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2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo
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2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo

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Housing Market and Economic Outlook …

Housing Market and Economic Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®

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  • 1. Residential Economic Issues & Trends Forum
  • 2. Housing  Market  and     Economic  Outlook   Lawrence  Yun,  Ph.D.   Chief  Economist   NATIONAL  ASSOCIATION    OF  REALTORS®     PresentaAon  in  Washington,  D.C.         May  15,  2014          
  • 3. U.S.  Popula:on   0   50   100   150   200   250   300   350   1968   1973   1978   1983   1988   1993   1998   2003   2008   2013   In  millions  
  • 4. Jobs  in  America  –  Less  Smooth   0   20000   40000   60000   80000   100000   120000   140000   160000   1968  -­‐  Jan   1969  -­‐  Dec   1971  -­‐  Nov   1973  -­‐  Oct   1975  -­‐  Sep   1977  -­‐  Aug   1979  -­‐  Jul   1981  -­‐  Jun   1983  -­‐  May   1985  -­‐  Apr   1987  -­‐  Mar   1989  -­‐  Feb   1991  -­‐  Jan   1992  -­‐  Dec   1994  -­‐  Nov   1996  -­‐  Oct   1998  -­‐  Sep   2000  -­‐  Aug   2002  -­‐  Jul   2004  -­‐  Jun   2006  -­‐  May   2008  -­‐  Apr   2010  -­‐  Mar   2012  -­‐  Feb   2014  -­‐  Jan  
  • 5. Jobs  to  Popula:on  Ra:o   (16  years  and  over)   50   52   54   56   58   60   62   64   66   1968  -­‐  Jan   1969  -­‐  Oct   1971  -­‐  Jul   1973  -­‐  Apr   1975  -­‐  Jan   1976  -­‐  Oct   1978  -­‐  Jul   1980  -­‐  Apr   1982  -­‐  Jan   1983  -­‐  Oct   1985  -­‐  Jul   1987  -­‐  Apr   1989  -­‐  Jan   1990  -­‐  Oct   1992  -­‐  Jul   1994  -­‐  Apr   1996  -­‐  Jan   1997  -­‐  Oct   1999  -­‐  Jul   2001  -­‐  Apr   2003  -­‐  Jan   2004  -­‐  Oct   2006  -­‐  Jul   2008  -­‐  Apr   2010  -­‐  Jan   2011  -­‐  Oct   2013  -­‐  Jul  
  • 6. Sluggish  Growth  +  Gap  aXer  Great  Recession      ($1.5  trillion  gap  …  $4,700  per  person)   0   5,000   10,000   15,000   20,000   1968   1970   1972   1974   1976   1978   1980   1982   1984   1986   1988   1990   1992   1994   1996   1998   2000   2002   2004   2006   2008   2010   2012   2014   GDP  in  2009  Dollars   Real  GDP   Real  GDP  W/O  Recession   3%  Growth  Line   2.2%  Growth  Line  
  • 7. Recent  Year  Ac:vity   GDP  Contrac:on  in  2014  Q1   -­‐10   -­‐5   0   5   10   2007   -­‐  Q1   2007   -­‐  Q3   2008   -­‐  Q1   2008   -­‐  Q3   2009   -­‐  Q1   2009   -­‐  Q3   2010   -­‐  Q1   2010   -­‐  Q3   2011   -­‐  Q1   2011   -­‐  Q3   2012   -­‐  Q1   2012   -­‐  Q3   2013   -­‐  Q1   2013   -­‐  Q3   2014   -­‐  Q1   GDP  Annualized  Growth  Rate  
  • 8. But  No  Fresh  Recession  in  Sight   -­‐6   -­‐4   -­‐2   0   2   4   GDP  Growth  Rate  from  one  year  ago  
  • 9. Cyclical  Housing  Sector:   Single-­‐Family  Exis:ng  Home  Sales  Only     (Best  Es:ma:on  –  could  be  off  by  several  %  points)   0   1,000,000   2,000,000   3,000,000   4,000,000   5,000,000   6,000,000   7,000,000   1968   1970   1972   1974   1976   1978   1980   1982   1984   1986   1988   1990   1992   1994   1996   1998   2000   2002   2004   2006   2008   2010   2012   2014  Q1  
  • 10. Single-­‐Family  Sales  to  Popula:on  Ra:o   (Average  =  1.36%)   0.0   0.5   1.0   1.5   2.0   2.5   1968   1970   1972   1974   1976   1978   1980   1982   1984   1986   1988   1990   1992   1994   1996   1998   2000   2002   2004   2006   2008   2010   2012   2014  Q1   %  
  • 11. #  of  People  per  Housing  Unit   0.00   0.50   1.00   1.50   2.00   2.50   3.00   3.50   1968   1970   1972   1974   1976   1978   1980   1982   1984   1986   1988   1990   1992   1994   1996   1998   2000   2002   2004   2006   2008   2010   2012  
  • 12. Single-­‐Family  Sales  to  Household  Ra:o   (Average  =  3.66%)   2.00   2.50   3.00   3.50   4.00   4.50   5.00   5.50   6.00   1968   1973   1978   1983   1988   1993   1998   2003   2008   2013  
  • 13. Monthly  Pending  Sales  Index   (Seasonally  Adjusted)   70.0   75.0   80.0   85.0   90.0   95.0   100.0   105.0   110.0   115.0   Source:  NAR  
  • 14. Exis:ng  Home  Sales  -­‐  Closings   3,000,000   3,500,000   4,000,000   4,500,000   5,000,000   5,500,000   2011  -­‐  Jan   2011  -­‐  Mar   2011  -­‐  May   2011  -­‐  Jul   2011  -­‐  Sep   2011  -­‐  Nov   2012  -­‐  Jan   2012  -­‐  Mar   2012  -­‐  May   2012  -­‐  Jul   2012  -­‐  Sep   2012  -­‐  Nov   2013  -­‐  Jan   2013  -­‐  Mar   2013  -­‐  May   2013  -­‐  Jul   2013  -­‐  Sep   2013  -­‐  Nov   2014  -­‐  Jan   2014  -­‐  Mar  
  • 15. Causes  of  Recent  Sales  Slowdown   •  Bad  winter   –  Only  delayed  sales  not  cancella:on   •  Lack  of  inventory   –  Steadily  more  inventory  coming  to  market   •  Home  prices  rose  too  fast   –  Showing  signs  of  slowing   •  Mortgage  credit  difficul:es   –  New  Qualified  Mortgage  Rules   –  Surely  cannot  get  worse!     •  Mortgage  rates  jumped   –  Trouble  !  
