us housing market outlook€¦ · 08-08-2018 · • large builders: 17 of top 20 builders...

US Housing

Market Outlook

August 8, 2018John Burns

CEO

949-870-1210

[email protected]

mailto:[email protected]

Agenda

Our Forecast Process

US Economy Outlook: Solid Growth

with Rising Risks from Too Much Debt

New Home Industry Outlook: Slow

Volume Growth with Very High Prices

Awesome Remodeling Industry Outlook

1

2

3

4

We collaborate with 200+ diverse subscriber

clients to get it right.

JBREC RESEARCH MEMBERSHIP DISTRIBUTION

Our Collaboration Process With Our

Clients

• Wall Street: Our investor clients help us catch macro trends, and helped us

become very negative in early 2007

• Private Equity and Banks: Our bank and private equity capital clients who

fund private developments help us understand growth, and helped us call

a bottom in 2012 when they began buying homes in bulk

• Large Builders: 17 of top 20 builders subscribe to our research, and 350+

local builders selling ~20% of all US new home sales answer our monthly

survey and helped us call a slow recovery from 2014-today

• Building Products: Largest BP firms in the country, plus owners of $6

billion/ year Lumber & Bldg Material dealers help us identify demand and

price changes

• Local Consultants: Our consultants in offices all over the country provide

insight from 500+ local consulting assignments per year

• Consumer Surveys: 140 questions to 23,000 new home shoppers help us

identify consumer trends, product shifts, and success strategies

Our Local Housing Market Analysis Process

• Data Scrubbing: Count all communities for 700+ builders each

quarter, looking for community count growth (~99% coverage in

top 30 MSAs)

• Proprietary Land Developer Survey: Survey 70+ land developer

and brokers each quarter

• Interview Experts: Hold monthly market insight phone calls with

our local consultants (50+ assignments/month) and clients

• Analyze All Data: Chart and analyze 60+ pages of data and

proprietary analytical tools and indices by MSA each month

• Consumer Insight: Four people devoted to demographics and

consumer research

• Disciplined Quest for Knowledge: Collect and distribute

pertinent news reports internally, constantly looking for new

data to analyze, and researching impacts of policy shifts

• Conference Attendance: Attend (and speak at) conferences for

additional color

MARKET RESEARCH BY DECADE BORN

FOR SETTING STRATEGIES

In 2016, we published a book on

Demographic Trends for Housing

Our New Home Construction Track Record

We built the most comprehensive and detailed

Repair & Remodel forecast available.

Remodeling Universe

Partially tracked in census data

Big remodels of owner-occupied homes

Small project spending on owner-occupied homes

Disaster repairs

Big project remodels of rental units

Small project spending on rental properties

Trade-up spending: Project count and spend per project

Census C-30 Harvard LIRA JBREC

Our Remodeling Spending Track Record

J B R E C R E M O D E L M AT E R I A L S S P E N D I N G V S H O M E D E P O T Y T D R E S U LT S

Source: John Burns Real Estate Consulting, LLC

R+

R

MA

TE

RI

AL

S

SP

EN

DI

NG

# Remodels +2.2%

# Transactions +2.3%

Spend per Remodel

+4.6%

Spend per Transaction

+4.5%

+6.8% +6.8%

0%

1%

2%

3%

4%

5%

6%

7%

JBREC 2017 Forecast Home Depot 2017 Growth

Agenda







1

2

3

4

The Burns Economic Performance Index™ is designed to rank current economic conditions against previous economic cycles on a scale of 0-100, 0 being the lowest performing,

and 100 being the highest performing economic conditions. The index includes 34 indicators grouped into 5 weighted categories: Employment, Housing, Economics, Stock Market,

and Confidence, each with history back to 1981.

Source: John Burns Real Estate Consulting, LLC (Pub: Jul-18)

Current

72

A forward looking component of the index with data back to 1953 provides a lead on recession events as well as an early indication of coming growth cycles. We did a

64 year back test of this data which shows a normal risk of recession in any given year on average to be 27% 2 years out and 50% four years out.

