albuquerque real estate presentation by dr. lawrence yun
DESCRIPTION
Dr Yun, NAR's cheif economist was in town last week and gave an excellent presentation about the Albuquerque real estate market and how it compared to other markets and the nation. See his slideshow hereTRANSCRIPT
Real Estate and Economic Outlook
Lawrence Yun, Ph.D. Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at Greater Albuquerque Association of REALTORS®
Albuquerque, NM
December 5, 2013
Existing Home Sales 20% cumulative increase over 2 years
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
Median Home Price
$100,000
$120,000
$140,000
$160,000
$180,000
$200,000
$220,000
$240,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Albuquerque Housing Statistics
• Closed Sales through October Up +19% year-to-date from 1 year ago
• Median Prices Up +3 to 5% from 1 year ago
• Dollar Volume … up +23% from a year ago
• Inventory … +9% from a year ago
Santa Fe Housing Statistics
• Closed Sales through Q3 Up +12% year-to-date from 1 year ago
• Median Prices Up +16% from 1 year ago
• Dollar Volume … up +18% from a year ago
• Inventory … +9% from a year ago
Income Trends 2% to 4% cumulative increase over 2 years
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,0002
00
0
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Household Income
Family Income
Disposable Incomeper person
Falling Affordability to 5-year Low But still 5th best in 40 years
0
50
100
150
200
250
19
71
- J
an
19
73
- J
an
19
75
- J
an
19
77
- J
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19
79
- J
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19
81
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19
83
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19
85
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19
87
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19
89
- J
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19
91
- J
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19
93
- J
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19
95
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19
97
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19
99
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20
01
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20
03
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20
05
- J
an
20
07
- J
an
20
09
- J
an
20
11
- J
an
20
13
- J
an
Housing Affordability Index (Record High in 2012)
0
50
100
150
200
250
19
70
19
72
19
74
19
76
19
78
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
Inevitable Rise in Mortgage Rates will further hurt Affordability
(30-yr rate have been below 6% for 5 years)
3
4
5
6
7
8
9
20
00
- J
an2
00
0 -
Ju
l2
00
1 -
Jan
20
01
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ul
20
02
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00
2 -
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l2
00
3 -
Jan
20
03
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ul
20
04
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00
4 -
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l2
00
5 -
Jan
20
05
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20
06
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00
6 -
Ju
l2
00
7 -
Jan
20
07
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08
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00
8 -
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l2
00
9 -
Jan
20
09
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ul
20
10
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01
0 -
Ju
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01
1 -
Jan
20
11
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ul
20
12
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01
2 -
Ju
l2
01
3 -
Jan
20
13
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ul
%
Refinances will Collapse in 2014 (to at least 15-year low)
0
2000
4000
6000
8000
10000
12000
Jan
14
20
00
Jul 1
4 2
00
0
Jan
12
20
01
Jul 1
3 2
00
1
Jan
11
20
02
Jul 1
2 2
00
2
Jan
10
20
03
Jul 1
1 2
00
3
Jan
9 2
00
4
Jul 9
20
04
Jan
7 2
00
5
Jul 8
20
05
Jan
6 2
00
6
Jul 7
20
06
Jan
5 2
00
7
Jul 6
20
07
Jan
4 2
00
8
Jul 4
20
08
Jan
2 2
00
9
Jul 3
20
09
Jan
1 2
01
0
Jul 2
20
10
Dec
31
20
10
Jul 1
20
11
Dec
30
20
11
Jun
29
20
12
Dec
28
20
12
Jun
28
20
13
All-Cash Buyers Stayed High … even when mortgages were cheap
(Cash share as % of total home sales)
0%
5%
10%
15%
20%
25%
30%
35%
40%2
00
8 -
Oct
20
09
- J
an
20
09
- A
pr
20
09
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ul
20
09
- O
ct
20
10
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20
10
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20
10
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20
10
- O
ct
20
11
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20
11
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20
11
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20
11
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ct
20
12
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20
12
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20
12
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ul
20
12
- O
ct
20
13
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an
20
13
- A
pr
20
13
- J
ul
Normal Range
Financial Industry Profits from Low Rates and Refis Now What … Boost Purchase Apps?
