The Numbers That Drive 1.Home Sales 2.Home Price 3.Months Supply of Inventory 4.Mortgage Rates U.S. Real Estate 5.Affordability
1. Home Sales - Annual 5.26 million homes sold in 2015, making it the best year for home sales since 2006. 5.3 3.0 2.9 2.9 3.2 3.4 3.5 3.5 3.8 4.0 4.5 4.7 4.6 4.7 5.0 5.4 6.0 6.2 5.7 4.9 4.4 4.6 4.3 4.3 4.7 5.1 4.9 5.3 89 91 93 95 97 99 01 03 05 07 09 11 '13 '15 Total Annual Single-Family Home Sales (in Millions) 2015 Sales 3 The Numbers That Drive U.S. Real Estate Vision 2016 Source: NAR
1. Home Sales - Monthly 2015 started modestly but quickly accelerated to the best summer months in several years. 5.6 5.6 5.5 5.5 5.3 5.3 5.3 5.3 5.2 5.2 5.1 5.1 5.1 5 5 4.9 4.9 4.9 4.8 4.8 4.7 4.6 4.6 4.6 Jan '14 Apr Jul Oct Jan '15 Apr Jul Oct Dec '15 Seasonally Adjusted Annual Rate of Home Sales 4 The Numbers That Drive U.S. Real Estate Vision 2016 Source: NAR
2. Home Price - Annual The median home price for 2015 was $222,400. This is 6.8% above 2014 and right on the edge of our sustainable range. $222 $179 $198 $250 $209 $222 17% $317 $271 $166 $95 89 91 93 95 97 99 01 03 05 06 07 08 09 10 11 12 '13 '14 '15 '16 '17 '18 '19 '20 Long-term Average = 4% Trend Reset Line Annual Median Home Price (in Thousands) 5 The Numbers That Drive U.S. Real Estate Vision 2016 Source: NAR
2. Home Price - Annual Appreciation On an annual basis home prices appreciated 6.8% for 2015, just outside our 4%-6% band we consider sustainable. 1989-2000 2001-2006 2007-2011 2012-2015 5.9% 2.9% 5.5% 2.7% 3.39% 4.8% 5.2% 5.4% 3.4% 4.0% 3.1% 3.8% 4.3% 6.3% 8.9% 12.2% 7.0% 7.5% 8.3% 1.3% - 4.6% 0.6% 7.6% 11.5% 6.3% 5.7% 6.8% -1.8% -2.7% 89 91 93 95 97 99 01 03 05 07 09 11 '13 '15 Annual Median Home Price Appreciation -9.8% -12.5% 6 The Numbers That Drive U.S. Real Estate Vision 2016 Source: NAR
3. Months Supply of Inventory - Annual Inventory tightened in 2015 due to increased demand from lower rates and continued sluggishness in new home construction. 8.9 10.4 8.8 9.4 8.3 Buyer s Mkt 4.8 4.5 4.6 4.7 4.7 4.3 4.5 6.5 5.9 4.9 5.2 4.8 Seller s Mkt Balanced 99 01 03 05 07 09 11 '13 '15 Balanced = 6 months Annual Months Supply of Inventory 7 The Numbers That Drive U.S. Real Estate Vision 2016 Source: NAR
4. Mortgage Rates - Annual Mortgage rates averaged 3.85% in 2015, down 0.32 percentage points from last year s average. 16.6 7.3 8.1 8.5 7.4 6.6 3.85 '72 '76 '80 '84 '88 '92 '96 '00 '04 '08 '12 '15 Annual Mortgage Rate (%) Historical Average from '72 - '15 Historical Average from '90 - '15 8 The Numbers That Drive U.S. Real Estate Vision 2016 Source: Freddie Mac
4. Mortgage Rates - Monthly Interest rates remained below 4% for almost all of 2015, helping to drive demand in the best year for home sales since the bubble years. 4.8% 4.5% 4.5% 4.2% 3.9% 3.9% 3.35% Jan '11 May '11 Sep '11 Jan '12 May '12 Sep '12 Jan '13 May '13 Sep '13 Jan '14 May '14 Sep '14 Jan '15 May '15 Sep '15 Jan '16 Monthly Mortgage Rate 9 The Numbers That Drive U.S. Real Estate Vision 2016 Source: Freddie Mac
5. Affordability - Percentage of Income In 2015 affordability was flat despite growing home prices due to persistently low mortgage rates. 21.6% 15.2% 15.0% 78.4% 84.8% 85.0% Historically 2014 2015 Principal and Interest Payment Everything Else 10 The Numbers That Drive U.S. Real Estate Vision 2016 Source: NAR
5. Affordability - Annual In 2015 affordability was flat despite growing home prices due to persistently low mortgage rates. 36 36 17 17 16 17 19 20 20 21 22 26 31 30 28 26 23 22 22 24 23 23 21 19 20 20 20 20 19 19 21 20 20 19 20 22 23 22 18 15 14 13 13 14 15 15 21.6 '70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 Affordability Historical Average 11 The Numbers That Drive U.S. Real Estate Vision 2016 Source: NAR
5. Affordability in Perspective House Payment 1995 2015 Median Home Price: $114,600 (Adj. $178,074) Mortgage Rate: 7.9% Monthly P&I Payment: $833 (Adj. $1,295) Median Income: $34,076 (Adj. $52,996) Median Home Price: $222,400 Mortgage Rate: 3.86% Monthly P&I Payment: $1,044 Median Income: $53,657 12 The Numbers That Drive U.S. Real Estate Vision 2016
