Texas Housing Market - 2016

February 12, 2016 ¡ Federal Reserve Bank of Dallas

Dr. James P. Gaines Chief Economist

Macro Housing Issues • Demographics: growing, shifting • Affordability: workforce priced out of ownership • Capital: more equity • Infrastructure: transportation, education, utilities • Development: Design, Density, Resources and Processes • Regulatory: lending; environmental; land use • Federal • State • Local Growth Controls/Initiatives

National Housing Market

3

2016 National Housing Market • • • •

Mortgage Rates: up ~0.5% over the year (4% 4.5%) Household Formations: ~1.25 million Rental Market: tight, low vacancies, higher rents Owner Market: sales volume and prices up ~5% • Increased first-timers, millennials more active

• Single-family Rental: organized SF rental market with institutional owners • Home Construction: builders focused on design, density, resources and processes • Affordability: prices and rents increasing faster than incomes – eventual constraint on market

7,000

6,500

6,500

6,000

6,000

5,500

5,500

5,000

5,000

4,500

4,500

4,000

4,000

3,500

3,500

3,000

3,000

Existing SF Home Sales

2,500

2,500

2,000

2,000

1,500

1,500

1,000

1,000

Sources: US Census Bureau , NAR, SAAR

Jan-16

Jul-15

Jan-15

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jul-09

Jan-09

Jul-08

Jan-08

Jul-07

500 Jan-07

Jul-06

Jan-06

Jul-05

Jan-05

Jul-04

Jan-04

Jul-03

Jan-03

Jan-02

Jul-01

Jan-01

Jul-00

0

Jul-02

New SF Home Sales

500

0

Home Sales 000s

7,000

Jan-00

Home Sales 000s

New and Existing SF Home Sales U.S.

0 Jan-90 Jul-90 Jan-91 Jul-91 Jan-92 Jul-92 Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

HMI

100 Housing Market Index

90 1,800

80 1,600

70 1,400

60 1,200

50 1,000

40 800

30 600

20 400

10 200

Source: NAHB, Real Estate Center at Texas A&M University

0

Housing Starts, thousands

NAHB HMI & SF Starts 2,000

Single-Family Starts

New SF Home Starts (000s SAAR)

1,800 1,700

1,716

1963-2002 average per year (1.06 million)

1,610

1,600 1,499

1,500

1,451 1,433

1,400

1,359 1,309

1,303 1,271 1,273 1,231

1,300 1,200 1,100 1,000 900 800 700

1,465

1,151

1,132

1,162

1,194

1,198

1,179 1,146 1,084 1,072 1,067

1,012 970964

1,126

1,081

1,076

1,003

899 844 811813 779

888892 852

1,161 1,134

1,030

1,046

935

895 840

726

705 663

648 618

622

600

535

500

471 445 431

400 200

1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 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 2014 2015 2016

300

*2015 & 2016 NAHB projections Apr 2015

Source: US Census Bureau; NAHB; Real Estate Center at Texas A&M University

Mortgage and Federal Funds Rate Fed Funds

30-YR FMR Mortgages

Source: Federal Reserve Board; FHLMC; Haver Analytics; Real Estate Center at Texas A&M University

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

Jan-05

Jan-04

Jan-03

Jan-02

Jan-01

Jan-00

Jan-99

Jan-98

Jan-97

Jan-96

Jan-95

Jan-94

Jan-93

Jan-92

Jan-91

Jan-90

Interest Rate %

12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0

Mortgage and 10-Year Treasury Rates 11.0 10-Year Treasury

10.0

30-YR FMR Mortgages

9.0 8.0

6.0 5.0 4.0 3.0

Source: Federal Reserve Bank of St. Louis; FHLMC; Real Estate Center at Texas A&M University

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

Jan-05

Jan-04

Jan-03

Jan-02

Jan-01

Jan-00

Jan-99

Jan-98

Jan-97

Jan-96

Jan-95

Jan-94

Jan-93

Jan-92

1.0

Jan-91

2.0 Jan-90

Interest Rate %

7.0

Texas Housing Market

10

Mortgage & Tenure Status of Homes in Texas 2005 & 2014 2005 Number of Homes

Total Housing Units

9,026,011

Total Occupied Units

7,978,095

2014 Percent of Total Units

Number of Homes

Percent of Total Units

10,426,760 88.4%

9,227,197

89.0%

Total Renter-Occupied Housing Units

2,815,491 35.3%

3,602,956

38.8%

Total Owner-Occupied Housing Units

5,162,604 64.7%

5,674,241

61.2%

O-O units with a mortgage

3,237,790

62.7%

3,307,196 58.3%

O-O units without a mortgage

1,924,814

37.3%

2,367,045 41.7%

Source: CensusBureau, Bureau, 2006 CommunityCommunity Survey Source: U.S.U.S. Census 2005American & 2014 American Survey

