Transcript irem77.org

Economic Outlook in Uncertain Times
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation to IREM Chapter 77
In Reston, VA
September 15, 2010
GDP Growing, but Decelerating
annualized % growth rate
Construction Spending
$ billion
Pending Contracts on Existing Homes
Tax Credit Impact
Share of First-Time Buyers
50%
45%
47%
42%
40%
40%
40%
40%
36%
39%
41%
35%
30%
25%
20%
2001
2003
2004
2005
2006
2007
2008
2009
Other Home Price Measurements
Still High Months Supply of
Existing Home Inventory
Pent-up Supply
and Demand
Number of Distressed Loans
7,000
Mortgage Payments
Past Due 30-59 Days
5,000
4,000
Mortgage Payments
Past Due 90+ Days
3,000
2,000
Mortgage
Foreclosures Started
1,000
2009/Q4
2009/Q3
2009/Q2
2009/Q1
2008/Q4
2008/Q3
2008/Q2
2008/Q1
2007/Q4
2007/Q3
2007/Q2
2007/Q1
2006/Q4
2006/Q3
2006/Q2
0
2006/Q1
Thousands
6,000
Mortgage
Foreclosure Inventory
Housing Starts
2,500
2,000
1,500
1,000
500
0
In thousands
Commercial Real Estate Transactions
Billions
(of those above $5 million properties)
$140
$120
Unknown
User/other
Public
Private
Institutional
Equity Fund
Crossborder
$100
$80
$60
$40
$20
$-
Source: Real Capital Analytics
Commercial Real Estate Market Activity
Based on Survey of Realtors®
Commercial Markets Expected to Bottom Out by 2011
– Sales Volume Compared with Previous Year: Down 6%
– Sales Prices Compared with Previous Year: Down 16%
– Expected Availability for the Next 12 Months: Up 12%
– Expected Cap Rate Movement for the Next 12 Months: Up 9 bps
–
–
–
–
Rental Volume Compared with Previous Quarter: Up 3%
Rental Rates Compared with Previous Quarter: Down 10%
Level of Rent Concessions Compared with Previous Quarter: Up 9%
Direction of Business Opportunities Compared with Previous Quarter: Down 1%
11
National Office Fundamentals
Absorption
Vacancy
15000
17.5%
10000
17.0%
16.5%
5000
16.0%
0
2009.4
2010.1
2010.2
2010.3
2010.4
2011.1
2011.2
-5000
15.0%
-10000
Washington DC Area vacancy rate at 13.3% and falling
-15000
15.5%
Percent (%)
Square Feet ('000s)
Completions
14.5%
14.0%
Source: NAR / CBRE-EA
12
National Multifamily Fundamentals
Completions
Absorption
Vacancy Rate
200000
8.0%
150000
100000
6.0%
50000
5.0%
Percent (%)
7.0%
0
-50000
2009.4
2010.1
2010.2
2010.3
2010.4
2011.1
-100000
2011.2
4.0%
3.0%
Washington D.C. vacancy rate at 4.1% and falling
Source: NAR / CBRE-EA
13
Corporate Profits and Business Spending
$ billion
Private Sector Job Gains
(763,000 in year-to-date in 2010)
% change from one year ago
Total Payroll Jobs in Michigan
5000
In thousands
4500
4000
3500
Source: BLS
Total Payroll Jobs in Washington D.C. Metro
2600
In thousands
2400
2200
2000
Source: BLS)
U.S. Budget Deficit
2012
2011
2010
2009
2008
Source: CBO, NAR estimate
2007
-1,600,000
2006
-1,400,000
2005
-1,200,000
2004
-1,000,000
2003
-800,000
2002
-600,000
2001
-400,000
2000
-200,000
1999
0
1998
200,000
1997
1996
1995
1994
1993
1992
1991
1990
400,000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
4500
4000
3500
3000
2500
2000
1500
1000
500
0
Thousands
Household Formation
(2-year moving average)
Weak
Growth
Source: Census
Baseline Outlook
• Moderate GDP Expansion 2.5% in the next 2
years (historical average is 3%)
• 1.0 to 1.5 million annual job additions in the
next 2 years
• Rental Housing Demand steady to improving
and first of commercial sectors to improve
• Local Apartment Rents 0% to 2% growth in 2011
• Local Apartment Rents 2% to 5% growth in 2012
Alternative Outlooks
• High inflation … people desire tangible investment like
real estate, but interest rate will be higher
• Deflation … people hold back for better home price …
holds back economy … but rental demand holding on
• Budget deficit tipping point … higher interest rate and
sharp cut back in standard of living