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Economic and Housing Market Trends and Outlook
The document presents an overview of economic and housing market trends as discussed by Lawrence Yun, chief economist of the National Association of Realtors, during a presentation in 2013. It highlights significant data points including median incomes for realtors, home sales statistics, inventory levels, and employment figures, all of which indicate a recovering housing market faced with a notable shortage. The analysis also touches upon factors influencing buyer and seller expectations and provides a broader outlook for housing demand and economic growth.
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Economic and Housing Market Trends and Outlook
- 1. Economic and HousingMarket Trends and Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® Presentation at NAR Midyear Meetings Washington, DC May 16, 2013
- 2. REALTOR® Median GrossIncome $0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 1995 1998 2000 2002 2004 2006 2007 2008 2009 2010 2011 2012 How many with more than $100,000? … 200,000 How many with less than $10,000? … 360,000
- 3.
- 4. Monthly Pending HomeSales Index (Seasonally Adjusted) 70 80 90 100 110 120 130 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 5-year High Homebuyer Tax Credit Source: NAR
- 5. Existing Home SalesClosings (71% of past peak) 3,000,000 3,500,000 4,000,000 4,500,000 5,000,000 5,500,000 6,000,000 6,500,000 7,000,000 7,500,000 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
- 6. New Home Sales (28%of the past peak) 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 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
- 7. Annual Existing HomeSales Closings: Impending Multiyear Growth 7.08 6.52 5.02 4.12 4.34 4.18 4.26 4.66 4.97 5.3 5.7 0 1 2 3 4 5 6 7 8 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f In million units
- 8. Investment Home SalesJumped in 2011 and 2012 0 500 1000 1500 2000 2500 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 In thousands
- 9. Vacation Home SalesSlow to Recover, But Ready to Rise in 2013 and beyond? 0 200 400 600 800 1000 1200 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 In thousands
- 10. Household Net WorthWill Help Vacation Home Purchases 30 35 40 45 50 55 60 65 70 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 $ trillion
- 11. Buyer and SellerTraffic from REALTOR® Survey 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 2008-Jan 2008-Apr 2008-Jul 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 Buyer Seller
- 12. REALTORS® Price Expectations forthe Next 12 months 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 200810 200901 200904 200907 200910 201001 201004 201007 201010 201101 201104 201107 201110 201201 201204 201207 201210 201301 Constant/Rising Prices Falling Prices
- 13. Rising Home Prices Becauseof High Demand and Under Supply (% change from one year ago) -25 -20 -15 -10 -5 0 5 10 15 20 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 Blue = NAR Median Price Red = Case-Shiller Index
- 14.
- 15. REALTOR® Price Expectations overthe next 12 months
- 16. Existing vs. NewHome Price … Big Gap (single-family homes) 0 50000 100000 150000 200000 250000 300000 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 New Existing
- 17. Home Price Forecast byWall Street Journal Economists Panel Year WSJ Home Price Forecast 2013 5.3% 2014 5.1%
- 18. Existing Home Inventory (Bouncingat 13-year lows) 0 500000 1000000 1500000 2000000 2500000 3000000 3500000 4000000 4500000 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
- 19. Visible New HomeInventory (Newly Constructed Homes Inventory at 50-year low) 0 100 200 300 400 500 600 700 1964-Jan 1966-Jan 1968-Jan 1970-Jan 1972-Jan 1974-Jan 1976-Jan 1978-Jan 1980-Jan 1982-Jan 1984-Jan 1986-Jan 1988-Jan 1990-Jan 1992-Jan 1994-Jan 1996-Jan 1998-Jan 2000-Jan 2002-Jan 2004-Jan 2006-Jan 2008-Jan 2010-Jan 2012-Jan
- 20. Housing Starts (Recovering, butstill well below 50-year average of 1.5 million each year) 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 multifamily single-family Thousand units (annualized) Long-term Average
- 21. Housing Starts Requirement •1.1 million household formation • 0.3 million demolition and uninhabitable (Implicitly assumes depreciation rate of more than 200 years) • 0.2 million net new vacation home demand • Total New Housing Need = 1.6 million each year
- 22. Quantifying Housing Shortage (2001to 2012) Household Formation Demolition New Vacation Home Housing Starts 11.0 million 3.6 million 2.0 million 15.7 million 16.6 million 15.7 million This housing shortage imbalance could grow because (1) Household Formation will exceed 1 million in 2013 and beyond (2) Housing Starts need to be 1.5 million per year … Not there in 2013
- 23. Household Formation BurstingOut (in millions) 0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00
- 24. GDP Growth …Unimpressive but no Fresh Recession (Could be on the verge of recession if not for housing recovery) -10 -8 -6 -4 -2 0 2 4 6 annualized % change % growth from one year ago
- 25. Blue Chip andCBO Economic Forecast Jobs and Household Formation to Grow Year Blue Chip Consensus GDP Growth Forecast CBO GDP Growth Forecast 2013 2.1% 1.4% 2014 2.7% 3.4% 2015 3.1% 4.1% 2016 2.9% 4.4% 2017 2.7% 3.8% Too Rosy?
