Presentation at Miami Real Estate Congress

1
Real Estate Forecast and Markets to Target for
Foreign Investment
Lawrence Yun, Ph.D. Senior Economist NATIONAL
ASSOCIATION OF REALTORS
Presentation at Miami Real Estate Congress Coral
Gables, FL June 13, 2007
2
Florida Home Prices - 1990
thousand
Source NAR
3
Florida Home Prices - 2006
thousand
Source NAR
4
Home Price Distribution(2006)
Source NAR
5
Florida Markets
thousand
Source NAR
6
International Home Buyers in Florida
81,900 Home Sales
Source 2005 NAR Profile of International Home
Buyers in Florida
7
International Homebuyer Trend in Florida(versus
5 years ago)
Source NAR
8
International Buyer Trend in the U.S. vs. 5
years ago
9
International Buyers Origin by Region(Among
those who brokered international transactions)
Source NAR
10
International Buyers Origin by Country(Among
those who brokered international transactions)
Source NAR
11
Type of Homes Purchased by Foreign Buyers
Foreign preference for condos are more than 3
times the domestic preference
Source NAR
12
Method of Financing by Foreign Buyers
Foreign preference for cash are more than 3 times
the domestic preference
Source NAR
13
Reason for Buying
Source NAR
14
Preferred Florida Location
Source NAR
15
Temporary Visitors to Florida

• 4.9 million foreign (non-immigrant) visitors to
  Florida
• 4 million foreign tourist visits
• 44,000 intra-company transfers of foreign workers
• 41,000 foreign students
• 3,000 foreign workers related to NAFTA
• 21,000 treaty traders and investors
• 518,000 foreigners for other business
• Mostly hotel demand
• More rental home demand
• But how many for home purchase demand

Source INS
16
Foreign Immigrants to Florida(From Select
Countries in 2004)
75,644 in All
Source Office of Immigration
17
U.S. Population Projection 2000 to 2050
milliion
2050
2000
Source U.S. Census
18
U.S. Population Growing but Not in Other
Countries 2000 to 2050
milliion
2000
2050
Source U.S. Census, Brugesgroup, The Economist
19
Foreign-Born Population on the Rise(1990 vs 2000)

2000
1980
Source U.S. Census
20
Immigrant Contribution to Overall Population
Growth(2003)
In 1,000s
Native contribution
Immigrant contribution
Source U.S. Census
21
U.S. Migration Trend Favors Warm-Weather,
Low-Tax States (Top vs. Bottom)
Source Census
22
Doubling of Florida

• Florida population growing twice as fast as the
  U.S.
• Population to double by 2040
• Adding more than 17 million people
• Equivalent to adding everyone currently in
  Pennsylvania and Maryland
• First-Mover Advantage (first in business
  generally do better than late-comers)

Source NAR
23
Foreign Direct Investment in U.S. Commercial
Real Estate
billion
Source Department. Of Commerce
24
Foreign Direct Investment Position in U.S.
Top Investing Countries in 2005

• Germany
• Latin America
• Australia
• Japan
• United Kingdom
• Canada
• Netherlands

25
Miami Office Vacancy Rate

Source NAR/Torto-Wheaton
26
Miami Office Rent - Positive

Source NAR/Torto-Wheaton
27
U.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

• Total 4.1 million

28
Outbound to Foreign Countries(2005 vs 2004)
Source NAR
29
Insurance Impact
30
FL Insurance Cost
31
FL Deductible
32
FL Realtor Buyer ClientsHave postponed or not
completed purchase due to price or availability
of insurance
33
FL Realtor Seller ClientsListed Home for Sale
due to price or availability of insurance
34
Hurricanes and Insurance Problem

• Historical Frequency
• 6 Atlantic hurricanes develop per year
• 1.6 make U.S. landfall per year
• Category 3 and higher hurricanes make U.S.
  landfall once every two years
• Florida from 1950 to 2000, only six hurricanes of
  at least Category 3 hit Florida about one per
  decade!

