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The Office of Economic Policy

HOUSING DASHBOARD
January 20, 2016
Housing activity continues to strengthen. Residential investment boosted GDP growth by
0.3 percentage point over the four quarters ending in 2015Q3, and the available data suggest
that residential investment is on track to make a modest (albeit somewhat smaller) contribution
to growth again in Q4. We expect that the pick-up in household formation will lead to further
improvement in 2016 despite some increase in interest rates.
Meanwhile, home price appreciation has moderated—from a double-digit pace in late 2013
and early 2014 to a more sustainable mid-single-digit pace now. The recovery in home prices
means that there has been a substantial decline in the share of mortgages that are underwater,
from around 25 percent in 2010 and 2011 to 8 percent today. In select states, where prices
remain substantially below their earlier highs, the share of mortgages underwater is still
considerable, at 12 percent or higher. However, these areas were among the most over-valued
during the housing boom, so a return to those highs is unlikely in the near term.
Although some mortgage borrowers continue to struggle in the wake of the crisis, delinquency
and foreclosure rates are closing in on their pre-crisis ranges. The number of distressed sales
also continues to drop.
This month’s Housing Dashboard features a new table, the “Housing Market Flash,” that is
designed to provide a summary of the direction in which key housing indicators are trending
as well as how current levels compare with their norms prior to the housing boom.

Housing Market Flash

January 2016

Housing Market Flash
Wednesday, January 20, 2016

Pre-bubble
norm
(2000-2002
Current
average) Trough
level
Single-family homes
New

921

Sales
(thousands)

Existing

Inventory of homes
available for sale

New

(months' supply at current
sales rate)

Existing

4,779
4.1
4.6

Housing starts

1,289

(thousands)

Building permits

1,257

Prices

CoreLogic HPI
w/distressed sales

115.7

Construction activity

(index, Jan 2000 = 100)

Housing affordability

270
Feb-11
3,060
Jul-10
12.2
Jan-09
11.3
Jul-10
353
Mar-09
337
Jan-09

490
Nov-15
4,150
Nov-15
5.7
Nov-15
5.2
Nov-15
768
Dec-15
740
Dec-15

127

(NAR, index=100 when median family income qualifies
for 80% LTV mortgage on a median priced home)

137.3

185.6

Nov-11

167.4

13.8%
6.5%
-0.2
month(s)

-0.4
month(s)

10.3%
6.9%
5.1%

Improved
Improved
Improved
Improved
Improved
Improved

-46.8%
-13.2%
1.6
month(s)

0.6
month(s)

-40.4%
-41.1%

Nov-15

101.1

Current 12-month
average versus yearearlier value

Current level
versus prebubble norm
(2000-2002)
average

Improved

-0.5%

60.3%
32.2%

Weakened

Jul-06

Nov-15

8
Jan-09

60
Jan-16

point(s)

117
Oct-08

157
Jan-16

point(s)

Sentiment
59

Homebuilder
(NAHB, over 50 means majority view conditions
positively)

Home-buying conditions

152

(Reuters/Umich, index = good time - bad time + 100)

7

1
Improved

point(s)

Improved

point(s)

Improved

thousands

2

5

Demographics
Household formation

1113

(thousands)

Homeownership rate
(percent)

67.7

100
1447
2008-Q4 2015-Q3

997
thousands

334

63.5
63.5
-0.2
-4.2
2015-Q2 2015-Q3 percentage point(s) Weakened percentage point(s)

1

Housing’s Importance to the Economy
Residential investment continues to give
a modest lift to GDP growth. Residential
investment rose at an annual rate of
8.2 percent in 2015Q3, adding

Percent

10.0

January 2016

Residential Investment's Contribution to
Real GDP

8.0
6.0

0.3 percentage point to real GDP growth,

4.0

matching the average contribution over the

2.0

last four quarters. The available data

0.0

suggest that residential investment is on
track to make a positive (though somewhat
smaller) contribution to growth in Q4.

