1.home sales 2.home price · 14 the numbers that drive canadian real estate | vision 2016 1. home...

Copyright ©2016 Keller Williams Realty, Inc.

1.Home Sales

2.Home Price

3.Months Supply of Inventory

4.Mortgage Rates

5.Affordability

The Numbers That Drive

U.S. Real Estate


1. Home Sales - Annual5.26 million homes sold in 2015, making it the best year for home sales since 2006.

3 The Numbers That Drive U.S. Real Estate | Vision 2016

‘89 ‘91 ‘93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09 ‘11 '13 '15

5.34.95.1

4.74.34.3

4.64.4

4.9

5.76.26.0

5.45.04.74.64.74.5

4.03.83.53.53.4

3.22.92.93.0

Total Annual Single-Family Home Sales (in Millions)

Source: NAR

5.3

2015 Sales


1. Home Sales - Monthly2015 started modestly but quickly accelerated to the best summer months in several years.


Jan '14 Apr Jul Oct Jan '15 Apr Jul Oct Dec '15

5.5

4.8

5.3

5.6

5.3

5.65.5

5.3

5.15.2

4.94.8

54.9

5.35.2

5.15.15

4.9

4.74.64.64.6

Seasonally Adjusted Annual Rate of Home Sales

Source: NAR


2. Home Price - AnnualThe median home price for 2015 was $222,400. This is 6.8% above 2014 and right on the edge of our sustainable range.


‘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)

$222$222

$179 $198

$95

$166

$250

$209

17%$271

$317

Source: NAR


‘89 ‘91 ‘93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09 ‘11 '13 '15

6.8%5.7%

11.5%

6.3%

-2.7%

0.6%

-12.5%-9.8%

-1.8%

1.3%

12.2%

8.3%7.5%7.0%6.3%4.3%3.8%

5.4%5.2%4.8%3.1%4.0%3.4%2.7%

5.5%2.9%

5.9%

Annual Median Home Price Appreciation

1989-2000 3.39%

2001-2006 8.9%

2007-2011 - 4.6%

2. Home Price - Annual AppreciationOn an annual basis home prices appreciated 6.8% for 2015, just outside our 4%-6% band we consider sustainable.

6 The Numbers That Drive U.S. Real Estate | Vision 2016 Source: NAR

2012-2015 7.6%


3. Months Supply of Inventory - Annual

Inventory tightened in 2015 due to increased demand from lower rates and continued sluggishness in new home construction.


‘99 ‘01 ‘03 ‘05 ‘07 ‘09 ‘11 '13 '15

Balanced = 6 months Annual Months Supply of Inventory

4.85.24.95.9

8.39.4

8.8

10.4

8.9

6.5

4.54.34.74.74.64.54.8

Buye

r’s M

ktSe

ller’s

Mkt

Bala

nced

Source: NAR


'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

4. Mortgage Rates - AnnualMortgage rates averaged 3.85% in 2015, down 0.32 percentage points from last year’s average.

8 The Numbers That Drive U.S. Real Estate | Vision 2016 Source: Freddie Mac

7.4

16.6

7.3 8.1 8.5

6.6

3.85


4. Mortgage Rates - MonthlyInterest rates remained below 4% for almost all of 2015, helping to drive demand in the best year for home sales since the bubble years.


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

3.9%

4.5%4.8%

3.35%

4.5%

4.2% 3.9%

Source: Freddie Mac


85.0%

15.0%

Principal and Interest Payment Everything Else

5. Affordability - Percentage of IncomeIn 2015 affordability was flat despite growing home prices due to persistently low mortgage rates.


84.8%

15.2%

78.4%

21.6%

Historically 20152014

Source: NAR


5. Affordability - Annual


'70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15

15151413131415

18

222322

201920202119192020202019

21232324

222223

2628

30

3636

31

26

2221202019

17161717

Affordability Historical Average

21.6

Source: NAR

In 2015 affordability was flat despite growing home prices due to persistently low mortgage rates.


