Residential Economic Issues & Trends Forum 2013

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Lawrence Yun's presentation from the 2013 Realtors® Conference and Expo Residential forum.

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  • @LoganMohtashami Hmmm. Quite possibly, given the artificial shortages being created by bad state foreclosure laws (see NV) and labor shortages for home builders. On the other hand, rising interest rates are going to have a powerful discouraging force - as borrowing costs rise during a period of wage stagnation AND rising health insurance costs.

    Loved point 1 of your article, as you can expect... right on.

    I feel another perfect storm coming, courtesy of state and local governments.....
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  • Housing Inflation is coming ... what I said of May of this year

    http://loganmohtashami.com/2013/05/07/housing-mammoth-stuck-in-tar-has-bigger-problems-to-worry-about/
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Residential Economic Issues & Trends Forum 2013

  1. 1. Housing Market and Economic Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® Presentation at NAR Annual Conference Residential Real Estate Forum San Francisco, CA November 8, 2013
  2. 2. Existing Home Sales 20% cumulative increase over 2 years 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
  3. 3. Median Home Price 18% cumulative increase over 2 years $240,000 $220,000 $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
  4. 4. Income Trends 2% to 4% cumulative increase over 2 years $70,000 $60,000 $50,000 Household Income $40,000 Family Income $30,000 $20,000 Disposable Income per person $10,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 $0
  5. 5. 2013 - Jan 2011 - Jan 2009 - Jan 2007 - Jan 2005 - Jan 2003 - Jan 2001 - Jan 1999 - Jan 1997 - Jan 1995 - Jan 1993 - Jan 1991 - Jan 1989 - Jan 1987 - Jan 1985 - Jan 1983 - Jan 1981 - Jan 1979 - Jan 1977 - Jan 1975 - Jan 1973 - Jan 1971 - Jan Falling Affordability to 5-year Low But still 5th best in 40 years 250 200 150 100 50 0
  6. 6. 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 Inevitable Rise in Mortgage Rates will further hurt Affordability 9% (30-yr rate have been below 6% for 5 years) 8 7 6 5 4 3
  7. 7. Jan 14 2000 Jul 14 2000 Jan 12 2001 Jul 13 2001 Jan 11 2002 Jul 12 2002 Jan 10 2003 Jul 11 2003 Jan 9 2004 Jul 9 2004 Jan 7 2005 Jul 8 2005 Jan 6 2006 Jul 7 2006 Jan 5 2007 Jul 6 2007 Jan 4 2008 Jul 4 2008 Jan 2 2009 Jul 3 2009 Jan 1 2010 Jul 2 2010 Dec 31 2010 Jul 1 2011 Dec 30 2011 Jun 29 2012 Dec 28 2012 Jun 28 2013 Refinances will Collapse in 2014 (to at least 15-year low) 12000 10000 8000 6000 4000 2000 0
  8. 8. 2013 - Jul 2013 - Apr 5% 2013 - Jan 10% 2012 - Oct 2012 - Jul 2012 - Apr 2012 - Jan 2011 - Oct 2011 - Jul 2011 - Apr 2011 - Jan 2010 - Oct 2010 - Jul 2010 - Apr 2010 - Jan 2009 - Oct 2009 - Jul 2009 - Apr 40% 2009 - Jan 2008 - Oct All-Cash Buyers Stayed High … even when mortgages were cheap (Cash share as % of total home sales) 35% 30% 25% 20% 15% Normal Range 0%
  9. 9. 500 -100 -200 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 2011 - Q3 2012 - Q1 2012 - Q3 2013 - Q1 Financial Industry Profits from Low Rates and Refis Now What … Boost Purchase Apps? $ billion 400 300 200 100 0
