Recession in Sight
-‐6
-‐4
-‐2
0
2
4
GDP Growth Rate from one year ago
Cyclical Housing Sector: Single-‐Family Exis:ng Home Sales Only
(Best Es:ma:on – could be off by several % points)
0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014 Q1
Single-‐Family Sales to Popula:on Ra:o (Average = 1.36%)
0.0 0.5 1.0 1.5 2.0 2.5
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014 Q1
%
# of People per Housing Unit
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Single-‐Family Sales to Household Ra:o (Average = 3.66%)
2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 6.00
1968 1973 1978 1983 1988 1993 1998 2003 2008 2013
Monthly Pending Sales Index (Seasonally Adjusted)
70.0 75.0 80.0 85.0 90.0 95.0 100.0 105.0 110.0 115.0
Source: NAR
Exis:ng Home Sales -‐ Closings
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
2011 -‐ Jan
2011 -‐ Mar
2011 -‐ May
2011 -‐ Jul
2011 -‐ Sep
2011 -‐ Nov
2012 -‐ Jan
2012 -‐ Mar
2012 -‐ May
2012 -‐ Jul
2012 -‐ Sep
2012 -‐ Nov
2013 -‐ Jan
2013 -‐ Mar
2013 -‐ May
2013 -‐ Jul
2013 -‐ Sep
2013 -‐ Nov
2014 -‐ Jan
2014 -‐ Mar
Causes of Recent Sales Slowdown • Bad winter
– Only delayed sales not cancella:on • Lack of inventory
– Steadily more inventory coming to market • Home prices rose too fast
– Showing signs of slowing • Mortgage credit difficul:es
– New Qualified Mortgage Rules – Surely cannot get worse!
• Mortgage rates jumped – Trouble !
Inventory of Homes for Sale
0 500,000
1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000
2007 -‐ Jan
2007 -‐ May
2007 -‐ Sep
2008 -‐ Jan
2008 -‐ May
2008 -‐ Sep
2009 -‐ Jan
2009 -‐ May
2009 -‐ Sep
2010 -‐ Jan
2010 -‐ May
2010 -‐ Sep
2011 -‐ Jan
2011 -‐ May
2011 -‐ Sep
2012 -‐ Jan
2012 -‐ May
2012 -‐ Sep
2013 -‐ Jan
2013 -‐ May
2013 -‐ Sep
2014 -‐ Jan
Change in Inventory (% change from one year ago)
-‐30 -‐25 -‐20 -‐15 -‐10 -‐5 0 5
10 15 20
2007 -‐ Jan
2007 -‐ May
2007 -‐ Sep
2008 -‐ Jan
2008 -‐ May
2008 -‐ Sep
2009 -‐ Jan
2009 -‐ May
2009 -‐ Sep
2010 -‐ Jan
2010 -‐ May
2010 -‐ Sep
2011 -‐ Jan
2011 -‐ May
2011 -‐ Sep
2012 -‐ Jan
2012 -‐ May
2012 -‐ Sep
2013 -‐ Jan
2013 -‐ May
2013 -‐ Sep
2014 -‐ Jan
Home Price Index in Phoenix and St. Louis Repeat-‐Transac:on Home Price Index
80
130
180
230
280
330
1995 -‐ Q1
1995 -‐ Q4
1996 -‐ Q3
1997 -‐ Q2
1998 -‐ Q1
1998 -‐ Q4
1999 -‐ Q3
2000 -‐ Q2
2001 -‐ Q1
2001 -‐ Q4
2002 -‐ Q3
2003 -‐ Q2
2004 -‐ Q1
2004 -‐ Q4
2005 -‐ Q3
2006 -‐ Q2
2007 -‐ Q1
2007 -‐ Q4
2008 -‐ Q3
2009 -‐ Q2
2010 -‐ Q1
2010 -‐ Q4
2011 -‐ Q3
2012 -‐ Q2
2013 -‐ Q1
Change in Home Price (% change from one year ago)
-‐10
-‐5
0
5
10
15
2011 -‐ Jan
2011 -‐ Mar
2011 -‐ May
2011 -‐ Jul
2011 -‐ Sep
2011 -‐ Nov
2012 -‐ Jan
2012 -‐ Mar
2012 -‐ May
2012 -‐ Jul
2012 -‐ Sep
