Presentation given by Lawrence Yun at the #NARAnnual conference in New Orleans, November 2014.

2. Mel Watt
Federal Housing Finance
Agency (FHFA)
Director

3. Real Estate Trends and
Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION of REALTORS®
Presentation at NAR Annual Residential Forum
New Orleans, LA
November 7, 2014

4. Expectations of Firm Profitability
(over the next 12-months)
80
70
60
50
40
30
20
10
0
Residential Firm Commercial Firm
Decrease
About Same
Increase

5. Consumer and REALTOR®
Confidence
0
20
40
60
80
100
120
140
160
2000 - Jan
2000 - Oct
2001 - Jul
2002 - Apr
2003 - Jan
2003 - Oct
2004 - Jul
2005 - Apr
2006 - Jan
2006 - Oct
2007 - Jul
2008 - Apr
2009 - Jan
2009 - Oct
2010 - Jul
2011 - Apr
2012 - Jan
2012 - Oct
2013 - Jul
2014 - Apr
Consumer
REALTOR

6. Zoom-in
Consumer and REALTOR® Confidence
100
95
90
85
80
75
70
65
60
55
50
Consumer
REALTOR

7. Monthly Pending Sales Index …
Making Upward U-Turn
(Seasonally Adjusted)
70.0
75.0
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
2011 - Jan
2011 - Mar
2011 - May
2011 - July
2011 - Sep
2011 - Nov
2012 - Jan
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
Source: NAR

8. Existing + New Home Sales
9,000,000
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

9. Homebuilder Confidence
(NAHB Market Index)
0
10
20
30
40
50
60
70
80
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
2014 - Jan
2014 - Aug

10. Single Family Housing Starts …
½ the Normal
2000
1800
1600
1400
1200
1000
800
600
400
200
0
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
Thousand units

11. Multifamily Housing Starts …
Back to Normal
600
500
400
300
200
100
0
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
Thousand units

12. Nationwide Home Price Recovery
(Almost Doubled over 20 years)
100
120
140
160
180
200
220
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
2014 - Q1
FHFA Home Price Index

13. Home Price Growth from 1995
San Francisco, Miami, Dallas
100
150
200
250
300
350
400
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
2014 - Q1
San Francisco
Miami
Dallas

14. Household Net Worth
($5,500 vs. $195,500)
$250,000
$200,000
$150,000
$100,000
$50,000
$0
1998 2001 2004 2007 2010 2013
x31 x36 x46 x46 x34
Homeowner net worth
ranges from 31 to 46
Renter Homeowner
x36
Source: Federal Reserve Survey of Consumer Finances

15. From 2010 to Today
• Homeowners
– Recovering Wealth for those who bought
during the bubble years
– Accumulating Wealth for those who bought
since 2010
• Renters
– No progress

16. Homeowner Households from 2010
(Decreased by 1 million)
50,000
55,000
60,000
65,000
70,000
75,000
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
In thousands

17. Renter Households from 2010
(Increased by 4 million)
25,000
27,000
29,000
31,000
33,000
35,000
37,000
39,000
41,000
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
In thousands

18. Homeownership Rate
60
61
62
63
64
65
66
67
68
69
70
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
2014 - Q1

19. Homeownership Rate by
Age Group
30
40
50
60
70
80
90
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
2014 - Q1
65 and over
55-64
45-54
35-44
Under 35

20. Harvard Elderly Housing Study
• One in Five Americans will be 65 or over by 2030
• Homeowners who have paid off mortgages before
retirement have lower housing costs and have
equity cushion health care expenses
• Renters face high housing costs and force millions
of low-income older adults to sacrifice spending
other necessities, including food and health care

21. Annual Income by Age
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$0
50-64 65-79 80 +

22. Do Elderly have Mortgage?
80
70
60
50
40
30
20
10
0
50-64 65 and Over
1992 1998 2004 2007 2010

23. First-time Buyer Share
(Less than 30% of All Buyers for 18 months)
60
50
40
30
20
10
0
Among only primary owner-occupants (excluding investors)
= 33% in 2014 … Lowest since 1987

