1. Housing Market
and
Economic Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at OAR Legislative and Economic Summit
Oklahoma City, OK
February 6, 2013

2. Forecast #1: 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

3. 0
2
4
6
8
10
12
14
16
‐4
‐2
1970 ‐ Jan
1972 ‐ Jan
1974 ‐ Jan
1976 ‐ Jan
1978 ‐ Jan
1980 ‐ Jan
1982 ‐ Jan
1984 ‐ Jan
1986 ‐ Jan
Core
1988 ‐ Jan
1990 ‐ Jan
1992 ‐ Jan
1994 ‐ Jan
1996 ‐ Jan
Overall
1998 ‐ Jan
2000 ‐ Jan
(% change from one year ago)
2002 ‐ Jan
2004 ‐ Jan
Consumer Price Inflation
2006 ‐ Jan
2008 ‐ Jan
2010 ‐ Jan
2012 ‐ Jan

4. ‐1
0
1
2
3
4
5
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
Owners' Equivalent Rent
2007 ‐ Jan
2007 ‐ Jul
2008 ‐ Jan
2008 ‐ Jul
2009 ‐ Jan
2009 ‐ Jul
2010 ‐ Jan
2010 ‐ Jul
(the biggest weight to Consumer Price Index)
Renters' Rent
2011 ‐ Jan
2011 ‐ Jul
2012 ‐ Jan
2012 ‐ Jul
Rising Renters’ and Homeowners’ Rent Growth

5. Percent of REALTORS® Reporting Changing
Rent Levels as Compared to 12 Months Ago
60%
Sept '12: Rising rent: 57%
50%
40%
30%
20%
10%
0%
Higher Rents Lower Rents Constant rents

6. Monetary Policy by Federal Reserve
(zero rate policy to 2015 ?)
% Fed Funds
6
5
4
3
2
1
0

7. Federal Reserve Balance Sheet from
Quantitative Easing
Total Assets
3500000
$ million
3000000
2500000
2000000
1500000
1000000
500000
0
1‐Aug‐07 1‐Aug‐08 1‐Aug‐09 1‐Aug‐10 1‐Aug‐11 1‐Aug‐12

8. 500000
0
1000000
1500000
2000000
2500000
3000000
3500000
4000000
1970 ‐ Jan
1972 ‐ Jan
1974 ‐ Jan
1976 ‐ Jan
1978 ‐ Jan
1980 ‐ Jan
1982 ‐ Jan
1984 ‐ Jan
12‐month tally in $ million
1986 ‐ Jan
Revenue
1988 ‐ Jan
1990 ‐ Jan
1992 ‐ Jan
1994 ‐ Jan
1996 ‐ Jan
Spending
1998 ‐ Jan
2000 ‐ Jan
Federal Government
2002 ‐ Jan
2004 ‐ Jan
Tax Revenue and Spending
2006 ‐ Jan
2008 ‐ Jan
2010 ‐ Jan
2012 ‐ Jan

9. Huge Federal Budget Deficit
… Will Push Up Borrowing Cost and/or Ignite Inflation
4
Deficit in relation to GDP
2
0
1960 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012
‐2‐ Jan ‐ Jan ‐ Jan ‐ Jan ‐ Jan ‐ Jan ‐ Jan ‐ Jan ‐ Jan ‐ Jan ‐ Jan ‐ Jan ‐ Jan ‐ Jan
‐4
‐6
‐8
‐10
‐12

10. Impact to Deficit
• Mortgage Interest Deduction … $90 billion
– Not the source of the current budget deficit since
MID was present for nearly 100 years
• Interest Rates Revert back to historical
average … $300 billion in extra interest
expense

11. Mortgage Rate Forecast
(Average Rate of 5.5% in 2015 ?)
30‐year Mortgage
%
7
6
5
4
3
2
1
0
Modestly higher rates could help home sales as banks re‐staff mortgage
work for home purchase applications and less refinance applications.

