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ECONOMIC AND HOUSING OUTLOOK
David CroweChief Economist
Blue Ridge Home Builders AssociationFebruary 27, 2014
Five Turn Around Points1. Consumer is back
2. Pent up demand waiting3. Growing need for new construction4. Distressed sales diminishing5. Builders see it
1. Consumer is back
0%
200%
400%
600%
800%
1000%
1200% Q/Q Percent Change, SAAR
1.9%
Real GDP GrowthPicking up speed
3.0%
3.7%
Payroll Employment: US and Charlottesville US and Charlottesville are nearly back
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14115,000
120,000
125,000
130,000
135,000
140,000
145,000
80
85
90
95
100
105
Charlottesville
Thou-sands
US CharlottesvillePre-Recession Peak 138 103Recent Trough 129 98Current 137 100
Current as% of Peak 99% 98%
US Trend (Left axis)
US
Millions
Unemployment Will Continue to Fall
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 150
2
4
6
8
10
12
US
Virginia
Percent, Seasonally Adjusted
Charlottesville
050505050505050505050505060606060606060606060606070707070707070707070707080808080808080808080808090909090909090909090909101010101010101010101010111111111111111111111111121212121212121212121212131313131313131313131313141420
40
60
80
100
120112
25
78
97
55
81
Index
Consumer Confidence Returns Back to pre-recession levels
Conference Board
University of Michigan
Motor Vehicle and Home Furnishing Sales Other Durable Sectors Rising Steadily
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$0
$90
$180
$270
$360
$450
380 380
Billion 2009$, SAAR
Motor Vehicles
Home Furnishings
00 01 02 03 04 05 06 07 08 09 10 11 12 130%
2%
4%
6%
8%
10%
90%
100%
110%
120%
130%
140%
Debt-to-Income
Percent, SA Percent, SAAR
AVG=4.6%
Household Balance SheetsDebt and savings closer to long term averages
Savings Rate
Annual Housing Starts Pace - VA
2009
2010
2011
2012
2013
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
15700
17000
15600
17900
20600
3500
3800
6800
7500
9200
SF MF
17%
8%
13%
Annual Housing Starts Pace - Charlottesville
2009
2010
2011
2012
2013
0 200 400 600 800 1,000 1,200 1,400
570
630
620
590
650
50
320
400
470
570
SF MF
4%
15%
7%
2. Pent up demand waiting
Household Formations Are on the RiseYear-over-year change in households rising again
02
02
02
02
03
03
03
03
04
04
04
04
05
05
05
05
06
06
06
06
07
07
07
07
08
08
08
08
09
09
09
09
10
10
10
10
11
11
11
11
12
12
12
12
13
13
13
13
0
500
1,000
1,500
2,000
2,500Thousands
Avg: 1.4 million(12% renters)
Avg: 0.5 million(130% renters )
Avg: 0.6 million(129% renters)
Share and Excess Number of Young Adults with Parents
1990 2000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20125%
7%
9%
11%
13%
15%
17%
19%
21%
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
11.1%
19.3%
Share w/parents Number above trend
Local Population Growth Exceeds National Average
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
U.S. Charlottesville
% change
3. Growing need for new construction
Home Sales VolumeNew homes have more ground to make up
19901991
19921993
19941995
19961997
19981999
20002001
20022003
20042005
20062007
20082009
20102011
20122013
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
0
200
400
600
800
1,000
1,200
1,400
Existing Homes (L) New Homes (R)
(000s)(000s)
New Homes Share of SalesNew homes half historic share of sales
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 130%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
7.5%8.7%
Avg=16.1%
Existing Home Turnover RateCurrent turnover lower than normal
2001 2003 2005 2007 2009 20114.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
6%
6%
7%
6%
5%
4%
Cumulative Lost Existing SalesSubstantial pent up sales
2007 2008 2009 2010 20110
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
4,128,579
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 132.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