Source: John Burns Real Estate Consulting, LLC (Pub: Jul-18)

53% 68%

Probability

Recession risks are higher than norm – 53%

within 2 years and 68% within 4 years

very low risk

very high risk

low risk

normal risk

high risk

27% 56%

This is the 2nd longest expansion in the

last 60 years.

We think it can

become the longest

This expansion has been mild – 6th

largest of last 10.

1. 1929–33 (43 mos.): Consumers

borrow to buy stocks

2. 1957–58 (8 mos.): Consumers

amass credit card debts

3. 1980–82 (22 mos.*)**: Bad bank

loans to developers and Latin

America; oil price increase

4. 1990–91 (8 mos.*): Junk bonds for

Leveraged Buy Outs; real estate

speculation fueled by S&L

lending; Japan

5. 2000–01 (8 mos.): Tech stock

speculation

6. 2007-09 (18 mos.*): Housing

speculation fueled by subprime

1. 1937–38 (13 mos.): Post-New Deal

2. 1945 (8 mos.): End of WWII

3. 1948–49 (11 mos.): Post-WWII

4. 1953–54 (10 mos.): Post-Korean War

5. 1969–70 (11 mos.): First Vietnam War

spending cutback

1973–75 (16 mos.*):

Removal of gold standard,

oil price increase

Speculative BubblesUsually fueled by debt

Government Spending CutsUsually after running up big deficits / debts

Other

1929: 32x

1999: 44x

2018: 34x

0

5

10

15

20

25

30

35

40

45

19

22

19

24

19

26

19

28

19

30

19

32

19

34

19

36

19

38

19

40

19

42

19

44

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46

19

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19

50

19

52

19

54

19

56

19

58

19

60

19

62

19

64

19

66

19

68

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

S&P 500 Price to Earnings Ratio

10-year Shiller cyclically adjusted price-to-earnings (CAPE) ratio

Source: DQYDJ.com (Data: Mar-18, updated quarterly†)

Note: The Cyclically Adjusted Price to Earnings Ratio, also known as CAPE or the Shiller PE Ratio, is a valuation measure which adjustspast company earnings by inflation to present a snapshot of stock market affordability at a given point in time. The ratio is calculated using real per-share earnings over a 10 year period.Pub: May-18

0

2

4

6

8

10

12

14

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Mortgage = 67% Student loan = 10% Auto loan = 9% Credit card = 6% HE revolving = 3% Other = 3%

Sources: NY Federal Reserve Consumer Credit Panel/Equifax; John Burns Real Estate Consulting, LLC (Data: 4Q17, updated quarterly†)

Total Debt Balance and Composition

Trillions

Pub: May-18

Publicly-traded company debt has grown 5X

faster than GDP since 2009.

-5%

3%

10%

24%

4%

20%

18%

16%

11%

9%

22%

25%

49%

-16%

24%

30%

28%

23%

31%

101%

117%

153%

178%

213%

308%

332%

116%

-50% 0% 50% 100% 150% 200% 250% 300% 350%

Building Materials

Real Estate, Home Building

Consumer Goods and Retail

Automotive

Energy

Services

Health Care

Technology & Electronics

All Companies

Growth from 2009 through 2016

Debt Growth Nominal GDP Growth Job Growth

0

5

10

15

20

251966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

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1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Trilli

ons o

f D

olla

rsFederal Debt Has Ballooned

Despite all the risks, the US is still the

most popular destination in the globe.

3.5%

3.9%

4.8%

4.9%

19.8%

United Kingdom

Saudi Arabia

Russia

Germany

United States

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 22%

Current Residency of the World’s Immigrants

Mortgage Rates Are Expected to Rise 0.5%

2.1%1.8%

2.3%2.9% 3.0% 3.0% 3.0%

1.8%1.9%

1.7%

1.7%1.8% 2.0% 2.1%3.8%

3.7%4.0%

4.6%4.8% 5.0% 5.1%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

2015 2016 2017 2018P 2019P 2020P 2021P

Mortgage Rate Forecast

Mortgage Rate Spread over 10-year 10-year Treasury History and Expectations

Source: John Burns Real Estate Consulting US Housing Analysis and Forecast, July 2018

