Download - Housing and Mortgage Market Update 6-16-2010
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
1/21
Housing and Mortgage MarketUpdate
Guaranteed Rate-Chicago Association of RealtorsChicago, IL
June 16, 2010
Frank E. Nothaft
Chief Economist
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
2/21
Office of the Chief Economist1
Office of the Chief Economist1
Mortgage Rates Low, But Defaults Rising; LoanModifications Will Help Reduce Overall Impact
Mortgage rates low, underwriting more careful 30-year fixed mortgage rates likely stay in 4.75% to 5.25% range in 2010 Originations 25% less in 2010, driven by less refinance FHA & VA about one-fourth of all lending in 2010
Mortgage defaults rise Unemployment main trigger event for delinquency House-price declines add to foreclosure risk Serious delinquency rates likely to rise further in 2010 Subprime, Alt-A and Option ARMs drive foreclosures
Making Home Affordable lessens impact Keeping families in homes is the long-term priority Streamline refinance will help families lower monthly payment Loan modification is important tool in 2010
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
3/21
Office of the Chief Economist2
Low Interest Rates & Falling Home Prices HaveIncreased Housing Affordability
Source: National Association of Realtors Composite Housing Affordability Index (% of median
priced home affordable on median income with conventional mortgage and 20% down),
seasonally adjusted; Freddie Mac Primary MortgageMarket Survey
60
90
20
50
80
9 9 9 9 9
9
98
98
98
98
989
99
99
99
99
999
200
200
200
200
2009
4.0
7.5
.0
4.5
8.0Index Percent
NAR AffordabilityIndex
(left scale)
30-year FixedMortgage Rate
(right scale)
Index = 00 meansmedian income buysmedian priced home
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
4/21
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
5/21
Office of the Chief EconomistOffice of the Chief Economist
Building Permits Fell in U.S. Over Past Years
Housing Permits U.S. (Thousands)
Sources: Bureau of Census (Chicago-Joliet-Naperville IL MSA) and National Bureau ofEconomic Research
United States
Chicago IL
Recession
Housing Permits Chicago (Thousands)
%Drop
%Drop
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
6/21
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
7/21
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
8/21
Office of the Chief Economist
Large Inventory Surplus Remains in Market
- 00
0
00
00
00
400
500
600
00
800
900
000
996 000 004
Source: Bureau of Census (1 6-2004:Annual Data, 2005Q12010Q1:Quarterly Data)Note: The excess unsold homes were estimated based on the average vacancy rate from1 6Q1 to 2005Q4 (1.7%).
Excess Unsold Homes for Sale (Numbers in Thousands)
Annual Data Quarterly Data
005 006 00
Q Q4 Q Q4 Q Q4 Q
008
Q4 Q
009
Q4 Q
0 0
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
9/21
Office of the Chief Economist
U.S. House Prices Have Experienced aCumulative Decline of 2 % Since June 2
2.1
5.1
2.3
1.6
2.7
4.4
2.4
1.2 1.2
1.9
-0.7
-1.3
0.60.8
-2.1
-4.0
-2.8
0.0
-2.7
-6.5
-2.0
2.5
0.0
-2.4
-0.9
2
2
2 2 2 2 2 2 2 2 2 2 2 2 2
uarterly Growth Rates (Numbers in Percentages)
Note: National home prices use the internal Freddie Mac Index, which is a value-weighted based on
FreddieMacs single-family portfolio. The US index is a monthly series; quarterly growth rates are
calculated as a 3-month change based on the final month of each quarter.
Source: Freddie Mac
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
10/21
Office of the Chief Economist
House Price Declines Largely Occur in Stateswith Excess acant-for-Sale Homes
-3 %
- %
- 2%
-3 %
> 2%
-2 to 2%
-2 to -1 %
-1 to -2%
Cumulative Change, 2 Q1 to 2 1 Q1
Source: FHFA Purchase-Only House Price Index (NSA) by State, 2006Q1 and 2010Q1.
< -2 %
-2 %
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
11/21
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
12/21
Office of the Chief Economist11
Job Loss Is the Main Hardship Reason AmongDelinquent Prime Borrowers
Source: Freddie Mac; data represent prime borrowers who were delinquent on conventional conforming loans owned by Freddie
Mac and had successful contact with their servicer during 200 . All Other Reasons includes: Abandonment of Property;
Energy/Environment Cost; Incarceration; Payment adjustment; Payment Dispute; Servicing problem; Unable to contact borrower and
other nondescript.
Hardship Reason
Unemployment or curtailment of income .3%
Excessive obligation 1 .3%
Illness or Death in the Family 11.2%Marital difficulties . %
Inability to sell or rent property 2. %
Property problem or casualty loss 1. %
Employment transfer or military service . %Extreme hardship .1%
All other reasons 3. %
2
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
13/21
Office of the Chief Economist12
Office of the Chief Economist12
Unemployment Rate (U.S. . % in May)Expected to Decline Gradually
11
1
1 1 1 1
2
1 1 1 1 1
2
1 1 1 2 2
2
2 2 2 2
1
Unemployment Rate (Percent) Forecast
Sources: Bureau of Labor Statistics (Chicago-Joliet-Naperville, IL MSA), National Bureau ofEconomic Research and Freddie Mac.
