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
Very Long Economic Expansion
Annual GDP Growth Rate of 3.2% in 2018? (Q1 at 2.2%; Q2 at 4.2%; Q3 at 3.5%) 4 3 2 1 0-1 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018-2 -3
Consumer Spending Growing Strongly: 4% 6.0 5.0 4.0 3.0 2.0 1.0 0.0-1.0-2.0-3.0-4.0-5.0 4.0
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 2016 - Q3 2017 - Q1 2017 - Q3 2018 - Q1 2018 - Q3 Near Record High Wealth 120000 100000 In $billion 80000 60000 40000 20000 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 2016 - Q3 2017 - Q1 2017 - Q3 2018 - Q1 After-Tax Corporate Profits 2500 In $billion 2000 1500 1000 500 0
Business Spending Growth Tapers Off: 0.8% 30.0 20.0 10.0 0.0-10.0-20.0-30.0 Non-Residential Investment Gr 0.8
Q1-2008 Q3-2008 Q1-2009 Q3-2009 Q1-2010 Q3-2010 Q1-2011 Q3-2011 Q1-2012 Q3-2012 Q1-2013 Q3-2013 Q1-2014 Q3-2014 Q1-2015 Q3-2015 Q1-2016 Q3-2016 Q1-2017 Q3-2017 Q1-2018 Q3-2018 30.0 20.0 10.0 0.0-10.0-20.0-30.0-40.0 Imports Growth Outpace Exports 9.3-0.6 Exports of Goods and Services Imports of Goods and Services
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 2017 - Q1 2017 - Q3 2018 - Q1 National Debt to GDP (%) 120 100 80 60 40 20 0
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 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Low Unemployment Rate (Sept 2018 figure is lowest since 1969) 3.7
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 155000 150000 145000 140000 135000 130000 125000 120000 115000 Total nonfarm payroll, SA
Risk Factors International Trade Wars Rising Rates and Inverted Yield Curve Shift to Snowballing Pessimism
2009 - Jan 2009 - May 2009 - Sep 2010 - Jan 2010 - May 2010 - Sep 2011 - Jan 2011 - May 2011 - Sep 2012 - Jan 2012 - May 2012 - Sep 2013 - Jan 2013 - May 2013 - Sep 2014 - Jan 2014 - May 2014 - Sep 2015 - Jan 2015 - May 2015 - Sep 2016 - Jan 2016 - May 2016 - Sep 2017 - Jan 2017 - May 2017 - Sep 2018 - Jan 2018 - May 2018 - Sep 6000000 Existing Home Sales Since 2009 5500000 5000000 4500000 4000000 3500000 3000000
2009 - Jan 2009 - Apr 2009 - Jul 2009 - Oct 2010 - Jan 2010 - Apr 2010 - Jul 2010 - Oct 2011 - Jan 2011 - Apr 2011 - Jul 2011 - Oct 2012 - Jan 2012 - Apr 2012 - Jul 2012 - Oct 2013 - Jan 2013 - Apr 2013 - Jul 2013 - Oct 2014 - Jan 2014 - Apr 2014 - Jul 2014 - Oct 2015 - Jan 2015 - Apr 2015 - Jul 2015 - Oct 2016 - Jan 2016 - Apr 2016 - Jul 2016 - Oct 2017 - Jan 2017 - Apr 2017 - Jul 2017 - Oct 2018 - Jan 2018 - Apr 2018 - Jul 800 700 600 500 400 300 200 100 In thousands New Home Sales Since 2009 0
2009 - Jan 2009 - Apr 2009 - Jul 2009 - Oct 2010 - Jan 2010 - Apr 2010 - Jul 2010 - Oct 2011 - Jan 2011 - Apr 2011 - Jul 2011 - Oct 2012 - Jan 2012 - Apr 2012 - Jul 2012 - Oct 2013 - Jan 2013 - Apr 2013 - Jul 2013 - Oct 2014 - Jan 2014 - Apr 2014 - Jul 2014 - Oct 2015 - Jan 2015 - Apr 2015 - Jul 2015 - Oct 2016 - Jan 2016 - Apr 2016 - Jul 2016 - Oct 2017 - Jan 2017 - Apr 2017 - Jul 2017 - Oct 2018 - Jan 2018 - Apr 2018 - Jul 2018 - Oct 30000 Wobbly Stock Market? Dow Jones Industrial Average since 2009 25000 20000 15000 10000 5000 0
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
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 2017 - Q1 2018 - Q1 500 Rising Home Prices (Constant Quality Index) San Francisco, Seattle, Boston, Dallas 400 300 200 100
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 2017 - Q1 2017 - Q3 2018 - Q1 Real Estate Wealth = Asset - Mortgage 35000 30000 In $billion 25000 20000 15000 10000 5000 0
Wealth: From 2000 to 2016 to 2018 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Renters Homeowners
Homeownership Rate Trying to Make a Comeback 70 68 66 64 62 60 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 2017 - Q1 2018 - Q1
Renters Desire to Own in Future? Strong Among Young Adults
New Bubble? Small One?
