rdc road show october 2014.ppt road... · buyers typically like to view between 12‐14 homes...

4

Number of SalesYear Over Year Change 2013 vs. 2012

SOURCE: NAR 4TH QTR HOUSING REPORT

5

Over $1 Million

6

Median Sales PriceYear Over Year Change 2013 vs. 2012

SOURCE: KCM Blog & NAR 4TH QTR HOUSING REPORT

2014 – It’s All About Jobs!

8 Source: David Benson, Chief Economist, Nationwide, Former Chief Economist at PMI & Fannie Mae, 3/18/14

2013 ‐ The Strongest Year for Housing Activity since before the Great Recession… but job growth was low.

2014 ‐ Economists predict an improved job market. Jobs will be the KEY factor even if mortgage rates increase and affordability declines.

Historically, job gains accelerate while mortgage rates rise OR job gains decline while mortgage rates drop.

Housing activity increases the most when job gains accelerate, not when mortgage rates drop.

People buy homes when their job and income prospects improve (consumer confidence) – even if affordability declines.

9 Source: David Benson, Chief Economist, Nationwide, Former Chief Economist at PMI & Fannie Mae, 3/18/14

Historically 1.2 Million households form every year in the U.S. Household formations are affected by the job market. During the Great Recession, people “doubled up” or lived with parents. Pent up demand ‐ economy is now short 3 million households. Rapid job creation will create more households (not all 3 million at once). Beginning in 2014, the pace of household formations will accelerate to

above‐normal for several years.

Demographics Favor Housing

Trulia12/201210

2014 Projections ‐ Forbes Magazine

11 Forbes Magazine 12/13/13

Up?

Or Down?

1. More homes will be available 2013‐ Short supply drove rapid price increases 2014‐ New construction and rising prices will increase inventory, both new and old, to traditional levels

2. Mortgage rates will rise 5% by the end of 2014–still well within normal levels. Janet Yellen is expected to keep mortgage rates low by buying blocks of mortgage‐backed securities, but the Fed’s bond‐buying taper could push rates higher.

Reality check. Prior to 2008: The 36‐year mortgage rate average was 9.2%, It was never below 5.8%.

2014 Projections ‐ Forbes Magazine 3. Mortgages will be easier to get

Refinance business will dwindle, forcing banks to compete for buyers.

4. Home prices will rise 3%‐5% 2013 ‐ 11% increase nationally. 2013 gains were unsustainable and well above historic norms for healthy, balanced markets.

In 2014, home value gains will slow because of: higher mortgage rates higher prices more supply created by fewer underwater homeowners

more new construction


Up?

Or Down?

2014 Projections ‐ Forbes Magazine

5. Fewer homeowners will be underwater. 2.5 million homeowners regained positive equity

6.4 million homes were still in negative equity. That number will shrink in 2014.

Nevada, Florida, Arizona, Michigan, and Georgia still have the highest shares of underwater homeowners (Kiplinger 1/14).

6. Affordability will decline.


Up?

Or Down?

2014 Projections ‐ Forbes Magazine 7. Ownership will decline

2014 ‐ Below 65 % for the first time since 1995.

Housing Bubble put 7 out of 10 American households into homeownership, if only temporarily. That proved unsustainable.

Adult children will probably rent first, but low vacancy rates and higher rents will prompt some to move on to homeownership.


Up?

Or Down?

2014 Projections ‐ Forbes Magazine 8. Americans will move

Rising prices, a reversal of underwater mortgages, and easier credit will free Americans up to move.

They’ll choose smaller homes in more affordable locations.

New lending regulations–which make it harder to borrow more–will send Americans to less expensive hubs like Portland, Denver, Austin, Richmond, Dallas, Houston, San Antonio, Atlanta, and Raleigh


Up?

Or Down?

2014 Projections – Forbes Magazine 9. Foreclosures will fade

September 2013 was the 36th straight month of year‐over‐year decreases in foreclosure activity.

