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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

Real Estate Market Trends & Outlook

Lawrence Yun, Ph.D.

Chief Economist

NATIONAL ASSOCIATION OF REALTORS®

Presentation at San Diego Association ofREALTORS ®

August 18, 2009

recent pending home sales
Recent Pending Home Sales

Taking a bit longer to close

In recent months

california existing home sales
California Existing Home Sales

In thousand units

2009

forecast

san diego market
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
national existing home price of transacted homes and not listed homes
National Existing Home Price (of transacted homes and not listed homes)

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

dayton vs san diego home price
Dayton vs San DiegoHome Price

$ thousand

Source: NAR

sf and la median home price
SF and LAMedian Home Price

$ thousand

Multiple-

bidding

months supply of single family homes
Months Supply of Single-Family Homes

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

new home inventory for sale
New Home Inventory for Sale

In thousand units

In thousands

Source: Census

housing starts too much to too little
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

ca housing permits
CA Housing Permits

In thousand units

Source: Census

san diego housing permits
San Diego Housing Permits

In thousand units

Source: Census

national foreclosure inventory will rise but will they get cleared off quickly
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
home price up in select regions
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

prices based on transaction only
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?
housing affordability index higher numbers mean more people can afford to buy a home
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

slide21
Economy to Recover Slowly

GDP annualized growth rate

Latest Data

Forecast

Source: BEA

job changes in u s
Job Changes in U.S.

One-month payroll job changes in thousands

Source: BLS

job changes in california
Job Changes in California

One-year payroll job changes in thousands

Source: BLS

job changes in san diego metro
Job Changes in San Diego Metro

One-year payroll job changes in thousands

Source: BLS

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

One-year payroll job changes in thousands

Source: BLS

job changes in ca construction
Job Changes in CA(Construction)

One-year payroll job changes in thousands

Source: BLS

job changes in ca professional business services
Job Changes in CA(Professional Business Services)

One-year payroll job changes in thousands

Source: BLS

job changes in ca health care and education
Job Changes in CA(Health Care and Education)

One-year payroll job changes in thousands

Source: BLS

credit crunch ending
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
commercial property price index
Commercial Property Price Index

Source: MIT Center for Real Estate

slide34
Retail Sales

(year-over-year % change)

Source: BEA

needed commercial stimulus
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
rental occupied units
Rental Occupied Units

In thousand units

Dip and Revival

Source: Census

college town rental boom to 2050
College Town Rental Boom to 2050?

20 to 24 year olds

In thousand units

Boom and Boom

Boom and Bust

commercial market forecast
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
housing forecast
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
economic outlook
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

inflation or deflation in 2011
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
right tools right now
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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