real estate market and economic outlook

8/3/2019 Real Estate Market and Economic Outlook

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RealEstateMarketandEconomicOutlook

LawrenceYun,Ph.D.

ChiefEconomistNATIONALASSOCIATIONOFREALTORS

PresentaonatNARLeadershipSummit

Chicago,IL

August23,2011


2/25

Exis5ngHomeSalesA;erTaxCredit(steadygainsbeforerecentslippage)

seasonallyadjustedannualizedrate

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

5,500,000

6,000,000

2010-Jul

2010-Aug

2010-Sep

2010-Oct

2010-Nov

2010-Dec

2011-Jan

2011-Feb

2011-Mar

2011-Apr

2011-May

2011-Jun

2011-Jul


3/25

EconomyLosingMomentum(GDPgrowtha;errecessionshouldbesustained4%to%not1%asin1sthalfin2011)

-10

-

0

10

2000-Q1

2000-Q3

2001-Q1

2001-Q3

2002-Q1

2002-Q3

2003-Q1

2003-Q3

2004-Q1

2004-Q3

2005-Q1

2005-Q3

2006-Q1

2006-Q3

2007-Q1

2007-Q3

2008-Q1

2008-Q3

2009-Q1

2009-Q3

2010-Q1

2010-Q3

2011-Q1

DesiredPace


4/25

DriversofHomeSales Jobs:improvingthoughslowly Affordability:all5mehighthisyear

(Lowerprice,lowermortgagerates,slightlyhigherincome)

Apartmentrents:rising Stockmarket:vola5lebuthighercomparedto08,09,10 Investorangle:cash-flowingandinfla5onhedge Consumerconfidence:notthere Underwri5ngstandards:frustra5ng


5/25

AnnualExis5ngHomeSalesStuckatmillion(DatarevisioncomingsoondueMLSduplicatesandfallingFSBOs)

0

1,000,000

2,000,000

3,000,000

4,000,000,000,000

6,000,000

7,000,000

8,000,000

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

2011ytd


6/25

EconomicFiscalS5mulus?

FiscalPolicynothingle;DeficitseverywhereGovernmentspendingcutsatstate/localPoten5altaxincreaseandMIDtrimmingonmillionairesandbillionairesthoseearning

$200,000+


7/25

StateandLocalGovernmentJobs(600,000jobcutsover3years)

1700

18000

1800

19000

1900

20000

2000

-Jan

200

0-Jul

2001

-Jan

200

1-Jul

2002

-Jan

200

2-Jul

2003

-Jan

200

3-Jul

2004

-Jan

200

4-Jul

2005

-Jan

200

5-Jul

2006

-Jan

200

6-Jul

2007

-Jan

200

7-Jul

2008

-Jan

200

8-Jul

2009

-Jan

200

9-Jul

2010

-Jan

201

0-Jul

2011

-Jan

201

1-Jul


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FederalGovernmentJobs(110,000jobgainsover3years)

2600

260

2700

270

2800

280

2900

2000

-Jan

200

0-Jul

2001

-Jan

200

1-Jul

2002

-Jan

200

2-Jul

2003

-Jan

200

3-Jul

2004

-Jan

200

4-Jul

2005

-Jan

200

5-Jul

2006

-Jan

200

6-Jul

2007

-Jan

200

7-Jul

2008

-Jan

200

8-Jul

2009

-Jan

200

9-Jul

2010

-Jan

201

0-Jul

2011

-Jan

201

1-Jul


9/25

MonetaryPolicy

Fedfundsratecannotgobelow0%Alreadyat0%AnotherRoundofQuan5ta5veEasing?Prin5ngALotofMoneytoBuyU.S.GovernmentDebt?


10/25

NoRateHike5ll2013!EconomicIceAge5ll2013?

0

2

4

68

10

2000

-Jan

200

0-Jul

2001

-Jan

200

1-Jul

2002

-Jan

200

2-Jul

2003

-Jan

200

3-Jul

2004

-Jan

200

4-Jul

2005

-Jan

200

5-Jul

2006

-Jan

200

6-Jul

2007

-Jan

200

7-Jul

2008

-Jan

200

8-Jul

2009

-Jan

200

9-Jul

2010

-Jan

201

0-Jul

2011

-Jan

201

1-Jul

30-yearMortgage FedFunds


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CPIandPPIInfla5onRising(%changefromoneyearago)

-

0

10

2000-

2000-

2001-

2001-

2002-

2002-

2003-

2003-

2004-

2004-

2005-

2005-

2006-

2006-

2007-

2007-

2008-

2008-

2009-

2009-

2010-

2010-

2011-

2011-

CPI PPI

SocialSecurityCOLAforecasttorise3.%in2011 WorkersWagetoriseby2%in2011


12/25

PrivateSectorEconomicRecovery?

