The Economic

Outlook for Real

Estate Sales
Volume
Dr. Mark G. Dotzour
Chief Economist
Real Estate Center
Texas A&M University
College Station, Texas
dotzour@tamu.edu
 The Outlook for 2011

Finally !
Turning the Corner ….
but we still have work to be done.
Manufacturers' New Orders:
Non-defense Capital Goods Excluding Aircraft

Source: Department of Commerce

Personal Consumption Expenditures

Source: Department of Commerce

Car and Light Truck Sales

Source: Bureau of Economic Analysis

Debt Service Payments
as a Percent of Disposable Personal Income

Source: Federal Reserve Board

 Corporate Profits
(With Inventory Valuation Adjustment & Capital Consumption Adjustment)

Source: Department of Commerce

 Small Business Outlook
“Planning To Hire People In The Next Six Months”

National Federation of Independent Business

 Corporate Hiring Plans:
Next 6 Months
Q4-10 Q3-10 Q2-10 Q1-10

More Jobs 45% 31% 39% 29%

Less Jobs 18% 23% 17% 21%

Source: Business Roundtable

 Bang the Piñata
If you promise the voters more candy, they will
re-elect you. Don’t worry that you have no way
to pay for your promises.
 Examples

• $43 Trillion unfunded liability for Social Security

and Medicare
• Prosecuting wars in Iraq and Afghanistan off-budget
• FRANNIE losses are also off-budget
• Health care plan supposed to “pay for itself”
premised on the “doctor’s haircut”.
• States and cities with underfunded pensions
• Banks and Wall Street taught us the perils of off-
balance sheet financing and now the federal
government is doing the same thing.
When the piñata breaks
and the candy is gone
The Short-Term Pain of Living
Within Our Means: “Austerity”

So far,
this has been
postponed by:

-Foreclosure postponements
-Foreclosure moratorium,
-Federal subsidies
to states and cities,
-Extended unemployment
benefits,
-Tax credits to buy stuff.
 Home Sales Volume

• Job Growth
• Low mortgage rates
• Home price appreciation
People Who Plan to Buy a Home
in the Next Six Months

Source: The Conference Board

Builders Sentiment
“Current Sales Are Good”

Source: National Association of Home Builders

Mortgages Rates Create Historic
Opportunity to Buy a Home
 Nov
Sep
Jul
May
Mar
Inventory of Unsold Homes

2010-Jan
Nov
Sep
Jul
May
Mar
2009-Jan
Nov
Sep
Jul
May
Mar
2008-Jan
Nov
Sep
Jul
May
Beaumont

Source: Real Estate Center

Mar
2007-Jan
Nov

Jan. 2001 to present

Sep
Jul
May
Mar
2006-Jan
Nov
Sep
Jul
May
Mar
2005-Jan
Nov
Sep
Jul
May
Mar
2004-Jan
Nov
Sep
Jul
May
Mar
2003-Jan
Nov
Sep
Jul
May
Mar
2002-Jan
Nov
Sep
Jul
May
Mar
12 2001-Jan

11
10
9
8
7
6
5
4
3
2
1
0
Months
 -4
-2
0
2
4
6
8
10
12
1q-04
2q-04
3q-04
4q-04
1q-05
2q-05
3q-05
4q-05
1q-06
2q-06
3q-06
4q-06
1q-07
2q-07
Series 1

3q-07
4q-07
1q-08
2q-08
3q-08
4q-08
1q-09
in FHFA Price Index

2q-09
3q-09
4q-09
1q-10
2q-10
Four-Quarter Percentage Change

3q-10
 Employment in Beaumont
170000
169000
168000
167000
166000
165000
164000
163000
162000
 Conclusions
Job growth will increase in 2011.

Mortgage rates could increase by a percent.

Home sale volume should be stronger in the second

half of the year after the negative impact of the
tax credit dissipates.