U.S. Housing Markets:Looking Back, Looking

Forward

Dr. Raphael Bostic

Assistant Secretary, Office of Policy Development and Research

U.S. Department of Housing and Urban DevelopmentSpecial Thanks – Ed Szymanoski, Kevin Kane, and Randall Goodnight

VCU Real Estate Trends Conference

Richmond, VA

October 12, 2010

Nonfarm PayrollsAnnual Percentage Change (12-month avg.)

-5.0

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Perc

enta

ge C

hange

11.0

11.5

12.0

12.5

13.0

13.5

0

2

4

6

8

10

12

$ T

rill

ion

s

Pe

rce

nt

Year and Quarter

Trends in Unemployment Rate and Real Gross Domestic Product

Unemployment Rate (left axis) Real GDP (right axis)

Source: IHS Global Insight

Broader Market Overview Summary

• Sales market conditions remain soft in much of the country

but continue to improve in many areas

• Data on home sales prices indicate improvement

• Home sales, previously supported by the homebuyer tax

credit, have leveled off

• Inventories of new and existing homes for sale are down

from a year ago and coming closer to balance

• Rental market conditions are mixed throughout the country

• Significant declines in multifamily permits have continued

Regional Conditions 2Q 2010

Sales Markets Rental Markets

Region I (New England) Balanced Balanced

Region II (NY/NJ) Slightly Soft Balanced (NYC Tight)

Region III (Mid-Atlantic) Slightly Soft Mixed

Region IV (SE-Caribbean) Soft Soft

Region V (Midwest Soft Mixed (soft/balanced)

Region VI (Southwest) Slightly Soft Soft

Region VII (Great Plains) Balanced (Soft in MO) Soft

Region VIII (Rocky Mtns.) Soft Mixed

Region IX (Pacific) Soft Mixed

Region X (Northwest) Soft Balanced

150

170

190

210

230

250

270

$ T

ho

usa

nd

s

Commonly Cited Home Price Indices Showing Signs of StabilityTrend Lines Starting From Median Home Price of $167,000 in January 2003

S&P Case-Shiller Index

FHFA Monthly Index

Sources: Standard and Poor's Case-Shiller 20-Metro Composite Index (not seasonally adjusted), Federal Housing Finance Agency Monthly Purchase Only Index for the US (seasonally adjusted) , and National Association of Realtors: Median Price of Existing Homes S old.

0

5

10

15

20

25

30

Pe

rce

nt

of L

oan

s Se

rvic

ed

Year and Quarter

Subprime Delinquencies Rose Prior to the Recession: Percent of Total Loans Past Due By Product Type

Subprime

FHA

Prime

Source: Mortgage Bankers Association, National Delinquency Survey . Data are seasonally adjusted.

All Loans

40.0

80.0

120.0

160.0

Foreclosure Starts and Completions Remain ElevatedMonthly Foreclosure Actions (Thousands)

Source: Realty Trac.

Cumulative foreclosure completions since April 2009: 1.42 million(Includes investor, second home, and jumbo properties)

Foreclosure

Starts

Foreclosure

Completions

0

20

40

60

80

100

120

0

200

400

600

800

Existing and New Home Sales

Monthly Sales (Thousands)

Seasonally Adjusted

Source: National Association of Realtors , Census Bureau, and HUD.

Existing Home Sales (left axis)

New Home Sales (right axis)

2

3

4

5

Existing Homes on the Market Below Peak, But Number of Units Held Off the Market Has Increased

Existing Homes Available for Sale (End of Period) and Total Vacant Housing Units (Year Round) Off Market (Millions)

Sources: National Association of Realtors and Census Bureau.

Existing Homes on Market

Units Held Off Market

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

0

2

4

6

8

10

12

Mil

lio

ns

of U

nit

s

Pe

rce

nt

Year and Quarter

Quarterly Rental and Owner Vacancy Rates and Vacant Units Held Off the Market for U.S.

Note: Vacancy rates are calculated as vacant units for rent (sale) as a percent of the sum of occupied and vacant rental (owner) un its. Vacant units held off the market are not included in vacancy rate calculations. Foreclosures can affect all categories of vacancies, but a re especially affecting units held off market. Source: Commerce Department, Bureau of the Census

Rental Vacancy Rate (Left Axis)

Owner Vacancy Rate (Left Axis)

Vacant Units Held Off Market (Right Axis)

Percentage Change in SF Activity12 Months Ending 6/09 to 6/10

0.02.04.06.08.0

10.012.014.016.018.020.0

The Federal Response

• Federal Reserve purchases of GSE MBS

• Treasury backstop on GSEs

• Home Affordable Mortgage Program

• Housing Counseling

• Housing Finance Agency initiatives

• First-Time Homebuyer Tax Credit

• Low-income Housing Tax Credit program changes

• Neighborhood Stabilization program

80

90

100

110

120

130

140

150

160

170

180

190

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

Mortgage Rates Fall to Record Low and Affordability Index Remains High

Percentage Rates (left axis) and Index Values

Sources: Freddie Mac and National Association of Realtors.

30-Yr Fixed Mortgage Rate (left axis)

Housing Affordability Index (right axis)

0

1,000

2,000

3,000

4,000

5,000

6,000

7.1 Million Homeowners Have Refinanced Since April 1, 2009

Quarterly Refinance Mortgage Originations (Thousands)

Sources: Mortgage Bankers Association and HUD.

0

5

10

15

20

2009 Q4 2010 Q1 2010 Q2

Homeowners Save From Reduced Mortgage Payments

Annualized Savings from Payment Reductions ($ Billions)

All Refinances HAMP Modifications

Aggregate annual reduction in mortgage payments on refinances and loan modifications since April 1, 2009.Sources: MBA, Treasury, Freddie Mac, and HUD.

0

2

4

6

8

10

12

14

16

Home Equity Up More than $1 Trillion Since First Quarter 2009

Owners’ Equity in Household Real Estate at End of Period ($ Trillions)

Source: Federal Reserve Board.

0

1

2

3

4

Mortgage Aid Has Been Extended More Than 3 Million Times, Outpacing Foreclosures

Cumulative Mortgages Offered Aid or Foreclosed Since April 1, 2009 (Millions)

FHA Loss Mitigation HAMP Modifications

Hope Now Modifications Foreclosure Completions

Sources: HUD, Dept. of Treasury, Hope Now Alliance, and Realty Trac.

Mortgage modifications initiated since April 1, 2009: 3.35 million

0

5

10

15

20

25

30

35

FHA Supports Mortgage Lending During Crisis

FHA as Share of Quarterly Mortgage Originations by Type (Percent)

Purchase Refinance Combined

Sources: MBA and HUD..

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2009 Q2 2009 Q3 2009 Q4 2010 Q1 2010 Q2

Housing Counselors Serve Millions of FamiliesCumulative Households Counseled Since Apr 1, 2009 (Thousands)

Source: HUD.

75

100

125

150

175

200

225

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Expectations on House Prices Have Shifted Up from 2009

S&P/Case-Shiller, House Price Futures Index (Jan 2000 = 100)

House Price Futures

Jan 2009 (dashed line)

House Price Futures

Sep 2010 (dashed line)

S&P/Case-Shiller Index,

NSA (solid line)

Sources: Standard and Poor's and Radar Logic.

Additional New Programs

• NSP III

• First Look

• FHA Short Sale program

• Hardest Hit Fund

• Emergency Homeowner Loan Program

• Rental Policies

THANK YOU

Key Web Links

Dept. of Housing and Urban Development: www.hud.gov

HUD Data and Research: www.huduser.org

Housing Scorecard: www.hud.gov/scorecard