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OUTLOOK
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS
Presentation at 2012 Resort and Second-Home Symposium
Kiawah Island, SC
4,500,000
4,000,000
2008 - Jan
2008 - Mar
2008 - May
2008 - Jul
2008 - Sep
2008 - Nov
2009 - Jan
2009 - Mar
2009 - May
2009 - Jul
2009 - Sep
2009 - Nov
2010 - Jan
2010 - Mar
2010 - May
2010 - Jul
2010 - Sep
2010 - Nov
2011 - Jan
2011 - Mar
2011 - May
2011 - Jul
2011 - Sep
2011 - Nov
2012 - Jan
6,000,000
5,500,000
5,000,000
Old Data
New Data
3,500,000
3,000,000
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
In thousands
3500
3000
2500
Investment
Vacation
2000
1500
1000
500
0
220000
200000
180000
160000
140000
120000
100000
2007
Source: NAR
2008
2009
2010
2011
180
160
140
120
100
2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Source: Federal Housing Finance Agency
350
300
250
200
150
100
2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Q1
Source: Federal Housing Finance Agency
2500
1959 - Jan
1961 - Jan
1963 - Jan
1965 - Jan
1967 - Jan
1969 - Jan
1971 - Jan
1973 - Jan
1975 - Jan
1977 - Jan
1979 - Jan
1981 - Jan
1983 - Jan
1985 - Jan
1987 - Jan
1989 - Jan
1991 - Jan
1993 - Jan
1995 - Jan
1997 - Jan
1999 - Jan
2001 - Jan
2003 - Jan
2005 - Jan
2007 - Jan
2009 - Jan
2011 - Jan
Lowest since the Second World War in the past three years
3000
Long-term Average;
Long-term Requirement
2000
1500
1000
500
1963 - Jan
1965 - Jan
1967 - Jan
1969 - Jan
1971 - Jan
1973 - Jan
1975 - Jan
1977 - Jan
1979 - Jan
1981 - Jan
1983 - Jan
1985 - Jan
1987 - Jan
1989 - Jan
1991 - Jan
1993 - Jan
1995 - Jan
1997 - Jan
1999 - Jan
2001 - Jan
2003 - Jan
2005 - Jan
2007 - Jan
2009 - Jan
2011 - Jan
700
600
500
400
300
200
100
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
- Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan
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
2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
2010 - Q3
2011 - Q1
2011-Q3
U.S.
12.0
10.0
8.0
6.0
4.0
2.0
0.0
U.S.
Cumulative
Default Rate
after 18 months
Freddie Mac
Vintage
Cumulative
Default Rate
after 18 months
2002
3.1%
2002
2.7%
2003
2.5%
2003
1.2%
2004
4.6%
2004
2.0%
2005
4.8%
2005
1.8%
2006
11.6%
2006
6.0%
2007
28.7%
2007
22.3%
2008
12.6%
2008
13.7%
2009
1.2%
2009
1.1%
Foreclosure Starts
(% of all mortgage outstanding; about 1/3 of homes are free and
clear)
3.0
2.5
New Jersey
Arizona
2.0
1.5
1.0
0.5
0.0
2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1
Foreclosure Inventory
(% of all mortgage outstanding; about 1/3 of homes are free and
clear)
9.0
New Jersey
Arizona
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
2000 - 2001 - 2002 - 2003 - 2004 - 2005 - 2006 - 2007 - 2008 - 2009 - 2010 - 2011 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1
-2
-4
-6
-8
-10
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
2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
2010 - Q3
2011 - Q1
2011 - Q3
Economic Expansion
10
Desired Pace
140000
2000 - Jan
2000 - Jul
2001 - Jan
2001 - Jul
2002 - Jan
2002 - Jul
2003 - Jan
2003 - Jul
2004 - Jan
2004 - Jul
2005 - Jan
2005 - Jul
2006 - Jan
2006 - Jul
2007 - Jan
2007 - Jul
2008 - Jan
2008 - Jul
2009 - Jan
2009 - Jul
2010 - Jan
2010 - Jul
2011 - Jan
2011 - Jul
2012 - Jan
In thousands
138000
136000
134000
132000
130000
128000
126000
124000
68
1990 - Jan
1991 - Jan
1992 - Jan
1993 - Jan
1994 - Jan
1995 - Jan
1996 - Jan
1997 - Jan
1998 - Jan
1999 - Jan
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
67
66
65
64
63
62
61
-100
2011 - Q3
2011 - Q1
2010 - Q3
2010 - Q1
2009 - Q3
2009 - Q1
2008 - Q3
2008 - Q1
2007 - Q3
2007 - Q1
2006 - Q3
2006 - Q1
2005 - Q3
2005 - Q1
2004 - Q3
2004 - Q1
2003 - Q3
2003 - Q1
2002 - Q3
2002 - Q1
2001 - Q3
600
2001 - Q1
500
400
300
200
100
2000 - Jan
2000 - Jul
2001 - Jan
2001 - Jul
2002 - Jan
2002 - Jul
2003 - Jan
2003 - Jul
2004 - Jan
2004 - Jul
2005 - Jan
2005 - Jul
2006 - Jan
2006 - Jul
2007 - Jan
2007 - Jul
2008 - Jan
2008 - Jul
2009 - Jan
2009 - Jul
2010 - Jan
2010 - Jul
2011 - Jan
2011 - Jul
2012 - Jan
Federal Reserve
Loose Monetary Policy
30-year Mortgage
Fed Funds
9
8
7
6
5
4
3
2
1
0
Banks/Regulators
Restricting Credit
(Average Credit Scores of Approved Loans)
Normal
2009
2010
If Normal
Fannie
720
761
762
720
Freddie
720
757
758
720
FHA
650
682
698
660
-1
2000 - Jan
2000 - Jul
2001 - Jan
2001 - Jul
2002 - Jan
2002 - Jul
2003 - Jan
2003 - Jul
2004 - Jan
2004 - Jul
2005 - Jan
2005 - Jul
2006 - Jan
2006 - Jul
2007 - Jan
2007 - Jul
2008 - Jan
2008 - Jul
2009 - Jan
2009 - Jul
2010 - Jan
2010 - Jul
2011 - Jan
2011 - Jul
5 %
Magnitude of Over or
Undervaluation
8% undervaluation
22% undervaluation
28% overvaluation
20% overvaluation
10% overvaluation
Proper valuation
(neither over nor under)
Job Creation
Solid stock market recovery from 2008
Rising rents and larger pool of qualified renters
Pent-up Release of Household Formation
Smart money chasing real estate (instead of gold?)
Consumer confidence OK (no longer dire)
Great affordability conditions
Favorable demographics for second home buyers
Will Investors shift money to alternative inflation hedge instrument to real estate?
Consumer Confidence
160
140
120
100
80
60
40
20
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
- Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan
105
100
95
90
85
80
75
70
2007 - 2007 - 2008 - 2008 - 2009 - 2009 - 2010 - 2010 - 2011 - 2011 - 2012 Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
July
Jan
Investment
Vacation
25000
20000
15000
10000
5000
0
2048
2046
2044
2042
2040
2038
2036
2034
2032
2030
2028
2026
2024
2022
2020
2018
2016
2014
2012
30000
In billion
8
7
6
5
4
3
2
1
0
1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100
Forecast
2011
2012
2013
4.55 million
4.70 million
305,000
370,000
510,000
Housing Starts
599,000
710,000
980,000
$166,100
$168,000
$172,000
GDP Growth
+1.8%
+2.3%
+3.1%
+1.7 million
+2.3 million
+2.6 million
30-yr Mortgage
4.7%
4.4%
5.4%
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