2. Housing
Market
and
Economic
Outlook
Lawrence
Yun,
Ph.D.
Chief
Economist
NATIONAL
ASSOCIATION
OF
REALTORS®
PresentaAon
in
Washington,
D.C.
May
15,
2014
3. U.S.
Popula:on
0
50
100
150
200
250
300
350
1968
1973
1978
1983
1988
1993
1998
2003
2008
2013
In
millions
4. Jobs
in
America
–
Less
Smooth
0
20000
40000
60000
80000
100000
120000
140000
160000
1968
-‐
Jan
1969
-‐
Dec
1971
-‐
Nov
1973
-‐
Oct
1975
-‐
Sep
1977
-‐
Aug
1979
-‐
Jul
1981
-‐
Jun
1983
-‐
May
1985
-‐
Apr
1987
-‐
Mar
1989
-‐
Feb
1991
-‐
Jan
1992
-‐
Dec
1994
-‐
Nov
1996
-‐
Oct
1998
-‐
Sep
2000
-‐
Aug
2002
-‐
Jul
2004
-‐
Jun
2006
-‐
May
2008
-‐
Apr
2010
-‐
Mar
2012
-‐
Feb
2014
-‐
Jan
5. Jobs
to
Popula:on
Ra:o
(16
years
and
over)
50
52
54
56
58
60
62
64
66
1968
-‐
Jan
1969
-‐
Oct
1971
-‐
Jul
1973
-‐
Apr
1975
-‐
Jan
1976
-‐
Oct
1978
-‐
Jul
1980
-‐
Apr
1982
-‐
Jan
1983
-‐
Oct
1985
-‐
Jul
1987
-‐
Apr
1989
-‐
Jan
1990
-‐
Oct
1992
-‐
Jul
1994
-‐
Apr
1996
-‐
Jan
1997
-‐
Oct
1999
-‐
Jul
2001
-‐
Apr
2003
-‐
Jan
2004
-‐
Oct
2006
-‐
Jul
2008
-‐
Apr
2010
-‐
Jan
2011
-‐
Oct
2013
-‐
Jul
6. Sluggish
Growth
+
Gap
aXer
Great
Recession
($1.5
trillion
gap
…
$4,700
per
person)
0
5,000
10,000
15,000
20,000
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
GDP
in
2009
Dollars
Real
GDP
Real
GDP
W/O
Recession
3%
Growth
Line
2.2%
Growth
Line
14. Exis:ng
Home
Sales
-‐
Closings
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
2011
-‐
Jan
2011
-‐
Mar
2011
-‐
May
2011
-‐
Jul
2011
-‐
Sep
2011
-‐
Nov
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
15. Causes
of
Recent
Sales
Slowdown
• Bad
winter
– Only
delayed
sales
not
cancella:on
• Lack
of
inventory
– Steadily
more
inventory
coming
to
market
• Home
prices
rose
too
fast
– Showing
signs
of
slowing
• Mortgage
credit
difficul:es
– New
Qualified
Mortgage
Rules
– Surely
cannot
get
worse!
• Mortgage
rates
jumped
– Trouble
!