-200
-100
0
100
200
300
400
5002
00
1 -
Q1
20
01
- Q
3
20
02
- Q
1
20
02
- Q
3
20
03
- Q
1
20
03
- Q
3
20
04
- Q
1
20
04
- Q
3
20
05
- Q
1
20
05
- Q
3
20
06
- Q
1
20
06
- Q
3
20
07
- Q
1
20
07
- Q
3
20
08
- Q
1
20
08
- Q
3
20
09
- Q
1
20
09
- Q
3
20
10
- Q
1
20
10
- Q
3
20
11
- Q
1
20
11
- Q
3
20
12
- Q
1
20
12
- Q
3
20
13
- Q
1
$ billion
No Increase in Mortgages for Home Purchases during 2-year Recovery; Will Rise in 2014?
0
100
200
300
400
500
600
Jan
7 2
00
0Ju
l 7 2
00
0Ja
n 5
20
01
Jul 6
20
01
Jan
4 2
00
2Ju
l 5 2
00
2Ja
n 3
20
03
Jul 4
20
03
Jan
2 2
00
4Ju
l 2 2
00
4D
ec 3
1 2
00
4Ju
l 1 2
00
5D
ec 3
0 2
00
5Ju
n 3
0 2
00
6D
ec 2
9 2
00
6Ju
n 2
9 2
00
7D
ec 2
8 2
00
7Ju
n 2
7 2
00
8D
ec 2
6 2
00
8Ju
n 2
6 2
00
9D
ec 2
5 2
00
9Ju
n 2
5 2
01
0D
ec 2
4 2
01
0Ju
n 2
4 2
01
1D
ec 2
3 2
01
1Ju
n 2
2 2
01
2D
ec 2
1 2
01
2Ju
n 2
1 2
01
3
Ready to Open Credit? (Average Credit Scores of Approved Loans)
Normal 2009 to 2012 If Normal
Fannie 720 760 to 770 720
Freddie 720 760 to 770 720
FHA 650 680 to 700 660
15% to 20% Higher Sales
But Will Washington Allow It?
• Washington Policies so far … Too Restrictive – Rising g-fees and FHA insurance premiums?
– Uncertainty about QRM down payment requirement? … Dodd-Frank?
– Too many Lawsuits? … Runaway DOJ?
• Mortgages Have Performed Outstandingly – Not because of Washington policies
– But because of home price increases
• New Restriction with PATH?
What is PATH? … Hensarling’s Ideology (Protecting American Taxpayers and Homeowners?)
• For-profit Fannie and Freddie were Arrogant • Today’s Fannie and Freddie have had reforms under
government control • Remove Government Guarantee on Mortgages • 30-yr Fixed Rate Mortgages … Hard to get and higher rates
• Large Banks will do Securitization … Small Banks at Risk • Market becomes excessively pro-cyclical • Large Banks have FDIC … taxpayer risk … vulnerable to
nationalization and, if so, government credit allocation
• Global capital could decide to go elsewhere rather than the U.S. …. Other countries grow faster than the U.S.
Latest Market Trends
Pending Sales (Contracts, not Closings) (Seasonally Adjusted)
70
80
90
100
110
120
130
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
Source: NAR
Buyer and Seller Traffic How Much from Gov’t Shutdown and Dysfunction?
