Macroeconomic View of the Housing Market · Source: Freddie Mac Primary Mortgage Market Survey®; forecast is an average of MBA, Fannie Mae, Freddie Mac, NAHB, NAR and IH S Market

Macroeconomic View of the Housing Market

Frank NothaftCoreLogic Chief EconomistDecember 12th 2018

© 2018 CoreLogic, Inc. NYSE:CLGX] All Rights Reserved. Proprietary. Innovate. Transform. Thrive. TM

2019 Economic and Housing Outlook

• Economic growth continues, recession risk rises, interest rates increase

• Home equity gains, lower homeowner mobility add to remodeling spending

• South and West lead in new home building, material and labor costs rise

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0

15

30

45

60

2019 2020 2021 or Later

• 2.3% economic growth in 2019 (IHS)

• Expansion becomes longest in U.S. history in July 2019 (NBER)

• 20% 1-year recession probability (WSJ)

• Most economists expect recession starts 2020 or later (NABE)

• TCJA stimulus dissipates• Higher interest rates• Trade war uncertainty

In what year do you expect the next recession to begin?

Percent of respondents

Source: IHS Markit (GDP growth 2018Q4 to 2019Q4), Wall Street Journal Economic Forecasting Survey (November 2018), National Association for Business Economics Outlook survey (October 1, 2018), National Bureau of Economic Research

Economy Forecast to Grow 2.3% in 2019…. When Will the Recession Hit?

3


November 2018 Unemployment 3.7%, 49-year lowForecast (IHS): 3.5% (2019 average)

3%4%5%6%7%8%9%

10%

Jan-00 Dec-03 Nov-07 Oct-11 Sep-15 Aug-19

-1%

0%

1%

2%

3%

4%

Jan-00 Dec-03 Nov-07 Oct-11 Sep-15 Aug-19

October 2018 Inflation At Fed’s 2% TargetForecast (NABE): 2.1% (2019 Q4/Q4)

Source: BLS (unemployment rate), BEA (PCE price index), IHS Markit (unemployment forecast), NABE (PCE forecast)

20192.1%

20193.5%

Fed Increasingly Focused on Inflation Risk

• Congressional dual mandate:• Maximum employment• Price stability

• Unemployment rate 3.7% (Nov.)• Lowest since 1969• “Full employment”: 4.2-4.5%

• Fed’s “price stability” definition:• 2% annual (PCE)• Avg. inflation 1.9% since 2000• Oct. 2018: 2.0% annual

• Fed expected to raise fed funds target to 2.25-2.50% on Dec. 19

• 3 more quarter-point hikes expected in 2019

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30-year FRM at 4.9% (Nov. avg.); forecast: 5.2% by Dec. 2019 & 5.3% by Dec. 2020

3%

4%

5%

6%

7%

2007 2009 2011 2013 2015 2017 2019

GreatRecession

ForecastApril2011:

5.1%

5.4%

June 2009:

Dec. 2020:5.3%

Source: Freddie Mac Primary Mortgage Market Survey®; forecast is an average of MBA, Fannie Mae, Freddie Mac, NAHB, NAR and IHS Market projections.

Interest Rate on 30-Year Fixed-Rate Mortgages

2019 Mortgage Rate Forecast: Highest Since 2009

5


$0

$400

$800

$1,200

$1,600

$2,000

$2,400

2010 2012 2014 2016 2018 2020

Single-family Mortgage Originations (Billions of U.S. dollars)

Purchase

Refinance

---Forecast---

Consensus2018 to 2019:Total: - 1%Refi: - 13%Purch: + 4%

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Home Mortgage Origination Volume Steady 2018-2020Refinancing Continues to Shrink as Mortgage Rates Increase

Source: Originations for 2010-2017 are from CoreLogic public records (benchmarked to HMDA through 2017); 2018 to 2020 are an average of the latest projections released by Mortgage Bankers Association, Fannie Mae, and Freddie Mac. Originations exclude HELOCs.


3%

4%

5%

6%

Oct. 2014 Oct. 2015 Oct. 2016 Oct. 2017 Oct. 2018 Oct. 2019

Home-Price Growth: Forecast To Slow in 2019

6.1%

5.4%

Forecast4.8%

Source: CoreLogic Home Price Index and HPI Forecast for U.S. (December 4, 2018 release)

CoreLogic Home Price Index Growth for U.S. (annual, percent)

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Price Growth Strongest For Lowest-Priced Houses

8

0%

20%

40%

60%

80%

100%

0%

2%

4%

6%

8%

10%

More Than 25%Below Median

25% or Less BelowMedian

Up to 25% AboveMedian

More Than 25%Above Median

One Year Ago Price TroughPrice Growth Since:

Source: CoreLogic HPI, Single-family Detached (December 4, 2018 release); National HPI trough occurred March 2011.

Cumulative Price Growth Through October 2018 (percent)Since October 2017 Since March 2011 Trough


Average Equity Gain per HomeownerU.S.: $12,400 per home (September 2017 to September 2018)Wealth effect adds $50 billion to consumer spending next 2-3 years

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Source: CoreLogic Equity Report for 2018Q3

Q3 2018


Americans Are Keeping Their Homes Longer

4

6

8

10

12

14

1985 1993 2001 2009 2017

Number of Years A Home Is Owned (Median)

Source: American Housing Survey for the United States, various years (difference between survey year and median year owner-occupant moved into unit), CoreLogic public records for United States (length of time between recorded sales on same home).

