the changing demand toward urban livingapr-03. jan-04. oct-04. jul-05. apr-06. jan-07. oct-07....

©2017 CoreLogic, Inc. All rights reserved. Proprietary and Confidential.

The Changing Demand Toward Urban Living Federal Reserve Bank of Atlanta 2017 Banking Outlook Conference Sam Khater VP & Deputy Chief Economist


Overview

2 Source: CoreLogic

Real Estate Market Update

• Sales Growth Decelerating, but Price Growth Steady • What’s the Impact of Higher Rates on Sales? • Underwriting Remains Steady and Asymmetrical, but Leverage is High • Mortgage Performance may be at the Trough

Changing Demand Toward Urban Living

• Home Prices Surging in Urban Areas Within 6 Miles of CBD • Surge Began in Mid-2000s and Heavily Driven by New Sales • Impact on Affordability and Distribution of Risk

Higher Home Price Inequality Changing Consumer Behavior & Consumption of Space Resorting of Much Higher Credit Risk to Outer Suburbs

©2017 CoreLogic, Inc. All rights reserved. Proprietary and Confidential. 3

Source: CoreLogic

Home Sales Growth Rate Decelerates in February Percent Change from Year Ago in Top 100 Markets

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%S

ept 1

7 20

15O

ct 1

201

5O

ct 1

5 20

15O

ct 2

9 20

15N

ov 1

2 20

15N

ov 2

6 20

15D

ec 1

0 20

15D

ec 2

4 20

15Ja

n 07

201

6Ja

n 21

201

6Fe

b 4

2016

Feb

18 2

016

Mar

3 2

016

Mar

17

2016

Mar

31

2016

Apr

14

2016

Apr

28

2016

May

12

2016

May

26

2016

Jun

9 20

16Ju

n 23

201

6Ju

ly 7

201

6Ju

ly 2

1 20

16A

ug 4

201

6A

ug 1

8 20

16S

ep 1

201

6S

ep 1

5 20

16S

ep 2

9 20

16O

ct 1

3 20

16O

ct 2

7 20

16N

ov 1

0 20

16N

ov 2

4 20

16D

ec 8

201

6D

ec 2

2 20

16Ja

n 5

2017

Jan

19 2

017

Feb

2 20

17Fe

b 16

201

7


Source: CoreLogic

Home Price Growth is Steady Heading Into Spring Percent Change from Year Ago in Top 100 Markets

0%

1%

2%

3%

4%

5%

6%

7%

8%S

ept 1

7 20

15O

ct 1

201

5O

ct 1

5 20

15O

ct 2

9 20

15N

ov 1

2 20

15N

ov 2

6 20

15D

ec 1

0 20

15D

ec 2

4 20

15Ja

n 07

201

6Ja

n 21

201

6Fe

b 4

2016

Feb

18 2

016

Mar

3 2

016

Mar

17

2016

Mar

31

2016

Apr

14

2016

Apr

28

2016

May

12

2016

May

26

2016

Jun

9 20

16Ju

n 23

201

6Ju

ly 7

201

6Ju

ly 2

1 20

16A

ug 4

201

6A

ug 1

8 20

16S

ep 1

201

6S

ep 1

5 20

16S

ep 2

9 20

16O

ct 1

3 20

16O

ct 2

7 20

16N

ov 1

0 20

16N

ov 2

4 20

16D

ec 8

201

6D

ec 2

2 20

16Ja

n 5

2017

Jan

19 2

017

Feb

2 20

17Fe

b 16

201

7

©2017 CoreLogic, Inc. All rights reserved. Proprietary and Confidential. Source: CoreLogic

Turnover Rate Higher when Rates Move Lower Percent of home buyers that sell by length of ownership, 1976-2016

5

0%

1%

2%

3%

4%

5%

6%

7%

0 3 6 9 12 15 18 21 24 27 30Number of Years

Rates up 3% Rates up 1.5%

Rates down 1.5%

Rates down 3%

©2017 CoreLogic, Inc. All rights reserved. Proprietary and Confidential. Source: CoreLogic

