JANUARY 2018
UPDATES UPDATES
The New Tax Code and its Impact on Residential Real Estate
https://members.bridgebuilderskcm.com/taxreform/
How did we finish 2017? 1. New-home sales are at the highest level in a decade. 2. Sales of previously owned homes are at the highest level in more than a decade. 3. Starts of single-family homes are the strongest in a decade and applications to build such properties advanced to the fastest pace since August 2007.
Mortgage Rate Projections Quarter
Freddie Mac
Fannie Mae
MBA
NAR
Average of All
2018 1Q
4.1
4.0
4.2
4.2
4.13
2018 2Q
4.3
4.1
4.4
4.3
4.28
2018 3Q
4.4
4.1
4.6
4.4
4.38
2018 4Q
4.6
4.2
4.8
4.5
4.53 1/2018
Total Home Sales in millions 2017
2018
6.4
6.4
6.27
6.45
6.25 6.18 6.1
5.98
National Association of Realtors
Freddie Mac
Mortgage Bankers Association
Fannie Mae
Buyer Traffic 2017 Better now than the past spring market
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov NAR
“America’s housing market is gearing up for a robust year ahead. Builders are more optimistic, demand is strong and lean inventory is keeping prices elevated. What’s more, the tax legislation signed by President Trump may not pose as big a risk to demand from homebuyers as earlier versions did.” Bloomberg Business
The New Tax Code and its Impact on Residential Real Estate
57.1%
"How will the tax bill likely influence your home sale this year?"
13.9% 10%
No Impact
I will sell faster
11.4% 7.6%
I will sell slower I will postpone my home sale
Other move.com
29.2%
22.9%
"What likely impact will the tax bill have on your plans to buy a home this year?" 18.5% 14.2% 12%
2.3% I will buy faster
No impact
I will buy slower
I will purchase a less expensive home
I will postpone my I will purchase in a plans to buy this different location year
0.9% Other
move.com
How important a part of the
53%
American Dream is owning a home? 22%
18%
5% The Most Important
Very Important
Somewhat Important
Not Very Important
2% Not at all important
1% Don't know
NeighborWorks America
% that agree that owning a home increases a person’s
financial stability % that would feel
less successful if they never owned a home
81 61
% %
NeighborWorks America
Buyer Traffic 2017 Better now than the past spring market
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov NAR
Buyer Traffic 2017 Better than last year 2016
August
2017
September
October
November
NAR 12/2017
“Single-family residential sales and prices continued to heat up. On a year-over-year basis, home prices grew in excess of 6 percent for four consecutive months…the longest such streak since June 2014. This escalation in home prices reflects both the acute lack of supply and the strengthening economy.” Dr. Frank Nothaft CoreLogic’s Chief Economist
“The healthy labor market and higher wage gains are expected to further strengthen buyer demand from young adults next year.
Their prospects for becoming homeowners will only improve if more lower-priced and smaller-sized homes come onto the market.� Lawrence Yun NAR Chief Economist
Available Months Housing Inventory 5.2
4.8
4.4 3.4
2014
2015
2016
December 2017 NAR
Inventory Levels heading into 2017
1,970,000 1,920,000
1,800,000 1,730,000 1,680,000
January 2017
February
March
April
May NAR
New Homes
733
SOLD in thousands
561 501
429
437
2013
2014
368 306
2011
2012
2015
2016
2017 Census
Actual Year-Over-Year % Change in Price By State
CoreLogic
Forecasted Year-Over-Year % Change in Price By State
CoreLogic
House Price Appreciation in the U.S. Annual Percentage Change 12.6% 10.0% 8.3%
11.6% 9.8%
9.5%
7.3%
6.1% 6.4% 6.3%
6.3% 4.9%
4.9%
1.0% 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
-3.0%
2011
2012
2013
2014
2015
2016
2017
2018 Forecast
-3.1% -4.9%
-5.2%
-12.3% Freddie Mac
House Price Appreciation in the U.S. Annual Percentage Change 12.6 10
11.6
9.5
The last four years has not seen the same levels of appreciation increase as did the four years prior to the crash
4.9
2002
2003
2004
2005
2014
6.1
6.4
6.3
2015
2016
2017 Freddie Mac
Average Annual Percentage Increase in House Price Appreciation 10.93
5.93
2002 - 2005
Last 4 Years Freddie Mac
“A bubble requires both overvaluation based on fundamentals and speculation. It is natural to focus on an asset’s fundamental value, but the real key for detecting a bubble is speculation… Speculation tends to chase appreciating assets, and then speculation begets more speculation, until finally, for some reason that will become obvious to all in hindsight, the ‘bubble’ bursts.” – Bill McBride of Calculated Risk in April 2005
23%
SPECULATION: Percentage of investor purchased homes
13%
2005
2017
NAR
“In 2005, people were just buying homes and letting them sit vacant - and then selling without significant improvements. Classic speculation. And even more dangerous during the bubble was the excessive use of leverage (all those poor quality loans). Currently lending standards are decent, and loan quality is excellent. So prices may be a little overvalued, but there is little speculation - and I wouldn't call house prices a bubble – and I don't expect house prices to decline nationally like during the bust.
