1. February 10, 2014
Economics Group
Special Commentary
Mark Vitner, Senior Economist
mark.vitner@wellsfargo.com ● (704) 410-3277
Anika R. Khan, Senior Economist
anika.khan@wellsfargo.com ● (704) 410-3271
Housing Chartbook: February 2014
Diminished Expectations for Housing in 2014
Surprisingly weak new home sales figures for December and downward revisions to the prior two
months have lowered expectations for housing in 2014. Despite diminished expectations, we do
not believe the underlying fundamentals of the housing recovery have suddenly taken a turn for
the worse. We have long held that the housing recovery would be a long, difficult slog and now
that investors appear to be backing away from the market, it has become abundantly clear how
modestly the underlying fundamentals have actually improved. Sluggish job and income growth
have weighed on household formation and encouraged a larger proportion of households to rent
rather than buy a home. We see this trend gradually shifting as the economy moves to firmer
ground, but the shift will be gradual and doubts will periodically resurface when bad weather or
unsettling political events send chills throughout the economy.
December’s disappointing new homes sales figures and the continuing slide in pending home
sales is all the more disappointing because there has been so much positive anecdotal evidence
that home sales and new home construction were set to improve. Home builder confidence has
been gradually improving. The NAHB/Wells Fargo Home Builders’ Index fell 1 point to 56 in
January, as both the present and future sales indices fell slightly. The overall index, however,
remains above its October and November level and improved over the course of the year. Many
builders also reported rising order backlogs at the end of 2013 and are planning to increase land
development in 2014. Confidence also seems to be gradually returning to the existing home
market, despite the recent slide in pending home sales. With home prices rising nearly 12 percent
over the past year, more homeowners now feel comfortable putting their homes on the market.
Existing home inventories have risen from their historic lows, and homes are selling relatively
quickly across much of the county.
Figure 1
Figure 2
NAHB Housing Market Index & Distressed Sales
60
CoreLogic National Home Price Index vs. Homeownership Rate
60
Year-over-Year Percent Change, Rate
10%
70%
5%
68%
0%
66%
-5%
Total Distressed: Dec @ 14.0%
64%
NAHB Housing Market Index: Jan @ 56.0
50
50
40
40
30
30
20
20
10
10
CoreLogic HPI: Q4 @ 2.7% (Left Axis)
Homeownership Rate: Q4 @ 65.2% (Right Axis)
0
Oct-08
Jul-09
Apr-10
Jan-11
Oct-11
Jul-12
Apr-13
0
Jan-14
-10%
62%
87
89
91
93
95
97
99
01
03
05
07
Source: NAR, CoreLogic, NAHB, U.S. Dept. of Commerce and Wells Fargo Securities, LLC
This report is available on wellsfargo.com/economics and on Bloomberg WFRE.
09
11
13
2. Housing Chartbook: February 2014
February 10, 2014
WELLS FARGO SECURITIES, LLC
ECONOMICS GROUP
Sluggish Household Formations Continue to Weigh on Housing Demand
The most recent data on residential vacancies and homeownership are reflective of the
diminished expectations for housing in 2014. The total number occupied housing units increased
by an incredibly modest 265,000 in 2013. Once again, all of the growth occurred in rental
households, which grew by 315,000. The number of owner occupied homes fell by just under
50,000 during the year. The sluggish pace of household formations is likely due to the shaky
recovery in employment and income. Nonfarm payrolls grew by an average of 182,000 jobs a
month in 2013 and many of those jobs were in relatively low-paying industries, which weighed on
wage and salary growth. We expect hiring to improve in 2014 and are currently looking for job
gains to average around 195,000 per month this year. We also expect the quality of jobs to
improve, with a larger proportion of new jobs created in higher paying industries.