  10. 10. Jan 7 2000 Jul 7 2000 Jan 5 2001 Jul 6 2001 Jan 4 2002 Jul 5 2002 Jan 3 2003 Jul 4 2003 Jan 2 2004 Jul 2 2004 Dec 31 2004 Jul 1 2005 Dec 30 2005 Jun 30 2006 Dec 29 2006 Jun 29 2007 Dec 28 2007 Jun 27 2008 Dec 26 2008 Jun 26 2009 Dec 25 2009 Jun 25 2010 Dec 24 2010 Jun 24 2011 Dec 23 2011 Jun 22 2012 Dec 21 2012 Jun 21 2013 No Increase in Mortgages for Home Purchases during 2-year Recovery; Will Rise in 2014? 600 500 400 300 200 100 0
  11. 11. But Will Washington Allow It? • Washington Policies so far … Too Restrictive – Rising g-fees and FHA insurance premiums? – Uncertainty about QRM down payment requirement? … Dodd-Frank? – Too many Lawsuits? … Runaway DOJ? • Mortgages Have Performed Outstandingly – Not because of Washington policies – But because of home price increases • New Restriction with PATH?
  12. 12. What is PATH? … Hensarling’s Ideology (Protecting American Taxpayers and Homeowners?) • For-profit Fannie and Freddie were Arrogant • Today’s Fannie and Freddie have had reforms under government control • Remove Government Guarantee on Mortgages • 30-yr Fixed Rate Mortgages … Hard to get and higher rates • Large Banks will do Securitization … Small Banks at Risk • Market becomes excessively pro-cyclical • Large Banks have FDIC … taxpayer risk … vulnerable to nationalization and, if so, government credit allocation • Global capital could decide to go elsewhere rather than the U.S. …. Other countries grow faster than the U.S.
  13. 13. Latest Market Trends
  14. 14. Pending Sales (Contracts, not Closings) (Seasonally Adjusted) 130 120 110 100 90 80 70 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan Source: NAR
  15. 15. 2008 - Jan 2008 - Apr 2008 - Jul 2008 - Oct 2009 - Jan 2009 - Apr 2009 - Jul 2009 - Oct 2010 - Jan 2010 - Apr 2010 - Jul 2010 - Oct 2011 - Jan 2011 - Apr 2011 - Jul 2011 - Oct 2012 - Jan 2012 - Apr 2012 - Jul 2012 - Oct 2013 - Jan 2013 - Apr 2013 - Jul Buyer and Seller Traffic How Much from Gov’t Shutdown and Dysfunction? Buyer Seller 80 70 60 50 40 30 20 10 0
  16. 16. Government Shutdown Did Not Help IRS Forms Along with FHA and USDA Closures Purchase Apps Fell with Closures Rates Rose with Treasuries 20% 15% 10% 5% 0% -5% -10% -15% -20% 4.7% 4.6% 4.5% 4.4% 4.3% 4.2% 4.1% 4.0% 3.9% 3.8% Gov't Conv Percent Change From Prior Week Déjà vu in January?…..February? 30-yr FRM
  17. 17. 4500000 Existing Home Inventory (Bouncing at 13-year lows) 4000000 3500000 3000000 2500000 2000000 1500000 1000000 500000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan
  18. 18. 1964 - Jan 1966 - Jan 1968 - Jan 1970 - Jan 1972 - Jan 1974 - Jan 1976 - Jan 1978 - Jan 1980 - Jan 1982 - Jan 1984 - Jan 1986 - Jan 1988 - Jan 1990 - Jan 1992 - Jan 1994 - Jan 1996 - Jan 1998 - Jan 2000 - Jan 2002 - Jan 2004 - Jan 2006 - Jan 2008 - Jan 2010 - Jan 2012 - Jan New Home Inventory (Newly Constructed Homes Inventory at near 50-year low) 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0
  19. 19. Shadow Inventory (Mortgages Late 90+ day or in foreclosure process) US 12 10 8 6 4 2 0
  20. 20. Housing Starts … Need to Reach 1.5 million soon or persistent housing shortage multifamily single-family 2500 Thousand units (annualized) 2000 Long-term Average 1500 1000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan
  21. 21. -5 -10 -15 -20 -25 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 Rising Home Prices Because of Lack of Inventory (% change from one year ago) Blue = NAR Median Price Red = Case-Shiller Index 20 15 10 5 0
