2015 Economic and Housing Outlook

8/20/2019 2015 Economic and Housing Outlook

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2/52

Economic and Housing

OutlookBy Lawrence Yun, Ph.D.Chief Economist, National Association of REALTORS®

Presentation at NAR Annual Meetings

San Diego, CA

November 13, 2015


3/52

Lifetime Wealth at All-Time High

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

1 9 9 0 - Q 1

1 9 9 1 - Q 2

1 9 9 2 - Q 3

1 9 9 3 - Q 4

1 9 9 5 - Q 1

1 9 9 6 - Q 2

1 9 9 7 - Q 3

1 9 9 8 - Q 4

2 0 0 0 - Q 1

2 0 0 1 - Q 2

2 0 0 2 - Q 3

2 0 0 3 - Q 4

2 0 0 5 - Q 1

2 0 0 6 - Q 2

2 0 0 7 - Q 3

2 0 0 8 - Q 4

2 0 1 0 - Q 1

2 0 1 1 - Q 2

2 0 1 2 - Q 3

2 0 1 3 - Q 4

2 0 1 5 - Q 1


4/52

Dow Jones Industrial Average(Doubling since 2009)

0

2000

4000

6000

800010000

12000

14000

16000

18000

20000

2 0 0 9 - J a

n

2 0 0 9 - M a

y

2 0 0 9 - S e

p

2 0 1 0 - J a

n

2 0 1 0 - M a

y

2 0 1 0 - S e

p

2 0 1 1 - J a

n

2 0 1 1 - M a

y

2 0 1 1 - S e

p

2 0 1 2 - J a

n

2 0 1 2 - M a

y

2 0 1 2 - S e

p

2 0 1 3 - J a

n

2 0 1 3 - M a

y

2 0 1 3 - S e

p

2 0 1 4 - J a

n

2 0 1 4 - M a

y

2 0 1 4 - S e

p

2 0 1 5 - J a

n

2 0 1 5 - M a

y

2 0 1 5 - S e

p


5/52


6/52

GDP GrowthInconsistent with 2.2% average since 2014

-10

-8

-6

-4

-2

0

2

4

6

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

2013

- Q3

2014

- Q1

2014

- Q3

2015

- Q1

2015

- Q3

Annualized Growth Rate


7/52

Sluggish Growth + Gap after

Recession($1.7 trillion gap … $5,000 per person)

10000

11000

12000

13000

14000

15000

16000

17000

18000

1998 - Q1 2000 - Q1 2002 - Q1 2004 - Q1 2006 - Q1 2008 - Q1 2010 - Q1 2012 - Q1

GDP in 2009 Dollars

Real GDP Real GDP W/O Recession

3% Growth Line

2.2% Growth Line


8/52

Residential Construction and

SalesMore consistent with 6.6% average since 2014

-40

-30

-20

-10

0

10

20

30

40


9/52

Homeownership Rate(seasonally adjusted … 50-year low)

