policy and pricing - constant contact · multifamily housing starts leveling off 1995-2003 331,000...
TRANSCRIPT
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Policy and Pricing
HBAofFaye+evilleJanuary25th,2018
RobertDietz,Ph.D.NAHBChiefEconomist
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Policy and Pricing – Economic Update
TaxReform–policychangeandeconomicimpactMacroeconomicupdate
InterestratesandhousingdemandSupply-sidefactorsupdateLocaleconomicfactors
ForecastsA?ppingpointforhomeownership?
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Tax Reform
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Tax Reform – Policy Changes and • IndividualTaxpayers
• Lowertaxrates,withtoprateof37%
• $1.2trilliontaxcutforratereduc?on• Personalexemp?onseliminatedbutstandarddeduc?onnearlydoubles,childcreditexpands
• $70billiontaxcutonnetbasis• Housingdeduc?ons
• Feweritemizers,butoffsetbylargerstandarddeduc?on
• $750KcapforMID,secondhomeruleretained• Propertytaxandincome/salesSALTdeduc?oncappedat$10,000
• Capitalgainexclusionforprincipalresidences• Protectedwiththeexis?ng2of5yearoccupancyrule
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Tax Reform – Policy Changes and • IndividualTaxpayers
• AMTthresholdsraised:$637billiontaxcut
• Estatetaxexemp?onamountsdoubledto$11millionperperson:$83billiontaxcut
• BusinessTaxpayers
• Specialpass-thrudeduc?onof20%:$415billiontaxcut
• LIHTCandprivateac?vitybondsprotected• Carriedinterestnowhasthree-yearholdingperiodrequirement
• Businessinterestdeduc?onprotectedforrealestate
• Ac?velosslimitof$500Kperyearagainstpassiveincome• Likekindexchangeprotectedforrealestate
• Completedcontractaccoun?ngrulesprotectedandexpanded
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Tax Reform – Policy Changes and • Economicimpacts
• GDP
• Markedup2018forecastto2.6%• Dynamicscoringmodelsuggests0.8%moreGDPa_er10years
• Businessinvestment• 1.1%highera_ertenyears
• Laborsupplyandemployment
• 0.6%higher• 0.9millionmoreworkersinlaborforce
• Reducedhomepricegrowthtoaposi?ve2.9%growthratein2018
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Macroeconomics
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-25%
0%
25%
50%
75%
100%
36556368913722537560378943823038564388983923339568399034023740574409084124341578419124224742582429164325143585
Q/Q Percent Change, SAAR Annual GrowthLT avg (‘58-’07) 3.4%2015 2.9%2016 1.5%2017f 2.3%2018f 2.6%2019f 2.1%
GDP GrowthStrongergrowthexpectedpost-taxreform
ff
Source:U.S.BureauofEconomicAnalysis(BEA).
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Probability of US Recession
0%
25%
50%
75%
100%
21946229502395424958259642696827972289752998230986319893299334000350033600737011380173902140025410294203543039
Nov 2018 = 10.9%
Recessionprobabilitysmallfor2018
Source:NAHBcalcula:onsandFederalReserveBankofNewYorkdata.
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Tight Labor MarketHowlowcanunemploymentgo?
0.041
3.781
7.520
11.260
15.000
1/31/06 11/30/06 9/30/07 6/30/08 3/31/09 1/31/10 11/30/10 9/30/11 6/30/12 3/31/13 1/31/14 11/30/14 9/30/15 6/30/16 3/31/17
Job Openings Rate
Unemployment Rate
Percent, SA Percent, SA
Source:U.S.BureauofLaborSta:s:cs(BLS).
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Labor Force Participation RateStabilizedlaborforceparJcipaJonkeytofuturegrowth
0
17.5
35.0
52.5
70.0
Source:U.S.BureauofLaborSta:s:cs(BLS).
