August 04, 2017

Economics Group

Special Commentary

Mark Vitner, Senior Economist

mark.vitner@wellsfargo.com (704) 410-3277
Hank Carmichael, Economic Analyst
john.h.carmichael@wellsfargo.com (704) 410-3059

Housing Chartbook: August 2017

The Housing Market Remains Woefully Out of Balance
The housing recovery remains woefully out of balance, with far too few homes available for sale in
parts of the country where population and employment are growing rapidly. The mismatch
between supply and demand has sent home prices soaring in many parts of the West and South, Mismatch
which has reduced affordability and set off alarm bells about another possible housing bubble. between
While some markets are seeing price gains reminiscent of the height of the housing bubble, most supply and
markets are not. The Case-Shiller national home price index has risen 5.6 percent over the past demand has
year, which is close to the pace maintained the past four years. Moreover, there are still many sent home
housing markets that are languishing throughout the country, particularly in large parts of the prices soaring
South, Midwest and the Northeast. The split is also apparent between many suburban and in many parts
exurban markets, which have been slower to recover, and many urban markets and areas close to of the West
key employment centers, which have seen home prices recover much more rapidly. and South.

Homeowners in parts of the country where home prices have been slower to recover have been
unable to sell their homes and relocate to more vibrant job markets. As a result, the share of the
population moving from one state to another has fallen to its lowest level since World War II.
Young persons are less impacted by this trend and continue to migrate to where they believe the
greatest opportunities are. The wave of relocating millennials has set off an apartment boom,
primarily in rapidly growing Sun Belt cities and parts of the West, many of which are seeing a
renaissance in their urban centers, where neighborhoods have often been dramatically gentrified.
The geographic mismatch is just one way housing is out of balance. There is also far less turnover
in existing homes today than there has been historically, particularly at the lower price points
needed to pull first-time buyers back into the market. The lack of lower-priced homes is a
consequence of the housing bust. Many of the homes lost to foreclosure were bought by investors The lack of
and converted to rentals. This trend was particularly prevalent in rapidly growing Sun Belt areas. lower-priced
homes is a
Figure 1 Figure 2 consequence
of the housing
Housing Starts U.S. Mobility Rate
2.4
Millions of Units
2.4 24%
Total Movers as a Percent of the Population
24%
bust.
Thousands

Multifamily Starts Mobility Rate: 2016 @ 11.2%

Multifamily Forecast
2.1 Single-Family Starts 2.1 22% 22%
Single-Family Forecast
1.8 1.8
20% 20%
Forecast
1.5 1.5
18% 18%
1.2 1.2
16% 16%
0.9 0.9

14% 14%
0.6 0.6

0.3 0.3 12% 12%

0.0 0.0 10% 10%

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 48 52 56 60 64 68 72 76 80 84 88 92 96 00 04 08 12 16

Source: U.S. Department of Commerce and Wells Fargo Securities

This report is available on wellsfargo.com/economics and on Bloomberg WFRE.

Housing Chartbook: August 2017 WELLS FARGO SECURITIES
August 04, 2017 ECONOMICS GROUP

