Lawrence Yun's presentation from the 2013 Realtors® Conference and Expo Residential forum.

1. Housing Market
and
Economic Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at NAR Annual Conference
Residential Real Estate Forum
San Francisco, CA
November 8, 2013

2. Existing Home Sales
20% cumulative increase over 2 years
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
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

3. Median Home Price
18% cumulative increase over 2 years
$240,000
$220,000
$200,000
$180,000
$160,000
$140,000
$120,000
$100,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

4. Income Trends
2% to 4% cumulative increase over 2 years
$70,000
$60,000
$50,000
Household Income
$40,000
Family Income
$30,000
$20,000
Disposable Income
per person
$10,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
$0

5. 2013 - Jan
2011 - Jan
2009 - Jan
2007 - Jan
2005 - Jan
2003 - Jan
2001 - Jan
1999 - Jan
1997 - Jan
1995 - Jan
1993 - Jan
1991 - Jan
1989 - Jan
1987 - Jan
1985 - Jan
1983 - Jan
1981 - Jan
1979 - Jan
1977 - Jan
1975 - Jan
1973 - Jan
1971 - Jan
Falling Affordability to 5-year Low
But still 5th best in 40 years
250
200
150
100
50
0

6. 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
2012 - Jul
2013 - Jan
2013 - Jul
Inevitable Rise in Mortgage Rates will
further hurt Affordability
9%
(30-yr rate have been below 6% for 5 years)
8
7
6
5
4
3

7. Jan 14 2000
Jul 14 2000
Jan 12 2001
Jul 13 2001
Jan 11 2002
Jul 12 2002
Jan 10 2003
Jul 11 2003
Jan 9 2004
Jul 9 2004
Jan 7 2005
Jul 8 2005
Jan 6 2006
Jul 7 2006
Jan 5 2007
Jul 6 2007
Jan 4 2008
Jul 4 2008
Jan 2 2009
Jul 3 2009
Jan 1 2010
Jul 2 2010
Dec 31 2010
Jul 1 2011
Dec 30 2011
Jun 29 2012
Dec 28 2012
Jun 28 2013
Refinances will Collapse in 2014
(to at least 15-year low)
12000
10000
8000
6000
4000
2000
0

8. 2013 - Jul
2013 - Apr
5%
2013 - Jan
10%
2012 - Oct
2012 - Jul
2012 - Apr
2012 - Jan
2011 - Oct
2011 - Jul
2011 - Apr
2011 - Jan
2010 - Oct
2010 - Jul
2010 - Apr
2010 - Jan
2009 - Oct
2009 - Jul
2009 - Apr
40%
2009 - Jan
2008 - Oct
All-Cash Buyers Stayed High … even when
mortgages were cheap
(Cash share as % of total home sales)
35%
30%
25%
20%
15%
Normal Range
0%

9. 500
-100
-200
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
2012 - Q1
2012 - Q3
2013 - Q1
Financial Industry Profits from Low Rates and Refis
Now What … Boost Purchase Apps?
$ billion
400
300
200
100
0

10. Jan 7 2000
Jul 7 2000
Jan 5 2001
Jul 6 2001
Jan 4 2002
Jul 5 2002
Jan 3 2003
Jul 4 2003
Jan 2 2004
Jul 2 2004
Dec 31 2004
Jul 1 2005
Dec 30 2005
Jun 30 2006
Dec 29 2006
Jun 29 2007
Dec 28 2007
Jun 27 2008
Dec 26 2008
Jun 26 2009
Dec 25 2009
Jun 25 2010
Dec 24 2010
Jun 24 2011
Dec 23 2011
Jun 22 2012
Dec 21 2012
Jun 21 2013
No Increase in Mortgages for Home Purchases
during 2-year Recovery; Will Rise in 2014?
600
500
400
300
200
100
0

11. But Will Washington Allow It?
• Washington Policies so far … Too Restrictive
– Rising g-fees and FHA insurance premiums?
– Uncertainty about QRM down payment
requirement? … Dodd-Frank?
– Too many Lawsuits? … Runaway DOJ?
• Mortgages Have Performed Outstandingly
– Not because of Washington policies
– But because of home price increases
• New Restriction with PATH?

