2009 economic forecast by hexter fair
DESCRIPTION
2009 Economic Forecast Presentation by David Fair and Hexter Fair Title. Agents attended the seminar from Southlake Texas, Flower Mound Texas,Highland Village Texas,Frisco Texas,Coppell Texas and other surrounding citiesTRANSCRIPT
DFW Real EstateDFW Real Estate“State of the Market”“State of the Market”
David Fair & Britt FairDavid Fair & Britt FairDavid Fair & Britt FairDavid Fair & Britt FairHexterHexter--Fair Title CompanyFair Title Company
January 28, 2009January 28, 2009
Roadmap of Today’s DiscussionRoadmap of Today’s Discussionp yp y
Current state of the DFW housing marketThe big difference between the DFW economy and housing market and those of y gthe rest of the USThe “ace in the hole” for housingThe ace in the hole for housingConclusions
“State of the Market” “State of the Market” The most important word is “certainty”
The current economic uncertainty keeps people/businessesThe current economic uncertainty keeps people/businesses from making big decisions, such as purchasing a home
Last Tuesday’s inauguration is first step to “certainty”O i i i i h kOngoing government intervention is another key to repairing “certainty”
Bailouts of Wall Street firms (including Bank of America this ( gmonth) to help keep liquidity in the marketInfusion in other areas (automakers, secondary mortgage market, etc.) trying to stimulate economy and maintain jobs, ) y g y jForeclosure relief plan to help consumers is likely in next tranche of TARP money
Today’s MarketToday’s MarketNTREIS S lNTREIS S l YTD D ‘08YTD D ‘08NTREIS Sales NTREIS Sales –– YTD Dec‘08YTD Dec‘08
% Change % Change Average % Change# of
Sales
% Change vs. Prior
YearAverage
Sale Price
% Change vs. Prior
Year
Average Days on Market
% Change vs. Prior
YearS. Denton County 3,521 -21% $239,322 -4% 70 19%N Denton County 2 610 12% $151 098 5% 75 3%N. Denton County 2,610 -12% $151,098 -5% 75 -3%Frisco 2,790 -10% $295,517 1% 89 16%Plano 3,429 -16% $274,276 -1% 68 24%The Colony 523 -13% $149,272 -2% 69 19%Carrollton/F.Branch 1,647 -11% $191,783 6% 61 11%Coppell 530 -20% $312,513 7% 54 13%Colleyville 373 -19% $515,652 -3% 73 18%Grapevine 486 -16% $247 593 3% 51 13%Grapevine 486 -16% $247,593 3% 51 13%Keller 750 -19% $339,281 5% 81 27%Southlake 485 -19% $634,944 3% 78 10%Trophy Club / Westlake 164 -15% $472,345 3% 85 25%
Today’s Market, cont’dToday’s Market, cont’dDFW S l YTD D ’08 ( 1)DFW S l YTD D ’08 ( 1)DFW Sales YTD Dec’08 (page 1)DFW Sales YTD Dec’08 (page 1)
S l P i R# sales YTD
(12 2008)% change vs.
iSale Price Range (12 mos 2008) prior year$1 to $19,999 757 45%
$20,000 to $29,999 1225 40%$30,000 to $39,999 1669 32%$30,000 to $39,999 669 3 %$40,000 to $49,999 1998 12%$50,000 to $59,999 2042 0%$60,000 to $69,999 2429 -2%$ $$70,000 to $79,999 2,937 -7%$80,000 to $89,999 3,376 -14%$90,000 to $99,999 3,493 -15%
$100 000 to $109 999 3 350 -21%$100,000 to $109,999 3,350 -21%$110,000 to $119,999 4,051 -20%$120,000 to $129,999 4,488 -18%$130,000 to $139,999 4,125 -18%$140,000 to $149,999 3,661 -17%
Today’s Market, cont’dToday’s Market, cont’dDFW S l YTD D ’08 ( 2)DFW S l YTD D ’08 ( 2)DFW Sales YTD Dec’08 (page 2)DFW Sales YTD Dec’08 (page 2)
Sale Price Range# sales YTD
(12 mos 2008)% change vs.
