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11© 2011 Fannie Mae. Trademarks of Fannie Mae.
The Economy Drags Housing UpwardDoug Duncan
Chief Economist, Fannie Mae
August 9, 2015
2
Disclaimer
Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic & Strategic Research (ESR) group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
3
Job Growth For Younger Workers Outpaces Older Cohorts
Source: Bureau of Labor Statistics
'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14-6%
-4%
-2%
0%
2%
4%
6%
8%
Year-over-Year Change in Employment (NSA)
25-34 35-64
4
-2000%
-1000%
0%
1000%
2000%
3000%
4000%
Difference Between % Increase and % Decrease 6 Months Hence (Left Axis)
Income Growth Expectations Continue to Improve
Source: The Conference Board, NBER
1991-1996
Avg.=9.9
1982-1987
Avg.=18.7
2001-2006
Avg.=9.7
2009-2014
Avg.= -1.64
5
Household Formation Shows Signs of Improvement
Source: Fannie Mae Economic & Strategic Research ForecastSource: Census Bureau
'00 '00 '01 '01 '02 '02 '03 '03 '04 '04 '05 '05 '06 '06 '07 '07 '08 '08 '09 '09 '10 '10 '11 '11 '12 '12 '13 '13 '14 '14 '150
500
1,000
1,500
2,000
2,500
Total Number of Households, Break-adjusted (Thous) Change - Year to Year
6
Multifamily Housing Starts Reach 27-Year High
Source: Census Bureau
SAAR, Thousands of Units
512
524
50
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0
100
200
300
400
500
600
700
800
900
1,000
Single-Family Housing Starts (SAAR, Thousands of Units, Left Axis)Multifamily Housing Starts (SAAR, Thousands of Units, Right Axis)
7
Existing Home Sales Reach 8-Year High, While New Home Sales Fall Short
Source: National Association of REALTORS®, Census Bureau
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '150
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0
200
400
600
800
1,000
1,200
1,400
1,600
NAR Total Existing Home Sales, United States (SAAR, Thous, Left Axis) New 1-Family Houses Sold: United States (SAAR, Thous, Right Axis)
8
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
FHFA House Price Index (Purchase Only, United States)
CoreLogic National House Price Index
S&P/Case-Shiller Home Price Index: Composite 20
Source: S&P/Case-Shiller, CoreLogic, Federal Housing Finance Agency
Home Price Appreciation Accelerates
Year-over-Year % Change
9
Continuous Tight Supply May Further Support Home Price Growth
Source: CoreLogic, National Association of REALTORS®
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15-2500%
-2000%
-1500%
-1000%
-500%
0%
500%
1000%
1500%
2000%
2500% 2
3
4
5
6
7
8
9
10
11
12
CoreLogic National House Price Index: 12 Month Change (NSA, %) Months' Supply of SF Existing Homes (4-Month Lead, Inverted, Right Axis)
10Source: Fannie Mae National Housing Survey™
Jun-
10
Aug-1
0
Oct-10
Dec-1
0
Feb-1
1
Apr-1
1
Jun-
11
Aug-1
1
Oct-11
Dec-1
1
Feb-1
2
Apr-1
2
Jun-
12
Aug-1
2
Oct-12
Dec-1
2
Feb-1
3
Apr-1
3
Jun-
13
Aug-1
3
Oct-13
Dec-1
3
Feb-1
4
Apr-1
4
Jun-
14
Aug-1
4
Oct-14
Dec-1
4
Feb-1
5
Apr-1
5
Jun-
150
10
20
30
40
50
60
70
80
Respondents Who Say it is a Good Time to Buy (%)Respondents Who Say it is a Good Time to Sell (%)
Consumers Exhibit a More Balanced View of the Housing Market
11Source: Fannie Mae Economic & Strategic Research ForecastSource: Census Bureau
'70 '75 '80 '85 '90 '95 '00 '05 '10 '150.0%
50.0%
100.0%
150.0%
200.0%
250.0%
300.0%
0%
200%
400%
600%
800%
1000%
1200%
Homeowner Vacancy Rate (%, Left Axis)
Rental Vacancy Rate (%, Right Axis)
Vacancy Rates Trend Lower
12
Homeownership Rate Continues to Decline as the Market Remains Dominated by Renter Households
'91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15-2,000
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2,500
Total Renter-Occupied Housing UnitsTotal Owner-Occupied Housing Units
Change in Units from Prior Year, Thousands of Units
'91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '1560
61
62
63
64
65
66
67
68
69
70
Homeownership Rate, %
Source: Census Bureau
13
Lenders Plan to Increase Their Marketing Investments Into First-Time Homebuyers and Move-Up Homebuyers
[If YES, firm develops or implements Direct-to-Consumer marketing programs] Listed below are some possible mortgage consumer segments. For each consumer segment, please indicate whether your firm plans to make marketing investments in 2015 to increase your firm’s penetration into
the consumer segment as part of your firm’s 2015 mortgage origination strategy. (Q4 2014)
In addition, larger institutions are more likely to invest in affluent consumers and mid-sized and smaller lenders are more likely to invest in lower-then-median income consumers.