12. What is PATH? … Hensarling’s Ideology
(Protecting American Taxpayers and Homeowners?)
• For-profit Fannie and Freddie were Arrogant
• Today’s Fannie and Freddie have had reforms under
government control
• Remove Government Guarantee on Mortgages
• 30-yr Fixed Rate Mortgages … Hard to get and higher rates
• Large Banks will do Securitization … Small Banks at Risk
• Market becomes excessively pro-cyclical
• Large Banks have FDIC … taxpayer risk … vulnerable to
nationalization and, if so, government credit allocation
• Global capital could decide to go elsewhere rather than the
U.S. …. Other countries grow faster than the U.S.

13. Latest Market Trends

14. Pending Sales (Contracts, not Closings)
(Seasonally Adjusted)
130
120
110
100
90
80
70
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
- Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan
Source: NAR

15. 2008 - Jan
2008 - Apr
2008 - Jul
2008 - Oct
2009 - Jan
2009 - Apr
2009 - Jul
2009 - Oct
2010 - Jan
2010 - Apr
2010 - Jul
2010 - Oct
2011 - Jan
2011 - Apr
2011 - Jul
2011 - Oct
2012 - Jan
2012 - Apr
2012 - Jul
2012 - Oct
2013 - Jan
2013 - Apr
2013 - Jul
Buyer and Seller Traffic
How Much from Gov’t Shutdown and Dysfunction?
Buyer
Seller
80
70
60
50
40
30
20
10
0

16. Government Shutdown Did Not Help
IRS Forms Along with FHA and USDA Closures
Purchase Apps Fell with Closures
Rates Rose with Treasuries
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
4.7%
4.6%
4.5%
4.4%
4.3%
4.2%
4.1%
4.0%
3.9%
3.8%
Gov't
Conv
Percent Change From Prior Week
Déjà vu in January?…..February?
30-yr FRM

17. 4500000
Existing Home Inventory
(Bouncing at 13-year lows)
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
- Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan

18. 1964 - Jan
1966 - Jan
1968 - Jan
1970 - Jan
1972 - Jan
1974 - Jan
1976 - Jan
1978 - Jan
1980 - Jan
1982 - Jan
1984 - Jan
1986 - Jan
1988 - Jan
1990 - Jan
1992 - Jan
1994 - Jan
1996 - Jan
1998 - Jan
2000 - Jan
2002 - Jan
2004 - Jan
2006 - Jan
2008 - Jan
2010 - Jan
2012 - Jan
New Home Inventory
(Newly Constructed Homes Inventory at near 50-year low)
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0

19. Shadow Inventory
(Mortgages Late 90+ day or in
foreclosure process)
US
12
10
8
6
4
2
0

20. Housing Starts … Need to Reach 1.5 million
soon or persistent housing shortage
multifamily
single-family
2500
Thousand units (annualized)
2000
Long-term Average
1500
1000
500
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
- Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan

21. -5
-10
-15
-20
-25
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
2012 - Jul
2013 - Jan
2013 - Jul
Rising Home Prices
Because of Lack of Inventory
(% change from one year ago)
Blue = NAR Median Price
Red = Case-Shiller Index
20
15
10
5
0

22. GDP Growth … Unimpressive but no
Fresh Recession
(Could be on the verge of recession if not for housing recovery)
% growth from one year ago
% growth from one year ago
4
2
0
-2
-4
-6

23. 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
2012 - Jul
2013 - Jan
2013 - May
U.S. Total Payroll Jobs
(8 million lost … 7 million gained)
In thousands
138000
136000
134000
132000
130000
128000
126000
124000

24. 150,000
140,000
130,000
120,000
110,000
100,000
90,000
80,000
70,000
60,000
Well Shy of Long Run Trend
(6 to 8 million more jobs needed)
In thousands

25. States with Fast Job Growth
1
2
3
4
5
6
7
8
9
10
State
North Dakota
Utah
Idaho
Texas
Colorado
Minnesota
Georgia
Washington
Arizona
New Jersey
Job Growth Rate
3.2%
2.7%
2.5%
2.4%
2.3%
2.3%
2.1%
2.1%
2.0%
2.0%

