Lansing-East Lansing Area
Local Market Report, Second Quarter 2011
Today's Market…
Median Price (Red Line) and One-year Price Growth
$160,000 20%
$140,000
10%
$120,000
0%
$100,000
$80,000 -10%
$60,000
-20%
$40,000
-30%
$20,000
$0 -40%
2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011
Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2
Lansing U.S. Local Trend
Price Activity
Current Median Home Price (2011 Q2) $85,900 $171,567
Prices are still down from a year ago,
1-year (4-quarter) Appreciation (2011 Q2) -6.7% -2.9% but the trend is improving
3-year (12-quarter) Appreciation (2011 Q2) -20.8% -17.5%
3-year (12-quarter) Housing Equity Gain* -$22,500 -$36,500 The local housing price correction
7-year (28 quarters) Housing Equity Gain* -$54,500 -$22,400 eliminated all of the equity gained
9-year (36 quarters) Housing Equity Gain* during the housing boom
-$42,300 $7,733
*Note: Equity gain reflects price appreciation only
Conforming Loan Limit** $417,000 $729,250
Most buyers in this market have access
FHA Loan Limit $271,050 $417,000 to government-backed financing
Local Median to Conforming Limit Ratio 21% not comparable
**Note: the 2009 loan limits for FHA and the GSEs were extended through 2010.
State Home Sales (Red Line) and Sales Growth
1,000s
250 20%
15%
200 10%
5%
150 0%
-5%
-10%
100 -15%
-20%
50 -25%
-30%
0 -35%
2002 Q4 2003 Q4 2004 Q4 2005 Q4 2006 Q4 2007 Q4 2008 Q4 2009 Q4 2010 Q4 2011
Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2
Home Sales Michigan U.S.
State Existing Home Sales Local sales growth continues to be
-17.3% -12.7%
(2011 Q2 vs 2010 Q2) weak
Drivers of Local Supply and Demand…
Local Economic Outlook Lansing U.S.
Not
12-month Job Change (Jun) 2,600
Comparable Employment has held up and is on an
Not upward trend
12-month Job Change (May) 1,400
Comparable
Not
36-month Job Change (Jun) -8,200
Comparable Unemployment in Lansing is better than
the national average and improving
Current Unemployment Rate (Jun) 9.0% 9.2%
Year-ago Unemployment Rate 10.4% 9.5%
Local employment growth is strong
compared to other markets
1-year (12 month) Job Growth Rate 1.2% 0.5%
Share of Total Employment by Industry
Lansing-East Lansing Area U.S.
Natural Resour 3.1% 6.7 Natural 5.1% Natural
Natural
Resources/
#N/A #N/A
Resources/ #N/A #N/A
Governmen Mining/Con
Mining/Con Manufacturi
struct
#N/A #N/A struct
Manufacturi #N/A t #N/A 5.1% ng
3.1% 15.9%
ng Other 9.0%
Manufacturing 8.5% 18.3 Manufac9.0%
8.5% Services
Trade/Transpo 15.2% 32.8 4.2%
Trade/T 19.1%
Trade/Tran
sportation/U Leisure &
Information 1.2% 2.6 Informa2.1%
Hospitality
Governmen tilities Trade/Tran
10.6%
Financial Act t
6.1% 13.3 15.2% Financi 5.9% sportation/
28.0% Information Utilities
Busin
Prof. & Other 9.9% 21.5 Profess13.2%
1.2% 19.1%
Services
Heal
Educ. &5.3% 14.8% 32 Financial Educat 15.0%
Activities
Leisure Leisure & 7.9%
& Ho 17 6.1% Educational
Leisure10.6%
Prof. & & Health
Hospitality
Other Service 5.3% Educ. &11.5 Business Other S4.2%
Services Information
7.9% Profession
Services 15.0% 2.1%
Government 28.0% Health 60.7 96.9%
9.9% Govern15.9% al &
100.0% Financial
Services Business Activities
#N/A #N/A 14.8% #N/A #N/A Services 5.9%
#N/A #N/A #N/A #N/A 13.2%
12-month Employment Change by Industry in the Lansing-East Lansing Area (Jun - 2011)
Goods Producing NA Information -100
Natural Resources/Mining/Construction 600 Financial Activities 100
Natural Resources and Mining NA Prof. & Business Services 800
Construction NA Educ. & Health Services 300
Manufacturing 400 Leisure & Hospitality -900
Service Providing Excluding Government NA Other Services 0
Trade/Transportation/Utilities 600 Government 800
State Economic Activity Index Michigan U.S.
