Title: Brought to you by the Greater Syracuse Association of Realtors, the Central New York Home Builders and Remodelers Association and the Central New York Mortgage Bankers Association.
1Market Trends and Forecasts
Ken Fears Manager, Regional Economics NATIONAL
ASSOCIATION OF REALTORS
Brought to you by the Greater Syracuse
Association of Realtors, the Central New York
Home Builders and Remodelers Association and the
Central New York Mortgage Bankers
Association. Syracuse, NY March 14, 2008
2National Housing Slowdown in 2007A Year of
Challenge
3National Home Price Growth
change from a year ago
Homeowners who have been in it for the long-run
have sizable equity gains despite the recent
decline in prices.
4News Maker Washington Metro Home Price Growth
change from a year ago
Same Stress on affordability leads buyers to
use ARMs, interest only loans expect prices to
continue to rise. Also, sub-primes jump and
appraisals fall.
5Syracuse Metro Home Price Growth
change from a year ago
Same Slow price growth causes affordability to
surge as monthly payments. Strong FHA usage
low sub-prime (if any) and few resetting loans.
6Annual Existing-Home Sales
In thousand units
EXCESSIVE BOOM
Home sales have retreated back to pre-boom years,
which was then considered to be at healthy
levels.
7Recent Monthly National Existing-Home
Sales(from over 7 million in peak to 5 million
now)
In thousand units
Low soft sales are reflecting the fact that
subprime lending has essentially disappeared.
But a pick up in FHA will help market turn around.
8New York Existing-Home Sales
In thousand units (seasonally adjusted annualized
rate)
Source NAR
9Syracuse Single Family Sales
In thousand units (seasonally adjusted annualized
rate)
Source Greater Syracuse Association of Realtors
10Single-Family Housing Starts(Major fall but,
good trend to control inventory)
In thousand units
Source Census
11Syracuse Single-Family Housing Starts
Source Census
12Souring U.S. Loan Performance(Big swings for
subprime no real change in prime)
Stagnant Prices
Job Losses pushes up delinquency
Housing boom permits re-financing and lowers
delinquency
Data MBA
13U.S. Subprime Loan Exposure
Source NAR Estimate
14U.S. Foreclosed Homes
Source NAR Estimate
15U.S. Foreclosure Rates by Loan Type 2007 Q3
Data MBA
16Foreclosure Rate Comparisons(2007 Q4)
Data Mortgage Bankers Association
17Gamble Did Not PayWall Street Re-valuation
Stock Price
Source Wall Street Journal
18Important Factorsfor 2008Year of Opportunity
19All Real Estate is Local
20National vs. Local Information
- National data are important
- Quick casual glance
- Economic impact and monetary policy
- Local data are important
- Home purchase is a serious decision
- Huge local variations
- national data are not meaningful
21Something appears Out of Whack!
Income and Price set to Index of 100 in 1990
Source NAR
22Mortgage Rates Falling
Source Freddie Mac
23Mortgage Obligation to Income Manageable
Source NAR
24National Story Doesnt Fit Local
- NAR data
- 1/2 of 150 metro markets with price expansion
- Treat all homes equally (low priced home gets
same weight at high-priced home) - OFHEO data
- 70 of 287 metro markets with price expansion
- Treat all homes equally (low priced home gets
same weight at high-priced home) - Case-Shiller
- 3 or 4 of 20 markets with price expansion
- Do not treat all homes equally, price weighted
index
25Mortgage Obligation to Income Very High in Some
Markets
San Diego
Source NAR
26Mortgage Obligation to Income Historically High
in Some Markets
Miami
Source NAR
27Under-Priced MarketsWith Affordable Mortgage
Obligation to Income
U.S. Historic Average
Similar Trends in Vast Part of Middle America
Source NAR
28Affordability is Strong in Syracuse
National Average
Local Average
Source NAR
29Favorable Economy 4 Million New Jobs in Past 24
months
12-month payroll job changes in millions
Source BLS
30Job Gains in Syracuse
12-month net payroll job changes in thousands
Source BLS
31Wage Growth Picking Up
Source BLS
32Aggregate U.S. Wages and Salary Disbursement
billion
Source BEA
33Corporate Profits Record High
billion
Source BEA
34Business Spending
year-over-year growth rate
35Dollar vs Euro
U.S. homes are selling at a 30 to 40 discount
for foreigners
Source BLS
36Export Growth
billion
37Consumer Spending
year-over-year growth rate
38Worry Spot - Oil Prices
per barrel
Source Wall Street Journal
39Positive Economic Outlook
2006 2007 2008
GDP 3.3 2.1 2.4
CPI Inflation 3.2 2.8 2.7
Job Growth 1.9 1.3 0.8
Unemployment Rate 4.6 4.6 5.0
10-year Treasury 4.8 4.6 4.4
40Pent-Up Demand ?
