1.
Real Estate and Economic
Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation to CID, NOMAR, CCIM Louisiana Chapter
at Loyola University
New Orleans, Louisiana
October 16, 2012

2.
Existing Home Sales Recovery:
Best in 5 years, but only up 8% year-to-date
8
In million units
7 7.08
6 6.52
5
5.02
4 4.62
4.12 4.34 4.18 4.26
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012
est.

3.
One Reason for Slower Recovery, aside from credit
bubble hangover, is the falling mobility rate
From 18% to 12%
Fraction of Population Who Moved in the Last 12 Months
(Any Distance)
.2
.18
.16
.14
.12
.1
1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
Year
Source: Raven Molloy, Federal Reserve Economist, Current Population Survey.

4.
Investors in the Market;
and Homebuyers Frustrated
Investor Sales In thousands
2500
2000
1500
1000
500
0
2005 2006 2007 2008 2009 2010 2011 2012 est.
Owner-occupant Sales In thousands
6000
5000
4000
3000
2000
1000
0
2005 2006 2007 2008 2009 2010 2011 2012 est

5.
New Orleans Housing Statistics
• Units Sold … up 14% year-to-date from one
year ago
• Median Price to $203,100 … up 2%
• Days on Market at 95 days (from 102 days one
year ago)
Source: NVAR

6.
Everyone Seeing Low Home Prices
Warren Buffet: Buy Low (not Buy High)
350
300
Phoenix
250
200
New Orleans
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: FHFA

7.
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
2008 - Jan
% change from one year ago
2008 - Jul
2009 - Jan
2009 - Jul
2010 - Jan
Investors seeing Rising Rent
2010 - Jul
because some of it will be passed on to renters)
2011 - Jan
2011 - Jul
(Not deterred by 3.8% Health Care Tax on Rental Income …
2012 - Jan

8.
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
2008 - Q3
2010 - Q1
2011 - Q3
Investors also seeing rising # of renters

9.
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
Homeowners not Rising
2005 - Q3
2007 - Q1
2008 - Q3
2010 - Q1
2011 - Q3

10.
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

11.
Visible Housing Inventory
(Existing inv. At 8-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

12.
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.5
5.0
4.0
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
million units
2010 - Q1
2010 - Q3
2011 - Q1
2011 - Q3
2012 - Q1
Shadow Inventory … Falling
2014 … 8%
(Seriously delinquent mortgage + homes in foreclosure process)
2013 … 15%
2012 … 25%
2011 … 33%
2010 … 33%
Market Share
Distressed Sales

13.
0%
10%
20%
30%
40%
50%
60%
2008 - Oct
2008 - Dec
2009 - Feb
2009 - Apr
2009 - Jun
2009 - Aug
2009 - Oct
2009 - Dec
2010 - Feb
2010 - Apr
REO
2010 - Jun
2010 - Aug
2010 - Oct
2010 - Dec
Short-Sale
2011 - Feb
2011 - Apr
2011 - Jun
2011 - Aug
2011 - Oct
2011 - Dec
Distressed Property Sales
2012 - Feb
2012 - Apr
2012 - Jun
2012 - Aug

14.
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
AZ
2008 - Q1
2008 - Q2
2008 - Q3
MI
2008 - Q4
2009 - Q1
2009 - Q2
CA
2009 - Q3
2009 - Q4
2010 - Q1
2010 - Q2
in Non-Judicial States
2010 - Q3
2010 - Q4
2011 - Q1
Foreclosures Rapidly Falling
2011 - Q2
2011 - Q3
Example: Seriously Delinquent Mortgages in AZ, CA , MI
2011 - Q4
2012 - Q1
2012 - Q2

15.
0
2
4
6
8
10
12
%
2005 - Q1
2005 - Q2
2005 - Q3
2005 - Q4
2006 - Q1
2006 - Q2
2006 - Q3
2006 - Q4
2007 - Q1
• Vacant property
2007 - Q2
2007 - Q3
2007 - Q4
2008 - Q1
2008 - Q2
CT
2008 - Q3
2008 - Q4
IL
2009 - Q1
2009 - Q2
2009 - Q3
2009 - Q4
2010 - Q1
2010 - Q2
• Missed Mortgages for 6 months or longer
2010 - Q3
2010 - Q4
2011 - Q1
2011 - Q2
2011 - Q3
Example Seriously Delinquent Mortgages in CT and IL
2011 - Q4
2012 - Q1
Foreclosures Clogged in Judicial States
2012 - Q2
Should a trigger be set up to foreclose without a court approval?

16.
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
Seriously Delinquent Mortgages
Shadow in Louisiana
2010 - Q3
2010 - Q4
2011 - Q1
2011 - Q2
2011 - Q3
2011 - Q4
2012 - Q1
2012 - Q2

17.
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

18.
0
10000
12000
14000
2000
4000
6000
8000
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
Housing Permits
2002
New Orleans Metro
2004
2006
2008
2010
2012

19.
Falling Inventory of Homes for Sale
2010 July 2011 July 2012 July
Existing Homes for Sale 3.41 million 3.15 million 2.40 million
Newly Constructed 210,000 165,000 142,000
Homes for Sale
“Shadow” Estimate 4.2 million 3.5 million 3.2 million
(Seriously Delinquent
Mortgages and Homes in
Foreclosure Process)
Homeowners waiting ??? ??? Inconsequential Impact
• for higher home since most will list
prices homes, but with intent
• To be freed from Tax also on buying
Credit Lock Period

20.
Wealth Distribution … Who will get
Future Wealth?
(Federal Reserve data on median net worth)
$300,000
$250,000
$200,000 1998
2001
$150,000 2004
2007
$100,000
2010
$50,000 2014
$0
Renter Owner
2014 Forecast by NAR

21.
Improving Factors for Sales in 2012 and Beyond:
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

22.
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

23.
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

24.
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.

