December 2011
U.S. Building Market
Intelligence Report
Building Stats for the Real Estate Market
for This Month
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December 2011 Building Statistics
Many thanks to our friends at John Burns Consulting for sharing their in-depth stats every month.
Enjoy
- Trevor
Trevor Mauch
The REI Brain dot Com
http://www.thereibrain.com
Skyrocketing Student Loan Debt Will Delay Homeownership
Student loan debt now totals $865 billion, which is greater than all credit card debt
outstanding, as well as all other types of household debt except for mortgages! College
graduates have debt averaging $25,000. Even more troubling is the rise in debts associated
with for-profit college and trade schools, whose revenues come primarily from debt available
through Federal government programs. The debt load is so high, and the job outlook so
bleak, that student loan default rates have almost doubled. With the economy little improved
since 2009 (two-year lag on data), default rates are bound to rise further.
Student loans are going to be yet another hurdle for the housing market to overcome. Faced with mounting student
loan debt, poor job prospects and stagnant wages, an increasing amount of 25 to 34 year olds (a prized
demographic for the housing sector) have moved back in with their parents. Almost 6 million 25 to 34 year olds now
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live with mom and dad, up 26% from when the recession started in 2007. Today's 36.8% homeownership rate for
25 to 29 year olds is at its lowest level since 1999, and homeownership for 30 to 34 year olds is at its lowest rate in
17 years.
The good news is that this pent-up demand will ultimately provide a much needed boost to the housing sector. The
bad news is that the boost will be heavily skewed to the rental market as it will take longer than ever for young
people to qualify for a mortgage, especially if more and more graduates are hit with credit blemishes from unpaid
student debt.
To help struggling graduates, the Obama Administration recently announced a program to help those with student
debt reduce their payments down to 10% of their income. However, with student loans at 10% of income, how will
these people be able to qualify for a home?
All of this analysis contributes to our belief that the lion's share of housing demand will end up in the rental market.
Look at the tremendous growth we expect in rentals in comparison to the last decade.
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U.S. Housing Market Statistics
Economic Growth............................................................................C-
The U.S. economy continues to steadily improve, albeit at a rate far below past recoveries. Notably, 3Q11 GDP
growth is at 2.0%, the job picture is slowly improving, and businesses are beginning to expand capacity.
Leading Indicators...........................................................................C-
Global economic uncertainty hit the stock market in November, with almost all major indices witnessing sequential
losses in November. Were it not for the end of month rally (largest daily advance since March 2009), the losses
would have been much worse.
Affordability......................................................................................C+
Ridiculously low mortgage rates coupled with growth in median household incomes (still low by historical
standards) helped push our JBREC Affordability Index to an A+ grade this month. Negative equity, however,
continues to weight on this subset of indicators, leading to an overall affordability grade of C+.
Consumer Behavior..........................................................................D+
Two of the three major consumer psyche gauges improved in November, helping our overall consumer behavior
grade improve from a D to D+ this month. In addition, most consumer credit default indices improved, as did
personal savings.
Existing Home Market.......................................................................D
Aside from NAR October resale prices, all of our existing home market indicators improved this month, though still
not enough to boost this subsection of the economy’s grading from a D.
New Home Market..............................................................................C-
The overwhelming majority of new home indicators improved this month, helping boost our overall grade for this
subsection of the economy from a D+ to C-.
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Repairs and Remodeling....................................................................C-
Only two of the eight residential repairs and remodeling indicators we track reported new data this month (BuildFax
Residential Remodeling Index and private residential construction), both of which turned in positive results.
Nevertheless, our overall grade for this subsection of the economy remains unchanged at a C-.
Housing Supply...................................................................................F
Single-family starts and permits rose from last month, though not enough to improve our overall housing supply
indicator grade of F. The multifamily space continues to ramp up supply in an attempt to capitalize on demand for
rentals.
U.S. HOUSING MARKET STATISTICS
Data Current Through December 5, 2011
Grade*
Overall Grade D+
Statistic Grade
Economic Growth C-
These are the best indicators of how the economy is currently performing.
Real GDP (annual rate) 2.0% C
Employment Growth (1-year Change)
- Non-ag Payroll, NSA 1,588,000 C
Employment Growth Rate
- Non-ag Payroll, NSA 1.2% C
Unemployment Rate 8.6% D
Average Length of Unemployment (Weeks) 40.9
Median Length of Unemployment (Weeks) 21.6
% of Labor Force Unemployed (27 weeks and over) 3.7%
U.S. Initial Jobless Claims 352,300
Mass Layoff Events, SA (YOY % Change) -12.2% B-
Productivity 2.3% C
Retail Sales 5.9% C+
Capacity Utilization 77.8% C-
Inflation
Core CPI 2.1% B
Full CPI 3.5% C
Personal Income Growth, nominal 3.9% C-
Federal Deficit (last 12 mos., $mil curr.) -$1,314,253 F
U.S. Immigration as a % of Total Population 0.3%
Total Population Growth 1.1%
Total Households 113,550,000
- Growth Rate 1.5% C
Owned Households 75,250,000
- Growth Rate 0.5% D+
Rented Households 38,299,000
- Growth Rate 3.4% B
Statistic Grade
Leading Indicators C-
These have all proven to be predictable early indicators of the direction of economic growth.
