Economic and Real Estate Market Outlook By Lawrence Yun, Ph.D. Chief Economist, National Association of REALTORS Presentation at Miami International Congress Miami, FL November 1, 2016
Lifetime Wealth at near All-Time High 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000 0 $ billion 1990 - Q1 1991 - Q1 1992 - Q1 1993 - Q1 1994 - Q1 1995 - Q1 1996 - Q1 1997 - Q1 1998 - Q1 1999 - Q1 2000 - Q1 2001 - Q1 2002 - Q1 2003 - Q1 2004 - Q1 2005 - Q1 2006 - Q1 2007 - Q1 2008 - Q1 2009 - Q1 2010 - Q1 2011 - Q1 2012 - Q1 2013 - Q1 2014 - Q1 2015 - Q1 2016 - Q1
Median Household Income (Inflation Adjusted) $59,000 $58,000 $57,000 $56,000 $55,000 $54,000 $53,000 $52,000 $51,000 $50,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Annual GDP 10 Below 3% for 11 straight years GDP Annual Growth Rate 8 6 4 2 0-2 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016-4
Sluggish Business Spending Despite High Profit 2500 2000 1500 1000 Profits Business Spending 500 0
Exports and Imports 2800 2600 2400 2200 2000 1800 1600 1400 1200 1000 2000 - Q1 2000 - Q3 2001 - Q1 2001 - Q3 2002 - Q1 2002 - Q3 2003 - Q1 2003 - Q3 2004 - Q1 2004 - Q3 2005 - Q1 2005 - Q3 2006 - Q1 2006 - Q3 2007 - Q1 2007 - Q3 2008 - Q1 2008 - Q3 2009 - Q1 2009 - Q3 2010 - Q1 2010 - Q3 2011 - Q1 2011 - Q3 2012 - Q1 2012 - Q3 2013 - Q1 2013 - Q3 2014 - Q1 2014 - Q3 2015 - Q1 2015 - Q3 2016 - Q1 2016 - Q3 Imports Exports
U.K. vs. U.S. (How many Pound to $1) 0.8 0.75 0.7 0.65 0.6 0.55 0.5 2000-2000 - Jul 2001-2001 - Jul 2002-2002 - Jul 2003-2003 - Jul 2004-2004 - Jul 2005-2005 - Jul 2006-2006 - Jul 2007-2007 - Jul 2008-2008 - Jul 2009-2009 - Jul 2010-2010 - Jul 2011-2011 - Jul 2012-2012 - Jul 2013-2013 - Jul 2014-2014 - Jul 2015-2015 - Jul 2016-2016 - Jul
China vs. U.S. (How many Yuan to $1) 8.5 8 7.5 7 6.5 6 2000-2000 - Jul 2001-2001 - Jul 2002-2002 - Jul 2003-2003 - Jul 2004-2004 - Jul 2005-2005 - Jul 2006-2006 - Jul 2007-2007 - Jul 2008-2008 - Jul 2009-2009 - Jul 2010-2010 - Jul 2011-2011 - Jul 2012-2012 - Jul 2013-2013 - Jul 2014-2014 - Jul 2015-2015 - Jul 2016-2016 - Jul
90 80 70 60 50 40 30 20 10 0 Russia vs. U.S. (How many Rubles to $1) 2000-2000 - Jun 2000 - Nov 2001 - Apr 2001 - Sep 2002 - Feb 2002 - Jul 2002 - Dec 2003 - May 2003 - Oct 2004 - Mar 2004 - Aug 2005-2005 - Jun 2005 - Nov 2006 - Apr 2006 - Sep 2007 - Feb 2007 - Jul 2007 - Dec 2008 - May 2008 - Oct 2009 - Mar 2009 - Aug 2010-2010 - Jun 2010 - Nov 2011 - Apr 2011 - Sep 2012 - Feb 2012 - Jul 2012 - Dec 2013 - May 2013 - Oct 2014 - Mar 2014 - Aug 2015-2015 - Jun 2015 - Nov 2016 - Apr 2016 - Sep
150,000 145,000 In thousands Jobs (8 million lost 15 million gained) 140,000 135,000 130,000 125,000 120,000 2000-2000 - Jul 2001-2001 - Jul 2002-2002 - Jul 2003-2003 - Jul 2004-2004 - Jul 2005-2005 - Jul 2006-2006 - Jul 2007-2007 - Jul 2008-2008 - Jul 2009-2009 - Jul 2010-2010 - Jul 2011-2011 - Jul 2012-2012 - Jul 2013-2013 - Jul 2014-2014 - Jul 2015-2015 - Jul 2016-2016 - Jul
Miami-Ft. Lauderdale-West Palm Beach (Total Payroll Jobs, in thousands) 2700 2600 2500 2400 2300 2200 2100 2000 2000-2000 - May 2000 - Sep 2001-2001 - May 2001 - Sep 2002-2002 - May 2002 - Sep 2003-2003 - May 2003 - Sep 2004-2004 - May 2004 - Sep 2005-2005 - May 2005 - Sep 2006-2006 - May 2006 - Sep 2007-2007 - May 2007 - Sep 2008-2008 - May 2008 - Sep 2009-2009 - May 2009 - Sep 2010-2010 - May 2010 - Sep 2011-2011 - May 2011 - Sep 2012-2012 - May 2012 - Sep 2013-2013 - May 2013 - Sep 2014-2014 - May 2014 - Sep 2015-2015 - May 2015 - Sep 2016-2016 - May 2016 - Sep
Recession over the Horizon?
