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US Housing
Market Outlook
August 8, 2018John Burns
CEO
949-870-1210
jburns@realestateconsulting.com
Agenda
Our Forecast Process
US Economy Outlook: Solid Growth
with Rising Risks from Too Much Debt
New Home Industry Outlook: Slow
Volume Growth with Very High Prices
Awesome Remodeling Industry Outlook
1
2
3
4
We collaborate with 200+ diverse subscriber
clients to get it right.
JBREC RESEARCH MEMBERSHIP DISTRIBUTION
Our Collaboration Process With Our
Clients
• Wall Street: Our investor clients help us catch macro trends, and helped us
become very negative in early 2007
• Private Equity and Banks: Our bank and private equity capital clients who
fund private developments help us understand growth, and helped us call
a bottom in 2012 when they began buying homes in bulk
• Large Builders: 17 of top 20 builders subscribe to our research, and 350+
local builders selling ~20% of all US new home sales answer our monthly
survey and helped us call a slow recovery from 2014-today
• Building Products: Largest BP firms in the country, plus owners of $6
billion/ year Lumber & Bldg Material dealers help us identify demand and
price changes
• Local Consultants: Our consultants in offices all over the country provide
insight from 500+ local consulting assignments per year
• Consumer Surveys: 140 questions to 23,000 new home shoppers help us
identify consumer trends, product shifts, and success strategies
Our Local Housing Market Analysis Process
• Data Scrubbing: Count all communities for 700+ builders each
quarter, looking for community count growth (~99% coverage in
top 30 MSAs)
• Proprietary Land Developer Survey: Survey 70+ land developer
and brokers each quarter
• Interview Experts: Hold monthly market insight phone calls with
our local consultants (50+ assignments/month) and clients
• Analyze All Data: Chart and analyze 60+ pages of data and
proprietary analytical tools and indices by MSA each month
• Consumer Insight: Four people devoted to demographics and
consumer research
• Disciplined Quest for Knowledge: Collect and distribute
pertinent news reports internally, constantly looking for new
data to analyze, and researching impacts of policy shifts
• Conference Attendance: Attend (and speak at) conferences for
additional color
MARKET RESEARCH BY DECADE BORN
FOR SETTING STRATEGIES
In 2016, we published a book on
Demographic Trends for Housing
Our New Home Construction Track Record
We built the most comprehensive and detailed
Repair & Remodel forecast available.
Remodeling Universe
Partially tracked in census data
Big remodels of owner-occupied homes
Small project spending on owner-occupied homes
Disaster repairs
Big project remodels of rental units
Small project spending on rental properties
Trade-up spending: Project count and spend per project
Census C-30 Harvard LIRA JBREC
Our Remodeling Spending Track Record
J B R E C R E M O D E L M AT E R I A L S S P E N D I N G V S H O M E D E P O T Y T D R E S U LT S
Source: John Burns Real Estate Consulting, LLC
R+
R
MA
TE
RI
AL
S
SP
EN
DI
NG
# Remodels +2.2%
# Transactions +2.3%
Spend per Remodel
+4.6%
Spend per Transaction
+4.5%
+6.8% +6.8%
0%
1%
2%
3%
4%
5%
6%
7%
JBREC 2017 Forecast Home Depot 2017 Growth
Agenda
Our Forecast Process
US Economy Outlook: Solid Growth
with Rising Risks from Too Much Debt
New Home Industry Outlook: Slow
Volume Growth with Very High Prices
Awesome Remodeling Industry Outlook
1
2
3
4
The Burns Economic Performance Index™ is designed to rank current economic conditions against previous economic cycles on a scale of 0-100, 0 being the lowest performing,
and 100 being the highest performing economic conditions. The index includes 34 indicators grouped into 5 weighted categories: Employment, Housing, Economics, Stock Market,
and Confidence, each with history back to 1981.
Source: John Burns Real Estate Consulting, LLC (Pub: Jul-18)
Current
72
A forward looking component of the index with data back to 1953 provides a lead on recession events as well as an early indication of coming growth cycles. We did a
64 year back test of this data which shows a normal risk of recession in any given year on average to be 27% 2 years out and 50% four years out.
