©2014 corelogic, inc. all rights reserved. proprietary & confidential slow and steady wins the...

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©2014 CoreLogic, Inc. All rights reserved. Proprietary & Confidential

Slow and Steady Wins the Race:Housing Market Outlook

David Stiff, Principal Economist, Case-ShillerNovember 19, 2014

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Agenda

U.S. Economy U.S. Housing Markets Boston Housing Market Demographics (the “Millennials”) Globalization and Real Estate Markets

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Trying to Close a Large Output GapGross domestic product, $ bil 2009, SAAR

Sources: Bureau of Economic Analysis, Congressional Budget Office

$5.6 trillion in lost output, about $46,000 per household

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Households Have Deleveraged% of disposable income

Sources: Federal Reserve, Bureau of Economic Analysis

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Banking System is Well CapitalizedCommercial banks

Source: FDIC

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Businesses Are Highly Profitable …After-tax corporate profit margin, %

Sources: Bureau of Economic Analysis, National Federation of Independent Business

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… but Wage Growth Continues to LagEmployment cost index, total compensation, Y/Y % change

Source: Bureau of Labor Statistics

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Houses Are Cheap (U.S.)% of median family income

Sources: NAR, Freddie Mac, HUD, Census Bureau, CoreLogic (calculation)

(2014 dollars)

Median P & I

Payment

Median Asking Rent

Jul-1971 $818

Jul-2006 $1,340 $726

Jul-2014 $811 $747

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Home Sales Inching UpwardU.S. single-family home sales, ths, SAAR

Sources: NAR, U.S. Census

Gap because of foreclosure sales and limited new construction

Increases due to homebuyer tax credits

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Distressed Sales No Longer Dominating MarketsShare of U.S. home sales, SA

Source: CoreLogic

Decrease due to homebuyer tax credits

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Housing Market Has Regained BalanceMonths supply of single-family homes, existing and new, U.S.

Sources: National Association of Realtors, U.S. Census

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Big Price Bounces in the “Sand” StatesChange in single-family home prices, July 2011 to July 2014

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Source: CoreLogic Case-Shiller

Decline

0% to 7.5% increase

7.5% to 15% increase

15% increase or m ore

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Difficult to Buy a House with Less Income

Source: U.S. Census

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Mortgage Lenders Are Too Cautious

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Source: CoreLogic

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Average annual appreciation since 1976 (4.8%)

Sources: CoreLogic, Moody’s Analytics

Price Appreciation is ModeratingU.S. single-family home prices, Y/Y % change

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Houses Are Cheap (Boston)% of median family income

Sources: Freddie Mac, HUD, Census Bureau, CoreLogic (calculation)

(2014 dollars)

MedianP & I

Payment

Median Gross Rent

Jul-2006 $1,940 $1,211

Jul-2014 $1,447$1,281 (2013)

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Very Limited Inventory …Months supply of homes, Boston metro area

Sources: Greater Boston Association of Realtors

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… is Restraining Sales ActivityHome sales, SA, Boston metro area

Source: Greater Boston Association of Realtors

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Largest Price Gains in Towns Inside I-495 Change in single-family home prices, July 2011 to July 2014

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Source: CoreLogic Case-Shiller

0% to 7.5% increase

7.5% to 10% increase

10% to 15% increase

15% increase or m ore

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Sources: CoreLogic, Moody’s Analytics

Average annual appreciation since 1976 (6.3%)

Price Appreciation is ModeratingSingle-family home prices, Y/Y % change, Boston metro area

“Boomers” Have Entered Their Prime Earnings Years (slide from 2001)

“Boomers” Have Entered Their Prime Earnings Years (slide from 2001)

Age of Householder

Households, 1990, millions

Households, 2000, millions

Change, 1990 to 2000, millions

Median Household

Income, 2000, $ thousands

Home Ownership Rate, 2000

15 to 24 5.1 5.4 0.3 $27.7 17.0%

25 to 34 20.4 18.1 -2.3 $44.5 46.1%

35 to 44 20.6 24.4 3.8 $53.2 66.7%

45 to 54 14.5 20.7 6.2 $58.2 75.8%

55 to 64 12.5 13.9 1.4 $45.0 80.1%

65 to 74 11.7 11.4 -0.3 $23.0 82.8%

75 and Over 8.4 11.4 3.0 $18.9 76.9%

All Ages 93.2 105.3 12.1 $42.1 67.0%

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The “Millennials” Will Drive Markets

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Sources: Census, Pew Research Center, NAR, Freddie Mac, CoreLogic

Early Baby Boom Late Baby Boom Generation X Millennials

Born 1946 to 1954 1955 to 1964 1965 to 1980 After 1980

Age in 2014 60 to 68 50 to 59 34 to 49 18 to 33

Population (2013) 30.2 mil 43.8 mil 65.7 mil 70.2 mil

Unemp. rate (age 25 to 32)

5.7%(in 1979)

7.3%(in 1986)

5.8%(in 1995)

8.2%(in 2013)

P&I payment median home(2013 dollars)

$1,380(in 1979)

$1,216(in 1986)

$1,035(in 1995)

$748(in 2013)

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Careers Starting Well (for College Grads) …Median annual earnings full-time workers ages 25 to 32, $ 2012

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Sources: U.S. Census, Pew Research Center

Early Boomers

(1979)

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… but Jobs Needed to Form New Households

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Millennials Are Moving Into the Housing Market …Population

Source: U.S. Census

Largest Age CohortMedian Age of

First-Time Homebuyers

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… Driving a Rebound in Apartment ConstructionHousing starts, ths, SAAR, 12-month average, U.S.

Source: U.S. Census Bureau

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More Multi-Family Development in Boston

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U.S. Real Estate Became Less ExpensiveHome price indexes, 2000:Q1=100

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Sources:The Economist, National Bureau of Statistics of China, Standard & Poor's, Teranet and National Bank

United States

China

Canada

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Global Markets Drive U.S. Interest RatesTreasury securities holdings, $ bil

Sources: Federal Reserve, U.S. Treasury

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Globalization Leads to Greater VolatilityFinancial crises vs. capital mobility

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Summary

U.S. economic recovery is accelerating (slowly) U.S. housing markets will continue steady improvement

Increasing sales and construction activity Moderating price appreciation

Boston housing market constrained by limited inventory “Millennials” will be as important as “Boomers” Increasing direct and indirect effects of globalization on

local real estate markets

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