Ho Housing Affordability is is Slo lowing th the Market Volusia Building Industry Association July 23, 2019 Robert Dietz, Ph.D. NAHB Chief Economist
Hou ousing Af Affor ordabili lity Continues to o Trend Lo Lower • Rising development and construction costs represent a threat to the housing market and prospective home buyers • The key economic issue of today: housing affordability • Metro areas that foster housing affordability will grow • Those that don’t will decline • Overall economic growth and the Fed • Housing demand is solid – within budget constraints • Supply-side headwinds: regulatory costs, labor and lumber • Forecasts • NAHB Home Building Geography Index
Ris Risin ing Popu opulatio ion En Entering Hou ousi sing Dem Demand Yea ears Millions 5.0 Headship rates increase from 15% to 45% v Avg=4.3 4.5 4.0 3.5 Silent 3.0 Greatest Generation: Generation: Born 1928-1945 2.5 Born Before 1928 2.0 1.5 1.0 Gen Z: Gen X: Baby Boomers: Millennials: Born After 1997 Born 1965-1980 Born 1946-1964 Born 1981-1997 0.5 0.0 0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100+ Source: U.S. Census Bureau (BOC)
Pop opulation Growth Volusia County population grew faster than national and statewide rates Thousands Thousands 500,000 30,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 U.S. 0.8% 0.7% 0.7% 0.7% 0.7% 0.7% 0.7% 0.6% 0.6% Florida 1.0% 1.3% 1.2% 1.2% 1.5% 1.8% 2.0% 1.7% 1.5% 400,000 24,000 Volusia County 0.0% 0.0% 0.4% 0.8% 1.3% 2.0% 2.3% 1.8% 1.7% 327,167 325,147 323,071 320,743 318,386 316,058 313,874 311,580 309,326 300,000 18,000 200,000 12,000 21,299 20,977 20,630 20,224 19,860 19,563 19,326 19,093 18,846 100,000 6,000 494 494 497 500 507 517 529 538 548 0 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 United States Florida Volusia Source: U.S. Census Bureau (BOC)
Payroll l Em Employment Daytona Beach MSA above pre-recession peak Thousands, SA Thousands, SA 9,200 250 111% Florida 8,600 230 8,056 8,000 107% 210 7,400 193 190 89% 6,800 170 Deltona-Daytona Beach- 6,200 Ormond Beach MSA 89% 5,600 150 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Source: U.S. Bureau of Labor Statistics (BLS)
Exis Existing Hou ouse Pric ice Ind ndex Daytona Beach MSA below pre-recession peak 2000Q1 = 100, SA 260 1 Relative to Pre-recession Peak 0.9 US Florida Daytona MSA 240 Recession-era Low 81% 55% 49% Current 116% 98% 91% 0.8 220 0.7 200 0.6 180 0.5 0.4 160 Florida 0.3 140 United States 0.2 120 0.1 Deltona-Daytona Beach-Ormond Beach MSA 100 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Source: U.S. Federal Housing Finance Agency (FHFA)
Florida Real GDP Growth Q/Q Percent Change (annualized), SAAR 10% 5% 0% -5% -10% -15% 05 06 07 08 09 10 11 12 13 14 15 16 17 18
GDP DP Growth Economy is slowing Annual Growth LT avg (‘58 - ’07) 3.4% Q/Q Percent Change, SAAR 10% 2017 2.2% 2018 2.9% 8% 2019 f 2.5% 2020 f 1.8% 6% 2021 f 1.5% 4% 2% 0% -2% -4% -6% -8% -10% 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Source: U.S. Bureau of Economic Analysis (BEA) and NAHB forecast
100 120 20 40 60 80 0 Current expansion is 121 months old – the longest Exp Expansio Trough to Peak, Months Dec 1854 Source: National Bureau of Economic Research (NBER) Dec 1858 Jun 1861 Dec 1867 ion is Dec 1870 Mar 1879 is Agi May 1885 Aging Apr 1888 May 1891 Jun 1894 Jun 1897 Dec 1900 Aug 1904 Jun 1908 Jan 1912 Dec 1914 Mar 1919 Jul 1921 Jul 1924 Nov 1927 Mar 1933 Jun 1938 Oct 1945 Oct 1949 May 1954 Apr 1958 106 Feb 1961 Nov 1970 Mar 1975 Jul 1980 92 Nov 1982 120 Mar 1991 73 Nov 2001
Tig ight Lab Labor Mar arket Lack of labor represents a macro risk Percent, SA Percent, SA 5.0% 12% 11% 4.5% Unemployment Rate 10% 4.0% 9% 3.5% 8% 3.0% 7% 6% 2.5% 5% 2.0% 4% Job Openings Rate 1.5% 3% 1.0% 2% 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 Source: U.S. Bureau of Labor Statistics (BLS) and NAHB forecast
Cumulative Cha hange in in Em Emplo loyment by Ag Age Group Mind the Gen-X gap Millions of Employees, SA 20 15 55 and Older 10 5 0 Under 55 -5 -10 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: U.S. Bureau of Labor Statistics (BLS)
