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.
Dennis McGill
National Association of REALTORS®
May 15, 2014
Zelman & Associates Equity Research
Drivers of New Shelter
q Accelerating Household Formations q Decoupling of households
q Improving job growth
q Increasing consumer confidence
q Near Record Occupancy Levels in Rental Housing
q Constrained Resale Housing Inventory
q Deficit of Shelter
New Housing Supply Implied by Decade Analysis
500
1,490
1,090 155
330
260
55
80
70
720
1,925
1,440
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2010-13 2014-19 2010-19
Manufactured Housing
2-4 Unit Multi-Family
5-Plus Multi-Family
Single-Family
New Housing Supply, in ThousandsAnnual Average
Source: Census Bureau, Zelman & Associates analysis
CPS Not Perfect But Showed Strongest Alignment With Decennial Census
990
1,395
740
700
1,935
655
1,430
1,550
1,380
855
1,855
1,100
2,000
730
1,355
1,050
1,645
780
400
360
1,155
1,155
1,465
0
500
1,000
1,500
2,000
2,500
1Q91
1Q92
1Q93
1Q94
1Q95
1Q96
1Q97
1Q98
1Q99
1Q00
1Q01
1Q02
1Q03
1Q04
1Q05
1Q06
1Q07
1Q08
1Q09
1Q10
1Q11
1Q12
1Q13
Current Population Survey Change in National Households in ThousandsWith Trailing Three-Year Average
Source: Census Bureau, Zelman & Associates analysis
Electric Data Supports Accelerating Trend in CPS Households
1.4%
1.2%
1.4%
1.4%
1.5%
1.3%
1.6%1.5% 1.5%
1.7%1.7%
1.5%
1.1%
1.2%
1.5%
1.4%
1.2%
0.8%
0.2%
0.4%
0.3%
0.5%
0.8%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Residential Electric Customers % Change CPS Average Households % Chg
Source: Census Bureau, Energy Information Administration, Zelman & Associates analysis
Not Surprisingly, Young Adult Employment Driving Household Growth
86.0%
87.0%
88.0%
89.0%
90.0%
91.0%
92.0%
93.0%
94.0%
95.0%
96.0%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1.8%
2.0%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
% Change Residential Electric Customers - left
20-34 Year Old Employment Rate - right
Source: BLS, Energy Information Administration, Zelman & Associates analysis
High Occupancy Supports Stable Rent Growth
(10%)
(8%)
(6%)
(4%)
(2%)
0%
2%
4%
6%
8%
10%
91.0%
91.5%
92.0%
92.5%
93.0%
93.5%
94.0%
94.5%
95.0%
95.5%
96.0%
2Q97
4Q97
2Q98
4Q98
2Q99
4Q99
2Q00
4Q00
2Q01
4Q01
2Q02
4Q02
2Q03
4Q03
2Q04
4Q04
2Q05
4Q05
2Q06
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
2Q10
4Q10
2Q11
4Q11
2Q12
4Q12
2Q13
4Q13
Occupancy Rent Growth
National Rent Growth and Occupancy
Long-Term Average = 94%
Source: Axiometrics, Zelman & Associates analysis
Recession Delayed Move to Single-Family for Many Married Couples
15.0%
15.6%
16.3%
14.7%
14.2%
15.3% 15.4%15.6%
15.5%
17.1%
15.3%
16.3%15.9%
16.2%
15.4%
16.9%
16.2%
17.1%
17.4%
18.6% 18.7%
19.3%
10%
12%
14%
16%
18%
20%
1Q92 1Q93 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13
Percentage of 25-34 Year Old Married Couples that Reside in Traditional Apartments
We believe that majority of change of late has
been due to recessionary impacts that should
unwind
Source: Census Bureau, Zelman & Associates analysis
Constrained Single-Family Rental Supply and Strong Demand Drive Price Inflation
84.0
88.386.1
81.783.6
86.684.8
77.979.4
84.8
79.380.7
23.5 23.2
32.234.7 34.1 35.2
39.7
44.842.7
35.0
43.540.7
10
20
30
40
50
60
70
80
90
100
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Mar-13 Feb-14 Mar-14
Demand
Supply
Supply Versus Demand of Single-Family Rentals0-100 Scale
Source: Zelman & Associates Single-Family Rental Survey
Existing Inventory Relative to Households ~30% Lower Than Last Two Decades
2.8%
2.0%
2.1%
1.4%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1980s 1990s 2000s 1Q14
Existing Home Inventory as Percentage of Households
~30% discount to average of
last two decades
Source: Census Bureau, NAR, Zelman & Associates analysis
Inventories at 30-Year Lows Support Robust Home Price Outlook
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1Q90
3Q90
1Q91
3Q91
1Q92
3Q92
1Q93
3Q93
1Q94
3Q94
1Q95
3Q95
1Q96
3Q96
1Q97
3Q97
1Q98
3Q98
1Q99
3Q99
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
Seasonally-Adjusted Single-Family New and Existing Home Inventory as Percentage of Households
3.5%
4.8%
-5.4%Average real change in existing home prices
per range of for-sale inventory.
