Economic Update Edward Seiler NH&RA 2
Annual Real GDP Growth (%) 5.0 4.0 Actual (BEA) Forecast (CBO in red, OMB red + orange) 3.0 2.0 1.0 0.0-1.0 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 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027-2.0-3.0 3
Seasonally Adjusted Unemployment Rate (%) 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Unemployment Rate Bachelor's degree and higher, 25 yrs. & over Some College or Associate Degree, 25 yrs. & over High School Grads, No College, 25 yrs. & over Less than a High School Diploma, 25 yrs. & over Source: Bureau Labor Statistics 4
Cumulative wage growth from 1979: Low-wage and middle-wage workers wages have been stagnant, while those with very high wages saw a 52% increase 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% 10th percentile 30th percentile 50th percentile 70th percentile 95th percentile 52% 14% 10% 7% 5% Notes: The 50 th percentile is the wage at which 50% of wage earners earn less Source: Economic Policy Institute 5
Interest rates remain (historically) low, but are expected to rise 9.0 30-Year Mortgage 8.0 10-Yr Treasury 3-Month Treasury 7.0 Fed Funds Rate Forecast (Source: CBO) 6.0 5.0 Actual (Source: FRED) 4.0 3.0 2.0 1.0 0.0 6
House Prices are expected to continue to rise 7
Why? Average months of supply is low 14 12 10 8 National Seattle LA Boston DC Philadelphia Chicago Six months supply is often considered a normal market 6 4 2 0 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Source: REDFIN 8
Drilling down by price tier further highlights the issues The affordable tier s (highlighted) inventory is shrinking and now represents less than 3-months supply of homes for sale. Note: Price tiers defined relative to median price home in that market (100 = median) 9
Drilling down by MSA further highlights the issues 10
How does this translate into homeownership rates by income, age and race? 90 80 70 60 50 40 Household income Median U.S. Household income < Median 90 80 70 60 50 40 35-44 65+ 55-64 45-54 U.S. 30 30 <35 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 80 70 White 60 U.S. 50 Hispanic 40 Black 30 Source: US Census 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 11
As homeownership declined, rental shares increased 12
Renters are more likely than owners to be young, low income and single 13
However, in the last decade the share of higher income households has increased 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Share of Rental Households 2006 Share of Rental Households 2016 Share of Growth Metropolitan Statistical Area Share of Growth 2006-2016 Under $25,000 $25,000- $49,999 $50,000- $74,999 $75,000- $99,999 United States 22% 19% 18% 13% 29% Atlanta 23% 19% 22% 15% 21% Baltimore 22% -5% 19% 10% 54% Boston 13% 2% 7% 16% 61% Chicago 21% 15% 15% 14% 35% Las Vegas 41% 28% 11% 7% 13% Los Angeles 27% 7% 15% 9% 42% New York 9% 15% 1% 11% 65% Philadelphia 22% 21% 11% 15% 30% Pittsburgh -60% 42% 42% 36% 40% San Francisco 1% -4% 0% 11% 93% Seattle 2% 3% 18% 25% 51% Washington, DC 22% 6% 10% 14% 48% $100,000 or More Source: JCHS 14
Additional units being built at high-end is in part due to increasingly expensive development costs with land and construction costs increasing faster than CPI 300 250 U.S. Land (Normalized to 1998 = 100) CPI-U Turner Non-Residential Construction Cost Index RSMeans Construction Cost Index 200 150 100 Sources: Land values from Costar CCRSI, CPI from BLS 15
Vacancy rates are rising and rents are increasing more slowly 16
And there appears to be slight easing of affordability pressures although the situation remains worse than it was a decade ago 17
Which populations are cost burdened? Income Metropolitan Statistical Area Under $15,000 Moderately Burdened $15,000 29,999 $30,000 44,999 $45,000 74,999 $75,000 and Over All Incomes Severely Burdened Mod Sev Mod Sev Mod Sev Mod Sev Mod Sev United States 11 72 38 39 39 12 20 3 5 0 22 25 Philadelphia 8 78 33 51 50 12 20 3 3 0 21 29 Pittsburgh 14 66 43 28 23 2 6 1 2 0 19 22 Moderately (severely) cost-burdened households pay 30% - 50% (> 50%) of household income for housing Note that AMI for Philadelphia and Pittsburgh were $65,996 and $56,063 in 2016 Source: US Census, 2016 American Community Survey Age Race/ Ethnicity Metropolitan Under 25 25-44 45-64 65 or Over Statistical Area Mod Sev Mod Sev Mod Sev Mod Sev United States 23 37 22 22 21 25 24 30 Philadelphia 20 45 21 26 21 30 24 30 Pittsburgh 16 42 17 18 19 19 25 24 Metropolitan White Black Hispanic Asian/Other Statistical Area Mod Sev Mod Sev Mod Sev Mod Sev United States 21 22 24 31 26 28 21 26 Philadelphia 19 24 23 35 23 35 21 28 Pittsburgh 19 20 21 26 19 35 16 28 18
9 8 7 6 5 4 3 2 1 0 The availability of housing assistance continues to lag the growth of very low-income renters Renters with worst case needs (millions) 2005 2007 2009 2011 2013 2015 Source: HUD Worst Case Needs 2017 Report to Congress. 19
Special Topic: The administration s proposed 25% steel and 10% aluminum tariffs Many areas we could talk about: Final versus intermediary goods Who uses these inputs? How it will affect jobs Infrastructure program Multi-stage retaliatory game and broader global repercussions Technology taking jobs Geography Is NAFTA excluded? But, Illinois relies on Brazil for 41% of its steel and China for 29 % of its AL 20
In closing Comments and questions welcome This is the first time I have given this economic update presentation How should I structure this in the future? What particular topics should I start showing, stop showing, continue (expand or contract)? Contact information: eseiler@dworbell.com 202-939-1795 21