-2.0
-4.0
-6.0

GDP (% Change, Annual Rate)
Residential Investment's Contribution

-8.0
-10.0
'00

'02

'04

'06

'08

'10

'12

'14

Source: Bureau of Economic Analysis

Employment in residential construction
continues to recover. Over the past year, it
has increased by 11,400 jobs per month,
compared with 13,500 jobs per month in
the year-earlier period. The level of
employment remains relatively low:
residential construction employment totaled
just under 2.5 million workers in 2015Q4,

Employment in Residential Construction

Millions

Percent

4.0

4.0

Number Employed (left scale)
Share of Total Private Employment (right scale)

3.5

3.5

3.0

3.0

2.5

2.5

2.0

2.0

1.5

1.5

accounting for roughly 2.1 percent of total
private payroll employment, compared with
around 2.6 percent in the early 2000s.

'02
'04
'06
'08
'10
'12
'14
Note: Includes those employed directly in residential construction as well as related
specialty trades.
Source: Bureau of Labor Statistics

Housing wealth is nearing its earlier
peak. The value of household real estate
reached $22 trillion in 2015Q3, up from a
low of $16 trillion in 2011Q4. The current

Trillions

Household Real Estate and Net Equity

Percent

Market Value of Real Estate (left scale)
Net Equity (left scale)
Equity's Share of Value (right scale)

25

75

20

65

15

55

10

45

5

35

level is close to its 2006Q4 peak, but the
sustainable level is higher than in 2006
because of population-driven growth in the
housing stock and overall inflation.

0

25
'00

'02

'04

Source: Federal Reserve Board

2

'06

'08

'10

'12

'14

Housing Starts and Inventories

January 2016

New residential construction activity
continues on its gradual upward

Starts and Permits

Millions

trajectory despite some recent volatility.

2.0

Single-family starts (light blue line) dipped

1.8

and permits (dark blue line) rose in

1.5

December. In the multifamily sector,

1.3

construction activity is back in the range

1.0

seen before the crisis, but the rapid rise in

0.8

rents suggests that construction activity is

0.5

not yet fully meeting demand.

0.3

Single-Family Starts
Single-Family Permits
Multifamily Starts
Multifamily Permits

0.0
'00

'02

'04

Source: U.S. Census Bureau

In January, builder confidence remained

40

19 months. All three of the index’s

30

components—sales expectations over the

20

next six months, current sales, and buyer

'16

50

view the market positively) for the last

'14

60

above 50 (meaning a majority of builders

'12

70

Homebuilders index has recorded readings

'10

80

October. The National Association of

'08

Builder Confidence

Index

close to the 10-year high registered in

'06

10

traffic—are above their 2014 averages.

0

'00

'02

'04

'06

'08

'10

'12

'14

'16

Source: National Association of Homebuilders

Unsold Homes

The inventory of homes for sale remains

Millions

Millions

Thousands

4.5

well below historical averages. The stock

3.5

was at 2.0 million units at the end of

Existing (left scale)

4.0

of existing homes for sale (dark blue line)

700

3.0

November, and the stock of new homes for
sale (light blue line) was at 232,000. At the

500

Series average

2.5

current sales pace, there is 5.1-month

1.5

for new homes, the available inventory is
equivalent to a 5.7-month supply.

400
300

Series average

2.0

supply of existing homes available for sale;

600

200

New (right scale)
100

1.0

0
'02

'04

'06

'08

'10

'12

Source: National Association of Realtors and U.S. Census Bureau

3

'14

Underpinnings of Housing Demand
Mortgage interest rates remain very low
by historical standards. The average
interest rate on new 30-year fixed-rate
conventional mortgages was 3.92 percent in
the week ending January 14. The current
rate is only 61 basis points higher than the
lowest rate recorded in 2012.

