National Housing Market OutlookBuilding Products

Back to the Future: Median Home Prices Mirror Years Past

August 19, 2011
Prepare to take a trip back in time as you use the interactive map below to view the last time median home prices matched current median prices. You’ll find some markets and regions are mirroring 2006 – when MySpace was the top website in the social networking realm. In other markets, you may have a flashback to 1997, standing in line to see the movie Titanic.
Of the markets where median prices have returned to 2006 and prior years, the Texas region has fared the strongest with Dallas, Houston, Austin and San Antonio grouped in 2006. These markets have benefited from a strong employment base, lower distress levels and a general absence of the abnormal appreciation rates experienced in many other parts of the county.
While Texas and other select markets rank on the more positive end, there are a handful of markets such as Atlanta, Las Vegas, Phoenix and Oakland where prices have turned back the clock more than a decade. Elevated levels of distress, heavy employment losses and large booms of sprawling development are common themes.
The highlighted markets represent opposite ends of the spectrum and a majority of notable markets fall in the middle and mirror the years of 2002 to 2004.
No matter where you build or invest, there are opportunities to understand your market’s unique characteristics, find submarkets that show very little distress, and identify consumer demand for housing with design characteristics that are in short supply. You just have to do your homework.
Economic Growth………………………………………………………………….C-
The U.S. economic recovery remains sluggish. Real GDP grew at a 1.3% pace in 2Q11, following downwardly revised growth of 0.4% in 1Q11; far below the 1.9% rate of expansion previously estimated for last quarter. We now have positive Y/Y employment growth for eleven consecutive months, with payrolls expanding by 117K in July, up from 46K in June, and the unemployment rate dropping from 9.2% to 9.1%. Initial jobless claims fell to 400K in July. Government payrolls decreased by 37K in July, the ninth straight sequential drop. The average length of unemployment increased to 40.4 weeks (new record high), and the labor force percentage of those unemployed over 27 weeks dipped slightly from 4.1% to 4.0%. On a positive note, retail sales continue to improve, with Y/Y growth at 8.5%.
Leading Indicators…………………………………………………………………C-
Leading indicators for the economy are mixed this month, with our overall grade for this subsection of indicators dropping from a C in June to C- in July. Many of the leading indicators we analyze have been trending down over the past several months, returning to levels not seen since mid-2009, a time when the U.S. economy was still in the midst of the Great Recession. For example, the ISM Purchasing Managers Index has fallen two consecutive months, dropping to 50.9 (just above the expansion threshold value), a level not seen since July 2009. In addition, the Vistage CEO Confidence Index fell in 2Q11, crossing into negative Y/Y territory for the first time since 2Q09. Corporate profit growth was revised down from last quarter, rising at an 8.8% Y/Y clip in 1Q11, the weakest annual growth rate since Q309. Other leading indicators such as the ECRI Leading Index were relatively flat versus last month.
Stocks were down across the board in July for the four major indices we track, with sequential losses ranging from -2.1% for the NASDAQ to -3.7% for the Wilshire 5000. That said, the indices have all improved from one year ago, climbing between +16% (Dow Jones) and +22% (NASDAQ). The S&P Homebuilding Index fell sharply again in July, dropping 5% sequentially, now up a marginal 1.2% Y/Y. Corporate bond spreads narrowed slightly this month to 196bps, while 10-year (2.97%) and 2-year (0.41%) Treasury rates were flat to marginally down for the month. Oil prices rose 0.9% sequentially in July to $97.
Due to a rise in the median home price over the last few months, our overall affordability indicator worsened from a C+ to C this month. As the cost of owning a home has come down in recent years, conversely the cost of renting has increased; resulting in a narrow rent gap for the 81 markets we aggregate. Our housing-cost-to-income ratio remains low, now at 25.5%, and our JBREC Affordability Index stands at 1.7, with zero being the best possible rating for affordability. Affordability continues to be bolstered by historically low mortgage rates. The 30-year fixed mortgage rate is currently at 4.55% and adjustable mortgage rates are at 2.95%. The median home price to income ratio is 3.3, which is slightly above the long-term historical norm and near a level conducive to market health. After increasing every quarter from 1Q09 through 2Q10, owner equity declined for the third consecutive quarter in 1Q11; a reflection of the continued downward pressure on home prices.
