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Real Estate Trends and Outlook
Lawrence Yun, Ph.D.Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at NAR Region XII Conference
Coeur d’Alene, ID
March 5, 2015
GDP Burstin 2014 Q2, Q3, Q4
-10
-8
-6
-4
-2
0
2
4
6
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
GDP Annualized Growth Rate
Jobs(8 million lost … 12 million gained)
124000
126000
128000
130000
132000
134000
136000
138000
140000
1420002
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 -
Ju
l2
01
4 -
Jan
20
14
- J
ul
20
15
- J
an
In thousands
Weekly New Unemployment Insurance Claims
250
300
350
400
450
500
550
600
20
00
- J
an2
00
0 -
Ju
l2
00
1 -
Jan
20
01
- J
ul
20
02
- J
an2
00
2 -
Ju
l2
00
3 -
Jan
20
03
- J
ul
20
04
- J
an2
00
4 -
Ju
l2
00
5 -
Jan
20
05
- J
ul
20
06
- J
an2
00
6 -
Ju
l2
00
7 -
Jan
20
07
- J
ul
20
08
- J
an2
00
8 -
Ju
l2
00
9 -
Jan
20
09
- J
ul
20
10
- J
an2
01
0 -
Ju
l2
01
1 -
Jan
20
11
- J
ul
20
12
- J
an2
01
2 -
Ju
l2
01
3 -
Jan
20
13
- J
ul
20
14
- J
an2
01
4 -
Ju
l2
01
5 -
Jan
In thousands
Unemployment Rate
0
2
4
6
8
10
12
20
00
- J
an2
00
0 -
Ju
l2
00
1 -
Jan
20
01
- J
ul
20
02
- J
an2
00
2 -
Ju
l2
00
3 -
Jan
20
03
- J
ul
20
04
- J
an2
00
4 -
Ju
l2
00
5 -
Jan
20
05
- J
ul
20
06
- J
an2
00
6 -
Ju
l2
00
7 -
Jan
20
07
- J
ul
20
08
- J
an2
00
8 -
Ju
l2
00
9 -
Jan
20
09
- J
ul
20
10
- J
an2
01
0 -
Ju
l2
01
1 -
Jan
20
11
- J
ul
20
12
- J
an2
01
2 -
Ju
l2
01
3 -
Jan
20
13
- J
ul
20
14
- J
an2
01
4 -
Ju
l
Household Net Worth at All-Time High
40000
45000
50000
55000
60000
65000
70000
75000
80000
85000$ billion
But Wait …
“I am not feeling it”
GDP Still not Robust … Below 3% for 9 straight years
-4
-2
0
2
4
6
8
10
19
50
19
52
19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
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
20
14
GDP Annual Growth Rate
Sluggish Growth + Gap after Great Recession ($1.5 trillion gap … $4,700 per person)
10000
11000
12000
13000
14000
15000
16000
17000
18000
19000
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
GDP in 2009 Dollars
Real GDP Real GDP W/O Recession
3% Growth Line
2.2% Growth Line
Employment Rate
54
56
58
60
62
64
66
20
00
- J
an2
00
0 -
Ju
l2
00
1 -
Jan
20
01
- J
ul
20
02
- J
an2
00
2 -
Ju
l2
00
3 -
Jan
20
03
- J
ul
20
04
- J
an2
00
4 -
Ju
l2
00
5 -
Jan
20
05
- J
ul
20
06
- J
an2
00
6 -
Ju
l2
00
7 -
Jan
20
07
- J
ul
20
08
- J
an2
00
8 -
Ju
l2
00
9 -
Jan
20
09
- J
ul
20
10
- J
an2
01
0 -
Ju
l2
01
1 -
Jan
20
11
- J
ul
20