The rental vacancy rate fell 0.5 percentage points over the past year and ended 2013 at
8.2 percent. The homeowner vacancy rate rose 0.2 percentage points over the past year to
2.1 percent, however, with the number of vacant homes for sale rising by 92,000 units. The drop
in the rental vacancy rate reflects tightening rental markets across much of the country, with the
biggest declines coming in the Northeast and Midwest. The West remains the tightest market,
however, with a rental vacancy rate at just 6.3 percent. The drop in residential vacancy rates has
lifted rents across the country and made homeownership relatively more attractive.
There is
mounting
evidence that the
9 year slide in the
homeownership
rate is nearing an
end.
There is mounting evidence that the nine-year slide in the homeownership rate is nearing an end.
The homeownership rate was unchanged in the fourth quarter at 65.1 percent on a seasonallyadjusted basis, which is where it has been for the past three quarters. The rate had peaked at
69.0 percent back in the fourth quarter of 2004.
We have slightly lowered our forecast for 2014 and 2015 to reflect the lower yearend home sales
and new home construction figures. Sales of new homes are expected to rise 19.4 percent to
510,000 units in 2014, while sales of existing home rise 4.5 percent to 5.3 million units. With
sales improving, new single-family starts should rise 19 percent in 2014 and by nearly 25 percent
the following year. Overall housing starts are expected to rise nearly 16 percent to 1.07 million
units in 2014 and another 14 percent to 1.22 million units the following year.
The gradual ramp up in new home construction will keep new home inventories relatively lean,
which means new home prices will likely once again post gains well above their historic norm. We
look for the median price of a new home to rise 4.6 percent in 2014 and look for median price of
existing homes to rise 4.0 percent. In addition to tight inventories, new home prices are also
being bolstered by rising construction costs and higher lot prices. Home price measures from
Case-Shiller and CoreLogic will likely post somewhat larger gains but the pace of home price
appreciation is expected to moderate in all measures, as more new and existing homes come on
the market.
Figure 4
Figure 3
U.S. Homeowners vs. Renters
Housing Starts
Annual Change in Occupied Units, In Thousands
2,500
Renters: 2013 @ 525.5 Thousand
Homeowners: 2013 @ -76.5 Thousand
2,000
2,000
2.4
2.1
2.4
Multifamily Starts
Multifamily Forecast
Single-family Starts
Single-family Forecast
2.1
1,500
1,500
1.8
1,000
1,000
1.5
1.5
500
1.2
1.2
0
0.9
0.9
-500
0.6
0.6
-1,000
0.3
0.3
-1,500
0.0
500
0
Series
Break
1981
-500
-1,000
-1,500
66
70
74
78
82
86
90
94
98
02
06
10
Forecast
0.0
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
2
1.8
Thousands
Millions of Units
2,500
3. 3.25
3.26
5.04
4.71
216.7
-6.6
172.5
-12.9
-5.6
-12.9
374.0
4,340.0
3,870.0
464.0
553.9
445.0
108.9
-2.8
-4.4
9.3
2009
3.25
3.22
4.69
3.79
221.8
2.4
172.9
0.2
-3.0
2.1
321.0
4,190.0
3,708.0
474.0
586.9
471.1
115.8
2.5
-0.7
9.6
2010
3.25
2.78
4.46
3.03
227.2
2.4
166.1
-3.9
-4.1
-3.5
305.0
4,260.0
3,787.0
477.0
608.8
430.5
178.3
1.8
1.2
8.9
2011
3.25
1.80
3.66
2.69
245.2
7.9
176.6
6.3
3.4
0.3
369.0
4,650.0
4,127.0
528.0
780.6
535.3
245.3
2.8
1.7
8.1
2012
Source: Federal Reserve Board, FHFA, MBA, NAR, S&P, U.S. Department of C ommerce, U.S. Department of Labor and Wells Fargo Securities, LLC
Forecast as of: February 10, 2014
4.88
3.66
6.04
5.18
232.1
-6.4
198.1
-9.5
-7.8
-16.7
Home Prices