16. Inventory
of
Homes
for
Sale
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
2007
-‐
Jan
2007
-‐
May
2007
-‐
Sep
2008
-‐
Jan
2008
-‐
May
2008
-‐
Sep
2009
-‐
Jan
2009
-‐
May
2009
-‐
Sep
2010
-‐
Jan
2010
-‐
May
2010
-‐
Sep
2011
-‐
Jan
2011
-‐
May
2011
-‐
Sep
2012
-‐
Jan
2012
-‐
May
2012
-‐
Sep
2013
-‐
Jan
2013
-‐
May
2013
-‐
Sep
2014
-‐
Jan
17. Change
in
Inventory
(%
change
from
one
year
ago)
-‐30
-‐25
-‐20
-‐15
-‐10
-‐5
0
5
10
15
20
2007
-‐
Jan
2007
-‐
May
2007
-‐
Sep
2008
-‐
Jan
2008
-‐
May
2008
-‐
Sep
2009
-‐
Jan
2009
-‐
May
2009
-‐
Sep
2010
-‐
Jan
2010
-‐
May
2010
-‐
Sep
2011
-‐
Jan
2011
-‐
May
2011
-‐
Sep
2012
-‐
Jan
2012
-‐
May
2012
-‐
Sep
2013
-‐
Jan
2013
-‐
May
2013
-‐
Sep
2014
-‐
Jan
19. Change
in
Home
Price
(%
change
from
one
year
ago)
-‐10
-‐5
0
5
10
15
2011
-‐
Jan
2011
-‐
Mar
2011
-‐
May
2011
-‐
Jul
2011
-‐
Sep
2011
-‐
Nov
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
NAR
Case-‐Shiller
CoreLogic
20. Median
Home
Price
–
Rising
($40,000
Equity
Gain
in
3
years)
$166,100
$176,800
$197,100
$208,200
$150,000
$160,000
$170,000
$180,000
$190,000
$200,000
$210,000
$220,000
2011
2012
2013
2014
forecast
21. Inevitable
Rise
in
Mortgage
Rates
will
further
hurt
Affordability
1/3rd
of
homeowners
have
no
mortgage
1/3rd
have
4.3%
rate
or
lower
1/3rd
have
higher
rate
3
4
5
6
7
8
9
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
%
22. Locked-‐in
Effect
of
Low
Rates?
• Housing
cannot
get
back
to
normal
in
a
hurry
• People
move
even
in
high
interest
rate
environment
– Marriage,
divorce,
new
baby,
school
district,
new
job,
fed-‐up
with
local
government,
…
• Many
unplanned
landlords
– Take
advantage
of
rising
rents
while
rates
are
low
and
fixed
• Poten:al
future
lock
from
longer
holding
period
for
capital
gains
tax
exclusion
23. Rising
Renters’
and
Homeowners’
Rent
Growth
(On
the
Way
to
3%)
-‐1
0
1
2
3
4
5
2003
-‐
Jan
2003
-‐
Jun
2003
-‐
Nov
2004
-‐
Apr
2004
-‐
Sep
2005
-‐
Feb
2005
-‐
Jul
2005
-‐
Dec
2006
-‐
May
2006
-‐
Oct
2007
-‐
Mar
2007
-‐
Aug
2008
-‐
Jan
2008
-‐
Jun
2008
-‐
Nov
2009
-‐
Apr
2009
-‐
Sep
2010
-‐
Feb
2010
-‐
Jul
2010
-‐
Dec
2011
-‐
May
2011
-‐
Oct
2012
-‐
Mar
2012
-‐
Aug
2013
-‐
Jan
2013
-‐
Jun
2013
-‐
Nov
Owners'
Equivalent
Rent
Renters'
Rent
25. If
there
is
persistent
housing
shortage
…
then
the
basle
begins
Landlord
from
Hell
versus
Rent
Control
26. Housing
Starts
Rising
…
More
Inventory
But
Needs
to
Reach
1.5
1.7
million
0
500
1000
1500
2000
2500
2000
-‐
Jan
2001
-‐
Jan
2002
-‐
Jan
2003
-‐
Jan
2004
-‐
Jan
2005
-‐
Jan
2006
-‐
Jan
2007
-‐
Jan
2008
-‐
Jan
2009
-‐
Jan
2010
-‐
Jan
2011
-‐
Jan
2012
-‐
Jan
2013
-‐
Jan
2014
-‐
Jan
mul:family
single-‐family
Thousand units (annualized)
Long-term Average
27. New
Home
Sales
0
200
400
600
800
1000
1200
1400
1600
2000
-‐
Jan
2001
-‐
Jan
2002
-‐
Jan
2003
-‐
Jan
2004
-‐
Jan
2005
-‐
Jan
2006
-‐
Jan
2007
-‐
Jan
2008
-‐
Jan
2009
-‐
Jan
2010
-‐
Jan
2011
-‐
Jan
2012
-‐
Jan
2013
-‐
Jan
2014
-‐
Jan
In
thousand
units
28. Sluggish
Recovery
in
Housing
Starts
• Cost
of
Construc:on
Rising
Faster
than
CPI
• Labor
Shortage
for
construc:on
work
• Construc:on
loan
difficulty
for
small
local
homebuilders
…
Dodd-‐Frank
financial
regula:ons?
