Title: Housing Market Trends
1Housing Market Trends Outlook
- Lawrence Yun, Ph.D.
- Chief Economist
- NATIONAL ASSOCIATION OF REALTORS
- Presentation at International Real Estate
Congress - At REALTOR Association of Greater Miami and the
Beaches in Coral Gables, FL - June 11, 2009
2Existing Home Sales
3Vacation Home Sales
In thousand units
Source NAR
4Pending Home Sales Index
Taking a bit longer to close In recent months
5Florida Existing Home Sales
In thousand units
6Florida Existing Home Sales Recent Quarters
In thousand units
7Miami Home Sales
- Condo Sales up 70 in April from one year ago
- Single Family Sales up 98 in April from one year
ago
8National Existing Home Price (of transacted
homes and not listed homes)
First-time buyers attracted to deeply discounted
distressed sale properties.
9Miami Median Home Price
thousand
Source NAR
10MiamiCase-Shiller Home Price Index
thousand
11MiamiFHFA (Government) Home Price Index
thousand
12Months Supply of Single-Family Homes
First-time buyers attracted to deeply discounted
distressed sale properties.
13Vacant Homes
In thousand units
Source Census
14Homebuilders Down and Out
In thousand units
Source Census
15New Home Inventory for Sale
In thousand units
In thousands
Source Census
16Housing Starts Too Much to Too Little
New Units Needed
3 million more people each year 1 to 1.4
million household formation need to account
for 300,000 demolitions . need 1.3 to 1.7 new
units
17Miami Ft. LauderdaleSingle-Family Housing
Permits
In thousand units
Source Census
18Miami Ft. LauderdaleMultifamily Housing Permits
In thousand units
Source Census
19National Foreclosure Inventory will Risebut will
they get cleared off quickly
In thousand units
Subprime
All Mortgages
- FHA Reserve Fund depleting may need funds to
implement a countercyclical policy - Fannie-Freddie will need funds future reform of
the secondary mortgage market - What is going on in Denmark ?
20Prices based on Transaction Only
- About half of all recent transactions have been
distressed sales - 15 to 20 short sales
- 30 to 35 foreclosures
- Market price is based on transaction
- What about non-transacted homes that is not on
market? - Can we extrapolate market price to other
non-listed homes? - Estimates of 25 or 33 of all homeowners are
UNDERWATER True?
21Housing Affordability Index(Higher numbers mean
more people can afford to buy a home)
ALL-TIME HIGH on conforming loans if people
need to stay within budget
22Lowest Rate since President Eisenhower Days, but
not on Jumbo Mortgages
23High-end Existing Home Sales(Homes priced above
750,000)
4.4
3.7
2.3
Source NAR
2009 figures are annualized from January and
February sales.
24California Existing Home Sales Tipping Point
In thousand units
Source CAR
25Home Price Bid Up in West
thousand
- February price from January according FHFA Home
Price Index - Measure price change only of those homes with
Fannie-Freddie mortgage using repeat transaction
methodology
26Economy Falls but Recovers from Stimulus Package
GDP annualized growth rate
Latest Data
Forecast
Source BEA
27 Job Changes in U.S.
One-month payroll job changes in thousands
Source BLS
28 Job Changes in Miami
One-year payroll job changes in thousands
Source BLS
29Federal Budget Deficit
million
30Credit Crunch Ending?
- Libor Rates improving
- Junk Bond yields becoming less wild
- Banks making profit but are they getting too
big again (75 of assets controlled by 10 banks) - Federal Reserve lending at zero (though not to
consumers) - True Test of credit easing
- Lower rate on jumbo mortgages
- Lower rate on second home purchases
- Lower rate on condo purchases
- Lower rate on commercial real estate loans
31Rental Occupied Units
In thousand units
Dip and Revival
Source Census
32College Town Rental Boom to 2050?
20 to 24 year olds
In thousand units
Boom and Boom
Boom and Bust
33Economic Outlook
Strength of GDP recovery dependent on home price
growth - Consumer spending improves from housing
wealth effect - Bank balance sheet improves
eases credit crunch - Foreclosure pressure
lessens
34Housing Forecast
- Stimulus and falling inventory will help
stabilize prices - Nationwide Existing Home Sales bump of 10 to 20
in the second half of 2009 vs. second half of
2008 - CA now seeing 100 jump in home sales from trough
Is CA setting trends for others? - Builders may not see a recovery till 2010
- Local Price Forecasts all over the map
- Sharp downward overshooting is susceptible to
sharper price rebound
35Inflation or Deflation in 2011 ?
- Inflation Print money and there goes the
inflation - Deflation Excess capacity and high unemployment
rate keeps prices in check. - Feds exit strategy to reclaim printed money
- Which one is more dangerous?
- Which one will occur? Watch the energy price
as the catalyst for both scenarios - If Inflation winners will be property owners
who locked-in low rate - If deflation losers will be responsible
homeowners with mortgages
36Recession Impact on Housing Market
- Mid-1970s Recession
- Little Change in Home Sales
- Early 1980s Recession
- Deep Cuts in Home Sales
- Early 1990s Recession
- Moderate Cuts in Home Sales
- Early 2000s Recession
- Rise in Home Sales
37Credit Crisis 2008 Libor vs. Fed Funds Rate
Lehman Brothers belly up
Subprime acting up
Bear Stearns
38Lowest Rate since President Eisenhower Days, but
not on Jumbo Mortgages
39High-Income Families contribute heavily in taxes,
yet getting punished on mortgage rates
Source IRS
40Tax Cut (or no increase) for 95 of Families
- What about the 5?
