Greater Lansing Association of REALTORS Regional Economic Update HOUSING MARKET OUTLOOK FOR 2018 Paul C. Bishop, PhD, CBE Vice President, Research NATIONAL ASSOCIATION OF REALTORS January 11, 2018
Today s Housing Market Environment ü Consumer Sentiment Ownership is Valued ü The Economy Is Solid Demand for Housing Remains Strong ü What s Next? Some Challenges and Opportunities
Consumers Believe Buying a Home is a Good Financial Decision 92% Agree than Buying a Home is a Good Financial Decision 90% 88% 86% 84% 82% 80% 78% 76% Source: National Association of REALTORS HOME Survey 2017Q4
The American Dream Includes Homeownership Is Homeownership Part of your American Dream? No 13% Yes 85% Strongly Agree 84% Don t Know 2% Moderately Agree 16% Source: National Association of REALTORS HOME Survey 2017Q4
Since 2011, 21,000 Jobs Added in Lansing and Unemployment Rate Has Declined Quickly 6,000 5,000 4,000 3,000 2,000 1,000 Lansing Metro Job Gains 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% Unemployment Rate U.S. Lansing 0 2011 2012 2013 2014 2015 2016 2017 0.0% 2005 2007 2009 2011 2013 2015 2017 Source: Bureau of Labor Statistics
Despite a Good Economy Home Sales Rising Very Slowly 7,500,000 7,000,000 6,500,000 6,000,000 5,500,000 5,000,000 4,500,000 4,000,000 3,500,000 SAAR U.S. Existing Home Sales 3,000,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: National Association of REALTORS
Less than 6 Months Supply of Existing Homes Since Late 2012 14 12 months U.S. Months Supply 10 8 6 4 2 3.4 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: National Association of REALTORS
Home Sales in Greater Lansing Area Down Thru October 5,800 5,700 5,600 5,500 5,400 5,300 5,200 5,100 5,000 Home Sales Year-to-date October 2013 2014 2015 2016 2017 Comparing Oct 2017 vs 2016 (ytd) Greater Lansing: -1.9% Among 42 Boards in Michigan o Sales increases: 22 Boards o Sales decreases: 20 Boards Source: Michigan REALTORS
Home Prices Growing at a Consistent Singe-digit Pace 20% percent change from one year ago U.S. Existing Home Sale Price Growth 15% 10% 5% 0% -5% -10% -15% -20% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: National Association of REALTORS
Home Prices Rising Steadily in Greater Lansing Area $180,000 $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Average Home Price Year-to-date October 2013 2014 2015 2016 2017 Comparing Oct 2017 vs 2016 (ytd) Greater Lansing: 5.1% Among 42 Boards in Michigan o Prices increases: 39 Boards o Price decreases: 3 Boards Source: Michigan REALTORS
Fewer First-time Buyers are Able to Move to Ownership 60% 50% Percent of Existing Homes Sold to First-time Buyers Long-term FTB Share 40% 30% 20% 10% 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: National Association of REALTORS
Current Renters Point to Affordability as Main Hurdle to Ownership Many Think Getting a Mortgage Would be Difficult Do renters ever want to own a home? Why don t renters own a home? Yes, 79% Millennials: 90% Gen X: 85% Can t afford to buy 36% Life circumstances not suitable for owning now Need flexibility of renting vs owning 33% 16% No, 17% Don t want responsibility of owning 6% Not sure, 4% 56% of renters think it would be difficult to qualify for a mortgage Source: National Association of REALTORS HOME Survey 2017Q4
Saving for Downpayment Increasingly Difficult for First-time Buyers 30% Saving for Downpayment Difficult First-time Buyers Repeat Buyers Expenses that Delayed Saving Downpayment (among those who indicated difficulty saving) Student Loans Car Loan Healthcare Costs Credit Card Debt Child Care Expenses 25% 60% 20% 15% 50% 40% 30% 10% 20% 5% 10% 0% 0% First-time Buyers Repeat Buyers Source: National Association of REALTORS
How to Think About the Impact of Tax Reform Weighing on the Housing Market Homeownership more costly for some MID limitation for new purchases SALT deduction cap Limits on incentives by doubling standard deduction Supporting the Housing Market Solid growth in jobs and income Demographics favor housing Desire to own still strong Source: National Association of REALTORS
What to Plan for in 2018 No significant change in economic outlook, even as we prepare for modestly higher interest rates Prices will continue to rise due to tight inventory and solid demand for homes No relief for the inventory shortage home building up, but a big shortfall to overcome Consumers remain optimistic about home ownership
Housing Forecast 2016 2017 2018 Forecast 2019 Forecast Housing Starts 1,174,000 1,205,000 1,312,000 1,380,000 New Home Sales 561,000 616,000 700,000 750,000 Existing Home Sales Median Existing Home Price Growth 5,450,000 5,540,000 5,520,000 5,710,000 5.1% 5.9% 2.1% 3.6% 30-year Mtg Rate 3.6% 4.0% 4.4% 4.8% Source: National Association of REALTORS (January 2018)
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Paul C. Bishop PhD, CBE Vice President, Research pbishop@realtors.org 202-383-1246 linkedin.com/in/pcbishop/ Download this presentation at: http://bit.ly/glaroutlook2018