Ted C. Jones, PhD Chief Economist

Ted C. Jones Chief Economist

The First People Not to Read the Apple Terms

& Conditions Prior To Clicking Accept Were Adam & Eve

When Getting On An Airplane, the Person On the Aisle Always

Gets There First

Things Change

Jobs are Everything Period

125

130

135

140

145

150

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

U.S. Jobs Jobs (Millions) Seasonally Adjusted

1.79% Prior 12 Months 2.64 Million Net New Jobs in Past 12-Months

U.S. Net Job Gains – Trailing 12-Months

0

1

2

3

4

'11 '12 '13 '14 '15 '16 '17 '18 '19

Jobs - Millions

U.S. Leisure & Hospitality Jobs

0

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0

16.5

Recession

Millions of Jobs Seasonally-Adjusted

+1.89% Past 12 Months

The Blood Pressure Test of the U.S. Economy

Hurricanes Harvey & Irma

3.2% 3.9% 12-Month Income Increase

Largest Since 2009

Unemployment Rate

48-Year Low (was 3.7% last month 49 Yrs)

$20

$22

$24

$26

$28

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19

U.S. Average Hourly Earnings $US Per Hour

Up 3.2 Percent in Past 12-Months To $27.48 Per Hour

90% $80 Billion Pay Less

Taxes

Extra Money Spent on Real Estate Annually

Due to Tax Cuts

Taxes – or Lack There of – Influences Where People Live & Businesses Relocate

Taxes Matter

U.S. Existing Home Sales & Median Prices Sales Trailing 12 Months

$180

$200

$220

$240

$260

$280

'14 '15 '16 '17 '18

4.8

5.0

5.2

5.4

5.6

Median Price Homes Sales

Median Price $ Thousands Home Sales 12-Months Millions

175

200

225

250

275

300

325

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

U.S. Average Existing Home Price $ Thousands – Not Seasonally Adjusted

All-Time Record June 2018

13.6% Percent of

U.S.

Population

Aged 25-34

36% Percent of

Homes

Purchased

Past 12-Months

700

800

900

1,000

1,100

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Austin-Round Rock MSA Jobs Jobs (Thousands) Seasonally Adjusted

3.39 Percent Prior 12 Months 35,400 Net New Jobs in Past 12-Months

Total Net Net

Jobs New New

Thousands Jobs Percent Jobs Percent

Employment Supersector Nov 2018 Today 5-Years Ago Thousands Change Thousands Change

Total 1,088.0 100.00% 100.00% 35.20 3.34% 179.90 19.8%

Mining, Logging and Construction 67.2 6.31% 5.20% 6.10 9.98% 20.00 42.4%

Manufacturing 58.0 5.45% 6.39% 0.20 0.35% - 0.0%

Trade-Transport-Utilities 194.1 18.24% 17.53% 11.60 6.36% 34.90 21.9%

Information 31.2 2.93% 2.71% 0.50 1.63% 6.60 26.8%

Financial Activites 61.6 5.79% 5.55% 0.60 0.98% 11.20 22.2%

Professional and Business Service 188.6 17.72% 15.98% 4.50 2.44% 43.50 30.0%

Education and Health Services 124.8 11.73% 11.55% 3.40 2.80% 19.90 19.0%

Leisure & Hospitality 133.6 12.55% 11.28% 4.20 3.25% 31.20 30.5%

Other 47.4 4.45% 4.54% 2.10 4.64% 6.20 15.0%

Government 181.5 17.05% 19.28% 2.00 1.11% 6.40 3.7%

Source: U.S. Bureau of Labor Statistics, Stewart Title Guaranty Company

All Jobs

12-Months 5 Years

Austin-Round Rock MSA Supersector Job Growth Analysis -- November 2018Not Seasonally Adjusted

Percent of

When You Get a Raise You Are Simply

Broke at a Higher Level

Dr Ivan Schmedemann, Professor Emeritus

Millennials Are the Future

and the Present

Austin-Round Rock MSA Home Sales & Median Prices Sales Trailing 12 Months

$200

$220

$240

$260

$280

$300

$320

'14 '15 '16 '17 '18 '19

29,000

30,000

31,000

32,000

33,000

34,000

35,000

Average Price Homes Sales

Median Price $ Thousands Home Sales 12-Months

Austin MSA Home Sales

0

1,000

2,000

3,000

4,000

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Number Per Month

4.6%

12-Month

Moving

Average

Of Median

Price

Increase

Y-O-Y

Austin-Round Rock MSA Residential Building Permits

0

5,000

10,000

15,000

20,000

25,000

30,000

'99

'00

'01

'02

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'05

'06

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'11

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Single Family Multi

Number of Dwelling Units

29,105 Permits is the Past 12 Months, Net 35,400 New Jobs

2018 is Latest 12 Months

Net Dwelling Jobs

New Unit Per New

Year Jobs Permits Dwelling

2013 38,300 20,865 1.84

2014 38,600 20,276 1.90

2015 41,400 22,370 1.85

2016 34,600 21,861 1.58

2017 32,600 26,700 1.22

Total 185,500 112,072 1.66

Austin-Round Rock MSA

Jobs & Residential Dwelling Unit Permits1.25 to

1.50 Net New Jobs Per

New Dwelling

Unit Is

Normal

No Where is It Written That Home Values Will Always

Go Up

The Same Goes for Rent Also

There are Three Kinds of People

That Can Buy a Home Without a Job

People with Gray Hair, Blue Hair or No Hair: Retirees

$150

$160

$170

$180

$190

$200

$210

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

U.S. Real Retail & Food Service Sales $ Billions – Seasonally Adjusted

0

2

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10

12

'00

'01

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E-Commerce Sales Percent of Total Sales – Not Seasonally Adjusted

