2020 CAR Market Outlook Presentation - George Ratiu

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REALTOR.COM
MARKET INSIGHTS
@GeorgeRatiu
Sr. Economist
realtor.com®
Chicago Association of REALTORS
2020 Market Outlook
Chicago, IL | January 9, 2020

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GLOBAL ECONOMIC ENVIRONMENT
Global economies remain in the shadow of the last recession…
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
UnitedStates
EuroArea
China
Japan
Canada
India
Russia
SouthKorea
Australia
Brazil
Mexico
Argentina
GDP YoY Jobless rate
Source: Trading Economics
GDP by Country
Source: Trading Economics
United
States
Euro
Area
China

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GLOBAL ECONOMIC ENVIRONMENT
…As monetary policies remain accommodative
1.8%
0.0%
4.2%
-0.1%
1.8%
0.0%
0.8%
0.0% 0.0% 0.0% 0.0%
-0.8%
1.5%
0.0% 0.0%
1.5%
0.0%
-0.8%
2.0%
5.2%
6.3%
1.3%
0.8%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
UnitedStates
EuroArea
China
Japan
Canada
Germany
United…
France
Italy
Spain
Netherlands
Switzerland
Poland
Sweden
Belgium
Norway
Ireland
Denmark
Czech…
India
Russia
SouthKorea
Australia
Global Interest Rates
Source: Trading Economics

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HISTORIC ECONOMIC THRESHOLD
US GDP marks longest expansion in recorded history
• GDP 2019: 3.1% Q1 2.0% Q2 2.1% Q3
(2.3% - 10-yr avg)
• Employment 2010-19: > 21M new jobs
• Unemployment rate: 3.5%
• Wage growth: 3.2% over past year
• Inflation: < 2.0%

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ECONOMIC EXPANSION
Illinois economic activity follows national trends; 2020 moderately positive
Source: Moody’s Analytics
Gross Metro Product (Bil $, SAAR) - Chicago MSA
80.00
90.00
100.00
110.00
120.00
130.00
140.00
Jan-01
Oct-01
Jul-02
Apr-03
Jan-04
Oct-04
Jul-05
Apr-06
Jan-07
Oct-07
Jul-08
Apr-09
Jan-10
Oct-10
Jul-11
Apr-12
Jan-13
Oct-13
Jul-14
Apr-15
Jan-16
Oct-16
Jul-17
Apr-18
Jan-19
Oct-19
Philadelphia FRB Coincident Index: National, (July 1992 = 100)
United States Illinois

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2 180
427
250
450
260
74314
848
750
502
199
54
496
Employment: Chicago MSA (000s, SA) - 2019.Q3
Natural Resources & Mining
Construction
Manufacturing
Wholesale trade
Retail Trade
Transportation & Public Utilities
Information
Financial Activities
Professional & Business Services
Education & Health Services
Leisure & Hospitality
Other Services
Government - Federal
Government - State & Local
Source: Bureau of Labor Statistics
6
ECONOMIC EXPANSION
Diversified employment sectors & growth drive Chicago unemployment @ 3.9%

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ECONOMIC CLOUDS
Household growth slowing in Chicago over next decade

8. HOUSING
INSIGHTS

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DEMOGRAPHICS ARE DESTINY
Over 60% of US population is under the age of 50
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000 0
2
4
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100+
Thousands
US Population by Age, End of 2016
Source: Realtor.com® Analysis of US Census Bureau Population Estimates (2016)
Boomer
78 million
X
61 million
Millennial
88 million
Z
65 million
Greatest
29 million

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ABOUT GEN Y… THE MILLENNIALS…

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…MILLENNIALS HAVE GROWN UP!

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YOUNGER GENERATIONS LEAD HOME BUYING
• Millennials are #1 in share of primary
home mortgages
• However, they are putting less money
down compared to other generations
• Millennials continue to take on larger
mortgages compared to Baby Boomers,
further adding to their debt load
• Markets where Millennial down
payments are more in line with other
generations tend to be more affordable

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FIRST-TIME HOMEBUYERS MAKING MOVES
42% cannot find a good house in their budget range
41% have not yet found a house that meets their needs
First-time homebuyers = 42% of shoppers
32% searched for > 6 months (18% 2017)
24% searched for > 1 year (11% 2017)
16% searched for homes in urban areas
34% searched for a home in suburbs
45% looked in small towns/rural areas
First-Time Home Shoppers Skew Young
16% are 18-24
36% are 25-34
23% are 35-44
14% are 45-54
9% are 55-64
2% are 65+
Younger generations lead home buying

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BUT STRUGGLE W/ INVENTORY & AFFORDABILITY
Tight inventory, insufficient supply & affordability hampered sales

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DEMOGRAPHICS DRIVE HOUSING
Mortgage originations by age group – 60 largest metros

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DEMOGRAPHICS DRIVE HOUSING
Chicago mortgage originations driven by Gen Y and Gen X

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DEMOGRAPHICS DRIVE HOUSING
Chicago mortgage originations driven by Gen Y and Gen X
Top Millennial Zips
60642 Chicago, IL
47978 Rensselaer, IN
60661 Chicago, IL
60654 Chicago, IL
60607 Chicago, IL
46319 Griffith, IN
60608 Chicago, IL
60655 Chicago, IL
60112 Cortland, IL
60480 Willow Springs,, IL
Top Gen X Zips
60091 Wilmette, IL
60069 Linconshire, IL
60468 Peotone, IL
60015 Deerfield, IL
60203 Evanston, IL
53158 Pleasant Prairie, WI
60012 Crystal Lake, IL
60646 Chicago, IL
60478 Country Club Hills, IL
60521 Hinsdale, IL