Source: Census Bureau, NAR, Zelman & Associates analysis
Ranking of Local Resale Markets 80
75
73
72
71
71
70
70
68
68
67
66
66
65
65
64
64
63
63
61
58
58
57
57
57
54
51
62
40
50
60
70
80
90
Hous
ton
San F
rancis
co
Austi
n
Los A
ngele
s
Denv
er
Miam
i
Orlan
do
Charl
otte
Las V
egas
Dalla
s
Was
hingto
n D.C
.
Salt L
ake C
ity
Charl
eston
Indian
apoli
s
Ralei
gh
Naple
s
San A
ntonio
Inlan
d Emp
ire
Atlan
ta
San D
iego
Chica
go
Tamp
a
Sacra
mento
Phila
delph
ia
Jack
sonv
ille
Phoe
nix
Cinc
innati
Natio
nal
Ranking of Local Resale MarketsTrailing Three Month Average
0 = Extreme Buyers' Market, 100 = Extreme Sellers' Market
Source: Zelman & Associates Homebuilding Survey
Distressed Sales Decline Due to Shrinking Supply While Traditional Sales Remain Healthy
-3% -3%
-11%
-19% -18
%
-18%
-12%
-14%
-17% -14
%
-16%
-5%
30% 32
%
23%
19% 22
% 23%
6%
1%
-13%
-36%
-14%
23%
11%
15%
15%
13%
18%
15%
19% 23
%
9%
-45%
-35%
-25%
-15%
-5%
5%
15%
25%
35%
45%
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
Year-Over-Year Change in Existing Home Sales
REO Sales
Short Sales
Traditional Sales
Source: CoreLogic, Zelman & Associates analysis
Distressed Sales as a Percentage of Total Existing Home Sales are Declining
3% 3% 3%4%
6% 6%7%
11%
17%19%
22%
30%
35%
29%
26%26%
30%
25%
29%30%
34%
28%
26%
27%29%
24%22%
24%24%
19%
17%18%18%
0%
5%
10%
15%
20%
25%
30%
35%
40%
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
Distressed Sales as % of Existing Home Sales
Source: CoreLogic, Zelman & Associates analysis
Availability of Distressed Homes Remains Constrained Across All Channels
36.1
29.6
20.4
33.3
30.7
18.7
34.0
28.9
23.5
38.2
31.7
26.1
10
20
30
40
50
60
70
MLS Trustee / Auction Sales Portfolios
2Q13 3Q13 4Q13 1Q14
Availability of REO For Sale0 = No Availability 100 = Abundant Availability
Source: Zelman & Associates Single-Family Rental Survey
Relative to Households, 2013 Closings 20% Lower Than 25-Year Average
5.6% 5.9
%
5.7%
5.6%
5.0%
4.7%
4.4% 4.8
% 5.2% 5.4
%
5.2% 5.6
% 5.7%
6.2% 6.3
%
6.1%
6.0% 6.2
% 6.5%
7.2% 7.6
%
6.8%
5.4%
4.3%
3.9%
3.7%
3.6% 3.9
% 4.3%
4.1% 4.2
% 4.4%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
E
2015
E
2016
E
Home Closings as Percentage of Households
Source: Census Bureau, Company data, CoreLogic, NAR, Zelman & Associates analysis
Resale Days on Market Down Sequentially and Year Over Year in March
91
62
55
98
66
53
0
20
40
60
80
100
120
Mar-12 Mar-13 Mar-14 Mar-12 Mar-13 Mar-14
Median Number of Days on Market Until Sale
All Existing Home Sales Non-Distressed Homes
Source: NAR, Zelman & Associates analysis
After First Increase Since 2007, Double-Digit Growth Projected in AD&C Lending in 2014-15
54%
34%
4% 4%
-6%
-15%
-23% -22%
-13%
-1%
7%
15%
9%
22%
21%
14%
22%
0%
10%
21%
31%
24%
13%
-5%
-23%
-27%
-19%
-9%
5%
14%
12%
500
700
900
1,100
1,300
1,500
1,700
1,900
2,100
2,300
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
E
2015
E
Change in Outstanding AD&C Loans
Total Housing Starts
Source FDIC, Zelman & Associates analysis
Both High and Low-Income Buyers at Record Level of Affordability
10%
12%
14%
16%
18%
20%
22%
24%
26%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
All incomes
Upper-Middle and Upper Income
Lower and Lower-Middle Income