The Numbers That Drive 1. Home Sales 2. Home Price 3. Inventory 4. Mortgage Rates Canadian Real 5. Affordability Estate
1. Home Sales - Annual Canadian home sales grew by 5.5% in 2015 with 506,334 homes changing hands. The greatest growth was seen in British Columbia, while Alberta and Saskatchewan saw year-over-year declines due to weakness in the energy sector. 506 523 506 317 261 '89 '92 '95 '98 '01 '04 '07 '10 '13 '15 Total Annual Single-Family Home Sales (in Thousands) 2015 Sales 14 The Numbers That Drive Canadian Real Estate Vision 2016 Source: CREA
2. Home Price - Annual Home prices also continued to grow in 2015 at an annual pace of 8.4%. Prices averaged $442,857 on a national level but there was significant variance across markets, with Vancouver and Toronto seeing the majority of price gains. 67 76 72 3.9% growth 77 76 80 94 110 16.3% growth 130 1.4% growth 147 142 149 150 153 158 151 151 155 152 158 164 172 189 207 227 249 10.1% growth 277 307 305 320 339 362 363 5.5% growth 383 408 443 4.6% 4.4% 80 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 '13 '15 Avg. Home Price (in Thousands $) 4.4% Growth Projected from 1980 Avg. Growth Since 1990 15 The Numbers That Drive Canadian Real Estate Vision 2016 Source: CREA
3. Inventory - Nationwide/Annual Inventory remained balanced throughout 2015, but did tighten year-over-year. 60% 40% 71% 66% 63% 64%64%61% 62% 59% 56% 56% 52%53% 52%53% 54% 56% 47% 48% 50%50% 47% 40% 44% 42% 42% 39% 33% Buyer s Mkt Balanced Seller s Mkt 89 91 93 95 97 99 01 03 05 07 09 11 '13 '15 Total Annual Single Family Home Sales 40% 60% 16 The Numbers That Drive Canadian Real Estate Vision 2016 Source: CREA
4. Mortgage Rates - Annual Interest rates in Canada declined slightly in 2015 after the Bank of Canada lowered interest rates early in the year, but remained stable for the remainder. 13.4% 12.1% 11.1% 9.5% 8.8% 9.5% 9.2% 7.9% 7.1% 6.9% 7.6% 8.4% 7.4% 7.0% 6.4% 6.2% 6.0% 6.7% 7.1% 7.1% 5.6% 5.6% 5.4% 5.2% 5.2% 4.9% 4.7% 89 91 93 95 97 99 01 03 05 07 09 11 '13 '15 Average Annual Mortgage Rate 5-Year Fixed (Percentage) 17 The Numbers That Drive Canadian Real Estate Vision 2016 Source: Bank of Canada
5. Affordability - Annual Affordability moved very little, as the slight decline in interest rates nearly offset the effects of rising prices. Property Type Q2 2014 Q2 2015 Q2/Q2 Change Avg. Since 1985 Q2 2015 Vs. Avg Detached Bungalow 42.4% 43.3% 0.9% 39.2% 3.2% Standard Two-Storey 47.9% 48.3% 0.4% 43.7% 4.2% Standard Condo 27.4% 27.1% -0.3% 27.0% 0.4% An increase (+) in cost (%) represents deteriorated affordability ( ) A decrease (-) in cost (%) represents improved affordability ( ) 18 The Numbers That Drive Canadian Real Estate Vision 2016 Source: RBC
The U.S. Economy 1. Gross Domestic Product 2. State Forecast 3. Unemployment 4. Inflation
1. Gross Domestic Product - Annual GDP grew by 2.4% in 2015. Growth between 2%-3% is likely to persist in the near term. 3.7% 1.9% 3.6% 2.7% 4% 2.7% 3.8% 4.5% 4.5% 4.7% 4.1% 1% 1.8% 2.8% 3.8% 3.3% 2.7% 1.8% 2.5% 1.6% 2.3% 2.2% 2.4% 2.4% -0.1% -0.3% 89 91 93 95 97 99 01 03 05 07 09 11 '13 '15 Real GDP Year-over-Year Change (Percentage) -2.8% 20 The U.S. Economy Vision 2016 Source: BEA
1. Gross Domestic Product - Quarterly Growth in 2015 started slow and then gained pace; however, the last quarter was anemic as businesses were hesitant to invest amid market turmoil and falling oil prices. 0.2% 3.1% 2.7% 1.4% 2.0% 3.9% 3.9% 2.7%2.5% 1.3% 1.7% 2.9% 0.8% 4.6% 2.3% 2.5% 1.6% 0.1% 4.5% 3.5% 2.7% 1.8% 4.6% 4.3% 3.9% 2.1% 2.0% 0.6% 0.7% -2.7% -1.9% -0.5% -1.5% -0.9% -5.4% -8.2% Q2 07 Q4 07 Q2 08 Q4 08 Q2 09 Q4 09 Q2 10 Q4 10 Q2 11 Q4 11 Q2 12 Q4 12 Q2 '13 Q4 '13 Q2 '14 Q4 '14 Q2 '15 Q4 '15 Real GDP Growth Rate, Quarterly, Seasonally Adjusted (Percentage) 21 The U.S. Economy Vision 2016 Source: BEA
2. State Forecast States whose economies rely heavily on oil, mining, or manufacturing will face difficulty this year. December 2015 State Leading Indexed (Expected 6-Month Change in State Coincident Indexes) Less than -4.5% 0.0% to -1.5% 0.0% to 1.5% 1.5% to 4.5% 22 The U.S. Economy Vision 2016 Source: Federal Reserve Bank of Philadelphia