Source: John Burns Real Estate Consulting, LLC (Pub: Jul-18)
53% 68%
Probability
Recession risks are higher than norm – 53%
within 2 years and 68% within 4 years
very low risk
very high risk
low risk
normal risk
high risk
27% 56%
This is the 2nd longest expansion in the
last 60 years.
We think it can
become the longest
This expansion has been mild – 6th
largest of last 10.
1. 1929–33 (43 mos.): Consumers
borrow to buy stocks
2. 1957–58 (8 mos.): Consumers
amass credit card debts
3. 1980–82 (22 mos.*)**: Bad bank
loans to developers and Latin
America; oil price increase
4. 1990–91 (8 mos.*): Junk bonds for
Leveraged Buy Outs; real estate
speculation fueled by S&L
lending; Japan
5. 2000–01 (8 mos.): Tech stock
speculation
6. 2007-09 (18 mos.*): Housing
speculation fueled by subprime
1. 1937–38 (13 mos.): Post-New Deal
2. 1945 (8 mos.): End of WWII
3. 1948–49 (11 mos.): Post-WWII
4. 1953–54 (10 mos.): Post-Korean War
5. 1969–70 (11 mos.): First Vietnam War
spending cutback
1973–75 (16 mos.*):
Removal of gold standard,
oil price increase
Speculative BubblesUsually fueled by debt
Government Spending CutsUsually after running up big deficits / debts
Other
1929: 32x
1999: 44x
2018: 34x
0
5
10
15
20
25
30
35
40
45
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00
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12
20
14
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16
20
18
S&P 500 Price to Earnings Ratio
10-year Shiller cyclically adjusted price-to-earnings (CAPE) ratio
Source: DQYDJ.com (Data: Mar-18, updated quarterly†)
Note: The Cyclically Adjusted Price to Earnings Ratio, also known as CAPE or the Shiller PE Ratio, is a valuation measure which adjustspast company earnings by inflation to present a snapshot of stock market affordability at a given point in time. The ratio is calculated using real per-share earnings over a 10 year period.Pub: May-18
0
2
4
6
8
10
12
14
20
03
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04
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Mortgage = 67% Student loan = 10% Auto loan = 9% Credit card = 6% HE revolving = 3% Other = 3%
Sources: NY Federal Reserve Consumer Credit Panel/Equifax; John Burns Real Estate Consulting, LLC (Data: 4Q17, updated quarterly†)
Total Debt Balance and Composition
Trillions
Pub: May-18
Publicly-traded company debt has grown 5X
faster than GDP since 2009.
-5%
3%
10%
24%
4%
20%
18%
16%
11%
9%
22%
25%
49%
-16%
24%
30%
28%
23%
31%
101%
117%
153%
178%
213%
308%
332%
116%
-50% 0% 50% 100% 150% 200% 250% 300% 350%
Building Materials
Real Estate, Home Building
Consumer Goods and Retail
Automotive
Energy
Services
Health Care
Technology & Electronics
All Companies
Growth from 2009 through 2016
Debt Growth Nominal GDP Growth Job Growth
0
5
10
15
20
251966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
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2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Trilli
ons o
f D
olla
rsFederal Debt Has Ballooned
Despite all the risks, the US is still the
most popular destination in the globe.
3.5%
3.9%
4.8%
4.9%
19.8%
United Kingdom
Saudi Arabia
Russia
Germany
United States
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22%
Current Residency of the World’s Immigrants
Mortgage Rates Are Expected to Rise 0.5%
2.1%1.8%
2.3%2.9% 3.0% 3.0% 3.0%
1.8%1.9%
1.7%
1.7%1.8% 2.0% 2.1%3.8%
3.7%4.0%
4.6%4.8% 5.0% 5.1%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
2015 2016 2017 2018P 2019P 2020P 2021P
Mortgage Rate Forecast
Mortgage Rate Spread over 10-year 10-year Treasury History and Expectations
Source: John Burns Real Estate Consulting US Housing Analysis and Forecast, July 2018
Federal Government Mortgage Policy Has Been
Driving Home Buying Demand for 70+ Years
20% Surge to 64% From 1940s – 1970
Post G.I Billand GSE/HUD
64%-66%Flat from
1970s-Early 1990s
64-68% Rise Caused by
1992+ GSE Acts
1% Final increase and fall due to
Subprime / privatelabel securities
4%Decline postDodd-Frank
pullback
40%
45%
50%
55%
60%
65%
70%
1943
1948
1953
1958
1963
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
2018
Homeownership Rate
Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC (Data: 4Q17) *Historical average: 1940 through current
Jerome Powell
Federal Reserve
Chairman
Directly Impacts Rates
Mick Mulvaney
CFPB Director
Enforces Dodd-Frank
Restrictions
(Documentation)
Ben Carson
HUD Secretary
Oversees FHA
Robert Wilkie
VA Nominee
Oversees VA
Mel Watt
FHFA Director /
Term Expires Jan.