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Average Hourly Wages
0%
25%
50%
75%
100%
39202393863956839752399334011740298404824066340847410294121341394415784175941943421244230842490426744285543039
Y/Y Percent Change, SA
Tightlabormarketplustaxreformshouldboostwagegrowth
Source:U.S.BureauofLaborSta:s:cs(BLS).
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Interest Rates and Demand
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Consumer and Core Inflation
-10
-5
0
5
10
15
20
3/31/796/30/869/30/93 3/31/016/30/089/30/158/31/931/31/966/30/98 1/31/016/30/03 1/31/066/30/08 1/31/116/30/13 1/31/166/30/18
Core PCE
CPI
Percent, SAAR
Source:U.S.BureauofLaborSta:s:cs(BLS)andNAHBforecast.
InflaJonpressuresbuilding
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Target Federal Funds RateFedwillconJnuetoraiserates
0.10000000000000000%
1.82500000000000026%
3.55000000000000051%
5.27500000000000077%
7.00000000000000102%
33238 33969 34699 35430 36160 36891 37621 38352 39082 39813 40543 41274 42004 42735 43465
2.56%
1.88%
1.12%
0.62%
0.20%0.12%0.12%0.12%0.12%0.12%0.12%0.12%
4.25%
5.25%
4.25%
2.25%
1.00%1.25%
1.75%
6.50%
5.50%
4.75%
5.50%5.25%
5.50%5.50%
3.00%3.00%
4.00%
7.00%
Source:NAHBforecastandFederalReservedata.
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Federal Reserve Balance SheetBalancesheetreducJonunderway
$0
$1,250,000
$2,500,000
$3,750,000
$5,000,000
USTreasurySecuri:es
Agency-andGSE-MBS
AllElse
Federal Reserve Balance Sheet ($Tr.)
Agency-andGSE-MBSShare
Source:U.S.BoardofGovernorsoftheFederalReserveSystem(FRB).
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30-Year Fixed Rate and 10-Year RateswillriseduetoFedpolicyandJghtlabormarkets
0%
25%
50%
75%
100%
1/31/9012/31/91 1/31/9412/31/95 1/31/9812/31/99 1/31/0212/31/03 1/31/0612/31/07 1/31/1012/31/11 1/31/1412/31/15 1/31/1812/31/19
October31,201630-YearFixedRateMortgage
10-YearTreasury
Difference
Source:NAHBforecastandFederalReserveandFreddieMacdata.
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Housing Affordability
National
Source:NAHB/WellsFargoHousingOpportunityIndex.
Affordabilitydeclining
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S&P/Case-Shiller National US Home
-15
-10
-5
0
5
10
15
20
1/31/87 1/31/89 1/31/91 1/31/93 1/31/95 1/31/97 1/31/99 1/31/01 1/31/03 1/31/05 1/31/07 1/31/09 1/31/11 1/31/13 1/31/15 1/31/17 1/31/19
Percent Growth, SAAR
Source:NAHBforecastandS&PDowJonesIndicesLLC;CoreLogic,Inc..
Pricesgrowingfasterthanincome
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Supply-Side Headwind Update
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LaborElevatedcountofunfilledconstrucJonjobs
0
3.75
7.50
11.25
15.00 Jobopeningsrate-Construc?on12-monthmovingaverage
Source:U.S.BureauofLaborSta:s:cs(BLS).
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Lending – AD&C Access
$0
$50,000
$100,000
$150,000
$200,000
39172 39447 39721 39994 40268 40543 40816 41090 41364 41639 41912 42185 42460 42735
Year-over-YearGrowthRates1-4unitResiden?alConstruc?onLoans
Millions
Source:FederalDepositInsuranceCorpora:on.
Loansgrowingbutataslowerrate
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Building Materials – Softwood Lumber
150.0
172.5
195.0
217.5
240.0
40939 41060 41182 41305 41425 41547 41670 41790 41912 42035 42155 42277 42400 42521 42643 42766 42886 43008
Index 1982=100, NSA
Source:U.S.BureauofLaborSta:s:cs(BLS).