  • 16. Inventory  of  Homes  for  Sale   0   500,000   1,000,000   1,500,000   2,000,000   2,500,000   3,000,000   3,500,000   4,000,000   4,500,000   2007  -­‐  Jan   2007  -­‐  May   2007  -­‐  Sep   2008  -­‐  Jan   2008  -­‐  May   2008  -­‐  Sep   2009  -­‐  Jan   2009  -­‐  May   2009  -­‐  Sep   2010  -­‐  Jan   2010  -­‐  May   2010  -­‐  Sep   2011  -­‐  Jan   2011  -­‐  May   2011  -­‐  Sep   2012  -­‐  Jan   2012  -­‐  May   2012  -­‐  Sep   2013  -­‐  Jan   2013  -­‐  May   2013  -­‐  Sep   2014  -­‐  Jan  
  • 17. Change  in  Inventory   (%  change  from  one  year  ago)   -­‐30   -­‐25   -­‐20   -­‐15   -­‐10   -­‐5   0   5   10   15   20   2007  -­‐  Jan   2007  -­‐  May   2007  -­‐  Sep   2008  -­‐  Jan   2008  -­‐  May   2008  -­‐  Sep   2009  -­‐  Jan   2009  -­‐  May   2009  -­‐  Sep   2010  -­‐  Jan   2010  -­‐  May   2010  -­‐  Sep   2011  -­‐  Jan   2011  -­‐  May   2011  -­‐  Sep   2012  -­‐  Jan   2012  -­‐  May   2012  -­‐  Sep   2013  -­‐  Jan   2013  -­‐  May   2013  -­‐  Sep   2014  -­‐  Jan  
  • 18. Home  Price  Index  in  Phoenix  and  St.  Louis   Repeat-­‐Transac:on  Home  Price  Index   80   130   180   230   280   330   1995  -­‐  Q1   1995  -­‐  Q4   1996  -­‐  Q3   1997  -­‐  Q2   1998  -­‐  Q1   1998  -­‐  Q4   1999  -­‐  Q3   2000  -­‐  Q2   2001  -­‐  Q1   2001  -­‐  Q4   2002  -­‐  Q3   2003  -­‐  Q2   2004  -­‐  Q1   2004  -­‐  Q4   2005  -­‐  Q3   2006  -­‐  Q2   2007  -­‐  Q1   2007  -­‐  Q4   2008  -­‐  Q3   2009  -­‐  Q2   2010  -­‐  Q1   2010  -­‐  Q4   2011  -­‐  Q3   2012  -­‐  Q2   2013  -­‐  Q1  
  • 19. Change  in  Home  Price   (%  change  from  one  year  ago)   -­‐10   -­‐5   0   5   10   15   2011  -­‐  Jan   2011  -­‐  Mar   2011  -­‐  May   2011  -­‐  Jul   2011  -­‐  Sep   2011  -­‐  Nov   2012  -­‐  Jan   2012  -­‐  Mar   2012  -­‐  May   2012  -­‐  Jul   2012  -­‐  Sep   2012  -­‐  Nov   2013  -­‐  Jan   2013  -­‐  Mar   2013  -­‐  May   2013  -­‐  Jul   2013  -­‐  Sep   2013  -­‐  Nov   2014  -­‐  Jan   2014  -­‐  Mar   NAR   Case-­‐Shiller   CoreLogic  
  • 20. Median  Home  Price  –  Rising   ($40,000  Equity  Gain  in  3  years)   $166,100   $176,800   $197,100   $208,200   $150,000   $160,000   $170,000   $180,000   $190,000   $200,000   $210,000   $220,000   2011   2012   2013   2014  forecast  
  • 21. Inevitable  Rise  in  Mortgage  Rates  will  further   hurt  Affordability   1/3rd  of  homeowners  have  no  mortgage   1/3rd  have  4.3%  rate  or  lower   1/3rd  have  higher  rate   3   4   5   6   7   8   9   2000  -­‐  Jan   2000  -­‐  Jul   2001  -­‐  Jan   2001  -­‐  Jul   2002  -­‐  Jan   2002  -­‐  Jul   2003  -­‐  Jan   2003  -­‐  Jul   2004  -­‐  Jan   2004  -­‐  Jul   2005  -­‐  Jan   2005  -­‐  Jul   2006  -­‐  Jan   2006  -­‐  Jul   2007  -­‐  Jan   2007  -­‐  Jul   2008  -­‐  Jan   2008  -­‐  Jul   2009  -­‐  Jan   2009  -­‐  Jul   2010  -­‐  Jan   2010  -­‐  Jul   2011  -­‐  Jan   2011  -­‐  Jul   2012  -­‐  Jan   2012  -­‐  Jul   2013  -­‐  Jan   2013  -­‐  Jul   2014  -­‐  Jan   %  
  • 22. Locked-­‐in  Effect  of  Low  Rates?   •  Housing  cannot  get  back  to  normal  in  a  hurry   •  People  move  even  in  high  interest  rate  environment   –  Marriage,  divorce,  new  baby,  school  district,  new  job,  fed-­‐up   with  local  government,  …   •  Many  unplanned  landlords   –  Take  advantage  of  rising  rents  while  rates  are  low  and  fixed   •  Poten:al  future  lock  from  longer  holding  period  for   capital  gains  tax  exclusion  
  • 23. Rising  Renters’  and  Homeowners’  Rent  Growth     (On  the  Way  to  3%)   -­‐1   0   1   2   3   4   5   2003  -­‐  Jan   2003  -­‐  Jun   2003  -­‐  Nov   2004  -­‐  Apr   2004  -­‐  Sep   2005  -­‐  Feb   2005  -­‐  Jul   2005  -­‐  Dec   2006  -­‐  May   2006  -­‐  Oct   2007  -­‐  Mar   2007  -­‐  Aug   2008  -­‐  Jan   2008  -­‐  Jun   2008  -­‐  Nov   2009  -­‐  Apr   2009  -­‐  Sep   2010  -­‐  Feb   2010  -­‐  Jul   2010  -­‐  Dec   2011  -­‐  May   2011  -­‐  Oct   2012  -­‐  Mar   2012  -­‐  Aug   2013  -­‐  Jan   2013  -­‐  Jun   2013  -­‐  Nov   Owners'  Equivalent  Rent   Renters'  Rent  
