THE LONG ROAD TO RECOVERY

1. THE LONG ROAD TO RECOVERY 2011 State of Housing Report

2. Economic Trends • Recession deep, wide, and long • Deep: job losses > 52,000 in NM since 2008 • Wide: all 33 NM counties and all industry sectors have experienced job losses • Long: NM has endured 11 consecutive quarters of negative job growth • New Mexico will experience a very slow recovery with continued high unemployment • 95% of NM businesses are small: tight credit markets even tighter for small businesses

3. Economic Trends, continued • Constrained state and local budgets • Gross receipts and income taxes ↓ • Oil prices ↓ (have rebounded somewhat) • Natural gas prices ↓ • Income Support Division caseloads ↑ • SNAP ↑ 22% • TANF ↑ 9% • General Assistance ↑ 28% • Stimulus funds have been spent • Uncertainty remains about national economy

4. Economic Trends, continued Source: New Mexico Department of Workforce Solutions

5. Economic Trends, continued Source: New Mexico Department of Workforce Solutions

6. Economic Trends, continued Source: New Mexico Department of Workforce Solutions

7. Demographic Drivers • 2010 Census: NM population = 2,059,179 • Population ↑ 13.2% • Metro areas ↑ • 14 counties population ↓ • Household growth ↓ • Immigration ↓ • Families doubling up • Growth in larger households may continue as long as unemployment remains high • Mobility ↓

8. Demographic Drivers, continued • Age-related demographic drivers • Baby boomers aging → NM median age now 35.6 • Downsize homes (more homes for sale) • Retrofit homes • Need communities with nearby amenities • Generation Y/Echo Boomers/Millennials • Home needs to fit lifestyle • Rent for a longer period of time • Purchase more modest existing home • Location → urban feel, access to transit, neighborhood character

9. Demographic Drivers, continued • Immigrants • Until the recession, immigrant population grew at a faster rate than native-born population • From 2000 – 2006, the foreign-born share of the increase in homeowners was 40% • The recession hasn’t impacted immigrant household formation rate as much as native-born rate • Women • In 2009, women headed an estimated 31.5% of NM households • Single women twice as likely to own homes as single men • Over last 30 years, women’s income ↑, men’s income stagnant

10. Homeownership Trends and Outlook • Homeownership rate • U.S. rate peaked at 69.2% in 2004; steady decline since 2006 • At end of 2010 U.S. rate was 66.5% • NM rate was 68.6% • Merits of homeownership called into question • Increasing home prices spurred consumer activity • Recessions associated with house-price busts deeper and longer than other downturns • $6.8 trillion of homeowners equity lost since 2005

11. Homeownership, continued Source: Federal Reserve Flow of Funds Report, B-100

12. Homeownership, continued • Benefits of homeownership • Alternate savings vehicle • Increased housing stability → higher educational attainment, other social benefits • 8 in 10 Americans: homeownership is important to the economy (even underwater homeowners) • Less than 5% of NM homeowners underwater • Home price appreciation + risky loan product originations = unsustainable housing market Lesson learned:

13. Homeownership, continued Source: Mortgage Bankers Association National Delinquency Survey

14. Rental Housing Trends and Outlook • Almost everyone rents a home at some point • Makes more economic sense for many people • One-third of NM households rent their homes • Among renters, 31% say they are more likely to rent as a result of the housing crisis • Significant growth in renter households since 2006 • Two thirds of growth = households aged 45–64 • Renters are more mobile • Homeownership rate and unemployment rate positively correlated

15. Rental Housing, continued • Recent trends a story of contradictions: • Demand side • Growth in renter households • High unemployment • Supply side • Multifamily construction stopped • For-sale homes and condos converted to rentals • In 2008 and 2009, vacancy rates ↑, rents ↓ • In 2010, vacancy rates ↓, rents ↑ • Unknown: what happens when vacant units held off market are offered for sale or rent?

