economic outlook and international markets (miami, november 2012)
DESCRIPTION
Presentation at Miami International Real Estate CongressTRANSCRIPT
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Economic Outlookand
International Markets
Lawrence Yun, Ph.D.Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at Miami International Real Estate Congress
Miami, FloridaNovember 6, 2012
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Existing Home Sales Recovery:Best in 5 years
2005 2006 2007 2008 2009 2010 2011 2012 est.
0
1
2
3
4
5
6
7
8
7.086.52
5.02
4.12 4.34 4.18 4.264.62
In million units
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Investors in the Market; and Homeowner buyers Neutral
2005 2006 2007 2008 2009 2010 2011 2012 est.
0
500
1000
1500
2000
2500Investor Sales In thousands
2005 2006 2007 2008 2009 2010 2011 2012 est0
100020003000400050006000 Owner-occupant Sales In thousands
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Investors also seeing rising # of renters
1980 - Q1 1984 - Q2 1988 - Q3 1992 - Q4 1997 - Q1 2001 - Q2 2005 - Q3 2009 - Q425,000
27,000
29,000
31,000
33,000
35,000
37,000
39,000
41,000
Rental Households
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Investors seeing Rising Rent
2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr
-1
0
1
2
3
4
5
% change from one year ago
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Visible Housing Inventory(Existing inv. At 8-year low; New inv. at 50-year low)
2000 - Jan 2001 - Dec 2003 - Nov 2005 - Oct 2007 - Sep 2009 - Aug 2011 - Jul0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
Existing New
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Miami Housing Demand
Miami Housing Demand• 2011 Record High Home Sales • 2012 slight decline (down 3%)
Lower Transactions because of Fewer Inventory• 24% fewer homes on the market for sale
Shorter Days on Market• median days on market is only 43 days
Source: MAR
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Home Prices RisingMiami up 7% from one year ago
Phoenix up 19% from one year ago
1989 - Jan 1991 - Jul 1994 - Jan 1996 - Jul 1999 - Jan 2001 - Jul 2004 - Jan 2006 - Jul 2009 - Jan 2011 - Jul0
50
100
150
200
250
300
Phoenix
Miami
Source: Case-Shiller
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Shadow Inventory … Falling(Seriously delinquent mortgage + homes in foreclosure process)
million units
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
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0Distressed Sales Market Share
2010 … 33%
2011 … 33%
2012 … 25%
2013 … 15%
2014 … 8%
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Foreclosures Rapidly Falling in Non-Judicial States
Example: Seriously Delinquent Mortgages in AZ, CA , MI
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
0
2
4
6
8
10
12
14
AZ MI CA
%
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Foreclosures Clogged in Judicial States Example Seriously Delinquent Mortgages in CT and IL
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
02468
1012
CT IL
%
Should a trigger be set up to foreclose without a court approval? • Vacant property• Missed Mortgages for 6 months or longer
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Shadow in FloridaSeriously Delinquent Mortgages
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
0
5
10
15
20
25%
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Housing Starts(Well Below 50-year average of 1.5 million each year)
2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr0
500
1000
1500
2000
2500
multifamily single-familyThousand units (annualized)
Long-term Average
Source: Census, HUD
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Miami - Ft. Lauderdale MetroHousing Permits
19801982
19841986
19881990
19921994
19961998
20002002
20042006
20082010
20120
5000100001500020000250003000035000400004500050000
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Most Miami REALTORS® Have Worked with an International Client in the Past 12 Months
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2012 International Survey
32%
26%
23%
28% 28% 27%
20%22%24%26%28%30%32%34%36%38%40%
2007 2008 2009 2010 2011 2012
Perc
enta
ge o
f Res
pond
ents
Realtors® with International Clients
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Global Buyers buying Where?
Arizona California Florida Georgia Nevada New York Texas
2007 5% 16% 10% 2% 2% 4% 8%
2008 5% 11% 9% 3% 2% 4% 7%
2009 7% 13% 23% 1% 1% 2% 11%
2010 11% 12% 22% 5% 3% 4% 8%
2011 6% 12% 31% 2% 2% 3% 9%
2012 7% 11% 26% 4% 2% 4% 7%
0%
5%
10%
15%
20%
25%
30%
35%
Percent of International Sales by State
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Global Buyers from Where?
Brazil Canada China France Germany India Japan Mexico Russia U.K.2007 2% 11% 5% 3% 3% 6% 1% 13% 1% 12%
2008 2% 24% 8% 3% 4% 6% 1% 9% 2% 12%
2009 1% 18% 5% 2% 4% 9% 1% 10% 1% 11%
2010 1% 23% 8% 3% 4% 5% 1% 10% 3% 9%
2011 3% 23% 9% 3% 4% 7% 1% 7% 1% 6%
2012 3% 24% 11% 3% 3% 6% 1% 8% 2% 6%
0%
5%
10%
15%
20%
25%
30%
Percent of International Sales by Country
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Responses to How Do You Get Most of Your Clients?Personal Contacts, Previous Clients, Online Marketing
Important in Obtaining Clients
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Economy Growing, though Slowly(No Fresh Recession because of Housing Recovery)
Real GDP Growth Rate
2005 2006 2007 2008 2009 2010 2011 2012 forecast
2013 forecast
-4
-3
-2
-1
0
1
2
3
4%
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Payroll Jobs Changes(December to December)
2005 2006 2007 2008 2009 2010 2011 2012 forecast
2013 forecast
-6
-5
-4
-3
-2
-1
0
1
2
3
In millions
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22
Unemployed and Underemployed … 6 to 7 million more than normal
Source: BLS
In thousands
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Florida JobsSlowly Coming Around
2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr62006400660068007000720074007600780080008200 In thousands
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Florida Jobs from 1940(When will the state run out of land?)
