The Office of Economic Policy

January 20, 2016

Housing activity continues to strengthen. Residential investment boosted GDP growth by 

0.3 percentage point over the four quarters ending in 2015Q3, and the available data suggest 

that residential investment is on track to make a modest (albeit somewhat smaller) contribution 

to growth again in Q4. We expect that the pick-up in household formation will lead to further 

improvement in 2016 despite some increase in interest rates. 

Meanwhile, home price appreciation has moderated—from a double-digit pace in late 2013 

and early 2014 to a more sustainable mid-single-digit pace now. The recovery in home prices

means that there has been a substantial decline in the share of mortgages that are underwater, 

from around 25 percent in 2010 and 2011 to 8 percent today. In select states, where prices 

remain substantially below their earlier highs, the share of mortgages underwater is still 

considerable, at 12 percent or higher. However, these areas were among the most over-valued 

during the housing boom, so a return to those highs is unlikely in the near term.

Although some mortgage borrowers continue to struggle in the wake of the crisis, delinquency 

and foreclosure rates are closing in on their pre-crisis ranges. The number of distressed sales

also continues to drop.

This month’s Housing Dashboard features a new table, the “Housing Market Flash,” that is 

designed to provide a summary of the direction in which key housing indicators are trending 

as well as how current levels compare with their norms prior to the housing boom.

HOUSING DASHBOARD
1

Housing Market Flash January 2016

Pre-bubble 

norm 

(2000-2002 

average) Trough

Current 

level

Current level 

versus prebubble norm 

(2000-2002) 

average

New 921 270 490 13.8% -46.8%

Feb-11 Nov-15

Existing 4,779 3,060 4,150 6.5% -13.2%

Jul-10 Nov-15

New 4.1 12.2 5.7 -0.2 1.6

Jan-09 Nov-15 month(s) month(s)

Existing 4.6 11.3 5.2 -0.4 0.6

Jul-10 Nov-15 month(s) month(s)

Housing starts 1,289 353 768 10.3% -40.4%

Mar-09 Dec-15

Building permits 1,257 337 740 6.9% -41.1%

Jan-09 Dec-15

115.7 137.3 185.6 5.1% 60.3%

Nov-11 Nov-15

Housing affordability 127 101.1 167.4 -0.5% 32.2%

Jul-06 Nov-15

5 9 8 6 0 7 1

Jan-09 Jan-16 point(s) point(s)

152 117 157 2 5

Oct-08 Jan-16 point(s) point(s)

1113 100 1447 997 334

2008-Q4 2015-Q3 thousands thousands

67.7 63.5 63.5 -0.2 -4.2

2015-Q2 2015-Q3 percentage point(s) percentage point(s)

Improved

Weakened

Household formation 

(thousands)

Homeownership rate 

(percent)

Homebuilder 

(NAHB, over 50 means majority view conditions 

positively)

Home-buying conditions 

(Reuters/Umich, index = good time - bad time + 100)

Sentiment

Demographics

Improved

Improved

Housing Market Flash

Wednesday, January 20, 2016

Improved

Improved

Current 12-month 

average versus yearearlier value

Single-family homes

(NAR, index=100 when median family income qualifies 

for 80% LTV mortgage on a median priced home)

Weakened

Sales 

(thousands)

Inventory of homes 

available for sale 

(months' supply at current 

sales rate)

Construction activity 

(thousands)

Prices 

(index, Jan 2000 = 100)

Improved

Improved

Improved

Improved

Improved

CoreLogic HPI 

w/distressed sales 
2

January 2016

Residential investment continues to give 

a modest lift to GDP growth. Residential

investment rose at an annual rate of 

8.2 percent in 2015Q3, adding

0.3 percentage point to real GDP growth, 

matching the average contribution over the 

last four quarters. The available data 

suggest that residential investment is on 

track to make a positive (though somewhat 

smaller) contribution to growth in Q4.