12. Forecast #2: Meaningfully Higher
Home Prices
• Demand is Up … Supply is Down
• 4% to 5% in 2012 (Case‐Shiller, FHFA)
• 6% in 2012 (Median Home Price)
• Probably 15% cumulative growth over 3 years

13. 0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
2008 ‐ Jan
2008 ‐ Apr
2008 ‐ Jul
2008 ‐ Oct
2009 ‐ Jan
2009 ‐ Apr
2009 ‐ Jul
2009 ‐ Oct
2010 ‐ Jan
Buyer
2010 ‐ Apr
2010 ‐ Jul
2010 ‐ Oct
2011 ‐ Jan
Seller
2011 ‐ Apr
2011 ‐ Jul
2011 ‐ Oct
from REALTOR® Survey
Buyer and Seller Traffic
2012 ‐ Jan
2012 ‐ Apr
2012 ‐ Jul
2012 ‐ Oct

14. 70
75
80
85
90
95
100
105
110
115
2007 ‐ Jan
2007 ‐ Apr
2007 ‐ Jul
Source: NAR
2007 ‐ Oct
2008 ‐ Jan
2008 ‐ Apr
2008 ‐ Jul
2008 ‐ Oct
2009 ‐ Jan
2009 ‐ Apr
Homebuyer Tax Credit
2009 ‐ Jul
2009 ‐ Oct
2010 ‐ Jan
2010 ‐ Apr
2010 ‐ Jul
(Seasonally Adjusted)
2010 ‐ Oct
2011 ‐ Jan
2011 ‐ Apr
2011 ‐ July
2011 ‐ Oct
2012 ‐ Jan
2012‐Apr
2012 ‐ Jul
2012 ‐ Oct
Monthly Pending Home Sales Index

15. Annual Existing Home Sales Closings:
U‐Shaped Recovery
8
In million units
7 7.08
6 6.52
5.7
5 5.1
5.4
5.02
4 4.66
4.12 4.34 4.18 4.26
3
2
1
0
2005
2006
2007
2008
2009
2010
2011
2013
2014
2015
2012 est.

16. Oklahoma Housing Statistics
• Sales up about 10% in 2012 Q3
– July up 14%
– August up 17%
– September down 4%
• Median Prices up 5% from one year ago
• Dollar Volume … up about 15%
• Inventories down 15% from 1 year ago
Please check with local MLS for precise information

17. Household Formation Bursting Out
(in millions)
2.00
1.80
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00

18. 124000
126000
128000
130000
132000
134000
136000
138000
2000 ‐ Jan
2000 ‐ Jul
2001 ‐ Jan
2001 ‐ Jul
140000 In thousands
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
U.S. Total Payroll Jobs
2009 ‐ Jul
2010 ‐ Jan
2010 ‐ Jul
(Recovered 63% of jobs lost)
2011 ‐ Jan
2011 ‐ Jul
2012 ‐ Jan
2012 ‐ Jul

19. 1300
1350
1400
1450
1500
1550
1600
1650
2000 ‐ Jan
2000 ‐ Jul
2001 ‐ Jan
2001 ‐ Jul
2002 ‐ Jan
In thousands
2002 ‐ Jul
2003 ‐ Jan
2003 ‐ Jul
2004 ‐ Jan
2004 ‐ Jul
2005 ‐ Jan
2005 ‐ Jul
2006 ‐ Jan
2006 ‐ Jul
2007 ‐ Jan
2007 ‐ Jul
(Setting New Peak)
2008 ‐ Jan
2008 ‐ Jul
2009 ‐ Jan
2009 ‐ Jul
2010 ‐ Jan
2010 ‐ Jul
Oklahoma Total Payroll Jobs
2011 ‐ Jan
2011 ‐ Jul
2012 ‐ Jan
2012 ‐ Jul

20. 0
2
4
6
8
10
12
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
Unemployment Rate … Falling
US
OK

21. 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
(How many of the civilian population is working?)
2011 ‐ Jan
Employment Rate … No Progress
2011 ‐ Jul
2012 ‐ Jan
2012 ‐ Jul