24. 30-year Mortgage Rates
9
8
7
6
5
4
3
2
1
0
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

25. Where Are Young People Hiding?
• 57 million Americans or 18.1% of the
population live in a multi-generational
family household in 2012,
– double the number who lived in
such households in 1980
• Of those who are 25-34:
– 20% of the unemployed live with
parents
– 12% of employed live with parents
Pew Research, Federal Reserve Bank of New York

26. Student Loan
(in $billion)
1400
1200
1000
800
600
400
200
0

27. Student Loans and
Homeownership

28. Desire of Gen Y to Buy a Home?
• 75% believe home ownership is an important
long-term goal
• 73% believe ownership is an excellent
investment
• 59% of young renters (18 to 39) believe owning
a home makes more sense, but 73% of young
renters also believe it would be difficult to get a
mortgage today
• REALTOR® Education Opportunity
– Many young people think 20 percent down payment is
needed !
Fannie Mae, 2013 Demand Institute Housing and Community Survey

29. Opening the Credit Box
• FICO New Method
• Thank You Director Mel Watt
– But, please clarify put-back risk so that lenders
can be confident
• Not Yet a Thank You Secretary Julian Castro
– FHA premiums need to come down
commensurate with falling default rate
• Historic low mortgage default rates on recent
vintages (2010-2014)

30. 10 best cities for millennials to buy a home
By MarketWatch
Published: Aug 3, 2014 8:14 a.m. ET

31. Millennial Housing Demand Returns
• Austin
• Dallas-Ft. Worth
• Denver
• Des Moines
• Grand Rapids
• Minneapolis
• New Orleans
• Ogden
• Salt Lake City
• Seattle-Tacoma

32. The Economist – July 19, 2014

33. Annual GDP Growth
(9 straight years of subpar growth)
-4
-2
0
2
4
6
8
10
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
2013

34. Jobs
(8 million lost … 10 million gained)
124000
126000
128000
130000
132000
134000
136000
138000
140000
142000
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
2013 - Nov
2014 - May
In thousands

35. Percent Change in Non-farm Employment
(Sept 2014/Sept 2013)

36. REALTORS® Confidence Index*:
Outlook in Next Six Months for Single-Family Homes
Based on July 2014-September 2014 RCI Surveys
*An index above 50 means there are more respondents having “moderate” or “strong” outlook than respondents with
“weak” outlook.

37. Unemployment Rate
0
2
4
6
8
10
12
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
2014 - Jan
2014 - Jul

38. Weekly New Unemployment
Insurance Claims
250
300
350
400
450
500
550
600
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
2014 - Jan
2014 - Aug
In thousands

39. Employment Rate
54
56
58
60
62
64
66
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
2014 - Jan
2014 - Jul

40. “Take This Job and Shove It …
I ain’t working here no more”
0
500
1,000
1,500
2,000
2,500
3,000
3,500
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
2014 - Jan
2014 - Jul
Quit Rate in thousands

41. Monetary Policy by Federal Reserve
(zero rate policy for 6 years!)
6
5
4
3
2
1
0
% Fed Funds
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

42. Non-worrisome CPI Inflation – Yet
COLA of 1.7% in 2015
-3
-2
-1
0
1
2
3
4
5
6
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
2014 - Jan
2014 - Aug

43. Rising Renters’ and Homeowners’ Rent
Growth
(Above 3%)
-1
0
1
2
3
4
5
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
2014 - Jan
2014 - Jul
Owners' Equivalent Rent Renters' Rent

44. Monetary Policy
• Quantitative Easing … Finished
• Fed Funds Rate … hike in 2015 Q1/Q2
• Earlier Move to Tighten because of
Inflation Pressure
• Long-term Steady State Rate (2016
onwards) .. 10 year Treasury at 5.0%
• Mortgage Rates reaching 6% by 2016

45. Inventory of Homes for Sale
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0

46. Shrinking Shadow Inventory
(but not in CT, NY, NJ)
12
10
8
6
4
2
0
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
2014
- Q1
% of mortgages in foreclosure process or seriously delinquent