Median New Home, $ Thousands
Percent Change
Median Existing Home, $ Thousands
Percent Change
FHFA (OFHEO) Home Price Index (Purch Only), Pct Chg
Case-Shiller C-10 Home Price Index, Percent Change
Interest Rates - Annual Averages
Prime Rate
Ten-Year Treasury Note
Conventional 30-Year Fixed Rate, Commitment Rate
One-Year ARM, Effective Rate, Commitment Rate
485.0
4,110.0
3,660.0
450.0
905.5
622.0
283.5
Home Construction
Total Housing Starts, in thousands
Single-Family Starts, in thousands
Multifamily Starts, in thousands
Home Sales
New Home Sales, Single-Family, in thousands
Total Existing Home Sales, in thousands
Existing Single-Family Home Sales, in thousands
Existing Condominium & Townhouse Sales, in thousands
-0.3
-0.6
5.8
Real GDP, percent change
Nonfarm Employment, percent change
Unemployment Rate
2008
National Housing Outlook
3.25
2.35
3.98
2.61
265.8
8.4
198.1
12.2
7.8
12.2
427.0
5,073.0
4,470.0
603.0
923.4
617.9
305.5
1.9
1.6
7.4
2013
3.25
3.10
4.80
2.70
272.5
2.5
205.0
3.5
3.8
8.1
520.0
5,300.0
4,670.0
630.0
1,100.0
750.0
340.0
2.6
1.6
6.7
Forecast
2014
3.44
3.46
5.05
2.90
279.5
2.6
210.0
2.4
2.7
3.3
630.0
5,500.0
4,850.0
650.0
1,250.0
880.0
370.0
2.9
1.7
6.3
2015
Housing Chartbook: February 2014
February 10, 2014
WELLS FARGO SECURITIES, LLC
ECONOMICS GROUP
3
4. Housing Chartbook: February 2014
February 10, 2014
WELLS FARGO SECURITIES, LLC
ECONOMICS GROUP
New Home Sales vs. 30-Year Mortgage Rate
Mortgages
§
§
§
Thousands; SAARFHLMC Conventional Fixed Rate Mortgage
1,600
Following a spike in mortgage rates,
applications for mortgages to purchase a home
fell 18.5 percent from their summer peak before
rebounding over the past few weeks. The recent
improvement provides a hint that the recent soft
housing data may be due to unseasonably cold
weather. The gain in purchase applications
foreshadows a modest rebound in home sales.
Rising mortgage rates over the balance of this
year
should
not
significantly
impede
affordability but will shift the mix of home sales
toward smaller and less expensive homes.
Refinance applications have also been weak in
recent months and are down more than
70 percent from their mid-2012 peak.
3.0%
1,400
4.0%
1,200
5.0%
1,000
6.0%
800
7.0%
600
8.0%
400
9.0%
200
10.0%
New Home Sales: Dec @ 414,000 (Left Axis)
30-Year Fixed Mortg. Rate: Feb @ 4.2% (Inverted Right Axis)
11.0%
0
90
92
94
96
98
00
02
04
06
08
10
12
14
Conventional Mortgage to 10-Year Treasury Spread
Basis Points
300
300
Mortgage Spread: Feb @ 159 bps
Mortgage Applications for Purchase
275
275
250
250
225
225
200
200
175
175
150
150
125
Seasonally Adjusted Index, 1990=100
500
125
500
400
400
300
300
200
200
Weekly Figure: Jan-31 @ 180.5
100
100
Down From 187.6 on Jan-24
8-Week Average Down 9.1% From Same Period Last Year
100
2005
100
2006
2007
2008
2009
2010
2011
2012
2013
2014
Mort. Appl.: 8-Week Average: Jan 31 @ 179.1
0
0
92
94
96
98
00
02
04
06
08
10
12
14
Residential Loan Standards and Demand
Prime Mortgages, Net Percent of Banks Reporting Change
80%
60%
Mortgage Applications for Refinancing
80%
60%
40%
40%
20%
20%
4-Week Moving Average, Seasonally Adjusted
12,000
12,000
Weekly Figure: Jan-31 @ 1,693
Up from 1,645 on Jan-24
4-Week Average: Jan-31 @ 1,558
4-Week Average Down 63.3% from Same Period Last Year
10,000
10,000
0%
8,000
0%
8,000
-20%
6,000
6,000
4,000
2,000
-40%
-40%
4,000
2,000
-20%
-60%
0
0
94
4
96
98
00
02
04
06
08
10
12
14
Tightening Standards: Q4 @ -8.7%
-60%
Reporting Stronger Demand: Q4 @ -7.2%
-80%
Apr 07
-80%
Apr 08
Apr 09
Apr 10
Apr 11
Apr 12
Apr 13
Source: Mortgage Bankers Association, FHLMC, U.S.
