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NAR SVP and Chief Economist Lawrence Yun shared trends and forecasts for both the national and Middle Tennessee market at Market Watch 2014 (July 9, 2014).
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Housing Market Watch 2014
Lawrence Yun, Ph.D.Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation in Nashville, TN
July 9, 2014
Existing Home Sales20% cumulative increase over 2 years
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
Median Home Price(Near 20% gain in 2 years)
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013$100,000
$120,000
$140,000
$160,000
$180,000
$200,000
$220,000
$240,000
Monthly Pending Sales Indexrecovering but still down from a year ago
(Seasonally Adjusted)
2011 - Jan
2011 - Mar
2011 - May
2011 - July
2011 - Sep
2011 - Nov
2012 - Jan
2012- Mar
2012 - May
2012 - Jul
2012 - Sep
2012 - Nov
2013 - Jan
2013 - Mar
2013 - May
2013 - Jul
2013 - Sep
2013 - Nov
2014 - Jan
2014 - Mar
2014 - May
70.0
75.0
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
Source: NAR
Local Area Housing Statistics(Outperforming vs. Nation)
• Home Sales• Up 2% in 2014 year-to-date
• Median Home Price• Up 6% in 2014 year-to-date
• Dollar Volume• Up 8% in 2014 year-to-date
• Inventory is loosening but still tight• Down 5% in May 2014 vs May 2013
Two and Out?Or Multi-year Expansion?
(Single-Family Existing Home Sales Only)
19681971
19741977
19801983
19861989
19921995
19982001
20042007
20102013
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
Causes of Recent Sales Slowdown
• Bad winter– Only delayed sales not cancellation
• Home prices rose too fast in relation to income– Showing signs of slowing
• Lack of inventory– Steadily more inventory coming to market
• Mortgage rates jumped– Trouble !
• Mortgage credit difficulties– New Qualified Mortgage Rules– Surely cannot get worse!
Mismatch Growth
2-year Growth0%2%4%6%8%
10%12%14%16%18%20% 19%
4%
Home Price Household Income
30-Year Fixed Rate Mortgage and
1-year Adjustable Rate Mortgage
2000 - Jan 2001 - Dec2003 - Nov2005 - Oct 2007 - Sep2009 - Aug 2011 - Jul 2013 - Jun0
1
2
3
4
5
6
7
8
9
Change in Home Price(% change from one year ago)
2011 - Jan
2011 - Mar
2011 - May
2011 - Jul
2011 - Sep
2011 - Nov
2012 - Jan
2012 - Mar
2012 - May
2012 - Jul
2012 - Sep
2012 - Nov
2013 - Jan
2013 - Mar
2013 - May
2013 - Jul
2013 - Sep
2013 - Nov
2014 - Jan
2014 - Mar
-10
-5
0
5
10
15
NAR Case-Shiller CoreLogic
Nashville Repeat Price Index
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
2013 - Q1
2014 - Q1
020406080
100120140160180200
Inventory of Homes for Sale
2007 - Jan
2007 - Jun
2007 - Nov
2008 - Apr
2008 - Sep
2009 - Feb
2009 - Jul
2009 - Dec
2010 - May
2010 - Oct
2011 - Mar
2011 - Aug
2012 - Jan
2012 - Jun
2012 - Nov
2013 - Apr
2013 - Sep
2014 - Feb
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
Change in Inventory(% change from one year ago)
2000 - Jan 2001 - Dec2003 - Nov 2005 - Oct 2007 - Sep2009 - Aug 2011 - Jul 2013 - Jun
-30
-20
-10
0
10
20
30
40
50
Forecast #1:Higher Inflation … Higher Interest Rates
• Federal Reserve “Quantitative Easing” finishes by the year end 2014
• Fed Funds Rate … hike in 2015 Q1• Earlier Move to Tighten because of Inflation
Pressure• Long-term Steady State Rate (2016 onwards) ..