January 2016

Interest Rate of 30 Year Fixed-Rate Mortgages

Percent
9
8
7
6
5
4

3
'00

'02

'04

'06

'08

'10

'12

'14

'16

Source: Freddie Mac

The National Association of Realtors
Housing Affordability Index suggests
that housing remains affordable for the
typical family. The index increased for the
fourth consecutive month in November
after falling to a 7-year low in July. The

Home Affordability

Index
240

Record Affordability
Index = 214.5

220

200
180

rebound in house prices accounts for much

160

of the decline in affordability since its peak

140

in 2013. (Note that the index assumes a 20

120

percent down payment; interest rates would

100

be higher and affordability would be lower

80
'00

for a family that made a smaller down

'02

'04

'06

'08

'10

'12

'14

'16

Source: National Association of Realtors

payment).

Households remain positive about home

Historic Average
(data since 1971)

Attitudes Towards Buying
Index (Good minus Bad plus 100)

buying conditions. The University of

180

Michigan Consumer Survey’s “Good Time to

170

Buy” Index remained higher than the long-

160

term average in January. Low interest rates

150

continue to be the main factor cited when

140

respondents were asked why home-buying

130

conditions are good. A small, but increasing,

120

proportion of respondents cited future

110

interest rate increases as a reason to buy

100

now.

Long-Run Average
(data since 1986)

'00

'02

'04

'06

'08

Source: University of Michigan Consumer Survey

4

'10

'12

'14

'16

Underpinnings of Housing Demand
Senior loan officers at banks report easing of
mortgage lending standards in recent

FRB Senior Loan Officer Opinion Survey
on Mortgage Lending

100

quarters. The last few quarters mark the first

Net Percent of Banks Reporting
Tightening Standards

80

period of sustained easing since the period of

January 2016

60

dramatic tightening during the financial crisis.
(Note that the level of the line shown corresponds

40

to the change in lending standards, with values

20

below 0 representing an easing of lending

Tightening

0

standards and values above 0 representing a

-20

tightening).

Easing

-40
'90

'94

'98

'02

'06

'10

'14

Mortgage Originations by Credit Score

Despite the easing, lending is still
restrained, and riskier borrowers continue
to have very limited access to mortgage
credit. Mortgage originations have been
rising over the past year, but the pick-up has

Billions of dollars

<620

1,000

620-659

660-719

720-779

780+

800
600

been driven largely by borrowers with credit
scores above 660. Originations by borrowers
with credits scores below 660 are well below

400
200

pre-crisis levels. Almost no mortgages are
0

being extended to borrower with FICO scores
below 620.

Credit Score at Mortgage Origination
800

The median FICO score of newly originated
mortgages is around 760, up from roughly

750

700 in the early 2000s. At the 10th

Score

700

percentile, the FICO score for new mortgages
was 649 in 2015Q3, compared with less than
600 in the early 2000s.

median

25th percentile
650
10th percentile
600

550
500
'00

'02

'04

'06

'08

'10

'12

Source: FRBNY Consumer Credit Panel/Equifax
Note: Credit Score is Equifax Riskscore 3.0; mortgages include first-liens only.

5

'14

Household Formation

January 2016
Household Formation

Millions
3.0

Household formation has picked up.
Between mid-2006 and 2014Q3, the rate of

2.5

household formation averaged roughly half
its historical average of 1.2 million per year.

1.5

Household formation surged at the end of

Historic Average
(data since 1956)

2.0

1.0

2014. It has receded since then but remains
above this historical average. In the year
ending in September, 1.3 million
households were formed.

0.5
0.0
-0.5
'00

'02

'04

'06

'08

Source: U.S. Census Bureau, Treasury calculation

84

working has seen a partial recovery. The

'16

80

individuals ages 25-34 has reversed nearly

'14

82

employment-to-population ratio for

'12

Employment-to-Population Ratio
Ages 25-34

Percent

The proportion of young adults who are

'10

78

half of the decline that occurred during the
recession. The strengthening labor market
should support household formation going
forward.