SinceJanuary2017,soWwoodlumberincreased14.6%
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Local Look
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North Carolina GDP Growth
-3.900%
22.075%
48.050%
74.025%
100.000%
3728737560378333810738383386563892939202394783975240025402984057440847411214139441670419434221642490
1.90%2.70%2.10%1.70%
-0.30%
1.20%1.10%
-3.90%
2.40%0.10%5.50%4.50%3.90%2.20%1.50%
Y/Y Percent Change
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Fayetteville MSA GDP Growth
-25%
0%
25%
50%
75%
100%
37287 37560 37833 38107 38383 38656 38929 39202 39478 39752 40025 40298 40574 40847 41121 41394 41670 41943 42216 42490
0.20%
-1.10%-3.70%-2.30%-2.60%
1.30%2.60%5.60%5.20%1.80%2.30%5.10%2.40%2.40%4.50%
Y/Y Percent Change
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Share of GDP by Major Industries –
0%
15%
30%
45%
60%
Wholesaletrade Construction Professionalandbusinessservices Government
15.34%12.00%
19.75%
11.68%12.81%
8.49%6.06%
3.95%3.86%6.06% 6.56%
52.73%
9.19%8.64%5.58%5.47%5.15%
2.44%2.42%1.81%
FayedevilleMSA U.S.
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0
100,000
200,000
300,000
400,000
38037837837837437336810,15710,0429,9419,8509,7559,6639,574
323,406321,040318,623316,235313,993311,644309,338
United States North Carolina Fayetteville, NC
Thousands Thousands
Population GrowthFaye[evilleMSApopulaJongrowingslowerthannaJonalandstatewiderates
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Payroll EmploymentFaye[evilleMSAabovepre-recessionpeak
113.80
1,210.35
2,306.90
3,403.45
4,500.00
1/31/00 3/31/01 5/31/02 7/31/03 9/30/04 12/31/05 3/31/07 5/31/08 7/31/09 9/30/10 12/31/11 3/31/13 5/31/14 7/31/15 9/30/16
101%
Thousands, SA Thousands, SA
98%
107%
92%
North Carolina
Fayetteville, NC
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Existing House Price IndexFaye[evilleMSAbelowpre-recessionpeak
1.00
50.75
100.50
150.25
200.00
3/31/00 3/31/03 3/31/06 3/31/09 3/31/12 3/31/15 1/31/06 1/31/07 1/31/08 1/31/09 1/31/10 1/31/11 1/31/12 1/31/13 1/31/14 1/31/15 1/31/16
2000Q1 = 100, SA
United States
Relative to Pre-recession Peak US FayettevilleRecession-era Low 81% 93%Current 107% 93%
Fayetteville, NC
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Affordability Higher Than National Level
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Forecasts
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Household Formation
-1,125-750-375
0375750
1,1251,500
Y/Y Change in Household Count, Thousands, NSA
Owner-Occupied
0
1
2
3
4
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31
Renter-Occupied
Source:U.S.CensusBureau(BOC):HousingVacancies&Homeownership.
Demandforhomeownershipstrengthening
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Homeownership Rate
0.610%
375.458%
750.305%
1125.153%
1500.000%
Percentage, Quarterly, SA
Source:U.S.CensusBureau(BOC):HousingVacancies&Homeownership.
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NAHB/Wells Fargo Housing Market
0
500
1,000
1,500
2,000
1/31/05 12/31/0511/30/0610/31/07 9/30/08 7/31/09 5/31/10 3/31/11 1/31/12 12/31/1211/30/1310/31/14 9/30/15 7/31/16 5/31/17
Index Thousands, SAAR
Single-Family Starts
HMI
Nearlytwo-decadehighforbuilderconfidence
Source:CensusBureauandNAHB/WellsFargoHMIsurvey.