House Prices Return to Near-NormalHouse Price-to-Income Ratio
US Charlottesville Virginia Long-term 3.2 3.3 2.9Peak 4.7 4.8 5.1Current 3.7 3.9 4.0
Peak/Long-termUS: 4.7/3.2 = 150%Charlottesville: 4.8/3.3 = 149%Virginia: 5.1/2.9 = 175%
Rates (inverted) & New Home Sales Still room for higher rates & more sales
0
200
400
600
800
1,000
1,200
1,400
1,600 0
2
4
6
8
10
12
14
16
18
20
New Home Sales (L) Mortgage Rate (R)
(000s) %
Forecast
4. Distressed sales diminishing
Seriously Delinquent Rates: Peak and Current - Largest correction in states with highest peak
FL AZ IL NJ US IN MD NYMA CT LA DE ID KY AL DC NH NM W
A OK CO IA KS NEW
Y AK-1
4
9
14
19
24
4Q2013 4Q2009
%
VA dropped 2.7 %pts over period
Std Dev4Q2009 3.324Q2013 2.19
5. Builders see it
Builders’ Concerns Increasing Share of builders citing issue
Building material prices
Cost/availability of labor
Cost/availability of developed lots
0 10 20 30 40 50 60 70 80 90
33
13
21
81
65
55
Expect in 2014 Faced in 2013 Faced in 2012 Faced in 2011
Forecasts
20
25
30
35
40
45
50
55
60
22
57
Remodeling Market Index (RMI)Above 50 for 5 of the past 6 quarters
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 1560,000
80,000
100,000
120,000
140,000
160,000
180,000
YR 4Q/4Q Chg 4.5% 3.4% 0.0% 2.9%
1.1%
Residential Remodeling Billions 2009 $, SAAR
Actual
Adjusted
Multifamily Production IndexAbove 50 for seven consecutive quarters
10
20
30
40
50
60
70
0
50
100
150
200
250
300
350
400
54
5+ Starts (R)
NAHB MMI (L)
16
(000s)
1995-2003 331,000 ”Normal”2010 114,0002011 178,000 56%2012 247,000 39%2013 306,000 25%2014 333,000 8%2015 363,000 9%
Multifamily Housing Starts Healthy Response from Growth in Renters
Trough to Current:4th Q 09 = 82,0004rh Q 13 = 351,000
+328%
2013Q4:106% of “Normal”
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 150
50
100
150
200
250
300
350
400
450
500
550Thousands
76% fall
2015Q4: 111%
Avg=339,000
0
10
20
30
40
50
60
70
80
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
8
14
46
NAHB/Wells Fargo Housing Market IndexBuilder sentiment dips, but improved overall from recession depth
Single-family starts (R)
HMI (L)
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 150.00
0.25
0.50
0.75
1.00
1.25
1.50
3,000.00
3,500.00
4,000.00
4,500.00
5,000.00
5,500.00
6,000.00
6,500.00Millions Millions
Existing and New Home Sales – On the Rise
New (L)
Existing (R)
2000-2003 1,343,000 ”Normal”2010 471,000 2011 434,000 -8%2012 537,000 24%2013 622,000 16%2014 822,000 32%2015 1,159,000 41%
Single-Family Starts – Beginning a Recovery
Trough to Current:Mar 09 = 353,000Jan 14 = 573,000
+62%
2013Q4: 49% of “Normal”
2015Q4:93%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 150
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000Thousands of units, SAAR
80% fall
Percent of 'Normal' (annual average 2000-2003)
Peak Trough Now
US 129% 32% 47%
VA 115% 36% 48%
Charlottesville 120% 41% 41%
Single-family Permits Relative to ‘normal’ annual average 2000-2003
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD
0%
20%
40%
60%
80%
100%
120%
140%
41%49%
30%
Charlottesville VA Richmond VA Roanoke VA
MI
IL
VT
KY
WI
IN
MN
OH
RI
NM
NH
MD
CA
PA
ME
WV
NV
GA
FL
NJ
AZ
VA
MS
CT
KS
SD
AK
AR
MO
HI
NY
TN
CO
NE
AL
DC
OR
DE
UT
WA
ID
IA
MA
NC
LA
SC
MT
WY
OK
TX
ND
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
2015Q4 2014Q4
Housing Starts / Average 2000-03 Starts
National Average will be 71% of normal by 2014Q4and 93% of normal by 2015Q4.
US
Recovery Will Vary By State
Source: US Census Bureau
Rank Q4 2015Bottom 20%
20% to 40%
40% to 60%
60% to 80%
Top 20%
The Long Road Back to Normal
< 84%
84% - 88%
89% - 94%
94% - 101%
102% <
Relative to Normal
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.
Questions?Answers: www.housingeconomics.comeyeonhousing.orgdcrowe@nahb.org
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