2019
Oversees Fannie,
Freddie
Presidential Appointees Determine the Policies on
70% of All Mortgages, and all the Riskiest Mortgages
0%
5%
10%
15%
20%
25%
30%
35%
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
Source: MBA (Data: Apr-18, updated quarterly†)
Percentage of Adjustable Loans
3-month average
Dodd-Frank Rules Have Kept Mortgage Loan
Documentation Tight, and Limited Adjustable Rate Loans
Pub: Jul-18
70%
19%
28%
77%
2% 4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
De
c-1
2
Mar-
13
Ju
n-1
3
Se
p-1
3
De
c-1
3
Mar-
14
Ju
n-1
4
Se
p-1
4
De
c-1
4
Mar-
15
Ju
n-1
5
Se
p-1
5
De
c-1
5
Mar-
16
Ju
n-1
6
Se
p-1
6
De
c-1
6
Mar-
17
Ju
n-1
7
Se
p-1
7
De
c-1
7
Mar-
18
Banks Non-banks Credit unions / state housing agencies
FHA Origination Shares by Lender Type
Sources: AEI International Center on Housing Risk; John Burns Real Estate Consulting, LLC (Data: Mar-18, updated quarterly†) Pub: Jul-18
Mortgage Origination: Much Less Risky than 2006 but
Riskier than 2002, and FHA-Dependent
13% 14%
32%41% 42%
33%
1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
6% 6%
4%
3% 3%
4%
17%24% 22% 19% 19% 19% 20% 23% 23% 24%
48%51%
35%
32% 32% 51%
65%
63%60%
58% 59% 61%
47%46% 46% 46%
33%29% 29%
24% 23%
12%17%
12%17%
22% 21% 19%
32% 30% 30% 29%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
First Lien Mortgage Origination Volume by Loan Type
Very High Risk - Subprime/ Private Label High Risk - FHA/VA
Low Risk - GSE Very Low Risk - Bank Portfolio
2002
Risk
2006
Risk
In Summary, Solid Economy. Rising Risks.
Current
72
53% 68%
Probability
very low risk
very high risk
low risk
normal risk
high risk
27% 56%
Agenda
Our Forecast Process
US Economy Outlook: Solid Growth
with Rising Risks from Too Much Debt
New Home Industry Outlook: Slow
Volume Growth with Very High Prices
Awesome Remodeling Industry Outlook
1
2
3
4
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
197
11
97
21
97
31
97
41
97
51
97
61
97
71
97
81
97
91
98
01
98
11
98
21
98
31
98
41
98
51
98
61
98
71
98
81
98
91
99
01
99
11
99
21
99
31
99
41
99
51
99
61
99
71
99
81
99
92
00
02
00
12
00
22
00
32
00
42
00
52
00
62
00
72
00
82
00
92
01
02
01
12
01
22
01
32
01
42
01
52
01
62
01
7
4 Big Downturns and 3 “Hiccups” in 47 years.
H O U S I N G C O N S T R U C T I O N 1 9 7 1 - 2 0 1 7
Source: John Burns Real Estate Consulting, LLC
SF Permits
1.7 M
We Expect Hiccup #4 Sometime in the Next Three Years,
With Sustained Growth Thereafter
Single-Family Construction Volumes Still
Below 1993 Levels!
