• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Economic and Housing Market Trends and Outlook
 

Economic and Housing Market Trends and Outlook

on

  • 586 views

Jed Smith, Managing Director, Quantitative Research

Jed Smith, Managing Director, Quantitative Research
NATIONAL ASSOCIATION OF REALTORS®

North Carolina Real Estate Summit
Cary, North Carolina
July 16, 2013

Statistics

Views

Total Views
586
Views on SlideShare
586
Embed Views
0

Actions

Likes
0
Downloads
2
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Economic and Housing Market Trends and Outlook Economic and Housing Market Trends and Outlook Presentation Transcript

    • Economic and Housing Market Trends and Outlook Jed Smith Managing Director, Quantitative Research NATIONAL ASSOCIATION OF REALTORS® North Carolina Real Estate Summit Embassy Suites, Cary, North Carolina July 16, 2013
    • The Outlook: Forecast Slow Economic Expansion 2011 2012 2013 Forecast 2014 Forecast GDP Growth +1.8% +2.1% +1.8% 2.7% Existing Home Sales 4.3 million 4.7 million 5.0 million 5.2 million Housing Starts 610 K 780 K 1.0 million 1.25 million Existing Home Price Growth - 4% + 6% + 8% + 5% 30-yr Mortgage Rate 4.7% 3.7% 4.0% 4.7%
    • “It Was the Best Of Times, and the Worst of Times” Index Continues Below 100: Expansion Slow, Weaker than Normal Conference Board: Consumer Confidence SA, 1985=100 100500959085 Source: The Conference Board 07/02/13 150 125 100 75 50 25 150 125 100 75 50 25
    • “It Was the Best Of Times, and the Worst of Times” Levels of Uncertainty Higher than Normal Economy: Slower/Weaker Expansion Economic Policy Uncertainty Index 1985-09=100 100500959085 Source: PolicyUncertainty.com 07/02/13 250 200 150 100 50 250 200 150 100 50
    • U.S. Total Payroll Jobs Labor Force Participation Rate Down 3 Percent 11.8 Million Unemployed 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 In thousands
    • Employment: The Major Issues Unemployed, 16 Years & Over: 16 yr + SA, Thous 100500959085 Source: Bureau of Labor Statistics 07/02/13 16000 14000 12000 10000 8000 6000 4000 16000 14000 12000 10000 8000 6000 4000 • Employment Lower than Normal. • Unemployment Duration: Higher than Normal. • Job Creation is Lagging. • It’s Hard to Find a Job! • Housing Market Expanding, But Could do Better. • Good News—But Still Underperforming.
    • Housing Outlook: Annual Existing Home Sales Good News: Impending Multiyear Growth 7.08 6.52 5.02 4.12 4.34 4.18 4.26 4.66 5.00 5.22 5.7 0 1 2 3 4 5 6 7 8 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f In million units
    • Housing Outlook: Home Prices Still Reasonable Market is Recovering—A Function of Jobs. Affordability Good, but Credit Availability Needs to Ease. 0 50000 100000 150000 200000 250000 2000-Jan 2000-Sep 2001-May 2002-Jan 2002-Sep 2003-May 2004-Jan 2004-Sep 2005-May 2006-Jan 2006-Sep 2007-May 2008-Jan 2008-Sep 2009-May 2010-Jan 2010-Sep 2011-May 2012-Jan 2012-Sep may 2014-Jan sept Existing Home Prices Actual and Forecast Home Prices, Monthly Forecast, Annual
    • Housing Outlook: Affordability 0 50 100 150 200 250 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 Affordability
    • Housing Outlook: Pending Home Sales Seasonally Adjusted 2001 = 100; Tax Credit Blips in 2010 0 20 40 60 80 100 120 140 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
    • Housing Outlook Low Inventories 0 2 4 6 8 10 12 14 2000-Jan 2000-Aug 2001-Mar 2001-Oct 2002-May 2002-Dec 2003-Jul 2004-Feb 2004-Sep 2005-Apr 2005-Nov 2006-Jun 2007-Jan 2007-Aug 2008-Mar 2008-Oct 2009-May 2009-Dec 2010-Jul 2011-Feb 2011-Sep 2012-Apr 2012-Nov Months Supply of Housing EHS Months Supply New SF Homes
