The Office of Economic Policy

March 16, 2016

Recent housing market indicators suggest that housing activity continues to strengthen. Solid 

residential investment in 2015Q4 contributed 0.3 percentage point to GDP growth, and 

available indicators suggest that residential investment is on track to boost GDP growth by a 

similar amount in 2016Q1.

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. This moderation occurs as 

high home values, in some areas, challenge affordability for potential homebuyers. However, 

access to credit continues to slowly expand to reach borrowers with lower credit quality. In 

addition, home price valuations look to be somewhat elevated relative to pre-bubble norms.

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.

HOUSING DASHBOARD
1

March 2016

Pre-bubble 

norm 

(2000-2002 

average) Trough

Current 

level

Current level 

versus prebubble norm 

(2000-2002 

average)

New 921 270 494 12.1% -46.4%

Feb-11 Jan-16

Existing 4,779 3,060 4,860 7.2% 1.7%

Jul-10 Jan-16

New 311 142 238 1 7 -73

Jul-12 Jan-16 thousands thousands

Existing 1,836 1,550 1,620 -39 -216

Dec-15 Jan-16 thousands thousands

Housing starts 1,289 353 822 12.0% -36.2%

Mar-09 Feb-16

Building permits 1,257 337 731 8.4% -41.9%

Jan-09 Feb-16

115.7 137.3 187.2 5.1% 61.7%

Nov-11 Jan-16

Inflation-Adjusted 111.6 101.9 136.7 6.3% 22.5%

CoreLogic HPI Nov-11 Jan-16

Housing affordability 127 101.1 171 -1.9% 35.1%

Jul-06 Jan-16

5 9 8 5 8 6 -1

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

152 117 155 1 3

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

1113 100 461 290 -653

2008-Q4 2015-Q4 thousands thousands

67.7 63.5 63.7 -0.8 -4

2015-Q2 2015-Q4 percentage point(s) percentage point(s)

Weakened

Improved

Weakened

Improved

Improved

Improved

Housing Market Flash

Wednesday, March 16, 2016

Improved

Improved

Current 12-month 

average versus yearearlier value

Single-family homes

Sales 

(thousands)

Inventory of homes 

available for sale 

(thousands)

Construction activity 

(thousands)

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)

CoreLogic HPI 

Prices 

(index, Jan 2000 = 100)

Improved

Sentiment

Demographics

Improved

Improved

(NAR, index=100 when median family income qualifies 

for 80% LTV mortgage on a median priced home)

Housing Market Flash
2

March 2016

Residential investment continues to 

support GDP growth. Residential

investment rose at an annual rate of 

8 percent in 2015Q4, adding 0.3 percentage 

point to real GDP growth, matching the 

average contribution over the last four 

quarters. Data through February suggest 

that residential investment is on track to 

make a contribution at least that large in 

2016Q1.

Employment in residential construction 

continues to recover. Over the past year,

it has increased by 12,900 jobs per month, 

compared with 14,000 jobs per month in 

the year-earlier period. The level of 

employment remains relatively low: 

residential construction employment 

totaled just over 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 $22.0 trillion in 2015Q4, up from a 

low of $16.2 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 '16

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 '12 '14 '16

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

March 2016

New residential construction activity 

continues on its gradual upward

trajectory despite some recent volatility. 

Single-family starts (light blue line) and 

permits (dark blue line) increased in

February. 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.

Builder confidence was unchanged in 

March but has declined from its 10-year 

high 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 21 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 1.82 million units at the end of

January, up from 1.76 million in December, 

which was the lowest level since December

1999. The stock of new homes for sale 

(light blue line) was at 238,000. At the 

current sales pace, there is 4.0-month 

supply of existing homes available for sale; 

for new homes, the available inventory is 

equivalent to a 5.8-month supply.

Housing Starts and Inventories

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 '16 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

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 
4

March 2016

Mortgage interest rates remain very low 

by historical standards. The average 

interest rate on new 30-year fixed-rate 

conventional mortgages settled at 3.68

percent in the week ending March 10. The 

current rate is only 37 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 rebounded to a 

ten-month high in January after declining 

for the first time in five months in 

December. Affordability has diminished 

considerably since 2013 as home prices 

have risen. (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 February. Low interest rates

continue to be the main factor cited when 

respondents were asked why home-buying 

conditions are good.

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 

Underpinnings of Housing Demand

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)

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 
5

March 2016

Senior loan officers at banks report

easing of mortgage lending standards in

recent quarters. The last six 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 risen, on net, over the past year, 

but the pick-up has been driven largely by

borrowers with credit scores above 780. 

Originations by borrowers with credits scores

below 780 are well below pre-crisis levels. Almost

no mortgages are being extended to borrower

with FICO scores below 660.

