2014 residential economic issues & trends forum: realtor® party convention & trade expo

Residential Economic Issues & Trends Forum

Housing Market and Economic Outlook

Lawrence Yun, Ph.D. Chief Economist

NATIONAL ASSOCIATION OF REALTORS®

PresentaAon in Washington, D.C.

May 15, 2014

U.S. Popula:on

0

50

100

150

200

250

300

350

1968 1973 1978 1983 1988 1993 1998 2003 2008 2013

In millions

Jobs in America – Less Smooth

0 20000 40000 60000 80000

100000 120000 140000 160000

1968 -‐ Jan

1969 -‐ De

c 1971 -‐ Nov

1973 -‐ Oct

1975 -‐ Sep

1977 -‐ Au

g 1979 -‐ Jul

1981 -‐ Jun

1983 -‐ May

1985 -‐ Ap

r 1987 -‐ Mar

1989 -‐ Feb

1991 -‐ Jan

1992 -‐ De

c 1994 -‐ Nov

1996 -‐ Oct

1998 -‐ Sep

2000 -‐ Au

g 2002 -‐ Jul

2004 -‐ Jun

2006 -‐ May

2008 -‐ Ap

r 2010 -‐ Mar

2012 -‐ Feb

2014 -‐ Jan

Jobs to Popula:on Ra:o (16 years and over)

50 52 54 56 58 60 62 64 66

1968 -‐ Jan

1969 -‐ Oct

1971 -‐ Jul

1973 -‐ Ap

r 1975 -‐ Jan

1976 -‐ Oct

1978 -‐ Jul

1980 -‐ Ap

r 1982 -‐ Jan

1983 -‐ Oct

1985 -‐ Jul

1987 -‐ Ap

r 1989 -‐ Jan

1990 -‐ Oct

1992 -‐ Jul

1994 -‐ Ap

r 1996 -‐ Jan

1997 -‐ Oct

1999 -‐ Jul

2001 -‐ Ap

r 2003 -‐ Jan

2004 -‐ Oct

2006 -‐ Jul

2008 -‐ Ap

r 2010 -‐ Jan

2011 -‐ Oct

2013 -‐ Jul

Sluggish Growth + Gap aXer Great Recession ($1.5 trillion gap … $4,700 per person)

0 5,000 10,000 15,000 20,000

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

GDP in 2009 Dollars

Real GDP Real GDP W/O Recession

3% Growth Line

2.2% Growth Line

Recent Year Ac:vity GDP Contrac:on in 2014 Q1

-‐10

-‐5

0

5

10

2007 -‐ Q1

2007 -‐ Q3

2008 -‐ Q1

2008 -‐ Q3

2009 -‐ Q1

2009 -‐ Q3

2010 -‐ Q1

2010 -‐ Q3

2011 -‐ Q1

2011 -‐ Q3

2012 -‐ Q1

2012 -‐ Q3

2013 -‐ Q1

2013 -‐ Q3

2014 -‐ Q1

GDP Annualized Growth Rate

But No Fresh Recession in Sight

-‐6

-‐4

-‐2

0

2

4

GDP Growth Rate from one year ago

Cyclical Housing Sector: Single-‐Family Exis:ng Home Sales Only

(Best Es:ma:on – could be off by several % points)

0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014 Q1

Single-‐Family Sales to Popula:on Ra:o (Average = 1.36%)

0.0 0.5 1.0 1.5 2.0 2.5

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014 Q1

%

# of People per Housing Unit

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Single-‐Family Sales to Household Ra:o (Average = 3.66%)

2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 6.00

1968 1973 1978 1983 1988 1993 1998 2003 2008 2013

Monthly Pending Sales Index (Seasonally Adjusted)

70.0 75.0 80.0 85.0 90.0 95.0 100.0 105.0 110.0 115.0

Source: NAR

Exis:ng Home Sales -‐ Closings

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,000

2011 -‐ Jan

2011 -‐ Mar

2011 -‐ May

2011 -‐ Jul

2011 -‐ Sep

2011 -‐ Nov

2012 -‐ Jan

2012 -‐ Mar

2012 -‐ May

2012 -‐ Jul

2012 -‐ Sep

2012 -‐ Nov

2013 -‐ Jan

2013 -‐ Mar

2013 -‐ May

2013 -‐ Jul

2013 -‐ Sep

2013 -‐ Nov

2014 -‐ Jan

2014 -‐ Mar

Causes of Recent Sales Slowdown •  Bad winter

–  Only delayed sales not cancella:on •  Lack of inventory

–  Steadily more inventory coming to market •  Home prices rose too fast

–  Showing signs of slowing •  Mortgage credit difficul:es

–  New Qualified Mortgage Rules –  Surely cannot get worse!

•  Mortgage rates jumped –  Trouble !

Inventory of Homes for Sale

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

2007 -‐ Jan

2007 -‐ May

2007 -‐ Sep

2008 -‐ Jan

2008 -‐ May

2008 -‐ Sep

2009 -‐ Jan

2009 -‐ May

2009 -‐ Sep

2010 -‐ Jan

2010 -‐ May

2010 -‐ Sep

2011 -‐ Jan

2011 -‐ May

2011 -‐ Sep

2012 -‐ Jan

2012 -‐ May

2012 -‐ Sep

2013 -‐ Jan

2013 -‐ May

2013 -‐ Sep

2014 -‐ Jan

Change in Inventory (% change from one year ago)

