• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Housing Market and Economic Outlook: July 2011
 

Housing Market and Economic Outlook: July 2011

on

  • 1,686 views

Chicago Chase Event July 2011

Chicago Chase Event July 2011

Statistics

Views

Total Views
1,686
Views on SlideShare
1,211
Embed Views
475

Actions

Likes
0
Downloads
21
Comments
0

6 Embeds 475

http://www.realtor.org 393
http://www.worcesteropenhouse.com 62
http://x351022.yourkwagent.com 11
http://204.146.162.1 6
http://realtors.org 2
http://webcache.googleusercontent.com 1

Accessibility

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

    Housing Market and Economic Outlook: July 2011 Housing Market and Economic Outlook: July 2011 Presentation Transcript

    • Housing Market and Economic Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® Presentation at JP Morgan Chase Event & Chicago Association of REALTORS ® Chicago, IL July 21, 2011
    • U.S. Annual Existing Home Sales …Ready to Breakout?
    • Monthly Existing Home Sales Tax Credit Impact
    • Pending Existing Home Sales Index 2010 to 2011 Tax Credit Impact
    • Activity in Chicagoland
      • First Quarter Sales (no tax credit in 2011 vs. tax credit in 2010)
        • Cook County down 12% from 2010 Q1
        • DuPage County down 1%
        • Kane County down 2%
        • Lake County down 7%
        • McHenry County down 16%
      • First Quarter Prices
        • Chicagoland MLS data down 7.3% from 2010 Q1
        • Federal Housing Finance down 5.0%
        • Case-Shiller down 7.5%
      • Source: IAR and Case-Shiller, FHFA
    • Midwest Weather Impact
    • Solid Gains of 30% or more (from one year ago among major markets)
              • Austin
              • Baltimore
              • Chicago
              • Hartford
              • Houston
              • Indianapolis
              • Kansas City
              • Portland, OR
              • San Antonio
              • Seattle
    • New Home Sales (Pending contracts, not Closings) In thousands
    • U.S. Housing Starts Housing Starts in thousands
    • Chicago MSA Housing Permits
    • Newly Built Home Inventory In thousands
    • New Home Price vs. Existing Home Price 30% premium rather than 10-15% normal premium 12 month moving average Existing Home Price New Home Price
    • Improving Factors for Higher Home Sales
      • First quarter at 5.1 million annualized pace … if sales can hold at current levels then 4% annual increase in 2011 … without homebuyer tax credit stimulus
      • The remainder of the year looks to be better
        • Job Creation
        • Robust stock market recovery from 2008
        • Rising rents and larger pool of qualified renters
        • Buyers want distressed properties … at deep discounts
        • International buyers cashing in on the weakened dollar
        • Smart money chasing real estate
        • Potential Huge Positive … Lending opens up
        • Potential Huge Negative … Washington policy change
    • Total U.S. Payroll Jobs – Modest Recovery In thousands 7 million below prior peak In thousands
    • North Dakota Jobs In thousands
    • Texas Payroll Jobs – Fully Recovered In thousands
    • Chicagoland Payroll Jobs – Recovery? In thousands
    • Weekly Fresh Unemployment Claims … Not Going under 400,000 In thousands In thousands
    • Financial Asset at $50 trillion … Full Recovery Source: Federal Reserve
    • Realtors Reporting Rising Apartment Rents
    • CPI Apartment Rent
    • Home Price vs Rent (index = 100 in 1980)
    • # of Serious Delinquent Mortgages … Mostly Borrowers prior to 2009 (90+ days late or in foreclosure process) In 2010, there were 1.5 million distressed sales … need to wait 2.7 years
    • Distress Sales: 30% to 40% of Transactions Will Remain Significant for Next 2 years
    • One U.S. Dollar gets …
    • U.S. Home Price after Currency Conversion
    • Smart Money Buying?
      • All-cash record high at 35% of all sales
        • Investors want quick deals
        • Investors cannot get mortgage