5. Affordability in PerspectiveHouse Payment


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

1995 2015


The Numbers That Drive

Canadian Real Estate

1. Home Sales

2. Home Price

3. Inventory

4. Mortgage Rates

5. Affordability

Copyright ©2016 Keller Williams Realty, Inc.The Numbers That Drive Canadian Real Estate | Vision 201614

1. Home Sales - AnnualCanadian 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.

Source: CREA

'89 '92 '95 '98 '01 '04 '07 '10 '13 '15

Total Annual Single-Family Home Sales (in Thousands)

317261

523 506506

2015 Sales


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.

The Numbers That Drive Canadian Real Estate | Vision 201615

2. Home Price - Annual

4.4%

4.6%

3.9% growth

16.3% growth

1.4% growth

10.1% growth

5.5% growth

Source: CREA

‘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

443

408383

363362339

320305307

277249

227207

189172164158152155151151158153150149142147

130110

94807677727667


3. Inventory - Nationwide/AnnualInventory remained balanced throughout 2015, but did tighten year-over-year.

‘89 ‘91 ‘93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09 ‘11 '13 '15

Total Annual Single Family Home Sales 40% 60%

56%54%53%52%53%52%

59%

47%

62%61%64%64%66%

71%

63%56%56%

50%50%48%

39%42%42%44%

40%33%

47%

Buy

er’s

Mkt

Selle

r’s M

ktB

alan

ced60%

40%

Source: CREA


4. Mortgage Rates - AnnualInterest 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.

‘89 ‘91 ‘93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09 ‘11 '13 '15

4.7%4.9%5.2%5.2%5.4%5.6%5.6%

7.1%7.1%6.7%6.0%6.2%6.4%

7.0%7.4%

8.4%7.6%

6.9%7.1%7.9%

9.2%9.5%8.8%

9.5%

11.1%

13.4%

12.1%

Average Annual Mortgage Rate 5-Year Fixed (Percentage)

Source: Bank of Canada


Property TypeQ2

2014Q2

2015Q2/Q2

Change

Detached Bungalow 42.4% 43.3% 0.9%

Standard Two-Storey 47.9% 48.3% 0.4%

Standard Condo 27.4% 27.1% -0.3%

The Numbers That Drive Canadian Real Estate | Vision 201618

5. Affordability - AnnualAffordability moved very little, as the slight decline in interest rates nearly offset the effects of rising prices.

An increase (+) in cost (%) represents deteriorated affordability ( ) A decrease (-) in cost (%) represents improved affordability ( )

Avg. Since 1985

Q2 2015

Vs. Avg

39.2% 3.2%

43.7% 4.2%

27.0% 0.4%

Source: RBC


The U.S. Economy

1. Gross Domestic Product

2. State Forecast

3. Unemployment

4. Inflation

20 The U.S. Economy | Vision 2016

1. Gross Domestic Product - AnnualGDP grew by 2.4% in 2015. Growth between 2%-3% is likely to persist in the near term.

‘89 ‘91 ‘93 ‘95 ‘97 ‘99 ‘01 ‘03 ‘05 ‘07 ‘09 ‘11 '13 '15

2.4%2.4%2.2%2.3%

1.6%

2.5%

-2.8%

-0.3%

1.8%

2.7%3.3%

3.8%

2.8%

1.8%

1%

4.1%4.7%4.5%4.5%

3.8%

2.7%

4%

2.7%

3.6%

-0.1%

1.9%

3.7%

Real GDP Year-over-Year Change (Percentage)

Source: BEACopyright ©2016 Keller Williams Realty, Inc.


1. Gross Domestic Product - QuarterlyGrowth 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.

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

0.7%

2.0%

3.9%

0.6%

2.1%

4.3%4.6%

-0.9%

3.5%4.5%

1.8%2.7%

0.1%

2.5%1.6%

2.3%

4.6%

0.8%

2.9%

-1.5%

2.5%2.7%

3.9%

1.7%

3.9%

1.3%

-0.5%

-5.4%

-8.2%

-1.9%

2.0%

-2.7%

1.4%

2.7%3.1%

0.2%

Real GDP Growth Rate, Quarterly, Seasonally Adjusted (Percentage)

Source: BEACopyright ©2016 Keller Williams Realty, Inc.

