Bond multi 2014 la jolla, ca_apr 2014

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Presentation slides for BONDMulti 2014 Conference on April 24 with focus on Multifamily Housing

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Bond multi 2014 la jolla, ca_apr 2014

  1. 1. BONDMulti 2014 Conference April 24, 2014
  2. 2. Outlook for the Economy and Multifamily Housing Presented by: Bernard M. Markstein Reed U.S. Chief Economist
  3. 3. About Reed Construction Data Reed Construction Data is a leading construction information provider. We deliver targeted and timely project leads, market intelligence, marketing solutions and RSMeans cost data to construction professionals throughout the US and Canada. Maximize Productivity Increase Profits Drive Growth Our products and services simplify decision-making and help organizations:
  4. 4. How we do it: our channels
  5. 5. Our coverage and penetration Private projects 22%increase year over year 80%acquisition rate Plans and specs TOTAL ACTIVE PROJECTS: 15.2% increase over 4 years 130,000public and private Non-residential construction information industry sources 22.9%increase over four years Plans and specs
  6. 6. Every state and every area in USAcovered including Alaska and Hawaii More coverage in Canada than anyone in the construction industry Our coverage and penetration
  7. 7. 7 The U.S. Economy
  8. 8. 8  Economic growth – improving, but should be better  Employment growing, but should be faster  Inflation remains moderate, too low?  Washington less of an obstacle, but will wrangling break out again and hinder basic business?  Federal Reserve has started to taper, when do interest rates rise? Overview of the economy
  9. 9. 9 Risks to the economy  Spike in interest rates due to Fed unwinding its Quantitative Easing program too fast  Sharp cuts to federal government spending in the near term  European government debt default  The euro  Energy (oil) prices  Russia?
  10. 10. 10 Construction Outlook
  11. 11. 11 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35 3-Month Moving Average, Year-over-Year % Change Reed Total Starts (3-Mo MA YoY) Source: Reed Construction Data Shaded area represents recession Overview of construction
  12. 12. 12 0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300 1,400 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Residential Nonresidential Building Heavy Construction $ Billions History Source: History – U.S. Census Bureau; Forecast – Reed Construction Data Forecast Forecast: Construction to improve Construction Spending and its Components Overview of construction
  13. 13. 13 47% 32% 20% 2002 Residential Nonresidential Building Heavy Construction 56% 27% 17% 2005 Residential Nonresidential Building Heavy Construction 2002 Total - $848 Billion 2005 Total - $1,104 Billion Construction Spending Components Source: U.S. Census Bureau Overview of construction
  14. 14. 14 56% 27% 17% 2005 Residential Nonresidential Building Heavy Construction 31% 36% 33% 2010 Residential Nonresidential Building Heavy Construction 2005 Total - $1,104 Billion 2010 Total - $805 Billion Construction Spending Components Source: U.S. Census Bureau Overview of construction
  15. 15. 15 38% 33% 29% 2013 Residential Nonresidential Building Heavy Construction 2005 Total - $1,104 Billion 2013 Total - $900 Billion Construction Spending Components Source: U.S. Census Bureau Overview of construction 56% 27% 17% 2005 Residential Nonresidential Building Heavy Construction
  16. 16. 16 2002 Total - $848 Billion 2013 Total - $900 Billion Construction Spending Components Source: U.S. Census Bureau Overview of construction 38% 33% 29% 2013 Residential Nonresidential Building Heavy Construction 47% 32% 20% 2002 Residential Nonresidential Building Heavy Construction
  17. 17. 17 Residential construction is recovering, but from a low level  Single-family housing market is on the mend, but much further to go before it is back to normal  Multifamily market has largely recovered, but still some room for growth Overview of housing
  18. 18. 18 0 250 500 750 1,000 1,250 1,500 1,750 2,000 2,250 2,500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Thousands of Units, SAAR Nation’s long-run (trend) need for the next decade Low Estimate (1.4 million starts per year) Nation’s long-run (trend) need for the next decade High Estimate (1.8 million starts per year) Total Housing Starts (3-Month Moving Average) Source: U.S. Census Bureau Shaded areas represent recession Overview of housing
  19. 19. 19 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Thousands of Units, SAAR Nation’s long-run (trend) need for the next decade Low Estimate (1.15 million starts per year) Nation’s long-run (trend) need for the next decade High Estimate (1.45 million starts per year) Single-Family Housing Starts (3-Month Moving Average) Overview of housing Source: U.S. Census Bureau Shaded areas represent recession