29. Exis:ng
vs.
New
Home
Price
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
2000
-‐
Jan
2002
-‐
Jan
2004
-‐
Jan
2006
-‐
Jan
2008
-‐
Jan
2010
-‐
Jan
2012
-‐
Jan
2014
-‐
Jan
Exis:ng
New
31. Monetary
Policy
• Tapering
Ends
by
the
year
end
2014
• Fed
Funds
Rate
…
hike
in
2015
Q1
• Earlier
Move
to
Tighten
because
of
Infla:on
Pressure
• Long-‐term
Steady
State
Rate
(2016
onwards)
..
10
year
Treasury
at
5.0%
…
250
basis
points
higher
than
current
32. Core
Price
InflaAon:
Less
than
2%;
but
rose
at
2.5%
annualized
rate
(%
change
from
one
year
ago)
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
1999
-‐
Jan
1999
-‐
Jul
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
All
items
exlcuding
fuel
and
energy
33. GDP
Growth
=
Job
Crea:ons
(8
million
lost
…
8
million
gained)
124000
126000
128000
130000
132000
134000
136000
138000
140000
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
-‐
May
2013
-‐
Nov
In thousands
34. Local
Market
Job
Comparisons
Fast
Growing
States
1-‐year
Growth
Rate
Nevada
3.8%
North
Dakota
3.7%
Colorado
3.0%
Florida
3.0%
Oregon
2.7%
Texas
2.7%
Utah
2.6%
Delaware
2.4%
California
2.3%
Arizona
1.9%
Slow
Moving
States
1-‐year
Growth
Rate
New
Mexico
-‐0.2%
Kentucky
-‐0.2%
New
Jersey
0.0%
Virginia
0.1%
Alaska
0.2%
West
Virginia
0.3%
Pennsylvania
0.3%
Maryland
0.3%
D.C.
0.4%
Mississippi
0.5%
38. Pent
Up
Demand
2000
2013
Exis:ng
Home
Sales
5.2
m
5.1
m
New
Home
Sales
880
K
430
K
Mortgage
Rates
8.0%
4.0%
Payroll
Jobs
132.0
m
136.4
m
Popula:on
282
m
316
m
41. Home
Countries
for
Interna:onal
Buyers
Preliminary
Analysis,
Subject
to
Change
*
Includes
People’s
Republic
of
China,
Taiwan,
and
Hong
Kong
Brazil
Canada
China*
Germany
India
Japan
Mexico
Russia
United
Kingdom
2011
3%
23%
9%
4%
7%
2%
7%
1%
7%
2012
3%
24%
12%
3%
6%
1%
8%
2%
6%
2013
2%
23%
12%
3%
5%
1%
8%
2%
5%
2014P
2%
18%
18%
3%
4%
2%
9%
1%
6%
0%
5%
10%
15%
20%
25%
30%
Distribu:on
of
Interna:onal
Sales
by
Country
of
Origin
42. Will
China
overtake
the
U.S.
in
GDP?
Had
An:cipated
around
2010
0
5000
10000
15000
20000
25000
1929
1933
1937
1941
1945
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2013
2017
2021
2025
U.S.
(growing
3%)
China
(growing
8%)
43. Chinese
Yuan
vs.
U.S.
Dollar
(Yuan
per
$)
5.00
5.50
6.00
6.50
7.00
7.50
8.00
8.50
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
44. Global
Pent-‐Up
Demand
from
Rising
World
Popula:on
0
2
4
6
8
10
1000
1100
1200
1300
1400
1500
1600
1700
1800
1900
2000
2100
In
billions
World-‐Class
Ci:es
will
Benefit
!
• Boston,
Chicago,
Dallas,
Miami,
New
York,
San
Diego,
San
Francisco,
Washington
D.C.,
etc.