-‐30 -‐25 -‐20 -‐15 -‐10 -‐5 0 5

10 15 20

2007 -‐ Jan

2007 -‐ May

2007 -‐ Sep

2008 -‐ Jan

2008 -‐ May

2008 -‐ Sep

2009 -‐ Jan

2009 -‐ May

2009 -‐ Sep

2010 -‐ Jan

2010 -‐ May

2010 -‐ Sep

2011 -‐ Jan

2011 -‐ May

2011 -‐ Sep

2012 -‐ Jan

2012 -‐ May

2012 -‐ Sep

2013 -‐ Jan

2013 -‐ May

2013 -‐ Sep

2014 -‐ Jan

Home Price Index in Phoenix and St. Louis Repeat-‐Transac:on Home Price Index

80

130

180

230

280

330

1995 -‐ Q1

1995 -‐ Q4

1996 -‐ Q3

1997 -‐ Q2

1998 -‐ Q1

1998 -‐ Q4

1999 -‐ Q3

2000 -‐ Q2

2001 -‐ Q1

2001 -‐ Q4

2002 -‐ Q3

2003 -‐ Q2

2004 -‐ Q1

2004 -‐ Q4

2005 -‐ Q3

2006 -‐ Q2

2007 -‐ Q1

2007 -‐ Q4

2008 -‐ Q3

2009 -‐ Q2

2010 -‐ Q1

2010 -‐ Q4

2011 -‐ Q3

2012 -‐ Q2

2013 -‐ Q1

Change in Home Price (% change from one year ago)

-‐10

-‐5

0

5

10

15

2011 -‐ Jan

2011 -‐ Mar

2011 -‐ May

2011 -‐ Jul

2011 -‐ Sep

2011 -‐ Nov

2012 -‐ Jan

2012 -‐ Mar

2012 -‐ May

2012 -‐ Jul

2012 -‐ Sep

2012 -‐ Nov

2013 -‐ Jan

2013 -‐ Mar

2013 -‐ May

2013 -‐ Jul

2013 -‐ Sep

2013 -‐ Nov

2014 -‐ Jan

2014 -‐ Mar

NAR Case-‐Shiller CoreLogic

Median Home Price – Rising ($40,000 Equity Gain in 3 years)

$166,100 $176,800

$197,100 $208,200

$150,000 $160,000 $170,000 $180,000 $190,000 $200,000 $210,000 $220,000

2011 2012 2013 2014 forecast

Inevitable Rise in Mortgage Rates will further hurt Affordability

1/3rd of homeowners have no mortgage 1/3rd have 4.3% rate or lower

1/3rd have higher rate

3 4 5 6 7 8 9

2000 -‐ Jan

2000 -‐ Jul

2001 -‐ Jan

2001 -‐ Jul

2002 -‐ Jan

2002 -‐ Jul

2003 -‐ Jan

2003 -‐ Jul

2004 -‐ Jan

2004 -‐ Jul

2005 -‐ Jan

2005 -‐ Jul

2006 -‐ Jan

2006 -‐ Jul

2007 -‐ Jan

2007 -‐ Jul

2008 -‐ Jan

2008 -‐ Jul

2009 -‐ Jan

2009 -‐ Jul

2010 -‐ Jan

2010 -‐ Jul

2011 -‐ Jan

2011 -‐ Jul

2012 -‐ Jan

2012 -‐ Jul

2013 -‐ Jan

2013 -‐ Jul

2014 -‐ Jan

%

Locked-‐in Effect of Low Rates? •  Housing cannot get back to normal in a hurry •  People move even in high interest rate environment

– Marriage, divorce, new baby, school district, new job, fed-‐up with local government, …

•  Many unplanned landlords –  Take advantage of rising rents while rates are low and fixed

•  Poten:al future lock from longer holding period for capital gains tax exclusion

Rising Renters’ and Homeowners’ Rent Growth (On the Way to 3%)

-‐1 0 1 2 3 4 5

2003 -‐ Jan

2003 -‐ Jun

2003 -‐ Nov

2004 -‐ Ap

r 2004 -‐ Sep

2005 -‐ Feb

2005 -‐ Jul

2005 -‐ De

c 2006 -‐ May

2006 -‐ Oct

2007 -‐ Mar

2007 -‐ Au

g 2008 -‐ Jan

2008 -‐ Jun

2008 -‐ Nov

2009 -‐ Ap

r 2009 -‐ Sep

2010 -‐ Feb

2010 -‐ Jul

2010 -‐ De

c 2011 -‐ May

2011 -‐ Oct

2012 -‐ Mar

2012 -‐ Au

g 2013 -‐ Jan

2013 -‐ Jun

2013 -‐ Nov

Owners' Equivalent Rent Renters' Rent

REALTOR® Rent Survey – Shows Rent Pressure

0 10 20 30 40 50 60

Falling Rising

If there is persistent housing shortage … then the basle begins

Landlord from Hell

versus Rent Control

Housing Starts Rising … More Inventory But Needs to Reach 1.5 1.7 million

0

500

1000

1500

2000

2500

2000 -‐ Jan

2001 -‐ Jan

2002 -‐ Jan

2003 -‐ Jan

2004 -‐ Jan

2005 -‐ Jan

2006 -‐ Jan

2007 -‐ Jan

2008 -‐ Jan

2009 -‐ Jan

2010 -‐ Jan

2011 -‐ Jan

2012 -‐ Jan

2013 -‐ Jan

2014 -‐ Jan

mul:family single-‐family

Thousand units (annualized)

Long-term Average

New Home Sales

0 200 400 600 800 1000 1200 1400 1600

2000 -‐ Jan

2001 -‐ Jan

2002 -‐ Jan

2003 -‐ Jan

2004 -‐ Jan

2005 -‐ Jan

2006 -‐ Jan

2007 -‐ Jan

2008 -‐ Jan

2009 -‐ Jan

2010 -‐ Jan

2011 -‐ Jan

2012 -‐ Jan

2013 -‐ Jan

2014 -‐ Jan

In thousand units

Sluggish Recovery in Housing Starts •  Cost of Construc:on Rising Faster than CPI

•  Labor Shortage for construc:on work

•  Construc:on loan difficulty for small local homebuilders … Dodd-‐Frank financial regula:ons?

