Transcript Economic Forecast - National Association of Realtors

Economic and Housing Market
TRENDS and OUTLOOK
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at Vanderbilt University
April 18, 2012
Monthly Pending Home Sales Index
(Seasonally Adjusted)
115
110
Homebuyer Tax Credit
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
2005 - Jan
2005 - May
2005 - Sep
2006 - Jan
2006 - May
2006 - Sep
2007 - Jan
2007 - May
2007 - Sep
2008 - Jan
2008 - May
2008 - Sep
2009 - Jan
2009 - May
2009 - Sep
2010 - Jan
2010 - May
2010 - Sep
2011 - Jan
2011 - May
2011 - Sep
2012 - Jan
Monthly Existing Home Sales
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
2005 - Jan
2005 - May
2005 - Sep
2006 - Jan
2006 - May
2006 - Sep
2007 - Jan
2007 - May
2007 - Sep
2008 - Jan
2008 - May
2008 - Sep
2009 - Jan
2009 - May
2009 - Sep
2010 - Jan
2010 - May
2010 - Sep
2011 - Jan
2011 - May
2011 - Sep
2012 - Jan
Monthly New Homes
New Home Sales
Single-Family Housing Starts
2000
1800
1600
1400
1200
1000
800
600
400
200
0
Improving Factors for Higher Home Sales
• Improving Factors
–
–
–
–
–
–
Very high affordability
Job creation
Solid stock market recovery from 2008
Rising rents and larger pool of qualified renters
Household formation pent-up release
Smart money chasing real estate
• Potential Huge Positive … Lending opens up
• Potential Huge Negative … Washington policy
Best Affordability Conditions
Annual Existing Home Sales
8
In million units
7
6
5
4
7.08
3
6.52
5.02
2
4.12
4.34
4.18
4.26
4.61
4.75
2008
2009
2010
2011
2012
forecast
2013
forecast
1
0
2005
2006
2007
Second Home vs. Primary
2011
2010
Investment
17%
Investment
27%
Vacation
10%
Primary
73%
Vacation
11%
Primary
62%
Second Home Sales
4000
In thousands
3500
3000
2500
Investment
Vacation
2000
1500
1000
500
0
2003 2004 2005 2006 2007 2008 2009 2010 2011
Housing Starts
2500
In thousand units
2000
1500
Multifamily
Single-Family
1000
500
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
forecast forecast
New Home Sales
In thousand units
NHS
Single-family starts
2000
1800
1600
1400
1200
1000
800
600
400
200
0
2005
2006
2007
2008
2009
2010
2011
2012
forecast
2013
forecast
Visible Housing Inventory
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
5.0
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
2010 - Q1
2010 - Q3
2011 - Q1
2011 - Q3
Shadow Inventory
(Seriously delinquent mortgage + homes in foreclosure process)
million units
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Median Home Price
260,000
History
240,000
220,000
200,000
180,000
160,000
140,000
120,000
100,000
Existing
New
Forecast
Economy
8
7
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
%
2005
Real GDP Growth
2006
2007
2008
Nominal GDP Growth
2009
2010
2011
2012
2013
forecast forecast
Payroll Jobs Changes
(December to December)
4
3
In millions
2
1
0
-1
-2
-3
-4
-5
-6
2005
2006
2007
2008
2009
2010
2011
2012
2013
forecast forecast
Unemployment Rate
12
(Average during the Year)
%
10
8
6
4
2
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
forecast forecast
Labor Force Participation Rate
%
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
2011 - Jan
2012 - Jan
68
67
66
65
64
63
62
61
Labor Force Participation Rate has been falling at the beginning of the recession. Many
went to school or took early retirement packages and are therefore no longer counted as
part of the labor force. If the labor force participation were to be normal (or had it not
fallen) then the corresponding unemployment rate would be closer to 11%.
Consumer Price Inflation
5
Rent
%
All Items
Core
4
3
2
1
0
2005
-1
2006
2007
2008
2009
2010
2011
2012
2013
forecast forecast
Fed Policy and Interest Rates
7
%
Fed Funds
10-year Treasury
30-year Mortgage
6
5
4
3
2
1
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
forecast forecast
Homes Bought How?
More People Sought Help From REALTORS®
Homebuilder
Directly from owner
Real estate agent
100
90
80
70
60
50
40
30
20
10
0
2005
2006
2007
2008
2009
2010
2011
Foreclosure Inventory
(% of all mortgage outstanding; about 1/3 of homes are free and clear)
10.0
8.0
New Jersey
Arizona
6.0
4.0
2.0
0.0
2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1
Important Judicial States with slow foreclosure process:
• IL, IN, OH (Midwest)
• NJ, NY, CT (Northeast)
• FL
Housing Starts
2500
In thousand units
2000
1500
Multifamily
1000
Single-Family
500
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
forecast forecast
-100
2011 - Q3
2011 - Q1
2010 - Q3
2010 - Q1
2009 - Q3
2009 - Q1
2008 - Q3
2008 - Q1
2007 - Q3
2007 - Q1
2006 - Q3
2006 - Q1
2005 - Q3
2005 - Q1
2004 - Q3
2004 - Q1
2003 - Q3
2003 - Q1
2002 - Q3
2002 - Q1
2001 - Q3
600
2001 - Q1
Financial Industry Corporate Profits
$ billions; seasonally adjusted annualized
500
400
300
200
100
0
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
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.
Cost Comparisons over 30 years
Item
Consumer price index
Price Index Price
in 1981
Index in
2011
87.2
226.3
160%
Rent index
84.7
254.3
200%
Food price index
91.6
229.6
150%
Gasoline price index
103.6
308.4
197%
College tuition index
75.8
601.3
693%
Medical care index
78.6
401.4
410%
Monthly mortgage payment on a
median priced home
$598
Home Prices (FHFA index)
100
Same if no
cash out
refi
319
0%
(free and clear
ownership)
219%
(14% mortgage
rate)
% Change
Annual Forecast
2011
History
2012
Forecast
2013
Forecast
Existing Home Sales 4.26 million
4.65 million
4.71 million
New Home Sales
304,000
400,000
530,000
Housing Starts
611,000
760,000
960,000
Existing Home Price
$166,100
$168,000
$172,000
GDP Growth
+1.8%
+2.3%
+3.1%
Payroll Job Gains
+1.7 million
+2.7 million
+2.7 million
Fed Funds Rate
0.1%
0.1%
0.1%
30-yr Mortgage
4.7%
4.3%
4.9%
Long-Term Demographics
U.S. Population Aged 25-to-34
44000
43000
42000
41000
40000
39000
38000
37000
36000
35000
34000
2050
2048
2046
2044
2042
2040
2038
2036
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
2012
Forecast Population Aged 25-to-34
60000
55000
50000
45000
40000
35000
30000
U.S. Population Aged 35-to-44
50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
2050
2048
2046
2044
2042
2040
2038
2036
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
2012
Forecast Population Aged 35-to-44
60000
55000
50000
45000
40000
35000
30000
U.S. Population Aged 45-to-54
50000
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
2050
2048
2046
2044
2042
2040
2038
2036
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
2012
Forecast Population Aged 45-to-54
55000
50000
45000
40000
35000
30000
U.S. Population Aged 55-to-64
40000
35000
30000
25000
20000
15000
10000
5000
0
Forecast Population Aged 55-to-64
50000
48000
46000
44000
42000
40000
38000
36000
34000
32000
2050
2048
2046
2044
2042
2040
2038
2036
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
2012
30000