3. Unemployment - Annual In 2015 unemployment averaged 5.3%, continuing the trend toward moving the economy back to full employment. 9.7% 1982 9.6% 2010 3.9% 1947 2.9% 1953 4.6% 2006-2007 5.3% 2015 '47 '51 '55 '59 '63 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15 Annual Unemployment 5.0% 23 The U.S. Economy Vision 2016 Source: BLS
4. Inflation - Annual Inflation remained low in 2015 as oil prices continued to decline substantially year-over-year; However, core inflation levels have begun to move back toward target levels. 4.5% 5.0% 2% 2% 1.75% 1.4% 1.0% 0.4% '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 CPI (Includes Energy and Food) Core CPI (Excludes Energy and Food) Target = 2% 24 The U.S. Economy Vision 2016 Source: BEA
The Canadian Economy 1. Gross Domestic Product 2. Unemployment 3. Inflation
1. Gross Domestic Product GDP is expected to have grown by 1.2% in 2015. After entering a recession in the first half of the year, the Canadian economy recovered in the third quarter. 5.6% 5.3% 3.9% 1.4% 2.7% 2.1% 3.1% 3.0% 2.8% 2.3% 0.9% 3.4% 2.4% 1.7% 2.0% 2.4% 1.2% 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 '13 '14 '15 Real GDP Year-over-Year Change -3.0% 26 The Canadian Economy Vision 2016 Source: Statistics Canada
2. Unemployment Unemployment averaged 6.9% in 2015 in Canada. While the annual average held steady in 2015, there has been an increase in unemployment in provinces with large energy sectors, notably Alberta and Saskatchewan. 7.1 8.1 8.4 7.5 7.5 7.6 12.0 11.1 11.4 10.5 9.6 8.8 7.8 7.5 8.2 11.2 11.4 10.3 10.4 9.5 9.6 9.1 8.3 7.6 6.8 7.3 7.7 7.6 7.2 6.8 6.3 6.1 6.2 8.3 8.0 7.5 7.3 7.1 6.9 6.9 8.5% 76 80 85 90 95 00 05 10 '15 Long-term Average = 8.5% Unemployment 27 The Canadian Economy Vision 2016 Source: Statistics Canada
3. Inflation Overall inflation dipped in 2015 due to the decline in oil prices; however, the effect of the decline in the value of the Canadian dollar helped keep core inflation in line with targets by boosting demand for other Canadian goods. 2.4% 2% 2% 1.3% 1.4% '93 95 '97 '99 '01 '03 05 '07 '09 '11 '13 '15 CPI (Includes Energy) Core CPI (Excludes Energy) Target = 2% 28 The Canadian Economy Vision 2016 Source: Statistics Canada
U.S. Events 1. Sides Per Agent 2. Credit Conditions 3. Distressed Sales 4. Underwater Homes 5. Federal Reserve Policy 6. New Home Construction 7. Builder Capacity 8. Oil Prices 9. Student Loan Debt
1. Sides Per Agent Sides per agent held steady in 2015 as the agent population grew only slightly to 1.17 million and home sales climbed to 5.26 million. 10.3 13.8 14.0 12.7 11.0 8.5 7.6 7.0 9.4 9.1 9.6 9.9 9.3 9.5 8.0 8.0 8.2 9.2 10.3 10.7 10.7 11.6 12.2 13.8 13.6 13.5 13.2 12.9 12.6 12.3 11.2 9.5 7.5 6.9 7.8 7.9 8.4 9.3 9.8 9.0 9.0 76 '78 80 '82 '84 '86 '88 90 '92 '94 '96 '98 00 '02 '04 '06 '08 10 '12 '14 '15 Sides Per Agent 10.3 Historical Average 30 U.S. Events Vision 2016 Source: NAR
2. Credit Conditions In 2015 banks continued to loosen mortgage lending standards with more than 10% of banks loosening standards on net in every quarter of 2015. Tightening Steady Loosening Q3 '07 Q1 '08 Q3 '08 Q1 '09 Q3 '09 Q1 '10 Q3 '10 Q1 '11 Q3 '11 Q1 '12 Q3 '12 Q1 '13 Q3 '13 Q1 '14 Q3 '14 Q1 '15 Q3 '15 31 U.S. Events Vision 2016 Tightening Loosening Source: Federal Reserve
3. Distressed Sales The percentage of distressed sales declined only slightly in 2015 as they remain only slightly elevated from normal levels. 49% 38% 40% 35% 5.4M 4.1M 34% 24% 14% 5% 2% 6% Oct '08 Jan '10 Jan '11 Jan '12 Jan '13 Jan '14 Jan '15 Dec '15 Foreclosures Short Sales Monthly Historical 32 U.S. Events Vision 2016 Source: NAR
4. Underwater Homes Underwater homes continue to return to equity as prices rise, increasing the pool of homes that could be available to list over the next few years. 25.1% 24.7% 25.4% 25% 24.8% 24.4% 25.2% 23.7% 22.3% 22% 21.7% 19.7% 14.5% 13% 13.3% 12.7% 10.7% 10.3% 10.8% 10.2% 8.7% 8.1% 6% Q2 '10 Q4 '10 Q2 '11 Q4 '11 Q2 '12 Q4 '12 Q2 '13 Q4 '13 Q2 '14 Q4 '14 Q2 '15 Q3 '15 Underwater Homes (% of Mortgaged Homes) 33 U.S. Events Vision 2016 Sources: Core Logic, Harvard Joint Center for Housing Studies
