02.02.22 Hasson

Patrick F. Stone
EXECUTIVE CHAIRMAN & FOUNDER
WFG National Title Insurance Company
Williston Financial Group
ECONOMIC PERSPECTIVES &
THE REAL ESTATE MARKET
WHERE DO WE GO
FROM HERE?
FEBRUARY 2, 2022
WFG OREGON
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2
02/02/2022 PATRICK STONE - 2022 ECONOMIC PERSPECTIVES/OREGON 2
WHERE EXACTLY ARE WE?
• PANDEMIC
• INFLATION
• INTEREST RATES
• THE ECONOMY
• REAL ESTATE
WHERE ARE WE HEADING?
• SUPPLY CHAIN EFFICIENCIES
• AUTOMATION
• PRODUCTIVITY
THE ECONOMY 2022-2025
OREGON – NOAH BLANTON

3
PANDEMIC

4
Source: THE WALL STREET JOURNAL

5
Source: WALL STREET JOURNAL

6
Source: WALL ST. JOURNAL

7
NOV 2021
6.9%

8
Source: NEW YORK TIMES

9

10

11
Source: THE NEW YORK TIMES

12

13
INFLATION

14
Consumer prices popped again in December, casting a
shadow over the economy.

15

16

17

18

19

20

21

22
Source: GOLDMAN SACHS

23

24
Source: BLOOMBERG ECONOMICS

25

26

27
Source: THE ECONOMIST

28
INTEREST
RATES

29

30
Source: NASSAU

31

32

33
Source: URBAN INSTITUTE

34
Source: MBA.ORG
125.9
December

35
SOURCE: https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2021Q3.pdf
Q4 RELEASE: FEB 2022

36
THE
ECONOMY

37

38

39

40
Source: NEW YORK TIMES

41
260,000
JAN 22, 2022

42

43

44

45

46

47

48

49

50

51
REAL ESTATE

52
Source: GOCOMICS.COM

53
Source: GREEN STREET ADVISORS

54
Source: REDFIN

55
Source: Inman news
Annual sales of new and existing homes. 2021 and 2022 are projected.
Source: Fannie Mae Economic and Housing Outlook, September 2021.
New and existing home sales

56
Source: NATIONAL ASSOCIATION OF REALTORS
The national median existing-home price for all housing types rose to $358,000 in December, up
15.8% percent from a year ago. Home prices have continued to rise, and this marks the 118th
consecutive month of year-over-year gains.

57

58
Booming Demand Has Reduced the Supply of Homes to the
Lowest Level Since the 1970s

59
Source: HOUSING WIRE

60

61

62
02/02/2022 PATRICK STONE - 2022 ECONOMIC PERSPECTIVES/OREGON
62
SOURCE: US CENSUS BUREAU
https://www.census.gov/construction/nrc/pdf/newresconst.pdf

63

64

65

66

67
WHERE ARE WE
HEADING?

68
SUPPLY CHAIN EFFICIENCY
AUTOMATION
PRODUCTIVITY

69
SUPPLY CHAIN
EFFICIENCY

70

71
Shipping rates have declined from September peaks
as of October 28, 2021

72
Record number of container ships are waiting at US ports
as of October 22, 2021

73

74

75
AUTOMATION

76
Source: FINANCIAL TIMES

77
PRODUCTIVITY

78
The Productivity Trend Has Accelerated by Around
1pp vs. Pre-Pandemic

79
The 2020 Productivity Surge in Non-Virus-Sensitive
Services Continued During 2021

80
Productivity Gains Skewed Towards Industries Ripe for Digitization; Scope for
Post-Pandemic Rebound in Virus-Sensitive Categories

81
Scale of Pandemic-Driven Workforce Changes Argues
for One-Time Productivity Gains of at Least 3%

82
OUTLOOK

83
REAL ESTATE = QUALITY OF LIFE
• 3X INDIVIDUALS WITH $5M NET WORTH OWN $1-5 MILLION IN REAL ESTATE
COMPARED TO 2019. 180% INCREASE IN LUXURY PROPERTY OWNERSHIP.
• 77% OF AMERICANS REPORTED THAT THEY WOULD RATHER INVEST IN
HOMEOWNERSHIP THAN SPEND IT ON A VACATION
• 82% OF UNMARRIED AMERICANS SURVEYED (85% OF FEMALES) WOULD RATHER
INVEST IN A HOME THAN PAY FOR A BIG EXPENSIVE WEDDING
• 41% OF COLLEGE GRADS ARE LIKELY TO SELECT “OWNING A HOME” AS A MORE
IMPORTANT GOAL THAN PAYING OFF STUDENT DEBT (17%)
• 42% OF AMERICANS IDENTIFY AS HISPANIC SAY “OWNING A HOME” IS THEIR MOST
IMPORTANT FINANCIAL GOAL
• 45% OF GEN Z AND MILLENIALS BETWEEN 18-44 SAY OWNING A HOME IS AN
IMPORTANT FINANCIAL GOAL.