Annual Texas Home Sales 310,000

$310,000

Sales

290,000

Avg Price

Md Price

295,355

292,805

285,535 276,459

275,584 266,842

270,000

2015 Record Year!!

250,000

241,020

$250,000

238,060

216,147

210,000

$230,000

213,334 205,786 203,637

201,528 196,401 188,738 184,056

190,000

$210,000 $190,000

170,638

170,000

$170,000 146,395 138,123

150,000

$150,000

122,134 116,604 121,823

130,000 110,000

$270,000

232,381

230,000

$290,000

$130,000

107,107 100,047 99,619

$110,000

Source: Real Estate Center at Texas A&M University

2015e

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

$50,000

1994

50,000 1993

$70,000

1992

70,000 1991

$90,000

1990

90,000

Texas Monthly Home Sales & WTI Price/bl January 1986 to Present

34,000

Dec. ’15 1st month < $40 since Feb ‘09

32,000 30,000 28,000 26,000 24,000 22,000 20,000 18,000 16,000

1986-1989 1990-1995 1996-1999 2000-2005 2006-2009 2010-2015

14,000 12,000 10,000 8,000 6,000 4,000

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

WTI Spot Price FOB Cushing, OK

Source: EIA; Real Estate Center at Texas A&M University

$120

$130

$140

$150

2015 Home Sales and Median Prices by Metro Areas 8.9%

Austin

3.8% 11.3%

Dallas

5.2% 1.1%

El Paso

10.7% 9.8%

Fort Worth Houston

7.6% 6.7% -2.5% 7.1%

San Antonio

9.1% 7.3%

Texas -4.0%

3.4%

-2.0%

0.0%

2.0%

Median Sales Price

4.0%

6.0%

8.0%

Sales Volume

Source: Real Estate Center at Texas A&M University

10.0%

12.0%

2.0 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16

Texas Monthsâ&#x20AC;&#x2122; Inventory

9.0 Inventory at extremely low level relative to market activity

8.0

7.0

6.0

5.0

4.0

3.0

Source: Real Estate Center at Texas A&M 15

Texas SF Building Permits 180,000 160,000

166,203 163,032

1990-2014 average 94,693/year

151,384 137,493

140,000

122,913

120,000 100,000

83,132 82,228

78,714 67,870 66,161

70,452 70,421 69,964

67,964

81,107

81,926

68,170 68,230 67,254

59,543

59,143 43,975

40,000

107,300 103,045 93,478

84,565

60,000

120,366

111,915 108,782 101,928 99,912

103,252

80,000

2014 +10% 2015 +4%

46,209

38,233 36,658 35,908

0

1980 1981 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 2014 2015e

20,000

Source: US Census Bureau, Real Estate Center at Texas A&M

Texas SF Permits & WTI Price/bl.

Monthly January 1991 to Current

18,000 17,000 16,000 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0

1991-1995 1996-1999 2000-2004 2005-2009 2010-2015

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100 $110 $120 $130 $140 $150

Avg. Monthly WTI Spot Price FOB Cushing, Ok

Source: U.S. Census; EIA; Real Estate Center at Texas A&M University

Texas MF Building Permits 70,000

2014 +20% 2015 +1%

1990-2014 average 34,368/year 60,000 50,000

47,271

46,918

40,715

40,245

38,671 37,537 35,791 33,958 33,036

32,521 31,281 30,165

30,000

65,000

54,145 53,615

53,196

51,576

40,000

64,135

30,729 28,381

19,741

20,000

15,837 13,879

Source: US Census Bureau, Real Estate Center at Texas A&M

2015e

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

0

9,304 8,291 8,273

1990

10,000

40

Source: Real Estate Center at Texas A&M Jan-16

Jul-15

Jan-15

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jul-09

Jan-09

Jul-08

Jan-08

Jul-07

Jan-07

Jul-06

Jan-06

Jul-05

Jan-05

Jul-04

Jan-04

Jul-03

Jan-03

Jul-02

Jan-02

Jul-01

Jan-01

Jul-00

Jan-00

Texas Residential Construction Indexes (Jan. 2000=100)