Less than -4.5%

0.0% to -1.5%

0.0% to 1.5%

1.5% to 4.5%

22

2. State ForecastStates whose economies rely heavily on oil, mining, or manufacturing will face difficulty this year.

The U.S. Economy | Vision 2016 Source: Federal Reserve Bank of Philadelphia

December 2015 State Leading Indexed (Expected 6-Month Change in State Coincident Indexes)



3. Unemployment - AnnualIn 2015 unemployment averaged 5.3%, continuing the trend toward moving the economy back to full employment.

Source: BLS

'47 '51 '55 '59 '63 '67 '71 '75 '79 '83 '87 '91 '95 '99 '03 '07 '11 '15

Annual Unemployment 5.0%

9.7% 1982

5.3% 2015

3.9% 1947

2.9% 1953

9.6% 2010

4.6% 2006-2007



4. Inflation - AnnualInflation 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.

'89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15

4.5%

5.0%

1.4%1.0%

CPI (Includes Energy and Food) Core CPI (Excludes Energy and Food) Target = 2%

Source: BEA

1.75%

0.4%

2% 2%




2. Unemployment

3. Inflation

The Canadian Economy

Copyright ©2016 Keller Williams Realty, Inc.The Canadian Economy | Vision 2016


26

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.

‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 '13 '14 '15

1.2%

2.4%2.0%1.7%2.4%

3.4%

-3.0%

0.9%

2.3%2.8%3.0%3.1%

2.1%2.7%

1.4%

5.3%5.6%

3.9%

Real GDP Year-over-Year Change

Source: Statistics Canada

Copyright ©2016 Keller Williams Realty, Inc.The Canadian Economy | Vision 2016

2. Unemployment

27

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.

‘76 ‘80 ‘85 ‘90 ‘95 ‘00 ‘05 ‘10 '15

Long-term Average = 8.5% Unemployment

6.96.97.17.37.58.08.3

6.26.16.36.8

7.27.67.7

7.36.8

7.68.3

9.19.69.5

10.4

11.411.210.3

8.27.57.8

8.89.6

10.511.4

12.011.1

7.67.57.58.48.1

7.1


8.5%


'93 ‘95 '97 '99 '01 '03 ‘05 '07 '09 '11 '13 '15

The Canadian Economy | Vision 2016

3. Inflation

28

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.

1.3%

2.4%

1.4%

CPI (Includes Energy) Core CPI (Excludes Energy) Target = 2%


2%2%


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

Copyright ©2016 Keller Williams Realty, Inc.30 U.S. Events | Vision 2016

1. Sides Per AgentSides 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.

‘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

9.09.09.8

9.38.4

7.97.86.9

7.5

9.5

11.2

12.312.612.913.213.513.613.8

12.211.6

10.710.710.3

9.2

8.28.08.0

9.59.39.99.6

9.19.4

7.07.6

8.5

11.0

12.7

14.013.8

Source: NAR

10.3


2. Credit ConditionsIn 2015 banks continued to loosen mortgage lending standards with more than 10% of banks loosening standards on net in every quarter of 2015.

Source: Federal Reserve

Tightening

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

Tightening

Steady

Loosening


Oct '08 Jan '10 Jan '11 Jan '12 Jan '13 Jan '14 Jan '15 Dec '15

Foreclosures Short Sales

Oct '08 Jan '10 Jan '11 Jan '12 Jan '13 Jan '14 Jan '15 Dec '15

Monthly Historical

32 U.S. Events | Vision 2016

3. Distressed SalesThe percentage of distressed sales declined only slightly in 2015 as they remain only slightly elevated from normal levels.

