The Housing & Mortgage Market Review ... - PMI Group, Inc.

ISSUE 12 VOLUME 4 Dec 2011
Inside this Issue
• The Outlook
• Special Topic:
The Relationship
between Housing
Demand and Jobs
• Housing Market
Indicators
• Mortgage Market
Indicators
• Regional Roundup
• Region in Focus:
The Midwest
• The PMI Forecast
Contributors
• David W. Berson, Ph.D.
Chief Economist and
Strategist
• Ralph DeFranco, Ph.D.
Senior Director of
Economics
• Brett G. Soares,
Economic Analyst
• Melanie Postich,
Executive Assistant II
The Outlook
PMI MORTGAGE INSURANCE CO’S MONTHLY ANALYSIS OF
ECONOMIC, HOUSING, AND MORTGAGE MARKET CONDITIONS
Once again, most measures of economic activity accelerated over the past month and it now looks as if
real GDP growth in the fourth quarter will be around 3.0 percent – the strongest pace in more than a
year. The severe sovereign debt problems plaguing the Eurozone nations remain, however. While there
has been some progress toward a solution, this is still the key risk to the outlook. As a result, the odds of
a downturn in the U.S. economy are around 20-30 percent. Moreover, low business/consumer confidence,
household deleveraging, significant borrowing constraints, and an overhang of distressed housing units
remain impediments to a more normal economic expansion. Still, growth in the U.S. appears to be
moving modestly upward toward trend rates, but it will probably take at least some rebound in the
housing market for growth to move sustainably above trend.
Most of the data in the November employment report were positive and point to a continued modest
improvement in the job market.
• The unemployment rate dropped sharply to 8.6 percent, the lowest level since early 2009. While
some of this decline came from a fall in labor force participation (a negative, as it suggests that people
continue to leave the job market), household employment jumped by 278,000 – the fourth consecutive
month of strong gains in this volatile labor market measure. Over the past four months, almost 1.3
million workers have found jobs – a strong pace by any measure.
• Total nonfarm payroll employment increased by 120,000, the 17 th consecutive monthly gain.
Moreover, the prior two months’ estimates of payroll employment were revised upward by a net
72,000 jobs. This is the third consecutive month with significant positive revisions to the prior
month’s gains. This is a very bullish indicator for future job gains.
• Private sector employment increased by 140,000 (see Figure 1), the 21 st consecutive monthly gain.
Over the past 12 months, a total of 1.9 million private sector jobs have been created – with a total of
nearly 3.0 million since the number of jobs bottomed out in early 2010.
• Average weekly hours worked for production and non-supervisory workers, a leading indicator of the
direction of job growth, fell by 0.1 hours in November, but remain close to the highs for this cycle.
• Income, as measured by average hourly earnings for all workers, edged down by 0.1 percent, but is up
by 1.9 percent for the year.
(Continued on page 2)
Figure 1: Private Job Growth is Slow, but Climbing
Percent
12
10
8
6
4
07
Change in Private Payroll Employment
(Right Axis)
Civilian
Unemployment Rate
(Left Axis)
08
Source: Bureau of Labor Statistics/Haver Analytics
Special Topic: The Relationship between Housing Demand and Jobs
09
Historically, there have been three primary drivers of housing demand: (1) employment, (2) affordability, and (3)
demographics. We looked at affordability in the March and June issues of the Housing and Mortgage Market
Review, and demographics in the July issue. Our analysis of affordability showed that the decline in house prices
in recent years has brought them back in line with income both nationally and in many areas of the country, and
that affordability is at record levels. (Continued on page 12)
10
11
500
250
0
-250
-500
-750
-1000
Thousands

The Outlook (Continued from cover page)
As we noted last month, the strong pickup in employment from the
household survey may be a leading indicator of better gains in the payroll
numbers. With four months of strong gains, the evidence is improving but
another couple of months would be more conclusive. Part of the reason for
the leading-indicator nature of the household survey is that it better captures
newer and smaller firms that the payroll survey initially misses. The most
recent figures from the National Federation for Independent Business (NFIB,
the trade association for small firms) suggest that the job market for small
businesses is improving. If that continues, then we should continue to see
strong household employment increases – which will eventually be captured
in the monthly payroll employment figures.
Much of the other economic data released over the past month has also been
positive. Retail sales rose by 0.5 percent in October and are up by 7.3
percent over the past 12 months. Strikingly, light vehicle sales (autos and
light trucks, including pickups and SUVs) increased to a 13.6 million unit
annualized pace in November – the strongest sales pace (other than the one
month of “cash for clunkers”) since the bottom fell out of the economy in
mid-2008 (see Figure 2). This bodes well for another strong gain in retail
sales for November. Measures of consumer confidence also were positive,
with the November Conference Board index jumping by the largest onemonth
increase since 2003.
Manufacturing continues to help boost the overall economy as well, with the
Institute of Supply Management’s (ISM) manufacturing survey index
climbing to the highest level in five months in November. More
importantly, the orders component of the ISM survey – which can be viewed
as a leading indicator of the overall index – rose sharply in November and
has moved above the total index, suggesting that the ISM index will rise
further in coming months (at least if orders stay strong – see Figure 3).
Unless something bad happens in Europe, it is unlikely that the U.S.
economy will slip into recession. Moreover, the stronger readings from
much of the recent economic data suggest that the economy is
accelerating. Unless housing activity picks up, however, there is a limit
to how much more rapidly the economy can expand. But with the
pickup in job growth, better demographics, and continued record-low
mortgage rates, leading indicators of home sales look better – and if
they lead to stronger housing activity, they could allow even faster
economic growth in 2012. In fact, the economy may be facing a
trifurcated outlook: (1) very slow growth, and perhaps recession, if the
sovereign debt problems of Europe mushroom; (2) modest-to-trend
growth if housing remains stable at current weak levels and Europe’s
debt problems don’t worsen further; and (3) modestly above-trend
growth if housing begins to rebound and Europe is OK. Even if
everything goes well, there are still impediments that will hold down
economic activity, so the odds of strong economic growth (as we would
usually see coming out of a downturn) are still low.
Housing: Current housing activity remains relatively stable at low levels,
but leading indicators have improved. New home sales edged up by 1.3
percent in October to 307,000 units (seasonally adjusted annual rate, or
SAAR), after a downward revision in September – but the data over the past
year have been remarkably stable, showing little trend. Total existing home
sales (single-family plus condominiums), which are a lagging indicator of
buying activity since they are counted when purchase contracts are closed,
rose by 1.4 percent in October to 4.97 million units (SAAR). While existing
sales have been somewhat more volatile than new sales over the past year,
they also haven’t exhibited much trend over that period. Housing starts
edged down by a miniscule 0.3 percent in October to 628,000 units (SAAR),
although the prior month was revised down by 4.3 percent. While singlefamily
starts climbed by 3.9 percent, the volatile multifamily sector dropped
by 8.3 percent – after a 35 percent pop in the prior month.