5. Federal Reserve Policy In December the Federal Reserve raised its target for the federal funds rate for the first time since 2006. 1. The target rate was changed from 0%-0.25% to 0.25%-0.5%. This is still very close to zero. 2. If growth or inflation diverge significantly from the Federal Reserve's targets in 2016, they would likely delay further rate increases. 34 U.S. Events Vision 2016
6. New Home Construction Single family home construction increased 10.4% in 2015. While new home construction continues to improve, the 715,000 homes started is still well below the historical average of 1 million. 1,082 1,046 622 445 471 430 535 618 648 715 Historical '07 '08 '09 '10 '11 '12 '13 '14 '15 New Homes (in Thousands) 35 U.S. Events Vision 2016 Source: U.S. Census Bureau
7. Builder Capacity NAHB Membership 240,000 220,000 200,000 180,000 50% decline in membership 25-year average = 182,400 160,000 140,000 120,000 100,000 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 36 U.S. Events Vision 2016 Source: NAHB
8. Oil Prices While declining oil prices should continue to benefit consumers, they also appear to signal a global demand slump that could act as a slowdown for the economy in the near term. 141 114.3 23.6 35 27.8 Jan '00 Jan '01 Jan '02 Jan '03 Jan '04 Jan '05 Jan '06 Jan '07 Jan '08 Jan '09 Jan '10 Jan '11 Jan '12 Jan '13 Jan '14 Jan '15 Jan '16 Weekly Oil Prices 37 U.S. Events Vision 2016 Source: Federal Reserve Bank of St. Louis
9. Student Loan Debt Between 2003 and 2015 the total amount of student loan debt nearly quintupled, going from $241 billion to $1.2 trillion. A 398% increase. 75% of recent graduates had student loans, with balances averaging $29,400. At 6.5%, that is a payment of $333 per month. $1.9T $1.9T $1.9T $2.0T $2.1T $2.1T $1.9T $1.8T $1.8T $1.8T $1.9T $1.9T $2.6T $1.1T $1.2T $0.9T $0.9T $1.0T $0.6T $0.7T $0.8T $0.4T $0.4T $0.5T $0.3T $0.3T '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Student Loans (in Trillions) All Other Consumer Debt (in Trillions) 38 U.S. Events Vision 2016 Source: Federal Reserve Bank of New York
Global Events 1. Global Concerns
1. Global Concerns There are currently several issues in the world that could impact the United States market. 1. A slowdown in global growth heralded by the slowdown of Chinese economic growth and low commodity prices. 1.1. Chinese equities markets have seen a substantial downturn at the beginning of 2016, possibly signaling a significant issue developing in China. 2. Global ramifications of low oil prices. 2.1. This has been a source of political tension among several OPEC member states and other countries including the United States. They may be partially resolved by negotiations to reduce global oil supply and raise prices. 3. Continued slow growth and low inflation in Europe. 3.1. The European Central Bank seems committed to combatting continued low inflation levels and has hinted at possible further stimulus. 40 Global Events Vision 2016
Luxury 1. The World s Wealthy 2. Allocation of Financial Investments 3. Months Supply of Inventory 4. Days on Market
1. The World s Wealthy Year HNWI* in US (in Thousands) HNWI in Canada (in Thousands) Global HNWI (in Millions) Wealth of Global HNWIs (in US$ Trillions) 2005 2,669 232 8.8 $33.4 2006 2,920 248 9.5 $37.2 2007 3,019 281 10.1 $40.7 2008 2,460 231 8.6 $32.8 2009 2,866 251 10 $39 2010 3,104 282 10.9 $42.7 2011 3,068 280 11 $42 2012 3,436 298 12 $46.2 2013 4,006 320 13.7 $52.6 2014 4,351 331 14.6 $56.4 2005-2014 63% increase *HNWI = High Net Worth Individuals 43% increase 66% increase 69% increase 42 Luxury Vision 2016 Sources: Capgemini and RBC Wealth Management
2. Allocation of Financial Investments - Globally Year Real Estate Cash/Deposits Fixed Income Stock Market Alternative Investments 2004 16% 13% 24% 28% 19% 2005 16% 13% 21% 30% 20% 2006 24% 14% 21% 31% 10% 2007 14% 17% 27% 33% 9% 2008 18% 21% 29% 25% 7% 2009 18% 17% 31% 29% 6% 2010 19% 14% 29% 33% 5% 2012 20% 28% 16% 26% 10% 2013 18.7% 26.6% 15.7% 24.8% 13% 2014 17.6% 25.6% 16.9% 26.8% 13% 43 Luxury Vision 2016 Sources: Capgemini and RBC Wealth Management * No data for 2011.