Down nearly 33% from the end of 2012.

10. Home buying process less crazed During the bust, investors bought 1 out of 5 homes in America.

More inventory, less competition from investors, and more mortgage credit should make the buying process less frenzied in 2014.


Up?

Or Down?

No Bubble!!!

17

100 housing experts predicted moderated appreciation closer to pre‐bubble norms of 3‐5% . A cumulative change in home values of 19.7% on average through the end of 2018 (“Pessimists” see prices going up 10.9% through 2018)

Zillow 2/2014

Home Sales On Track!

Existing home sales were at the highest pace of the year in July, projecting a 5.15 million finish to the year.

9/14 Lawrence Yun, National Association of Realtors19

A Confluence of Positive Trends Pending sales point to more gains

largest growth in 4 years More than 2.4 million homes were available on the market

in July, the highest in 2 years. Buyers typically like to view between 12‐14 homes before choosing one (buyers like variety).

All‐cash buyers are stepping away, leaving more room for first‐time buyers to get into the market. The lack of competition will also give buyers more choices in their home search.

Investorsmade up 16% of all transactions in July, while first time buyers comprised 29%

Lawrence Yun, NAR, 9/1420

A Confluence of Positive Trends Distressed sales are at their lowest level since 2008.

Only 9% of July sales were distressed vs. 15% in 2013. The number of seriously deliquent mortgages is down

from 10% a few years ago to 4.6% in the 2nd quarter. New‐home sales recently surged, and home builders

are growing perkier and reporting strengthening results.

Lawrence Yun, NAR, 9/14

21

Pending Sales Fell 1% in August Fewer listings and the exodus of investors brought

pending sales down1% from July sales and 2.2 % from August of 2013.

Fewer distressed homes at bargain prices and the acknowledgement that we are entering a rising interest rate environment caused hesitation among investors.

The market is shifting toward traditional and first‐time buyers who rely on mortgages to purchase a home

Realtor’s Pending Home Sales Index is still, however, at its second highest level.

Diana Olick, CNBC, 9/29/14

22

Pending Sales Fell 1% in August Regionally, pending sales fell:

3% in the Northeast, 2.1 percent in the Midwest, 1.4 % in the South, and rose 2.6% in the West.

Supplies of For Sale Homes dropped 9.3% from July to August, compared to an average drop of 3.2%. Traditionally listings drop in the fall and winter months.

Buyer demand was up over 37% in August Buyers want to buy but they’re patient and more

careful not to overpay

Diana Olick, CNBC, 9/29/14

23

Pace of Home Price Appreciation Cooling The pace of year‐over year appreciation

continues to slow down as real estate markets find more balance.

Home price appreciation reached a peak of 12%year over year in Oct. 2013 and has since subsided to a current pace of 6%

Continued moderation of home price appreciation is a welcomed sign of more balanced real estate markets and less pressure on affordability for home buyers in the near future.

24CoreLogic, a data and analytics company , Mark Fleming, Chief Economics, August 2014

2 Core Based Statistical Areas measured by population showed year‐over year price decreases in August:

Little Rock, North Little Rock, Conway, AR

Rochester, NY

Excluding distressed sales, 49 states and DC showed year‐over‐year home price appreciation in August.

25 states and DC are at or within 10% of their peak

State Highlights

25 CoreLogic, a data and analytics company, August 2014

5 states with largest year‐over‐year increase (includes distress sales): Michigan: 11.1% California: 9.2% Nevada: 9.2% Maine 9.0% West Virginia 8.7%

5 states remaining furthest from the peak: Nevada: ‐36.2% Florida: ‐33.4% Arizona: ‐28.9% Rhode Island: ‐26.8% Maryland: ‐20.2%

State Highlights

26 CoreLogic, a data and analytics company, August 2014

27

HPI peak‐to‐current change including distressed sales

CoreLogic, a data and analytics company, July 2014

National Peak to Current Price Change is now ‐12.1%

2 New Mortgage Rules Effective 1/17/14 Ability to Repay:

Lenders must determine applicant has the income & assets to afford to make payments throughout the life of the loan.