0
10
20
30
40
50
60
70
80
20
08
- J
an
20
08
- A
pr
20
08
- J
ul
20
08
- O
ct
20
09
- J
an
20
09
- A
pr
20
09
- J
ul
20
09
- O
ct
20
10
- J
an
20
10
- A
pr
20
10
- J
ul
20
10
- O
ct
20
11
- J
an
20
11
- A
pr
20
11
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20
11
- O
ct
20
12
- J
an
20
12
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20
12
- J
ul
20
12
- O
ct
20
13
- J
an
20
13
- A
pr
20
13
- J
ul
Buyer Seller
Government Shutdown Did Not Help IRS Forms Along with FHA and USDA Closures
Purchase Apps Fell with Closures
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%Gov't
Conv
Percent Change From Prior Week
Rates Rose with Treasuries
3.8%3.9%4.0%4.1%4.2%4.3%4.4%4.5%4.6%4.7%
30-yr FRM
Déjà vu in January?…..February?
New Home Inventory (Newly Constructed Homes Inventory at near 50-year low)
0
100,000
200,000
300,000
400,000
500,000
600,000
700,0001
96
4 -
Jan
19
66
- J
an1
96
8 -
Jan
19
70
- J
an1
97
2 -
Jan
19
74
- J
an1
97
6 -
Jan
19
78
- J
an1
98
0 -
Jan
19
82
- J
an1
98
4 -
Jan
19
86
- J
an1
98
8 -
Jan
19
90
- J
an1
99
2 -
Jan
19
94
- J
an1
99
6 -
Jan
19
98
- J
an2
00
0 -
Jan
20
02
- J
an2
00
4 -
Jan
20
06
- J
an2
00
8 -
Jan
20
10
- J
an2
01
2 -
Jan
Shadow Inventory in NM and AZ (Mortgages Late 90+ day or in foreclosure process)
0
2
4
6
8
10
12
14
20
00
- Q
1
20
00
- Q
4
20
01
- Q
3
20
02
- Q
2
20
03
- Q
1
20
03
- Q
4
20
04
- Q
3
20
05
- Q
2
20
06
- Q
1
20
06
- Q
4
20
07
- Q
3
20
08
- Q
2
20
09
- Q
1
20
09
- Q
4
20
10
- Q
3
20
11
- Q
2
20
12
- Q
1
20
12
- Q
4
20
13
- Q
3
Housing Starts … Need to Reach 1.5 million soon or persistent housing shortage
0
500
1000
1500
2000
2500
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
multifamily single-family
Thousand units (annualized)
Long-term Average
Albuquerque Area Housing Permits (year-to-date)
0
1000
2000
3000
4000
5000
6000
7000
8000
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
Santa Fe County Housing Permits (year-to-date)
0
100
200
300
400
500
600
700
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
Rising Home Prices Because of Lack of Inventory
(% change from one year ago)
-25
-20
-15
-10
-5
0
5
10
15
20
20
01
- J
an
20
01
- J
ul
20
02
- J
an
20
02
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20
03
- J
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20
03
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20
04
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20
04
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20
05
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an
20
05
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20
06
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an
20
06
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ul
20
07
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20
07
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20
08
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20
08
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20
09
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20
09
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20
10
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an
20
10
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20
11
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an
20
11
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20
12
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20
12
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ul
20
13
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an
20
13
- J
ul
Blue = NAR Median Price Red = Case-Shiller Index
