February 12, 2016 · Federal Reserve Bank of Dallas

Dr. James P. Gaines
Chief Economist

Macro Housing Issues
• Demographics: growing, shifting
• Affordability: workforce priced out of
ownership
• Capital: more equity
• Infrastructure: transportation, education,
utilities
• Development: Design, Density, Resources and
Processes
• Regulatory: lending; environmental; land use
• Federal
• State
• Local Growth Controls/Initiatives

National Housing Market

3

2016 National Housing Market



Mortgage Rates: up ~0.5% over the year (4% 4.5%)
Household Formations: ~1.25 million
Rental Market: tight, low vacancies, higher rents
Owner Market: sales volume and prices up ~5%
• Increased first-timers, millennials more active

• Single-family Rental: organized SF rental market
with institutional owners
• Home Construction: builders focused on design,
density, resources and processes
• Affordability: prices and rents increasing faster than
incomes – eventual constraint on market

7,000

6,500

6,500

6,000

6,000

5,500

5,500

5,000

5,000

4,500

4,500

4,000

4,000

3,500

3,500

3,000

3,000

Existing SF Home Sales

2,500

2,500

2,000

2,000

1,500

1,500

1,000

1,000

Sources: US Census Bureau , NAR, SAAR

Jan-16

Jul-15

Jan-15

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jul-09

Jan-09

Jul-08

Jan-08

Jul-07

500
Jan-07

Jul-06

Jan-06

Jul-05

Jan-05

Jul-04

Jan-04

Jul-03

Jan-03

Jan-02

Jul-01

Jan-01

Jul-00

0

Jul-02

New SF Home Sales

500

0

Home Sales 000s

7,000

Jan-00

Home Sales 000s

New and Existing SF Home Sales U.S.

0
Jan-90
Jul-90
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16

HMI

100
Housing Market Index

90
1,800

80
1,600

70
1,400

60
1,200

50
1,000

40
800

30
600

20
400

10
200

Source: NAHB, Real Estate Center at Texas A&M University

0

Housing Starts, thousands

NAHB HMI & SF Starts
2,000

Single-Family Starts

New SF Home Starts
(000s SAAR)

1,800
1,700

1,716

1963-2002 average per year (1.06 million)

1,610

1,600
1,499

1,500

1,451
1,433

1,400

1,359
1,309

1,303
1,271 1,273
1,231

1,300
1,200
1,100
1,000
900
800
700

1,465

1,151

1,132

1,162

1,194

1,198

1,179
1,146
1,084
1,072
1,067

1,012
970964

1,126

1,081

1,076

1,003

899
844
811813
779

888892
852

1,161
1,134

1,030

1,046

935

895
840

726

705
663

648
618

622

600

535

500

471
445 431

400
200

1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

300

*2015 & 2016 NAHB projections Apr 2015

Source: US Census Bureau; NAHB; Real Estate Center at Texas A&M University

Mortgage and Federal Funds Rate
Fed Funds

30-YR FMR Mortgages

Source: Federal Reserve Board; FHLMC; Haver Analytics; Real Estate Center at Texas A&M University

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

Jan-05

Jan-04

Jan-03

Jan-02

Jan-01

Jan-00

Jan-99

Jan-98

Jan-97

Jan-96

Jan-95

Jan-94

Jan-93

Jan-92

Jan-91

Jan-90

Interest Rate %

12.0
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0

Mortgage and 10-Year Treasury Rates
11.0
10-Year Treasury

10.0

30-YR FMR Mortgages

9.0
8.0

6.0
5.0
4.0
3.0

Source: Federal Reserve Bank of St. Louis; FHLMC; Real Estate Center at Texas A&M University

Jan-16

Jan-15

Jan-14

Jan-13

Jan-12

Jan-11

Jan-10

Jan-09

Jan-08

Jan-07

Jan-06

Jan-05

Jan-04

Jan-03

Jan-02

Jan-01

Jan-00

Jan-99

Jan-98

Jan-97

Jan-96

Jan-95

Jan-94

Jan-93

Jan-92

1.0

Jan-91

2.0
Jan-90

Interest Rate %

7.0

Texas Housing Market

10

Mortgage & Tenure Status of
Homes in Texas 2005 & 2014
2005
Number of
Homes

Total Housing Units

9,026,011

Total Occupied Units

7,978,095

2014
Percent
of Total
Units

Number of
Homes

Percent
of Total
Units

10,426,760
88.4%

9,227,197

89.0%

Total Renter-Occupied Housing
Units

2,815,491 35.3%

3,602,956

38.8%

Total Owner-Occupied Housing
Units

5,162,604 64.7%

5,674,241

61.2%

O-O units with a mortgage

3,237,790

62.7%

3,307,196 58.3%

O-O units without a mortgage

1,924,814

37.3%

2,367,045 41.7%

Source:
CensusBureau,
Bureau, 2006
CommunityCommunity
Survey
Source:
U.S.U.S.
Census
2005American
& 2014 American
Survey

