REALTOR.COM MARKET OUTLOOK Realtor.com Economics October 2018
AGENDA Economic and housing data and insights from realtor.com National Forecast How well did we predict 2018? U.S. Economic Trends GDP, Jobs U.S. Housing Trends Ownership Up, EHS Struggle Supply: Inventory, Prices, Affordability Demand: Aging Millennials, Rents How Shoppers React How realtor.com data highlights U.S. trends California, Cross Market Demand Hot Markets, Generational Shopping Local Data Greater Boston Area 2
NATIONAL FORECAST 3
2018 FORECAST Key economic and housing metrics from NAR and realtor.com National Association of REALTORS Macro Forecast: Real GDP grows 3.0% in 2018 (vs. 2.3% in 2017) Nonfarm payroll employment grows 1.6% in 2018 (vs. 1.6% in 2017) Unemployment declines to 3.9% in 2018, (vs 4.4% in 2017) realtor.com housing forecast: Existing home prices appreciate 3.2% Existing home sales grow 2.5% New home sales grow 7% Housing starts increase 3% (SF up 7%) 30-year fixed conforming rate averages 4.6% 4
2018 FORECAST Key economic and housing metrics from realtor.com Variable 2018 Forecast Year to Date Actual Tracking So Far? Existing Home Sales 3.2% -1.9% Lower Existing Home Prices 2.5% 5.0% Higher New Home Sales 7% 7% As Expected Housing Starts 3% 7% Higher SF Housing Starts 7% 6% Slightly Lower Mortgage Rates 4.6% 4.4% / 4.6% As Expected 5
2019 TRENDS TO WATCH Key economic and housing metrics from NAR and realtor.com National Association of REALTORS Macro Forecast: Real GDP grows 2.6% in 2019 (vs. 3.0% in 2018) Nonfarm payroll employment grows 1.4% in 2019 (vs. 1.6% in 2018) Unemployment declines to 3.9% in 2018 realtor.com housing trends: Slowing economic growth vs. positive demographics Housing inventory turnaround, but not at low-price end Renaissance of suburbs? Amazon boom-town? 6
U.S. ECONOMIC TRENDS 7
ECONOMIC GROWTH IS STRONG Consumption drives strong growth, Investment contributes little 8
JOB CREATION SLOWING 211,000 monthly average in past 12 months, Sep saw 134,000 Source: Bureau of Labor Statistics 9
CONSUMER CONFIDENCE Plans to purchase a home recover after dip Source: The Conference Board, Moody s Analytics 10
U.S. HOUSING TRENDS 11
OWNERSHIP RECOVERING 64.3% ownership rate off low; 1.1 M households last 4qs Source: Census Bureau 12
MOST COMPETITIVE SEASON ON RECORD What are the hallmarks and drivers of the most competitive season? Supply: Not Keeping Pace Inventory - at record lows but decline has stopped Prices - at record highs and still increasing Affordability - least affordable since 2008/09, but more affordable than most of early 2000s and 1990s Demand: More Buyers in the Market Aging Millennials want to own peak millennial coming to the housing market in 2020 Rents - rising in 73% of counties 1 3
EXISTING HOME SALES STUCK EHS down 1.5% Y/Y in Aug; ~5.5 million pace since mid-2015 Source: National Association of REALTORS Existing Home Sales Report 14
MONTHLY INVENTORY DATA TRENDS Nationwide housing market pause or turning point? July August Inventories up year over year in 16 major metros Increases concentrated in high-priced, competitive markets Inventory increases not limited to California, but San Jose +44% Price cuts more prevalent, especially in pricey markets Seattle (+8%), San Jose (+7%), and San Diego, Riverside, Indianapolis, and LA (each +5%) Prices still generally growing, but sellers may have overreached September Inventory essentially flat from one year ago (-0.2%) New listings up 8% year-over-year the largest jump since 2013 15
SUPPLY SIDE 16
INVENTORY Inventory flat year-over-year in Sep Source: Realtor.com 17
PRICES CONTINUE TO RISE List Price at $295,000, Sales Price Record $273,800 (June 2018) Source: Realtor.com and National Association of REALTORS 18
LISTING PRICES UP 7.7% Y/Y IN SEP Median list price increases are widespread September 2018 Source: Realtor.com 19
INVENTORY DIVERGENCE 4.3 months supply for existing and 6.1 months for new Source: National Association of REALTORS, Commerce Department 20