Demographics Headwinds Are Taking Longer to Dissipate

The lack of turnover is also a problem at higher price points, which is inhibiting trade-ups. Part of
the problem in the trade-up market is that there are so few homes available for sale in the nations
stronger economies that many potential home buyers are choosing to stay put, further
compounding the lack of inventory. The inclination to stay put has likely been reinforced by the
persistence of low mortgage rates that have allowed homeowners to refinance at incredibly low
interest rates and quickly build equity. For many homeowners, refinancing their home has
There is also provided their biggest financial windfall in recent years, and they are unwilling to put their
far less current lower housing costs at risk to trade up for another home at what looks like the top of the
housing market in many parts of the country.
turnover at
higher price There have been some signs that this logjam is beginning to break. There has been a slight uptick
points. in the corporate relocation market, with businesses and workers leaving higher costs markets like
California, New Jersey and Connecticut for lower costs areas like Texas, Florida, Georgia and the
Carolinas. Baby Boomers are also retiring in increasing numbers, boosting demand for homes in
retiree-driven markets like Florida, Arizona, Nevada and South Carolina. In many cases, retirees
are buying homes without selling their current residence. This is not that unusual, as younger-
retirees tend to gradually transition to full-time living in retiree areas and may choose to hold
onto their current home to maintain ties with family. There has been a rise in the number of
vacant homes held off the market and more homes are also likely been rented.
We are also seeing some positive trends in the first-time home buyer market. Millennials are
aging up and the leading edge of this cohort is now reaching their peak family formation years.
While Millennials face more obstacles than previous generations, such as larger student loan
debts and generally tighter mortgage qualification requirements, their sheer numbers are pushing
first-time home buying higher. The rising number of first-time buyers is a big reason why the
median price of a new home has fallen over the past year, as homebuilders are increasingly
finding ways to bring more affordable homes to market. The median price of a new home has
fallen 3.4 percent over the past year to $310,800, as a larger share of new home sales in recent
months has been for homes priced under $300,000. Even with the drop, new homes still sell at a
huge premium to existing homes. The large relative price gap is creating an opportunity for
We have builders able to ramp up production of lower-priced homes.
slightly scaled With half the year in the books, we have slightly scaled back our forecasts for homes sales and
back our new home construction. While demand remains solid, diminishing affordability amid a general
forecast lack of homes available for sale appear to be problems with no quick or easy solutions. New home
homes sales sales remain on pace to rise 10.5 percent this year to 620,000 homes. Sales should rise an
and new home additional 9.7 percent in 2018. Existing home sales should rise 2.5 percent this year, as tight
construction. supplies continue to push prices up faster than incomes.

Figure 3 Figure 4
Existing Home Sales New to Existing Home Price Ratio
Year-Over-Year Change
12-MMA, Median New Home Price, Mendian Existing Home Price
25% 25%
1.6 1.6

20% 20% New to Existing Home Price Ratio: Jul @ 1.32

15% 15%
1.4 1.4
10% 10%

5% 5%

0% 0% 1.2 1.2

-5% -5%

-10% -10%
Northeast 1.0 1.0
Midwest
-15% -15%
South
-20% West -20%
U.S. 0.8 0.8
-25% -25% 97 99 01 03 05 07 09 11 13 15 17
$0-100K $100-250K $250-500K $500-750K $750K-1M $1M+

Source: NAR, U.S. Dept. of Commerce and Wells Fargo Securities

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 August 04, 2017

National Housing Outlook

Forecast
2010 2011 2012 2013 2014 2015 2016 2017 2018
Real GDP, Percent Change 2.5 1.6 2.2 1.7 2.4 2.6 1.6 2.1 2.5
Residential Investment, Percent Change -2.5 0.5 13.5 11.9 3.5 11.7 4.9 2.5 4.6
Nonfarm Payroll Change (Avg. Monthly) 88 174 179 192 250 226 187 164 140
Housing Chartbook: August 2017

Unemployment Rate 9.6 8.9 8.1 7.4 6.2 5.3 4.9 4.4 4.1
Home Construction
Total Housing Starts, in Thousands 586.9 608.8 780.6 924.9 1,003.3 1,111.8 1,173.7 1,240.0 1,320.0
Single-Family Starts, in Thousands 471.1 430.5 535.3 617.7 647.9 714.5 781.5 860.0 930.0
Multifamily Starts, in Thousands 115.8 178.3 245.3 307.2 355.4 397.3 392.2 380.0 390.0
Home Sales
New Home Sales, Single-Family, in Thousands 322.0 305.0 369.0 429.0 437.0 501.0 561.0 620.0 680.0
Total Existing Home Sales, in Thousands 4,190.0 4,260.0 4,660.0 5,090.0 4,940.0 5,250.0 5,450.0 5,580.0 5,720.0
Existing Single-Family Home Sales, in Thousands 3,708.0 3,787.0 4,128.0 4,484.0 4,344.0 4,646.0 4,838.0 4,960.0 5,090.0
Existing Condominium & Townhouse Sales, in Thousands 474.0 477.0 528.0 603.0 591.0 608.0 614.0 620.0 630.0
Home Prices
Median New Home, $ Thousands 221.8 227.2 245.2 268.9 282.8 296.4 316.2 325.0 335.2
Percent Change 2.4 2.4 7.9 9.7 5.2 4.8 6.7 2.8 3.1
Median Existing Home, $ Thousands 172.9 166.1 176.8 197.1 208.3 222.4 233.8 247.9 262.3
Percent Change 0.2 -3.9 6.4 11.5 5.7 6.8 5.1 6.0 5.8
FHFA Purchase Only Index, Percent Change -3.0 -4.1 3.0 7.3 5.3 5.6 6.1 6.4 6.0
S&P Case-Shiller C-10 Home Price Index, Percent Change 2.1 -3.5 0.3 11.7 7.9 4.6 4.5 5.5 5.4
Interest Rates - Annual Averages
Federal Funds Target Rate 0.25 0.25 0.25 0.25 0.25 0.27 0.52 1.25 1.88
Prime Rate 3.25 3.25 3.25 3.25 3.25 3.27 3.52 4.25 4.88
10-Year Treasury Note 3.22 2.78 1.80 2.35 2.54 2.14 1.84 2.42 2.71
Conventional 30-Year Fixed Rate, Commitment Rate 4.69 4.46 3.66 3.98 4.17 3.85 3.65 4.12 4.41
Forecast as of: August 2, 2017
Source: U.S. Dept. of C ommerce, U.S. Dept. of Labor, FRB, FHFA, FHLMC , National Association of Realtors, S&P, Wells Fargo Securities
WELLS FARGO SECURITIES
ECONOMICS GROUP

