Building Industry Forecast DC Jeff Meyers On National Trends

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Building Industry Forecast

September 2014

Job Growth •  U.S. job growth has improved.

•  Strongest job growth is in the West, Southeast and Texas

•  The U.S. economy has added jobs for 46 consecutive months.

•  Areas with the best job growth also have healthy housing markets.

The Economy

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Job Growth

•  3 of the top 10 are in Texas

•  2 of the top 10 are in Bay Area

•  2 of the top 10 Florida

•  Tech, Oil and Gas and Hospitality

Source: Bureau of Labor Sta/s/cs, June 2014

Top-10 Large Metro Areas

MSA Annual Job Growth

Orlando-Kissimmee-Sanford, FL 3.7%

Austin-Round Rock-San Marcos, TX 3.6%

Dallas-Fort Worth-Arlington, TX 3.6%

San Jose-Sunnyvale-Santa Clara, CA 3.4%

Las Vegas-Paradise, NV 3.1%

Portland-Vancouver-Hillsboro, OR-WA 3.1%

Houston-Sugar Land-Baytown, TX 3.1%

San Francisco-Oakland-Fremont, CA 3.0%

Miami-Fort Lauderdale-Pompano Beach, FL 3.0%

Indianapolis-Carmel, IN 3.0%

The Economy

Demographics

Homeownership Rate •  The homeownership rate in 2Q14 fell to its lowest level since 1995.

•  Homeownership is been steadily declining for a decade; It was exacerbated by the recession.

•  The homeownership rate in the West region has increased for two straight quarters after reaching its lowest levels since 1997.

Demographics


Homeownership Rate •  The first-time homebuyer segment is feeling the pinch of declining affordability the most.

•  Homeownership rate amongst the Under-35 age group is at the lowest (35.9%) it has been since the Census began tracking in ownership by age in 1994.

•  Millennials are renting over buying, represent upside ahead as they get into 30s.

Demographics


0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%

Under 35 years

35 to 44 years

45 to 54 years

55 to 64 years

65 years and over

Homeownership Rates by Age

8

International Migration on Coasts and Near Diverse Economies The top U.S. “gateway” cities for international migration are outlined below. Many top markets in the United States, including markets in California, Seattle, Miami and New York are seeing incoming housing demand from international buyers seeking a home or investment property to buy. International buyers include those from all parts of Asia, South America, Europe, Russia and the Middle East. International buyers are a particular condo market factor in Miami and New York markets, as well as in California.

Source: MPI and US Census

9

Domestic Migration Driven by Jobs but also Affordability and Retirement Looking at just domestic migration trends, it is low-cost Sunbelt areas, energy centers (Texas), and knowledge and technology hubs that earn the biggest net gain in domestic population. The three largest metros in the United States (New York, Chicago, Los Angeles) continue to lose domestic population. The Rustbelt area continues to lose domestic population.


10

Total Migration Fuels the Major Metropolitan Areas This chart combines domestic and foreign migration. Metros with knowledge-based economies and in the Sunbelt account for the largest population growth (North Carolina, Florida, Atlanta, Texas, Phoenix and Las Vegas, etc.). Eleven large metros, most in or near the Rustbelt, displayed decreases in population. New York and LA are losing more Americans than they are gaining, but foreign migration makes up for it.


Housing Market

Improving Residential Building •  Single-family building permits have rebounded since first part of year.

•  Bad weather during the winter months slowed building activity.

•  Tighter lending standards and lower affordability may also be contributing factors.

•  High rental demand has kept multi-family permit activity at elevated levels.

Housing Market


New Home Sales •  New home sales were down 11.5% from last June, the biggest annual decline since April

2011.

•  Affordability hampering demand since prices are still rising.

•  Moody’s forecasts a strong year for new home sales in 2014.

•  New home sales still only a third of what they were at their peak; Lots of room to grow.

Housing Market


Mortgage Rate Activity in the last 24 months •  Rates declined slightly this past week while again matching their lowest levels of the year.

•  Average 30-year fixed rate mortgage currently matches its lowest levels of the year.

•  Fixed rates remained low despite stronger economic data and the Fed’s continued tapering.

•  The Fed cut their monthly bond-buying by another $10 billion to $25 billion/month in August.


Housing Market

FHA Loan limits impact New Home Sales


County Name State

2013FHA Loan

Limits

2014FHA Loan

Limits

Changein LoanLimits

2013 First Half New

Home Sales

2014 First HalfNew

Home Sales

Change in New

Home SalesWashington DC $729,750 $625,500 -‐14.29% 327 499 52.60%Santa Clara CA $729,750 $625,500 -‐14.29% 530 770 45.28%Kings NY $729,750 $625,500 -‐14.29% 596 652 9.40%Tarrant TX $271,050 $287,500 6.07% 2130 2181 2.39%Queens NY $729,750 $625,500 -‐14.29% 391 393 0.51%Broward FL $423,750 $345,000 -‐18.58% 583 583 0.00%Harris TX $272,550 $295,550 8.44% 5313 5221 -‐1.73%Orange CA $729,750 $625,500 -‐14.29% 1307 1231 -‐5.81%Bexar TX $332,500 $316,250 -‐4.89% 2866 2692 -‐6.07%Wayne MI $297,500 $271,050 -‐8.89% 326 295 -‐9.51%Dallas TX $271,050 $287,500 6.07% 1093 952 -‐12.90%Miami-‐Dade FL $423,750 $345,000 -‐18.58% 1088 919 -‐15.53%New York NY $729,750 $625,500 -‐14.29% 439 369 -‐15.95%Maricopa AZ $346,250 $271,050 -‐21.72% 4960 3974 -‐19.88%King WA $567,500 $506,000 -‐10.84% 1906 1501 -‐21.25%Los Angeles CA $729,750 $625,500 -‐14.29% 1831 1414 -‐22.77%Cook IL $410,000 $365,700 -‐10.80% 905 631 -‐30.28%San Bernardino CA $500,000 $355,350 -‐28.93% 977 679 -‐30.50%Riverside CA $500,000 $355,350 -‐28.93% 1961 1273 -‐35.08%San Diego CA $697,500 $546,250 -‐21.68% 1653 1008 -‐39.02%Clark NV $400,000 $287,500 -‐28.13% 4037 2204 -‐45.41%

Housing Market

Foreclosure Heat Map •  Foreclosure activity remains high in some Rust Belt states and the Southeast.

•  Nevada, Michigan, and Arizona still amongst worst performers despite a recovery.

•  Florida still leads the nation in foreclosures.

Housing Market


Conclusion


1.  Mortgage industry is still holding us back

2.  Diverse Markets of Have and Have NOTS

3.  Demographics are favorable for housing expansion

4.  Builder population is low and could see further consolidation

5.  Capital is taking more risk and less expensive

Conclusions


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Building Industry Forecast DC Jeff Meyers On National Trends

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