Mel Watt

Federal Housing Finance

Agency (FHFA)
Director

Real Estate Trends and

Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION of REALTORS
Presentation at NAR Annual Residential Forum
New Orleans, LA
November 7, 2014

Expectations of Firm Profitability

(over the next 12-months)

Consumer and REALTOR

Confidence

Zoom-in
Consumer and REALTOR Confidence

Monthly Pending Sales Index

Making Upward U-Turn
(Seasonally Adjusted)

Source: NAR

Existing + New Home Sales

Homebuilder Confidence
(NAHB Market Index)

Single Family Housing Starts

the Normal
Thousand units

Multifamily Housing Starts

Back to Normal
Thousand units

Nationwide Home Price Recovery

(Almost Doubled over 20 years)

FHFA Home Price Index

Home Price Growth from 1995

San Francisco, Miami, Dallas

San Francisco

Miami

Dallas

Household Net Worth

($5,500 vs. $195,500)

Source: Federal Reserve Survey of Consumer Finances

From 2010 to Today

Homeowners
Recovering Wealth for those who bought
during the bubble years
Accumulating Wealth for those who bought
since 2010

Renters
No progress

Homeowner Households from 2010

(Decreased by 1 million)
In thousands

Renter Households from 2010

(Increased by 4 million)
In thousands

Homeownership Rate

Homeownership Rate by
Age Group

Harvard Elderly Housing Study

One in Five Americans will be 65 or over by 2030
Homeowners who have paid off mortgages before
retirement have lower housing costs and have
equity cushion health care expenses
Renters face high housing costs and force millions
of low-income older adults to sacrifice spending
other necessities, including food and health care

Annual Income by Age

Do Elderly have Mortgage?

First-time Buyer Share

(Less than 30% of All Buyers for 18 months)

Among only primary owner-occupants (excluding investors)

= 33% in 2014 Lowest since 1987

30-year Mortgage Rates

Where Are Young People Hiding?

57 million Americans or 18.1% of the
population live in a multi-generational
family household in 2012,
double the number who lived in
such households in 1980
Of those who are 25-34:
20% of the unemployed live with
parents
12% of employed live with parents

Pew Research, Federal Reserve Bank of New York

Student Loan
(in $billion)

Student Loans and

Homeownership

Desire of Gen Y to Buy a Home?

75% believe home ownership is an important
long-term goal

73% believe ownership is an excellent

investment
59% of young renters (18 to 39) believe owning
a home makes more sense, but 73% of young
renters also believe it would be difficult to get a
mortgage today
REALTOR Education Opportunity
Many young people think 20 percent down payment is
needed !
Fannie Mae, 2013 Demand Institute Housing and Community Survey

Opening the Credit Box

FICO New Method
Thank You Director Mel Watt
But, please clarify put-back risk so that lenders
can be confident

Not Yet a Thank You Secretary Julian Castro

FHA premiums need to come down
commensurate with falling default rate

Historic low mortgage default rates on recent

vintages (2010-2014)

10 best cities for millennials to buy a home

By MarketWatch

Published: Aug 3, 2014 8:14 a.m. ET

Millennial Housing Demand Returns

Austin
Dallas-Ft. Worth
Denver
Des Moines
Grand Rapids
Minneapolis
New Orleans
Ogden
Salt Lake City
Seattle-Tacoma

The Economist July 19, 2014

Annual GDP Growth

(9 straight years of subpar growth)

Jobs
(8 million lost 10 million gained)
In thousands

Percent Change in Non-farm Employment

(Sept 2014/Sept 2013)

REALTORS Confidence Index*:

Outlook in Next Six Months for Single-Family Homes
Based on July 2014-September 2014 RCI Surveys

*An index above 50 means there are more respondents having moderate or strong outlook than respondents with
weak outlook.

Unemployment Rate

Weekly New Unemployment

Insurance Claims
In thousands

Employment Rate

Take This Job and Shove It

I aint working here no more
Quit Rate in thousands

Monetary Policy by Federal Reserve

(zero rate policy for 6 years!)
%

Non-worrisome CPI Inflation Yet

COLA of 1.7% in 2015

Rising Renters and Homeowners Rent

Growth
(Above 3%)

Monetary Policy
Quantitative Easing Finished

Fed Funds Rate hike in 2015 Q1/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

Inventory of Homes for Sale

Shrinking Shadow Inventory

(but not in CT, NY, NJ)

Distressed Property Sales

(% of total sales)

Household Net Worth at All-Time High

Vacation Home Sales

Falling Birth Rate in the U.S.

U.S. Legal Immigration

Next China?
Mexico + Latin America!

Sales to International Buyers Increased

Both in Terms of Transactions and Price

Canada Leads in Number of

Transactions
China Leads in Dollar Volume

FloridaFirst Choice for

International Buyers

Economic Forecast

GDP Growth
Job Growth

2013

2014
Likely

2.2%

2.2%

2015
2016
Forecast Forecast
2.7%

2.9%

+2.3 million +2.5 million +2.5 million +2.6 million

CPI Inflation

1.5%

1.6%

2.7%

3.3%

Consumer
Confidence

73

87

95

98

2.5%

2.6%

3.2%

4.3%

10-year
Treasury

Housing Forecast
2013

2014
Likely

2015
2016
Forecast Forecast

Housing Starts

925,000

1.0 million

1.3 million

1.4 million

New Home
Sales

430,000

440,000

620,000

700,000

Existing Home
Sales

5.1 million

4.9 million

5.3 million

5.4 million

Median Price
Growth

+ 11.5%

+ 5.3%

+ 4%

+ 4%

30-year Rate

4.0%

4.2%

4.9%

6.0%

Underwriting
Standards

Strict

Strict

Transition

Normal

Median Expected Price Change of REALTORS in Next

12 Months, By State
Based on July 2014-September 2014 RCI Surveys
July 2014-September 2014 RCI Surveys

Lets Spin the Bottle !

How Young Are REALTORS ?

Spin the Globe Find the Source

of Improving Standard of Living

When, How, What, Why?

British Glorious Revolution of 1688
William and Mary arrive to say
Power not with King but with people via
Parliament
No Taxation with Representation
Life, Liberty, and (Acquire) Property

American Revolution of 1776

Power resides not with King but with people
No Taxation with Representation
Life, Liberty, and the Pursuit of Happiness

Participants in Democracy to
Protect Property Rights!