3
Housing Chartbook: August 2017 WELLS FARGO SECURITIES
August 04, 2017 ECONOMICS GROUP

Mortgage Rate vs. 10-Year Treasury Yield

Mortgages 7%
Percent
7%

Mortgage rates dipped for the third week in a 6% 6%

row to end the month at 3.92 percent. While

down substantially from their post-election 5% 5%

highs, mortgage rates remain about 35 bps

above their level prior to the presidential 4% 4%

election. As a result, the pull-back in rates has

3% 3%
done more for lifting purchase applications than
it has refinancings. 2% 2%

Mortgage purchase applications have been

gradually trending higher for the past few 1%
Conv. 30-Year Fixed Mortg. Rate: Jul-26 @ 3.92%
1%

months, reflecting the modest uptrend in new 10-Year Yield: Jul-26 @ 2.27%
0% 0%
home sales. After a bump following the surprise 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Brexit vote, refinancing applications have settled
back down near their lows.

Mortgage Apps for Refi and 10-Year Treasury Yield

4-Week Moving Averages
12,000 7.0%
New Home Sales vs. Mortgage Purchase Applications
Thousands, Index 1990=100; Seasonally Adjusted Refi Index: Jul-21 @ 1,345.9 (Left Axis)
1,500 500 10-Year: Jul-21 @ 2.3% (Right Axis)
10,000 6.0%
1,350 450

1,200 400 8,000 5.0%

1,050 350
6,000 4.0%
900 300

750 250
4,000 3.0%
600 200

450 150 2,000 2.0%

300 100
0 1.0%
150 New Home Sales: Jun @ 610,000 (Left Axis) 50 00 02 04 06 08 10 12 14 16
Mortgage Purchase Applications: Jul @ 242.8 (Right Axis)
0 0
90 92 94 96 98 00 02 04 06 08 10 12 14 16
Mortgage Origination by Credit Score
Billions of Dollars
30% $1,200
<620: Q1 @ $17.7B (R)
620-659: Q1 @ $22.8B (R)
Mortgage Applications for Purchase Index 660-719: Q1 @ $74.2B (R)
Seasonally Adjusted Index, 1990=100 25% $1,000
720-759: Q1 @ $77.7B (R)
280 280 760+: Q1 @ $299.1B (R)
Subprime Share: Q1 @ 8.2% (L)
20% $800
260 260

15% $600
240 240

10% $400
220 220

200 200 5% $200

180 180 0% $0
03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

160 160
Weekly Figure: Jul-21 @ 240.1
Mort. Appl.: 4-Week Average: Jul 21 @ 244.4
140 140
10 11 12 13 14 15 16 17 Source: MBA, FHLMC, Federal Reserve Board, U.S. Dept. of
Commerce, FRBNY and Wells Fargo Securities

4
Housing Chartbook: August 2017 WELLS FARGO SECURITIES
August 04, 2017 ECONOMICS GROUP

Builder Confidence & Single-Family Starts

Single-Family Construction 100
Diffusion Index; Starts SAAR 3-MMA in Millions
2,000
NAHB Housing Market Index: Jul @ 64.0 (Left Axis)
Single-Family Housing Starts: Jun @ 824K (Right Axis)
Single-family housing starts rose 6.3 percent in
90 1,800