76
74
72

70
'00

'02

'04

'06

'08

'10

'12

'14

'16

Source: Bureau of Labor Statistics

Growth in Rents vs. Overall Inflation
Year-over-year percent change

Higher rents are an obstacle to young
adults establishing their own households.
The supply of rental housing appears to
have not risen as fast as demand and, as a
result, rents have been increasing rapidly.
They outpaced overall inflation by
3 percentage points over the year ending in

7.5

5.0

CPI-U: Rent of
Primary Residence

2.5

0.0

December.

CPI-U: All Items
-2.5
'00
Source: BLS

6

'02

'04

'06

'08

'10

'12

'14

'16

Homeownership

January 2016

The homeownership rate held steady in
2015Q3. The homeownership rate was
unchanged at 63.5 percent in 2015Q3, the
lowest reading since 1967Q4. The
homeownership rate may decline further in
coming quarters as household formation
continues to recover because newly formed
households are more likely to rent before
purchasing a home.

Homeownership Rate
Percent
70
68
66
64
62
60
'80

'85

'90

'95

'00

'05

'10

'15

Source: U.S. Census Bureau

First-time home buyers account for
around half of purchase mortgage
originations. The share of newly originated
mortgages going to first-time buyers was
51.2 percent in December. Smoothing

Percent

55

Share of Mortgages Accounted by
First-time Buyers

53

through the normal seasonal fluctuations,
the series appears to be on an uptrend—it

51

was 50.2 percent a year earlier.
49

47
'13

'14

'15

Source: American Enterprise Institute

Primary Reasons for Renting among
Young Renters who Prefer to Own

87 percent of households headed by
young adults that are renting say that
they would prefer to own if they could
afford it. Of those households, the most

Cannot qualify
for a mortgage

35

commonly cited reasons for not owning are
lack of downpayment (59 percent) and not
being able to qualify for a mortgage to buy

Cannot afford
downpayment

59

a home (35 percent).
0

10

20

30
40
Percent

50

60

70

Source: Report on Economic Well-Being of U.S. Households in 2014, Federal Reserve Board

7

Home Sales
New single-family home sales have
moved sideways in recent months but are
above their levels of a year ago. At an
annual rate of 490,000 in November, they
were 11 percent above their average level in
2014. Still, the current pace of sales is still
only about half the level seen prior to the
boom in the early 2000s. (December data
will be released on January 27.)

January 2016
New-Single Family Home Sales

Thousands
1600
1400
1200
1000
800
600
400
200
0

Sales of existing single-family homes

'02

tumbled in November due in part to new
disclosure requirements for mortgages
originated after October 1. The new
requirements have reportedly increased the
amount of time it takes to close on a sale.
Accordingly, analysts believe that some
sales were pushed from November into
December and that the December value of
this series will show a strong rebound.
(December data will be released on January
22).

'04

'06

'08

'10

'12

'14

'16

Source: U.S. Census Bureau

Millions

Existing Single-Family Home Sales

7

6

5

4

3

2
'00

'02

'04

'06

'08

'10

'12

'14

'16

Source: National Association of Realtors

Pending Existing Home Sales

The National Association of Realtors
index of pending sales of existing homes
declined in November but was above its
level of a year ago. The index is a leading

Index, 2002: Jan = 100

130
120

indicator of existing home sales which are

110

recorded at the closing of the sale. The

100

National Association of Realtors is

90

projecting that existing home sales will rise

80

1.5 percent in 2016.

70
60
'02

'04

'06

'08

'10

'12

Source: National Association of Realtors, Treasury Calculation

8

'14

'16

Home Prices

January 2016
Changes in Home Prices

After rising at a high single-digit to
low-double-digit pace in late 2013 and

24
16

early 2014, the pace of home price

8

appreciation has eased. Home prices are

0

now growing at a more sustainable
low-to-mid single-digit pace.

