real estate 2015 and beyond - rascw. · pdf filereal estate 2015 and beyond jonathan smoke ......

© 2015 Move, Inc. All rights reserved. Do not copy or distribute. 1

REAL ESTATE 2015 AND BEYOND Jonathan Smoke Chief Economist

September 21, 2015


NATIONAL CONTEXT

© 2015 Move, Inc. All rights reserved. Do not copy or distribute.

JOB EXPANSION CONTINUES 173,000 jobs created in August, 2.919 million jobs in last 12 mos.

3

Source: Bureau of Labor Statistics

-

2.0

4.0

6.0

8.0

10.0

12.0

120.0

125.0

130.0

135.0

140.0

145.0

2000

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.05

2000

.09

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Mill

ions

Employment and Unemployment Nonfarm Employment Unemployment Rate


REAL ESTATE RECOVERY Sales up 10% over ’14 in July; new high for median $ in June

4

Source: National Association of REALTORS® Existing Home Sales Report

$0

$50,000

$100,000

$150,000

$200,000

$250,000

0

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2000

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2015

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Existing Home Sales and Prices EHS SAAR Med Exist Home Price


COMPOSITION BACK TO NORMAL Distress activity down substantially

5

Source: National Association of REALTORS® Monthly Realtor Confidence Survey

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008

.10

2008

.12

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.02

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.06

2009

.08

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.12

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2011

.06

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.02

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.06

2014

.08

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2014

.12

2015

.02

2015

.04

2015

.06

Composition of Sales by Type Foreclosed Short Sale Normal


INVENTORY HAS BEEN A CONSTRAINT Demand continues to exceed supply

6

Source: National Association of REALTORS®, Commerce Department

0.0

2.0

4.0

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2000

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2014

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2015

.01

2015

.05

Months' Supply of Homes for Sale Existing New


NEW CONSTRUCTION FINALLY UP Highest level of activity since 2006; SF up 19% over last year

7

Source: Commerce Department

0

500

1000

1500

2000

2500

Residential Construction Single-Family Starts Multi-Family Starts


SALES NOW BEST IN 9 YEARS Pending sales up 7% and new sales up 26% in July over last year

8

Source: National Association of REALTORS®, Commerce Department

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

0.0

20.0

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60.0

80.0

100.0

120.0

140.0

2001

.01

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2001

.09

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2013

.01

2013

.05

2013

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2014

.01

2014

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.09

2015

.01

2015

.05

Home Sales (New Contracts) SAAR Pending Home Sales (Existing) New Home Sales


INVENTORY GRADUALLY INCREASING Age of inventory increasing as we move into slower time of year

9

Source: Realtor.com®

0

20

40

60

80

100

120

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

Listings and Median Age of Inventory Listings Median Age of Inventory


ASKING PRICES AND RENTS UP Rents now growing more quickly than home prices

10

Source: Realtor.com® and Altos Research

$1,300

$1,400

$1,500

$1,600

$1,700

$1,800

$1,900

$2,000

$150,000

$170,000

$190,000

$210,000

$230,000

$250,000

$270,000

National Home Price and Rent Trends Median Existing List Price Median Asking Rent


LISTING PRICES GREW 7% Y/Y IN AUG Median list price increases are widespread

August 2015

Source: Realtor.com®


RENTS RISING Y/Y IN 2/3 OF COUNTIES Rent increases adding to demand for buying

2015

Source: Realtor.com® Analysis of HUD Fair Market Rents


NEARING THE END OF AN ERA Low rates have enabled purchasing power but now weakening

13

Source: Commerce Department and National Association of REALTORS®

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2002

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.01

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.01

2014

.05

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.09

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.01

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Income and Affordability Median Family Income Affordability Index


CHEAPER TO BUY IN 4/5 OF COUNTIES Simple monthly cost analysis favors buying

Source: Realtor.com® Analysis of HUD Fair Market Rents, Nielsen Pop-Facts Demographics and Realtor.com® Data


