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Real Estate Outlook and Trends at NYC Summit
- 1. Real Estate Outlook at Global Real Estate Summit NYC By Lawrence Yun, Ph.D. Chief Economist, National Association of REALTORS® Joint Conference of Staten Island Board of Realtors® and Hudson Gateway Association of Realtors® New York, NY October 22, 2018
- 2. Good Domestic Economy • Job Additions for 8 straight years • Unemployment Rate 4.0% • High Stock Market • High Net Worth • Wages picking up
- 3. Very Long Economic Expansion
- 4. GDP Growth Rate; 4% in Q2 -10 -8 -6 -4 -2 0 2 4 6 2008 - Q1 2008 - Q3 2009 - Q1 2009 - Q3 2010 - Q1 2010 - Q3 2011 - Q1 2011 - Q3 2012 - Q1 2012 - Q3 2013 - Q1 2013 - Q3 2014 - Q1 2014 - Q3 2015 - Q1 2015 - Q3 2016 - Q1 2016 - Q3 2017 - Q1 2017 - Q3 2018 - Q1
- 6. Unemployment Rate U.S. and NYC Metro 0 2 4 6 8 10 12 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 2015 - Jan 2016 - Jan 2017 - Jan 2018 - Jan
- 7. Jobs (18 million gained from 2010) 120,000 125,000 130,000 135,000 140,000 145,000 150,000 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 2015 - Jan 2016 - Jan 2017 - Jan 2018 - Jan In thousands
- 8. Total Jobs Greater NYC Metro (13% growth vs 13% nationwide from 2000) 8000 8500 9000 9500 10000 10500 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 2015 - Jan 2016 - Jan 2017 - Jan 2018 - Jan In thousands
- 10. Weekly Initial Unemployment Insurance Filings 200 300 400 500 600 700 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 2015-Jan 2015-Jul 2016-Jan 2016-Jul 2017-Jan 2017-Jul 2018-Jan 2018-Jul In thousands
- 11. Home Sales Not Breaking Higher • Pending Contracts stable and neutral • Low Inventory • Weakening Affordability • Low Homeownership Rate • Low First-Time Buyers • Diminished Optimism of Home Buying
- 12. National Pending Sales Index: Lower Every Month in 2018 (seasonally adjusted) 80 85 90 95 100 105 110 115 2011-Jan 2011-Apr 2011-Jul 2011-Oct 2012-Jan 2012-Apr 2012-Jul 2012-Oct 2013-Jan 2013-Apr 2013-Jul 2013-Oct 2014-Jan 2014-Apr 2014-Jul 2014-Oct 2015-Jan 2015-Apr 2015-Jul 2015-Oct 2016-Jan 2016-Apr 2016-Jul 2016-Oct 2017-Jan 2017-Apr 2017-Jul 2017-Oct 2018-Jan 2018-Apr 2018-Jul Source: NAR
- 13. Regional Variation in August -15 -13 -11 -9 -7 -5 -3 -1 1 3 Northeast Midwest South West % change in Pending Contracts From a year ago
- 14. Inventory of Homes on Market (Lowest Inventory in a generation) 1000000 1500000 2000000 2500000 3000000 3500000 2011-Jan 2011-Apr 2011-Jul 2011-Oct 2012-Jan 2012-Apr 2012-Jul 2012-Oct 2013-Jan 2013-Apr 2013-Jul 2013-Oct 2014-Jan 2014-Apr 2014-Jul 2014-Oct 2015-Jan 2015-Apr 2015-Jul 2015-Oct 2016-Jan 2016-Apr 2016-Jul 2016-Oct 2017-Jan 2017-Apr 2017-Jul 2017-Oct 2018-Jan Source: NAR
- 15. Home Price Index (Constant Quality) NYC Metro 100 150 200 250 300 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 2015-Q1 2016-Q1 2017-Q1 2018-Q1
- 16. Foreclosure Starts and Inventory in NY 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 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 2010-Q3 2011-Q1 2011-Q3 2012-Q1 2012-Q3 2013-Q1 2013-Q3 2014-Q1 2014-Q3 2015-Q1 2015-Q3 2016-Q1 2016-Q3 2017-Q1 2017-Q3 2018-Q1
- 17. Mortgage Rates to Rise Permanently (around 170 basis points spread above 10 year Treasury) 0 1 2 3 4 5 6 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 2013-Oct 2014-Jan 2014-Apr 2014-Jul 2014-Oct 2015-Jan 2015-Apr 2015-Jul 2015-Oct 2016-Jan 2016-Apr 2016-Jul 2016-Oct 2017-Jan 2017-Apr 2017-Jul 2017-Oct 2018-Jan 2018-Apr 2018-Jul
