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Economic and Housing Market Trends and Outlook

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PPT slide presentation by NAR Chief Economist Lawrence Yun at the 2013 Midyear Meeting's "Economic and Housing Market Trends and Outlook" Forum.

PPT slide presentation by NAR Chief Economist Lawrence Yun at the 2013 Midyear Meeting's "Economic and Housing Market Trends and Outlook" Forum.

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

  • Economic and Housing MarketTrends and OutlookLawrence Yun, Ph.D.Chief EconomistNATIONAL ASSOCIATION OF REALTORS®Presentation at NAR Midyear MeetingsWashington, DCMay 16, 2013
  • REALTOR® Median Gross Income$0$10,000$20,000$30,000$40,000$50,000$60,0001995 1998 2000 2002 2004 2006 2007 2008 2009 2010 2011 2012How many with more than $100,000? … 200,000How many with less than $10,000? … 360,000
  • 30100,000200,000300,000400,000500,000600,000700,000800,000900,0001,000,0001,100,0001,200,0001,300,0001,400,0001,500,000Annual Membership(at year-end)
  • Monthly Pending Home Sales Index(Seasonally Adjusted)7080901001101201302001- Jan2002- Jan2003- Jan2004- Jan2005- Jan2006- Jan2007- Jan2008- Jan2009- Jan2010- Jan2011- Jan2012- Jan2013- Jan5-year HighHomebuyer Tax CreditSource: NAR
  • Existing Home Sales Closings(71% of past peak)3,000,0003,500,0004,000,0004,500,0005,000,0005,500,0006,000,0006,500,0007,000,0007,500,0002000- Jan2001- Jan2002- Jan2003- Jan2004- Jan2005- Jan2006- Jan2007- Jan2008- Jan2009- Jan2010- Jan2011- Jan2012- Jan2013- Jan
  • New Home Sales(28% of the past peak)0200,000400,000600,000800,0001,000,0001,200,0001,400,0001,600,0002000- Jan2001- Jan2002- Jan2003- Jan2004- Jan2005- Jan2006- Jan2007- Jan2008- Jan2009- Jan2010- Jan2011- Jan2012- Jan2013- Jan
  • Annual Existing Home Sales Closings:Impending Multiyear Growth7.086.525.024.12 4.34 4.18 4.264.664.975.35.7012345678200520062007200820092010201120122013f2014f2015fIn million units
  • Investment Home Sales Jumped in2011 and 2012050010001500200025002003 2004 2005 2006 2007 2008 2009 2010 2011 2012In thousands
  • Vacation Home Sales Slow toRecover, But Ready to Rise in 2013 andbeyond?0200400600800100012002003 2004 2005 2006 2007 2008 2009 2010 2011 2012In thousands
  • Household Net Worth Will HelpVacation Home Purchases3035404550556065702000- Q12001- Q12002- Q12003- Q12004- Q12005- Q12006- Q12007- Q12008- Q12009- Q12010- Q12011- Q12012- Q1$ trillion
  • Buyer and Seller Trafficfrom REALTOR® Survey0.010.020.030.040.050.060.070.080.02008-Jan2008-Apr2008-Jul2008-Oct2009-Jan2009-Apr2009-Jul2009-Oct2010-Jan2010-Apr2010-Jul2010-Oct2011-Jan2011-Apr2011-Jul2011-Oct2012-Jan2012-Apr2012-Jul2012-Oct2013-JanBuyer Seller