Rising Rates May Be A Hurdle for Resales Percent of home buyers that sell by length of ownership, 1976-2016

6

0%

1%

2%

3%

4%

5%

6%

7%

0 3 6 9 12 15 18 21 24 27 30Number of Years

Rates down 1.5%

Rates up 1.5%


Drop Off in Sales When Rates 100 Basis Points Above Original Note Rate… Number of Home Sales by Change in Mortgage Rate Between Sales, 1976 - 2016

7 Source: CoreLogic

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

-10 -9 -8 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7Rate Spread (<0 in the money, >0 out of money)

Sales When Rates Are Higher Sales When Rates Are Lower

Sales


Source: CoreLogic

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

0

1

2

3

4

5

6

7

8

-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6

Milli

ons

1976 - 2016 - L 1980 - 1984 - R

Rate Spread (<0 in the money, >0 out of money)

…However During Periods of Sustained Rate Rises ‘Lockout’ Effect More Muted Home Sales by Mortgage Rate for Sale Minus Subsequent Purchase for Sales Between 1976 - 2016

Sales When Rates Are Higher Sales When Rates Are Lower

Sales Sales


Source: CoreLogic

Housing Credit Index

Credit Score Less Than 640

LTV Share 95 And Above

DTI Share 43 And Above

Non-Owner Occupancy Share

Condo Co-op Share

Low & No Doc Share

0

25

50

75

100

125

150

Benchmark (2001 and 2002Originations)Current (2016:Q3)


Source: CoreLogic

Housing Credit Index - Underwriting Remains ‘Tight’

20

40

60

80

100

120

14020

01:Q

1

2001

:Q4

2002

:Q3

2003

:Q2

2004

:Q1

2004

:Q4

2005

:Q3

2006

:Q2

2007

:Q1

2007

:Q4

2008

:Q3

2009

:Q2

2010

:Q1

2010

:Q4

2011

:Q3

2012

:Q2

2013

:Q1

2013

:Q4

2014

:Q3

2015

:Q2

2016

:Q1

Housing Credit Index (2001=100) HCI factors Credit Score Loan-to-Value Ratio (LTV) Debt -to-Income Ratio (DTI) Documentation Type Occupancy Status Condo/Co-op Share

2001

-200

3 Be

nchm

ark

Mor

e R

isk

Less

Ris

k


Leverage is at All Time High for Entry Level Buyers Combined LTV by Price Segment, Includes Piggybacks/Silent Seconds

65

70

75

80

85

90

95 $

20,0

00 $

50,0

00 $

80,0

00 $

110,

000

$14

0,00

0 $

170,

000

$20

0,00

0 $

230,

000

$26

0,00

0 $

290,

000

$32

0,00

0 $

350,

000

$38

0,00

0 $

410,

000

$44

0,00

0 $

470,

000

$50

0,00

0 $

530,

000

$56

0,00

0 $

590,

000

$62

0,00

0 $

650,

000

$68

0,00

0 $

710,

000

$74

0,00

0 $

770,

000

$80

0,00

0

2000 2005 2016 (YTD)

CLT

V

11 Source: CoreLogic


Front End Delinquency Transition Rates at 15 Year Lows Current to 30 Day Delinquency Rates for First Lien Loans

Source: CoreLogic

0.8%

0.9%

1.0%

1.1%

1.2%

1.3%

1.4%

1.5%

1.6%Ja

n-01

Aug

-01

Mar

-02

Oct

-02

May

-03

Dec

-03

Jul-0

4Fe

b-05

Sep

-05

Apr

-06

Nov

-06

Jun-

07Ja

n-08

Aug

-08

Mar

-09

Oct

-09

May

-10

Dec

-10

Jul-1

1Fe

b-12

Sep

-12

Apr

-13

Nov

-13

Jun-

14Ja

n-15

Aug

-15

Mar

-16

Oct

-16

12


FHA Early Delinquencies Begin to Worsen Current to 30 Day Delinquency Rates for FHA Loans

