Recovery to Normalcy - Colorado Housing Overview and Forecast
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The document discusses the outlook for the US housing market and economic recovery. It notes that while the job market and GDP are growing, the recovery remains uncertain. Housing starts, sales and prices stabilized in 2010 but remain depressed. The baseline outlook predicts moderate economic and job growth over the next few years, with housing market stabilization as affordability and pent-up demand support sales. However, risks include high inflation, deflation, or a budget crisis that could slow the recovery.
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Recovery to Normalcy - Colorado Housing Overview and Forecast
- 1. Recovery to Normalcy Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® Presentation to Denver Metro REALTORS® Denver, Colorado November 17, 2010
- 3. “Outlook remains unusually uncertain”
- 4. Alan Greenspan (former Chairman):
- 5. “If home prices start falling again, we could be facing a double-dip recession”
- 6. James Bullard (St. Louis Fed):
- 7. “The U.S. is closer to a Japanese-style deflationary outcome”
- 8. Thomas Hoenig(Kansas City Fed):
- 10. Consumer Confidence about Future Conditions – Not good but not as bad 9.6% unemployment rate, but different confidence level
- 11. Business Spending shows weak confidence in relation to profits $ billion
- 12. REALTORS’ Home Value Expectation:over the next 12 months Increase or Stable Decrease
- 13. REALTOR Expectation vs Reality
- 14. Government Spending (Confidence) $ billion
- 15. GDP Growing, but without vigor annualized % growth rate
- 16. U.S. Private Sector Job Gains(863,000 from Jan. to Sep. 2010) Month-to-month job gains in thousands
- 17. Total Payroll Jobs in the U.S. (same as in 2000, but with 30 million more people)
- 18. How Many Years to Get Job Market Back to Normal?
- 19. Total Payroll Jobs in Boulder and Ft. Collins In thousands Source: BLS
- 20. Total Payroll Jobs in Denver-Aurora In thousands Source: BLS
- 21. Total Payroll Jobs in Michigan In thousands Source: BLS
- 22. Total Payroll Jobs in Washington D.C. Metro In thousands Source: BLS)
- 23. Long-term Job Growth in Colorado (30 years) In thousands Source: BLS
- 24. Existing Home Sales (Closings) Tax Credit Impact
- 25. Colorado Existing Home Sales: Quarterly Change % change from a year ago Tax Credit Impact
- 26. Long-term Colorado Home Sales: 30 years In thousands
- 27. Median Home Price in Denver Area $ thousand Separate Case-Shiller Index shows Denver price gain of 2% from 18 months ago Source: NAR
- 28. Distressed Loans and Shadow Inventory Bad loans are nearly always made in good times. But recently originated loans are performing very well.
- 29. Newly Built Home Inventory and Its Shadow Inventory
- 30. Depressed Housing Starts In thousands
- 31. Housing Starts in Boulder In thousands
- 32. Housing Starts in Denver-Aurora In thousands
- 33. Housing Starts in Ft. Collins-Loveland In thousands
- 34. Return to Normalcy Unprecedented Boom and Bust: 2000 to 2010 Sales Boomed and Retreated Prices Overshot and Corrected Fundamental Back to Justifiable Levels Long-standing Housing Policy still in place Credit Market Bubble … out the window
- 35. Existing-Home Sales In million units 29
- 36. Home Sale to Jobs 30
- 37. National Median Home Price Source: NAR
- 38. Home Price-to-Income Ratio (No Bubble Now) Source: NAR
- 39. Home Price and Construction Cost(No Bubble Now)
- 40. Credit Bubble DeadSubprime, Alt-A, Home Equity Mortgage Origination $ billion Source: NAR estimate based on Inside Mortgage Finance data
- 41. Long Standing Housing Policy Mortgage Interest Deduction If eliminated, about 15% hit to home values Massive wealth destruction on property owners who have saved and saved (in many cases to pass it on to the next generation) FHA Self-financing without ever needing taxpayer funds (as of yet) Fannie and Freddie Made mistakes and need to be restructured
- 42. Long-Term Path to Self Reliance may be Helped from Long-Term Housing Wealth Gains Median Family Net Worth 2010 2010 Source: Federal Reserve, NAR estimate for 2010
- 43. Compelling AffordabilityMonthly Mortgage to buy a Median Priced Home
- 45. CPI-Housing Rent Inflation(Home price is not part of CPI because of asset/investment aspect)
- 48. Real Estate Price Residential: Case-Shiller Commercial: MIT
- 51. 2010.Q3: UP 115% Y-o-Y
- 52. 2011 Outlook
- 54. 1.5 million annual job additions in the next 2 years
- 56. People fussing about home value could miss out on low rates
- 57. Home values – no meaningful change in the national price in the next 2 years
- 58. Home sales to be choppy but overall improving in line with job growth … 5.2 million in 2011 (up from 4.8 m in 2010, but same as in 2000)
- 59. Affordability conditions are too compelling
- 61. Net absorption steadily improve … because of recovering job market
- 62. Rents stabilize (but no meaningful increase) … because of very low newly built inventory
- 64. Deflation … people hold back for better price … holds back economy
- 65. Budget deficit tipping point … higher interest rate and sharp cut back in standard of living
Editor's Notes
- This graph shows the number of distressed loans by category. The bottom category is the foreclosure inventory, which as you can has been steadily rising but the increase over the last 2 quarters of 2009 tempered off some. The green group are foreclosures started which have also decreased in the last quarter of 2009. this is, as I will talk about it more later on, due to pressure on mortgage companies to modify distressed loans and minimize the numbers going into foreclosure. Many states have also put moratorium on foreclosures towards the end of the year. The pink group are mortgages 90+ days past due which have also leveled out at the end of 2009. finally is the orange group, which are newly delinquent loans and that is the most positive news, showing that loans entering delinquent status are decreasing and possibly indicating that the foreclosure crisis in 2010 might not be as bad as was in 2009.