3. Months Supply of Inventory 39.4 Months Supply 22.9 12.9 6 22.8 15.3 9.8 18.0 11.4 7.9 19.2 11.3 7.8 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Dec '15 10.9 6.3 3.9 12.0 7.7 6.1 11.1 6.5 4.0 12.0 6.0 3.0 Luxury Move-Up Starter Balanced (6 Months) 44 Luxury Vision 2016 Source: BrokerMetrics
4. Days on Market 164 143 144 126 121 109 90 89 112 92 123 119 110 109 98 93 93 85 82 81 79 115 88 71 Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Dec '15 Luxury Move-Up Starter 45 Luxury Vision 2016 Source: BrokerMetrics
Commercial 1. Job Growth 2. Vacancy Rates 3. Loan Delinquency Rates 4. Commercial Property Price Index
1. Job Growth Businesses in the United States added a net 2.65 million jobs in 2015, down slightly from 2014 but still a very strong year for employment growth. 237 301 314 289 284 0 172 0-167 -290 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15-780 3-Week Moving Average of Net Jobs Added, in Thousands 0 Jobs Added 47 Commercial Vision 2016 Source: REIS
2. Vacancy Rates Vacancy rates continue to trend downward with the exception of multifamily, which remains historically low but has begun to trend upward. 17% 17% 16.4% 9.1% 7.9% 7.1% 3.8% 11% 7.2% 6.9% 12.6% 9.5% 7.5% 5.7% 11.4% 10.6% 8% 10% 4% 3.2% '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Office Industrial Retail Multifamily 48 Commercial Vision 2016 Source: REIS
3. Loan Delinquency Rates The commercial real estate loan delinquency rate continued to decline, reaching 1.14% and indicating continued strengthening of the commercial market. 12.06% 8.76% 4.01% 1.05% 1.78% 1.14% 91 92 93 94 95 96 97 98 '99 00 01 02 03 04 05 06 07 08 09 10 11 12 '13 '14 '15 Average '91 to present Commercial Real Estate Loan Delinquency Rate 49 Commercial Vision 2016 Source: Board of Governors of the Federal Reserve System
4. Commercial Property Price Index The price index for commercial property is up 15% in 2015 and up 110% since 2000. Offices located in central business districts posted the largest gains, followed by retail, while industrial and suburban offices had the smallest price gains. 86% 110% 46% 13% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Commercial Property Price Index (% change from 2000) 50 Commercial Vision 2016 Source: Moody s/rca
Industry 1. TRID - New Loan Forms 2. Lending Standards Are Loosening 3. CFPB Warns Against MSAs 4. Do Not Call Regulations 5. Worker Classification
1. TRID - New Loan Forms The new Loan Estimate and Closing Disclosure forms make it easier for consumers to understand their mortgage and closing details. 1. The TILA-RESPA Integrated Disclosure (TRID) forms were implemented on October 3. 2. The new process did temporarily impact home sales, with delays pushing a significant number of closings from November to December. 3. Going forward, further impact on home sales is not expected. 52 Industry Vision 2016
2. Lending Standards Are Loosening 1. Almost all of the mortgage lenders surveyed by Fannie Mae in Q4 expect to maintain or ease credit standards for GSE-eligible loans in the next quarter. 2. Fannie Mae is implementing two new programs in 2016 to increase consumer access to financing: 2.1. Lenders will be required to use trended data to evaluate mortgage applicants. 2.2. Submitting loans for borrowers with nontraditional credit records will become easier. 3. Congress is already attempting to deregulate lending practices: 3.1. Pending legislation would undo a significant portion of the QM regulations, but The White House has said it would not allow the bill to pass. 53 Industry Vision 2016
3. CFPB Warns Against MSAs MSAs pose substantial risks according to the CFPB. 1. In October 2015, the CFPB claimed investigations reveal that many MSAs appear to be designed to evade RESPA s anti-kickback laws. 2. The CFPB reiterates that any agreement that entails exchanging a thing of value for referrals of settlement service business involving a federally related mortgage loan likely violates RESPA. 3. Actions that have resulted in punishment include: 3.1. Fees based on referral business. 3.2. Not providing all of the services of the MSA while still receiving full payment. 3.3. Not properly disclosing an affiliate relationship or hindering the consumer s ability to shop for settlement service providers. 4. Bank of America, Wells Fargo, and Prospect Mortgage have discontinued MSAs. 54 Industry Vision 2016
4. Do Not Call Regulations As salespeople, know the rules and create systems that help you comply. 1. The Do Not Call Registry was established in 2003 to allow consumers to limit their exposure to telemarketing calls. 2. The Federal Trade Commission in cooperation with 4 states recently cited Dish Network for 57 million violations, which will likely result in a large fine. The largest penalty to date is $7.5M paid by Sprint. 3. Key prohibitions include: 3.1. Calling any number on the national Do Not Call list. 3.2. Using automated dialers to call cell phones. 3.3. Calling anyone who has previously requested that you stop calling them within 5 years of that request. 55 Industry Vision 2016
5. Worker Classification An increasing number of lawsuits are challenging independent contractor classifications. 1. Real estate is in a relatively unique position when it comes to worker classification: 1.1. Brokers are required to supervise their agents, but a key criteria for establishing an independent contractor relationship is a general lack of control. 1.2. To address this conflict, certain exemptions at both the federal and state level have been established specifically for real estate agents. 2. In the past year, 2 major industry lawsuits were resolved without significant impact. 3. NAR has taken an active role in support of the independent contractor status. 56 Industry Vision 2016