- 26. U.S. Total PayrollJobs (98% of prior peak and 104% of Jan. 2000) 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 In thousands
- 27. Ohio Total Jobs (92%of prior peak and 92% of Jan. 2000) 5000 5100 5200 5300 5400 5500 5600 5700 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
- 28. California Total Jobs (95%of prior peak and 104% of Jan. 2000) 13000 13500 14000 14500 15000 15500 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
- 29. D.C. Metro TotalJobs (101% of prior peak and 114% of Jan. 2000) 2000 2100 2200 2300 2400 2500 2600 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
- 30. Texas Total Jobs (104%of prior peak and 121% of Jan. 2000) 8000 8500 9000 9500 10000 10500 11000 11500 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
- 31.
- 32. Homeowner Households hasnot 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 In thousands
- 33. Number of “Qualified”Renters (credit scores unknown and not factored) Year Income Needed to Buy a Median Priced Home Number of Renters with necessary income Share of Renters Qualified 2000 $40,300 11.8 million 33% 2005 $50,400 9.0 million 24% 2012 $31,700 20.1 million 51% If the year 2000 is considered as normal, then 11.8 million renters had the income to buy a median priced home but chose not to. In 2012 there are about 8 million more renters with the necessary income but choosing not to be or are unable to be a homeowner.
- 34. Financial Industry HighProfits … Ready to Dial Down Credit Stringency? -200 -100 0 100 200 300 400 500 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 $ billion
- 35. Ready to OpenCredit? (Average Credit Scores of Approved Loans) Normal 2009 to 2012 If Normal Fannie 720 760 to 770 720 Freddie 720 760 to 770 720 FHA 650 680 to 700 660 15% to 20% Higher Sales
- 36. Forecast 2011 2012 2013 Forecast 2014 Forecast GDPGrowth +1.8% +2.1% +2.1% 3.0% Existing Home Sales 4.3 million 4.7 million 5.0 million 5.3 million Housing Starts 610 K 780 K 1.1 million 1.4 million Existing Home Price Growth - 4% + 6% + 8% + 5% 30-yr Mortgage Rate 4.7% 3.7% 3.9% 4.6%
- 37. Risks to Forecast •Upside … Credit Availability – Housing recovery so far even with tight credit – What happens if mortgage accessibility opens up? • Downside … Washington Policies – Rising g-fees and FHA insurance premiums – QRM 20% down payment requirement? – 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?
