NAHB Housing & Economic Outlook Report Distributed by:
North Central Home Builders Association www.nchba.cc “Promoting & Protecting the Building Industry of NCW�
Housing and Economic Outlook Board of Directors May 20, 2011 DAVID CROWE CHIEF ECONOMIST
Total Housing Starts 600
595 580
523 500
400
300 IBS Q1 2011 Forecast (Dec.)
Actual Q1 2011
.
Apr-11
2011 Total Housing Starts Forecast Change since the January Board Meeting 750 708
615
620
Current 2011 Forecast
Consensus 2011 Forecast (Blue Chip)
600
450
300 IBS 2011 Forecast
Outline
•Why be Optimistic •Why Be Pessimistic •Forecast
Why Be Optimistic
Mortgage Rates Are Low 20
Percent
18 16 14 12 10
Fixed-Rate
8 6
5.90
Adjustable-Rate
4
4.50
2 0 78
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
12
House Prices Returned to Normal (Mostly) House Price-to-Income Ratio 5.0
4.7 4.5
4.0
3.5
3.2 3.3
3.0
2.5
2.0 90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
Most States Returning to Normal House Prices House Price-to-Income Ratio Relative to the Long-term Average*
Legend House Price-to-Income Ratio Relative to the LT Average Less than Up to 25% above More than 25% above
* LT average is the average house priceto-income ratio for each state between first quarter 1980 and fourth quarter 2000.
Affordability Very Good – United States NAHB/Wells Fargo Housing Opportunity Index 100
75
75
50
25 92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
New Home Inventory Very Low New and Existing Homes For-Sale 600
Thousand Units
Million Units
4.0
3.5 500
New (L) 3.0
400 2.5
300
2.0
Existing (R) 1.5 200
183 1.0 100
73K completed
0
0.5
0.0 90
92
94
96
98
00
02
04
06
08
10
Pent Up Household Demand Awaiting Recovery Up to 2 Million Unformed Household 114,000
Number of Households
(000s)
3.0%
1 to 2 M Gap
112,000
2.5%
110,000
2.0%
108,000
1.5%
Percentage Change
106,000
1.0%
104,000
0.5%
102,000
0.0% 01
02
03
04
05
06
07
08
09
10
11
Employment Situation is Improving Monthly Job Growth 2010 and 2011 500 Thousand jobs 400 300 200 100 0 -100 -200 -300 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 2010
2011 Total Employment
Private Employment
Why Be Pessimistic
NAHB/Wells Fargo Housing Market Index Remains Low 100 90 80 70 60 50 40 30 20
16
10 0 90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
Single-Family Starts Remain Near Bottom 2,000
Thousands
1995-2003 2009 2010
1,800 1,600
1,256,000 442,000 471,000
7%
1,400 1,200 1,000 800 600 400
Mar 09 = 353,000 Apr 11 = 394,000 +12%
200 0 90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
Mortgage Foreclosures and Delinquency Million Loans (12MMA)
7
5.91
6
5 4.38 4
3.74
3
2
2.02
1
0 90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
Total Loans in Foreclosure at End of Quarter
Loans Past Due 90 Days
Loans Past Due 60 Days
Loans Past Due 30 Days
08
09
10
Reasons Customer is Holding Back 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Buyers!think!they!cannot!sell!their!existing!home!at! a!favorable!price Buyers!think!it!is!hard!to!get!financing Media!reports!are!making!buyers!more!cautious Buyers!think!new"home!prices!will!decline!further Buyers!think!employment/economic!situation!is! deteriotating Buyers!think!interest!rates!will!drop May"11
Apr"10
May"09
What’s Gotten Worse in Last 3 Months? 0%
10%
20%
Cost!of!construction!greater!than!price!customer! willing!to!pay Competition!from!foreclosure/short!sales Customer!reluctance Inaccurate!appraisals The!market!segment!I!build!in!is!weak Difficulty!with!AD&C!financing Competition!from!large!volume!builders 11"May
10"May
30%
40%
50%
60%
70%
80%
Sales By Price Range % describing change
$1,000,000"and"over