Source National Hurricane Center
35
Unprecedented Florida Hurricanes in 2004 and 2005

• 4 Strong Hurricanes in 2004
• 4 Strong Hurricanes in 2005
• Strong Category 3

36
Where is the Housing Correction?
37
U.S. New Single-Family Construction
33 Tumble
Source Census
38
Florida New Single-Family Construction
70 Tumble
Source Census
39
U.S. Existing-Home Sales
In thousand units
11 Retreat
Source Census
40
Existing Home Sales in Florida
In thousand units (seasonally adjusted annualized
rate)
40 off its peak
Source NAR
41
Investor (Speculative) Home Sales
In thousand units
29 Fall
Source NAR
42
Fight the Bubble
43
Something appears Out of Whack!
Income and Price set to Index of 100 in 1990
Source NAR
44
Mortgage Obligation to Income Manageable

Source NAR
45
Mortgage Obligation to Income Very High in Some
Markets
45 !!!
San Diego
Source NAR
46
Mortgage Obligation to Income Historically High
in Some Markets
Way Above Historical Local Norm
Miami
Source NAR
47
Renters Beginning to Get Squeezed U.S.

Source Torto-Wheaton Research
48
Markets Like Tampa -- Strong in Jobs but Weak in
Housing Feel the Squeeze

Source Torto-Wheaton Research
49
Markets Like Miami -- Strong in Jobs but Weak in
Housing Feel the Squeeze

Source Torto-Wheaton Research
50
Subprime Impact
51
Mortgage Delinquencies
Housing Boom
Housing Slump
Job Losses
Source MBA
52
High Delinquencies
Katrina Effect
Job Troubles
Source MBA
53
High Foreclosures
Source MBA
54
Jobs Will Bufferthe SubprimeFallout
55
Steady U.S. Job Gains4.5 Million in Past 24
months
Payroll job changes in thousands
Source BLS
56
Job Gains in Seattle Region
12-month net payroll job changes in thousands
Source BLS
57
Job Gains Tampa-St. Petersburg Region
12-month net payroll job changes in thousands
Source BLS
58
Job Gains in Miami Region
12-month net payroll job changes in thousands
Source BLS
59
Florida vs U.S.Job Growth
change from a year ago
Source BLS
60
Wage Growth Picking Up

Source BLS
61
Rates Near 45-Year Lows
1970s 9 average
1980s 13 average
1990s 8 average
2000s 6.5 average
Source Freddie Mac
62
Stable Mortgage Rates
Source Freddie Mac
63
Mortgage Rates RetreatBut Where are the Buyers?
Source Freddie Mac
64
Negative Media !

• Bubbles Will Burst
• Balloons Will Pop
• Prices Will Fall 30 to 40
• Housing Downturn Will Send Economy into Recession

65
Dow JonesIndustrial Average
Source NYSE
66
Record Household Wealth
trillion
Source Federal Reserve
67
Expanding World Economy

Source World Bank
68
Dollar vs Euro
U.S. homes are selling at a 30 to 40 discount
Source BLS
69
International Home Price Growth(1997 to 2005)

• U.S. price growth 74
• Miami price growth 203
• ---------------------------------
• Spain 140
• U.K. 150
• Ireland 180

RISKIER MORTGAGE PRODUCTS
70
Live Births in the U.S.
Million
Baby Boomers
Echo Boomers Entering 20s
Source National Center for Health Statistics
71
Baby Boomers
million
Source Census
72
Household Wealth Accumulation (2004)
Median Net Worth in thousand
Source Federal Reserve
73
Vacation Home Sales
In thousand units
Source NAR
74
Economic Outlook
The Fed cuts rate in early 2008
75
National Housing Outlook
76
Local Forecast

• Property tax reform
• Insurance market ???
• Statistical Momentum to become favorable
• Long-term favorable demographics
• International Buyers
• Bottom Line Forecast is

77
Real Estate Forecast and Markets to Target for
Foreign Investment
Lawrence Yun, Ph.D. Senior Economist NATIONAL
ASSOCIATION OF REALTORS
Presentation at Miami Real Estate Congress Coral
Gables, FL June 13, 2007