Downloaded 32 times
Uploaded byCharleston Trident Association of REALTORS
2012 Midyear Charleston Residential Real Estate Market Update
Lawrence Yun, Ph.D., presented an economic and real estate outlook, highlighting a tough four-year period for existing home sales, with signs of recovery starting in 2012. The Charleston region experienced a 19% increase in closing sales year-over-year and a significant drop in inventory, indicating a tightening market. Factors contributing to the expected higher sales in 2012 include improved affordability, job creation, and rising demand for ownership and rentals among young adults.
More Related Content
Similar to 2012 Midyear Charleston Residential Real Estate Market Update
More from Charleston Trident Association of REALTORS
2012 Midyear Charleston Residential Real Estate Market Update
- 2. Real Estate andEconomic Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® Presentation at Charleston Trident Association of REALTORS® August 15, 2012
- 3. Annual Existing HomeSales: A Tough, Flat 4 years 8 In million units 7 7.08 6 6.52 5 5.02 4 4.12 4.34 4.18 4.26 3 2 1 0 2005 2006 2007 2008 2009 2010 2011
- 4. Despite Second HomeSales Recovery In thousands 4000 3500 3000 2500 2000 Investment 1500 1000 Vacation 500 0 2005 2006 2007 2008 2009 2010 2011 53% of REALTOR® members own a residential investment property 29% own a commercial property 19% own a vacation home
- 5. Owner-Occupancy Sales Falling In thousands 6000 5000 4000 3000 2000 1000 0 2005 2006 2007 2008 2009 2010 2011
- 6. 2012 First Half:Strongest in 5 years 6,000,000 5,000,000 4,000,000 2008 2009 3,000,000 2010 2,000,000 2011 2012 1,000,000 0 Q1 Q2 Q3 Q4
- 7. Charleston Region HousingStatistics • Closing Sales of 10,748 in July 2012 (12-month total) … Up 19% from July, 2011 • Median price … up 3.4% from one year ago • Inventory … down 26% • Months Supply … 7.1 (from 11.4 one year ago) Source: Charleston Trident MLS
- 8. Monthly Pending HomeSales Index (Seasonally Adjusted) 115 110 105 Homebuyer Tax Credit 100 95 90 85 80 75 70 2007 - 2007 - 2008 - 2008 - 2009 - 2009 - 2010 - 2010 - 2011 - 2011 - 2012 - Jan Jul Jan Jul Jan Jul Jan Jul Jan July Jan Source: NAR
- 9. REALTOR® Member MarketSurvey Buyer Traffic Seller Traffic 80.0 60.0 40.0 20.0 0.0
- 10. Annual Membership (NRDS count at year-end) 1,500,000 1,400,000 1,300,000 1,200,000 1,100,000 1,000,000 900,000 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 10
- 11. Improving Factors forHigher Sales in 2012: 1. High Affordability and Job Creation 2. Solid stock market recovery from 2008 3. Rising rents and a larger pool of qualified renters 4. Pent-up release of Household Formation • Rising demand for ownership and rentals as young-adults move out of parent’s basement 5. Smart money chasing real estate (i.e., investors) 6. Consumer confidence in buying an appreciating asset
- 12. 50 70 90 110 130 150 170 190 210 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 Best Affordability Conditions 2004 2006 2008 2010 2012
- 13. 1,000 1,500 2,000 2,500 3,000 3,500 500 0 2005 - Jan 2005 - Jun 2005 - Nov 2006 - Apr 2006 - Sep 2007 - Feb 2007 - Jul 2007 - Dec 2008 - May 2008 - Oct 2009 - Mar 2009 - Aug 2010 - Jan 2010 - Jun 2010 - Nov 2011 - Apr 2011 - Sep S&P 500 (Almost 100% from low point) 2012 - Feb NASDAQ (More than 100% increase from low point) S&P 500 NASDAQ
- 14. 0 1 2 3 4 5 -1 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 Rent Growth 2008 - Jan % change from one year ago 2008 - Jul 2009 - Jan 2009 - Jul 2010 - Jan 2010 - Jul (Component from Consumer Price Index) 2011 - Jan 2011 - Jul 2012 - Jan
- 15. Annual Household Formation… Future Rent Pressure? (3 separate Census data) In millions Household Formation leads to increase ownership and renters; Could begin to return to normal of at least 1 million from 2012.