- 38. New Downside Risk#1: Proposal to Cap Fees and Points • 3% maximum fee for loan origination from 2014 – Loan origination – Insurance and taxes in escrow – Title (only if affiliated) – Loan Level Price Adjustment – Mortgage brokerage fee – more unclear items • Price control … limits credit … who will be rationed out? Winners … top notch credit borrowers and big banks Losers … less than stellar credit borrowers and mortgage brokers
- 39. Drive Like AGirl … in UK • EU law … girls and boys must pay the same premium Europe Continent … Boys Win and Girls Lose UK … Girls Win ! • 3% cap will limit credit and create winners and losers
- 40. New Downside Risk#2: Mortgage Investor Rights in U.S.A.? –Court system clogging the foreclosure process –Eminent Domain to take mortgages out of investors’ hands? (In order to restructure mortgages)
- 41. Seriously Delinquent Mortgagesor in Foreclosure Process 0 2 4 6 8 10 12 14 2005-Q1 2005-Q2 2005-Q3 2005-Q4 2006-Q1 2006-Q2 2006-Q3 2006-Q4 2007-Q1 2007-Q2 2007-Q3 2007-Q4 2008-Q1 2008-Q2 2008-Q3 2008-Q4 2009-Q1 2009-Q2 2009-Q3 2009-Q4 2010-Q1 2010-Q2 2010-Q3 2010-Q4 2011-Q1 2011-Q2 2011-Q3 2011-Q4 2012-Q1 2012-Q2 2012-Q3 2012-Q4 Arizona Illinois %
- 42. Brazil’s My HouseMy Life Program Effort to Start Mortgage Market • Current Deals are mostly All-Cash … only few buy • Mortgage Access will permit more homebuyers • What is needed for investors to offer mortgages? – Strong contract enforcement – Strong eviction laws to recover some money if the loan defaults
- 43. New Downside Risk#3: Aging Baby Boomers but Falling Birth Rate (Live Births per 1000 population in U.S.) 0 5 10 15 20 25 30 35 Baby Boomers … now aged 49 to 68 … too many homes for sale in future years?
- 44. Foreign-Born Population in millions(bar, left axis) and % of total population (light, right axis) 0% 2% 4% 6% 8% 10% 12% 14% 16% 0 5 10 15 20 25 30 35 40 45 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
- 45.
- 47. Work Like aSpy! • Real Spies … go talk to strangers and cultivate relationship … earn trust … get results • What should REALTORS® do? … go talk to strangers and cultivate relationship … earn trust (the most important factor in choosing an agent) … get results
- 48. Immigrant Homeownership Rate Risesover Time 0 10 20 30 40 50 60 70 80 90 % Source: U.S. Census 2000 Years in the U.S.
- 49. Homeownership Rate byCitizenship Status Source: Census, Harvard Joint Center 0 10 20 30 40 50 60 70 80 NH White Black Asian/Pacific Islander Hispanic Noncitizen Naturalized Native Higher Rate for New Citizens
- 50. Movement in Singapore (Population:1/3 Malay, 1/3 Indian, 1/3 Chinese) • Very Strong Private Property Rights Protection • Ranked #1 Globally in Ease of Doing Business • 15% of Households are Millionaires !
- 51. New Downside Risk#4: Student College Debt … Up Up and Away ($ trillion) 0.0 0.2 0.4 0.6 0.8 1.0 1.2 2003 - Q1 2004 - Q1 2005 - Q1 2006 - Q1 2007 - Q1 2008 - Q1 2009 - Q1 2010 - Q1 2011 - Q1 2012 - Q1
- 52. Homeownership Rate amongthe Young (No significant difference between those with and without student loan debt, not yet) 20 25 30 35 40 45 50 55 60 65 70 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 Under 25 25-29 30-34 35-39 67% 55% 35% 43%
- 53. Most Graduates areOK but Some in Serious Trouble Table: Debt Amount Chart: Student Loan Payment as % of Income for Renters Under-30 30-39 Median Debt $11,000 $15,000 Average Debt $21,000 $31,000 0 5 10 15 20 10th Percentile 25th Median 75th 90th Under 30 30-39 Source: Federal Reserve Bank of New York
- 54. Summary on Whatto Expect • Likely Multiyear Housing Recovery – No recession – Job growth and household formation – Lagging housing starts and continuing housing shortage • Home prices are primed to rise further, by 13% cumulatively in 2013 and 2014 • Watch out for New Risks
- 55. What To DoPersonally To Be Even Better! 1. Work Like a Spy 2. Drive Like a Girl (for your own safety) 3. Lobby like a REALTOR® … Don’t forget about perfecting English
- 56. For Daily Updateand Analysis • Twitter @NAR_Research