To the Eastside Economic Forecast HOUSING MARKET OUTLOOK Trusted Analysis for Executive Decisions Presented by: John Burns, CEO 949-870-1210 jburns@realestateconsulting.com 1
Today s Mission is the Same as our Company Mission: To help executives make the most informed housing industry investment decisions Market Trends Demographic Shifts Innovating Ideas New Insights in to Your Business 2
CARD ON YOUR TABLE WITH CODE FOR DOWNLOAD OF 300 SLIDES. 3
We work all over the country. Ken Perlman and Annie Radecki lead our Northwest team. 4
Our Seattle-area clients. 5
Short-Term View: Goldilocks housing market not too Hot, not too Cold Seattle Hot 6
Medium-Term View: Low Risk 74% Low Risk 24% Medium Risk 2% High Risk Seattle Low-Medium Risk A measurement of today s demand, supply and affordability in comparison to historical levels in each market. 7
Long-Term View: Overpriced National market is 13% overpriced if you believe rates will return to 6% some day Seattle 20% 8
Most markets are still in the expansion phase. Seattle has entered the Exuberance phase. Bay Area Orange County Austin Denver Portland Manhattan Nashville Seattle Los Angeles Dallas San Diego Boston urban Jacksonville Miami (SF) Kansas City Salt Lake City Wash. DC Charlotte Minneapolis San Antonio Raleigh Phoenix Orlando Philadelphia suburbs Tampa Chicago Las Vegas Atlanta Riverside-SBern. Mainly distressed capital investment Declining to flattish pricing/volumes John Burns Real Estate Consulting, LLC 2016 Rising sales and prices Good affordability Low construction Capital investment picking up Surging prices and volumes Affordability getting worse and/or construction getting high Consumer overly exuberant Capital should become more cautious Capital still being deployed Sales volumes declining Capital questioning what to do Houston Sales volumes and pricing declining Invested capital losing money New capital raising for new opportunities 9
The President of the United States appoints the heads of mortgage policy 10
Tight documentation and unwillingness to dip into the bottom 30% of credit scores will hold back homeownership Source: John Burns Real Estate Consulting presentation of American Enterprise Institute data and calculations. 11
Seattle Metro Area Multifamily Construction hit a 28 year high last year! We expect a 50% decline by 2019. 12
Seattle apartment occupancy remains high, at 96%. Rent growth has outpaced income growth. 13
Seattle single-family construction has recently ramped up to 7,100 homes. 14
We expect a slight increase and a level SF construction volume in the low 7,000s per year in Seattle. Actively selling communities have declined 6% since last year. 15
Seattle single-family affordability remains reasonable But only thanks to low mortgage rates. 16
Labor is holding construction back Problems getting worse, not better 17
Lenders holding construction back Construction lenders have 56% less outstanding than in 2008 18
What do these people have in common? 31 years old Working Father 16 years old High School Junior BOOMER 70 years old Retired Grandfather 53 years old Junior s Father 19
321 million Americans identify well with people their own age 2015 US POPULATION BY PLACE OF BIRTH Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau 2014 National Projections John Burns Real Estate Consulting, LLC 2016 20
Economic growth has declined for each generation AVERAGE REAL GDP GROWTH PER PERSON DURING PRIME WORKING YEARS (25-54) 2.4% 2.1% 1.9% 1.5% 1.1% 1.0% 1930s Savers 1940s Achievers 1950s Innovators 1960s Equalers* 1970s Balancers* 1980s Sharers* * Prime working years not yet complete Source: John Burns Real Estate Consulting, LLC calculations of Bureau of Economic Analysis data John Burns Real Estate Consulting, LLC 2016 21
Those born in the 1990s and later will drive most future household formations NET CHANGE IN HOUSEHOLDS BY DECADE BORN, 2016 2025 (MILLIONS) 15 25.8 million gains 14.0 10 5 5.9 4.3 0-5 Pre 1930s -3.1 1930s Savers -4.9 13.3 million losses 1940s 1950s Achievers Innovators -3.8 1960s Equalers -1.4-0.1 1.6 1970s Balancers 1980s Sharers 1990s Connectors 2000s Globals Sources: John Burns Real Estate Consulting, LLC John Burns Real Estate Consulting, LLC 2016 22