Tech Trends 1. How Technology Markets Evolve 2. Current State of Technology 3. Real Estate Tech Funding 4. The Sharing Economy 5. Evolution of Travel Search 6. Evolution of Real Estate Search 7. Real Estate Online Advertising 8. Consumer Search Behavior 9. Traditional Model 10. Upstream Model 11. Broker Public Portal 12. Technology Trends of 2016 13. Predictions
How Technology Markets Evolve Period of acquisitions, investments, and experimentations Stability Pivot Havoc Market becomes saturated. Innovation stalls. Stability Pivot Innovation disrupts the status quo 58 Tech Trends Vision 2016 Source: Forrester
Current State of Technology TRANSACTIONS SEARCH AGENT SHOWINGS Havoc NAR & ziplogix partnership 8/10 people searching real estate online visit Zillow Group or Realtor.com Stability Stability Pivot Drone photography DotLoop acquisition Upstream? 87% of buyers used an agent in 2015 Live streaming tours 3D showings On-demand showing services Virtual reality 59 Tech Trends Vision 2016
Real Estate Tech Funding 182 Deals 151 101 $1.5B Funding 66 $1.1B 28 37 $238M $223M $288M $438M '10 '11 '12 '13 '14 '15 60 Tech Trends Vision 2016 Source: CB Insights
Real Estate Tech Funding Search DIY 7.8% Property Management 7% Financial Tools 6.1% Big Data 5.9% Brokers 4.6% Agent Tools 3.4% Discounter 3% Coworking 1.8% Commercial 1.7% Consumer Tools 0.5% Auction 0.1% 58.3% 61 Tech Trends Vision 2016
The Sharing Economy Sharing Economy - Peer-to-peer based sharing of access to goods and services coordinated through community-based online services. Car Ownership > Leasing Midsize sedan after 6 years. Leasing Buying New Buying Used Final Cost $23,476 $18,417 $15,570 Car Ownership > Ubering For the average American who drives 13,476 miles per year. Ubering Owning Difference Annual Cost $16,321 $9,859 $6,462 62 Tech Trends Vision 2016 Source: Edmunds and AAA
The Sharing Economy Homeownership > Renting Median Net Worth 2001 2004 2007 2010 2013 Homeowner $211,500 $212,600 $246,000 $187,000 $195,400 Renter $5,900 $4,600 $5,400 $5,400 $5,400 Real Estate Difference $205,600 $208,000 $240,600 $181,600 $190,000 63 Tech Trends Vision 2016 Source: Federal Reserve Survey of Consumer Finances
Evolution of Travel Search Travel Agents Search Portals Meta Search Portal 64 Tech Trends Vision 2016
Evolution of Real Estate Search Agent Websites Search Portals Meta Search Portal?? 65 Tech Trends Vision 2016
Real Estate Online Advertising ROI 38.5% ROI -32% $8.9B $6.1B $2.6B $3.6B 2007 2015 Online Ad Spending Online Lead Revenue 66 Tech Trends Vision 2016 Source: NAR & Borrell Associates
Consumer Search Behavior 1. Survey of top agents shows 46% of clients provide their agent with a list of properties they researched on their own that they are interested in buying. 25% of the time the home they ultimately purchase originated from this list. 1.1. Average size of list 6 properties 1.2. 15% of clients say they just want help negotiating the deal because they feel like they have found their ideal home. 68 Tech Trends Vision 2016
Traditional Model 69 Tech Trends Vision 2016
Upstream Model MLS Broker Public Portal Zillow Realtor.com Homes.com Trulia 300+ others KWLS 70 Tech Trends Vision 2016
Broker Public Portal 1. The goal of the Broker Public Portal is to create a national, consumer-facing MLS property search website defined by simplicity, integrity, and common sense. 1.1. Will adhere to the Fair Display Guidelines - developed by brokers to ensure that only the listing broker/agent are displayed on a listing. 2. Currently in active negotiations to bring a broker-owned and operated site to consumers. This site will be what Realtor.com should have been and will compete head to head with Zillow, Trulia, and Realtor.com. 71 Tech Trends Vision 2016
National Association of Realtors
First-time Home Buyers 47% 50% 40% 41% 42% 42% 42% 42% 40% 40% 40% 36% 39% 41% 37% 39% 38% 33% 32% 40% '93 '95 '97 '99 '01 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 First-time Home Buyers 75 National Association of Realtors Vision 2016
Primary Reason for Purchasing a Home 2006 2008 2013 2014 2015 Desire to own a home 32% 34% 30% 24% 30% Desire for a larger home 14 10 12 12 14 Job-related relocation or move 12 11 8 9 8 Desire for a home in a better area 8 5 6 8 8 Change in family situation 9 9 7 8 7 Desire to be closer to family/friends * 6 6 3 7 Desire for a smaller home 5 3 5 3 6 Retirement 4 3 5 3 5 Desire to be closer to job/school/transit 7 4 4 2 4 Affordability * 3 6 5 3 Establish household * 1 3 3 2 Financial security * 1 2 3 2 76 National Association of Realtors Vision 2016
Tenure in Previous Home 2008 2013 2014 2015 1 year or less 4% 3% 4% 4% 2 to 3 years 21 9 9 10 4 to 5 years 19 13 12 13 6 to 7 years 13 15 11 14 8 to 10 years 15 18 20 15 11 to 15 years 11 19 20 19 16 to 20 years 6 9 9 9 21 years or more 10 14 16 16 Median 6 9 10 9 77 National Association of Realtors Vision 2016 13% buy again in less than 4 years.
Buyer s Expected Tenure Buyers expect to stay almost twice as long as they actually do. Stay in touch so that even if your client s move is unexpected, you are top of mind. 2013 2014 2015 1 year or less 1% 2% 2% 2 to 3 years 2 3 4 4 to 5 years 9 9 9 6 to 7 years 3 3 2 8 to 10 years 15 14 14 11 to 15 years 6 5 6 16 to 20 years 27 25 26 Don t know 37 39 38 Median 15 12 14 78 National Association of Realtors Vision 2016
Weeks in Home Search 12 12 12 12 12 10 10 10 8 8 8 8 8 7 '01 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Number of Weeks 79 National Association of Realtors Vision 2016 *There is no data for 2002.