12
- J
an2
01
2 -
Ju
l2
01
3 -
Jan
20
13
- J
ul
20
14
- J
an2
01
4 -
Ju
l
Renter Households over 10 years (Increased by 9 million)
25,000
27,000
29,000
31,000
33,000
35,000
37,000
39,000
41,000
43,000
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
20
14
- Q
1
In thousands
Homeowner Households over 10 years(Decreased by 1 million)
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
12
01
4 -
Q1
In thousands
Homeownership Rate
60
61
62
63
64
65
66
67
68
69
70
19
90
- Q
1
19
91
- Q
1
19
92
- Q
1
19
93
- Q
1
19
94
- Q
1
19
95
- Q
1
19
96
- Q
1
19
97
- Q
1
19
98
- Q
1
19
99
- Q
1
20
00
- Q
1
20
01
- Q
1
20
02
- Q
1
20
03
- Q
1
20
04
- Q
1
20
05
- Q
1
20
06
- Q
1
20
07
- Q
1
20
08
- Q
1
20
09
- Q
1
20
10
- Q
1
20
11
- Q
1
20
12
- Q
1
20
13
- Q
1
20
14
- Q
1
Household Net Worth($5,500 vs. $195,500)
$0
$50,000
$100,000
$150,000
$200,000
$250,000
Renter Homeowner
1998 2001 2004 2007 2010 2013
x31 x46x36 x34x46
Homeowner net worth ranges from 31 to 46 times that of renters x36
Source: Federal Reserve Survey of Consumer Finances
Home Price Index
0
100
200
300
400
500
600
19
80
- Q
1
19
81
- Q
3
19
83
- Q
1
19
84
- Q
3
19
86
- Q
1
19
87
- Q
3
19
89
- Q
1
19
90
- Q
3
19
92
- Q
1
19
93
- Q
3
19
95
- Q
1
19
96
- Q
3
19
98
- Q
1
19
99
- Q
3
20
01
- Q
1
20
02
- Q
3
20
04
- Q
1
20
05
- Q
3
20
07
- Q
1
20
08
- Q
3
20
10
- Q
1
20
11
- Q
3
20
13
- Q
1
20
14
- Q
3
Alaska Washington Oregon Idaho Montana
The Reason for Not Feeling It
• Very Slow Housing Market Recovery
• Very Slow Commercial Market Recovery
• Holds Back Economic Recovery
Two and Out?Or Multi-year Expansion?
(Single-Family Existing Home Sales Only)
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,0001
96
8
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
20
14
Housing Starts Rising … Too Slowly
0
500
1000
1500
2000
2500
30001
97
0 -
Jan
19
72
- J
an
19
74
- J
an
19
76
- J
an
19
78
- J
an
19
80
- J
an
19
82
- J
an
19
84
- J
an
19
86
- J
an
19
88
- J
an
19
90
- J
an
19
92
- J
an
19
94
- J
an
19
96
- J
an
19
98
- J
an
20
00
- J
an
20
02
- J
an
20
04
- J
an
20
06
- J
an
20
08
- J
an
20
10
- J
an
20
12
- J
an
20
14
- J
an
Thousand units
Time to Sell a New Spec Home(in months)
0
2
4
6
8
10
12
14
16
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
Sluggish Recovery in Housing Starts
• Cost of Construction Rising Faster than CPI
• Labor Shortage for construction work
• Construction loan difficulty for small local homebuilders … Dodd-Frank financial regulations?