63

64

65

66

67

68

69

70

1 9 9 5 - Q 1

1 9 9 5 - Q 4

1 9 9 6 - Q 3

1 9 9 7 - Q 2

1 9 9 8 - Q 1

1 9 9 8 - Q 4

1 9 9 9 - Q 3

2 0 0 0 - Q 2

2 0 0 1 - Q 1

2 0 0 1 - Q 4

2 0 0 2 - Q 3

2 0 0 3 - Q 2

2 0 0 4 - Q 1

2 0 0 4 - Q 4

2 0 0 5 - Q 3

2 0 0 6 - Q 2

2 0 0 7 - Q 1

2 0 0 7 - Q 4

2 0 0 8 - Q 3

2 0 0 9 - Q 2

2 0 1 0 - Q 1

2 0 1 0 - Q 4

2 0 1 1 - Q 3

2 0 1 2 - Q 2

2 0 1 3 - Q 1

2 0 1 3 - Q 4

2 0 1 4 - Q 3

2 0 1 5 - Q 2


10/52

Young People: Under 35 years oldHistoric Low Homeownership Rate

33

35

37

39

41

43

45

1 9 9 5 - Q 1

1 9 9 6 - Q 1

1 9 9 7 - Q 1

1 9 9 8 - Q 1

1 9 9 9 - Q 1

2 0 0 0 - Q 1

2 0 0 1 - Q 1

2 0 0 2 - Q 1

2 0 0 3 - Q 1

2 0 0 4 - Q 1

2 0 0 5 - Q 1

2 0 0 6 - Q 1

2 0 0 7 - Q 1

2 0 0 8 - Q 1

2 0 0 9 - Q 1

2 0 1 0 - Q 1

2 0 1 1 - Q 1

2 0 1 2 - Q 1

2 0 1 3 - Q 1

2 0 1 4 - Q 1

2 0 1 5 - Q 1


11/52

First-time collapse … why? Lowest in nearly 30 years … since 1987

30%

50%

33% 32%

%

10%

20%

30%

40%

50%

60%

1 9 8 1

1 9 8 5

1 9 8 7

1 9 8 9

1 9 9 1

1 9 9 3

1 9 9 5

1 9 9 7

1 9 9 9

2 0 0 1

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5


12/52

Difficulty Facing First-time Buyers –

• Student loan debt, even among successful first-time home buyers:

– 41% have student loan debt and typical amount is$25,000

• No affordable inventory: – 51% hardest task is finding the right property

• Competition from vacation buyers and investors

–

Buying similar priced/size homes and paying all cash


13/52

Student Loan(in $billion)

0

200

400

600

800

1000

12001400

2 0 0 6 - Q 1

2 0 0 6 - Q 3

2 0 0 7 - Q 1

2 0 0 7 - Q 3

2 0 0 8 - Q 1

2 0 0 8 - Q 3

2 0 0 9 - Q 1

2 0 0 9 - Q 3

2 0 1 0 - Q 1

2 0 1 0 - Q 3

2 0 1 1 - Q 1

2 0 1 1 - Q 3

2 0 1 2 - Q 1

2 0 1 2 - Q 3

2 0 1 3 - Q 1

2 0 1 3 - Q 3

2 0 1 4 - Q 1

2 0 1 4 - Q 3

2 0 1 5 - Q 1

2 0 1 5 - Q 3


14/52

H O M E S


15/52

H.O.M.E. Survey(Housing Opportunity and Market

Experience)• Desire to own remains strong and

is strengthening:

– 87 percent of Americans believehomeownership is part of theirpersonal American Dream

– HIGHER for 18-24 year olds at 91percent


16/52

H O M E S


17/52

H.O.M.E. Survey(Housing Opportunity and Market

Experience)

83 percent of Americans

believe buying is a good

financial decision


18/52

Optimism—View Home as

Good Financial Investment

2015 Profile of Generational Trends

0

10

20

30

40

50

60

70

80

90

34 and younger 35 to 49 50 to 59 60 to 68 69 to 89

42 39 40 39 38

30 30 26 2620

12 1312 12

15

Better than stocks About as good as stocks Not as good as stocks

84%82% 77% 77%

72%

h ll h


19/52

Homeownership Rate Fall Further …

why?Net New

RentersIn thousands

Net New

HomeownersIn thousands

Homeownership Rate

only among the NewPeople

2008 482 -67 0%

2009 713 -90 0%

2010 771 -194 0%

2011 974 -421 0%

2012 1120 -193 0%

2013 599 55.5 9%

2014 1112 -89 0%

2015 forecast 800 200 30%

2016 forecast 600 600 50%

2017 forecast 500 700 58%


20/52

Even with Falling ownership

rate, Home Sales to Rise Further

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3

2 0 1 4

2 0 1 5

New

Existing


21/52

Housing Forecast made in

November 2014

2015Forecast

(made one

year ago)

2015Likely

Housing Starts 1.3 millionWas Too high

1.1 million

New Home Sales 620,000

Was Little high

570,000

Existing Home Sales 5.3 million

Was Right On

5.3 million

Median Price Growth + 4%

Was Too Low

+ 6%


22/52

Housing Forecast Good for 2016

2013 2014 2015Likely

2016Forecast

Housing Starts 925,000 1 million 1.1 million 1.4 million

New Home

Sales

430,000 437,000 570,000 720,000

Existing Home

Sales

5.1 million 4.9 million 5.3 million 5.4 to 5.5

million

Median Price

Growth

+ 11.5% + 5.7% + 6% +5%

30-year Rate 4.0% 4.2% 3.8% 4.5%

M thl P di S l I d


23/52

Monthly Pending Sales IndexLosing Momentum

(Seasonally Adjusted)