Phoenix, Albuquerque, Santa Fe Home Price Index
80
130
180
230
280
330
19
95
- Q
1
19
95
- Q
4
19
96
- Q
3
19
97
- Q
2
19
98
- Q
1
19
98
- Q
4
19
99
- Q
3
20
00
- Q
2
20
01
- Q
1
20
01
- Q
4
20
02
- Q
3
20
03
- Q
2
20
04
- Q
1
20
04
- Q
4
20
05
- Q
3
20
06
- Q
2
20
07
- Q
1
20
07
- Q
4
20
08
- Q
3
20
09
- Q
2
20
10
- Q
1
20
10
- Q
4
20
11
- Q
3
20
12
- Q
2
20
13
- Q
1
GDP Growth … Unimpressive but no Fresh Recession
(Could be on the verge of recession if not for housing recovery)
-6
-4
-2
0
2
4
% growth from one year ago
% growth from one year ago
U.S. Total Payroll Jobs (8 million lost … 7 million gained)
124000
126000
128000
130000
132000
134000
136000
138000
1400002
00
0 -
Jan
20
00
- J
ul
20
01
- J
an2
00
1 -
Ju
l2
00
2 -
Jan
20
02
- J
ul
20
03
- J
an2
00
3 -
Ju
l2
00
4 -
Jan
20
04
- J
ul
20
05
- J
an2
00
5 -
Ju
l2
00
6 -
Jan
20
06
- J
ul
20
07
- J
an2
00
7 -
Ju
l2
00
8 -
Jan
20
08
- J
ul
20
09
- J
an2
00
9 -
Ju
l2
01
0 -
Jan
20
10
- J
ul
20
11
- J
an2
01
1 -
Ju
l2
01
2 -
Jan
20
12
- J
ul
20
13
- J
an2
01
3 -
May
In thousands
Albuquerque Area Total Jobs
350
360
370
380
390
400
410
2000 - Jan 2002 - Jan 2004 - Jan 2006 - Jan 2008 - Jan 2010 - Jan 2012 - Jan
Santa Fe Area Total Jobs
50
52
54
56
58
60
62
64
66
68
2000 - Jan 2002 - Jan 2004 - Jan 2006 - Jan 2008 - Jan 2010 - Jan 2012 - Jan
Forecast
Essentially Same as the one made last year in November 2012
Forecast #1 (in 2012): 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
Rising Renters’ and Homeowners’ Rent Growth (the biggest weight to Consumer Price Index)
-1
0
1
2
3
4
5
20
00
- J
an
20
00
- A
ug
20
01
- M
ar
20
01
- O
ct
20
02
- M
ay
20
02
- D
ec
20
03
- J
ul
20
04
- F
eb
20
04
- S
ep
20
05
- A
pr
20
05
- N
ov
20
06
- J
un
20
07
- J
an
20
07
- A
ug
20
08
- M
ar
20
08
- O
ct
20
09
- M
ay
20
09
- D
ec
20
10
- J
ul
20
11
- F
eb
20
11
- S
ep
20
12
- A
pr
20
12
- N
ov
20
13
- J
un
Owners' Equivalent Rent Renters' Rent
Forecast #2 (Rising Mortgage Rates to 5.3% by end of 2014)
2013 forecast
2014 forecast
Existing Home Sales 11% 0%
Median Price 11% 6%
Dollar Volume Estimate
+22% +6%
Home Price Forecast by Wall Street Journal Economists Panel
Year WSJ Home Price Forecast
2014 5%
Robert Shiller : “Homes are still affordable …
we do not have extravagant mindset today”
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
Renter Households
25,000
27,000
29,000
31,000
33,000
35,000
37,000
39,000
41,000
19
80
- Q
11
98
1 -
Q1
19
82
- Q
11
98
3 -
Q1
19
84
- Q
11
98
5 -
Q1
19
86
- Q
11
98
7 -
Q1
19
88
- Q
11
98
9 -
Q1
19
90
- Q
11
99
1 -
Q1
19
92
- Q
11
99
3 -
Q1
19
94
- Q
11
99
5 -
Q1
19
96
- Q
11
99
7 -
Q1
19
98
- Q
11
99
9 -
Q1
20
00
- Q
12
00
1 -
Q1
20
02
- Q
12
00
3 -
Q1
20
04
- Q
12
00
5 -
Q1
20
06
- Q
12
00
7 -
Q1
20
08
- Q
12
00
9 -
Q1
20
10
- Q
12
01
1 -
Q1
20
12
- Q
12
01
3 -
Q1
In thousands
Homeowner Households has not Grown since 2006 … but Primed to Grow
50,000
55,000
60,000
65,000
70,000
75,000
80,0001
98
0 -
Q1
19
81
- Q
11
98
2 -
Q1
19
83
- Q
11
98
4 -
Q1
19
85
- Q
11
98
6 -
Q1
19
87
- Q
11
98
8 -
Q1
19
89
- Q
11
99
0 -
Q1
19
91
- Q
11
99
2 -
Q1
19
93
- Q
11
99
4 -
Q1
19
95
- Q
11
99
6 -
Q1
19
97
- Q
11
99
8 -
Q1
19
99
- Q
12
00
0 -
Q1
20
01
- Q
12
00
2 -
Q1
20
03
- Q
12
00
4 -
Q1
20
05
- Q
12
00
6 -
Q1
20
07
- Q
12
00
8 -
Q1
20
09
- Q
12
01
0 -
Q1
20
11
- Q
12
01
2 -
Q1
20
13
- Q
1
In thousands
Wealth Distribution (Federal Reserve data on median net worth)
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
Renter Owner
1998
2001
2004
2007
2010
2014
2014 Forecast by NAR
Bubble Crash
• Dodd-Frank?
