Slides from NAR Chief Economist Lawrence Yun's presentation to #NARAnnual, November 13th, 2015

2. Economic and Housing
Outlook
By Lawrence Yun, Ph.D.
Chief Economist, National Association of REALTORS®
Presentation at NAR Annual Meetings
San Diego, CA
November 13, 2015

3. Lifetime Wealth at All-Time High
0
10000
20000
30000
40000
50000
60000
70000
80000
90000 1990-Q1
1991-Q2
1992-Q3
1993-Q4
1995-Q1
1996-Q2
1997-Q3
1998-Q4
2000-Q1
2001-Q2
2002-Q3
2003-Q4
2005-Q1
2006-Q2
2007-Q3
2008-Q4
2010-Q1
2011-Q2
2012-Q3
2013-Q4
2015-Q1

4. Dow Jones Industrial Average
(Doubling since 2009)
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
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
2014-May
2014-Sep
2015-Jan
2015-May
2015-Sep

5. Median Household Income
(Inflation Adjusted)
$50,000
$51,000
$52,000
$53,000
$54,000
$55,000
$56,000
$57,000
$58,000
$59,000
2000 2002 2004 2006 2008 2010 2012 2014

6. GDP Growth
Inconsistent with 2.2% average since 2014
-10
-8
-6
-4
-2
0
2
4
6
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
2014
- Q3
2015
- Q1
2015
- Q3
Annualized Growth Rate

7. Sluggish Growth + Gap after
Recession
($1.7 trillion gap … $5,000 per person)
10000
11000
12000
13000
14000
15000
16000
17000
18000
1998 - Q1 2000 - Q1 2002 - Q1 2004 - Q1 2006 - Q1 2008 - Q1 2010 - Q1 2012 - Q1
GDP in 2009 Dollars
Real GDP Real GDP W/O Recession
3% Growth Line
2.2% Growth Line

8. GDP Component on
Residential Construction and
Sales
More consistent with 6.6% average since 2014
-40
-30
-20
-10
0
10
20
30
40

9. Homeownership Rate
(seasonally adjusted … 50-year low)
63
64
65
66
67
68
69
70
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
2013-Q4
2014-Q3
2015-Q2

10. Young People: Under 35 years old
Historic Low Homeownership Rate
33
35
37
39
41
43
45
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
2014-Q1
2015-Q1

11. First-time collapse … why?
Lowest in nearly 30 years … since 1987
30%
50%
33% 32%
%
10%
20%
30%
40%
50%
60%
1981
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

12. Difficulty Facing First-time Buyers –
• Student loan debt, even among successful first-
time home buyers:
– 41% have student loan debt and typical amount is
$25,000
• No affordable inventory:
– 51% hardest task is finding the right property
• Competition from vacation buyers and investors
– Buying similar priced/size homes and paying all cash

13. Student Loan
(in $billion)
0
200
400
600
800
1000
1200
1400
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
2014-Q1
2014-Q3
2015-Q1
2015-Q3

14. Sales Change by Price Points
(% change from one year ago in September)
-10
-5
0
5
10
15
20
25
up to $100K $100K to $250K $250K to $500K $500K to $750 $750K to $1 M Over $1 M

15. H.O.M.E. Survey
(Housing Opportunity and Market
Experience)
• Desire to own remains strong and
is strengthening:
– 87 percent of Americans believe
homeownership is part of their
personal American Dream
– HIGHER for 18-24 year olds at 91
percent

16. H.O.M.E. Survey
(Housing Opportunity and Market
Experience)
• Psychological reasons, but also
financial
• Americans want to own for a place to
raise a family and own a place of their
own, but also a nest egg for retirement
• Recent buyers bought for to start a
family but also because owning is
cheaper than renting

17. H.O.M.E. Survey
(Housing Opportunity and Market
Experience)
83 percent of Americans
believe buying is a good
financial decision

18. Younger Buyers Have
Optimism—View Home as
Good Financial Investment
2015 Profile of Generational Trends
0
10
20
30
40
50
60
70
80
90
34 and younger 35 to 49 50 to 59 60 to 68 69 to 89
42 39 40 39 38
30 30 26 26
20
12 13
12 12
15
Better than stocks About as good as stocks Not as good as stocks
84%
82% 77% 77%
72%

19. Homeownership Rate Fall Further …
why?
Net New
Renters
In thousands
Net New
Homeowners
In thousands
Homeownership Rate
only among the New
People
2008 482 -67 0%
2009 713 -90 0%
2010 771 -194 0%
2011 974 -421 0%
2012 1120 -193 0%
2013 599 55.5 9%
2014 1112 -89 0%
2015 forecast 800 200 30%
2016 forecast 600 600 50%
2017 forecast 500 700 58%

20. Even with Falling ownership
rate, Home Sales to Rise Further
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
9000000 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
New
Existing

21. Housing Forecast made in
November 2014
2015
Forecast
(made one
year ago)
2015
Likely
Housing Starts 1.3 million
Was Too high
1.1 million
New Home Sales 620,000
Was Little high
570,000
Existing Home Sales 5.3 million
Was Right On
5.3 million
Median Price Growth + 4%
Was Too Low
+ 6%

22. Housing Forecast Good for 2016
2013 2014 2015
Likely
2016
Forecast
Housing Starts 925,000 1 million 1.1 million 1.4 million
New Home
Sales
430,000 437,000 570,000 720,000
Existing Home
Sales
5.1 million 4.9 million 5.3 million 5.4 to 5.5
million
Median Price
Growth
+ 11.5% + 5.7% + 6% +5%
30-year Rate 4.0% 4.2% 3.8% 4.5%

