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Real Estate Trends and Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS ® Presentation at Associated Taxpayers of Idaho Boise, ID December 10, 2014
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GDP Rebound in 2014 Q2 and Q3
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Jobs (8 million lost … 10 million gained) In thousands
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Weekly New Unemployment Insurance Claims In thousands
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Unemployment Rate
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Jobs in Boise Area In thousands
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Jobs: U.S. vs Boise Area
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Household Net Worth at All-Time High
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But Wait … “I am not feeling it”
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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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Employment Rate
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Renter Households from 2010 (Increased by 4 million) In thousands
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Homeowner Households from 2010 (Decreased by 1 million) In thousands
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Homeownership Rate
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Household Net Worth ($5,500 vs. $195,500) Source: Federal Reserve Survey of Consumer Finances
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Median Home Price (Near 20% gain in 2 years)
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The Reason for Not Feeling It Very Slow Housing Market Recovery Very Slow Commercial Market Recovery Holds Back Economic Recovery
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Existing Home Sales 20% cumulative increase over 2 years
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Monthly Pending Sales Index … Making Upward U-Turn (Seasonally Adjusted) Source: NAR
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Two and Out? Or Multi-year Expansion? (Single-Family Existing Home Sales Only)
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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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Housing Starts Rising … Too Slowly Thousand units
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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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Ada County Housing Statistics Home Sales down 1% year-to-date October 2013 up 14% 2012 up 1% 2011 up 9% Average Price up 10% 2013 up 17% 2012 up 13% 2011 down 9%
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Boise Area Housing Permits (year-to-date)
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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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“Take This Job and Shove It … I ain’t working here no more” Quit Rate 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 COLA of 1.7% in 2015
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Rising Renters’ and Homeowners’ Rent Growth (Above 3%)
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REALTOR ® Rent Survey – Shows Rent Pressure
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Oil Price
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Monetary Policy Quantitative Easing … Finished Fed Funds Rate … hike in 2015 Q2 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% 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 Ridiculous FHA premiums … should decline Historic low mortgage default rates on recent vintages (2010-2014)
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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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U.S. Population
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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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Shadow Inventory in Idaho
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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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Vacation Home Sales
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Economic Forecast 20132014 Likely 2015 Forecast 2016 Forecast GDP Growth2.2% 2.7%2.9% Job Growth+2.3 million+2.5 million +2.6 million CPI Inflation1.5%1.6%2.7%3.3% Consumer Confidence 73879598 10-year Treasury 2.5%2.6%3.2%4.3%
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Housing Forecast 20132014 Likely 2015 Forecast 2016 Forecast Housing Starts925,0001.0 million1.3 million1.4 million New Home Sales 430,000440,000620,000700,000 Existing Home Sales 5.1 million4.9 million5.3 million5.4 million Median Price Growth + 11.5%+ 5.3%+ 4% 30-year Rate4.0%4.2%4.9%6.0% Underwriting Standards Strict TransitionNormal
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Commercial Real Estate
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Commercial Investment Sales of Large Properties (Properties valued at $2.5 million and over)
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Federal Reserve Commercial Property Price Index
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REALTOR® Markets & Deal Size (Not $2.5 million Properties)
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Small Banks Important to REALTORS®
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Forecast over the next 2 years Increased occupancy and falling vacancy (new supply lacking) Rising rents … can offset rising rates to support property values Overall … improving business opportunities
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OFFICE 201420152016 Vacancy Rate 16.2%15.8%15.6% Net Absorption ('000 sq. ft.) 36,19250,67857,782 Completions ('000 sq. ft.) 26,45041,79944,862 Rent Growth 2.6%3.2%3.6% INDUSTRIAL 201420152016 Vacancy Rate 8.9%8.5%8.1% Net Absorption ('000 sq. ft.) 107,580104,948105,044 Completions ('000 sq. ft.) 83,42468,75561,720 Inventory ('000,000 sq. ft.) 8,4688,5378,598 Rent Growth 2.4%2.8%2.9% RETAIL 201420152016 Vacancy Rate 9.8%9.7%9.4% Net Absorption ('000 sq. ft.) 11,21419,31424,313 Completions ('000 sq. ft.) 7,27512,19616,342 Rent Growth 2.0%2.4%3.0% MULTI-FAMILY 201420152016 Vacancy Rate 4.0% 4.2% Net Absorption (Units) 223,421170,065140,128 Completions (Units) 191,481146,461122,381 Rent Growth 4.0%3.9%3.5% Sources: National Association of REALTORS® / Reis, Inc. Commercial Real Estate Forecast
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Washington Policy Watch on Commercial Real Estate Facilitate Covered Bonds to help credit flow Raise cap on holding of commercial RE loans by credit unions Preserve Like-Kind Exchanges Preserve Terrorism Insurance Preserve capital gains status on carried interest Depreciation Rules should match economic life Oppose lease-accounting changes
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How Young Are REALTORS® ?
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Let’s Spin the Bottle !
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Spin the Globe … Find the Source of Improving Standard of Living
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When, How, What, Why? British Glorious Revolution of 1688 – William and Mary arrives to say … – Power not with King but with people via Parliament – No Taxation with Representation – Life, Liberty, and (Acquire) Property American Revolution of 1766 – Power resides not with King but with people – No Taxation with Representation – Life, Liberty, and the Pursuit of Happiness
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Participants in Democracy to Protect Property Rights!
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