Leading indicators of home sales were up strongly over the past month. The
National Association of Realtors’ (NAR) pending home sales index had one
of the largest one-month gains in the short history of the survey, jumping to
the highest level of the year. There has been significant fallout of potential
buyers over the past year – perhaps caused by buyers who didn’t qualify for
a mortgage after signing a purchase contract, or who pulled out of the
contract when appraised values fell short. As a result, caution needs to be
exercised with respect to the rise in pending sales. The National Association
of Homebuilders’ (NAHB) housing market index continued its recent
upward move, climbing in November to the highest level since the second
homebuyer tax credit was in effect in early 2010. The absolute level of the
index remains low, however, as the new home sales market continues to face
significant competition from distressed properties. Finally, the purchase
applications component of the Mortgage Bankers Association’s (MBA)
weekly applications survey jumped in the second half of November to the
highest levels since April. Taken together, these indicators suggest that
home sales should improve in coming months, but further increases in these
indicators would be a stronger signal.
Measures of house prices were mostly lower over the past month, with
seasonal factors starting to hurt prices. The median price of existing homes
sold fell by 2.0 percent in October, down by 4.8 percent from a year earlier.
The monthly 20-city S&P/Case-Shiller repeat-transaction house price index
(HPI), which doesn’t suffer from the change in the mix of homes sold
problems of median and average price measures, slipped by 0.6 percent in
September – its first decline in six months. (Continued on page 3)
Figure 2: Light Vehicle Sales at Strongest Pace
since Cash for Clunkers
Figure 3: Manufacturing Continues to Boost
Economy
Million Units, SAAR
18
16
14
12
10
18
16
14
12
10
Million Units, SAAR
Index, 50+ = Econ Expanding
70
60
50
40
30
New Orders
Total
Manufacturing
70
60
50
40
30
Index, 50+ = Econ Expanding
8
07
08
09
10
11
8
20
07
08
09
10
11
20
Source: Autodata / Haver Analytics
Source: Institute for Supply Management / Haver Analytics
Page 2

The Outlook (Continued from page 2)
This measure of house values is down by 3.6 percent from a year earlier.
The CoreLogic HPI (including distressed sales) fell by 1.1 percent in
September, the second consecutive monthly drop as seasonal factors helped
to push it down. Excluding distressed sales, however, the CoreLogic HPI
continued to move upward, rising by 0.3 percent in September, despite
unfavorable seasonal factors. The value of non-distressed homes is down by
only 1.1 percent from year-ago levels. Finally, the monthly purchase-only
HPI from the Federal Housing Finance Agency surprisingly jumped by 0.9
percent in September on a seasonally adjusted basis, and is down by 2.2
percent from year-ago levels.
Home sales have been roughly flat for the past year, as the modest gains
in the economy and job market (along with record-high levels of
affordability) have not been able to offset the effects of extremely tight
underwriting, large numbers of underwater borrowers, and concerns
about future house price declines. That may be changing, however, as
the job market is strengthening, consumer confidence is rising, and
household formations are finally accelerating (see Figure 4). The
impediments remain in place, so even if jobs, confidence, and
demographics improve, potential gains in housing demand are likely to
be modest in the near term. Still, the recent economic data are more
positive and leading indicators of home sales are responding. It is too
soon to say that housing trends are finally moving upward, but if the
economic data continue upward, then housing activity should be
somewhat stronger in 2012. We expect home sales to increase by 7.1
percent next year, the best performance since 2004. In addition, we
project house values to be up a smidge in 2012, which would be the first
time since 2006 that values didn’t decline on a year-over-year basis.
Trend increases in house values (3-4 percent annual gains) are still
probably several years away, however.
Interest Rates and Financial Markets: Despite signs of stronger economic
growth, interest rates in the U.S. remain historically low as the Federal
Reserve continues its zero interest rate policy (ZIRP) and concerns with the
stability of the European Union (E.U.) cause repeated flights to quality into
safe assets – most notably U.S. Treasury securities. This increased
uncertainty in financial markets has caused credit spreads to widen over the
past few months, and measures of market volatility have increased. Equity
prices have also been affected, with significant moves both up and down as
news from the E.U. is either better or worse – depending on the day.
The Fed, along with other major central banks, has recently moved to
improve liquidity in the E.U. so that European banks continue to have access
to U.S. dollar-denominated funds. This is yet another way in which the
world’s central banks have loosened monetary policy, and there is little risk
of that changing in the near-term. Indeed, any additional signs of economic
slowing or financial market distress will almost certainly lead to further nontraditional
central bank easing. It is possible that the Fed will conduct yet
another round of quantitative easing (this would be QE III), purchasing
longer-term Treasury securities along with mortgage-backed securities. If
economic activity continues to accelerate, however, then the odds of QE III
will decline. It is also possible that the Fed could move to ease further in
response to fiscal tightening in 2012, in order to keep economic activity from
slipping.
Short-term interest rates that were unimaginably low just a few years
ago appear likely to remain so at least into 2013. Even with moderately
faster economic growth in 2012, we don’t expect any Fed tightening
until the middle of 2013. How quickly the Fed moves then will depend
upon the pace of economic growth and inflation and how concerned the
Fed is about the potential for the economy to stall given the tightening of
policy. But it is the case that a 0 percent federal funds rate is not
sustainable – while something closer to 4 percent is. Long-term rates
should slowly edge upward over the next year as economic activity picks
up a bit more speed, but any increases should be modest. By the end of
next year, we project that the yield on the 10-year Treasury note will
climb to around 3.00 percent – still a historically low rate, but up by less
than 100 basis points from today. By the end of 2013, with continued
economic growth, it should still be less than 4.00 percent – but closer to
its long-term sustainable level of 4.50-5.00 percent.
Mortgage Markets: While not quite at their lows for this cycle, yields on
30-year fixed-rate mortgages (FRMs) are around 4.00 percent – essentially
the lowest levels in the post-war period. Yields on 1-year Treasury-indexed
adjustable-rate mortgages (ARMs) have dropped to their lowest levels ever
in the past few weeks, as have yields on the most common type of
intermediate-term ARMs (those fixed for five years before becoming
annually adjustable). It is likely that mortgage rates will remain near historic
lows for a while, although FRM rates may edge upward a bit in 2012 as
other long-term rates move modestly higher.
