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Real Estate Trends and Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS ® Presentation at Provo Association of REALTORS® Provo, UT September 17, 2014
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Existing Home Sales 20% cumulative increase over 2 years
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Median Home Price (Near 20% gain in 2 years)
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Monthly Pending Sales Index (Seasonally Adjusted) Source: NAR
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Utah County Housing Statistics 2014 Home Sales Up 3% year-to-date to July Up 20% from 2 years ago Up 30% from 3 years ago Median Home Price About 10% Dollar Volume Up 13% in 2014
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Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory Record High Household Wealth
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GDP Rebound in 2014 Q2
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GDP Still not Robust … Below 3% for 9 straight years
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Sluggish Growth + Gap after Great Recession ($1.5 trillion gap … $4,700 per person) 3% Growth Line 2.2% Growth Line
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GDP Growth = Job Creations (8 million lost … 8+ million gained) In thousands
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Unemployment Rate
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Employment Rate
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Jobs in Provo-Orem In thousands
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Jobs in Salt Lake City In thousands
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Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory Record High Household Wealth
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Monetary Policy by Federal Reserve (zero rate policy for 6 years!) %
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Federal Reserve Balance Sheet from Quantitative Easing $ million
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30-year Mortgage Rates
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Non-worrisome CPI Inflation - Yet
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Rising Renters’ and Homeowners’ Rent Growth (Above 2% and On the Way to 3%)
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REALTOR ® Rent Survey – Shows Rent Pressure
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Monetary Policy Tapering Ends by the year end 2014 Fed Funds Rate … hike in 2015 Q1 Earlier Move to Tighten because of Inflation Pressure Long-term Steady State Rate (2016 onwards).. 10 year Treasury at 5.0% Mortgage Rates reaching 6.5% by 2016
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Erratic Credit Availability FICO New Method Mel Watt – New overseer of Fannie/Freddie Consumer Financial Protection Bureau’s – Lawsuits … Bleeding Big Banks – Other 2000-page shuffling of Dodd-Frank … Squeezing Small Banks – Qualified Mortgages … or else – 3% Maximum Cap on Affiliated Business … Consumers worst off? FHA Hawk Program Ridiculous FHA premiums Historic low mortgage default rates on recent vintages (2010-2014)
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Locked-in Effect of Low Rates? Housing cannot get back to normal in a hurry People move even in high interest rate environment Many unplanned landlords – Take advantage of rising rents while rates are low and fixed Potential future lock from longer holding period for capital gains tax exclusion
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Reasons Why Sellers Move ReasonPercentage Home is too small or large29% Job relocation or closer to current job 20% Want to move closer to friends.. Better neighborhood 13% Neighborhood has become less desirable 10% Marriage, Divorce, Birth8% Moving due to retirement6% Upkeep is too difficult4% Cannot afford the mortgage and other expenses of owning 3%
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Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory Record High Household Wealth
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U.S. Population
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Renter Households In thousands
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Homeowner Households has not Grown since 2006 … but Primed to Grow In thousands
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Pent Up Demand 20002013 Existing Home Sales5.2 m5.1 m New Home Sales880 K430 K Mortgage Rates8.0%4.0% Payroll Jobs132.0 m136.4 m Population282 m316 m
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Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory and Moderate Price Growth Record High Household Wealth
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Inventory of Homes for Sale Maryland inventory up 18% in July
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Mismatch Growth
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Change in Home Price (% change from one year ago)
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Repeat Price Index
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Shadow Inventory in Utah
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Housing Starts Rising … Too Slowly Thousand units
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Provo-Orem Housing Permits (year-to-date)
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Time to Sell a New Spec Home (in months)
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Sluggish Recovery in Housing Starts Cost of Construction Rising Faster than CPI Labor Shortage for construction work Construction loan difficulty for small local homebuilders … Dodd-Frank financial regulations?
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Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory and Moderate Price Growth Record High Household Wealth
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Household Net Worth at All-Time High
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Vacation Home Sales
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First-time Buyer Share
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Young Adult Homeownership Rate (under 35 years old)
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Millennial Housing Demand Returns Austin Dallas-Ft. Worth Denver Des Moines Grand Rapids Minneapolis New Orleans Ogden Salt Lake City Seattle-Tacoma
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10 best cities for millennials to buy a home By MarketWatchMarketWatch Published: Aug 3, 2014 8:14 a.m. ET
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Economic Forecast 20132014 forecast 2015 forecast GDP Growth1.9% 2.7% Job Growth1.7% 1.8% CPI Inflation1.4%2.5%3.5% Consumer Confidence 738286 10-year Treasury2.5%2.8%3.6%
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National Housing Forecast 20132014 forecast 2015 forecast Housing Starts925,0001.1 million1.4 million New Home Sales430,000Near 500,000Near 700,000 Existing Home Sales5.1 million4.9 million5.3 million Median Price Growth + 11.5%+ 5% to 6%+ 3% to 5% 30-year Rate4.0%4.4%5.4%
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What Homebuyers Want?
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Slide 52 Slightly More Preference For Condo or Apartment Living Than In 2011 Housing Type Preference (2013): Housing Type Preference (2011): Right now, if you could choose, which of the following would you prefer to live in: 6% Single Family Attached
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What Buyers Want Most From Their Agent
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Where Clients Come From From Members: – 21 percent repeat business from past clients – 21 percent referrals from past clients – 3 percent off member website (of those with a website) From Buyers: – 54 percent use an agent that was referred to them or they had worked with before – 9 percent found agent online From Sellers: – 64 percent use an agent that was referred to them or they had worked with before – 4 percent found agent online 2/3rds of buyers/sellers only contact 1 agent
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