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,0001975
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
2017
Single-Family Starts
1993
J B R E C M A R K E T H O T N E S S I N D E X F O R 5 0 L A R G E S T M A R K E T S
2%
6% 28%64%
30% of Markets Outperforming; 6% Lagging
1%
6%
-1%
-7%
10%
-3%
-12%
-2%
-2%
8%
6%
-4%
6%
5%
4%
1%
6%
8% 9
%
9%
12%
3% 3% 4%
-1%
2%
5%
15%
15%
16%
10%
7%
6%
4%
3%
-10%
1%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Ju
l-1
5
Au
g-1
5
Se
p-1
5
Oct-
15
No
v-1
5
De
c-1
5
Ja
n-1
6
Fe
b-1
6
Ma
r-1
6
Ap
r-1
6
Ma
y-1
6
Ju
n-1
6
Ju
l-1
6
Au
g-1
6
Se
p-1
6
Oct-
16
No
v-1
6
De
c-1
6
Ja
n-1
7
Fe
b-1
7
Ma
r-1
7
Apr-
17
Ma
y-1
7
Ju
n-1
7
Ju
l-1
7
Au
g-1
7
Sep-1
7
Oct-
17
No
v-1
7
De
c-1
7
Ja
n-1
8
Feb-1
8
Ma
r-1
8
Ap
r-1
8
Ma
y-1
8
Ju
n-1
8
Jul-18
Year-over-Year Sales Rate Growth
*Note: The above chart shows YOY comparisons only for builders who participated in the survey one year prior. For the May survey, YOY comparisons include
200 responses.
Source: John Burns Real Estate Consulting, LLC, independent survey of ~18% of all US new home sales, NSA (Data: May-18, Pub: Jun-18)
2018 YOY Sales Rate Growth decelerating
Rising rates will have more impact on moveup
buyers than on new home entry-level buyers.
Source: John Burns Real Estate Consulting online survey, June 2018
New home community counts continue to
grow slowly. Up only 1% YOY.
Source: John Burns Real Estate Consulting, Home Building Analysis and Forecast, May 2018
5%
3%
0%
4%
3%
1%
0%
1%
2%
3%
4%
5%
6%
2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q1
Community Count GrowthAll Builders, Top 33 Metros
-33%-14%
-10%-7%-7%-7%-6%-6%-5%-5%-5%
-1%0%0%0%1%1%2%3%3%4%4%4%4%5%5%7%8%8%8%9%
12%15%17%
30%
-35% -25% -15% -5% 5% 15% 25% 35%
San Francisco**Los Angeles*
Las VegasPhoenixOrlando
East Bay Area*Philadelphia, PA (MSA)
CharlotteRiverside-San Bern.
West Palm Beach*AtlantaAustin
San JoseTampa
HoustonTop 34 MarketsOrange County
SacramentoWashington DC (MSA)
JacksonvilleChicago**Tacoma*
Fort Worth*BostonDenver
Fort Lauderdale*San Antonio
Salt Lake CityRaleigh-Durham**
NashvilleDallas*
Seattle*Miami*
MinneapolisSan Diego
Builder Communities YOY % Growth
Jul-18
Source: John Burns Real Estate Consulting, LLC (Data: Jul-18, Pub: Jul-18)
*Metro division **Combination of metro divisions
34%
25%
23%
22%
19%
19%
19%
18%
18%
17%
16%
15%
14%
13%
13%
12%
12%
12%
12%
12%
11%
10%
9%
9%
9%
9%
7%
7%
6%
6%
5%
3%
0% 5% 10% 15% 20% 25% 30% 35%
Austin
Nashville
Dallas*
San Antonio
Denver
Salt Lake City
Orlando
Charlotte
Raleigh-Durham**
Houston
Seattle*
Riverside-San Bern.