Pent Up Demand
2000 2014
Existing Home Sales 5.2 m 4.9 m
New Home Sales 880 K 440 K
Mortgage Rates 8.0% 4.2%
Payroll Jobs 132.0 m 138.9 m
Population 282 m 319 m
37 million more people living in the country
Multiyear Recovery Likely
• More Jobs
• Manageable Mortgage Rates
• Population Pent-Up Demand
• More Inventory
• Record High Household Wealth
Jobs in Alaska
200
220
240
260
280
300
320
340
360
20
00
- J
an2
00
0 -
Ju
l2
00
1 -
Jan
20
01
- J
ul
20
02
- J
an2
00
2 -
Ju
l2
00
3 -
Jan
20
03
- J
ul
20
04
- J
an2
00
4 -
Ju
l2
00
5 -
Jan
20
05
- J
ul
20
06
- J
an2
00
6 -
Ju
l2
00
7 -
Jan
20
07
- J
ul
20
08
- J
an2
00
8 -
Ju
l2
00
9 -
Jan
20
09
- J
ul
20
10
- J
an2
01
0 -
Ju
l2
01
1 -
Jan
20
11
- J
ul
20
12
- J
an2
01
2 -
Ju
l2
01
3 -
Jan
20
13
- J
ul
20
14
- J
an2
01
4 -
Ju
l
In thousands
Jobs in Washington
2400
2500
2600
2700
2800
2900
3000
3100
3200
20
00
- J
an2
00
0 -
Ju
l2
00
1 -
Jan
20
01
- J
ul
20
02
- J
an2
00
2 -
Ju
l2
00
3 -
Jan
20
03
- J
ul
20
04
- J
an2
00
4 -
Ju
l2
00
5 -
Jan
20
05
- J
ul
20
06
- J
an2
00
6 -
Ju
l2
00
7 -
Jan
20
07
- J
ul
20
08
- J
an2
00
8 -
Ju
l2
00
9 -
Jan
20
09
- J
ul
20
10
- J
an2
01
0 -
Ju
l2
01
1 -
Jan
20
11
- J
ul
20
12
- J
an2
01
2 -
Ju
l2
01
3 -
Jan
20
13
- J
ul
20
14
- J
an2
01
4 -
Ju
l
In thousands
Jobs in Oregon
1500
1550
1600
1650
1700
1750
1800
20
00
- J
an2
00
0 -
Ju
l2
00
1 -
Jan
20
01
- J
ul
20
02
- J
an2
00
2 -
Ju
l2
00
3 -
Jan
20
03
- J
ul
20
04
- J
an2
00
4 -
Ju
l2
00
5 -
Jan
20
05
- J
ul
20
06
- J
an2
00
6 -
Ju
l2
00
7 -
Jan
20
07
- J
ul
20
08
- J
an2
00
8 -
Ju
l2
00
9 -
Jan
20
09
- J
ul
20
10
- J
an2
01
0 -
Ju
l2
01
1 -
Jan
20
11
- J
ul
20
12
- J
an2
01
2 -
Ju
l2
01
3 -
Jan
20
13
- J
ul
20
14
- J
an2
01
4 -
Ju
l
In thousands
Jobs in Idaho
500
520
540
560
580
600
620
640
660
680
20
00
- J
an2
00
0 -
Ju
l2
00
1 -
Jan
20
01
- J
ul
20
02
- J
an2
00
2 -
Ju
l2
00
3 -
Jan
20
03
- J
ul
20
04
- J
an2
00
4 -
Ju
l2
00
5 -
Jan
20
05
- J
ul
20
06
- J
an2
00
6 -
Ju
l2
00
7 -
Jan
20
07
- J
ul
20
08
- J
an2
00
8 -
Ju
l2
00
9 -
Jan
20
09
- J
ul
20
10
- J
an2
01
0 -
Ju
l2
01
1 -
Jan
20
11
- J
ul
20
12
- J
an2
01
2 -
Ju
l2
01
3 -
Jan
20
13
- J
ul
20
14
- J
an2
01
4 -
Ju
l
In thousands
Jobs in Montana
300
320
340
360
380
400
420
440
460
480
20
00
- J
an2
00
0 -
Ju
l2
00
1 -
Jan
20
01
- J
ul
20
02
- J
an2
00
2 -
Ju
l2
00
3 -
Jan
20
03
- J
ul
20
04
- J
an2
00
4 -
Ju
l2
00
5 -
Jan
20
05
- J
ul
20
06
- J
an2
00
6 -
Ju
l2
00
7 -
Jan
20
07
- J
ul
20
08
- J
an2
00
8 -
Ju
l2
00
9 -
Jan
20
09
- J
ul
20
10
- J
an2
01
0 -
Ju
l2
01
1 -
Jan
20
11
- J
ul
20
12
- J
an2
01
2 -
Ju
l2
01
3 -
Jan
20
13
- J
ul
20
14
- J
an2
01
4 -
Ju
l
In thousands
Multiyear Recovery Likely
• More Jobs
• Manageable Mortgage Rates
• Population Pent-Up Demand
• More Inventory
• Record High Household Wealth
Monetary Policy by Federal Reserve (zero rate policy for 6 years!)