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0
500
1,000
1,500
2,000
1/31/00 4/30/01 7/31/02 11/30/03 3/31/05 6/30/06 9/30/07 1/31/09 4/30/10 7/31/11 11/30/12 3/31/14 6/30/15 9/30/16 1/31/18 4/30/19
Thousands of units, SAAR
80% fall2017Q3: 63% of
“Normal”
2019Q4:73% of
“Normal”
2000-2003 1,343,000 “Normal”2014 647,0002015 712,000 10%2016 784,000 10%2017 854,000 9%2018 893,000 5%2019 940,000 5%
Single-Family StartsGrowthahead
Trough to Current:Mar 09 = 353,000Nov 17 = 930,000
+163%
Source:CensusBureauandNAHBforecast.
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Single-Family Building Permits –
500.00
21,618.75
42,737.50
63,856.25
84,975.00
33238 33969 34699 35430 36160 36891 37621 38352 39082 39813 40543 41274 42004 42735
Number of Units
Fayetteville, NC
North Carolina
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North Carolina Single-Family Housing Market Somemetroareasareclosertoarecoverythanothers
Rank2016
Bo#om20%
20%to40%
40%to60%
60%to80%
Top20%
Relative to Normal
<36%
36%-46%
46%-62%
62%-84%
84%<
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Multifamily Housing StartsLevelingoff
1995-2003 331,000 “Normal”2014 355,0002015 395,000 11%2016 393,000 -1%2017 360,000 -8%2018 354,000 -2%2019 344,000 -3%
Source:CensusBureauandNAHBforecast
0
50
100
150
200
250
300
350
400
450
500
550
3/31/00 3/31/04 3/31/08 3/31/12 3/31/16 9/30/06 1/31/08 4/30/09 7/31/10 11/30/11 3/31/13 6/30/14 9/30/15 1/31/17 4/30/18 7/31/19
Trough to Current:4th Q 09 = 82,0003rd Q 17 = 324,000
+295%
2017Q3:98% of
“Normal”
Thousands of units, SAAR
76% fall
Avg=344,000
2019Q4: 104% of “Normal”
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Multifamily Building Permits –
0
7,500
15,000
22,500
30,000
12/31/90 12/31/92 12/31/94 12/31/96 12/31/98 12/31/00 12/31/02 12/31/04 12/31/06 12/31/08 12/31/10 12/31/12 12/31/14 12/31/16
Number of Units
Fayetteville, NC
North Carolina
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Residential RemodelingStrongmarketcondiJons
0
75
150
225
300
3/31/94 3/31/99 3/31/04 3/31/09 3/31/14 3/31/19 1/31/04 8/31/05 3/31/0711/30/087/31/10 2/29/12 9/30/13 4/30/1512/31/168/31/18
Billions, SAAR
Adjusted
Actual
Year Percent Change2016 11%2017 17%2018 7%2019 3%
Source:CensusBureauandNAHBforecast.
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Homeownership
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Geography of Homeownership
Alaska
Hawaii
HomeownershipRatesintheU.S.byCounty
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Determinants of Homeownership
NAHBEconomicAnalysis
Importantfactorsforcountylevelanalysis:• Age• Marriage• Localhomecosts• Localincomes
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Determinants of HomeownershipModelingResults
Increaseaverageageincountyby5years• Adds3percentagepointstorate
Increaseshareofmarriedhouseholdsby10%• Added5.1percentagepointstorate
Increaselocalincomesby$10,000• Adds0.6percentagepointstorate
Decreasehousingcostsby$75,000• Adds4.1percentagepointstorate
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Policy ImplicationsEconomic/SocialPolicyThatPromoteHousing
Provideaffordablehousing(rentalandowned)foryoungpeoplesotheycandeveloproots
Tax/economicpolicythatdoesn’tdiscouragemarriage
Incomegrowthisalwaysgood
Reducecostofhousing• Lowerregulatorycosts(up29%overlast5years)
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Regulatory Costs Rising – Up 29% Totaleffectofbuildingcodes,landuse,environmentalandotherrules