        • Some do not want to bother with appraisals
        • Financial asset recovery helping with cash
        • Hedge against future inflation
        • Hedge against future housing shortage?
        • Empty nesters downsizing and using leftover cash for kids’ home?
      • Upper-end market beginning to move
    • Real Estate as Inflation Hedge? (single-family home price in blue vs CPI in red) Good inflation hedge in the past before the housing bubble/bust
    • Upside Potential Surprise
    • Average Credit Score for Loan Origination 15% to 20% Higher Sales Normal 2009 2010 If Fannie 720 761 762 720 Freddie 720 757 758 720 FHA 650 682 698 660
    • QE2 … to keep rates low … are inconsequential if too strict underwriting standards Fannie and Freddie Backed Mortgage Loan Performance Source: Federal Housing Finance Agency Fannie Mae Vintage Cumulative Default Rate after 18 months 2002 3.1% 2003 2.5% 2004 4.6% 2005 4.8% 2006 11.6% 2007 28.7% 2008 12.6% 2009 1.2% Freddie Mac Vintage Cumulative Default Rate after 18 months 2002 2.7% 2003 1.2% 2004 2.0% 2005 1.8% 2006 6.0% 2007 22.3% 2008 13.7% 2009 1.1%
    • Downside Potential Surprise
    • Washington Policy Change?
      • Going after the Middle-Class by Republicans
        • Raise down payment to 20% ???
        • Despite no taxpayer bailout for FHA and VA program
      • Going after the Rich by Democrats
        • Limit mortgage interest deduction for high income and second homes ???
        • Crush the working class in resort areas (Yacht Tax Impact)
      • Going after the Rich by Republicans
        • Lower conforming loan limit ???
        • Income redistribution from consumers to banks
      • Going after the Small Business “Tax Cheats” by Democrats
        • Force massive 1099 paperwork to run a business and hire IRS agents
        • REPEALED !!!
      • Fannie and Freddie model was flawed (private profit/taxpayer loss) and need a fundamental restructuring
    • Current Savings Rate = 6% Takes 9 years to save $20,000 based on average $2,200 per year Takes 14 years to save $32,000 (20% of today’s median price)
    • Economic Hurdles
      • Inflation hitting pocketbooks
        • Gas and Oil … daily reminder
        • Food and grocery … daily reminder
      • Huge pool of underemployed … everything is unaffordable even if no inflation
      • Budget Deficit … no impact now but when?
      • Consumer confidence … another losing election for incumbents
    • CPI Inflation and PPI Inflation (% change from one year ago) Prices falling on consumer electronic products : Smartphone1 = $200 to Smartphone2 = $200 is computed as falling prices; even though your wallet did not get any relief
    • Broad Inflationary Pressure Indicator % change from one year ago Consumer Price Index 3.4% Producer Price Index (Finished Product) 7.0% Producer Price Index (Intermediate Product) 11.0% Producer Price Index (Crude Product) 25.5% Dow Jones Commodity Spot Price Index 38.1% Gold Price Around Record High Price
    • # Unemployed (looking but cannot find job)
    • Adults in the Labor Force (Rest are not looking for job and officially not included in unemployment rate)
    • Government Spending and Tax Receipts $ billion
    • Government Default?
    • Consumer Confidence Index
    • Housing Baseline Outlook
      • Moderate GDP Expansion 1.5% to 2.5% in the next 2 years
      • 1.2 to 1.7 million annual job additions yearly in the next 2 years
      • Mortgage Rates rising to 5.5% by year-end 2011 and 6% in 2012
      • Home values – no meaningful change in the national price in the next 2 years
      • Chicago Market ???
    • Presidential Quotes
      • Franklin Delano Roosevelt:
        • “ A nation of homeowners is unconquerable.”
      • Ronald Reagan
      • “ We will preserve the part of the American dream which the mortgage-interest deduction symbolizes."
      •  
    • For More Information
      • realtors.org/research
        • Research data and analysis
        • facebook, twitter for daily economic updates