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DEMAND-SUPPLY IMBALANCE
Mismatch of available product leads to insufficient entry-level supply
• What’s available: $309,000, up 4% YoY
• What we are viewing: $288,000
– realtor.com traffic: 50% of shoppers search for homes < $288,000
• What we are buying: $271,300 (NAR EHS)
• What we can afford: $245,000 (realtor.com affordability score)

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THE HOTTEST HOME
Detached starter homes gobbled up before they appear
SF Detached Home in the Suburbs
28th percentile of price
($150k -$190k on avg)
35th percentile of size
(1600 -1800 sq.ft. on avg)
Sells 14% faster & gets 1.25x more
views than average home in
surrounding area

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CHICAGO DEMAND
Chicago Cross Market Demand
Top Out-of-State Buyers by MSA
1 St Louis, MO
2 New York, NY
3 Milwaukee, WI
4 Fond du Lac, WI
5 Minneapolis-St Paul, MN
6 Kansas City, MO
7 Indianapolis, IN
8 Seattle, WA
9 Rockford, IL
10 Washington, DC

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NEW SUPPLY REMAINS SUBDUED
Most national new supply aimed at upper end of market
0
10000
20000
30000
40000
50000
60000
70000
2000Q1
2000Q4
2001Q3
2002Q2
2003Q1
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2006Q1
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2007Q3
2008Q2
2009Q1
2009Q4
2010Q3
2011Q2
2012Q1
2012Q4
2013Q3
2014Q2
2015Q1
2015Q4
2016Q3
2017Q2
2018Q1
2018Q4
2019Q3
Housing Starts: Chicago MSA (#, SAAR)
Single-Family Multifamily

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CHICAGO HOUSING ACTIVITY
Higher prices in Chicago drive move to affordability
County Median List Price Median List Price Y/Y
Lake $399,050 0.50%
DuPage $398,550 -0.10%
Cook $310,050 1.60%
Kane $302,550 -3.20%
Will $284,200 -2.00%
McHenry $279,950 3.70%
Kendall $262,300 1.80%
DeKalb $205,040 3.80%
Champaign $180,000 -2.20%
Ogle $169,950 -4.30%
Kankakee $162,500 20.80%
St. Clair $159,550 -0.60%
Chicago MSA $315,050 1.0%

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CHICAGO INTERNATIONAL DEMAND

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2019-20 BIG TREND?
Mid-size metro areas and suburbs gain residents…

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LARGE, EXPENSIVE METROS FEEL PAIN
Young buyers are leaving expensive metros seeking quality of life & affordability
Rank Lowest Inbound/Outbound Metro
1 San Jose-Sunnyvale-Santa Clara, CA
2 Washington-Arlington-Alexandria, DC-VA-MD-WV
3 San Francisco-Oakland-Hayward, CA
4 Seattle-Tacoma-Bellevue, WA
5 Chicago-Naperville-Elgin, IL-IN-WI
6 New York-Newark-Jersey City, NY-NJ-PA
7 Los Angeles-Long Beach-Anaheim, CA
8 Salt Lake City, UT
9 Atlanta-Sandy Springs-Roswell, GA
10 Minneapolis-St. Paul-Bloomington, MN-WI

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MID-SIZED METROS RISE
Top 10 markets with greatest share of home shopping interest from out-of-state shoppers
Rank Highest Inbound/Outbound Metro
Median Listing Price
Viewed vs Viewer Home
Market Median Listing
Price*
Median Listing Price
Viewed vs Local
Median Listing Price
Viewed*
1 Spokane-Spokane Valley, WA -21.8% 1.8%
2 Deltona-Daytona Beach-Ormond Beach, FL -16.4% 1.6%
3 McAllen-Edinburg-Mission, TX -32.7% 6.5%
4 Charleston-North Charleston, SC 19.2% 12.2%
5 Palm Bay-Melbourne-Titusville, FL -15.5% 1.8%
6 Portland-South Portland, ME 10.6% 6.3%
7 North Port-Sarasota-Bradenton, FL 3.9% -0.3%
8 Cape Coral-Fort Myers, FL -4.7% 8.1%
9 El Paso, TX -33.6% 5.8%
10 Lakeland-Winter Haven, FL -29.1% -2.1%

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2020 OUTLOOK
Economic output moderates, leading to slower housing activity
Realtor.com 2020 Outlook
GDP 1.7%
Unemployment 3.7%
Inflation 2.0%
30-yr FRM 3.9%
Housing Starts 6.0%
Existing Home Sales -1.8%
EHS Prices 0.8%
Homeownership Rate 64.6%
Chicago MSA Sales -0.9%
Chicago MSA Prices -0.3%

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2020 OPPORTUNITIES
Homeownership remains dominant goal across generations

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RESOURCES
Realtor.com/Research

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ECONOMIC RESEARCH
Access market data, research, and presentations at
realtor.com/research
@RDC_Economics https://www.youtube.com/RealtorDotCom