Although applications for the refinancing of existing mortgage loans have
increased as a result of the record-low mortgage rates in recent months, the
rise has been surprisingly small. Indeed, a lesser drop in mortgage rates last
year resulted in a bigger increase in refinancing activity. Why this only
modest pickup in refinancings in response to the drop in mortgage rates? It’s
hard to know for sure, but FRM rates are only about 25-35 basis points lower
today than they were at their lows in 2010 – so they may not be low enough
to make it worth the time and expense to refinance. Additionally, further
declines in house values have resulted in more underwater (or nearunderwater)
mortgages – and thus have reduced the number of potential
refinancers. Finally, the continued ratcheting up of credit standards and fees
in order to qualify for a mortgage have made it increasingly difficult for even
credit-worthy households to get a loan – including those who want to
refinance. As a result of these factors, we don’t expect refinance activity to
increase, unless mortgage rates fall meaningfully further.
Our forecast of mortgage originations for 2011 is unchanged from last
month at $1.30 trillion – down by almost 20 percent from 2010. We
estimate that about 69 percent of mortgage originations this year will
come from refinancings, as mortgage rates have declined to record lows.
Our forecast for 2012 mortgage originations is also unchanged from our
prior estimate, with more balance between purchase and refinance. At
$1.01 trillion, total originations would fall by an additional 22 percent
from this year’s level, with refi activity falling sharply as mortgage rates
finally start to edge upward. Despite the sharp decline in total
originations, stronger home sales, modest increases in house prices, and
perhaps slightly easier underwriting standards should allow purchase
originations to climb by about 25 percent.
Annual Change in Households
3000
2500
2000
1500
1000
Figure 4: Household Formations are Accelerating
(Thousands)
500
0
95
00
Source: Census Bureau / Haver Analytics
05
10
3000
2500
2000
1500
1000
500
0
Annual Change in Households
Page 3

Housing Market Indicators
HOME SALES
( THOUSANDS OF UNITS)
MEDIAN HOME PRICES
($)
6750
6000
Total Existing
(Left Axis)
1200
1000
240000
220000
Total Existing
(Left Axis)
280000
260000
800
200000
5250
240000
600
180000
4500
3750
New
(Right Axis)
07
08
09
10
11
400
200
160000
140000
07
New
(Right Axis)
08
09
10
11
220000
200000
Source: National Association of Realtors/ Census Bureau/ Haver Analytics
Source: National Association of Realtors/ Census Bureau/ Haver Analytics
% Change Existing New
Oct-10 to Oct-11 13.5 8.9
Sept-11 to Oct-11 1.4 1.3
% Change Existing New
Oct-10 to Oct-11 -4.8 4.0
Sept-11 to Oct-11 -2.0 -0.5
NOTES:
• Sales of both new and existing homes have stabilized, but new sales remain exceptionally low.
• Median house prices are declining in line with normal seasonal patterns.
• Months’ Supply, a leading indicator of prices, is clearly improving, but remains elevated.
14
12
MONTHS’ SUPPLY OF HOMES
Total Existing
14
12
400
300
HOUSING STARTS
(THOUSANDS OF UNITS)
Multifamily
(Left Axis)
1400
1200
1000
10
10
200
800
600
8
New
8
100
Single-Family
(Right Axis)
400
6
07
08
09
10
11
6
0
07
08
09
10
11
200
Source: National Association of Realtors/ Census Bureau /Haver Analytics
Months Existing New
October 2010 10.6 8.5
October 2011 8.0 6.3
Source: U.S. Census Bureau / Haver Analytics
% Change
Single
Family
Multi
Family
Oct-10 to Oct-11 -0.9 88.6
Sept-11 to Oct-11 3.9 -8.3
Page 4

Mortgage Market Indicators
MORTGAGE APPLICATIONS
(INDEX: MARCH 16, 1990 = 100)
MORTGAGE RATES
(%)
8000
525
6.75
6.75
6000
Refinance
(Left Axis)
450
6.00
30-Year
Fixed Rate
6.00
5.25
5.25
4000
Purchase
(Right Axis)
375
300
4.50
3.75
1-Year
Adjustable
Rate
4.50
3.75
2000
225
3.00
3.00
0
150
2.25
2.25
07
08
09
10
11
07
08
09
10
11
Source: Mortgage Bankers Association / Haver Analytics
Source: Freddie Mac / Haver Analytics
% Change Purchase Refinance
Nov-10 to Nov-11 -4.2 -10.3
Oct-11 to Nov-11 9.2 -6.4
Percent
30-Year
Fixed
1-Year
Adjustable
November 2010 4.30 3.25
November 2011 3.99 2.90
NOTES:
• Mortgage rates are at post-war lows, encouraging relatively stronger mortgage application activity.
• Mortgage applications for home purchases have jumped to the highest levels since last April.
• New delinquencies continue to slowly drop, but the foreclosure inventory remains high.
REFI/ARM SHARES
(%)
DELINQUENT MORTGAGE LOANS
(SHARE OF MORTGAGES, %)
24
20
ARM Share
(Left Axis)
Refinance Share
(Right Axis)
90
80
5.25
4.50
─ Foreclosure Inventory
─ 90+ Days Delinquent
─ 60-89 Days Delinquent
5.25
4.50
16
70
3.75
3.75
12
60
3.00
3.00
8
50
2.25
2.25
4
40
1.50
1.50
0
07
08
09
10
11
30
0.75
07
08
09
10
11
0.75
Source: Mortgage Bankers Association / Haver Analytics
Source: Mortgage Bankers Association / Haver Analytics
Percent Refinance ARM
November 2010 78.9 5.4
November 2011 76.4 5.9
Percent
Foreclosure
Inventory
90+ Days
Delinquent
60-89 Days
Delinquent
3 rd Quarter 2010 4.39 4.34 1.44
3 rd Quarter 2011 4.43 3.50 1.30
Page 5

Regional Roundup
Source: Bureau of Labor Statistics / Haver Analytics
12-MONTH CHANGE IN PAYROLL EMPLOYMENT
OCTOBER 2011
-0.9% to 0.0%
0.0% to 1.0%
1.0% to 2.0%
2.0% to 4.9%
Georgia -0.9% Mississippi 1.0%
Indiana -0.4% South Carolina 1.0%
Arkansas -0.1% Hawaii 1.0%
Delaware 0.0% Kentucky 1.1%
Rhode Island 0.0% New Hampshire 1.1%
Missouri 0.0% Illinois 1.1%
District of Columbia 0.1% Nevada 1.1%
Alabama 0.2% United States 1.1%
Wisconsin 0.2% Ohio 1.3%
Maine 0.3% Michigan 1.3%
North Carolina 0.3% Florida 1.3%
Kansas 0.3% Colorado 1.5%
Maryland 0.4% Oregon 1.5%
South Dakota 0.4% Washington 1.5%
New Jersey 0.6% Massachusetts 1.6%
New Mexico 0.6% Vermont 1.7%
Connecticut 0.6% California 1.7%
West Virginia 0.6% Wyoming 1.7%
Virginia 0.7% Arizona 1.9%
Minnesota 0.7% Montana 1.9%
New York 0.7% Nebraska 2.0%
Alaska 0.7% Texas 2.2%
Idaho 0.7% Louisiana 2.3%
Iowa 0.9% Utah 2.6%
Tennessee 0.9% Oklahoma 3.1%
Pennsylvania 1.0% North Dakota 4.9%
NOTES:
• Payroll employment continues to improve, except in five states, where it has declined or is unchanged over the past year.