22. Visible Existing Home Inventory
(Existing home inventory at 8‐year low)
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
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

23. 100
200
300
400
500
600
700
0
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
Visible New Home Inventory
2006 ‐ Jan
2008 ‐ Jan
(Newly Constructed Homes Inventory at 50‐year low)
2010 ‐ Jan
2012 ‐ Jan

24. Housing Starts
(Well Below 50‐year average of 1.5 million each year)
multifamily single‐family
Thousand units (annualized)
2500
2000
Long‐term Average
1500
1000
500
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

25. Oklahoma Housing Permits
45000
40000
35000
30000
25000
20000
15000
10000
5000
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012

26. 0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
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
million units
2010 ‐ Q3
2011 ‐ Q1
2011 ‐ Q3
2012 ‐ Q1
2012 ‐ Q3
Shadow Inventory … Falling
2015 … 5%
2014 … 8%
(Seriously delinquent mortgage + homes in foreclosure process)
2013 … 15%
2012 … 25%
2011 … 33%
2010 … 33%
Market Share
Distressed Sales

27. 0
2
4
6
8
10
12
14
%
2005 ‐ Q1
2005 ‐ Q2
2005 ‐ Q3
2005 ‐ Q4
2006 ‐ Q1
2006 ‐ Q2
2006 ‐ Q3
2006 ‐ Q4
2007 ‐ Q1
2007 ‐ Q2
2007 ‐ Q3
2007 ‐ Q4
2008 ‐ Q1
2008 ‐ Q2
AZ
2008 ‐ Q3
2008 ‐ Q4
2009 ‐ Q1
MI
2009 ‐ Q2
2009 ‐ Q3
2009 ‐ Q4
2010 ‐ Q1
2010 ‐ Q2
2010 ‐ Q3
2010 ‐ Q4
in Non‐Judicial States
2011 ‐ Q1
2011 ‐ Q2
Foreclosures Rapidly Falling
2011 ‐ Q3
2011 ‐ Q4
Example: Seriously Delinquent Mortgages in AZ, CA , MI
2012 ‐ Q1
2012 ‐ Q2
2012 ‐ Q3

28. 0
2
4
6
8
10
12
%
2005 ‐ Q1
2005 ‐ Q2
2005 ‐ Q3
2005 ‐ Q4
2006 ‐ Q1
2006 ‐ Q2
2006 ‐ Q3
2006 ‐ Q4
2007 ‐ Q1
2007 ‐ Q2
2007 ‐ Q3
2007 ‐ Q4
2008 ‐ Q1
CT
2008 ‐ Q2
2008 ‐ Q3
IL
2008 ‐ Q4
2009 ‐ Q1
2009 ‐ Q2
OK
2009 ‐ Q3
2009 ‐ Q4
2010 ‐ Q1
2010 ‐ Q2
2010 ‐ Q3
2010 ‐ Q4
2011 ‐ Q1
2011 ‐ Q2
2011 ‐ Q3
2011 ‐ Q4
Example Seriously Delinquent Mortgages in CT and IL
2012 ‐ Q1
2012 ‐ Q2
2012 ‐ Q3
Foreclosures Clogged in Judicial States

29. 50
100
150
200
250
300
350
400
450
0
1990 ‐ Q1
1991 ‐ Q1
1992 ‐ Q1
1993 ‐ Q1
1994 ‐ Q1
1995 ‐ Q1
1996 ‐ Q1
1997 ‐ Q1
1998 ‐ Q1
1999 ‐ Q1
2000 ‐ Q1
OK
2001 ‐ Q1
AZ
2002 ‐ Q1
2003 ‐ Q1
2004 ‐ Q1
2005 ‐ Q1
2006 ‐ Q1
Home Price Index
2007 ‐ Q1
2008 ‐ Q1
2009 ‐ Q1
2010 ‐ Q1
2011 ‐ Q1
2012 ‐ Q1