Lenders are required to document & verify applicant’s income, assets, credit history, and debt. For borrower’s –more paperwork, longer processing time.

Underwriters must approve mortgages based on the maximum monthly charges a borrower faces, not just the low “teaser” rate.

Qualified Mortgages: Debt to income ratio must be below 43%. – But some Banks may still lend at higher DTI levels.

No risky features. Upfront fees cannot be more than 3% of mortgage balance.

29Les Christie, CNN Money, 1/10/14

1st Quarter Report: Mortgage Applications at Lowest Levels in 20 Years Higher rates in the 4th qtr of 2013 pushed refinances down, causing layoffs at mortgage companies

Applications to purchase were expected to be up in the first quarter, but were down 15% from a year ago

Unusually bad weather throughout the country may have contributed

Mortgage rates have vacillated in a very narrow range Credit availability and tighter underwriting have been far higher barriers to entry, especially for first time home buyers, who have played little to no role in the recovery

30Source: Diana Olick, CNBC Real Estate ReporterPublished: Wednesday, 26 Feb 2014

Mortgage Rates Today Economists expected rates to rise to 5.5% this year, but it hasn’t

happened, October Mortgage Rates dropped and are now at 4% Home loans haven’t been this cheap since May 2013. Why?

Still a weak demand for loans Refinances are off 60% this year. Expected to offset decline in refi’s with home purchase loans, but those loans

are off 10% Lenders only wrote 226,000 mortgages in the 1st quarter, the fewest since

1997. Mortgages rebounded to 267,000 in the second quarter, but it was less than half of 2013’s loans at that time

Even with the Fed bowing out of the mortgage market, there are still plenty of others willing to buy whatever debt mortgage lenders can create.

Bottom line to borrowers: crashing demand and lots of money to lend from sources other than the Fed have eased pressure on interest rates for now.

31

New Twist on Low Mortgage Rates

When Rates Increase from the Lowest Levels in 50 years: Those who bought or refinanced at rates at or below 4% may never want

to sell. A 2011 study by the Federal Reserve Bank of New York concluded that for

every $1,000 increase in a homeowner's annual mortgage payment, the likelihood that homeowner would sell fell as much as 16%.

The issue has begun to interfere with some transferees’ willingness to move for a new job.

Low rates have combined with rising rents nationwide to make renting out a home, rather than selling, more attractive.

32 Chris Rugaber, AP Washington, Jul 11, 2014

Housing Still Affordable Mortgage rates went from 3.36% in 2012

to 4.3% in 2013. NAR’s Housing Affordability Index went

from a high of 196.5 in 2012. Fell to 175.8 in 2013.

Monthly mortgage payment remains unusually low. Still more affordable than at any time since 1981.

Payment‐to‐income chart is a better barometer of near‐term housing affordability.

33 Source: National Association of Realtors

Boomerang Buyers5.3 Million Households Lost their Home to Foreclosure or Short Sale

889,000 have already purchased a home. 1.6 Million will be stuck renting for at least the next 7 years. 2.8 million will become homeowners again by 2021.

36 Source: Business Insider, 3/6/14

Recent FHA Loan Limit Changes

37 Source: Business Insider, 3/6/14

Will hurt homeownership. Most common loans for Boomerang Buyers. Impairs the higher price points in a handful of markets. Hurts new homes market more than resale.

Jobs Outlook

From highest to lowest point, U.S. economy lost 8.74 million jobs

85% of the jobs lost were regained by 2013

200,000 +‐ jobs were created per month Unemployment bottomed out in 2010. Jobs have risen by 7.45 million since then.

Fastest growing jobs: Healthcare & New Construction.

