October 22, 2010

October 22, 2010

Housing Trends and the Future Needs For the Region

John C. McClain, AICPSenior Fellow and Deputy Director

Center for Regional AnalysisSchool of Public Policy, George Mason University

Leckey ForumAlliance for Housing Solutions

Intro and How We Got HereThe Economic Backdrop

◦National and RegionalHousing Trends and Outlook

◦National, Regional, ArlingtonThe Future Need for HousingFactors and Challenges Ahead

How we got here

2003

2005 Fe

bAp

rJu

nAu

gOc

tDe

cFe

bAp

rJu

nAu

gOc

tDe

cFe

bAp

rJu

nAu

gOc

tDe

cFe

bAp

rJu

nAu

gOc

tDe

cFe

bAp

rJu

n010203040506070

New Housing Contract Kick-Out RateWashington Metro, All Housing Types

% 2006 2007 2008 2009 2010

Source: Hanley Wood

The Economic Backdrop

0 1 2 3 4 5 60

2

4

6

8

10

12

1982-Q31991-Q12001-Q42009-Q2

Quarters After Trough

% C

hang

e in

GD

P

Recession Recovery Patterns of GDPPast Four Recessions

Sources: BEA, GMU Center for Regional Analysis,

Annual Change in Payroll Jobs - US

Jan-01Aug-01Mar-02Oct-02May-03Dec-03Jul-04Feb-05Sep-05Apr-06Nov-06Jun-07Jan-08Aug-08Mar-09Oct-09May-10

-7000

-5000

-3000

-1000

1000

3000

THOUSANDS

Sep = + 321

Source: BLS Establishment Survey, NSA

Oct-06

Feb-07

Jun-07

Oct-07

Feb-08

Jun-08

Oct-08

Feb-09

Jun-09

Oct-09

Feb-10

Jun-10

Oct-10

200250300350400450500550600650700

Initial Unemployment Claims000s (4-week moving average)

454

U.S. Unemployment Rate

3456789

1011

%

Source: BLS, Seasonally Adjusted

9.6 %

GI Fcst10 9.711 9.612 9.113 8.514 7.915 7.3

U.S. Housing TrendsNew & Existing Home Sales

Aug-06

Aug-07

Aug-08

Aug-09

Aug-10

350040004500500055006000650070007500

200300400500600700800900100011001200

Existing(left scale)

New(Right Scale)

(000s) (000s)

Nov-06

Feb-0

7

May-07

Aug-0

7Nov

-07Fe

b-08

May-08

Aug-0

8Nov

-08Fe

b-09

May-09

Aug-0

9Nov

-09Fe

b-10

May-10

Aug-1

096.098.0

100.0102.0104.0106.0108.0110.0112.0

L.I.

C.I.

U.S. Coincident and Leading IndicesNov 2006 – Aug 2010

RECESSION > > > >

Aug-06

Aug-07

Aug-08

Aug-09

Aug-10

20406080

100120140160

Consumer Confidence

100

Present Situation

Expectations

Source: Conference Board, GMU Center for Regional Analysis

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

-4-202468

10

US GDP and Washington GRP %

Washington GRP

US GDP

2002

2004

2006

Jan

Mar

May

Jul

Sep

Nov

Jan

Mar

May

Jul

Sep

Nov

Jan

Mar

May

Jul

-100-80-60-40-20

020406080

Annual Job ChangeWashington MSA

000s Annual Data Annual Month over Year

2008 2009 2010

Source: BLS March 2010 Benchmark, GMU Center for Regional Analysis

2002

2004

2006

Jan

Mar

May

Jul

Sep

Nov

Jan

Mar

May

Jul

Sep

Nov

Jan

Mar

May

Jul

-40-30-20-10

0102030405060

Annual Job ChangeNorthern Virginia

000s Annual Data Annual Month over Year

2008 2009 2010


Transp. & Util.Wlse Trade

ManufacturingInformation

FinancialOther Services

ConstructionLeisure & Hosp.

Retail TradeState & Local Govt

Educ & Health SvcsFederal Govt.

Prof. & Bus. Svcs

-20 -15 -10 -5 0 5 10 15 20 25 300

-1-2

-4-2

1-6

116

05

43

Job Change by SectorAug 2009 – Aug 2010Northern Virginia

(000s) Total 15,900


Aug-03

Aug-04

Aug-05

Aug-06

Aug-07

Aug-08

Aug-09

Aug-10

0

2

4

6

8

10

12

9.5

6.2

5.1

%

Unemployment Rate

Source: BLS (Not seasonally adjusted)

U.S.