• House price growth, including distressed sales, varies dramatically by state, with 16 states having year-over-year growth.
• House price declines remain widespread, with the worst declines in the West, parts of the manufacturing belt (but not Michigan), Georgia and
Rhode Island.
12-MONTH GROWTH IN HOUSE PRICES
OCTOBER 2011
Page 6
-12.5% to -10.0%
-10.0% to -5.0%
-5.0% to 0.0%
0.0% to 4.8%
Source: CoreLogic
Note: Single-family detached + single-family attached including distressed sales
Nevada -12.1% Hawaii -1.2%
Illinois -9.4% Colorado -1.2%
Arizona -8.1% Maine -1.0%
Minnesota -7.9% Montana -0.9%
Georgia -7.3% Maryland -0.8%
Rhode Island -6.8% New Jersey -0.8%
Idaho -6.5% North Carolina -0.6%
California -6.3% Tennessee -0.2%
Utah -6.1% Arkansas -0.1%
New Mexico -6.1% Iowa 0.0%
Ohio -6.1% Virginia 0.1%
Delaware -5.4% Oklahoma 0.1%
Washington -5.0% Pennsylvania 0.6%
Connecticut -4.5% Wyoming 0.8%
Wisconsin -4.2% Indiana 0.9%
United States -3.9% North Dakota 1.2%
Massachusetts -3.9% Vermont 1.6%
Alabama -3.7% South Carolina 1.7%
Missouri -3.7% Nebraska 1.9%
New Hampshire -3.5% Mississippi 2.0%
Florida -3.4% Alaska 2.0%
Oregon -3.1% Kansas 2.1%
Louisiana -2.5% District of Columbia 2.4%
Kentucky -2.2% New York 3.0%
Texas -1.6% South Dakota 3.2%
Michigan -1.4% West Virginia 4.8%

Source: Mortgage Bankers Association / Haver Analytics
SHARE OF SERIOUSLY DELINQUENT MORTGAGES
3 RD QUARTER 2011
1.9% to 5.0%
5.0% to 7.5%
7.5% to 10.0%
10.0% to 18.9%
NOTES:
• The Great Plains states have the lowest share of seriously delinquent loans.
Regional Roundup
North Dakota 1.9% Tennessee 6.3%
Alaska 2.3% Pennsylvania 6.5%
Wyoming 2.4% Washington 6.5%
South Dakota 2.7% Massachusetts 6.7%
Nebraska 3.2% Louisiana 6.8%
Montana 3.3% Kentucky 6.8%
Virginia 4.2% Delaware 7.1%
Colorado 4.2% Hawaii 7.3%
Minnesota 4.6% Michigan 7.3%
Texas 4.7% South Carolina 7.4%
Iowa 4.8% Arizona 7.5%
West Virginia 4.8% California 7.7%
Kansas 4.8% Georgia 7.7%
Missouri 4.9% Connecticut 7.9%
New Hampshire 5.0% Rhode Island 7.9%
Vermont 5.0% United States 7.9%
Arkansas 5.2% Mississippi 8.0%
Idaho 5.3% Indiana 8.3%
Utah 5.5% Maryland 8.5%
Alabama 5.5% Maine 8.6%
Oklahoma 5.7% Ohio 8.6%
Wisconsin 5.9% New York 9.3%
New Mexico 6.0% Illinois 11.0%
District of Columbia 6.1% New Jersey 11.9%
North Carolina 6.1% Nevada 13.9%
Oregon 6.1% Florida 18.9%
• Florida, Nevada, New Jersey, and Illinois continue to have the worst share of serious delinquencies – with all in double-digits.
• Some of the states hardest hit by the housing bust (e.g. Nevada, California) are seeing the most improvement in serious delinquency rates (even if
those rates are still high).
1-YEAR CHANGE IN SHARE OF SERIOUSLY DELINQUENT MORTGAGES
3 RD QUARTER 2011
Source: Mortgage Bankers Association / Haver Analytics
-3.9% to -1.0%
-1.0% to -0.5%
-0.5% to 0.0%
0.0% to 1.2%
Nevada -3.9% Ohio -0.3%
Arizona -3.3% South Dakota -0.3%
California -2.7% Indiana -0.3%
Michigan -2.0% Iowa -0.3%
Utah -1.3% Wisconsin -0.2%
Georgia -1.1% Delaware -0.2%
Idaho -0.9% Tennessee -0.1%
Wyoming -0.9% Oklahoma -0.1%
Minnesota -0.9% North Dakota 0.0%
Colorado -0.8% Kansas 0.0%
United States -0.8% District of Columbia 0.0%
Rhode Island -0.8% Washington 0.1%
Louisiana -0.7% New Mexico 0.1%
Florida -0.7% Pennsylvania 0.1%
Massachusetts New Hampshire
-0.6%
-0.6%
South Carolina
Arkansas
0.1%
0.1%
Hawaii -0.6% Vermont 0.2%
Virginia -0.6% Illinois 0.2%
Texas -0.5% Oregon 0.2%
Montana -0.5% North Carolina 0.2%
Nebraska -0.5% Maryland 0.2%
West Virginia -0.4% Connecticut 0.3%
Alabama -0.4% Kentucky 0.3%
Mississippi -0.4% New York 0.3%
Missouri -0.3% Maine 0.4%
Alaska -0.3% New Jersey 1.2%
Page 7

Region in Focus: The Midwest
Unemployment rates in the Midwest region have fallen at a faster pace than the other Census regions, and seem to
have resumed their descent after stalling in the summer as a result of slower national growth, concerns about the
U.S. debt ceiling, and European Union (E.U.) sovereign debt problems. After recovering in late-2010 in the wake
of the downturn following the expiration of the homebuyer tax credit, homes sold have stagnated throughout 2011.
Median house prices have not shown any significant improvement above the usual seasonal gains. Mortgage credit
quality in the Midwest is better than the national average, with lower foreclosure and delinquency rates.
Labor market conditions in the Midwest have generally improved. The average unemployment rate in the region
fell to 8.5 percent in October, but that was still above its post-recession low of 8.1 percent. The Midwest is the
only region where the unemployment rate has fallen by more than a full percentage point below its post-recession
peak, dropping by 1.6 percentage points. The unemployment rates in the region vary significantly by state.
Michigan had the highest unemployment rate at 10.1 percent, while North Dakota had the lowest at 3.5 percent.
Job growth has been especially strong in states with larger concentrations in the energy sector.
REGION IN FOCUS
*The Midwest region
includes IA, IL, IN, KS,
MI, MN, MO, ND, NE,
OH, SD, and WI.