Employment in residential construction 

continues to recover. Over the past year, it

has increased by 11,400 jobs per month, 

compared with 13,500 jobs per month in 

the year-earlier period. The level of 

employment remains relatively low: 

residential construction employment totaled 

just under 2.5 million workers in 2015Q4, 

accounting for roughly 2.1 percent of total 

private payroll employment, compared with 

around 2.6 percent in the early 2000s. 

Housing wealth is nearing its earlier 

peak. The value of household real estate 

reached $22 trillion in 2015Q3, up from a 

low of $16 trillion in 2011Q4. The current 

level is close to its 2006Q4 peak, but the

sustainable level is higher than in 2006 

because of population-driven growth in the 

housing stock and overall inflation. 

Housing’s Importance to the Economy

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

'00 '02 '04 '06 '08 '10 '12 '14

GDP (% Change, Annual Rate)

Residential Investment's Contribution

Percent

Residential Investment's Contribution to 

Real GDP 

Source: Bureau of Economic Analysis 

1.5

2.0

2.5

3.0

3.5

4.0

1.5

2.0

2.5

3.0

3.5

4.0

'02 '04 '06 '08 '10 '12 '14

Number Employed (left scale)

Share of Total Private Employment (right scale)

Millions Percent

Employment in Residential Construction 

Note: Includes those employed directly in residential construction as well as related 

specialty trades.

Source: Bureau of Labor Statistics 

25

35

45

55

65

75

0

5

10

15

20

25

'00 '02 '04 '06 '08 '10 '12 '14

Market Value of Real Estate (left scale) Net Equity (left scale)

Equity's Share of Value (right scale)

Household Real Estate and Net Equity

Trillions Percent 

Source: Federal Reserve Board 
3

January 2016

New residential construction activity 

continues on its gradual upward

trajectory despite some recent volatility. 

Single-family starts (light blue line) dipped 

and permits (dark blue line) rose in

December. In the multifamily sector, 

construction activity is back in the range 

seen before the crisis, but the rapid rise in 

rents suggests that construction activity is 

not yet fully meeting demand.

In January, builder confidence remained 

close to the 10-year high registered in 

October. The National Association of 

Homebuilders index has recorded readings 

above 50 (meaning a majority of builders 

view the market positively) for the last 

19 months. All three of the index’s 

components—sales expectations over the 

next six months, current sales, and buyer 

traffic—are above their 2014 averages.

The inventory of homes for sale remains 

well below historical averages. The stock 

of existing homes for sale (dark blue line) 

was at 2.0 million units at the end of 

November, and the stock of new homes for 

sale (light blue line) was at 232,000. At the 

current sales pace, there is 5.1-month 

supply of existing homes available for sale; 

for new homes, the available inventory is 

equivalent to a 5.7-month supply.

Housing Starts and Inventories

0

10

20

30

40

50

60

70

80

'00 '02 '04 '06 '08 '10 '12 '14 '16

Source: National Association of Homebuilders 

Builder Confidence Index

0.0

0.3

0.5

0.8

1.0

1.3

1.5

1.8

2.0

'00 '02 '04 '06 '08 '10 '12 '14 '16

Single-Family Starts

Single-Family Permits Multifamily Starts Multifamily Permits

Source: U.S. Census Bureau 

Millions

Starts and Permits 

0

100

200

300

400

500

600

700

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

'02 '04 '06 '08 '10 '12 '14 Millions Millions Unsold Homes Thousands

Source: National Association of Realtors and U.S. Census Bureau 

Existing (left scale)

New (right scale)

Series average

Series average
4

January 2016

Mortgage interest rates remain very low 

by historical standards. The average 

interest rate on new 30-year fixed-rate 

conventional mortgages was 3.92 percent in 

the week ending January 14. The current 

rate is only 61 basis points higher than the 

lowest rate recorded in 2012.

