A Bright Future For Housing in 2008

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Bring out the Buyers in 2009
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A Bright Future For Housing in 2008

  1. 1. Economic Issues and Residential Real Estate Business Trends Forum NAR Midyear Meetings Washington, D.C. May 17, 2007 Lawrence Yun, Ph.D. Senior Economist NATIONAL ASSOCIATION OF REALTORS® All Real Estate is Local : Local Trends and Local Forecasts
  2. 2. Home Price Distribution (2006) Source: NAR
  3. 3. New York and Los Angeles Source: NAR $ thousand
  4. 4. Atlanta and Columbus Source: NAR $ thousand
  5. 5. Orlando and Providence Source: NAR $ thousand
  6. 6. Local Markets Are All Different Source: NAR $ thousand
  7. 7. Typical U.S. Home Price Source: NAR Ten-fold increase over 38 years for the U.S. What multiple in your local area?
  8. 8. Soft or Hard Landing? Source: NAR, Dow Jones, NASDAQ Annual % Change
  9. 9. NASDAQ Index Source: NASDAQ
  10. 10. Where is the Housing Correction?
  11. 11. U.S. New Single-Family Construction Source: Census 33% Tumble
  12. 12. U.S. Existing-Home Sales Source: Census 11% Retreat In thousand units
  13. 13. Investor (Speculative) Home Sales Source: NAR 29% Fall In thousand units
  14. 14. Vacation Home Sales Source: NAR In thousand units
  15. 15. Investor-Heavy Markets Now Taking a Hit (Existing-Home Sales: 2006 Q4 vs 2005 Q4) Source: NAR
  16. 16. Rapid Change in Prices (1-year Home Price Growth) Source: NAR
  17. 17. Construction Jobs Now Falling Source: NAR
  18. 18. Income of REALTORS ® Source: NAR
  19. 19. Housing’s Contribution to Economy Source: BEA % point contribution to GDP
  20. 20. Sub-Par Economic Growth Source: BEA
  21. 21. Property Taxes, Transfer Taxes, Impact Fees, Recordation Expenses … <ul><li>Local government spending needs = </li></ul><ul><li>Inflation rate + population growth </li></ul><ul><ul><li>Inflation rate = about 3% </li></ul></ul><ul><ul><li>Population growth = -1% to +8% </li></ul></ul><ul><li>Government Spending Needs </li></ul><ul><ul><li>On average = 3% + 1% = 4% </li></ul></ul><ul><ul><li>At most = 3% + 8% = 11% </li></ul></ul>How much has your local government revenue risen?
  22. 22. Fight the Bubble
  23. 23. Something is Out of Whack! Income and Price set to Index of 100 in 1990 Source: NAR
  24. 24. Mortgage Obligation to Income Manageable Source: NAR %
  25. 25. Mortgage Obligation to Income Very High in Some Markets San Diego 45% !!! Source: NAR
  26. 26. Mortgage Obligation to Income Historically High in Some Markets Miami Way Above Historical Local Norm Source: NAR
  27. 27. Mortgage Obligation to Income Manageable in Boston Region Boston Source: NAR
  28. 28. Mortgage Obligation to Income Favorable in Louisville Source: NAR 11% Louisville
  29. 29. Renters Beginning to Get Squeezed – U.S. Source: Torto-Wheaton Research %
  30. 30. Markets Like Phoenix -- Strong in Jobs but Weak in Housing – Feel the Squeeze Source: Torto-Wheaton Research %
  31. 31. Subprime Impact
  32. 32. Mortgage Delinquencies Source: MBA Job Losses Housing Boom Housing Slump
  33. 33. Mortgage Loan Foreclosures: All Action in the Subprime Markets Source: MBA
  34. 34. High Delinquencies Source: MBA Katrina Effect Job Troubles
  35. 35. High Foreclosures Source: MBA
  36. 36. Rising Foreclosures Source: MBA States with Marked Price Deceleration/Declines
  37. 37. Falling Foreclosures Source: MBA Mostly Strong Job Growth and Price Appreciating States
  38. 38. FHA Market Share …Revival Ahead? Source: HMDA ??? Estimate
  39. 39. Jobs Will Buffer the Subprime Fallout
  40. 40. Steady U.S. Job Gains 2 Million in Past 12 months Source: BLS Payroll job changes in thousands
  41. 41. Wage Growth Picking Up % Source: BLS
  42. 42. Job Gains in Boston Region Source: BLS 12-month net payroll job changes in thousands Still down by 100,000 from peak
  43. 43. Job Gains in New Orleans Source: BLS 12-month net payroll job changes in thousands Still down by 100,000 jobs compared to pre-Katrina