Department of Commerce, Federal Reserve and
Wells Fargo Securities, LLC
5. Housing Chartbook: February 2014
February 10, 2014
WELLS FARGO SECURITIES, LLC
ECONOMICS GROUP
Existing & New Single-Family Home Sales
Single-Family Construction
In Millions, Seasonally Adjusted Annual Rate
7.0
1.2
6.0
1.0
5.0
0.8
4.0
0.6
3.0
0.4
2.0
The more forward-looking single-family permits
data have also been disappointing. Single-family
permits were down 4.8 percent in December
and have risen just 4.5 percent over last year.
§
1.4
We suspect the dip in starts is weather-related,
which suggests construction activity may
remain soft through January and February.
§
8.0
Following two straight monthly gains, singlefamily starts dropped 7 percent in December.
Although swings in the monthly data are
expected during the seasonally slow winter
months, non-seasonally adjusted figures
plummeted more than 17 percent in December.
§
1.6
0.2
1.0
New Home Sales: Dec @ 414 Thousand (Left Axis)
Existing Home Sales: Dec @ 4.3 Million (Right Axis)
0.0
0.0
94
96
98
00
02
04
06
08
10
12
14
Single-Family Housing Starts
SAAR, In Millions, 3-Month Moving Average
1.8
Single-Family Building Permits
2.0
1.8
1.8
1.6
1.6
1.4
1.4
1.2
1.2
1.0
1.0
0.8
0.8
0.6
0.6
Thousands
SAAR, In Millions, 3-Month Moving Average
2.0
2.0
1.8
1.6
1.6
1.4
1.4
1.2
1.2
1.0
1.0
0.8
0.8
0.6
0.6
0.4
Thousands
2.0
0.4
Single-family Housing Starts: Dec @ 661K
0.2
0.2
90
0.4
92
94
96
98
00
02
04
06
08
10
12
14
0.4
Single-family Building Permits: Dec @ 624K
0.2
0.2
90
92
94
96
98
00
02
04
06
08
10
12
Expected Single-Family Home Sales
14
Percent, NAHB Housing Market Index
100%
Single-Family Housing Completions
100%
90%
90%
Seasonally Adjusted Annual Rate, In Millions
2.0
2.0
80%
80%
1.8
1.8
70%
70%
1.6
1.6
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
1.4
1.4
1.2
1.2
1.0
1.0
0.8
0.8
0.6
0.6
0.4
0.4
10%
10%
In the Next 6 Months: Jan @ 60.0%
0%
0%
87
89
91
93
95
97
99
01
03
05
07
09
11
13
Single-family Housing Completions: Dec @ 550K
0.2
0.2
87
89
91
93
95
97
99
01
03
05
07
09
11
13
Source: U.S. Dept. of Commerce, National Association of
Realtors, NAHB and Wells Fargo Securities, LLC
5
6. Housing Chartbook: February 2014
February 10, 2014
WELLS FARGO SECURITIES, LLC
ECONOMICS GROUP
Multifamily Housing Starts
Multifamily Construction
§
§
SAAR, In Thousands, 3-Month Moving Average
450
450
Despite summer slowdown, multifamily starts
are running nearly 25 percent ahead of last
year’s pace, reaching the highest level in seven
years in 2013. Multifamily construction
accounts for a third of total housing starts and is
expected to continue to grow this year, albeit at
a more modest pace.