Consumer Behavior………………………………………………………………..D+
Consumer behavior was mixed this month, with several metrics rising and others falling, resulting in an unchanged overall grade of D+. Consumer debt continues to decline, as evidenced by the Financial Obligation Ratio (FOR), which is a relation of debt payments to disposable personal income. At 16.4% of income, this ratio is at its lowest level since 1994. The percentage of consumer credit accounts entering default also improved this month, as evidenced by the S&P/Experian U.S. Consumer Credit Default Indices. Credit default indices for all major accounts (first mortgages, second mortgages, automobile loans, bank cards) have all improved over the last year. Both Consumer Comfort and Consumer Sentiment decreased in July, while Consumer Confidence ticked up. Due to rising inflation and a still elevated unemployment rate, the misery index (unemployment + inflation) worsened this month, increasing to 12.8%; significantly higher than its historical average of 9.46% that dates back to 1948.
Existing Home Market……………………………………………………………..D+
The existing home market continues to remain weak, with most indicators worsening this month. Homeownership fell to 65.9% in 2Q11, down from 66.4% in 1Q11, which is the lowest level since 1Q98. The seasonally adjusted annual resale activity dropped to 4.77 million homes in June, with median resale prices up a modest 0.6% Y/Y. ” The S&P/Case-Shiller 10 and 20 market composite indices fell again this month, and have now declined -3.6% and -4.5%, respectively over the last 12-months. Both existing home inventory and months of supply rose in June, while the Purchase Mortgage Application Index rose marginally through July.
New Home Market……………………………………………………………………C-
The new home market improved this month, due in large part to continued declines in new home supply. The median single-family new home price rose to $235,200 this month, and is up 7.2% Y/Y, but that is a shift in what is selling and not a true price increase. Our overall grade for the new home market is a C-, up from a D+ last month. The Housing Market Index stayed flat at 15, still far below its historical average of 49. Rolling 12-month sales rose slightly to 299K transactions, while new home sales decreased to 312K units on an annualized basis. Months of unsold new homes dropped this month, currently at 6.3 months versus 6.4 months in June. New home inventory (NSA), declined to 165K in June, hitting a new all-time low.
Repairs and Remodeling…………………………………………………………..D+
Indicators for residential repairs and remodeling were mixed this month. Homeowner improvement activity increased in 2Q11, climbing at a 1.3% Y/Y clip. Residential investment as a percentage of GDP increased slightly to 2.2% this quarter, rising $4.4 billion on an absolute level. The Remodeling Market Index (current) fell in 2Q11, dropping from 46.1 to 44.8, below its historical average of 46.4. The Remodeling Market Index (future expectations) fell from 46.8 in 1Q11 to 43 in 2Q11. The Remodeling market Index (future expectations) is now below its historical average.
Housing Supply………………………………………………………………………..F
While some housing supply indicators improved from last month, only multifamily starts (D-) and excess vacancy (D) is not an F. Single-family permits decreased to 404K units (SA), and single-family starts decreased to 425K units (SA). Multifamily permits continue to rise, now up 34% Y/Y, while multifamily starts are up 100% Y/Y. New housing units completed is at 636K (SA)this month, while manufactured housing placements fell to 0K (SA). The homeowner vacancy rate decreased this quarter to 2.5%.
Data Current Through August 17, 2011
Overall Grade
Economic Growth
These are the best indicators of how the economy is currently performing.
Real GDP (annual rate) 1.3% C
Employment Growth (1-year Change)
- Non-ag Payroll, NSA 952,000 C
Employment Growth Rate
- Non-ag Payroll, NSA 1.0% C
Unemployment Rate 9.1% D-
Average Length of Unemployment (Weeks) 40.4
Median Length of Unemployment (Weeks) 21.2
% of Labor Force Unemployed (27 weeks and over) 4.0%
U.S. Initial Jobless Claims 400,000
Mass Layoff Events, SA (YOY % Change) -11.4% B-
Productivity -0.3% C-
Retail Sales 8.5% B+
Capacity Utilization 76.7% D+
Core CPI 1.6% A-
Full CPI 3.6% C
Personal Income Growth, nominal 5.0% C-
Federal Deficit (last 12 mos., $mil curr.) -$1,290,016 F
U.S. Immigration as a % of Total Population 0.3%
Total Population Growth 1.1%
Total Households 112,473,000
- Growth Rate 0.7% D
Owned Households 74,131,000
- Growth Rate -0.8% F
Rented Households 38,342,000
- Growth Rate 3.8% B+
Leading Indicators
These have all proven to be predictable early indicators of the direction of economic growth.