    • Housing Recovery—Why Sustainable? Housing Starts Requirement • 1.1 million household formation. • 0.3 million demolition and uninhabitable. (Implicitly assumes depreciation rate of more than 200 years) • 0.2 million net new vacation home demand. • Total New Housing Need = 1.6 million each year.
    • Housing Recovery—Why Sustainable? Household Formation Accelerating After Great Recession (in millions) 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00
    • Housing Recovery—Why Sustainable? Quantifying Housing Shortage (2001 to 2012) Household Formation Demolition New Vacation Home Housing Starts 11.0 million 3.6 million 2.0 million 15.7 million 16.6 million 15.7 million This housing shortage imbalance could grow because (1) Household Formation will exceed 1 million in 2013 and beyond (2) Housing Starts need to be 1.5 million per year … Not there in 2013
    • Housing Recovery—Why Sustainable? Housing Starts: Long Term Demand Greater than Supply 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 multifamily single-family Thousand units (annualized) Long-term Average
    • Housing Recovery—Why Sustainable? Existing vs. New Home Prices … Big Gap (single-family homes) 0 50000 100000 150000 200000 250000 300000 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 New Existing
    • Number of “Qualified” Renters (credit scores unknown and not factored) Year Income Needed to Buy a Median Priced Home Number of Renters with necessary income Share of Renters Qualified 2000 $40,300 11.8 million 33% 2005 $50,400 9.0 million 24% 2012 $31,700 20.1 million 51% If the year 2000 is considered as normal, then 11.8 million renters had the income to buy a median priced home but chose not to. In 2012 there are about 8 million more renters with the necessary income but choosing not to be or are unable to be a homeowner.
    • Price Expectations--Next 12 Months Source: REALTOR® Survey 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 200810 200901 200904 200907 200910 201001 201004 201007 201010 201101 201104 201107 201110 201201 201204 201207 201210 201301 Constant/Rising Prices Falling Prices
    • Price Expectations for Next 12 Months As Reported by REALTORS®
    • Summary of Outlook: Where Are We Headed? • Likely Multiyear Housing Recovery. – No Recession but Slow Economy. – Continued Job Growth and Household Formation. – Lagging Housing Starts and Continuing Housing Shortage. • Home prices are primed to rise further, by 13% cumulatively in 2013 and 2014. • Smooth Sailing Right Now—But Would be Better with Increased Credit Availability and Job Creation. • But There are Major Risks.
    • Risks to Forecast—Housing Related • Upside Uncertainties … Credit Availability – Housing recovery so far even with tight credit – What happens if mortgage accessibility opens up? • Downside … Washington Housing Policies – Rising g-fees and FHA insurance premiums – QRM 20% down payment requirement? – Basel 3 … capital rule that punishes private mortgage with low down payment and commercial loans – Trim mortgage interest deduction? – Capital gains tax on home sale?
    • Credit Risks--Ready to Open Credit? (Average Credit Scores of Approved Loans) Normal 2009 to 2012 If Normal Fannie 720 760 to 770 720 Freddie 720 760 to 770 720 FHA 650 680 to 700 660 15% to 20% Higher Sales Possible if Normal Conditions
    • Downside Risk: Mortgage Investor Rights –Court system clogging the foreclosure process –Eminent Domain to take mortgages out of investors’ hands? (In order to restructure mortgages)
    • Downside Risk: Aging Baby Boomers (Live Births per 1000 population in U.S.) 0 5 10 15 20 25 30 35 Baby Boomers … now aged 49 to 68 … Mix, Preferences, Millennial Buying Power
