September 13, 2011
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- Bu səhifədəki naviqasiya:
- Demographic Drivers – Baby Boom Generation
- Current Price-to-Income Ratio Compared to Historical Average Lowest 20
- Homebuilding and Job Creation
- Constant Dollars (2005, Billions)
- Housing Recovery has Wide-Ranging Implications – Beneficiaries of a Housing Recovery
- Construction Materials
- Alarm/Security Companies
Introduction
- 14 - Reuters/University of Michigan Consumer Sentiment Index 40 50 60 70 80 90 100
110 120
19 78 19 79 19 81 19 83 19 85 19 86 19 88 19 90 19 92 19 93 19 95 19 97 19 99 20 00 20 02 20 04 20 06 20 07 20 09 20 11
Source: Thomson Reuters/University of Michigan, Copyright, 2011, Survey Research Center Demographic Drivers – Baby Boom Generation
Source: PulteGroup, Inc., Investor Presentation, June 2011 The very first generation of baby boomers, which includes ~ 78 million individuals who were born between 1946 and 1964, turned 65 this past January (January 2011). According to the U.S. Census Bureau’s national population projections released in 2009, the number of Americans 65 years old or older will grow by an impressive 36% from 40 million to 54.6 million by 2020. The baby boom generation is generally healthier than their parents’ generation so they’ll likely be able to delay the move to retirement communities. Further, while baby boomers were not immune from the financial crisis, they still represent the largest and wealthiest demographic. In our view, this has two important implications: Introduction
- 15 - (1) This should provide a boost to home improvement retailers, especially given boomers’ preference to remain in their current residences. (2) This should bolster demand for second homes. Notably, many of the areas hardest hit by the housing decline and still suffering from the highest percentage of underwater mortgages (Southern California, Florida, Las Vegas, etc.) are also very popular retirement or second home locations. Accordingly, although baby boomers were not immune from the economic/real estate downturn either, attractive housing values in these areas could spur baby boomers to absorb much of the excess supply in coming years.
-35%
-25% -22%
-19% -19%
-18% -17%
-16% -14%
-13% -13%
-12% -12%
-11% -10%
-10% -10%
-10% -10%
-9% -40%
-35% -30%
-25% -20%
-15% -10%
-5% 0% Detroit Las Vegas Manchester Merced Stockton
Modesto Reno
Ocala Gainsesville (GA) Phoenix Fort Myers Cleveland El Centro Dallas-Fort Worth Binghamton Worcester Port St. Lucie Melbourne Dayton
Vallejo
Source: Zillow via Wall Street Journal online, “Linkage in Income, Home Prices Shifts,” online.wsj.com; August 17, 2011 Although there is the potential for a fair amount of supply to emerge from the baby boom generation, we believe that there is plenty of potential for this supply to be absorbed, especially via new household formation as discussed above. In particular, we believe that the “echo boom” generation will soon be positioned to absorb the supply generated by the baby boom generation in the coming years. The echo boom generation is comprised of 80 million people (slightly larger than the baby boom generation) that were born between 1982 and 1995. The bulk of this generation has already entered the work force. We would reiterate that 20 million adult children (primarily echo boomers) are currently living at home with their parents. In our view, as economic conditions improve and new job creation gains traction there will be an enormous pent-up demand for housing from this generation as they begin to feel more confident in their financial situation. Homebuilding and Job Creation Since 1970, private residential investment – which includes construction of new single family and multifamily structures, residential remodeling, production of manufactured homes, and brokers’ fees – has ranged between 5% and 6% of gross domestic product. This peaked at 6.1% in 2005 and dropped to 2.5% in 2010. Introduction
- 16 - Housing’s Contribution to GDP 1970 1975 1980 1985 1990 1995 2000 2005 2010 Constant Dollars (2005, Billions)
Gross Domestic Product $4,270 $4,880 $5,839 $6,849 $8,034 $9,094 $11,226 $12,638 $13,248
Gross private domestic investment 475 504 718
943 994
1,259 1,970
2,172 1,775
Residential Fixed Investment 248 256 310
384 386
456 580
775 333
Personal Consumption Expenditures 2,740 3,214 3,766 4,540 5,316 6,079 7,608 8,819 9,314
Housing Services 537 673 800 912
1,044 1,199
1,384 1,567
1,674
Residential Fixed Investment + Housing Services $785 $929 $1,110 $1,296 $1,430 $1,656 $1,964 $2,342 $2,007
Percentage of Real GDP
Residential Fixed Investment 5.8% 5.2%
5.3% 5.6%
4.8% 5.0%
5.2% 6.1%
2.5% Housing Services 12.6% 13.8% 13.7% 13.3% 13.0% 13.2% 12.3%
12.4% 12.6%
Residential Fixed Investment + Housing Services 18.4% 19.0% 19.0% 18.9% 17.8% 18.2% 17.5%
18.5% 15.1%
Residential investment is an important driver of overall employment growth. According to the National Association of Home Builders (NAHB), three jobs are created for every new single family home constructed. About 1½ jobs are created in construction, while the rest are created in other housing related industries such as lumber, concrete, lighting, fixtures, heating and cooling equipment, and other products used to build a home. Additional jobs are created when real estate agents, lawyers and brokers provide services to home builders and home buyers. According to the Bureau of Labor and Statistics, it is estimated that between 2000 and 2006, approximately 40% of the job growth in the financial sector occurred in businesses directly related to the selling and buying of homes. For instance, from 2001 to 2006, total mortgage industry employment surged by 83%, to nearly 500,000 positions and the number of realtors jumped by 66%, to roughly 1.3 million. However, between April 2006 and December 2010, housing related financial industries lost 348,000 jobs and employment fell to its lowest level since January 1998. Sales of new and existing homes peaked between mid 2005 and early 2006, and the peak in employment in construction and several housing related financial industries followed soon after. During the peak, it is estimated that housing related industry payroll employment accounted for approximately 5% of total nonfarm payrolls and about 6% of private nonfarm payrolls, or about 7 million payroll jobs. Residential construction employment peaked in April 2006 at 3.5 million jobs, following approximately 5 years of rapid growth. As a result of the recession and the deflating of the housing bubble, the U.S. Bureau of Labor Statistics estimates that this figure currently stands near 2.0 million, which represents a nearly 45% decrease. Housing Recovery has Wide-Ranging Implications – Beneficiaries of a Housing Recovery While our homebuilders short report back in 2007 proved correct, we could have featured a number of other sectors/industries that would have produced equally spectacular results. The housing bubble of the previous decade provided fuel to a broad list of companies from investment banks to cable companies to mortgage insurers. Just as the housing crash had several beneficiaries, we believe that there are a number of industries that will benefit as housing conditions improve. In the table below we have included a list of a few traditional and non- traditional companies that could receive a boost from a housing recovery.
Company Ticker
Vulcan Materials VMC
Bed Bath & Beyond BBBY Martin Marietta Materials MLM
Ethan Allen ETH Texas Industries TXI
LEG
Alarm/Security Companies
Company Ticker
Ascent Media ASCMA
Comcast CMCSK
Tyco International TYC
Time Warner Cable TWC
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