2012 -‐ Nov
2013 -‐ Jan
2013 -‐ Mar
2013 -‐ May
2013 -‐ Jul
2013 -‐ Sep
2013 -‐ Nov
2014 -‐ Jan
2014 -‐ Mar
NAR Case-‐Shiller CoreLogic
Median Home Price – Rising ($40,000 Equity Gain in 3 years)
$166,100 $176,800
$197,100 $208,200
$150,000 $160,000 $170,000 $180,000 $190,000 $200,000 $210,000 $220,000
2011 2012 2013 2014 forecast
Inevitable Rise in Mortgage Rates will further hurt Affordability
1/3rd of homeowners have no mortgage 1/3rd have 4.3% rate or lower
1/3rd have higher rate
3 4 5 6 7 8 9
2000 -‐ Jan
2000 -‐ Jul
2001 -‐ Jan
2001 -‐ Jul
2002 -‐ Jan
2002 -‐ Jul
2003 -‐ Jan
2003 -‐ Jul
2004 -‐ Jan
2004 -‐ Jul
2005 -‐ Jan
2005 -‐ Jul
2006 -‐ Jan
2006 -‐ Jul
2007 -‐ Jan
2007 -‐ Jul
2008 -‐ Jan
2008 -‐ Jul
2009 -‐ Jan
2009 -‐ Jul
2010 -‐ Jan
2010 -‐ Jul
2011 -‐ Jan
2011 -‐ Jul
2012 -‐ Jan
2012 -‐ Jul
2013 -‐ Jan
2013 -‐ Jul
2014 -‐ Jan
%
Locked-‐in Effect of Low Rates? • Housing cannot get back to normal in a hurry • People move even in high interest rate environment
– Marriage, divorce, new baby, school district, new job, fed-‐up with local government, …
• Many unplanned landlords – Take advantage of rising rents while rates are low and fixed
• Poten:al future lock from longer holding period for capital gains tax exclusion
Rising Renters’ and Homeowners’ Rent Growth (On the Way to 3%)
-‐1 0 1 2 3 4 5
2003 -‐ Jan
2003 -‐ Jun
2003 -‐ Nov
2004 -‐ Ap
r 2004 -‐ Sep
2005 -‐ Feb
2005 -‐ Jul
2005 -‐ De
c 2006 -‐ May
2006 -‐ Oct
2007 -‐ Mar
2007 -‐ Au
g 2008 -‐ Jan
2008 -‐ Jun
2008 -‐ Nov
2009 -‐ Ap
r 2009 -‐ Sep
2010 -‐ Feb
2010 -‐ Jul
2010 -‐ De
c 2011 -‐ May
2011 -‐ Oct
2012 -‐ Mar
2012 -‐ Au
g 2013 -‐ Jan
2013 -‐ Jun
2013 -‐ Nov
Owners' Equivalent Rent Renters' Rent
REALTOR® Rent Survey – Shows Rent Pressure
0 10 20 30 40 50 60
Falling Rising
If there is persistent housing shortage … then the basle begins
Landlord from Hell
versus Rent Control
Housing Starts Rising … More Inventory But Needs to Reach 1.5 1.7 million
0
500
1000
1500
2000
2500
2000 -‐ Jan
2001 -‐ Jan
2002 -‐ Jan
2003 -‐ Jan
2004 -‐ Jan
2005 -‐ Jan
2006 -‐ Jan
2007 -‐ Jan
2008 -‐ Jan
2009 -‐ Jan
2010 -‐ Jan
2011 -‐ Jan
2012 -‐ Jan
2013 -‐ Jan
2014 -‐ Jan
mul:family single-‐family
Thousand units (annualized)
Long-term Average
New Home Sales
0 200 400 600 800 1000 1200 1400 1600
2000 -‐ Jan
2001 -‐ Jan
2002 -‐ Jan
2003 -‐ Jan
2004 -‐ Jan
2005 -‐ Jan
2006 -‐ Jan
2007 -‐ Jan
2008 -‐ Jan
2009 -‐ Jan
2010 -‐ Jan
2011 -‐ Jan
2012 -‐ Jan
2013 -‐ Jan
2014 -‐ Jan
In thousand units
Sluggish Recovery in Housing Starts • Cost of Construc:on Rising Faster than CPI
• Labor Shortage for construc:on work
• Construc:on loan difficulty for small local homebuilders … Dodd-‐Frank financial regula:ons?