Portland
New York*
Atlanta
Jacksonville
San Diego
Weighted Average
Indianapolis
Bay Area, CA¹
Miami*
Boston
Washington DC (MSA)
Tampa
Minneapolis
Phoenix
Las Vegas
Orange County
Sacramento
Los Angeles*
Philadelphia
Chicago**
N E W B O O M T O W N S
AV E R A G E G R O W T H
S T I L L R E C O V E R I N G
S L O W G R O W T H
C U R R E N T J O B S I N E X C E S S O F P R E - R E C E S S I O N P E A K
Source: John Burns Real Estate Consulting, LLC
MA
RK
ET
J O B S I N E X C E S S O F P E A K
Huge Differences in Economic Growth this Cycle
-5%
-3%
-4%
-2%
-2%
-2%
-2%
-3%
-4%
-2%
-3%
0%
-1%
-1%
0%
0%
2%
1%
1%
4%
0%
0%
2%
1%
3%
4%
-1%
3%
4%
4%
5%
2%
6%
6%
-5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7%
DenverBoston
San DiegoPortland
NashvilleMiami*Tampa
Orange County, CAMinneapolis
Salt Lake CityLos Angeles*
East Bay Area*Sacramento
Seattle*Washington DC (MSA)
OrlandoRaleigh-Durham**Weighted Average
San JoseHouston
Riverside-San Bern.Chicago**
San Francisco**Dallas*
PhiladelphiaSan Antonio
Las VegasIndianapolis
AustinAtlanta
JacksonvilleNew York*
CharlottePhoenix
Current = 12-month total, YOY % 3-month forecast based on Google search trends
Burns Predictive Analytics: 3-Month Existing Home Sales Forecast
Source: John Burns Real Estate Consulting, LLC; Google Trends (Pub: Jul-18) *Metropolitan division **Combination of metropolitan divisions
Recent slowing
in Las Vegas &
Denver
Recent improvement in
Houston, Raleigh
Recent Demand changes vary by market
2%
Medium-Term Outlook: Most Low to Normal RiskJ B R E C H O U S I N G C Y C L E R I S K I N D E X ™ F O R 5 0 L A R G E S T M A R K E T S
16% 20%62%
Huge Differences in Price Appreciation this Cycle
1. Peak BHVI values from 2002–2008 2. Bay Area, CA is composed of San Francisco and San Jose MSAs. *Metro division **Combination of metro divisions.
Source: John Burns Real Estate Consulting, LLC (Data: Jun-18, Pub: Jul-18)
-12%-10%-10%
-4%-4%-3%-3%
-1%-1%
0%4%
5%6%
10%10%11%
17%18%
23%23%
24%25%
27%34%
42%44%44%
49%58%
60%68%
73%
-20% 10% 40% 70%
Las VegasChicago**
Riverside-San Bern.Sacramento
OrlandoWashington DC (MSA)
Miami*Phoenix
New York*Tampa
PhiladelphiaJacksonville
Orange CountySan Diego
MinneapolisLos Angeles*
Weighted AverageBoston
IndianapolisAtlanta
Salt Lake CityCharlotte
Raleigh-Durham**Portland
San AntonioSeattle*
Bay Area, CA²Houston
NashvilleAustin
Dallas*Denver
Burns Home Value Index™ Percent above/below Peak1
Huge Differences in Price Appreciation this Year
3%4%4%4%
5%6%
6%6%6%6%
6%7%7%7%7%7%
7%7%
8%8%
8%8%9%9%
9%9%
9%10%10%
12%13%
14%
0% 2% 4% 6% 8% 10% 12% 14%
Washington DC (MSA)
Chicago**
Austin
Houston
San Antonio
Philadelphia
Orange County
Dallas*
Raleigh-Durham**
Portland
New York*
United States
Minneapolis
San Diego
Sacramento
Boston
Indianapolis
Riverside-San Bern.
Phoenix
Los Angeles*
Miami*
Jacksonville
Denver
Charlotte
Orlando
Salt Lake City
Tampa
Atlanta
Nashville
Bay Area, CA¹
Seattle*
Las Vegas
YOY % change (June 2018)Prices - Burns Home Value Index™
Source: John Burns Real Estate Consulting, LLC (Data: Jun-18, Pub: Jul-18)
(1) Bay Area composed of San Francisco and San Jose MSAs *Metro division **Combination of metro divisions
Long-Term Outlook: 8% Overvalued (4.6% Rates)J B R E C I N T R I N S I C H O M E VA L U E I N D E X ™ F O R T O P M A R K E T S
Overvalued
Fairly valued
Undervalued
Long-Term Outlook: 22% Overvalued (6% Rates)J B R E C I N T R I N S I C H O M E VA L U E I N D E X ™ F O R T O P M A R K E T S
Overvalued
Fairly valued
Undervalued
Maturing
Growing Declining
Bottoming
Recovering Falling
12 Markets
6 Markets
15 Markets
Housing Cycle, 33 Largest Markets
13%
30%
53%
61%
71%
78%
82%
84%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
2011
2012
2013
2014
2015
2016
2017
2018*
Source: NAHB (Data: 2017, updated quarterly†)
Percentage of Builders Reporting Labor Shortages
*Expected labor shortages Pub: Jul-18
85
3K
88
0K
92
0K
0K
200K
400K
600K
800K
1,000K
1,200K
1,400K
1,600K
1,800K