CRISIS SHIFTED NEW HOME MARKET Average spread 2000-2008: 12%; 2009-2018: 33% Source: National Association of REALTORS, Commerce Department 21
NEW HOMES ONLY 11 PERCENT Sales down 1.5% for existing and up 12.8% for new Y/Y (Aug) Source: National Association of REALTORS, Commerce Department 22
HOUSING STARTS UP SF MATTERS Up 9.4% Y/Y with SF down 0.2% and MF up 38.1% (Aug) Source: Commerce Department 23
HISTORIC AFFORDABILITY DECLINING 30-year conforming rate averaged 4.3% in past 12 months Source: Moody s Analytics, Freddie Mac, and National Association of REALTORS 24
AFFORDABILITY A Different Measure: Pros and Cons NAR Affordability Index Sales Prices Backward Looking (Con) Actual Market Price (Pro) Median Price Point Median Income Family Easy to interpret REALTORS Affordability Distribution Listing Prices Forward Looking (Pro) May sell for more/less (Con) Prices of All Listings Income of All Families More work to interpret 25
AFFORDABILITY HEATMAP U.S. Score is 0.81 in general homes are less affordable Source: realtor.com and National Association of REALTORS 26
TOP AFFORDABLE STATES 30 th Percentile vs. 60 th Percentile Income State Kansas 35% Ohio 34% Indiana 33% Iowa 32% Michigan 29% Pennsylvania 28% Missouri 28% 30 th %tile Affordability State Ohio 68% Alaska 69% Iowa 67% Indiana 66% Kansas 65% Missouri 65% Oklahoma 65% 60 th %ile Affordability Source: realtor.com and National Association of REALTORS 27
LEAST AFFORDABLE STATES 30 th Percentile vs. 60 th Percentile Income State Rhode Island 1% California 3% D.C. 3% Oregon 4% Arizona 5% Massachusetts 5% Washington 5% 30 th %tile Affordability State Oregon 24% Hawaii 26% California 27% D.C. 30% Washington 31% Nevada 32% Idaho 32% 60 th %ile Affordability Source: realtor.com and National Association of REALTORS 28
AFFORDABLE HOME SHORTAGE 350,000 fewer starter homes (<$200k) now vs. Sep 2015 Source: realtor.com 29
DEMAND DRIVERS 30
DEMOGRAPHICS SET THE TABLE When viewed by age, importance of Millennials becomes clearer 5,000 4,500 US Population by Age, End of 2016 65 million 88 million 61 million 78 million 29 million Z Millennial X Boomer Thousands 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 100+ Source: Realtor.com Analysis of US Census Bureau Population Estimates (2016) 31
RENT CHEAPER IN 66% OF COUNTIES Simple monthly cost analysis favors renting now in more places September 2018 Source: Realtor.com Analysis of HUD Median Rents, Nielsen Pop-Facts Demographics and Realtor.com Data 32
RENTS RISING Y/Y IN 73% OF COUNTIES Rent increases adding to demand for buying 2018 Source: Realtor.com Analysis of HUD Median Market Rents 33
LIFE DRIVES HOUSING DEMAND Everyone s tired of waiting and Millennials are building families tired of current home Top 10 Buying Triggers all 25-34 favorable home prices change of family circumstance/composition getting married/moving in with partner looking for a safer neighhorhood increase in family size relocated to a new city planning an increase to family size desire to live closer to good schools increase in income change of job/job location 30% 25% 13% 32% 0% 5% 10% 15% 20% 25% 30% 35% Source: realtor.com Active Home Shopper Survey, September 2016 34
MILLENNIAL OWNERSHIP VARIES Strong correlation with affordable markets Source: Realtor.com Analysis of Nielsen Demographics PopFacts 2018 35
SHOPPERS REACT 36
HOW HOME SHOPPERS REACT Survey of March home shoppers Sticking Around: Nearly three-quarters of shoppers started their search in 2017 Know It s Tough: 35 percent of shoppers anticipate a lot of competition and 94 percent are actively employing strategies to compete Key Strategy Categories: (1) Stay Informed and (2) Use Cash Remain Optimistic: More than 70 percent expect to close in 2018 37