The National Association of Realtors 

Housing Affordability Index suggests 

that housing remains affordable for the 

typical family. The index increased for the 

fourth consecutive month in November

after falling to a 7-year low in July. The 

rebound in house prices accounts for much 

of the decline in affordability since its peak 

in 2013. (Note that the index assumes a 20 

percent down payment; interest rates would 

be higher and affordability would be lower 

for a family that made a smaller down 

payment).

Households remain positive about home 

buying conditions. The University of 

Michigan Consumer Survey’s “Good Time to 

Buy” Index remained higher than the longterm average in January. Low interest rates 

continue to be the main factor cited when 

respondents were asked why home-buying 

conditions are good. A small, but increasing,

proportion of respondents cited future 

interest rate increases as a reason to buy 

now. 

Underpinnings of Housing Demand

3

4

5

6

7

8

9

'00 '02 '04 '06 '08 '10 '12 '14 '16

Interest Rate of 30 Year Fixed-Rate Mortgages 

Percent

Source: Freddie Mac 

80

100

120

140

160

180

200

220

240

'00 '02 '04 '06 '08 '10 '12 '14 '16

Historic Average

(data since 1971)

Record Affordability

Index = 214.5

Home Affordability Index

Source: National Association of Realtors 

100

110

120

130

140

150

160

170

180

'00 '02 '04 '06 '08 '10 '12 '14 '16

Attitudes Towards Buying

Long-Run Average

(data since 1986)

Source: University of Michigan Consumer Survey

Index (Good minus Bad plus 100)
5

January 2016

Senior loan officers at banks report easing of 

mortgage lending standards in recent 

quarters. The last few quarters mark the first

period of sustained easing since the period of 

dramatic tightening during the financial crisis. 

(Note that the level of the line shown corresponds

to the change in lending standards, with values

below 0 representing an easing of lending 

standards and values above 0 representing a 

tightening).

Despite the easing, lending is still 

restrained, and riskier borrowers continue

to have very limited access to mortgage

credit. Mortgage originations have been 

rising over the past year, but the pick-up has

been driven largely by borrowers with credit

scores above 660. Originations by borrowers

with credits scores below 660 are well below

pre-crisis levels. Almost no mortgages are

being extended to borrower with FICO scores

below 620.

The median FICO score of newly originated 

mortgages is around 760, up from roughly

700 in the early 2000s. At the 10th 

percentile, the FICO score for new mortgages

was 649 in 2015Q3, compared with less than

600 in the early 2000s.

0

200

400

600

800

1,000

Mortgage Originations by Credit Score 

<620 620-659 660-719 720-779 780+

Billions of dollars

Underpinnings of Housing Demand

median

25th percentile 

10th percentile 

500

550

600

650

700

750

800

'00 '02 '04 '06 '08 '10 '12 '14

Credit Score at Mortgage Origination

Score

Source: FRBNY Consumer Credit Panel/Equifax Note: Credit Score is Equifax Riskscore 3.0; mortgages include first-liens only.

-40

-20

0

20

40

60

80

100

'90 '94 '98 '02 '06 '10 '14

FRB Senior Loan Officer Opinion Survey 

on Mortgage Lending

Tightening

Net Percent of Banks Reporting 

Tightening Standards

Easing
6

January 2016

Household formation has picked up. 

Between mid-2006 and 2014Q3, the rate of 

household formation averaged roughly half 

its historical average of 1.2 million per year. 

Household formation surged at the end of 

2014. It has receded since then but remains

above this historical average. In the year 

ending in September, 1.3 million 

households were formed.

The proportion of young adults who are 

working has seen a partial recovery. The 

employment-to-population ratio for 

individuals ages 25-34 has reversed nearly 

half of the decline that occurred during the 

recession. The strengthening labor market

should support household formation going 

forward.

Higher rents are an obstacle to young 

adults establishing their own households. 

The supply of rental housing appears to 

have not risen as fast as demand and, as a 

result, rents have been increasing rapidly. 

They outpaced overall inflation by 

3 percentage points over the year ending in

December. 