Federal Government Mortgage Policy Has Been

Driving Home Buying Demand for 70+ Years

20% Surge to 64% From 1940s – 1970

Post G.I Billand GSE/HUD

64%-66%Flat from

1970s-Early 1990s

64-68% Rise Caused by

1992+ GSE Acts

1% Final increase and fall due to

Subprime / privatelabel securities

4%Decline postDodd-Frank

pullback

40%

45%

50%

55%

60%

65%

70%

1943

1948

1953

1958

1963

1968

1973

1978

1983

1988

1993

1998

2003

2008

2013

2018

Homeownership Rate

Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC (Data: 4Q17) *Historical average: 1940 through current

Jerome Powell

Federal Reserve

Chairman

Directly Impacts Rates

Mick Mulvaney

CFPB Director

Enforces Dodd-Frank

Restrictions

(Documentation)

Ben Carson

HUD Secretary

Oversees FHA

Robert Wilkie

VA Nominee

Oversees VA

Mel Watt

FHFA Director /

Term Expires Jan.

2019

Oversees Fannie,

Freddie

Presidential Appointees Determine the Policies on

70% of All Mortgages, and all the Riskiest Mortgages

0%

5%

10%

15%

20%

25%

30%

35%

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Source: MBA (Data: Apr-18, updated quarterly†)

Percentage of Adjustable Loans

3-month average

Dodd-Frank Rules Have Kept Mortgage Loan

Documentation Tight, and Limited Adjustable Rate Loans

Pub: Jul-18

70%

19%

28%

77%

2% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

De

c-1

2

Mar-

13

Ju

n-1

3

Se

p-1

3

De

c-1

3

Mar-

14

Ju

n-1

4

Se

p-1

4

De

c-1

4

Mar-

15

Ju

n-1

5

Se

p-1

5

De

c-1

5

Mar-

16

Ju

n-1

6

Se

p-1

6

De

c-1

6

Mar-

17

Ju

n-1

7

Se

p-1

7

De

c-1

7

Mar-

18

Banks Non-banks Credit unions / state housing agencies

FHA Origination Shares by Lender Type

Sources: AEI International Center on Housing Risk; John Burns Real Estate Consulting, LLC (Data: Mar-18, updated quarterly†) Pub: Jul-18

Mortgage Origination: Much Less Risky than 2006 but

Riskier than 2002, and FHA-Dependent

13% 14%

32%41% 42%

33%

1% 1% 1% 1% 1% 1% 1% 1% 1% 1%

6% 6%

4%

3% 3%

4%

17%24% 22% 19% 19% 19% 20% 23% 23% 24%

48%51%

35%

32% 32% 51%

65%

63%60%

58% 59% 61%

47%46% 46% 46%

33%29% 29%

24% 23%

12%17%

12%17%

22% 21% 19%

32% 30% 30% 29%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

First Lien Mortgage Origination Volume by Loan Type

Very High Risk - Subprime/ Private Label High Risk - FHA/VA

Low Risk - GSE Very Low Risk - Bank Portfolio

2002

Risk

2006

Risk

In Summary, Solid Economy. Rising Risks.

Current

72

53% 68%

Probability

very low risk

very high risk

low risk

normal risk

high risk

27% 56%

Agenda







1

2

3

4

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

197

11

97

21

97

31

97

41

97

51

97

61

97

71

97

81

97

91

98

01

98

11

98

21

98

31

98

41

98

51

98

61

98

71

98

81

98

91

99

01

99

11

99

21

99

31

99

41

99

51

99

61

99

71

99

81

99

92

00

02

00

12

00

22

00

32

00

42

00

52

00

62

00

72

00

82

00

92

01

02

01

12

01

22

01

32

01

42

01

52

01

62

01

7

4 Big Downturns and 3 “Hiccups” in 47 years.

H O U S I N G C O N S T R U C T I O N 1 9 7 1 - 2 0 1 7


SF Permits

1.7 M

We Expect Hiccup #4 Sometime in the Next Three Years,

With Sustained Growth Thereafter

Single-Family Construction Volumes Still

Below 1993 Levels!

