Economic and Real Estate OutlookBy Lawrence Yun, Ph.D.

Chief Economist, National Association of REALTORS®

Presentation at Darien Board of REALTORS®

Darien, CTOctober 27, 2016

Lifetime Wealth at near All-Time High

1990 - Q1 1992 - Q4 1995 - Q3 1998 - Q2 2001 - Q1 2003 - Q4 2006 - Q3 2009 - Q2 2012 - Q1 2014 - Q40

100002000030000400005000060000700008000090000

100000$ billion

Median Household Income(Inflation Adjusted)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015$50,000

$51,000

$52,000

$53,000

$54,000

$55,000

$56,000

$57,000

$58,000

$59,000

Annual GDP … Below 3% for 11 straight years

19501953

19561959

19621965

19681971

19741977

19801983

19861989

19921995

19982001

20042007

20102013

2016

-4

-2

0

2

4

6

8

10

GDP Annual Growth Rate

Sluggish GDP and Gap after Recession($2.5 trillion gap … $7,000 per person)

2000 - Q1

2000 - Q4

2001 - Q3

2002 - Q2

2003 - Q1

2003 - Q4

2004 - Q3

2005 - Q2

2006 - Q1

2006 - Q4

2007 - Q3

2008 - Q2

2009 - Q1

2009 - Q4

2010 - Q3

2011 - Q2

2012 - Q1

2012 - Q4

2013 - Q3

2014 - Q2

2015 - Q1

2015 - Q4

1000011000120001300014000150001600017000180001900020000

$ billion 3% Growth Line

Slow 2% Growth Line

Sluggish Business Spending Despite High Profit

20002001

20022003

20042005

20062007

20082009

20102011

20122013

20142015

0

500

1000

1500

2000

2500

ProfitsBusiness Spending

Jobs(8 million lost … 15 million gained)

2000 - Jan 2001 - Jul 2003 - Jan 2004 - Jul 2006 - Jan 2007 - Jul 2009 - Jan 2010 - Jul 2012 - Jan 2013 - Jul 2015 - Jan120,000

125,000

130,000

135,000

140,000

145,000

150,000In thousands

Unemployment Ratevs. Employment Rate

2000 - Jan 2003 - Jan 2006 - Jan 2009 - Jan 2012 - Jan 2015 - Jan0

2

4

6

8

10

12

Unemployment Rate

2000 - Jan 2003 - Apr 2006 - Jul 2009 - Oct 2013 - Jan 2016 - Apr54

56

58

60

62

64

66Employment Rate

Jobs in Connecticut

2000 - Jan 2001 - Sep2003 - May2005 - Jan 2006 - Sep2008 - May2010 - Jan 2011 - Sep2013 - May2015 - Jan1500

1550

1600

1650

1700

1750

Jobs in New Haven

2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr 2014 - Jan 2015 - Oct250

255

260

265

270

275

280

285

290

Jobs in Norwich-New London

2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr 2014 - Jan 2015 - Oct100

105

110

115

120

125

130

135

140

145

Jobs in Bridgeport-Stamford-Norwalk

2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr 2014 - Jan 2015 - Oct350

360

370

380

390

400

410

420

430

440

Jobs in NYC metro

2000 - Jan 2001 - Sep2003 - May2005 - Jan 2006 - Sep2008 - May2010 - Jan 2011 - Sep2013 - May2015 - Jan8000

8200

8400

8600

8800

9000

9200

9400

9600

9800

No CPI Inflation – Yet

2000 - Jan 2001 - Apr 2002 - Jul 2003 - Oct 2005 - Jan 2006 - Apr 2007 - Jul 2008 - Oct 2010 - Jan 2011 - Apr 2012 - Jul 2013 - Oct 2015 - Jan

-3

-2

-1

0

1

2

3

4

5

6

Renting PainfulRents Rising at 7-year high

2000 - Jan 2001 - Jun 2002 - Nov 2004 - Apr 2005 - Sep 2007 - Feb 2008 - Jul 2009 - Dec 2011 - May 2012 - Oct 2014 - Mar 2015 - Aug