Exis:ng vs. New Home Price

$0 $50,000

$100,000 $150,000 $200,000 $250,000 $300,000 $350,000

2000 -‐ Jan

2002 -‐ Jan

2004 -‐ Jan

2006 -‐ Jan

2008 -‐ Jan

2010 -‐ Jan

2012 -‐ Jan

2014 -‐ Jan

Exis:ng New

Economic Outlook

Monetary Policy •  Tapering Ends by the year end 2014 •  Fed Funds Rate … hike in 2015 Q1 •  Earlier Move to Tighten because of Infla:on Pressure

•  Long-‐term Steady State Rate (2016 onwards) .. 10 year Treasury at 5.0% … 250 basis points higher than current

Core Price InflaAon: Less than 2%; but rose at 2.5% annualized rate

(% change from one year ago)

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50

1999 -‐ Jan

1999 -‐ Jul

2000 -‐ Jan

2000 -‐ Jul

2001 -‐ Jan

2001 -‐ Jul

2002 -‐ Jan

2002 -‐ Jul

2003 -‐ Jan

2003 -‐ Jul

2004 -‐ Jan

2004 -‐ Jul

2005 -‐ Jan

2005 -‐ Jul

2006 -‐ Jan

2006 -‐ Jul

2007 -‐ Jan

2007 -‐ Jul

2008 -‐ Jan

2008 -‐ Jul

2009 -‐ Jan

2009 -‐ Jul

2010 -‐ Jan

2010 -‐ Jul

2011 -‐ Jan

2011 -‐ Jul

2012 -‐ Jan

2012 -‐ Jul

2013 -‐ Jan

2013 -‐ Jul

2014 -‐ Jan

All items exlcuding fuel and energy

GDP Growth = Job Crea:ons (8 million lost … 8 million gained)

124000 126000 128000 130000 132000 134000 136000 138000 140000

2000 -‐ Jan

2000 -‐ Jul

2001 -‐ Jan

2001 -‐ Jul

2002 -‐ Jan

2002 -‐ Jul

2003 -‐ Jan

2003 -‐ Jul

2004 -‐ Jan

2004 -‐ Jul

2005 -‐ Jan

2005 -‐ Jul

2006 -‐ Jan

2006 -‐ Jul

2007 -‐ Jan

2007 -‐ Jul

2008 -‐ Jan

2008 -‐ Jul

2009 -‐ Jan

2009 -‐ Jul

2010 -‐ Jan

2010 -‐ Jul

2011 -‐ Jan

2011 -‐ Jul

2012 -‐ Jan

2012 -‐ Jul

2013 -‐ Jan

2013 -‐ May

2013 -‐ Nov

In thousands

Local Market Job Comparisons Fast Growing States 1-‐year Growth Rate

Nevada 3.8%

North Dakota 3.7%

Colorado 3.0%

Florida 3.0%

Oregon 2.7%

Texas 2.7%

Utah 2.6%

Delaware 2.4%

California 2.3%

Arizona 1.9%

Slow Moving States 1-‐year Growth Rate

New Mexico -‐0.2%

Kentucky -‐0.2%

New Jersey 0.0%

Virginia 0.1%

Alaska 0.2%

West Virginia 0.3%

Pennsylvania 0.3%

Maryland 0.3%

D.C. 0.4%

Mississippi 0.5%

Business Spending in rela:on to Corporate Profits … Huge Poten:al for Business Spending Increase

0 500 1000 1500 2000 2500

1980 -‐ Q1

1981 -‐ Q3

1983 -‐ Q1

1984 -‐ Q3

1986 -‐ Q1

1987 -‐ Q3

1989 -‐ Q1

1990 -‐ Q3

1992 -‐ Q1

1993 -‐ Q3

1995 -‐ Q1

1996 -‐ Q3

1998 -‐ Q1

1999 -‐ Q3

2001 -‐ Q1

2002 -‐ Q3

2004 -‐ Q1

2005 -‐ Q3

2007 -‐ Q1

2008 -‐ Q3

2010 -‐ Q1

2011 -‐ Q3

2013 -‐ Q1

Profits Business Spending

Economic Forecast 2013 2014

forecast 2015

forecast GDP Growth 1.9% 2.2% 2.9%

Job Growth 1.7% 1.6% 1.9%

CPI Infla:on 1.4% 2.5% 3.5%

Consumer Confidence 73 82 86

10-‐year Treasury 2.5% 3.0% 3.8%

Housing Market Outlook

Pent Up Demand 2000 2013

Exis:ng Home Sales 5.2 m 5.1 m

New Home Sales 880 K 430 K

Mortgage Rates 8.0% 4.0%

Payroll Jobs 132.0 m 136.4 m

Popula:on 282 m 316 m

Vaca:on Home Sales

-‐ 200 400 600 800

1,000 1,200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

In thousands

Household Net Worth

40000 45000 50000 55000 60000 65000 70000 75000

2000 -‐ Q1

2000 -‐ Q4

2001 -‐ Q3

2002 -‐ Q2

2003 -‐ Q1

2003 -‐ Q4

2004 -‐ Q3

2005 -‐ Q2

2006 -‐ Q1

2006 -‐ Q4

2007 -‐ Q3

2008 -‐ Q2

2009 -‐ Q1

2009 -‐ Q4

2010 -‐ Q3

2011 -‐ Q2

2012 -‐ Q1

2012 -‐ Q4

$ billion

Home Countries for Interna:onal Buyers Preliminary Analysis, Subject to Change

* Includes People’s Republic of China, Taiwan, and Hong Kong

Brazil Canada China* Germany India Japan Mexico Russia United Kingdom

2011 3% 23% 9% 4% 7% 2% 7% 1% 7% 2012 3% 24% 12% 3% 6% 1% 8% 2% 6% 2013 2% 23% 12% 3% 5% 1% 8% 2% 5% 2014P 2% 18% 18% 3% 4% 2% 9% 1% 6%

