Economic and Housing Market

Outlook
By Lawrence Yun, Ph.D.
Chief Economist
National Association of REALTORS
May 14, 2015
Washington, D.C.

Hows the Market?

Annual Home Sales

9000000
8000000
7000000
6000000
5000000
4000000
3000000
2000000
1000000
0

New
Existing

Monthly Pending Sales Index

(Seasonally Adjusted)

115.0
110.0
105.0
100.0
95.0
90.0

Source: NAR

Up 1% from 1 month ago

Up 11% from 1 year ago

Median Home Price Appreciation

(% change from one year ago)
16
14
12
10
8
6
4
2
0
-2
-4

Hitting Affordability
250
200
150
100
50
0

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

Regional Variation
Pending Sales Change from One Year Ago
25
20
15
10
5
0
-5
-10
-15
-20
Northeast

Midwest

South

West

Regional Variation
Median Price Change from One Year Ago
20
15
10
5
0
-5
Northeast

Midwest

South

West

Future Housing Demand?

Huge Pent Up Demand

Underperforming Home Sales in Relation to Population
2000

2014

Existing Home Sales

5.2 m

4.9 m

New Home Sales

880 K

440 K

Mortgage Rates

8.0%

4.2%

Payroll Jobs

132 m

139 m

Population

282 m

319 m

37 million more people living in the country

Jobs
(8 million lost 12 million gained)
145,000
140,000
135,000
130,000
125,000
120,000

In thousands

Fresh Unemployment Insurance

Claims
600
550
500
450
400
350
300
250

In thousands

Top and Bottom States for

Jobs
The Best

% Gain in 12
months

The Worst

% Gain in 12
months

Utah

4.0%

West Virginia

-0.7%

Florida

3.8%

Mississippi

0.5%

Oregon

3.4%

Maine

0.5%

Washington

3.4%

Montana

0.6%

California

3.2%

Alaska

0.6%

Georgia

3.2%

North Dakota

3.2%

Nevada

3.0%

Idaho

2.9%

Jobs in Denver Metro

1400 In thousands
1350
1300
1250
1200
1150
1100
1050
1000

Future Housing Supply?

Housing Starts Rising Too

Slowly
3000 Thousand units
2500
2000
1500
1000
500
0

Denver Metro Housing Permits

(year-to-date)

40000
35000
30000
25000
20000
15000
10000
5000
0

Shadow Inventory in the U.S.

% of mortgages in foreclosure process or seriously delinquent
12
10
8
6
4
2
0

Distressed Property Sales

(% of total sales)
60
50
40
30
20
10
0

Shadow Inventory in AZ and NJ

% of mortgages in foreclosure process or seriously delinquent
14
12
10
8
6
4
2
0

Homeowner Staying Put

Longer
Median Years of Tenure Before Moving
12
10
8
6
4
2
0
2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Duke Basketball
Ticket Price?

Vehicle Sales Pent Up Demand Release after having

older cars
(millions annualized rate)

22
20
18
16
14
12
10
8

Mortgage Rates Rise:

How Much and How Soon?

Reserve
(zero rate policy 7th and final
year)
%
Fed Funds
6
5
4
3
2
1
0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

30-year Mortgage Rates

9
8
7
6
5
4
3
2
1
0

No CPI Inflation Yet

6
5
4
3
2
1
0
-1
-2
-3

Oil Price
160
140
120
100
80
60
40
20
0

Supply and Demand: Oil in

U.S.
9
5

21
19

Rents Rising at 7-year high

Renters' Rent
5
4
3
2
1
0
-1

Rental Vacancy Rate

(Census Measurement)

12
11
10
9
8
7
6
5

Monetary Policy
Quantitative Easing Finished
Fed Funds Rate hike September
2015
Mortgage Rates reaching 6% by 2017

Credit Box Opens?