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,0001975

1976

1977

1978

1979

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

2017

Single-Family Starts

1993

J B R E C M A R K E T H O T N E S S I N D E X F O R 5 0 L A R G E S T M A R K E T S

2%

6% 28%64%

30% of Markets Outperforming; 6% Lagging

1%

6%

-1%

-7%

10%

-3%

-12%

-2%

-2%

8%

6%

-4%

6%

5%

4%

1%

6%

8% 9

%

9%

12%

3% 3% 4%

-1%

2%

5%

15%

15%

16%

10%

7%

6%

4%

3%

-10%

1%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Ju

l-1

5

Au

g-1

5

Se

p-1

5

Oct-

15

No

v-1

5

De

c-1

5

Ja

n-1

6

Fe

b-1

6

Ma

r-1

6

Ap

r-1

6

Ma

y-1

6

Ju

n-1

6

Ju

l-1

6

Au

g-1

6

Se

p-1

6

Oct-

16

No

v-1

6

De

c-1

6

Ja

n-1

7

Fe

b-1

7

Ma

r-1

7

Apr-

17

Ma

y-1

7

Ju

n-1

7

Ju

l-1

7

Au

g-1

7

Sep-1

7

Oct-

17

No

v-1

7

De

c-1

7

Ja

n-1

8

Feb-1

8

Ma

r-1

8

Ap

r-1

8

Ma

y-1

8

Ju

n-1

8

Jul-18

Year-over-Year Sales Rate Growth

*Note: The above chart shows YOY comparisons only for builders who participated in the survey one year prior. For the May survey, YOY comparisons include

200 responses.

Source: John Burns Real Estate Consulting, LLC, independent survey of ~18% of all US new home sales, NSA (Data: May-18, Pub: Jun-18)

2018 YOY Sales Rate Growth decelerating

Rising rates will have more impact on moveup

buyers than on new home entry-level buyers.

Source: John Burns Real Estate Consulting online survey, June 2018

New home community counts continue to

grow slowly. Up only 1% YOY.

Source: John Burns Real Estate Consulting, Home Building Analysis and Forecast, May 2018

5%

3%

0%

4%

3%

1%

0%

1%

2%

3%

4%

5%

6%

2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q1

Community Count GrowthAll Builders, Top 33 Metros

-33%-14%

-10%-7%-7%-7%-6%-6%-5%-5%-5%

-1%0%0%0%1%1%2%3%3%4%4%4%4%5%5%7%8%8%8%9%

12%15%17%

30%

-35% -25% -15% -5% 5% 15% 25% 35%

San Francisco**Los Angeles*

Las VegasPhoenixOrlando

East Bay Area*Philadelphia, PA (MSA)

CharlotteRiverside-San Bern.

West Palm Beach*AtlantaAustin

San JoseTampa

HoustonTop 34 MarketsOrange County

SacramentoWashington DC (MSA)

JacksonvilleChicago**Tacoma*

Fort Worth*BostonDenver

Fort Lauderdale*San Antonio

Salt Lake CityRaleigh-Durham**

NashvilleDallas*

Seattle*Miami*

MinneapolisSan Diego

Builder Communities YOY % Growth

Jul-18

Source: John Burns Real Estate Consulting, LLC (Data: Jul-18, Pub: Jul-18)

*Metro division **Combination of metro divisions

34%

25%

23%

22%

19%

19%

19%

18%

18%

17%

16%

15%

14%

13%

13%

12%

12%

12%

12%

12%

11%

10%

9%

9%

9%

9%

7%

7%

6%

6%

5%

3%

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

Austin

Nashville

Dallas*

San Antonio

Denver

Salt Lake City

Orlando

Charlotte

Raleigh-Durham**

Houston

Seattle*

Riverside-San Bern.