om·ni·chan·nel /ˈämnəˌCHanl/ adjective adjective: omnichannel; adjective: omni-channel denoting or relating to a type of retail that integrates the different methods of shopping available to consumers (e.g., online, in a physical store, or by phone). "80 percent of sales for omnichannel retailers happen in the offline world"

Omnichannel Marketing

Omnichannel Marketing

• The number of people who shopped both online and in-store Cyber Monday was up nearly 40% over 2017

• Multichannel shoppers outspent single-channel shoppers by up to $93 on average

• 49% of all e-commerce traffic came from smartphones

0

4

8

12

16

20

'04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

Light Weight Vehicle Sales Millions – Seasonally Adjusted Annual Rate

Bureau of Economic Analysis

Cash For Clunkers

Household Debt Service as a Percent of Household Disposable Income

9

10

11

12

13

14

'82

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'00

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Percent

FED Board of Governors, BEA

Fed Funds Rate Up 25 bp

to 1.75% to 2.0%

Percent June 13, 2018

$2.2 Billion More Per

Year in Just Credit Card

Basis

Months Number Points

Duration Increases Increase

June 2004 - June 2006 25 17 425

June 1999 - May 2000 12 6 175

March 1997 1 1 25

February 1994 - Feb 1995 13 7 300

Average 231.25

Median 237.5

Source: Federal Reserve Bank of New York

Fed Funds Target Rate Increases

10-Year Treasury 2.19%

30-Year Residential 3.94%

Lower Quartile 115.6

1/3rd 173.4

Median Quartile 231.3

November 2015

Rate Increase Impact - Basis Points

Rate Moves Over Cycle

Lower Quartile 3.35%

1/3rd 3.92%

Median Quartile 4.50%

Lower Quartile 5.10%

1/3rd 5.67%

Median Quartile 6.25%

30-Year Residential Rates 9-15 Months

Treasury Forecasts 9-15 Months

Forecast For June 2019

4.8% Fannie Mae 5.1% Freddie Mac 5.1% MBA 5.1% - 5.7% Ted

30-Year Conventional Mortgage Rate Forecast

$0

$100

$200

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$500

$600

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U.S. Commercial Real Estate Sales Volume

$ Billions – Trailing 12 Months

Property and Portfolio Sales $2.5 Million and Up

+6.1 Percent Year-Over-Year

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

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Austin Commercial Real Estate Sales Volume

$ Billions – Trailing 12 Months

Property and Portfolio Sales $2.5 Million and Up

There is No Such Thing as a National Real Estate Market

(Or Economy)

TINSTAANREM Axiom -- Ted C Jones

5%

6%

7%

8%

9%

10%

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18

US Cleveland Austin South Carolina

Commercial Real Estate Cap Rates

Percent – 12-Month Moving Average

Property and Portfolio Sales $2.5 Million and Up

Dr Glenn Mueller

Dr Glenn Mueller

Dr Glenn Mueller

Dr Glenn Mueller

Dr Glenn Mueller

Dr Glenn Mueller

Federal Debt – Total Public Debt

0

4

8

12

16

20

24

'80

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$ Trillions

St Louis Federal reserve

Federal Debt Interest Payments

+30% March 2017 Vs 2016 +10.7% March 2018 Vs 2017

Latin for “It’s Going to Cost More.”

U.S. & China Trade

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17

$ Millions

US Purchases From China

China Purchases From US

What the U.S. Bought from China in 2017

$ Billions

What the China Bought from U.S. in 2017

$ Billions

“It’s not a currency. It does not meet the test

of a currency. I wouldn’t be surprised if it’s not around in 10

or 20 years. Stay away from it – it’s a

mirage.”

Warren Buffett on Cryptocurrencies

$4,758 Electricity Cost to Mine 1 Bitcoin

In U.S.

Bitcoin Terra Watt Hours

1012

Terra Watt

1st Time in 75 Years U.S. is a Net Oil

Exporter

0

500

1,000

1,500

2,000

2,500

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North American Drilling Rig Counts Number of Operating Rigs

Oil $60s 2018

Twitter

DrTCJ

Strong Economy Lagging Home Construction Growing Jobs & Wages Rising Interest Rates Rising Home Prices (Albeit at a Lower Pace) Cheap Energy

2019 Economic Outlook

Paper Straw Manufacturer

In the U.S.

We use 500 Million Straws Daily

Ted C. Jones, PhD Chief Economist

Ted C. Jones Chief Economist