Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS. Presentation at NAR Leadership Summit Chicago, IL

Transcription

1 Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS Presentation at NAR Leadership Summit Chicago, IL August 21, 2008

2 60 50 Home Sales Starting to Recover from Improving Affordability Conditions % change in existing home sales from 2008 Q1 to 2008 Q2 (seasonally adjusted) Source: NAR

3 Source: NAR Home Price Trend

4 Sales Still Struggling % change in existing home sales from 2008 Q1 to 2008 Q2 (seasonally adjusted) Source: NAR

5 Jan May Sep Jan May Sep Jan May National Total Existing-Home Sales (Up markets + Down markets = Stable total) 8,000,000 7,000,000 6,000,000 5,000,000 Stable 4,000,000

6 Housing Stimulus Package First-time Homebuyer Tax Credit Up to $7,500 (but with repayment requirement) Helps unleash chain reaction for trade-up buyers Permanently higher Loan Limit Up to $625,000 covers most jumbo loans Will lower conforming jumbo mortgage rates by 1% point (from say 7.5% to 6.5%) Saving $4,000 in interest cost per year

7 FHA Market Share for Home Purchase 20% 15% 10% 5% 0% est proj proj. Source: HMDA, NAR Estimate

8 Annual Existing-Home Sales at 1998 levels 8,000 In thousand units 7,000 6,000 5,000 4,000 3,000

9 1998 vs 2008 Existing Home Sales stable but trending at 10 year ago levels From 1998 to million more people 13 million more jobs Comparable affordability conditions Is it credit tightening? Is it excessive pessimism?

10 Location, Location, Location: Makes a Big Difference! All Real Estate is Very Local Local Affordability and Local Job Market Conditions? Steepest price declines are concentrated in neighborhoods with high subprime loans Steep price declines attracting buyers

11 Delinquency Rates Subprime vs. Prime Data: Mortgage Bankers Association

12 Stresses are in Neighborhoods with Subprime Loans 0% Detroit Miami Las Vegas -10% -20% -30% -40% -50% Price change from a year ago Yellow Mostly Prime Conforming Loans Only (OFHEO) Orange All Loans including subprime and jumbo loans (Case-Shiller) Red Subprime Loans (NAR estimate based on weighted average)

13 One For Every 100 Households 100 households 32 renters and 68 homeowners 22 have no mortgage 46 have mortgage 3 are delinquent 43 are current 1 gets foreclosed 2 work it out Historically only ½ gets foreclosed

14 Homeowners in Denial? 62% of homeowners say no price decline Most U.S. Markets are experiencing price decline Price info gleamed from transacted homes and not all homes More than usual number of transactions from REO-foreclosed, short-sales 90% of homes are not on the market Only 9% of homeowners have subprime loans Homeowners have long-term view Rural areas (land prices up 9%)

15 Strong Job Growth States (Yet, Falling Sales because of mortgage tightening and buyer hesitancy) % change in job growth from one year ago Source: NAR

16 Interest Rates (Long and Short)

17 U.S. Single-Family In thousand units Housing Starts Source: Census

18 Inventory of New Homes Fell Even as Sales Fell (Inventory will fall very fast if sales pick up) Source: Census

19 Home Price Forecast Falling inventory will help stabilize prices Ben Bernanke s view? Alan Greenspan s view early Economists view 2009 My view Watch out for Denver and Houston on fundamentals Watch out for CA, NV, AZ, and FL on multibids Watch out for Pitt, Indy, Cincy once jobs come around

20 Economic Forecast Consumers are angry Businesses are OK Exports booming Net: Improving economy in the second half of will depend on persistent or dissipating consumer anger

21 GDP Growth % annualized growth rate Source: BEA

22 Source: BLS U.S. Job Changes 7 straight months of job cuts 12-month payroll job changes in thousands

23 Consumer Price Inflation Source: BLS

24 Consumer Sentiment 120 Sentiment Source: University of Michigan

25 Source: BEA Corporate Profits Near Record High $ billion

26 $ billion (2000-chain $) Exports Growing

27 Commercial Real Estate Construction Spending $ billion (2000-chain $)

28 Commercial Fundamentals Vacancy Rates rising modestly all across Rent Growth slowing still positive in most markets and most property types Multifamily holding up better Retail less so

29 Euro vs Dollar

30 Dollar Strength and Oil Price

31 Economic Outlook GDP 2.0% 1.7% 1.5% CPI Inflation 2.9% 4.1% 2.6% Job Growth 1.1% 0.1% 0.2% Unemployment Rate 4.6% 5.5% 6.0%

32 What will Happen to Fannie and Freddie? Survive Able to raise capital Default rate slows Do not Survive become Bear Stearns Treasury and Fed helps through the crisis Repay the government after crisis Chrysler model Nationalization Temporary government takeover Re-privatize but with tighter regulation

33 Sharp or Modest Rebound? Depends on all of us in informing and educating consumers Get the neighborhood information from local professionals If ready financially, buy a home and get that special tax break Mortgage rates off rock-bottom points but still historically favorable Though no guarantee, buying a home has been a path to long-term wealth accumulation in vast number of cases U.S. homes are on a big-time sale, own a piece of America