First Step in Buying Process 2013 2014 2015 Looked online for properties for sale 42% 43% 42% Contacted a real estate agent 17 15 14 Looked online for information about the buying process 14 12 13 Talked with a friend or relative about the buying process 5 7 5 Contacted a bank or mortgage lender 6 6 7 Drove by homes/neighborhoods 7 6 7 Visited open houses 3 3 3 Contacted a builder/visited builder models 2 2 2 Contacted a home seller directly 1 1 * Looked in newspapers, magazines, or home-buying guides 1 1 * Attended a Home Buying Seminar * 1 * 80 National Association of Realtors Vision 2016
Information Sources Buyers Use 2004 2013 2014 2015 Online website 74% 89% 88% 89% Real estate agent 90 89 87 87 Mobile or tablet website or application * 45 50 57 Mobile or tablet search engine * 42 48 54 Yard sign 74 51 48 51 Open house 51 45 44 48 Online video site * 27 26 29 Print newspaper advertisement 53 23 21 20 Home builder 37 17 18 20 Home book or magazine 40 15 14 13 Billboard 21 5 4 6 Television 26 4 4 3 Relocation company 16 3 4 3 81 National Association of Realtors Vision 2016
Where Buyers Found the Home They Purchased 01 03 04 05 06 07 08 09 10 11 12 '13 '14 '15 Internet 8% 11% 15% 24% 24% 29% 32% 36% 37% 40% 42% 43% 43% 44% Real estate agent 48 41 38 36 36 34 34 36 38 35 33 33 33 33 Yard sign/open house sign 15 16 16 15 15 14 15 12 11 11 9 9 9 9 Friend, relative, or neighbor 8 7 7 7 8 8 7 6 6 6 5 6 6 6 Home builder or their agent 3 7 7 7 8 8 7 5 4 5 4 5 5 6 Directly from sellers/knew the sellers 4 4 5 3 3 3 2 2 2 2 1 2 3 2 Print newspaper advertisement 7 7 5 5 5 3 3 2 2 2 1 1 1 1 Home book or magazine 2 1 2 1 1 1 1 * * * * 1 * * Other 3 6 4 -- -- -- -- -- -- -- -- -- * * 82 National Association of Realtors Vision 2016 *There is no data for 2002.
Value of Website Features Detailed Property Info Property Photos Neighborhood Info Interactive Maps Detailed Info about Recently Sold Properties Virtual Tours Real Estate Agent Contact Information Pending Sales/Contract Status Information about Upcoming Open Houses Videos Real Estate News or Articles 83 National Association of Realtors Vision 2016 0 25 50 75 100 Very Useful Somewhat Useful Not Useful Did Not Use/NA
Method of Home Purchase Just because buyers are using the Internet more doesn t mean they re not relying on you. In fact, the number of buyers using an agent remains near a ten-year high. To keep it that way, understand your value proposition and be able to communicate it. 69% 75% 77% 77% 77% 79% 81% 77% 83% 89% 89% 88% 88% 87% '01 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Agent or Broker Builder or Builder's Agent Previous Owner Other 84 National Association of Realtors Vision 2016 *There is no data for 2002.
Buyer Representation Agreement Buyer representation agreement is a crucial protocol to maintain transparency and to align expectations between buyers and agents. 2005 2011 2012 2013 2014 2015 Yes, a written arrangement 43% 42% 40% 42% 40% 40% Yes, an oral arrangement 20 18 19 19 19 18 No 26 29 28 26 29 29 Don t know 12 11 13 13 13 13 85 National Association of Realtors Vision 2016
What Buyers Want Most from Their Agent Help finding the right home 53% Help negotiating terms Help with price negotiations 12% 11% Price of comparable home sales Help with paperwork Tell me how much I can afford 4% 7% 6% Help with financing Help teach buyer about neighborhood and area Help find renters for buyers' property 1% 1% 0% 86 National Association of Realtors Vision 2016 Other 1%
How Buyers Found Their Agent Maintaining a relationship with clients will help agents in generating more business through referrals. 2005 2011 2012 2013 2014 2015 Referred by (or is) a friend, neighbor, or relative 44% 41% 40% 42% 40% 41% Used agent previously to buy or sell a home 11 9 10 12 12 12 Website 7 9 11 9 10 10 Visited an open house and met agent 7 7 6 6 5 5 Saw contact information on for sale/open house sign 6 6 6 6 5 5 Referred by another real estate agent or broker * * * 4 5 5 Referred through employer or relocation company 4 4 4 4 4 4 Walked into or called office and agent was on duty 4 4 3 3 2 4 Search engine * * * * 1 1 Newspaper, Yellow Pages, or home book ad 2 1 * 1 1 * Direct mail (newsletter, flier, postcard, etc.) 1 -- * * * * Other 6 10 10 10 11 10 87 National Association of Realtors Vision 2016
Interviews by Buyer Agents have a higher chance of getting the business, if they are the first agent to be contacted by the buyer. 2002 2005 2009 2010 2011 2012 2013 2014 2015 One 59% 64% 66% 64% 65% 66% 66% 67% 67% Two 22 20 19 21 20 20 20 20 20 Three 19 10 10 10 10 8 10 8 9 Four or more -- 5 6 6 6 6 5 4 5 88 National Association of Realtors Vision 2016
Most Important Factors for Buyers An agent s honesty, trustworthiness, and reputation matter the most to buyers. Reputation 23% Honesty and Integrity 21% Agent Is Family or Friend 16% Knowledge of Neighborhood 13% Caring and Good Listener Timely Responses 7% 8% 100% Accessible (tech) 5% Association with Company 3% Designations 1% Other 1% 89 National Association of Realtors Vision 2016