FICO New Method
Fannie/Freddie
Lower down payment products

FHA premiums lowered

Portfolio Lending historic low mortgage
default rates on recent vintages (20102014)

American Inequality?

Homeownership Rate
from 1990
70
69
68
67
66
65
64
63

Lowest in 25 years

Renters
(8 million more households)
44
42
40
38
36
34
32
30

Homeowners
(2.5 million fewer households)
77.0
76.5
76.0
75.5
75.0
74.5
74.0

Home Price Index

Dallas and Phoenix
350
300
250
200
150
100

All-Cash Sales
(% of total sales)

40
35
30
25
20
15
10
5
0

Real Estate Asset and

Mortgage
25000
20000
15000
10000
5000
0

$ billion

Household Net Worth

($5,500 vs. $195,500)
1998

2001

2004

2007

2010

2013

$250,000
$200,000
$150,000
$100,000
$50,000
$0

Homeowner net worth

ranges from 31 to 46
times that of renters

Renter

x31 x3 x4 x4 x3 x3
6
6
6
4
6

Homeowner

Source: Federal Reserve Survey of Consumer Finances

Stock Market
S&P 500 Index

2300
2100
1900
1700
1500
1300
1100
900
700

Household Net Worth at AllTime High

85000
80000
75000
70000
65000
60000
55000
50000
45000
40000

$ billion

Vacation Home Sales

1,200
1,000
800
600
400
200
-

In thousands

Metro Market Examples

Metro

Change in
Ownership

Change in
Housing
Wealth
Inequality

Change in
Income
Equality

Bakersfield

-5.6%

$18,400

- 1.4%

Orlando

-4.3%

$31,500

-0.4%

Cincinnati

-3.5%

$13,000

-3.0%

New Orleans

-3.2%

$11,900

-4.2%

Atlanta

-3.2%

$29,700

-3.3%

Honolulu

-2.9%

$80,100

-0.8%

Austin

+0.8%

$37,700

+0.2%

Social Benefits of Homeownership

Higher Student Test Scores
Higher Graduation Rate and Higher
Earnings
Less TV time
Lower Teen Delinquencies

Likely Further Fall in

Homeownership But Rising
Homeowners
Likely to Decline to 62% by 2016
before rising
Homeowners will no longer fall, but rise
Renters will also rise
50-50 split in new households
But much faster household formation

Household Growth Ready to Pop?

Household
2.0
1.5
1.0
0.5
0.0

Population

% growth from one year ago

From 2001 to 2006: Mix of Renters and Owners

From 2007: Growth only from Renters

Baltimore and Forecast

Baltimore Metro City and Suburbs

(Total Jobs in thousands)
1400
1300
1200
1100
1000
900

Baltimore City
(Total Jobs in thousands)
500
450
400
350
300

New Cool Kids?

Roland Fryer

2015 John Bates Clark Award

Method to Find Agent?

Adults Friends are Important!

Other; 13%
Past
Internet;
4%Relationship; 22%
Personal Contact Meeting/Open House/Mailer; 14%

Referral from Friend; 47%

Economic Forecast
2013

2014

2.2%

2.6%

Job Growth

+2.3 million

+3.0 million

CPI Inflation

1.5%

1.6%

0.3%

3.2%

73

87

99

101

2.5%

2.6%

2.2%

3.3%

GDP Growth

Consumer
Confidence
10-year Treasury

2015
2016
Forecast Forecast
2.3%

3.0%

+2.4 million +2.7 million

Housing Forecast
2013

2014

Housing Starts

925,000

1,001,000

1.1 million

1.4 million

New Home Sales

430,000

437,000

570,000

720,000

5.1 million

4.9 million

5.3 million

5.5 million

Median Price
Growth

+ 11.5%

+ 5.7%

+ 6%

+ 4%

30-year Rate

4.0%

4.2%

4.0%

5.2%

Underwriting
Standards

Strict

Strict

Transition

Normal

Existing Home
Sales

2015
2016
Forecast Forecast