  • 24. REALTOR®  Rent  Survey  –     Shows  Rent  Pressure   0   10   20   30   40   50   60   Falling   Rising  
  • 25. If  there  is  persistent  housing   shortage  …  then  the  basle  begins     Landlord  from  Hell    versus   Rent  Control    
  • 26. Housing  Starts  Rising  …  More  Inventory   But  Needs  to  Reach  1.5  1.7  million   0   500   1000   1500   2000   2500   2000   -­‐  Jan   2001   -­‐  Jan   2002   -­‐  Jan   2003   -­‐  Jan   2004   -­‐  Jan   2005   -­‐  Jan   2006   -­‐  Jan   2007   -­‐  Jan   2008   -­‐  Jan   2009   -­‐  Jan   2010   -­‐  Jan   2011   -­‐  Jan   2012   -­‐  Jan   2013   -­‐  Jan   2014   -­‐  Jan   mul:family   single-­‐family   Thousand units (annualized) Long-term Average
  • 27. New  Home  Sales   0   200   400   600   800   1000   1200   1400   1600   2000   -­‐  Jan   2001   -­‐  Jan   2002   -­‐  Jan   2003   -­‐  Jan   2004   -­‐  Jan   2005   -­‐  Jan   2006   -­‐  Jan   2007   -­‐  Jan   2008   -­‐  Jan   2009   -­‐  Jan   2010   -­‐  Jan   2011   -­‐  Jan   2012   -­‐  Jan   2013   -­‐  Jan   2014   -­‐  Jan   In  thousand  units  
  • 28. Sluggish  Recovery  in  Housing  Starts   •  Cost  of  Construc:on  Rising  Faster  than  CPI   •  Labor  Shortage  for  construc:on  work   •  Construc:on  loan  difficulty  for  small  local   homebuilders  …  Dodd-­‐Frank  financial   regula:ons?  
  • 29. Exis:ng  vs.  New  Home  Price   $0   $50,000   $100,000   $150,000   $200,000   $250,000   $300,000   $350,000   2000  -­‐   Jan   2002  -­‐   Jan   2004  -­‐   Jan   2006  -­‐   Jan   2008  -­‐   Jan   2010  -­‐   Jan   2012  -­‐   Jan   2014  -­‐   Jan   Exis:ng   New  
  • 30. Economic  Outlook  
  • 31. Monetary  Policy   •  Tapering  Ends  by  the  year  end  2014   •  Fed  Funds  Rate  …  hike  in  2015  Q1   •  Earlier  Move  to  Tighten  because  of  Infla:on   Pressure   •  Long-­‐term  Steady  State  Rate  (2016  onwards)  ..  10   year  Treasury  at  5.0%    …  250  basis  points  higher   than  current    
  • 32. Core  Price  InflaAon:    Less  than  2%;     but  rose  at  2.5%  annualized  rate   (%  change  from  one  year  ago)   0.00   0.50   1.00   1.50   2.00   2.50   3.00   3.50   1999  -­‐  Jan   1999  -­‐  Jul   2000  -­‐  Jan   2000  -­‐  Jul   2001  -­‐  Jan   2001  -­‐  Jul   2002  -­‐  Jan   2002  -­‐  Jul   2003  -­‐  Jan   2003  -­‐  Jul   2004  -­‐  Jan   2004  -­‐  Jul   2005  -­‐  Jan   2005  -­‐  Jul   2006  -­‐  Jan   2006  -­‐  Jul   2007  -­‐  Jan   2007  -­‐  Jul   2008  -­‐  Jan   2008  -­‐  Jul   2009  -­‐  Jan   2009  -­‐  Jul   2010  -­‐  Jan   2010  -­‐  Jul   2011  -­‐  Jan   2011  -­‐  Jul   2012  -­‐  Jan   2012  -­‐  Jul   2013  -­‐  Jan   2013  -­‐  Jul   2014  -­‐  Jan   All  items  exlcuding  fuel  and  energy  
  • 33. GDP  Growth  =  Job  Crea:ons   (8  million  lost  …  8  million  gained)   124000   126000   128000   130000   132000   134000   136000   138000   140000   2000  -­‐  Jan   2000  -­‐  Jul   2001  -­‐  Jan   2001  -­‐  Jul   2002  -­‐  Jan   2002  -­‐  Jul   2003  -­‐  Jan   2003  -­‐  Jul   2004  -­‐  Jan   2004  -­‐  Jul   2005  -­‐  Jan   2005  -­‐  Jul   2006  -­‐  Jan   2006  -­‐  Jul   2007  -­‐  Jan   2007  -­‐  Jul   2008  -­‐  Jan   2008  -­‐  Jul   2009  -­‐  Jan   2009  -­‐  Jul   2010  -­‐  Jan   2010  -­‐  Jul   2011  -­‐  Jan   2011  -­‐  Jul   2012  -­‐  Jan   2012  -­‐  Jul   2013  -­‐  Jan   2013  -­‐  May   2013  -­‐  Nov   In thousands