180

160

140

120

100 United States Coincident Index

80 Texas Coincident Index

60 Texas Leading Index

Texas Housing Affordability Price vs. Income

$70,000 Source: Real Estate Center at Texas A&M University Jan-16

Jul-15

Jan-15

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jul-09

Jan-09

Jul-08

Jan-08

Jul-07

Jan-07

Jul-06

Jan-06

Jul-05

Jan-05

Jul-04

Jan-04

Jul-03

Jan-03

Jul-02

Jan-02

Jul-01

Jan-01

Jul-00

Jan-00

Jul-99

Jan-99

Jul-98

Jan-98

Jul-97

Jan-97

Jul-96

Jan-96

Jul-95

Jan-95

Texas Monthly Median Home Price $230,000

$210,000

Median Price on Trend

$190,000

$170,000

$150,000

$130,000

$110,000

$90,000

Texas Average & Median Home Prices 12-Month Moving Average

$300,000 $280,000 $260,000

Since Jan 2013, average price is up 20.9% & median price is up 26.0%

$240,000 $220,000 $200,000 $180,000

Average Price

$160,000 $140,000 $120,000

Median Price

$80,000

Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

$100,000

Source: Real Estate Center at Texas A&M University

22

Texas Median HH Income & Median Home Price Indexed to 1989

Median Home Price

Nominal HH Income

Source: U.S. Census Bureau; Real Estate Center at Texas A&M University

2015e

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

Real HH Income 1989

300 290 280 270 260 250 240 230 220 210 200 190 180 170 160 150 140 130 120 110 100 90 80

300 290 280 270 260 250 240 230 220 210 200 190 180 170 160 150 140 130 120 110 100 90 80

Texas Households by Highest Affordable Price >$750,000

450

4.9%

$500,000-$749,999

538

5.9%

$400,000-$499,999

20% down; 4.15% interest; 35% qualifying ratio; and 5.5% taxes, insurance & utilities

602

6.6%

$300,000-$399,999

1,007

11.1%

$250,000-$299,999

645

7.1%

$200,000-$249,999

893

9.8%

$175,000-$199,999

526

5.8%

$150,000-$174,999

576

6.3%

$125,000-$149,999 $100,000-$124,999

689

7.6%

$70,000-$99,999

~43% of Texas HHs cannot afford home priced > $150,000

644

7.1%

9.4%

<$70,000

858 1,682

18.5%

0

500

1,000

1,500

2,000

Thousands of Households

Source: US Census Bureau 2013 American Community Survey; Real Estate Center at Texas A&M University

Texas Households by Highest Affordable Price >$750,000

443

4.9%

$500,000-$749,999

4.7%

$400,000-$499,999

10% down; 4.15% interest; 35% qualifying ratio; and 5.5% taxes, insurance & utilities

432 519

5.7%

$300,000-$399,999

996

10.9%

$250,000-$299,999

636

7.0%

$200,000-$249,999

886

9.7%

$175,000-$199,999

538

5.9%

$150,000-$174,999

577

6.3%

$125,000-$149,999

671

7.4%

$100,000-$124,999

~45% of Texas HHs cannot afford home priced > $150,000 1,117

12.3%

$70,000-$99,999

5.4%

494

<$70,000

1,802

19.8%

0

500

1,000

1,500

2,000

Thousands of Households

Source: US Census Bureau 2013 American Community Survey; Real Estate Center at Texas A&M University

Texas Households by Highest Affordable Price >$750,000

438

4.9%

$500,000-$749,999

4.7%

$400,000-$499,999

3% down; 4.15% interest; 35% qualifying ratio; and 5.5% taxes, insurance & utilities

385 465

5.7%

$300,000-$399,999

956

10.9%

$250,000-$299,999

660

7.0%

$200,000-$249,999

867

9.7%

$175,000-$199,999

530

5.9%

$150,000-$174,999

589

6.3%

$125,000-$149,999

678

7.4%

$100,000-$124,999

730

12.3%

$70,000-$99,999

~46% of Texas HHs cannot afford home priced > $150,000

927

5.4%

<$70,000

1,885

19.8%

0

500

1,000

1,500

2,000

Thousands of Households

Source: US Census Bureau 2013 American Community Survey; Real Estate Center at Texas A&M University

December Closed Sales Texas MSAs Y/Y Percent Change

Dec. Sales +6% YTD Sales +4%

Source: MetroTex; Texas RealtorÂŽ Data Relevance Project, Real Estate Center at Texas A&M University

December Average Sales Price/Sq.Ft. Y/Y Percent Change

Dec. P/SF +4% YTD P/SF +6% Md. Pr. YTD +7%

Source: MetroTex; Texas RealtorÂŽ Data Relevance Project, Real Estate Center at Texas A&M University

February 12, 2016 ¡ Federal Reserve Bank of Dallas

Dr. James P. Gaines Chief Economist