Real Estate Market Outlook for August 2023

2. 2
Lawrence Yun, Ph.D.
Chief Economist
National Association of REALTORS®
2023 Leadership Summit

3. 3
Real Estate
Market
Outlook

4. Scary Chart:
10-year Treasury Borrowing Rate Testing
Resistance Line
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
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
2019
-
Jan
2020
-
Jan
2021
-
Jan
2022
-
Jan
2023
-
Jan
Source: U.S. Treasury and Federal Reserve

5. Scary Chart Zoom-in:
10-year Treasury Borrowing Rate Testing
Resistance Line
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
2019 -
Jan
2019 -
Jun
2019 -
Nov
2020 -
Apr
2020 -
Sep
2021 -
Feb
2021 -
Jul
2021 -
Dec
2022 -
May
2022 -
Oct
2023 -
Mar
2023 -
Aug

6. High Borrowing Costs from Fed’s Aggressive
Policy:
10-year Treasury and Fed Funds Rate
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2019
-
Jan
2019
-
Mar
2019
-
May
2019
-
Jul
2019
-
Sep
2019
-
Nov
2020
-
Jan
2020
-
Mar
2020
-
May
2020
-
Jul
2020
-
Sep
2020
-
Nov
2021
-
Jan
2021
-
Mar
2021
-
May
2021
-
Jul
2021
-
Sep
2021
-
Nov
2022
-
Jan
2022
-
Mar
2022
-
May
2022
-
Jul
2022
-
Sep
2022
-
Nov
2023
-
Jan
2023
-
Mar
2023
-
May
2023
-
Jul
Source: U.S. Treasury and Federal Reserve

7. 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
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020
$ million
Downgrade of USA Debt ???
Federal Outlay (blue bar) > Tax Receipts (orange line)
Source: Congressional Budget Office

8. Damage from High Interest
Rates
• Home Sales Down
• Commercial Real Estate Transactions
Down
• Commercial Real Estate Property Prices
Down
• Community Banks in a Mess from Interest
Rate Mismatch
• Community Banks in a Mess from
Commercial Real Estate Loan Exposure
• Economic Slowdown
• Interest Expenditure of Federal Debt Rising

9. Weaker Home Sales - Existing-Home Sales Below
Pre-COVID...Down 23% Year-to-Date
Source: NAR
3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
6,000,000
6,500,000
7,000,000
2017 -
Jan
2017 -
Jul
2018 -
Jan
2018 -
Jul
2019 -
Jan
2019 -
Jul
2020 -
Jan
2020 -
Jul
2021 -
Jan
2021 -
Jul
2022 -
Jan
2022 -
Jul
2023 -
Jan
Seasonally adjusted annualized sale pace

10. Newly Constructed Home Sales...Back to Pre-COVID
Source: HUD
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
2017 -
Jan
2017 -
Jul
2018 -
Jan
2018 -
Jul
2019 -
Jan
2019 -
Jul
2020 -
Jan
2020 -
Jul
2021 -
Jan
2021 -
Jul
2022 -
Jan
2022 -
Jul
2023 -
Jan

11. Inventory of Existing Homes Low ... New Homes
High
Source: NAR and HUD

12. Commercial Real Estate Transactions ...
Down 50%
(properties valued at $2.5 million and above)
0
100
200
300
400
500
600
700
800
900
2019 2020 2021 2022 2023
$ billion
Source: MSCI

13. Commercial Real Estate Property Price Index
... Down 15%
100
110
120
130
140
150
160
2019
-
Jan
2019
-
Mar
2019
-
May
2019
-
Jul
2019
-
Sep
2019
-
Nov
2020
-
Jan
2020
-
Mar
2020
-
May
2020
-
Jul
2020
-
Sep
2020
-
Nov
2021
-
Jan
2021
-
Mar
2021
-
May
2021
-
Jul
2021
-
Sep
2021
-
Nov
2022
-
Jan
2022
-
Mar
2022
-
May
2022
-
Jul
2022
-
Sep
2022
-
Nov
2023
-
Jan
2023
-
Mar
2023
-
May
2023
-
Jul
Index value
Source: Green Street