Median Front-End DTI of Purchase Originations Assuming 30-Year Fixed Rate Mortgage
Source: HMDA, Zelman & Associates analysis
Investor Mortgages During Peak Were Highly Levered and Poorly Underwritten
4% 4% 4%5%
5%6% 6%
6% 6%7%
7%
8%
9%
11%
14%
17%
16%
14%
12%
9%
10%
12% 12%
11%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Investor Share of Unit Purchase Mortgage Originations
Note: Investor mortgages accounted for 53% of growth from 1999-2005, excluding non owner-occupants that falsely applied as owners for more
favorable terms
Source: Census Bureau, Company data, CoreLogic, HMDA. NAR, Zelman & Associates analysis
Cash Purchases Higher Across Market But Mix is Critical Element
14% 13% 13% 14% 15% 14% 14% 15%18%
20%23%
25% 24%22%
65%
43%
49%
43%46% 47%
54%
65%
74%
79%76% 76%
73% 73%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
% of Owner-Occupant Purchases Using Cash
% of Investor Purchases Using Cash
Source: Census Bureau, Company data, CoreLogic, HMDA, NAR, Zelman & Associates analysis
Zelman Survey Indicates Underwriting is Loosening While Credit Quality is Improving
68.7
70.7
72.6
74.6 74.8 74.9 75
.4 76.5 76.7
76.5 76.6
76.1
74.8
73.5
71.7
70.9
70.0
61.3
60.3
59.2 59
.6
59.2
58.1
57.9 58
.6
60.5
64.4
66.4 67
.4 68.3 68.7
68.0 68
.8 69.0
50
55
60
65
70
75
80
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
Internal Underwriting Criteria Index0 = Extremely Easy 100 = Extremely Tight
Applicant Credit Quality Index0 = Extremely Weak 100 = Extremely Strong
Source: Zelman & Associates Mortgage Survey
Owner-Occupant Purchases Mortgages Post Double-Digit Growth in 2013
-3%
6%
1%
5%3%
2%
-11%
-22%
-26%
-8%-6%
-9%
15% 15%
0%
12%
8%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
E
2015
E
2016
E
Year-Over-Year Change in Owner-Occupied Unit Purchase Mortgage Originations
Source: HMDA, Zelman & Associates analysis
Big Banks Not Representative of Market; Smaller Institutions Stepping Up
10%
1% 0%
-9%
-16%
-7%
29%27%
12%
3%
-12%
15%
-20%
-10%
0%
10%
20%
30%
40%
Cred
it Unio
ns
Regio
nal B
anks
Mortg
age C
ompa
nies
All Ba
nks
Natio
nal B
anks
Total
Cred
it Unio
ns
Mortg
age C
ompa
nies
Regio
nal B
anks
All Ba
nks
Natio
nal B
anks
Total
Year-Over-Year Growth in Purchase Unit Originations by Institution Type
2011 2012
Source: HMDA, Zelman & Associates analysis
Higher-Quality Borrowers Led Recovery in 2012, But Entry-Level Credits Joined in 2013
35%
27%
8%
-10%
15%
21% 21%
10%
3%
15%
-20%
-10%
0%
10%
20%
30%
40%
A+ A B C Total
2012 2013
Owner-Occupied Purchase Mortgage Year-Over-Year Growth by Credit Bucket
Source: HMDA, Ellie Mae, Zelman & Associates analysis
Purchase Activity in Younger Age Cohorts Likely Stronger than Assumed
8%
19%
13%
20%
15%
9%
19%
14%
16%
15%
0%
5%
10%
15%
20%
25%
Under 30 30-39 40-49 50-plus All
2012 2013
Owner-Occupied Purchase Mortgage Year-Over-Year Growth by Age
Source: HMDA, Ellie Mae, Zelman & Associates analysis
Lack of Savings for a Downpayment Most Cited as Hurdle to Credit…
55%
44%
19% 19%
42%
31%
25%
19%
0%
10%
20%
30%
40%
50%
60%
I do not haveenough savings
for adownpayment
My monthlyincome would
not support thecost of
ownership
I have badcredit
I have too muchdebt
I do not haveenough savings
for adownpayment
My monthlyincome would