70.075.0

80.0

85.0

90.0

95.0

100.0

105.0

110.0

115.0

2011 -

Jan

2011 -

May

2011 -

Sep

2012 -

Jan

2012 -

May

2012 -

Sep

2013 -

Jan

2013 -

May

2013 -

Sep

2014 -

Jan

2014 -

May

2014 -

Sep

2015 -

Jan

2015 -

May

2015 -

Sep

Source: NAR


24/52

Momentum in Pending Contract(% change from one year ago)

-30

-25

-20

-15

-10

-5

0

5

10

15

20

2 0 1 1 - J a n

2 0 1 1 - A p r

2 0 1 1 - J u l

2 0 1 1 - O c t

2 0 1 2 - J a n

2 0 1 2 - A p r

2 0 1 2 - J u l

2 0 1 2 - O c t

2 0 1 3 - J a n

2 0 1 3 - A p r

2 0 1 3 - J u l

2 0 1 3 - O c t

2 0 1 4 - J a n

2 0 1 4 - A p r

2 0 1 4 - J u l

2 0 1 4 - O c t

2 0 1 5 - J a n

2 0 1 5 - A p r

2 0 1 5 - J u l


25/52

Trigger? Jump in Mortgage Rate

3.00

3.50

4.00

4.50

5.00

5.50

2 0 1 1 - J a

n

2 0 1 1 - A p r

2 0 1 1 - J

u l

2 0 1 1 - O

c t

2 0 1 2 - J a

n

2 0 1 2 - A p r

2 0 1 2 - J

u l

2 0 1 2 - O

c t

2 0 1 3 - J a

n

2 0 1 3 - A p r

2 0 1 3 - J

u l

2 0 1 3 - O

c t

2 0 1 4 - J a

n

2 0 1 4 - A p r

2 0 1 4 - J

u l

2 0 1 4 - O

c t

2 0 1 5 - J a

n

2 0 1 5 - A p r

2 0 1 5 - J

u l

2 0 1 5 - O

c t


26/52

Fed Rate Hike in

December?


27/52

Fed Rate Hike in December

then again in March


28/52

Fed Rate Hike in December

then again in March

then again in August

then again in …


29/52

Fed Policy and Mortgage Rate

0

1

2

3

45

6

7

8

9

2 0 0 0 - J a n

2 0 0 0 - J u

l

2 0 0 1 - J a n

2 0 0 1 - J u

l

2 0 0 2 - J a n

2 0 0 2 - J u

l

2 0 0 3 - J a n

2 0 0 3 - J u

l

2 0 0 4 - J a n

2 0 0 4 - J u

l

2 0 0 5 - J a n

2 0 0 5 - J u

l

2 0 0 6 - J a n

2 0 0 6 - J u

l

2 0 0 7 - J a n

2 0 0 7 - J u

l

2 0 0 8 - J a n

2 0 0 8 - J u

l

2 0 0 9 - J a n

2 0 0 9 - J u

l

2 0 1 0 - J a n

2 0 1 0 - J u

l

2 0 1 1 - J a n

2 0 1 1 - J u

l

2 0 1 2 - J a n

2 0 1 2 - J u

l

2 0 1 3 - J a n

2 0 1 3 - J u

l

2 0 1 4 - J a n

2 0 1 4 - J u

l

2 0 1 5 - J a n

2 0 1 5 - J u

l

Mortgage Rate Fed Funds Rate


30/52

What Determines Bond Yields?

• Federal Reserve’s short-term rate changes

• Inflation and erosion of purchasing power

• Foreign capital flow and demand for dollar

• Savings rate• U.S. budget deficit

• Printing of money

• …


31/52

Federal Deficit - Shrinking( $ million, 12 month total)