Portland

New York*

Atlanta

Jacksonville

San Diego

Weighted Average

Indianapolis

Bay Area, CA¹

Miami*

Boston

Washington DC (MSA)

Tampa

Minneapolis

Phoenix

Las Vegas

Orange County

Sacramento

Los Angeles*

Philadelphia

Chicago**

N E W B O O M T O W N S

AV E R A G E G R O W T H

S T I L L R E C O V E R I N G

S L O W G R O W T H

C U R R E N T J O B S I N E X C E S S O F P R E - R E C E S S I O N P E A K


MA

RK

ET

J O B S I N E X C E S S O F P E A K

Huge Differences in Economic Growth this Cycle

-5%

-3%

-4%

-2%

-2%

-2%

-2%

-3%

-4%

-2%

-3%

0%

-1%

-1%

0%

0%

2%

1%

1%

4%

0%

0%

2%

1%

3%

4%

-1%

3%

4%

4%

5%

2%

6%

6%

-5% -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7%

DenverBoston

San DiegoPortland

NashvilleMiami*Tampa

Orange County, CAMinneapolis

Salt Lake CityLos Angeles*

East Bay Area*Sacramento

Seattle*Washington DC (MSA)

OrlandoRaleigh-Durham**Weighted Average

San JoseHouston

Riverside-San Bern.Chicago**

San Francisco**Dallas*

PhiladelphiaSan Antonio

Las VegasIndianapolis

AustinAtlanta

JacksonvilleNew York*

CharlottePhoenix

Current = 12-month total, YOY % 3-month forecast based on Google search trends

Burns Predictive Analytics: 3-Month Existing Home Sales Forecast

Source: John Burns Real Estate Consulting, LLC; Google Trends (Pub: Jul-18) *Metropolitan division **Combination of metropolitan divisions

Recent slowing

in Las Vegas &

Denver

Recent improvement in

Houston, Raleigh

Recent Demand changes vary by market

2%

Medium-Term Outlook: Most Low to Normal RiskJ B R E C H O U S I N G C Y C L E R I S K I N D E X ™ F O R 5 0 L A R G E S T M A R K E T S

16% 20%62%

Huge Differences in Price Appreciation this Cycle

1. Peak BHVI values from 2002–2008 2. Bay Area, CA is composed of San Francisco and San Jose MSAs. *Metro division **Combination of metro divisions.

Source: John Burns Real Estate Consulting, LLC (Data: Jun-18, Pub: Jul-18)

-12%-10%-10%

-4%-4%-3%-3%

-1%-1%

0%4%

5%6%

10%10%11%

17%18%

23%23%

24%25%

27%34%

42%44%44%

49%58%

60%68%

73%

-20% 10% 40% 70%

Las VegasChicago**

Riverside-San Bern.Sacramento

OrlandoWashington DC (MSA)

Miami*Phoenix

New York*Tampa

PhiladelphiaJacksonville

Orange CountySan Diego

MinneapolisLos Angeles*

Weighted AverageBoston

IndianapolisAtlanta

Salt Lake CityCharlotte

Raleigh-Durham**Portland

San AntonioSeattle*

Bay Area, CA²Houston

NashvilleAustin

Dallas*Denver

Burns Home Value Index™ Percent above/below Peak1

Huge Differences in Price Appreciation this Year

3%4%4%4%

5%6%

6%6%6%6%

6%7%7%7%7%7%

7%7%

8%8%

8%8%9%9%

9%9%

9%10%10%

12%13%

14%

0% 2% 4% 6% 8% 10% 12% 14%

Washington DC (MSA)

Chicago**

Austin

Houston

San Antonio

Philadelphia

Orange County

Dallas*

Raleigh-Durham**

Portland

New York*

United States

Minneapolis

San Diego

Sacramento

Boston

Indianapolis

Riverside-San Bern.