80 1,600
June, driven primarily by solid gains in the
supply-starved South and West. Starts rose 70 1,400

7.2 and 10.6 percent, respectively, in those 60 1,200

regions. The rebound reflects some 50 1,000
normalization in housing starts, which were
40 800
buoyed earlier this year by unseasonably mild
winter weather, which pulled strength forward 30 600

from the spring. 20 400

Single-family permits rose 4.1 percent in June, 10 200

following three consecutive monthly declines. 0 0

On a year-to-date basis, permits are running 90 92 94 96 98 00 02 04 06 08 10 12 14 16

7.4 percent ahead of their year-ago pace. But

permits are also running slightly below the
Single-Family Housing Completions
recent pace of starts, suggesting starts are Year-over-Year Percent Change
2.0 2.0
unlikely to suddenly break out to the upside.
1.8 1.8
Single-Family Housing Starts vs. Building Permits
SAAR, In Millions, 3-Month Moving Average
2.0 2.0 1.6 1.6
Thousands

1.8 1.8 1.4 1.4

1.6 1.6 1.2 1.2

1.4 1.4 1.0 1.0

1.2 1.2 0.8 0.8

1.0 1.0 0.6 0.6

0.4 0.4
0.8 0.8
Single-Family Housing Completions: Jun @ 798K
0.2 0.2
0.6 0.6
87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17

0.4 Single-Family Housing Starts: Jun @ 824K 0.4

Single-Family Building Permits: Jun @ 795K
0.2 0.2
90 92 94 96 98 00 02 04 06 08 10 12 14 16
Single-Family Housing Permits by MSA
Year-to-Date, Total Number of Permits in Thousands
Houston, TX
Dallas, TX
Single-Family Housing Starts Atlanta, GA
Annual Average of SAAR
2,400 2,400 Phoenix, AZ
SF Housing Starts: 2017 @ 831K 2017 is YTD Average Austin, TX
of SAAR
2,100 2,100 Orlando, FL
Washington, DC-VA-MD-WV
1,800 1,800 Charlotte, NC-SC
Nashville, TN
1,500 1,500 Tampa, FL
Raleigh, NC
1,200 1,200 Riverside, CA
Los Angeles, CA
900 900
Denver, CO
June 2017
Las Vegas, NV
600 600
0 5 10 15 20 25

300 300

000 000
85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17 Source: U.S. Department of Commerce, National Association
of Home Builders and Wells Fargo Securities

5
Housing Chartbook: August 2017 WELLS FARGO SECURITIES
August 04, 2017 ECONOMICS GROUP

Multifamily Housing Starts vs. Building Permits

SAAR, In Thousands, 3-Month Moving Average
Multifamily Construction 600 600

Despite jumping 13 percent in June, multifamily 500 500

housing starts and permits have both slowed
significantly. The three-month moving average 400 400
shows both series have clearly rolled over,
possibly reflecting some tightening in credit. 300 300

Multifamily effective rent growth has slowed to

nearly a standstill, rising 0.2 percent over the 200 200

quarter, the smallest quarterly gain since 2009.

There has been a surge of apartment deliveries 100 100

over the past few quarters in many of the fastest Multifamily Housing Starts: Jun @ 340K
Multifamily Building Permits: Jun @ 422K
growing markets, leading to higher vacancy 0 0

rates and increased leasing concessions. 90 92 94 96 98 00 02 04 06 08 10 12 14 16

Demand for apartments remains strong,

however, particularly in markets that have not
yet seen a surge in new apartment development. Multifamily Housing Starts
SAAR, In Thousands, 3-Month Moving Average
500 100

Multifamily Housing Permits by MSA

Year-to-Date, Total Number of Permits in Thousands
400 80
New York, NY-NJ-PA
Dallas, TX
Los Angeles, CA
300 60
Denver, CO
Seattle, WA
Miami, FL
200 40
Chicago, IL-IN-WI
Atlanta, GA
Austin, TX
100 20
San Francisco, CA
Phoenix, AZ 5+ Units: Jun @ 328K (Left Axis)
2-4 Units: Jun @ 12K (Right Axis)
Washington, DC-VA-MD-WV
0 0
Boston, MA-NH 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17
Houston, TX
June 2017
Tampa, FL