**All Region in Focus
graphs contain data
gathered from BLS,
CoreLogic, and MBA.
According to the National Association of Realtors (NAR), existing single-family home sales in the Midwest were
up by 19.1 percent over the year ending in October. While sales are still up on the year, they have been relatively
flat since the end of 2010. The median sales price of existing single-family homes sold in the Midwest dropped by
4.4 percent in October from a year earlier – the smallest decline of all four Census regions.
Mortgage credit quality in the Midwest is better on average than the U.S. as a whole. According to the Mortgage
Bankers Association (MBA), the rate of foreclosures started in the Midwest was 1.04 percent (non-seasonally
adjusted, or NSA) in the third quarter of 2011, remaining just below the national average of 1.08 percent. Seriously
delinquent loans (90+ days delinquent plus the foreclosure inventory) were 7.33 percent of the total, with only the
West having a lower rate. The Midwest also had the second lowest delinquency rates on all loans at 8.09 percent.
Page 8
Missouri
Missouri’s labor market has been mixed, with the
state’s unemployment rate continuing to decline, but
with very weak payroll employment growth. Home
sales fell in the third quarter and are still at low levels –
although they are up on the year. House prices have
begun to fall again after some seasonal increases
during the spring/summer. According to the U.S.
Bureau of Economic Analysis, per capita personal
income in the state rose by 1.0 percent in the second
quarter, and was up by 4.0 percent from a year earlier.
Mortgage credit quality in Missouri is better than the
national average, with a much lower share of seriously
delinquent loans.
The two monthly U.S. government surveys on
employment are telling very different stories about
Missouri’s labor conditions. According to the
household survey, the state’s unemployment rate
dropped to 8.5 percent in October, more than a
percentage point below the level of a year earlier.
Although the state’s labor force has increased, the
unemployment rate has continued to decrease – a
positive sign. The state’s largest MSA, St. Louis, has
the highest unemployment rate in the state at 8.8
percent, while Kansas City has a lower unemployment
rate at 8.3 percent. Columbia had the lowest
unemployment rate in Missouri at 5.9 percent. The
payroll survey shows a much weaker picture. After
losing 170,300 jobs in the recession, Missouri has only
gained 16,300 back. Since hitting bottom, job growth
in the state has been much weaker than the national
average, climbing by only 0.6 percent – only one-third
of the national recovery. Even worse, job growth has
trended downward recently with a 0.3 percent decline
over the past six months.
According to NAR, third quarter total existing home
sales in the state were down by 2.7 percent from the
previous quarter, up by 21.0 percent from a year
earlier, and down by 40.2 percent from the peak.
According to Moody’s Economy.com, existing singlefamily
home sales have been mixed recently –
increasing in half of the states’ MSAs in the third
quarter. Still, sales were down in all eight MSAs over
the past year. In St. Louis, sales increased by 8.1
percent in the third quarter and were up by 19.1 percent
from a year earlier. Sales in Kansas City decreased in
the second quarter by 9.2 percent, but were up over the
past 12 months by 35.5 percent.
According to data from CoreLogic’s HPI, Missouri
house prices have begun to decline again, falling by 3.4
percent over the past three months, after climbing in
the spring/summer. This recent dip has pushed prices
down by 3.7 percent from a year earlier. Prices in both
St. Louis and Kansas City also dropped over the past
12 months, falling by 4.9 percent each – bigger
declines than the other MSAs in the state. House
prices decreased the least in Springfield, slipping by
just 0.7 percent.
(Continued on page 9)

Region in Focus: The Midwest
Missouri (continued from page 8)
Mortgage credit quality in Missouri has been better
than the national average. According to the MBA, the
rate of foreclosures started in the state rose to 0.90
percent (NSA) during the third quarter of 2011.
Despite the rise, this is below the national average of
1.08 percent. The delinquency rate on all mortgages in
the state was 8.36 percent, above the national average
of 8.20 percent. The share of seriously delinquent
loans in Missouri was only 4.94 percent, well below
the national average of 7.89 percent.
Percent
12.0
9.0
6.0
3.0
0.0
-3.0
-6.0
Missouri
U.S.
-3.7
-3.9
House Price
Appreciation
Oct 10 - Oct 11
8.5
9.0
Unemployment
Rate October 2011
4.94
7.89
Seriously
Delinquent
Mortgages 2011Q3
Page 9
Ohio
Ohio has been recovering at a faster pace than the
nation as a whole. The unemployment rate is down
and job growth has been trending upward for nearly
two years. Home sales have been flat in 2011, but are
still above the lows seen during the second half of
2010. After some gains in the spring/summer, house
prices have begun to fall again in recent months in
response to seasonal pressures. The state’s per capita
personal income rose by 1.2 percent in the second
quarter, and was up by 5.1 percent from a year earlier.
Mortgage credit quality in Ohio continues to be worse
than the nation as a whole, with high serious
delinquency rates.
Ohio’s unemployment rate fell to 9.0 percent in
October, although it had been trending upward since
May. A shrinking labor force, which is a negative sign
for the job market, is contributing to the trend decline
in unemployment from its peak rate of 10.6 percent.
The unemployment rates in Cleveland-Elyria-Mentor
and Columbus have been relatively low compared with
the other MSAs in the state at 8.0 and 7.9 percent,
respectively. On the other hand, Mansfield and
Steubenville-Weirton had the highest unemployment
rates in the state, each at 10.9 percent. After losing
450,300 payroll jobs in the recession, 105,700 have
been recovered. Employment is up by 1.3 percent over
the past 12 months, while private employment is up
even more, increasing by 1.7 percent. The professional
and business services and the leisure and hospitality
sectors are leading job growth – although the leisure
and hospitality sector has taken a dive in the second
half of 2011.
According to NAR, third quarter total existing home
sales in the state were up by 0.2 percent from the
previous quarter. They were also up by 22.6 percent
from a year earlier, but were down by 21.4 percent
from the peak. According to Moody’s Economy.com,
single-family home sales were down in only three of
the state’s thirteen MSAs in the third quarter and were
up in all of them over the past year. Sales in
Percent
Cincinnati-Middletown climbed by 6.9 percent during
the third quarter and were up by 35.1 percent over the
past year. Home sales increased by less in Cleveland-
Elyria-Mentor, up by 3.7 percent during the third
quarter and by 25.6 percent over the past year.
According to CoreLogic, house prices in Ohio were up
by 7.1 percent from March to August, helped in part by
positive seasonal factors. Prices have slipped by 3.0
percent over the past three months, however, and are
now down by 6.1 percent from a year earlier. House
prices in Cincinnati-Middletown fell by 4.0 percent
over the past year. Prices in Cleveland-Elyria-Mentor
and Columbus decreased by more, down by 7.8 and 6.7
percent, respectively. House prices decreased the least
in Toledo, falling by 1.5 percent, while they dropped
the most in Akron, down by 10.0 percent.