Phoenix

Los Angeles*

Miami*

Jacksonville

Denver

Charlotte

Orlando

Salt Lake City

Tampa

Atlanta

Nashville

Bay Area, CA¹

Seattle*

Las Vegas

YOY % change (June 2018)Prices - Burns Home Value Index™

Source: John Burns Real Estate Consulting, LLC (Data: Jun-18, Pub: Jul-18)

(1) Bay Area composed of San Francisco and San Jose MSAs *Metro division **Combination of metro divisions

Long-Term Outlook: 8% Overvalued (4.6% Rates)J B R E C I N T R I N S I C H O M E VA L U E I N D E X ™ F O R T O P M A R K E T S

Overvalued

Fairly valued

Undervalued

Long-Term Outlook: 22% Overvalued (6% Rates)J B R E C I N T R I N S I C H O M E VA L U E I N D E X ™ F O R T O P M A R K E T S

Overvalued

Fairly valued

Undervalued

Maturing

Growing Declining

Bottoming

Recovering Falling

12 Markets

6 Markets

15 Markets

Housing Cycle, 33 Largest Markets

13%

30%

53%

61%

71%

78%

82%

84%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

2011

2012

2013

2014

2015

2016

2017

2018*

Source: NAHB (Data: 2017, updated quarterly†)

Percentage of Builders Reporting Labor Shortages

*Expected labor shortages Pub: Jul-18

85

3K

88

0K

92

0K

0K

200K

400K

600K

800K

1,000K

1,200K

1,400K

1,600K

1,800K

19

81

19

82

19

83

1984

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

1993

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

2002

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

2011

20

12

20

13

20

14

20

15

20

16

20

17

Cu

rre

nt

20

18

P

2019P

Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC forecasts (Data: Apr-18, Pub: Jun-18)

US Single-Family Residential Permits

Source: John Burns Real Estate Consulting Client Survey, June 2018

84

3K

88

0K

92

0K

91

0K

85

0K

0K

200K

400K

600K

800K

1,000K

1,200K

1,400K

1,600K

1,800K

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

2017

Curr

ent

2018

P 2

019

P 2

020

P 2

021

P

Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC forecasts (Data: May-18, Pub: Jul-18)

US Single-Family Residential Permits

50

1K

46

0K

43

0K

0K

100K

200K

300K

400K

500K

600K

700K

800K

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

2017

2018P

2019P

Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC forecasts (Data: Apr-18, Pub: Jun-18)

US Multifamily Residential Permits

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

US Born

Alive TodayForeign Born

14 M

1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09

1930s SaversAge 78-87

Defining the Generations by Decade Born

Will Simplify Your Decision-Making2016 US POPULATION

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

27 M


1940s AchieversAge 68-77


14 M

1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09

The high-achieving Earliest Baby

Boomers have retired.2016 US POPULATION

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

27 M

40 M



14 M

1950s InnovatorsAge 58-67

1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09

The 1950s Innovator Boomers Are

now Retiring in Droves2016 US POPULATION

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

27 M

40 M43 M




14 M

1960s EqualersAge 48-57

1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09

The 1960s Equalers Achieved Equal Education,

with more Women Graduating from College than

Men2016 US POPULATI ON

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

27 M

40 M43 M

41 M




14 M


1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09

1970s Balancers Shifted the Definition

of Success to Include Success at Home2016 US POPULATION

1970s BalancersAge 38-47

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

27 M

40 M43 M

41 M

44 M





14 M

1980s SharersAge 28-37


1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09

1980s Sharers Have Led the

Disruptive Shift to a Sharing Economy2016 US POPULATION

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

27 M

40 M43 M

41 M

44 M44 M



1980s SharersAge 28-37


1990s ConnectorsAge 18-27


14 M


1930–39 1940–49 1950–59 1960–69 1970–79 1980–89 1990–99 2000-09

1990s Connectors use their phones

whenever possible2016 US POPULATION

Agenda







1

2

3

4

We expect 4 good Remodeling spending years ahead, even assuming an economic slowdown.

We classify materials spending into 3 categories:

Source: John Burns Real Estate Consulting

Note: Numbers may not add to total because of rounding. New Construction Spending Excludes Land

M AT E R I A L S

$349 B (2018)

$17 B

5%

DISASTERREPAIR+REMODEL

$221 B

64%

$111 B

32%

N E W H O M E S

$349 billion will be 7% growth this year

R+R will grow 9% this year and 7% next year.