30. 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

31. 2000
4000
6000
8000
10000
12000
14000
16000
0
2000 ‐ Q1
2000 ‐ Q3
2001 ‐ Q1
2001 ‐ Q3
In $ billion
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
Bubble growth
2008 ‐ Q3
2009 ‐ Q1
2009 ‐ Q3
2010 ‐ Q1
Net Equity in Real Estate
2010 ‐ Q3
2011 ‐ Q1
2011 ‐ Q3
2012 ‐ Q1
If 4% annual gain

32. 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 Owner
2014 Forecast by NAR

33. 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
In thousands
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
Renter Households
2004 ‐ Q1
2005 ‐ Q1
2006 ‐ Q1
2007 ‐ Q1
2008 ‐ Q1
2009 ‐ Q1
2010 ‐ Q1
2011 ‐ Q1
2012 ‐ Q1

34. 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
In thousands
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
Homeowner Households
2006 ‐ Q1
2007 ‐ Q1
2008 ‐ Q1
2009 ‐ Q1
2010 ‐ Q1
2011 ‐ Q1
2012 ‐ Q1

35. Household Formation
(Usually 2/3 owners and 1/3 renters
= 66% homeownership rate)
1.6
1.4
1.2
All Renters
1
0.8
0.6
0.4
0.2
0
Source: Harvard Joint Center for Housing Studies

36. Economic Backdrop

37. Economy Growing, though Slowly
(No Fresh Recession because of Housing Recovery)
Real GDP Growth Rate
4
%
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
‐1 forecastforecast
‐2
‐3
‐4

38. Payroll Jobs Changes
(December to December)
3
In millions
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
‐1 forecastforecast
‐2
‐3
‐4
‐5
‐6

39. Business Spending Growth
(Nonresidential Fixed Investment)
30
20
10
0
2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012
‐10 ‐ Q1 ‐ Q3 ‐ Q1 ‐ Q3 ‐ Q1 ‐ Q3 ‐ Q1 ‐ Q3 ‐ Q1 ‐ Q3 ‐ Q1 ‐ Q3 ‐ Q1 ‐ Q3 ‐ Q1 ‐ Q3
‐20
‐30
‐40

40. ‐200
‐100
0
100
200
300
400
500
2001 ‐ Q1
2001 ‐ Q3
2002 ‐ Q1 $ billion
2002 ‐ Q3
2003 ‐ Q1
2003 ‐ Q3
2004 ‐ Q1
2004 ‐ Q3
2005 ‐ Q1
2005 ‐ Q3
2006 ‐ Q1
2006 ‐ Q3
2007 ‐ Q1
2007 ‐ Q3
2008 ‐ Q1
(excluding Federal Reserve)
2008 ‐ Q3
2009 ‐ Q1
2009 ‐ Q3
Financial Industry Profits
2010 ‐ Q1
2010 ‐ Q3
2011 ‐ Q1
2011 ‐ Q3
2012 ‐ Q1

41. Risks to Forecast
• Upside … Credit Availability
– Housing recovery so far even with tight credit
– What happens if mortgage accessibility opens up?
– Counter‐cyclical housing policy … lower FHA premiums and
lower GSE g‐fees
• Downside … Washington Policy
– QRM 20% down payment requirement?
– Basel 3 … capital rule that punishes private mortgage with
low down payment and commercial loans
– Trim mortgage interest deduction?
– Capital gains tax on home sale?

42. Forecast
(If Prolonged Fiscal Cliff is Avoided)
2011 2012 2013 2014
Forecast Forecast
GDP Growth +1.8% +2.1% +2.3% 3.0%
Existing Home 4.3 million 4.66 million 5.1 million 5.3 million
Sales
Housing Starts 610 K 780 K 1.1 million 1.3 million
Existing Home ‐ 4% + 6% + 5% + 4%
Price Growth
30‐yr Mortgage 4.7% 3.7% 4.1% 4.8%
Rate

43. Oklahoma Forecast
• Steady Growth
• Jobs more important determinant than
mortgage rates
• 15% cumulative price increase in 3 years.

44. For Daily Update and Analysis
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@NAR_Research
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