- 16. Home Price: Big Declines from 2006 to 2008 Small Declines from 2009 to 2011 (index set at 100 from 2000) Case-Shiller FHFA 220 200 180 160 140 120 100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan
- 17. Home Prices Index 350 300 250 Charleston 200 Phoenix 150 100 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 Source: Federal Housing Finance Agency
- 18. Home Prices Metric % change from one year ago Comment NAR + 7.9% Mix of homes impact price … fewer distressed sales recently Case-Shiller - 1.9% Lagging indicator … one month 1.3% jump in April FHFA + 3.0% 3 straight monthly increase to April Core Logic + 2.0% 3 straight monthly increase to May FNC - 1.8% 3 straight monthly increase to May Radar Logic - 0.2% 3 straight monthly increase to April
- 19. Equity and UnderwaterHomeowners Positive Equity Negative Equity Homeowners Homeowners Early 2012 About 65 million 11 to 12 million Of which 25 million have no mortgages After 5% price 67 million 9 million appreciation After 10% price 69 million 7 million appreciation Source: Census, Federal Reserve, CoreLogic, NAR estimates
- 20. 15% of Homeownersare Underwater Homeowners 15% Underwater Abovewater 85%
- 21. 0 2 4 6 8 10 12 14 2005 - Jan 2005 - May 2005 - Sep 2006 - Jan 2006 - May 2006 - Sep 2007 - Jan 2007 - May 2007 - Sep 2008 - Jan 2008 - May 2008 - Sep 2009 - Jan 2009 - May 2009 - Sep 2010 - Jan (Around 6 months is normal) 2010 - May 2010 - Sep Inventory in Months Supply 2011 - Jan 2011 - May 2011 - Sep 2012 - Jan 2012 - May
- 22. Visible Housing Inventory (Existinginv. At 6-year low; New inv. at 50-year low) 4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan Existing New
- 23. Shadow Inventory (Seriously delinquent mortgage + homes in foreclosure process) million units 5.0 4.0 3.0 2.0 1.0 0.0 2002 - Q1 2000 - Q1 2000 - Q3 2001 - Q1 2001 - Q3 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 Shadow Inventory can be defined as those distressed properties not yet on the market but will at some point appear given the serious delinquency situation. Latest and Forecast: Shadow inventory admittedly is still high, but it is about 1 million fewer than two years ago and is anticipated to steadily diminish over time. The falling share of distressed properties over time will lead to the median price of all homes that gets transacted to be higher.
- 24. 500 1000 1500 2000 2500 0 2000 - Jan 2000 - Jul 2001 - Jan 2001 - Jul 2002 - Jan Source: Census, HUD 2002 - Jul 2003 - Jan 2003 - Jul Thousand units (annualized) 2004 - Jan 2004 - Jul 2005 - Jan multifamily 2005 - Jul 2006 - Jan 2006 - Jul 2007 - Jan 2007 - Jul single-family Housing Starts 2008 - Jan 2008 - Jul 2009 - Jan 2009 - Jul 2010 - Jan 2010 - Jul 2011 - Jan (Well Below 50-year average of 1.5 million each year) 2011 - Jul 2012 - Jan Long-term Average
- 25. 0 10000 12000 2000 4000 6000 8000 1980 1981 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 Charleston Housing Permits 2009 2010 2011
- 26. 50,000 55,000 65,000 70,000 75,000 80,000 60,000 1980 - Q1 1981 - Q3 1983 - Q1 1984 - Q3 1986 - Q1 1987 - Q3 1989 - Q1 1990 - Q3 1992 - Q1 1993 - Q3 1995 - Q1 1996 - Q3 Homeowners 1998 - Q1 1999 - Q3 2001 - Q1 2002 - Q3 2004 - Q1 2005 - Q3 2007 - Q1 Owner Occupied Housing Units 2008 - Q3 2010 - Q1 2011 - Q3