Disaster repair will likely decline 1% and then 4%.R E S I D E N T I A L B U I L D I N G M AT E R I A L S S P E N D I N G G R O W T H F O R E C A S T

6% 6%5%

9%

7%

4%

-5%

5%

-1%

-4%

13%

4%

3%

6%

4%

2%

-4%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

2015 2016 2017E 2018P 2019P 2020P 2021P

Residential Building Materials Spending Growth

New construction Repair and remodel Disaster repair

In 2018, we expect 6% growth in homeowner big

projects and 11% growth in homeowner small projects.2 0 1 8 R E M O D E L I N G M AT E R I A L S S P E N D I N G G R O W T H


SP

EN

DI

NG

G

RO

WT

H

T Y P E O F P R O J E C T

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Big $5,000+Small <$5,000

Big Projects Small Projects

+13%

Owner

-2%

Rental

+12%

Owner

+9%

Rental

Per our Building Material Dealer Survey – Rebound in Q2 after

Slow Q1

Huge Differences by Product Type: Strong Kitchen & Bath, but

Weak Roofing, Siding, and Windows & Doors.

10-year Household growth will Be Young and OldHOUSEHOLD FORMATION BY AGE GROUP, 2016–2025


10.2 M

3.3 M

-1.0 M

25–44 45–64 65+

Age that 50% Form a Household and Buy a Home

2006 2016

Household 24 26

Homeownership 31 36

Societal Delays

2 Year Delay in Household Formation

5 Year Delay in Homeownership

Older homes will transact more to younger buyers. We expect 1.1M existing older home owners to leave their home every year over the

next 10 years. Many will be bought by younger buyers.

H O M E O W N E R G R O W T H B Y G E N E R AT I O N ( M I L L I O N S ) , 2 0 1 6 – 2 0 2 5


HO

ME

OW

NE

R G

RO

WT

H (

MI

LL

IO

NS

)

G E N E R A T I O N

-2.2

-4.1

-3.2

-1.1

0.6

2.8

5.4

6.2

0.9

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

Pre 1930s1930s

Savers

1940s

Achievers

1950s

Innovators

1960s

Equalers1970s

Balancers

1980s

Sharers1990s

Connectors

2000s

Globals

-10.6 M

15.9 M

Older homes drive more systems and exterior

remodels.I M PA C T O F A G E O F H O M E O N R E M O D E L :


NEW HOMES (<16 yrs)

• Spend +69% More on Outdoors

MIDDLE-AGED HOMES (16-35 yrs)

• Spend +18% More on Indoors

OLDER HOMES (46+ yrs)

• Spend 22% More on Exteriors and

• +27% More on Systems

Young buyers are 38% more likely to DIY, and will

spend 30% less.< 3 5 Y E A R - O L D B U Y E R R E M O D E L I N G S P E N D I N G V S U S N O R M


38%

#

NUMBER OF DIY PROJECTS

more DIY projects than the

US average

$

AVG PRICE OF DIY PROJECTS

-30%less spending on DIY projects

than the US average

70

After 20 years of declining DIY market share, we saw a

stabilization in 2017 that we believe will continue.

Slowing home price appreciation and rising income

causes a shift to small project remodels (paint & windows

rather than new kitchens).

Incoming wave of first time homebuyers that do 38%

more DIY projects

Youtube makes DIY projects much less intimidating.

30%+ of households born after 1980 report they are “More

likely to do DIY Home Improvement because of Youtube”

HGTV Viewership: Viewers <35 years old are 21% more

likely to watch HGTV than US Norm!

The home builders have pivoted to entry-level,

creating new brands.