National Recession
United States
Nov-Dec 2:1 . %
2 11:Q. %
Illinois
Chicago-Joliet-Naperville
IL
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
14/21
Office of the Chief Economist13
Office of the Chief Economist13
Recent Default Experience Is Unlike AnyPrevious Business Cycle Since the 1 3 s
1
2
3
1
2
1 1 1 1 1
2
1 1 1 1 1
2
1 1 1 1 1
2
1 1 1 2 2
2
2 2 2 2
1
Prime conventional loans days or more delinquent or in foreclosure (percent)
Recession Year
Source: National Bureau of Economic Research,Mortgage Bankers Association(Prime Conventional includes Alt-A).
1%
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
15/21
Office of the Chief Economist1
Office of the Chief Economist1
Increasing Delinquencies, Especially Subprime
1
1
1
1 1
11
All oans rime & Alt-A Subprime
oans Days or More Delinquent or in Foreclosure (percent of number)
Source: Mortgage Bankers Association; Prime Loans includes Alt-A (Quarterlydata not seasonally adjusted;1 Q1-2010Q1).
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
16/21
Office of the Chief Economist1
Prime & Alt-A Delinquencies Are Highest in AreasWith Largest Negative Equity Shares
National = 7.1% Seriously Delinquent
Illinois = 8.0%
(90+ days delinquent or in foreclosure, Prime & Alt-A Conventional)
Data as of March 31, 2010
Below 3. %
. - . %
Above 1 %
. - . %
. - . %
Source: Mortgage Bankers Association
1 . %
1 . %
1 .2%
1 . %
3. -3. %
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
17/21
Office of the Chief Economist1
Office of the Chief Economist1
Subprime, Alt-A ARMs, and Option ARMs DriveForeclosures in Illinois
Source:Mortgage Bankers Association National Delinquency Survey. Numbers adjusted for 5% coverage.
1
11
1
1
1
1
Distribution of oans Outstandin in Ib roduct: anuar 1,
Distribution of Foreclosures Started in Ib roduct: an-Dec
SUB RIME
FHA &A
RIME & Alt-AARM
RIME & Alt-AFIXED RATE
.Million
Thousand
Million oans 11 Thousand Foreclosures
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
18/21
Office of the Chief Economist1
tri ion
1%
1 %
1 1%
% 1 %
%
1
tri ion
1%
%
%
1%
%%
Subprime and A t-A o ume Quintup ed 1 to, then Fe from to
Source: Inside Mortgage Finance (by dollar amount)
A t-A Home EquityLoans
Conventiona ,Conforming Prime
Jumbo Prime Subprime FHA& A
1 tri ion
%
1%
%
%
%
%
Sing e-fami y
OriginationsSubprimeand A t-A tri ion 1 tri ion 1 tri ion
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
19/21
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
20/21
Office of the Chief Economist1
Office of the Chief Economist1
Private Label Securities Comprise 1 % of LoansOutstanding but Almost 3 % of Problem Loans
reddie Mac23%
annie Mae
33%
A VA
13%
Private Label
Securities
1 %
ank and
hrift
Portfolios
1 %
Other
%
Number of First Mortgages Outstanding(in millions)
Seriously Delinquent 1st Mortgages(in millions)
OtherPortfolio
otal: MillionSources: FDIC, Freddie Mac, Fannie Mae, Mortgage Bankers Association, HUD, First American CoreLogic (LoanPerformance). Note:
Data as of December 31, 200
. Seriously Delinquent loans were at least
0 days delinquent or in foreclosure. Components may notsum to 100% because of rounding. Freddie Mac and Fannie Mae figures include whole loans held in portfolio and in guaranteed
securities outstanding.
1
1
2 1 1 2 1 1
reddieMac
annieMae
ankshrifts
AVA
Private LabelSecurities
otal: 3 Million
Other
-
8/9/2019 Housing and Mortgage Market Update 6-16-2010
21/21
Where to Get More InformationLook for regular updates to our economic forecast,commentary and data at
www.FreddieMac.com/news/finance
Contact us at [email protected]
Opinions, estimates, forecasts and other views contained in this document are those of Freddie Mac's Office of
the Chief Economist, do not necessarily represent the views of Freddie Mac or its management, should not be
construed as indicating Freddie Mac's business prospects or expected results, and are subject to change without
notice. Although the Office of the Chief Economist attempts to provide reliable, useful information, it does not
guarantee that the information is accurate, current or suitable for any particular purpose.
Information from this document may be used with proper attribution. Alteration of this document is prohibited.
2010 by Freddie Mac.