Dr. Lawrence Yun - 13th Annual Economic Summit


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Presentation by Dr. Lawrence Yun at the 13th Annual Economic Summit hosted by NVAR at George Mason University on Wednesday, September 23, 2009.

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Dr. Lawrence Yun - 13th Annual Economic Summit

  1. 1. Real Estate Market Trends & Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS ® Presentation at Northern Virginia Association of REALTORS ® September 23, 2009
  2. 2. National Existing Home Sales
  3. 3. Recent Pending Home Sales Rising, but Taking Longer to Close in Recent Months
  4. 4. Appraisal Issues from HVCC <ul><li>Good Intended Policy Gone Bad </li></ul><ul><ul><li>Appraisers getting paid less </li></ul></ul><ul><ul><li>Appraiser driving long distances </li></ul></ul><ul><ul><li>Appraisal process taking shorter time </li></ul></ul><ul><ul><li>Consumers paying higher fee </li></ul></ul><ul><ul><li>Homeowners unable to refinance </li></ul></ul><ul><ul><li>Homebuyers wanting to buy but cannot </li></ul></ul><ul><li>Unintended Consequences of Slowing Housing Market Recovery … Slowing Economic Recovery </li></ul>
  5. 5. National Existing Median Home Price $
  6. 6. Dallas, San Diego, Washington Home Price Source: NAR $ thousand SD DC Dallas
  7. 7. Home Price to Income Ratio (Enticing for All-Cash Buyers) Stay within Budget and all will be OK !
  8. 8. Housing Affordability Index (Higher numbers mean more people can afford to buy a home) ALL-TIME HIGH … on conforming loans …if people need to stay within budget
  9. 9. Latest Monthly Home Price Trend Case-Shiller, Govt (FHFA), NAR … Seasonally Adjusted Data $ thousand NAR FHFA Case-Shiller
  10. 10. Serious Delinquency Rate (90+ days late or foreclosure) % Subprime <ul><li>FHA Reserve Fund depleting … may need funds to implement a countercyclical policy </li></ul><ul><li>Fannie-Freddie will need funds … future reform of the secondary mortgage market </li></ul><ul><li>VA … slight rise … even though a zero-down product … stay within budget and all will be OK! </li></ul>VA (purple) FHA Prime (green)
  11. 11. Foreclosure Rates Virginia vs Nation % US Virginia
  12. 12. Home Price Up in Select Regions <ul><li>April to May according FHFA (Government) Home Price Index </li></ul>%
  13. 13. Homebuilders Down and Out (Single Family Starts and New Home Sales) Source: Census In thousand units
  14. 14. New Home Inventory for Sale Source: Census In thousand units In thousands
  15. 15. Housing Starts: Too Much to Too Little New Units Needed 3 million more people each year … 1 to 1.4 million household formation … need to account for 300,000 demolitions …. need 1.3 to 1.7 new units
  16. 16. Economy to Recover Slowly GDP annualized growth rate Source: BEA Latest Data Forecast
  17. 17. Job Changes in U.S. … Unemployment Rate to 10.5% Source: BLS, NAR forecast One-month payroll job changes in thousands
  18. 18. Federal Budget Deficit .. Impact? Future Generation and Housing $ million Source: Congressional Budget Office Projections
  19. 19. Tax Revenue Collections (4-quarter change as of 2009 Q1) Tax Assessors and Appraisers need to meet %
  20. 20. Housing Market Recovery Helps Reduce Budget Deficit <ul><li>Housing Market Impact on the Economy </li></ul><ul><ul><li>$62,000 from each home sale (furniture, moving truck, carpeting, title search, etc.) </li></ul></ul><ul><ul><li>Home values are most American’s wealth … and consumer spending </li></ul></ul><ul><ul><li>Higher home sales … reduce inventory … stabilize home values </li></ul></ul><ul><ul><li>Home values strongly impact bank balance sheets and foreclosures </li></ul></ul><ul><li>Home Buyer Tax Credit … Extend and Expand </li></ul>
  21. 21. Economic Outlook 2008 2009 2010 forecast 50 year average GDP 1.1% -2.9% 1.5% 3.3% CPI Inflation 3.8% -0.5% 2.1% 4.1% Unemployment Rate 5.8% 9.5% 10.0% 5.9% Mortgage Rate 6.1% 5.2% 5.8% 9.1% Existing Home Sales 4.9 m 4.9 m 5.2 m 5.2 m in 2000 (before bubble)
  22. 22. Credit Crunch Ending? <ul><li>Libor Rates improving </li></ul><ul><li>Junk Bond yields becoming less wild </li></ul><ul><li>Banks making profit … but are they getting too big again (75% of assets controlled by 10 banks) </li></ul><ul><li>Federal Reserve lending at zero (though not to consumers) </li></ul><ul><li>True Test of credit easing </li></ul><ul><ul><li>Lower rate on jumbo mortgages </li></ul></ul><ul><ul><li>Lower rate on second home purchases </li></ul></ul><ul><ul><li>Lower rate on condo purchases </li></ul></ul><ul><ul><li>Lower rate on commercial real estate loans </li></ul></ul>
  23. 23. Commercial Credit Freeze
  24. 24. Commercial Real Estate Loan Delinquency Rate Source: Federal Reserve
  25. 25. Housing Forecast <ul><li>Stimulus and falling inventory will help stabilize prices … and change in psychology </li></ul><ul><ul><li>“ Why buy now when I can buy later” </li></ul></ul><ul><ul><li>“ Not to miss out on a golden opportunity” </li></ul></ul><ul><li>Current Sales about 10% short of Normal </li></ul><ul><ul><li>(5.0 million to 5.5 million) </li></ul></ul><ul><li>Builders may not see a full recovery till 2011 </li></ul>
  26. 26. Inflation or Deflation in 2011 ? <ul><li>Inflation: Print money and there goes the inflation </li></ul><ul><li>Deflation: Excess capacity and high unemployment rate keeps prices in check. </li></ul><ul><li>Fed’s exit strategy to reclaim printed money </li></ul><ul><li>Which one is more dangerous? </li></ul><ul><li>Which one will occur? … Watch the energy price as the catalyst for both scenarios </li></ul><ul><li>If Inflation … winners will be property owners who locked-in low rate </li></ul><ul><li>If deflation … losers will be responsible property owners with mortgages </li></ul>
  27. 27. Right Tools Right Now <ul><li>Many Free Products </li></ul><ul><ul><li>Relocation Reports </li></ul></ul><ul><ul><li>REALTOR Member Profile </li></ul></ul><ul><ul><li>Home Buyer and Home Seller Survey </li></ul></ul><ul><ul><li>Daily Forecast Update </li></ul></ul><ul><li>www.realtors.org </li></ul><ul><ul><li>click Research </li></ul></ul><ul><ul><li>click “Right Tools Right Now” </li></ul></ul>