45. Housing
Forecast
2013
2014
forecast
2015
forecast
Housing
Starts
925,000
1.07
million
1.4
million
New
Home
Sales
430,000
510,000
710,000
Exis:ng
Home
Sales
5.1
million
4.9
million
5.2
million
Median
Price
$197,000
$209,000
$219,000
30-‐year
Rate
4.0%
4.7%
5.5%
Dollar
Volume
Es:mate
+21%
+3%
+11%
46. Housing
Market
and
Economic
Outlook
Lawrence
Yun,
Ph.D.
Chief
Economist
NATIONAL
ASSOCIATION
OF
REALTORS®
PresentaAon
in
Washington,
D.C.
May
15,
2014
74. Recession Delayed Move to Single-Family for
Many Married Couples
15.0%
15.6%
16.3%
14.7%
14.2%
15.3%
15.4%
15.6%
15.5%
17.1%
15.3%
16.3%
15.9%
16.2%
15.4%
16.9%
16.2%
17.1%
17.4%
18.6%
18.7%
19.3%
10%
12%
14%
16%
18%
20%
1Q92 1Q93 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13
Percentage of 25-34 Year Old Married Couples that Reside in Traditional Apartments
We believe that majority
of change of late has
been due to recessionary
impacts that should
unwind
Source: Census Bureau, Zelman & Associates analysis
76. Existing Inventory Relative to Households ~30%
Lower Than Last Two Decades
2.8%
2.0%
2.1%
1.4%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
1980s 1990s 2000s 1Q14
Existing Home Inventory as Percentage of Households
~30%
discount to
average of
last two
decades
Source: Census Bureau, NAR, Zelman & Associates analysis
77. Inventories at 30-Year Lows Support
Robust Home Price Outlook
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
1Q90
3Q90
1Q91
3Q91
1Q92
3Q92
1Q93
3Q93
1Q94
3Q94
1Q95
3Q95
1Q96
3Q96
1Q97
3Q97
1Q98
3Q98
1Q99
3Q99
1Q00
3Q00
1Q01
3Q01
1Q02
3Q02
1Q03
3Q03
1Q04
3Q04
1Q05
3Q05
1Q06
3Q06
1Q07
3Q07
1Q08
3Q08
1Q09
3Q09
1Q10
3Q10
1Q11
3Q11
1Q12
3Q12
1Q13
3Q13
1Q14
Seasonally-Adjusted Single-Family New and Existing Home
Inventory as Percentage of Households
3.5%
4.8%
-5.4%
Average real change in existing home prices
per range of for-sale inventory.
Source: Census Bureau, NAR, Zelman & Associates analysis
78. Ranking of Local Resale Markets80
75
73
72
71
71
70
70
68
68
67
66
66
65
65
64
64
63
63
61
58
58
57
57
57
54
51
62
40
50
60
70
80
90
Houston
SanFrancisco
Austin
LosAngeles
Denver
Miami
Orlando
Charlotte
LasVegas
Dallas
WashingtonD.C.