0 5 10 15 20
Apartment Supply & Demand
Percent, Thousands of Units
9% 100

Apartment Effective Rent Growth 8% 75

Quarter-over-Quarter Percent Change
6.0% 2.4%

5.0% 2.0% 7% 50

4.0% 1.6%
6% 25
3.0% 1.2%

2.0% 0.8% 5% 0

1.0% 0.4%
4% -25
0.0% 0.0%

-1.0% -0.4% 3% Apartment Net Completions: Q1 @ 39,000 Units (Right Axis) -50
Apartment Net Absorption: Q1 @ 23,790 Units (Right Axis)
-2.0% -0.8%
Apartment Vacancy Rate: Q1 @ 4.3% (Left Axis)
2% -75
-3.0% -1.2%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Quarter-over-Quarter: Q1 @ 0.2% (Right Axis)
-4.0% -1.6%
Year-over-Year: Q1 @ 3.0% (Left Axis)
-5.0% -2.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: U.S. Department of Commerce, Reis, Inc., and
Wells Fargo Securities

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Housing Chartbook: August 2017 WELLS FARGO SECURITIES
August 04, 2017 ECONOMICS GROUP

Home Purchase Sentiment Index

Buying Conditions 90
Index
90

The current housing environment is

imbalanced, with a shortage of homes available 80 80

for sale keeping potential buyers and sellers on

the sidelines and driving home prices higher.
The West has been particularly hard hit, as 70 70

construction has been unusually slow to ramp

back up. Demand is not the issue. The Fannie
Mae Home Purchase Sentiment Index rose to a 60 60

post-recession high of 88.3 in June.

The University of Michigans measure of the 50
Home Purchase Sentiment Index: Jun @ 88.3
50
proportion of consumers stating that now is a 2011 2012 2013 2014 2015 2016 2017

good time to buy a home continues to trend

lower and is now even with the rising number
stating that now is a good time to sell. Potential
Good Time to Buy vs. Good Time to Sell
buyers have been put off by the general lack of University of Michigan Consumer Sentiment Survey
inventory and rising home prices. 200
Good Time to Buy a House: Jun @ 143.0
200

Good Time to Sell a House: Jun @ 143.0

Consumer Confidence vs. Disposable Income 175 175
Pct. Consumers That Expect Incomes to Increase Next 6 Months
36% 12% 150 150
6-Month Income Expectations 12-MMA: Jul @ 19.2% (Left Axis)
32% Income Yr/Yr % Chg. 12-MMA: May @ 3.7% (Right Axis) 10% 125 125

28% 8% 100 100

24% 6% 75 75

20% 4% 50 50

16% 2% 25 25

12% 0% 0 0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
8% -2%

4% -4%
87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17
Home Prices vs. Wages and Salaries
Year-over-Year Percentage Change
30% 30%
Wage & Salaries (3-MMA): May @ 3.5%
S&P/Case-Shiller Composite-20: May @ 5.7%
Homeownership vs. Housing Affordability 24%
National HPI: May @ 5.6%
24%
Percentage, Index
72% 210 18% 18%
Homeownership Rate: Q2 @ 63.7% (Left Axis)
Housing Affordability Index: Q2 @ 154.5 (Right Axis) 12% 12%
70% 190
6% 6%

68% 170 0% 0%

-6% -6%
66% 150
-12% -12%

64% 130 -18% -18%

-24% -24%
62% 110 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Source: University of Michigan, National Association of

60% 90
85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17
Realtors, The Conference Board, S&P, Fannie Mae,
U.S. Dept. of Commerce and Wells Fargo Securities