39 Source: Shaila Dewan, New York Times, 2/7/14

Jobs Outlook – Projections Economists expect job growth to accelerate to 3% annually, up from 2% the last 4 years

U.S. economy should get a boost from the 2 year budget deal Congress approved in December. Should give businesses confidence to hire and invest since it guarantees there won’t be another budget crisis before 2015

Mark Zandi at Moody’s predicts a “breakout year” with full employment in 3 years – with a 5.75% unemployment rate and 64% labor force participation.

40 Source: Shaila Dewan, New York Times, 2/7/14

3rd Quarter ‐ Good News ‐ Hiring is up! A broad labor‐market rebound is on pace to add the most

jobs in 15 years. Industries from construction to autos to oil and gas are

increasing jobs as growth accelerates after a harsh winter that stunted business.

The construction industry has regained 650,000 jobs, but that is still less than 30% of the number of jobs that were lost.

On average, the past 12 months’ job creation numbers were 220,000 per month – about 3 times faster than needed to keep the unemployment rate from rising.

September’s unemployment rate of 5.9% was the lowest since July 2008.

41

Gary Burtless, Senior Fellow, Economic Studies, October 2014

Help Wanted! Employers who held off hiring can’t wait any longer However ‐ Not seeing wage inflation or increased

hours Consumer spending is still tepid

Companies aren’t hiring in anticipation that demand will rise, as in other recoveries

Instead they are expanding when they have orders in hand

42Bloomberg News, July 2, 2014

Positive Signs! Recovery in homebuilding is crucial for the job market

New homebuilding spurs purchases of carpets, flooring, lighting, appliances and furniture.

Moody’s is forecasting construction job growth of 1.8% this year, which would be the highest rate since 2005, and for it to peak at 2.4% in 2016.

Building Boom Housing starts on an annual basis surpassed 1 million in May and April.

In April 2009, they had declined to as low as 478,000, creating pent‐up need for homes and apartments.

43 Bloomberg News, July 2, 2014

16 States Have Recovered All Jobs Lost During the Recession

Colorado DC Iowa Louisiana Massachusetts Maryland Minnesota Montana

Nebraska New York Oklahoma South Dakota Texas Utah Vermont West Virginia

44Source: Pamela M. Prah, Pew/Stateline, 1/7/14

Rental Overview Improving jobs picture spurs younger Americans to form their own

households, but tighter lending standards make it more difficult to buy.

The homeownership rate in the U.S. slid to 65.2% in the fourth quarter of last year, from a high of 69% in 2004. The figure is lower among people in their 20s and 30s.

AIG cited an increasing number of renters as the New York‐based firm looks to add investments in apartments.

New York‐based Guardian Life Insurance Co. of America last year backed a $1 billion venture to bet on mid‐tier apartments in western U.S. cities.

MetLife Inc. is looking to increase investments in apartment buildings in U.S. cities such as New York and Los Angeles as young professionals fuel demand.

46

Regional Rental InformationAtlanta

1 bedroom apt ‐ $1200‐$1500 2 bedroom apt ‐ $1500‐$1800 3 bedroom apt ‐ $1600‐$2300 3 bedroom home ‐ $1600‐$2000 4 bedroom home ‐ $1800‐$2500

Supply is low across the board, except for 3 bedroom homes where supply is balanced

47

Chicago 1 bedroom apt ‐ $1600 2 bedroom apt ‐ $2070 3 bedroom apt ‐ $2326 3 bedroom home ‐ $1471 4 bedroom home ‐ $1813

In the city there are many rental high rises under construction as the shortage continues.

In the suburbs shortages for rentals continue as the housing market sees increases in value, lending to a shortage of inventory.

Homeowners that have been renting are now beginning to sell homes.

Regional Rental Information

48

New York City 1 bedroom apt ‐ $3800 2 bedroom apt ‐ $5800 3 bedroom apt ‐ $7000

Supply is low. A slight loosening of inventory.