0%

5%

10%

15%

20%

25%

30%

Distribu:on of Interna:onal Sales by Country of Origin

Will China overtake the U.S. in GDP? Had An:cipated around 2010

0

5000

10000

15000

20000

25000

1929

1933

1937

1941

1945

1949

1953

1957

1961

1965

1969

1973

1977

1981

1985

1989

1993

1997

2001

2005

2009

2013

2017

2021

2025

U.S. (growing 3%) China (growing 8%)

Chinese Yuan vs. U.S. Dollar (Yuan per $)

5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50

2000 -‐ Jan

2000 -‐ Jul

2001 -‐ Jan

2001 -‐ Jul

2002 -‐ Jan

2002 -‐ Jul

2003 -‐ Jan

2003 -‐ Jul

2004 -‐ Jan

2004 -‐ Jul

2005 -‐ Jan

2005 -‐ Jul

2006 -‐ Jan

2006 -‐ Jul

2007 -‐ Jan

2007 -‐ Jul

2008 -‐ Jan

2008 -‐ Jul

2009 -‐ Jan

2009 -‐ Jul

2010 -‐ Jan

2010 -‐ Jul

2011 -‐ Jan

2011 -‐ Jul

2012 -‐ Jan

2012 -‐ Jul

2013 -‐ Jan

2013 -‐ Jul

2014 -‐ Jan

Global Pent-‐Up Demand from Rising World Popula:on

0

2

4

6

8

10

1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100

In billions

World-‐Class Ci:es will Benefit ! •  Boston, Chicago, Dallas, Miami, New York, San Diego,

San Francisco, Washington D.C., etc.

Housing Forecast 2013 2014

forecast 2015

forecast Housing Starts 925,000 1.07 million 1.4 million

New Home Sales 430,000 510,000 710,000

Exis:ng Home Sales 5.1 million 4.9 million 5.2 million

Median Price $197,000 $209,000 $219,000

30-‐year Rate 4.0% 4.7% 5.5%

Dollar Volume Es:mate +21% +3% +11%

Housing Market and

Economic Outlook Lawrence Yun, Ph.D. Chief Economist

NATIONAL ASSOCIATION OF REALTORS®

PresentaAon in Washington, D.C.

May 15, 2014

© 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E

Housing Demand

Eric Belsky May 2014

Washington, DC


Federal Surveys Providing a Murky Picture on Extent of Recent Household Growth

0

500

1,000

1,500

2011 2012 2013

Change in Households (Thousands)

Housing Vacancy Survey Current Population Survey American Community Survey

Note: Data for 2013 American Community Survey is not yet available and is not presented on this slide. Household growth for Housing Vacancy Survey uses revised 2010/12 vintage weights, and the Current Population Survey uses 2010 vintage weights


Hard to Know What’s Happening With Household Growth But . . . Long-Run Housing Production Is

WAY Below Narrow Normal Range

0 500

1,000 1,500 2,000

Lagging Ten-Year Annual Average Housing Completions and Manufactured Home Placements (Thousands)

Median Source: US Census Bureau


WAITING FOR STRONGER DEMAND REBOUND

50


Even CPS Suggests Cumulative Household Growth Is Now 1.5 Million Below Even Modest 1.14M ’95 -’00 Trend

-4,000

-3,000

-2,000

-1,000

0

1,000

2006 2007 2008 2009 2010 2011 2012

Change in Number of Households (Thousands)

CPS vs 1995-2000 Rate CPS vs. 2000-2005 Rate


Nearly 3 Million More Adults in Their 20s and Early 30s Lived with their Parents In 2012 Than 2007

0

500

1,000

1,500

2,000

20-24 25-29 30-34 Age

Change from 2007-2012 in Number of Adult Children Living with Parents (Thousands)

Source: JCHS tabulations of US Census Bureau, Current Population Survey


Real Median Incomes for All Young Adult Households Have Declined Since Great Recession

-15

-10

-5

0

20-24 25-29 30-34 35-39 Age

2007-2012 Change in Real Median Household Incomes (Percent)

Note: Percent change based on dollar values that have adjusted for inflation using the CPI-U for All Items. Source: JCHS tabulations of US Census Bureau, Current Population Survey.


A Significant But Lower Fraction of Adult Children Living with Parents Were Employed Full Time in ‘12 than ‘07

0

50

100

20-24 25-29 30-34 35-39 Age

Share of Adult Children Living with Parents Who Have Full-Time Employment (Percent)

2007 2012

Source: JCHS tabulations of US Census Bureau, Current Population Survey


Student Default Rates Have Soared, Hindering Ability to Qualify for a Mortgage

0 2 4 6 8

10 12 14

2003

:Q1

2003

:Q3

2004

: Q1

2004

: Q3

2005

: Q1

2005

: Q3

2006

: Q1

2006

: Q3

2007

: Q1

2007

: Q3

2008

: Q1

2008

: Q3

2009

: Q1

2009

: Q3

2010

: Q1

2010

: Q3

2011

: Q1

2011

: Q3

2012

: Q1

2012

: Q3

2013

: Q1

2013

: Q3

Share of Seriously Delinquent Student Loans (Percent)

Note: Seriously delinquent student loans are defined as 90-plus days delinquent. Source: Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit.


