2009 Economic Forecast by Hexter Fair
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2009 Economic Forecast by Hexter Fair

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2009 Economic Forecast Presentation by David Fair and Hexter Fair Title. ...

2009 Economic Forecast Presentation by David Fair and Hexter Fair Title.
Agents attended the seminar from Southlake Texas, Flower Mound Texas,Highland Village Texas,Frisco Texas,Coppell Texas and other surrounding cities

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  • 1. DFW Real Estate “State of the Market” David Fair & Britt Fair Hexter- Hexter-Fair Title Company January 28, 2009
  • 2. Roadmap of Today’s Discussion p y Current state of the DFW housing market The big difference between the DFW economy and housing market and those of y g the rest of the US The “ace in the hole” for housing ace hole Conclusions
  • 3. “State of the Market” The most important word is “certainty” The current economic uncertainty keeps people/businesses from making big decisions, such as purchasing a home Last Tuesday’s inauguration is first step to “certainty” Ongoing government i O i intervention i another k to i is h key repairing “certainty” Bailouts of Wall Street firms (including Bank of America this ( g month) to help keep liquidity in the market Infusion in other areas (automakers, secondary mortgage market, etc.) trying to stimulate economy and maintain jobs , )yg y j Foreclosure relief plan to help consumers is likely in next tranche of TARP money
  • 4. Today’s Market NTREIS S l – YTD D ‘08 Sales Dec‘08 % Change % Change Average % Change # of vs. Prior Average vs. Prior Days on vs. Prior Sales Year Sale Price Year Market Year S. Denton County 3,521 -21% $239,322 -4% 70 19% N. N Denton County 2,610 2 610 -12% 12% $151,098 $151 098 -5% 5% 75 -3% 3% Frisco 2,790 -10% $295,517 1% 89 16% Plano 3,429 -16% $274,276 -1% 68 24% The Colony 523 -13% $149,272 -2% 69 19% Carrollton/F.Branch 1,647 -11% $191,783 6% 61 11% Coppell 530 -20% $312,513 7% 54 13% Colleyville 373 -19% $515,652 -3% 73 18% Grapevine 486 -16% $247,593 $247 593 3% 51 13% Keller 750 -19% $339,281 5% 81 27% Southlake 485 -19% $634,944 3% 78 10% Trophy Club / Westlake 164 -15% $472,345 3% 85 25%
  • 5. Today’s Market, cont’d DFW S l YTD D ’08 ( Sales Dec’08 (page 1) # sales YTD % change vs. (12 mos 2008) prior year i Sale P i R S l Price Range $1 to $19,999 757 45% $20,000 to $29,999 1225 40% $30,000 to $39,999 1669 669 3% 32% $40,000 to $49,999 1998 12% $50,000 to $59,999 2042 0% $60,000 to $69,999 2429 -2% $70,000 to $ $ $79,999 2,937 -7% $80,000 to $89,999 3,376 -14% $90,000 to $99,999 3,493 -15% $100,000 $100 000 to $109 999 $109,999 3,350 3 350 -21% $110,000 to $119,999 4,051 -20% $120,000 to $129,999 4,488 -18% $130,000 to $139,999 4,125 -18% $140,000 to $149,999 3,661 -17%
  • 6. Today’s Market, cont’d DFW S l YTD D ’08 ( Sales Dec’08 (page 2) # sales YTD % change vs. (12 ( mos 2008) ) p prior year y Sale Price Range g $150,000 to $159,999 3,354 -20% $160,000 to $169,999 3,109 -21% $170,000 to $179,999 2,775 -19% $180,000 $180 000 to $189 999 $189,999 2,429 2 429 -15% $190,000 to $199,999 1,975 -17% $200,000 to $249,999 7,323 -15% $250,000 to $299,999 4,777 -13% $300,000 to $399,999 $300 000 t $399 999 4,921 4 921 -18% 18% $400,000 to $499,999 2,194 -17% $500,000 to $599,999 1,003 -18% $600,000 to $699,999 661 -17% $700,000 to $799,999 452 -18% $800,000 to $899,999 258 -27% $900,000 to $999,999 185 -20% $1,000,000 $1 000 000 and more 822 -11% 11% Total 75,839 -14%
  • 7. NTREIS Dollar Volume S ce 2004 S o a o u e Since 00