HOW HOME SHOPPERS REACT Survey of March home shoppers Rising Rents a Trigger: Millennials cited rising rent as a reason for home purchase Adjusting to Market Conditions: Roughly 4 in 5 shoppers have adapted their home search to cope with rising interest rates and home prices Key Adjustments: (1) Smaller home, (2) Less expensive home, (3) Different neighborhood, (4) Larger Down Payment, (5) Increase monthly budget 38
CURRENT CONDITIONS 39
TOP 8 CA COUNTIES TO LEAVE Areas Have 1.3 to 6.1 Times More Outbound Traffic County Outbound/Inbound Views Ratio Median List Price (March 2018) Santa Clara, CA 6.1 1,299,000 Alameda, CA 4.8 799,000 San Mateo, CA 4.4 1,504,000 San Francisco, CA 3.0 1,298,000 Los Angeles, CA 2.0 690,000 Orange, CA 1.7 849,000 Marin, CA 1.4 1,344,000 Sonoma, CA 1.3 713,000 Source: Realtor.com 40
CROSS MARKET DEMAND Shoppers From Santa Clara Look to Sacramento 41
HOTTEST MARKETS West Coast, Rocky Mountains, and Midwest are Hottest Source: Realtor.com 42
PHOENIX AND PITTSBURGH ATTRACT SR.S Minneapolis attracts ages 35-44; Cincinnati is top among 25-34 43
AMAZON HQ2 CITIES 19 U.S. candidate cities plus Toronto Source: Realtor.com Depiction of Amazon Announcement 44
JEFF BEZOS VS. HQ2 CITY HOUSING Bezos $112 Billion net worth could purchase all active listings in each city Area Multiple Atlanta 7.1 Austin 25.4 Boston 13.6 Chicago 5.1 Columbus 57.8 Dallas 11.0 Denver 15.3 Indianapolis 72.7 Los Angeles 3.5 Miami 2.4 Area Multiple Nashville 24.8 Philadelphia 13.9 Pittsburgh 39.2 Raleigh 41.6 Washington, DC 70.7 Newark 87.6 Montgomery, MD 47.2 New York City 3.0 Northern Virginia 14.7 COMBINED 0.51 Source: Realtor.com Analysis 45
LOCATION LOCATION LOCATION 46
HOMEOWNERSHIP HIGHER OR LOWER? 47
HOME OWNERSHIP Overall Ownership Rate in Region is 61% vs 64% Nationally Source: Nielsen Demographics Pop-Facts 2018 48
MILLENNIAL OWNERSHIP 25-34 Ownership Rate in Region is 34% vs 36% Nationally Source: Nielsen Demographics Pop-Facts 2018 49
HOME PRICES HIGHER OR LOWER? 50
LIST PRICES IN BOSTON AREA Suffolk County Has Highest List Price at $705,000 (Sep 2018) Source: Realtor.com 51
PRICE GROWTH HIGHEST WHERE? 52
LIST PRICE GROWTH IN BOSTON AREA Worcester County Seeing Largest Yearly Price Growth (Sep 2018) Source: Realtor.com 53
PRICE GROWTH IN BOSTON METRO 71% of Zips Experienced Price Growth Y/Y (Sep 2018) Source: Realtor.com 54
INVENTORY GROWING WHERE? 55
ACTIVE INVENTORY IN BOSTON AREA Active Listings Up 3 to 26 percent Y/Y (Sep 2018) Source: Realtor.com 56
ACTIVE INVENTORY IN BOSTON METRO Single Family and Condo Active Listings (Sep 2018) Source: Realtor.com 57
AGE OF INVENTORY IN BOSTON AREA Days on Market Y/Y Generally Down in the Past 12 Months Source: Realtor.com 58
HOTTEST ZIP??? 59
PEABODY, MA ZIP 01960 5 TH HOTTEST Homes in this ZIP sell in 20 days, get 4.5x more views vs. U.S. 60
HOTTEST COUNTIES IN BOSTON AREA Middlesex Claims Top Performing County (Q3 2018) Source: Realtor.com 61
HOTTEST ZIPS IN BOSTON METRO Top 10 Performing Zip Codes (Q3 2018) Source: Realtor.com 62
WHO S SHOPPING??? 63
GENERATIONAL PROPENSITY Interest in Zips by Age Groups in the Region (Q1 2018) Source: Realtor.com 64
GENERATIONAL PROPENSITY Interest in Zips by Age Groups in the Region (Q1 2018) Source: Realtor.com 65
RENT VS. BUY THINK LONG TERM 66
RENT VS BUY All Counties Cheaper to Rent (Sep 2018) Source: Realtor.com Analysis of Nielsen Pop-Facts Demographics, HUD Fair Market Rents and Realtor.com Data 67
RENT PRICES IN BOSTON AREA Five Counties Seeing Positive Rent Growth Year-on-Year Source: Realtor.com Analysis of HUD Fair Market Rents 68
HOUSEHOLD GROWTH 2018-2023 All of Zips Seeing Growth Source: Nielsen Demographics Pop-Facts 2018 69
REALTOR.COM RESOURCES 70
Danielle Hale Chief Economist Javier Vivas Director, Economic Research Joe Kirchner Senior Economist Akshay Suryawanshi Data Engineer Sabrina Speianu Research Analyst Nicolas Bedo Research Analyst 71
OUR INSIGHTS GET NOTICED Other Market Analysts 72
Economic Research realtor.com @RDC_Economics Access market data, research tools, and presentations at REALTOR.COM/RESEARCH 73
THANK YOU 74
NEARBY MANCHESTER, NH Recognized among areas with winning combo 75