L/M/S - Denote a % is significantly higher than the annual loan origination volume group that the letter represents at the 95% confidence levelPlease note that percentages are based on the number of financial institutions that gave responses other than “Not Applicable.” Percentages may add to under or over 100% due to rounding.
Source: Fannie Mae Mortgage Lender Sentiment Survey™ – Q4 2014
14
The Share of Lenders Reporting Increased Demand for GSE Eligible Loans Over the Prior Three Months Has Been in a Steady Climb Since Q4 2014
UpThe sameDown
Q: Over the past three months, apart from normal seasonal variation, did your firm’s consumer demand for single-family purchase mortgages go up, go down, or stay the same? “Up” = Went up significantly + Went up somewhat, “Down” = Went down significantly + Went down somewhatQ: Over the next three months, apart from normal seasonal variation, do you expect your firm’s consumer demand for single-family purchase mortgages to go up, go down, or stay the same? “Up” = Go up significantly + Go up somewhat, “Down” = Go down significantly + Go down somewhat
Past 3 Months
Next 3 Months
Mid-sizedInstitutions
Larger Institutions
SmallerInstitutions
Total
* Denotes a statistically significant change since Q1 2015
Q1 2014
Q2 2014
Q32014
Q42014
Q1 2015
Q22015
33%
56% 53%42%
52%
77%*
20%
24%31%
38% 36% 16%*
47%
19% 17% 20%11% 6%
Q1 2014
Q2 2014
Q3 2014
Q42014
Q12015
Q22015
59%54%
21%
17%
71%
65%
35%43%
66% 62%
26% 30%
6% 4% 13%
22%
3%5%
Q1 2014
Q2 2014
Q32014
Q42014
Q1 2015
Q22015
34%
69%59%
37%
51%
79%*
13%
20% 24%
42%32%
12%*
52%
11% 18% 21% 17% 9%
Q1 2014
Q2 2014
Q3 2014
Q4 2014
Q1 2015
Q22015
63% 57%
15%
17%
69%
65%
35% 38%
71%58%
27%30%
2% 5%15%
25%
5% 4%
Q1 2014
Q2 2014
Q3 2014
Q42014
Q1 2015
Q22015
52% 51%
25% 20%
72%
64%
40% 43%
62% 62%
25% 32%
8% 6%
13%18% 3% 4%
Q1 2014
Q2 2014
Q32014
Q42014
Q1 2015
Q22015
38%
48% 51%46%
62%
81%*
23% 24%
31%
35%
31%
15%*
39%28%
18% 19%7%
4%
Q1 2014
Q2 2014
Q32014
Q42014
Q1 2015
Q22015
27%
53%48%
42% 44%
73%*
24%
29%37% 38%
44% 22%*
48%
18% 15%21%
12%5%
Q1 2014
Q2 2014
Q32014
Q42014
Q1 2015
Q22015
63% 53%
23%
13%
73%64%
30%
47%
66% 64%
22% 27%
7%0% 12%
22%
0%8%
Purchase Mortgage Demand: GSE Eligible
Source: Fannie Mae Mortgage Lender Sentiment Survey™ – Q2 2015
15
Reported Credit Tightening for GSE-Eligible Loans Continues to Trend Down Gradually Each Quarter
Source: Fannie Mae Mortgage Lender Sentiment Survey™ – Q2 2015
Credit Standards: GSE Eligible
Past 3 Months
Next 3 Months
Mid-sizedInstitutions
