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Economic and Housing MarketTRENDS and OUTLOOK            Lawrence Yun, Ph.D.               Chief Economist     NATIONAL AS...
Monthly Pending Home Sales Index                         (Seasonally Adjusted)115           Homebuyer Tax Credit1101051009...
1,000,000                              2,000,000                                                      4,000,000           ...
200               600               800              1000              1200              1400              1800           ...
Improving Factors for Higher Home Sales• Improving Factors   –   Very high affordability   –   Job creation   –   Solid st...
Best Affordability Conditions
Annual Existing Home Sales8    In million units7654    7.083           6.52                        5.02                   ...
Second Home vs. Primary                                              2011               2010      Investment         17%  ...
Second Home Sales       In thousands40003500300025002000                                                  Investment1500  ...
Housing Starts2500   In thousand units20001500                                                                            ...
New Home Sales       In thousand units      NHS          Single-family starts200018001600140012001000800600400200   0     ...
Visible Housing Inventory4,500,0004,000,0003,500,0003,000,0002,500,0002,000,0001,500,0001,000,000 500,000       0         ...
0.5                        1.0                              1.5                                          2.5              ...
Median Home Price260,000                                 History   Forecast240,000220,000200,000180,000160,000140,000120,0...
Economy            Real GDP Growth        Nominal GDP Growth     % 8 7 6 5 4 3 2 1 0-1   2005   2006   2007   2008   2009 ...
Payroll Jobs Changes                         (December to December)43 In millions210-1   2005       2006   2007   2008   2...
Unemployment Rate     %                         (Average during the Year)121086420         2005   2006   2007   2008   200...
Labor Force Participation Rate      %6867666564636261      2002 - Jan      2008 - Jan      1990 - Jan      1991 - Jan     ...
Consumer Price Inflation                               Rent     All Items    Core     %543210         2005    2006   2007 ...
Fed Policy and Interest Rates           Fed Funds     10-year Treasury      30-year Mortgage    %76543210    2005   2006  ...
Homes Bought How?         More People Sought Help From REALTORS®      Homebuilder    Directly from owner      Real estate ...
Foreclosure Inventory(% of all mortgage outstanding; about 1/3 of homes are free and clear)10.0                           ...
Housing Starts2500   In thousand units20001500                                                                            ...
-100            0                100                      200                            300                              ...
Banks/Regulators                   Restricting Credit          (Average Credit Scores of Approved Loans)            Normal...
Annual Household Formation…      Future Rent Pressure?                  (3 separate Census data)   In millionsHousehold Fo...
Cost Comparisons over 30 yearsItem                            Price Index     Price        % Change                       ...
Annual Forecast                      2011           2012           2013                      History        Forecast      ...
Long-Term Demographics
U.S. Population Aged 25-to-344400043000420004100040000390003800037000360003500034000
30000               35000                               45000                                       50000                 ...
U.S. Population Aged 35-to-445000045000400003500030000250002000015000100005000    0
30000               35000                               45000                                       50000                 ...
U.S. Population Aged 45-to-545000045000400003500030000250002000015000100005000    0
30000               35000                       40000                               45000                                 ...
U.S. Population Aged 55-to-64400003500030000250002000015000100005000    0
Forecast Population Aged 55-to-645000048000460004400042000400003800036000340003200030000                      2016        ...