Households headed by people 65+ will increase by 10.2 million this decade HOUSEHOLD FORMATION BY AGE GROUP, 2016 2025 5.4 M 1940s Achievers Age 67-76 Aged 65+ 1950s Innovators Age 57-66 Under 45 4.3 M 2.5 M Aged 45 64 2000s Globals 0.8 M 1970s Balancers 1960s Equalers 0.5 M 0 M 1990s Connectors 1980s Sharers -0.8 M -0.2 M 1950s Innovators 1940s Achievers 1930s Savers Source: John Burns Real Estate Consulting, LLC John Burns Real Estate Consulting, LLC 2016 23
1950s 1930s INNOVATORS 40 Million Aged 57-66 24
The 1950s Innovators will drive an explosion of 18 million more people aged 65+ over 65+ POPULATION BY DECADE OF BIRTH Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau Population Estimates and 2014 National Projections John Burns Real Estate Consulting, LLC 2016 25
The retirement surge will force the labor pool to grow much more slowly over the next decade GROWTH OF US RESIDENT POPULATION AGED 20 64 +21.0 M +16.6 M +14.6 M FORECAST +6.3 M 1986-1995 1996-2005 2006-2015 2016-2025 Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau Population Estimates and 2014 National Projections John Burns Real Estate Consulting, LLC 2016 26
Moveup and empty nester households will not grow in size this decade HOUSEHOLD FORMATION BY AGE GROUP, 2016 2025 1960s Equalers Age 47-56 1970s Balancers Age 37-46 5.4 M 4.3 M 2.5 M Aged 45 64 2000s Globals 0.8 M 1970s Balancers 1960s Equalers 0.5 M 0 M 1990s Connectors 1980s Sharers -0.8 M -0.2 M 1950s Innovators 1940s Achievers 1930s Savers Source: John Burns Real Estate Consulting, LLC John Burns Real Estate Consulting, LLC 2016 27
1960s EQUALERS 43 Million Aged 47-56 28
Women receive 58% of college degrees PERCENT OF ALL BACHELOR S AND MASTER S DEGREES CONFERRED Source: John Burns Real Estate Consulting, LLC calculations of National Center for Education Statistics data John Burns Real Estate Consulting, LLC 2016 29
SURBAN 30
1970s 1930s BALANCERS 41 Million Aged 37-46 31
Fewer women worked after 9/11; Fewer men worked too FEMALE LABOR FORCE PARTICIPATION RATE, AGES 20 64 37% Source: John Burns Real Estate Consulting, LLC calculations of Bureau of Labor Statistics data; color-coded based on the year a generation turns 20 32
The Balancers led a reversal, with more stay-at-home moms SHARE OF MOMS WHO STAY AT HOME FULL TIME 44% 29% 23% Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau, Current Population Survey, Annual Social and Economic Supplements via IPUMS-CPS; colors based on a 30-year-old mother John Burns Real Estate Consulting, LLC 2016 33
1980s SHARERS 44 Million Aged 27-36 34
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Less than 1/2 of 1980s Sharers are married / with a partner at their 10-year high school reunion 85% 84% 73% 64% 60% 49% 1930s Savers 1940s Achievers 1950s Innovators 1960s Equalers 1970s Balancers 1980s Sharers Source: US Census Bureau Decennial Census (1950-2000), American Community Survey (2010-2013) via IPUMS-USA, forecast by JBREC John Burns Real Estate Consulting, LLC 2016 37
We forecast 5.2 million more homeowners by 2025 HOMEOWNER GROWTH BY GENERATION (MILLIONS), 2016 2025-2.2 Pre 1930s -10.6 M -4.1-3.2 1930s Savers 1940s Achievers -1.1 1960s Equalers 1970s Balancers 1950s Innovators 0.6 2.8 1980s Sharers 5.4 15.9 M 1990s Connectors 6.2 2000 Globals 0.9 Source: John Burns Real Estate Consulting, LLC John Burns Real Estate Consulting, LLC 2016 38
1990s 1930s CONNECTORS 44 Million Aged 17-26 39
12.5 million more households will boost the economy HOUSEHOLD GROWTH BY DECADE (MILLIONS) FORECAST +14.7 +14.6 +14.0 +12.0 +12.5 +6.7 Source: John Burns Real Estate Consulting, LLC based on US Census Bureau data. John Burns Real Estate Consulting, LLC 2016 40
Five opportunities over the next decade, much of which will be surban living: +8 million more busy working women +8 million more increasingly affluent immigrants +18 million increasingly affluent retirees +26 million (net 12.5) newly formed households +16 million (net 5.2) new homeowners 41
We are here to help you make great decisions Ken Perlman Annie Radecki Presented by: John Burns, CEO 949-870-1210 jburns@realestateconsulting.com 42