Mortgage credit quality in Ohio is worse than the
national average. According to the MBA, the rate of
foreclosures started in the state fell to 1.11 percent
(NSA) during the third quarter of 2011. This is slightly
above the national average of 1.08 percent. Seriously
delinquent loans were 8.61 percent, also above the
national average of 7.89 percent. The delinquency rate
on all mortgages in the state was 9.29 percent, above
the national average of 8.20 percent.
12.0
9.0
6.0
3.0
0.0
-3.0
-6.0
-9.0
Ohio
U.S.
-6.1
-3.9
House Price
Appreciation
Oct 10 - Oct 11
9.0 9.0
8.61 7.89
Unemployment
Rate October 2011
Seriously
Delinquent
Mortgages 2011Q3

Region in Focus: The Midwest
South Dakota
South Dakota’s unemployment rate continues to be one
of the lowest in the nation and the state has added back
almost two-thirds of the jobs lost in the recession. The
state’s per capita personal income rose by 2.0 percent
in the second quarter and was up by 6.3 percent from a
year earlier. Home sales have climbed over the past
year. House prices in South Dakota are also up and
nearing an all-time high. Mortgage credit quality is far
better than the country as a whole, with much lower
mortgage foreclosure and delinquency rates.
South Dakota’s unemployment rate fell to 4.5 percent
in October. Only North Dakota and Nebraska had
lower rates. The unemployment rate has continued to
fall even with a growing labor force – a positive sign.
The unemployment rate in Rapid City was just 4.8
percent in October. Sioux Falls’ rate was even lower at
4.5 percent. According to the October payroll
employment survey, after losing 17,300 payroll jobs in
the recession, 11,400 have been recovered. Job gains
have slowed a bit recently, however, and payroll
employment is up by only 0.4 percent over the past 12
months, with the strongest growth in the professional
and business services sector.
According to NAR, third quarter total existing home
sales in the state were up by 5.6 percent. Home sales
were also up over the past year, increasing by 26.7
percent. Interestingly, home sales in the state hit a new
high during the fourth quarter of 2009, likely
influenced by the homebuyer tax credit; however, they
have fallen by 26.9 percent since. According to
Moody’s Economy.com, single-family home sales in
Sioux Falls were also positive, increasing by 7.7
percent in the third quarter and by 45.2 percent over
the past year. Sales in Rapid City were much weaker,
falling during the third quarter by 5.0 percent, while
they were flat over the past year.
According to data from CoreLogic’s HPI, house prices
in South Dakota are up by 3.2 percent over the past 12
months. Over the past eight months, they have jumped
by 6.1 percent – helped, but only in part, by positive
seasonal factors. Now that seasonal factors are a
negative, price gains have slowed in the past two
months – although they are still rising. Prices in Rapid
City rose by 2.9 percent over the past 12 months.
Prices also increased in Sioux Falls, up by 3.7 percent.
Mortgage credit quality in South Dakota is much better
than the national average. According to the MBA, the
rate of foreclosures started in the state fell to 0.39
percent (NSA) during the third quarter of 2011,
significantly below the national average of 1.08
percent. The delinquency rate on all mortgages in the
state was 3.66 percent, well below the national average
of 8.20 percent. The share of seriously delinquent
loans in South Dakota was 2.70 percent, far lower than
the national average of 7.89 percent.
12.0
9.0
South Dakota
U.S.
9.0
7.89
Percent
6.0
3.0
0.0
3.2
4.5
2.70
-3.0
-6.0
-3.9
House Price
Appreciation
Oct 10 - Oct 11
Unemployment
Rate October 2011
Seriously
Delinquent
Mortgages 2011Q3
Page 10

Region in Focus: The Midwest –
Selected Housing / Economic Indicators
State MSA Oct-11 Jul-11 3rd Qtr 11 2nd Qtr 11 3rd Qtr 11 2nd Qtr 11
Illinois 10.1 9.5 12.1 -0.1 3.5 3.1
Indiana
Iowa
Kansas
Michigan
Minnesota
Missouri
Nebraska
North Dakota
Ohio
South Dakota
Wisconsin
House Price Appreciation
Unemployment Rate Annualized Quarterly Rate Homeowner Vacancy Rate
Chicago-Naperville-Joliet 10.6 9.9 16.3 -4.4 3.1 3.6
Lake County-Kenosha County 9.6 9.0 1.3 4.5 3.1 3.6
Peoria 8.6 8.0 12.8 -1.1 - -
9.0 8.5 10.6 7.5 2.3 2.9
Evansville 7.8 7.3 17.9 7.4 - -
Fort Wayne 8.8 8.0 18.9 14.2 - -
Gary 9.8 9.3 6.0 -2.1 3.1 3.6
Indianapolis-Carmel 8.5 8.0 10.6 9.6 1.7 5.2
6.0 6.0 5.4 9.1 2.3 2.4
Des Moines-West Des Moines 5.9 6.1 4.5 11.9 - -
6.7 6.5 8.6 4.2 2.7 1.7
Witchita 7.8 7.4 -14.1 3.3 - -
10.6 10.9 38.6 1.2 2.3 2.4
Ann Arbor 6.5 6.6 21.2 -1.8 - -
Detroit-Livornia-Dearborn 13.4 13.8 42.4 -2.7 1.6 2.4
Flint 11.1 10.9 38.6 2.1 - -
Grand Rapids-Wyoming 8.2 8.3 33.3 -0.9 3.8 2.6
Lansing-East Lansing 7.9 8.1 38.5 1.4 - -
Warren-Troy-Farmington Hills 11.2 11.7 37.5 -5.6 1.6 2.4
6.4 7.2 8.7 -1.8 2.1 1.6
Minneapolis-St. Paul-Bloomington 6.3 7.0 9.1 -0.2 1.4 1.8
8.5 8.7 9.3 9.3 1.9 2.5
Kansas City 8.3 8.3 9.5 3.0 2.4 3.7
St. Louis 8.8 8.8 9.6 9.7 2.9 3.3
Springfield 7.7 7.9 4.8 2.9 - -
4.2 4.2 9.0 8.7 2.5 2.1
Omaha-Council Bluffs 4.8 4.7 7.7 8.6 2.8 1.6
3.5 3.3 4.3 -2.0 1.5 1.0
9.0 9.0 14.1 2.0 1.8 3.0
Akron 8.6 8.5 13.4 -1.1 2.8 6.6
Cincinnati-Middletown 9.0 9.0 11.2 4.1 1.5 2.9
Cleveland-Elyria-Mentor 8.0 7.9 15.6 -0.9 0.9 1.9
Columbus 7.9 7.7 11.6 3.6 2.2 3.7
Dayton 9.6 9.6 11.5 -0.1 6.5 4.7
Toledo 10.0 9.8 21.3 9.7 2.8 3.6
Youngstown-Warren-Boardman 9.6 9.6 2.8 3.8 - -
4.5 4.7 14.5 4.8 2.6 1.7
7.7 7.8 6.4 8.3 2.5 1.9
Madison 5.6 5.5 7.9 8.7 - -
Milwaukee-Waukesha-West Allis 8.1 8.1 11.5 3.6 2.6 1.7
United States 9.0 9.1 7.2 6.9 2.4 2.5
Source: Bureau of Labor Statistics / CoreLogic, LoanPerformance HPI / U.S. Census Bureau / Haver Analytics
Page 11

Special Topic (Continued from cover page)
Of course, while housing may be affordable, to the extent that falling
house prices cause expectations of future declines, potential home buyers
may pass on purchases until they are sure that prices have truly
bottomed. Additionally, our discussion on demographics suggested that
vacancy rates were lower than many analysts assume, so there is
somewhat less downward pressure on house prices as a result. In this
issue, we turn to the relationship between employment and house price
changes (which depends not only on the demand factors mentioned
above, but also on supply factors). State-level data suggest that stronger
job growth could drive a pickup in house prices, especially in states that
have seen the biggest house price declines. Unfortunately, excess supply
factors in many of those markets will likely keep downward pressure on
house prices, at least in the near term.
