MBA Economic and Mortgage Finance Outlook MBA of Alabama Annual Conference June 7, 2017 Presented by Lynn Fisher Mortgage Bankers Association 1
Summary of the MBA Outlook 2016 2017 2018 2019 GDP Growth 2.0% 2.1% 1.9% 1.7% Inflation 1.3% 2.4% 2.3% 2.5% Unemployment 4.9% 4.4% 4.3% 4.4% Fed Funds 0.625% 1.375% 2.375% 3.125% 10-year Treasury 1.8% 2.6% 3.1% 3.5% 30-year Mortgage 3.6% 4.3% 5.0% 5.4% New home sales (000s) 560 631 694 729 Existing home sales (000s) 5,440 5,779 6,020 6,104 Purchase originations ($B) 990 1,081 1,178 1,245 Refi originations ($ B) 901 515 410 395 Total originations ($B) 1,891 1,596 1,588 1,640 Mortgage debt outstanding ($B) 9,670 10,041 10,437 10,806 Source: MBA Forecast – May 2017 2 2
Job Growth Starting Off Strong in 2017 Average Monthly Payroll Growth 400 284 300 265 254 250 235 232 226 216 210 192 187 179 200 174 174 174 170 163 138 96 88 100 50 Thousands of jobs 10 - (42) (100) (144) (200) (300) (297) (400) (422) (500) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 - 2017 - 2017 - 2017 - 2018 - Jan Feb Mar Apr Mar Source: BLS 3 3
Source: BLS 10 12 Alabama’s Unemployment Rate Remains Above US 0 2 4 6 8 1996 - Jan 1996 - Jun 1996 - Nov 1997 - Apr 1997 - Sep 1998 - Feb 1998 - Jul 1998 - Dec 1999 - May 1999 - Oct 2000 - Mar 2000 - Aug 2001 - Jan 2001 - Jun 2001 - Nov 2002 - Apr 2002 - Sep 2003 - Feb US and AL Unemployment Rates (%) 2003 - Jul 2003 - Dec 2004 - May 2004 - Oct 2005 - Mar 2005 - Aug 2006 - Jan AL 2006 - Jun 2006 - Nov US 2007 - Apr 2007 - Sep 2008 - Feb 2008 - Jul 2008 - Dec 2009 - May 2009 - Oct 2010 - Mar 2010 - Aug 2011 - Jan 4 2011 - Jun 2011 - Nov 2012 - Apr 2012 - Sep 2013 - Feb 2013 - Jul 2013 - Dec 2014 - May 2014 - Oct 2015 - Mar 2015 - Aug 2016 - Jan 2016 - Jun 2016 - Nov 4.4 5.4 2017 - Apr
Steady Increase in Recent Wage Growth Atlanta Fed Wage Growth Tracker Percent 6.0 5.0 4.0 3.9 3.5 3.0 2.0 1.0 Overall Prime-age 0.0 Source: Federal Reserve Bank of Atlanta 5 5
Inflation Near 2 Percent Threshold CPI and Selected Components Year over year percent change 4.0 40.0 3.0 30.0 2.2 2.0 20.0 1.9 1.0 10.0 - - (1.0) (10.0) (2.0) (20.0) (3.0) (30.0) (4.0) (40.0) Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 Motor Fuel (right axis) All Items (left axis) All Items exc Food & Energy (left axis) Source: BLS 6 6
Changes to Fed’s Balance Sheet Are Coming… Source: Federal Reserve, Wall Street Journal 7
Rates Expected to Increase Source: Federal Reserve, Freddie Mac, MBA 8 8
Refinance Activity Has Declined Sharply Refinance Index and 30 Yr Fixed Mortgage Rate 6000.0 6.00 5000.0 5.00 30 yr Fixed Rate 4000.0 4.00 Index Rate 3000.0 3.00 2000.0 2.00 1000.0 1.00 Refinance Index 0.0 0.00 Refi Index (left axis) 30 Yr Fixed rate (right axis) Source: MBA Weekly Applications Survey 9 9
IMB Volume, Profits Down in Q1 Source: MBA’s Quarterly Mortgage Bankers Performance Report, www.mba.org/performancereport 10
The Millennial Progression Population Projections by 5-Year Age Group 26 Millions 25.1 25 24.7 24.0 24 23 22 21 26-30 31-35 36-40 20 19 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 Source: Census 2014 National Population Projections 11 11
Growth in Owner-Occupier Households Picking Up Chart of the Week - June 2, 2017 Annual Change in Owner-Occupied and Renter Households 2,500 70% 69% 2,000 68% 1,500 67% 66% 1,000 65% 500 64% 63% 0 62% -500 61% -1,000 60% 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17Q1 Homeowner (thous.) Renter (thous.) Homeownership Rate (%) Source: Census 12
Low Inventories of Existing Homes for Sale Existing Home Sales, Inventory and Months Supply Ths. Months 12 8,000 7,000 10 6,000 8 5,000 6 4,000 4.03 3,000 4 2,000 2 1,000 - - Jan 1999 Jun 1999 Nov 1999 Apr 2000 Sep 2000 Feb 2001 Jul 2001 Dec 2001 May 2002 Oct 2002 Mar 2003 Aug 2003 Jan 2004 Jun 2004 Nov 2004 Apr 2005 Sep 2005 Feb 2006 Jul 2006 Dec 2006 May 2007 Oct 2007 Mar 2008 Aug 2008 Jan 2009 Jun 2009 Nov 2009 Apr 2010 Sep 2010 Feb 2011 Jul 2011 Dec 2011 May 2012 Oct 2012 Mar 2013 Aug 2013 Jan 2014 Jun 2014 Nov 2014 Apr 2015 Sep 2015 Feb 2016 Jul 2016 Dec 2016 Months supply of existing homes on market (Months, SA) Existing Home Sales (Ths., SAAR) Number of homes available for sale (Ths., SA) Source: NAR 13