  • 34. Local  Market  Job  Comparisons   Fast  Growing  States   1-­‐year  Growth  Rate   Nevada   3.8%   North  Dakota   3.7%   Colorado   3.0%   Florida   3.0%   Oregon   2.7%   Texas   2.7%   Utah   2.6%   Delaware   2.4%   California   2.3%   Arizona   1.9%   Slow  Moving  States   1-­‐year  Growth  Rate   New  Mexico   -­‐0.2%   Kentucky   -­‐0.2%   New  Jersey   0.0%   Virginia   0.1%   Alaska   0.2%   West  Virginia   0.3%   Pennsylvania   0.3%   Maryland   0.3%   D.C.   0.4%   Mississippi   0.5%  
  • 35. Business  Spending  in  rela:on  to  Corporate  Profits  …   Huge  Poten:al  for  Business  Spending  Increase   0   500   1000   1500   2000   2500   1980  -­‐  Q1   1981  -­‐  Q3   1983  -­‐  Q1   1984  -­‐  Q3   1986  -­‐  Q1   1987  -­‐  Q3   1989  -­‐  Q1   1990  -­‐  Q3   1992  -­‐  Q1   1993  -­‐  Q3   1995  -­‐  Q1   1996  -­‐  Q3   1998  -­‐  Q1   1999  -­‐  Q3   2001  -­‐  Q1   2002  -­‐  Q3   2004  -­‐  Q1   2005  -­‐  Q3   2007  -­‐  Q1   2008  -­‐  Q3   2010  -­‐  Q1   2011  -­‐  Q3   2013  -­‐  Q1   Profits   Business  Spending  
  • 36. Economic  Forecast   2013   2014   forecast   2015   forecast   GDP  Growth   1.9%   2.2%   2.9%   Job  Growth   1.7%   1.6%   1.9%   CPI  Infla:on   1.4%   2.5%   3.5%   Consumer  Confidence   73   82   86   10-­‐year  Treasury   2.5%   3.0%   3.8%  
  • 37. Housing  Market  Outlook  
  • 38. Pent  Up  Demand   2000   2013   Exis:ng  Home  Sales   5.2  m   5.1  m   New  Home  Sales   880  K   430  K   Mortgage  Rates   8.0%   4.0%   Payroll  Jobs   132.0  m   136.4  m   Popula:on   282  m   316  m  
  • 39. Vaca:on  Home  Sales    -­‐          200      400      600      800      1,000      1,200     2003   2004   2005   2006   2007   2008   2009   2010   2011   2012   2013   In  thousands  
  • 40. Household  Net  Worth     40000   45000   50000   55000   60000   65000   70000   75000   2000  -­‐  Q1   2000  -­‐  Q4   2001  -­‐  Q3   2002  -­‐  Q2   2003  -­‐  Q1   2003  -­‐  Q4   2004  -­‐  Q3   2005  -­‐  Q2   2006  -­‐  Q1   2006  -­‐  Q4   2007  -­‐  Q3   2008  -­‐  Q2   2009  -­‐  Q1   2009  -­‐  Q4   2010  -­‐  Q3   2011  -­‐  Q2   2012  -­‐  Q1   2012  -­‐  Q4   $  billion  
  • 41. Home  Countries  for  Interna:onal  Buyers   Preliminary  Analysis,  Subject  to  Change     *  Includes  People’s  Republic  of  China,  Taiwan,  and  Hong  Kong   Brazil   Canada   China*   Germany   India   Japan   Mexico   Russia   United   Kingdom   2011   3%   23%   9%   4%   7%   2%   7%   1%   7%   2012   3%   24%   12%   3%   6%   1%   8%   2%   6%   2013   2%   23%   12%   3%   5%   1%   8%   2%   5%   2014P   2%   18%   18%   3%   4%   2%   9%   1%   6%   0%   5%   10%   15%   20%   25%   30%   Distribu:on  of  Interna:onal  Sales  by  Country  of  Origin    
  • 42. Will  China  overtake  the  U.S.  in  GDP?   Had  An:cipated  around  2010   0   5000   10000   15000   20000   25000   1929   1933   1937   1941   1945   1949   1953   1957   1961   1965   1969   1973   1977   1981   1985   1989   1993   1997   2001   2005   2009   2013   2017   2021   2025   U.S.  (growing  3%)   China  (growing  8%)  
  • 43. Chinese  Yuan  vs.  U.S.  Dollar    (Yuan  per  $)   5.00   5.50   6.00   6.50   7.00   7.50   8.00   8.50   2000  -­‐  Jan   2000  -­‐  Jul   2001  -­‐  Jan   2001  -­‐  Jul   2002  -­‐  Jan   2002  -­‐  Jul   2003  -­‐  Jan   2003  -­‐  Jul   2004  -­‐  Jan   2004  -­‐  Jul   2005  -­‐  Jan   2005  -­‐  Jul   2006  -­‐  Jan   2006  -­‐  Jul   2007  -­‐  Jan   2007  -­‐  Jul   2008  -­‐  Jan   2008  -­‐  Jul   2009  -­‐  Jan   2009  -­‐  Jul   2010  -­‐  Jan   2010  -­‐  Jul   2011  -­‐  Jan   2011  -­‐  Jul   2012  -­‐  Jan   2012  -­‐  Jul   2013  -­‐  Jan   2013  -­‐  Jul   2014  -­‐  Jan  
  • 44. Global  Pent-­‐Up  Demand  from  Rising   World  Popula:on   0   2   4   6   8   10   1000   1100   1200   1300   1400   1500   1600   1700   1800   1900   2000   2100   In  billions   World-­‐Class  Ci:es  will  Benefit  !   •  Boston,  Chicago,  Dallas,  Miami,  New  York,  San  Diego,     San  Francisco,  Washington  D.C.,  etc.  