prior yearg ( ) p y$150,000 to $159,999 3,354 -20%$160,000 to $169,999 3,109 -21%$170,000 to $179,999 2,775 -19%$180 000 to $189 999 2 429 -15%$180,000 to $189,999 2,429 -15%$190,000 to $199,999 1,975 -17%$200,000 to $249,999 7,323 -15%$250,000 to $299,999 4,777 -13%$300 000 t $399 999 4 921 18%$300,000 to $399,999 4,921 -18%$400,000 to $499,999 2,194 -17%$500,000 to $599,999 1,003 -18%$600,000 to $699,999 661 -17%$700,000 to $799,999 452 -18%$800,000 to $899,999 258 -27%$900,000 to $999,999 185 -20%$1 000 000 and more 822 -11%$1,000,000 and more 822 11%
Total 75,839 -14%
NTREIS Dollar Volume Since 2004NTREIS Dollar Volume Since 2004S o a o u e S ce 00S o a o u e S ce 00
Interest Rates Near Historic LowsInterest Rates Near Historic Lowste est ates ea sto c o ste est ates ea sto c o s
Conforming rates have fallen to 5% and belowConforming rates have fallen to 5% and below, down from over 6% a year agoDecline in conforming rates driven by US Treasury’s
h f $50 billi i 4Q’08 d F d illpurchase of $50 billion in 4Q’08, and Fed will purchase $500 billion in first half of 2009
Many experts project these secondary market purchases y p p j y pby the US government will drive rates to 4.5% and belowRefi boom is currently starting, which then works its way through economy, but not as many people or homes will g y y p pqualify as in last refi boom
Jumbo rates have not fallen as fast as those of conforming loansconforming loans
Sep’07 Spike in “Jumbo Spread”Sep’07 Spike in “Jumbo Spread”
Source: Freddie Mac & HSH Associates
Spike in “Jumbo Spread”Spike in “Jumbo Spread”Sp e Ju bo Sp eadSp e Ju bo Sp ead
Spread between conforming and jumbo ratesSpread between conforming and jumbo rates continues to be much larger than normal
158 b d 1/26/09 b k t158 b.p. spread on 1/26/09, per bankrate.com (7.00% versus 5.42% conforming)
Increased spread likel slo ing do n someIncreased spread likely slowing down some qualified homebuyers in higher price rangesThe spread will eventually return to a more normal range with the return to “certainty”
Strong DFW economy keeps real Strong DFW economy keeps real g y pg y pestate values upestate values up
Strong job creationContinuing corporate and individual g prelocationsOil & gas industry especially in the BarnettOil & gas industry, especially in the Barnett Shale!
Barnett Shale created 83k jobs in 2007 andBarnett Shale created 83k jobs in 2007 and generated $8.2 billion into the local economy
Employment Changes Employment Changes -- 1/08 to 12/08, pg.11/08 to 12/08, pg.1p y gp y g / / , pg/ / , pgState Dec. 2007
Prelim Dec. 2008
Year/Year Change
Alabama 2,018,000 1,976,300 ‐41,700Arizona 2,659,300 2,543,900 ‐115,400Arkansas 1,206,400 1,187,700 ‐18,700California 15,171,000 14,913,600 ‐257,400Connecticut 1 706 500 1 677 200 29 300Connecticut 1,706,500 1,677,200 ‐29,300Florida 8,039,400 7,784,200 ‐255,200Georgia 4,159,700 4,041,300 ‐118,400Hawaii 626,000 612,600 ‐13,400Hawaii 626,000 612,600 13,400Idaho 657,300 628,800 ‐28,500Illinois 5,986,500 5,885,800 ‐100,700Indiana 2,994,900 2,883,000 ‐111,900Kentucky 1,880,000 1,843,200 ‐36,800Maine 619,800 608,100 ‐11,700Michigan 4,227,600 4,054,600 ‐173,000
Source: US Bureau of Labor StatisticsMinnesota 2,776,300 2,720,400 ‐55,900
Employment Changes Employment Changes -- 1/08 to 12/08, pg.21/08 to 12/08, pg.2p y gp y g / / , pg/ / , pgState Dec. 2007
Prelim Dec. 2008
Year/Year Change
Mississippi 1,154,600 1,128,400 ‐26,200N d 1 293 300 1 261 100 32 200Nevada 1,293,300 1,261,100 ‐32,200New York 8,781,100 8,661,200 ‐119,900North Carolina 4,187,700 4,067,500 ‐120,200Ohio 5 418 700 5 329 700 89 000Ohio 5,418,700 5,329,700 ‐89,000Oregon 1,740,600 1,695,200 ‐45,400Pennsylvania 5,808,300 5,732,100 ‐76,200Rhode Island 490,800 468,800 ‐22,000Rhode Island 490,800 468,800 22,000South Carolina 1,958,100 1,903,900 ‐54,200Tennessee 2,806,800 2,742,700 ‐64,100Texas 10,475,100 10,628,800 153,700Utah 1,264,800 1,237,700 ‐27,100Vermont 308,500 302,700 ‐5,800Washington 2,958,300 2,920,200 ‐38,100
Source: US Bureau of Labor StatisticsWisconsin 2,882,100 2,819,500 ‐62,600
Job creation 12/07 to 11/08Job creation 12/07 to 11/08/ // /US Metro AreasUS Metro Areas
12-Month Job Rank Metro Area Growth
1 Houston-Sugarland-Baytown 54,300 2 Dallas-Fort Worth-Arlington 46,900 3 Washington Arlington Alexandria 31 1003 Washington-Arlington-Alexandria 31,100 4 Seattle-Tacoma-Bellevue 19,900
12-MonthRank Metro Area
12 Month Growth Rate
1 Houston-Sugarland-Baytown 2.10%2 San Antonio 2.00%3 Austin-Round Rock 1.60%4 Dallas-Fort Worth-Arlington 1.60%5 Virginia Beach-Norfolk-Newport News 1.50%
Source: US Bureau of Labor Statistics
Positive signs in DFW housingPositive signs in DFW housingg gg g
5.7 months’ inventory on home resale listingsSix months is generally considered equilibriumg y q
Continued population growth offers supportDFW has only 3 1 months’ inventory of newDFW has only 3.1 months inventory of new home (finished and vacant) inventory, per MetrostudyMetrostudy