14%

49%

34%

38%40%

35%

Source: NAR

2%

6%

24%

5%

5.4M

4.1M


4. Underwater HomesUnderwater 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.

Q2 '10 Q4 '10 Q2 '11 Q4 '11 Q2 '12 Q4 '12 Q2 '13 Q4 '13 Q2 '14 Q4 '14 Q2 '15 Q3 '15

8.1%8.7%10.2%10.8%10.3%10.7%

12.7%13.3%13%14.5%

19.7%

21.7%22%22.3%23.7%

25.2%24.4%24.8%25%25.4%24.7%25.1%

Underwater Homes (% of Mortgaged Homes)

Sources: Core Logic, Harvard Joint Center for Housing Studies

6%


5. Federal Reserve PolicyIn 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.


6. New Home ConstructionSingle 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.

Historical '07 '08 '09 '10 '11 '12 '13 '14 '15

715648618

535430471445

622

1,0461,082

New Homes (in Thousands)

Source: U.S. Census Bureau


7. Builder Capacity

Source: NAHB

NAHB Membership

240,000

220,000

200,000

180,000

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

25-year average = 182,400

50% decline in membership


8. Oil PricesWhile 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.

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

27.823.6

141

114.3

35

Source: Federal Reserve Bank of St. Louis


9. Student Loan DebtBetween 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.

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

$2.6T$1.9T$1.9T

$1.8T$1.8T$1.8T$1.9T$2.1T$2.1T$2.0T$1.9T

$1.9T$1.9T

$1.2T$1.1T$1.0T$0.9T$0.9T$0.8T$0.7T$0.6T$0.5T$0.4T$0.4T$0.3T$0.3T

Student Loans (in Trillions) All Other Consumer Debt (in Trillions)

Source: Federal Reserve Bank of New York


1. Global ConcernsGlobal Events


1. Global Concerns

40

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.

Global Events | Vision 2016


Luxury 1. The World’s Wealthy

2. Allocation of Financial Investments

3. Months Supply of Inventory

4. Days on Market

Copyright ©2016 Keller Williams Realty, Inc.42 Luxury | Vision 2016

1. The World’s Wealthy

YearHNWI* 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 $33.42006 2,920 248 9.5 $37.22007 3,019 281 10.1 $40.72008 2,460 231 8.6 $32.82009 2,866 251 10 $392010 3,104 282 10.9 $42.72011 3,068 280 11 $42

2012 3,436 298 12 $46.2

2013 4,006 320 13.7 $52.62014 4,351 331 14.6 $56.4

2005 - 201463%

increase43%

increase66%

increase69%

increase

Sources: Capgemini and RBC Wealth Management

*HNWI = High Net Worth Individuals


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%

Sources: Capgemini and RBC Wealth Management * No data for 2011.


3. Months Supply of Inventory M

onth

s Su

pply

Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Dec '15

39.4

10.9

22.9

6.3

12.9

3.9

22.8

15.3

9.8

18.0

11.4

7.9

19.2

11.3

7.86

Luxury Move-Up Starter Balanced (6 Months)

12.0

6.0

3.0

Source: BrokerMetrics

12.0

7.7

6.1

11.1

6.5

4.0


4. Days on Market

Dec '08 Dec '09 Dec '10 Dec '11 Dec '12 Dec '13 Dec '14 Dec '15

Luxury Move-Up Starter

164

121126

109

90 89 92

112

Source: BrokerMetrics

115

71

88

123

82

93

119

79

85

144

98

110 109

81

93

143


Commercial 1. Job Growth

2. Vacancy Rates

3. Loan Delinquency Rates

4. Commercial Property Price Index


47

Commercial | Vision 2016

1. Job GrowthBusinesses 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.

'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

3-Week Moving Average of Net Jobs Added, in Thousands 0 Jobs Added

237

301

172

-167-290

-780

314

0

Source: REIS

289284

0


'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

2. Vacancy RatesVacancy rates continue to trend downward with the exception of multifamily, which remains historically low but has begun to trend upward.