MSA

NVA4.1 ARL

New York

Los Angeles

Chicago

DallasPhiladelphia

Houston

Boston

Miami

Atlanta

Detroit

SF-Oakland

Minneapolis

Phoenix

Seattle

-100-80-60-40-20

020406080

100

15 Largest Job MarketsJob Change Aug 09 – Aug 10

(000s)

Washington + 20,500


The Housing Market Trends and Outlook

20022003

20042005

50062007

20082009

20102011

20122013

20140

0.5

1

1.5

2

2.5

U.S. Housing Starts

Millions

Source: Global Insight

Forecast > > > > > > > >

20022003

20042005

50062007

20082009

20102011

20122013

2014012345678

U.S. Existing Home Sales

Millions

Source: Global Insight

Forecast > > > > > > > >

Home Price Declines Have Moderated and in Several Metro Areas are Up Slightly in last 6-9 months

End of home buyer tax credit in June Foreclosures in 2010 up slightly over 2009 and was

up over 2008 – Working them through the system Household Growth/Formation Has Slowed US Population Increasing 3 Million Per Year = Need

for 1.5 New Housing Units Housing Starts at Historic Lows, in 2009 = 30% of

Need for “Average Year” The National Discussion Ahead re: Public Policy for

Home Ownership

Factors at the National Level

Washington

Los Angeles

New York

Boston

Miami

Seattle

SF-Oakland

Chicago

Minneapolis

Dallas

Phoenix

Atlanta

0102030405060708090

House Price Index ChangeJan 2000 – Jan 2010

%

Source: Case Shiller (S&P)

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0

2000

4000

6000

8000

10000

12000

14000

Existing Home SalesWashington MSA

Through September 2010

12-Month Moving Average

Percent Change in Inventories of Existing HomesMonth-Over-the-Year-Change2000 – 2010, MSA

2000

2000

2000

2001

2001

2002

2002

2002

2003

2003

2004

2004

2005

2005

2005

2006

2006 july

dec

May oc

tM

arA

ug20

10 Jun-40

-20

0

20

40

60

80

100

120

140Jan-May, 2006 >100 %

Source: MRIS, GMU Center for Regional Analysis

%

Sep = + 2.1%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010100150200250300350400450500

Median House Sales PriceWashington MSA


$311.5KSep 2010

+ 155 % to June 2006 Peak - 27 % from Peak+ 5.8 %/yr 99-10

20002002

20042006

AprOct

AprOct

AprOct

Apr-30

-20

-10

0

10

20

30

6

111414

2022

2 2 2 2 1 1

0

64

0

0 -2

0

-9-5

-12-11-13-13

-16-17

-23

-18

-23-25-24

-26

-20-18

-14

-10-9-7

0

-4

3

96 6

46

5 47 5 4

Average Sales Price Percent ChangeWashington MSAAll Housing Types

%


Annual Change Annual Change by Month

2007 2008 2009 2010

20002002

20042006

AprOct

AprOct

AprOct

Apr-40

-30

-20

-10

0

10

20

30

5

101414

2223

1 1

-1-1-3-1-2

1 2 1

-3-5-4

-15-12

-18-17-19-20-22

-25

-32-28-29-30

-28-28

-22-19

-12-8

-2-1

95

11

1519

1617161211

9 96

Average Sales Price Percent ChangeNorthern VirginiaAll Housing Types

%


Annual Change Annual Change by Month

2007 2008 2009 2010

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20090

1

2

3

4

5

6

7

2.73 2.76 2.993.39

3.894.5

5.42 5.75 5.515.02

4.55

Housing Affordability IndexWashington Metro Area

2006 2007 2008 2009 2010*0

20

40

60

80

100

120

140

160

Foreclosure Trends3rd Quarter Each YearWashington Metro Area

Foreclosures/10,000 o-o units

Source: RealtyTrac and GMU Center for Regional Analysis* Estimated

Median Sales PriceAll Housing TypesArlington County

0

100,000

200,000

300,000

400,000

500,000

199,900218,300

250,000

300,000342,000

410,000

499,000475,000

450,000460,700


$

11-Yr Avg.= 6.6%/Yr

-8% From Peak

+ 150%, 1998-2005, 18%/yr

2005

2007 Feb Apr

Jun

Aug Oct Dec Feb AprJu

nAug Oct Dec Feb Apr

Jun

Aug-40

-30

-20

-10

0

10

20

3021

-1

2

13

-3

14

-10-11

-2

0

-9

-3

-10 -9

-17

-10-11-15

1

-2

-7 -8 -6 -7

-1

15

63 3 4

0

1310

-3

6

Average Sales Price Percent ChangeArlington CountyAll Housing Types

%


Annual Annual Change by Month

2008 2009 2010

2009 2010 % Chang

eAverage Price $478,900 $507,70

06%

Median Price $419,000 $460,700

10%

Sales 221 174 -21%Days on Market 62 62 0 Sales by Price Range>$500,000 80 73 -9%$400-$500,000 39 33 -15%< $400,000 102 68 -33%