4.5% 2.2% Michigan's economy is stronger than
12-month change (2011 - Jun)
the nation's, but slowed from last
-8.9% -4.3% month's 5.28% change
36-month change (2011 - Jun)
New Housing Construction
Local Fundamentals Lansing U.S.
12-month Sum of 1-unit Building Permits through The current level of construction is
232 not comparable
Jun 2011 69.3% below the long-term average
Reduced construction will limit new
8-year average for 12-month Sum of 1-Unit supply to the market, allowing demand
756 not comparable
Building Permits to catch up with the inventory more
quickly
Single-Family Housing Permits (Jun 2011) Construction is down from last year,
-12.8% -14.5%
12-month sum vs. a year ago but appears to have bottomed.
Construction: 12-month Sum of Local Housing Permits
(Historical Average Shown in Red Dashed Line)
1,600
1,400
1,200
1,000
800
600
400
200
0
While new construction is the traditional driver of supply in real estate, foreclosures now have a strong impact on
inventories, particularly at the local level. Rising inventories, through construction or foreclosure, place downward
pressure on the median home prices.
State Total Foreclosure Rate vs. U.S Average
(U.S. Average in Blue Dashed Line)
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
Source: Mortgage Bankers' Association
Foreclosures by Type
Monthly Market Data -
May 2011 Lansing U.S.
3.1% 5.9% 5.0 5.9
Market Share: % % Suprime mortgages make up a larger
Prime (blue), Alt-A 91.0% 3.1% 5.9% 89.1% 5.0% 5.9% than average share of the Lansing
(green), and Subprime 91.0 89.1 market, while prime foreclosures are in
(red) % % decline
There was a substantial decline
2.6% 3.3%
PRIME: 3.08 2.61 3.34
3.26
compared to November of last year
% %
Foreclosure + REO % %
Rate Compared to the national average,
Nov-11 May-11 3.1% Nov-11 3.3%
May-11 today's local prime rate is low
The local subprime rate eased modestly
15.4% 18.1%
SUBPRIME: 16.60 18.0 relative to November of last year
% 15.43 17.9 8%
Foreclosure + REO % 3%
Rate Locally, today's foreclosure rate is low
16.6% Nov-11
17.9%
May-11
Nov-11 May-11 relative to the national average
The alt-A foreclosure rate rose slightly
ALT-A: 11.46 11.5% 15.0%
15.0
11.36 14.9
over the most recent 6 months
% 3%
Foreclosure + REO % 0%
Rate The May rate for Lansing is low
Nov-11 May-11 11.4% Nov-11 14.9%
May-11
compared to the national average
The "foreclosure + REO rate" is the number of mortgages, by metro area, that are either in the foreclosure process or have completed
the foreclosure process and are owned by banks divided by the total number of mortgages for that area.
Source: First American CoreLogic, LoanPerformance data
Prime Foreclosures and Delinquencies in Process
Monthly Market Data -
May 2011 Lansing U.S.
5.8% 6.3% 6.4% 6.8% 7.3% 7.5%
The local 60-day delinquency rate fell
6.39 6.30 7.45
Prime: 60-day % 5.75 %
7.25 over the 6-month period ending in May
% % 6.80
Delinquent % % suggesting that 90-day delinquencies
will decline in the near future
May-10 Nov-11 May-11 May-10 Nov-11 May-11
4.7% 5.2% 5.3% 5.9% 6.2% 6.4%
5.31 5.17 6.42 The 90-day delinquency rate in Lansing
Prime: 90-day % 4.71 % 6.16
% 5.88 fell over the 6-month period ending in
Delinquent % % % May
May-10 Nov-11 May-11 May-10 Nov-11 May-11
2.6% 3.1% 2.6% 3.3% 3.3% 2.9% The decline of both the 60 and 90-day
Prime: 3.08 3.34 3.26 delinquency rates over the most recent
2.61 % 2.61 2.90 % %
Foreclosure + % % %
6-month period suggests a decline in
REO Rate the local foreclosure rate in the near
May-10 Nov-11 May-11 May-10 Nov-11 May-11 future.