  20. 20. 20 0 50 100 150 200 250 300 350 400 450 500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Thousands of Units, SAAR Nation’s long-run (trend) need for the next decade Low Estimate (250,000 starts per year) Nation’s long-run (trend) need for the next decade High Estimate (350,000 starts per year) Multifamily Housing Starts (3-Month Moving Average) Overview of housing Source: U.S. Census Bureau Shaded areas represent recession
  21. 21. 21 0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Thousands of Units, SAAR Nation’s long-run (trend) need for the next decade High Estimate (350,000 starts per year) Nation’s long-run (trend) need for the next decade Low Estimate (250,000 starts per year) Multifamily Housing Starts (3-Month Moving Average) Overview of housing Source: U.S. Census Bureau Shaded areas represent recession
  22. 22. 22 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 3-Month Moving Average, Year-over-Year % Change Reed Residential Starts (3-Mo MA YoY) Overview of housing Source: Reed Construction Data Shaded area represents recession
  23. 23. 23 0 100 200 300 400 500 600 700 800 02 03 04 05 06 07 08 09 10 11 12 13 14 15 Improvements Single-family Multifamily $ Billions Residential Spending Components Source: History – U.S. Census Bureau; Forecast – Reed Construction Data History Forecast Overview of housing
  24. 24. 24 0 50 100 150 200 250 300 350 400 450 Single-Family Multifamily Improvements $ Billions 2006 to 2013 ’14 ’15 Residential Construction Spending Source: History – U.S. Census Bureau; Forecast – Reed Construction Data Overview of housing
  25. 25. 25 Issues Facing Housing
  26. 26. 26 Headwinds for housing  Builders’ inventory of land for development and construction is low  prices for land rising  Shortages of skilled labor in some markets  Lending standards easing, but still rigorous by historical standards  Debt burden by young adults—student debt  Fear of homeownership?
  27. 27. 27 Changing lending standards for residential real estate loans
  28. 28. 28 -20 -10 0 10 20 30 40 50 60 70 80 90 100 Overall (discontinued series) Prime loans Nontraditional Sub-prime Net % of Banks Tightening Standards for Mortgage Loans Percent Lending standards Source: Federal Reserve Board of Governors Shaded areas represent recession
  29. 29. 29 Net % of Banks Tightening Standards for Commercial Real Estate Loans Percent Lending standards -40 -20 0 20 40 60 80 100 Source: Federal Reserve Board of Governors Shaded areas represent recession
  30. 30. 30 Net % of Banks Reporting Stronger Demand for Commercial Real Estate Loans Percent Lending standards -80 -60 -40 -20 0 20 40 60 Source: Federal Reserve Board of Governors Shaded areas represent recession
  31. 31. 31 Would you lend to a person carrying a large amount of student debt? Would you want to borrow more money if you were such a person? The debt burden headwind
  32. 32. 32 Headwinds for housing
  33. 33. 33 Headwinds for housing
  34. 34. 34 Are views about homeownership changing ?
  35. 35. 35 0 5 10 15 20 25 30 15-24 25-34 35-44 45-54 55-64 65-74 75-84 85+ 2006 2008 2010 2012 Millions Head of Household by Age Cohort in 2012 Source: U.S. Census Bureau, American Community Survey (ACS) Demographics and housing
  36. 36. 36 0 5 10 15 20 25 30 15-24 25-34 35-44 45-54 55-64 65-74 75-84 85+ Millions Head of Household by Age Cohort in 2012 Demographics and housing Source: U.S. Census Bureau, American Community Survey (ACS)
  37. 37. 37 0 5 10 15 20 25 30 35 40 45 50 15-24 25-34 35-44 45-54 55-64 65-74 75-84 85+ Millions Population by Age Cohort in 2012 Source: U.S. Census Bureau Demographics
  38. 38. 38 63 64 65 66 67 68 69 70 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Homeownership Rate Percent Lowest rate: Q4 1985 63.6% Peak rate: Q2 2004 69.4% 65.1% Demographics and housing Source: U.S. Census Bureau Shaded areas represent recession
  39. 39. 39 30 31 32 33 34 35 36 37 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 Rental Rate Percent Highest rate: Q4 1985 36.4% Lowest rate: Q2 2004 30.6% 34.9% Demographics and housing Source: U.S. Census Bureau Shaded areas represent recession
  40. 40. 40 6.5 7.0 7.5 8.0 8.5 9.0 9.5 10.0 10.5 11.0 11.5 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Rental Vacancy Rate (SA) Percent Peak rate: Q3 2009 10.9% 8.2% Demographics and housing Source: U.S. Census Bureau Shaded areas represent recession
  41. 41. 41 Regional Economic Performance
  42. 42. 42Source: Philadelphia Federal Reserve Bank Regional economic performance
  43. 43. 43Source: Philadelphia Federal Reserve Bank Regional economic performance
  44. 44. 44 Connect with Reed Construction Data  Twitter twitter.com/Bmarkstein  Twitter twitter.com/ReedConstrData  Facebook www.facebook.com/Reed-Construction-Data  LinkedIn www.linkedin.com/company/reed-construction-data  web www.reedconstructiondata.com Contact
  45. 45. 45 Contact Information and Links Bernard M. Markstein  Office: 301-588-5190  Mobile: 404-952-3381  b.markstein@reedbusiness.com  U.S. Forecast and Commentary: http://www.reedconstructiondata.com/market- intelligence/articles/  Blog: http://www.reedconstructiondata.com/market- intelligence/bernie-markstein/ Contact

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