400
400
350
350
300
300
250
250
200
200
Multifamily starts are expected to rise only
modestly in coming years as the supply of newly
completed units begins to run ahead of demand
and sluggish income gains limit rent growth.
Even with the dynamics shifting, the apartment
market appears set for several years of gains.
150
150
100
100
50
50
Multifamily Housing Starts: Dec @ 340K
0
0
90
92
94
96
98
00
02
04
06
08
10
12
14
Multifamily Building Permits
SAAR, In Thousands, 3-Month Moving Average
600
600
500
500
400
400
300
300
200
200
100
100
Private Multifamily Construction Spending
Percent
120%
120%
100%
100%
80%
80%
60%
60%
40%
40%
20%
20%
0%
0%
-20%
-20%
-40%
-40%
Multifamily Building Permits: Dec @ 390K
0
90
3-Month Annual Rate: Dec @ 23.3%
-60%
0
92
94
96
98
00
02
04
06
08
10
12
14
-60%
Year-over-Year Percent Change: Dec @ 27.3%
-80%
-80%
94
96
98
00
02
04
06
08
10
12
Apartment Supply & Demand
14
Percent, Thousands of Units
9%
8%
Quarter-over-Quarter Percent Change
75
7%
Apartment Effective Rent Growth
100
50
6%
25
1.6%
1.6%
1.2%
1.2%
0.8%
0.8%
0.4%
0.4%
5%
0
0.0%
0.0%
4%
-25
-0.4%
-0.4%
-0.8%
-0.8%
-1.2%
-1.2%
Apartment Net Completions: Q4 @ 41,651 Units (Right Axis)
Apartment Net Absorption: Q4 @ 50,627 Units (Right Axis)
Apartment Vacancy Rate: Q4 @ 4.1% (Left Axis)
3%
-50
2%
-75
2005
2006
2007
2008
2009
2010
2011
2012
Apartment Effective Rent Growth: Q4 @ 0.8%
-1.6%
-1.6%
2006
6
2007
2008
2009
2010
2011
2012
2013
Source: U.S. Dept. of Commerce, REIS Inc. and
Wells Fargo Securities, LLC
2013
7. Housing Chartbook: February 2014
February 10, 2014
WELLS FARGO SECURITIES, LLC
ECONOMICS GROUP
Housing Affordability, NAR-Home Sales
Buying Conditions
Base = 100
220
220
Housing Affordability Index: Nov @ 170.3
§
With the Fed winding down its unprecedented
asset purchase program, many are concerned
that rising long-term rates could derail the
housing recovery. With the summer spike in
mortgage rates and rise in home prices, housing
affordability has edged lower over the past year.
First-time home buyers, which now account for
an exceptionally small portion of sales, are
particularly sensitive to rising mortgage rates.
§
Tight lending conditions and investors paying
all-cash for properties have played the largest
role in keeping first-time home buyers on the
sidelines. According to the latest Senior Loan
Officer Survey, few banks reported any change
in lending standards or demand.