  22. 22. GDP Growth … Unimpressive but no Fresh Recession (Could be on the verge of recession if not for housing recovery) % growth from one year ago % growth from one year ago 4 2 0 -2 -4 -6
  23. 23. 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 U.S. Total Payroll Jobs (8 million lost … 7 million gained) In thousands 138000 136000 134000 132000 130000 128000 126000 124000
  24. 24. 150,000 140,000 130,000 120,000 110,000 100,000 90,000 80,000 70,000 60,000 Well Shy of Long Run Trend (6 to 8 million more jobs needed) In thousands
  25. 25. States with Fast Job Growth 1 2 3 4 5 6 7 8 9 10 State North Dakota Utah Idaho Texas Colorado Minnesota Georgia Washington Arizona New Jersey Job Growth Rate 3.2% 2.7% 2.5% 2.4% 2.3% 2.3% 2.1% 2.1% 2.0% 2.0%
  26. 26. Forecast Essentially Same as the one made last year in November 2012
  27. 27. Forecast #1 (in 2012): Inflation will be Notably Higher by 2015 • No Threatening Inflation Signs for 2013 • But Inflation rises to 4% to 6% in 2015 • Well above Fed’s preferred rate of 2% • But not in double-digits as in 1970s
  28. 28. -1 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 2013 - Jun Rising Renters’ and Homeowners’ Rent Growth (the biggest weight to Consumer Price Index) Owners' Equivalent Rent Renters' Rent 5 4 3 2 1 0
  29. 29. Forecast #2 (in 2012): Meaningfully Higher Home Prices • Demand is Up … Supply is Down • 4% to 5% in 2012 (Case-Shiller, FHFA) … Too Low • 5% to 7% in 2012 (Median Home Price)… Too Low • Home price growth could slow or accelerate … all depends on housing starts • Probably 15% cumulative growth over 3 years
  30. 30. What If Scenarios on Housing Starts Housing Starts in 2013 Case-Shiller Price Growth Forecast in 2013 900,000 (15% increase) 8% 1,000,000 (28% increase) 7% 1,130,000 (45% increase) 5% … This was forecasted one year ago 1,200,000 (54% increase) 4% 1,300,000 (67% increase) 3% 1,400,000 (80% increase) 2% 1,500,000 (92% increase) 1%
  31. 31. What If Scenarios on Housing Starts Housing Starts in 2013 Case-Shiller Price Growth Forecast in 2013 900,000 (15% increase) 8 % … This is closer to actual 1,000,000 (28% increase) 7% 1,130,000 (45% increase) 5% 1,200,000 (54% increase) 4% 1,300,000 (67% increase) 3% 1,400,000 (80% increase) 2% 1,500,000 (92% increase) 1%
  32. 32. Home Price Forecast by Wall Street Journal Economists Panel Year WSJ Home Price Forecast 2014 5% Robert Shiller : “Homes are still affordable … we do not have extravagant mindset today”
  33. 33. Forecast (Rising Mortgage Rates to 5.3% by end of 2014) 2013 forecast 11% 2014 forecast 0% Median Price 11% 6% Dollar Volume Estimate +22% +6% Existing Home Sales
  34. 34. Forecast #3: More Unequal Wealth Distribution • Renters do not accumulate wealth • Renter population rising • Homeowners build wealth after buying at low prices • Stagnant homeowner population • Tight Credit hinders ‘good’ renters from becoming homeowners • Investors becoming increasing share of property owners
  35. 35. 41,000 39,000 1980 - Q1 1981 - Q1 1982 - Q1 1983 - Q1 1984 - Q1 1985 - Q1 1986 - Q1 1987 - Q1 1988 - Q1 1989 - Q1 1990 - Q1 1991 - Q1 1992 - Q1 1993 - Q1 1994 - Q1 1995 - Q1 1996 - Q1 1997 - Q1 1998 - Q1 1999 - Q1 2000 - Q1 2001 - Q1 2002 - Q1 2003 - Q1 2004 - Q1 2005 - Q1 2006 - Q1 2007 - Q1 2008 - Q1 2009 - Q1 2010 - Q1 2011 - Q1 2012 - Q1 2013 - Q1 Renter Households In thousands 37,000 35,000 33,000 31,000 29,000 27,000 25,000