14. Commercial Real Estate Loans Held by
Top-25 Banks and 1000 Small Banks
0
500
1000
1500
2000
2500
2017
-
Jan
2017
-
Apr
2017
-
Jul
2017
-
Oct
2018
-
Jan
2018
-
Apr
2018
-
Jul
2018
-
Oct
2019
-
Jan
2019
-
Apr
2019
-
Jul
2019
-
Oct
2020
-
Jan
2020
-
Apr
2020
-
Jul
2020
-
Oct
2021
-
Jan
2021
-
Apr
2021
-
Jul
2021
-
Oct
2022
-
Jan
2022
-
Apr
2022
-
Jul
2022
-
Oct
2023
-
Jan
2023
-
Apr
$ billion
Source: Federal Reserve

15. 0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
$ million
National Defense and Interest Payment

16. 16
Why is the
Fed Raising
Interest
Rates?

17. Inflation Steadily Calming Down: 3% in June, but Not Yet 2%,
With More Deceleration Underway as Wage and Rents
Moderate
0
2
4
6
8
10
2019
-
Jan
2019
-
Mar
2019
-
May
2019
-
Jul
2019
-
Sep
2019
-
Nov
2020
-
Jan
2020
-
Mar
2020
-
May
2020
-
Jul
2020
-
Sep
2020
-
Nov
2021
-
Jan
2021
-
Mar
2021
-
May
2021
-
Jul
2021
-
Sep
2021
-
Nov
2022
-
Jan
2022
-
Mar
2022
-
May
2022
-
Jul
2022
-
Sep
2022
-
Nov
2023
-
Jan
2023
-
Mar
2023
-
May
2023
-
Jul
% change from a year ago
Source: BLS

18. More Jobs and Less Inflation ...
But Voters Saying It Ain’t So
0
2
4
6
8
10
12
14
16
18
Recent 12 months From January 2021
%
Democrat Narrative
Wage Growth > CPI
Inflation
in recent 12 months
Republican Narrative
Wage Growth < CPI Inflation
since Biden Inauguration

19. Item % change from a year ago
Car Insurance 16.9%
Rent 8.3%
Food 5.8%
Electricity 5.4%
Lodging Away from Home
(Hotel/Airbnb)
5.0%
New Car 4.1%
Clothes 3.1%
Medical Service -1%
Airfare -13%
Gasoline -27%
Price Growth by Key Items
Source: BLS

20. Annual Apartment Construction at 40-year
High... Why has Rent Not Calmed Down?
0
100,000
200,000
300,000
400,000
500,000
600,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Source: Census/HUD

21. Apartment Rent Growth in Private Sector Data
Source: CoStar
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2
%

22. Rents Rising or Softening?
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 2023 Q2
Source: BLS and CoStar
Official Government Data
Private Sector Data

23. Financial Literacy on Rent Control:
Supply and Demand Graph

24. 24
Home Prices:
Not Part of
CPI

25. $0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
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
2019
-
Jan
2020
-
Jan
2021
-
Jan
2022
-
Jan
2023
-
Jan
National Median Home Price
Source: NAR

26. Home Price Change in 2023 Q1 from Prior Quarter
Source: NAR Analysis of FHFA data

27. Source: NAR Analysis of FHFA data
Home Price Change from Onset of COVID (2020 Q1 to
2023 Q2)

28. $0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
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
2019
-
Q1
2020
-
Q1
2021
-
Q1
2022
-
Q1
2023
-
Q1
Median Home Price - Hawaii
Source: NAR

29. 50
52
54
56
58
60
62
64
66
68
%
Homeownership Rate in Hawaii and U.S.
Source: Census

30. 0
10000
20000
30000
40000
50000
60000
2000
-…
2001
-…
2002
-…
2003
-…
2004
-…
2005
-…
2006
-…
2007
-…
2008
-…
2009
-…
2010
-…
2011
-…
2012
-…
2013
-…
2014
-…
2015
-…
2016
-…
2017
-…
2018
-…
2019
-…
2020
-…
2021
-…
2022
-…
2023
-…
$ billion
Home Value (fell $3 trillion) and Mortgage Debt
(rose $1 trillion)
Source: Federal Reserve

