Every year local realtors gather at the Computer History Museum in Moutain View for the annual Economic and Real Estate Update by Lawrence Yun, Chief Economist for National Association of Realtors. Below are my notes from the presentation. 1. Tax reform may harm the real estate, for more information, go to http://on.car.org/2017taxreform 2. Once the election ended the interest rates went up, mortgage rates are still low, expect interest rates increase in December 2017. 3. Housing shortage past 10 years across the United States, last time we had one after the World War Two. We are facing the same issue now. Reasons: too many regulations, shortage of lots, shortage of construction workers, domestic trade skill shortage. 4. Inventory, inventory, raise capital gain exemption at least for California. 5. We used to have Oversupply vs Loose lending rules, Today undersupply and Tight lending. Both are equally bad. 6. Fewer borrowers defaulting on mortgages in California due to 20% downpayment mandate. 7. Homeownership rate still near 50-year low 8. Student debt stops young generation to buy a house. 9. Solid jobs growth 10. Jobs opening skyrocketing

1. Economic & Real Estate Outlook
By Lawrence Yun, Ph.D.
Chief Economist, National Association of REALTORS®
Presentation at Santa Clara Association of REALTORS®
and Silicon Valley Association of REALTORS®
October 19, 2017

2. Existing Home Sales
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000

3. Existing Home Sales – Mostly Rising in
Recent Years
(Exceptions: when home buyer tax credit ended and “taper tantrum”)
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
6,000,000
2008 2009 2010 2011 2012 2013 2014 2015 2016
???

4. Mortgage Rates
30-year Fixed Rate
3.0
3.5
4.0
4.5
5.0 2012-Jan
2012-Apr
2012-Jul
2012-Oct
2013-Jan
2013-Apr
2013-Jul
2013-Oct
2014-Jan
2014-Apr
2014-Jul
2014-Oct
2015-Jan
2015-Apr
2015-Jul
2015-Oct
2016-Jan
2016-Apr
2016-Jul
2016-Oct
2017-Jan
2017-Apr
2017-Jul

5. Existing Home Sales Rising After Election
(% change from one year ago)
0
2
4
6
8
2016 -
Dec
2017 -
Jan
2017 -
Feb
2017 -
Mar
2017 -
Apr
2017 -
May
2017 -
Jun
2017 -
Jul
2017 -
Aug

6. New Home Sales Rising – After Election
-10
0
10
20
30
2016 -
Dec
2017 -
Jan
2017 -
Feb
2017 -
Mar
2017 -
Apr
2017 -
May
2017 -
Jun
2017 -
Jul
2017 -
Aug

7. NAR HOME Survey of Consumers
% Strongly indicating Good Time to Buy
40
42
44
46
48
50
2016 - Q1 2016 - Q2 2016 - Q3 2016 - Q4 2017 - Q1 2017 - Q2 2017 - Q3

8. Stock Market: S&P 500 Index
1800
1900
2000
2100
2200
2300
2400
2500

9. Animal Spirit Revival of Consumers?
Consumer Confidence Index
80
90
100
110
120
130 2016-Jan
2016-Feb
2016-Mar
2016-Apr
2016-May
2016-Jun
2016-Jul
2016-Aug
2016-Sep
2016-Oct
2016-Nov
2016-Dec
2017-Jan
2017-Feb
2017-Mar
2017-Apr
2017-May
2017-Jun
2017-Jul
2017-Aug
2017-Sep

10. Animal Spirit Revival of Businesses?
Small Business Optimism Index
100
110
120
130 2016-Jan
2016-Feb
2016-Mar
2016-Apr
2016-May
2016-Jun
2016-Jul
2016-Aug
2016-Sep
2016-Oct
2016-Nov
2016-Dec
2017-Jan
2017-Feb
2017-Mar
2017-Apr
2017-May
2017-Jun
2017-Jul
2017-Aug

11. Single-family Housing Starts
(Shortage of Lots, Labor, Lending, Lumber)
Thousand units
-100
100
300
500
700
900
1100
1300
1500 2008-Oct
2009-Feb
2009-Jun
2009-Oct
2010-Feb
2010-Jun
2010-Oct
2011-Feb
2011-Jun
2011-Oct
2012-Feb
2012-Jun
2012-Oct
2013-Feb
2013-Jun
2013-Oct
2014-Feb
2014-Jun
2014-Oct
2015-Feb
2015-Jun
2015-Oct
2016-Feb
2016-Jun
2016-Oct
2017-Feb
2017-Jun

12. Months to Sell a Newly Built Home
0
2
4
6
8
10
2011-Jan
2011-Apr
2011-Jul
2011-Oct
2012-Jan
2012-Apr
2012-Jul
2012-Oct
2013-Jan
2013-Apr
2013-Jul
2013-Oct
2014-Jan
2014-Apr
2014-Jul
2014-Oct
2015-Jan
2015-Apr
2015-Jul
2015-Oct
2016-Jan
2016-Apr
2016-Jul
2016-Oct
2017-Jan
2017-Apr
2017-Jul