• PATH?
• Lawsuits?
• Legacy?
What Homebuyers Want?
76% Single Family
Detached House
Single Family Attached
4%
14% Condo or Apt.
80% Single Family
Detached House
7%
5%
Condo or Apt.
8%
Slide 42
Slightly More Preference For Condo or
Apartment Living Than In 2011
Housing Type Preference (2013): Housing Type Preference (2011):
Right now, if you could choose, which of the following would you prefer to live in:
6%
Single
Family
Attached
21%
25%
28%
21%
23%
23%
28%
45%
37%
46%
34%
34%
37%
44%
43%
44%
40%
29%
43%
40%
0% 20% 40% 60% 80% 100%
Living in a place that’s away from it all
Public transportation within walking distance of your home
Being within a short commute to work
An established neighborhood with older homes and maturetrees
Living in a community with people at all stages of life adults,families with children and older people
Easy access to the highway
Being within an easy walk of other places and things in thecommunity
High-quality public schools
Sidewalks and places to take walks
Privacy from neighbors
Slide 43
In deciding where to live, indicate how important having each of the following would be to you: very important, somewhat important,
not very important, or not at all important.
Privacy, Walkability, Schools
Most Important in Deciding Where to Live Most Important Factors in Deciding Where to Live:
Very Important Somewhat Important
86%
80%
74%
69%
68%
66%
65%
65%
59%
55%
Slide 44
Walkability and Age-Diversity
Gaining in Importance
46% 45%
37%
28% 28%
23% 23%
45% 44%
31%
24%
36%
15%
21%
0%
10%
20%
30%
40%
50%
Privacy fromneighbors
High-qualitypublic schools
Sidewalks andplaces to take
walks
Being within aneasy walk of
other places andthings in thecommunity
Being within ashort commute
to work
A communitywith people atall stages of lifeadults, familieswith children
and older people
Easy access to thehighway
Changes in Important Factors in Deciding Where to Live
+1 +1
+6
+4 -8
+8 +2
Very Important - 2013 Very Important - 2011
Q.47 In deciding where to live, indicate how important having each of the following would be to you: very important, somewhat important,
not very important, or not at all important.
What Buyers Want Most From Their Agent
Help find the
right home to
purchase,
53% Help buyer
negotiate the
terms of sale,
12%
Help with the
price
negotiations,
11%
Determine
what
comparable
homes were
selling for,
8%
Help with
paperwork,
7%
Help find
and arrange
financing,
3%
REALTOR® Median Gross Income
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
1995 1998 2000 2002 2004 2006 2007 2008 2009 2010 2011 2012
How many with more than $100,000? … 200,000 How many with less than $10,000? … 360,000
47
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1,100,000
1,200,000
1,300,000
1,400,000
1,500,000
Annual Membership (at year-end)
For Daily Update and Analysis
@NAR_Research