Household Formation 

70

72

74

76

78

80

82

84

'00 '02 '04 '06 '08 '10 '12 '14 '16

Employment-to-Population Ratio 

Percent Ages 25-34

Source: Bureau of Labor Statistics

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

'00 '02 '04 '06 '08 '10 '12 '14 '16

Historic Average

(data since 1956)

Source: U.S. Census Bureau, Treasury calculation 

Millions Household Formation 

-2.5

0.0

2.5

5.0

7.5

'00 '02 '04 '06 '08 '10 '12 '14 '16

Growth in Rents vs. Overall Inflation

Year-over-year percent change

CPI-U: All Items

Source: BLS

CPI-U: Rent of 

Primary Residence
7

January 2016

The homeownership rate held steady in

2015Q3. The homeownership rate was

unchanged at 63.5 percent in 2015Q3, the 

lowest reading since 1967Q4. The 

homeownership rate may decline further in 

coming quarters as household formation 

continues to recover because newly formed 

households are more likely to rent before 

purchasing a home.

First-time home buyers account for 

around half of purchase mortgage 

originations. The share of newly originated 

mortgages going to first-time buyers was 

51.2 percent in December. Smoothing 

through the normal seasonal fluctuations, 

the series appears to be on an uptrend—it 

was 50.2 percent a year earlier. 

87 percent of households headed by 

young adults that are renting say that 

they would prefer to own if they could 

afford it. Of those households, the most 

commonly cited reasons for not owning are 

lack of downpayment (59 percent) and not 

being able to qualify for a mortgage to buy 

a home (35 percent).

60

62

64

66

68

70

'80 '85 '90 '95 '00 '05 '10 '15

Homeownership Rate

Percent

Source: U.S. Census Bureau

59

35

0 10 20 30 40 50 60 70

Cannot afford

downpayment

Cannot qualify

for a mortgage

Percent

Primary Reasons for Renting among 

Young Renters who Prefer to Own

Source: Report on Economic Well-Being of U.S. Households in 2014, Federal Reserve Board 

47

49

51

53

55

'13 '14 '15

Share of Mortgages Accounted by 

Percent First-time Buyers

Source: American Enterprise Institute

Homeownership
8

January 2016

New single-family home sales have 

moved sideways in recent months but are 

above their levels of a year ago. At an 

annual rate of 490,000 in November, they 

were 11 percent above their average level in 

2014. Still, the current pace of sales is still 

only about half the level seen prior to the 

boom in the early 2000s. (December data 

will be released on January 27.)

Sales of existing single-family homes

tumbled in November due in part to new 

disclosure requirements for mortgages 

originated after October 1. The new 

requirements have reportedly increased the 

amount of time it takes to close on a sale. 

Accordingly, analysts believe that some 

sales were pushed from November into 

December and that the December value of 

this series will show a strong rebound. 

(December data will be released on January

22).

The National Association of Realtors 

index of pending sales of existing homes 

declined in November but was above its 

level of a year ago. The index is a leading 

indicator of existing home sales which are 

recorded at the closing of the sale. The 

National Association of Realtors is 

projecting that existing home sales will rise 

1.5 percent in 2016.

Home Sales

2

3

4

5

6

7

'00 '02 '04 '06 '08 '10 '12 '14 '16

Source: National Association of Realtors 

Millions Existing Single-Family Home Sales 

0

200

400

600

800

1000

1200

1400

1600

'02 '04 '06 '08 '10 '12 '14 '16

Thousands New-Single Family Home Sales 

Source: U.S. Census Bureau 

60

70

80

90

100

110

120

130

'02 '04 '06 '08 '10 '12 '14 '16

Pending Existing Home Sales

Source: National Association of Realtors, Treasury Calculation

Index, 2002: Jan = 100
9

January 2016

After rising at a high single-digit to 

low-double-digit pace in late 2013 and 

early 2014, the pace of home price 

appreciation has eased. Home prices are 

now growing at a more sustainable 

low-to-mid single-digit pace.

Home prices remain below their pre-crisis 

peaks. Most measures for the nation as a 

whole are currently around early 2005 levels. 