  • 45. Housing  Forecast   2013   2014   forecast   2015   forecast   Housing  Starts   925,000   1.07  million   1.4  million   New  Home  Sales   430,000   510,000   710,000   Exis:ng  Home  Sales   5.1  million   4.9  million   5.2  million   Median  Price   $197,000   $209,000   $219,000   30-­‐year  Rate   4.0%   4.7%   5.5%   Dollar  Volume  Es:mate   +21%   +3%   +11%  
  • 46. Housing  Market     and     Economic  Outlook   Lawrence  Yun,  Ph.D.   Chief  Economist   NATIONAL  ASSOCIATION    OF  REALTORS®     PresentaAon  in  Washington,  D.C.         May  15,  2014          
  • 47. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Housing Demand Eric Belsky May 2014 Washington, DC
  • 48. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Federal Surveys Providing a Murky Picture on Extent of Recent Household Growth 0 500 1,000 1,500 2011 2012 2013 Change in Households (Thousands) Housing Vacancy Survey Current Population Survey American Community Survey Note: Data for 2013 American Community Survey is not yet available and is not presented on this slide. Household growth for Housing Vacancy Survey uses revised 2010/12 vintage weights, and the Current Population Survey uses 2010 vintage weights
  • 49. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Hard to Know What’s Happening With Household Growth But . . . Long-Run Housing Production Is WAY Below Narrow Normal Range 0 500 1,000 1,500 2,000 Lagging Ten-Year Annual Average Housing Completions and Manufactured Home Placements (Thousands) Median Source: US Census Bureau
  • 50. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E WAITING FOR STRONGER DEMAND REBOUND 50
  • 51. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Even CPS Suggests Cumulative Household Growth Is Now 1.5 Million Below Even Modest 1.14M ’95 -’00 Trend -4,000 -3,000 -2,000 -1,000 0 1,000 2006 2007 2008 2009 2010 2011 2012 Change in Number of Households (Thousands) CPS vs 1995-2000 Rate CPS vs. 2000-2005 Rate
  • 52. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Nearly 3 Million More Adults in Their 20s and Early 30s Lived with their Parents In 2012 Than 2007 0 500 1,000 1,500 2,000 20-24 25-29 30-34 Age Change from 2007-2012 in Number of Adult Children Living with Parents (Thousands) Source: JCHS tabulations of US Census Bureau, Current Population Survey
  • 53. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Real Median Incomes for All Young Adult Households Have Declined Since Great Recession -15 -10 -5 0 20-24 25-29 30-34 35-39 Age 2007-2012 Change in Real Median Household Incomes (Percent) Note: Percent change based on dollar values that have adjusted for inflation using the CPI-U for All Items. Source: JCHS tabulations of US Census Bureau, Current Population Survey.
  • 54. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E A Significant But Lower Fraction of Adult Children Living with Parents Were Employed Full Time in ‘12 than ‘07 0 50 100 20-24 25-29 30-34 35-39 Age Share of Adult Children Living with Parents Who Have Full-Time Employment (Percent) 2007 2012 Source: JCHS tabulations of US Census Bureau, Current Population Survey
  • 55. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Student Default Rates Have Soared, Hindering Ability to Qualify for a Mortgage 0 2 4 6 8 10 12 14 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 2011:Q3 2012:Q1 2012:Q3 2013:Q1 2013:Q3 Share of Seriously Delinquent Student Loans (Percent) Note: Seriously delinquent student loans are defined as 90-plus days delinquent. Source: Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit.
  • 56. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E 0 10 20 30 40 50 60 70 80 90 100 2004 2010 Payments are 15 percent or greater of monthly income Payments are 10 to 14.9 percent of monthly income Payments are 5 to 9.9 percent of monthly income0 10 20 30 40 50 60 70 80 90 100 2004 2010 Share of Households with Head Aged 20 to 29 (Percent), By Tenure and Year Student Debt Payments May Pose a Significant Barrier to Mortgage Borrowing For As Many 1 in 10 Renters in Their 20s Renters Owners Source: JCHS tabulations of Federal Reserve Board, Survey of Consumer Finances
  • 57. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E 0 10 20 30 40 50 60 70 80 90 100 2004 2010 0 10 20 30 40 50 60 70 80 90 100 2004 2010 Payments are 15 percent or greater of monthly income Payments are 10 to 14.9 percent of monthly income Payments are 5 to 9.9 percent of monthly income Payments are less than 5 percent of monthly income Has student loan debt but not making payments on it Has no student loan debt And Even Smaller Share of Renters in Their 30s Are Spending 5 Percent+ of Income on Student Debt Renters Owners Source: JCHS tabulations of Federal Reserve Board, Survey of Consumer Finances Share of Households with Head Aged 30 to 39 (Percent), By Tenure and Year
  • 58. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Household Growth Is Expected to Rival or Top 1995-2000 Annual Average Pace 500 600 700 800 900 1,000 1,100 1,200 1,300 1995-2000 CPS HVS Source: JCHS Household Projections (for Projected Annual Average Household Growth) 500 600 700 800 900 1,000 1,100 1,200 1,300 2000-2010 Decennial Census 500 600 700 800 900 1,000 1,100 1,200 1,300 JCHS Projections 15-25 Low Projection Middle Projection High Projection Average Annual Household Growth (Thousands)
  • 59. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Minority Households Will Account for 76 Percent of Household Growth Over the Next Decade 0 20 40 60 80 100 Household Composition in 2012 ACS Projected Composition of Household Growth, 2015-2025 Percent Share of Households, by Race and Ethnicity Asian/other Hispanic Black, non-Hispanic White, non-Hispanic Source: JCHS tabulations of US Census Bureau, 2012 American Community Survey; JCHS Household Projections, Middle Series
  • 60. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E The Greatest Increase in Households Will Be Among Households 65 and Older 0 2 4 6 8 10 12 14 <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80+ 2015 2025 Projected Households (Millions) 60 Source: JCHS households projections.
  • 61. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E WILL V. WAY 61
  • 62. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Nearly All People Under Age 45 Expect to Buy in the Future . . . 0 20 40 60 80 100 Under 25 25 to 34 35 to 44 45 to 54 55 to 64 % Who Expect to Buy a Home at Some Point in the Future Source: Drew and Herbert, 2012. Based on Fannie Mae National Housing Survey 2010-2012.