Total Job Openings 6500 6000 5500 5000 4500 4000 3500 3000 2500 2000 In thousands 2001-2001 - Jul 2002-2002 - Jul 2003-2003 - Jul 2004-2004 - Jul 2005-2005 - Jul 2006-2006 - Jul 2007-2007 - Jul 2008-2008 - Jul 2009-2009 - Jul 2010-2010 - Jul 2011-2011 - Jul 2012-2012 - Jul 2013-2013 - Jul 2014-2014 - Jul 2015-2015 - Jul 2016-2016 - Jul
Total Job Separations 6500 6000 5500 5000 4500 4000 3500 3000 2500 2000 In thousands 2001-2001 - Jul 2002-2002 - Jul 2003-2003 - Jul 2004-2004 - Jul 2005-2005 - Jul 2006-2006 - Jul 2007-2007 - Jul 2008-2008 - Jul 2009-2009 - Jul 2010-2010 - Jul 2011-2011 - Jul 2012-2012 - Jul 2013-2013 - Jul 2014-2014 - Jul 2015-2015 - Jul 2016-2016 - Jul
Initial Unemployment Insurance Filings 700 650 600 550 500 450 400 350 300 250 200 2001-2001 - Jun 2001 - Nov 2002 - Apr 2002 - Sep 2003 - Feb 2003 - Jul 2003 - Dec 2004 - May 2004 - Oct 2005 - Mar 2005 - Aug 2006-2006 - Jun 2006 - Nov 2007 - Apr 2007 - Sep 2008 - Feb 2008 - Jul 2008 - Dec 2009 - May 2009 - Oct 2010 - Mar 2010 - Aug 2011-2011 - Jun 2011 - Nov 2012 - Apr 2012 - Sep 2013 - Feb 2013 - Jul 2013 - Dec 2014 - May 2014 - Oct 2015 - Mar 2015 - Aug 2016-2016 - Jun
S&P 500 Index 2,500 2,000 1,500 1,000 500 0 2000-2000 - Jul 2001-2001 - Jul 2002-2002 - Jul 2003-2003 - Jul 2004-2004 - Jul 2005-2005 - Jul 2006-2006 - Jul 2007-2007 - Jul 2008-2008 - Jul 2009-2009 - Jul 2010-2010 - Jul 2011-2011 - Jul 2012-2012 - Jul 2013-2013 - Jul 2014-2014 - Jul 2015-2015 - Jul 2016-2016 - Jul
Consumer Confidence Index (Conference Board) 120.0 100.0 80.0 60.0 40.0 20.0 0.0 2008-2008 - Mar 2008 - May 2008 - Jul 2008 - Sep 2008 - Nov 2009-2009 - Mar 2009 - May 2009 - Jul 2009 - Sep 2009 - Nov 2010-2010 - Mar 2010 - May 2010 - Jul 2010 - Sep 2010 - Nov 2011-2011 - Mar 2011 - May 2011 - Jul 2011 - Sep 2011 - Nov 2012-2012 - Mar 2012 - May 2012 - Jul 2012 - Sep 2012 - Nov 2013-2013 - Mar 2013 - May 2013 - Jul 2013 - Sep 2013 - Nov 2014-2014 - Mar 2014 - May 2014 - Jul 2014 - Sep 2014 - Nov 2015-2015 - Mar 2015 - May 2015 - Jul 2015 - Sep 2015 - Nov 2016-2016 - Mar 2016 - May 2016 - Jul 2016 - Sep
2000 1800 1600 1400 1200 1000 800 600 400 200 0 Single-family Housing Permits and Starts Thousand units Grossly Inadequate 2000-2000 - Jun 2000 - Nov 2001 - Apr 2001 - Sep 2002 - Feb 2002 - Jul 2002 - Dec 2003 - May 2003 - Oct 2004 - Mar 2004 - Aug 2005-2005 - Jun 2005 - Nov 2006 - Apr 2006 - Sep 2007 - Feb 2007 - Jul 2007 - Dec 2008 - May 2008 - Oct 2009 - Mar 2009 - Aug 2010-2010 - Jun 2010 - Nov 2011 - Apr 2011 - Sep 2012 - Feb 2012 - Jul 2012 - Dec 2013 - May 2013 - Oct 2014 - Mar 2014 - Aug 2015-2015 - Jun 2015 - Nov 2016 - Apr 2016 - Sep
Probability of Recession (NY Fed: based on interest rate spread) 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0
Is the Economy Turning? No strong recession signals Softer growth momentum
Barrack Real Estate Market is Getting Bubblicious
Miami Metro Home Price Index 400 350 300 250 200 150 100 1995 - Q1 1995 - Q4 1996 - Q3 1997 - Q2 1998 - Q1 1998 - Q4 1999 - Q3 2000 - Q2 2001 - Q1 2001 - Q4 2002 - Q3 2003 - Q2 2004 - Q1 2004 - Q4 2005 - Q3 2006 - Q2 2007 - Q1 2007 - Q4 2008 - Q3 2009 - Q2 2010 - Q1 2010 - Q4 2011 - Q3 2012 - Q2 2013 - Q1 2013 - Q4 2014 - Q3 2015 - Q2 2016 - Q1