50 45 40 35 Diminished Optimism about Buying NAR Survey of Consumers % Strongly indicating Good Time to Buy 30 2016 - Q1 2016 - Q2 2016 - Q3 2016 - Q4 2017 - Q1 2017 - Q2 2017 - Q3 2017 - Q4 2018 - Q1 2018 - Q2 2018 - Q3
2009 2010 2011 2012 2013 2014 2015 2016 2017 Jan-Mar Apri-Jun Jul-Sep REALTORS Report on Buyer and Seller Traffic REALTOR Buyer Traffic Index REALTOR Seller Traffic Index 80 70 60 50 40 30 20 10 0 46 40 67 70 72 63 60 63 53 54 57 41 39 39 42 41 43 44 45 44 45 44 31 34 51 40
20 Months Supply and Price Change Inverse Relationship If Months Supply >7 then Price Decline 14 15 10 5 0 2000 - Jan -5 2002 - Jan 2004 - Jan 2006 - Jan 2008 - Jan 2010 - Jan 2012 - Jan 2014 - Jan 2016 - Jan 2018 - Jan -10-15 12 10 8 6 4 2-20 Price Change Months Supply 0
2000 - Jan 2000 - Aug 2001 - Mar 2001 - Oct 2002 - May 2002 - Dec 2003 - Jul 2004 - Feb 2004 - Sep 2005 - Apr 2005 - Nov 2006 - Jun 2007 - Jan 2007 - Aug 2008 - Mar 2008 - Oct 2009 - May 2009 - Dec 2010 - Jul 2011 - Feb 2011 - Sep 2012 - Apr 2012 - Nov 2013 - Jun 2014 - Jan 2014 - Aug 2015 - Mar 2015 - Oct 2016 - May 2016 - Dec 2017 - Jul 2018 - Feb 250 200 150 100 50 Affordability Index Weakest in 10 years, but well above 2004 Source: NAR
Regional Variation 1-1 -3-5 % change in Pending Contracts from one year ago Northeast Midwest South West -7-9 -11-13 -15
Global Comparison: Canada and New Zealand at Risk?
Forecast
Year Short-term Uncertainty Long-term Solid Pent-Up Demand Existing Home Sales Mortgage Rate Median Monthly Payment as % of income Total Jobs 2000 5.2 million 8.0% 20.5% 132 million 2018 5.3 million 4.6% 17.5% 149 million Now vs. Then Roughly Same Lower rate Lower payment More Jobs
Forecast of Home Sales: Boring! Existing Home Sales Newly Constructed Total 2016 5,450,000 561,000 6.0 million 2017 5,510,000 613,000 6.1 million 2018 forecast 5,340,000 617,000 6.0 million 2019 forecast 5,320,000 680,000 6.0 million 2020 forecast 5,520,000 740,000 6.3 million 2000 Reference 5,173,000 877,000 6.1 million
Forecast of Home Price Median Home Price % change 2016 $233,800 5.1% 2017 $247,200 5.7% 2018 forecast $258,700 4.7% 2019 forecast $265,200 2.5% 2020 forecast $273,100 3.0%
Forecast Dependent Upon Rising Single-Family Housing Starts 2000 1800 1600 1400 1200 1000 800 600 400 200 0 In thousand units 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Raise Awareness About Housing Underproduction
Local Solutions to Consider
On Common Ground
Any Common Ground? Photos from respective Twitter accounts
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
Thank You!