Exis:ng vs. New Home Price
$0 $50,000
$100,000 $150,000 $200,000 $250,000 $300,000 $350,000
2000 -‐ Jan
2002 -‐ Jan
2004 -‐ Jan
2006 -‐ Jan
2008 -‐ Jan
2010 -‐ Jan
2012 -‐ Jan
2014 -‐ Jan
Exis:ng New
Economic Outlook
Monetary Policy • Tapering Ends by the year end 2014 • Fed Funds Rate … hike in 2015 Q1 • Earlier Move to Tighten because of Infla:on Pressure
• Long-‐term Steady State Rate (2016 onwards) .. 10 year Treasury at 5.0% … 250 basis points higher than current
Core Price InflaAon: Less than 2%; but rose at 2.5% annualized rate
(% change from one year ago)
0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50
1999 -‐ Jan
1999 -‐ Jul
2000 -‐ Jan
2000 -‐ Jul
2001 -‐ Jan
2001 -‐ Jul
2002 -‐ Jan
2002 -‐ Jul
2003 -‐ Jan
2003 -‐ Jul
2004 -‐ Jan
2004 -‐ Jul
2005 -‐ Jan
2005 -‐ Jul
2006 -‐ Jan
2006 -‐ Jul
2007 -‐ Jan
2007 -‐ Jul
2008 -‐ Jan
2008 -‐ Jul
2009 -‐ Jan
2009 -‐ Jul
2010 -‐ Jan
2010 -‐ Jul
2011 -‐ Jan
2011 -‐ Jul
2012 -‐ Jan
2012 -‐ Jul
2013 -‐ Jan
2013 -‐ Jul
2014 -‐ Jan
All items exlcuding fuel and energy
GDP Growth = Job Crea:ons (8 million lost … 8 million gained)
124000 126000 128000 130000 132000 134000 136000 138000 140000
2000 -‐ Jan
2000 -‐ Jul
2001 -‐ Jan
2001 -‐ Jul
2002 -‐ Jan
2002 -‐ Jul
2003 -‐ Jan
2003 -‐ Jul
2004 -‐ Jan
2004 -‐ Jul
2005 -‐ Jan
2005 -‐ Jul
2006 -‐ Jan
2006 -‐ Jul
2007 -‐ Jan
2007 -‐ Jul
2008 -‐ Jan
2008 -‐ Jul
2009 -‐ Jan
2009 -‐ Jul
2010 -‐ Jan
2010 -‐ Jul
2011 -‐ Jan
2011 -‐ Jul
2012 -‐ Jan
2012 -‐ Jul
2013 -‐ Jan
2013 -‐ May
2013 -‐ Nov
In thousands
Local Market Job Comparisons Fast Growing States 1-‐year Growth Rate
Nevada 3.8%
North Dakota 3.7%
Colorado 3.0%
Florida 3.0%
Oregon 2.7%
Texas 2.7%
Utah 2.6%
Delaware 2.4%
California 2.3%
Arizona 1.9%
Slow Moving States 1-‐year Growth Rate
New Mexico -‐0.2%
Kentucky -‐0.2%
New Jersey 0.0%
Virginia 0.1%
Alaska 0.2%
West Virginia 0.3%
Pennsylvania 0.3%
Maryland 0.3%
D.C. 0.4%
Mississippi 0.5%
Business Spending in rela:on to Corporate Profits … Huge Poten:al for Business Spending Increase
0 500 1000 1500 2000 2500
1980 -‐ Q1
1981 -‐ Q3
1983 -‐ Q1
1984 -‐ Q3
1986 -‐ Q1
1987 -‐ Q3
1989 -‐ Q1
1990 -‐ Q3
1992 -‐ Q1
1993 -‐ Q3
1995 -‐ Q1
1996 -‐ Q3
1998 -‐ Q1
1999 -‐ Q3
2001 -‐ Q1
2002 -‐ Q3
2004 -‐ Q1
2005 -‐ Q3
2007 -‐ Q1
2008 -‐ Q3
2010 -‐ Q1
2011 -‐ Q3
2013 -‐ Q1
Profits Business Spending
Economic Forecast 2013 2014
forecast 2015
forecast GDP Growth 1.9% 2.2% 2.9%
Job Growth 1.7% 1.6% 1.9%
CPI Infla:on 1.4% 2.5% 3.5%