SmallBusinesses!!!


13/25

WhatsNeeded?SmallBusinessStartupRecovery

10

170

190

210

230

2000 2001 2002 2003 2004 200 2006 2007 2008 2009 2010

inthousandunits


14/25

HousingEquityFundingSourceforSmallBusinessOwners

($6trillionhousingequityneedtorecover)

024681012

1416

Source:FederalReserve


15/25

HomePricesScratchingsmallgainsinrecentmonths

100120140160180200220

2000-Jan

200

0-Jul

2001-Jan

200

1-Jul

2002-Jan

200

2-Jul

2003-Jan

200

3-Jul

2004-Jan

200

4-Jul

2005-Jan

200

5-Jul

2006-Jan

200

6-Jul

2007-Jan

200

7-Jul

2008-Jan

200

8-Jul

2009-Jan

200

9-Jul

2010-Jan

201

0-Jul

2011-Jan

201

1-Jul

Case-Shiller FHFA FNC NAR


16/25

LowHousingStartsLeanFutureInventory

0

00

1000

100

2000

200

2000

-Jan

2001

-Jan

2002

-Jan

2003

-Jan

2004

-Jan

200

-Jan

2006

-Jan

2007

-Jan

2008

-Jan

2009

-Jan

2010

-Jan

2011

-Jan

inthousands

HistoricalAverage


17/25

CPIApartmentRent

-1

0

1

2

3

4

2000-Jan

200

0-Jul

2001-Jan

200

1-Jul

2002-Jan

200

2-Jul

2003-Jan

200

3-Jul

2004-Jan

200

4-Jul

2005-Jan

200

5-Jul

2006-Jan

200

6-Jul

2007-Jan

200

7-Jul

2008-Jan

200

8-Jul

2009-Jan

200

9-Jul

2010-Jan

201

0-Jul

2011-Jan

%changefrom12monthsago


18/25

HomePricevsRent(index=100in1980)

0.0

100.0

200.0

300.0

400.0

00.0

1980-

Jan

1984-

Jan

1988-

Jan

1992-

Jan

1996-

Jan

2000-

Jan

2004-

Jan

2008-

Jan

rent price


19/25

RenterSurvey

72%saidowningahomeis

atoppriorityinfuture

(NARHousingPulseSurveyviaHarrisInterac5ve)


20/25

TightCredithinderingFirst-5meBuyersNormal 2009 2010 If

Fannie 720 761 762 720

Freddie 720 77 78 720

FHA 60 682 698 660

1%to20%HigherSales


21/25

WashingtonPolicyChange? QRMand20%downpaymentrequirement???

Affordability(stayingwithinbudget)moreimportantthandownpayment

NotaxpayerbailoutforFHAandVAprogram Limitmortgageinterestdeduc5onforhighincome

andsecondhomes???

Crushtheworkingclassinresortareas(YachtTaxImpact)


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Na5onalMuseumofAmericanHistory

4millionno-down-paymentVAmortgages

forWorldWarIIveterans

FueledanunprecedentedgrowthofAmericas

middleclass


23/25

RealEstateBaselineOutlook ModerateGDPExpansion1.%to2.%inthenext2years 1.0to1.millionannualjobaddi5onsyearlyinthenext2years MortgageRatesrisingto%byyear-end2011and.%in2012

Notthatimportantcomparedtounderwri1ngstandards Homevaluessteadyandslowgrowthinthena5onalpriceinthe

next2yearscri5calsourceofsmallbusinessstart-upfunds

Commercialnetabsorp5onrisingvacancyratesfalling


24/25

SpecialLocalMarketForecastfor2012 NorthDakotacon5nuing3%to%priceincrease

Jobs,Jobs,Jobs,Everywhere 3.3%unemploymentrate

SouthFloridasurprising10%priceincrease Slowjobsrecovery,butpricesaretoogoodtopassup Bargainhuntersandforeignbuyerscirclingandbidding


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