economic and real estate market outlook - · animal spirit revival of consumers? ... professional...
TRANSCRIPT
By Lawrence Yun, Ph.D.Chief Economist, National Association of REALTORS®
Presentation at NAR Legislative MeetingsWashington, DC
May 18, 2017
Economic and Real Estate Market
Outlook
2008 2009 2010 2011 2012 2013 2014 2015 20163,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
6,000,000
???
Existing Home Sales – Mostly Rising in Recent Years(Exceptions: when home buyer tax credit ended and “taper tantrum”)
2016 - Dec 2017 - Jan 2017 - Feb 2017 - Mar01234567
Existing Home Sales Rising After Election(% change from one year ago)
2016 - Q1 2016 - Q2 2016 - Q3 2016 - Q4 2017 - Q140
41
42
43
44
45
46
47
48
NAR HOME Survey of Consumers% Strongly indicating Good Time to Buy
2016 - Jan2016 - Feb2016 - Mar2016 - Apr2016 - May2016 - Jun2016 - Jul2016 - Aug2016 - Sep2016 - Oct2016 - Nov2016 - Dec2017 - Jan2017 - Feb2017 - Mar2017 - Apr80859095
100105110115120125130
Animal Spirit Revival of Consumers? Consumer Confidence Index
2016 - Jan2016 - Feb2016 - Mar2016 - Apr2016 - May2016 - Jun2016 - Jul2016 - Aug2016 - Sep2016 - Oct2016 - Nov2016 - Dec2017 - Jan2017 - Feb2017 - Mar2017 - Apr80
85
90
95
100
105
110
Animal Spirit Revival of Businesses? Small Business Optimism Index
2016 - Q1 2016 - Q2 2016 - Q3 2016 - Q4 2017 - Q125
27
29
31
33
35
37
39
41
NAR HOME Survey of Consumers% Strongly indicating Good Time to Sell
oPortia in the Merchant of Venice
“Mercy is twice blessed … it blesseth him that gives and him that takes”
oCommercial exchange is twice blessed … not a zero-sum game
• Benefits the buyer • Benefits the seller
Contradiction?More indicating Good Time to Buy and Good Time to Sell !!!
0123456789
10 Low Supply over the past 5 year
Home price grew by 41% … 4 times faster than income
Inventory of Homes – Low Months Supply
Thousand units
-100
100
300
500
700
900
1100
1300
1500
Single-family Housing Starts(Cannot Ramp Up because of Lots, Labor, Lending, Lumber)
Borrowers Not Defaulting(Serious Delinquency Rate)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Veterans Affairs Mortgages
All MortgagesFHA Mortgages
Homeownership Rate and Home Price By Region
West Northeast South Midwest50
55
60
65
70
West Northeast South Midwest$0
$100,000
$200,000
$300,000
$400,000
REALTORS® ConsumersNY Fed Survey
EconomistsWSJ Panelists
ConsumersFannie Mae
ConsumersNAR HOME Survey
4.0%
Next 12 months
5.1%
Next 12 months
4.1%
Next 12 months
53% prices will rise
8% prices will fall
51% prices will rise
7% price will fall
Home Price Growth Expectations
Secretary Ben Carson
Kevin Kane, Chief Market Analyst at HUD
Jonathan Spader, Harvard
Joel Kan, Mortgage Bankers Association
Christie Peale, NYC Neighborhoods
Lawrence Yun, NAR
June 1st at HUD
NEW ERA OF HOMEOWNERSHIP CONFERENCE IN DC
Dr. Ken Rosen of UC Berkeley and his team on research findings
Dr. Jim Gaines of Texas A&M
Joel Singer of California Assoc. REALTORS®
Former FHA Commissioners
Current Trump Administration Official (invited)
Bill Brown and Lawrence Yun, NAR
SUSTAINABLE HOMEOWNERSHIP CONFERENCE – JUNE 9TH AT BERKLEY STADIUM
-60
-40
-20
0
20
40
60
80
100
120
Mortgage Refinance Applications: Buckling(% change from a year ago)
Jobs(8 million lost … 16 million gained)
120,000
125,000
130,000
135,000
140,000
145,000
150,000
In thousands
Health CareProfessional & Tech Service
HospitalityAdministrative Service
ConstructionState & Local Govt
Financial & InsuranceEducation
Retail SalesReal Estate & Leasing
WholesaleManufacturing
Federal GovtMining & Logging
Information
-50 0 50 100 150 200 250 300 350 400 450
Jobs by Sector
Net Change over past 12 months (in thousands)
05
10152025303540
$15.40 $18.01
$26.15 $26.57 $28.55 $29.93 $31.62 $32.56$37.96
Hourly Wage Rate by Sector
Less than $10Kto $25K to $50K to $75K to $100K Over $100K0%
5%
10%
15%
20%
25%
30%
REALTOR® Gross Income Distribution
Median Income of $42,500
Historic versus Modern Dorms
• Dorms are randomly assigned
• 90% were glad they were assigned that dorm
• Either A>B or B>A … Cannot logically be both A and B is much better than A and B
• Heavy Inertia about not wanting to move
Something’s Not Right about Not Wanting to Move
oRetiree living in San Francisco could be super-happy living in
• Sedona• Bend• Ashville• Cape Cod• Sarasota• Traverse City• Lake home in Wisconsin …
oAirline overbooked seats• More volunteers when offer made before boarding; not after seated
How many homeowners are happy living in a wrong house?
Homebuyer Savings Account• Colorado• Mississippi• Montana• Virginia
• On-Deck• Iowa • Missouri• Oklahoma
Behavioral Economics … Nudge People
2015 2016 2017Forecast
2018 Forecast
GDP Growth
2.6% 1.6% 2.2% 2.4%
Job Growth +2.6 million
+2.0 million
+2.1 million
+2.4million
CPI Inflation 0.3% 1.3% 2.3% 2.2%
Economic Forecast
oFed Funds Rate: 2 more hikes in 2017
oUnwinding Bond and MBS Asset Holding:• Unlikely to buy more mortgages from MBS proceeds (refis and full payment)
• Gradual … Gradual … Gradual … 20 year process• Without Fed Buying … Fewer buyers of Mortgages … Mortgage rates will rise
Monetary Policy
100000
105000
110000
115000
120000
125000
130000
Actual versus projected HouseholdsKC Federal Reserve estimate of 6.9 million missing households
30000
35000
40000
45000
50000
Population in their 20s (in thousands)
Softening Rental DemandInvestors slowly sell single-family rental homes?
Housing Forecast
2015 2016 2017 Foreca
st
2018 Foreca
stNew Home Sales
500,000 560,000 620,000 670,000
Existing Home Sales
5.3 million
5.4 million
5.6 million
5.8 million
Median Price Growth
+ 6.8% +5.1% +5.0% +3.5%
30-year Rate 3.9% 3.6% 4.3% 5.0%
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
6,000,000
6,500,000
7,000,000
7,500,000
Existing Home Sales
o Dodd-Frank?
o Fannie/Freddie and Mortgage Availability?
o Tax Simplification? and Mortgage Interest Deduction and 1031 exchange?
o International Trade? … Viewing as Zero-Sum Game?
o EPA, land use, development fees?
Trump Presidency
o Social Media impact on Buying Interest in LA zipcode• ask clients to post about the experience• correct misconception about down payment requirements
o FHA changes and Home Buying Impact
o Higher Future Earnings … from Home Price Appreciations
o Immigrants impact on Real Estate
o CBO’s long-term budget deficit projections … very ugly!• buy real estate and other tangible asset
REALTOR® University Lecture Series