Markets, He Wrote. Northeastern Economy and Multifamily Real Estate. By: Anirban Basu Sage Policy Group, Inc.

Transcription

1 Markets, He Wrote Northeastern Economy and Multifamily Real Estate On Behalf of Eastern Lenders Association 2017 Annual Conference By: Anirban Basu Sage Policy Group, Inc. February 7 th, 2017

2 Macro P.I. (Just How Hairy is the Global Situation?) Photo: Flixter.com

3 Estimated Growth in Output by Select Global Areas 2017 Projected Advanced economies Euro area France Germany Italy Spain Japan (2) United Kingdom Canada Australia (3) United States Emerging market & developing economies Sub-Saharan Africa Emerging & developing Europe Russia Emerging & developing Asia China India (4) Middle East, North Africa, Afghanistan, & Pakistan Latin America & the Caribbean Mexico Brazil 2017 Proj. Global Output Growth: 3.4% 1.9% 1.6% 1.3% 1.5% 0.7% 2.3% 0.8% 1.5% 1.9% 2.7% 2.3% 4.5% 2.8% 3.1% 1.1% 3.1% 1.2% 1.7% 0.2% 6.4% 6.5% 7.2% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Annual % Change Source: International Monetary Fund: World Economic Outlook Update, January 2017; World Economic Outlook Database, October Notes: 1. Real effective exchange rates are assumed to remain constant at the levels prevailing during November 4-December 2, Economies are listed on the basis of economic size. The aggregated quarterly data are seasonally adjusted. 2. Japan's historical national accounts figures reflect a comprehensive revision by the national authorities, released in December The main revisions are the switch from the System of National Accounts 1993 to the System of National Accounts 2008 and the updating of the benchmark year from 2005 to Australia's projected output growth is from the IMF's October 2016 WEO Database. 4. For India, data and forecasts are presented on a fiscal year basis and GDP from 2011 onward is based on GDP at market prices with FY2011/12 as a base year.

4 International Population Dynamics, 16 Largest Nations Population (Millions) Nation Net Change % Change Nigeria % Ethiopia % Egypt % Pakistan % Philippines % India 1, , % Mexico % Bangladesh % Indonesia % United States % Vietnam % Brazil % China 1, , % Germany % Russian Federation % Japan % World 7.3 billion 9.7 billion 2.4 billion 32.3% Source: United Nations, Department of Economic and Social Affairs, Population Division (2015). World Population Prospects: The 2015 Revision. *For statistical purposes, the data for China do not include Hong Kong and Macao, Special Administrative Regions (SAR) of China, and Taiwan Province of China.

5 Niamey Vice (Fertility Rates by Country, 2014) Rank* Source: World Bank, World Development Indicators Top 15 Bottom 15 Country Fertility Rate Rank* Country Fertility Rate 1 Niger Germany Somalia Italy Mali Malta Chad Hungary Angola Slovak Republic Congo, Dem. Rep Greece Burundi Poland Uganda Spain Gambia, The Bosnia and Herzegovina Nigeria Moldova Burkina Faso Singapore Mozambique Macao SAR, China Zambia Hong Kong SAR, China Tanzania Portugal Malawi Korea, Rep *Rank among 200 countries for which data are available for the most recent year (2014) **Total fertility rate represents the number of children that would be born to a woman if she were to live to the end of her childbearing years and bear children in accordance with age-specific fertility rates of the specified year.

6 Niamey, Niger Photo: Supporters of incumbent President Mahamadou Issoufou cheer at a campaign rally in Niamey on February 18, 2016.Joe Penney/REUTERS.

7 Global Debt to Exacerbate Slow Growth? According to the IMF, global debt reached an all-time high in 2015; At $152 trillion, global gross debt of the nonfinancial sector now represents 225% of global GDP; About 2/3 of this debt is in the private sector; Current low nominal-growth environment is making adjustment difficult, setting the stage for a vicious feedback loop in which lower growth hampers deleveraging and the debt overhang exacerbates the slowdown. 2 Sources: 1. International Monetary Fund. October World Economic Outlook: Subdued Demand: Symptoms and Remedies. 2. International Monetary Fund (IMF). October Fiscal Monitor: Debt Use It Wisely. Note: The nonfinancial sector comprises the general government, nonfinancial firms, and households. Gross debt represents the unconsolidated liabilities of the three.