  • REALTORS® Price Expectationsfor the Next 12 months0%10%20%30%40%50%60%70%80%90%100%200810200901200904200907200910201001201004201007201010201101201104201107201110201201201204201207201210201301Constant/Rising PricesFalling Prices
  • Rising Home PricesBecause of High Demand and Under Supply(% change from one year ago)-25-20-15-10-5051015202001-Jan2001-Jul2002-Jan2002-Jul2003-Jan2003-Jul2004-Jan2004-Jul2005-Jan2005-Jul2006-Jan2006-Jul2007-Jan2007-Jul2008-Jan2008-Jul2009-Jan2009-Jul2010-Jan2010-Jul2011-Jan2011-Jul2012-Jan2012-Jul2013-JanBlue = NAR Median PriceRed = Case-Shiller Index
  • Home Price Index0501001502002503003501990-Q11991-Q11992-Q11993-Q11994-Q11995-Q11996-Q11997-Q11998-Q11999-Q12000-Q12001-Q12002-Q12003-Q12004-Q12005-Q12006-Q12007-Q12008-Q12009-Q12010-Q12011-Q12012-Q1Phoenix Houston
  • REALTOR® Price Expectationsover the next 12 months
  • Existing vs. New Home Price … Big Gap(single-family homes)0500001000001500002000002500003000002000-Jan2000-Jul2001-Jan2001-Jul2002-Jan2002-Jul2003-Jan2003-Jul2004-Jan2004-Jul2005-Jan2005-Jul2006-Jan2006-Jul2007-Jan2007-Jul2008-Jan2008-Jul2009-Jan2009-Jul2010-Jan2010-Jul2011-Jan2011-Jul2012-Jan2012-Jul2013-JanNewExisting
  • Home Price Forecastby Wall Street Journal Economists PanelYear WSJ Home Price Forecast2013 5.3%2014 5.1%
  • Existing Home Inventory(Bouncing at 13-year lows)0500000100000015000002000000250000030000003500000400000045000002000- Jan2001- Jan2002- Jan2003- Jan2004- Jan2005- Jan2006- Jan2007- Jan2008- Jan2009- Jan2010- Jan2011- Jan2012- Jan2013- Jan
  • Visible New Home Inventory(Newly Constructed Homes Inventory at 50-year low)01002003004005006007001964-Jan1966-Jan1968-Jan1970-Jan1972-Jan1974-Jan1976-Jan1978-Jan1980-Jan1982-Jan1984-Jan1986-Jan1988-Jan1990-Jan1992-Jan1994-Jan1996-Jan1998-Jan2000-Jan2002-Jan2004-Jan2006-Jan2008-Jan2010-Jan2012-Jan
  • Housing Starts(Recovering, but still well below 50-year averageof 1.5 million each year)050010001500200025002000- Jan2001- Jan2002- Jan2003- Jan2004- Jan2005- Jan2006- Jan2007- Jan2008- Jan2009- Jan2010- Jan2011- Jan2012- Jan2013- Janmultifamily single-familyThousand units (annualized)Long-term Average
  • 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 eachyear
  • Quantifying Housing Shortage(2001 to 2012)HouseholdFormationDemolition New VacationHomeHousingStarts11.0 million 3.6 million 2.0 million 15.7 million16.6 million 15.7 millionThis 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
  • Household Formation Bursting Out(in millions)0.000.200.400.600.801.001.201.401.601.802.00
  • GDP Growth … Unimpressive but noFresh Recession(Could be on the verge of recession if not for housing recovery)-10-8-6-4-20246annualized % change % growth from one year ago
  • Blue Chip and CBO Economic ForecastJobs and Household Formation to GrowYear Blue ChipConsensusGDP GrowthForecastCBOGDP GrowthForecast2013 2.1% 1.4%2014 2.7% 3.4%2015 3.1% 4.1%2016 2.9% 4.4%2017 2.7% 3.8%Too Rosy?