Home as a Financial Investment It is evident that real estate is considered as a good financial investment, and better than stocks. 2005 2010 2011 2012 2013 2014 2015 Good financial investment 94% 85% 78% 78% 81% 79% 80% - Better than stocks * 47 45 46 44 40 43 - About as good as stocks * 30 24 23 27 27 25 - Not as good as stocks * 9 9 9 10 12 12 Not a good financial investment 1 4 8 6 6 7 6 Don t know 5 11 14 16 13 14 14 90 National Association of Realtors Vision 2016
Buyer: Repeat and Referrals '15 '14 72% 73% 16% 15% 5% 5% 5% 5% 2% 1% '13 '12 '11 73% 74% 72% 15% 15% 17% 6% 5% 5% 4% 2% 4% 2% 4% 2% '10 '09 65% 66% 22% 22% 6% 6% 5% 5% 2% 2% '08 70% 18% 6% 4% 1% '07 '06 '05 68% 66% 66% 19% 19% 19% 7% 6% 6% 5% 7% 7% 1% 2% 2% Definitely Probably Probably Not Definitely Not Don t Know 88% 88% 88% 89% 89% 87% 88% 88% 87% 85% 85% Definitely and Probably 91 National Association of Realtors Vision 2016
Method Sellers Used to Find Their Agent 2005 2011 2012 2013 2014 2015 Referred by (or is) a friend, neighbor, or relative 43% 39% 38% 39% 38% 42% Used agent previously to buy or sell a home 28 22 23 25 22 24 Visited an open house and met agent 4 4 4 4 5 3 Website 2 3 3 4 4 4 Personal contact by agent (telephone, email, etc.) 5 4 5 4 4 4 Referred by another real estate agent or broker 3 4 4 4 4 4 Saw contact information on for sale/open house sign 4 4 4 3 3 3 Referred through employer or relocation company 3 5 4 3 3 3 Direct mail (newsletter, flier, postcard, etc.) 3 2 2 2 2 1 Walked into or called office and agent was on duty 2 1 2 2 1 1 Newspaper, Yellow Pages, or home book ad 2 1 1 1 1 1 Advertising specialty (calendar, magnet, etc.) * * 1 1 * 1 Other * 11 11 10 14 9 92 National Association of Realtors Vision 2016
Seller Interviews Number of agents sellers contacted before deciding who to list with. 2002 2010 2011 2012 2013 2014 2015 One 76% 66% 66% 65% 66% 67% 72% Two 16 19 16 20 19 20 15 Three 8 10 13 11 11 8 9 Four or more -- 6 5 5 4 4 2 93 National Association of Realtors Vision 2016
What Sellers Want Most from Their Agent 2005 2010 2011 2012 2013 2014 2015 Help sellers market home to potential buyers * 20% 24% 21% 25% 23% 21% Help sell the home within specific time frame 27 19 19 22 20 20 21 Help price the home competitively 17 23 20 18 19 19 16 Help find a buyer for the home 28 21 19 19 15 14 16 Help sellers find ways to fix up the home to sell it for more 12 7 9 10 11 13 14 Help with negotiations and dealing with buyers 5 5 5 5 4 5 5 Help with paperwork/inspections/preparing for settlement 7 4 3 3 4 3 3 Help sellers see homes available for purchase 3 1 2 1 1 2 2 94 National Association of Realtors Vision 2016
Most Important Factor for Sellers 2005 2010 2011 2012 2013 2014 2015 Reputation of agent 57% 35% 38% 37% 35% 36% 34% Agent is honest and trustworthy * 23 20 19 18 19 18 Agent s knowledge of the neighborhood 17 12 11 12 14 15 15 Agent is friend or family member * 16 18 13 15 13 16 Agent has caring personality/good listener * 4 4 4 5 4 4 Agent s association with a particular firm 6 4 5 4 5 4 4 Agent s commission * * * * 3 4 4 Agent seems 100% accessible because of use of technology like tablet or smartphone * * * * 1 3 2 Professional designations held by agent 3 1 1 1 1 2 2 Other 17 4 4 5 3 2 3 95 National Association of Realtors Vision 2016
Compensation Negotiations 2011 2012 2013 2014 2015 Real estate agent initiated discussion of compensation 43% 43% 43% 46% 46% Client brought up the topic and the real estate agent was able and willing to negotiate their commission or fee Client brought up the topic and the real estate agent was not able or willing to negotiate their commission or fee Client did know commissions and fees could be negotiated but did not bring up the topic 26 22 25 21 20 10 9 8 7 16 8 11 10 11 10 Client did not know commissions and fees could be negotiated 13 15 14 15 8 96 National Association of Realtors Vision 2016
Seller: Repeat and Referrals '15 67% 17% 7% 7% 1% 84% '14 68% 15% 8% 7% 2% 83% '13 65% 19% 8% 7% 1% 84% '12 66% 18% 7% 7% 2% 84% '11 69% 16% 8% 5% 3% 85% '10 63% 21% 7% 8% 1% 84% '09 59% 22% 10% 7% 2% 81% '08 65% 20% 8% 6% 1% 85% '07 62% 19% 9% 7% 1% 81% '06 63% 19% 8% 7% 2% 82% '05 65% 23% 6% 6% 88% Definitely Probably Probably Not Definitely Not Don t Know Definitely and Probably 97 National Association of Realtors Vision 2016
Method Used to Sell Home 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sold home using an agent or broker 79% 83% 82% 85% 84% 85% 84% 85% 88% 87% 88% 88% 88% 89% For sale by owner (FSBO) 13 14 14 13 12 12 13 11 9 10 9 9 9 8 Seller sold home without using a real estate agent - - - - - - - - - - - - - 7 Sold home to home-buying company 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Other 7 3 3 2 3 2 2 3 3 2 2 2 2 2 98 National Association of Realtors Vision 2016 *There is no data for 2002.
Incentives Offered to Attract Buyers 2011 2012 2013 2014 2015 None 59% 60% 64% 64% 63% Home warranty policies 23 22 19 19 21 Assistance with closing costs 20 17 16 18 16 Credit toward remodeling or repairs 7 7 7 6 7 Other incentives, such as a car, flat-screen TV, etc. 3 3 4 4 4 Assistance with condo association fees 1 * * 1 1 Other 4 5 4 3 3 99 National Association of Realtors Vision 2016