– Bill McBride of Calculated Risk on 2017’s housing market
“The acceleration in home prices is good news for both homeowners and the economy because it leads to higher home equity balances that support consumer spending and is a cushion against mortgage risk.� Frank Martell President & CEO of CoreLogic
“Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than 3 years. This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.� Dr. Frank Nothaft Chief Economist for CoreLogic
Equity Share By State
CoreLogic
Significant Equity (> 20%) By State
CoreLogic
Average Equity Gained Year-Over-Year By State
CoreLogic
Seller Tenure in Home Median years since 1985
10 9 9 9
1010 9
8 7 6 6 6 6 6
7 6 6 6 6 6 6 6
5
1985 1987 1989 1991 1993 1995 1997 2000 2002 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 NAR
Median Equity Earned in Home Recently Sold by Tenure in Home
104%
56%
18% 11 to 15 years
16 to 20 years
21 years or more NAR
“It’s encouraging to see opinions from homeowners and appraisers more aligned on a national level. Appraisals are one of the most important data points when applying for a mortgage …The more homeowners and appraisers agree, the smoother the process is.” Bill Banfield VP of Capital Markets at Quicken Loans
Appraiser Home Value Opinions Compared to Homeowner Estimates
-0.67
-1.14 -1.33
-0.99
-1.35
-1.47 -1.69
-1.77
-1.70 -1.90
-1.55
-1.93
Last 12 Months %
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
-1.33
-1.47
-1.69
-1.77
-1.90
-1.93
-1.70
-1.55
-1.35
-1.14
-0.99
-0.67
Quicken Loans
Home Price Expectation Survey
A nationwide panel of over one hundred economists, real estate experts and investment & market strategists.
PROJECTED
5.6
Mean Percentage Appreciation
4.2 3.4
2017
2018
2019
3.1
3.0
3.1
2020
2021
2022
Home Price Expectation Survey 2017 4Q
34.0%
Cumulative House Appreciation by 2022 23.4%
10.4% Bulls
All Projections
Bears Home Price Expectation Survey 2017 4Q
$44,905
$294,905
potential growth in family wealth over the next five years based solely on increased home equity
$286,038 $277,707
$269,357 $260,500 $250,000
January 2018
January 2019
January 2020
January 2021
January 2022
January 2023
Increased home equity based on price appreciation projected by the Home Price Expectation Survey Home Price Expectation Survey 2017 4Q
Median Asking
RENT since 1988
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 2017
Census
“After about a two-year slowdown, rent growth is starting to pick back up across the nation...Looking into 2018, rent is expected to continue gaining. More widespread rent growth could mean home buying demands stay high, as renters who can afford it move away from the unpredictability of rising rents toward the relative stability of a monthly mortgage payment instead.�
Aaron Terrazas Zillow Senior Economist
UPDATES
Average Days on the Market By State
NAR
EXISTING Home Sales 5,500,000
5,000,000
4,500,000
Since January 2012 4,000,000
Jan 2012
Jan 2013
Jan 2014
Jan 2015
Jan 2016
Jan 2017
NAR 1/2018
5,800,000
5,700,000
EXISTING Home Sales
5,600,000
5,500,000
5,400,000
5,300,000
5,200,000
5,100,000
5,000,000
4,900,000
4,800,000
4,700,000
4,600,000
4,500,000
4,400,000
Since January 2014
4,300,000
Jan 2014
Jan 2015
Jan 2016
Jan 2017
NAR 1/2018
EXISTING
6.8%
Home Sales Y-O-Y by region
4.0%
3.8% 2.5%
0.0% U.S.