16. Rental Housing, continued • Projections for multifamily rental housing development and investment are mixed • Pent-up demand from young adult population • Former homeowners • Apartments and townhomes near stores and attractions gain favor with aging and downsizing baby-boomer parents, and their children want ‘stimulating environments in more urban places’ • Senior housing • Student housing • Affordable housing sector

17. Rental Housing, continued

18. Index (1995 = 100) Index (1995 = 100) Housing Challenges: Affordability US Income and Home Purchase Price Index Source: Bureau of Economic Analysis / CoreLogic / Haver Analytics / The PMI Group

19. Affordability Challenges, continued • House price – wage disconnect • In the decade leading up to the housing crisis, national median home prices increased 45% • Median wages per worker increased by 10% • Home prices have fallen . . . so things are more affordable now, right? Maybe, as long as: • Prospective buyer is employed • Prospective buyer has strong credit • Prospective buyer has cash for a down payment • Prospective buyer is mobile Unfortunately, this is not the case for many . . .

20. Affordability Challenges, continued

21. Affordability Challenges, continued Things have gotten worse, not better . . . • More homeowners are cost-burdened • In 2009, 25% of homeowners paid more than 30% of their income on housing costs (vs. 20% in 2000) • In 2009, 43% of homeowners earning less than $50,000 were cost-burdened • More renters are cost-burdened • In 2009, 47% of renters paid more than 30% of their income on housing costs (vs. 44% in 2000) • In 2009, 72% of renters earning less than $35,000 were cost-burdened

22. Housing Challenges: Availability • New construction has declined dramatically • Single family units permitted dropped roughly 85 percent from peak to trough in Albuquerque, Rio Rancho, and Hobbs • Rio Rancho issued no multifamily permits in 2009 • Neither Carlsbad nor Gallup issued multifamily permits in 2009 and 2010 • From 2006 – 2010, total construction employment in NM has declined by more than 15,250 jobs, or almost 26% • Financing challenges prevail

23. Availability Challenges, continued

24. Housing Challenges: Sustainability • More than half of NM’s housing stock was built before 1980 • Desire to improve resource efficiency and livability • Financing for these activities extremely limited • Location efficiency increasingly important • Gas prices ↑ → foreclosures ↑ • New way of looking at housing affordability: housing + transportation ≤ 45% of income • Sustainable financing: from 2005 – 2009, homeownership rates for low-income households fell almost twice as much as those for higher-income households

25. MFA Is Addressing Affordability Challenges Last year, MFA: • Provided almost $152 million in mortgages and down payment assistance to approximately 1,200 first-time homebuyers throughout New Mexico • Processed $23.6 million in Section 8 rental assistance payments for 5,318 apartments occupied by low-income households throughout New Mexico • Provided $5.1 million in funding to homeless service providers who served 13,900 homeless and “precariously housed” individuals

26. MFA Is Addressing Availability Challenges Last year, MFA: • Provided approximately $95 million in funding for the development of 1,235 affordable rental homes throughout New Mexico • Financed $8.5 million in loans for the construction or acquisition/rehabilitation/re-sale of 115 affordable single family for-sale homes, including 32 foreclosed properties • Provided approximately $2 million in funding for various affordable housing activities on tribal land, and roughly $10.5 million in the colonias • Provided $168,000 in Helping Hand down payment assistance loans to 28 homebuyers with disabilities

27. MFA Is Addressing Sustainability Challenges Last year, MFA: • Provided $19.7 million in owner-occupied housing rehabilitation and weatherization funds to address critical needs of more than 4,000 homeowners • Financed preservation of 300 affordable rental homes • Received a competitive award of $920,000 from DOE to establish a Weatherization Training Center • Received the U.S. Green Building Council New Mexico Chapter’s 2010 “Leadership in Green Building Award” • Provided roughly $300,000 in housing counseling funds to educate 1,523 prospective homebuyers and troubled homeowners

28. MFA Is Addressing Housing Challenges: Recovery Act Program Implementation • MFA received more than $95 million in stimulus funds for housing and residential energy efficiency initiatives • As of March 31, 72% of funds had been expended • Approximately 4,000 homes will be weatherized (more than 2,500 households are already enjoying warmer, more energy efficient homes) • Approximately 700 new affordable rental homes will be built (144 units are complete)

29. MFA Is Addressing Housing Challenges: Recovery Act Programs, continued • More than 300 affordable rental homes have been preserved • More than 1,500 households who were at risk of becoming homeless or who were already experiencing homelessness have been assisted • These programs have provided work to an estimated 2,920 individuals • An estimated 564 full-time jobs have been created or retained