Source: First American CoreLogic, LoanPerformance data
Affordability
Long-Term Trend: Ratio of Local Mortgage Servicing Cost to Income
(Local Historical Average Shown in Red, U.S. Average in Green)
30%
25%
20%
15%
10%
5%
0%
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Monthly Mortgage Payment to Income Lansing U.S.
Ratio for 2009 5.7% 15.1% Historically strong, but weaker than the
Ratio for 2011 Q2 5.6% 14.7% first quarter of 2011
Historical Average 11.5% 22.0% More affordable than most markets
Recent Trend - Local Mortgage Servicing Cost to Income
(Historical Average Shown in Red Dashed Line)
14%
12%
10%
8%
6%
4%
2%
0%
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4 2011 Q1 2011 Q2
Median Home Price to Income Lansing U.S.
0.9 2.4
Ratio for 2010 The price-to-income ratio rose, but is
better than the historic average
0.9 2.4
Ratio for 2011 Q2
Historical Average 1.5 2.7 Affordable compared to most markets
Ratio of Local Median Home Price to Local Average Income
(Local Historical Average Shown in Red, U.S. Average in Green)
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
The Mortgage Market
30-year Fixed Mortgage Rate and Treasury Bond Yield
280 7.0%
240 6.0%
200 5.0%
160 4.0%
120 3.0%
80 2.0%
40 1.0%
0 0.0%
2006 Q2 Q4 2007 Q2 Q4 2008 Q2 Q4 2009 Q2 Q4 2010 Q2 Q4 2011 Q2
Spread (left axis) 30-Year FRM (Right axis) 10-Year Treasury Bond (Right Axis)
A steady flow of progressively weaker economic news reported in May and June combined to weigh on Treasury bonds in
the 2nd quarter, driving the yield on the 10-year Treasury near record lows. The rate on the 30-year fixed rate mortgage
followed suit, but the gap between the two opened up as investors sought out better returns than MBS as well as to avoid
the risk of refinances. Concerns about the U.S. government's debt along with the sluggish economy are unlikely to be
resolved in the near term. Furthermore, the Federal Reserve has made it clear that it will actively support an environment
that would foster economic growth through low rates. As result, mortgage rates are expected to remain low through the
fall and into 2012. The low rates will help consumers and businesses alike to navigate this economic soft patch, but they
will also remove a layer of urgency from the home buying process, which could drag on home sales.
A Closer Look…FHA Role Locally
FHA Market Share as of Q1 2010
FHA Market Share Michigan U.S.
Maine
2010 FHA Originations 29,895 989,842 Hawaii
Wisconsin
2010 Market Share 19.8% 20.2% Ohio
2011 Q1 Market Share 15.8% 0.1 South Dakota
Iowa
West Virginia
Arkansas
Massachusetts
Mississippi
Kansas
FHA's market share fell sharply during the North Carolina
housing boom. Home sellers preferred to Kentucky
work with non-FHA lenders in order to avoid Idaho
Oklahoma
the FHA's more stringent and time Illinois
consuming underwriting. Since the power in Florida
the housing market resided with the sellers at South Carolina
Nebraska
that time, usage of FHA loans fell off. As the Tennessee
real estate market shifted, so did the FHA's Georgia
market share. FHA's market share this year New York
New Hampshire
is higher than the historical average, but Alabama
down from the height of last year's tax-credit Missouri
induced sales surge. The tax credit brought Nevada
Texas
in many low-income and first time buyers, Minnesota
FHA's target market. Locally, the FHA's Vermont
share of originations in Michigan fell from North Dakota
New Mexico
19.8% in 2010 to 15.8% in the first quarter of Louisiana
this year. The FHA's market share is likely to Oregon
remain historically elevated until the housing Indiana
Arizona
market returns to normal in the coming years. Washington
Pennsylvania
Michigan
New Jersey
Connecticut
Colorado
District of Columbia
Rhode Island
Virginia
Delaware
Maryland
California
Utah
0% 5% 10% 15% 20% 25% 30% 35% 40%
Geographic Coverage for this Report
The Lansing area referred to in this report covers the geographic area of the Lansing-East Lansing metro area as officially
defined by the Office of Management and Budget of the U.S. Government. The official coverage area includes the
following counties:
Clinton County, Eaton County, and Ingham County
More information on the OMB's geographic definitions can be found at http://www.whitehouse.gov/omb/inforeg_statpolicy/