Investor Sales (% of Total Sales; 12-month average) 22 20 18 16 14 12 10 2009 - Sep 2009 - Dec 2010 - Mar 2010 - Jun 2010 - Sep 2010 - Dec 2011 - Mar 2011 - Jun 2011 - Sep 2011 - Dec 2012 - Mar 2012 - Jun 2012 - Sep 2012 - Dec 2013 - Mar 2013 - Jun 2013 - Sep 2013 - Dec 2014 - Mar 2014 - Jun 2014 - Sep 2014 - Dec 2015 - Mar 2015 - Jun 2015 - Sep 2015 - Dec 2016 - Mar 2016 - Jun 2016 - Sep
Rent Growth (% change from a year ago) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
Inventory of Homes per Households (currently 1.5 homes for 100 households) 4.0 3.5 3.0 2.5 2.0 1.5 1.0 2000-2001 - 2002-2003 - 2004-2005 - 2006-2007 - 2008-2009 - 2010-2011 - 2012-2013 - 2014-2015 - 2016 -
Single-family Housing Starts Grossly Inadequate 2000 1800 Thousand units 1600 1400 1200 1000 800 600 400 200 0 2000-2001 - 2002-2003 - 2004-2005 - 2006-2007 - 2008-2009 - 2010-2011 - 2012-2013 - 2014-2015 - 2016 -
Miami Area Housing Starts 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Borrowers Not Defaulting (Serious Delinquency Rate) 25.0 20.0 15.0 FL Mortgages 10.0 5.0 0.0 U.S. All Mortgages 2005 - Q1 2005 - Q2 2005 - Q3 2005 - Q4 2006 - Q1 2006 - Q2 2006 - Q3 2006 - Q4 2007 - Q1 2007 - Q2 2007 - Q3 2007 - Q4 2008 - Q1 2008 - Q2 2008 - Q3 2008 - Q4 2009 - Q1 2009 - Q2 2009 - Q3 2009 - Q4 2010 - Q1 2010 - Q2 2010 - Q3 2010 - Q4 2011 - Q1 2011 - Q2 2011 - Q3 2011 - Q4 2012 - Q1 2012 - Q2 2012 - Q3 2012 - Q4 2013 - Q1 2013 - Q2 2013 - Q3 2013 - Q4 2014 - Q1 2014 - Q2 2014 - Q3 2014 - Q4 2015 - Q1 2015 - Q2 2015 - Q3 2015 - Q4 2016 - Q1 2016 - Q2
Commercial Property Price may be Bubblish (60% gain in 5 years) 300 250 200 150 100 50 0 2000 - Q1 2000 - Q3 2001 - Q1 2001 - Q3 2002 - Q1 2002 - Q3 2003 - Q1 2003 - Q3 2004 - Q1 2004 - Q3 2005 - Q1 2005 - Q3 2006 - Q1 2006 - Q3 2007 - Q1 2007 - Q3 2008 - Q1 2008 - Q3 2009 - Q1 2009 - Q3 2010 - Q1 2010 - Q3 2011 - Q1 2011 - Q3 2012 - Q1 2012 - Q3 2013 - Q1 2013 - Q3 2014 - Q1 2014 - Q3 2015 - Q1 2015 - Q3 2016 - Q1 Source: Federal Reserve
Fed Rate Hike in December 15 Next hike in December 16? then again in
NCREIF Cap Rates Likely Already Hit Low 8 7 6 5 6.1 % 5.7 5.6 6.0 6.9 6.3 6.0 5.9 5.7 5.5 5.1 5.2 5.4 5.7 4 3 2 1 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Capital seeking yield drives prices REALTORS Commercial Capitalization Rates 10.0% RCA Capitalization Rates 12.0% Office Retail Industrial Multifamily 9.0% 11.0% Hotel 8.0% 7.0% 6.0% 5.0% '09 '10 '11 '12 '13 '14 '15 Hotel Sub-Office Industrial Retail Apartment CBD-Office 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% Source: NAR, RCA
Rising Cap Rates and Commercial Real Estate Prices Steady prices in mid-tier markets Price drops in trophy properties Green Street price index could fall 4% to 8% over the next two years
Global Dimension
Foreign Buyer Purchases: $102.6 B (7 Percent of Existing Home Sales) Billions $120 $100 $80 $60 $40 $20 $0 Dollar Volume of Foreign Buyer Residential Property Purchases $49 $45 $59 $41 $33 $33 $33 $41 $47 $54 $35 $44 2011 2012 2013 2014 2015 2016 Recent Immigrants Pure Foreign National
