Housing Supply and Affordability Consumer Federation of America - - PowerPoint PPT Presentation

Housing Supply and Affordability

Consumer Federation of America November 30, 2018 Robert Dietz, Ph.D. NAHB Chief Economist

Ris isin ing Population Entering Housing Demand Years: : 2017

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100+ Avg=4.3 Millions Gen Z: Born After 1997 Gen X: Born 1965-1980 Baby Boomers: Born 1946-1964 Silent Generation: Born 1928-1945

v

Headship rates increase from 15% to 45% Greatest Generation: Born Before 1928 Millennials: Born 1981-1997

Share of Young Adults Liv ivin ing wit ith Parents

9% 11% 13% 15% 17% 19% 21% 23% 25% 40% 42% 44% 46% 48% 50% 52% 54% 56% 58% 60% 1990 2000 2002 2004 2006 2008 2010 2012 2014 2016

Ages 18 to 24 Ages 25 to 34

Source: US Census 1990, 2000, PUMS, 2000-2016 ACS, PUMS, NAHB Estimates.

Almost doubled

Housing Affordabil ility – NAHB/Well lls Fargo HOI

Source: NAHB/Wells Fargo Housing Opportunity Index.

78 56

20 30 40 50 60 70 80 90 Q1_04 Q1_05 Q1_06 Q1_07 Q1_08 Q1_09 Q1_10 Q1_11 Q1_12 Q1_13 Q1_14 Q1_15 Q1_16 Q1_17 Q1_18

National

Supply-Side Factors

Labor

Elevated count of unfilled construction jobs

• 0.10

0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90 1.00 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Job openings rate - Construction 12-month moving average Source: U.S. Bureau of Labor Statistics (BLS).

Buil ildin ing Materials ls – Lumber Pric ices

1/6/2017, 357

582

11/16/2018, 340 $250 $300 $350 $400 $450 $500 $550 $600 2015 2016 2017 2018 $ per thousand board feet

Since January 2017, lumber prices decreased 5%; 63% at peak

Source: NAHB Analysis; Random Lengths Composite Index.

Lots

Housing Starts (Area) and Low/Very Low Lot Supply (bars)

0% 10% 20% 30% 40% 50% 60% 70% 300 600 900 1,200 1,500 1,800 2,100 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Starts (Thousands) Low Supply Source: Census Bureau and NAHB/Wells Fargo HMI survey.

Regulatory ry Costs Ris isin ing – Up 29% Over Last 5 Years

Total effect of building codes, land use, environmental and other rules

Regulatio ions - 32% of Mult ltif ifamil ily Develo lopment Costs

4.8% 7.3% 2.3% 2.3% 4.2% 5.5% 4.0% 5.3% 3.9% 5.4%

5.9% 8.4% 5.2% 7.0% 7.1%

Lower Quartile Average Upper Quartile

Cost increases from changes to building codes over the past 10 years Development requirements that go beyond the ordinary Fees charged when building construction is authorized Cost of applying for zoning approval Other (non-refundable) fees charged when site work begins Cost of complying with OSHA requirements Others 21.7%* 32.1% 42.6%*

Government Regulations as a Share of Multifamily Development Costs

Note: * For quartiles, all types of costs do not sum to the total. Source: NAHB/Wells Fargo HMI survey.

NAHB-NMHC research

Construction Outlook

2000-2003 1,343,000 “Normal” 2015 713,000 2016 785,000 10% 2017 852,000 9% 2018 884,000 4% 2019 917,000 4% 2020 933,000 2%

Sin ingle le-Famil ily Starts

Slowing growth ahead

Trough to Current: Mar 09 = 353,000 Oct 18 = 865,000 +145%

Source: U.S. Census Bureau (BOC) and NAHB Forecast. 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Thousands of units, SAAR

80% fall

2018Q3: 65% of “Normal” 2020Q4: 69% of “Normal”

Typic ical l New Home Siz ize

1600 1700 1800 1900 2000 2100 2200 2300 2400 2500 2600 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

SF Starts: Median Floor Area SF Starts: Median 1 Year MA

Square Feet

Decline after market shift

Source: U.S. Census Bureau (BOC).

Townhouse Market Expanding

0% 2% 4% 6% 8% 10% 12% 14% 16% 10 20 30 40 50 60 70 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 SF Starts: Attached Townhouse Share: 1-Year Moving Average Thousands, NSA Source: U.S. Census Bureau (BOC).

Mult ltif ifamil ily Housin ing Starts

Leveling off

1995-2003 331,000 “Normal” 2015 394,000 2016 393,000 0% 2017 356,000

• 9%

2018 376,000 6% 2019 366,000

• 3%

2020 364,000

• 1%

Source: U.S. Census Bureau (BOC) and NAHB Forecast. 50 100 150 200 250 300 350 400 450 500 550 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20

Trough to Current: 4th Q 09 = 82,000 3rd Q 18 = 347,000 +324%

2018Q3: 105% of “Normal” Thousands of units, SAAR

76% fall Avg=344,000

2020Q4: 109% of “Normal”

Thank you

Questions? rdietz@nahb.org @dietz_econ eyeonhousing.org housingeconomics.com

Household Formatio ion

• 1,000
• 500

500 1,000 1,500 2,000 Y/Y Change in Household Count, Thousands, NSA

Owner-Occupied

• 1,000
• 500

500 1,000 1,500 2,000 2,500 2010 2011 2012 2013 2014 2015 2016 2017 2018

Renter-Occupied

Source: U.S. Census Bureau (BOC): Housing Vacancies & Homeownership.

Demand for home ownership strengthening

In Interest Rates – In Increases Ahead

2 4 6 8 10 12 14 16 18 20 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 Percent

10 Year Treasury Fed Funds 30 Year FRM

Source: U.S. Board of Governors of the Federal Reserve System (FRB) and NAHB forecast.