- 27. 25,000 29,000 31,000 33,000 35,000 39,000 41,000 27,000 37,000 1980 - Q1 1981 - Q3 1983 - Q1 1984 - Q3 1986 - Q1 1987 - Q3 1989 - Q1 1990 - Q3 1992 - Q1 1993 - Q3 1995 - Q1 1996 - Q3 1998 - Q1 Rental Households 1999 - Q3 2001 - Q1 2002 - Q3 2004 - Q1 2005 - Q3 2007 - Q1 Rental Occupied Housing Units 2008 - Q3 2010 - Q1 2011 - Q3
- 28. 59 60 61 62 64 65 66 67 69 70 63 68 % 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 (Lowest in 15 years) 1993 - Q1 1995 - Q1 1997 - Q1 1999 - Q1 2001 - Q1 2003 - Q1 2005 - Q1 Homeownership Rate at 65.4% 2007 - Q1 2009 - Q1 2011 - Q1
- 29. Wealth Distribution (FederalReserve data on median net worth, with 2011 NAR estimate) $300,000 $250,000 $200,000 1998 2001 $150,000 2004 $100,000 2007 2010 $50,000 $0 Renter Owner Data Source for Median Net Worth: Federal Reserve
- 30. Banks/Regulators Restricting Credit (Average Credit Scores of Approved Loans) Normal 2009 2010 If Normal Fannie 720 761 762 720 Freddie 720 757 758 720 FHA 650 682 698 660 15% to 20% Higher Sales
- 31. -200 -100 0 100 200 300 400 500 2001 - Q1 $ billion 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 (excluding Federal Reserve) 2008 - Q3 2009 - Q1 2009 - Q3 Financial Industry Profits 2010 - Q1 2010 - Q3 2011 - Q1 2011 - Q3 2012 - Q1
- 32. Economy Growing, thoughSlowly % Real GDP 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 -1 forecast forecast -2 -3 -4
- 33. 10 20 30 -40 -30 -20 -10 0 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 Home Buyer Tax Credit Residential Investment Spending Growth 2011 - Q3 2012 - Q1
- 34. Payroll Jobs Changes (December to December) 3 In millions 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 -1 forecast forecast -2 -3 -4 -5 -6
- 35. 61 63 64 65 66 67 68 62 % 1990 - Jan 1991 - Jan 1992 - Jan 1993 - Jan 1994 - Jan 1995 - Jan 1996 - Jan 1997 - Jan 1998 - Jan 1999 - Jan 2000 - Jan 2001 - Jan 2002 - Jan 2003 - Jan 2004 - Jan 2005 - Jan 2006 - Jan 2007 - Jan 2008 - Jan 2009 - Jan 2010 - Jan Labor Force Participation Rate 2011 - Jan 2012 - Jan
- 36. % 10 20 30 40 50 60 70 80 90 0 100 1948 - Jan 1951 - Jan 1954 - Jan 1957 - Jan Source: BLS 1960 - Jan 1963 - Jan 1966 - Jan 1969 - Jan 1972 - Jan 1975 - Jan 1978 - Jan 1981 - Jan 1984 - Jan 1987 - Jan 1990 - Jan 1993 - Jan Women Men 1996 - Jan 1999 - Jan Labor Force Participation Rate 2002 - Jan 2005 - Jan 2008 - Jan 2011 - Jan
- 37. 200 220 260 280 300 320 240 2000 -… 2000 -… 2001 -… In thousands 2001 -… 2002 -… 2002 -… 2003 -… 2003 -… 2004 -… 2004 -… 2005 -… 2005 -… 2006 -… 2006 -… 2007 -… 2007 -… 2008 -… 2008 -… 2009 -… 2009 -… 2010 -… 2010 -… Charleston Payroll Jobs 2011 -… 2011 -… 2012 -…
- 38. Charleston Payroll Jobsfrom 1940 In thousands 350 300 250 200 150 100 50 0 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan
- 39. Unemployment Rate % (Average during the Year) 12 10 8 6 4 2 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 forecast forecast Need to add 250,000 jobs each month for the next 8 years to bring the unemployment rate down to 5%.
- 40. Consumer Price Inflation (Above Fed’s preferred 2% core inflation rate) Rent All Items Core % 5 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 -1 forecast forecast
- 41. Prepare for EarlyMove (2014) by Federal Reserve Fed Funds 30-year Mortgage % 7 6 5 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 forecast forecast forecast Modestly higher rates could help home sales as banks re-staff mortgage work for home purchase applications and less refinance applications.