SaltLakeCity
Charleston
Indianapolis
Raleigh
Naples
SanAntonio
InlandEmpire
Atlanta
SanDiego
Chicago
Tampa
Sacramento
Philadelphia
Jacksonville
Phoenix
Cincinnati
National
Ranking of Local Resale Markets
Trailing Three Month Average
0 = Extreme Buyers' Market, 100 = Extreme Sellers' Market
Source: Zelman & Associates Homebuilding Survey
83. Resale Days on Market Down Sequentially and
Year Over Year in March
91
62
55
98
66
53
0
20
40
60
80
100
120
Mar-12 Mar-13 Mar-14 Mar-12 Mar-13 Mar-14
Median Number of Days on Market Until Sale
All Existing Home Sales Non-Distressed Homes
Source: NAR, Zelman & Associates analysis
90. Big Banks Not Representative of Market; Smaller
Institutions Stepping Up
10%
1% 0%
-9%
-16%
-7%
29%
27%
12%
3%
-12%
15%
-20%
-10%
0%
10%
20%
30%
40%
CreditUnions
RegionalBanks
MortgageCompanies
AllBanks
NationalBanks
Total
CreditUnions
MortgageCompanies
RegionalBanks
AllBanks
NationalBanks
Total
Year-Over-Year Growth in Purchase Unit Originations by Institution Type
2011 2012
Source: HMDA, Zelman & Associates analysis
91. Higher-Quality Borrowers Led Recovery in 2012, But
Entry-Level Credits Joined in 2013
35%
27%
8%
-10%
15%
21%
21%
10%
3%
15%
-20%
-10%
0%
10%
20%
30%
40%
A+ A B C Total
2012 2013
Owner-Occupied Purchase Mortgage Year-Over-Year Growth by Credit Bucket
Source: HMDA, Ellie Mae, Zelman & Associates analysis
92. Purchase Activity in Younger Age Cohorts Likely
Stronger than Assumed
8%
19%
13%
20%
15%
9%
19%
14%
16%
15%
0%
5%
10%
15%
20%
25%
Under 30 30-39 40-49 50-plus All
2012 2013
Owner-Occupied Purchase Mortgage Year-Over-Year Growth by Age
Source: HMDA, Ellie Mae, Zelman & Associates analysis
93. Lack of Savings for a Downpayment
Most Cited as Hurdle to Credit…
55%
44%
19% 19%
42%
31%
25%
19%
0%
10%
20%
30%
40%
50%
60%
I do not have
enough savings
for a
downpayment
My monthly
income would
not support the
cost of
ownership
I have bad
credit
I have too much
debt
I do not have
enough savings
for a
downpayment
My monthly
income would
not support the
cost of
ownership
I have bad
credit
I have too much
debt
Reasons Young Adults Do Not Believe They Would Qualify for a Mortgage
Respondents Requested to Select All that Apply - Answers Do Not Sum to 100%
25-29 Year Olds 30-34 Year Olds
Source: Zelman & Associates Consumer Survey
96. Nearly a Quarter of Under-35 Age Cohort is Debt
Free, Better than History
20%
19%
17%
19%
17%
20%
16%
22%
24%
14%
11%
0%
5%
10%
15%
20%
25%
1989 1992 1995 1998 2001 2004 2007 2010 Under 35 25-29 30-34
Percentage of Under-35 Age Cohort That is Debt Free
Federal Reserve Survey of Consumer Finances Zelman 2014 Survey
Source: Federal Reserve, Zelman & Associates Consumer Survey
97. Contrary to Fears, Student Loan Debt
Uncorrelated to Household Formation
17%
23%
20%
14%
13%
13%
16%
18%
17%
0%
5%
10%
15%
20%
25%
With Without Total With Without Total With Without Total
Share of Young Adults Living at Home,
Depending on Student Loan Status
25-29 Year Olds 25-34 Year Olds30-34 Year Olds
Source: Zelman & Associates Consumer Survey
98. Important to Differentiate Between Ownership and
Living in a Single-Family Home
27% 26%
47%
62%
34%
46%
62%
77%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Living at Home All Renters Married
Renters
Married Renters
With Children
Living at Home All Renters Married
Renters
Married Renters
With Children
Hypothetical Housing Decisions for 25-34
Renters or Those Living at Home
Purchase if Moved in Next Year Single-Family if Moved in Next Year
Single-Family
Share Higher than
Purchase Share for
Every Segment
Source: Zelman & Associates Consumer Survey
99. Historical Drivers of Younger Ownership Rates
Point to Future Gains
40%
41%
42%
43%
44%
45%
46%
47%
48%
49%
50%
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Homeownership Rate of 25-34 Year Olds
From 2004 to 2012,
initial losses were
driven by falling real
incomes and lower
affordability, while
additional losses
resulted from lower
employment and
incomes, falling
home prices, and
tighter credit.
From 1993 to 2004,
rising real incomes,
lower interest rates
relative to the 1980s and
more lenient
underwriting standards
helped to increase
ownership rates.
Homeownership rates fell
despite the decline in
interest rates as real
income growth stagnated
and affordability remained
elusive.
Source: Census Bureau, Zelman & Associates analysis