8 NYMEX Crude Oil Future Prices in U.S. Dollars January 2001 through January 2017 $140 $120 $100 January 2017: $52.61 /Barrel $/Barrel $80 $60 $40 $20 $0 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 Source: U.S. Energy Information Administration *Month of January = average of daily prices from 1/3-1/31

9 Baltic Dry Index April 2009 through February ,000 4,000 3,000 February 3 rd 752 2,000 1,000 0 Jan. 4, 1985: 1,000 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Source: Quandl.com The Baltic Dry Index (BDI) is a measure of the price of shipping major raw materials such as metals, grains, and fossil fuels by sea. The BDI is a composite of 3 sub-indices, each covering a different carrier size: Capesize, Panamax, and Supramax.

10 USA CSI (Commercial Situation Investigation) Photo: AMCNetworks.com

11 % Change from Preceding Period (SAAR) Gross Domestic Product 1990Q1 through 2016Q4* 8% 6% 4% 2% 0% -2% -4% -6% -8% 2016Q4: +1.9% -10% 1990Q1 1990Q3 1991Q1 1991Q3 1992Q1 1992Q3 1993Q1 1993Q3 1994Q1 1994Q3 1995Q1 1995Q3 1996Q1 1996Q3 1997Q1 1997Q3 1998Q1 1998Q3 1999Q1 1999Q3 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 Source: Bureau of Economic Analysis *1 st (Advance) Estimate

12 Percent Change from Preceding Period (SAAR) Contributions to GDP Growth by Component 2016Q1 2016Q4* SAAR (%) Q1 2016Q2 2016Q3 2016Q GDP -3.0 Personal Consumption Government Spending Net Exports Gross Investment Source: Bureau of Economic Analysis *1 st (Advance) Estimate 2016Q4: +1.9%

13 Net Change in U.S. Jobs, BLS January 2002 through January Thousands January 2017: +227K Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 Source: U.S. Bureau of Labor Statistics

14 National Nonfarm Employment by Industry Sector January 2016 v. January 2017 Professional and Business Services 574 Education and Health Services 556 Trade, Transportation, and Utilities 372 Leisure and Hospitality 347 Financial Activities 190 Construction 170 Government 162 Other Services 70 Information Manufacturing All told 2,343K jobs gained Mining and Logging Thousands, SA Source: U.S. Bureau of Labor Statistics

15 U.S. Employment to Population Ratio January 2000 January January 2017: 59.9% Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Source: U.S. Bureau of Labor Statistics Note: Civilian employment-population ratio, population 16 years and over, seasonally adjusted (SA).

16 New York City Nonfarm Employment by Industry Sector Groups (NSA) December 2015 v. December 2016 Absolute Change Education and Health Services 25,500 Leisure and Hospitality 14,700 Trade, Transportation, and Utilities 8,000 Professional and Business Services 7,700 Other Services 6,400 Government Mining, Logging, and Construction Manufacturing ,200 3,100 NY City Total: +63.5K; +1.5% NY Total (SA): K; +1.2% Information Financial Activities -2,200-4,200 US Total (SA): +2,242K; +1.6% -10,000-5, ,000 10,000 15,000 20,000 25,000 30,000 Source: U.S. Bureau of Labor Statistics

17 Baltimore-Columbia-Towson MSA Nonfarm Employment by Industry Sector Groups (NSA) December 2015 v. December 2016 Absolute Change Education and Health Services 9,600 Professional and Business Services Leisure and Hospitality 5,000 6,300 Government 3,000 Other Services 1,600 Information Manufacturing Financial Activities Baltimore MSA Total: +22.2K; +1.6% MD Total (SA): +30.1K; +1.1% Mining, Logging, and Construction Trade, Transportation, and Utilities -1,100-1,200 US Total (SA): +2,242K; +1.6% -5,000-2,000 1,000 4,000 7,000 10,000 Source: U.S. Bureau of Labor Statistics

18 Boston-Cambridge-Quincy MA-NH NECTA Nonfarm Employment by Industry Sector Groups (NSA) December 2015 v. December 2016 Absolute Change Education & Health Services 16,500 Professional & Business Services Other Services 9,200 10,800 Financial Activities Mining, Logging, and Construction Trade, Transportation & Utilities Government Information Leisure & Hospitality Manufacturing -2, ,400 5,100 3,600 3,000 1,300 Boston NECTA Total: +53.2K; +2.0% MA Total (SA): +75.0K; +2.1% US Total (SA): +2,242K; +1.6% -5, ,000 10,000 15,000 Source: U.S. Bureau of Labor Statistics *NECTA: New England City and Town Area