84

85

86

87
Source: NATIONAL MORTGAGE NEWS

88

89
We Now Forecast GDP Will Grow by +3.8% on an Annual
Basis and by +2.9% on a Q4/Q4 Basis

90

91
ECONOMIC OUTLOOK
NEAR-TERM GROWTH OUTLOOK REMAINS POSITIVE
• FY 2021 GDP 5.7%
• FY 2022 GDP FORECAST 4.0%
LABOR MARKET RECOVERY REMAINS ERRATIC
• STARTEDTAPERING IN DECEMBEROF 2021
FEDWILL STARTEDTAPERING IN DEC 2021 WITHTHE POTENTIALTIMELINE:
• ANNOUNCEDTAPER IN NOVEMBERAND STARTEDACCELERATING IN DECEMBER
• TAPER DONE MARCH 2022, OR SOONER
• FEDWILLANNOUNCE FIRST RATE INCREASE IN MARCH 2022, EXPECT 4 OR 5
PRUDENCE IN COVID IMPACT SECTORS
• TRAVELAND LEISURE SECTORS IMPROVING/STUCK/IMPROVING
• RETAIL CHALLENGES LIKELY PERMANENT/ECOMMERCETO 30% BY 2025

92
ECONOMIC OUTLOOK CONT.
KEY RISKS & CHALLENGES
• OMICRONVARIANT/OTHERVARIANTS
• INVESTORS’OPTIMISM IS HIGH/BUT CONCERNED
• INFLATIONCOULDOVERSHOOT,THANKSTO AGGRESSIVE POLICY SUPPORT, BETTER
GROWTHAND AMPLE LIQUIDITY, LEADINGTOTIGHTER FINANCIALCONDITIONS
• LOW RATES MASK LEVERAGE & DEBT ISSUANCE
MORTGAGE RATES WILL GO UP
• 2022 3.75 - 4.00
• 2023 4.00 - 4.50
• 2024 4.50 -
RESIDENTIAL REAL ESTATE
• WILL STAY STRONGTHROUGH 2025/26 (UNTIL NEXT RECESSION)
• PRICEAPPRECIATIONWILL RETURNTO 3-5% ANNUALLY DEPENDINGON LOCATION
• DEMANDWILL EXCEED SUPPLY FOR FORESEEABLE FUTURE

93
THANK
YOU

Oregon 2022
Supply & Demand Forecast

$439,900
$450,000
$499,000
$516,500
100.0%
100.5%
105.1%
101.4%
$400,000
$420,000
$440,000
$460,000
$480,000
$500,000
$520,000
$540,000
97.5%
98.5%
99.5%
100.5%
101.5%
102.5%
103.5%
104.5%
105.5%
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21
% Sold to List Price
Median Sale Price Avg. % to List
02/02/2022 98

$13
$2,617
$29,777
$8,370
$32,024
$6,838,113
$75,870,077
$16,249,222
-$10,000
-$5,000
$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$(20,000,000)
$(10,000,000)
$-
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$90,000,000
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21
$$ Impact - Avg. & Abs.
Avg. $ Impact (rhs) Abs. $ Impact
02/02/2022 99

0
100000
200000
300000
400000
500000
600000
700000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Pending Ratio (demand indicator) & Avg. Sale Price - Portland
Recession Recovery Expansion Hypersupply
02/02/2022 100

0
10,000
20,000
30,000
40,000
50,000
60,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Oregon - Inbound Migration
Projected
Source: PSU Population Forecast Center
02/02/2022 102

290,478
342,510
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85+
Oregon Population by Age Cohort
2020 2025 2029
Source: PSU Population Forecast Center
02/02/2022
104

STRUCTURAL > CYCLICAL
02/02/2022 108

0.25
0.75
1.25
1.75
2.25
2.75
3.25
3.75
Months of Inventory
02/02/2022 110

$370,000
$390,000
$410,000
$430,000
$450,000
$470,000
$490,000
$510,000
$530,000
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
Portland Appreciation 2019-2021
% Change from Prior Month Median Sale Price
02/02/2022 111

Bend-Redmond, OR, 0.1
Median, 1.00
Eugene, OR, 0.4
Medford, OR, 0.5
Salem, OR, 0.5
Laredo, TX, 3.6
Portland-Vancouver-Hillsboro,
OR-WA, 0.4
0
0.5
1
1.5
2
2.5
3
3.5
4
30-89 day mortgage delinquency rates
Source: MBA
02/02/2022 112

$300,000
$320,000
$340,000
$360,000
$380,000
$400,000
$420,000
$440,000
$460,000
$480,000
2,500
4,500
6,500
8,500
10,500
12,500
14,500
Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21
Avg. Loan Amounts & Refinance Volume
Total # of Refinances (lhs) Avg. Refi Loan Amt. Avg. Purchase Loan Amt.
Source: DataTrace
02/02/2022 113

0%
10%
20%
30%
40%
50%
60%
70%
0
2000
4000
6000
8000
10000
12000
14000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Number of Units by Type & Percent MFR
1 Unit 5 Units or More % MFR
Source: US Census Bureau
02/02/2022 114

$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
LUMBER FUTURES
02/02/2022 115

$300,000
$350,000
$400,000
$450,000
$500,000
$550,000
2.50
3.00
3.50
4.00
4.50
5.00
Interest Rate & Median Price - Portland Metro
Avg. 30-year rate Median Price
02/02/2022 116

Bottom Line – Market Drivers
• Seasonal patterns become more apparent through 2022
• Structure remains > Cycle
• Price ceilings appear to have been reached – appreciation moderates,
velocity remains stable or increases, inventory remains below LTA
• At what price would you list your home?
• At what interest rate would you delay or move up a purchase?
• Migratory patterns continue or accelerate?
• Expectations of consumers – will prices continue to rise?
• Effect of Pandemic on LT Behavior?
• How do people work?
• Where do people WANT to live?
02/02/2022 117

02.02.22 Hasson

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02.02.22 Hasson