  • U.S. Total Payroll Jobs(98% of prior peak and 104% of Jan. 2000)1240001260001280001300001320001340001360001380001400002000-Jan2000-Jul2001-Jan2001-Jul2002-Jan2002-Jul2003-Jan2003-Jul2004-Jan2004-Jul2005-Jan2005-Jul2006-Jan2006-Jul2007-Jan2007-Jul2008-Jan2008-Jul2009-Jan2009-Jul2010-Jan2010-Jul2011-Jan2011-Jul2012-Jan2012-Jul2013-JanIn thousands
  • Ohio Total Jobs(92% of prior peak and 92% of Jan. 2000)500051005200530054005500560057002000-Jan2000-Aug2001-Mar2001-Oct2002-May2002-Dec2003-Jul2004-Feb2004-Sep2005-Apr2005-Nov2006-Jun2007-Jan2007-Aug2008-Mar2008-Oct2009-May2009-Dec2010-Jul2011-Feb2011-Sep2012-Apr2012-Nov
  • California Total Jobs(95% of prior peak and 104% of Jan. 2000)1300013500140001450015000155002000-Jan2000-Aug2001-Mar2001-Oct2002-May2002-Dec2003-Jul2004-Feb2004-Sep2005-Apr2005-Nov2006-Jun2007-Jan2007-Aug2008-Mar2008-Oct2009-May2009-Dec2010-Jul2011-Feb2011-Sep2012-Apr2012-Nov
  • D.C. Metro Total Jobs(101% of prior peak and 114% of Jan. 2000)20002100220023002400250026002000-Jan2000-Aug2001-Mar2001-Oct2002-May2002-Dec2003-Jul2004-Feb2004-Sep2005-Apr2005-Nov2006-Jun2007-Jan2007-Aug2008-Mar2008-Oct2009-May2009-Dec2010-Jul2011-Feb2011-Sep2012-Apr2012-Nov
  • Texas Total Jobs(104% of prior peak and 121% of Jan. 2000)8000850090009500100001050011000115002000-Jan2000-Aug2001-Mar2001-Oct2002-May2002-Dec2003-Jul2004-Feb2004-Sep2005-Apr2005-Nov2006-Jun2007-Jan2007-Aug2008-Mar2008-Oct2009-May2009-Dec2010-Jul2011-Feb2011-Sep2012-Apr2012-Nov
  • Renter Households25,00027,00029,00031,00033,00035,00037,00039,00041,0001980-Q11981-Q11982-Q11983-Q11984-Q11985-Q11986-Q11987-Q11988-Q11989-Q11990-Q11991-Q11992-Q11993-Q11994-Q11995-Q11996-Q11997-Q11998-Q11999-Q12000-Q12001-Q12002-Q12003-Q12004-Q12005-Q12006-Q12007-Q12008-Q12009-Q12010-Q12011-Q12012-Q1In thousands
  • Homeowner Households has not Grownsince 2006 … but Primed to Grow50,00055,00060,00065,00070,00075,00080,0001980-Q11981-Q11982-Q11983-Q11984-Q11985-Q11986-Q11987-Q11988-Q11989-Q11990-Q11991-Q11992-Q11993-Q11994-Q11995-Q11996-Q11997-Q11998-Q11999-Q12000-Q12001-Q12002-Q12003-Q12004-Q12005-Q12006-Q12007-Q12008-Q12009-Q12010-Q12011-Q12012-Q1In thousands
  • Number of “Qualified” Renters(credit scores unknown and not factored)Year Income Needed toBuy a MedianPriced HomeNumber of Renterswith necessaryincomeShare of RentersQualified2000 $40,300 11.8 million 33%2005 $50,400 9.0 million 24%2012 $31,700 20.1 million 51%If the year 2000 is considered as normal, then 11.8 million renters hadthe income to buy a median priced home but chose not to.In 2012 there are about 8 million more renters with the necessaryincome but choosing not to be or are unable to be a homeowner.
  • Financial Industry High Profits …Ready to Dial Down Credit Stringency?-200-10001002003004005002001-Q12001-Q32002-Q12002-Q32003-Q12003-Q32004-Q12004-Q32005-Q12005-Q32006-Q12006-Q32007-Q12007-Q32008-Q12008-Q32009-Q12009-Q32010-Q12010-Q32011-Q12011-Q32012-Q1$ billion
  • Ready to Open Credit?(Average Credit Scores of Approved Loans)Normal 2009 to 2012 If NormalFannie 720 760 to 770 720Freddie 720 760 to 770 720FHA 650 680 to 700 66015% to 20% Higher Sales
  • Forecast2011 2012 2013Forecast2014ForecastGDP Growth +1.8% +2.1% +2.1% 3.0%Existing HomeSales4.3 million 4.7 million 5.0 million 5.3 millionHousing Starts 610 K 780 K 1.1 million 1.4 millionExisting HomePrice Growth- 4% + 6% + 8% + 5%30-yr MortgageRate4.7% 3.7% 3.9% 4.6%
  • Risks to Forecast• Upside … Credit Availability– Housing recovery so far even with tight credit– What happens if mortgage accessibility opens up?• Downside … Washington Policies– Rising g-fees and FHA insurance premiums– QRM 20% down payment requirement?– Basel 3 … capital rule that punishes private mortgagewith low down payment and commercial loans– Trim mortgage interest deduction?– Capital gains tax on home sale?