Arlington County Existing Sales Statistics - September

Average Price Sept 2010 = Feb 2005

Fairfax County Affordable/Workforce Housing ProjectNovember 2006

John C. McClain, AICPSenior Fellow and Deputy DirectorCenter for Regional Analysis George Mason University

186,300

81,000

0

50,000

100,000

150,000

200,000

Job Growth HH Growth

Job and HouseholdGrowth, 1990 -2005

0

50000

100000

150000

200000

HH Growth HH Demand

1990 - 2005 Households Needed to Supply Workers for Job Growth

Assumes 1.5 Workers per HH

81,000

124,200

Deficit= 43,200

213,700

104,800

0

50,000

100,000

150,000

200,000

250,000

Job Growth HH Growth

Forecasts of Jobs and Households 2005 -2025

0

50000

100000

150000

200000

HH Growth HH Demand

2005 - 2025 Households Needed to Supply Workers for Job Growth

Assumes 1.5 Workers per HH

104,800

142,500

Deficit=37,700

Industry Sector Jobs Avg. Annual Wage

Construction 34,500 $54,000Manufacturing 11,500 $62,100Trade, Transportation, Utilities 84,800 $44,700Information 31,400 $97,700Financial 34,500 $86,500Professional & Business Services 193,900 $81,000Education & Health Services 86,400 $44,400Leisure & Hospitality 46,900 $19,500Other Services 20,300 $38,100Government 20,800 $75,000

TOTAL 565,200 $62,300

2005 Jobs and Wages, Fairfax County

Income Rental Units

Affordable Rent Levels

Ownership Units

Affordable House Prices

< 50% MI 16,000 < $850 14,000 <$150,000

50%-80% MI 9,000 < $1,375 15,000 < $285,000

80% - 120% MI 8,000 < $2,080 22,000 <$475,000

> 120% MI 5,000 >$2,080 53,500 >$475,000

Totals 38,000 104,500

Housing Units Needed by Tenure by Price, 2005 – 2025, Fairfax County

Fairfax CountyRental Housing Affordability: 2005-2010-2025Percent of Rental Units Affordable

Household Income Level

%

Fairfax CountyFor-Sale Housing Affordability: 2005-2010-2025Percent of Units Affordable

Household Income Level

%

2002 GMU Study of the Future Housing Supply and Demand for the Washington Region:◦ In 2005, a shortage of 43,000 housing units◦ By 2025, the shortage would grow to 218,000

Primarily caused by longer commuting in the search for more affordable housing:◦ In 2000: 230,000 workers commuting from

outside the region to work in the region◦ In 2007: increased to 260,000 workers

The Need for Housing in the Washington Region

Housing Directors Advisory Committee – “Affordable Housing Goals for the National Capital Region” – 2009

“The need for affordable housing has reached a critical stage at both the national level and the region at large. Limited access to affordable housing for low- and moderate-income families is a prevalent cross-jurisdictional issue”.

Estimated affordable housing need based on projected growth in employment 2005-2015

Metropolitan Washington Council of Governments

Forecast of job change from 2005 – 2015: 538,000

Total Housing units needed for workers: 330,000

Affordable housing unit shortfall: 71,000

Future shortfall + Current need (HUD): 273,000

Metropolitan Washington Council of Governments

2010 20302

2.5

3

3.5

Washington Metropolitan AreaHousing Requirements, 2010-2030

Housing Units for Non-Resident Workers

Hou

sing

Uni

ts i

n m

illio

ns

513,300

700,000

HUs for Resident Workers

Source: GMU Center for Regional Analysis, The Future of the Washington MetropolitanArea Economy, Prepared for The 2030 Group, 2010

The bursting of the housing market bubble hasn’t changed the challenge to increase the supply of affordable housing.

There is a clear need for more housing and more housing in the right locations that support healthy economic growth and healthy communities.

There is increasing awareness of the link between the costs of housing and transportation.

Changing preferences: proximity not only to jobs but also amenities…”GenY” and “empty nesters”?

The Factors and Challenges Ahead

Better planning and zoning strategies that encourage more housing development. E.G., Tysons Corner and Reston rail corridor planning.

Redevelopment in areas of high access to jobs Affordable dwelling unit ordinances (and applied

to mid- and high-rise) Local Government Initiatives & Local Community

and Non-Profit Initiatives

Directions for Solutions

policy-cra.gmu.org

Documents

October 22, 2010