6-Month Moving Average: Nov @ 164.9
200
200
180
180
160
160
140
140
120
120
100
100
80
80
92
94
96
98
00
02
04
06
08
10
12
14
U.S. Real Home Prices
Index, Jan. 2000=100, Not Seasonally Adjusted
190
190
U.S. Real Home Prices: Nov @ 118.2
Trough Trend
Net Percent of Banks Tightening Standards
Nontraditional Mortgages
170
100%
Nontraditional Mortgages: Q1 @ 8.6%
90%
90%
170
* CoreLogic HPI Deflated with CPI Less Shelter
100%
60%
50%
40%
30%
30%
20%
10%
110
20%
10%
110
50%
40%
130
70%
60%
150
80%
70%
150
130
80%
90
90
70
70
50
50
76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
0%
-10%
Apr 07
0%
Apr 08
Apr 09
Apr 10
Apr 11
Apr 12
Apr 13
-10%
Apr 14
S&P Case-Shiller Home Price Index P/E Ratio
January 1987=100
2.0
2.0
S&P Case-Shiller P/E Ratio: Nov @ 1.28
Occupied Housing Units
Year-over-Year Percent Change
S&P Case-Shiller C-10 Home Price Index
Divided by CPI Owners' Equivalent Rent
1.8
5%
1.8
5%
Owner Occupied: Q3 @ -0.2%
Renter Occupied: Q3 @ 1.4%
3%
1.6
1.4
1.2
4%
1.6
1.4
4%
1.2
1.0
1.0
3%
2%
2%
1%
1%
0%
0%
-1%
-1%
-2%
-2%
0.8
0.8
87
-3%
-3%
85
88
91
94
97
00
03
06
09
12
89
91
93
95
97
99
01
03
05
07
09
11
13
Source: CoreLogic, S&P, Federal Reserve, NAR, U.S. Dept. of
Labor, U.S. Dept. of Commerce and
Wells Fargo Securities, LLC
7
8. Housing Chartbook: February 2014
February 10, 2014
WELLS FARGO SECURITIES, LLC
ECONOMICS GROUP
Inventory of New Homes for Sale
New Home Sales
§
§
§
New Homes for Sale at End of Month, In Thousands
600
600
Reflecting unseasonably cold weather, newhome sales dropped more than expected in
December to a 414,000-unit pace and sales for
the previous three months were revised lower.
The weaker new home sales data are at odds
with improving builder sentiment.
550
550
500
500
450
450
400
400
350
350
Although inventories remain exceptionally tight,
they are 15 percent higher than one year ago.
Completions may have been slowed by
unseasonably wet weather. Units “not started”
and “under construction” have seen a
meaningful increase over the past year.
300
300
250
250
200
200
150
150
New Homes for Sale: Dec @ 171,000
100
100
97
Sales of new homes below $150,000 rose in
December, but activity in this segment has been
a weak spot during the past year.
99
01
03
05
07
09
11
13
Months' Supply of New Homes
Seasonally Adjusted
14
14
12
12
10
10
New Home Sales
Seasonally Adjusted Annual Rate, In Thousands
1,500
1,500
1,300
1,300
1,100
1,100
8
8
6
6
4
4
900
900
700
700
500
500
Months' Supply: Dec @ 5.0
2
300
300
New Home Sales: Dec @ 414,000
2
90
92
94
96
3-Month Moving Average: Dec @ 440,667
100
91
93
95
97
99
01
03
05
07
09
11
00
02
04
06
08
10
12
14
New Home Sales
100
89
98
New Homes Sold During Month, 2002=100
13
180
160
160
140
140
120
Median New & Existing Home Sale Prices
180
120
100
100
In Thousands, Single-Family
$300
$300
Median New Sales Price: Dec @ $270,200
Median Existing Sales Price: Dec @ $197,900
$250
$250
80
60
$200
80
60
$200
40
South: Dec @ 62.7
40
Midwest: Dec @ 33.5
20
$150
West: Dec @ 43.2
20
Northeast: Dec @ 43.3
$150
0
0
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
$100
$100
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
8
Source: U.S. Department of Commerce, National Association
of Realtors and Wells Fargo Securities, LLC
9. Housing Chartbook: February 2014
February 10, 2014
WELLS FARGO SECURITIES, LLC
ECONOMICS GROUP
Existing Home Resales
Seasonally Adjusted Annual Rate - In Millions
Existing Home Sales
§
7.5
Existing home sales rebounded in December to
a 4.87 million-unit pace. Over the last year, allcash transactions have played a large role in
overall sales activity. Although this activity has
helped fuel the housing recovery by clearing up
foreclosures and short sales, the spike in prices
for lower priced homes has pushed many
potential first-time home buyers to the
sidelines. Investor purchases have shown signs
of pulling back more recently, however.