Northeast
West
South
Midwest NAR 1/2018
Existing Home Sales in thousands
January
February
March
April
May
June
2016
July
August September October November December
2017 Census & NAR
New Home Sales in thousands
January
February
March
April
May
June
2016
July
August
September October
November December
2017 Census & NAR
New Home Sales Annualized in thousands
Census
New Home Sales
33%
25%
% of sales by price range
14% 10%
9%
5% 3% Under $150K
$150-$199K
$200-299K
$300-$399K
$400-$499K
$500-$749K
Over $750K Census
New Homes Selling Fast (median months from completion to sold) 4.0 3.7
3.3
2.9
4.1
4.0 3.8
3.7 3.7
3.6
3.2 3.0
3.1
3.2
3.3
3.4 3.2
3.1
3.1
3.2 3.2
3.3
2.9 2.9
Census
Total Home Sales in thousands 612
632
656
578 516
525
567 563
585 580 530
503
471
364
359 366
January
February
341
March
511
491
507 458
April
May
June
2016
July
August
September October
479
476
November December
2017 Census & NAR
Pending Home Sales
2016 2017
2015
2014
January
February
March
April
May
June
July
August
September
October
November
December
NAR 1/2018
115
PENDING Home Sales since 2012
110
105
100
100 = Historically Healthy Level
95
90
January 2012
January 2013
January 2014
January 2015
January 2016
January 2017
NAR 1/2018
115
PENDING Home Sales since 2014
110
105
100
100 = Historically Healthy Level
95
90
January 2014
January 2015
January 2016
January 2017 NAR 1/2018
2.5%
0.8%
U.S.
1.1%
Northeast
0.8%
Midwest
South
West
PENDING Home Sales
-2.3%
Year-Over-Year By Region NAR 1/2018
35%
Percentage of Distressed Property Sales
6% 4%
January 2012 - Today Jan 2012
Jan 2013
Jan 2014
Jan 2015
Jan 2016
Jan 2017
NAR 1/2018
Home Prices
EXISTING
8.8%
Home Prices
8.2%
Y-O-Y by region
5.8% 4.8% 4.0%
U.S.
Northeast
South
West
Midwest NAR 1/2018
18.0% 14.1% 10.8% 9.2%
0.6%
% Change in Sales from last year by Price Range -11.7% %
$0-100K -11.7%
$100-250K 0.6%
$250-500K 9.2%
$500-750K 14.1%
$750K-1M 10.8%
$1M+ 18.0% NAR 1/2018
Case Shiller 0.14
Year-Over-Year
PRICE
0.12
CHANGES
0.1
0.08
0.06
0.04
0.02
0
June 2012
January 2013
January 2014
January 2015
January 2016
January 2017
S&P Case Shiller 1/2018
Case Shiller
13.2%
12.9% 12.4%
Year-Over-Year PRICE CHANGES 20 City Composite
10.8%
9.3%
8.1%
6.7%
5.6%
5.4% 4.8%
5.0% 5.0% 4.5%
4.3%
4.4%
4.6%
4.9% 4.9%
5.0% 5.0%
4.7%
5.5%
5.7% 5.7% 5.7%
5.4%
5.5%
5.4%
5.1%
5.0% 5.0%
5.1%
5.0%
5.1%
5.2%
5.5%
5.7%
5.9% 5.9%
6.2% 5.8%
5.7%
5.6%
6.4%
5.8% 5.8%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2014 2015 2016 2017
S&P Case Shiller 1/2018
Case Shiller
Year-Over-Year PRICE CHANGES 20 City Composite
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct 2014 2015 2016 2017
S&P Case Shiller 1/2018
Forecasted Year-Over-Year % Change in Price By State
CoreLogic
Appraiser Home Value Opinions Compared to Homeowner Estimates
-0.67
-1.14 -1.33
-0.99
-1.35
-1.47 -1.69
-1.77
-1.70 -1.90
-1.55
-1.93
Last 12 Months %
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
-1.33
-1.47
-1.69
-1.77
-1.90
-1.93
-1.70
-1.55
-1.35
-1.14
-0.99
-0.67
Quicken Loans
HOUSING INVENTORY
Seller Traffic By State
NAR
Months Inventory of HOMES FOR SALE 2011 - Today
January 2011
January 2012
January 2013
January 2014
January 2015
January 2016
January 2017 NAR 1/2018
Months Inventory of HOMES FOR SALE
5.8
last 2 years
5.3
4.8
4.3
3.8
3.3
Dec
Jan-16
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan-17
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
NAR 1/2018
Months Inventory of HOMES FOR SALE Last 12 Months
4.2
4.2
4.2
4.2
4.2
4.1 3.9 3.8
3.8
3.6 3.5 3.4 Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov NAR 1/2018
2013-Today
Year-over-Year Inventory Levels Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov %
-
-20. -16.
