1. Economic and Housing Market
TRENDS and OUTLOOK
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at Vanderbilt University
April 18, 2012

2. Monthly Pending Home Sales Index (Seasonally Adjusted)
Homebuyer Tax Credit

3. Monthly Existing Home Sales

4. Monthly New Homes

5. Improving Factors for Higher Home Sales
Very high affordability
Job creation
Solid stock market recovery from 2008
Rising rents and larger pool of qualified renters
Household formation pent-up release
Smart money chasing real estate
Potential Huge Positive … Lending opens up
Potential Huge Negative … Washington policy

6. Best Affordability Conditions

7. Annual Existing Home Sales
In million units

8. Second Home vs. Primary

9. Second Home Sales
In thousands

10. Housing Starts
In thousand units

11. New Home Sales
In thousand units

12. Visible Housing Inventory

13. Shadow Inventory (Seriously delinquent mortgage + homes in foreclosure process) million units

14. Median Home Price
History
Forecast

15. Economy %

16. Payroll Jobs Changes (December to December)
In millions

17. Unemployment Rate (Average during the Year)%

18. Labor Force Participation Rate%
Labor Force Participation Rate has been falling at the beginning of the recession. Many went to school or took early retirement packages and are therefore no longer counted as part of the labor force. If the labor force participation were to be normal (or had it not fallen) then the corresponding unemployment rate would be closer to 11%.

19. Consumer Price Inflation%

20. Fed Policy and Interest Rates%

21. Homes Bought How? More People Sought Help From REALTORS®

22. Foreclosure Inventory (% of all mortgage outstanding; about 1/3 of homes are free and clear)
Important Judicial States with slow foreclosure process:
IL, IN, OH (Midwest)
NJ, NY, CT (Northeast) FL

23. Housing Starts
In thousand units

24. Financial Industry Corporate Profits

25. Banks/Regulators Restricting Credit (Average Credit Scores of Approved Loans)
Normal
2009
2010
If Normal
Fannie
720
761
762
Freddie
757
758
FHA
650
682
698
660
15% to 20% Higher Sales

26. Annual Household Formation… Future Rent Pressure
Annual Household Formation… Future Rent Pressure? (3 separate Census data)
In millions
Household Formation leads to increase ownership and renters;
Could begin to return to normal of at least 1 million from 2012.

27. Cost Comparisons over 30 years
Item
Price Index in 1981
Price Index in 2011
% Change
Consumer price index
87.2
226.3
160%
Rent index
84.7
254.3
200%
Food price index
91.6
229.6
150%
Gasoline price index
103.6
308.4
197%
College tuition index
75.8
601.3
693%
Medical care index
78.6
401.4
410%
Monthly mortgage payment on a median priced home
$598
(14% mortgage rate)
Same if no cash out refi 0%
(free and clear ownership)
Home Prices (FHFA index)
100
319
219%

28. Annual Forecast 2011 History 2012 Forecast 2013 Existing Home Sales
4.26 million
4.65 million
4.71 million
New Home Sales
304,000
400,000
530,000
Housing Starts
611,000
760,000
960,000
Existing Home Price
$166,100
$168,000
$172,000
GDP Growth
+1.8%
+2.3%
+3.1%
Payroll Job Gains
+1.7 million
+2.7 million
Fed Funds Rate
0.1%
30-yr Mortgage
4.7%
4.3%
4.9%

29. Long-Term Demographics

30. U.S. Population Aged 25-to-34

31. Forecast Population Aged 25-to-34

32. U.S. Population Aged 35-to-44

33. Forecast Population Aged 35-to-44

34. U.S. Population Aged 45-to-54

35. Forecast Population Aged 45-to-54

36. U.S. Population Aged 55-to-64

37. Forecast Population Aged 55-to-64