L O U I S V I L L E . E D U

The State of the Housing Market in the Greater Louisville Area

Louisville Housing Market - 2013

By: Jose M. FernandezAssistant Professor of

EconomicsUniversity of Louisville

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The Recession of 2007 - 2009

Louisville Housing Market – 2013Recent Past, Present, and Future

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Employment and Unemployment

Louisville Housing Market – 2013Recent Past, Present, and Future

June - 2007 606,325 Jobs

Feb. - 2010 547,802 Jobs

Jobs Recovered45,144

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Employment and Unemployment

Louisville Housing Market – 2013Recent Past, Present, and Future

Nov. 2007 Unemployment Rate, 4.6%

Feb 2010 Unemployment Rate, 12.3%

7.9%

L O U I S V I L L E . E D UChanges in Louisville employment during 2012, via Brookings Institution Metro Monitor

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Jobless Recovery?

Louisville Housing Market – 2013Recent Past, Present, and Future

9/1/2002 1/14/2004 5/28/2005 10/10/2006 2/22/2008 7/6/2009 11/18/2010 4/1/2012 8/14/2013 12/27/2014$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00

AVG STOCK PRICE OF PUBLICLY TRADED COMPANIES LOCATED IN LOUISVILLE

WEIGHTED AVG STOCK PRICE

Jan. 2007 $62

March 2009 $26

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Historically Low Interest Rates

Louisville Housing Market – 2013Recent Past, Present, and Future

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Historically Low Interest Rates

Louisville Housing Market – 2013Recent Past, Present, and Future

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Historically Low Interest Rates

Louisville Housing Market – 2013Recent Past, Present, and Future

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Recovery

Louisville Housing Market – 2013Recent Past, Present, and Future

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Policies that fueled the buying

Louisville Housing Market – 2013Recent Past, Present, and Future

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Present

Louisville Housing Market – 2013Recent Past, Present, and Future

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Present

Louisville Housing Market – 2013Recent Past, Present, and Future

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Slow Price Recovery

Louisville Housing Market – 2013Recent Past, Present, and Future

2005M01

2005M06

2005M11

2006M04

2006M09

2007M02

2007M07

2007M12

2008M05

2008M10

2009M03

2009M08

2010M01

2010M06

2010M11

2011M04

2011M09

2012M02

2012M07

2012M12105.00

110.00

115.00

120.00

125.00

130.00

Housing Price Index 2005 - 2013

Louisville-Jefferson County KY-IN MSALexington-Fayette KY MSA

Pric

e In

dex

(Bas

e Ye

ar =

200

0M04

)

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Slow Price Recovery

Louisville Housing Market – 2013Recent Past, Present, and Future

2005Q1

2005Q3

2006Q1

2006Q3

2007Q1

2007Q3

2008Q1

2008Q3

2009Q1

2009Q3

2010Q1

2010Q3

2011Q1

2011Q3

2012Q1

2012Q3

2013Q1-6-4-202468

101214

Four-Quarter Percent Change in FHFA MSA-Level House Price Indexes

Louisville-Jefferson County, KY-IN Lexington-Fayette, KY

Perc

ent C

hang

e

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Price and Quantity

Louisville Housing Market – 2013Recent Past, Present, and Future

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Mortgage Loan Origination in Southern Region of US

Louisville Housing Market – 2013Recent Past, Present, and Future

200501

200503

200601

200603

200701

200703

200801

200803

200901

200903

201001

201003

201101

201103

201201

201203

2013010.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Share of New Purchase and Refinance Loans

PurchaseRate-Term Cash-Out Share

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Mortgage Loan Origination in Southern Region of US

Louisville Housing Market – 2013Recent Past, Present, and Future

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013-20%

-10%

0%

10%

20%

30%

40%

Median Appreciation of Refinanced Property

Median Appreciation of Refinanced Property

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Louisville Housing Market – 2013Recent Past, Present, and Future

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Louisville Housing Market – 2013Recent Past, Present, and Future

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Louisville Housing Market – 2013Recent Past, Present, and Future

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Year-to-Year change by County within Louisville MSA

Louisville Housing Market – 2013Recent Past, Present, and Future

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Year-to-Year change by County within Louisville MSA

Louisville Housing Market – 2013Recent Past, Present, and Future

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Percent. Foreclosures by Geographic Location

Louisville Housing Market – 2013Foreclosures

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Louisville Housing Market – 2013Foreclosures

2005Q1

2005Q3

2006Q1

2006Q3

2007Q1

2007Q3

2008Q1

2008Q3

2009Q1

2009Q3

2010Q1

2010Q3

2011Q1

2011Q3

2012Q1

2012Q3

2013Q10.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

Homeownership and Vacancy Rates

Homeownership Rates Homeowner Vacancy Rental Vacancy

Perc

enta

ge

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Median Sale Prices: Typical vs. Foreclosure Louisville MSA

Louisville Housing Market – 2013Foreclosures

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By Zip Code in Louisville MSA

Louisville Housing Market – 2013Foreclosures

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Future: Interest Rates and Recovery

Louisville Housing Market – 2013Recent Past, Present, and Future

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Future: Interest Rates and Recovery

Louisville Housing Market – 2013Recent Past, Present, and Future

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Future: Interest Rates and Recovery

What to look out for?

• Inflationary concerns (currently low, but keep an

eye on the price of gold)

The Law of Money

MV = PY

M = Money Supply P = Price Level

V = Velocity of Money Y = Real GDP

• Student Loan Defaults

• Good Job Reports

Louisville Housing Market – 2013Recent Past, Present, and Future

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The Persistence of Financial Illiteracy

Suppose you had $100 in a savings account and the interest rate

was 2 percent per year. After 5 years, how much do you think you

would have in the account if you left the money to grow?

a. More than $102

b. Exactly $102

c. Less than $102

d. Do not know

* Fewer than 1/3 of young adults in the US answered this question

correctly!

Louisville Housing Market – 2013Recent Past, Present, and Future

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The Persistence of Financial Illiteracy

Annamaria Lusardi (Dartmouth) studies financial literacy

The Wall Street Journal summarizes:

In fact, Americans’ grasp of concepts such as investment risk

and inflation has weakened since the recovery began in mid-

2009. Research released last week shows that on a five-question

test (take the test here), respondents did worse in 2012 than in

2009. The average number of correct answers fell to 2.9 in 2012

from 3.0 on the test in 2009.

Louisville Housing Market – 2013Recent Past, Present, and Future

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The Persistence of Financial Illiteracy

Annamaria Lusardi (Dartmouth) studies financial literacy

• Nearly 50% of observed income differences are due to financial

illiteracy

• These “optimally ignorant” individuals include 67% of the dropouts,

47% of the high school graduates, and 33% of college graduates.

• The majority of Americans do not plan for predictable events such

as retirement or children’s college education. Most importantly,

people do not make provisions for unexpected events and

emergencies, leaving themselves and the economy exposed to

shocks.

Louisville Housing Market – 2013Recent Past, Present, and Future

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Conclusion

• Recovery• Financial Recovery – accomplished• Employment Recovery – SLOW• Expect interest rates to rise, but stay remain low• Expect housing purchase to even out and prices to

rise at decreasing rate• Outlook is positive, but growth will not be strong.• Expect continued re-finance applications

• Future• Watch out for inflation• Help make consumers more financially literate

Louisville Housing Market – 2013Recent Past, Present, and Future