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Economic and Real Estate

Outlook
By Lawrence Yun, Ph.D.
Chief Economist, National Association of REALTORS®

Presentation at Association Executive Institute

April 1, 2019
Annual GDP Growth Rate of 2.9% in 2018
4
(Q4 to Q4 at 3.0%)
3

0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-1

-2

-3
Longest Expansion Ever? # of months of GDP growth
140
120
100
80
60
40
20
0
Jun 2009 - Mar 1991 - Feb 1961 - Nov 1982 - Nov 2001 - Mar 1975 -
Mar 2016 Mar 2001 Dec 1969 Jul 1990 Dec 2007 Jan 1980
10
12
14
16
18
20

0
2
4
6
8
1970 - Jan
1971 - Jan
1972 - Jan
1973 - Jan
1974 - Jan
1975 - Jan
1976 - Jan
1977 - Jan
1978 - Jan
1979 - Jan
1980 - Jan
1981 - Jan
1982 - Jan
1983 - Jan
1984 - Jan
1985 - Jan
1986 - Jan
1987 - Jan
1988 - Jan
1989 - Jan
1990 - Jan
1991 - Jan
10-Yr

1992 - Jan
1993 - Jan
1994 - Jan
1995 - Jan
1996 - Jan
1997 - Jan
1998 - Jan
1999 - Jan
Fed Funds

2000 - Jan
2001 - Jan
2002 - Jan
2003 - Jan
2004 - Jan
2005 - Jan
2006 - Jan
2007 - Jan
2008 - Jan
2009 - Jan
2010 - Jan
2011 - Jan
2012 - Jan
2013 - Jan
2014 - Jan
2015 - Jan
Inverted Yield Curve? What is Different This Time?

2016 - Jan
2017 - Jan
2018 - Jan
2019 - Jan
100
140
160

120

0
20
40
60
80
2000 - Jan
2000 - Jun
2000 - Nov
2001 - Apr
2001 - Sep
2002 - Feb
2002 - Jul
2002 - Dec
2003 - May
2003 - Oct
2004 - Mar
2004 - Aug
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
2012 - Jul
2012 - Dec
2013 - May
2013 - Oct
2014 - Mar
2014 - Aug
2015 - Jan
2015 - Jun
2015 - Nov
2016 - Apr
Consumer Confidence Remains High

2016 - Sep
2017 - Feb
2017 - Jul
2017 - Dec
2018 - May
2018 - Oct
2019 - Mar
Jobs
(20 million gained from 2010 … more than 2 million per year)
155,000
In thousands
150,000

145,000

140,000

135,000

130,000

125,000

120,000

115,000
2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 - 2012 - 2013 - 2014 - 2015 - 2016 - 2017 - 2018 -
Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan
Average Hourly Wage
4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0
2010 - Jan 2011 - Jan 2012 - Jan 2013 - Jan 2014 - Jan 2015 - Jan 2016 - Jan 2017 - Jan 2018 - Jan 2019 - Jan
Total Jobs Missouri
(6% growth vs 13% nationwide from 2000)
2950 In thousands
2900
2850
2800
2750
2700
2650
2600
2550
2500
2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 - 2012 - 2013 - 2014 - 2015 - 2016 - 2017 - 2018 - 2019 -
Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan
Total Jobs Texas
(32% growth vs 13% nationwide from 2000)
13000 In thousands
12500
12000
11500
11000
10500
10000
9500
9000
8500
8000
2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 - 2012 - 2013 - 2014 - 2015 - 2016 - 2017 - 2018 - 2019 -
Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan
Total Jobs Wichita and Fayetteville
(0% growth and 64% nationwide from 2000)
300 In thousands
280
260
240
220
200
180
160
140
120
100
2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 - 2012 - 2013 - 2014 - 2015 - 2016 - 2017 - 2018 - 2019 -
Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan
Job Growth (Feb 2018 to Feb 2019)
Wage Growth and Home Price Growth
15.0

10.0

5.0

0.0
2010 - Jan 2011 - Jan 2012 - Jan 2013 - Jan 2014 - Jan 2015 - Jan 2016 - Jan 2017 - Jan 2018 - Jan 2019 - Jan

-5.0

-10.0
“Patient” Fed … Impact on Mortgage Rates
30-year Mortgage
5.0
4.9
4.8
4.7
4.6
4.5
4.4
4.3
4.2
4.1
4.0
2018 - 2018 - 2018 - 2018 - 2018 - 2018 - 2018 - 2018 - 2018 - 2018 - 2018 - 2018 - 2019 -
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
10

0
5

-5

-30
-25
-20
-15
-10
2011 - Jan
2011 - Mar
2011 - May
2011 - Jul
2011 - Sep
2011 - Nov
2012 - Jan

Source: NAR
2012 - Mar
2012 - May
2012 - Jul
2012 - Sep
2012 - Nov
2013 - Jan
2013 - Mar
2013 - May
2013 - Jul
2013 - Sep
2013 - Nov
2014 - Jan
2014 - Mar
2014 - May
2014 - Jul
2014 - Sep
2014 - Nov
2015 - Jan
2015 - Mar
2015 - May
2015 - Jul
2015 - Sep
2015 - Nov
2016 - Jan
(% change from one year ago)

2016 - Mar
2016 - May
2016 - Jul
2016 - Sep
2016 - Nov
2017 - Jan
2017 - Mar
2017 - May
Inventory Growth: 7th straight months

2017 - Jul
2017 - Sep
2017 - Nov
2018 - Jan
2018 - Mar
2018 - May
2018 - Jul
2018 - Sep
2018 - Nov
2019 - Jan
1000000
1500000
2000000
3000000
3500000
4000000
4500000