10 year Treasury at 5.0%
Rising Renters’ and Homeowners’ Rent Growth (On the Way to 3%)
2003 - Jan 2004 - Jul 2006 - Jan 2007 - Jul 2009 - Jan 2010 - Jul 2012 - Jan 2013 - Jul
-1
0
1
2
3
4
5
Owners' Equivalent Rent Renters' Rent
REALTOR® Rent Survey – Shows Rent Pressure
2010 - Dec
2011 - Feb
2011 - Apr
2011 - Jun
2011 - Aug
2011 - Oct
2011 - Dec
2012 - Feb
2012 - Apr
2012 - Jun
2012 - Aug
2012 - Oct
2012 - Dec
2013 - Feb
2013 - Apr
2013 - Jun
2013 - Aug
2013 - Oct
2013 - Dec
0
10
20
30
40
50
60
Falling Rising
Economic Forecast2013 2014
forecast2015
forecastGDP Growth 1.9% 1.9% 2.7%
Job Growth 1.7% 1.7% 1.8%
CPI Inflation 1.4% 2.5% 3.5%
Consumer Confidence
73 82 86
10-year Treasury 2.5% 2.8% 3.6%
Forecast #2Multi-year Housing Expansion – Broadly Speaking
• Pent-Up Demand– Population Growth– Job Growth
• Some underperformance, however, from lock-in effect
• Inevitable Growth in housing starts add inventory
• Vacation home sales growth
U.S. Population
19681970
19721974
19761978
19801982
19841986
19881990
19921994
19961998
20002002
20042006
20082010
20120
50
100
150
200
250
300
350In millions
Pent Up Demand2000 2013
Existing Home Sales 5.2 m 5.1 m
New Home Sales 880 K 430 K
Mortgage Rates 8.0% 4.0%
Payroll Jobs 132.0 m 136.4 m
Population 282 m 316 m
GDP Contraction in 2014 Q1
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
-10
-8
-6
-4
-2
0
2
4
6
GDP Annualized Growth Rate
Sluggish Growth + Gap after Great Recession
($1.5 trillion gap … $4,700 per person)
1998 - Q1
1998 - Q3
1999 - Q1
1999 - Q3
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
2013 - Q3
10000
11000
12000
13000
14000
15000
16000
17000
18000
GDP in 2009 Dollars
Real GDP Real GDP W/O Recession
3% Growth Line
2.2% Growth Line
GDP Growth = Job Creations(8 million lost … 8+ million gained)
2000 - Jan 2002 - Mar 2004 - May 2006 - Jul 2008 - Sep 2010 - Nov 2013 - Jan124000
126000
128000
130000
132000
134000
136000
138000
140000In thousands
Unemployment Rate
2000 - Jan 2001 - Dec2003 - Nov 2005 - Oct 2007 - Sep2009 - Aug 2011 - Jul 2013 - Jun0
2
4
6
8
10
12
Employment Rate
2000 - Jan 2001 - Dec2003 - Nov 2005 - Oct 2007 - Sep2009 - Aug 2011 - Jul 2013 - Jun54
56
58
60
62
64
66
Job Market Comparisons by StateFast Growing States 1-year Growth Rate
North Dakota 4.5
Nevada 3.7
Texas 3.4
Florida 2.9
Utah 2.9
Colorado 2.8
Oregon 2.7
Delaware 2.6
West Virginia 2.5
California 2.2
Slow Moving States 1-year Growth Rate
Michigan 0.7
Alabama 0.6
Wyoming 0.6
South Dakota 0.3
Virginia 0.3
New Jersey 0.1
Illinois 0.0
Alaska 0.0
New Mexico -0.1
Vermont -0.2
Tennessee growing at 2.1%
Jobs in Nashville Metro(New Peak and growing at 3.2%)
2000 - Jan 2001 - Dec2003 - Nov 2005 - Oct 2007 - Sep2009 - Aug 2011 - Jul 2013 - Jun600
650
700
750
800
850In thousands
Locked-in Effect of Low Rates?