Forecasters generally believe that home 

price appreciation will remain moderate 

going forward. Participants in the 2015Q4

Pulsenomics/Zillow home price survey 

expect home prices to rise 3.9 percent over 

the four quarters of 2015, and 3.4 percent 

over the four quarters of 2016.

The ratio of home prices to rents, a 

common way to assess whether home 

prices are overvalued, remains well below 

its pre-crisis peak. That said, the 

substantial appreciation of home prices 

since late 2012 has pushed up this ratio, and 

it is now noticeably above its pre-crisis 

range.

Home Prices

0.8

1.0

1.2

1.4

1.6

1.8

2.0

'84 '87 '90 '93 '96 '99 '02 '05 '08 '11 '14

Percent Price-to-Rent Ratio 

Source: Ratio of CoreLogic National Home Price Index to CPI Owner's Equivalent 

Rent. Both Indexes set to 100 in January 1983. 

-24

-16

-8

0

8

16

24

'00 '02 '04 '06 '08 '10 '12 '14 '16

20-City Case-Shiller

FHFA Purchase-Only

CoreLogic

Zillow

Changes in Home Prices 

Source: Standard and Poors, FHFA, CoreLogic, Zillow

12-month percent change 

100

120

140

160

180

200

220

'00 '02 '04 '06 '08 '10 '12 '14 '16

20-City Case-Shiller

FHFA Purchase-Only

CoreLogic

Zillow

Home Prices 

Source: Standard and Poors, FHFA, CoreLogic, Zillow 

Index, January 2000 =100 
10

January 2016

Applications for home purchase 

mortgages have been volatile of late. The 

Fed rate hike and new mortgage disclosure

requirements may have caused fluctuations 

in recent months. Purchase applications

remain well below pre-crisis levels. 

Refinancing activity has been very low since 

mid-2013 as most borrowers who have been 

able to refinance have already done so.

New mortgage originations have 

increased over the past year but remain 

low by pre-crisis standards. New 

mortgage originations rose to $502 billion 

in 2015Q3, up from a low of $286 billion in 

2014Q2. The low level of mortgage 

originations stands in contrast to the 

pattern of some other forms of household 

credit, including auto loan originations, 

which have been increasing briskly along 

with sales and now stand near the top of 

their historical range.

The share of new mortgage originations 

backed by the government has fallen

since its 2009 high, but remains 

significantly higher than pre-crisis levels. 

About 70 percent of new mortgages were 

backed by the FHA, VA, or GSEs in the first 

three quarters of 2015 (dark blue and light 

blue portions of bars). While bank portfolio 

lending has increased noticeably, the 

private-label mortgage-backed securities

market has experienced essentially no 

recovery since collapsing in late 2007.

0%

20%

40%

60%

80%

100%

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 2015 Q1-3

Mortgage Originations by Investor

GSE securitization FHA/VA securitization PLS securitization Portfolio

Source: Inside Mortgage Finance and Urban Institute 

Share, percent

0

100

200

300

400

500

600

700

800

900

0

50

100

150

200

250

'04 '06 '08 '10 '12 '14

Auto Loan (Left Axis)

Mortgage (Right Axis)

Source: Federal Reserve Bank of New York 

Billions

New Originated Installment Loan Balances

Billions

Mortgage Originations

0

30

60

90

120

150

180

210

0

500

1000

1500

2000

2500

3000

'00 '03 '06 '09 '12 '15

Mortgage Applications

Source: Mortgage Bankers Association

Index, 2000:Jan 7 = 100

Purchase (right scale)

Refinance (left scale)
11

January 2016

Mortgage foreclosure and delinquency 

rates continue to normalize. The share of

homes in foreclosure declined to 1.9 percent 

of outstanding loans in 2015Q3. The rate of 

mortgages in default (90+ days delinquent 

or in foreclosure) fell to 3.6 percent in 

2015Q3, compared with a pre-crisis average 

of around 2 percent. 