3.2%

Source: REIS

16.4%

10%

4%

17%

11.4%

10.6%

8%

17%

11%

7.2%

6.9%

9.1%7.9%7.1%

3.8%

12.6%

9.5%7.5%

5.7%

Copyright ©2016 Keller Williams Realty, Inc.49 Commercial | Vision 2016

3. Loan Delinquency RatesThe commercial real estate loan delinquency rate continued to decline, reaching 1.14% and indicating continued strengthening of the commercial market.

‘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

12.06%

1.05%

8.76%

1.78%

Source: Board of Governors of the Federal Reserve System

4.01%

1.14%

Copyright ©2016 Keller Williams Realty, Inc.50 Commercial | Vision 2016

4. Commercial Property Price IndexThe 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.

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Commercial Property Price Index (% change from 2000)

110%

86%

46%

13%

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

Copyright ©2016 Keller Williams Realty, Inc.52 Industry | Vision 2016

1. TRID - New Loan FormsThe 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.


2. Lending Standards Are Loosening1. 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.


3. CFPB Warns Against MSAsMSAs 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.


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.

4. Do Not Call Regulations


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.

5. Worker Classification


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

Copyright ©2016 Keller Williams Realty, Inc.58 Tech Trends | Vision 2016

How Technology Markets Evolve

PivotStability

Havoc

Stability Pivot

Innovation disrupts the status quo

Period of acquisitions, investments, and experimentations

Market becomes saturated. Innovation stalls.

Source: Forrester


Current State of Technology

Pivot

Havoc

Stability

AGENT SHOWINGS

TRANSACTIONS

SEARCH

87% of buyers used an agent

in 2015

• Drone photography

• Live streaming tours

• 3D showings

• On-demand showing services

• Virtual reality

• NAR & zipLogix partnership

• DotLoop acquisition

• 8/10 people searching real estate online visit Zillow Group or Realtor.com

• Upstream?

Stability


Real Estate Tech Funding

'10 '11 '12 '13 '14 '15

Deals

Funding

Source: CB Insights

$238M $223M $288M$438M

$1.1B

$1.5B

2837

66

101

151

182


Real Estate Tech FundingSearch

DIY

Property Management

Financial Tools

Big Data

Brokers

Agent Tools

Discounter

Coworking

Commercial

Consumer Tools

Auction 0.1%

0.5%

1.7%

1.8%

3%

3.4%

4.6%

5.9%

6.1%

7%

7.8%

58.3%


The Sharing EconomySharing Economy - Peer-to-peer based sharing of access to goods and services coordinated through community-based online services.

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

Car Ownership > Leasing • Midsize sedan after 6 years.

Leasing Buying New Buying Used

Final Cost $23,476 $18,417 $15,570

Source: Edmunds and AAA


The Sharing Economy

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

Homeownership > Renting

Source: Federal Reserve Survey of Consumer Finances


Evolution of Travel Search

Travel Agents Search Portals Meta Search Portal


Evolution of Real Estate Search

Agent Websites Search Portals Meta Search Portal

??

Copyright ©2016 Keller Williams Realty, Inc.66

Real Estate Online Advertising

Tech Trends | Vision 2016

2007 2015

$6.1B

$3.6B

$8.9B

$2.6B

Online Ad Spending Online Lead RevenueSource: NAR & Borrell Associates

ROI 38.5% ROI -32%


Consumer Search Behavior1. 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.



Traditional Model



Upstream Model


MLS

Broker Public Portal

Zillow

Realtor.com

Homes.com

Trulia

KWLS

300+ others


Broker Public Portal1. 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.



National Association of

Realtors

75 National Association of Realtors | Vision 2016

First-time Home Buyers

'93 '95 '97 '99 '01 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

32%33%

38%39%37%

50%47%

41%39%

36%

40%40%40%42%42%42%42%41%

First-time Home Buyers

40%

40%



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



Tenure in Previous Home2008 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

13% buy again in less than 4 years. Copyright ©2016 Keller Williams Realty, Inc.


