Real Estate Market. Lawrence Yun, Ph.D. Presentation to New England REALTORS Conference. February 2, 2010 NATIONAL ASSOCIATION OF REALTORS

Transcription

1 Real Estate Market Trends & Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS Presentation to New England REALTORS Conference February 2, 2010

2 Housing Stimulus Impact Tax Credit and Higher Loan Limit 2 million 1 st -time buyers could claim to date Additional 2.4 million buyers (1 st time and many repeat buyers) by end of June 2010 Existing Home Sales gets 15% boost Home Price gets 3% to 5% boost Preservation of Middle-Class Wealth

3 Recent Pending Home Sales Recovery pre-dominantly in lower-end and taking longer to close in recent months Source: NAR

4 Bifurcated Recovery $ thousand % change from one year ago Homes priced under $100K Homes priced above $500K Source: NAR

5 Aggregate Months Supply In thousand units Source: NAR

6 National Existing Home Sales Pre-boom sales

7 Massachusetts Existing Home Sales Thousand units

8 Maine Existing Home Sales Thousand units

9 Rhode Island Existing Home Sales Thousand units

10 New Hampshire Existing Home Sales Thousand units

11 Vermont Existing Home Sales Thousand units

12 Connecticut Existing Home Sales Thousand units

13 First-Time Buyers Used Up or Pent-Up Demand? In year 2000 (pre-boom) 11 million renters with qualifying income to buy a median priced home In million renters with qualifying income to buy a median priced home Most renters are not qualified and should not Most renters are not qualified and should not be homeowners

14 First-Time Buyers Used Up or Pent-Up Demand? 2000 (pre-boom) 2009 (3 months prior to tax credit) Existing Home Sales 5.2 m 4.6 m 5.3 m New Home Sales 880 K 364 K 418 K Payroll Jobs m m m 2009 (recent 3 months with tax credit) Household Jobs m m m Median Home Price $143,600 $173,600 $177,900 Mortgage Rates 8.1% 5.5% 5.2% Underwriting Standard + FHA % Normal (not loose) About Normal About Normal FHA about 10% FHA 24% FHA 15% to 20% with higher credit score Household Income $41,990 $50,303 $50,303 # renters that could buy a median priced home (assume no tax credit) 11.5 million 16.2 million 16.1 million Change in Pool of Potential 1 st Time Buyers (without tax credit) Change in Pool of Potential 1 st Time Buyers (with tax credit) Fear Factor Impact (Waiting to buy later at a lower price) N/A 4.7 million 4.6 million N/A/ 4.7 million 5.4 million N/A Hard to Measure Hard to Measure

15 Household Formation (2-year moving average)

16 Preservation of Middle Class Wealth $8000 Price Drop or $8000 Tax Credit? No difference from buyer s perspective Major differences on market impact $8,000 or 4% decline value means $730 billion in housing wealth destruction Consumer wealth effects Consumer s rational postponement t of purchase

17 Financial Wealth Rising $ billion Source: Source: Federal Federal Reserve, ReserveNAR estimate

18 Housing Wealth to Rise ($4 trillion wealth loss in housing from peak) If additional $8,000 price decline $700 billion further loss $ billion Source: Source: Federal Federal Reserve, ReserveNAR estimate

19 Metro Median Home Price $ thousand Boston Riverside Kansas City Source: NAR

20 National Existing Home Price

21 Overcorrection Needs to be Halted (Home Price to Income Ratio) Stay within Budget and all will be OK! Source: NAR

22 Mortgage Payment to Income (by middle income person buying a median priced home) Stay within Budget and all will be OK! Source: NAR

23 Latest Monthly Home Price Trend % change from one year ago Case-Shiller in Green (Boston) FHFA in Red (New England) NAR in blue bar (Northeast)

24 Housing Starts: Too Much to Too Little 2,500 2,000 New Units Needed 1,500 1, million more people each year 1 to 14million household formation 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

25 Serious Delinquency Rate (90+ days late or foreclosure) 30.0 % Subprime Prime (green) FHA VA (purple) FHA Reserve Fund depleting Bailout??? Fannie-Freddie future reform without private profit and taxpayer loss Veterans Affairs backed mortgages slight rise even though a zero-down product stay within budget and all will be OK!