-1

0

1

2

3

4

5

Renters' Rent

National Home Sales Rising

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

1000000

2000000

3000000

4000000

5000000

6000000

7000000

8000000

9000000

NewExisting

CT Housing Stats • Home Sales

… up 9% in August, from a year ago• Price

… no meaningful change

CT Metro Home Price Index

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

100

120

140

160

180

200

220

240

260

Stamford

New Haven

Rising Home Price andRising Housing Wealth

2000 - Q1

2000 - Q4

2001 - Q3

2002 - Q2

2003 - Q1

2003 - Q4

2004 - Q3

2005 - Q2

2006 - Q1

2006 - Q4

2007 - Q3

2008 - Q2

2009 - Q1

2009 - Q4

2010 - Q3

2011 - Q2

2012 - Q1

2012 - Q4

2013 - Q3

2014 - Q2

2015 - Q1

2015 - Q4

0

5000

10000

15000

20000

25000

Real Estate ValueMortgage Debt

$ billion

Homeownership RateNear 50-year low

1965 - Q1 1969 - Q4 1974 - Q3 1979 - Q2 1984 - Q1 1988 - Q4 1993 - Q3 1998 - Q2 2003 - Q1 2007 - Q4 2012 - Q360

61

62

63

64

65

66

67

68

69

70

Younger Households Less Likely to Own a Home

34 and younger 65 and older0%

10%20%30%40%50%60%70%80%90%

Homeownership Rate

2004 (Peak) 2016Q1

Source: Census Bureau

Median net worth of households headed by…

Wealth Gap Between Young Adults (under-35) and Retiree (65+) in 1983 and 2013

1983 2013$0

$50,000

$100,000

$150,000

$200,000

$250,000

Student Loan …NAR-ASA Study implies 5 year Delay

(in $billion)

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

0

200

400

600

800

1000

1200

1400

Consumer Price Indexover the Long Haul

1983 - Jul1987 - Jan1990 - Jul1994 - Jan1997 - Jul2001 - Jan2004 - Jul2008 - Jan2011 - Jul2015 - Jan0

100

200

300

400

500

600

700

800

900

TuitionMedicalRentCPI

Social Benefits to Homeownership• Higher student test score• Lower juvenile delinquency rate• Better health outcome and higher self-esteem from having a sense of

control in life• Increased charitable donations and volunteering• Local civic engagement

• Terrible social results if foreclosure … therefore need sustainable homeownership

Barrack

“Real Estate Market is Getting Bubblicious”

National Pending Sales Index(Seasonally Adjusted)

2011 - Jan

2011 - Apr

2011 - July

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

70.075.080.085.090.095.0

100.0105.0110.0115.0120.0

Source: NAR

Foot Traffic (Lockbox openings - below 50 Reading for 3 straight months)

Inventory of Homes per Households(currently 1.5 homes for 100 households)

2000 - Jan 2001 - Mar 2002 - May 2003 - Jul 2004 - Sep 2005 - Nov 2007 - Jan 2008 - Mar 2009 - May 2010 - Jul 2011 - Sep 2012 - Nov 2014 - Jan 2015 - Mar1.0

1.5

2.0

2.5

3.0

3.5

4.0

Single-family Housing Starts – Grossly Inadequate

Thousand units

2000 - Jan 2001 - Mar 2002 - May 2003 - Jul 2004 - Sep 2005 - Nov 2007 - Jan 2008 - Mar 2009 - May 2010 - Jul 2011 - Sep 2012 - Nov 2014 - Jan 2015 - Mar0

200

400

600

800

1000

1200

1400

1600

1800

2000

Borrowers Not Defaulting(Serious Delinquency Rate)

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

0.0

2.0

4.0

6.0

8.0

10.0

12.0

U.S. All Mortgages

Veterans Affairs Mortgages

CT Mortgages

Commercial Property Price may be Bubblish

2000 - Q1

2000 - Q4

2001 - Q3

2002 - Q2

2003 - Q1

2003 - Q4

2004 - Q3

2005 - Q2

2006 - Q1

2006 - Q4

2007 - Q3

2008 - Q2

2009 - Q1

2009 - Q4

2010 - Q3

2011 - Q2

2012 - Q1

2012 - Q4

2013 - Q3

2014 - Q2

2015 - Q1

2015 - Q4

0

50

100

150

200

250

300

Source: Federal Reserve

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

Fed Rate Hike in December ‘15

Next hike in December ‘16?

then again in …

Fed Policy and Mortgage Rate

2000 - Jan 2001 - Jul 2003 - Jan 2004 - Jul 2006 - Jan 2007 - Jul 2009 - Jan 2010 - Jul 2012 - Jan 2013 - Jul 2015 - Jan0123456789

Mortgage Rate Fed Funds Rate

Forecast

Normal vs. Now2000 (Likely Normal) 2015

Existing Home Sales 5.2 million 5.2 million

New Home Sales 900,000 500,000

Population 282 million 320 million

Jobs 132 million 144 million

Total U.S. Household Wealth $44 trillion $85 trillion

Economic Forecast2014 2015 2016

Forecast2017

Forecast

GDP Growth 2.6% 2.1% 1.6% 2.2%

Job Growth +3.0 million +2.6 million +2.0 million +2.2 million

CPI Inflation 1.6% 0.3% 1.4% 2.7%

Housing Forecast2014 2015 2016

Forecast2017

Forecast

New Home Sales 437,000 500,000 540,000 600,000

Existing Home Sales

4.9 million 5.3 million 5.4 million 5.5 million

Median Price Growth

+ 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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