3. Real Estate Trends and
Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION of REALTORS®
Presentation at NAR Annual Residential Forum
New Orleans, LA
November 7, 2014
4. Expectations of Firm Profitability
(over the next 12-months)
80
70
60
50
40
30
20
10
0
Residential Firm Commercial Firm
Decrease
About Same
Increase
5. Consumer and REALTOR®
Confidence
0
20
40
60
80
100
120
140
160
2000 - Jan
2000 - Oct
2001 - Jul
2002 - Apr
2003 - Jan
2003 - Oct
2004 - Jul
2005 - Apr
2006 - Jan
2006 - Oct
2007 - Jul
2008 - Apr
2009 - Jan
2009 - Oct
2010 - Jul
2011 - Apr
2012 - Jan
2012 - Oct
2013 - Jul
2014 - Apr
Consumer
REALTOR
7. Monthly Pending Sales Index …
Making Upward U-Turn
(Seasonally Adjusted)
70.0
75.0
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
2011 - Jan
2011 - Mar
2011 - May
2011 - July
2011 - Sep
2011 - Nov
2012 - Jan
2012- Mar
2012 - May
2012 - Jul
2012 - Sep
2012 - Nov
2013 - Jan
2013 - Mar
2013 - May
2013 - Jul
2013 - Sep
2013 - Nov
2014 - Jan
2014 - Mar
2014 - May
2014 - Jul
2014 - Sep
Source: NAR
8. Existing + New Home Sales
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
9. Homebuilder Confidence
(NAHB Market Index)
0
10
20
30
40
50
60
70
80
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
2013 - Jun
2014 - Jan
2014 - Aug
10. Single Family Housing Starts …
½ the Normal
2000
1800
1600
1400
1200
1000
800
600
400
200
0
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
2014
- Jan
Thousand units
11. Multifamily Housing Starts …
Back to Normal
600
500
400
300
200
100
0
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
2014
- Jan
Thousand units
14. Household Net Worth
($5,500 vs. $195,500)
$250,000
$200,000
$150,000
$100,000
$50,000
$0
1998 2001 2004 2007 2010 2013
x31 x36 x46 x46 x34
Homeowner net worth
ranges from 31 to 46
Renter Homeowner
x36
Source: Federal Reserve Survey of Consumer Finances
15. From 2010 to Today
• Homeowners
– Recovering Wealth for those who bought
during the bubble years
– Accumulating Wealth for those who bought
since 2010
• Renters
– No progress
20. Harvard Elderly Housing Study
• One in Five Americans will be 65 or over by 2030
• Homeowners who have paid off mortgages before
retirement have lower housing costs and have
equity cushion health care expenses
• Renters face high housing costs and force millions
of low-income older adults to sacrifice spending
other necessities, including food and health care
21. Annual Income by Age
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
50-64 65-79 80 +
22. Do Elderly have Mortgage?
80
70
60
50
40
30
20
10
0
50-64 65 and Over
1992 1998 2004 2007 2010
23. First-time Buyer Share
(Less than 30% of All Buyers for 18 months)
60
50
40
30
20
10
0
Among only primary owner-occupants (excluding investors)
= 33% in 2014 … Lowest since 1987
24. 30-year Mortgage Rates
9
8
7
6
5
4
3
2
1
0
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
2014
- Jan
25. Where Are Young People Hiding?
• 57 million Americans or 18.1% of the
population live in a multi-generational
family household in 2012,
– double the number who lived in
such households in 1980
• Of those who are 25-34:
– 20% of the unemployed live with
parents
– 12% of employed live with parents
Pew Research, Federal Reserve Bank of New York
28. Desire of Gen Y to Buy a Home?
• 75% believe home ownership is an important
long-term goal
• 73% believe ownership is an excellent
investment
• 59% of young renters (18 to 39) believe owning
a home makes more sense, but 73% of young
renters also believe it would be difficult to get a
mortgage today
• REALTOR® Education Opportunity
– Many young people think 20 percent down payment is
needed !
Fannie Mae, 2013 Demand Institute Housing and Community Survey
29. Opening the Credit Box
• FICO New Method
• Thank You Director Mel Watt
– But, please clarify put-back risk so that lenders
can be confident
• Not Yet a Thank You Secretary Julian Castro
– FHA premiums need to come down
commensurate with falling default rate
• Historic low mortgage default rates on recent
vintages (2010-2014)
30. 10 best cities for millennials to buy a home
By MarketWatch
Published: Aug 3, 2014 8:14 a.m. ET
31. Millennial Housing Demand Returns
• Austin
• Dallas-Ft. Worth
• Denver
• Des Moines
• Grand Rapids
• Minneapolis
• New Orleans
• Ogden
• Salt Lake City
• Seattle-Tacoma
36. REALTORS® Confidence Index*:
Outlook in Next Six Months for Single-Family Homes
Based on July 2014-September 2014 RCI Surveys
*An index above 50 means there are more respondents having “moderate” or “strong” outlook than respondents with
“weak” outlook.