23. Monthly Pending Sales Index
Losing Momentum
(Seasonally Adjusted)
70.0
75.0
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
2011 -
Jan
2011 -
May
2011 -
Sep
2012 -
Jan
2012 -
May
2012 -
Sep
2013 -
Jan
2013 -
May
2013 -
Sep
2014 -
Jan
2014 -
May
2014 -
Sep
2015 -
Jan
2015 -
May
2015 -
Sep
Source: NAR

24. Momentum in Pending Contract
(% change from one year ago)
-30
-25
-20
-15
-10
-5
0
5
10
15
20
2011-Jan
2011-Apr
2011-Jul
2011-Oct
2012-Jan
2012-Apr
2012-Jul
2012-Oct
2013-Jan
2013-Apr
2013-Jul
2013-Oct
2014-Jan
2014-Apr
2014-Jul
2014-Oct
2015-Jan
2015-Apr
2015-Jul

25. Trigger? Jump in Mortgage Rate
3.00
3.50
4.00
4.50
5.00
5.50
2011-Jan
2011-Apr
2011-Jul
2011-Oct
2012-Jan
2012-Apr
2012-Jul
2012-Oct
2013-Jan
2013-Apr
2013-Jul
2013-Oct
2014-Jan
2014-Apr
2014-Jul
2014-Oct
2015-Jan
2015-Apr
2015-Jul
2015-Oct

26. Fed Rate Hike in
December?

27. Fed Rate Hike in December
then again in March

28. Fed Rate Hike in December
then again in March
then again in August
then again in …

29. Fed Policy and Mortgage Rate
0
1
2
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
2014-Jul
2015-Jan
2015-Jul
Mortgage Rate Fed Funds Rate

30. What Determines Bond Yields?
• Federal Reserve’s short-term rate changes
• Inflation and erosion of purchasing power
• Foreign capital flow and demand for dollar
• Savings rate
• U.S. budget deficit
• Printing of money
• …

31. Federal Deficit - Shrinking
( $ million, 12 month total)
-1600000
-1400000
-1200000
-1000000
-800000
-600000
-400000
-200000
0
200000
400000
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
2015
- Jan

32. Federal Debt … Cumulative
( $ million; debt held by public excluding intra-
governmental holdings)
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
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
2015
- Jan

33. No CPI Inflation – Yet
-3
-2
-1
0
1
2
3
4
5
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
2014-Jan
2014-Jul
2015-Jan
2015-Jul

34. Rents Rising at 7-year high
-1
0
1
2
3
4
5
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
2014-Jul
2015-Jan
2015-Jul
Renters' Rent

35. Rental Vacancy Rate
(30-year low)
5
6
7
8
9
10
11
12
2000-Q1
2000-Q3
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
2013-Q3
2014-Q1
2014-Q3
2015-Q1

36. Credit Box Opens?
• FICO New Method
• Fannie/Freddie
– Lower down payment products
• FHA premiums … lowered
• Portfolio Lending … historic low
mortgage default rates on recent
vintages (2010-2014)

37. Fannie/Freddie G-fees for
Highways?

38. Rising Home Price is becoming
Obstacle
(Median National Existing Home Price)
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
260,000
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
2014-Jul
2015-Jan
2015-Jul

39. New Home Price … Even Higher
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
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
2014-Jul
2015-Jan
2015-Jul
New
Existing

40. Condos Underperforming
(% change from 12 months ago in September)
0 2 4 6 8 10 12
Price Growth
Sales
Single-family
Condominium

41. Affordability Solution …
Tiny Home Movement?

42. Tiny Home Movement?
Less than 1% of all homes
sold …
perhaps much less than
1%

43. Real Solution to Affordability …
More Supply
• More Supply
– Existing Homeowners List Homes
– Shadow Inventory of Distressed
Homes
– Newly Constructed Homes
– More Rental Housing … Can be
converted to Condominiums Later

44. Pent-Up Home Sellers
0
2
4
6
8
10
12
2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Median Years of Tenure Before Moving

45. Shadow Inventory
(% of mortgages in foreclosure or late
payment)
0
2
4
6
8
10
12
14
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
2013-Q3
2014-Q2
2015-Q1
NJ
AZ
10%
2%

46. National Shadow Inventory
(% of mortgages in foreclosure or late
payment)
0
2
4
6
8
10
12
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
2013-Q3
2014-Q2
2015-Q1
4%

47. Housing Starts
0
200
400
600
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
2015 -
Jan
MultifamilyThousand units
0
1000
2000
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
2015 -
Jan
Single-family

48. Massive Housing Shortage
(from 2012 to 2015)
Metro Job Creation New Home
Construction
Ratio
San Francisco-
Oakland
234,000 30,000 7.8
Grand Rapids 46,000 6,000 7.8
San Jose 118,000 23,000 5.1
San Diego 101,000 21,000 4.9
Miami-Ft.
Lauderdale
191,000 48,000 3.9
Salt Lake City 57,000 15,000 3.9
New York City 400,000 114,000 3.5

49. Why Would Home Sales Rise?
• Rising Mortgage Rates – Not Good
• Too Fast Rising Prices – Not Good
• Housing Equity for Pent-up Sellers –
Good
• Return Boomerang Buyers - Good
• Steadily increased supply - Good
• Job creation – Super Good

50. Trade-Up Opportunities
from Housing Equity
0
5000
10000
15000
20000
25000
2000-Q1
2000-Q3
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
2013-Q3
2014-Q1
2014-Q3
2015-Q1
Real Estate Value Mortgage Debt
$ billion

51. Return Buyers

52. Time to Sell a New Spec Home
(in months)
0
2
4
6
8
10
12
14
16
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