Provident Solitaire Park Square Kanakapura Road, Bangalore E- Brochure.pdf
Economic and Housing Market Trends and Outlook
1. Economic and Housing Market
Trends and Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at NAR Midyear Meetings
Washington, DC
May 16, 2013
2. REALTOR® Median Gross Income
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
1995 1998 2000 2002 2004 2006 2007 2008 2009 2010 2011 2012
How many with more than $100,000? … 200,000
How many with less than $10,000? … 360,000
4. Monthly Pending Home Sales Index
(Seasonally Adjusted)
70
80
90
100
110
120
130
2001
- Jan
2002
- Jan
2003
- Jan
2004
- Jan
2005
- Jan
2006
- Jan
2007
- Jan
2008
- Jan
2009
- Jan
2010
- Jan
2011
- Jan
2012
- Jan
2013
- Jan
5-year High
Homebuyer Tax Credit
Source: NAR
5. Existing Home Sales Closings
(71% of past peak)
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
6,000,000
6,500,000
7,000,000
7,500,000
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
2013
- Jan
6. New Home Sales
(28% of the past peak)
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
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
2013
- Jan
8. Investment Home Sales Jumped in
2011 and 2012
0
500
1000
1500
2000
2500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
In thousands
9. Vacation Home Sales Slow to
Recover, But Ready to Rise in 2013 and
beyond?
0
200
400
600
800
1000
1200
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
In thousands
13. Rising Home Prices
Because of High Demand and Under Supply
(% change from one year ago)
-25
-20
-15
-10
-5
0
5
10
15
20
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
2008-Jan
2008-Jul
2009-Jan
2009-Jul
2010-Jan
2010-Jul
2011-Jan
2011-Jul
2012-Jan
2012-Jul
2013-Jan
Blue = NAR Median Price
Red = Case-Shiller Index
16. Existing vs. New Home Price … Big Gap
(single-family homes)
0
50000
100000
150000
200000
250000
300000
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
2008-Jan
2008-Jul
2009-Jan
2009-Jul
2010-Jan
2010-Jul
2011-Jan
2011-Jul
2012-Jan
2012-Jul
2013-Jan
New
Existing
17. Home Price Forecast
by Wall Street Journal Economists Panel
Year WSJ Home Price Forecast
2013 5.3%
2014 5.1%
18. Existing Home Inventory
(Bouncing at 13-year lows)
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000
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
2013
- Jan
20. Housing Starts
(Recovering, but still well below 50-year average
of 1.5 million each year)
0
500
1000
1500
2000
2500
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
2013
- Jan
multifamily single-family
Thousand units (annualized)
Long-term Average
21. Housing Starts Requirement
• 1.1 million household formation
• 0.3 million demolition and uninhabitable
(Implicitly assumes depreciation rate of more than 200 years)
• 0.2 million net new vacation home demand
• Total New Housing Need = 1.6 million each
year
22. Quantifying Housing Shortage
(2001 to 2012)
Household
Formation
Demolition New Vacation
Home
Housing
Starts
11.0 million 3.6 million 2.0 million 15.7 million
16.6 million 15.7 million
This housing shortage imbalance could grow because
(1) Household Formation will exceed 1 million in 2013 and beyond
(2) Housing Starts need to be 1.5 million per year … Not there in 2013
24. GDP Growth … Unimpressive but no
Fresh Recession
(Could be on the verge of recession if not for housing recovery)
-10
-8
-6
-4
-2
0
2
4
6
annualized % change % growth from one year ago
25. Blue Chip and CBO Economic Forecast
Jobs and Household Formation to Grow
Year Blue Chip
Consensus
GDP Growth
Forecast
CBO
GDP Growth
Forecast
2013 2.1% 1.4%
2014 2.7% 3.4%
2015 3.1% 4.1%
2016 2.9% 4.4%
2017 2.7% 3.8%
Too Rosy?
