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 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- Leading Indicators…………………………………………………………………C- Affordability…………………………………………………………………………..C+ Consumer Behavior………………………………………………………………..D+ Existing Home Market……………………………………………………………..D New Home Market……………………………………………………………………C- Repairs and Remodeling…………………………………………………………..C- Housing Supply………………………………………………………………………..F |
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U.S. HOUSING MARKET STATISTICS
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Data Current Through December 5, 2011
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Grade*
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Overall Grade
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D+
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Statistic
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Grade
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Economic Growth
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C-
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These are the best indicators of how the economy is currently performing.
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| Real GDP (annual rate) | 2.0% | C | |
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Employment Growth (1-year Change)
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| – Non-ag Payroll, NSA | 1,588,000 | C | |
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Employment Growth Rate
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| – 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- | |
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Inflation
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| 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 | |
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Statistic
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Grade
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Leading Indicators
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C-
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These have all proven to be predictable early indicators of the direction of economic growth.
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| 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% | ||
| 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 | |
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Interest Rate Spread
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| 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 | |
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Stock Market (Return over last 12 months)
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| 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 | |
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Statistic
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Grade
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Affordability
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C+
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These statistics are probably the most important indicators of short-term housing market performance.
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Conforming Mortgage Rates (contract rate; an additional 0.6 – 1.0 points are also paid up front by the borrower)
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| 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+ | |
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Statistic
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Grade
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Consumer Behavior
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D+
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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.
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| 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+ | |
| U.S. Net Worth Growth Rate | 8.4% | C | |
| Financial Obligation Ratio | 16.1% | B+ | |
| Misery Index (Unemployment + Inflation) | 12.53 | C- | |
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Statistic
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Grade
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Existing Home Market
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D
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Sales volumes correlate well with the Housing Cycle calculations, and boost the trade up New Home sales market.
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| 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+ | |
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Statistic
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Grade
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New Home Market
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C-
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High appreciation and low inventory would mean an excellent short-term outlook for the new home industry.
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| 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 | |
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Statistic
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Grade
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Repairs and Remodeling
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C-
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High remodeling levels are good for the economy and are closely tied to consumer confidence.
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| 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 | |
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Statistic
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Grade
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Housing Supply
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F
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High construction levels are good for the economy. However, if new supply exceeds demand, prices could fall.
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| 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 | |
| Total Supply, SA | 694,000 | F | |
| Total Housing Stock | 132,353,000 | ||
| Excess Vacancy | 105330119.6% | D | |
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SA stands for Seasonally Adjusted Annual Rate. NSA stands for Not Seasonally Adjusted.
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* The best 15% ever are “A” scores, the average is a “C”, and the worst 15% ever are “F” scores, with distributions throughout.
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If you have any questions, please contact Rick Palacios Jr. at (949) 870-1244 or by