0 10 20 30 40 50 60 70 80 90

100

2004 2010

Payments are 15 percent or greater of monthly income

Payments are 10 to 14.9 percent of monthly income

Payments are 5 to 9.9 percent of monthly income 0

10 20 30 40 50 60 70 80 90

100

2004 2010

Share of Households with Head Aged 20 to 29 (Percent), By Tenure and Year

Student Debt Payments May Pose a Significant Barrier to Mortgage Borrowing For As Many 1 in 10 Renters in Their 20s

Renters Owners Source: JCHS tabulations of Federal Reserve Board, Survey of Consumer Finances


0 10 20 30 40 50 60 70 80 90

100

2004 2010 0

10 20 30 40 50 60 70 80 90

100

2004 2010

Payments are 15 percent or greater of monthly income Payments are 10 to 14.9 percent of monthly income Payments are 5 to 9.9 percent of monthly income Payments are less than 5 percent of monthly income Has student loan debt but not making payments on it

Has no student loan debt

And Even Smaller Share of Renters in Their 30s Are Spending 5 Percent+ of Income on Student Debt

Renters Owners Source: JCHS tabulations of Federal Reserve Board, Survey of Consumer Finances

Share of Households with Head Aged 30 to 39 (Percent), By Tenure and Year


Household Growth Is Expected to Rival or Top 1995-2000 Annual Average Pace

500 600 700 800 900

1,000 1,100 1,200 1,300

1995-2000

CPS HVS

Source: JCHS Household Projections (for Projected Annual Average Household Growth)

500 600 700 800 900

1,000 1,100 1,200 1,300

2000-2010

Decennial Census

500 600 700 800 900

1,000 1,100 1,200 1,300

JCHS Projections 15-25 Low Projection Middle Projection High Projection

Average Annual Household Growth (Thousands)


Minority Households Will Account for 76 Percent of Household Growth Over the Next Decade

0 20 40 60 80

100

Household Composition in 2012 ACS

Projected Composition of Household Growth,

2015-2025

Percent Share of Households, by Race and Ethnicity

Asian/other Hispanic Black, non-Hispanic White, non-Hispanic

Source: JCHS tabulations of US Census Bureau, 2012 American Community Survey; JCHS Household Projections, Middle Series


The Greatest Increase in Households Will Be Among Households 65 and Older

0 2 4 6 8

10 12 14

<25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80+ 2015 2025

Projected Households (Millions)

60

Source: JCHS households projections.


WILL V. WAY

61


Nearly All People Under Age 45 Expect to Buy in the Future . . .

0

20

40

60

80

100

Under 25 25 to 34 35 to 44 45 to 54 55 to 64

% Who Expect to Buy a Home at Some Point in the Future

Source: Drew and Herbert, 2012. Based on Fannie Mae National Housing Survey 2010-2012.


But Underwriting Has Tightened Dramatically

0

20

40

60

80

100

2006 2007 2008 2009 2010 2011 2012

Share of FHA-Insured Mortgages by Dollar Volume (Percent)

Below 640 640-679 680-850

0

20

40

60

80

100

2001 2011

Share of Freddie Mac and Fannie Mae Originations (Percent)

Higher Risk Medium Risk Lower Risk

Notes: Higher (lower) risk loans are to borrowers with credits scores under 690 (above 750) and have loan-to-value ratios above 85% (below 75%). FHA data exclude records with no credit score information. Sources: Amherst Securities; US Department of Housing and Urban Development.

Credit Score


Demanding More Down or Capping Credit Scores Disproportionately Impacts Minorities

12

38

11

29

60

27 18

49

18 5

23

6 0

10 20 30 40 50 60 70

3% Downpayment 10% Downpayment FICO 660

Perc

ent o

f Per

form

ing

Loan

s Ex

clud

ed

Non-Hispanic White African American Latino Asian

64

Percent of performing loans excluded from mortgage market 2004-2008 originations (1st lien, owner occupied, full doc only--excludes IO, neg. am and < 5 year hybrid ARMs)

Source: Roberto Quercia, Lei Ding, and Carolina Reid (2012). Balancing Risk and Access: Underwriting Standards for Qualified Residential Mortgages, Center for Community Capital Research Report, January 2012.


. . . And those with Lower Incomes

25

49

25 22

49

18 13

42

12 7

32

8

0 10 20 30 40 50 60

3% Downpayment 10% Downpayment FICO 660

Perc

ent o

f Per

form

ing

Loan

s Ex

clud

ed

Low-Income Moderate-Income Middle-Income Upper-Income

65

Percent of performing loans excluded from mortgage market 2004-2008 originations (1st lien, owner occupied, full doc only--excludes IO, neg. am and < 5 year hybrid ARMs)

Note: Income categories are defined as follows: low—less than 50% of MSA median income; moderate—50-79%; middle—80-119%; and upper—120%+ of MSA median income. Source: Roberto Quercia, Lei Ding, and Carolina Reid (2012). Balancing Risk and Access: Underwriting Standards for Qualified Residential Mortgages, Center for Community Capital Research Report, January 2012.

