Housing Market Outlook

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1 Housing Market Outlook By Lawrence Yun, Ph.D. Chief Economist, National Association of REALTORS Presentation at National Conference of State Legislatures Washington, DC December 7, 2018

2 Very Long Economic Expansion

3 Annual GDP Growth Rate of 3.2% in 2018? (Q1 at 2.2%; Q2 at 4.2%; Q3 at 3.5%)

4 Consumer Spending Growing Strongly: 4%

5 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 Near Record High Wealth In $billion

6 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1 After-Tax Corporate Profits 2500 In $billion

7 Business Spending Growth Tapers Off: 0.8% Non-Residential Investment Gr 0.8

8 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Imports Growth Outpace Exports Exports of Goods and Services Imports of Goods and Services

9 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1 National Debt to GDP (%)

10 2000-Jan 2000-Sep 2001-May 2002-Jan 2002-Sep 2003-May 2004-Jan 2004-Sep 2005-May 2006-Jan 2006-Sep 2007-May 2008-Jan 2008-Sep 2009-May 2010-Jan 2010-Sep 2011-May 2012-Jan 2012-Sep 2013-May 2014-Jan 2014-Sep 2015-May 2016-Jan 2016-Sep 2017-May 2018-Jan 2018-Sep Low Unemployment Rate (Sept 2018 figure is lowest since 1969) 3.7

11 Job Gains for 103 straight months (19.8 million gained from Feb 2010) 2000-Jan 2000-Oct 2001-Jul 2002-Apr 2003-Jan 2003-Oct 2004-Jul 2005-Apr 2006-Jan 2006-Oct 2007-Jul 2008-Apr 2009-Jan 2009-Oct 2010-Jul 2011-Apr 2012-Jan 2012-Oct 2013-Jul 2014-Apr 2015-Jan 2015-Oct 2016-Jul 2017-Apr 2018-Jan in thousands Total nonfarm payroll, SA

12 Risk Factors International Trade Wars Rising Rates and Inverted Yield Curve Shift to Snowballing Pessimism

13

14 Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Existing Home Sales Since

15 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul In thousands New Home Sales Since

16 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Wobbly Stock Market? Dow Jones Industrial Average since

17 90% with Price Gains 10% with Price Declines 150 Metro Prices Lower-end Stronger Price Gains Upper-end Weaker Price Gains or Price Cuts Near Downtown Stronger Price Gains Distant Suburbs and Rural Areas Softer Gains

18 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1 500 Rising Home Prices (Constant Quality Index) San Francisco, Seattle, Boston, Dallas

19 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1 Real Estate Wealth = Asset - Mortgage In $billion

20 Wealth: From 2000 to 2016 to 2018 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Renters Homeowners

21 Homeownership Rate Trying to Make a Comeback Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q1

22 Renters Desire to Own in Future? Strong Among Young Adults

23 New Bubble? Small One?

24 Diminished Optimism about Buying NAR Survey of Consumers % Strongly indicating Good Time to Buy Q Q Q Q Q Q Q Q Q Q Q3

25 Jan-Mar Apri-Jun Jul-Sep REALTORS Report on Buyer and Seller Traffic REALTOR Buyer Traffic Index REALTOR Seller Traffic Index

26 20 Months Supply and Price Change Inverse Relationship If Months Supply >7 then Price Decline Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Price Change Months Supply 0

27 Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Sep Apr Nov Jun Jan Aug Mar Oct May Dec Jul Feb Affordability Index Weakest in 10 years, but well above 2004 Source: NAR

28 Regional Variation % change in Pending Contracts from one year ago Northeast Midwest South West

29 Global Comparison: Canada and New Zealand at Risk?

30 Forecast

31 Year Short-term Uncertainty Long-term Solid Pent-Up Demand Existing Home Sales Mortgage Rate Median Monthly Payment as % of income Total Jobs million 8.0% 20.5% 132 million million 4.6% 17.5% 149 million Now vs. Then Roughly Same Lower rate Lower payment More Jobs

32 Forecast of Home Sales: Boring! Existing Home Sales Newly Constructed Total ,450, , million ,510, , million 2018 forecast 5,340, , million 2019 forecast 5,320, , million 2020 forecast 5,520, , million 2000 Reference 5,173, , million

33 Forecast of Home Price Median Home Price % change 2016 $233, % 2017 $247, % 2018 forecast $258, % 2019 forecast $265, % 2020 forecast $273, %

34 Forecast Dependent Upon Rising Single-Family Housing Starts In thousand units

35 Raise Awareness About Housing Underproduction

36

37 Local Solutions to Consider

38 On Common Ground

39 Any Common Ground? Photos from respective Twitter accounts

40 Any Common Ground? HUD Funding to localities be tied to YIMBY (not NIMBY) Housing Trust Funding to localities be tied to YIMBY (not NIMBY) Photos from respective Twitter accounts

41 Thank You!

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