Annual Texas Home Sales
310,000

$310,000

Sales

290,000

Avg Price

Md Price

295,355

292,805

285,535
276,459

275,584
266,842

270,000

2015 Record Year!!

250,000

241,020

$250,000

238,060

216,147

210,000

$230,000

213,334
205,786
203,637

201,528
196,401
188,738
184,056

190,000

$210,000
$190,000

170,638

170,000

$170,000
146,395
138,123

150,000

$150,000

122,134
116,604 121,823

130,000
110,000

$270,000

232,381

230,000

$290,000

$130,000

107,107
100,047
99,619

$110,000

Source: Real Estate Center at Texas A&M University

2015e

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

$50,000

1994

50,000
1993

$70,000

1992

70,000
1991

$90,000

1990

90,000

Texas Monthly Home Sales & WTI Price/bl
January 1986 to Present

34,000

Dec. ’15 1st month < $40 since Feb ‘09

32,000
30,000
28,000
26,000
24,000
22,000
20,000
18,000
16,000

1986-1989
1990-1995
1996-1999
2000-2005
2006-2009
2010-2015

14,000
12,000
10,000
8,000
6,000
4,000

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$110

WTI Spot Price FOB Cushing, OK

Source: EIA; Real Estate Center at Texas A&M University

$120

$130

$140

$150

2015 Home Sales and Median
Prices by Metro Areas
8.9%

Austin

3.8%
11.3%

Dallas

5.2%
1.1%

El Paso

10.7%
9.8%

Fort Worth
Houston

7.6%
6.7%
-2.5%
7.1%

San Antonio

9.1%
7.3%

Texas
-4.0%

3.4%

-2.0%

0.0%

2.0%

Median Sales Price

4.0%

6.0%

8.0%

Sales Volume

Source: Real Estate Center at Texas A&M University

10.0%

12.0%

2.0
Apr-01
Jul-01
Oct-01
Jan-02
Apr-02
Jul-02
Oct-02
Jan-03
Apr-03
Jul-03
Oct-03
Jan-04
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16

Texas Months’ Inventory

9.0
Inventory at extremely low level relative to market activity

8.0

7.0

6.0

5.0

4.0

3.0

Source: Real Estate Center at Texas A&M
15

Texas SF Building Permits
180,000
160,000

166,203
163,032

1990-2014 average 94,693/year

151,384
137,493

140,000

122,913

120,000
100,000

83,132
82,228

78,714
67,870
66,161

70,452
70,421
69,964

67,964

81,107

81,926

68,170
68,230 67,254

59,543

59,143
43,975

40,000

107,300
103,045
93,478

84,565

60,000

120,366

111,915
108,782
101,928
99,912

103,252

80,000

2014 +10%
2015 +4%

46,209

38,233
36,658
35,908

0

1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015e

20,000

Source: US Census Bureau, Real Estate Center at Texas A&M

Texas SF Permits & WTI Price/bl.
Monthly January 1991 to Current

18,000
17,000
16,000
15,000
14,000
13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0

1991-1995
1996-1999
2000-2004
2005-2009
2010-2015

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100 $110 $120 $130 $140 $150

Avg. Monthly WTI Spot Price FOB Cushing, Ok

Source: U.S. Census; EIA; Real Estate Center at Texas A&M University

Texas MF Building Permits
70,000

2014 +20%
2015 +1%

1990-2014 average 34,368/year
60,000
50,000

47,271

46,918

40,715

40,245

38,671
37,537
35,791
33,958
33,036

32,521
31,281
30,165

30,000

65,000

54,145
53,615

53,196

51,576

40,000

64,135

30,729
28,381

19,741

20,000

15,837
13,879

Source: US Census Bureau, Real Estate Center at Texas A&M

2015e

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

0

9,304
8,291
8,273

1990

10,000

40

Source: Real Estate Center at Texas A&M
Jan-16

Jul-15

Jan-15

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jul-09

Jan-09

Jul-08

Jan-08

Jul-07

Jan-07

Jul-06

Jan-06

Jul-05

Jan-05

Jul-04

Jan-04

Jul-03

Jan-03

Jul-02

Jan-02

Jul-01

Jan-01

Jul-00

Jan-00

Texas Residential Construction
Indexes (Jan. 2000=100)

