06MYMRes2

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Business-Finance

Published on April 9, 2008

Author: BAWare

Source: authorstream.com

Slide1:  David Lereah, Ph.D., Chief Economist NATIONAL ASSOCIATION OF REALTORS® Economic Issues & Residential Real Estate Business Trends Forum Washington, DC -- May 2006 Five-Year Boom … Something to Remember:  Five-Year Boom … Something to Remember Memories, Like the corners of my mind Misty water-colored memories Of the Way We Were… Five Straight Record Years: Existing-Home Sales :  Five Straight Record Years: Existing-Home Sales In million units Source: NAR Five Straight Record Years: New-Home Sales:  In thousand units Source: Census Five Straight Record Years: New-Home Sales Extraordinary Home Price Appreciation:  Extraordinary Home Price Appreciation Source: NAR Hot Markets in Past Five Years (2000 to 2005):  Hot Markets in Past Five Years (2000 to 2005) Source: NAR Rates Near Historic Lows:  Rates Near Historic Lows Source: Freddie Mac 1970s 9% average 1980s 13% average 1990s 8% average 2000s 6.5% average Lean Housing Inventory :  Lean Housing Inventory Source: NAR NAR Membership:  NAR Membership Source: NAR in thousands 499,000 gain in 5 years Real Estate Employment Surges:  Real Estate Employment Surges Source: NAR, BLS * Construction jobs in the residential sector. ** Lending jobs in credit intermediation but not commercial banking. % Residential Real Estate Industry Revenue Surges:  Residential Real Estate Industry Revenue Surges Source: BEA GDP excluding residential real estate Overconfidence and Rising Rates Emptied the Punch Bowl:  Overconfidence and Rising Rates Emptied the Punch Bowl Rising Mortgage Rates:  Rising Mortgage Rates Source: Freddie Mac Income Not Keeping Pace With Home Prices:  Income Not Keeping Pace With Home Prices Source: NAR Income and Price set to Index of 100 in 1990 Mortgage Debt Obligation to Income High in Some Markets:  Mortgage Debt Obligation to Income High in Some Markets Source: NAR San Diego Mortgage Debt Obligation to Income High in Some Markets:  Mortgage Debt Obligation to Income High in Some Markets Source: NAR Miami Too Much Speculation:  Too Much Speculation Flipping Pre-construction purchases / sales Long lines at sales offices and lottery purchases Long distance purchases (without seeing property) Interest-only and/or adjustable loans dominate some markets Interest-Only stretched household income Adjustable Mortgages (2005 Q4) :  Adjustable Mortgages (2005 Q4) Source: FHFB % Interest-Only Mortgages:  Interest-Only Mortgages Source: Loan Performance % Interest-Only Loans :  Interest-Only Loans Stretching to get a 40% larger loan $250,000 traditional loan at 6% rate equals $1,499 per month $350,000 interest-only loan at 5% rate equals $1,458 per month Minimum Payment – Option ARMS Loans Even more stretching Even Muhammad Ali Had Limits:  Even Muhammad Ali Had Limits Successive Record Years Not Sustainable Double-digit Price Gains Not Healthy or Sustainable Inevitable Rate Rise from Generational Low Mortgage Rates But Roof Not Caving:  But Roof Not Caving No Bust – Just Deceleration Boom Winding Down to Expansion Inventory Building, but not Excess Price Appreciation Slowing Sales Take a Dip – but only for a year A Needed Cleansing Housing Inventory :  Housing Inventory Source: NAR All-time High Housing Inventory Months Supply:  Housing Inventory Months Supply Source: NAR Home Price Appreciation :  Home Price Appreciation Source: NAR Percent Change Lower Existing-Home Sales:  Lower Existing-Home Sales In million units Source: NAR Declining Mortgage Applications for Home Purchase:  Declining Mortgage Applications for Home Purchase Source: Mortgage Bankers Association Real-Time Housing Market Ticker Live Information:  Real-Time Housing Market Ticker Live Information Tale of Two Cities:  Tale of Two Cities Boom Cities Adjusting from Seller to Buyer Market Non-Boom Cities showing Booming Tendencies Common Thread for Both Markets – Job Gains and Income Growth (excluding Michigan) Healthy Local Economy assures boom cities to land softly Healthy Local Economy assures non-boom cities to grow Days on Market Lengthening in Boom Markets :  Days on Market Lengthening in Boom Markets Days on Market Shortening in Non-Boom Markets :  Days on Market Shortening in Non-Boom Markets Existing-Home Sales (2006 Q1 vs 2005 Q1):  Existing-Home Sales (2006 Q1 vs 2005 Q1) Source: NAR Cooling Markets Booming in Jobs:  Cooling Markets Booming in Jobs Non-Boom Markets With Strong Job Growth:  Non-Boom Markets With Strong Job Growth Source: BLS % One-year Job Growth Rate Cool ’06 and Rise ‘07:  Cool ’06 and Rise ‘07 Solid fundamentals: Low Historic Rates, Favorable Demographics, Healthy Economy Speculators Out Exotic Mortgages Out Economic Backdrop:  Economic Backdrop Sound Economy:  Sound Economy % Source: BEA Consumer Spending Still Healthy:  Consumer Spending Still Healthy % Source: BEA Business Spending Rebounding:  Business Spending Rebounding % Source: BEA Government Spending Providing Support:  Government Spending Providing Support % Source: BEA Imports and Exports Remain at High Levels:  Imports and Exports Remain at High Levels % Source: BEA Corporate Profits are Strong … Will Boost Business Spending:  Corporate Profits are Strong … Will Boost Business Spending Source: BEA Stock Market Near All-time High:  Stock Market Near All-time High Steady Job Gains 2 Million in Past 12 months :  Steady Job Gains 2 Million in Past 12 months Source: BLS Payroll job changes in thousands Weakness from Katrina Inflation Building:  Inflation Building % change from a year ago Source: BLS Fed Rate Hikes :  Fed Rate Hikes Risks – Three Dark Clouds:  Risks – Three Dark Clouds Oil Interest Rates Housing Oil Prices Inhibiting Growth and Exerting Inflationary Pressure :  Oil Prices Inhibiting Growth and Exerting Inflationary Pressure Price per barrel $100 Per Barrel Oil:  $100 Per Barrel Oil 400,000 job gain rather than 2 million Inflation to 4.4% rather than 3.4% Mortgage to 8% rather than 6.7% Home sales – double digit percentage declines Home prices – possibly turn negative Interest Rates – 4-year high:  Interest Rates – 4-year high % Forecast Sluggish Housing Inhibits Economy:  Sluggish Housing Inhibits Economy Wealth Effect Slows Unrealized Gains Slows Less Home Equity Borrowing Less Cash-out Refis Less Residential Investment Negative Multiplier/Secondary Spending Impact Impact of Unlikely Sharp Correction in Housing:  Impact of Unlikely Sharp Correction in Housing Wealth Effect Turns Negative Local Governments Run Budget Deficits GDP Growth Falls 2.5% to 3.5% points Economy Enters Recession ’07 and Beyond:  ’07 and Beyond Still Favorable Interest Rates Favorable Demographic Trends More Balanced Markets Back to Fundamentals Economic Outlook:  Economic Outlook Housing Outlook:  Housing Outlook Slide56:  David Lereah, Ph.D., Chief Economist NATIONAL ASSOCIATION OF REALTORS® Economic Issues & Residential Real Estate Business Trends Forum Washington, DC -- May 2006

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