Still a challenging market for tenants in comparison to other areas of the country.

Conditions for renters have improved with increased inventory and slightly lower asking rents for nearly all apartment types.

Orlando 1 bedroom apt ‐ $650 2 bedroom apt ‐ $750‐$800 3 bedroom apt ‐ $1100‐$1250 3 bedroom home ‐ $1000‐$1500 4 bedroom home ‐ $1000‐$1500

Supply is balanced. It’s a very positive rental market. Business is brisk and there are good rental rates.


49

Dallas 1 bedroom apt ‐ $1320 2 bedroom apt ‐ $1988 3 bedroom apt ‐ $3204

Supply is starting to balance out as new construction is increasing. Current occupancy across the board is 94%.

Los Angeles 1 bedroom apt ‐ $2300 2 bedroom apt ‐ $3200 3 bedroom apt ‐ $3800 3 bedroom home ‐ $5725 4 bedroom home ‐ $6250

Current Inventory of rental homes is low; demand is up; prices have leveled off with slight increases in high demand areas.


50

Phoenix 1 bedroom apt ‐ $716 2 bedroom apt ‐ $906 3 bedroom apt ‐ $1137 3 bedroom home ‐ $1136 4 bedroom home ‐ $1403

San Francisco 1 bedroom apt ‐ $3000 2 bedroom apt ‐ $3700 3 bedroom home ‐ $4700 4 bedroom home ‐ $5500

Very low inventory in most areas and high rental prices due to lack of inventory.

In 2013 we saw…

A shortage of housing inventory Pent‐up demand and multiple offers in some

markets Home price increases Transferees continuing to rent rather than buy Mortgage appraisal challenges More pre‐decision departure BMAs and

destination area counseling Reduction in distressed properties

52

In 2014 we see… Continuing challenges with determining

correct pricing in markets that are either behind or ahead of national trends

Relocation inspection reports and IRS compliance education

More in‐depth counseling on market conditions to prepare buying & selling transferees

Continued increase in renter transferees Recruiting challenges in some areas as

the job market becomes more competitive in other parts of the country

53

Regional & Local Market Data To get the most accurate information on

real estate markets and trends, it’s important to look at regional and local data.

RDC Members post quarterly market stats on: Median/Average Sales Prices Days on Market Absorption Rate # of Active Listings # of Closed Sales (past 6 months) Increase/decrease in value List Price to Sales Price Ratio Rental information

55 www.relocationdirectorscouncil.org

Why Use A Relocation Trained Agent?Relocation Trained: Requested:

Understands terminology and paperwork

Understand timeframes and procedures

Understands stress of relocating family Lower BMA variance which translates

into fewer DOM Understands importance of market

trends Attended extensive relocation team

training Understands & accepts referral fees RDC Education!

Doesn't understand terminology and paperwork

Doesn‘t understand timeframes and procedures

Doesn't understand stress of relocating family

Higher BMA variance which translates into longer DOM

Doesn’t understand importance of market trends

Has never attended relocation team training

Thinks it is THEIR customer/business and resents paying referrals fees

56

2014 RDC Board Officers

Maureen Campbell, CRP, SGMS: Chairman Carol A Kelly, SCRP, SGMS: President Tommy Steel, CRP: Vice President Annie Hamilton, CRP: Secretary/Treasurer Beth Archibald, SCRP, SGMS: USAC Representative

58

2014 RDC Board of Directors Ryan Carrell, CRP Karen Danner, CRP Vicki Hamp, CRP, GMS Connie Swenson, CRP, GMS Fran Cashion, CRP Debbie Robinson, CRP

59

61

Relocation Directors Council8 South Michigan Avenue ‐ #802

Chicago, IL 60603Telephone: (312) 726‐7410

Fax: (312) 580‐0165www.relocationdirectorscouncil.org

rdc road show october 2014.ppt road... · buyers typically like to view between 12‐14 homes...

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