Dennis McGill

National Association of REALTORS®

May 15, 2014

Zelman & Associates Equity Research

Drivers of New Shelter

q  Accelerating Household Formations q  Decoupling of households

q  Improving job growth

q  Increasing consumer confidence

q  Near Record Occupancy Levels in Rental Housing

q  Constrained Resale Housing Inventory

q  Deficit of Shelter

New Housing Supply Implied by Decade Analysis

500

1,490

1,090 155

330

260

55

80

70

720

1,925

1,440

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2010-13 2014-19 2010-19

Manufactured Housing

2-4 Unit Multi-Family

5-Plus Multi-Family

Single-Family

New Housing Supply, in ThousandsAnnual Average

Source: Census Bureau, Zelman & Associates analysis

CPS Not Perfect But Showed Strongest Alignment With Decennial Census

990

1,395

740

700

1,935

655

1,430

1,550

1,380

855

1,855

1,100

2,000

730

1,355

1,050

1,645

780

400

360

1,155

1,155

1,465

0

500

1,000

1,500

2,000

2,500

1Q91

1Q92

1Q93

1Q94

1Q95

1Q96

1Q97

1Q98

1Q99

1Q00

1Q01

1Q02

1Q03

1Q04

1Q05

1Q06

1Q07

1Q08

1Q09

1Q10

1Q11

1Q12

1Q13

Current Population Survey Change in National Households in ThousandsWith Trailing Three-Year Average


Electric Data Supports Accelerating Trend in CPS Households

1.4%

1.2%

1.4%

1.4%

1.5%

1.3%

1.6%1.5% 1.5%

1.7%1.7%

1.5%

1.1%

1.2%

1.5%

1.4%

1.2%

0.8%

0.2%

0.4%

0.3%

0.5%

0.8%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Residential Electric Customers % Change CPS Average Households % Chg

Source: Census Bureau, Energy Information Administration, Zelman & Associates analysis

Not Surprisingly, Young Adult Employment Driving Household Growth

86.0%

87.0%

88.0%

89.0%

90.0%

91.0%

92.0%

93.0%

94.0%

95.0%

96.0%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

% Change Residential Electric Customers - left

20-34 Year Old Employment Rate - right

Source: BLS, Energy Information Administration, Zelman & Associates analysis

High Occupancy Supports Stable Rent Growth

(10%)

(8%)

(6%)

(4%)

(2%)

0%

2%

4%

6%

8%

10%

91.0%

91.5%

92.0%

92.5%

93.0%

93.5%

94.0%

94.5%

95.0%

95.5%

96.0%

2Q97

4Q97

2Q98

4Q98

2Q99

4Q99

2Q00

4Q00

2Q01

4Q01

2Q02

4Q02

2Q03

4Q03

2Q04

4Q04

2Q05

4Q05

2Q06

4Q06

2Q07

4Q07

2Q08

4Q08

2Q09

4Q09

2Q10

4Q10

2Q11

4Q11

2Q12

4Q12

2Q13

4Q13

Occupancy Rent Growth

National Rent Growth and Occupancy

Long-Term Average = 94%

Source: Axiometrics, Zelman & Associates analysis

Recession Delayed Move to Single-Family for Many Married Couples

15.0%

15.6%

16.3%

14.7%

14.2%

15.3% 15.4%15.6%

15.5%

17.1%

15.3%

16.3%15.9%

16.2%

15.4%

16.9%

16.2%

17.1%

17.4%

18.6% 18.7%

19.3%

10%

12%

14%

16%

18%

20%

1Q92 1Q93 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13

Percentage of 25-34 Year Old Married Couples that Reside in Traditional Apartments

We believe that majority of change of late has

been due to recessionary impacts that should

unwind


Constrained Single-Family Rental Supply and Strong Demand Drive Price Inflation

84.0

88.386.1

81.783.6

86.684.8

77.979.4

84.8

79.380.7

23.5 23.2

32.234.7 34.1 35.2

39.7

44.842.7

35.0

43.540.7

10

20

30

40

50

60

70

80

90

100

1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Mar-13 Feb-14 Mar-14

Demand

Supply

Supply Versus Demand of Single-Family Rentals0-100 Scale

Source: Zelman & Associates Single-Family Rental Survey

Existing Inventory Relative to Households ~30% Lower Than Last Two Decades

2.8%

2.0%

2.1%

1.4%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

1980s 1990s 2000s 1Q14

Existing Home Inventory as Percentage of Households

~30% discount to average of

last two decades

Source: Census Bureau, NAR, Zelman & Associates analysis

Inventories at 30-Year Lows Support Robust Home Price Outlook

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

1Q90

3Q90

1Q91

3Q91

1Q92

3Q92

1Q93

3Q93

1Q94

3Q94

1Q95

3Q95

1Q96

3Q96

1Q97

3Q97

1Q98

3Q98

1Q99

3Q99

1Q00

3Q00

1Q01

3Q01

1Q02

3Q02

1Q03

3Q03

1Q04

3Q04

1Q05

3Q05

1Q06

3Q06

1Q07

3Q07

1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

1Q11

3Q11

1Q12

3Q12

1Q13

3Q13

1Q14

Seasonally-Adjusted Single-Family New and Existing Home Inventory as Percentage of Households

3.5%

4.8%

-5.4%Average real change in existing home prices

per range of for-sale inventory.

Source: Census Bureau, NAR, Zelman & Associates analysis

Ranking of Local Resale Markets 80

75

73

72

71

71

70

70

68

68

67

66

66

65

65

64

64

63

63

61

58

58

57

57

57

54

51

62

40

50

60

70

80

90

Hous

ton

San F

rancis

co

Austi

n

Los A

ngele

s

Denv

er

Miam

i

Orlan

do

Charl

otte

Las V

egas

Dalla

s

Was

hingto

n D.C

.