  44. 44. Job Gains in Seattle Region Source: BLS 12-month net payroll job changes in thousands
  45. 45. Jobs in Dallas- Ft. Worth Region Source: BLS 12-month net payroll job changes in thousands
  46. 46. Job Gains Tampa-St. Petersburg Region Source: BLS 12-month net payroll job changes in thousands
  47. 47. Job Gains Phoenix Region Source: BLS 12-month net payroll job changes in thousands
  48. 48. Job Gains Washington D.C. Region Source: BLS 12-month net payroll job changes in thousands
  49. 49. Jobs: Detroit Region Source: BLS 12-month net payroll job changes in thousands
  50. 50. Rates: Near 45-Year Lows Source: Freddie Mac 1970s 9% average 1980s 13% average 1990s 8% average 2000s 6.5% average
  51. 51. Stable Mortgage Rates Source: Freddie Mac
  52. 52. Mortgage Rates Retreat But Where are the Buyers? Source: Freddie Mac
  53. 53. Dow Jones Industrial Average Source: NYSE
  54. 54. Record Household Wealth $ trillion Source: Federal Reserve
  55. 55. Expanding World Economy Source: World Bank %
  56. 56. U.S. vs Foreign Currencies Source: Federal Reserve
  57. 57. Housing Comeback <ul><li>Jobs being created </li></ul><ul><li>Rates at near historic lows </li></ul><ul><li>Address tax and insurance problems </li></ul><ul><li>No further artificial swings by speculators </li></ul><ul><li>Raise buyer confidence </li></ul><ul><li>Set the record straight: </li></ul><ul><li>All Real Estate is Local </li></ul>
  58. 58. Existing Housing Inventory Source: NAR
  59. 59. New-Home Inventory Source: Census
  60. 60. Mortgage Purchase Applications Source: MBA Index
  61. 61. Price Correction – Ending? Source: NAR Percent change from a year ago
  62. 62. Improving Housing Affordability Source: NAR
  63. 63. Housing Market Tracker Based on Real-Time Data from MLSs <ul><li>Sweeping real-time data daily from 14 metro markets </li></ul><ul><li>Providing early signals on market direction </li></ul><ul><li>Soon, will sweep data at more frequent intervals – hourly or at every 15-minutes </li></ul><ul><li>Will sweep data from more MLSs over time </li></ul><ul><li>To be on Realtor.org site in July (estimated ) </li></ul>
  64. 64. Latest Daily Home Sales Tracker: Becoming Less Negative Source: NAR
  65. 65. Latest Daily Home Price Tracker: Also Less Negative Source: NAR
  66. 66. Latest Daily Inventory Tracker: Modest Tightening in Months Supply Source: NAR
  67. 67. Economic Outlook The Fed cuts rate in early 2008 4.8% 2.5% 4.6% 2.1% 2007 5.0% 4.8% 10-year Treasury 2.5% 3.2% CPI Inflation 4.8% 4.6% Unemployment Rate 3.0% 3.3% GDP 2008 2006
  68. 68. National Housing Outlook -1.0% 5.5% 6.4% 1.46 million 0.86 million 6.29 million 2007 1.4% 1.0% Existing-Home Price Growth 5.1% 5.5% 1-Year ARM 6.7% 6.4% 30-Year FRM 1.52 million 1.80 million Housing Starts 0.94 million 1.05 million New Home Sales 6.49 million 6.48 million Existing-Home Sales 2008 2006
  69. 69. Local Forecasts: Who Will be on Top?
  70. 70. Top Five Markets (in random order) <ul><li>Nashville </li></ul><ul><li>Austin </li></ul><ul><li>Salt Lake City </li></ul><ul><li>Denver </li></ul><ul><li>Raleigh-Durham </li></ul><ul><li>Watch out for these small markets </li></ul><ul><ul><li>St. George, UT </li></ul></ul><ul><ul><li>Myrtle Beach, SC </li></ul></ul>
  71. 71. Top Global Livable Cities (Ranked by Economist Intelligence Unit) <ul><li>Vancouver </li></ul><ul><li>26. Cleveland </li></ul><ul><li>26. Pittsburgh </li></ul><ul><li>Honolulu </li></ul><ul><li>33. Boston </li></ul><ul><li>Chicago </li></ul><ul><li>33. Miami </li></ul><ul><li>Seattle </li></ul><ul><li>Others: </li></ul><ul><li>Atlanta, D.C., Detroit, Houston </li></ul>
  72. 72. Best Evidence: Household Wealth Accumulation Source: Federal Reserve Median Net Worth $184,400 $4,000
  73. 73. Economic Issues and Residential Real Estate Business Trends Forum NAR Midyear Meetings Washington, D.C. May 17, 2007 Lawrence Yun, Ph.D. Senior Economist NATIONAL ASSOCIATION OF REALTORS® All Real Estate is Local : Local Trends and Local Forecasts

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