Source: CoreLogic

13

1.50%

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

Jan-

00N

ov-0

0S

ep-0

1Ju

l-02

May

-03

Mar

-04

Jan-

05N

ov-0

5S

ep-0

6Ju

l-07

May

-08

Mar

-09

Jan-

10N

ov-1

0S

ep-1

1Ju

l-12

May

-13

Mar

-14

Jan-

15N

ov-1

5S

ep-1

6

FHA Current-to-30 Day Delinquency Transition Rate

-0.80%

-0.60%

-0.40%

-0.20%

0.00%

0.20%

0.40%

0.60%

0.80%

Jan-

01O

ct-0

1Ju

l-02

Apr

-03

Jan-

04O

ct-0

4Ju

l-05

Apr

-06

Jan-

07O

ct-0

7Ju

l-08

Apr

-09

Jan-

10O

ct-1

0Ju

l-11

Apr

-12

Jan-

13O

ct-1

3Ju

l-14

Apr

-15

Jan-

16O

ct-1

6

Year Ago Change in FHA Current-to-30 Day Delinquency Transition Rate


2

2.5

3

3.5

4

4.5

5

5.5

6

6.5

7

0 to 50 50 to 75 75 to 100 100 to 125 125 to 150 150 to 175 175 to 200

Dec-15Dec-16

Inventory of Affordable Homes is Low and Declining Months' Supply by Price Tier, Three Month Moving Average

14

Price Tier

Mon

ths’

Sup

ply

Source: CoreLogic


Rent Growth is Decelerating Repeat Rent Index, Percent Change from Year Ago

15 15 Source: CoreLogic

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%Ja

n-05

Jun-

05N

ov-0

5A

pr-0

6S

ep-0

6Fe

b-07

Jul-0

7D

ec-0

7M

ay-0

8O

ct-0

8M

ar-0

9A

ug-0

9Ja

n-10

Jun-

10N

ov-1

0A

pr-1

1S

ep-1

1Fe

b-12

Jul-1

2D

ec-1

2M

ay-1

3O

ct-1

3M

ar-1

4A

ug-1

4Ja

n-15

Jun-

15N

ov-1

5A

pr-1

6S

ep-1

6

Overall Low Tier High Tier


Changing Demand Toward Urban Living

16 Source: CoreLogic


*Note: 40 metros had same boundaries, 5 added new counties but were small percentage of population. Source: CoreLogic

0

5

10

15

20

25

30

35

40

45

50

1 2 3 4 5 6 7 8 9 10

Distance From City Center to Suburban Ring Number of Miles From City Center to Suburban Ring

Outer Suburb Inner Suburb Middle Suburb


Source: CoreLogic

$100

$105

$110

$115

$120

$125

$130

$135

1 2 3 4 5 6 7 8 9 10

2000

Price Gradient by City to Suburb Ring Price Per Square Foot by Spatial Ring



$170

$180

$190

$200

$210

$220

$230

1 2 3 4 5 6 7 8 9 10

2005



+ $90

+ $80

+ $90

Source: CoreLogic 19


$100

$120

$140

$160

$180

$200

$220

1 2 3 4 5 6 7 8 9 10

2010



- $30

- $60

- $60



$120

$160

$200

$240

$280

$320

1 2 3 4 5 6 7 8 9 10

2016



+ $100

+ $30

+ $60



Change in Price Gradient by City to Suburb Ring Annual Percent Change in Price Per Square Foot by Spatial Ring