7
Housing Chartbook: August 2017 WELLS FARGO SECURITIES
August 04, 2017 ECONOMICS GROUP

New Home Sales vs. Mortgage Rates

Seasonally Adjusted Annual Rate, In Thousands
New Home Sales 10% 1,750
Mortgage Rate: Jun @ 3.9% (Left Axis)
New Home Sales: Jun @ 610,000 (Right Axis)
New home sales inched up to a 610,000-unit 9% 1,500

pace in June. The West and Midwest led the

8% 1,250
way. Supply concerns have been the primary
drag on new home sales. The recent momentum 7% 1,000
in the West is an encouraging sign, however, as
completions have risen in this rapidly growing 6% 750
region, which is seeing increased development.
Homebuilders have been ramping up 5% 500

construction of lower priced homes in an effort 4% 250

to attract more first-time buyers. The shifting
price mix has pulled down the median price of a 3% 0
new home over the past year. Builders are 93 95 97 99 01 03 05 07 09 11 13 15 17

increasingly looking to lower-priced suburban

areas for lots, which is one reason so much of
the recent gain in home sales has been for Months' Supply of New Homes
Seasonally Adjusted
homes where construction has not yet begun. 14 14
Months' Supply: Jun @ 5.4
Median New Home Sales Price
Year-over-Year Percent Change, 3-Month Moving Average 12 12
20% 20%
Median New Sales Price: Jun @ $310,800
Year-over-Year Percent Change: Jun @ 0.6%
10 10
15% 15%

10% 10% 8 8

5% 5% 6 6

0% 0%
4 4

-5% -5%
2 2
85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17
-10% -10%

-15% -15%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
New Home Sales
New Homes Sold During Month, Index 2002=100, 3-MMA
180 180

Average and Median New Home Sale Price 160 160

In Thousands
$440 $440 140 140

$400 $400 120 120

100 100
$360 $360

80 80
$320 $320
60 60
$280 $280
40 40
South: Jun @ 82.6
$240 $240 Midwest: Jun @ 37.0
20 West: Jun @ 68.8 20

$200 $200 Northeast: Jun @ 59.7

0 0
97 99 01 03 05 07 09 11 13 15 17
$160 Average Sales Price: Jun @ $379,500 $160
Median New Sales Price: Jun @ $310,800
$120 $120 Source: U.S. Department of Commerce, FHLMC and
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Wells Fargo Securities

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Housing Chartbook: August 2017 WELLS FARGO SECURITIES
August 04, 2017 ECONOMICS GROUP

Pending vs. Existing Home Sales

Existing Home Sales 130
Index 2001=100, SAAR in Millions
7.5

Existing home sales fell for the second time in

three months, declining by 1.8 percent to a 115 6.5

5.5 million-unit pace. The drop is most likely due

to the lack of supply of homes available for sale. 100 5.5
The inventory of existing homes for sale has
declined year-to-year for the past 25 months. The
lack of homes is particularly an issue in the South 85 4.5
and West, which account for over half of the
nations existing home sales. This has pushed the
median existing single-family home price to a 70 3.5

record $266,200 and pulled affordability lower. Pending Home Sales Index: Jun @ 110.2 (Left Axis)
Existing Home Sales: Jun @ 5.52 Million (Right Axis)
The lack of existing homes for sale is most 55
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
2.5

apparent at the lower end of the price spectrum,

which is where investor purchases of distressed
properties have severely reduced inventories and
Inventory of Existing Homes for Sale
profoundly lowered housing turnover. Home sales Existing Homes for Sale at End of Month, In Millions
below $100,000 fell 9.3 percent over the year. 4.5 4.5
Total Inventory: Jun @ 1.96M

Existing Single Family Home Sales vs. Mortgage Rate 4.0 4.0
Percent and SAAR In Millions
12% 7.0
30-Yr. Conventional Mortg. Rate: Jun @ 3.90% (Left Axis)
SF Existing Home Sales: Jun @ 4.9 Million (Right Axis) 3.5 3.5

10% 6.0
3.0 3.0

8% 5.0 2.5 2.5

2.0 2.0
6% 4.0

1.5 1.5
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
4% 3.0

2% 2.0
86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
Existing Home Sales
Existing Homes Sold During Month, Index, 2002=100
150 150
Northeast: Jun @ 76.0
Existing Single-Family Home Prices Midwest: Jun @ 95.0
South: Jun @ 105.2
In Thousands 130 130
West: Jun @ 90.3
$350 $350

110 110

$300 $300

90 90

$250 $250
70 70

$200 $200
50 50

$150 $150 30 30
04 05 06 07 08 09 10 11 12 13 14 15 16 17
Average Sale Price: Jun @ $305,500
Median Sale Price: Jun @ $266,200
$100 $100
94 96 98 00 02 04 06 08 10 12 14 16 Source: National Association of Realtors, FHLMC and
Wells Fargo Securities