0
1
2
3
4
5
6
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Fed Funds%
Federal Reserve Balance Sheet from Quantitative Easing
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
20
05
- J
an
20
05
- J
un
20
05
- N
ov
20
06
- A
pr
20
06
- S
ep
20
07
- F
eb
20
07
- J
ul
20
07
- D
ec
20
08
- M
ay
20
08
- O
ct
20
09
- M
ar
20
09
- A
ug
20
10
- J
an
20
10
- J
un
20
10
- N
ov
20
11
- A
pr
20
11
- S
ep
20
12
- F
eb
20
12
- J
ul
20
12
- D
ec
20
13
- M
ay
Total Asset Purchase
$ million
30-year Mortgage Rates
0
1
2
3
4
5
6
7
8
9
Non-worrisome CPI Inflation – YetCOLA of 1.7% in 2015
-3
-2
-1
0
1
2
3
4
5
6
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
20
14
- J
an
20
14
- A
ug
Rising Renters’ and Homeowners’ Rent Growth (Above 3%)
-1
0
1
2
3
4
5
20
03
- J
an
20
03
- J
ul
20
04
- J
an
20
04
- J
ul
20
05
- J
an
20
05
- J
ul
20
06
- J
an
20
06
- J
ul
20
07
- J
an
20
07
- J
ul
20
08
- J
an
20
08
- J
ul
20
09
- J
an
20
09
- J
ul
20
10
- J
an
20
10
- J
ul
20
11
- J
an
20
11
- J
ul
20
12
- J
an
20
12
- J
ul
20
13
- J
an
20
13
- J
ul
20
14
- J
an
20
14
- J
ul
Owners' Equivalent Rent Renters' Rent
Oil Price
0
20
40
60
80
100
120
140
160
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
20
14
- J
an
20
14
- A
ug
Supply and Demand: Oil in U.S.
19
21
5
9
Monetary Policy
• Quantitative Easing … Finished
• Fed Funds Rate … hike in mid-2015
• Earlier Move to Tighten because of Inflation Pressure
• Long-term Steady State Rate (2016 onwards) .. 10 year Treasury at 5.0%
• Mortgage Rates reaching 6% by 2016
Erratic Credit Availability
• FICO New Method
• Mel Watt – New overseer of Fannie/Freddie
– Lower down payment products
• Ridiculous FHA premiums … should decline
• Historic low mortgage default rates on recent vintages (2010-2014)
Multiyear Recovery Likely
• More Jobs
• Manageable Mortgage Rates
• Population Pent-Up Demand
• More Inventory
• Record High Household Wealth
U.S. Population
0
50
100
150
200
250
300
350
1968 1973 1978 1983 1988 1993 1998 2003 2008 2013
In millions
Multiyear Recovery Likely
• More Jobs
• Manageable Mortgage Rates
• Population Pent-Up Demand
• More Inventory and Moderate Price Growth
• Record High Household Wealth
Low Inventory of Homes for Sale
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,0002
00
7 -
Jan
20
07
- M
ay2
00
7 -
Sep
20
08
- J
an2
00
8 -
May
20
08
- S
ep2
00
9 -
Jan
20
09
- M
ay2
00
9 -
Sep
20
10
- J
an2
01
0 -
May
20
10
- S
ep2
01
1 -
Jan
20
11
- M
ay2
01
1 -
Sep
20
12
- J
an2
01
2 -
May
20
12
- S
ep2
01
3 -
Jan
20
13
- M
ay2
01
3 -
Sep
20
14
- J
an2
01
4 -
May
20
14
- S
ep2
01
5 -
Jan
Shadow Inventory(% of mortgage in foreclosure process or seriously delinquent)
0
1
2
3
4
5
6
7
8
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
20
14
- Q
2
AK WA OR ID MT
Alaska Housing Permits (year-to-date)
0
500
1000
1500
2000
2500
3000
3500
4000
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
Washington Housing Permits (year-to-date)
0
10000
20000
30000
40000
50000
60000
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
Oregon Housing Permits (year-to-date)
0
5000
10000
15000
20000
25000
30000
35000
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
Idaho Housing Permits (year-to-date)
0
5000
10000
15000
20000
25000
2000 - Jan2001 - Jan2002 - Jan2003 - Jan2004 - Jan2005 - Jan2006 - Jan2007 - Jan2008 - Jan2009 - Jan2010 - Jan2011 - Jan2012 - Jan2013 - Jan2014 - Jan2015 - Jan