2500000

500000

0
2000 - Jan
2000 - Jun
2000 - Nov
2001 - Apr
2001 - Sep
2002 - Feb
2002 - Jul
2002 - Dec
2003 - May
2003 - Oct
2004 - Mar
2004 - Aug
2005 - Jan
2005 - Jun
2005 - Nov
2006 - Apr
2006 - Sep
2007 - Feb
2007 - Jul
2007 - Dec
2008 - May
2008 - Oct
2009 - Mar
2009 - Aug
Inventory of Homes For Sale

2010 - Jan
2010 - Jun
2010 - Nov
2011 - Apr
2011 - Sep
2012 - Feb
2012 - Jul
2012 - Dec
2013 - May
2013 - Oct
2014 - Mar
2014 - Aug
2015 - Jan
2015 - Jun
2015 - Nov
2016 - Apr
2016 - Sep
2017 - Feb
2017 - Jul
(7th straight months of increase on a year-over-year basis)

2017 - Dec
2018 - May
2018 - Oct
National Existing Home Sales - Sideways
Since 2016
5,800,000

5,600,000

5,400,000

5,200,000

5,000,000

4,800,000

4,600,000

4,400,000

4,200,000

4,000,000
Mortgage Purchase Applications
4-week moving average
290
280
270
260
250
240
230
220
210
200
Jan 5 Feb 2 Mar 2 Mar 30 Apr 27 May 25 Jun 22 Jul 20 Aug 17 Sep 14 Oct 12 Nov 9 Dec 7 Jan 4 Feb 1 Mar 1
2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2018 2019 2019 2019
20
30
50
70

40
60
80
200801
200806
200811
(Above

200904
200909
201002
201007
201012
201105
201110
201203
201208
50=“Stronger”)

201301

Buyer Traffic Index


201306
201311
201404
201409
201502
201507
201512
Seller Traffic Index

201605
201610
201703
REALTORS® Buyer and Seller Traffic Index

201708
201801
201806
201811
43
55
REALTORS® Buyer Traffic Index
REALTORS® Seller Traffic Index
20
40
60
80

0
100
120

201105
201109
201201
201205
201209
201301
201305
201309
201401
201405
201409
201501
201505
201509
201601
201605
201609
201701
201705
REALTORS® Median Days on Market

201709
201801
201805
201809
201901
44
Mortgages in Foreclosure and Seriously Delinquent (%)
12.0

10.0

8.0

6.0

4.0

2.0

0.0
REALTORS® Median Expected Price Change in Next 12 Months
Percent of Closed Sales Where Seller Offered
Incentives
29% Seller Incentives Offered
27% 77.1%

25%
23%
23%

21%

19% 10.5% 8.8%


2.9% 0.6% 0.3% 2.4%
17%

15%
201607
201610
201510
201601
201604

201701
201704
201707
201710
201801
201804
201807
201810
201901
Regional Variations
West hit by Unaffordability (not jobs)
% change in Closings from one year ago
3

-1

-3 Northeast Midwest South West


-5

-7

-9

-11

-13

-15
U.S. Housing Starts … Not Enough
Short by 5 to 6 million units
Multifamily Single-Family
2000
1800
1600
1400
1200
1000
800
600
400
200
0
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Consequence and Possible Solutions
• BAD: Homeowners staying put for longer period
• BAD: Home prices outpace income growth … hurts affordability
• BAD: Slower economic growth
• BAD: Rent Control discussion come alive

• Reduce local supply constraints … zoning laws, long permit process


• Plentiful skilled workers … trade school training
• Federal spending tied to allow more home construction
• Opportunity zones … tax incentives to develop and re-develop
Wealth: From 2000 to 2016 to 2018
$300,000

$250,000

$200,000

$150,000

$100,000

$50,000

$0

Renters Homeowners
60
61
62
63
64
65
66
67
69
70

68
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
Homeownership Rate

2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
Trying to Make a Comeback

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
Real Estate Wealth = Asset - Mortgage
35000
In $billion
30000

25000

20000

15000

10000

5000

0
After-Tax Corporate Profits
2500
In $billion

2000

1500

1000

500

0
Too Much Borrowing?
• Households … homeowners with sizable equity, but not renters

• Corporations … huge profits, but to diminish, and elevated borrowing

• Government … ???
National Debt to GDP (%)
120

100

80

60

40

20

0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Tax Reform
• Tax cut for most households

• Mortgage interest cap at $750,000; SALT cap at $10,000

• Over 90% of Homeowners will be fully able to deduct without


hitting the limit

• However, many will not itemize and do a standard deduction


Oklahoma SALT
Broad Labor Market Conditions
Unemployment Rate Employment Rate
(% of population with job)
12
66
10
64
8
62
6 60
4 58

2 56

0 54
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
- Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan
Economic Forecast
2016 2017 2018 2019 2020
Forecast Forecast

GDP Growth 1.5% 2.2% 2.9% 2.0% 1.8%

Job Growth +2.5 +2.2 +2.4 +2.0 +1.5


million million million million million

CPI Inflation 1.3% 2.1% 2.4% 1.4% 1.8%


Housing Forecast
2016 2017 2018 2019 2020
Forecast Forecast

New Home 560,000 613,000 627,000 635,000 700,000


Sales

Existing Home 5.4 million 5.5 million 5.3 million 5.3 million 5.5 million
Sales

Median Price +5.1% +5.7% +4.9% +2.7% +3.0%


Growth

30-year Rate 3.6% 4.0% 4.6% 4.3% 4.6%


Thank You !