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Housing Chartbook: August 2017 WELLS FARGO SECURITIES
August 04, 2017 ECONOMICS GROUP

S&P CoreLogic Case-Shiller Home Prices

Home Prices Seattle
Year-over-Year Percent Change, NSA
13.3%
Portland 8.9%
Denver 7.9%
The S&P CoreLogic Case-Shiller Home Price Dallas
Detroit
7.8%
7.6%
Index rose 5.6 percent year-to-year in May. Las Vegas
Tampa
6.9%
6.8%
Prices are rising the fastest in the West, where San Diego
Boston
6.6%
6.1%
population and employment are growing rapidly Charlotte 6.1%
Phoenix 5.7%
and homebuilding remains constrained. Minneapolis 5.7%
Los Angeles 5.6%
While prices are surging in the West, they are Atlanta
San Francisco
5.5%
5.4%
cooling off slightly in some larger metro areas, Miami
New York City 4.0%
5.3%

including New York, Chicago and Washington Washington, D.C.

Cleveland
3.6%
3.6%
D.C. All of these markets are included in the Chicago 3.3%

10-City HPI, which has underperformed the C-10

C-20
4.9%
5.7% May 2017
broader national and 20-City indices. National HPI 5.6%

Home prices in Denver and Dallas fell less than

0% 2% 4% 6% 8% 10% 12% 14%

they did nationally during the housing bust and

recovered much more rapidly, lifting home S&P CoreLogic Case-Shiller Home Prices
prices in both well past their previous highs. Denver
Percent Change from Previous Peak, NSA
41.4%
May 2017 39.6%
Dallas
Portland 17.9%
S&P CoreLogic CS Home Price Index Seattle 17.7%
Index, January 2000=100 Boston 10.1%
240 240 San Francisco 9.8%
Charlotte 9.2%
Atlanta 1.2%
San Diego -4.2%
220 220
Los Angeles -4.4%
Minneapolis -6.3%
Cleveland -7.2%
200 200 Detroit -10.0%
Washington, D.C. -11.4%
New York City -12.6%
180 180 Chicago -17.5%
Tampa -18.3%
Miami -20.2%
Phoenix -25.8%
160 160
Las Vegas -31.6%

C-10 -6.2%
140 140 C-20 -3.7%
National HPI 3.2%
-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50%
120 National HPI: May @ 190.6 120
Composite-20 City: May @ 199.0
Composite-10 City: May @ 212.3
100 100
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
S&P CoreLogic Case-Shiller Home Price Index
Index, January 2000=100
240 240
Denver: May @ 198.3
National HPI: May @ 190.6
Home Prices 220 220
Year-over-Year Percentage Change Dallas: May @ 176.5
25% 25%

20% 20% 200 200

15% 15%
180 180
10% 10%

5% 5%
160 160
0% 0%

-5% -5% 140 140

-10% -10%
120 120
-15% -15%

-20% -20%
Median Sale Price: Jun @ $266,200 100 100
Median Sale Price, 3-M Mov Avg: Jun @ 6.2% 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
-25% FHFA Purchase Only Index: May @ 6.9% -25%
S&P/Case-Shiller Composite-10: May @ 4.9%
-30% -30%
97 99 01 03 05 07 09 11 13 15 17

Source: National Association of Realtors, U.S. Dept. of

Commerce, S&P, FHFA and Wells Fargo Securities

10
Housing Chartbook: August 2017 WELLS FARGO SECURITIES
August 04, 2017 ECONOMICS GROUP

Residential Improvements
Renovation and Remodeling 40%
Year-over-Year Percent Change
40%
Improvements: Q1 @ 6.2%

Residential improvements spending rose less

30% Res. Investment Ex. Improvements: Q1 @ 7.1% 30%

than initially thought, with spending rising 20% 20%

6.2 percent year-to-year in the first quarter. 10% 10%

Earlier data had put the gain at 7.5 percent.