19 Employment Growth, U.S. States (SA) December 2015 v. December 2016 Percent Change RANK STATE % RANK STATE % RANK STATE % 1 OREGON SOUTH CAROLINA DELAWARE FLORIDA TENNESSEE ILLINOIS NEVADA MINNESOTA IOWA WASHINGTON SOUTH DAKOTA PENNSYLVANIA UTAH ARIZONA ARKANSAS GEORGIA VIRGINIA NEW JERSEY DISTRICT OF COLUMBIA NEW YORK NEW MEXICO MISSOURI MARYLAND WEST VIRGINIA HAWAII ALABAMA MAINE MASSACHUSETTS WISCONSIN CONNECTICUT CALIFORNIA MONTANA LOUISIANA NORTH CAROLINA INDIANA OKLAHOMA COLORADO OHIO KANSAS IDAHO NEBRASKA MISSISSIPPI TEXAS RHODE ISLAND ALASKA MICHIGAN VERMONT NORTH DAKOTA NEW HAMPSHIRE KENTUCKY WYOMING -2.8 Source: U.S. Bureau of Labor Statistics U.S. Year-over-year Percent Change: +1.6%

20 Employment Growth, 24 Largest Metros (NSA) December 2015 v. December 2016 Percent Change Rank MSA % Rank MSA % 1 Orlando-Kissimmee-Sanford, FL MSA San Diego-Carlsbad, CA MSA Seattle-Tacoma-Bellevue, WA MSA San Francisco-Oakland-Hayward, CA MSA Dallas-Fort Worth-Arlington, TX MSA Charlotte-Concord-Gastonia, NC-SC MSA Denver-Aurora-Lakewood, CO MSA Detroit-Warren-Dearborn, MI MSA Riverside-San Bernardino-Ontario, CA MSA 6 Atlanta-Sandy Springs-Roswell, GA MSA St. Louis, MO-IL MSA (1) Miami-Fort Lauderdale-West Palm Beach, FL MSA Source: U.S. Bureau of Labor Statistics Baltimore-Columbia-Towson, MD MSA 1.6 Los Angeles-Long Beach-Anaheim, CA MSA Minneapolis-St. Paul-Bloomington, MN-WI MSA Philadelphia-Camden-Wilmington, PA-NJ-DE-MD MSA 9 Portland-Vancouver-Hillsboro, OR-WA MSA Phoenix-Mesa-Scottsdale, AZ MSA Tampa-St. Petersburg-Clearwater, FL MSA Washington-Arlington-Alexandria, DC-VA-MD-WV MSA Boston-Cambridge-Nashua, MA-NH 12 Metro NECTA *CES Survey New York-Newark-Jersey City, NY- NJ-PA MSA Chicago-Naperville-Elgin, IL-IN-WI MSA Houston-The Woodlands-Sugar Land, TX MSA 0.5

21 Unemployment Rates, 24 Largest Metros (NSA) December 2016 Rank MSA UR Rank MSA UR Boston-Cambridge-Nashua, MA-NH Orlando-Kissimmee-Sanford, FL MSA 4.2 Metro NECTA 2 Denver-Aurora-Lakewood, CO MSA San Diego-Carlsbad, CA MSA Washington-Arlington-Alexandria, Los Angeles-Long Beach-Anaheim, CA DC-VA-MD-WV MSA MSA 3 San Francisco-Oakland-Hayward, CA MSA Philadelphia-Camden-Wilmington, 5 Minneapolis-St. Paul-Bloomington, MN-WI MSA PA-NJ-DE-MD MSA Tampa-St. Petersburg-Clearwater, FL MSA Dallas-Fort Worth-Arlington, TX MSA Charlotte-Concord-Gastonia, NC-SC MSA Baltimore-Columbia-Towson, MD MSA Detroit-Warren-Dearborn, MI MSA Portland-Vancouver-Hillsboro, OR-WA MSA Miami-Fort Lauderdale-West Palm Beach, FL MSA 7 Seattle-Tacoma-Bellevue, WA MSA Atlanta-Sandy Springs-Roswell, GA MSA St. Louis, MO-IL MSA (1) New York-Newark-Jersey City, NY- NJ-PA MSA Riverside-San Bernardino-Ontario, CA MSA Houston-The Woodlands-Sugar Land, TX MSA 11 Phoenix-Mesa-Scottsdale, AZ MSA Chicago-Naperville-Elgin, IL-IN-WI MSA Source: U.S. Bureau of Labor Statistics U.S. Unemployment Rate December 2016: 4.7% January 2017: 4.8% 1. Area boundaries do not reflect official OMB definitions.

