an economic and real estate forecast for ’12 ’13 · an economic and real estate forecast for...
TRANSCRIPT
Déjà Vu All Over Again
An Economic and Real Estate Forecast for ’12-’13 Ted C. Jones PhD -- Chief Economist -- Stewart Title
http://blog.stewart.com/Ted
Mega Themes
• Time to Over Weight in Real Estate
• Residential Renting vs. Owning
• Fiscal Cliff
• Massive Uncertainty from Washington, DC…… and the Election
Capital Gains Rate in 2013? Was 15 Percent No Vote Says 20 Percent 3.8 Percent Obamacare Tax SO Minimum 23.8 Percent Obama “Likes” 35 Percent
128
130
132
134
136
138
'07 '08 '09 '10 '11 '12
U.S. Job Numbers
Jobs (Millions) Seasonally Adjusted
4.268 Million Fewer vs. Jan 2008 171,000 Gained in October 2012
U.S. Unemployment Rate
0
90 92 94 96 98 '00 '02 '04 '06 '08 '10 '12
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Recession
Percent Seasonally-Adjusted
Joke
Not in the Work Force – Seasonally Adjusted
0
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
65
70
75
80
85
90
Recession Millions of People
People Are Considered
Not in the Work Force If They Have
Not Looked for a Job In the Past Four weeks
8.97 Million People Increase Since January 1 2009
http://taxfoundation.org/files/2012_tax_foundation_index_bp62.pdf
Colorado – 16th Best Business Tax Environment
Seasonally-Adjusted Data
September Data Comparison
Percent Percent Number
Change Change Jobs
Prior Since Sept 2012
State 12 Months Peak* (Thousands)
Alabama 0.68% -6.61% 1,878.3
Alaska 0.76% 2.19% 330.6
Arizona 2.20% -7.86% 2,469.5
Arkansas 0.94% -3.68% 1,165.5
California 1.86% -5.62% 14,347.9
Colorado 1.65% -2.59% 2,300.2
Connecticut 0.12% -5.06% 1,626.1
Delaware 0.05% -5.90% 416.2
Dist of Columbia 0.90% 4.13% 739.6
Florida 0.87% -8.93% 7,349.8
Georgia 1.45% -5.18% 3,942.1
* Peak Employment Level From Jan 2006 - December 2009
Job Growth Rates
Seasonally-Adjusted Data
September Data Comparison
Percent Percent Number
Change Change Jobs
Prior Since Sept 2012
State 12 Months Peak* (Thousands)
Hawaii 2.07% -3.57% 605.7
Idaho 1.83% -5.96% 618.8
Illinois 0.93% -4.73% 5,711.5
Indiana 2.30% -3.08% 2,899.6
Iowa 0.78% -2.53% 1,489.6
Kansas 0.76% -3.48% 1,348.1
Kentucky 2.62% -1.67% 1,840.7
Louisiana 1.22% -0.23% 1,938.5
Maine 0.00% -3.98% 595.8
Maryland 1.00% -1.42% 2,581.3
Massachusetts 1.39% -1.65% 3,249.6
* Peak Employment Level From Jan 2006 - December 2009
Job Growth Rates
Seasonally-Adjusted Data
September Data Comparison
Percent Percent Number
Change Change Jobs
Prior Since Sept 2012
State 12 Months Peak* (Thousands)
Michigan 0.98% -8.85% 3,982.7
Minnesota 1.09% -2.38% 2,713.5
Mississippi -0.64% -6.45% 1,085.4
Missouri 0.43% -5.30% 2,657.2
Montana 1.85% -3.23% 434.2
Nebraska 1.34% -0.90% 958.3
Nevada 0.53% -12.41% 1,136.1
New Hampshire 0.29% -3.92% 625.7
New Jersey 1.14% -4.62% 3,905.4
New Mexico -1.32% -6.47% 794.6
New York 1.44% -0.02% 8,825.0
* Peak Employment Level From Jan 2006 - December 2009
Job Growth Rates
Seasonally-Adjusted Data
September Data Comparison
Percent Percent Number
Change Change Jobs
Prior Since Sept 2012
State 12 Months Peak* (Thousands)
North Carolina 0.80% -5.37% 3,953.0
North Dakota 5.60% 14.01% 420.7
Ohio 1.74% -5.06% 5,177.2
Oklahoma 2.54% 0.10% 1,596.7
Oregon 0.62% -6.19% 1,631.6
Pennsylvania 0.72% -1.57% 5,733.9
Rhode Island -0.37% -7.75% 458.0
South Carolina 1.60% -4.88% 1,860.5
South Dakota 0.87% -1.14% 407.6