-
-
-7.6 -5% -6.2 1.8%0.9%5.0%1.6%7.3%5.3%3.2%6.5% 6% 5.5%5.8%4.5% 6% 5.2% 5% -0.5 -0.5 -0.5 2.0% -0.9 1.8%0.4% -4.7 -1.7 -3.1 -4.5 -1.9 -3.8 -2.2 -1.1 -1.5 -3.6 -9.6 -5.8 -5.8 -10. -6.8 -10. -9.3 -6.3 -7.1 -6.4 -6.6 -9.0 -8.4 -7.1 -9.0 -6.7 -6.4 -10. -9.7
NAR 1/2018
HOUSING SUPPLY Year-Over-Year Dec
Jan
-6.3%
Feb
-6.4%
Mar
Apr
May
Jun
Jul
-6.6%
-7.1%
Aug
-6.7%
-7.1%
Sep
Oct
Nov
-6.4%
-8.4% -9.0%
-9.0% -9.7%
Last 12 Months
-10.4% NAR 1/2018
New Home Inventory months supply
6.0
5.9 5.5
5.5
5.2
5.6
5.5
5.1 5.1
5.4 5.2 5.4 5.2
5.3
5.1
5.1 5.3
5.2 5.4
5.0 4.5
Jan
Feb
5.1
Mar
Apr
May
Jun
2016
Jul
2017
4.6
Aug
Sept
Oct
Nov
Dec Census
New Home Inventory months supply Last 12 Months 5.9
6.0
5.6 5.4 5.2
5.1
5.4
5.3
5.3
5.4
5.0
4.6
Dec
Jan-17
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov Census
BUYER DEMAND
Buyer Traffic By State
NAR
Foot Traffic indicator of future sales
Jul 2013
Jan 2014
Jan 2015
Jan 2016
Jan 2017
NAR 1/2018
Foot Traffic Last 12 Months indicator of future sales
Dec
Jan 2017
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov NAR 1/2018
Foot Traffic
2016
indicator of future sales
January
February
March
2017
April
May
June
July
August
September
October
November December
NAR 1/2018
INTEREST RATES
4.29 4.19 4.09 3.99
3.99
3.97
3.89 3.79 3.69 3.59 3.49
30 Year Fixed Rate Mortgages from Freddie Mac
3.39 Freddie Mac 1/2018
Mortgage Rate Projections Quarter
Freddie Mac
Fannie Mae
MBA
NAR
Average of All
2018 1Q
4.1
4.0
4.2
4.2
4.13
2018 2Q
4.3
4.1
4.4
4.3
4.28
2018 3Q
4.4
4.1
4.6
4.4
4.38
2018 4Q
4.6
4.2
4.8
4.5
4.53 1/2018
Mortgage Rates Freddie Mac 30 Year Fixed Rate
2015
2017
2016
2018 - Actual - Projected
Rate
2015 Q1
2015 Q2
2015 Q3
2015 Q4
2016 Q1
2016 Q2
2016 Q3
2016 Q4
2017 Q1
2017 Q2
2017 Q3
2017 Q4
2018 Q1
2018 Q2
2018 Q3
2018 Q4
3.7
3.8
4.0
3.9
3.7
3.6
3.5
3.8
4.2
4.0
3.9
3.9
4.1
4.3
4.4
4.6
Freddie Mac
Mortgage Credit Availability YES
NO
MAYBE
Mortgage Credit Availability
Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association Apr 2013
Jan 2014
Jan 2015
Jan 2016
Jan 2017 MBA
900
800
700
600
500
Historic Data for the MORTGAGE CREDIT AVAILABILITY INDEX (a report from the Mortgage Bankers Association)
400
300
200
100
0
June 2004 June 2005 June 2006 June 2007 June 2008 June 2009 June 2010 June 2011 June 2012 June 2013 June 2014 June 2015 June 2016 June 2017 Oct 2017
MBA
Average Days To Close A Loan 48 48
Last 12 Months
45
45 44 44 43
43 43 43 42 42
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
All Closed Loans as per Ellie Mae
® FICO
Score
Requirements
726
Last 12 months 724 724 724 724 724 723 722
722
722
721 720
Dec
Jan-17
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
All Closed Loans as per Ellie Mae
® FICO
Score
33.0%
Distribution 24.4% 20.0% 13.2% 8.9%
0.05%
0.6%
500-549
550-599
600-649
650-699
53.3%
700-749
750-799
800+
All Closed Loans as per Ellie Mae
Average 751
® FICO
Score
for Closed Purchase Loans by Loan Type
722 709 681
All Loans
Conventional
FHA
VA All Closed Loans as per Ellie Mae
Average Back End DTI for Closed Purchase Loans by Loan Type
39
All Loans*
43
42
FHA
VA
36
Conventional
All Closed Loans as per Ellie Mae
Resources Slide
Slide Title
Link
7, 11
How Did We Finish 2017?, Bloomberg Quote
https://www.bloomberg.com/amp/news/articles/2017-12-22/here-are-four-charts-showing-u-s-housing-momentum-entering-2018
8