10%

11%

12%

13%

14%

15%

1 2 3 4 5 6 7 8 9 10

2000 to 2005





-10%

-8%

-6%

-4%

-2%

0%

1 2 3 4 5 6 7 8 9 10

2005 to 2010





3%

4%

5%

6%

7%

8%

1 2 3 4 5 6 7 8 9 10

2010 to 2016





1%

2%

3%

4%

5%

6%

1 2 3 4 5 6 7 8 9 10

2000 - 2016 Percent Annual Change




New Home Prices in Inner Suburban Rings Skyrocket Price Per Square Foot for New Home Sales vs All Home Sales

Source: CoreLogic

$0

$100

$200

$300

$400

$500

1 2 3 4 5 6 7 8 9 10

2016

All Sales New Sales

$0

$100

$200

$300

$400

$500

1 2 3 4 5 6 7 8 9 10

2000

All Sales New Sales

Outer Suburb Inner Suburb Middle Suburb Outer Suburb Inner Suburb Middle Suburb

26


New Sales Price Increases Rapidly Outpacing Total Prices in 1st Two Rings

Source: CoreLogic

$(50)

$-

$50

$100

$150

$200

1 2 3 4 5 6 7 8 9 10

2000 2016

New Home Sale Price Per Square Foot Minus Total Home Sale Price Per Square Foot


27


Atlanta Home Price Gradient Much Lower than US

Source: CoreLogic

Price Per Square Foot

$0

$50

$100

$150

$200

$250

$300

$350

1 2 3 4 5 6 7 8 9 10

2000

Atlanta US$0

$50

$100

$150

$200

$250

$300

$350

1 2 3 4 5 6 7 8 9 10

2016

Atlanta US

Outer Suburb Inner Suburb Middle Suburb Outer Suburb Inner Suburb Middle Suburb

28


Atlanta Home Price Gradient Much Lower than US

Source: CoreLogic

Percent Change in Price Per Square Foot

0%

1%

2%

3%

4%

5%

6%

1 2 3 4 5 6 7 8 9 10

Atlanta US


29


Source: CoreLogic

Impact of Urban Rebound: Higher Home Price Inequality 75th to 25th Price Tier Ratio

2.0

2.2

2.4

2.6

2.8

3.0

3.2

3.4

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


80%

90%

100%

110%

120%19

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

1420

1520

16

25th 50th 75th

Impact of Urban Rebound: Higher Home Price Inequality Inner Suburb to Middle Suburb Price Ratios by Price Tier



Impact of Urban Rebound: Buyers Consume Less Space in Urban Areas

Source: CoreLogic

Percent Change in Square Footage Between 2000 and 2016

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

1 2 3 4 5 6 7 8 9 10

All Sales New


32


Source: CoreLogic

Impact of Urban Rebound: Leading to Longer Commutes Again Number of Miles From City Center to Suburban Ring

3.0

3.5

4.0

4.5

5.0

5.5

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

1st Spatial Ring (Inner Suburb)

28.0

28.5

29.0

29.5

30.0

30.5

31.0

31.5

32.0

32.5

33.0

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

9th Spatial Ring (Outer Suburb)


Impact of Urban Rebound: Higher Credit Risk Sorting to Suburbs Percent of Purchase Applicants by Credit Score Band Applying for Homes in Outer Suburbs

Source: CoreLogic

30%

32%

34%

36%

38%

40%

42%

44%

46%

48%

50%Ja

n-04

Sep

-04

May

-05

Jan-

06

Sep

-06

May

-07

Jan-

08

Sep

-08

May

-09

Jan-

10

Sep

-10

May

-11

Jan-

12

Sep

-12

May

-13

Jan-

14

Sep

-14

May

-15

Jan-

16

Sep

-16

<= 660 Credit Score >= 780 Credit Score

34

©2017 CoreLogic, Inc. All rights reserved. Proprietary and Confidential. 35 Source: CoreLogic

Look for regular updates to our housing forecast, commentary and data at: http://www.corelogic.com/blog @CoreLogicEcon @TheSamKhater

Where to Find More Information

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the changing demand toward urban livingapr-03. jan-04. oct-04. jul-05. apr-06. jan-07. oct-07....

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