Regional Housing Markets: Too hot, too cold, or just right?

JANUARY 19, 2016 || 1 – 2:00 PM

Presenter(s):

David W. Berson || Nationwide Mutual Insurance Co.,

Columbus, OH

Regional Housing Market Insights

While the national housing market continues to grow at a modest

pace, each regional market is different. Factors such as labor

markets, affordability, and demographics differ across the country

and impact housing markets. What do the latest data on these

factors, plus others, imply for the sustainability of the housing

expansion in regional markets across the country? Are there

markets that have serious risk factors, or will 2016 see another year

with expansion almost everywhere?

Learning Outcomes

Learn about the key demographic drivers of housing demand.

Learn about why house price appreciation has been so strong.

Learn which housing markets in the U.S. appear to be most

sustainable for 2016.

Learn which housing markets in the U.S. have the largest risk

factors that could end sustainable expansion.

Household formations are now above average,

suggesting stronger housing demand

Image

Image

Source: Census Bureau / Haver Analytics

Cha

nge

, ye

ar-

to-y

ea

r, M

illio

ns

Total number of households3rd Quarter 2015

4

Supply/demand for new homes is still fairly tight

Image

Image

Source: Census Bureau / Haver Analytics

Mo

nth

s

Month’s supply of new homesNovember 2015

5

Vacancy rates are low – especially for rental units –

putting upward pressure on pricing/rents

Image

Image

Source: Census Bureau / Haver Analytics

Pe

rcen

t

Vacancy rates3rd Quarter 2015

Homeowner Vacancy Rate (L)

Rental Vacancy Rate (R)

Pe

rcen

t

6

Tight supply/demand conditions are pushing house

prices up rapidly

Image

Image

Source: CoreLogic / Haver Analytics

Pe

rcen

t

CoreLogic House Price IndexNovember 2015

7

Current value

Total housing starts are still historically low relative to

the number of households – lots of pent up demand

Image

Image

Source: Census Bureau / Haver Analytics

Hou

se

hold

s p

er

sta

rt

Households vs. Total housing starts3rd Quarter 2015

8

Lots of opportunity for owner-occupied starts

Image

Image

Source: Census Bureau / Haver Analytics

Hou

se

hold

s p

er

sta

rt

Households vs. Single-family housing starts3rd Quarter 2015

9

LIHHM Overview & Methodology

10

• The Nationwide Leading Indicator of Healthy Housing Markets (LIHHM) is a data-driven

forecast of the future housing market “health” of 400 metropolitan statistical areas (MSAs)

and divisions across the country.

• The LIHHM combines the quantitative analysis of nine variables under these categories:

(1) employment, (2) demographic, (3) mortgage market and (4) home price factors.

• A z-score (value range from 75 to 125) is computed for each factor for each MSA with

values near 100 as neutral. We conducted a backtest to empirically determine the optimal

weighting of our nine healthy housing market indicators. Weightings are consistent across

the different MSAs.

• Historically, MSAs with a LIHHM score above 100 have tended to outperform their

own long-run average in home price and sales growth over the following four-to-eight

quarter period.

The national housing market is healthy

Image

Image

Source: Nationwide’s Health of Housing Markets (HoHM) Report: www.InTheNation.com/housing

2015 Q4 National Leading Index of Healthy Housing Markets (LIHHM)

11

75

80

85

90

95

100

105

110

115

120

125

75

80

85

90

95

100

105

110

115

120

125 LIHHM Scores

NEGATIVE

POSITIVE

NEUTRAL

125

75

100

Most regional housing markets look healthy – a far cry

from the 2000s

Image

Image

12Source: Nationwide’s Health of Housing Markets (HoHM) Report: www.InTheNation.com/housing

0

50

100

150

200

250

300

350

400

Nu

mb

er

of

MSA

s

NEGATIVE

POSITIVE

NEUTRAL

+4

- 4

0

Performance

Rankings

The LIHHM: Energy state concerns, but overall very

positive

Image

Image

13Source: Nationwide’s Health of Housing Markets (HoHM) Report: www.InTheNation.com/housing

2015 Q4 LIHHM Rankings

NEGATIVE

POSITIVE

NEUTRAL

+4

- 4

0

Performance

Rankings

While the overall LIHHM is positive, LIHHM scores are

declining in more MSAs

Image

Image

14Source: Nationwide’s Health of Housing Markets (HoHM) Report: www.InTheNation.com/housing

LIHHM 4Q change*

* Change in performance ranking; Data as of 2015 Q3

DECREASED

INCREASED≥ +3

≤ -3

UNCHANGED

LIHHM payrolls score: Positive in most areas

Image

Image

15Source: Nationwide’s Health of Housing Markets (HoHM) Report: www.InTheNation.com/housing

2015 Q4 (2015 Q3 Data)

Ranking:

WORSE

BETTER

NEUTRAL

LIHHM unemployment scores: Positive in most areas

Image

16Source: Nationwide’s Health of Housing Markets (HoHM) Report: www.InTheNation.com/housing

2015 Q4 (2015 Q3 Data)

Ranking:

WORSE

BETTER

NEUTRAL

LIHHM investor share: Very mixed

Image

Image

17Source: Nationwide’s Health of Housing Markets (HoHM) Report: www.InTheNation.com/housing

2015 Q4 (2015 Q3 Data)

Ranking:

WORSE

BETTER

NEUTRAL

LIHHM delinquency score: Delinquencies have fallen

sharply in most areas

Image

Image

18Source: Nationwide’s Health of Housing Markets (HoHM) Report: www.InTheNation.com/housing

2015 Q4 (2015 Q3 Data)

Ranking:

WORSE

BETTER

NEUTRAL

LIHHM median LTV score: Very mixed

Image

Image

19Source: Nationwide’s Health of Housing Markets (HoHM) Report: www.InTheNation.com/housing

2015 Q4 (2015 Q3 Data)

Ranking:

WORSE

BETTER

NEUTRAL

LIHHM HPI price score: Positive in most places, with

some notable exceptions

Image

Image

20Source: Nationwide’s Health of Housing Markets (HoHM) Report: www.InTheNation.com/housing

2015 Q4 (2015 Q3 Data)

Ranking:

WORSE

BETTER

NEUTRAL

LIHHM price-to-income score: Not so good in the West

Image

Image

21Source: Nationwide’s Health of Housing Markets (HoHM) Report: www.InTheNation.com/housing

2015 Q4 (2015 Q3 Data)

Ranking:

WORSE

BETTER

NEUTRAL

Important disclosure

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Image

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This material is provided by Nationwide Economics and is general in nature. It is not intended as

investment or economic advice, or a recommendation to buy or sell any security or adopt any

investment strategy. Additionally, it does not take into account the specific investment objectives, tax

and financial condition or particular needs of any specific person. We encourage you to seek the

advice of an investment professional who can tailor a financial plan to meet your specific needs.

The economic and market forecasts in this report reflect our opinion as of the date of this

presentation/review and are subject to change without notice. These forecasts show a broad range

of possible outcomes. Because they are subject to high levels of uncertainty, they may not reflect

actual performance. Case studies and examples are for illustrative purposes only. We obtained

certain information from sources deemed reliable, but we do not guarantee its accuracy,

completeness or fairness.

David W. Berson

Natonwide Mutual

Insurance Co.

614.677.2994

1 Nationwide Blvd.

Columbus, OH 43128

Speaker Contacts:

David Crowe

NAHB

202.266.8383

1201 15th St. NW

Washington, DC20005

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Frank E. Nothaft

CoreLogic

703.610.5036

8229 Boone Blvd.

Vienna, VA 22182

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