13. San Jose – Sunnyvale – Santa Clara Area Metro
Multifamily Permits (year-to-date)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2000-Jan
2000-Jul
2001-Jan
2001-Jul
2002-Jan
2002-Jul
2003-Jan
2003-Jul
2004-Jan
2004-Jul
2005-Jan
2005-Jul
2006-Jan
2006-Jul
2007-Jan
2007-Jul
2008-Jan
2008-Jul
2009-Jan
2009-Jul
2010-Jan
2010-Jul
2011-Jan
2011-Jul
2012-Jan
2012-Jul
2013-Jan
2013-Jul
2014-Jan
2014-Jul
2015-Jan
2015-Jul
2016-Jan
2016-Jul
2017-Jan
2017-Jul

14. San Jose – Sunnyvale – Santa Clara Area Metro
Single-family Housing Permits: year-to-date
0
500
1000
1500
2000
2500
3000
3500
2000-Jan
2000-Jul
2001-Jan
2001-Jul
2002-Jan
2002-Jul
2003-Jan
2003-Jul
2004-Jan
2004-Jul
2005-Jan
2005-Jul
2006-Jan
2006-Jul
2007-Jan
2007-Jul
2008-Jan
2008-Jul
2009-Jan
2009-Jul
2010-Jan
2010-Jul
2011-Jan
2011-Jul
2012-Jan
2012-Jul
2013-Jan
2013-Jul
2014-Jan
2014-Jul
2015-Jan
2015-Jul
2016-Jan
2016-Jul
2017-Jan
2017-Jul

15. Santa Clara County Housing Statistics
• Home Sales … up 12% in August
• Median Price … up 18%
• Inventory … 2.4 months supply

16. San Mateo County Housing Statistics
• Home Sales … down 7% in August
• Median Price … up 10%
• Inventory … 2.0 months supply

17. Home Price Index (Constant Quality)
Austin
100
150
200
250
300
350
1995-Q1
1996-Q1
1997-Q1
1998-Q1
1999-Q1
2000-Q1
2001-Q1
2002-Q1
2003-Q1
2004-Q1
2005-Q1
2006-Q1
2007-Q1
2008-Q1
2009-Q1
2010-Q1
2011-Q1
2012-Q1
2013-Q1
2014-Q1
2015-Q1
2016-Q1
2017-Q1

18. Job Creation and Housing Construction
Cumulative over Recent 5 years
0
100000
200000
300000
400000
500000
SF-Oak San Jose Dallas Houston
New New Jobs Housing Permits Single-Family Permits

19. Median Home Price
San Francisco vs. Dallas
0
200
400
600
800
1000 1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016

20. Texas Markets: Home Price Index
(Doubling in Price in 20 years)
100
150
200
250
300
Dallas Houston San Antonio

21. CA Markets: Home Price Index
(Quadrupling in Price in 20 years)
100
200
300
400
500
SF-Oak SJ LA

22. Fewer Borrowers Defaulting in California
(Serious Delinquency Rate)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2005
- Q1
2005
- Q3
2006
- Q1
2006
- Q3
2007
- Q1
2007
- Q3
2008
- Q1
2008
- Q3
2009
- Q1
2009
- Q3
2010
- Q1
2010
- Q3
2011
- Q1
2011
- Q3
2012
- Q1
2012
- Q3
2013
- Q1
2013
- Q3
2014
- Q1
2014
- Q3
2015
- Q1
2015
- Q3
2016
- Q1
2016
- Q3
2017
- Q1
Veterans Affairs Mortgages
All Mortgages
FHA Mortgages

23. FHA Insurance Premium - High

24. Homeownership Rate
Still Near 50-year Lows
60
62
64
66
68
70
1965-Q1
1967-Q1
1969-Q1
1971-Q1
1973-Q1
1975-Q1
1977-Q1
1979-Q1
1981-Q1
1983-Q1
1985-Q1
1987-Q1
1989-Q1
1991-Q1
1993-Q1
1995-Q1
1997-Q1
1999-Q1
2001-Q1
2003-Q1
2005-Q1
2007-Q1
2009-Q1
2011-Q1
2013-Q1
2015-Q1
2017-Q1

25. Is Owning still American Dream?
Will you Buy in Future?
50
60
70
80
90
Yes on Dream Yes on Future

26. % 10% 20% 30% 40% 50% 60% 70% 80%
None of these
Own a pet
Rent or own closer to work or school location
Purchase daily necessities
Start a small business
Purchase clothes
Purchase entertainment
Rent solo or change living situation
Continue with education
Purchase a car
Take a vacation
Purchase a home
5%
21%
33%
38%
40%
40%
46%
58%
64%
65%
72%
76%
Student Loan Debt Impacted