-1600000

-1400000

-1200000

-1000000

-800000

-600000

-400000

-200000

0

200000

400000

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

2014

- Jan

2015

- Jan


32/52


33/52


34/52

Rents Rising at 7-year high

-1

0

1

2

3

4

5

2 0 0 0 - J a n

2 0 0 0 - J u l

2 0 0 1 - J a n

2 0 0 1 - J u l

2 0 0 2 - J a n

2 0 0 2 - J u l

2 0 0 3 - J a n

2 0 0 3 - J u l

2 0 0 4 - J a n

2 0 0 4 - J u l

2 0 0 5 - J a n

2 0 0 5 - J u l

2 0 0 6 - J a n

2 0 0 6 - J u l

2 0 0 7 - J a n

2 0 0 7 - J u l

2 0 0 8 - J a n

2 0 0 8 - J u l

2 0 0 9 - J a n

2 0 0 9 - J u l

2 0 1 0 - J a n

2 0 1 0 - J u l

2 0 1 1 - J a n

2 0 1 1 - J u l

2 0 1 2 - J a n

2 0 1 2 - J u l

2 0 1 3 - J a n

2 0 1 3 - J u l

2 0 1 4 - J a n

2 0 1 4 - J u l

2 0 1 5 - J a n

2 0 1 5 - J u l

Renters' Rent


35/52

Rental Vacancy Rate(30-year low)

5

6

7

8

9

10

11

12

2 0 0 0 - Q 1

2 0 0 0 - Q 3

2 0 0 1 - Q 1

2 0 0 1 - Q 3

2 0 0 2 - Q 1

2 0 0 2 - Q 3

2 0 0 3 - Q 1

2 0 0 3 - Q 3

2 0 0 4 - Q 1

2 0 0 4 - Q 3

2 0 0 5 - Q 1

2 0 0 5 - Q 3

2 0 0 6 - Q 1

2 0 0 6 - Q 3

2 0 0 7 - Q 1

2 0 0 7 - Q 3

2 0 0 8 - Q 1

2 0 0 8 - Q 3

2 0 0 9 - Q 1

2 0 0 9 - Q 3

2 0 1 0 - Q 1

2 0 1 0 - Q 3

2 0 1 1 - Q 1

2 0 1 1 - Q 3

2 0 1 2 - Q 1

2 0 1 2 - Q 3

2 0 1 3 - Q 1

2 0 1 3 - Q 3

2 0 1 4 - Q 1

2 0 1 4 - Q 3

2 0 1 5 - Q 1


36/52

Credit Box Opens?

• FICO New Method

• Fannie/Freddie

–

Lower down payment products• FHA premiums … lowered

• Portfolio Lending … historic low

mortgage default rates on recentvintages (2010-2014)


37/52

Fannie/Freddie G-fees for

Highways?

s ng ome r ce s ecom ng


38/52

s ng ome r ce s ecom ngObstacle

(Median National Existing Home Price)

100,000

120,000

140,000

160,000

180,000

200,000

220,000

240,000260,000

2 0 0 0 - J a n

2 0 0 0 - J u l

2 0 0 1 - J a n

2 0 0 1 - J u l

2 0 0 2 - J a n

2 0 0 2 - J u l

2 0 0 3 - J a n

2 0 0 3 - J u l

2 0 0 4 - J a n

2 0 0 4 - J u l

2 0 0 5 - J a n

2 0 0 5 - J u l

2 0 0 6 - J a n

2 0 0 6 - J u l

2 0 0 7 - J a n

2 0 0 7 - J u l

2 0 0 8 - J a n

2 0 0 8 - J u l

2 0 0 9 - J a n

2 0 0 9 - J u l

2 0 1 0 - J a n

2 0 1 0 - J u l

2 0 1 1 - J a n

2 0 1 1 - J u l

2 0 1 2 - J a n

2 0 1 2 - J u l

2 0 1 3 - J a n

2 0 1 3 - J u l

2 0 1 4 - J a n

2 0 1 4 - J u l

2 0 1 5 - J a n

2 0 1 5 - J u l


39/52

New Home Price … Even Higher

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

2 0 0 0 - J a n

2 0 0 0 - J u l

2 0 0 1 - J a n

2 0 0 1 - J u l

2 0 0 2 - J a n

2 0 0 2 - J u l

2 0 0 3 - J a n

2 0 0 3 - J u l

2 0 0 4 - J a n

2 0 0 4 - J u l

2 0 0 5 - J a n

2 0 0 5 - J u l

2 0 0 6 - J a n

2 0 0 6 - J u l

2 0 0 7 - J a n

2 0 0 7 - J u l

2 0 0 8 - J a n

2 0 0 8 - J u l

2 0 0 9 - J a n

2 0 0 9 - J u l

2 0 1 0 - J a n

2 0 1 0 - J u l

2 0 1 1 - J a n

2 0 1 1 - J u l

2 0 1 2 - J a n

2 0 1 2 - J u l

2 0 1 3 - J a n

2 0 1 3 - J u l

2 0 1 4 - J a n

2 0 1 4 - J u l

2 0 1 5 - J a n

2 0 1 5 - J u l

New

Existing


40/52

Condos Underperforming(% change from 12 months ago in September)

0 2 4 6 8 10 12

Price Growth

Sales

Single-family

Condominium

Aff d bilit S l ti


41/52

Affordability Solution …

Tiny Home Movement?