Consumer Confidence 73 82 86
10-‐year Treasury 2.5% 3.0% 3.8%
Housing Market Outlook
Pent Up Demand 2000 2013
Exis:ng Home Sales 5.2 m 5.1 m
New Home Sales 880 K 430 K
Mortgage Rates 8.0% 4.0%
Payroll Jobs 132.0 m 136.4 m
Popula:on 282 m 316 m
Vaca:on Home Sales
-‐ 200 400 600 800
1,000 1,200
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
In thousands
Household Net Worth
40000 45000 50000 55000 60000 65000 70000 75000
2000 -‐ Q1
2000 -‐ Q4
2001 -‐ Q3
2002 -‐ Q2
2003 -‐ Q1
2003 -‐ Q4
2004 -‐ Q3
2005 -‐ Q2
2006 -‐ Q1
2006 -‐ Q4
2007 -‐ Q3
2008 -‐ Q2
2009 -‐ Q1
2009 -‐ Q4
2010 -‐ Q3
2011 -‐ Q2
2012 -‐ Q1
2012 -‐ Q4
$ billion
Home Countries for Interna:onal Buyers Preliminary Analysis, Subject to Change
* Includes People’s Republic of China, Taiwan, and Hong Kong
Brazil Canada China* Germany India Japan Mexico Russia United Kingdom
2011 3% 23% 9% 4% 7% 2% 7% 1% 7% 2012 3% 24% 12% 3% 6% 1% 8% 2% 6% 2013 2% 23% 12% 3% 5% 1% 8% 2% 5% 2014P 2% 18% 18% 3% 4% 2% 9% 1% 6%
0%
5%
10%
15%
20%
25%
30%
Distribu:on of Interna:onal Sales by Country of Origin
Will China overtake the U.S. in GDP? Had An:cipated around 2010
0
5000
10000
15000
20000
25000
1929
1933
1937
1941
1945
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2013
2017
2021
2025
U.S. (growing 3%) China (growing 8%)
Chinese Yuan vs. U.S. Dollar (Yuan per $)
5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50
2000 -‐ Jan
2000 -‐ Jul
2001 -‐ Jan
2001 -‐ Jul
2002 -‐ Jan
2002 -‐ Jul
2003 -‐ Jan
2003 -‐ Jul
2004 -‐ Jan
2004 -‐ Jul
2005 -‐ Jan
2005 -‐ Jul
2006 -‐ Jan
2006 -‐ Jul
2007 -‐ Jan
2007 -‐ Jul
2008 -‐ Jan
2008 -‐ Jul
2009 -‐ Jan
2009 -‐ Jul
2010 -‐ Jan
2010 -‐ Jul
2011 -‐ Jan
2011 -‐ Jul
2012 -‐ Jan
2012 -‐ Jul
2013 -‐ Jan
2013 -‐ Jul
2014 -‐ Jan
Global Pent-‐Up Demand from Rising World Popula:on
0
2
4
6
8
10
1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100
In billions
World-‐Class Ci:es will Benefit ! • Boston, Chicago, Dallas, Miami, New York, San Diego,
San Francisco, Washington D.C., etc.
Housing Forecast 2013 2014
forecast 2015
forecast Housing Starts 925,000 1.07 million 1.4 million
New Home Sales 430,000 510,000 710,000
Exis:ng Home Sales 5.1 million 4.9 million 5.2 million
Median Price $197,000 $209,000 $219,000
30-‐year Rate 4.0% 4.7% 5.5%
Dollar Volume Es:mate +21% +3% +11%
Housing Market and
Economic Outlook Lawrence Yun, Ph.D. Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
PresentaAon in Washington, D.C.