26. U.S. Total Payroll Jobs
(98% of prior peak and 104% of Jan. 2000)
124000
126000
128000
130000
132000
134000
136000
138000
140000
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
2008-Jan
2008-Jul
2009-Jan
2009-Jul
2010-Jan
2010-Jul
2011-Jan
2011-Jul
2012-Jan
2012-Jul
2013-Jan
In thousands
27. Ohio Total Jobs
(92% of prior peak and 92% of Jan. 2000)
5000
5100
5200
5300
5400
5500
5600
5700
2000-Jan
2000-Aug
2001-Mar
2001-Oct
2002-May
2002-Dec
2003-Jul
2004-Feb
2004-Sep
2005-Apr
2005-Nov
2006-Jun
2007-Jan
2007-Aug
2008-Mar
2008-Oct
2009-May
2009-Dec
2010-Jul
2011-Feb
2011-Sep
2012-Apr
2012-Nov
28. California Total Jobs
(95% of prior peak and 104% of Jan. 2000)
13000
13500
14000
14500
15000
15500
2000-Jan
2000-Aug
2001-Mar
2001-Oct
2002-May
2002-Dec
2003-Jul
2004-Feb
2004-Sep
2005-Apr
2005-Nov
2006-Jun
2007-Jan
2007-Aug
2008-Mar
2008-Oct
2009-May
2009-Dec
2010-Jul
2011-Feb
2011-Sep
2012-Apr
2012-Nov
29. D.C. Metro Total Jobs
(101% of prior peak and 114% of Jan. 2000)
2000
2100
2200
2300
2400
2500
2600
2000-Jan
2000-Aug
2001-Mar
2001-Oct
2002-May
2002-Dec
2003-Jul
2004-Feb
2004-Sep
2005-Apr
2005-Nov
2006-Jun
2007-Jan
2007-Aug
2008-Mar
2008-Oct
2009-May
2009-Dec
2010-Jul
2011-Feb
2011-Sep
2012-Apr
2012-Nov
30. Texas Total Jobs
(104% of prior peak and 121% of Jan. 2000)
8000
8500
9000
9500
10000
10500
11000
11500
2000-Jan
2000-Aug
2001-Mar
2001-Oct
2002-May
2002-Dec
2003-Jul
2004-Feb
2004-Sep
2005-Apr
2005-Nov
2006-Jun
2007-Jan
2007-Aug
2008-Mar
2008-Oct
2009-May
2009-Dec
2010-Jul
2011-Feb
2011-Sep
2012-Apr
2012-Nov
32. Homeowner Households has not Grown
since 2006 … but Primed to Grow
50,000
55,000
60,000
65,000
70,000
75,000
80,000
1980-Q1
1981-Q1
1982-Q1
1983-Q1
1984-Q1
1985-Q1
1986-Q1
1987-Q1
1988-Q1
1989-Q1
1990-Q1
1991-Q1
1992-Q1
1993-Q1
1994-Q1
1995-Q1
1996-Q1
1997-Q1
1998-Q1
1999-Q1
2000-Q1
2001-Q1
2002-Q1
2003-Q1
2004-Q1
2005-Q1
2006-Q1
2007-Q1
2008-Q1
2009-Q1
2010-Q1
2011-Q1
2012-Q1
In thousands
33. Number of “Qualified” Renters
(credit scores unknown and not factored)
Year Income Needed to
Buy a Median
Priced Home
Number of Renters
with necessary
income
Share of Renters
Qualified
2000 $40,300 11.8 million 33%
2005 $50,400 9.0 million 24%
2012 $31,700 20.1 million 51%
If the year 2000 is considered as normal, then 11.8 million renters had
the income to buy a median priced home but chose not to.
In 2012 there are about 8 million more renters with the necessary
income but choosing not to be or are unable to be a homeowner.
35. Ready to Open Credit?
(Average Credit Scores of Approved Loans)
Normal 2009 to 2012 If Normal
Fannie 720 760 to 770 720
Freddie 720 760 to 770 720
FHA 650 680 to 700 660
15% to 20% Higher Sales
36. Forecast
2011 2012 2013
Forecast
2014
Forecast
GDP Growth +1.8% +2.1% +2.1% 3.0%
Existing Home
Sales
4.3 million 4.7 million 5.0 million 5.3 million
Housing Starts 610 K 780 K 1.1 million 1.4 million
Existing Home
Price Growth
- 4% + 6% + 8% + 5%
30-yr Mortgage
Rate
4.7% 3.7% 3.9% 4.6%
37. Risks to Forecast
• Upside … Credit Availability
– Housing recovery so far even with tight credit
– What happens if mortgage accessibility opens up?