  • 63. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E But Underwriting Has Tightened Dramatically 0 20 40 60 80 100 2006 2007 2008 2009 2010 2011 2012 Share of FHA-Insured Mortgages by Dollar Volume (Percent) Below 640 640-679 680-850 0 20 40 60 80 100 2001 2011 Share of Freddie Mac and Fannie Mae Originations (Percent) Higher Risk Medium Risk Lower Risk Notes: Higher (lower) risk loans are to borrowers with credits scores under 690 (above 750) and have loan-to- value ratios above 85% (below 75%). FHA data exclude records with no credit score information. Sources: Amherst Securities; US Department of Housing and Urban Development. Credit Score
  • 64. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Demanding More Down or Capping Credit Scores Disproportionately Impacts Minorities 12 38 11 29 60 27 18 49 18 5 23 6 0 10 20 30 40 50 60 70 3% Downpayment 10% Downpayment FICO 660 PercentofPerforming LoansExcluded Non-Hispanic White African American Latino Asian 64 Percent of performing loans excluded from mortgage market 2004-2008 originations (1st lien, owner occupied, full doc only--excludes IO, neg. am and < 5 year hybrid ARMs) Source: Roberto Quercia, Lei Ding, and Carolina Reid (2012). Balancing Risk and Access: Underwriting Standards for Qualified Residential Mortgages, Center for Community Capital Research Report, January 2012.
  • 65. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E . . . And those with Lower Incomes 25 49 2522 49 18 13 42 12 7 32 8 0 10 20 30 40 50 60 3% Downpayment 10% Downpayment FICO 660 PercentofPerforming LoansExcluded Low-Income Moderate-Income Middle-Income Upper-Income 65 Percent of performing loans excluded from mortgage market 2004-2008 originations (1st lien, owner occupied, full doc only--excludes IO, neg. am and < 5 year hybrid ARMs) Note: Income categories are defined as follows: low—less than 50% of MSA median income; moderate—50-79%; middle—80-119%; and upper —120%+ of MSA median income. Source: Roberto Quercia, Lei Ding, and Carolina Reid (2012). Balancing Risk and Access: Underwriting Standards for Qualified Residential Mortgages, Center for Community Capital Research Report, January 2012.
  • 66. Dennis McGill
  • 67. National Association of REALTORS® May 15, 2014 Zelman & Associates Equity Research
  • 68. Drivers of New Shelter q  Accelerating Household Formations q  Decoupling of households q  Improving job growth q  Increasing consumer confidence q  Near Record Occupancy Levels in Rental Housing q  Constrained Resale Housing Inventory q  Deficit of Shelter
  • 69. New Housing Supply Implied by Decade Analysis 500 1,490 1,090 155 330 260 55 80 70 720 1,925 1,440 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2010-13 2014-19 2010-19 Manufactured Housing 2-4 Unit Multi-Family 5-Plus Multi-Family Single-Family New Housing Supply, in Thousands Annual Average Source: Census Bureau, Zelman & Associates analysis
  • 70. CPS Not Perfect But Showed Strongest Alignment With Decennial Census990 1,395 740 700 1,935 655 1,430 1,550 1,380 855 1,855 1,100 2,000 730 1,355 1,050 1,645 780 400 360 1,155 1,155 1,465 0 500 1,000 1,500 2,000 2,500 1Q91 1Q92 1Q93 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 Current Population Survey Change in National Households in Thousands With Trailing Three-Year Average Source: Census Bureau, Zelman & Associates analysis
  • 71. Electric Data Supports Accelerating Trend in CPS Households 1.4% 1.2% 1.4% 1.4% 1.5% 1.3% 1.6% 1.5% 1.5% 1.7% 1.7% 1.5% 1.1% 1.2% 1.5% 1.4% 1.2% 0.8% 0.2% 0.4% 0.3% 0.5% 0.8% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Residential Electric Customers % Change CPS Average Households % Chg Source: Census Bureau, Energy Information Administration, Zelman & Associates analysis
  • 72. Not Surprisingly, Young Adult Employment Driving Household Growth 86.0% 87.0% 88.0% 89.0% 90.0% 91.0% 92.0% 93.0% 94.0% 95.0% 96.0% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % Change Residential Electric Customers - left 20-34 Year Old Employment Rate - right Source: BLS, Energy Information Administration, Zelman & Associates analysis
  • 73. High Occupancy Supports Stable Rent Growth (10%) (8%) (6%) (4%) (2%) 0% 2% 4% 6% 8% 10% 91.0% 91.5% 92.0% 92.5% 93.0% 93.5% 94.0% 94.5% 95.0% 95.5% 96.0% 2Q97 4Q97 2Q98 4Q98 2Q99 4Q99 2Q00 4Q00 2Q01 4Q01 2Q02 4Q02 2Q03 4Q03 2Q04 4Q04 2Q05 4Q05 2Q06 4Q06 2Q07 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 Occupancy Rent Growth National Rent Growth and Occupancy Long-Term Average = 94% Source: Axiometrics, Zelman & Associates analysis
  • 74. Recession Delayed Move to Single-Family for Many Married Couples 15.0% 15.6% 16.3% 14.7% 14.2% 15.3% 15.4% 15.6% 15.5% 17.1% 15.3% 16.3% 15.9% 16.2% 15.4% 16.9% 16.2% 17.1% 17.4% 18.6% 18.7% 19.3% 10% 12% 14% 16% 18% 20% 1Q92 1Q93 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 Percentage of 25-34 Year Old Married Couples that Reside in Traditional Apartments We believe that majority of change of late has been due to recessionary impacts that should unwind Source: Census Bureau, Zelman & Associates analysis
  • 75. Constrained Single-Family Rental Supply and Strong Demand Drive Price Inflation 84.0 88.3 86.1 81.7 83.6 86.6 84.8 77.9 79.4 84.8 79.3 80.7 23.5 23.2 32.2 34.7 34.1 35.2 39.7 44.8 42.7 35.0 43.5 40.7 10 20 30 40 50 60 70 80 90 100 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Mar-13 Feb-14 Mar-14 Demand Supply Supply Versus Demand of Single-Family Rentals 0-100 Scale Source: Zelman & Associates Single-Family Rental Survey