§
Listed inventories fell to 1.86 million units, but
we are in the seasonally slow period of the year.
We will get a better idea of the pace of activity
this spring, when the bulk of for-sale inventory
tends to come on the market.
7.5
7.0
7.0
6.5
6.5
6.0
6.0
5.5
5.5
5.0
5.0
4.5
4.5
4.0
4.0
3.5
3.5
Existing Home Sales: Dec @ 4.87 Million
3.0
3.0
99
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
Existing Single-Family Home Resales
Seasonally Adjusted Annual Rate - In Millions
7.0
7.0
6.0
6.0
5.0
5.0
4.0
4.0
3.0
3.0
Existing Single-Family Home Supply
In Months, Seasonally Adjusted
12
12
Home Supply: Dec @ 4.6
6-Month Moving Average: Dec @ 4.9
11
11
10
10
9
9
8
8
7
7
6
6
5
5
Existing Home Sales: Dec @ 4.3 Million
2.0
4
4
3
2.0
86
3
00
01
02
03
04
05
06
07
08
09
10
11
12
13
88
90
92
94
96
98
00
02
04
06
08
10
12
14
Percent Change in Existing-Home Sales
14
Year-over-Year Percent Change, By Price Range
20%
15%
Millions of Units
4.5
15%
10%
Single-Family Home Inventory
20%
10%
4.5
New Homes: Dec @ 0.17M
Existing Homes: Dec @ 1.64M
4.0
4.0
5%
5%
0%
0%
2.5
-5%
-5%
2.0
2.0
-10%
1.5
1.5
1.0
1.0
0.5
0.5
3.5
3.5
3.0
3.0
2.5
0.0
0.0
92
94
96
98
00
02
04
06
08
10
12
-10%
-15%
-15%
$0-100K $100-250K $250-500K $500-750K $750-1M
$1M+
Source: National Association of Realtors, U.S. Department of
Commerce, CoreLogic and
Wells Fargo Securities, LLC
9
10. Housing Chartbook: February 2014
February 10, 2014
WELLS FARGO SECURITIES, LLC
ECONOMICS GROUP
FHFA Purchase-Only Index, NSA
Home Prices
Bars = Q/Q % Change
Line = Yr/Yr % Change
Home price appreciation has begun to moderate
due to stronger year-over-year comparison as
well as some softening in investor demand. An
influx of investors concentrated in the parts of
the housing market where prices overshot the
most, further exaggerated the turnaround in
prices and give the impression that the housing
recovery is stronger than it actually is. The
underlying fundamentals, such as job growth,
income growth and household formations, have
improved much more modestly.
§
5.0%
12.5%
§
15.0%
4.0%
10.0%
3.0%
7.5%
2.0%
5.0%
1.0%
2.5%
0.0%
0.0%
-1.0%
-2.5%
-2.0%
-5.0%
-3.0%
-4.0%
-7.5%
Purchase-Only Index: Q3 @ 2.1% (Right Axis)
-10.0%
-5.0%
Purchase-Only Index: Q3 @ 8.5% (Left Axis)
-6.0%
-12.5%
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13
With investors pulling back and monetary policy
set to become progressively less supportive of
housing, we expect price appreciation to
decelerate to the mid- to low-single digit range.