• Downside … Washington Policies
– Rising g-fees and FHA insurance premiums
– QRM 20% down payment requirement?
– Basel 3 … capital rule that punishes private mortgage
with low down payment and commercial loans
– Trim mortgage interest deduction?
– Capital gains tax on home sale?
38. New Downside Risk #1:
Proposal to Cap Fees and Points
• 3% maximum fee for loan origination from 2014
– Loan origination
– Insurance and taxes in escrow
– Title (only if affiliated)
– Loan Level Price Adjustment
– Mortgage brokerage fee
– more unclear items
• Price control … limits credit … who will be rationed out?
Winners … top notch credit borrowers and big banks
Losers … less than stellar credit borrowers and mortgage brokers
39. Drive Like A Girl … in UK
• EU law … girls and boys must pay the same premium
Europe Continent … Boys Win and Girls Lose
UK … Girls Win !
• 3% cap will limit credit and create winners and losers
40. New Downside Risk #2:
Mortgage Investor Rights in U.S.A.?
–Court system clogging the foreclosure
process
–Eminent Domain to take mortgages out of
investors’ hands? (In order to restructure
mortgages)
42. Brazil’s My House My Life Program
Effort to Start Mortgage Market
• Current Deals are mostly All-Cash … only few buy
• Mortgage Access will permit more homebuyers
• What is needed for investors to offer mortgages?
– Strong contract enforcement
– Strong eviction laws to recover some money if the
loan defaults
43. New Downside Risk #3:
Aging Baby Boomers but Falling Birth Rate
(Live Births per 1000 population in U.S.)
0
5
10
15
20
25
30
35
Baby Boomers … now aged 49 to 68 …
too many homes for sale in future years?
44. Foreign-Born Population
in millions (bar, left axis) and % of total population (light, right axis)
0%
2%
4%
6%
8%
10%
12%
14%
16%
0
5
10
15
20
25
30
35
40
45
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
47. Work Like a Spy!
• Real Spies
… go talk to strangers and cultivate relationship
… earn trust
… get results
• What should REALTORS® do?
… go talk to strangers and cultivate relationship
… earn trust
(the most important factor in choosing an agent)
… get results
49. Homeownership Rate by Citizenship Status
Source: Census, Harvard Joint Center
0
10
20
30
40
50
60
70
80
NH White Black Asian/Pacific Islander Hispanic
Noncitizen Naturalized Native Higher Rate for New Citizens
50. Movement in Singapore
(Population: 1/3 Malay, 1/3 Indian, 1/3 Chinese)
• Very Strong Private Property Rights Protection
• Ranked #1 Globally in Ease of Doing Business
• 15% of Households are Millionaires !
52. Homeownership Rate among the Young
(No significant difference between those
with and without student loan debt, not yet)
20
25
30
35
40
45
50
55
60
65
70
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
2012-Q1
2012-Q3
2013-Q1
Under 25 25-29 30-34 35-39
67%
55%
35%
43%
53. Most Graduates are OK but Some in Serious Trouble
Table: Debt Amount
Chart: Student Loan Payment as % of Income for Renters
Under-30 30-39
Median Debt $11,000 $15,000
Average Debt $21,000 $31,000
0
5
10
15
20
10th
Percentile
25th Median 75th 90th
Under 30
30-39
Source: Federal Reserve Bank of New York
54. Summary on What to Expect
• Likely Multiyear Housing Recovery
– No recession
– Job growth and household formation
– Lagging housing starts and continuing housing
shortage
• Home prices are primed to rise further, by
13% cumulatively in 2013 and 2014
• Watch out for New Risks
55. What To Do Personally To Be Even Better!
1. Work Like a Spy
2. Drive Like a Girl (for your own safety)
3. Lobby like a REALTOR®
… Don’t forget about perfecting English