Leading Econ. Index (Ann. Growth Rate Last 6 Mos.) 5.4% C+
ECRI Leading Index 2.1% C
Manpower Net Employment Outlook 8% D+
U.S. Vistage CEO Confidence Index 93%
CEO Economic Outlook Survey 110%
U.S. Average Hours Worked per Week 33.7
Temporary Employed Workers (YOY % Change) 7.6% C+
Corporate Profit Growth (pre-tax) 8.8% C
Corporate Bond Spread (Corp Bond vs. 10-Yr Tres.) 196.0%
Capital Goods New Orders 6.6% C+
Money Supply - M2 2.4% C
Interest Rate Spread
10-year Treasury 2.97%
2-year Treasury 0.41%
Interest Rate Spread 2.56% B+
3-month LIBOR 0.25%
3-month Treasury 0.07%
TED Spread 0.18% B
Stock Market (Return over last 12 months)
Dow Jones 16% C
S&P 500 17% C+
Wilshire 5000 19% C+
S&P Super Homebuilding 1% C
Tougher Standards on Business Loans - Large Firms -16% A-
- Small Firms -14% B+
Crude Oil Price (Current $) $97.19 D
ISM Manufacturing Index 50.9 C
ISM Non-Manufacturing Business Activity Index 56.1 C
These statistics are probably the most important indicators of short-term housing market performance.
Conforming Mortgage Rates (contract rate; an additional 0.6 - 1.0 points are also paid up front by the borrower)
JBREC Affordability Index 1.7 B+
US Median Home Payment / Income Ratio 25.5%
US Median Home Price / Income Ratio 3.3 C
Mortgage Rates, Fixed 4.55% A+
Mortgage Rates, Adjustable 2.95% A+
Fixed/Adjustable Spread 1.60% C
Fixed/10-year Spread 1.58% C
Fed Funds Rate 0.15%
Percentage of Adjust. Loans 6.6% B+
Equity/Owned Home (Current $) $82,209 F
Avg. Debt % in Home (LTV) - Homes with Mortgages 85.2% F
Median Household Income $55,986
- Growth Rate, nominal 1.2% D
Consumer Behavior
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.
Consumer Confidence Index 60.8 D
Consumer Sentiment Index 63.7 D-
Consumer Comfort Index -44.7 F
Revolving Cons. Credit per Household $7,095
- Growth Rate -4.4% B
Personal Savings Rate 5.4% C-
U.S. Net Worth Growth Rate 5.0% C
Financial Obligation Ratio 16.4% B
Misery Index (Unemployment + Inflation) 12.80 D+
Existing Home Market
Sales volumes correlate well with the Housing Cycle calculations, and boost the trade up New Home sales market.
S&P/Case-Shiller® U.S. Price Index (YOY % Change) -5.1% D+
NAR Single-Family Median Home Price $184,600
NAR Single-Family Annual Price Appreciation 0.6% C-
Freddie Mac Annual Price Appreciation -8.5% F
Annual Sales Volume, SA 4,770,000 B-
Existing Home Inventory for Sale, SA 3,765,000 D
Months Supply of Unsold Homes, SA 9.5 D+
Purchase Mort. App. Index, SA 209.9 D+
Pending Home Sales Index, SA 90.9 D
Homeownership Rate 65.9% C
New Home Market
High appreciation and low inventory would mean an excellent short-term outlook for the new home industry.
Housing Market Index 15 F
Multifamily Condo Market Index 23 D+
Median Price, NSA $235,200
Annual Appreciation Rate 7.2% C
Constant Quality Price Index (YOY % Change) -0.6% D
Sales Volume, SA 312,000 F
New Home Inventory for Sale, NSA 165,000 A+
Months Supply of Unsold Homes, SA 6.3 C
Months of Homes Completed, SA 2.3 C
Months of Homes Under Const., SA 3.0 B-
Months of Homes Not Started, SA 1.0 C
Repairs and Remodeling
High remodeling levels are good for the economy and are closely tied to consumer confidence.
Homeowner Improvement Activity (YOY % Change) 1.3% C
Remodeling Market Index - Current 44.8 C
Remodeling Market Index - Future Expectations 43.0 C
Private Residential Construction (YOY % Change) -2.1% C
Residential Investment as % of GDP (nominal) 2.2% F
Housing Supply
High construction levels are good for the economy. However, if new supply exceeds demand, prices could fall.
New Housing Units Completed, SA 636,000 F
Single-Family Starts, SA 425,000 F
Multifamily Starts, SA 179,000 D-
Total Starts, SA 604,000 F
Single-Family Permits, SA 404,000 F
Multifamily Permits, SA 193,000 F
Total Permits, SA 597,000 F
Manuf. Housing Placements, SA 0,000 F
Total Supply, SA 597,000 F
Total Housing Stock 131,173,000
Excess Vacancy 108715753.1% D
SA stands for Seasonally Adjusted Annual Rate. NSA stands for Not Seasonally Adjusted.
* 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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