The median FICO score of newly originated 

mortgages has fallen slightly in recent quarters to 

around 750, but it is still up from roughly 700 in the

early 2000s. At the 10th percentile, the FICO

score for new mortgages was down to 642 by the 

end of 2015, compared with less than 600 in the

early 2000s.

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.

Underpinnings of Housing Demand

-40

-20

0

20

40

60

80

100

90 94 98 02 08 10 14

FRB Senior Loan Officer Opinion Survey 

on Mortgage Lending

Tightening

Net Percent of Banks Reporting 

Tightening Standards

Easing 0

200

400

600

800

1,000

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Mortgage Originations by Credit Score 

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

Billions of dollars

Source: FRBNY Consumer Credit Panel/Equifax Note: Credit Score is Equifax Riskscore 3.0; 
6

March 2016

Household formation fell sharply in 

2015Q4. In the year ending in December, 

just 191,000 households were formed. The 

explanation for the decline is unclear. 

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 and remained above its historical 

average through 2015Q3. 

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 more 

than 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 

2.7 percentage points over the year ending 

in February. 

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

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 
7

March 2016

The homeownership rate edged up in

2015Q4. The homeownership rate was

63.7 percent in 2015Q4, up from a low of 

63.5 percent in 2015Q2. The 

homeownership rate may stagnate 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 

50.7 percent in January, about the same as 

its year-earlier value. 

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).

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 

60

62

64

66

68

70

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

Homeownership Rate

Percent

Source: U.S. Census Bureau

Homeownership

47.0

49.0

51.0

53.0

55.0

'13 '14 '15 '16

Share of Mortgages Accounted by 

First-time Buyers Percent

Source: American Enterprise Institute
8

March 2016

New single-family home sales dropped 

sharply in January. At an annual rate of 

494,000 in January, they were 1.7 percent 

lower than their average level in 2015. New 

single-family home sales averaged 503,000 

units for all of 2015, the best annual 

performance since 2007. Still, the current 

pace of sales is still only about half the level 

seen prior to the boom in the early 2000s. 

Sales of existing single-family homes

bounced back in December and January

following declines in the previous two 

months, which were due in part to new 

mortgage disclosure requirements. The 

new requirements have reportedly 

increased the amount of time it takes to 

close on a sale. Existing single-family home 

sales averaged 4.63 million units in 2015, up 

6.6 percent from 2014, and the highest 

annual total since 2006. 

The National Association of Realtors 

index of pending sales of existing homes 

dropped in January but was slightly 

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 2.5 percent in 2016.

Home Sales

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

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 

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 
9

March 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 midsingle-digit pace.

Home prices remain below their precrisis peaks. Most measures for the nation 

as a whole are currently around early 2005 

levels. The FHFA Purchase-Only Home Price 

Index is the only one that has surpassed its 

pre-recession peak. Forecasters generally 

believe that home price appreciation will 

remain moderate going forward. 

Participants in the 2016Q1

Pulsenomics/Zillow home price survey 

expect home prices to rise 3.7 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

-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 

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. 
10

March 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 

$437 billion in 2015Q4, up from a low of 

$354 billion in 2014Q4. 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

March 2016

Mortgage foreclosure and delinquency 

rates continue to normalize. The share of

homes in foreclosure declined to 1.6 percent 

of outstanding loans in 2015Q4. The rate of 

mortgages in default (90+ days delinquent 

or in foreclosure) fell to 3.4 percent in 

2015Q4, 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 share of sales represented by REO sales

has trended down over the past 3 years. In

December 2015, REO sales fell to about 

7 percent of total sales. The share associated 

with short sales has been moving sideways at 

around 3 percent in recent quarters. 

Delinquencies, Foreclosures and Distressed Sales

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 

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 
12

March 2016

Rising home prices have greatly reduced the 

number of underwater borrowers. The share of 

mortgage loans with negative equity was 8.6

percent in 2015Q4, down from 10.3 percent in 

2015Q1. The number of homes now underwater

stands at 4.3 million, a 64 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 2015Q4.

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 Q4 

0

200

400

600

800

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

Amount of Negative Equity 

Billions of dollars 18.7

17.1

14.6 14.0 13.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

NV FL IL AZ RI

Negative Equity Share in Top 5 States
13

March 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 75 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: 12 of 23 states that employ

the practice have noticeably 

elevated rates (darker red). Other

states with high inventories, like

Nevada, are still struggling 

economically.

State Detail 

Foreclosure Inventories by State as 

a Percent of All Mortgage Homes

Source: CoreLogic Market Pulse, data as of December 2015

0

5

10

15

20

25 NJ NY MEFL MS DERI CT MDNVPAIL OHDC NMINMAHI LAOKKYAL VTSC

Q4 2015 value Minimum since Q1 2000 Maximum since Q1 2000

Percent, since Q1 2000 

Serious Delinquencies for 25 Highest-Rate States: Q4 2015 

Source: Mortgage Bankers Association/Haver