  • 76. Existing Inventory Relative to Households ~30% Lower Than Last Two Decades 2.8% 2.0% 2.1% 1.4% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 1980s 1990s 2000s 1Q14 Existing Home Inventory as Percentage of Households ~30% discount to average of last two decades Source: Census Bureau, NAR, Zelman & Associates analysis
  • 77. Inventories at 30-Year Lows Support Robust Home Price Outlook 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 1Q90 3Q90 1Q91 3Q91 1Q92 3Q92 1Q93 3Q93 1Q94 3Q94 1Q95 3Q95 1Q96 3Q96 1Q97 3Q97 1Q98 3Q98 1Q99 3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 Seasonally-Adjusted Single-Family New and Existing Home Inventory as Percentage of Households 3.5% 4.8% -5.4% Average real change in existing home prices per range of for-sale inventory. Source: Census Bureau, NAR, Zelman & Associates analysis
  • 78. Ranking of Local Resale Markets80 75 73 72 71 71 70 70 68 68 67 66 66 65 65 64 64 63 63 61 58 58 57 57 57 54 51 62 40 50 60 70 80 90 Houston SanFrancisco Austin LosAngeles Denver Miami Orlando Charlotte LasVegas Dallas WashingtonD.C. SaltLakeCity Charleston Indianapolis Raleigh Naples SanAntonio InlandEmpire Atlanta SanDiego Chicago Tampa Sacramento Philadelphia Jacksonville Phoenix Cincinnati National Ranking of Local Resale Markets Trailing Three Month Average 0 = Extreme Buyers' Market, 100 = Extreme Sellers' Market Source: Zelman & Associates Homebuilding Survey
  • 79. Distressed Sales Decline Due to Shrinking Supply While Traditional Sales Remain Healthy -3% -3% -11% -19% -18% -18% -12% -14% -17% -14% -16% -5% 30% 32% 23% 19% 22% 23% 6% 1% -13% -36% -14% 23% 11% 15% 15% 13% 18% 15% 19% 23% 9% -45% -35% -25% -15% -5% 5% 15% 25% 35% 45% 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 Year-Over-Year Change in Existing Home Sales REO Sales Short Sales Traditional Sales Source: CoreLogic, Zelman & Associates analysis
  • 80. Distressed Sales as a Percentage of Total Existing Home Sales are Declining 3% 3% 3% 4% 6% 6% 7% 11% 17% 19% 22% 30% 35% 29% 26%26% 30% 25% 29% 30% 34% 28% 26% 27% 29% 24% 22% 24%24% 19% 17% 18%18% 0% 5% 10% 15% 20% 25% 30% 35% 40% 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Distressed Sales as % of Existing Home Sales Source: CoreLogic, Zelman & Associates analysis
  • 81. Availability of Distressed Homes Remains Constrained Across All Channels 36.1 29.6 20.4 33.3 30.7 18.7 34.0 28.9 23.5 38.2 31.7 26.1 10 20 30 40 50 60 70 MLS Trustee / Auction Sales Portfolios 2Q13 3Q13 4Q13 1Q14 Availability of REO For Sale 0 = No Availability 100 = Abundant Availability Source: Zelman & Associates Single-Family Rental Survey
  • 82. Relative to Households, 2013 Closings 20% Lower Than 25-Year Average 5.6% 5.9% 5.7% 5.6% 5.0% 4.7% 4.4% 4.8% 5.2% 5.4% 5.2% 5.6% 5.7% 6.2% 6.3% 6.1% 6.0% 6.2% 6.5% 7.2% 7.6% 6.8% 5.4% 4.3% 3.9% 3.7% 3.6% 3.9% 4.3% 4.1% 4.2% 4.4% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E Home Closings as Percentage of Households Source: Census Bureau, Company data, CoreLogic, NAR, Zelman & Associates analysis
  • 83. Resale Days on Market Down Sequentially and Year Over Year in March 91 62 55 98 66 53 0 20 40 60 80 100 120 Mar-12 Mar-13 Mar-14 Mar-12 Mar-13 Mar-14 Median Number of Days on Market Until Sale All Existing Home Sales Non-Distressed Homes Source: NAR, Zelman & Associates analysis
  • 84. After First Increase Since 2007, Double-Digit Growth Projected in AD&C Lending in 2014-15 54% 34% 4% 4% -6% -15% -23% -22% -13% -1% 7% 15% 9% 22% 21% 14% 22% 0% 10% 21% 31% 24% 13% -5% -23% -27% -19% -9% 5% 14% 12% 500 700 900 1,100 1,300 1,500 1,700 1,900 2,100 2,300 -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E Change in Outstanding AD&C Loans Total Housing Starts Source FDIC, Zelman & Associates analysis
  • 85. Both High and Low-Income Buyers at Record Level of Affordability 10% 12% 14% 16% 18% 20% 22% 24% 26% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 All incomes Upper-Middle and Upper Income Lower and Lower-Middle Income Median Front-End DTI of Purchase Originations Assuming 30-Year Fixed Rate Mortgage Source: HMDA, Zelman & Associates analysis
  • 86. Investor Mortgages During Peak Were Highly Levered and Poorly Underwritten 4% 4% 4% 5% 5% 6% 6% 6% 6% 7% 7% 8% 9% 11% 14% 17% 16% 14% 12% 9% 10% 12% 12% 11% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Investor Share of Unit Purchase Mortgage Originations Note: Investor mortgages accounted for 53% of growth from 1999-2005, excluding non owner-occupants that falsely applied as owners for more favorable terms Source: Census Bureau, Company data, CoreLogic, HMDA. NAR, Zelman & Associates analysis
  • 87. Cash Purchases Higher Across Market But Mix is Critical Element 14% 13% 13% 14% 15% 14% 14% 15% 18% 20% 23% 25% 24% 22% 65% 43% 49% 43% 46% 47% 54% 65% 74% 79% 76% 76% 73% 73% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % of Owner-Occupant Purchases Using Cash % of Investor Purchases Using Cash Source: Census Bureau, Company data, CoreLogic, HMDA, NAR, Zelman & Associates analysis