  • 8. Interest Rates Near Historic Lows te est ates ea sto c o s Conforming rates have fallen to 5% and below below, down from over 6% a year ago Decline in conforming rates driven by US Treasury’s purchase of $50 billi i 4Q’08 and F d will h f billion in 4Q’08, d Fed ill purchase $500 billion in first half of 2009 Many experts p j yp project these secondary market p y purchases by the US government will drive rates to 4.5% and below Refi boom is currently starting, which then works its way through economy, but not as many p p or homes will g y y people qualify as in last refi boom Jumbo rates have not fallen as fast as those of conforming loans
  • 9. Sep’07 Spike in “Jumbo Spread” Source: Freddie Mac & HSH Associates
  • 10. Sp e Spike in “Jumbo Spread” Ju bo Sp ead Spread between conforming and jumbo rates continues to be much larger than normal 158 b spread on 1/26/09 per b k t b.p. d 1/26/09, bankrate.com (7.00% versus 5.42% conforming) Increased spread likel slo ing do n some likely slowing down qualified homebuyers in higher price ranges The spread will eventually return to a more normal range with the return to “certainty”
  • 11. Strong DFW economy keeps real g y p estate values up Strong job creation Continuing corporate and individual g p relocations Oil & gas industry especially in the Barnett industry, Shale! Barnett Shale created 83k jobs in 2007 and generated $8.2 billion into the local economy
  • 12. Employment Changes - 1/08 to 12/08, pg py g / / , pg.1 Prelim Dec.  Year/Year  Dec. 2007 2008 Change State Alabama 2,018,000 1,976,300 ‐41,700 Arizona 2,659,300 2,543,900 ‐115,400 Arkansas 1,206,400 1,187,700 ‐18,700 California 15,171,000 14,913,600 ‐257,400 Connecticut 1,706,500 1 706 500 1,677,200 1 677 200 ‐29,300 29 300 Florida 8,039,400 7,784,200 ‐255,200 Georgia 4,159,700 4,041,300 ‐118,400 Hawaii 626,000 612,600 ‐13,400 13,400 Idaho 657,300 628,800 ‐28,500 Illinois 5,986,500 5,885,800 ‐100,700 Indiana 2,994,900 2,883,000 ‐111,900 Kentucky 1,880,000 1,843,200 ‐36,800 Maine 619,800 608,100 ‐11,700 Michigan 4,227,600 4,054,600 ‐173,000 Minnesota 2,776,300 2,720,400 ‐55,900 Source: US Bureau of Labor Statistics
  • 13. Employment Changes - 1/08 to 12/08, pg py g / / , pg.2 Prelim Dec.  Year/Year  Dec. 2007 2008 Change State Mississippi 1,154,600 1,128,400 ‐26,200 Nevada N d 1,293,300 1 293 300 1,261,100 1 261 100 ‐32,200 32 200 New York 8,781,100 8,661,200 ‐119,900 North Carolina 4,187,700 4,067,500 ‐120,200 Ohio 5,418,700 5 418 700 5,329,700 5 329 700 ‐89,000 89 000 Oregon 1,740,600 1,695,200 ‐45,400 Pennsylvania 5,808,300 5,732,100 ‐76,200 Rhode Island 490,800 468,800 ‐22,000 22,000 South Carolina 1,958,100 1,903,900 ‐54,200 Tennessee 2,806,800 2,742,700 ‐64,100 Texas 10,475,100 10,628,800 153,700 Utah 1,264,800 1,237,700 ‐27,100 Vermont 308,500 302,700 ‐5,800 Washington 2,958,300 2,920,200 ‐38,100 Wisconsin 2,882,100 2,819,500 ‐62,600 Source: US Bureau of Labor Statistics
  • 14. Job creation 12/07 to 11/08 / / US Metro Areas 12-Month Job Rank Metro Area Growth 1 Houston-Sugarland-Baytown 54,300 2 Dallas-Fort Worth-Arlington 46,900 3 Washington-Arlington-Alexandria Washington Arlington Alexandria 31,100 31 100 4 Seattle-Tacoma-Bellevue 19,900 12 Month 12-Month Rank Metro Area Growth Rate 1 Houston-Sugarland-Baytown 2.10% 2 San Antonio 2.00% 3 Austin-Round Rock 1.60% 4 Dallas-Fort Worth-Arlington 1.60% 5 Virginia Beach-Norfolk-Newport News 1.50% Source: US Bureau of Labor Statistics
  • 15. Positive signs in DFW housing g g 5.7 months’ inventory on home resale listings Six months is generally considered equilibrium g y q Continued population growth offers support DFW has only 3 1 months’ inventory of new 3.1 months home (finished and vacant) inventory, per Metrostudy Builders have shown significant restraint in keeping housing starts low