May 15, 2014
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Housing Demand
Eric Belsky May 2014
Washington, DC
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Federal Surveys Providing a Murky Picture on Extent of Recent Household Growth
0
500
1,000
1,500
2011 2012 2013
Change in Households (Thousands)
Housing Vacancy Survey Current Population Survey American Community Survey
Note: Data for 2013 American Community Survey is not yet available and is not presented on this slide. Household growth for Housing Vacancy Survey uses revised 2010/12 vintage weights, and the Current Population Survey uses 2010 vintage weights
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Hard to Know What’s Happening With Household Growth But . . . Long-Run Housing Production Is
WAY Below Narrow Normal Range
0 500
1,000 1,500 2,000
Lagging Ten-Year Annual Average Housing Completions and Manufactured Home Placements (Thousands)
Median Source: US Census Bureau
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
WAITING FOR STRONGER DEMAND REBOUND
50
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Even CPS Suggests Cumulative Household Growth Is Now 1.5 Million Below Even Modest 1.14M ’95 -’00 Trend
-4,000
-3,000
-2,000
-1,000
0
1,000
2006 2007 2008 2009 2010 2011 2012
Change in Number of Households (Thousands)
CPS vs 1995-2000 Rate CPS vs. 2000-2005 Rate
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Nearly 3 Million More Adults in Their 20s and Early 30s Lived with their Parents In 2012 Than 2007
0
500
1,000
1,500
2,000
20-24 25-29 30-34 Age
Change from 2007-2012 in Number of Adult Children Living with Parents (Thousands)
Source: JCHS tabulations of US Census Bureau, Current Population Survey
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Real Median Incomes for All Young Adult Households Have Declined Since Great Recession
-15
-10
-5
0
20-24 25-29 30-34 35-39 Age
2007-2012 Change in Real Median Household Incomes (Percent)
Note: Percent change based on dollar values that have adjusted for inflation using the CPI-U for All Items. Source: JCHS tabulations of US Census Bureau, Current Population Survey.
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
A Significant But Lower Fraction of Adult Children Living with Parents Were Employed Full Time in ‘12 than ‘07
0
50
100
20-24 25-29 30-34 35-39 Age
Share of Adult Children Living with Parents Who Have Full-Time Employment (Percent)
2007 2012
Source: JCHS tabulations of US Census Bureau, Current Population Survey
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Student Default Rates Have Soared, Hindering Ability to Qualify for a Mortgage
0 2 4 6 8
10 12 14
2003
:Q1
2003
:Q3
2004
: Q1
2004
: Q3
2005
: Q1
2005
: Q3
2006
: Q1
2006
: Q3
2007
: Q1
2007
: Q3
2008
: Q1
2008
: Q3
2009
: Q1
2009
: Q3
2010
: Q1
2010
: Q3
2011
: Q1
2011
: Q3
2012
: Q1
2012
: Q3
2013
: Q1
2013
: Q3
Share of Seriously Delinquent Student Loans (Percent)
Note: Seriously delinquent student loans are defined as 90-plus days delinquent. Source: Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit.