INCREDIBLE RATES REMAIN China and the stock market gave buyers another reprieve

15

Source: Freddie Mac

0.00

1.00

2.00

3.00

4.00

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6.00

7.00

8.00

9.00

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.04

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.09

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.07

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.04

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.02

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.12

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.10

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.03

2009

.08

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.01

2010

.06

2010

.11

2011

.04

2011

.09

2012

.02

2012

.07

2012

.12

2013

.05

2013

.10

2014

.03

2014

.08

2015

.01

2015

.06

Published Mortgage Rates

30 yr Fixed 1 Yr Adj


DEMAND DRIVERS


DEMOGRAPHICS SET THE TABLE Population and its composition define the future

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

US Live Births by Year and Generation

Boom X Y Z

Source: Realtor.com® Analysis of US National Center for Health Statistics


0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

0 5 10 15 20 25 30 35 40 45 50 55 60 65 70

Thou

sand

s

Current US Population By Age, 0-74

18

DEMOGRAPHICS SET THE TABLE When viewed by age, importance of Millennials becomes clearer

Source: Realtor.com® Analysis of US Census Bureau Population Estimates

Boom X Y Z


EMPLOYMENT BEGETS OPPORTUNITY 752,000 jobs created in last 12 months for 25-34 year olds

19

26%

13%

33%

30%

25%

13%

32%

Source: Bureau of Labor Statistics, Realtor.com® Analysis

-6.0%

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

Year-Over-Year Gains in Civilian Employment Civilian Employment 25-34 Employment


MILLENNIAL OWNERSHIP VARIES Strong correlation with affordable markets

Source: Nielsen Demographics PopFacts 2015, Realtor.com® Analysis


LIFE DRIVES HOUSING DEMAND Today’s Millennial home shoppers are propelled by success

26%

13%

33%

30%

25%

13%

32%

Source: BDX Home Shopper Insights Panel, Summer 2015

8

8

12

9

18

13

27

26

28

24

14

14

18

19

20

22

28

32

34

35

0% 25% 50%

Desire to live closer to work/office

Desire to live closer to good schools

Increase in family size

Planning to increase family size

Change of family circumstance/composition

Increasing rent

Favorable interest rates

Favorable home prices

Tired of current home

Increase in income

% of respondents

Top 10 millennial triggers

69% of Millennial shoppers indicate

some form of change in family size* as a trigger

*Change in Family Size includes: Change of family circumstances/composition, Increase in family size, Decrease in family size, Planning to increase family size, Upcoming decrease in family size, Older parent moving into my home, Getting married/moving in with partner.

ALL MILLENNIAL


BIRTH TREND INCREASING Baby needs a new pair of shoes and a room of her own

26%

13%

33%

30%

25%

13%

32%

Source: National Vital Statistics Reports, NCHS, Haver Analytics

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2001

.01

2001

.04

2001

.07

2001

.10

2002

.01

2002

.04

2002

.07

2002

.10

2003

.01

2003

.04

2003

.07

2003

.10

2004

.01

2004

.04

2004

.07

2004

.10

2005

.01

2005

.04

2005

.07

2005

.10

2006

.01

2006

.04

2006

.07

2006

.10

2007

.01

2007

.04

2007

.07

2007

.10

2008

.01

2008

.04

2008

.07

2008

.10

2009

.01

2009

.04

2009

.07

2009

.10

2010

.01

2010

.04

2010

.07

2010

.10

2011

.01

2011

.04

2011

.07

2011

.10

2012

.01

2012

.04

2012

.07

2012

.10

2013

.01

2013

.04

2013

.07

2013

.10

2014

.01

2014

.04

2014

.07

2014

.10

Live Births, % Change YY


BOOMERS KEEP DISTURBING Boomer wave is causing a major population shift

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

2015 2020

Population by Age (United States) Under 25 25-34 35-54 55+

Over the next 5 years:

Population grows 4%

55+ grows 12%

35-54 declines 1%

25-34 grows 1%

Under 25 grows 1%

27%

26%

13%

33%

30%

25%

13%

32%

Source: Nielsen Demographics Pop-Facts 2015


WE COULD DO MORE


CREDIT ACCESS SLOWLY IMPROVING Mortgage access up 8.6% year-over-year in August

25

26%

13%

33%

30%

25%

13%

32%

Source: Mortgage Bankers Association, Haver Analytics

0

100

200

300

400

500

600

700

800

900

1000

Mortgage Credit Availability Index Mar-2012=100


300-499 4.9 500-549

7.6

550-599 9.4

600-649 10.3

650-699 13 700-749

16.6

750-799 18.2

800-850 19.9

FICO Population Distribution (Apr 2015)

26

BUT CREDIT STILL A PROBLEM In July the average FICO score on a closed mortgage loan was 725; the average denied score was 668

26%

13%

33%

13%

Source: Ellie Mae and Fair Isaac Corporation

300

350

400

450

500

550

600

650

700

750

800

2011

.08

2011

.10

2011

.12

2012

.02

2012

.04

2012

.06

2012

.08

2012

.10

2012

.12

2013

.02

2013

.04

2013

.06

2013

.08

2013

.10

2013

.12

2014

.02

2014

.04

2014

.06

2014

.08

2014

.10

2014

.12

2015

.02

2015

.04

2015

.06

Average FICO Score by Closed and Denied Applications

Closed Denied 2014 Median FICO (713)


• More jobs • Millennials reaching tipping point of key 25-34 year range • More households •  Improved household credit • More life events

•  Favorable mortgage rates • Slightly better credit availability •  FHA more attractive

•  Late peak in inventory

27

KEY FACTORS COMING TOGETHER More demand and recovery in first-time buyers


DEMAND IN 2015 IS STRONG Traffic up 21% over July 2014; 21-34 year olds up 33%

28

Source: Realtor.com® Analysis of comScore Media Metrix® Real Estate Category Unique Visitor Data

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Thou

sand

s

Thou

sand

s

Real Estate Web Unique Visitors by Age 21-34 35-54 55+ All Traffic (Right Axis)

33% of 55+, 57% of 35-54, and 70% of 21-34 in July


IMPEDIMENTS TO PURCHASE Biggest issues for first-timers are supply, time, and down payment

29

26%

13%

33%

30%

25%

13%

32%

Source: Realtor.com Survey of Buyer Traffic, August 2015

0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 50.00%

Have not yet found a house that meets my needs

Cannot find a good house in my budget range

Always overbid by other buyers

Just starting to explore

Haven't decided on a specific neighborhood/town

Need to improve credit score

Lack enough funds for down payment

I owe more on my current home than it is worth

Can't sell current home

Currently on a lease

Having difficulty qualifying for a mortgage

What's Getting in the Way of Making a Home Purchase? Repeat First-Time All Buyers


THERE IS NO SUCH THING AS A US HOUSING MARKET


EVEN MORTGAGE RATES VARY 30-Year-Fixed in various states

31 Source: Realtor.com


RECORD NUMBER OF JOBS Unemployment rate back down and far better than US overall

32

Source: BLS, Moody’s Analytics

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

300,000

310,000

320,000

330,000

340,000

350,000

360,000

370,000

380,000

390,000

400,000

Jan-

00

Jun-

00

Nov

-00

Apr

-01

Sep

-01

Feb-

02

Jul-0

2 D

ec-0

2 M

ay-0

3 O

ct-0

3 M

ar-0

4 A

ug-0

4 Ja

n-05

Ju

n-05

N

ov-0

5 A

pr-0

6 S

ep-0

6 Fe

b-07

Ju

l-07

Dec

-07

May

-08

Oct

-08

Mar

-09

Aug

-09

Jan-

10

Jun-

10

Nov

-10

Apr

-11

Sep

-11

Feb-

12

Jul-1

2 D

ec-1

2 M

ay-1

3 O

ct-1

3 M

ar-1

4 A

ug-1

4 Ja

n-15

Ju

n-15

Madison Employment and Unemployment Rate Total Nonfarm Employment (SA) Unemployment Rate, (%, SA)


NEW CONSTRUCTION NOT RECOVERED Multi-family strong, but single-family far from peak