26. Forecast
Essentially Same as the one made
last year in November 2012

27. Forecast #1 (in 2012):
Inflation will be Notably Higher by 2015
• No Threatening Inflation Signs for 2013
• But Inflation rises to 4% to 6% in 2015
• Well above Fed’s preferred rate of 2%
• But not in double-digits as in 1970s

28. -1
2000 - Jan
2000 - Aug
2001 - Mar
2001 - Oct
2002 - May
2002 - Dec
2003 - Jul
2004 - Feb
2004 - Sep
2005 - Apr
2005 - Nov
2006 - Jun
2007 - Jan
2007 - Aug
2008 - Mar
2008 - Oct
2009 - May
2009 - Dec
2010 - Jul
2011 - Feb
2011 - Sep
2012 - Apr
2012 - Nov
2013 - Jun
Rising Renters’ and Homeowners’ Rent Growth
(the biggest weight to Consumer Price Index)
Owners' Equivalent Rent
Renters' Rent
5
4
3
2
1
0

29. Forecast #2 (in 2012):
Meaningfully Higher Home Prices
• Demand is Up … Supply is Down
• 4% to 5% in 2012 (Case-Shiller, FHFA) … Too Low
• 5% to 7% in 2012 (Median Home Price)… Too Low
• Home price growth could slow or accelerate … all
depends on housing starts
• Probably 15% cumulative growth over 3 years

30. What If Scenarios on Housing Starts
Housing Starts in 2013
Case-Shiller Price Growth Forecast in 2013
900,000 (15% increase)
8%
1,000,000 (28% increase)
7%
1,130,000 (45% increase)
5% … This was forecasted one year ago
1,200,000 (54% increase)
4%
1,300,000 (67% increase)
3%
1,400,000 (80% increase)
2%
1,500,000 (92% increase)
1%

31. What If Scenarios on Housing Starts
Housing Starts in 2013
Case-Shiller Price Growth Forecast in 2013
900,000 (15% increase)
8 % … This is closer to actual
1,000,000 (28% increase)
7%
1,130,000 (45% increase)
5%
1,200,000 (54% increase)
4%
1,300,000 (67% increase)
3%
1,400,000 (80% increase)
2%
1,500,000 (92% increase)
1%

32. Home Price Forecast
by Wall Street Journal Economists Panel
Year
WSJ Home Price Forecast
2014
5%
Robert Shiller : “Homes are still affordable …
we do not have extravagant mindset today”

33. Forecast
(Rising Mortgage Rates to 5.3% by end of 2014)
2013
forecast
11%
2014
forecast
0%
Median Price
11%
6%
Dollar Volume
Estimate
+22%
+6%
Existing Home Sales

34. Forecast #3: More Unequal Wealth
Distribution
• Renters do not accumulate wealth
• Renter population rising
• Homeowners build wealth after buying at low
prices
• Stagnant homeowner population
• Tight Credit hinders ‘good’ renters from
becoming homeowners
• Investors becoming increasing share of
property owners

35. 41,000
39,000
1980 - Q1
1981 - Q1
1982 - Q1
1983 - Q1
1984 - Q1
1985 - Q1
1986 - Q1
1987 - Q1
1988 - Q1
1989 - Q1
1990 - Q1
1991 - Q1
1992 - Q1
1993 - Q1
1994 - Q1
1995 - Q1
1996 - Q1
1997 - Q1
1998 - Q1
1999 - Q1
2000 - Q1
2001 - Q1
2002 - Q1
2003 - Q1
2004 - Q1
2005 - Q1
2006 - Q1
2007 - Q1
2008 - Q1
2009 - Q1
2010 - Q1
2011 - Q1
2012 - Q1
2013 - Q1
Renter Households
In thousands
37,000
35,000
33,000
31,000
29,000
27,000
25,000