    • Downside Risk: Student College Debt Important Issues: Are Colleges Effective, Are Expectations Realistic? ($ trillion) 0.0 0.2 0.4 0.6 0.8 1.0 1.2 2003 - Q1 2004 - Q1 2005 - Q1 2006 - Q1 2007 - Q1 2008 - Q1 2009 - Q1 2010 - Q1 2011 - Q1 2012 - Q1
    • Downside Risk: GDP Growth … Unimpressive How Fragile is the Recovery? Housing, Quantitative Easing, Other -6 -4 -2 0 2 4 6 8 10 1960-Q1 1962-Q2 1964-Q3 1966-Q4 1969-Q1 1971-Q2 1973-Q3 1975-Q4 1978-Q1 1980-Q2 1982-Q3 1984-Q4 1987-Q1 1989-Q2 1991-Q3 1993-Q4 1996-Q1 1998-Q2 2000-Q3 2002-Q4 2005-Q1 2007-Q2 2009-Q3 2011-Q4 GDP Growth Percent Change, Year to Year, Constant Dollars
    • North Carolina Outlook Employment Tracks National Trends 3500 3600 3700 3800 3900 4000 4100 4200 4300 124000 126000 128000 130000 132000 134000 136000 138000 140000 2000 - Jan 2002 - Jan 2004 - Jan 2006 - Jan 2008 - Jan 2010 - Jan 2012 - Jan Employment, Establishment Data U.S. North Carolina
    • North Carolina Outlook Building Permits: Recovering 0 2000 4000 6000 8000 10000 12000 0 50000 100000 150000 200000 250000 2000-Jan 2000-Sep 2001-May 2002-Jan 2002-Sep 2003-May 2004-Jan 2004-Sep 2005-May 2006-Jan 2006-Sep 2007-May 2008-Jan 2008-Sep 2009-May 2010-Jan 2010-Sep 2011-May 2012-Jan 2012-Sep Authorized Building Permits U.S. North Carolina
    • North Carolina Outlook Percent of Mortgages Past Due 0 2 4 6 8 10 12 Past Due Mortgages U.S. North Carolina
    • North Carolina Outlook Indexes of Coincident Indicators 0 20 40 60 80 100 120 140 160 180 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 Index of Coincident Economic Indicators North Carolina US
    • North Carolina Outlook North Carolina Unemployment Rate Slightly Higher than Nation as a Whole 0 2 4 6 8 10 12 2000-Jan 2000-Aug 2001-Mar 2001-Oct 2002-May 2002-Dec 2003-Jul 2004-Feb 2004-Sep 2005-Apr 2005-Nov 2006-Jun 2007-Jan 2007-Aug 2008-Mar 2008-Oct 2009-May 2009-Dec 2010-Jul 2011-Feb 2011-Sep 2012-Apr 2012-Nov Unemployment Rates U.S. North Carolina
    • North Carolina Outlook Home Prices Have Stabilized 0 50 100 150 200 250 300 350 400 FHFA Home Price Index U.S. North Carolina
    • Community Leaders—Thought Leadership • Thought Leadership: People Look to Leaders for Ideas on Important Topics. • Short Term—Recovery is Proceeding Nicely. • Longer Term—There are Major Problems. • The “Longer Term” Could be a Year or Two. – Problems are not Certainties. – But Problems Need to be Addressed. – And Can Show Up as a Surprise.
    • Major Economic Risks: Problems Not to be Ignored. For Now—Smooth Sailing. Longer Run—Avoid Surprises. Problems: just ignored. • Budget Deficit. • Quantitative Easing. • Home Ownership Levels. • Entitlements: Social Security, Medical Care, Disability, Social Welfare Programs. • State/Local Government Finances. • Labor Force Issues. • Student Loans. • Generational Split. • Income Distribution. • Lack of Growth. • Regulation. • Divisive Rancor. The iceberg: just ignored. • Photographed morning April 15, 1912…smear of red paint along the base of the berg, indication that it had collided with a ship sometime in the previous twelve hours.
    • NAR Research—On Line • Twitter: https://twitter.com/NAR_Research • Blog: http://economistsoutlook.blogs.realtor.org/ • NAR Research Page http://www.realtor.org/research-and-statistics • NAR Housing Statistics – http://www.realtor.org/research-and-statistics/housing-statistics • Research Reports – http://www.realtor.org/research-and-statistics/housing-statistics • NAR Commercial Reports – http://www.realtor.org/research-and-statistics/research- reports/commercial-real-estate