31. $0
$500
$1,000
$1,500
$2,000
$2,500
2000…
2001…
2002…
2003…
2004…
2005…
2006…
2007…
2008…
2009…
2010…
2011…
2012…
2013…
2014…
2015…
2016…
2017…
2018…
2019…
2020…
2021…
2022…
2023…
Shockingly High Monthly Mortgage Payment
To Buy Typical Home at Prevailing Mortgage Rate -
Not Part of CPI
Source: NAR

32. 0
5
10
15
20
25
30
35
40
2009
- Jan
2010
- Jan
2011
- Jan
2012
- Jan
2013
- Jan
2014
- Jan
2015
- Jan
2016
- Jan
2017
- Jan
2018
- Jan
2019
- Jan
2020
- Jan
2021
- Jan
2022
- Jan
2023
- Jan
More Turning to Cash Sales
Source: NAR
% of total sales

33. 0
10
20
30
40
50
60
2009
- Jan
2010
- Jan
2011
- Jan
2012
- Jan
2013
- Jan
2014
- Jan
2015
- Jan
2016
- Jan
2017
- Jan
2018
- Jan
2019
- Jan
2020
- Jan
2021
- Jan
2022
- Jan
2023
- Jan
Distressed Property Sales Rising from 1% to 2% ...
Non-Existent
Source: NAR
% of total sales

34. 34
Job Market

35. Total Payroll Jobs ... 4 Million More from Pre-Covid
Source: BLS
100000
110000
120000
130000
140000
150000
160000
2020 - Jan 2021 - Jan 2022 - Jan 2023 - Jan
In thousands

36. Job Openings > Those Searching for Job
Source: BLS
0
5000
10000
15000
20000
25000
2019
-
Jan
2019
-
Mar
2019
-
May
2019
-
Jul
2019
-
Sep
2019
-
Nov
2020
-
Jan
2020
-
Mar
2020
-
May
2020
-
Jul
2020
-
Sep
2020
-
Nov
2021
-
Jan
2021
-
Mar
2021
-
May
2021
-
Jul
2021
-
Sep
2021
-
Nov
2022
-
Jan
2022
-
Mar
2022
-
May
2022
-
Jul
2022
-
Sep
2022
-
Nov
2023
-
Jan
2023
-
Mar
2023
-
May
In thousands

37. Job Gains Since Pre-Covid Record High Payroll
Employment
(% change from March 2020 to June 2023)
7.6%
Source: NAR Analysis of BLS data

38. Hollywood Before the Strike:
Motion Picture Jobs in California
Source: BLS
0
50,000
100,000
150,000
200,000
250,000
2000 2003 2006 2009 2012 2015 2018 2021

39. Motion Picture Jobs in Georgia
Source: BLS
0
5,000
10,000
15,000
20,000
25,000
30,000
2000 2003 2006 2009 2012 2015 2018 2021

40. 40
Forecast

41. Mortgage Rates to Fall?
30-year Fixed Rate to be near 6% by the early
spring
• Rents will calm down further ... Holds down
CPI ... and make the Fed stop raising the
interest rate
• Community banks are suffering from high
interest rates
• Spread with government bond with a
return to normal

42. 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
2019 2020 2021 2022 2023 F 2024 F
Total Home Sales: New and Existing
Bottoming This Year Before Upturn Next Year
Source: NAR forecast and HUD

43. 43
Extra Demand from International Home
Buyers?
Foreigners and Very Recent Immigrants

44. International Purchases by $ Volume
Source: NAR

45. Top Countries of Origin:
China, Mexico, Canada, India, and Colombia
Source: NAR

46. Top Destinations by Foreign Buyers:
Florida, California, Texas, North Carolina, and Arizona
Source: NAR

47. 47
NAR
Membership

48. 0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
NAR Membership
Source: NAR

49. Membership Change From a Year Ago
-20000
0
20000
40000
60000
80000
100000
120000
140000
2020
- Jan
2020
- Apr
2020
- Jul
2020
- Oct
2021
- Jan
2021
- Apr
2021
- Jul
2021
- Oct
2022
- Jan
2022
- Apr
2022
- Jul
2022
- Oct
2023
- Jan
2023
- Apr
Source: NAR

50. Membership Changes from One Year Ago to July 2023
Source: NAR