47. Distressed Property Sales
(% of total sales)
0
10
20
30
40
50
60
2008 - Oct
2009 - Feb
2009 - Jun
2009 - Oct
2010 - Feb
2010 - Jun
2010 - Oct
2011 - Feb
2011 - Jun
2011 - Oct
2012 - Feb
2012 - Jun
2012 - Oct
2013 - Feb
2013 - Jun
2013 - Oct
2014 - Feb
2014 - Jun
Foreclosure
Short Sale

48. Household Net Worth at All-Time High
85000
80000
75000
70000
65000
60000
55000
50000
45000
40000
$ billion

49. Vacation Home Sales
1,200
1,000
800
600
400
200
-
In thousands
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

50. Falling Birth Rate in the U.S.
0
5
10
15
20
25
30
35
1909
1913
1917
1921
1925
1929
1933
1937
1941
1945
1949
1953
1957
1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2013
Per 1000 Residents

51. U.S. Legal Immigration
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
1901
1906
1911
1916
1921
1926
1931
1936
1941
1946
1951
1956
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
2011

52. Next China? …
Mexico + Latin America!

53. Sales to International Buyers Increased
Both in Terms of Transactions and Price
Estimated Sales Dollar Volume of U.S. Residential Property
$ 66.4
to International Buyers ( in Billion Dollars)*
$ 82.5
$68.2
$92.2
2011 2012 2013 2014
Estimate is for 12 month period April 2013 - March 2014.

54. Canada Leads in Number of
Transactions
China Leads in Dollar Volume
International Transactions by Country of Origin
Brazil Canada China* France Germany India Japan Mexico Russia
United
Kingdom
30%
25%
20%
15%
10%
5%
0%
2010 1% 23% 9% 3% 4% 5% 1% 10% 3% 9%
2011 3% 23% 9% 4% 4% 7% 2% 7% 1% 7%
2012 3% 24% 12% 3% 3% 6% 1% 8% 2% 6%
2013 2% 23% 12% 2% 3% 5% 1% 8% 2% 5%
2014 2% 19% 16% 2% 3% 5% 2% 9% 1% 5%

55. Florida—First Choice for
International Buyers

56. Economic Forecast
2013 2014
Likely
2015
Forecast
2016
Forecast
GDP Growth 2.2% 2.2% 2.7% 2.9%
Job Growth +2.3 million +2.5 million +2.5 million +2.6 million
CPI Inflation 1.5% 1.6% 2.7% 3.3%
Consumer
Confidence
73 87 95 98
10-year
Treasury
2.5% 2.6% 3.2% 4.3%

57. Housing Forecast
2013 2014
Likely
2015
Forecast
2016
Forecast
Housing Starts 925,000 1.0 million 1.3 million 1.4 million
New Home
Sales
430,000 440,000 620,000 700,000
Existing Home
Sales
5.1 million 4.9 million 5.3 million 5.4 million
Median Price
Growth
+ 11.5% + 5.3% + 4% + 4%
30-year Rate 4.0% 4.2% 4.9% 6.0%
Underwriting
Standards
Strict Strict Transition Normal

58. Median Expected Price Change of REALTORS® in Next
12 Months, By State
Based on July 2014-September 2014 RCI Surveys
July 2014-September 2014 RCI Surveys

59. Let’s Spin the Bottle !

60. How Young Are REALTORS® ?
70
60
50
40
30
20
10
0
Under 30 In 30s In 40s In 50s In 60s
Retiree
Working Age

61. Spin the Globe … Find the Source
of Improving Standard of Living

62. When, How, What, Why?
• British Glorious Revolution of 1688
– William and Mary arrive to say …
– Power not with King but with people via
Parliament
– No Taxation with Representation
– Life, Liberty, and (Acquire) Property
• American Revolution of 1776
– Power resides not with King but with people
– No Taxation with Representation
– Life, Liberty, and the Pursuit of Happiness

63. Participants in Democracy to
Protect Property Rights!