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Restoring Neighborhoods Task ForceJanuary 21, 2020


• Welcome and Introductions

• Outlook for the 2020 Housing Economy

Sam Khater, Freddie Mac

Lawrence Yun, National Association of REALTORS

Mike Fratantoni, Mortgage Bankers Association

• Q&A

WEBINAR AGENDAJanuary 21, 2020


NHC UPDATES


Outlook for the 2020 Housing Economy

Sam Khater, Freddie Mac

Lawrence Yun, National Association of REALTORS

Mike Fratantoni, Mortgage Bankers Association

Economic and Housing Market Outlook

Sam Khater, Chief Economist

January 2020

© Freddie Mac 8

Summary

▪ Economic Growth is Slowing Due to Weaker Investment and Global Growth

▪ But Strong Job Market Leading to Solid Consumer Spending

▪ Lower Rates Led to a Rebound in Home Sales But Supply Shortage is Limiting Sales Rebound

▪ Lack of Supply is a Major Obstacle to Proper Functioning House Market Causing Many Downstream

Ripple Effects

– Lower Household Formations and a Failure to Launch for Young Adults

– High Number of Renters Scramble for Shrinking Inventory

– Intense Competition Drives Up Entry Level Home Prices Much More than Luxury Prices

– Older Affordable Homes Being Raided by Higher Income Households

– First Time Buyers Move Further Out

© Freddie Mac 9

Economic Growth is Decelerating…

Source: US Bureau of Economic Analysis

Pe

rcen

t C

ha

nge

fro

m Y

ea

r A

go

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

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4Q

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2Q

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3Q

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4Q

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1Q

19

2Q

19

3Q

19

Real Gross Domestic Product

© Freddie Mac 10

…Driven by Contraction in Investment but Consumer Spending

Remains Firm

Source: US Bureau of Economic Analysis, 4 quarter moving average

Pe

rce

nta

ge

Po

int C

ontr

ibutio

n to

Re

al G

DP

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Q1

20

10

Q3

20

10

Q1

20

11

Q3

20

11

Q1

20

12

Q3

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12

Q1

20

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Q3

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14

Q3

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Q3

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Q3

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Q3

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17

Q1

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Q3

20

18

Q1

20

19

Q3

20

19

Investment

Non-Residential

Residential

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Q1

20

10

Q3

20

10

Q1

20

11

Q3

20

11

Q1

20

12

Q3

20

12

Q1

20

13

Q3

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13

Q1

20

14

Q3

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Q3

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Q1 2

016

Q3

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Consumption

Pe

rce

nta

ge

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ontr

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Re

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DP

© Freddie Mac 11

Consumer Confidence Index

Business Confidence

Index

93

94

95

96

97

98

99

100

101

102

103

0

20

40

60

80

100

120

140

160

Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12 Jul-13 Jan-15 Jul-16 Jan-18 Jul-19

Consumer and Business Confidence Indices

Business Confidence Declines, but Consumers Remain Firm

Source: Conference Board and OECD

© Freddie Mac 12

Source: ETA and BLS

Initial Jobless Claims (3-Month Moving Average)

Consumers are Confident Because Unemployment at 50 Year Lows and

There Are More Job Openings Than Unemployed

0.5

1.0

1.5

2.0

2.5

3.0

1968

1970

1972

1975

1977

1979

1982

1984

1986

1989

1991

1993

1996

1998

2000

2003

2005

2007

2010

2012

2014

2017

2019

Mill

ion

s

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Unemployment Job OpeningsN

um

be

r in

Th

ou

sands

Number of Unemployed vs Job Openings

© Freddie Mac 13

Economy on Solid Ground But Some Warning Signs are Emerging

Source: FDIC, Conference Board, BLS and BEA

0%

1%

2%

3%

4%

5%

6%

0%

2%

4%

6%

8%

10%

12%

Unemployment Rate and Delinquency Rate on Consumer Loans

-100

-50

0

50

100

Inde

x

Consumer Confidence IndexConsumer Expectations - Present Situation

4%

6%

8%

10%

Corporate Profits as a % of GDP

© Freddie Mac 14

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

7,000

7,500

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Existing Home Sales (Ths. #, SAAR)

Existing Home Sales Regain Some Momentum in 2019, But Have Already at the

Speed Limit

Source: National Association of Realtors

-15

-10

-5

0

5

10

15

20

2012 2013 2014 2015 2016 2017 2018 2019

Existing Home Sales (Pct Change YOY)

© Freddie Mac 15

New Housing Supply Still at Recession Levels

Source: U.S. Census Bureau and Department of Housing and Urban Development, Institute for Building Technology & Safety

0

500

1,000

1,500

2,000

2,500

3,000

68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

Housing Completions and Manufactured Home Shipments (1000s)