Percent of Respondents Who Had an International Client Decreased Across All Counties Percent of Respondents Who Worked With an International Client, By Main Business Area of Respondent 77% 74% 71% 62% 57% 51% 38% 35% Miami-Dade County Broward County Palm Beach County Martin County 2015 2016
62 Percent Reported the Exchange Rate Changes Had a Significant Effect, Higher than in Previous Years Effect of Exchange Rate Changes on International Clients 39% 47% 36% 37% 39% 53% 62% 49% 40% 12% 13% 43% 43% 43% 21% 20% 18% 37% 28% 10% 5% 2010 2011 2012 2013 2014 2015 2016 Not much of an effect Moderate effect Very significant effect Don t Know
Top Tier Countries of Origin to Miami Area 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Venezuela Argentina Brazil Colombia Canada Mexico France Peru 2011 15% 11% 11% 8% 10% 5% 5% 3% 2012 15% 13% 12% 8% 9% 4% 4% 3% 2013 14% 11% 11% 8% 8% 4% 5% 3% 2014 16% 12% 11% 8% 7% 4% 5% 3% 2015 13% 10% 12% 10% 7% 5% 4% 2% 2016 15% 11% 10% 10% 6% 4% 4% 4% * Includes some purchases in areas outside Miami-Dade, Broward, Palm Beach, and Martin County.
Second Tier Countries of Origin to Miami Area 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Italy Ecuador China, People's Republic Dominican Republic United Kingdom 2011 4% 3% 1% 3% 3% 2012 3% 3% 1% 3% 1% 2013 4% 2% 2% 3% 2% 2014 3% 3% 2% 2% 2% 2015 4% 3% 2% 3% 2% 2016 3% 3% 3% 3% 3% * Includes some purchases in areas outside Miami-Dade, Broward, Palm Beach, and Martin County.
On Average, Miami* Foreign Buyers Purchased More Expensive Properties Compared to Other Foreign Buyers Average Purchase Price Among Residential Foreign Buyers $570,000 $412,100 $477,500 Foreign Buyers-Miami* Foreign Buyers-Florida Foreign Buyers- U.S. * Refers to Miami-Dade County, Broward County, Palm Beach County, and Martin County.
72 Percent of Miami* Foreign Buyers Paid Cash Type of Foreign Buyer Financing 21% 24% 74% 72% 2015 2016 All cash With mortgage financing - Home country Don't know With mortagage financing - US sources Other *Miami refers to Miami-Dade County, Broward County, Palm Beach County and Martin County.
55 Percent of Miami* Foreign Buyers Purchased Condominiums 55% Type of Residential Property Foreign Buyers Purchased 27% 14% 3% Condominium Single-family, detached Townhouse/rowhouse Land/Other *Miami refers to Miami-Dade County, Broward County, Palm Beach County and Martin County.
Markets to Target - Inbound Columbia China Eastern Europe Czech Republic, Poland Canada Chile
Markets to Target - Outbound Costa Rica Nicaragua Panama Colombia Cuba (wildcard)
Forecast
Economic Forecast 2014 2015 2016 Forecast 2017 Forecast 2018 Forecast GDP Growth 2.6% 2.1% 1.6% 2.2% 2.5% Job Growth +3.0 million +2.6 million +2.0 million +2.2 million +2.2 million CPI Inflation 1.6% 0.3% 1.4% 2.7% 2.5%
Housing Forecast 2014 2015 2016 Forecast 2017 Forecast New Home Sales 437,000 500,000 540,000 600,000 Existing Home Sales Median Price Growth 4.9 million 5.3 million 5.4 million 5.5 million + 5.7% + 6.8% +4.5% 3.2% 30-year Rate 4.2% 3.9% 3.7% 4.1%
Commercial Real Estate Forecast 2016-2017 Vacancy Rent Apartment From 4.7% to 5.0% 3.5% per year Office From 13% to 12% 4% per year Industrial Stable at near 9% 4% per year Retail Stable at near 11% 2% per year
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