12-month percent change

20-City Case-Shiller

-8

FHFA Purchase-Only
CoreLogic

-16
-24

Zillow

'00

'02

'04

'06

'08

'10

'12

'14

'16

Source: Standard and Poors, FHFA, CoreLogic, Zillow

Home Prices
Index, January 2000 =100

Home prices remain below their pre-crisis
peaks. Most measures for the nation as a
whole are currently around early 2005 levels.
Forecasters generally believe that home
price appreciation will remain moderate
going forward. Participants in the 2015Q4
Pulsenomics/Zillow home price survey
expect home prices to rise 3.9 percent over
the four quarters of 2015, and 3.4 percent

220

20-City Case-Shiller
FHFA Purchase-Only
CoreLogic
Zillow

200
180
160

140
120
100

over the four quarters of 2016.

'00

'02

'04

'06

'08

'10

'12

'14

'16

Source: Standard and Poors, FHFA, CoreLogic, Zillow

Price-to-Rent Ratio

Percent
2.0

The ratio of home prices to rents, a
common way to assess whether home

1.8

prices are overvalued, remains well below

1.6

its pre-crisis peak. That said, the

1.4

substantial appreciation of home prices

1.2

since late 2012 has pushed up this ratio, and
it is now noticeably above its pre-crisis

1.0

range.

0.8
'84

'87

'90

'93

'96

'99

'02

'05

'08

'11

Source: Ratio of CoreLogic National Home Price Index to CPI Owner's Equivalent
Rent. Both Indexes set to 100 in January 1983.

9

'14

Mortgage Originations

January 2016

Applications for home purchase
mortgages have been volatile of late. The
Fed rate hike and new mortgage disclosure

Mortgage Applications
Index, 2000:Jan 7 = 100

3000

requirements may have caused fluctuations

180

2500

in recent months. Purchase applications

210

Purchase (right scale)

2000

remain well below pre-crisis levels.
Refinancing activity has been very low since
mid-2013 as most borrowers who have been
able to refinance have already done so.

150
Refinance (left scale)

120

1500
90
1000

60

500

30

0

0
'00

'03

'06

'09

'12

'15

Source: Mortgage Bankers Association

New mortgage originations have
increased over the past year but remain
low by pre-crisis standards. New
mortgage originations rose to $502 billion
in 2015Q3, up from a low of $286 billion in
2014Q2. The low level of mortgage
originations stands in contrast to the
pattern of some other forms of household
credit, including auto loan originations,
which have been increasing briskly along
with sales and now stand near the top of

New Originated Installment Loan Balances
Billions

900

Auto Loan (Left Axis)
200

800
700

Mortgage (Right Axis)
150

600

500
400

100

300

200

50

100
0

0
'04

their historical range.

'06

'08

'10

'12

'14

Source: Federal Reserve Bank of New York

The share of new mortgage originations

Mortgage Originations by Investor

backed by the government has fallen
since its 2009 high, but remains

Billions

250

GSE securitization

FHA/VA securitization

PLS securitization

Portfolio

Share, percent

100%

significantly higher than pre-crisis levels.
About 70 percent of new mortgages were
backed by the FHA, VA, or GSEs in the first
three quarters of 2015 (dark blue and light
blue portions of bars). While bank portfolio
lending has increased noticeably, the
private-label mortgage-backed securities

80%
60%
40%
20%

market has experienced essentially no

0%

recovery since collapsing in late 2007.

Source: Inside Mortgage Finance and Urban Institute

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 2015
Q1-3

10

Delinquencies, Foreclosures and Distressed Sales

January 2016

Foreclosure and Delinquency Rates

Mortgage foreclosure and delinquency

Percent

rates continue to normalize. The share of

12

homes in foreclosure declined to 1.9 percent

10

of outstanding loans in 2015Q3. The rate of
mortgages in default (90+ days delinquent
or in foreclosure) fell to 3.6 percent in
2015Q3, compared with a pre-crisis average
of around 2 percent.