© Freddie Mac 16

Impact of Supply Shortage #1: Slower Household Formations and More Young

Persons Living at Home

Percent of 23 to 25 Year Old’s Living at Home

15%

17%

19%

21%

23%

25%

27%

29%

31%

33%

35%

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

2007

2010

2013

2016

2019

Source: U.S. Census Bureau

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Q3

20

19

Percent Change in Households from Year Earlier

© Freddie Mac 17

5

10

15

20

251

98

2

198

3

198

4

198

5

198

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198

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9

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201

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201

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201

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201

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201

6

201

7

201

8

Number of Renter Households per Home Available For Sale

Impact of Supply Shortage #2: Renters Scramble for Shrinking

Inventory

Source: National Association of Realtors, U.S. Census Bureau, IPUMS - CPS

© Freddie Mac 18

Impact of Supply Shortage #3: Entry-Level Home Prices Rising Much

More than Other Segments

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Entry-LevelHome Prices

Overall HomePrices

Luxury HomePrices

% Change in Home Prices from Year Earlier, November 2019

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

% Change in Home Prices From Year Earlier

© Freddie Mac 19

Source: Freddie Mac

80

85

90

95

100

105

1 6 11 16 21 26 31 36 41 46 51 56 61 66

40

60

80

100

120

140

160

1 6 11 16 21 26 31 36 41 46 51 56 61 66

Atlanta Chicago

Detroit Los Angeles

Minneapolis Washington DC

Age of HomeAge of Home

Rep

ea

t In

co

me

In

de

x

Re

pe

at In

co

me

In

de

x

Impact of Supply Shortage #4: Older Homes are Being Raided by

Higher Income Households (or Filtering Up)

© Freddie Mac 20

Impact of Supply Shortage #5: First Time Buyers Moving Further Out Due to

Affordability Pressures

7.0

7.5

8.0

8.5

9.0

9.5Distance From City Center for Inner Ring Quartile First Time Buyers

Source and Note: This is using Freddie Mac first time homebuyers. Each loan was geocoded and we computed the Euclidean distance to city center for each property. The analysis was done for the 50 largest metros.

© Freddie Mac 21

Tweets: @TheSamKhater

Economic and Housing Research: http://www.freddiemac.com/research

Opinions, estimates, forecasts and other views contained in this document are those of Freddie Mac's Economic & Housing Research group, do not necessarily represent the views of Freddie Mac or its management, should not be

construed as indicating Freddie Mac's business prospects or expected results, and are subject to change without notice. Although the Economic & Housing Research attempts to provide reliable, useful information, it does not

guarantee that the information is accurate, current or suitable for any particular purpose. The information is therefore provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be

used with proper attribution. Alteration of this document is prohibited. © 2019 by Freddie Mac.

The End!

http://www.freddiemac.com/research


Lawrence YunChief Economist | Senior Vice President, Research

National Association of REALTORS

OUTLOOK FOR THE 2020 HOUSING ECONOMY

Economic and Mortgage Market Outlook

Prepared for NHC

Presented by:

Mike Fratantoni

Mortgage Bankers Association

MBA Forecast: Slowing Growth in 2020, Job Market Weakening

Source: MBA Forecast24

2018 2019 2020 2021 2022

GDP Growth 2.5% 2.2% 1.2% 1.8% 2.2%

Inflation 2.4% 1.8% 1.9% 2.0% 2.2%

Unemployment 3.9% 3.7% 3.9% 4.0% 4.0%

Fed Funds 2.375% 1.625% 1.625% 1.875% 2.125%

10-year Treasury 3.0% 1.8% 1.9% 2.0% 2.3%

30-year Mortgage 4.8% 3.7% 3.7% 3.8% 4.1%

Forecast of Originations Volume: Return to a Purchase Market

Source: MBA Forecast25

Homeowners’ Equity Has Exceeded Its 2006 Peak

Source: Federal Reserve

2005Q4, 14,415,566

2019Q3, 18,672,461 2007Q4, 1,138,004

510,116

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

20,000,000

Owners Equity in Real Estate and Home Equity Debt Outstanding

Owners Equity in Real Estate (left axis) Home Equity Debt (right axis)

Housing Demand to Drive Purchase Growth

Source: Census27

Uneven Growth by Purchase Loan Size

Source: MBA Weekly Applications Survey28

First Time Home Buyers – Shift Toward Higher Income Buyers

Source: Harvard Joint Center for Housing Studies29

Number of Owner and Renter Households, by Real Income and Level of Housing

Cost Burden, Selected Years (millions)

Source: MBA and Harvard’s Joint Center for Housing Studies

15 10 5 0 5 10 15 20 25 30 35 40

201720152013201120092007200520032001

20162014201220102008200620042002

201720152013201120092007200520032001

20162014201220102008200620042002

201720152013201120092007200520032001

No burden

Moderate burden

Severe burden

Less than

$15,000

$15,000 -

$29,999

$30,000 -

$44,999

$45,000 -

$74,999

$75,000

and over

Renters Owners →

Source: Harvard Joint Center: State of the Nation’s Housing 201931

Contact Information and MBA Resources

Mike Fratantoni, Ph.D

Chief Economist & Senior Vice President | Research and Industry Technology

(202) 557-2935

[email protected]

MBA Research: RIHA:

www.mba.org/research www.housingamerica.org

32

mailto:[email protected]

http://www.mba.org/research

http://www.housingamerica.org/


Sam Khater

Freddie Mac

Lawrence Yun

National Association of REALTORS

Mike Fratantoni

Mortgage Bankers Association

QUESTIONS?

the webinar will begin momentarily please ......initial jobless claims (3-month moving average)...

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