2016 market updatekw-sites.s3-us-west-2.amazonaws.com/kw-images-prod/s3fs...homes remain in a...

2016 Market UpdateGary Keller and Jay Papasan

©2016 Keller Williams Realty, Inc.

Housing Market Cycles


The Numbers That Drive U.S. Real Estate

1. Home Sales

2. Home Price

3. Months Supply of Inventory

4. Mortgage Rates


1. Home Sales

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 Feb Apr Jun

5.65.55.45.45.1

5.55.3

5.05.14.7

4.34.34.6

4.4

5.0

5.7

6.26.0

5.45.0

4.74.64.74.5

4.03.8

3.53.63.4

3.22.92.93.0

Total Annual Single-Family Home Sales (in Millions) 2016 Monthly Home Sales (Annualized)

Nationally home sales are on pace for another post-crisis record. However, sales are slowing in some markets as affordability becomes a serious issue.

Source: NAR


'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

Annual Median Home Price (in Thousands)

$235 (projected)$222

$179 $198

$95

$166

$222

Home prices continue to rise as mortgage rates remain low. Price gains have been in the sustainable range for the majority of 2016.

Source: NAR

3. Home Price - Annual


4. Months Supply of Inventory

Jun '14 Sep Dec Mar Jun '15 Sep Dec Mar Jun '16

Inventory Balanced = 6 months

4.64.74.74.44.443.954.84.85.14.955.15.2

4.64.74.64.455.25.45.65.65.5

Buy

er’s

Mkt

Selle

r’s M

ktB

alan

ced

6

We are now seeing many markets split by price point. Entry-level homes remain in a buyer’s market, but some luxury and move-up markets show signs of shifting.

Source: NAR


7. Mortgage Rates - Monthly

Jan '11 Jul '11 Jan '12 Jul '12 Jan '13 Jul '13 Jan '14 Jul '14 Jan '15 Jul '15 Jan '16 Jul '16

Monthly Mortgage Rate

3.9%

4.8%

3.35%

4.5%

4.2%3.4%

Source: Freddie Mac

Home sales benefited from near record-low interest rates so far in 2016, as lackluster economic growth has kept the Federal Reserve from making substantial changes to policy and pushed more money into treasuries.


The U.S. Economy1. Gross Domestic Product

2. Unemployment

3. Inflation


1. Gross Domestic Product - Quarterly

Q2 '07 Q4 '07 Q2 '08 Q4 '08 Q2 '09 Q4 '09 Q2 '10 Q4 '10 Q2 '11 Q4 '11 Q2 '12 Q4 '12 Q2 '13 Q4 '13 Q2 '14 Q4 '14 Q2 '15 Q4 '15 Q2 '16

1.2%0.8%1.4%

2%

3.9%

0.6%

2.1%

4.3%4.6%

-0.9%

3.5%4.5%

1.8%2.7%

0.1%

2.5%1.6%

2.3%

4.6%

0.8%

2.9%

-1.5%

2.5%2.7%

3.9%

1.7%

3.9%

1.3%

-0.5%

-5.4%

-8.2%

-1.9%

2.0%

-2.7%

1.4%

2.7%3.1%

0.2%

Real GDP Growth Rate, Quarterly, Seasonally Adjusted (Percentage) 2015 2016Source: BEA

Growth has been held back by low levels of investment in 2016, but consumer spending remains strong.


2. Unemployment - Monthly

Source: BLS

Jan '08 Jan '09 Jan '10 Jan '11 Jan '12 Jan '13 Jan '14 Jan '15 Jul '16

10%

5%5.7%

4.9%

Employment has been stable below 5% so far in 2016, as other statistics on unemployment continue to show progress.


3. Inflation - Annual

Persistent low levels of inflation will be another factor holding down interest rates.

'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16

4.5%

5.4%

1.4%

CPI (Includes Energy and Food) Core CPI (Excludes Energy and Food) Target = 2%Source: BEA

1.5%2% 2%

(projected)


Special Topics1. Affordability

2. New Home Construction

3. New Home Sales


1. Affordability

Source: NAR

Affordability Definition: A value of 100 means that a family earning the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that a family earning the median income has more than enough income.

'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Jan Feb Mar Apr May

159164170174171164164176

197186

172169

138115108113

124131126128122131133127126125128131122110108106

Yearly Monthly

Affordability has been declining since January as prices continue to outpace wage growth.

2016


2. New Home Construction

Historical '15 Jan Feb Mar Apr May Jun

778764762753845

771715

1,082

New Homes (in Thousands)

Construction has been focused in higher price ranges, which may create issues down the line.