Salt L

ake C

ity

Charl

eston

Indian

apoli

s

Ralei

gh

Naple

s

San A

ntonio

Inlan

d Emp

ire

Atlan

ta

San D

iego

Chica

go

Tamp

a

Sacra

mento

Phila

delph

ia

Jack

sonv

ille

Phoe

nix

Cinc

innati

Natio

nal

Ranking of Local Resale MarketsTrailing Three Month Average

0 = Extreme Buyers' Market, 100 = Extreme Sellers' Market

Source: Zelman & Associates Homebuilding Survey

Distressed Sales Decline Due to Shrinking Supply While Traditional Sales Remain Healthy

-3% -3%

-11%

-19% -18

%

-18%

-12%

-14%

-17% -14

%

-16%

-5%

30% 32

%

23%

19% 22

% 23%

6%

1%

-13%

-36%

-14%

23%

11%

15%

15%

13%

18%

15%

19% 23

%

9%

-45%

-35%

-25%

-15%

-5%

5%

15%

25%

35%

45%

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

Year-Over-Year Change in Existing Home Sales

REO Sales

Short Sales

Traditional Sales

Source: CoreLogic, Zelman & Associates analysis

Distressed Sales as a Percentage of Total Existing Home Sales are Declining

3% 3% 3%4%

6% 6%7%

11%

17%19%

22%

30%

35%

29%

26%26%

30%

25%

29%30%

34%

28%

26%

27%29%

24%22%

24%24%

19%

17%18%18%

0%

5%

10%

15%

20%

25%

30%

35%

40%

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

Distressed Sales as % of Existing Home Sales

Source: CoreLogic, Zelman & Associates analysis

Availability of Distressed Homes Remains Constrained Across All Channels

36.1

29.6

20.4

33.3

30.7

18.7

34.0

28.9

23.5

38.2

31.7

26.1

10

20

30

40

50

60

70

MLS Trustee / Auction Sales Portfolios

2Q13 3Q13 4Q13 1Q14

Availability of REO For Sale0 = No Availability 100 = Abundant Availability

Source: Zelman & Associates Single-Family Rental Survey

Relative to Households, 2013 Closings 20% Lower Than 25-Year Average

5.6% 5.9

%

5.7%

5.6%

5.0%

4.7%

4.4% 4.8

% 5.2% 5.4

%

5.2% 5.6

% 5.7%

6.2% 6.3

%

6.1%

6.0% 6.2

% 6.5%

7.2% 7.6

%

6.8%

5.4%

4.3%

3.9%

3.7%

3.6% 3.9

% 4.3%

4.1% 4.2

% 4.4%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

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

E

2015

E

2016

E

Home Closings as Percentage of Households

Source: Census Bureau, Company data, CoreLogic, NAR, Zelman & Associates analysis

Resale Days on Market Down Sequentially and Year Over Year in March

91

62

55

98

66

53

0

20

40

60

80

100

120

Mar-12 Mar-13 Mar-14 Mar-12 Mar-13 Mar-14

Median Number of Days on Market Until Sale

All Existing Home Sales Non-Distressed Homes

Source: NAR, Zelman & Associates analysis

After First Increase Since 2007, Double-Digit Growth Projected in AD&C Lending in 2014-15

54%

34%

4% 4%

-6%

-15%

-23% -22%

-13%

-1%

7%

15%

9%

22%

21%

14%

22%

0%

10%

21%

31%

24%

13%

-5%

-23%

-27%

-19%

-9%

5%

14%

12%

500

700

900

1,100

1,300

1,500

1,700

1,900

2,100

2,300

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

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

E

2015

E

Change in Outstanding AD&C Loans

Total Housing Starts

Source FDIC, Zelman & Associates analysis

Both High and Low-Income Buyers at Record Level of Affordability

10%

12%

14%

16%

18%

20%

22%

24%

26%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

All incomes

Upper-Middle and Upper Income

Lower and Lower-Middle Income

Median Front-End DTI of Purchase Originations Assuming 30-Year Fixed Rate Mortgage

Source: HMDA, Zelman & Associates analysis

Investor Mortgages During Peak Were Highly Levered and Poorly Underwritten

4% 4% 4%5%

5%6% 6%

6% 6%7%

7%

8%

9%

11%

14%

17%

16%

14%

12%

9%

10%

12% 12%

11%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Investor Share of Unit Purchase Mortgage Originations

Note: Investor mortgages accounted for 53% of growth from 1999-2005, excluding non owner-occupants that falsely applied as owners for more

favorable terms

Source: Census Bureau, Company data, CoreLogic, HMDA. NAR, Zelman & Associates analysis

Cash Purchases Higher Across Market But Mix is Critical Element

14% 13% 13% 14% 15% 14% 14% 15%18%

20%23%

25% 24%22%

65%

43%

49%

43%46% 47%

54%

65%

74%

79%76% 76%

73% 73%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

% of Owner-Occupant Purchases Using Cash

% of Investor Purchases Using Cash

Source: Census Bureau, Company data, CoreLogic, HMDA, NAR, Zelman & Associates analysis

Zelman Survey Indicates Underwriting is Loosening While Credit Quality is Improving