Builders have shown significant restraint in keeping housing starts lowkeeping housing starts low
PMI U S Market Risk Index:PMI U S Market Risk Index:PMI U.S. Market Risk Index:PMI U.S. Market Risk Index:DFW steady despite US uncertaintyDFW steady despite US uncertainty
On 1/14/09, The PMI Group released a study which measures the riskiness of the 50 largest MSAs in the US
Risk measured as the % chance that home prices will beRisk measured as the % chance that home prices will be lower in 2 years
The 5 markets with the highest risk:g1. Riverside, CA: 99.9% chance of price decline2. Miami, FL : 99.9% chance of price decline3. Fort Lauderdale, FL: 99.8% chance of price decline4. Los Angeles, CA: 99.8% chance of price decline5 W t P l B h FL 99 6% h f i d li5. West Palm Beach, FL: 99.6% chance of price decline
PMI U S Market Risk Index continued:PMI U S Market Risk Index continued:PMI U.S. Market Risk Index, continued:PMI U.S. Market Risk Index, continued:DFW steady despite US uncertaintyDFW steady despite US uncertainty
The 5 MSAs with the lowest risk of a price decline in the next two years:
46.San Antonio : 1% chance 47 Pittsburgh PA: <1% chance47.Pittsburgh, PA: <1% chance48.Houston-Sugar Land-Baytown: <1% chance49 F t W th A li t 1% h49.Fort Worth-Arlington: <1% chance50.Dallas-Plano-Irving: <1% chance
S&P CaseS&P Case Shiller Index:Shiller Index:S&P CaseS&P Case--Shiller Index:Shiller Index:DFW flat relative to national price declinesDFW flat relative to national price declines
Monthly analysis of price changes in 20 major US marketsNovember’s price index released 1/27/08
Showed that NATIONAL prices had declined by a record 18.2% year over yearHowever, Dallas area had just a 3.3% price decline over that same period, which was the best of the 20 markets measured
Housing’s “Ace in the Hole”Housing’s “Ace in the Hole”
Inflation!!!Typically considered to be something badyp y g
In fact, the Fed’s mandate is "to promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates"moderate long-term interest rates
However, today’s economic environment is anything but typicalanything but typical
We are currently experiencing “DEFLATION”, which governments hate even more than inflation
Housing’s “Ace in the Hole”, cont’dHousing’s “Ace in the Hole”, cont’dH i fl i ill l i l lHow inflation will ultimately loom over us
US leaders (Congress, President, Treasury Secretary, the Federal Reserve, etc.) doing everything possible to keep economy from collapsingcollapsing
Original $700 billion bailout$350 billion for equity investments in banksRemaining $350 billion to make other investments
Tax rebate(s) of 2008Tax rebate(s) of 2008Lowered Fed Funds rate to 0.25%Obama’s $850 billion “second bailout” announced in mid-January
Fed’s balance sheet has climbed from $850 billion to $2.25 trillion in two months, with promises to spend $1 trillion moreThe same thing is happening in many nations across the globeGovernments are printing money and throwing it at the problem!!!
Housing’s “Ace in the Hole”, cont’dHousing’s “Ace in the Hole”, cont’d
How inflation will help real estateThe value of commodities (gold, real estate, oil, t ) i ith t i i d l ietc.) rises without any increase in underlying
demandBecause real estate is typically purchased with theBecause real estate is typically purchased with the leverage of a mortgage, this inflation will provide a higher percentage return than other commodities
Such a rise will actually “bail out” manySuch a rise will actually “bail out” many homeowners who are “under water” on their mortgages, preventing future foreclosuresg g , p g
Housing’s “Ace in the Hole”, cont’dHousing’s “Ace in the Hole”, cont’d
Why governments might err toward inflationIndividuals on the brink of foreclosure get “bailed
t” ith t h i t d tiout” without anyone having to go on record voting for itBanks get bailed out because their distressedBanks get bailed out because their distressed assets gain in value before they have to be marked to marketAdditional benefit of minimizing impact of defined future payments (automaker pensions, Social Security national debt payments etc )Security, national debt payments, etc.)
Housing Market Crystal BallHousing Market Crystal BallHousing Market Crystal BallHousing Market Crystal BallJanuary always is the slowest month for residential sales
Seasonal uptick begins thereafterConstruction to remain sluggish until summer
Building rebound date dependent on each neighborhood’sBuilding rebound date dependent on each neighborhood s supply/demand
Inflationary pressures toward the end of 2009 will make real t t i t bl k t lik DFW ll t i t testate in stable markets like DFW an excellent investment
As “certainty” (from federal bailouts, interest rates, job security, inauguration, etc.) returns over the coming months, DFW residential market is poised to rebound in the spring of 2009
National market will not rebound until 2010