- 42. Forecast Summary 2011 2012 2013 History Forecast Forecast Existing Home Sales 4.26 million 4.6 million 5.0 million New Home Sales 301,000 390,000 630,000 Housing Starts 611,000 770,000 1,150,000 Existing Home Price $166,100 $173,000 $182,000 GDP Growth +1.7% +2.0% +2.9% Payroll Job Gains +1.7 million +1.5 million +2.3 million Fed Funds Rate 0.1% 0.1% 0.1% 30-yr Mortgage 4.7% 3.8% 4.1%
- 43. Risks to Forecast •Washington Policy – QRM 20% down payment requirement? – Other Dodd-Frank rules? Help or Hurt? – Basel 3 … capital rule that punishes private mortgage with low down payment and commercial loans – Trim mortgage interest deduction? – Capital gains tax on home sale? – Fiscal Cliff on January 1, 2013 … if no new compromised budget, then: • Automatic deep cuts to military and domestic spending • Automatic higher taxes • 3% shaved off GDP
- 44. -1600000 -1400000 -1200000 -1000000 -800000 -600000 -400000 400000 -200000 200000 0 2000 - Jan 2000 - Aug 2001 - Mar 2001 - Oct 2002 - May 2002 - Dec 2003 - Jul 2004 - Feb $ million; 12-month Total 2004 - Sep 2005 - Apr 2005 - Nov 2006 - Jun 2007 - Jan 2007 - Aug 2008 - Mar 2008 - Oct 2009 - May 2009 - Dec U.S. Federal Budget Deficit 2010 - Jul 2011 - Feb 2011 - Sep 2012 - Apr
- 45. World Report Card Country 10-Year Borrowing Rate Switzerland 0.5% Germany 1.3% Singapore 1.3% United States 1.4% United Kingdom 1.5% Canada 1.6% France 2.2% Brazil 2.9% Italy 6.0% Spain 6.8% Greece 26.0% Source: Bloomberg as of July 26, 2012
- 46. State Report Card State 10-year Borrowing Rate above Benchmark (% points) Average State borrowing costs Around 3.5% Rhode Island Benchmark + 0.5% Michigan Benchmark + 0.7% Nevada Benchmark + 0.7% California Benchmark + 0.9% Illinois Benchmark + 1.6% Source: WSJ
- 47.
- 48. Big Transactions ComingBack $2.5 million property and above Source: Real Capital Analytics, 4Q 2011. 13
- 49. REALTOR® Business Deals (Majority are less than $1 million)
- 50.
- 51. Multifamily Fundamentals Completions Net Absorption Vacancy 250,000 9.0 8.0 200,000 7.0 150,000 6.0 5.0 100,000 4.0 50,000 3.0 2.0 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1.0 -50,000 Source: NAR/REIS 0.0
- 52. Office Fundamentals Completions Net Absorption Vacancy 150 20.0 Millions 18.0 100 16.0 14.0 50 12.0 0 10.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 8.0 -50 6.0 4.0 -100 2.0 -150 Source: NAR/REIS 0.0
- 53. Commercial Market Forecast OFFICE 2011 2012 2013 Vacancy Rate 16.6% 16.3% 15.9% Net Absorption ('000 sq. ft.) 20,178 31,700 53,000 Completions ('000 sq. ft.) 11,659 25,474 37,847 Rent Growth 1.4% 1.7% 2.4% INDUSTRIAL 2011 2012 2013 Vacancy Rate 12.4% 11.9% 11.1% Net Absorption ('000 sq. ft.) 61,957 41,249 59,855 Completions ('000 sq. ft.) 20,462 26,947 54,881 Rent Growth -0.5% 1.8% 2.3% RETAIL 2011 2012 2013 Vacancy Rate 12.9% 12.2% 11.0% Net Absorption ('000 sq. ft.) 1,238 13,547 23,330 Completions ('000 sq. ft.) 4,207 12,677 19,878 Rent Growth -0.2% 0.7% 1.4% MULTI-FAMILY 2011 2012 2013 Vacancy Rate 5.4% 4.6% 4.5% Net Absorption (Units) 238,398 126,621 102,687 Completions (Units) 38,014 88,839 93,706 Rent Growth 2.5% 3.5% 3.8%
- 54. For Daily Updateand Analysis • Twitter @NAR_Research
- 55. Q & A
Editor's Notes
- #49 Currently, deal flow remains significantly below the 2007 peak, but sizable transactions have been reported recently, and there has been a year-over-year improvement in transaction volume. In 2010, commercial real estate deal volume rose 124.3 percent year-over-year, to $122.7 billion, compared to $54.7 billion in 2009. Gains were higher for high-quality core assets, especially in the office segment, where sales volume rose 156.6 percent YoY to $41.1 billion in 2010, from $16.0 billion in 2009. The growth has continued so far in 2011, with CRE deal volume rising 69.5 percent YoY in 1Q11 to $30.5 billion. While this improvement is a positive development, it has yet to be sustained for a long enough to confirm 2009 as the bottom for transactions in this cycle. Transaction levels remain below peak, but private investors continue to account for the largest share of the total. The recent increase, however, has been driven by public investors (including REITs) and foreign investors, with both categories surpassing 2009 totals in 2010.