27. Economy?

28. 0
1
2
3
4
5
Reagan GHW
Bush
Clinton GW Bush Obama Trump
Q1
Trump
Q2
GDP Growth Rates

29. Jobs
(8 million lost … 16 million gained)
120,000
125,000
130,000
135,000
140,000
145,000
150,000
2000-Jan
2000-Jul
2001-Jan
2001-Jul
2002-Jan
2002-Jul
2003-Jan
2003-Jul
2004-Jan
2004-Jul
2005-Jan
2005-Jul
2006-Jan
2006-Jul
2007-Jan
2007-Jul
2008-Jan
2008-Jul
2009-Jan
2009-Jul
2010-Jan
2010-Jul
2011-Jan
2011-Jul
2012-Jan
2012-Jul
2013-Jan
2013-Jul
2014-Jan
2014-Jul
2015-Jan
2015-Jul
2016-Jan
2016-Jul
2017-Jan
2017-Jul
In thousands

30. Total Jobs in San Jose Metro
800
850
900
950
1000
1050
1100
1150
2000-Jan
2000-Aug
2001-Mar
2001-Oct
2002-May
2002-Dec
2003-Jul
2004-Feb
2004-Sep
2005-Apr
2005-Nov
2006-Jun
2007-Jan
2007-Aug
2008-Mar
2008-Oct
2009-May
2009-Dec
2010-Jul
2011-Feb
2011-Sep
2012-Apr
2012-Nov
2013-Jun
2014-Jan
2014-Aug
2015-Mar
2015-Oct
2016-May
2016-Dec
2017-Jul
In thousands

31. Total Job Openings
2000
2500
3000
3500
4000
4500
5000
5500
6000
6500 2001-Jan
2001-Sep
2002-May
2003-Jan
2003-Sep
2004-May
2005-Jan
2005-Sep
2006-May
2007-Jan
2007-Sep
2008-May
2009-Jan
2009-Sep
2010-May
2011-Jan
2011-Sep
2012-May
2013-Jan
2013-Sep
2014-May
2015-Jan
2015-Sep
2016-May
2017-Jan
In thousands

32. Weekly Initial Unemployment
Insurance Filings
200
300
400
500
600
700
2001-Jan
2001-Aug
2002-Mar
2002-Oct
2003-May
2003-Dec
2004-Jul
2005-Feb
2005-Sep
2006-Apr
2006-Nov
2007-Jun
2008-Jan
2008-Aug
2009-Mar
2009-Oct
2010-May
2010-Dec
2011-Jul
2012-Feb
2012-Sep
2013-Apr
2013-Nov
2014-Jun
2015-Jan
2015-Aug
2016-Mar
2016-Oct
2017-May
In thousands

33. Monetary Policy
Fed Funds Rate
0
0.2
0.4
0.6
0.8
1
1.2
2012-Jan
2012-Mar
2012-May
2012-Jul
2012-Sep
2012-Nov
2013-Jan
2013-Mar
2013-May
2013-Jul
2013-Sep
2013-Nov
2014-Jan
2014-Mar
2014-May
2014-Jul
2014-Sep
2014-Nov
2015-Jan
2015-Mar
2015-May
2015-Jul
2015-Sep
2015-Nov
2016-Jan
2016-Mar
2016-May
2016-Jul
2016-Sep
2016-Nov
2017-Jan
2017-Mar
2017-May
2017-Jul
Series 1

34. Economic Forecast
2015 2016 2017
Forecast
2018
Forecast
GDP Growth 2.9% 1.5% 1.7% 2.7%
Job Growth +2.6
million
+2.0
million
+1.8
million
+2.4
million
CPI Inflation 0.3% 1.3% 2.0% 2.5%

35. 100000
110000
120000
130000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Actual versus projected Households
KC Federal Reserve estimate of 6.9 million missing households

36. 5
10
15
20
2000 2002 2004 2006 2008 2010 2012 2014 2016
Young Adults Living with Parents
% of those aged 25 to 34

37. National Housing Forecast
2015 2016 2017
Forecast
2018
Forecast
New Home
Sales
500,000 560,000 600,000 700,000
Existing Home
Sales
5.3 million 5.4 million Fewer 5.8 million
Median Price
Growth
+ 6.8% +5.1% +5.7% +4.6%
30-year Rate 3.9% 3.6% 4.0% 4.5%

38. oFlood Insurance Availability? Extended … Thank You for Responding
oDodd-Frank?
oFannie/Freddie and Mortgage Availability?
oTax Simplification?
– Mortgage Interest Deduction
– Property Tax Deduction
– 1031 exchange?
Trump Presidency