Many factors are contributing to the current negative momentum in
house prices. Among these are significant numbers of distressed sales,
restrictive lending guidelines, and cautious potential buyers. One of the
major factors, however, appears to be weak job growth. Roughly 8.8
million nonfarm payroll jobs were lost during the 2007-2010 period, and
only about 2.5 million have come back so far. Since some of the job
losses were in the housing construction, home sales, and mortgage
finance sectors, the relationship between jobs and housing demand is
direct. Moreover, this can be a self-reinforcing process, as declines in
house prices lead to lower housing demand (if this causes buyers to
expect further price declines), which lead in turn to additional drops in
construction, sales, and finance jobs – and thus to even lower housing
demand, which places further downward pressure on house prices, etc.
From the peak in residential construction and real estate-related financial
employment (which occurred before the start of the Great Recession) to
the trough, 583,000 jobs have been lost. This direct count certainly
understates the full impact of the decline in residential real estate on
employment, as spillover effects into other sectors stemming from the
housing bust are hard to estimate but are likely large.
How much of the weak employment situation is coming from the
housing sector? According to Moody’s Ecomomy.com, the direct
contributions of housing construction and renovations are typically closer
to 5 percent of GDP than the current 2 percent. Given that real GDP is
around 7 percent below the Congressional Budget Office’s estimate of
potential real GDP, this suggests that the 3 percentage-point shortfall in
residential housing construction (relative to GDP) accounts for somewhat
more than 40 percent of the economic shortfall. In a normal recovery,
housing construction comes back quickly as interest rates fall.
Unfortunately, housing construction has yet to recover from the fallout of
the housing boom/bust. Given the overhang of vacant units and the
current slow pace of housing demand, it may be a while before housing
construction accelerates to normal levels.
The importance of state-level employment conditions on house prices is
borne out by comparing job growth to the House Price Appreciation
(HPA) rate. Figure 1 shows the relationship between the cumulative
percent change in total nonfarm payrolls for each state versus the
cumulative change in house prices, both starting at the beginning of the
recession in December 2007. The curved line in the figure is the best
quadratic fit to the data, which clearly shows a strong positive
relationship between job growth and HPA. Common goodness-of-fit
measures indicate that significantly more than half of the variation in
HPAs can be explained by variation in employment growth over this
time period.
The data behind Figure 1 appear in Table 1. The second and third
columns of the table show the cumulative change in nonfarm payroll
employment from December 2007 to October 2011 and the cumulative
change in the CoreLogic house price index (including distressed sales)
over the same time period. North Dakota has had both the best
employment growth and HPA, thanks to a boom in energy exploration
(making it the top right-hand dot in Figure 1). Nevada (the bottom lefthand
dot in Figure 1) had both the worst employment and house price
declines.
The HPA forecasts in columns 4 and 5 of Table 1 are simple
extrapolations based on the fitted relationship in Figure 1 and Moody’s
Economy.com’s state-level employment growth forecasts for 2012 and
2013. These simple projections of house prices assume that the other
factors affecting housing supply and demand remain unchanged from
their average values over the December 2007 - October 2011 period. On
a national basis, Moody’s projections are for 1.0 percent payroll
employment growth in 2012 (about the same as this year) and 1.5 percent
for 2013.
15%
Figure 1: A Positive Relationship between Job and
House Price Growth
HPA Dec 2007-Oct 2011
5%
-5%
-15%
-25%
-35%
-45%
-55%
R 2 = 0.61
-15. 0% -10.0% -5.0% 0.0% 5.0% 10.0%
Change in Job Growth Dec 2007-Oct 2011
Source: CoreLogic / Bureau of Labor Statistics / PMI
Page 12

The good news from this simple forecast is that house prices should only
decline in seven states (plus the District of Columbia) in the coming year,
with gains everywhere but DC for 2013. This even includes 2.0 and 4.0
percent increases for hard-hit Nevada in 2012 and 2013, respectively.
The bad news is that the other factors that affect house prices aren’t
included. Perhaps the most important of these missing inputs is supply
conditions, especially vacant units. Figure 2 shows 2010 vacancy rates
from the Decennial Census, indicating that many of the states with the
Special Topic (Continued from page 12)
worst price performance in recent years have the highest vacancy rates.
(Note that Maine and Vermont have the highest vacancy rates, but this is
because they have large numbers of second/vacation homes – which by
Census Bureau definition are counted as vacant – relative to the total size
of the housing stock in those states.) What the simple forecast shows,
however, is that in the absence of supply conditions, even many of what
are thought to be the worst states would see house price gains as a result
of job growth.