19
81
19
82
19
83
1984
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
1993
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
2002
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
2011
20
12
20
13
20
14
20
15
20
16
20
17
Cu
rre
nt
20
18
P
2019P
Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC forecasts (Data: Apr-18, Pub: Jun-18)
US Single-Family Residential Permits
Source: John Burns Real Estate Consulting Client Survey, June 2018
84
3K
88
0K
92
0K
91
0K
85
0K
0K
200K
400K
600K
800K
1,000K
1,200K
1,400K
1,600K
1,800K
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
2017
Curr
ent
2018
P 2
019
P 2
020
P 2
021
P
Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC forecasts (Data: May-18, Pub: Jul-18)
US Single-Family Residential Permits
50
1K
46
0K
43
0K
0K
100K
200K
300K
400K
500K
600K
700K
800K
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
2017
2018P
2019P
Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC forecasts (Data: Apr-18, Pub: Jun-18)
US Multifamily Residential Permits
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
US Born
Alive TodayForeign Born
14 M
1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09
1930s SaversAge 78-87
Defining the Generations by Decade Born
Will Simplify Your Decision-Making2016 US POPULATION
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
27 M
1930s SaversAge 78-87
1940s AchieversAge 68-77
1940s AchieversAge 68-77
14 M
1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09
The high-achieving Earliest Baby
Boomers have retired.2016 US POPULATION
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
27 M
40 M
1930s SaversAge 78-87
1940s AchieversAge 68-77
14 M
1950s InnovatorsAge 58-67
1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09
The 1950s Innovator Boomers Are
now Retiring in Droves2016 US POPULATION
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
27 M
40 M43 M
1930s SaversAge 78-87
1940s AchieversAge 68-77
1950s InnovatorsAge 58-67
14 M
1960s EqualersAge 48-57
1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09
The 1960s Equalers Achieved Equal Education,
with more Women Graduating from College than
Men2016 US POPULATI ON
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
27 M
40 M43 M
41 M
1930s SaversAge 78-87
1940s AchieversAge 68-77
1950s InnovatorsAge 58-67
14 M
1960s EqualersAge 48-57
1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09
1970s Balancers Shifted the Definition
of Success to Include Success at Home2016 US POPULATION
1970s BalancersAge 38-47
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
27 M
40 M43 M
41 M
44 M
1930s SaversAge 78-87
1970s BalancersAge 38-47
1940s AchieversAge 68-77
1950s InnovatorsAge 58-67
14 M
1980s SharersAge 28-37
1960s EqualersAge 48-57
1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09
1980s Sharers Have Led the
Disruptive Shift to a Sharing Economy2016 US POPULATION
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
27 M
40 M43 M
41 M
44 M44 M
1930s SaversAge 78-87
1970s BalancersAge 38-47
1980s SharersAge 28-37
1940s AchieversAge 68-77
1990s ConnectorsAge 18-27
1950s InnovatorsAge 58-67
14 M
1960s EqualersAge 48-57
1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09
1990s Connectors use their phones
whenever possible2016 US POPULATION
Agenda
Our Forecast Process
US Economy Outlook: Solid Growth
with Rising Risks from Too Much Debt
New Home Industry Outlook: Slow
Volume Growth with Very High Prices
Awesome Remodeling Industry Outlook
1
2
3
4
We expect 4 good Remodeling spending years ahead, even assuming an economic slowdown.
We classify materials spending into 3 categories:
Source: John Burns Real Estate Consulting
Note: Numbers may not add to total because of rounding. New Construction Spending Excludes Land
M AT E R I A L S
$349 B (2018)
$17 B
5%
DISASTERREPAIR+REMODEL
$221 B
64%
$111 B
32%
N E W H O M E S
$349 billion will be 7% growth this year
R+R will grow 9% this year and 7% next year.
