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Real Estate Market - Return to Normalcy

Lawrence Yun’s Presentation at Macroeconomic Advisers 12-8-2010

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Real Estate Market - Return to Normalcy

  1. 1. Return to Normalcy<br />Lawrence Yun, Ph.D.<br />Chief Economist<br />NATIONAL ASSOCIATION OF REALTORS®<br />Presentation at Macroeconomic Advisers Meeting <br />Washington, D.C.<br />December 8, 2010<br />
  2. 2. Existing Home Sales (Closings)<br />Tax Credit Impact<br />
  3. 3. Pending Home Sales Index<br />
  4. 4. Pre-Boom vs. Post-Boom<br />
  5. 5. Housing Affordability Index(assumes constant underwriting standards)<br />
  6. 6. Compelling AffordabilityMonthly Mortgage to buy a Median Priced Home<br />
  7. 7. QE2 Inconsequential if Too Strict Underwriting Standards?Fannie and Freddie Backed Mortgage Loan Performance<br />Source: Federal Housing Finance Agency <br />
  8. 8. Distressed Loans and Shadow Inventory<br />Bad loans are nearly always made in good times. But recently originated loans are performing very well.<br />
  9. 9. Underwater Homeowners and Short-Sales<br />11 million underwater homeowners <br />Overestimate by CoreLogic?<br />75 million total homeowners <br />Short-sales and Foreclosures: about 1/3 of existing home sales…1.5 million per year<br />Assume ½ underwater homeowners stay put by choice (and not go through distressed sale)<br />5.5 million out of pocket (CoreLogic data) … 7% lower sales<br />4 million out of pocket (NAR estimate based on Fed data) … 5% lower sales<br />2010 Existing + New Home Sales are … 21% lower sales versus 2000<br />
  10. 10. Homeowner Vacancy Rate(0.8% point above normal = 600,000 above normal)<br />
  11. 11. Newly Built Home Inventory<br />In thousands<br />
  12. 12. Months Supply of Inventory and Real Price Growth(Historic Avg. = 7.3 months and 0.5% real price anualized growth)<br />
  13. 13. Home Sale to Payroll Jobs<br />13<br />
  14. 14. Home Price-to-Income Ratio <br />Source: NAR<br />
  15. 15. Home Price and Construction Cost<br />
  16. 16. CPI Housing Rent Inflation<br />
  17. 17. REALTORS’ Home Value Expectation:Survey of Realtors regarding prices in 12 months<br />Increase or Stable<br />Decrease<br />
  18. 18. Baseline Outlook Cont.<br /><ul><li>Mortgage Rates rising to 5.0% in 2011 and 5.9% in 2012
  19. 19. Home values – no meaningful change in the national price in the next 2 years
  20. 20. Home sales to be choppy but overall improving in line with job growth … 5.2 million in 2011 (up from 4.8 m in 2010, but same as in 2000)
  21. 21. Affordability conditions are too compelling
  22. 22. There maybe a pent-up demand. 30 million additional people from 2000 but same home sales as in 2000.</li></li></ul><li>Commercial Real Estate<br />
  23. 23. Real Estate Price<br />Residential: Case-Shiller<br />Commercial: MIT<br />

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