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Market Watch 2014 presentation - Dr. Lawrence Yun

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NAR SVP and Chief Economist Lawrence Yun shared trends and forecasts for both the national and Middle Tennessee market at Market Watch 2014 (July 9, 2014).

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Market Watch 2014 presentation - Dr. Lawrence Yun

  1. 1. Housing Market Watch 2014 Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® Presentation in Nashville, TN July 9, 2014
  2. 2. Existing Home Sales 20% cumulative increase over 2 years 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 20002001200220032004200520062007200820092010201120122013
  3. 3. Median Home Price (Near 20% gain in 2 years) $100,000 $120,000 $140,000 $160,000 $180,000 $200,000 $220,000 $240,000 20002001200220032004200520062007200820092010201120122013
  4. 4. Monthly Pending Sales Index recovering but still down from a year ago (Seasonally Adjusted) 70.0 75.0 80.0 85.0 90.0 95.0 100.0 105.0 110.0 115.0 Source: NAR
  5. 5. Local Area Housing Statistics (Outperforming vs. Nation) • Home Sales • Up 2% in 2014 year-to-date • Median Home Price • Up 6% in 2014 year-to-date • Dollar Volume • Up 8% in 2014 year-to-date • Inventory is loosening but still tight • Down 5% in May 2014 vs May 2013
  6. 6. Two and Out? Or Multi-year Expansion? (Single-Family Existing Home Sales Only) 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014Q1
  7. 7. Causes of Recent Sales Slowdown • Bad winter – Only delayed sales not cancellation • Home prices rose too fast in relation to income – Showing signs of slowing • Lack of inventory – Steadily more inventory coming to market • Mortgage rates jumped – Trouble ! • Mortgage credit difficulties – New Qualified Mortgage Rules – Surely cannot get worse!
  8. 8. Mismatch Growth 19% 4% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 2-year Growth Home Price Household Income
  9. 9. 30-Year Fixed Rate Mortgage and 1-year Adjustable Rate Mortgage 0 1 2 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
  10. 10. 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
  11. 11. Nashville Repeat Price Index 0 20 40 60 80 100 120 140 160 180 200 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
  12. 12. 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 2014-May
  13. 13. Change in Inventory (% change from one year ago) -30 -20 -10 0 10 20 30 40 50 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
  14. 14. Forecast #1: Higher Inflation … Higher Interest Rates • Federal Reserve “Quantitative Easing” finishes by the year end 2014 • Fed Funds Rate … hike in 2015 Q1 • Earlier Move to Tighten because of Inflation Pressure • Long-term Steady State Rate (2016 onwards) .. 10 year Treasury at 5.0%
  15. 15. Rising Renters’ and Homeowners’ Rent Growth (On the Way to 3%) -1 0 1 2 3 4 5 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 Owners' Equivalent Rent Renters' Rent
  16. 16. REALTOR® Rent Survey – Shows Rent Pressure 0 10 20 30 40 50 60 Falling Rising
  17. 17. Economic Forecast 2013 2014 forecast 2015 forecast GDP Growth 1.9% 1.9% 2.7% Job Growth 1.7% 1.7% 1.8% CPI Inflation 1.4% 2.5% 3.5% Consumer Confidence 73 82 86 10-year Treasury 2.5% 2.8% 3.6%
  18. 18. Forecast #2 Multi-year Housing Expansion – Broadly Speaking • Pent-Up Demand – Population Growth – Job Growth • Some underperformance, however, from lock- in effect • Inevitable Growth in housing starts add inventory • Vacation home sales growth
  19. 19. U.S. Population 0 50 100 150 200 250 300 350 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 In millions
  20. 20. Pent Up Demand 2000 2013 Existing 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 Population 282 m 316 m
  21. 21. GDP Contraction in 2014 Q1 -10 -8 -6 -4 -2 0 2 4 6 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 GDP Annualized Growth Rate
  22. 22. Sluggish Growth + Gap after Great Recession ($1.5 trillion gap … $4,700 per person) 10000 11000 12000 13000 14000 15000 16000 17000 18000 1998 - Q1 2000 - Q1 2002 - Q1 2004 - Q1 2006 - Q1 2008 - Q1 2010 - Q1 2012 - Q1 GDP in 2009 Dollars Real GDP Real GDP W/O Recession 3% Growth Line 2.2% Growth Line
  23. 23. GDP Growth = Job Creations (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 2014-May In thousands
  24. 24. Unemployment Rate 0 2 4 6 8 10 12 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
  25. 25. Employment Rate 54 56 58 60 62 64 66 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
  26. 26. Job Market Comparisons by State Fast Growing States 1-year Growth Rate North Dakota 4.5 Nevada 3.7 Texas 3.4 Florida 2.9 Utah 2.9 Colorado 2.8 Oregon 2.7 Delaware 2.6 West Virginia 2.5 California 2.2 Slow Moving States 1-year Growth Rate Michigan 0.7 Alabama 0.6 Wyoming 0.6 South Dakota 0.3 Virginia 0.3 New Jersey 0.1 Illinois 0.0 Alaska 0.0 New Mexico -0.1 Vermont -0.2 Tennessee growing at 2.1%