Disaster repair will likely decline 1% and then 4%.R E S I D E N T I A L B U I L D I N G M AT E R I A L S S P E N D I N G G R O W T H F O R E C A S T
6% 6%5%
9%
7%
4%
-5%
5%
-1%
-4%
13%
4%
3%
6%
4%
2%
-4%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
2015 2016 2017E 2018P 2019P 2020P 2021P
Residential Building Materials Spending Growth
New construction Repair and remodel Disaster repair
In 2018, we expect 6% growth in homeowner big
projects and 11% growth in homeowner small projects.2 0 1 8 R E M O D E L I N G M AT E R I A L S S P E N D I N G G R O W T H
Source: John Burns Real Estate Consulting, LLC
SP
EN
DI
NG
G
RO
WT
H
T Y P E O F P R O J E C T
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
Big $5,000+Small <$5,000
Big Projects Small Projects
+13%
Owner
-2%
Rental
+12%
Owner
+9%
Rental
Per our Building Material Dealer Survey – Rebound in Q2 after
Slow Q1
Huge Differences by Product Type: Strong Kitchen & Bath, but
Weak Roofing, Siding, and Windows & Doors.
10-year Household growth will Be Young and OldHOUSEHOLD FORMATION BY AGE GROUP, 2016–2025
Source: John Burns Real Estate Consulting, LLC
10.2 M
3.3 M
-1.0 M
25–44 45–64 65+
Age that 50% Form a Household and Buy a Home
2006 2016
Household 24 26
Homeownership 31 36
Societal Delays
2 Year Delay in Household Formation
5 Year Delay in Homeownership
Older homes will transact more to younger buyers. We expect 1.1M existing older home owners to leave their home every year over the
next 10 years. Many will be bought by younger buyers.
H O M E O W N E R G R O W T H B Y G E N E R AT I O N ( M I L L I O N S ) , 2 0 1 6 – 2 0 2 5
Source: John Burns Real Estate Consulting, LLC
HO
ME
OW
NE
R G
RO
WT
H (
MI
LL
IO
NS
)
G E N E R A T I O N
-2.2
-4.1
-3.2
-1.1
0.6
2.8
5.4
6.2
0.9
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
Pre 1930s1930s
Savers
1940s
Achievers
1950s
Innovators
1960s
Equalers1970s
Balancers
1980s
Sharers1990s
Connectors
2000s
Globals
-10.6 M
15.9 M
Older homes drive more systems and exterior
remodels.I M PA C T O F A G E O F H O M E O N R E M O D E L :
Source: John Burns Real Estate Consulting, LLC
NEW HOMES (<16 yrs)
• Spend +69% More on Outdoors
MIDDLE-AGED HOMES (16-35 yrs)
• Spend +18% More on Indoors
OLDER HOMES (46+ yrs)
• Spend 22% More on Exteriors and
• +27% More on Systems
Young buyers are 38% more likely to DIY, and will
spend 30% less.< 3 5 Y E A R - O L D B U Y E R R E M O D E L I N G S P E N D I N G V S U S N O R M
Source: John Burns Real Estate Consulting, LLC
38%
#
NUMBER OF DIY PROJECTS
more DIY projects than the
US average
$
AVG PRICE OF DIY PROJECTS
-30%less spending on DIY projects
than the US average
70
After 20 years of declining DIY market share, we saw a
stabilization in 2017 that we believe will continue.
Slowing home price appreciation and rising income
causes a shift to small project remodels (paint & windows
rather than new kitchens).
Incoming wave of first time homebuyers that do 38%
more DIY projects
Youtube makes DIY projects much less intimidating.
30%+ of households born after 1980 report they are “More
likely to do DIY Home Improvement because of Youtube”
HGTV Viewership: Viewers <35 years old are 21% more
likely to watch HGTV than US Norm!
The home builders have pivoted to entry-level,
creating new brands.
