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ECONOMIC AND HOUSING OUTLOOK David Crowe Chief Economist Blue Ridge Home Builders Association February 27, 2014
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Five Turn Around Points 1. Consumer is back 2. Pent up demand waiting 3. Growing need for new construction 4. Distressed sales diminishing 5. Builders see it
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1. Consumer is back
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Real GDP Growth Picking up speed 3.0% 3.7%
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Payroll Employment: US and Charlottesville US and Charlottesville are nearly back US Trend (Left axis) US Millions
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Unemployment Will Continue to Fall Charlottesville
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Consumer Confidence Returns Back to pre-recession levels Conference Board University of Michigan
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Motor Vehicle and Home Furnishing Sales Other Durable Sectors Rising Steadily
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Household Balance Sheets Debt and savings closer to long term averages Savings Rate
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Annual Housing Starts Pace - VA 13%
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Annual Housing Starts Pace - Charlottesville 7%
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2. Pent up demand waiting
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Household Formations Are on the Rise Year-over-year change in households rising again Thousands Avg: 1.4 million (12% renters) Avg: 0.5 million (130% renters ) Avg: 0.6 million (129% renters)
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Share and Excess Number of Young Adults with Parents
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Local Population Growth Exceeds National Average % change
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3. Growing need for new construction
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Home Sales Volume New homes have more ground to make up (000s)
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New Homes Share of Sales New homes half historic share of sales
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Existing Home Turnover Rate Current turnover lower than normal
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Cumulative Lost Existing Sales Substantial pent up sales
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House Prices Return to Near-Normal House Price-to-Income Ratio US Charlottesville Virginia Long-term 3.2 3.3 2.9 Peak 4.7 4.8 5.1 Current 3.7 3.9 4.0 Peak/Long-term US: 4.7/3.2 = 150% Charlottesville: 4.8/3.3 = 149% Virginia: 5.1/2.9 = 175%
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Rates (inverted) & New Home Sales Still room for higher rates & more sales Forecast
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4. Distressed sales diminishing
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Seriously Delinquent Rates: Peak and Current - Largest correction in states with highest peak Std Dev 4Q2009 3.32 4Q2013 2.19
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5. Builders see it
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New Home Sales and NAHB/Wells Fargo Housing Market Index 1 month peak to peak (000s) 1 month peak to peak 3 months trough to trough 2 months peak to peak
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Builders’ Concerns Increasing Share of builders citing issue
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Forecasts
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Remodeling Market Index (RMI) Above 50 for 5 of the past 6 quarters
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Residential Remodeling Billions 2009 $, SAAR Actual Adjusted
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Multifamily Production Index Above 50 for seven consecutive quarters (000s)
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1995-2003331,000 ”Normal” 2010114,000 2011178,00056% 2012247,00039% 2013306,00025% 2014333,0008% 2015363,0009% Multifamily Housing Starts Healthy Response from Growth in Renters Trough to Current: 4 th Q 09 = 82,000 4 rh Q 13 = 351,000 +328% 2013Q4: 106% of “Normal”
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NAHB/Wells Fargo Housing Market Index Builder sentiment dips, but improved overall from recession depth Single-family starts (R) HMI (L)
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Existing and New Home Sales – On the Rise New (L) Existing (R)
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2000-20031,343,000 ”Normal” 2010471,000 2011434,000-8% 2012537,00024% 2013622,00016% 2014822,00032% 20151,159,00041% Single-Family Starts – Beginning a Recovery Trough to Current: Mar 09 = 353,000 Jan 14 = 573,000 +62% 2013Q4: 49% of “Normal” 2015Q4: 93%
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Percent of 'Normal' (annual average 2000-2003) PeakTroughNow US129%32%47% VA115%36%48% Charlottesville120%41%
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Single-family Permits Relative to ‘normal’ annual average 2000-2003
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Recovery Will Vary By State Source: US Census Bureau
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Rank Q4 2015 Bottom 20% 20% to 40% 40% to 60% 60% to 80% Top 20% The Long Road Back to Normal < 84% 84% - 88% 89% - 94% 94% - 101% 102% < Relative to Normal This map shows how the states rank in the return to more normal levels of housing production. By the end of 2015, the top 20% will be back to normal production levels. The bottom 20% will be below 84% of normal production.
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Questions? Answers: www.housingeconomics.com eyeonhousing.org dcrowe@nahb.org
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