Market update for the Grosse Pointe Board of Realtors.

1. Grosse Pointe Board of REALTORS®
Housing Market Update: Current
Conditions and Affordability Challenges
Paul C. Bishop, PhD, CBE
Vice President, Research
NATIONAL ASSOCIATION OF REALTORS®
June 6, 2018

2. Housing Market Update: Current Conditions and
Affordability Challenges
 Market Conditions
Rising Prices and Too Few Homes For Sale
 Challenge Ahead
Affordability for Renters and Buyers

3. Market
Conditions:
Rising Prices and Too
Few Homes For Sale

4. Less than 6 Months Supply of Existing Homes
Since Late 2012
4.0
0
2
4
6
8
10
12
14
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
U.S. Months Supply
months
Source: National Association of REALTORS®

5. Existing Home Sales in a Narrow Range
Since 2016 Despite a Growing Economy
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
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
U.S. Existing Home Sales
Source: National Association of REALTORS® /Michigan REALTORS®
Michigan Home Sales
(through April)
2016 7.8%
2017 -2.7%
2018 -7.3%

6. More Local Associations in Michigan Report
Declining Sales Levels
12
22
32
0
5
10
15
20
25
30
35
40
2016 2017 2018
April Year-to-date Sales Changes as
Reported by 42 Local Associations
Sales Decline Increase of up to 10% Increase of 10% or more
Source: Michigan REALTORS®

7. Home Prices in U.S. Growing at a
Consistent Single-digit Pace
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
U.S. Existing Home Sale Price Growth
percent change from one year ago
Michigan Average Price Growth
(through April)
2016 2.9%
2017 11.8%
2018 6.8%
Source: National Association of REALTORS® /Michigan REALTORS®

8. Price Increases in a Majority of Areas in Michigan
21
19
21
11
19
15
0
5
10
15
20
25
30
35
40
2016 2017 2018
April Year-to-date Average Price Changes as
Reported by 42 Local Associations
Price Decline Increase of up to 10% Increase of 10% or more
Source: Michigan REALTORS®

9. Nationally, Not Building Enough Homes…
U.S. Single Family Starts
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
Avg Annual Starts 1997-2006
Source: Census Bureau

10. …and Much the Same Story in Michigan
Michigan Single Family Permits
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
Avg Annual Permits 1997-2006
Source: Census Bureau

11. A Deficit in Housing Construction in U.S. of
Nearly 4 million Units in the 2010s
Source: Census Bureau
15.1
15.5
11.0
13.3
9.0 9.0
17.6
15.0
13.7
15.4
7.4
11.2
0
2
4
6
8
10
12
14
16
18
20
22
1970s 1980s 1990s 2000s 2010-2017 2010-2017
New Households and Housing Starts by Decade
New Households Housing Starts
millions If Housing Starts were at the same
relative pace as the 1990s…
…we would have 3.8 million more
housing starts in the 2010s

12. Number of Construction Job Openings Tops
Previous Peak During Housing Boom
0
50,000
100,000
150,000
200,000
250,000
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
U.S. Construction Job Openings
4-qtr moving average
Source: Bureau of Labor Statistics

13. Challenge Ahead:
Affordability for
Renters and Buyers

14. Rent Growth May Be Slowing But Still Outpacing
Other Segments of the Economy
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Core Consumer Price Inflation
Rent Other than Shelter
percent change from one year ago
Source: Bureau of Labor Statistics

15. Why Renters Don’t Own a Home
Millennials Gen X
Younger
Boomers
Older
Boomers
Silent
Gen
Can’t afford a home 39% 46% 45% 32% 35%
Life circumstances 31% 19% 29% 29% 21%
Need flexibility of renting 15% 11% 15% 8% 2%
Don’t want responsibility 9% 12% 8% 9% 15%
Source: National Association of REALTORS®
62% of renters believe it would be “very” or “somewhat” difficult to get a mortgage

16. First-time Buyers Share Below
Long-term Average
0%
10%
20%
30%
40%
50%
60%
2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
First-time Buyer Share
Source: National Association of REALTORS®

17. Where are all the Starter Homes?
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2008 2017
Percent of U.S. New Home Sales
Less than $150,000 $500,000 or higher
Source: Census Bureau

18. How Affordable Is the Current Market
for Home Buyers?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$25,000 $50,000 $100,000 $150,000 $200,000
Household Income
Percent of Homes Available for Sale Affordable to Different
Income Levels
U.S. Michigan Detroit-Warren-Dearborn
Source: National Association of REALTORS®

19. What to Plan for…
• No significant change in economic outlook, even as we
prepare for modestly higher interest rates
– Wildcards include possible trade war and consumer
confidence
• No relief for the inventory shortage – home building up, but
a big shortfall to overcome
• Prices will continue to rise due to tight inventory and solid
demand for homes
• Consumers remain optimistic about home ownership

20. Housing Forecast
2016 2017
2018
Forecast
2019
Forecast
Housing Starts 1,174,000 1,203,000 1,318,000 1,390,000
New Home Sales 561,000 613,000 700,000 770,000
Existing Home
Sales
5,450,000 5,510,000 5,540,000 5,650,000
Median Existing
Home Price Growth
5.1% 5.7% 5.1% 3.8%
30-year Mtg Rate 3.6% 4.0% 4.6% 5.1%
Source: National Association of REALTORS® (June 2018)

21. Paul C. Bishop PhD, CBE
Vice President, Research
pbishop@realtors.org
202-383-1246
linkedin.com/in/pcbishop/