Economic and Housing Market Outlook

Lawrence Yun

National Existing Home Sales

0

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

1981 1986 1991 1996 2001 2006

Recent Pending Home Sales Rising, but Taking Longer to Close in Recent Months

6065707580859095

100105110

Appraisal Issues from HVCC• Good Intended Policy Gone Bad

– Appraisers getting paid less– Appraisal process taking shorter time– Consumers paying higher fee– Homeowners unable to refinance– Homebuyers wanting to buy but cannot

• Unintended Consequences of Slowing Housing Market Recovery … Slowing Economic Recovery

National Existing Median Home Price

0

50000

100000

150000

200000

250000

1970 1975 1980 1985 1990 1995 2000 2005

$

Serious Delinquency Rate(90+ days late or foreclosure)

0.0

5.0

10.0

15.0

20.0

25.0

30.0%

Subprime

•FHA Reserve Fund depleting … may need funds to implement a countercyclical policy•Fannie-Freddie will need funds … future reform of the secondary mortgage market•VA … slight rise … evev though a zero-down product … stay within budget and all will be OK!

VA (purple)

FHA

Prime (green)

Mortgage Payment to Incometo Buy a Median Price Home

(for those staying within budget … middle income person buying a middle priced home)

1015202530354045

Stay within budget and monthly payment will be manageable !

%

Home Price to Income Ratio(Enticing for All-Cash Buyers)

2.02.22.42.62.83.03.23.43.6

Stay within Budget and all will be OK !

Home Price Up in Select Regions•April to May according FHFA (Government) Home Price Index

%

-6.0

-3.0

0.0

3.0

6.0

9.0

2005 -Q

1

2005 -Q

3

2006 -Q

1

2006 -Q

3

2007 -Q

1

2007 -Q

3

2008 -Q

1

2008 -Q

3

2009 -Q

1

2009 -Q

3

2009 Q

4

Economy to Recover Slowly

GDP annualized growth rate

Source: BEA

Latest Data

Forecast

Job Changes in U.S. … Unemployment Rate to 10.5%

-1000

-800

-600

-400

-200

0

200

400

600

Source: BLS, NAR forecast

One-month payroll job changes in thousands

Federal Budget Deficit … Impact?Future Generation and Housing

-2,000,000

-1,500,000

-1,000,000

-500,000

0

500,000

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

$ million

Source: Congressional Budget Office Projections

Tax Revenue Collections(4-quarter change as of 2009 Q1)

Tax Assessors and Appraisers need to meet

%

Housing Market Recovery Helps Reduce Budget Deficit

• Housing Market Impact on the Economy– $62,000 from each home sale (furniture, moving truck, carpeting,

title search, etc.)– Home values are most American’s wealth … and consumer

spending– Higher home sales … reduce inventory … stabilize home values– Home values strongly impact bank balance sheets and foreclosures

• Home Buyer Tax Credit … Extend and Expand

Commercial Credit Freeze

Economic Outlook 2008 2009

2010

forecast50 year average

GDP 1.1% -2.9% 1.5% 3.3%

CPI Inflation 3.8% -0.5% 2.1% 4.1%

Unemployment Rate 5.8% 9.5% 10.0% 5.9%

Mortgage Rate 6.1% 5.2% 5.8% 9.1%

Existing Home Sales 4.9 m 4.9 m 5.2 m

N/A

5.2 m in 2000 (before bubble)

Customer Satisfaction• Historically 80% of customers would

recommend their specific REALTOR® to a friend and colleagues

• Some Decline in satisfaction bust-years• Serve your client well and assure that clients

stay within budget