68.7

70.7

72.6

74.6 74.8 74.9 75

.4 76.5 76.7

76.5 76.6

76.1

74.8

73.5

71.7

70.9

70.0

61.3

60.3

59.2 59

.6

59.2

58.1

57.9 58

.6

60.5

64.4

66.4 67

.4 68.3 68.7

68.0 68

.8 69.0

50

55

60

65

70

75

80

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

Internal Underwriting Criteria Index0 = Extremely Easy 100 = Extremely Tight

Applicant Credit Quality Index0 = Extremely Weak 100 = Extremely Strong

Source: Zelman & Associates Mortgage Survey

Owner-Occupant Purchases Mortgages Post Double-Digit Growth in 2013

-3%

6%

1%

5%3%

2%

-11%

-22%

-26%

-8%-6%

-9%

15% 15%

0%

12%

8%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

E

2015

E

2016

E

Year-Over-Year Change in Owner-Occupied Unit Purchase Mortgage Originations


Big Banks Not Representative of Market; Smaller Institutions Stepping Up

10%

1% 0%

-9%

-16%

-7%

29%27%

12%

3%

-12%

15%

-20%

-10%

0%

10%

20%

30%

40%

Cred

it Unio

ns

Regio

nal B

anks

Mortg

age C

ompa

nies

All Ba

nks

Natio

nal B

anks

Total

Cred

it Unio

ns

Mortg

age C

ompa

nies

Regio

nal B

anks

All Ba

nks

Natio

nal B

anks

Total

Year-Over-Year Growth in Purchase Unit Originations by Institution Type

2011 2012


Higher-Quality Borrowers Led Recovery in 2012, But Entry-Level Credits Joined in 2013

35%

27%

8%

-10%

15%

21% 21%

10%

3%

15%

-20%

-10%

0%

10%

20%

30%

40%

A+ A B C Total

2012 2013

Owner-Occupied Purchase Mortgage Year-Over-Year Growth by Credit Bucket

Source: HMDA, Ellie Mae, Zelman & Associates analysis

Purchase Activity in Younger Age Cohorts Likely Stronger than Assumed

8%

19%

13%

20%

15%

9%

19%

14%

16%

15%

0%

5%

10%

15%

20%

25%

Under 30 30-39 40-49 50-plus All

2012 2013

Owner-Occupied Purchase Mortgage Year-Over-Year Growth by Age

Source: HMDA, Ellie Mae, Zelman & Associates analysis

Lack of Savings for a Downpayment Most Cited as Hurdle to Credit…

55%

44%

19% 19%

42%

31%

25%

19%

0%

10%

20%

30%

40%

50%

60%

I do not haveenough savings

for adownpayment

My monthlyincome would

not support thecost of

ownership

I have badcredit

I have too muchdebt

I do not haveenough savings

for adownpayment

My monthlyincome would

not support thecost of

ownership

I have badcredit

I have too muchdebt

Reasons Young Adults Do Not Believe They Would Qualify for a MortgageRespondents Requested to Select All that Apply - Answers Do Not Sum to 100%

25-29 Year Olds 30-34 Year Olds

Source: Zelman & Associates Consumer Survey

…But Consumers Don’t Understand Actual Downpayment Requirements

9% 11% 11%16% 15% 18%

12% 14% 13%

30% 28% 32%27%

37%24% 38%

24% 29%

30% 29%19% 16%

10%

16%

13%

12%

19%

17%22%

24% 31% 26%

21%

23%

31%

25%

14%10%

14%10% 12%

21%13%

19%15%

0%

20%

40%

60%

80%

100%

120%

18-21 22-24 25-29 30-34 35-39 40-44 45-59 50-Plus Total

Over 20%

16-20%

11-15%

6-10%

0-5%

Perceived Downpayment Requirement for Purchase MortgageNote: FHA Downpayment Requirement = 3.5%

Source: FHA, Zelman & Associates Consumer Survey

Surprisingly, Credit Scores Improved During Downturn for Bottom Quartile of Consumers

606 607 609 609 608 607 608612 614 616

621

703706 708 710 712 713 713 712 712 713 712

550

570

590

610

630

650

670

690

710

730

4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13

Bottom Quartile Median

Consumer Credit Scores

Source: Federal Reserve, Zelman & Associates analysis

Nearly a Quarter of Under-35 Age Cohort is Debt Free, Better than History

20%

19%

17%

19%

17%

20%

16%

22%

24%

14%

11%

0%

5%

10%

15%

20%

25%

1989 1992 1995 1998 2001 2004 2007 2010 Under 35 25-29 30-34

Percentage of Under-35 Age Cohort That is Debt Free

Federal Reserve Survey of Consumer Finances Zelman 2014 Survey

Source: Federal Reserve, Zelman & Associates Consumer Survey

Contrary to Fears, Student Loan Debt Uncorrelated to Household Formation

17%

23%

20%

14%

13%13%

16%

18%

17%

0%

5%

10%

15%

20%

25%

With Without Total With Without Total With Without Total

Share of Young Adults Living at Home, Depending on Student Loan Status

25-29 Year Olds 25-34 Year Olds30-34 Year Olds


Important to Differentiate Between Ownership and Living in a Single-Family Home

27% 26%

47%

62%

34%

46%

62%

77%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Living at Home All Renters MarriedRenters

Married RentersWith Children

Living at Home All Renters MarriedRenters

Married RentersWith Children

Hypothetical Housing Decisions for 25-34 Renters or Those Living at Home

Purchase if Moved in Next Year Single-Family if Moved in Next Year

Single-Family Share Higher than

Purchase Share for Every Segment


Historical Drivers of Younger Ownership Rates Point to Future Gains

40%

41%

42%

43%

44%

45%

46%

47%

48%

49%

50%

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

Homeownership Rate of 25-34 Year Olds

From 2004 to 2012, initial losses were

driven by falling real incomes and lower affordability, while additional losses

resulted from lower employment and incomes, falling

home prices, and tighter credit.

From 1993 to 2004, rising real incomes, lower interest rates

relative to the 1980s and more lenient

underwriting standards helped to increase ownership rates.

Homeownership rates fell despite the decline in interest rates as real

income growth stagnated and affordability remained

elusive.


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