Percent of loans 90 days or
more delinquent or in
foreclosure

8
6

Percent of loans in
foreclosure

4
Percent of loans 90 or
more days delinquent

2
0
'00

'02

'04

'06

'08

'10

'12

'14

Source: Mortgage Bankers Association and Haver Analytics

Re-Default Rate 24 Months after Modification

Re-default rates for borrowers who have
received a mortgage modification have

80

Percent

Fannie Mae
Government-Guaranteed
Portfolio Loans

run significantly lower for mortgages that
were modified more recently. Mortgages

Freddie Mac
Private
Overall

60

that were modified in 2013 (24 months ago)
had re-default rates that were between 32

40

and 55 percentage points lower than those
modified in 2008.

20

0
'08

'09

'10

Source: OCC Mortgage Metrics Report for Q1-2015

'11

'12

'13

Distressed Sales as a Percent of Total Sales

The shares of sales represented by REO sales
and short sales have trended down over the
past 3 years. In October 2015, REO sales
made up nearly 7 percent of total sales while
short sales remained around 3 percent.

Percent
35

Short Sales Share

REO Sales Share

30
25
20
15
10
5
0
'06

'07

Source: CoreLogic

11

'08

'09

'10

'11

'12

'13

'14

'15

Negative Equity

January 2016

Share of Loans that are Underwater by
Loan-to-Value Ratio

Rising home prices have greatly reduced

Percent

the number of underwater borrowers.

30

The share of mortgage loans with negative
equity was 8.1 percent in 2015Q3, down
from 10.2 percent in 2015Q1. The number
of homes now underwater stands at
4.1 million, a 66 percent drop since the
2011 peak. Mortgages that are very
underwater, with negative equity
exceeding 25 percent, have declined and

100-105

25

105-125

125+

'14

'15

20
15
10
5
0
'10

are now 37 percent of all underwater

'11

'12

'13

Source: CoreLogic Equity Report, 2015 Q2

mortgages.

Amount of Negative Equity
Billions of dollars
800

The aggregate amount of negative
equity continues to fall. Since 2010Q1,
aggregate negative equity has fallen from
over $800 billion to around $300 billion in
2015Q3.

600

400

200

0
'10

'11

'12

'13

'14

'15

Negative Equity Share in Top 5 States
20

19
17.8

18

Negative equity rates are still very high in

16

some states. Around 20 percent of

14

mortgaged residential properties in Nevada

12

and Florida still have negative equity.

10

However, these rates have fallen by more

12.3

12.1

RI

MD

8

than half in these two states since the

14.6

6

beginning of 2013.

4
2
0

12

NV

FL

AZ

State Detail
Serious delinquencies have fallen across
the country but the degree of
improvement varies by state. They remain
near peak levels in some states, particularly
in judicial foreclosure states such as New
Jersey and New York. However, serious
delinquencies are down nearly 64 percent
from their peak in Florida, a judicial state
that passed a law in June 2013 speeding up

January 2016
Serious Delinquencies for 25 Highest-Rate States:
Q2 2015
Percent, since Q1 2000

25

Q2 2015 value

Minimum since Q1 2000

Maximum since Q1 2000

20
15
10
5

the foreclosure process. Serious
hard-hit areas with flexible foreclosure laws,

0

NJ
NY
FL
ME
CT
RI
MD
NV
DE
MS
IL
MA
PA
DC
OH
HI
NM
IN
LA
VT
OK
AL
KY
SC

delinquencies have also fallen markedly in

Source: Mortgage Bankers Association/Haver

such as Nevada.
Foreclosure Inventories by State as
a Percent of All Mortgage Homes
Foreclosure inventories have declined in
many states but remain relatively high in
others. Judicial foreclosure is an important
factor: 13 of 23 states that employ the
practice have noticeably elevated rates
(shaded red). Other states with high
inventories, like Nevada, are still struggling
economically.

Source: CoreLogic Market Pulse, data as of October 2015

13


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102