S&P Case-Shiller National Home Price Index, NSA
Bars = Q/Q % Change
Line = Yr/Yr % Change
24%
18%
6%
12%
Home Prices
Year-over-Year Percentage Change
24%
8%
4%
6%
2%
24%
16%
16%
8%
8%
0%
0%
0%
0%
-6%
-2%
-8%
-8%
-12%
-4%
-18%
National Home Price Index: Q3 @ 11.2% (Left Axis)
-24%
Median Sale Price: Dec @ $197,900
Median Sales Price 3-M Mov. Avg.: Dec @ 10.1%
FHFA (OFHEO) Purchase Only Index: Nov @ 7.6%
S&P Case-Shiller Composite 10: Nov @ 13.8%
-24%
-8%
88
-24%
-32%
-32%
96
98
00
02
04
06
08
-6%
National Home Price Index: Q3 @ 3.2% (Right Axis)
-16%
-16%
10
12
90
92
94
96
98
00
02
04
06
08
10
12
Median Single-Family Existing Home Price
14
Year-over-Year Percentage Change
20%
15%
First-Time Home Buyers
Share of Existing-Home Sales
36%
36%
Share of Total Existing-Home Sales: Dec @ 27%
20%
15%
10%
10%
34%
32%
32%
30%
30%
5%
5%
0%
34%
0%
-5%
-5%
-10%
-10%
Median Price Change: Dec @ 9.8%
-15%
28%
28%
Median Sale Price: Dec @ $197,900
-20%
-20%
97
26%
Jan-12
10
-15%
6-Month Moving Average: Dec @ 11.2%
99
01
03
05
07
09
11
13
26%
May-12
Sep-12
Jan-13
May-13
Sep-13
Source: CoreLogic, NAR, S&P, FHFA, U.S. Department of
Commerce and Wells Fargo Securities, LLC
11. Housing Chartbook: February 2014
February 10, 2014
WELLS FARGO SECURITIES, LLC
ECONOMICS GROUP
Residential Investment
Renovation and Remodeling
Year-over-Year Percent Change
40%
40%
Improvements: Q4 @ 7.7%
§
The share of owner-occupied homes built more
than four decades ago now represent more than
40 percent of total housing stock. Older housing
units could bode well for remodeling activity
and new construction in the years ahead.
Spending
on
residential
improvements
accounted for nearly 40 percent of total
residential outlays in 2012. Part of the increase
reflects investors upgrading formerly distressed
properties.
§
Rising home prices has also helped fuel
spending on improvements, as homeowners
benefitted from rising home equity. The NAHB
Remodeling Market Index recently hit its
highest level since early 2004.
30%
30%
Res. Investment Ex. Improvements: Q4 @ 16.2%
20%
20%
10%
10%
0%
0%
-10%
-10%
-20%
-20%
-30%
-30%
-40%
-40%
-50%
1996
1998
2000
2002
2004
2006
2008
2010
2012
-50%
2014
NAHB Remoldeling Market Index
Index, Seasonally Adjusted
65
Residential Investment
65
60
60
$900
55
55
$800
50
50
$700
$700
45
45
$600
$600
40
40
$500
$500
35
35
30
30
$400
$400
$300
$300
Billions of Dollars
$900
$800
Other: Q4 @ $6.6 Billion
Brokers' Commissions: Q4 @ $127.1 Billion
Improvements: Q4 @ $177.0 Billion
New Building: Q4 @ $209.5 Billion
25
25
Overall Index: Q4 @ 57.0
Future Expectations: Q4 @ 58.0
Backlog of Remodeling Jobs: Q4 @ 59.0
20
$200
$200
$100
$100
$0
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
$0
15
15
01
02
03
04
05
06
07
08
09
10
11
12
13
Share of Owner-Occupied Housing
Year Structure Built - 2011
Leading Indicator of Remodeling Activity
1990 to 1999
14%
In Billions, 4-Q Moving Total, Harvard Joint Center for Housing Studies
$160
20
2000 to 2009
15%
$160
JCHS
Forecast
$150
$150
$140
$140
$130
$130
$120
$120
$110
1980 to 1989
13%
$110
$100
$100
2009
2010
2011
2012
2013
2014
1970 to 1979
17%
1969 or earlier
41%
Source: Joint Center for Housing Studies, U.S. Department
of Commerce, NAHB and
Wells Fargo Securities, LLC
11