$500,000"to"$999,999
$250,000"to"$499,999
$150,000"to"$249,000
Less"than"$150,000
!0.7
!0.6
May!11!increase
!0.5
!0.4
Dec!10!increase
!0.3
!0.2
!0.1
May!11!decline
0
0.1
Dec!10!decline
0.2
0.3
Fixed Investment Residential and Commercial Structures 90
$ billion (Commercial)
(Residential) $ billion
Residential
80
900 800
70
700
60
600
Office
50
500
40
400
Shopping Centers
30
300
20
200
Warehouse
10
100
0
0 95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
Forecast
Real GDP Growth Q/Q Percent Change, SAAR
10% 8% 6% 4% 2% 0% -2% -4% -6% -8% 90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
Job Growth Improving in Recent Months Average Monthly Employment Change 600 400
Thousand jobs
198,000
96,000
200 0 -200 -400 -600 -800
1st half 2010 = 110,000 ( 71K private) 2nd half 2010 = 47,000 (125K private) 1st 4 months 2011 = 192,000 (214K private)
-1,000 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
New and Existing Single-Family Home Sales 1.6
Million
Million
8
1.4
7
1.2
6
Existing (R)
1.0
5
New (L) 0.8
4
0.6
3
0.4
2
0.2
1
0.0
0 78
80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
12
Single-Family Starts 2,000 1,800 1,600
Thousands
1995-2003 2009 2010 2011 2012
1,256,000 442,000 471,000 471,000 698,000 .
7% 0% 48%
1,400 1,200 1,000 800 600 400 200
Mar 09 = 353,000 Apr 11 = 394,000 12%
0 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
NAHB and Census Production Index (NAHB)
(Census) Thousand Units
60
500
NAHB MF Rental Production Index
450
50 400 350 40
Census MF Starts
300
30
250 200
20 150 100 10 50 0
0 04
05
06
07
08
09
10
11
12
Multifamily Housing Starts 750
600
Thousands
1995-2003 2009 2010 2011 2012
331,000 112,000 114,000 140,000 175,000.
2% 23% 25%
450
300
150
0
4th Q 09 = 82,000 1st Q 11 = 166,000 103% 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12
Remodeling Market Index Index
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
0 00
01
02
03
04
05
06
07
08
09
10
11
12
Residential Remodeling Owner-Occupied Improvements Billions 2005 $, SAAR 160 150 140 130 120 110 100 90 80 70 60 93
94
95
96
97
98
99
00
01
02
03
04
05
06
07
08
09
10
11
12
Trough Level of Production Relative To “Normal” Housing Starts / Average 2000-03 Starts 0.8
0.7
National Average bottomed out at 27% in 2009Q1 0.6
0.5
0.4
0.3
0.2
0.1
0.0 U M N I A M C C F G O I M R W C N N O M U K I A M K V N P I N N H T S D W D N S W V A M T N A M O L MW S I V L Z NOA L AHNO I I T H J RD T SDKAYACAAYM I NDEACECV T RE XD L SKA T Y Source: US Census Bureau
Tax Credit Level of Production Above Low 1.0
Housing Starts / Average 2000-03 Starts
0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 U M N I A M C C F G O I M R W C N N O M U K I A M K V N P I N N H T S D W D N S W V A M T N A M O L MW S I V L ZNOALAHNO I I T H J RDT SDKAYACAAYM I NDEACECV TREXDL SKAT Y Source: US Census Bureau
Current Level of Production Relative To “Normal” 1.0
Housing Starts / Average 2000-03 Starts
0.9 0.8
National Average at 31% in 2011Q1
0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 U M N I A M C C F G O I M R W C N N O M U K I A M K V N P I N N H T S D W D N S W V A M T N A M O L MW S I V L ZNOALAHNO I I T H J RDT SDKAYACAAYM I NDEACECV TREXDL SKAT Y Source: US Census Bureau
Long Road Back to Normal* for Single-Family Housing Starts – Q4 2012
Legend Relative to Normal Single-Family Housing Starts Less than 50% of Normal 50% to 75% of Normal 75% to 100% of Normal Greater than 100% of Normal
* Normal Production is measured as SingleFamily housing starts between Q1 2000 and Q4 2003
* Normal is the average from Q1 2000 to Q4 2003
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