  • New Downside Risk #1:Proposal to Cap Fees and Points• 3% maximum fee for loan origination from 2014– Loan origination– Insurance and taxes in escrow– Title (only if affiliated)– Loan Level Price Adjustment– Mortgage brokerage fee– more unclear items• Price control … limits credit … who will be rationed out? Winners … top notch credit borrowers and big banks Losers … less than stellar credit borrowers and mortgage brokers
  • Drive Like A Girl … in UK• EU law … girls and boys must pay the same premium Europe Continent … Boys Win and Girls Lose UK … Girls Win !• 3% cap will limit credit and create winners and losers
  • New Downside Risk #2:Mortgage Investor Rights in U.S.A.?–Court system clogging the foreclosureprocess–Eminent Domain to take mortgages out ofinvestors’ hands? (In order to restructuremortgages)
  • Seriously Delinquent Mortgages orin Foreclosure Process024681012142005-Q12005-Q22005-Q32005-Q42006-Q12006-Q22006-Q32006-Q42007-Q12007-Q22007-Q32007-Q42008-Q12008-Q22008-Q32008-Q42009-Q12009-Q22009-Q32009-Q42010-Q12010-Q22010-Q32010-Q42011-Q12011-Q22011-Q32011-Q42012-Q12012-Q22012-Q32012-Q4Arizona Illinois%
  • Brazil’s My House My Life ProgramEffort to Start Mortgage Market• Current Deals are mostly All-Cash … only few buy• Mortgage Access will permit more homebuyers• What is needed for investors to offer mortgages?– Strong contract enforcement– Strong eviction laws to recover some money if theloan defaults
  • New Downside Risk #3:Aging Baby Boomers but Falling Birth Rate(Live Births per 1000 population in U.S.)05101520253035Baby Boomers … now aged 49 to 68 …too many homes for sale in future years?
  • Foreign-Born Populationin millions (bar, left axis) and % of total population (light, right axis)0%2%4%6%8%10%12%14%16%0510152025303540451900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
  • Anxiety and Opportunity!What to do?
  • Work Like a Spy!• Real Spies… go talk to strangers and cultivate relationship… earn trust… get results• What should REALTORS® do?… go talk to strangers and cultivate relationship… earn trust(the most important factor in choosing an agent)… get results
  • Immigrant Homeownership RateRises over Time0102030405060708090%Source: U.S. Census 2000Years in the U.S.
  • Homeownership Rate by Citizenship StatusSource: Census, Harvard Joint Center01020304050607080NH White Black Asian/Pacific Islander HispanicNoncitizen Naturalized Native Higher Rate for New Citizens
  • Movement in Singapore(Population: 1/3 Malay, 1/3 Indian, 1/3 Chinese)• Very Strong Private Property Rights Protection• Ranked #1 Globally in Ease of Doing Business• 15% of Households are Millionaires !
  • New Downside Risk #4:Student College Debt … Up Up and Away($ trillion)0.00.20.40.60.81.01.22003 -Q12004 -Q12005 -Q12006 -Q12007 -Q12008 -Q12009 -Q12010 -Q12011 -Q12012 -Q1
  • Homeownership Rate among the Young(No significant difference between thosewith and without student loan debt, not yet)20253035404550556065702000-Q12000-Q32001-Q12001-Q32002-Q12002-Q32003-Q12003-Q32004-Q12004-Q32005-Q12005-Q32006-Q12006-Q32007-Q12007-Q32008-Q12008-Q32009-Q12009-Q32010-Q12010-Q32011-Q12011-Q32012-Q12012-Q32013-Q1Under 25 25-29 30-34 35-3967%55%35%43%
  • Most Graduates are OK but Some in Serious TroubleTable: Debt AmountChart: Student Loan Payment as % of Income for RentersUnder-30 30-39Median Debt $11,000 $15,000Average Debt $21,000 $31,0000510152010thPercentile25th Median 75th 90thUnder 3030-39Source: Federal Reserve Bank of New York
  • Summary on What to Expect• Likely Multiyear Housing Recovery– No recession– Job growth and household formation– Lagging housing starts and continuing housingshortage• Home prices are primed to rise further, by13% cumulatively in 2013 and 2014• Watch out for New Risks
  • What To Do Personally To Be Even Better!1. Work Like a Spy2. Drive Like a Girl (for your own safety)3. Lobby like a REALTOR®… Don’t forget about perfecting English
  • For Daily Update and Analysis• Twitter@NAR_Research