2005 2007 Difference
Total Home Sales (new and existing) 8.4 million 6.5 million - 1.9 million
Jobs (in October) 134.4 million 138.4 million 4 million
Wage Salary (in October) 5.7 trillion 6.4 trillion 700 billion
Household Wealth (3rd quarter) 51 trillion 59 trillion 8 trillion
Home Prices 219,600 217,600 - 1.9
Mortgage Rates 5.9 6.3 0.4 points
41Unleashing of Pent-Up Demand
42Existing-Home Inventory(From 2 million to 4.5
million but most are owner-occupied)
Source NAR
43New Home Inventory(Already Topped Out)
Source Census
44The Truth on Wall Street
- Moodys and Standard Poors
- Need to quickly downgrade bad debts
- Come clean about conflict of interest
- Show us all of your bad cards
- Merrill Lynch 8 billion in write-down
- Citi 8 to 11 billion in write-down
- Global investors want transparency before
re-entering the market
45Fed Rate Cut
Source Freddie Mac
46Mortgage Rates Falling
Source Freddie Mac
47FHA Endorsements Rising(2007 Q2)
48National FHA Market Share for Home Purchase
Source HMDA, NAR Estimate
49Syracuse FHA Usage
Source Greater Syracuse Association of Realtors
50FHA Reform Very Important
- NAR has been lobbying for
- Higher Loan Limit
- Risk-based Pricing
- Lower Down-payment
- Greater Flexibility
51Jumbo Loan Rate Spread(Jumbo Loan rate above
Prime Conforming Rate)
Basis Points
Source Freddie Mac, NAR Estimate
52Healthier Future Market (national)
- Job growth leads to accumulating and releasing of
pent-up housing demand - Cut back in new home construction thins out
inventory and strengthen home prices - Shift to traditional products
- Reckless lenders going belly up
- Wall Street tightening
- FHA revival
- Higher prevalence of fixed-rate mortgages
- Short-term Pain from lower home sales
- Long-term Gain from lower defaults
53National Housing Outlook
2006 2007 2008
Existing-Home Sales 6.48 million 5.65 million 5.38 million
New Home Sales 1.05 million 0.77 million 0.63 million
Housing Starts 1.80 million 1.36 million 1.08 million
30-Year FRM 6.4 6.3 5.7
1-Year ARM 5.5 5.5 4.9
Existing-Home Price Growth 1.0 -1.4 -1.2
54Employment is the Key to Sustaining Syracuses
Solid Housing Market
- Solid employment growth results in build up of
demand - Construction was weak in recent years
- Helps to contain supply
- Stabilizes prices
- Risky loan usage a problem everywhere, but much
less so here - low median home price (less margin for ARM
brokers) - No affordability squeeze no reason to use
- Slow price growth yesterday means near-record
affordability today - Cleansing of national market allows for stable,
long-term growth path - Better national news soon
- Some reform helps local buyers (lower FHA down
payments) - No problem refinancing in Syracuse
55Slow and Steady Wins the Race
- High FHA and VA usage
- preserves market stability
- Sellers and buyers in relative balance
- Local market linked anchored in fundamentals
- Cleansing of national market allows for stable,
long-term growth path - Home price insurance (Home Headquarters) Price
Stability - Home price insurance eliminates panic selling
- Down payment assistance
- Foreclosure prevention counseling
- Conforming mortgage rates near record lows again
combined with stable employment and
affordability solid sales and price growth