- Mortgage Interest Deduction tweaks for 5, but
will impact nearly all homeowners in terms of
housing equity destruction - Will 5 become acutely cognizant of state income
taxes paid? - Will people migrate to FL, NV, AK, SD, WA, WY, TX?
41Commercial Credit Freeze
42Bailouts and Too Big to Fail
- AIG, Bear Sterns, Lehman Brothers, TARP, and
Fannie/Freddie - inter-linkages and systemic risks
- Chrysler
- Make it small and let it fail
- Managerial Hubris Want to run big companies
- Acquiring companies lose stock value
- Acquired companies get immediate stock boost
(windfall gain) - Too big to manage and diseconomies of scale
- Is the Government becoming too big to manage? It
cannot fail and difficult to fire federal
employees
43Credit Crunch Ending?
- Libor Rates improving
- Junk Bond yields becoming less wild
- Banks making profit but are they getting too
big again (75 of assets controlled by 10 banks) - Federal Reserve lending at zero (though not to
consumers) - True Test of credit easing
- Lower rate on jumbo mortgages
- Lower rate on second home purchases
- Lower rate on condo purchases
- Lower rate on commercial real estate loans
44Commercial Market Forecast
- 2008 to 2009
- Net absorption turns negative
- Rising Vacancy Rates and Stagnant Rent
- Markedly Fewer Transactions
- Property Prices Falling providing opportunities
for parked cash - Apartments holding up better
- 2010
- Economic recovery
- Commercial recovery with lag time
- Pent-up and delayed transactions
- Modestly Positive net absorption and rising rents
45The Next Baby Boomers(Recent Births matching the
post-War Baby Boomer numbers)
Number of Live Birth Each Year
Baby Bust Impact Ending ?
Boomers
Next Boomers
46The Next Middle Class
- Global Economy is here to stay
- U.S. population 300 million
- BRIC countries nearly 10 times the U.S.
population - Brazil 190 million
- Russia 140 million
- India 1.1 billion
- China 1.3 billion
- Potentially 30 million new middle class each year
from just 1 upward shift - How many will want a property in the U.S.?
-
47Top World Economies
trillion
Source IMF
48Typical Economic Expansion Rates
49World Economies in 30 years (in 2037)
trillion
Source NAR
50U.S. Population Projection 2000 to 2050
milliion
2050
2000
Source U.S. Census
51Rapid Population Growth in Developing Countries
2000 to 2050
milliion
2050
2000
Source The Economist
52Stagnant or Declining Population 2000 to 2050
milliion
2000
2050
Source U.S. Census, Brugesgroup, The Economist
53Most Expensive Cities
- 6. Osaka
- 7. Geneva
- 8. Copenhagen
- 9. Zurich
- 10. Oslo
- 10. New York
1. Moscow 2. Seoul 3. Tokyo 4. Hong Kong 5.
London
Where is Miami ?
Source Mercer Consulting
54International Home Price Growth(1997 to 2009)
- U.S. price growth 50 to 85
- -----------------------------
- Switzerland 26
- Germany flat
- Japan -35
- U.S. price growth 50 to 85
- -----------------------------
- Spain 175
- U.K. 158
- Ireland 182
- France 133
- Australia 156
55U.S. International Trade
Import Export in relation to GDP
Source BEA
56International Buyers Destination in the U.S. in
2007
Source NAR
57International Homebuyer Trend in Florida in
2008(versus 5 years ago)
58International Buyers Origin by Country in Florida
Source NAR
59Top Florida Destination
Source NAR
60Why Florida?
- Desirable location 72
- Profitable Investment 16
- Secure Investment 6
- Other 6
61International Buyer Prospects Non-Purchase
Source NAR
62Commercial Foreign Direct Investment Position in
U.S.
Top Investing Countries in 2007
- Latin America 15
- Australia 14
- Germany 13
- Japan 10
- United Kingdom 8
- Canada 4
- Netherlands 1
- Other 34
63U.S. Citizens Living Abroad
- Mexico 1,036,300
- Canada 687,000
- UK 224,000
- Germany 210,000
- Italy 168,000
- Philippines 105,000
- Australia 102,000
- France 101,000
- Spain 94,000
- Israel 94,000
- All other countries 1,247,705
64High Immigration
million
Projected
Source Census Bureau, NAR Forecast
65Where do theForeign-born Live?
Top 10 states account for ¾ of all foreign-born
in U.S.
U.S. Census Bureau
66Foreign-Born Population on the Rise Inevitable
Rise in International Inbound/Outbound Purchases
2000
1980
Source U.S. Census
67Positive Trends in Global Real Estate
- Private Property Movement
- Better market information
- Thailand 1997 Crisis from lack of reliable Real
Estate Information - Foreign MLSs?
- Mortgage Market Innovations in other countries
- ARMs in U.K.
- Few mortgages in Russia
- Large down payments in South Korea
- Nascent Mortgage Backed Securities outside U.S.
- Deeper Information and Liquidity lower
borrowing cost and more transactions
68Local Real Estate in Global World
- Location, Location, Location
- Non-movable asset
- Local specialists needed
- Only the clients will no longer be locals
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