  • 16. PMI U.S. Market Risk Index: US DFW steady despite US uncertainty On 1/14/09, The PMI Group released a study which measures the riskiness of the 50 largest MSAs in the US Risk measured as the % chance that home prices will be lower in 2 years The 5 markets with the highest risk: g 1. Riverside, CA: 99.9% chance of price decline 2. Miami, FL : 99.9% chance of price decline 3. Fort Lauderdale, FL: 99.8% chance of price decline 4. Los Angeles, CA: 99.8% chance of price decline 5. West P l B 5 W t Palm Beach, FL 99.6% chance of price decline h FL: 99 6% h f i d li
  • 17. PMI U S Market Risk Index, continued: U.S. Index DFW steady despite US uncertainty The 5 MSAs with the lowest risk of a price decline in the next two years: 46.San Antonio : 1% chance 47.Pittsburgh, 47 Pittsburgh PA: <1% chance 48.Houston-Sugar Land-Baytown: <1% chance 49.Fort Worth-Arlington: <1% chance 49 F t W th A li t 1% h 50.Dallas-Plano-Irving: <1% chance
  • 18. S&P Case-Shiller Index: Case- DFW flat relative to national price declines Monthly analysis of price changes in 20 major US markets November’s price index released 1/27/08 Showed that NATIONAL prices had declined by a record 18.2% year over year However, Dallas area had just a 3.3% price decline over that same period, which was the best of the 20 markets measured
  • 19. Housing’s “Ace in the Hole” Inflation!!! Typically considered to be something bad yp y g In fact, the Fed’s mandate is quot;to promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates long-term ratesquot; However, today’s economic environment is anything but typical We are currently experiencing “DEFLATION”, which governments hate even more than inflation
  • 20. Housing’s “Ace in the Hole”, cont’d How i fl i will ultimately l H inflation ill l i l loom over us US leaders (Congress, President, Treasury Secretary, the Federal Reserve, etc.) doing everything possible to keep economy from collapsing Original $700 billion bailout $350 billion for equity investments in banks Remaining $350 billion to make other investments Tax rebate(s) of 2008 Lowered Fed Funds rate to 0.25% Obama’s $850 billion “second bailout” announced in mid-January Fed’s balance sheet has climbed from $850 billion to $2.25 trillion in two months, with promises to spend $1 trillion more The same thing is happening in many nations across the globe Governments are printing money and throwing it at the problem!!!
  • 21. Housing’s “Ace in the Hole”, cont’d How inflation will help real estate The value of commodities (gold, real estate, oil, etc.) rises without any i t)i ith t increase i underlying in d l i demand Because real estate is typically purchased with the leverage of a mortgage, this inflation will provide a higher percentage return than other commodities Such a rise will actually “bail out” many homeowners who are “under water” on their mortgages, p g g , preventing future foreclosures g
  • 22. Housing’s “Ace in the Hole”, cont’d Why governments might err toward inflation Individuals on the brink of foreclosure get “bailed out” without anyone having t go on record voting t” ith t h i to d ti for it Banks get bailed out because their distressed assets gain in value before they have to be marked to market Additional benefit of minimizing impact of defined future payments (automaker pensions, Social Security, Security national debt payments etc ) payments, etc.)
  • 23. Housing Market Crystal Ball January always is the slowest month for residential sales Seasonal uptick begins thereafter Construction to remain sluggish until summer Building rebound date dependent on each neighborhood s neighborhood’s supply/demand Inflationary pressures toward the end of 2009 will make real estate in stable markets like DFW an excellent i t t i t bl k t lik ll t investment t t As “certainty” (from federal bailouts, interest rates, job security, inauguration, etc.) returns over the coming months, DFW residential market is poised to rebound in the spring of 2009 National market will not rebound until 2010