Market Facts in Uncertain Times
NAR Research
September 2010
Economic and Market Facts• Informed consumers make smarter decisions.• The economy is soft and consumer confidence remains low.• Housing affordability is at generational high.• Home values in many markets have returned to historically justifiable levels. • Most economists expect home values to rise in upcoming years, though not at
a fast pace.• Bad loans are nearly always made in good times. But recently originated loans
are performing very well.• Patient homeowners over the long-term do much better than renters in
attaining wealth.
Fact 1: The Economy is Growing, though Slowly
2000 - Q1
2000 - Q3
2001 - Q1
2001 - Q3
2002 - Q1
2002 - Q3
2003 - Q1
2003 - Q3
2004 - Q1
2004 - Q3
2005 - Q1
2005 - Q3
2006 - Q1
2006 - Q3
2007 - Q1
2007 - Q3
2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
-8
-6
-4
-2
0
2
4
6
8
10GDP annualized % growth rate
Fact 2: Private Sector Finally Creating Some Jobs (Government jobs were not included since many could be temporary from stimulus measures)
2000 - Jan 2001 - Jul 2003 - Jan 2004 - Jul 2006 - Jan 2007 - Jul 2009 - Jan
-1000
-800
-600
-400
-200
0
200
400
600 Monthly Net Private Payroll Job Changes in Thousands
Fact 3: Consumer Confidence Remains Low, though Clearly Off Bottom
2000 - Jan 2001 - Jun 2002 - Nov2004 - Apr 2005 - Sep 2007 - Feb 2008 - Jul 2009 - Dec0
20
40
60
80
100
120
140
160 Index by The Conference Board
Fact 4: The 30-year Mortgage Rate at Generational Lows
(Very accommodative Federal Reserve monetary policy helping, but for how long?)
1971 - May 1976 - Apr 1981 - Mar 1986 - Feb 1991 - Jan 1995 - Dec 2000 - Nov 2005 - Oct02468
101214161820 %
30-year Mortgage
Fact 5: National Median Home Price Stabilizing(Combination of price change and type of homes that are selling)
2001 - Feb 2002 - Jan 2002 - Dec 2003 - Nov 2004 - Oct 2005 - Sep 2006 - Aug 2007 - Jul 2008 - Jun 2009 - May2010 - Apr100000
120000
140000
160000
180000
200000
220000
240000
260000
280000
New Home Price
Existing Home Price
Fact 6: Other Home Price Measurements also Showing Price Stabilization
2001 - Feb 2002 - Jan 2002 - Dec 2003 - Nov 2004 - Oct 2005 - Sep 2006 - Aug 2007 - Jul 2008 - Jun 2009 - May 2010 - Apr100
120
140
160
180
200
220
Case-Shiller
Core Logic
Fact 7: Home Price-to-Income Ratio Have Returned to Fundamentally Justifiable Levels
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
3.6
Source: NAR
Fact 8: Economists Expect Price Increases in Upcoming Years
• Macromarkets, a firm associated with Professor Robert Shiller, surveys about 100 economists about home price outlook.
• The consensus forecast as of August 2010 (which can be found from Macromarkets or from news media stories such as Wall Street Journal) are for
• 0.78% price increase in 2011• 2.43% price increase in 2012• 3.20% price increase in 2013• 3.69% price increase in 2014• No forecast for 2015 and beyond
Fact 9: Delinquencies Are High but Recent Loan Originations Performing Well
• Due to Past Lending Mistakes the Bad Loans are still working through the system
• Banker’s Afterthought is nearly always that “Bad Loans are made in Bubble Times.”
• But Mortgage Delinquency Rate may have peaked. According to Mortgage Bankers Association, mortgage delinquencies fell to 9.85 percent in second quarter 2010 from 10.1 percent in the first quarter.
• Various reports suggest good loan performance on recently originated mortgages (see government reports on loan performance of government backed mortgages).
• One-third of homeowners own their homes free-and-clear. They are not included in mortgage delinquency statistics.
• Loan approval is more difficult, which explains for better recent loan performance. There is a better approval chance if the borrower stays well within budget.
Renter Homeowner$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
1995
1995
1998
1998
2001
2001
2004
2004
2007
20072007
2007
Fact 10: Long-Term Path to Self Reliance may be Helped from Long-Term Housing Wealth Gains
(2010 data to be published in 2012 by the Federal Reserve)
Fact 10: Long-Term Path to Self Reliance may be Helped from Long-Term Housing Wealth Gains
(2010 data to be published in 2012 by the Federal Reserve)
Source: Federal Reserve
Median Family Net Worth