Source: Builders’ most recent quarterly earnings calls (Pub: Sep-17)

LGIH:IPO

3Q13

DHI:Express Homes

Debut

2Q14

NVR:Simply Ryan

Debut

2Q15

MDC:Seasons by

Richmond

American Debut

4Q15

TPH:Pardee in Las

Vegas (Responsive

Home) Debut

1Q16

MTH:LIVE Now Debut

NWHM:Announced ~

Entry-Level

Product

3Q16

CCS:Century Complete Debut

MHO:Announced Entry-Level

Targeted Product

TOL:Announced T | Select;

entry-level brand

4Q16

TPH:Responsive Homes

in more markets

MHO:Roll-out of Smart

Series into more

markets

2Q17


16%

33%

0%

5%

10%

15%

20%

25%

30%

35%

Closer Further

Location From Job Center

55%

2%

0%

10%

20%

30%

40%

50%

60%

Smaller Larger

Lot size

45%

3%

0%

10%

20%

30%

40%

50%

Smaller Larger

Home Size

16%

39%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

More Standard Less Standard

Specification Level


38%

0%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Closer Further


31%

23%

0%

5%

10%

15%

20%

25%

30%

35%

Smaller Larger

Lot size

17%

33%

0%

5%

10%

15%

20%

25%

30%

35%

Smaller Larger

Home Size

77%

0%0%

10%

20%

30%

40%

50%

60%

70%

80%

90%


Specification Level

4%

22%

0%

5%

10%

15%

20%

25%

Closer Further


29%

13%

0%

5%

10%

15%

20%

25%

30%

35%

Smaller Larger

Lot size

26%

22%

0%

5%

10%

15%

20%

25%

30%

Smaller Larger

Home Size

21% 21%

0%

5%

10%

15%

20%

25%


Specification Level


Brand name companies beware:

younger homebuyers put less value on brands.B U Y E R S W H O M A R K E D N A M E B R A N D A S “ M O S T I M P O R TA N T ” T O T H E M

Source: Consumer and Product Insights Survey 2016, John Burns Real Estate Consulting, LLC

%

OF

B

UY

ER

S

G E N E R A T I O N

16%

15% 14%

12%

10%

7% 7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

1930sSavers

1940sAchievers

1950sInnovators

1960sEqualers

1970sBalancers

1980sSharers

1990sConnectors

87% 87%

68%

39%

28%23% 24%

71% 71%67%

54%

36%

28%31%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

GE Whirlpool KitchenAid Bosch Sub-Zero/Wolf Thermador Viking

Example: Younger buyers less likely to pay for

branded appliance upgrades.HOME SHOPPERS WILL ING TO PAY MORE TO UPGRADE APPLIANCE BRANDS


% W

IL

LIN

G T

O P

AY

F

OR

B

RA

ND

A

T P

RIC

E P

RE

MIU

M

A P P L I A N C E A N D P R I C E P R E M I U M

35+ years old< 35 years old

$800+ $3,500+No premium $1,500+

But young buyers are more willing to pay for new

technology features.B U Y E R S W I L L I N G T O PAY A N E X T R A $ 3 , 5 0 0 F O R A R E F R I G E R AT O R W I T H

B U I L D I N F O O D M A N A G E M E N T F O R G R O C E R Y O R D E R S


%

OF

B

UY

ER

S

LI

KE

LY

T

O

AD

D

G E N E R A T I O N

15%17% 18%

23%

28%26%

29%

0%

5%

10%

15%

20%

25%

30%

1930sSavers

1940sAchievers

1950sInnovators

1960sEqualers

1970sBalancers

1980sSharers

1990sConnectors

Monthly

• Building Products Spending Forecast – Repair

and Remodel + New Construction

• Home Builder Survey

• Dealer / Distributor Survey

• Regional Housing Analysis and Forecast

• National Housing Analysis and Forecast

Annual

• New Home Consumer Product Insight Survey

• Executive Summit Conference (May in CA)

• Housing Outlook Conference (Nov. in NY)

• Home Design Conference (March in CO or TX)

• Direct Interaction with our Experts

• Detailed Building Products Spending

Forecasts by category, geography,

price point, etc.

• Company Acquisition Due Diligence

• Strategic Plan and Investor Relation

Support

• Channel and Customer Research

• Custom Remodeler, Builder, and

Distribution Surveys

• Consumer Research

US Housing

Market Outlook

August 8, 2018John Burns

CEO

949-870-1210

[email protected]

mailto:[email protected]

us housing market outlook€¦ · 08-08-2018 · • large builders: 17 of top 20 builders...

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