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Vanderbilt Presentation (April 2012)

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Housing Market Outlook, NAR Chief Economist Lawrence Yun, Vanderbilt University

Published in: Real Estate, Technology, Business
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Transcript of "Vanderbilt Presentation (April 2012)"

  1. 1. Economic and Housing MarketTRENDS and OUTLOOK Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® Presentation at Vanderbilt University April 18, 2012
  2. 2. Monthly Pending Home Sales Index (Seasonally Adjusted)115 Homebuyer Tax Credit110105100959085807570 2007 - 2007 - 2008 - 2008 - 2009 - 2009 - 2010 - 2010 - 2011 - 2011 - 2012 - Jan Jul Jan Jul Jan Jul Jan Jul Jan July Jan
  3. 3. 1,000,000 2,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 3,000,000 0 2005 - Jan2005 - May 2005 - Sep 2006 - Jan2006 - May 2006 - Sep 2007 - Jan2007 - May 2007 - Sep 2008 - Jan2008 - May 2008 - Sep 2009 - Jan2009 - May 2009 - Sep 2010 - Jan2010 - May 2010 - Sep 2011 - Jan Monthly Existing Home Sales2011 - May 2011 - Sep 2012 - Jan
  4. 4. 200 600 800 1000 1200 1400 1800 2000 400 1600 0 2005 - Jan2005 - May 2005 - Sep 2006 - Jan2006 - May 2006 - Sep 2007 - Jan2007 - May New Home Sales 2007 - Sep 2008 - Jan2008 - May 2008 - Sep 2009 - Jan2009 - May 2009 - Sep 2010 - Jan2010 - May Monthly New Homes Single-Family Housing Starts 2010 - Sep 2011 - Jan2011 - May 2011 - Sep 2012 - Jan
  5. 5. Improving Factors for Higher Home Sales• Improving Factors – Very high affordability – Job creation – Solid stock market recovery from 2008 – Rising rents and larger pool of qualified renters – Household formation pent-up release – Smart money chasing real estate• Potential Huge Positive … Lending opens up• Potential Huge Negative … Washington policy
  6. 6. Best Affordability Conditions
  7. 7. Annual Existing Home Sales8 In million units7654 7.083 6.52 5.02 4.61 4.752 4.12 4.34 4.18 4.2610 2005 2006 2007 2008 2009 2010 2011 2012 2013 forecast forecast
  8. 8. Second Home vs. Primary 2011 2010 Investment 17% Investment 27%Vacation 10% Vacation Primary 11% 62% Primary 73%
  9. 9. Second Home Sales In thousands40003500300025002000 Investment1500 Vacation1000500 0 2003 2004 2005 2006 2007 2008 2009 2010 2011
  10. 10. Housing Starts2500 In thousand units20001500 Multifamily1000 Single-Family500 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 forecast forecast
  11. 11. New Home Sales In thousand units NHS Single-family starts200018001600140012001000800600400200 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 forecast forecast
  12. 12. Visible Housing Inventory4,500,0004,000,0003,500,0003,000,0002,500,0002,000,0001,500,0001,000,000 500,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan Existing New
  13. 13. 0.5 1.0 1.5 2.5 3.0 3.5 4.0 4.5 5.0 0.0 2.02000 - Q12000 - Q32001 - Q12001 - Q32002 - Q12002 - Q32003 - Q12003 - Q32004 - Q12004 - Q32005 - Q12005 - Q32006 - Q1 million units2006 - Q32007 - Q12007 - Q32008 - Q1 Shadow Inventory2008 - Q32009 - Q12009 - Q32010 - Q12010 - Q3 (Seriously delinquent mortgage + homes in foreclosure process)2011 - Q12011 - Q3
  14. 14. Median Home Price260,000 History Forecast240,000220,000200,000180,000160,000140,000120,000100,000 Existing New
  15. 15. Economy Real GDP Growth Nominal GDP Growth % 8 7 6 5 4 3 2 1 0-1 2005 2006 2007 2008 2009 2010 2011 2012 2013-2 forecast forecast-3-4-5
  16. 16. Payroll Jobs Changes (December to December)43 In millions210-1 2005 2006 2007 2008 2009 2010 2011 2012 2013 forecast forecast-2-3-4-5-6
  17. 17. Unemployment Rate % (Average during the Year)121086420 2005 2006 2007 2008 2009 2010 2011 2012 2013 forecast forecast
  18. 18. Labor Force Participation Rate %6867666564636261 2002 - Jan 2008 - Jan 1990 - Jan 1991 - Jan 1992 - Jan 1993 - Jan 1994 - Jan 1995 - Jan 1996 - Jan 1997 - Jan 1998 - Jan 1999 - Jan 2000 - Jan 2001 - Jan 2003 - Jan 2004 - Jan 2005 - Jan 2006 - Jan 2007 - Jan 2009 - Jan 2010 - Jan 2011 - Jan 2012 - Jan Labor Force Participation Rate has been falling at the beginning of the recession. Many went to school or took early retirement packages and are therefore no longer counted as part of the labor force. If the labor force participation were to be normal (or had it not fallen) then the corresponding unemployment rate would be closer to 11%.
