NAR Residential Economic Issues Trends Forum
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Presentation by Dr. Lawrence Yun, National Association of Realtors Chief Economist to NAR Directors, May 2015.
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NAR Residential Economic Issues Trends Forum
- 1. Economic and Housing Market Outlook By Lawrence Yun, Ph.D. Chief Economist National Association of REALTORS® May 14, 2015 Washington, D.C.
- 4. Monthly Pending Sales Index (Seasonally Adjusted) 90.0 95.0 100.0 105.0 110.0 115.0 Up 1% from 1 month ago Up 11% from 1 year ago Source: NAR
- 5. Median Home Price Appreciation (% change from one year ago) -4 -2 0 2 4 6 8 10 12 14 16
- 6. Hitting Affordability 0 50 100 150 200 250 Too fast price gain could cut affordability in 2016
- 7. 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 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 Inventory remains low because homebuilders are not actively building.
- 8. Regional Variation Pending Sales Change from One Year Ago -20 -10 0 10 20 2014 - Jan 2014 - Feb 2014 - Mar 2014 - Apr 2014 - May 2014 - Jun 2014 - Jul 2014 - Aug 2014 - Sep 2014 - Oct 2014 - Nov 2014 - Dec 2015 - Jan 2015 - Feb 2015 - Mar Northeast Midwest South West
- 9. Regional Variation Median Price Change from One Year Ago -5 0 5 10 15 20 2014 - Jan 2014 - Feb 2014 - Mar 2014 - Apr 2014 - May 2014 - Jun 2014 - Jul 2014 - Aug 2014 - Sep 2014 - Oct 2014 - Nov 2014 - Dec 2015 - Jan 2015 - Feb 2015 - Mar Northeast Midwest South West
- 11. Huge Pent Up Demand Underperforming Home Sales in Relation to Population 2000 2014 Existing Home Sales 5.2 m 4.9 m New Home Sales 880 K 440 K Mortgage Rates 8.0% 4.2% Payroll Jobs 132 m 139 m Population 282 m 319 m 37 million more people living in the country
- 12. Jobs (8 million lost … 12 million gained) 122,000 124,000 126,000 128,000 130,000 132,000 134,000 136,000 138,000 140,000 142,000 144,000 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 In thousands
- 13. Fresh Unemployment Insurance Claims 250 300 350 400 450 500 550 600 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 In thousands
- 14. Top and Bottom States for Jobs The Best % Gain in 12 months Utah 4.0% Florida 3.8% Oregon 3.4% Washington 3.4% California 3.2% Georgia 3.2% North Dakota 3.2% Nevada 3.0% Idaho 2.9% The Worst % Gain in 12 months West Virginia -0.7% Mississippi 0.5% Maine 0.5% Montana 0.6% Alaska 0.6%
- 15. Jobs in Denver Metro 1000 1050 1100 1150 1200 1250 1300 1350 1400 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 2015 - Jan In thousands Denver market is hot because of strong job market.
- 17. Housing Starts Rising … Too Slowly 0 500 1000 1500 2000 2500 3000 1970 - Jan 1973 - Jan 1976 - Jan 1979 - Jan 1982 - Jan 1985 - Jan 1988 - Jan 1991 - Jan 1994 - Jan 1997 - Jan 2000 - Jan 2003 - Jan 2006 - Jan 2009 - Jan 2012 - Jan 2015 - Jan Thousand units Homebuilding is well below Historical normal rate of 1.5 million per year.
- 18. Denver Metro Housing Permits (year-to-date) 0 5000 10000 15000 20000 25000 30000 35000 40000 2000 2002 2004 2006 2008 2010 2012 2014 Even the super hot Denver is not getting big gains in new home construction.
- 19. Shadow Inventory in the U.S. 0 2 4 6 8 10 12 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 % of mortgages in foreclosure process or seriously delinquent There will be continual decline in distressed sales because the shadow is thinning out.
- 20. Distressed Property Sales (% of total sales) 0 10 20 30 40 50 60 2008-Oct 2009-Jan 2009-Apr 2009-Jul 2009-Oct 2010-Jan 2010-Apr 2010-Jul 2010-Oct 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
- 21. Shadow Inventory in AZ and NJ 0 2 4 6 8 10 12 14 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 % of mortgages in foreclosure process or seriously delinquent
- 22. Homeowner Staying Put Longer 0 2 4 6 8 10 12 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Median Years of Tenure Before Moving
- 23. Duke Basketball Ticket Price? Those who do not get the tickets after camping out is willing to pay about $140 to get the ticket. Those who won the the ticket are willing to sell for about $1500. That is, a greater value placed and unwillingness to let go of what one has in possession. Do homeowners like their low mortgage rates and unwilling to Give it up and hence staying longer than usual to make the move?
- 24. Vehicle Sales – Pent Up Demand Release after having older cars (millions annualized rate) 8 10 12 14 16 18 20 22 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 But car sales are rebounding strongly after a longer holding period because car loans are less subject to new regulation?
- 25. Mortgage Rates Rise: How Much and How Soon?
- 26. Monetary Policy by Federal Reserve (zero rate policy … 7th and final year) 0 1 2 3 4 5 6 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Fed Funds%
- 27. 30-year Mortgage Rates 0 2 4 6 8 10 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 2015 - Jan
- 28. No CPI Inflation – Yet -3 -2 -1 0 1 2 3 4 5 6 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
- 30. Supply and Demand: Oil in U.S. 19 21 5 9
- 31. Rents Rising at 7-year high -1 0 1 2 3 4 5 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 Renters' Rent
- 32. Rental Vacancy Rate (Census Measurement) 5 6 7 8 9 10 11 12 2000-Q1 2000-Q3 2001-Q1 2001-Q3 2002-Q1 2002-Q3 2003-Q1 2003-Q3 2004-Q1 2004-Q3 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 Rents will continue to rise because of historic low vacancy rate.