26 Economy Recovering 9.0 GDP annualized growth rate Forecast Q Q Q Q Q Q Q Q Q Q Q Q Q4 Source: BEA

27 Job Changes in U.S. Total Payroll Jobs in U.S. y (one year change) 4000 In thousands Source: BLS

28 Temp Hire Job Changes in U.S. Total Payroll Jobs in U.S. y (one year change) In thousands Source: BLS

29 Total Payroll Jobs in Massachusetts 3400 In thousands Source: BLS

30 Total Payroll Jobs in Maine In thousands Source: BLS

31 Total Payroll Jobs in Rhode Island In thousands Source: BLS

32 In thousands Total Payroll Jobs in New Hampshire Source: BLS

33 Total Payroll Jobs in Vermont In thousands Source: BLS

34 Total Payroll Jobs in Connecticut In thousands Source: BLS

35 Total Payroll Jobs in Michigan 5000 In thousands Source: BLS

36 Total Payroll Jobs in Washington D.C In thousands Metro Source: BLS; (12-month moving average)

37 Federal Budget Deficit , , , , , ,000-1,000,000-1,200, ,400,000-1,600,000 Source: Congressional CBO, NAR Budget estimate Office Projections

38 Federal Housing Policy Tax Favoritism Mortgage interest deduction Capital gains tax exclusion Property tax deduction But who pays taxes? Ownership and Positive Externalities Student test scores, teen pregnancy, juvenile delinquency What is the proper homeownership rate? Any Ownership vs Successful Ownership

39 Economic Outlook forecast GDP 04% 0.4% -2.5% 28% 2.8% CPI Inflation 3.8% -0.2% 1.3% Unemployment Rate 5.8% 9.3% 9.9% 10-year Treasury 3.7% 3.3% 3.8% Unemployment Rate Peak at 10.5% in few months before going down consistently

40 Housing Outlook forecast Existing Home Sales m m m New Home Sales 485 k 380 k 530 k Home Price Growth -10% -13% 4% Mortgage Rate 6.1% 5.1% 5.5% Price Fear Factor?? None

41 Commercial and Residential Index = 100 in 1990 Property Prices Case-Shiller Residential MIT Commercial data is for Q2

42 Who Is Buying? Billions $140 $120 Crossborder Equity Fund Inst'l Private Public User/other Unknown $100 $80 $60 $40 $20 $- 06Q1 06Q2 06Q3 06Q4 07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 Source: Real Capital Analytics

43 P e r c e n t a g e Credit Crisis 2008: Libor vs. Fed Funds Rate Subprime acting up Lehman Brothers belly up Bear Stearns Jan Jan Feb Mar Apr Apr May Jun Jul Aug Aug Sep Oct Nov Nov Dec Jan Feb Mar Mar Apr May Jun Jul Jul Aug Sep Oct Oct Nov Dec Jan Jan Feb Mar Apr Libor Fed Funds

44 Credit 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) Not Yet Need to see Lower rate on jumbo mortgages Lower rate on second home purchases Lower rate on condo purchases Lower rate on commercial real estate loans

45 Office Market Fundamentals Completions Absorption Vacancy Square Feet ('000s) % 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 80% Percent (%) Source: NAR/CBRE-EA

46 Office Rent Growth National Rent Growth 15.00% 10.00% 5.00% 0.00% -5.00% % 00% % % Source: NAR/CBRE-EA

47 Commercial Market Outlook 2008 to 2009 Net absorption turns negative Rising Vacancy Rates and Stagnant Rent Markedly Fewer Transactions Property Prices Falling Distress Rising 2010 Economic recovery Local market recovery Commercial recovery with lag time Modestly Positive net absorption Rent struggles to move positive

48 Right Tools Right Now Many Free Products Relocation Reports REALTOR Member Profile Home Buyer and Home Seller Survey Daily Forecast Update org Then click Research