  19. 19. Consumer Price Inflation Rent All Items Core %543210 2005 2006 2007 2008 2009 2010 2011 2012 2013-1 forecast forecast
  20. 20. Fed Policy and Interest Rates Fed Funds 10-year Treasury 30-year Mortgage %76543210 2005 2006 2007 2008 2009 2010 2011 2012 2013 forecast forecast
  21. 21. Homes Bought How? More People Sought Help From REALTORS® Homebuilder Directly from owner Real estate agent100 90 80 70 60 50 40 30 20 10 0 2005 2006 2007 2008 2009 2010 2011
  22. 22. Foreclosure Inventory(% of all mortgage outstanding; about 1/3 of homes are free and clear)10.0 New Jersey Arizona 8.0 6.0 4.0 2.0 0.0 2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 - Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Important Judicial States with slow foreclosure process: • IL, IN, OH (Midwest) • NJ, NY, CT (Northeast) • FL
  23. 23. Housing Starts2500 In thousand units20001500 Multifamily1000 Single-Family500 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 forecast forecast
  24. 24. -100 0 100 200 300 400 500 6002001 - Q12001 - Q32002 - Q12002 - Q32003 - Q12003 - Q32004 - Q1 $ billions; seasonally adjusted annualized2004 - Q32005 - Q12005 - Q32006 - Q12006 - Q32007 - Q12007 - Q32008 - Q12008 - Q32009 - Q12009 - Q32010 - Q12010 - Q32011 - Q1 Financial Industry Corporate Profits2011 - Q3
  25. 25. Banks/Regulators Restricting Credit (Average Credit Scores of Approved Loans) Normal 2009 2010 If NormalFannie 720 761 762 720Freddie 720 757 758 720FHA 650 682 698 660 15% to 20% Higher Sales
  26. 26. Annual Household Formation… Future Rent Pressure? (3 separate Census data) In millionsHousehold Formation leads to increase ownership and renters;Could begin to return to normal of at least 1 million from 2012.
  27. 27. Cost Comparisons over 30 yearsItem Price Index Price % Change in 1981 Index in 2011Consumer price index 87.2 226.3 160%Rent index 84.7 254.3 200%Food price index 91.6 229.6 150%Gasoline price index 103.6 308.4 197%College tuition index 75.8 601.3 693%Medical care index 78.6 401.4 410%Monthly mortgage payment on a $598 Same if no 0%median priced home (14% mortgage cash out (free and clear rate) refi ownership)Home Prices (FHFA index) 100 319 219%
  28. 28. Annual Forecast 2011 2012 2013 History Forecast ForecastExisting Home Sales 4.26 million 4.65 million 4.71 millionNew Home Sales 304,000 400,000 530,000Housing Starts 611,000 760,000 960,000Existing Home Price $166,100 $168,000 $172,000GDP Growth +1.8% +2.3% +3.1%Payroll Job Gains +1.7 million +2.7 million +2.7 millionFed Funds Rate 0.1% 0.1% 0.1%30-yr Mortgage 4.7% 4.3% 4.9%
  29. 29. Long-Term Demographics
  30. 30. U.S. Population Aged 25-to-344400043000420004100040000390003800037000360003500034000
  31. 31. 30000 35000 45000 50000 55000 60000 400002012201420162018202020222024202620282030203220342036203820402042204420462048 Forecast Population Aged 25-to-342050
  32. 32. U.S. Population Aged 35-to-445000045000400003500030000250002000015000100005000 0
  33. 33. 30000 35000 45000 50000 55000 60000 400002012201420162018202020222024202620282030203220342036203820402042204420462048 Forecast Population Aged 35-to-442050
  34. 34. U.S. Population Aged 45-to-545000045000400003500030000250002000015000100005000 0
  35. 35. 30000 35000 40000 45000 50000 550002012201420162018202020222024202620282030203220342036203820402042204420462048 Forecast Population Aged 45-to-542050
  36. 36. U.S. Population Aged 55-to-64400003500030000250002000015000100005000 0
  37. 37. Forecast Population Aged 55-to-645000048000460004400042000400003800036000340003200030000 2016 2026 2012 2014 2018 2020 2022 2024 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 2048 2050
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