Larger Institutions
SmallerInstitutions
Total
Q1 2014
Q2 2014
Q3 2014
Q42014
Q12015
Q2 2015
25%
11%10% 12% 12%
9%
66%
89% 86% 84% 83% 89%
9%1%
4% 4% 5%2%
Q1 2014
Q2 2014
Q3 2014
Q42014
Q1 2015
Q2 2015
11%
9% 11% 11%
17%11%
57%66% 69%
78% 77%85%
32%25%
20%12%
6% 3%
Q1 2014
Q2 2014
Q3 2014
Q42014
Q12015
Q2 2015
13%
11% 12% 12%
16% 12%
59%70% 70%
75% 77%82%
28%20% 18%
13%7% 6%
Q1 2014
Q2 2014
Q3 2014
Q42014
Q12015
Q2 2015
12% 7% 6% 9% 12%7%
76%
86% 86% 85% 83%89%
13% 7% 8%6% 5%
4%
Q1 2014
Q2 2014
Q3 2014
Q42014
Q12015
Q2 2015
26% 19% 19% 19% 21%
9%
62%69% 66%
71% 74% 86%
12%
12% 15% 9% 5% 5%
Q1 2014
Q2 2014
Q3 2014
Q42014
Q12015
Q2 2015
1% 3% 4% 6%11%
16%
59%
74% 75% 75% 79% 75%
40%
22% 20% 19%
10% 9%
Q1 2014
Q2 2014
Q3 2014
Q42014
Q12015
Q2 2015
3%2% 2%
10%
11%7%
75%88% 84% 79% 84% 87%
22% 10% 13%12%
4%7%
Q1 2014
Q2 2014
Q3 2014
Q42014
Q12015
Q2 2015
7%8%
6%5%
13%7%
86% 81%87% 91%
81%91%
7%11%
7% 4% 7%
2%
EaseRemain UnchangedTighten
Q: Over the past three months, how did your firm’s credit standards for approving consumer applications for mortgage loans change (across both purchase mortgages and refinance mortgages)? “Ease” = Eased considerably + Eased somewhat, “Tighten” = Tightened somewhat + Tightened considerably Q: Over the next three months, how do you expect your firm’s credit standards for approving applications from individuals for mortgage loans to change (across purchase mortgages and refinance mortgages)? “Ease” = Ease considerably + Ease somewhat, “Tighten” = Tighten somewhat + Tighten considerably
16
[IF deliver loans to the GSEs or Ginnie Mae] You mentioned that your firm securitizes or sells mortgage loans with/to Fannie Mae, Freddie Mac, or Ginnie Mae. Does your firm apply credit overlays* that are more stringent than what Fannie Mae, Freddie Mac, or Ginnie Mae require? Showing Total (N=185)
Applying Credit Overlays Among Lenders Delivering to the GSEs or Ginnie Mae
A Limited Number of Lenders Reported That They Apply Overlays When Delivering Loans to the GSEs or Ginnie Mae
41%
59%
Yes No
Respondents saw the following definition when they hovered over “overlays” in the question text: Lenders’ own underwriting guidelines that exceed requirements in the guides published by the investor to which the loan is being sold. Lender overlays can address various borrower and property attributes, including, but not limited to, credit score, debt-to-income ratio, amount of assets and the type of assets, minimum down payment, property type, and other attributes.