180

160

140

120

100
United States Coincident Index

80
Texas Coincident Index

60
Texas Leading Index

Texas Housing
Affordability
Price vs. Income

$70,000
Source: Real Estate Center at Texas A&M University
Jan-16

Jul-15

Jan-15

Jul-14

Jan-14

Jul-13

Jan-13

Jul-12

Jan-12

Jul-11

Jan-11

Jul-10

Jan-10

Jul-09

Jan-09

Jul-08

Jan-08

Jul-07

Jan-07

Jul-06

Jan-06

Jul-05

Jan-05

Jul-04

Jan-04

Jul-03

Jan-03

Jul-02

Jan-02

Jul-01

Jan-01

Jul-00

Jan-00

Jul-99

Jan-99

Jul-98

Jan-98

Jul-97

Jan-97

Jul-96

Jan-96

Jul-95

Jan-95

Texas Monthly Median Home Price
$230,000

$210,000

Median Price on Trend

$190,000

$170,000

$150,000

$130,000

$110,000

$90,000

Texas Average & Median Home Prices
12-Month Moving Average

$300,000
$280,000
$260,000

Since Jan 2013, average
price is up 20.9% & median
price is up 26.0%

$240,000
$220,000
$200,000
$180,000

Average Price

$160,000
$140,000
$120,000

Median Price

$80,000

Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16

$100,000

Source: Real Estate Center at Texas A&M University

22

Texas Median HH Income & Median
Home Price Indexed to 1989

Median Home Price

Nominal HH Income

Source: U.S. Census Bureau; Real Estate Center at Texas A&M University

2015e

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

Real HH Income
1989

300
290
280
270
260
250
240
230
220
210
200
190
180
170
160
150
140
130
120
110
100
90
80

300
290
280
270
260
250
240
230
220
210
200
190
180
170
160
150
140
130
120
110
100
90
80

Texas Households by Highest
Affordable Price
>$750,000

450

4.9%

$500,000-$749,999

538

5.9%

$400,000-$499,999

20% down; 4.15% interest; 35%
qualifying ratio; and 5.5% taxes,
insurance & utilities

602

6.6%

$300,000-$399,999

1,007

11.1%

$250,000-$299,999

645

7.1%

$200,000-$249,999

893

9.8%

$175,000-$199,999

526

5.8%

$150,000-$174,999

576

6.3%

$125,000-$149,999
$100,000-$124,999

689

7.6%

$70,000-$99,999

~43% of Texas HHs cannot afford
home priced > $150,000

644

7.1%

9.4%

<$70,000

858
1,682

18.5%

0

500

1,000

1,500

2,000

Thousands of Households

Source: US Census Bureau 2013 American Community Survey; Real Estate Center at Texas A&M University

Texas Households by Highest
Affordable Price
>$750,000

443

4.9%

$500,000-$749,999

4.7%

$400,000-$499,999

10% down; 4.15% interest; 35%
qualifying ratio; and 5.5% taxes,
insurance & utilities

432
519

5.7%

$300,000-$399,999

996

10.9%

$250,000-$299,999

636

7.0%

$200,000-$249,999

886

9.7%

$175,000-$199,999

538

5.9%

$150,000-$174,999

577

6.3%

$125,000-$149,999

671

7.4%

$100,000-$124,999

~45% of Texas HHs cannot afford
home priced > $150,000
1,117

12.3%

$70,000-$99,999

5.4%

494

<$70,000

1,802

19.8%

0

500

1,000

1,500

2,000

Thousands of Households

Source: US Census Bureau 2013 American Community Survey; Real Estate Center at Texas A&M University

Texas Households by Highest
Affordable Price
>$750,000

438

4.9%

$500,000-$749,999

4.7%

$400,000-$499,999

3% down; 4.15% interest; 35%
qualifying ratio; and 5.5% taxes,
insurance & utilities

385
465

5.7%

$300,000-$399,999

956

10.9%

$250,000-$299,999

660

7.0%

$200,000-$249,999

867

9.7%

$175,000-$199,999

530

5.9%

$150,000-$174,999

589

6.3%

$125,000-$149,999

678

7.4%

$100,000-$124,999

730

12.3%

$70,000-$99,999

~46% of Texas HHs cannot afford
home priced > $150,000

927

5.4%

<$70,000

1,885

19.8%

0

500

1,000

1,500

2,000

Thousands of Households

Source: US Census Bureau 2013 American Community Survey; Real Estate Center at Texas A&M University

December Closed Sales Texas MSAs
Y/Y Percent Change

Dec. Sales +6%
YTD Sales +4%

Source: MetroTex; Texas Realtor®
Data Relevance Project, Real
Estate Center at Texas A&M
University

December Average Sales Price/Sq.Ft.
Y/Y Percent Change

Dec. P/SF +4%
YTD P/SF +6%
Md. Pr. YTD +7%

Source: MetroTex; Texas Realtor®
Data Relevance Project, Real
Estate Center at Texas A&M
University

February 12, 2016 · Federal Reserve Bank of Dallas

Dr. James P. Gaines
Chief Economist