  • 88. Zelman Survey Indicates Underwriting is Loosening While Credit Quality is Improving 68.7 70.7 72.6 74.6 74.8 74.9 75.4 76.5 76.7 76.5 76.6 76.1 74.8 73.5 71.7 70.9 70.0 61.3 60.3 59.2 59.6 59.2 58.1 57.9 58.6 60.5 64.4 66.4 67.4 68.3 68.7 68.0 68.8 69.0 50 55 60 65 70 75 80 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Internal Underwriting Criteria Index 0 = Extremely Easy 100 = Extremely Tight Applicant Credit Quality Index 0 = Extremely Weak 100 = Extremely Strong Source: Zelman & Associates Mortgage Survey
  • 89. Owner-Occupant Purchases Mortgages Post Double-Digit Growth in 2013 -3% 6% 1% 5% 3% 2% -11% -22% -26% -8% -6% -9% 15% 15% 0% 12% 8% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E Year-Over-Year Change in Owner-Occupied Unit Purchase Mortgage Originations Source: HMDA, Zelman & Associates analysis
  • 90. Big Banks Not Representative of Market; Smaller Institutions Stepping Up 10% 1% 0% -9% -16% -7% 29% 27% 12% 3% -12% 15% -20% -10% 0% 10% 20% 30% 40% CreditUnions RegionalBanks MortgageCompanies AllBanks NationalBanks Total CreditUnions MortgageCompanies RegionalBanks AllBanks NationalBanks Total Year-Over-Year Growth in Purchase Unit Originations by Institution Type 2011 2012 Source: HMDA, Zelman & Associates analysis
  • 91. Higher-Quality Borrowers Led Recovery in 2012, But Entry-Level Credits Joined in 2013 35% 27% 8% -10% 15% 21% 21% 10% 3% 15% -20% -10% 0% 10% 20% 30% 40% A+ A B C Total 2012 2013 Owner-Occupied Purchase Mortgage Year-Over-Year Growth by Credit Bucket Source: HMDA, Ellie Mae, Zelman & Associates analysis
  • 92. Purchase Activity in Younger Age Cohorts Likely Stronger than Assumed 8% 19% 13% 20% 15% 9% 19% 14% 16% 15% 0% 5% 10% 15% 20% 25% Under 30 30-39 40-49 50-plus All 2012 2013 Owner-Occupied Purchase Mortgage Year-Over-Year Growth by Age Source: HMDA, Ellie Mae, Zelman & Associates analysis
  • 93. Lack of Savings for a Downpayment Most Cited as Hurdle to Credit… 55% 44% 19% 19% 42% 31% 25% 19% 0% 10% 20% 30% 40% 50% 60% I do not have enough savings for a downpayment My monthly income would not support the cost of ownership I have bad credit I have too much debt I do not have enough savings for a downpayment My monthly income would not support the cost of ownership I have bad credit I have too much debt Reasons Young Adults Do Not Believe They Would Qualify for a Mortgage Respondents Requested to Select All that Apply - Answers Do Not Sum to 100% 25-29 Year Olds 30-34 Year Olds Source: Zelman & Associates Consumer Survey
  • 94. …But Consumers Don’t Understand Actual Downpayment Requirements 9% 11% 11% 16% 15% 18% 12% 14% 13% 30% 28% 32% 27% 37% 24% 38% 24% 29% 30% 29% 19% 16% 10% 16% 13% 12% 19% 17% 22% 24% 31% 26% 21% 23% 31% 25% 14% 10% 14% 10% 12% 21% 13% 19% 15% 0% 20% 40% 60% 80% 100% 120% 18-21 22-24 25-29 30-34 35-39 40-44 45-59 50-Plus Total Over 20% 16-20% 11-15% 6-10% 0-5% Perceived Downpayment Requirement for Purchase Mortgage Note: FHA Downpayment Requirement = 3.5% Source: FHA, Zelman & Associates Consumer Survey
  • 95. Surprisingly, Credit Scores Improved During Downturn for Bottom Quartile of Consumers 606 607 609 609 608 607 608 612 614 616 621 703 706 708 710 712 713 713 712 712 713 712 550 570 590 610 630 650 670 690 710 730 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 Bottom Quartile Median Consumer Credit Scores Source: Federal Reserve, Zelman & Associates analysis
  • 96. Nearly a Quarter of Under-35 Age Cohort is Debt Free, Better than History 20% 19% 17% 19% 17% 20% 16% 22% 24% 14% 11% 0% 5% 10% 15% 20% 25% 1989 1992 1995 1998 2001 2004 2007 2010 Under 35 25-29 30-34 Percentage of Under-35 Age Cohort That is Debt Free Federal Reserve Survey of Consumer Finances Zelman 2014 Survey Source: Federal Reserve, Zelman & Associates Consumer Survey
  • 97. Contrary to Fears, Student Loan Debt Uncorrelated to Household Formation 17% 23% 20% 14% 13% 13% 16% 18% 17% 0% 5% 10% 15% 20% 25% With Without Total With Without Total With Without Total Share of Young Adults Living at Home, Depending on Student Loan Status 25-29 Year Olds 25-34 Year Olds30-34 Year Olds Source: Zelman & Associates Consumer Survey
  • 98. Important to Differentiate Between Ownership and Living in a Single-Family Home 27% 26% 47% 62% 34% 46% 62% 77% 0% 10% 20% 30% 40% 50% 60% 70% 80% Living at Home All Renters Married Renters Married Renters With Children Living at Home All Renters Married Renters Married Renters With Children Hypothetical Housing Decisions for 25-34 Renters or Those Living at Home Purchase if Moved in Next Year Single-Family if Moved in Next Year Single-Family Share Higher than Purchase Share for Every Segment Source: Zelman & Associates Consumer Survey
  • 99. Historical Drivers of Younger Ownership Rates Point to Future Gains 40% 41% 42% 43% 44% 45% 46% 47% 48% 49% 50% 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Homeownership Rate of 25-34 Year Olds From 2004 to 2012, initial losses were driven by falling real incomes and lower affordability, while additional losses resulted from lower employment and incomes, falling home prices, and tighter credit. From 1993 to 2004, rising real incomes, lower interest rates relative to the 1980s and more lenient underwriting standards helped to increase ownership rates. Homeownership rates fell despite the decline in interest rates as real income growth stagnated and affordability remained elusive. Source: Census Bureau, Zelman & Associates analysis

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