Source: Census Bureau


3. New Home Sales (compared to 2000)

0

45

90

135

180

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

<$200K $200 to $300K $300K to $400K >$400k

100

160

176

168

124

49

3621

848071

27

The lack of construction in the entry-level price range has contributed to shortages, causing extremely low inventory levels of entry-level houses in many cities.

Source: Census Bureau


The Numbers That Drive Canadian Real Estate

1. Home Sales

2. Home Price

3. Inventory

4. Mortgage Rates


1. Home Sales - Monthly

Jul '14 Aug Sep Oct Nov Dec Jan '15 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan '16 Feb Mar Apr May Jun

45K45K47K

46K44K44K44K44K

43K42K43K43K43K43K

42K41K

39K38K

39K

42K42K42K42K41K

Total Monthly Home Sales

Home sales have been at record paces in Canada despite slowing sales in Alberta.

Source: CREA


2. Home Price - Monthly

Jul '14Aug Sep Oct Nov DecJan '15Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

$503K$503K$508K$508K$503K

$470K$454K$456K$455K

$433K$433K$437K$453K$450K$449K

$439K$432K

$402K$405K$414K$420K

$409K$399K$402K

Average Monthly Home Price

The Greater Toronto and Greater Vancouver areas continue to be the main drivers of price growth in the Canadian market.

Source: CREA


3. Inventory - National

Jul '14 Aug Sep Oct Nov DecJan '15Feb Mar Apr May Jun Jul '15 Aug Sep Oct Nov DecJan '16Feb Mar Apr May Jun

Monthly Single-Family Home Sales 40% 60%

63%65%65%62%60%59%56%57%58%57%57%57%57%58%56%54%53%50%52%

56%56%56%56%54%

Source: CREA

60%

40%

Seller’s

Balanced

Buyer’s

Inventory levels fell into seller’s market territory for the first time since 2009 as sales accelerated through the first half of 2016.


4. Mortgage Rates

‘89

‘91

‘93

‘95

‘97

‘99

‘01

‘03

‘05

‘07

‘09

‘11 '1

3

Jan '

15 MarMay Ju

lSe

pNov

Jan '

16 MarMay

Jul '1

6

5%5%5%5%5%5%5%5%5%5%5%5%5%5%5%5%5%5%5%5%5%5%5%6%6%

7%7%7%

6%6%6%7%

7%

8%8%

7%7%8%

9%10%9%

10%

11%

13%

12%

Average Annual Mortgage Rate (Percentage) '15 - '16 Actual Monthly Mortgage Rate (Percentage)

MonthlyYearly

4.7%

13%12%

10% 8%

6% 7%

5%

Mortgage rates held steady for first half of 2016, and rose slightly in July.

Source: Bank of Canada


Industry UpdateRestrictions on how real estate teams advertise are becoming more widespread.

1. A bill recently passed in South Carolina that outlaws the use of “realty” and “real estate” in team names.

2. Nine other states already have regulations on team advertising.


Technology Trends

Search

Home Ownership Transaction

3. UPSTREAM

5. SHOWING INNOVATION

2. ARTIFICIAL INTELLIGENCE

1. PREDICTIVE ANALYTICS

4. RESPONSE TIMES

6. TRANSPARENT OFFER MANAGEMENT


1. Predictive AnalyticsIncreased competition in the predictive analytics space will drive accuracy, leading to higher conversion rates.

1. LEAD SCORING

2. TARGETED MARKETING

3. AVMs


2. Artificial IntelligenceARTIFICIAL INTELLIGENCE - The theory and development of computer systems able to perform tasks that normally require human intelligence, such as visual perception, speech recognition, decision-making, and translation between languages.

Source: CB Insights


3. Upstream ModelMLS

Broker Public Portal

Zillow

Realtor.com

Homes.com

Trulia

KWLS

300+ others


4. Instantaneous Response TimeThe industry is beginning to leverage technology to improve a longtime weakness: response time.

Text Phone Email

Agent Response Rate

51%

71%

45%

Text Phone Email

Agent Response Time

5h 35m

1h 45m

30m

Source: Baylor University


5. Showing InnovationsShowings are going through a period of innovation where different providers are offering users unique tools to schedule and tour showings on demand with or without an agent.

1. AGENT-LESSSHOWINGS

2. SMART LOCKBOXES

3. ON-DEMAND


6. Transparent Offer ManagementNew competitors are entering the real estate market offering “transparent offer management” solutions that allow consumers to place offers on homes online with or without an agent. Some are even making these offers visible to the public.

Date Price Status

8/5/16 $325,000 Declined

8/1/16 $318,000 Declined

7/25/16 $312,000 Declined

List Price

$350,000

MAKE AN OFFER

OFFER HISTORY


2016 market updatekw-sites.s3-us-west-2.amazonaws.com/kw-images-prod/s3fs...homes remain in a...

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