36. 80,000
1980 - Q1
1981 - Q1
1982 - Q1
1983 - Q1
1984 - Q1
1985 - Q1
1986 - Q1
1987 - Q1
1988 - Q1
1989 - Q1
1990 - Q1
1991 - Q1
1992 - Q1
1993 - Q1
1994 - Q1
1995 - Q1
1996 - Q1
1997 - Q1
1998 - Q1
1999 - Q1
2000 - Q1
2001 - Q1
2002 - Q1
2003 - Q1
2004 - Q1
2005 - Q1
2006 - Q1
2007 - Q1
2008 - Q1
2009 - Q1
2010 - Q1
2011 - Q1
2012 - Q1
2013 - Q1
Homeowner Households has not Grown since
2006 … but Primed to Grow
In thousands
75,000
70,000
65,000
60,000
55,000
50,000

37. Wealth Distribution
(Federal Reserve data on median net worth)
$300,000
Bubble Crash
$250,000
$200,000
1998
2001
$150,000
2004
$100,000
2007
2010
$50,000
2014
$0
Renter
2014 Forecast by NAR
Owner
•
•
•
•
Dodd-Frank?
PATH?
Lawsuits?
Legacy?

38. Top 10 Turnaround Markets in 2013
(Realtor.com Analysis)
•
•
•
•
•
Detroit
Santa Barbara
Reno
Ft. Lauderdale
Ann Arbor
•
•
•
•
•
Dallas
West Palm Beach
Boston
Boulder
Las Vegas

39. Top 10 Markets to Watch in 2014
(Forecast)
•
•
•
•
•
Salt Lake City
Naples
Tampa
Atlanta
Boise
•
•
•
•
•
Houston
Charlotte
Denver
Seattle
Tucson

40. What Homebuyers Want?

41. Slightly More Preference For Condo or
Apartment Living Than In 2011
Housing Type Preference (2013):
Housing Type Preference (2011):
Condo
or Apt.
8%
14%
Condo or Apt.
5%
Single
Family
Attached
7%
4%
6%
Single Family
Attached
76%
Single Family
Detached
House
80%
Single Family
Detached House
Right now, if you could choose, which of the following would you prefer to live in:
Slide 41

42. Privacy, Walkability, Schools
Most Important in Deciding Where to Live
Most Important Factors in Deciding Where to Live:
Privacy from neighbors
46%
Sidewalks and places to take walks
37%
High-quality public schools
43%
21%
Being within a short commute to work
25%
Living in a place that’s away from it all
21%
0%
68%
66%
44%
28%
Public transportation within walking distance of your home
Somewhat Important
44%
23%
34%
20%
65%
37%
34%
40%
74%
69%
40%
23%
Living in a community with people at all stages of life
adults, families with children and older people
An established neighborhood with older homes and mature
trees
80%
29%
28%
Easy access to the highway
86%
43%
45%
Being within an easy walk of other places and things in the
community
Very Important
40%
65%
59%
55%
60%
80%
100%
In deciding where to live, indicate how important having each of the following would be to you: very important, somewhat important,
not very important, or not at all important.
Slide 42

43. Walkability and Age-Diversity
Gaining in Importance
Changes in Important Factors in Deciding Where to Live
50%
40%
+1
+1
46% 45%
45% 44%
+6
37%
30%
+4
28%
31%
-8
36%
28%
+2
23%
24%
20%
+8
23%
21%
15%
10%
0%
Privacy from
neighbors
High-quality
public schools
Sidewalks and
places to take
walks
Being within an Being within a
easy walk of
short commute
other places and
to work
things in the
community
Very Important - 2013
A community Easy access to the
with people at
highway
all stages of life
adults, families
with children
and older people
Very Important - 2011
Q.47 In deciding where to live, indicate how important having each of the following would be to you: very important, somewhat important,
not very important, or not at all important.
Slide 43

44. What Buyers Want Most From Their Agent
Determine Help with
paperwork, 7
what
%
comparable
homes were
selling
for, 8%
Help with the
price
negotiations,
11%
Help find
and arrange
financing, 3
%
Help buyer
negotiate the
terms of
sale, 12%
Help find the
right home to
purchase, 53
%