Continued Strong House Price Growth FHFA Expanded HPI (quarterly, SA, 1991Q1 = 100) 240.00 220.00 200.00 180.00 160.00 140.00 120.00 100.00 Q1-91 Q4-91 Q3-92 Q2-93 Q1-94 Q4-94 Q3-95 Q2-96 Q1-97 Q4-97 Q3-98 Q2-99 Q1-00 Q4-00 Q3-01 Q2-02 Q1-03 Q4-03 Q3-04 Q2-05 Q1-06 Q4-06 Q3-07 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-12 Q3-13 Q2-14 Q1-15 Q4-15 Q3-16 US Alabama Source: FHFA 14 14
Single Family Starts Still Recovering Single and Multi Family Housing Starts SAAR, 000s of units 2000 1800 1600 1400 1200 1000 835 800 600 400 337 200 0 Housing Starts: 1 Unit (SAAR, Thous.Units) Housing Starts: Total Multifamily (SAAR, Thous.Units) Source: Census 15 15
The Supply of Non-Jumbo Mortgage Credit Conforming Index Government Index (NSA, 3/2012=73.5) (NSA, 3/2012=183.5) 110 500 450 100 400 90 350 80 300 250 70 200 60 150 50 100 Source: Mortgage Bankers Association; Powered by AllRegs Market Clarity Source: Mortgage Bankers Association; Powered by AllRegs Market Clarity 16 16
Purchase Apps Running Slightly Ahead of 2016 Purchase Mortgage Applications Index (by week of the year, NSA) 350 300 250 200 150 100 50 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Week of the Year 2015 2016 2017 Source: MBA Weekly Applications Survey 17 17
Purchase Applications Increasing in AL Purchase Mortgage Applications Index - AL (by week of the year, NSA) 250 230 210 190 170 150 130 110 90 70 50 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 Week of Year 2015 2016 2017 Source: MBA Weekly Applications Survey 18
Government Share of Purchase Mortgage Applications and Average Loan Size FHA Purchase Share and Avg Loan Size VA Purchase Share and Avg Loan Size 25 300 25 300 250 250 20 20 200 200 15 15 150 150 10 10 100 100 Average Loan Size (Thous. $, right axis) Average Loan Size (Thous. $, right axis) 5 5 50 50 Share of Purchase Loan Applications (%, left axis) Share of Purchase Loan Applications (%, left axis) 0 0 0 0 17-Jan-14 14-Mar-14 09-May-14 04-Jul-14 29-Aug-14 24-Oct-14 19-Dec-14 13-Feb-15 10-Apr-15 05-Jun-15 31-Jul-15 25-Sep-15 20-Nov-15 15-Jan-16 11-Mar-16 06-May-16 01-Jul-16 26-Aug-16 21-Oct-16 16-Dec-16 10-Feb-17 Apr 7 2017 17-Jan-14 14-Mar-14 09-May-14 04-Jul-14 29-Aug-14 24-Oct-14 19-Dec-14 13-Feb-15 10-Apr-15 05-Jun-15 31-Jul-15 25-Sep-15 20-Nov-15 15-Jan-16 11-Mar-16 06-May-16 01-Jul-16 26-Aug-16 21-Oct-16 16-Dec-16 10-Feb-17 Source: MBA Weekly Applications Survey 19
Declining Credit Scores as FHA Returns to Mission Chart of the Week – February 10, 2017 FHA Average Credit Scores on New Endorsements Fully underwritten only, excludes streamlines 710 706 703 701 701 700 698 700 697 695 693 692 691 688 690 681 681 680 680 677 676 675 673 672 672 670 660 650 Home Purchase Conventional to FHA Refi FHA to FHA Refi 2010 2011 2012 2013 2014 2015 2016 Source: HUD 20 20
ARM Share of Applications Increasing ARM Loans as Share of All Applications NSA, based on loan count 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1 Yr ARM 3/1 ARM 5/1 ARM 7/1 ARM 10/1 ARM Other ARM Source: MBA Weekly Applications Survey 21
MBA Originations Forecast Mortgage Originations: 1999-2019 $4,000 $3,500 $3,000 Billions of dollars in originations $2,500 901 $2,000 395 515 410 $1,500 1,245 $1,000 1,081 1,178 $500 990 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Purchase Refi Source: MBA Forecast – May 2017 22
Contact Information & MBA Resources Lynn Fisher, Ph.D. Vice President & Executive Director of RIHA | Research and Economics 202-557-2739 lfisher@mba.org MBA Research: RIHA: www.mba.org/research www.housingamerica.org 23 23
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