42/52

R l S l ti t Aff d bilit


43/52

Real Solution to Affordability …

More Supply• More Supply

– Existing Homeowners List Homes

–Shadow Inventory of DistressedHomes

– Newly Constructed Homes

– More Rental Housing … Can beconverted to Condominiums Later


44/52

Pent-Up Home Sellers

0

2

4

6

8

10

12

2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Median Years of Tenure Before Moving


45/52

National Shadow Inventory


46/52

National Shadow Inventory(% of mortgages in foreclosure or late

payment)

0

2

4

6

8

10

12

2 0 0 0 - Q

1

2 0 0 0 - Q

4

2 0 0 1 - Q

3

2 0 0 2 - Q

2

2 0 0 3 - Q

1

2 0 0 3 - Q

4

2 0 0 4 - Q

3

2 0 0 5 - Q

2

2 0 0 6 - Q

1

2 0 0 6 - Q

4

2 0 0 7 - Q

3

2 0 0 8 - Q

2

2 0 0 9 - Q

1

2 0 0 9 - Q

4

2 0 1 0 - Q

3

2 0 1 1 - Q

2

2 0 1 2 - Q

1

2 0 1 2 - Q

4

2 0 1 3 - Q

3

2 0 1 4 - Q

2

2 0 1 5 - Q

1

4%


47/52

Housing Starts

0

200

400

600

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

2014 -

Jan

2015 -

Jan

MultifamilyThousand units

0

1000

2000

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

2014 -

Jan

2015 -

Jan

Single-family


48/52

Massive Housing Shortage(from 2012 to 2015)

Metro Job Creation New Home

Construction

Ratio

San Francisco-

Oakland

234,000 30,000 7.8

Grand Rapids 46,000 6,000 7.8

San Jose 118,000 23,000 5.1

San Diego 101,000 21,000 4.9

Miami-Ft.

Lauderdale

191,000 48,000 3.9

Salt Lake City 57,000 15,000 3.9

New York City 400,000 114,000 3.5


49/52

Why Would Home Sales Rise?

• Rising Mortgage Rates – Not Good

• Too Fast Rising Prices – Not Good

• Housing Equity for Pent-up Sellers – Good

• Return Boomerang Buyers - Good• Steadily increased supply - Good

• Job creation – Super Good

Trade Up Opportunities


50/52

Trade-Up Opportunitiesfrom Housing Equity

0

5000

10000

15000

20000

25000

2 0 0 0 - Q 1

2 0 0 0 - Q 3

2 0 0 1 - Q 1

2 0 0 1 - Q 3

2 0 0 2 - Q 1

2 0 0 2 - Q 3

2 0 0 3 - Q 1

2 0 0 3 - Q 3

2 0 0 4 - Q 1

2 0 0 4 - Q 3

2 0 0 5 - Q 1

2 0 0 5 - Q 3

2 0 0 6 - Q 1

2 0 0 6 - Q 3

2 0 0 7 - Q 1

2 0 0 7 - Q 3

2 0 0 8 - Q 1

2 0 0 8 - Q 3

2 0 0 9 - Q 1

2 0 0 9 - Q 3

2 0 1 0 - Q 1

2 0 1 0 - Q 3

2 0 1 1 - Q 1

2 0 1 1 - Q 3

2 0 1 2 - Q 1

2 0 1 2 - Q 3

2 0 1 3 - Q 1

2 0 1 3 - Q 3

2 0 1 4 - Q 1

2 0 1 4 - Q 3

2 0 1 5 - Q 1

Real Estate Value Mortgage Debt

$ billion


51/52

Return Buyers


52/52

2015 Economic and Housing Outlook

Documents

Transcript of 2015 Economic and Housing Outlook