Montana Housing Permits (year-to-date)
0
1000
2000
3000
4000
5000
6000
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
Multiyear Recovery Likely
• More Jobs
• Manageable Mortgage Rates
• Population Pent-Up Demand
• More Inventory and Moderate Price Growth
• Record High Household Wealth
Vacation Home Sales
-
200
400
600
800
1,000
1,200
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
In thousands
Economic Forecast
2013 2014Likely
2015Forecast
2016 Forecast
GDP Growth 2.2% 2.6% 3.1% 3.0%
Job Growth +2.3 million +3.0 million +2.5 million +2.7 million
CPI Inflation 1.5% 1.2% 2.0% 3.2%
Consumer Confidence
73 87 95 98
10-yearTreasury
2.5% 2.5% 2.9% 4.2%
Housing Forecast
2013 2014Likely
2015Forecast
2016 Forecast
Housing Starts 925,000 990,000 1.2 million 1.4 million
New Home Sales
430,000 440,000 600,000 720,000
Existing Home Sales
5.1 million 4.9 million 5.3 million 5.4 million
Median Price Growth
+ 11.5% + 5.3% + 4% + 4%
30-year Rate 4.0% 4.2% 4.8% 5.8%
Underwriting Standards
Strict Strict Transition Normal
Commercial Investment Sales of Large Properties(Properties valued at $2.5 million and over)
130
212
362
423
571
174
67
147
233
299
355400 420 430
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Commercial Sales in $Billions
REALTOR® Markets & Deal Size(Not $2.5 million Properties)
21%
22%
26%
17%
12%
1%
2%
< $250,000
$250,000 - $500,000
$500,000 - $1,000,000
$1,000,000 - $2,000,000
$2,000,000 - $5,000,000
$5,000,000 - $10,000,000
> $10,000,000
2013 CRE Lending Survey: Value of most recent sales transaction
Source: NAR
8%
17%
25%
7%
6%
4%
18%
1% 11%
3%
Current sources of financing for commercial deals
National banks (“Big four”)
Regional banks
Local banks
Credit unions
Life insurance companies
REITs
Private investors
Public companies
Small Business Administration
Other, please specify
Source: NAR
Small Banks Important to REALTORS®
REALTORS® Report Commercial Sales Increase
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
Pe
rce
nt C
ha
ng
e, y
ea
r-o
ver-
yea
r
Sales Volume
Sales Volume
Source: National Association of Realtors®
New Construction and Leasing Favorable
OFFICE 2014 2015 2016
Vacancy Rate 16.2% 15.8% 15.6%
Net Absorption ('000 sq. ft.) 36,192 50,678 57,782
Completions ('000 sq. ft.) 26,450 41,799 44,862
Rent Growth 2.6% 3.2% 3.6%
INDUSTRIAL 2014 2015 2016
Vacancy Rate 8.9% 8.5% 8.1%
Net Absorption ('000 sq. ft.) 107,580 104,948 105,044
Completions ('000 sq. ft.) 83,424 68,755 61,720
Inventory ('000,000 sq. ft.) 8,468 8,537 8,598
Rent Growth 2.4% 2.8% 2.9%
RETAIL 2014 2015 2016
Vacancy Rate 9.8% 9.7% 9.4%
Net Absorption ('000 sq. ft.) 11,214 19,314 24,313
Completions ('000 sq. ft.) 7,275 12,196 16,342
Rent Growth 2.0% 2.4% 3.0%
MULTI-FAMILY 2014 2015 2016
Vacancy Rate 4.0% 4.0% 4.2%
Net Absorption (Units) 223,421 170,065 140,128
Completions (Units) 191,481 146,461 122,381
Rent Growth 4.0% 3.9% 3.5%
Sources: National Association of REALTORS® / Reis, Inc.
Commercial Real Estate Forecast
Commercial Market Forecast over the next 2 years
• Rising interest rates …
• Cap rates rise somewhat (narrow the gap first)
• Increased occupancy and falling vacancy (new supply lacking)
• Rising rents … can offset rising rates to support property values
• Overall … improving business opportunities