
2012 MID-YEAR MEETING Austin, Texas April 13, 2012. Economic and Real Estate Outlook. Dr. James P. Gaines Research Economist Real Estate Center at Texas A&M University. Bentley's First Law of Economics: “The only thing more dangerous than an economist is an amateur economist!” .
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Austin, Texas
April 13, 2012
Dr. James P. Gaines
Research Economist
Real Estate Center at Texas A&M University
Bentley's First Law of Economics: “The only thing more dangerous than an economist is an amateur economist!”
Bentley's Second Law of Economics : "The only thing more dangerous than an amateur economist is a professional economist."
Remember:
Amateurs built the Ark
Professionals built the Titanic
Projections for the next couple of years indicate substantive growth doesn’t occur until 2013-14
The average rate of growth is 3.3% per quarter since 1947
Source: Bureau of Economic Analysis
National Debt as a Percentage of Annual GDP (right scale)
Ended WWII $270B
Hit $1T in 1981 @ 32% GDP
Beginning FY2012 $14.8T @ 97% GDP and 55 times 1946 debt
Total National Debt (left scale)
Source: U.S. Treasury
Sources: Fed Flow of Funds, Real Estate Center at Texas A&M University
Average 2000-2010 = 88%
Average 1985-1999 = 63%
Average 1945-1984 = 39%
Average 1945-2010 = 52.5%
Sources: Fed Flow of Funds, Real Estate Center at Texas A&M University
“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established.”Ben BernankeJune 7, 2011, International Monetary Conference, Atlanta, Georgia
Source: BLS, Texas Workforce Commission; Real Estate Center at Texas A&M
Expansion
Recession
7 cycles since 1967:
Avg. during recession = 72
Avg. during an expansion = 102
Source: The Conference Board (1985=100)
Source: Current Population Survey, Census Bureau, Department of Commerce (The source of annual data is the Current Population Survey March Supplement. The quarterly data source is the monthly Current Population Survey/Housing Vacancy Survey.)
millions
26.1%
24.3%
21.4%
15.9%
12.2%
Echo Boom (Gen Y)
Baby Boom
Millennials (Gen I)
Baby Bust (Gen X)
Silent/Greatest
Age
16-34
0-15
47-65
35-46
66+
Source: U.S. Census Bureau; 2009 National Population Projections (Supplemental)
Source: FNMA National Housing Survey, 4Q2010
Racial and Ethnic Composition of Texas 2010 and 2030
Asian
4.6%
Asian
7.7%
Black
11.5%
Black
10.5%
During the next two decades, minorities will account for approximately two-thirds of household growth … and half of all first-time homebuyers
Hispanic
38.8%
Anglo
30.9%
Anglo
45.1%
Hispanic
50.9%
Source: Social Science Data Analysis Network; NAR Forecast
(Percent)
Current rate is same as 3Q1998
1995-2005
Low interest rates and new mortgage products; Homeownership explodes from 64.1% to 69.1%
1970s
Baby Boomers enter market;
homeownership grows
Source: U.S. Census Bureau
$7 trillion or 53% in lost real estate equity
Source: Federal Reserve, Flow of Funds, B-100
2000’s Boom
1946 to 1999 averaged 111.25
1915 to 1945 averaged 75.74
70’s
Boom
80’s
Boom
Great
Depression
WWII
WWI
1890 to 1914 averaged 100.16
2000 to 2010 averaged 156.01
Source: Robert J. Shiller, Irrational Exuberance, 2nd. Edition, Princeton University Press,2005, 2009, Broadway Books 2006, also Subprime Solution, 2008, as updated by author: http://www.econ.yale.edu/~shiller/data.htm
Source: RealtyTrac, Inc.
Data include Notices of Trustee Sales plus Notices of Foreclosure Sale
Source: NAR
Judicial Foreclosure States
Non-Judicial Foreclosure States
US
Source: Mortgage Bankers Association, National Delinquency Survey
High Negative Equity Concentrated in a Small Number of States
6 states > 30%
13 states > 20%
21 states > 15%
14 states < 10%
Source: CoreLogic® , Negative Equity Report, 3Q2011
8.1%
9.5%
7.9%
7.7%
9.1%
8.7%
8.6%
7.9%
0%
0%
9%
0%
0%
11%
0%
11%
1%
1%
11%
2%
12%
12%
14%
14%
72%
71%
71%
70%
69%
68%
65%
65%
19%
18%
19%
19%
19%
19%
20%
19%
Source: Mortgage Bankers Association, 4Q2011 National Delinquency Survey
New and Existing SF Home Sales U.S.
(Existing
000s)
(New
000s)
Existing Sales
(left axis)
New Sales
(right axis)
New SF sales are down 78% from 2005 peak
Annual Average Total Sales
1980-1989 3.55 million
1990-1999 4.7 million
2000-2007 7.1 million
2008-2010 5.5 million
Sources: US Census Bureau , NAR, SAAR
Rise in Employment Beginning to Show in Sales Volume
(Home Sales
000s)
(Employed
000s)
Employment
(right axis)
Total Existing Home Sales
(left axis)
Sources: BLS. US Census Bureau , NAR, SAAR
Average value 1977-2011 = 3.3%
US pop 2010 = 309 million; at average, 10.2 million people or 4.2 million households plan to buy a house in the next 6 months. At current rate, 5.7 million people or 2.3 million households plan to buy a house in the next 6 months.
Source: The Conference Board, Original Data
Vacant For Rent
Vacant For Sale
Vacant & Off the Market: Other
Source: US Census Bureau
FHFA Repeat
Sales Index
FHLMC HPI
NAR Median Price
Case-Shiller Comp 20 SA
Sources: NAR, FHFA, S&P Case-Shiller, FHLMC
(000, SAAR)
-77% 2005 Peak to Current
2011 less than half of “normal” level needed
-50% 1977 Peak to Trough
-28% 1986 Peak to Trough
-28% 1972 Peak to Trough
Source: US Census Bureau, NAHB, Real Estate Center
(000s SAAR)
2011 down 75% from 2005 peak and 628,000 fewer units than 1960-2002 average per year (1.06 million)
Source: US Census Bureau, Real Estate Center at Texas A&M University
Source: US Census Bureau
Major declines in 2008 & 2009
2011 median down 25% from 2006 peak
Source: NAR
1968-1999 Trend Line
Source: NAR, Real Estate Center at Texas A&M University
Increase of 107% from July 2006 to Oct. 2011
Average 1994-2003 = 132.4
Drop of 31.5% from April 2003 to July 2006
Source: NAR Composite Index
New Homes
(‘75-’00 avg. = 3.82)
Existing Homes
(‘75-’00 avg. = 3.36)
Source: US Census Bureau, NAR, Real Estate Center at Texas A&M University
1990=100
Median Home Price
Median HH Income
Source: US Census Bureau, NAR
Most Affordable States
3.0
4.0
Least Affordable States
Source: FHFA 2Q2010 Median Prices, 2010 American Community Survey, U.S. Census Bureau
Equilibrium
Source: FHFA, BLS
Market Headwinds
Reasons for Optimism
Albert Einstein
Austin, Texas
April 13, 2012
Dr. James P. Gaines
Research Economist
Real Estate Center at Texas A&M University