Fed ed Fu Funds Ra Rate 10% 10% 9% 9% 10-Year Treasury 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% Federal Funds – Top Rate 2% 2% 1% 1% 0% 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 17 18 19 Source: U.S. Board of Governors of the Federal Reserve System (FRB) 21
The Easiest Game of Clue …. Ever Who Killed the Expansion? “Expansions don’t die of old age. They are murdered.” Ben Bernanke
The Easiest Game of Clue …. Ever Who Killed the Expansion? The Suspects Professor Plumb Miss Scarlett Mr. Powell
The Easiest Game of Clue …. Ever Who Killed the Expansion? The Weapons Candlestick Lead Pipe Monetary Policy
The Easiest Game of Clue …. Ever Who Killed the Expansion? The Room The Lounge The Study The Boardroom
NAH AHB Fed edCast Current top rate of 2.5% A more dovish stance for 2019 Rate cut during second half of 2019 Slowing of sales of Treasury bond holdings, ongoing drawdown of MBS
30 30-Year Fi Fixed Ra Rate Mort ortgage an and 10 10-Year Treasury Some increases ahead but nearing peak rates for the cycle 12% 12% 30-Year Fixed Rate Mortgage 10% 10% October 31, 2016 8% 8% 6% 6% 4% 4% 10-Year Treasury 2% 2% 0% 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 17 18 19 20 21 Source: Federal Reserve and Freddie Mac data and NAHB forecast
Housing Demand and Affordability
Con onsumer Con onfidence Le Leveli ling Off Near two-decade high but economic uncertainty took a toll at end of year Index 1985=100, SA 1 160 0.9 140 0.8 120 0.7 100 0.6 0.5 80 0.4 60 0.3 40 0.2 20 0.1 0 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Source:The Conference Board
Hou ousehold Bala alance She Sheets A shift in debt away from mortgages % of Disposable Inc., SA 7.5% 8 7.2% 7 7.0% 6.7% 6 Mortgage 6.5% 5 6.0% 6.3% 6.0% 5.7% 4 5.8% 5.5% 3 5.0% Consumer 5.0% 2 4.9% 4.5% 4.3% 1 4.0% 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: U.S. Board of Governors of the Federal Reserve System (FRB)
Con onsumer Deb Debt Rise in student and auto loans 250% 8 244% Student Loans 7 200% 6 158% 5 150% 9/30/2008, Auto Loans Other 100% 4 99% 100% 3 97% 2 50% Credit Cards 1 0% 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Federal Reserve Bank of New York
Sha Share of of You oung Ad Adults Liv Living wit ith Par arents Almost doubled 60% 25% 58% 23% 56% Ages 18 to 24 21% 54% 19% 52% 50% 17% Ages 25 to 34 48% 15% 46% 13% 44% 11% 42% 40% 9% 1990 2000 2005 2007 2009 2011 2013 2015 2017 Source: US Census 1990, 2000, PUMS, 2000-2017 ACS, PUMS, and NAHB Estimates
Hou ousehold Form ormatio ion Demand for home ownership strengthening but stumbled in 1Q19 2,000 Y/Y Change in Household Count, Thousands, NSA Owner-Occupied 1,500 1,000 500 0 -500 -1,000 2,500 Renter-Occupied 2,000 1,500 1,000 500 0 -500 -1,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: U.S. Census Bureau (BOC): Housing Vacancies & Homeownership
Hom omeownership Ra Rate A decline in 2019 Q1 after ten quarters of growth Percentage, Quarterly, SA 71% 1.00 69.4% 70% 0.90 69% 0.80 68% 0.70 67% 0.60 66% 0.50 65% 0.40 64% 0.30 64.3% 63% 0.20 62% 0.10 61% - 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 Source: U.S. Census Bureau (BOC): Housing Vacancies & Homeownership
Geo eography of of Hom omeownership Homeownership rate for Volusia County was 69.4% Homeownership Rates in the U.S. by County Alaska Hawaii Source: 2013-2017 American Community Survey 5-Year Estimates
Hou ousing Af Affor ordabili lity – NAH AHB/Well lls s Far argo HOI 100 89 90 78 80 70 63 National 61 60 50 40 Deltona-Daytona Beach-Ormond Beach MSA 30 20 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: NAHB/Wells Fargo Housing Opportunity Index (HOI)
The Geog eography of of Hou ousing Af Affordabili lity-NAHB/Well lls s Far argo HOI Coastal markets least affordable Source: NAHB/Wells Fargo Housing Opportunity Index (HOI)
Supply-Side Factors
Reg egulatory Cos osts Ris Risin ing – Up p 29 29% Over 20 2011-2016 2016 Florida regulatory costs are relatively higher than average
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