  27. 27. Jobs in Nashville Metro (New Peak and growing at 3.2%) 600 650 700 750 800 850 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 In thousands
  28. 28. 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 • Potential future lock from longer holding period for capital gains tax exclusion
  29. 29. Household Net Worth 40000 45000 50000 55000 60000 65000 70000 75000 2000-Q1 2000-Q4 2001-Q3 2002-Q2 2003-Q1 2003-Q4 2004-Q3 2005-Q2 2006-Q1 2006-Q4 2007-Q3 2008-Q2 2009-Q1 2009-Q4 2010-Q3 2011-Q2 2012-Q1 2012-Q4 $ billion
  30. 30. Vacation Home Sales - 200 400 600 800 1,000 1,200 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 In thousands
  31. 31. Housing Starts Rising … More Inventory But Needs to Reach 1.5 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 multifamily single-family Thousand units (annualized) Long-term Average
  32. 32. Nashville Metro Housing Permits (year to date) 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 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
  33. 33. Sluggish Recovery in Housing Starts • Cost of Construction Rising Faster than CPI • Labor Shortage for construction work • Construction loan difficulty for small local homebuilders … Dodd-Frank financial regulations?
  34. 34. National Housing Forecast 2013 2014 forecast 2015 forecast Housing Starts 925,000 1.1 million 1.4 million New Home Sales 430,000 Near 500,000 Near 700,000 Existing Home Sales 5.1 million 4.9 million 5.3 million Median Price Growth + 11.5% + 5% to 6% + 3% to 5% 30-year Rate 4.0% 4.4% 5.4%
  35. 35. Nashville Housing Forecast? Has to outperform because of faster job growth and faster housing starts recovery
  36. 36. Forecast #3: More Unequal Wealth Distribution • Renters do not accumulate wealth • Renter population rising • Homeowners build wealth after buying at low prices • Stagnant homeowner population • Tight Credit hinders ‘good’ renters from becoming homeowners • Investors becoming increasing share of property owners
  37. 37. Renter Households 25,000 27,000 29,000 31,000 33,000 35,000 37,000 39,000 41,000 1980-Q1 1981-Q1 1982-Q1 1983-Q1 1984-Q1 1985-Q1 1986-Q1 1987-Q1 1988-Q1 1989-Q1 1990-Q1 1991-Q1 1992-Q1 1993-Q1 1994-Q1 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 In thousands
  38. 38. Homeowner Households has not Grown since 2006 … but Primed to Grow 50,000 55,000 60,000 65,000 70,000 75,000 80,000 1980-Q1 1981-Q1 1982-Q1 1983-Q1 1984-Q1 1985-Q1 1986-Q1 1987-Q1 1988-Q1 1989-Q1 1990-Q1 1991-Q1 1992-Q1 1993-Q1 1994-Q1 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 In thousands
  39. 39. Wealth Distribution (Federal Reserve data on median net worth) $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 Renter Owner 1998 2001 2004 2007 2010 2014 2014 Forecast by NAR Bubble Crash
  40. 40. What Homebuyers Want?
  41. 41. 76% Single Family Detached House Single Family Attached 4% 14% Condo or Apt. 80% Single Family Detached House 7% 5% Condo or Apt. 8% Slide 41 Slightly More Preference For Condo or Apartment Living Than In 2011 Housing Type Preference (2013): Housing Type Preference (2011): Right now, if you could choose, which of the following would you prefer to live in: 6% Single Family Attached
  42. 42. Slide 42 Walkability and Age-Diversity Gaining in Importance 46% 45% 37% 28% 28% 23% 23% 45% 44% 31% 24% 36% 15% 21% 0% 10% 20% 30% 40% 50% Privacy from neighbors High-quality public schools Sidewalks and places to take walks Being within an easy walk of other places and things in the community Being within a short commute to work A community with people at all stages of life adults, families with children and older people Easy access to the highway Changes in Important Factors in Deciding Where to Live +1 +1 +6 +4 -8 +8 +2 Very Important - 2013 Very Important - 2011 Q.47 In deciding where to live, indicate how important having each of the following would be to you: very important, somewhat important, not very important, or not at all important.
  43. 43. What Buyers Want Most From Their Agent Help find the right home to purchase, 53% Help buyer negotiate the terms of sale, 12% Help with the price negotiations, 11% Determine what comparable homes were selling for, 8% Help with paperwork, 7% Help find and arrange financing, 3%
  44. 44. Where Clients Come From • From Members: – 21 percent repeat business from past clients – 21 percent referrals from past clients – 3 percent off member website (of those with a website) • From Buyers: – 54 percent use an agent that was referred to them or they had worked with before – 9 percent found agent online • From Sellers: – 64 percent use an agent that was referred to them or they had worked with before – 4 percent found agent online • 2/3rds of buyers/sellers only contact 1 agent
  45. 45. For Daily Update and Analysis • Twitter @NAR_Research

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