Market Facts in Uncertain Times
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Market Facts in Uncertain Times

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Informed consumers make smarter decisions.

Informed consumers make smarter decisions.

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Market Facts in Uncertain Times Market Facts in Uncertain Times Presentation Transcript

  • Market Facts in Uncertain Times NAR Research September 2010
  • Economic and Market Facts
    • Informed consumers make smarter decisions.
    • The economy is soft and consumer confidence remains low.
    • Housing affordability is at a generational high.
    • Home values in many markets have returned to historically justifiable levels.
    • Most economists expect home values to rise in upcoming years, though not at a fast pace.
    • Bad loans are nearly always made in good times. But recently originated loans are performing very well.
    • Patient homeowners over the long-term do much better than renters in attaining wealth.
  • Fact 1: The Economy is Growing, though Slowly GDP annualized % growth rate
  • Fact 2: The Private Sector is Finally Creating Some Jobs (Government jobs were not included since many could be temporary from stimulus measures) Monthly Net Private Payroll Job Changes in Thousands
  • Fact 3: Consumer Confidence Remains Low, though Clearly Off Bottom Index by The Conference Board
  • Fact 4: The 30-year Mortgage Rate is at Generational Lows (A very accommodative Federal Reserve monetary policy helping, but for how long?)
  • Fact 5: National Median Home Price Stabilizing (Combination of price change and type of homes that are selling)
  • Fact 6: Other Home Price Measurements Are Also Showing Price Stabilization
  • Fact 7: Home Price-to-Income Ratio Have Returned to Fundamentally Justifiable Levels Source: NAR
  • Fact 8: Economists Expect Price Increases in Upcoming Years
    • Macromarkets, a firm associated with Professor Robert Shiller, surveys about 100 economists on their outlook on home prices.
    • The consensus forecast as of August 2010 (which can be found at Macromarkets or via news media stories such as the Wall Street Journal) is as follows:
        • 0.78% price increase in 2011
        • 2.43% price increase in 2012
        • 3.20% price increase in 2013
        • 3.69% price increase in 2014
        • No forecast for 2015 and beyond
  • Fact 9: Delinquencies Are High but Recent Loan Originations Performing Well
    • Due to Past Lending Mistakes the Bad Loans are still working through the system
    • Banker’s Afterthought is nearly always that “Bad Loans are made in Bubble Times.”
    • However, the Mortgage Delinquency Rate may have peaked. According to the Mortgage Bankers Association, mortgage delinquencies fell to 9.85 percent in second quarter 2010 from 10.1 percent in the first quarter.
    • Various reports suggest good loan performance on recently originated mortgages (see government reports on loan performance of government backed mortgages).
    • One-third of homeowners own their homes free-and-clear. They are not included in mortgage delinquency statistics.
    • Loan approval is more difficult, which explains better recent loan performance. There is a better approval chance if the borrower stays well within
    • their budget.
  • Source: : Federal Reserve Median Family Net Worth Fact 10: Long-Term Path to Self Reliance may be Helped from Long-Term Housing Wealth Gains (2010 data to be published in 2012 by the Federal Reserve) Renters Homeowners
  • Reprint Guidelines
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    • For additional information, visit realtor.org/home/reprint_guidelines or contact Kelly Killian, manager of editorial development for REALTOR.org, at 312/329-8572, or send an e-mail to kkillian@realtors.org