Transcript The Housing Market ‘Reset’ and its Implications for Housing Policy Alan Mallach Non-resident Senior Fellow The Brookings Institution.

The Housing Market
‘Reset’ and its
Implications for Housing
Policy
Alan Mallach
Non-resident Senior Fellow
The Brookings Institution
Subprime lending exploded
Housing production outstripped
Between 1999 and
household formation
2500
2000
New Units Authorized
2009 6.9 million
more housing units
were approved than
the number of
additional households
Units (000)
1500
1000
500
Increase in
occupied housing units
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Bureau of the Census
-500
Year
Prices took off, and then fell
250
Las Vegas
Index (1/2000=100)
200
150
100
US (20 city composite)
Phoenix
Detroit
Minneapolis
Las Vegas
50
0
2000
2001
2002
2003
2004
2005
Year
2006
2007
2008
2009
2010
Foreclosures skyrocketed
14% of all mortgages are
delinquent or in foreclosure
12
Percentage of mortgages
10
8
Delinquent but not
in foreclosure
6
4
In foreclosure
2
0
Q1
06
Q2
06
Q3
06
Q4
06
Q1
07
Q2
07
Source: Mortgage Bankers Association
Q3
07
Q4
07
Q1
08
Q2
08
Year/Quarter
Q3
08
Q4
08
Q1
09
Q2
09
Q3
09
Q4
09
Q1
10
New housing production fell
16000
Las Vegas metro area new
units authorized by quarter
2005 through 2010
14000
Units Authorized in Quarter
12000
10000
8000
6000
4000
2000
0
Source: Bureau of the Census
2005- 2005- 2006- 2006- 2006- 2006- 2007- 2007- 2007- 2007- 2008- 2008- 2008- 2008- 2009- 2009- 2009- 2009- 2010- 20103
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
3
4
1
2
Year/quarter
Homeownership rates have declined
69.5
% of all households
69
68.5
68
67.5
67
66.5
66
65.5
Source: Bureau of the Census
65
1999
2000
2001
2002
2003
2004
2005
Year
2006
2007
2008
2009
2010
Tenure patterns have shifted significantly
Nearly 3 million
more renters
3500
3000
2500
change (000)
2000
1500
Ow ners
Renters
1000
500
0
2006-07
2007-08
2008-09
2009-10
-500
-1000
Year (Q2 of each year)
Source: Bureau of the Census
2006-2010
Net loss of
homeowners
the “shadow inventory” is growing
3000000
Foreclosures completed
New foreclosures filed
2500000
Foreclosures in process
Mortgages in OCC sample
Seriously delinquent (60+ days)
3.4 million
mortgages
2000000
1.8 million
mortgages
1500000
570,000
mortgages
1000000
500000
0
Q12008 Q22008 Q32008 Q42008 Q12009 Q22009 Q32009 Q42009 Q12010
Source: OCC Mortgage Metrics
Year/quarter
240,000
mortgages
Nearly 25% of all mortgages are
underwater
% of mortgages underwater in
3rd quarter 2009 – top five states
and United States
70
60
50
40
30
20
10
0
Nevada
Arizona
Florida
Michigan
California
United States
Vacancy rates have risen and remain
elevated
Housing is affordable almost everywhere
.
.. .
.
.
..
... .
.
50-100% above national median
More than double national median
Source: National Association of Realtors, median sales price of existing single-family homes 2009
Earnings have stagnated
700
$622.81
600
Real average weekly earnings
$589.72
500
400
$386.55
300
200
100
Real average weekly earnings
1947 to 2007 (2007 dollars)
0
1967
1973
1979
Source:1947
Economic
Policy
Institute
1982
1989
1995
2000
2007
Unemployment rates are elevated
17.1%
18
16
Unemployment rate (official)
Expanded unemployment rate
14
12
% of workforce
9.9%
10
8
6
4
2
0
Source: Bureau of Labor Statistics, April of each year seasonally adjusted
2000
2001
2002
2003
2004
2005
Year
2006
2007
2008
2009
2010
Consumer confidence is at historically
low levels
Manufacturing jobs are disappearing
25000
19.4M
20000
Number of jobs (000)
17.3M
15000
15.9M
11.9M
10000
5000
Manufacturing employment in
the United States 1964-2009
Source: Bureau of Labor Statistics
0
1964
1969
1974
1979
1984
1989
1994
1999
2004
2009
Household formations have declined
1200
1000
Households (000)
800
600
Average
annual
increase
2000-2005
= 1,122,000
Average
Annual
Increase
2005-2009
= 631,000
400
200
Source: American Community Survey
0
2000-2005
2005-2006
2006-2007
2007-2008
2008-2009
Where is the rental housing?
3/4 of all private
market rentals
are in 1 to 9 unit
properties
Who is the target population for affordable
housing?
Category
(Federal
definition)
Income
range
Income
range in
Las-Vegas
MSA
(family of
four)
Affordable
rental
range
Household
share
Low income 50 to 80%
of median
$32,501$52,000
$800-$1300 16% of
per month
households
Very low
income
30 to 50%
of median
$19,501$32,500
$500-$800
per month
Extremely
low income
0 to 30% of
median
$0-$19,500
Under $500 13% of
per month
households
11% of
households