0% 0%
Milder conditions this past winter pulled
spending at home improvement centers forward -10% -10%

into the first quarter and contributed to a slow -20% -20%

start to the spring.
-30% -30%
The Harvard Joint Center for Housing Studies
-40% -40%
(JCHS) expects home improvement spending to
continue to strengthen. With for-sale -50% -50%
96 98 00 02 04 06 08 10 12 14 16
inventories unusually lean, more homeowners
are opting to renovate their existing homes.
Rising home values are also encouraging
NAHB Remodeling Market Index
homeowners to enhance their current homes. Index, Seasonally Adjusted
65 65

60 60
Residential Investment
Billions of Dollars 55 55
$1,100 $1,100
Other: Q1 @ $10.3 B 50 50
$1,000 Brokers' Commissions: Q1 @ $169.1 B $1,000
Improvements: Q1 @ $235.5 B
New Building: Q2 @ $323.7 B 45 45
$900 $900
40 40
$800 $800
35 35
$700 $700
30 30
$600 $600
25 25
$500 $500
20 20
$400 $400
Overall Index: Q1 @ 58.3
15 Future Expectations: Q1 @ 58.2 15
$300 $300 Backlog of Remodeling Jobs: Q1 @ 61.8
10 10
$200 $200 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

$100 $100

$0 $0
92 94 96 98 00 02 04 06 08 10 12 14 16
Building Material, Garden Equip & Supply Stores
3-Month Moving Average
50% 50%
Year-over-Year Percent Change: Jun @ 7.2%
3-Month Annual Rate: Jun @ -2.5%
Leading Indicator of Remodeling Activity 40% 40%
In Billions, 4-Q Moving Total, Harvard Joint Center for Housing Studies
$350 $350 30% 30%
JCHS
Forecast
20% 20%

$300 $300
10% 10%

0% 0%
$250 $250
-10% -10%

-20% -20%
$200 $200
-30% -30%

-40% -40%
$150 $150
04 05 06 07 08 09 10 11 12 13 14 15 16 17

Source: Harvard Joint Center for Housing Studies, U.S.

$100 $100
05 06 07 08 09 10 11 12 13 14 15 16 17 18
Dept. of Commerce, NAHB and
Wells Fargo Securities

11
Wells Fargo Securities Economics Group

Diane Schumaker-Krieg Global Head of Research, (704) 410-1801 diane.schumaker@wellsfargo.com

Economics & Strategy (212) 214-5070

John E. Silvia, Ph.D. Chief Economist (704) 410-3275 john.silvia@wellsfargo.com

Mark Vitner Senior Economist (704) 410-3277 mark.vitner@wellsfargo.com
Jay H. Bryson, Ph.D. Global Economist (704) 410-3274 jay.bryson@wellsfargo.com
Sam Bullard Senior Economist (704) 410-3280 sam.bullard@wellsfargo.com
Nick Bennenbroek Currency Strategist (212) 214-5636 nicholas.bennenbroek@wellsfargo.com
Anika R. Khan Senior Economist (212) 214-8543 anika.khan@wellsfargo.com
Eugenio J. Alemn, Ph.D. Senior Economist (704) 410-3273 eugenio.j.aleman@wellsfargo.com
Azhar Iqbal Econometrician (704) 410-3270 azhar.iqbal@wellsfargo.com
Tim Quinlan Senior Economist (704) 410-3283 tim.quinlan@wellsfargo.com
Eric Viloria, CFA Currency Strategist (212) 214-5637 eric.viloria@wellsfargo.com
Sarah House Economist (704) 410-3282 sarah.house@wellsfargo.com
Michael A. Brown Economist (704) 410-3278 michael.a.brown@wellsfargo.com
Jamie Feik Economist (704) 410-3291 jamie.feik@wellsfargo.com
Erik Nelson Currency Strategist (212) 214-5652 erik.f.nelson@wellsfargo.com
Michael Pugliese Economic Analyst (704) 410-3156 michael.d.pugliese@wellsfargo.com
E. Harry Pershing Economic Analyst (704) 410-3034 edward.h.pershing@wellsfargo.com
Hank Carmichael Economic Analyst (704) 410-3059 john.h.carmichael@wellsfargo.com
Ariana Vaisey Economic Analyst (704) 410-1309 ariana.b.vaisey@wellsfargo.com
Abigail Kinnaman Economic Analyst (704) 410-1570 abigail.kinnaman@wellsfargo.com
Shannon Seery Economic Analyst (704) 410-1681 shannon.seery@wellsfargo.com
Donna LaFleur Executive Assistant (704) 410-3279 donna.lafleur@wellsfargo.com
Dawne Howes Administrative Assistant (704) 410-3272 dawne.howes@wellsfargo.com

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