Buyer’s Expected TenureBuyers 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



First Step in Buying Process2013 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 *



Information Sources Buyers Use2004 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


82

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 -- -- -- -- -- -- -- -- -- * *

*There is no data for 2002.National Association of Realtors | Vision 2016Copyright ©2016 Keller Williams Realty, Inc.


Value of Website FeaturesDetailed 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

0 25 50 75 100

Very Useful Somewhat Useful Not Useful Did Not Use/NA



Method of Home PurchaseJust 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.

'01 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

87%88%88%89%89%83%77%81%79%77%77%77%75%69%

Agent or Broker Builder or Builder's Agent Previous Owner Other

*There is no data for 2002.Copyright ©2016 Keller Williams Realty, Inc.


Buyer Representation AgreementBuyer 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



What Buyers Want Most from Their Agent

Help finding the right home

Help negotiating terms

Help with price negotiations

Price of comparable home sales

Help with paperwork

Tell me how much I can afford

Help with financing

Help teach buyer about neighborhood and area

Help find renters for buyers' property

Other 1%

0%

1%

1%

4%

6%

7%

11%

12%

53%



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



Interviews by BuyerAgents 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



Most Important Factors for Buyers

Reputation

Honesty and Integrity

Agent Is Family or Friend

Knowledge of Neighborhood

Caring and Good Listener

Timely Responses

100% Accessible (tech)

Association with Company

Designations

Other 1%

1%

3%

5%

7%

8%

13%

16%

21%

23%

An agent’s honesty, trustworthiness, and reputation matter the most to buyers.



Home as a Financial Investment

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

It is evident that real estate is considered as a good financial investment, and better than stocks.



Buyer: Repeat and Referrals'15

'14

'13

'12

'11

'10

'09

'08

'07

'06

'05 2%

2%

1%

1%

2%

2%

2%

2%

2%

1%

2%

7%

7%

5%

4%

5%

5%

4%

4%

4%

5%

5%

6%

6%

7%

6%

6%

6%

5%

5%

6%

5%

5%

19%

19%

19%

18%

22%

22%

17%

15%

15%

15%

16%

66%

66%

68%

70%

66%

65%

72%

74%

73%

73%

72%

Definitely Probably Probably Not Definitely Not Don’t Know

88%

88%

88%

89%

89%

87%

88%

88%

87%

85%

85%

Definitely and Probably


92

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

National Association of Realtors | Vision 2016Copyright ©2016 Keller Williams Realty, Inc.

93

Seller InterviewsNumber 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


94

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


95

Most Important Factor for Sellers2005 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


96

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

26 22 25 21 20

Client brought up the topic and the real estate agent was not able or willing to negotiate their commission or fee

10 9 8 7 16

Client did know commissions and fees could be negotiated but did not bring up the topic

8 11 10 11 10

Client did not know commissions and fees could be negotiated 13 15 14 15 8


'15

'14

'13

'12

'11

'10

'09

'08

'07

'06

'05

2%

1%

1%

2%

1%

3%

2%

1%

2%

1%

6%

7%

7%

6%

7%

8%

5%

7%

7%

7%

7%

6%

8%

9%

8%

10%

7%

8%

7%

8%

8%

7%

23%

19%

19%

20%

22%

21%

16%

18%

19%

15%

17%

65%

63%

62%

65%

59%

63%

69%

66%

65%

68%

67%

Definitely Probably Probably Not Definitely Not Don’t Know

97

Seller: Repeat and Referrals84%

83%

84%

84%

85%

84%

81%

85%

81%

82%

88%

Definitely and Probably


98

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

*There is no data for 2002.National Association of Realtors | Vision 2016Copyright ©2016 Keller Williams Realty, Inc.

99

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


1.home sales 2.home price · 14 the numbers that drive canadian real estate | vision 2016 1. home...

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