- 18. Tightening Monetary Policy Fed Funds Rate … from zero to … 0.00 0.50 1.00 1.50 2.00 2011-Jan 2011-Apr 2011-Jul 2011-Oct 2012-Jan 2012-Apr 2012-Jul 2012-Oct 2013-Jan 2013-Apr 2013-Jul 2013-Oct 2014-Jan 2014-Apr 2014-Jul 2014-Oct 2015-Jan 2015-Apr 2015-Jul 2015-Oct 2016-Jan 2016-Apr 2016-Jul 2016-Oct 2017-Jan 2017-Apr 2017-Jul 2017-Oct 2018-Jan 2018-Apr
- 19. Federal Reserve Balance Sheet Pace and Impact of Unwinding? Slow but Uncertain
- 20. Consumer Inflation Slowly Moving Up (year over year % growth) -1.0 0.0 1.0 2.0 3.0 4.0 5.0 2010-Jan 2010-May 2010-Sep 2011-Jan 2011-May 2011-Sep 2012-Jan 2012-May 2012-Sep 2013-Jan 2013-May 2013-Sep 2014-Jan 2014-May 2014-Sep 2015-Jan 2015-May 2015-Sep 2016-Jan 2016-May 2016-Sep 2017-Jan 2017-May 2017-Sep 2018-Jan 2018-May Core CPI
- 21. National Debt in $ billion $0 $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 $18,000,000 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 2015-Jan 2015-Jul 2016-Jan 2016-Jul 2017-Jan 2017-Jul 2018-Jan
- 22. Rising Rates and Home Sales Rate Change Home Sales Change (around that year) 1984 12% to 15% Increased 1987 9% to 11% Stable 1994 7% to 9% Stable 1999 6.5% to 8% Stable 2008 5.5% to 6.5% Crashed (sub-prime blowup) 2014 3.5% to 4.5% Stable
- 23. Homeownership Rate Trying to Make a Comeback 60 62 64 66 68 70 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 2015 - Q1 2016 - Q1 2017 - Q1 2018 - Q1
- 24. Wealth: From 2000 to 2016 $0 $50,000 $100,000 $150,000 $200,000 $250,000 Renters Homeowners
- 25. Diminished Optimism NAR Survey of Consumers % Strongly indicating Good Time to Buy 30 35 40 45 50 2016 - Q1 2016 - Q2 2016 - Q3 2016 - Q4 2017 - Q1 2017 - Q2 2017 - Q3 2017 - Q4 2018 - Q1 2018 - Q2 2018 - Q3
- 26. Home Price Expectation 0 20 40 60 80 100 Gallup Fannie NAR Consumers NAR Realtors® Rise Fall
- 27. Good Time to Sell? % indicating yes 50 60 70 80 2016 - Q1 2016 - Q2 2016 - Q3 2016 - Q4 2017 - Q1 2017 - Q2 2017 - Q3 2017 - Q4 2018 - Q1 2018 - Q2 2018 - Q3 Source: NAR
- 28. Diminished Optimism Because of Lack of Supply Need to Boost Single-Family Housing Starts 0 200 400 600 800 1000 1200 1400 1600 1800 2000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 In thousand units
- 29. NYC Metro Single-family Housing Starts 0 5000 10000 15000 20000 25000 30000 35000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
- 30. NYC Metro Multifamily Housing Starts 0 10000 20000 30000 40000 50000 60000 70000 80000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
- 31. How to Boost Home Construction • Provide Regulatory Relief to Community Banks • Remove Tariff on Lumber and Building Materials • Don’t be Too Stringent on Zoning Land Use • Repurpose Malls into Condominiums • Vocational Training for Construction Industry
- 32. Commercial Real Estate Outlook
- 33. Commercial Property Price – New Highs (85% gain in 7 years) 100 150 200 250 300 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 2012-Q1 2012-Q3 2013-Q1 2013-Q3 2014-Q1 2014-Q3 2015-Q1 2015-Q3 2016-Q1 2016-Q3 2017-Q1 2017-Q3 Source: Federal Reserve
- 34. NCREIF Cap Rates – Likely Already Hit Cyclical Low 6.1 5.7 5.6 6.0 6.9 6.3 6.0 5.9 5.7 5.5 5.1 5.1 5.1 0 1 2 3 4 5 6 7 8 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 %
- 35. Commercial Investment Sales of Large Properties (Properties valued at $2.5 million and over) 130 212 362 423 571 174 67 147 233 299 355 424 470 547 489 450 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
- 37. Global Dimension of Home Buyers (Foreigners and Recent Immigrants) $66.4 $82.5 $68.2 $92.2 $103.9 $102.6 $153.0 $121.0 2011 2012 2013 2014 2015 2016 2017 2018 DOLLAR VOLUME OF FOREIGN BUYER RESIDENTIAL PROPERTY PURCHASES(USD $BIL) Note: Based on transactions in the 12 months ending March of each year.