Re-default rates for borrowers who have

received a mortgage modification have

run significantly lower for mortgages that

were modified more recently. Mortgages

that were modified in 2013 (24 months ago)

had re-default rates that were between 32

and 55 percentage points lower than those

modified in 2008. 

The shares of sales represented by REO sales

and short sales have trended down over the

past 3 years. In October 2015, REO sales

made up nearly 7 percent of total sales while

short sales remained around 3 percent.

Delinquencies, Foreclosures and Distressed Sales

0

20

40

60

80

'08 '09 '10 '11 '12 '13

Fannie Mae Freddie Mac

Government-Guaranteed Private

Portfolio Loans Overall

Percent

Re-Default Rate 24 Months after Modification 

Source: OCC Mortgage Metrics Report for Q1-2015 

0

2

4

6

8

10

12

'00 '02 '04 '06 '08 '10 '12 '14

Source: Mortgage Bankers Association and Haver Analytics 

Percent

Foreclosure and Delinquency Rates 

Percent of loans 90 or more days delinquent

Percent of loans in 

foreclosure

Percent of loans 90 days or more delinquent or in 

foreclosure

0

5

10

15

20

25

30

35

'06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Short Sales Share REO Sales Share

Distressed Sales as a Percent of Total Sales 

Source: CoreLogic

Percent 
12

January 2016

Rising home prices have greatly reduced

the number of underwater borrowers. 

The share of mortgage loans with negative

equity was 8.1 percent in 2015Q3, down 

from 10.2 percent in 2015Q1. The number

of homes now underwater stands at

4.1 million, a 66 percent drop since the

2011 peak. Mortgages that are very 

underwater, with negative equity 

exceeding 25 percent, have declined and 

are now 37 percent of all underwater 

mortgages.

The aggregate amount of negative 

equity continues to fall. Since 2010Q1, 

aggregate negative equity has fallen from 

over $800 billion to around $300 billion in 

2015Q3.

Negative equity rates are still very high in 

some states. Around 20 percent of 

mortgaged residential properties in Nevada 

and Florida still have negative equity. 

However, these rates have fallen by more 

than half in these two states since the 

beginning of 2013.

Negative Equity

0

5

10

15

20

25

30

'10 '11 '12 '13 '14 '15

100-105 105-125 125+

Percent 

Share of Loans that are Underwater by 

Loan-to-Value Ratio 

Source: CoreLogic Equity Report, 2015 Q2 

0

200

400

600

800

'10 '11 '12 '13 '14 '15

Amount of Negative Equity 

Billions of dollars 19

17.8

14.6

12.3 12.1

0

2

4

6

8

10

12

14

16

18

20

NV FL AZ RI MD

Negative Equity Share in Top 5 States
13

January 2016

Serious delinquencies have fallen across

the country but the degree of

improvement varies by state. They remain

near peak levels in some states, particularly

in judicial foreclosure states such as New

Jersey and New York. However, serious

delinquencies are down nearly 64 percent

from their peak in Florida, a judicial state

that passed a law in June 2013 speeding up 

the foreclosure process. Serious

delinquencies have also fallen markedly in

hard-hit areas with flexible foreclosure laws,

such as Nevada. 

Foreclosure inventories have declined in

many states but remain relatively high in

others. Judicial foreclosure is an important

factor: 13 of 23 states that employ the

practice have noticeably elevated rates

(shaded red). Other states with high 

inventories, like Nevada, are still struggling 

economically.

State Detail 

0

5

10

15

20

25 NJ NYFL MECTRI MDNVDE MSIL MAPADC OHHI NMINLAVT OKAL KYSC

Q2 2015 value Minimum since Q1 2000 Maximum since Q1 2000

Percent, since Q1 2000 

Serious Delinquencies for 25 Highest-Rate States: Q2 2015 

Source: Mortgage Bankers Association/Haver 

Foreclosure Inventories by State as 

a Percent of All Mortgage Homes

Source: CoreLogic Market Pulse, data as of October 2015