not support thecost of
ownership
I have badcredit
I have too muchdebt
Reasons Young Adults Do Not Believe They Would Qualify for a MortgageRespondents Requested to Select All that Apply - Answers Do Not Sum to 100%
25-29 Year Olds 30-34 Year Olds
Source: Zelman & Associates Consumer Survey
…But Consumers Don’t Understand Actual Downpayment Requirements
9% 11% 11%16% 15% 18%
12% 14% 13%
30% 28% 32%27%
37%24% 38%
24% 29%
30% 29%19% 16%
10%
16%
13%
12%
19%
17%22%
24% 31% 26%
21%
23%
31%
25%
14%10%
14%10% 12%
21%13%
19%15%
0%
20%
40%
60%
80%
100%
120%
18-21 22-24 25-29 30-34 35-39 40-44 45-59 50-Plus Total
Over 20%
16-20%
11-15%
6-10%
0-5%
Perceived Downpayment Requirement for Purchase MortgageNote: FHA Downpayment Requirement = 3.5%
Source: FHA, Zelman & Associates Consumer Survey
Surprisingly, Credit Scores Improved During Downturn for Bottom Quartile of Consumers
606 607 609 609 608 607 608612 614 616
621
703706 708 710 712 713 713 712 712 713 712
550
570
590
610
630
650
670
690
710
730
4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13
Bottom Quartile Median
Consumer Credit Scores
Source: Federal Reserve, Zelman & Associates analysis
Nearly a Quarter of Under-35 Age Cohort is Debt Free, Better than History
20%
19%
17%
19%
17%
20%
16%
22%
24%
14%
11%
0%
5%
10%
15%
20%
25%
1989 1992 1995 1998 2001 2004 2007 2010 Under 35 25-29 30-34
Percentage of Under-35 Age Cohort That is Debt Free
Federal Reserve Survey of Consumer Finances Zelman 2014 Survey
Source: Federal Reserve, Zelman & Associates Consumer Survey
Contrary to Fears, Student Loan Debt Uncorrelated to Household Formation
17%
23%
20%
14%
13%13%
16%
18%
17%
0%
5%
10%
15%
20%
25%
With Without Total With Without Total With Without Total
Share of Young Adults Living at Home, Depending on Student Loan Status
25-29 Year Olds 25-34 Year Olds30-34 Year Olds
Source: Zelman & Associates Consumer Survey
Important to Differentiate Between Ownership and Living in a Single-Family Home
27% 26%
47%
62%
34%
46%
62%
77%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Living at Home All Renters MarriedRenters
Married RentersWith Children
Living at Home All Renters MarriedRenters
Married RentersWith Children
Hypothetical Housing Decisions for 25-34 Renters or Those Living at Home
Purchase if Moved in Next Year Single-Family if Moved in Next Year
Single-Family Share Higher than
Purchase Share for Every Segment
Source: Zelman & Associates Consumer Survey
Historical Drivers of Younger Ownership Rates Point to Future Gains
40%
41%
42%
43%
44%
45%
46%
47%
48%
49%
50%
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Homeownership Rate of 25-34 Year Olds
From 2004 to 2012, initial losses were
driven by falling real incomes and lower affordability, while additional losses
resulted from lower employment and incomes, falling
home prices, and tighter credit.
From 1993 to 2004, rising real incomes, lower interest rates
relative to the 1980s and more lenient
underwriting standards helped to increase ownership rates.
Homeownership rates fell despite the decline in interest rates as real
income growth stagnated and affordability remained
elusive.
Source: Census Bureau, Zelman & Associates analysis
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