Housing and Economic Outlook: Residential Forum, NAR Midyear Meeting
1. Housing and Economic Outlook
Midyear Meeting
Marriot Wardman Park
May 17, 2012
By Lawrence Yun
2. Annual Existing Home Sales:
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
3. Despite Second Home Sales Recovery
In thousands
4000
3500
3000
2500
2000 Investment
1500
1000 Vacation
500
0
2005 2006 2007 2008 2009 2010 2011
Buy a condo for your college student
53% of REALTOR® members own a residential investment property
29% own a commercial property
19% own a vacation home
4. Owner-Occupancy Sales Falling
(All-Cash deals hiding the current dysfunctional mortgage market)
In thousands
6000
5000
4000
3000
2000
1000
0
2005 2006 2007 2008 2009 2010 2011
QRM rules
Raising g-fees to fund non-housing issues
Banks hoarding cash! … from regulatory uncertainties and lawsuits?
8. 2012 First Quarter Sales: 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
9. Pending Contracts
Point to Strongest Second Quarter in 5 years
115 Homebuyer Tax Credit
110
105
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
10. 10
30
40
50
20
-40
-30
-20
-10
0
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
(Year-over-Year % changes)
2010 - Jan
2010 - Jul
2011 - Jan
2011 - Jul
2012 - Jan
Pending and Closings of Existing Homes
Closing
Pending
11. Improving Factors for Higher 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
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. Mind
GAP
the
2012 - Jan
(Recovered half of jobs lost a few years ago, but still down by 10 million
2010 - Jan
2008 - Jan
2006 - Jan
2004 - Jan
2002 - Jan
compared to long-term projections)
Total Payroll Jobs
2000 - Jan
1998 - Jan
1996 - Jan
1994 - Jan
1992 - Jan
1990 - Jan
1988 - Jan
1986 - Jan
1984 - Jan
1982 - Jan
1980 - Jan
1978 - Jan
1976 - Jan
In millions 1974 - Jan
1972 - Jan
1970 - Jan
150
140
130
120
110
100
90
80
70
60
50
15. 50
52
54
56
58
60
62
64
1948 - Jan
66 %
1951 - Jan
1954 - Jan
1957 - Jan
1960 - Jan
1963 - Jan
1966 - Jan
1969 - Jan
1972 - Jan
Father-Knows-Best Years
1975 - Jan
1978 - Jan
1981 - Jan
1984 - Jan
1987 - Jan
1990 - Jan
Source: BLS, among those 16 years old and older
1993 - Jan
1996 - Jan
1999 - Jan
2002 - Jan
Reverting Back to Old Days?
2005 - Jan
2008 - Jan
Employment-to-Population Ratio:
2011 - Jan
16. 0
5
10
15
20
30
1948 - Jan
million
1951 - Jan
1954 - Jan
1957 - Jan
Source: BLS
1960 - Jan
1963 - Jan
1966 - Jan
1969 - Jan
1972 - Jan
25 Manufacturing and Construction
1975 - Jan
1978 - Jan
vs.
1981 - Jan
1984 - Jan
1987 - Jan
1990 - Jan
1993 - Jan
1996 - Jan
1999 - Jan
2002 - Jan
2005 - Jan
Education and Healthcare Services
Education and Healthcare
2008 - Jan
Jobs: Manufacturing and Construction
2011 - Jan
17. %
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
18. -1000
-800
-600
-400
-200
0
200
400
600
2005 - Jan
2005 - Apr
2005 - Jul
2005 - Oct
2006 - Jan
2006 - Apr
In thousands
2006 - Jul
2006 - Oct
2007 - Jan
2007 - Apr
2007 - Jul
2007 - Oct
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
Monthly Payroll Job Gains …
2011 - Apr
2011 - Jul
2011 - Oct
paving the way for higher home sales
2012 - Jan
2012 - Apr
19. 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
20. Visible Inventory of Homes
(6-year low for Existing Homes and 50-year low for New Homes)
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
Source: NAR, Census
22. 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
23. 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
24. Latest Home Price Trend in early 2012
(Lagging Indicator … reflects price negotiations from late 2011)
• NAR: Up in more than half of local markets
• FHFA: Up in deep-middle America, New England, South
Atlantic, Mountain states
• Case-Shiller: Up in Charlotte, Dallas, Las
Vegas, Miami, Minneapolis, Phoenix, Portland, San Diego, San
Francisco, Tampa, Washington D.C.
• Core Logic and LPS: many markets with price gains
25. Listing Price Changes
Market % Change from
March 2011 to March 2012
Miami Double-digit gains
Phoenix Double-digit gains
San Antonio Double-digit gains
Washington D.C. Double-digit gains
Please note that a part of the price change may reflect more upper-end homes being listed and fewer lower-end homes .
Therefore, not all of the price change is due to price appreciation of a particular property.
Source: Realtor.com
26. REALTOR® Confidence Index
Showing Signs of Recovery:
5 year-high
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Oct08
Oct09
Oct10
Oct11
Apr08
Apr09
Apr10
Apr11
Jul08
Jul09
Jul10
Jul11
Jan08
Jan09
Jan10
Jan11
Jan12
Single Family Townhouses Condos
27. Prepare for Early Move (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.
30. Annual Forecast
2011 2012 2013
History Forecast Forecast
Existing Home Sales 4.26 million 4.6 to 4.7 million 4.7 to 4.8 million
New Home Sales 304,000 400,000 530,000
Housing Starts 610,000 770,000 970,000
Existing Home Price $166,100 $168,100 $173,100
(Growth) (-3.9%) (+1.2%) (+3.1%)
GDP Growth +1.8% +2.4% +3.1%
Payroll Job Gains +1.7 million +2.2 million +2.5 million
Fed Funds Rate 0.1% 0.1% 0.1%
30-yr Mortgage 4.7% 4.2% 4.9%
31. Risks to Forecast
• Washington Policy
– QRM 20% down payment requirement?
– Other Dodd-Frank rules? Help or Hurt?
– 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
32. Wealth Distribution
(Federal Reserve data on median net worth, with 2011 NAR estimate)
$250,000
$200,000 1998
$150,000 2001
$100,000 2004
$50,000 2007
$0 2011 estimate
Renter Owner
Big Drivers of Future Income and Wealth will be:
• Tax and Spend policy • Voting
• Graduate from high school • Stay in school
• Ability to buy a home • Buy a home within means
Data Source for Median Net Worth: Federal Reserve, NAR estimate for 2011