1939 - Jan1948 - Jul1958 - Jan1967 - Jul1977 - Jan1986 - Jul1996 - Jan2005 - Jul0
1000
2000
3000
4000
5000
6000
7000
8000
9000 In thousands
Nonfarm Payroll Jobs
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S&P 500 (Almost 100% from low point)
NASDAQ (More than 100% increase from low point)
2005 - Jan
2005 - Jun
2005 - Nov
2006 - Apr
2006 - Sep
2007 - Feb
2007 - Jul
2007 - Dec
2008 - May
2008 - Oct
2009 - Mar
2009 - Aug
2010 - Jan
2010 - Jun
2010 - Nov
2011 - Apr
2011 - Sep
2012 - Feb
0
500
1,000
1,500
2,000
2,500
3,000
3,500
S&P 500NASDAQ
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Foot Traffic
2008 - Jan
2008 - Apr
2008 - Jul
2008 - Oct
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
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Buyer Seller
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Monthly Pending Home Sales Index(Seasonally Adjusted)
2007 - Jan
2007 - May
2007 - Sep
2008 - Jan
2008 - May
2008 - Sep
2009 - Jan
2009 - May
2009 - Sep
2010 - Jan
2010 - May
2010 - Sep
2011 - Jan
2011 - May
2011 - Sep
2012 - Jan
2012 - May
2012 - Sep
70
75
80
85
90
95
100
105
110
115
Homebuyer Tax Credit
Source: NAR
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Housing Recovery Occurring
• Tight Access to Mortgage
• More All-Cash purchases
• What happens when Mortgage Accessibility Opens Up?
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Financial Industry Profits(excluding Federal Reserve)
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
-200
-100
0
100
200
300
400
500$ billion
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Monetary Policy by Federal Reserve (no change to 2014)
20052006
20072008
20092010
2011
2012 foreca
st
2013 foreca
st
2014 foreca
st01234567
Fed Funds 30-year Mortgage%
Modestly higher rates could help home sales as banks re-staff mortgage work for home purchase applications and less refinance applications.
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Consumer Price Inflation(Slightly Above Fed’s preferred 2% core inflation rate)
2005 2006 2007 2008 2009 2010 2011 2012 forecast
2013 forecast
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
All Items Core%
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Risks to Forecast
• Washington Policy– QRM 20% down payment requirement?– Basel 3 … capital rule that punishes private mortgage with low
down payment and commercial loans– Trim mortgage interest deduction?– Capital gains tax on home sale?
– Fiscal Cliff on January 1, 2013 … if no new compromised budget, then:
• Automatic deep cuts to military and domestic spending• Automatic higher taxes• 3% shaved off GDP … Fresh Economic Recession
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Forecast Summary2011History
2012Forecast
2013Forecast
Existing Home Sales 4.26 million 4.64 million 5.05 million
New Home Sales 301,000 368,000 575,000
Housing Starts 612,000 776,000 1,128,000
Existing Home Price $166,100 $176,100 $185,200
GDP Growth +1.8% +2.1% +2.5%
Payroll Job Gains +1.7 million +1.7 million +2.2 million
Fed Funds Rate 0.1% 0.1% 0.1%
30-yr Mortgage 4.7% 3.7% 4.0%
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Existing Home SalesIn million units
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Median Home Price
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Commercial Real Estate
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'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12'12'12'12'12'12'12'12$0
$10,000,000,000
$20,000,000,000
$30,000,000,000
$40,000,000,000
$50,000,000,000
$60,000,000,000
$70,000,000,000
$80,000,000,000$ Volume
Source: Real Capital Analytics
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12'12'12'12'12'12'12'12-100%
-50%0%
50%100%150%200% Year-Over-Year % Change
Commercial InvestmentsSales Slow in 2012.Q3
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Commercial InvestmentsCap Rates Continue Downward Trend
'01 '06 '11 '125.0%
5.5%
6.0%
6.5%
7.0%
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
Avg Cap Rates by Sector
Apartment
Industrial
Retail
CBD - Office
Sub - Office
Source: Real Capital Analytics
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2000 December February April June August October 2007 December February April June90
110
130
150
170
190
210
Moody's/RCA CPPI - Composite Indices
Apartment Retail Industrial Office
Source: Real Capital Analytics
Commercial Investments—Apartment Prices Rise
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Global Economy
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U.S. International Trade(Doubles every 10 years)
1992 - Jan 1995 - Jul 1999 - Jan 2002 - Jul 2006 - Jan 2009 - Jul0
50000
100000
150000
200000
250000
ImportsExports
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Economic GrowthCountry GDP Growth
2012 forecast
U.S. 2%Canada 2%Mexico 4%Brazil 1%U.K. 0%France 0%Germany 1%EU overall -1%Russia 4%India 6%China 8%Japan 2%
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10-Year Government Borrowing RateCountry 10-Year Interest
RateInflation Rate
U.S. 1.7% 2.0%Canada 1.8% 1.2%Mexico 7.7% 4.1%Brazil 9.7% 5.3%U.K. 1.8% 2.2%France 2.2% 1.9%Germany 1.5% 2.0%EU overall n/a 2.5%Russia 7.7% 5.1%India 8.2% 9.7%China 3.2% 1.9%Japan 0.8% -0.3%
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Rising World Population
1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 21000
1
2
3
4
5
6
7
8
9
10In billion
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