Home Sellers

Owner Occupants

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Longer Homeowner Duration and Growth in Home Equity Spurs Remodeling Expenditures

$100

$200

$300

$400

2000 2002 2005 2008 2011 2013 2016 2019

Homeowner Improvements and Repairs (Billions)

Source: Harvard University Joint Center for Housing Studies

Forecast6.6% growth

11


0%

10%

20%

30%

40%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Cash Out Refinancing ReemergingIn 2012, 10% of refinances were cashout; in 2018Q3, 40% were

Source: CoreLogic Public Records (first liens)

Cash out refinances as a share of $ refinance originations

2001-04Refi Boom

2009-13Refi Boom

October41%

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HELOC Volume Projected to Hold SteadyHome Improvement HELOC gain in 2019 expected to offset part of decline in other HELOCs

$0

$50

$100

$150

$200

$250

$300

$350

$400

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Source: CoreLogic Public Records; second-lien HELOCs placed more than 60 days after first lien; 2018 reflects first eight months, annualized.

Billions of Dollars Authorized

Forecast

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Most Construction Material Costs Up A Lot Since 2013

14

-30%

-20%

-10%

0%

10%

20%

30%

40%

Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18

LumberDrywallMasonryInsulationSteelElectricalRoofingPlumbing

Percent Change in Material Cost since March 2013

Source: CoreLogic Quarterly Construction Insights, 2018Q3.


Material Cost Increases Vary Widely by Region

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States with Highest Cost Increase relative to YOY National Average Change:• Alaska (29% above)• Hawaii (28%)• Maine (6%)• New York (6%)

States with Lowest Cost Increase relative to YOY National Average Change:• Wisconsin (6% below)• Indiana (5%)• Nebraska (5%)• Ohio (5%)

Source: CoreLogic Quarterly Construction Insights, 2018Q3; percentages are based on material cost compared to the national average from Sep. 2017 to Sep. 2018


Labor Costs Up, and Many Jobs Unfilled

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Labor Cost by Occupation (percent change Sep. 2017 to Sep. 2018)

Source: CoreLogic Quarterly Construction Insights, 2018Q3.


New-Home Sales Levels Highest in the South

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Monthly Number of New Home Sales (Average)

Source: CoreLogic, average monthly new homes sold September 2017 through August 2018 in the 100 metropolitan areas with the largest number of home sales

0 500 1,000 1,500 2,000 2,500

Houston TXDallas TX

Atlanta GAPhoenix AZOrlando FL

Tampa FLAustin TX

Charlotte NCSan Antonio TXLas Vegas NV

Denver CORaleigh NC

Washington DCFort Worth TX

Nashville TNRiverside CA

Jacksonville FLNew York NY

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South & West Lead New-Home Growth

Source: CoreLogic, percent change in number of new-home sales Sep 2017 to Aug 2018 vs. Sep 2016 to Aug 2017, for CBSAs with a year-over-year increase of at least 200 new home sales.

Highest Growth New-Home Metros

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0% 10% 20% 30% 40% 50%

Lafayette LAMerced CA

Ocala FLLakeland FLTacoma WA

San Diego CAAtlanta GA

Raleigh NCTampa FL

Louisville KYSan Jose CA

Boise City IDSalt Lake City UT

Las Vegas NVCharleston SCFort Worth TX

Jacksonville FLDenver COOrlando FLHouston TX

Metros with:

• good affordability,

• good job growth,

• good weather

have had the highest growth in new-home sales over the last year

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All New Home Sales Financing by New Home Sales Price

Source: CoreLogic public records, new home settlements January-August 2018 (Number of mortgages)

Mortgage Financing for New Home Buyers

Conventional Conforming

65%

Jumbo6%

FHA16%

VA12%

Other1%

0%

20%

40%

60%

80%

100%Other

VA

FHA

ConventionalConforming

Jumbo

Sales Price

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2019 Economic and Housing Outlook

• Economic growth continues, recession risk rises, interest rates increase

• Home equity gains, lower homeowner mobility add to remodeling spending

• South and West lead in new home building, material and labor costs rise

20


Where to find more information

Look for regular updates to our housing forecast, commentary and data at

http://www.corelogic.com/blog

@CoreLogicInc

@DrFrankNothaft

The views, opinions, forecasts and estimates herein are those of the CoreLogic Office of the Chief Economist, are subject to change without notice and do not necessarily reflect the position of CoreLogic or its management. The Office of the Chief Economist makes every effort to provide accurate and reliable information, however, it does not guarantee accuracy, completeness, timeliness or suitability for any particular purpose.

CORELOGIC and the CoreLogic logo are trademarks of CoreLogic, Inc. and/or its subsidiaries.

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http://www.corelogic.com/blog

Documents

Macroeconomic View of the Housing Market · Source: Freddie Mac Primary Mortgage Market Survey®; forecast is an average of MBA, Fannie Mae, Freddie Mac, NAHB, NAR and IH S Market