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
0 10 20 30 40 50 60 70 80 90
100
2004 2010
Payments are 15 percent or greater of monthly income
Payments are 10 to 14.9 percent of monthly income
Payments are 5 to 9.9 percent of monthly income 0
10 20 30 40 50 60 70 80 90
100
2004 2010
Share of Households with Head Aged 20 to 29 (Percent), By Tenure and Year
Student Debt Payments May Pose a Significant Barrier to Mortgage Borrowing For As Many 1 in 10 Renters in Their 20s
Renters Owners Source: JCHS tabulations of Federal Reserve Board, Survey of Consumer Finances
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
0 10 20 30 40 50 60 70 80 90
100
2004 2010 0
10 20 30 40 50 60 70 80 90
100
2004 2010
Payments are 15 percent or greater of monthly income Payments are 10 to 14.9 percent of monthly income Payments are 5 to 9.9 percent of monthly income Payments are less than 5 percent of monthly income Has student loan debt but not making payments on it
Has no student loan debt
And Even Smaller Share of Renters in Their 30s Are Spending 5 Percent+ of Income on Student Debt
Renters Owners Source: JCHS tabulations of Federal Reserve Board, Survey of Consumer Finances
Share of Households with Head Aged 30 to 39 (Percent), By Tenure and Year
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Household Growth Is Expected to Rival or Top 1995-2000 Annual Average Pace
500 600 700 800 900
1,000 1,100 1,200 1,300
1995-2000
CPS HVS
Source: JCHS Household Projections (for Projected Annual Average Household Growth)
500 600 700 800 900
1,000 1,100 1,200 1,300
2000-2010
Decennial Census
500 600 700 800 900
1,000 1,100 1,200 1,300
JCHS Projections 15-25 Low Projection Middle Projection High Projection
Average Annual Household Growth (Thousands)
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Minority Households Will Account for 76 Percent of Household Growth Over the Next Decade
0 20 40 60 80
100
Household Composition in 2012 ACS
Projected Composition of Household Growth,
2015-2025
Percent Share of Households, by Race and Ethnicity
Asian/other Hispanic Black, non-Hispanic White, non-Hispanic
Source: JCHS tabulations of US Census Bureau, 2012 American Community Survey; JCHS Household Projections, Middle Series
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
The Greatest Increase in Households Will Be Among Households 65 and Older
0 2 4 6 8
10 12 14
<25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80+ 2015 2025
Projected Households (Millions)
60
Source: JCHS households projections.
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
WILL V. WAY
61
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Nearly All People Under Age 45 Expect to Buy in the Future . . .
0
20
40
60
80
100
Under 25 25 to 34 35 to 44 45 to 54 55 to 64
% Who Expect to Buy a Home at Some Point in the Future
Source: Drew and Herbert, 2012. Based on Fannie Mae National Housing Survey 2010-2012.
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
But Underwriting Has Tightened Dramatically
0
20
40
60
80
100
2006 2007 2008 2009 2010 2011 2012
Share of FHA-Insured Mortgages by Dollar Volume (Percent)
Below 640 640-679 680-850
0
20
40
60
80
100
2001 2011
Share of Freddie Mac and Fannie Mae Originations (Percent)
Higher Risk Medium Risk Lower Risk
Notes: Higher (lower) risk loans are to borrowers with credits scores under 690 (above 750) and have loan-to-value ratios above 85% (below 75%). FHA data exclude records with no credit score information. Sources: Amherst Securities; US Department of Housing and Urban Development.
Credit Score
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
Demanding More Down or Capping Credit Scores Disproportionately Impacts Minorities
12
38
11
29
60
27 18
49
18 5
23
6 0
10 20 30 40 50 60 70
3% Downpayment 10% Downpayment FICO 660
Perc
ent o
f Per
form
ing
Loan
s Ex
clud
ed
Non-Hispanic White African American Latino Asian
64
Percent of performing loans excluded from mortgage market 2004-2008 originations (1st lien, owner occupied, full doc only--excludes IO, neg. am and < 5 year hybrid ARMs)
Source: Roberto Quercia, Lei Ding, and Carolina Reid (2012). Balancing Risk and Access: Underwriting Standards for Qualified Residential Mortgages, Center for Community Capital Research Report, January 2012.
© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E
. . . And those with Lower Incomes
25
49
25 22
49
18 13
42
12 7
32
8
0 10 20 30 40 50 60
3% Downpayment 10% Downpayment FICO 660
Perc
ent o
f Per
form
ing
Loan
s Ex
clud
ed
Low-Income Moderate-Income Middle-Income Upper-Income
65
Percent of performing loans excluded from mortgage market 2004-2008 originations (1st lien, owner occupied, full doc only--excludes IO, neg. am and < 5 year hybrid ARMs)
Note: Income categories are defined as follows: low—less than 50% of MSA median income; moderate—50-79%; middle—80-119%; and upper—120%+ of MSA median income. Source: Roberto Quercia, Lei Ding, and Carolina Reid (2012). Balancing Risk and Access: Underwriting Standards for Qualified Residential Mortgages, Center for Community Capital Research Report, January 2012.