33

Source: Commerce Department, Moody’s Analytics

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Jan-

00

Jun-

00

Nov

-00

Apr

-01

Sep

-01

Feb-

02

Jul-0

2

Dec

-02

May

-03

Oct

-03

Mar

-04

Aug

-04

Jan-

05

Jun-

05

Nov

-05

Apr

-06

Sep

-06

Feb-

07

Jul-0

7

Dec

-07

May

-08

Oct

-08

Mar

-09

Aug

-09

Jan-

10

Jun-

10

Nov

-10

Apr

-11

Sep

-11

Feb-

12

Jul-1

2

Dec

-12

May

-13

Oct

-13

Mar

-14

Aug

-14

Jan-

15

Jun-

15

New Construction in Madison Single-Family Starts Multi-Family Starts


EXISTING HOME PRICES FOR STATE Looking at year-over-year peaks, the state looks recovered

34

Source: Realtor.com Analysis of Deed Transfers


MADISON EXISTING HOME PRICES Madison also appears recovered

35

Source: Realtor.com Analysis of Deed Transfers


LIST PRICES KEEP SOME MOMENTUM List prices showing solid year-over-year gains (Aug 2015)

36

Source: Realtor.com


Y/Y PRICE VARIATION IN AUGUST Madison is second fastest appreciating metro (Aug 2015)

37

Source: Realtor.com


INVENTORY REMAINS TIGHT Madison saw fewer homes for sale than last year all year

38

Source: Realtor.com


ACTIVE INVENTORY Madison has second largest inventory in the state (Aug 2015)

39

Source: Realtor.com


AGE OF INVENTORY DOWN Inventory moving faster year-over-year (Aug 2015)

40


HOTTEST ZIPS THIS YEAR Based on Supply and Demand

41

Source: Realtor.com


HOTTEST ZIPS THIS YEAR Based on Supply and Demand (Madison MSA)

42

Source: Realtor.com


HOTTEST HOMES LAST 90 DAYS 6 of the 200 Hottest Listings in WI Are In Madison MSA

43


0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

2015 2020

Population by Age (Madison) Under 25 25-34 35-54 55+

OLDER SHIFT IN MADISON TOO Over 55 grows from smaller base but market remains young

44


26%

27%

15%

33%

28%

26%

15%

31%

Over the next 5 years:

Population grows 4%

55+ grows 15%

35-54 grows 3%

25-34 declines 3%

Under 25 declines 2%


MILLENNIAL PROPENSITY 25-34 interest relative to other age groups (April 2015)

45

Source: Realtor.com


FOCUS ON MADISON 25-34 interest relative to other age groups (April 2015)

46

Source: Realtor.com


FOCUS ON MADISON 50-64 interest relative to other age groups (April 2015)

47

Source: Realtor.com


HOME OWNERSHIP IS STRONG Overall home ownership rates well above nation in 9/10 Zips

48



MILLENNIAL OWNERSHIP 25-34 homeowner rates in WI also well above national average

49



HOUSEHOLD GROWTH 2015-2020 Madison should see substantial growth

50



TOP ZIPS FOR REMODELING Nearly 1/5 households in the market report $1K+ improvements

51

Source: Realtor.com


ENDING ON A POSITIVE NOTE(S)

1.  Rents are rising and it’s cheaper to buy a home in 80% of the country—owning is cool again

2.  Despite the last decade, real estate is viewed very positively, especially by young people

3.  This off season has the potential to be much busier than usual

4.  Real estate fundamentals are finally healthy again, and the future looks good

Courtesy of DJ Smokey Smoke


• GDP grows 1.9%, slightly weaker than last year • Payroll growth of 2.77 million jobs or 231,000 per month •  1.3 million household formations

• Home prices appreciate 6.3% (median existing home price) • Existing home sales grow 7% to 5.25 million • New home sales grow 14% to 500,000 • Housing starts increase 8% to 1.08 million •  30-year fixed rate ends year at 4.22%

• Affordability declines 2%

53

REALTOR.COM® YEAR END FORECAST Key economic and housing metrics


Jonathan Smoke Chief Economist

realtor.com® [email protected]

@SmokeonHousing 703.634.9193

THANK YOU


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