Leading Econ. Index (Ann. Growth Rate Last 6 Mos.) 6.1% C+
ECRI Leading Index -7.3% D+
Manpower Net Employment Outlook 7% D
U.S. Vistage CEO Confidence Index 8350%
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CEO Economic Outlook Survey 7760%
U.S. Average Hours Worked per Week 33.6
Temporary Employed Workers (YOY % Change) 7.8% C+
Corporate Profit Growth (pre-tax) 7.9% C
Corporate Bond Spread (Corp Bond vs. 10-Yr Tres.) 153.0%
Capital Goods New Orders 9.2% B-
Money Supply - M2 6.2% B
Interest Rate Spread
10-year Treasury 1.94%
2-year Treasury 0.27%
Interest Rate Spread 1.67% B-
3-month LIBOR 0.50%
3-month Treasury 0.02%
TED Spread 0.48% C
Stock Market (Return over last 12 months)
Dow Jones 9% C
S&P 500 6% C
NASDAQ 5% C
Wilshire 5000 5% C
S&P Super Homebuilding 6% C
Tougher Standards on Business Loans - Large Firms -6% B
- Small Firms -6% B
Crude Oil Price (Current $) $100.19 D-
ISM Manufacturing Index 52.7 C
ISM Non-Manufacturing Business Activity Index 56.2 C
Statistic Grade
Affordability C+
These statistics are probably the most important indicators of short-term housing market performance.
Conforming Mortgage Rates (contract rate; an additional 0.6 - 1.0 points are also paid up front by the
borrower)
JBREC Affordability Index 0.0 A+
US Median Home Payment / Income Ratio 22.1%
US Median Home Price / Income Ratio 2.9 B+
Mortgage Rates, Fixed 3.98% A+
Mortgage Rates, Adjustable 2.79% A+
Fixed/Adjustable Spread 1.19% D+
Fixed/10-year Spread 2.04% C
Fed Funds Rate 0.15%
Percentage of Adjust. Loans 5.8% B+
Equity/Owned Home (Current $) $84,256 F
Avg. Debt % in Home (LTV) - Homes with Mortgages 84.4% F
Median Household Income $56,281
- Growth Rate, nominal 2.0% D+
Statistic Grade
Consumer Behavior D+
Consumer attitudes correlate well with short-term housing sales performance. Consumer income growth, debt
levels and job prospects affect the long-term outlook for housing sales.
Consumer Confidence Index 56.0 D
Consumer Sentiment Index 64.1 D-
Consumer Comfort Index -50.6 F
Revolving Cons. Credit per Household (inflation adjusted) $6,954
- Growth Rate -3.4% B
Personal Savings Rate 3.5% D+
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U.S. Net Worth Growth Rate 8.4% C
Financial Obligation Ratio 16.1% B+
Misery Index (Unemployment + Inflation) 12.53 C-
Statistic Grade
Existing Home Market D
Sales volumes correlate well with the Housing Cycle calculations, and boost the trade up New Home sales
market.
S&P/Case-Shiller® U.S. Price Index (YOY % Change) -3.9% D+
NAR Single-Family Median Home Price $161,600
NAR Single-Family Annual Price Appreciation -5.8% D
Freddie Mac Annual Price Appreciation -4.3% D
Annual Sales Volume, SA 4,970,000 B-
Existing Home Inventory for Sale, SA 3,330,000 D+
Months Supply of Unsold Homes, SA 8.0 C
Purchase Mort. App. Index, SA 192.1 D+
Pending Home Sales Index, SA 93.3 D+
Homeownership Rate 66.3% C+
Statistic Grade
New Home Market C-
High appreciation and low inventory would mean an excellent short-term outlook for the new home industry.
Housing Market Index 20 F
Multifamily Condo Market Index 28 C-
Median Price, NSA $212,300
Annual Appreciation Rate 4.0% C
Constant Quality Price Index (YOY % Change) -1.3% D
Sales Volume, SA 307,000 F
New Home Inventory for Sale, NSA 162,000 A+
Months Supply of Unsold Homes, SA 6.3 C
Months of Homes Completed, SA 2.3 C
Months of Homes Under Const., SA 2.9 B
Months of Homes Not Started, SA 1.1 C
Statistic Grade
Repairs and Remodeling C-
High remodeling levels are good for the economy and are closely tied to consumer confidence.
Homeowner Improvement Activity (YOY % Change) 3.5% C
NAHB Remodeling Market Index - Current 43.0 C-
NAHB Remodeling Market Index - Future Expectations 40.4 C-
Private Residential Construction (YOY % Change) 1.7% C
Residential Investment as % of GDP 2.2% F
Statistic Grade
Housing Supply F
High construction levels are good for the economy. However, if new supply exceeds demand, prices could
fall.
New Housing Units Completed, SA 584,000 F
Single-Family Starts, SA 430,000 F
Multifamily Starts, SA 198,000 D-
Total Starts, SA 628,000 F
Single-Family Permits, SA 434,000 F
Multifamily Permits, SA 219,000 D-
Total Permits, SA 653,000 F
Manuf. Housing Placements, SA 41,000 F
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Total Supply, SA 694,000 F
Total Housing Stock 132,353,000
Excess Vacancy 105330119.6% D
SA stands for Seasonally Adjusted Annual Rate. NSA stands for Not Seasonally Adjusted.
* The best 15% ever are "A" scores, the average is a "C", and the worst 15% ever are "F" scores, with
distributions throughout.
This December 2011 real estate building stats report as provided by our friends at John Burns Consulting .
© 2008-2011 All Rights Reserved - The REI Brain.
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