Table 1: Changes in Employment and House Price Appreciation
Change in
Employment
Dec07-Oct11
HPA
Dec07-
Oct11
2012 Simple
HPA
Forecast
2013 Simple
HPA
Forecast
Change in
Employment
Dec07-Oct11
HPA
Dec07-
Oct11
2012 Simple
HPA
Forecast
2013 Simple
HPA
Forecast
Alabama -7.0% -19% 2% 2%
Alaska 3.6% -3% 1% 2%
Arizona -9.6% -44% 2% 3%
Arkansas -3.0% -4% 1% 1%
California -6.8% -32% 1% 1%
Colorado -4.1% -8% 2% 2%
Connecticut -4.5% -18% -1% 1%
Delaware -6.1% -18% 1% 2%
District of Columbia 2.3% -6% -3% -1%
Florida -8.6% -39% 3% 2%
Georgia -8.4% -25% 2% 3%
Hawaii -5.0% -23% 0% 1%
Idaho -7.2% -37% 1% 2%
Illinois -5.0% -27% 0% 1%
Indiana -6.5% -10% -1% 1%
Iowa -2.7% -1% 0% 1%
Kansas -4.3% -9% 1% 1%
Kentucky -3.8% -7% 2% 1%
Louisiana -0.1% -7% 2% 1%
Maine -3.9% -11% 0% 1%
Maryland -3.2% -23% -2% 1%
Massachusetts -1.6% -12% 0% 1%
Michigan -7.5% -28% -1% 1%
Minnesota -3.5% -22% 1% 1%
Mississippi -4.9% -6% 0% 1%
Missouri -5.2% -18% 0% 1%
Montana -2.4% -15% -1% 1%
Nebraska -0.1% -1% 1% 1%
Nevada -13.2% -50% 2% 4%
New Hampshire -2.8% -11% 1% 1%
New Jersey -5.3% -18% -1% 1%
New Mexico -5.1% -24% 3% 3%
New York -1.6% -10% 1% 1%
North Carolina -7.2% -9% 1% 2%
North Dakota 10.2% 13% 4% 1%
Ohio -5.8% -15% 0% 1%
Oklahoma -0.3% -1% 1% 1%
Oregon -6.5% -26% 1% 1%
Pennsylvania -2.0% -8% 0% 1%
Rhode Island -6.0% -24% 0% 1%
South Carolina -6.4% -13% 1% 1%
South Dakota -0.5% 3% 0% 1%
Tennessee -5.6% -10% 1% 1%
Texas 0.9% -10% 2% 2%
Utah -3.7% -31% 1% 1%
Vermont -1.7% -5% -2% 1%
Virginia -2.8% -14% 1% 2%
Washington -4.7% -25% 2% 2%
West Virginia -0.8% -24% 1% 1%
Wisconsin -4.9% -14% 0% 1%
Wyoming -1.6% -8% 0% 1%
Figure 2: 2010 Vacancy Rates from the Decennial
Percent Vacant 2010
Census
9.2%
9.3%
14.3%
8.1%
15.6%
20.5% 22.8%
15.2%
11.4%
11.1%
9.3%
13.2%
13.1%
9.7%
11.3%
13.4%
14.6%
10.7%
7.9%
8.6%
9.9%
9.5% 9.5%
10.2%
15.7%
10.4% 8.7% 10.5%
10.8%
13.4%
9.3%
9.8%
9.2%
12.4%
10.8%
10.1%
16.3%
12.2%
12.3%
12.9%
11.3%
13.5%
15.7%
12.5%
13.3%
12.3%
10.6%
12.0%
15.9%
12.4%
7.0% to 10.0%
10.0% to 13.0%
13.0% to 18.0%
18.0% to 25.0%
17.5%
Source: 2010 Decennial Census / PMI
Page 13

The PMI Forecast
Economic Outlook
2010 2011
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2010 2011 2012 2013
Real GDP Growth 1 3.9 3.8 2.5 2.4 0.4 1.3 2.0 2.9 3.0 3.1 3.3 3.5 3.1 1.8 3.2 3.6
Consumer Price Inflation 2 1.5 -0.7 1.5 2.6 5.2 4.1 3.1 1.5 1.4 1.9 2.0 2.2 1.7 3.2 2.0 2.3
Civilian Unemployment Rate 9.7 9.6 9.6 9.6 8.9 9.1 9.1 8.8 8.9 8.9 8.8 8.7 9.6 9.0 8.8 8.2
2012
Interest Rates
30-year Fixed Rate Mortgage (%) 5.00 4.91 4.45 4.41 4.88 4.66 4.31 4.02 4.07 4.17 4.35 4.55 4.69 4.47 4.29 5.14
1-year Adjustable Rate Mortgage (%) 4.25 4.01 3.57 3.31 3.26 3.11 2.91 2.88 2.95 3.00 3.10 3.20 3.79 3.04 3.06 3.70
10-year Treasury Note (%) 3.72 3.49 2.79 2.86 3.46 3.21 2.43 2.07 2.15 2.30 2.60 2.90 3.21 2.79 2.49 3.53
Housing Market
Existing Sales (Thousands of Units) 5183 5570 4170 4747 5137 4883 4877 5000 5100 5250 5350 5450 4908 4975 5288 5650
New Sales (Thousands of Units) 360 335 291 300 299 309 297 310 325 350 375 410 322 304 365 500
Median Existing Home Price Change (%) 3 -2.6 6.2 0.2 -4.0 -7.0 6.8 0.4 -4.2 -2.8 6.9 2.9 -2.0 0.2 -4.5 1.8 2.3
Mortgage Market
Single Family Originations (Billions of $) 355 385 415 465 330 300 330 340 240 280 280 210 1620 1 300 1010 1200
Refinancing Share (%) 69 60 70 73 66 64 70 74 68 55 40 35 68 6 9 50 33
ARM Share (%) 5 6 6 6 6 8 9 10 11 12 13 14 6 8 12 15
All forecasted values are in bold
1 Quarterly = annualized percent change ; Annual = Q4 / Q4
2 Quarterly = annualized percent change ; Annual = Year Avg. / Year Avg.
3 Quarterly = percent change ; Annual = Year Avg. / Year Avg.
Cautionary Statement:
Statements in this document that relate to future plans, events or performance are "forward-looking" statements within the meaning of the Private Securities Litigation Refo rm Act of 1995.
These forward-looking statements include our expectations with respect to national and regional economic activity, the risk of recession, inflation, employment trends, consum er spending and
borrowing, interest rates, home sales and price trends, governmental policy, as well as other trends in housing, financial, and mortgage markets. Readers are cautioned that forward-looking
statements by their nature involve risk and uncertainty because they relate to events and circumstances that will occur in the future. Many factors could cause actual re sults and de velopments to
differ materially from those expressed or implied by forward-looking statements, such as different than expected levels and growth rates of national or regional economic activity; changes in
monetary and fiscal policy, sources and uses of bank liquidity, and credit and other market disruptions; political tensions and unrest in certain foreign nations; fluctu ations in oil prices; natural
and manmade disasters; changes in international economic and financial conditions, particularly financial and fiscal volatility, and the risks of national debt default in Europe; changes in interest
rates, lending standards, housing prices and employment rates; foreclosure trends; and regulatory and legislative developments. Other risks and uncertainties are discussed in the SEC filings of
the PMI Group, Inc., including its Annual Report on Form 10-K for the year ended December 31, 2010 (in Part I, Item 1A), filed on March 15, 2011 and its Quarterly Repor Form 10-Q for
ts on
es no obligatio
the quarters ended March 31, 2011 (in Part II, Item 1A), filed on May 10, 2011 and June 30, 2011 (in Part II, Item 1A), filed on August 4, 2011. PMI undertak n to update
forward-looking statements.
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