• Housing cannot get back to normal in a hurry• People move even in high interest rate
environment– Marriage, divorce, new baby, school district, new job,
fed-up with local government, …• Many unplanned landlords
– Take advantage of rising rents while rates are low and fixed
• Potential future lock from longer holding period for capital gains tax exclusion
Household Net Worth
2000 - Q1
2000 - Q4
2001 - Q3
2002 - Q2
2003 - Q1
2003 - Q4
2004 - Q3
2005 - Q2
2006 - Q1
2006 - Q4
2007 - Q3
2008 - Q2
2009 - Q1
2009 - Q4
2010 - Q3
2011 - Q2
2012 - Q1
2012 - Q4
40000
45000
50000
55000
60000
65000
70000
75000$ billion
Vacation Home Sales
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 -
200
400
600
800
1,000
1,200
In thousands
Housing Starts Rising … More InventoryBut Needs to Reach 1.5 million
2000 - Jan 2001 - Dec2003 - Nov 2005 - Oct 2007 - Sep 2009 - Aug 2011 - Jul 2013 - Jun0
500
1000
1500
2000
2500multifamily single-family
Thousand units (annualized)
Long-term Average
Nashville Metro Housing Permits(year to date)
2000 - Jan 2002 - Jan 2004 - Jan 2006 - Jan 2008 - Jan 2010 - Jan 2012 - Jan 2014 - Jan0
2000
4000
6000
8000
10000
12000
14000
16000
18000
Sluggish Recovery in Housing Starts
• Cost of Construction Rising Faster than CPI
• Labor Shortage for construction work
• Construction loan difficulty for small local homebuilders … Dodd-Frank financial regulations?
National Housing Forecast2013 2014
forecast2015
forecast
Housing Starts 925,000 1.1 million 1.4 million
New Home Sales 430,000 Near 500,000 Near 700,000
Existing Home Sales 5.1 million 4.9 million 5.3 million
Median Price Growth
+ 11.5% + 5% to 6% + 3% to 5%
30-year Rate 4.0% 4.4% 5.4%
Nashville Housing Forecast?
Has to outperform because of faster job growth and faster housing starts recovery
Forecast #3: More Unequal Wealth Distribution
• Renters do not accumulate wealth• Renter population rising• Homeowners build wealth after buying at low
prices• Stagnant homeowner population• Tight Credit hinders ‘good’ renters from
becoming homeowners• Investors becoming increasing share of property
owners
Renter Households
1980 - Q11984 - Q21988 - Q31992 - Q41997 - Q12001 - Q22005 - Q32009 - Q425,000
27,000
29,000
31,000
33,000
35,000
37,000
39,000
41,000In thousands
Homeowner Households has not Grown since 2006 … but Primed to Grow
1980 - Q11984 - Q21988 - Q31992 - Q41997 - Q12001 - Q22005 - Q32009 - Q450,000
55,000
60,000
65,000
70,000
75,000
80,000In thousands
Wealth Distribution (Federal Reserve data on median net worth)
Renter Owner$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
199820012004200720102014
2014 Forecast by NAR
Bubble Crash
What Homebuyers Want?
76%Single Family
Detached House
Single Family At-tached
4%
14%Condo or Apt.
80%Single Family De-
tached House
7%
5%
Condo or Apt.
8%
Slide 41
Slightly More Preference For Condo or Apartment Living Than In 2011
Housing Type Preference (2013): Housing Type Preference (2011):
Right now, if you could choose, which of the following would you prefer to live in:
6%
Single Family Attached
Slide 42
Walkability and Age-Diversity Gaining in Importance
0%
10%
20%
30%
40%
50%
46% 45%
37%
28% 28%
23% 23%
45% 44%
31%
24%
36%
15%
21%
Changes in Important Factors in Deciding Where to Live
+1 +1
+6
+4 -8
+8 +2
Very Important - 2013 Very Important - 2011
Q.47 In deciding where to live, indicate how important having each of the following would be to you: very important, somewhat important, not very important, or not at all important.
What Buyers Want Most From Their Agent
Help find the right home to
purchase; 53%
Help buyer negotiate the terms of sale;
12%
Help with the price negotia-
tions; 11%
Determine what compa-rable homes were selling
for; 8%
Help with paperwork;
7%Help find and arrange
financing; 3%
Where Clients Come From• From Members:
– 21 percent repeat business from past clients– 21 percent referrals from past clients– 3 percent off member website (of those with a website)
• From Buyers:– 54 percent use an agent that was referred to them or they
had worked with before– 9 percent found agent online
• From Sellers:– 64 percent use an agent that was referred to them or they
had worked with before– 4 percent found agent online
• 2/3rds of buyers/sellers only contact 1 agent
For Daily Update and Analysis
• Twitter @NAR_Research
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