Mortgage Rate Projections, Total Home Sales
http://www.freddiemac.com/research/pdf/201711-Outlook.pdf http://www.fanniemae.com/resources/file/research/emma/pdf/Housing_Forecast_121817.pdf https://www.mba.org/Documents/Research/Mtg%20Fin%20Forecast%20Dec%202017.pdf https://www.nar.realtor/sites/default/files/documents/forecast-01-2018-us-economic-outlook-12-27-2017.pdf
10, 17-18,
Buyer Traffic
http://nar.realtor/infographics/foot-traffic
13, 14
Tax Bill Impact
http://news.move.com/2017-12-21-Tax-Bill-Raises-Concerns-About-Homeownership-Most-Will-Change-Buying-Or-Selling-Plans
15, 16
American Dream, Benefits
http://www.neighborworks.org/Documents/HomeandFinance_Docs/Homeownership_Docs/SurveyResults_Docs/Neigh borWorksAmericaAtHomeSurveyReport-2017.aspx
19, 33
Frank Nothaft Quote
http://www.corelogic.com/about-us/researchtrends/corelogic-home-price-insights.aspx
20
Lawrence Yun Quote
https://www.nar.realtor/newsroom/existing-home-sales-soar-56-percent-in-november-to-strongest-pace-in-over-a-decade
21, 22
Inventory
http://nar.realtor
23
New Home Sold
https://www.census.gov/construction/nrs/pdf/soldann.pdf
24, 25
Actual & Forecasted YOY Price Change
http://www.corelogic.com/about-us/researchtrends/corelogic-home-price-insights.aspx
26-28
Home Price Appreciation YOY Change
http://www.freddiemac.com/research/outlook/20170921_looking_ahead_to_2018.html
31
Bill McBride Quote
http://www.calculatedriskblog.com/2005/04/housing-speculation-is-key.html
32
Frank Martell Quote
http://www.corelogic.com/about-us/researchtrends/corelogic-home-price-insights.aspx
34-36
Equity Maps
http://www.corelogic.com/about-us/researchtrends/homeowner-equity-report.aspx#
37, 38
Seller Tenure In Home, Equity Gained
http://nar.realtor
KEEPINGCURRENTMATTERS.COM
Resources Slide
Slide Title
Link
39-40, 71
Bill Banfield Quote, Appraisal Challenge
http://www.quickenloans.com/press-room/2017/12/12/owner-perceptions-home-values-rise-year-ends/
42-44
Home Price Expectation Survey
https://pulsenomics.com/Q4_2017_HPE_Survey.php
45
Median Asking Rent
http://www.census.gov/housing/hvs/files/currenthvspress.pdf
46
Aaron Terrazas Quote
http://zillow.mediaroom.com/2017-12-21-Rent-Growth-Accelerates-Going-Into-2018
49, 73, 82
Average Days on Market, Buyer & Seller Traffic Maps
https://www.nar.realtor/reports/realtors-confidence-index
50-52, 63, 65,66, 74-78
Existing Home Sales Report
http://nar.realtor/
53, 54, 58
Freddie Mac Home Sales
http://www.census.gov/construction/nrs/pdf/newressales.pdf http://nar.realtor/
55-57, 79-80
New Home Sales, Inventory
http://www.census.gov/construction/nrs/pdf/newressales.pdf
59-62
Pending Home Sales Report
http://nar.realtor/
67-69
Case Shiller Price Index
https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/638549_cshomeprice-release-1226.pdf
70
CoreLogic Price Changes
http://www.corelogic.com/about-us/researchtrends/corelogic-home-price-insights.aspx
83-85
Foot Traffic
http://nar.realtor/
87-89
Freddie Mac Rates
http://www.freddiemac.com/pmms
91-92
Mortgage Credit Availability
https://www.mba.org/news-research-and-resources/research-and-economics/single-family-research/mortgage-credit-availability-index
93-97
Ellie Mae Report
https://cdn.elliemae.com/origination-insight-reports/Ellie_Mae_OIR_NOVEMBER2017.pdf
KEEPINGCURRENTMATTERS.COM
The New Tax Code and its Impact on Residential Real Estate
JANUARY 2018