IF YESN=66
47%
21%
7% 7% 6% 3%8%
[IF apply credit overlays] What type of overlay does your firm apply most often? Showing Total (N=66)
Higher credit scores
Additional documentation
Lower LTV ratio Restrictions on property type
Lower DTI ratio Limitations on sources of funds
permitted for down payment
and closing costs
Other
Results across subgroups can be found on pp. 28-29
Due to small sample sizes, results should be interpreted with caution
Source: Fannie Mae Mortgage Lender Sentiment Survey™ – Q2 2015
17
2011 2014
Small Medium Large Small Medium Large
580
600
620
640
660
680
700
720
740
760
780
800
820
840
860
Weighted Fico (PMM)
758.9
747.3
While There is Minimal Diversion From the Median for All Lender Sizes, Smaller Institutions Demonstrate Larger Spread of FICO Scores
Number of Lenders696 164 121
Number of Lenders830 201 112
Lower Quartile
(Q1)
Upper Quartile
(Q3)
Median
Outlier
Source: Marketrac, HMDA, Freddie Mac, Fannie Mae
Max Value
Min Value
*2014 Data through 2014 Q3“Other” Institution Type includes private equity firms and insurance companies (i.e. Fortress Investment, Walter Investment, Ocwen Financial, Metlife, Inc.)Note: FICO weighted by loan UPB**Q1 – (Q3-Q1)*1.5 < Outlier < Q3 + (Q3-Q1)*1.5
18
Real Interest Rates Have Trended Lower for Over Three Decades
Source: Federal Reserve Board, Freddie Mac, Bloomberg
5-400%
-200%
0%
200%
400%
600%
800%
1000%
-1.13529411764706
4.13%
2.13%
0.83%
Inflation Adjusted 1-Year U.S. Treasury Yield
19
The Fed’s Balance Sheet Remains at Historic High, Though Its Duration is Shortening
Source: Federal Reserve Board
'08 '09 '10 '11 '12 '13 '14 '15$0.0
$500,000.0
$1,000,000.0
$1,500,000.0
$2,000,000.0
$2,500,000.0
$3,000,000.0
$3,500,000.0
$4,000,000.0
$4,500,000.0
$5,000,000.0
Treasury securities Agency MBS Other assets
20
Mortgage Securitization is Dominated by GSEs and Ginnie Mae. However, the Share of Credit Risk Held by the Private Sector is Increasing
Source: Federal Reserve, Fannie Mae, Freddie Mac, FDIC, Treasury & FHLBs
'01
'01
'01
'01
'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
'14
'14
'14
'14
'15
0%
20%
40%
60%
80%
100%Mortgage-Related Securities (MRS) Share
Fannie Mae Freddie Mac Ginnie MaePrivate Label Security
*Preliminary
'07 '08 '09 '10 '11 '12 '13 '14 '150%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Credit Risk Share of Originations
PortfolioShared Risk
*
21
Douglas G. Duncan is Fannie Mae’s Senior Vice President and Chief Economist. He is responsible for managing Fannie Mae’s Economic & Strategic Research Group and oversees corporate strategy. In this leadership role, Duncan provides all economic, housing, and mortgage market forecasts and analyses, and serves as the company’s thought leader and spokesperson on economic and mortgage market issues.
Prior to joining Fannie Mae, Duncan was Senior Vice President and Chief Economist at the Mortgage Bankers Association. His experience also includes service as a LEGIS Fellow and staff member with the Committee on Banking, Finance, and Urban Affairs for Congressman Bill McCollum in the U.S. House of Representatives, and work on the Financial Institutions Project at the U.S. Department of Agriculture. He has been elected to the Board of Directors for the National Association of Business Economists, is a member of the American Economics Association and the American Real Estate and Urban Economics Association, and is past president of the Housing Statistics Users Group.
Named one of Bloomberg / BusinessWeek’s 50 Most Powerful People in Real Estate and one of Inman News’ 100 Most Influential Real Estate Leaders for 2013, Duncan is a frequent speaker on national and state economic, housing, and mortgage market conditions.
Duncan received his Ph. D. in Agricultural Economics from Texas A&M University and his B.S. and M.S. in Agricultural Economics from North Dakota State University.
Speaker Biography
22
Contact Informationfanniemae.com/portal/research-and-analysis/
Doug Duncan, Senior Vice President & Chief Economist
Fannie Mae
3900 Wisconsin Avenue, NW
Mail Stop 1H-2N/01
Washington, DC 20016
(o) 202-752-0160
(c) 202-409-5913
(fax) 202-752-4441