- 33. Monetary Policy • Quantitative Easing … Finished • Fed Funds Rate hike … September 2015 • Mortgage Rates reaching 6% by 2017
- 34. Credit Box Opens? • FICO New Method • Fannie/Freddie – Lower down payment products • FHA premiums … lowered • Portfolio Lending … historic low mortgage default rates on recent vintages (2010-2014)
- 37. Renters (8 million more households) 30 32 34 36 38 40 42 44
- 38. Homeowners (2.5 million fewer households) 74.0 74.5 75.0 75.5 76.0 76.5 77.0
- 39. Home Price Index Dallas and Phoenix 100 150 200 250 300 350 1995-Q1 1995-Q4 1996-Q3 1997-Q2 1998-Q1 1998-Q4 1999-Q3 2000-Q2 2001-Q1 2001-Q4 2002-Q3 2003-Q2 2004-Q1 2004-Q4 2005-Q3 2006-Q2 2007-Q1 2007-Q4 2008-Q3 2009-Q2 2010-Q1 2010-Q4 2011-Q3 2012-Q2 2013-Q1 2013-Q4 2014-Q3 Home prices and housing wealth is rising in many places, but we have fewer homeowners.
- 40. All-Cash Sales (% of total sales) 0 5 10 15 20 25 30 35 40 2008-Oct 2009-Jan 2009-Apr 2009-Jul 2009-Oct 2010-Jan 2010-Apr 2010-Jul 2010-Oct 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
- 41. Real Estate Asset and Mortgage 0 5000 10000 15000 20000 25000 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 $ billion
- 42. Household Net Worth ($5,500 vs. $195,500) $0 $50,000 $100,000 $150,000 $200,000 $250,000 Renter Homeowner 1998 2001 2004 2007 2010 2013 x31 x46x36 x34x46 Homeowner net worth ranges from 31 to 46 x36 Source: Federal Reserve Survey of Consumer Finances
- 43. Stock Market S&P 500 Index 700 900 1100 1300 1500 1700 1900 2100 2300 2000-Jan 2000-Sep 2001-May 2002-Jan 2002-Sep 2003-May 2004-Jan 2004-Sep 2005-May 2006-Jan 2006-Sep 2007-May 2008-Jan 2008-Sep 2009-May 2010-Jan 2010-Sep 2011-May 2012-Jan 2012-Sep 2013-May 2014-Jan 2014-Sep
- 44. Household Net Worth at All-Time High 40000 50000 60000 70000 80000 90000 $ billion
- 45. Vacation Home Sales - 200 400 600 800 1,000 1,200 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 In thousands
- 46. Metro Market Examples Metro Change in Ownership Change in Housing Wealth Inequality Change in Income Equality Bakersfield -5.6% $18,400 - 1.4% Orlando -4.3% $31,500 -0.4% Cincinnati -3.5% $13,000 -3.0% New Orleans -3.2% $11,900 -4.2% Atlanta -3.2% $29,700 -3.3% Honolulu -2.9% $80,100 -0.8% Austin +0.8% $37,700 +0.2%
- 47. Social Benefits of Homeownership • Higher Student Test Scores • Higher Graduation Rate and Higher Earnings • Less TV time • Lower Teen Delinquencies
- 48. Likely Further Fall in Homeownership … But Rising Homeowners • Likely to Decline to 62% by 2016 … before rising • Homeowners will no longer fall, but rise • Renters will also rise • 50-50 split in new households • But much faster household formation
- 49. Household Growth Ready to Pop? 0.0 0.5 1.0 1.5 2.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Household Population % growth from one year ago From 2001 to 2006: Mix of Renters and Owners From 2007: Growth only from Renters
- 51. Baltimore Metro – City and Suburbs (Total Jobs in thousands) 900 1000 1100 1200 1300 1400 1980 - Jan 1985 - Jan 1990 - Jan 1995 - Jan 2000 - Jan 2005 - Jan 2010 - Jan 2015 - Jan
- 52. Baltimore City (Total Jobs in thousands) 300 350 400 450 500 1980 - Jan 1985 - Jan 1990 - Jan 1995 - Jan 2000 - Jan 2005 - Jan 2010 - Jan 2015 - Jan
- 53. New Cool Kids? Roland Fryer 2015 John Bates Clark Award Kids with fewer friends in the African-American community was shown to correlate with success. Ben Carson and Michelle Obama had few friends growing up? It’s cool not to have so many friends?
- 54. Method to Find Agent? Adults Friends are Important! Past Clients 22% Referral from Friend or Relative 47% Personal Contact Meeting/Open House/Mailer 14% Internet 4% Other 13%
- 55. Economic Forecast 2013 2014 2015 Forecast 2016 Forecast GDP Growth 2.2% 2.6% 2.3% 3.0% Job Growth +2.3 million +3.0 million +2.4 million +2.7 million CPI Inflation 1.5% 1.6% 0.3% 3.2% Consumer Confidence 73 87 99 101 10-year Treasury 2.5% 2.6% 2.2% 3.3%
- 56. Housing Forecast 2013 2014 2015 Forecast 2016 Forecast Housing Starts 925,000 1,001,000 1.1 million 1.4 million New Home Sales 430,000 437,000 570,000 720,000 Existing Home Sales 5.1 million 4.9 million 5.3 million 5.5 million Median Price Growth + 11.5% + 5.7% + 6% + 4% 30-year Rate 4.0% 4.2% 4.0% 5.2% Underwriting Standards Strict Strict Transition Normal