Source: Builders’ most recent quarterly earnings calls (Pub: Sep-17)
LGIH:IPO
3Q13
DHI:Express Homes
Debut
2Q14
NVR:Simply Ryan
Debut
2Q15
MDC:Seasons by
Richmond
American Debut
4Q15
TPH:Pardee in Las
Vegas (Responsive
Home) Debut
1Q16
MTH:LIVE Now Debut
NWHM:Announced ~
Entry-Level
Product
3Q16
CCS:Century Complete Debut
MHO:Announced Entry-Level
Targeted Product
TOL:Announced T | Select;
entry-level brand
4Q16
TPH:Responsive Homes
in more markets
MHO:Roll-out of Smart
Series into more
markets
2Q17
Source: John Burns Real Estate Consulting, LLC, independent survey of ~18% of all US new home sales, NSA (Data: May-18, Pub: Jun-18)
16%
33%
0%
5%
10%
15%
20%
25%
30%
35%
Closer Further
Location From Job Center
55%
2%
0%
10%
20%
30%
40%
50%
60%
Smaller Larger
Lot size
45%
3%
0%
10%
20%
30%
40%
50%
Smaller Larger
Home Size
16%
39%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
More Standard Less Standard
Specification Level
Source: John Burns Real Estate Consulting, LLC, independent survey of ~18% of all US new home sales, NSA (Data: May-18, Pub: Jun-18)
38%
0%0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Closer Further
Location From Job Center
31%
23%
0%
5%
10%
15%
20%
25%
30%
35%
Smaller Larger
Lot size
17%
33%
0%
5%
10%
15%
20%
25%
30%
35%
Smaller Larger
Home Size
77%
0%0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
More Standard Less Standard
Specification Level
4%
22%
0%
5%
10%
15%
20%
25%
Closer Further
Location From Job Center
29%
13%
0%
5%
10%
15%
20%
25%
30%
35%
Smaller Larger
Lot size
26%
22%
0%
5%
10%
15%
20%
25%
30%
Smaller Larger
Home Size
21% 21%
0%
5%
10%
15%
20%
25%
More Standard Less Standard
Specification Level
Source: John Burns Real Estate Consulting, LLC, independent survey of ~18% of all US new home sales, NSA (Data: May-18, Pub: Jun-18)
Brand name companies beware:
younger homebuyers put less value on brands.B U Y E R S W H O M A R K E D N A M E B R A N D A S “ M O S T I M P O R TA N T ” T O T H E M
Source: Consumer and Product Insights Survey 2016, John Burns Real Estate Consulting, LLC
%
OF
B
UY
ER
S
G E N E R A T I O N
16%
15% 14%
12%
10%
7% 7%
0%
2%
4%
6%
8%
10%
12%
14%
16%
1930sSavers
1940sAchievers
1950sInnovators
1960sEqualers
1970sBalancers
1980sSharers
1990sConnectors
87% 87%
68%
39%
28%23% 24%
71% 71%67%
54%
36%
28%31%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
GE Whirlpool KitchenAid Bosch Sub-Zero/Wolf Thermador Viking
Example: Younger buyers less likely to pay for
branded appliance upgrades.HOME SHOPPERS WILL ING TO PAY MORE TO UPGRADE APPLIANCE BRANDS
Source: Consumer and Product Insights Survey 2016, John Burns Real Estate Consulting, LLC
% W
IL
LIN
G T
O P
AY
F
OR
B
RA
ND
A
T P
RIC
E P
RE
MIU
M
A P P L I A N C E A N D P R I C E P R E M I U M
35+ years old< 35 years old
$800+ $3,500+No premium $1,500+
But young buyers are more willing to pay for new
technology features.B U Y E R S W I L L I N G T O PAY A N E X T R A $ 3 , 5 0 0 F O R A R E F R I G E R AT O R W I T H
B U I L D I N F O O D M A N A G E M E N T F O R G R O C E R Y O R D E R S
Source: Consumer and Product Insights Survey 2016, John Burns Real Estate Consulting, LLC
%
OF
B
UY
ER
S
LI
KE
LY
T
O
AD
D
G E N E R A T I O N
15%17% 18%
23%
28%26%
29%
0%
5%
10%
15%
20%
25%
30%
1930sSavers
1940sAchievers
1950sInnovators
1960sEqualers
1970sBalancers
1980sSharers
1990sConnectors
Monthly
• Building Products Spending Forecast – Repair
and Remodel + New Construction
• Home Builder Survey
• Dealer / Distributor Survey
• Regional Housing Analysis and Forecast
• National Housing Analysis and Forecast
Annual
• New Home Consumer Product Insight Survey
• Executive Summit Conference (May in CA)
• Housing Outlook Conference (Nov. in NY)
• Home Design Conference (March in CO or TX)
• Direct Interaction with our Experts
• Detailed Building Products Spending
Forecasts by category, geography,
price point, etc.
• Company Acquisition Due Diligence
• Strategic Plan and Investor Relation
Support
• Channel and Customer Research
• Custom Remodeler, Builder, and
Distribution Surveys
• Consumer Research
US Housing
Market Outlook
August 8, 2018John Burns
CEO
949-870-1210
jburns@realestateconsulting.com
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