25.
Home Prices
Metric % change from one year ago Comment
NAR + 9.5% Mix of homes impact price …
fewer distressed sales recently …
Leading Data
Case-Shiller +0.5% 30% annualized gains for two
straight months
FHFA + 3.6% Monthly gains in 7 of recent 8
months

26.
75
85
95
105
110
115
70
80
90
100
2007 - Jan
2007 - Apr
Source: NAR
2007 - Jul
2007 - Oct
2008 - Jan
2008 - Apr
2008 - Jul
2008 - Oct
Homebuyer Tax Credit
2009 - Jan
2009 - Apr
2009 - Jul
2009 - Oct
2010 - Jan
2010 - Apr
(Seasonally Adjusted)
2010 - Jul
2010 - Oct
2011 - Jan
2011 - Apr
2011 - July
2011 - Oct
2012 - Jan
2012-Apr
2012 - Jul
Monthly Pending Home Sales Index

27.
0.0
10.0
30.0
40.0
50.0
60.0
70.0
20.0
2008 - Jan
2008 - Apr
2008 - Jul
2008 - Oct
2009 - Jan
2009 - Apr
2009 - Jul
2009 - Oct
Buyer
2010 - Jan
2010 - Apr
2010 - Jul
2010 - Oct
Seller
Foot Traffic
2011 - Jan
2011 - Apr
2011 - Jul
2011 - Oct
2012 - Jan
2012 - Apr
2012 - Jul

28.
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

29.
-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

30.
Economy Growing, though Slowly
(No Fresh Recession because of Housing Recovery)
Real GDP Growth Rate
4
%
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
-1
forecast forecast
-2
-3
-4

31.
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

32.
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

33.
Louisiana Jobs
In thousands
2000
1950
1900
1850
1800
1750
1700
1650
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

34.
1000
1500
2000
2500
0
500
1939 -…
1942 -…
1945 -…
In thousands
1948 -…
1951 -…
1954 -…
1957 -…
1960 -…
1963 -…
1966 -…
1969 -…
1972 -…
1975 -…
1978 -…
1981 -…
1984 -…
1987 -…
1990 -…
Nonfarm Payroll Jobs
1993 -…
1996 -…
1999 -…
2002 -…
Louisiana Jobs from 1940
2005 -…
2008 -…
2011 -…

35.
Consumer Price Inflation
(Slightly Above Fed’s preferred 2% core inflation rate)
All Items Core
%
5.00
4.00
3.00
2.00
1.00
0.00
2005 2006 2007 2008 2009 2010 2011 2012 2013
-1.00 forecast forecast

36.
Monetary Policy by Federal Reserve
(no change to 2014)
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.

37.
Huge Federal Budget Deficit …
Will Push Up Borrowing Cost
(% of GDP)
4
2
0
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
-2
- Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan
-4
-6
-8
-10
-12

38.
10
12
14
16
0
2
4
6
8
1982 - Aug
1983 - Oct
1984 - Dec
1986 - Feb
1987 - Apr
1988 - Jun
1989 - Aug
1990 - Oct
1991 - Dec
1993 - Feb
1994 - Apr
1995 - Jun
10-year
1996 - Aug
1997 - Oct
1998 - Dec
2000 - Feb
2001 - Apr
2002 - Jun
3-month
2003 - Aug
2004 - Oct
2005 - Dec
2007 - Feb
2008 - Apr
2009 - Jun
2010 - Aug
But … Falling Treasury Borrowing Rate
2011 - Oct

39.
Impact to Deficit
• Mortgage Interest Deduction … $90 billion
– Not the source of the current budget deficit since
MID was present for nearly 100 years
• Interest Rates Revert back to historical
average … $300 billion in extra interest
expense

40.
Housing Forecast Summary
2011 2012 2013
History Forecast Forecast
Existing Home Sales 4.26 million 4.6 million 5.0 million
New Home Sales 301,000 385,000 608,000
Housing Starts 611,000 775,000 1,150,000
Existing Home Price $166,100 $173,900 $182,700
GDP Growth +1.8% +2.2% +2.6%
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%

41.
Risks to Forecast
• Washington Policy
– 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?
– 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 … Fresh Economic Recession

42.
Commercial Real Estate

43.
Big Transactions Coming Back
$2.5 million property and above
Source: Real Capital Analytics, 4Q 2011.
13

44.
REALTOR® Business Deals
(Majority are less than $1 million)

45.
Method of Finance

46.
Underwriting Standards?

47.
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

48.
Apartment Deals and Pricing
Source: RCA, 4Q 2011.
19

49.
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

50.
Office Deals and Pricing
• Source: RCA, 4Q 2011.
• Source: RCA, 4Q 2011.
15

51.
800
1300
1800
2300
2800
3300
2000 - Q1
$ billion
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
(International Trade always fall during recessions)
2009 - Q3
2010 - Q1
2010 - Q3
2011 - Q1
2011 - Q3
Imports and Exports … Expanding Briskly
2012 - Q1

52.
Industrial Fundamentals
Completions Net Absorption Vacancy
150 14.0
Millions
12.0
100
10.0
50 8.0
0 6.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
4.0
-50
2.0
-100 Source: NAR/REIS 0.0

53.
Industrial Deals and Pricing
Source: RCA, 4Q 2011.
17

54.
Retail Fundamentals
Completions Net Absorption Vacancy
40 14.0
Millions
30 12.0
20 10.0
10 8.0
0 6.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
-10 4.0
-20 2.0
-30 Source: NAR/REIS 0.0

55.
Retail Deals and Pricing
Source: RCA, 4Q 2011.
21

56.
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

57.
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