22 21 Jump Street (And Other Addresses of Interest) Photo: TheMoveDatabase.org

23 15-Year & 30-Year Fixed Mortgage Rates February 1995 through February 2017* 10% 9% 8% 7% 15-yr 30-yr Rate 6% 5% 4% 3% 2% 4.19% 3.41% 1% Feb-95 Aug-95 Feb-96 Aug-96 Feb-97 Aug-97 Feb-98 Aug-98 Feb-99 Aug-99 Feb-00 Aug-00 Feb-01 Aug-01 Feb-02 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16 Feb-17 Source: Freddie Mac *Week ending 2/2/2017

24 U.S. Homeownership (NSA) 1980Q4-2016Q4 70% 68% 2016Q4: 63.7% 66% 64% 62% 60% 58% 1980Q4 1981Q4 1982Q4 1983Q4 1984Q4 1985Q4 1986Q4 1987Q4 1988Q4 1989Q4 1990Q4 1991Q4 1992Q4 1993Q4 1994Q4 1995Q4 1996Q4 1997Q4 1998Q4 1999Q Q4 2002Q4 2003Q Q Q Q4 2011Q4 2012Q4 2013Q4 2014Q4 2015Q4 2016Q4 Source: U.S. Census Bureau *NSA: not seasonally adjusted

25 U.S. Private New Multifamily Construction December 1993 through December 2016 $70 $60 $ Billions (SAAR) $50 $40 $30 $20 $10 $0 Dec-93 Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Source: U.S. Census Bureau

26 12-Month % Change S&P/Case-Shiller Home Price Indices for Select Metros November 2016, 12-Month Percentage Change 9% 8.1% 8% 7% 6.6% 6% 5.3% 5.3% 5.5% 5.5% 6.0% 6.1% 6.1% 5% 3.7% 4.0% 4% 3% 2.4% 2% 1% 0% 8.7% Source: Standard & Poor s

27 U.S. Single-Family Housing Starts December 1999 through December ,000 1,800 Thousands, SAAR 1,600 1,400 1,200 1, December 2016: 795K Dec-99 Jun-00 Dec-00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Source: U.S. Census Bureau

28 Down to The Wire Photo: RecapGuide.com

29 Sales Growth by Type of Business December 2015 v. December 2016* Internet, etc. Retailers Miscellaneous Store Retailers Motor Vehicle & Parts Dealers Gasoline Stations Health & Personal Care Stores Furniture & Home Furn. Stores Food Services & Drinking Places Building Material & Garden Supplies Dealers Food & Beverage Stores Clothing & Clothing Accessories Stores Electronics & Appliance Stores General Merchandise Stores Sporting Goods, Hobby, Book & Music Stores -2.4% -2.8% -3.6% 0.9% 3.1% 2.8% 2.6% 2.5% 7.1% 6.8% 6.3% 6.2% 13.2% -10% -5% 0% 5% 10% 15% 12-month % change Source: U.S. Census Bureau *December 2016 advanced estimate Total Retail Sales: +4.1% YOY

30 U.S. Saving Rate, January 2005 December 2016 (Savings as Percentage of Personal Disposable Income) 12.0 Savings Rate (%) December 2016: 5.4% Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Source: Bureau of Economic Analysis

31 U.S. Gross Private Domestic Investment (SAAR) % Change from Previous Quarter, 2000Q1 2016Q4* Q1 2000Q4 2001Q3 2002Q2 2003Q1 2016Q4: +10.7% 2003Q4 2004Q3 2005Q2 2006Q1 2006Q4 2007Q3 2008Q2 2009Q1 2009Q4 2010Q3 2011Q2 2012Q1 2012Q4 2013Q3 2014Q2 2015Q1 2015Q4 2016Q3 Source: Bureau of Economic Analysis *1 st (Advance) Estimate

32 Conference Board Leading Economic Indicators Index August 2007 through December % 1.0% One-month Percent Change 0.5% 0.0% -0.5% -1.0% -1.5% December 2016: where 2010: 100 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Source: Conference Board

33 The Closer Global economy remains weak, and correspondingly... ; Global money has continued to pour into America in search of yield and safety, including into commercial real estate that was particularly true in 2015, a bit less true in 2016; Inflationary pressures are on the rise so, too, are interest rates that could begin to squeeze asset prices in 2017, particularly if expected tax cuts are not passed into law; There are indications of minibubbles forming in commercial real estate, particularly in office, lodging and multifamily segments; But tax cuts, stimulus, and more defense spending should see us through ; There are also longer-term structural considerations, including the national debt and pending insolvencies of Medicare and Social Security the longerterm outlook may be deteriorating even as the short-run improves; 2017 shaping up to be solid, but beyond 2018, we may have some issues... *Kyra Sedgwick as Brenda Leigh Johnson Photo: Google

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