- 38. U.S. Dollar Strength (Trade-weighted Exchange Value of Dollar) 80 90 100 110 120 130 140 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 2015-Jan 2015-Jul 2016-Jan 2016-Jul 2017-Jan 2017-Jul 2018-Jan 2018-Jul
- 39. Market Share of Global Buyers 7% 9% 6% 7% 8% 7% 10% 8% 5% 5% 4% 5% 4% 4% 5% 5% 2011 2012 2013 2014 2015 2016 2017 2018 As a percent of dollar volume of existing home sales As a percent of existing home sales
- 40. The share of REALTORS® who had an International Client 28% 28% 27% 27% 28% 35% 31% 29% 23% 2010 2011 2012 2013 2014 2015 2016 2017 2018
- 41. U.S. Dollar Strength (Trade-weighted Exchange Value of Dollar) 80 90 100 110 120 130 140 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 2015-Jan 2015-Jul 2016-Jan 2016-Jul 2017-Jan 2017-Jul 2018-Jan 2018-Jul
- 42. Top Foreign Buyers: China, Canada, Mexico, India, U.K. 15% 10% 8% 5% 3% 3% 0% 5% 10% 15% 20% 25% CHINA* CANADA MEXICO INDIA UNITED KINGDOM BRAZIL MAJOR FOREIGN BUYERS* 2007 2008 2009 2010 2011 2012 *China includes People's Republic of China, Hong Kong, and Taiwan.
- 43. The median purchase price among foreign buyers tends to be higher than the typical home buyer $277,380 $302,290 $292,400 $223,058 $235,792 $249,300 2016 2017 2018 MEDIAN PURCHASE PRICE Foreign Buyers All Existing Homebuyers
- 44. About half of foreign buyers purchased the property for primary residence use46% 18% 14% 10% 4% 5% 3% 49% 18% 12% 9% 4% 5% 4% 52% 16% 12% 9% 3% 3% 5% PRIMARY RESIDENCE RESIDENTIAL RENTAL VACATION HOME BOTH VACATION AND RENTAL STUDENT USE OTHER DON'T KNOW INTENDED USE OF FOREIGN BUYER RESIDENTIAL PROPERTY 2016 2017 2018
- 45. 62 percent of leads/referrals were personal or business contacts and former clients 23% 21% 12% 11% 8% 7% 5% 4% 1% 8% Personal Contacts Was a Former Client Walk-in/Open House/Phone Call From a Business contact in the U.S. From a Business Contact Outside the U.S. SOURCE OF REFERRALS OR LEADS ON FOREIGN RESIDENTIAL BUYERS
- 46. International Trade (Growing 5% per year, twice as fast as GDP) 0 500 1000 1500 2000 2500 3000 3500 4000 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 2012-Q1 2012-Q3 2013-Q1 2013-Q3 2014-Q1 2014-Q3 2015-Q1 2015-Q3 2016-Q1 2016-Q3 2017-Q1 2017-Q3 2018-Q1 Imports Exports In $billion
- 48. Forecast
- 49. National Existing Home Sales Little Drop in 2018; Gain in 2019 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
- 50. Median Home Price Rising 8% over 2 years 0 50,000 100,000 150,000 200,000 250,000 300,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
- 51. Rising Cap Rates and Commercial Real Estate Prices • Fewer transactions as buyers and sellers face-off without budging on price (5% to 10% decline in unit sales) • Steady prices in mid-tier markets • Modest price correction in big cities and trophy properties – (3% to 7% drop in 2018 after 90% increase)
- 52. Thank You !