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ECONOMIC AND HOUSING OUTLOOK

ECONOMIC AND HOUSING OUTLOOK. Home Building Association of Richmond February 12, 2014. David Crowe Chief Economist. Five Turn Around Points 1. Consumer is back 2. Pent up demand waiting 3. Growing need for new construction 4. Distressed sales diminishing 5. Builders see it.

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ECONOMIC AND HOUSING OUTLOOK

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  1. ECONOMIC AND HOUSING OUTLOOK Home Building Association of Richmond February 12, 2014 David Crowe Chief Economist

  2. Five Turn Around Points1. Consumer is back 2. Pent up demand waiting 3. Growing need for new construction 4. Distressed sales diminishing 5. Builders see it

  3. 1. Consumer is back

  4. Real GDP GrowthPicking up speed 3.7% 3.0%

  5. Payroll Employment: US and Richmond US nearly back while Richmond has fully recovered Millions US Trend (Left axis) US

  6. Unemployment Will Continue to Fall Richmond

  7. State and Local Government Employment 17th out of 43 state capitals in employment growth since 2011 U.S. (R)

  8. Consumer Confidence Returns Back to pre-recession levels University of Michigan Conference Board

  9. Motor Vehicle and Home Furnishing Sales Other Durable Sectors Rising Steadily

  10. Household Balance Sheets Debt and savings closer to long term averages Savings Rate

  11. Annual Housing Starts Pace Increases - VA 13%

  12. Annual Housing Starts Pace Increases - Richmond -19%

  13. 2. Pent up demand waiting

  14. Household Formations Are on the RiseYear-over-year change in households rising again Thousands Avg: 1.4 million (12% renters) Avg: 0.6 million (129% renters) Avg: 0.5 million (130% renters )

  15. Share and Excess Number of Young Adults with Parents

  16. Local Population Growth Accelerated in 2012 % change

  17. 3. Growing need for new construction

  18. Home Sales VolumeNew homes have more ground to make up (000s) (000s)

  19. New Homes Share of SalesNew homes half historic share of sales

  20. Existing Home Turnover RateCurrent turnover lower than normal

  21. Cumulative Lost Existing SalesSubstantial pent up sales

  22. To-Date House Price ChangeSignificant state variation in price recovery (2013Q3 relative to peak) -14%

  23. House Prices Return to Near-Normal House Price-to-Income Ratio US RichmondVirginia Long-term 3.2 2.5 2.3 Peak 4.7 3.5 2.8 Current 3.7 2.7 2.0 Peak/Long-term US: 4.7/3.2 = 150% Richmond:3.5/2.5 = 138% Virginia: 3.3/2.7 = 123%

  24. Affordability Has Dipped But Remains HighNAHB/Wells Fargo Housing Opportunity Index

  25. Rates (inverted) & New Home SalesStill room for higher rates & more sales Forecast

  26. 4. Distressed sales diminishing

  27. Seriously Delinquent Rates: Peak and Current - Largest correction in states with highest peak

  28. 5. Builders see it

  29. New Home Sales and NAHB/Wells Fargo Housing Market Index 2 months peak to peak 2 months peak to peak 1 month peak to peak 1 month peak to peak (000s) 3 months trough to trough 3 months trough to trough

  30. Builders’ Concerns Increasing Share of builders citing issue

  31. Forecasts

  32. Percent of 'Normal' (annual average 2000-2003)

  33. Remodeling Market Index (RMI)Above 50 for 5 of the past 6 quarters

  34. Residential Remodeling Billions 2009 $, SAAR Adjusted Actual

  35. Multifamily Production IndexAbove 50 for seven consecutive quarters (000s)

  36. Multifamily Housing Starts Healthy Response from Growth in Renters 2013Q4: 103% of “Normal” Trough to Current: 4th Q 09 = 82,000 4rh Q 13 = 340,000 +315%

  37. NAHB/Wells Fargo Housing Market Index Builders remain optimistic Single-family starts (R) HMI (L)

  38. Existing and New Home Sales – On the Rise New (L) Existing (R)

  39. Single-Family Starts – Beginning a Recovery 2015Q4: 93% 2013Q4: 49% of “Normal” Trough to Current: Mar 09 = 353,000 Dec 13 = 667,000 +89%

  40. Single-family Housing Starts – Richmond

  41. Recovery Will Vary By State Source: US Census Bureau

  42. Rank Q4 2015 Bottom 20% 20% to 40% 40% to 60% 60% to 80% Top 20% The Long Road Back to Normal Relative to Normal < 84% 84% - 88% 89% - 94% 94% - 101% 102% < This map shows how the states rank in the return to more normal levels of housing production. By the end of 2015, the top 20% will be back to normal production levels. The bottom 20% will be below 84% of normal production.

  43. Questions?Answers: www.housingeconomics.comeyeonhousing.org dcrowe@nahb.org

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