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Real Estate Market Trends & Outlook. Lawrence Yun , Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS ® Presentation at San Diego Association of REALTORS ® August 18, 2009. National Existing Home Sales. Recent Pending Home Sales . Taking a bit longer to close In recent months.

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Real Estate Market Trends & Outlook

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Real estate market trends outlook l.jpg

Real Estate Market Trends & Outlook

Lawrence Yun, Ph.D.

Chief Economist

NATIONAL ASSOCIATION OF REALTORS®

Presentation at San Diego Association ofREALTORS ®

August 18, 2009


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National Existing Home Sales


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Recent Pending Home Sales

Taking a bit longer to close

In recent months


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California Existing Home Sales

In thousand units

2009

forecast


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California Existing Home Sales – Recent Quarters

In thousand units (annualized)


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San Diego Market

  • Sales up 11%, but price down 13% in June from one year ago

    • Prices rising on a month-to-month but read with caution

    • Median transaction price $362,000

  • Sacramento … first to recover in sales, but sales now tapering off


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National Existing Home Price (of transacted homes and not listed homes)

First-time buyers attracted to deeply discounted distressed sale properties.


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Dayton vs San DiegoHome Price

$ thousand

Source: NAR


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SF and LAMedian Home Price

$ thousand

Multiple-

bidding


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Months Supply of Single-Family Homes

First-time buyers attracted to deeply discounted distressed sale properties.


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Homebuilders Down and Out(Single Family Starts and New Home Sales)

In thousand units

Source: Census


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New Home Inventory for Sale

In thousand units

In thousands

Source: Census


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Housing Starts: Too Much to Too Little

New Units Needed

3 million more people each year … 1 to 1.4 million household formation

… need to account for 300,000 demolitions …. need 1.3 to 1.7 new units


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CA Housing Permits

In thousand units

Source: Census


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San Diego Housing Permits

In thousand units

Source: Census


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National Foreclosure Inventory will rise,But will they get cleared off quickly?

In thousand units

Subprime

All Mortgages

  • FHA Reserve Fund depleting … may need funds to implement a countercyclical policy

  • Fannie-Freddie will need funds … future reform of the secondary mortgage market


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Home Price Up in Select Regions

  • April to May according FHFA Home Price Index

  • Measure price change only of those homes with Fannie-Freddie mortgage using repeat transaction methodology

$ thousand


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Prices based on Transaction Only

  • About half of all recent transactions have been distressed sales

    • 15% to 20% short sales

    • 30% to 35% foreclosures

  • Market price is based on transaction

  • What about non-transacted homes that is not on market?

  • Can we extrapolate market price to other non-listed homes?

  • Estimates of 25% of all homeowners are UNDERWATER … How Accurate?


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Housing Affordability Index(Higher numbers mean more people can afford to buy a home)

ALL-TIME HIGH … on conforming loans …if people need to stay within budget


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Lowest Rate since President Eisenhower Days, but not on Jumbo Mortgages


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Economy to Recover Slowly

GDP annualized growth rate

Latest Data

Forecast

Source: BEA


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Job Changes in U.S.

One-month payroll job changes in thousands

Source: BLS


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Job Changes in California

One-year payroll job changes in thousands

Source: BLS


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Job Changes in San Diego Metro

One-year payroll job changes in thousands

Source: BLS


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Job Changes in Michigan(one million fewer workers from 2000)

One-year payroll job changes in thousands

Source: BLS


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Job Changes in CA(Construction)

One-year payroll job changes in thousands

Source: BLS


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Job Changes in CA(Professional Business Services)

One-year payroll job changes in thousands

Source: BLS


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Job Changes in CA(Health Care and Education)

One-year payroll job changes in thousands

Source: BLS


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Federal Budget Deficit

$ million


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Credit Crunch Ending?

  • Libor Rates improving

  • Junk Bond yields becoming less wild

  • Banks making profit … but are they getting too big again (75% of assets controlled by 10 banks)

  • Federal Reserve lending at zero (though not to consumers)

  • True Test of credit easing

    • Lower rate on jumbo mortgages

    • Lower rate on second home purchases

    • Lower rate on condo purchases

    • Lower rate on commercial real estate loans


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Commercial Credit Freeze


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Commercial Property Price Index

Source: MIT Center for Real Estate


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Commercial Real Estate Loan Delinquency Rate

Source: Federal Reserve


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Retail Sales

(year-over-year % change)

Source: BEA


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Needed Commercial Stimulus?

  • NAR commercial stimulus advocacy

    • Relax mark-to-market accounting

    • Fed buys CMBS (via TALF and TARP)

      • Fed taking on credit risk

      • Future political independence or entanglement

    • Preserve low capital gains tax rate


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Rental Occupied Units

In thousand units

Dip and Revival

Source: Census


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College Town Rental Boom to 2050?

20 to 24 year olds

In thousand units

Boom and Boom

Boom and Bust


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Commercial Market Forecast

  • 2008 to 2009

    • Net absorption turns negative

    • Rising Vacancy Rates and Stagnant Rent

    • Markedly Fewer Transactions

    • Property Prices Falling … providing opportunities for parked cash

    • Apartments holding up better

  • 2010

    • Economic recovery

    • Commercial recovery with lag time

    • Pent-up and delayed transactions

    • Modestly Positive net absorption and rising rents


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Housing Forecast

  • Stimulus and falling inventory will help stabilize prices

  • Nationwide Existing Home Sales bump of 10% to 20% in the second half of 2009 vs. second half of 2008

  • CA … many affordable homes, job market turnaround could be stronger in CA given the technology exposure

  • Builders may not see a recovery till 2010


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Economic Outlook

Strength of GDP recovery dependent on home price growth

- Consumer spending improves from housing wealth effect

- Bank balance sheet improves … eases credit crunch

- Foreclosure pressure lessens


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Inflation or Deflation in 2011 ?

  • Inflation: Print money and there goes the inflation

  • Deflation: Excess capacity and high unemployment rate keeps prices in check.

  • Fed’s exit strategy to reclaim printed money

  • Which one is more dangerous?

  • Which one will occur? … Watch the energy price as the catalyst for both scenarios

  • If Inflation … winners will be property owners who locked-in low rate

  • If deflation … losers will be responsible property owners with mortgages


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Right Tools Right Now

  • Many Free Products

    • Relocation Reports

    • REALTOR Member Profile

    • Home Buyer and Home Seller Survey

    • Daily Forecast Update

  • www.realtors.org

    • click “Right Tools Right Now”

    • click Research


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