HOUSING TRENDS, FACTORS, AND FORCES

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HOUSING TRENDS, FACTORS, AND FORCES

By: Andy Carswell, University of Georgia

Georgia Institute for Community Housing Tifton, GA February 26, 2008

Single-Family Housing Starts

1,900 (Thousands of Units, SAAR) 1,700 1,500 1,300 1,100 900 700 500 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Source: NAHB

12

Multifamily Housing Starts

500 (Thousands of Units, SAAR) 450 400 350 300 250 200 150 100 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Source: NAHB

13

Housing Starts Per Capita

0.010

0.009

0.008

0.007

0.006

0.005

0.004

0.003

CA, AZ, NV, FL All Other States MI, IN, OH 0.002

0.001

0.000

1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: New York Federal Reserve, Economy.com, Mortgage Bankers Association of America 0.010

0.009

0.008

0.007

0.006

0.005

0.004

0.003

0.002

0.001

0.000

New Home Sales

1,400 (Thousands of units, Seasonally Adjusted) 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Source: NAHB

11

12 Percent

Prime Conventional Conforming Home Mortgage Rates

Fixed-Rate Mortgages 10 8 6 4 Adjustable Rate Mortgages 2 0 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Source: NAHB

10

Real GDP Forecast

4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 0.6% 3.8% 3.9% 1.5% 2.3% 2.4% 2.5% 2.6% 2.6% 2.6% 2.6% 2007 Q1 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 2.6% Source: NAHB

Unemployment Forecast

5.0% 4.9% 4.9% 4.9% 4.9% 4.9% 4.9% 4.8% 4.7% 4.7% 4.8% 4.8% 4.6% 4.6% 4.5% 4.4% 4.5% 4.5% 4.3% 2007 Q1 Source: NAHB 2007 Q2 2007 Q3 2007 Q4 2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4 4.9%

Vacant Year-Round Housing Units on the Market

6500 6000 5500 5000 4500 4000 3500 3000 2500 (000s) No. of Units (left scale) % of Housing Stock (right scale) (Percent) 2000 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 6 5 4 3 2 6

Georgia and Projected Household Growth

• • • • •

Top 5 Counties

Chattahoochee (+58%) Barrow (+32%) Newton (+31%) Paulding (+30%) Forsyth (+29%) • • • • •

Bottom 5 Counties

Butts (-30%) DeKalb (-19%) Liberty (-18%) Taliafero (-13%) Ware (-13%)

Percent of Defaults Due to Non-Owner Occupied Loans

Nevada Arizona Florida California All other states Total US Prime Loans Percent of Share of prime home prime defaults due to non-owner occupied loans as of purchase loan originations for non owner occupied properties in 2005, based on HMDA June 30, 2007 32% 26% 25% 21% 13% 29% 29% 32% 14% 15% 16% 17% Nevada Arizona Florida California All other states Total US Subprime Loans Percent of Share of subprime subprime defaults due home purchase loan originations for non to non-owner occupied loans as of owner occupied properties in 2005, based on HMDA June 30, 2007 24% 18% 14% 14% 14% 15% 11% 15% 7% 10% 12% 10% Source: MBA, Home Mortgage Disclosure Act 2005 Report

Mortgage Delinquency Data

Source: Equifax/Moody’s Economy. COM

Historical Data Patterns

Industry and Market Determinants of Foreclosure

• LTV Ratios (+) • House Price Appreciation (-) • Sub-Prime Lender (+) • Mortgage Type  Non-FRM (+) • Savings Rate (-) • Servicing by Primary Lender (-) • Interest Rates (+)

Human/Individual Factors Associated with Foreclosure

• Divorce (+) • Health Care Exps. (+) • Unemployment (+) • Seasonal Nature of Job (+) • # of Dependents (+) • Non-Housing Wealth (-) • FTHB Status (+) • Gambling (+)

Pre-purchase Homeownership Counseling’s Effects on Default and Foreclosure

• Positive effect overall as a risk mitigator • Little in the way of follow up procedures • Questionable purchasing behavior of FTHB • More vulnerable to predatory lenders

after

origination than before

Community Costs of Foreclosure

• Fire Risks • Increasing Crime • Administrative/Municip al Costs • Property Value Effects

Foreclosure and Mortgage Fraud

• Fraud-for-property schemes vs. fraud-for profit schemes • Clustering effect • Adverse community effects • Difficulty in researching fraud effects on foreclosure

Mortgage Fraud – Case Study

Concentration of Mortgage Fraud

So, Who’s To Blame for the Affordability Problem?

• Land as a finite resource • Government infatuated with homeownership • Liberalized financing of mortgages • Building codes • Mortgage fraud • Suburbanization • Housing norms • Inflexible nature of market rents • Lack of availability of Section 8 • Growth of subprimes • The dominance of the “stick-built” market

Possible Solutions to Affordability Problem

• Solid, yet realistic, homeownership counseling programs • Reducing the stigma of manufactured housing • Reducing the influence of the sub-prime market • Living wage campaigns • Land trusts • Housing trust funds

Other Housing Items Dominating My World

• • • • • • • • Predatory lending and anti-fraud legislation Rise of gated communities Rise of New Urbanism Effects of foreclosure laws on bankruptcy behavior Housing (in)equality Appraisals, assessments, and proper valuation Residential property management Employer-assisted housing

Any Questions?

Andrew T. Carswell, Ph.D. Assistant Professor Dept. of Housing & Consumer Economics University of Georgia 109 Dawson Hall Athens, GA 30602 Ph: (706) 542-4867 Fax: (706) 542-4397 [email protected]

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