Transcript Slide 1

Housing Market
Trends & Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION
OF REALTORS®
Presentation at NAR Annual
Conference in San Diego
November , 2009
Housing Stimulus Impact
• Tax Credit and Higher Loan Limit
• Raised Sales by 350,000 to 400,000 among
First-time buyers in 2009
• In 2010
– Existing Home Sales gets 15% boost
– Home Price gets 3% to 5% boost
• Preservation of Middle-Class Wealth
Recent Pending Home Sales
Recovery pre-dominantly in lower-end and taking
longer to close in recent months
120
110
100
90
80
70
60
Source: NAR
Bifurcated Recovery
$ thousand
% change from one year ago
Homes priced under $100K
Homes priced above $500K
Source: NAR
Months Supply of Inventory
United States
Months Supply - Single Family Homes
Seasonally Adjusted
0-100K
20
15
100-250K
10
250-500K
5
500K+
0
1999
2001
Source: NAR
2003
2005
2007
2009
Aggregate Months Supply
In thousand units
12
8
4
0
Source: NAR
First-Time Buyers Used Up or
Pent-Up Demand ?
• In year 2000 (pre-boom)
– 11 million renters with qualifying income
to buy a median priced home
• In 2009
– 16 million renters with qualifying income
to buy a median priced home
• Most renters are not qualified and should not
be homeowners
First-Time Buyers Used Up or
Pent-Up Demand ?
2000
(pre-boom)
2009
(3 months prior to
tax credit)
2009
(recent 3 months with tax credit)
Existing Home Sales
5.2 m
4.6 m
5.3 m
New Home Sales
880 K
364 K
418 K
Payroll Jobs
131.8 m
135.0 m
131.4 m
Household Jobs
136.9 m
143.2 m
140.0 m
Median Home Price
$143,600
$173,600
$177,900
Mortgage Rates
8.1%
5.5%
5.2%
Underwriting Standard + FHA %
Normal (not loose)
FHA about 10%
About Normal
FHA 24%
About Normal
FHA 15% to 20% with higher credit
score
Household Income
$41,990
$50,303
$50,303
# renters that could buy a
median priced home (assume no
tax credit)
11.5 million
16.2 million
16.1 million
Change in Pool of Potential 1st
Time Buyers (without tax credit)
N/A
4.7 million
4.6 million
Change in Pool of Potential 1st
Time Buyers (with tax credit)
N/A/
4.7 million
5.4 million
Fear Factor Impact (Waiting to
buy later at a lower price)
N/A
Hard to Measure
Hard to Measure
Tax Credit to More Buyers?
• Bifurcated inventory conditions … need
more inventory on lower priced homes
• Increased velocity stimulate economic
activity and helps price stabilization (even
though no net change in inventory; months
supply falls)
• HVCC/appraisal issue becomes less
problematic if there are more comparables.
Tax Credit to More Buyers? … cont.
• Financial gains/losses on FHA, Fannie-Freddie
and Federal Reserve MBS depend upon home
price recovery
• Bring financially healthy buyers … 4.8 million
renters with income above $75,000
• Home value recovery … improves bank balance
sheet … greater lending in other areas like small
business loans
• Home value recovery … lessens foreclosure
pressure … lessens re-default rate after loan
modification
Preservation of Middle Class Wealth
• $8000 Price Drop or $8000 Tax Credit ?
• No difference from buyer’s perspective
• Major differences on market impact
• $8,000 or 4% decline value means $730 billion in
housing wealth destruction
• Consumer wealth effects
• Consumer’s rational postponement of purchase
Stock Market Wealth Rising
$ billion
Source:
Federal
Reserve,
Source:
Federal
ReserveNAR estimate
But Consumers Confidence is Down
160
140
120
100
80
60
40
20
0
2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Jan
Source: Conference Board
Housing Wealth to Rise
($4 trillion wealth loss in housing from peak)
If additional $8,000 price decline … $700 billion further loss
$ billion
Source:
Federal
Reserve,
Source:
Federal
ReserveNAR estimate
Bubble Wealth All Removed
$ thousand
Sarasota
Greenville
Source: NAR
Overcorrection Needs to be Halted
(Home Price to Income Ratio)
3.6
3.4
3.2
3.0
2.8
2.6
2.4
2.2
2.0
Stay within Budget and all will be OK !
Source: NAR
Latest Monthly Home Price Trend
Case-Shiller, Govt (FHFA), NAR … Seasonally Adjusted Data
$ thousand
FHFA
NAR
Case-Shiller
National Existing Home Sales
Pre-boom sales
8000000
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0
1981
1986
1991
1996
2001
2006
Homebuilders Down and Out
(Single Family Starts and New Home Sales)
In thousand units
2,000
1,500
1,000
500
0
Source: Census
New Home Inventory for Sale
In thousand units
In thousands
600
500
400
300
200
Source: Census
Housing Starts: Too Much to Too Little
2,500
New Units Needed
2,000
1,500
1,000
500
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
3 million more people each year … 1 to 1.4 million household formation
… need to account for 300,000 demolitions …. need 1.3 to 1.7 new units
2010
-3.0
-6.0
Source: BEA
3.0
2009 Q4
2009 - Q3
2009 - Q1
2008 - Q3
2008 - Q1
2007 - Q3
2007 - Q1
2006 - Q3
2006 - Q1
2005 - Q3
9.0
2005 - Q1
Economy Recovering
GDP annualized growth rate
6.0
Forecast
0.0
Job Changes in U.S.
One-month payroll job changes in thousands
600
400
200
0
-200
-400
-600
-800
-1000
Source: BLS
Federal Budget Deficit
-1,600,000
Source:
Congressional
Office Projections
Source:
CBO, NAR Budget
estimate
2012
-1,400,000
2011
-1,200,000
2010
-1,000,000
2009
-800,000
2008
-600,000
2007
-400,000
2006
-200,000
2005
0
2004
200,000
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
400,000
Tax Revenue Collections
(4-quarter change as of 2009 Q1)
%
Tax Assessors and Appraisers
need to meet
Economic Outlook
2008
2009
2010
forecast
GDP
0.4%
-2.5%
2.7%
CPI Inflation
3.8%
-0.4%
1.6%
Unemployment Rate
5.8%
9.3%
9.9%
10-year Treasury
3.7%
3.2%
3.7%
Housing Outlook
2008
2009
2010
forecast
Existing Home
Sales
4.9 m
5.0 m
5.8 m
New Home Sales
485 k
397 k
560 k
Home Price Growth
-10%
-13%
4%
Mortgage Rate
6.1%
5.2%
5.7%
?
?
None
Price Fear Factor