  36. 36. 80,000 1980 - Q1 1981 - Q1 1982 - Q1 1983 - Q1 1984 - Q1 1985 - Q1 1986 - Q1 1987 - Q1 1988 - Q1 1989 - Q1 1990 - Q1 1991 - Q1 1992 - Q1 1993 - Q1 1994 - Q1 1995 - Q1 1996 - Q1 1997 - Q1 1998 - Q1 1999 - Q1 2000 - Q1 2001 - Q1 2002 - Q1 2003 - Q1 2004 - Q1 2005 - Q1 2006 - Q1 2007 - Q1 2008 - Q1 2009 - Q1 2010 - Q1 2011 - Q1 2012 - Q1 2013 - Q1 Homeowner Households has not Grown since 2006 … but Primed to Grow In thousands 75,000 70,000 65,000 60,000 55,000 50,000
  37. 37. Wealth Distribution (Federal Reserve data on median net worth) $300,000 Bubble Crash $250,000 $200,000 1998 2001 $150,000 2004 $100,000 2007 2010 $50,000 2014 $0 Renter 2014 Forecast by NAR Owner • • • • Dodd-Frank? PATH? Lawsuits? Legacy?
  38. 38. Top 10 Turnaround Markets in 2013 (Realtor.com Analysis) • • • • • Detroit Santa Barbara Reno Ft. Lauderdale Ann Arbor • • • • • Dallas West Palm Beach Boston Boulder Las Vegas
  39. 39. Top 10 Markets to Watch in 2014 (Forecast) • • • • • Salt Lake City Naples Tampa Atlanta Boise • • • • • Houston Charlotte Denver Seattle Tucson
  40. 40. What Homebuyers Want?
  41. 41. Slightly More Preference For Condo or Apartment Living Than In 2011 Housing Type Preference (2013): Housing Type Preference (2011): Condo or Apt. 8% 14% Condo or Apt. 5% Single Family Attached 7% 4% 6% Single Family Attached 76% Single Family Detached House 80% Single Family Detached House Right now, if you could choose, which of the following would you prefer to live in: Slide 41
  42. 42. Privacy, Walkability, Schools Most Important in Deciding Where to Live Most Important Factors in Deciding Where to Live: Privacy from neighbors 46% Sidewalks and places to take walks 37% High-quality public schools 43% 21% Being within a short commute to work 25% Living in a place that’s away from it all 21% 0% 68% 66% 44% 28% Public transportation within walking distance of your home Somewhat Important 44% 23% 34% 20% 65% 37% 34% 40% 74% 69% 40% 23% Living in a community with people at all stages of life adults, families with children and older people An established neighborhood with older homes and mature trees 80% 29% 28% Easy access to the highway 86% 43% 45% Being within an easy walk of other places and things in the community Very Important 40% 65% 59% 55% 60% 80% 100% In deciding where to live, indicate how important having each of the following would be to you: very important, somewhat important, not very important, or not at all important. Slide 42
  43. 43. Walkability and Age-Diversity Gaining in Importance Changes in Important Factors in Deciding Where to Live 50% 40% +1 +1 46% 45% 45% 44% +6 37% 30% +4 28% 31% -8 36% 28% +2 23% 24% 20% +8 23% 21% 15% 10% 0% Privacy from neighbors High-quality public schools Sidewalks and places to take walks Being within an Being within a easy walk of short commute other places and to work things in the community Very Important - 2013 A community Easy access to the with people at highway all stages of life adults, families with children and older people Very Important - 2011 Q.47 In deciding where to live, indicate how important having each of the following would be to you: very important, somewhat important, not very important, or not at all important. Slide 43
  44. 44. What Buyers Want Most From Their Agent Determine Help with paperwork, 7 what % comparable homes were selling for, 8% Help with the price negotiations, 11% Help find and arrange financing, 3 % Help buyer negotiate the terms of sale, 12% Help find the right home to purchase, 53 %

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