Economic Outlook in Uncertain Times Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® Presentation to IREM Chapter 77 In Reston, VA September 15, 2010
GDP Growing, but Decelerating annualized % growth rate
Construction Spending $ billion
Pending Contracts on Existing Homes Tax Credit Impact
Share of First-Time Buyers
Other Home Price Measurements
Still High Months Supply of Existing Home Inventory Pent-up Supply and Demand
Number of Distressed Loans
Housing Starts In thousands
Commercial Real Estate Transactions (of those above $5 million properties)
Commercial Real Estate Market Activity Based on Survey of Realtors® Commercial Markets Expected to Bottom Out by 2011 – Sales Volume Compared with Previous Year: Down 6% – Sales Prices Compared with Previous Year: Down 16% – Expected Availability for the Next 12 Months: Up 12% – Expected Cap Rate Movement for the Next 12 Months: Up 9 bps – Rental Volume Compared with Previous Quarter: Up 3% – Rental Rates Compared with Previous Quarter: Down 10% – Level of Rent Concessions Compared with Previous Quarter: Up 9% – Direction of Business Opportunities Compared with Previous Quarter: Down 1% 11
National Office Fundamentals 12 Washington DC Area vacancy rate at 13.3% and falling
National Multifamily Fundamentals 13 Washington D.C. vacancy rate at 4.1% and falling
Corporate Profits and Business Spending $ billion
Private Sector Job Gains (763,000 in year-to-date in 2010) % change from one year ago
Source: BLS In thousands Total Payroll Jobs in Michigan
Source: BLS) In thousands Total Payroll Jobs in Washington D.C. Metro
U.S. Budget Deficit Source: CBO, NAR estimate
Household Formation Household Formation (2-year moving average)
Baseline Outlook Moderate GDP Expansion 2.5% in the next 2 years (historical average is 3%) Moderate GDP Expansion 2.5% in the next 2 years (historical average is 3%) 1.0 to 1.5 million annual job additions in the next 2 years 1.0 to 1.5 million annual job additions in the next 2 years Rental Housing Demand steady to improving and first of commercial sectors to improve Rental Housing Demand steady to improving and first of commercial sectors to improve Local Apartment Rents 0% to 2% growth in 2011 Local Apartment Rents 0% to 2% growth in 2011 Local Apartment Rents 2% to 5% growth in 2012 Local Apartment Rents 2% to 5% growth in 2012
Alternative Outlooks High inflation … people desire tangible investment like real estate, but interest rate will be higher High inflation … people desire tangible investment like real estate, but interest rate will be higher Deflation … people hold back for better home price … holds back economy … but rental demand holding on Deflation … people hold back for better home price … holds back economy … but rental demand holding on Budget deficit tipping point … higher interest rate and sharp cut back in standard of living Budget deficit tipping point … higher interest rate and sharp cut back in standard of living