37. Unemployment Rate
0
2
4
6
8
10
12
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
2013 - Jul
2014 - Jan
2014 - Jul
38. Weekly New Unemployment
Insurance Claims
250
300
350
400
450
500
550
600
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
2013 - Jun
2014 - Jan
2014 - Aug
In thousands
39. Employment Rate
54
56
58
60
62
64
66
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
2013 - Jul
2014 - Jan
2014 - Jul
40. “Take This Job and Shove It …
I ain’t working here no more”
0
500
1,000
1,500
2,000
2,500
3,000
3,500
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
2013 - Jul
2014 - Jan
2014 - Jul
Quit Rate in thousands
42. Non-worrisome CPI Inflation – Yet
COLA of 1.7% in 2015
-3
-2
-1
0
1
2
3
4
5
6
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
2013 - Jun
2014 - Jan
2014 - Aug
43. Rising Renters’ and Homeowners’ Rent
Growth
(Above 3%)
-1
0
1
2
3
4
5
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
2013 - Jul
2014 - Jan
2014 - Jul
Owners' Equivalent Rent Renters' Rent
44. Monetary Policy
• Quantitative Easing … Finished
• Fed Funds Rate … hike in 2015 Q1/Q2
• Earlier Move to Tighten because of
Inflation Pressure
• Long-term Steady State Rate (2016
onwards) .. 10 year Treasury at 5.0%
• Mortgage Rates reaching 6% by 2016
45. Inventory of Homes for Sale
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
47. Distressed Property Sales
(% of total sales)
0
10
20
30
40
50
60
2008 - Oct
2009 - Feb
2009 - Jun
2009 - Oct
2010 - Feb
2010 - Jun
2010 - Oct
2011 - Feb
2011 - Jun
2011 - Oct
2012 - Feb
2012 - Jun
2012 - Oct
2013 - Feb
2013 - Jun
2013 - Oct
2014 - Feb
2014 - Jun
Foreclosure
Short Sale
48. Household Net Worth at All-Time High
85000
80000
75000
70000
65000
60000
55000
50000
45000
40000
$ billion
53. Sales to International Buyers Increased
Both in Terms of Transactions and Price
Estimated Sales Dollar Volume of U.S. Residential Property
$ 66.4
to International Buyers ( in Billion Dollars)*
$ 82.5
$68.2
$92.2
2011 2012 2013 2014
Estimate is for 12 month period April 2013 - March 2014.
54. Canada Leads in Number of
Transactions
China Leads in Dollar Volume
International Transactions by Country of Origin
Brazil Canada China* France Germany India Japan Mexico Russia
United
Kingdom
30%
25%
20%
15%
10%
5%
0%
2010 1% 23% 9% 3% 4% 5% 1% 10% 3% 9%
2011 3% 23% 9% 4% 4% 7% 2% 7% 1% 7%
2012 3% 24% 12% 3% 3% 6% 1% 8% 2% 6%
2013 2% 23% 12% 2% 3% 5% 1% 8% 2% 5%
2014 2% 19% 16% 2% 3% 5% 2% 9% 1% 5%
56. Economic Forecast
2013 2014
Likely
2015
Forecast
2016
Forecast
GDP Growth 2.2% 2.2% 2.7% 2.9%
Job Growth +2.3 million +2.5 million +2.5 million +2.6 million
CPI Inflation 1.5% 1.6% 2.7% 3.3%
Consumer
Confidence
73 87 95 98
10-year
Treasury
2.5% 2.6% 3.2% 4.3%
57. Housing Forecast
2013 2014
Likely
2015
Forecast
2016
Forecast
Housing Starts 925,000 1.0 million 1.3 million 1.4 million
New Home
Sales
430,000 440,000 620,000 700,000
Existing Home
Sales
5.1 million 4.9 million 5.3 million 5.4 million
Median Price
Growth
+ 11.5% + 5.3% + 4% + 4%
30-year Rate 4.0% 4.2% 4.9% 6.0%
Underwriting
Standards
Strict Strict Transition Normal
58. Median Expected Price Change of REALTORS® in Next
12 Months, By State
Based on July 2014-September 2014 RCI Surveys
July 2014-September 2014 RCI Surveys
60. How Young Are REALTORS® ?
70
60
50
40
30
20
10
0
Under 30 In 30s In 40s In 50s In 60s
Retiree
Working Age
61. Spin the Globe … Find the Source
of Improving Standard of Living
62. When, How, What, Why?
• British Glorious Revolution of 1688
– William and Mary arrive to say …
– Power not with King but with people via
Parliament
– No Taxation with Representation
– Life, Liberty, and (Acquire) Property
• American Revolution of 1776
– Power resides not with King but with people
– No Taxation with Representation
– Life, Liberty, and the Pursuit of Happiness