Tennessee 0.77% -4.41% 2,685.1
Texas 2.48% 2.02% 10,857.6
* Peak Employment Level From Jan 2006 - December 2009
Job Growth Rates
Seasonally-Adjusted Data
September Data Comparison
Percent Percent Number
Change Change Jobs
Prior Since Sept 2012
State 12 Months Peak* (Thousands)
Utah 1.62% -1.97% 1,238.6
Vermont 0.87% -2.35% 302.9
Virginia 0.98% -1.50% 3,722.5
Washington 2.04% -3.19% 2,880.6
West Virginia -1.32% -2.29% 747.5
Wisconsin -0.18% -5.77% 2,729.2
Wyoming 1.05% -3.99% 289.0
* Peak Employment Level From Jan 2006 - December 2009
Job Growth Rates
2200
2225
2250
2275
2300
2325
2350
2375
'07 '08 '09 '10 '11 '12
Colorado Job Numbers
Jobs (Thousands) Seasonally Adjusted
37,300 Net New Jobs in Prior 12 Months
1,150
1,175
1,200
1,225
1,250
1,275
'07 '08 '09 '10 '11 '12
Denver-Aurora MSA Job Numbers
Jobs (Thousands) Seasonally Adjusted
30,000 Net New Jobs in Prior 12 Months
Seasonally-Adjusted Data
September Data Comparison
Percent Percent Number
* Peak Employment 1-2006 to 12-2009 Change Change Jobs
Prior Since Sept 2012
Metro Statistical Area (MSA) 12 Months Peak* (Thousands)
Boulder-Longmont 3.13% -0.94% 168.1
Colorado Springs -1.68% -6.40% 245.5
Denver-Aurora 2.47% -1.25% 1,244.0
Fort Collins-Loveland 2.71% 1.08% 140.0
Grand Junction 4.14% -5.70% 62.9
Greeley 4.34% 0.84% 84.1
Pueblo 0.00% -0.34% 58.9
Job Growth Rates
Housing Has Finally Reached the Bottom
Nationwide With Some Markets
Rebounding (Some Markets Never Declined)
0
2
4
6
8
10
12
'09 '10 '11 '12
Months Inventory of Existing Homes
National Association of REALTORS®
Months -- Seasonally-Adjusted Sales and Inventory
U.S. Existing Home Sales & Prices 12-Month Moving Averages
$150
$165
$180
$195
$210
$225
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
3
4
5
6
7
Median Price Homes Sales
Median Price $ Thousands Home Sold Millions
Luxury home sales jumped 52 percent in the Denver metro area in June, according to a report by Coldwell Banker Residential Brokerage. A total of 108 homes sold for more than $1 million in June, up 52 percent from last June's 71 sales and 42 percent higher than May, when 76 properties changed hands above the million-dollar mark. Coldwell Banker said the June sales were the highest since it began compiling the luxury report in 2007 . The report noted that while luxury sales increased, the median sale price for a million dollar home eased somewhat, falling 2.1 percent from May and 4.2 percent from June 2011
NAR Profile of Home Buyers and Sellers
View of Home as an Investment
Good Financial Investment 78% Better than stocks 45% As good as stocks 24% Not as good as stocks 9%
Denver-Aurora Existing Home Sales
$0
$50
$100
$150
$200
$250
$300
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Median Price ($ Thousands)
National Association of REALTORS®
U.S. Residential Building Permits
0.0
0.3
0.6
0.9
1.2
1.5
1.8
2.1
80 82 84 86 88 90 92 94 96 98 '00
'02
'04
'06
'08
'10
'12f
Single Family Multi
Number of Dwelling Units -- Millions
Colorado Residential Building Permits
0
10,000
20,000
30,000
40,000
50,000
60,000
80 82 84 86 88 90 92 94 96 98 '00
'02
'04
'06
'08
'10
'12f
Single Family Multi
Number of Dwelling Units
18,951 Permits in Past Months and 37,300 Net New Jobs -- 1.97 New Jobs Per New Dwelling
∑(40 i) i = 1
∞
X
QE3 - Quantitative Easing 3 $40 Billion Per Month Until the Economy Improves
$0
$300
$600
$900
$1,200
$1,500
$1,800
$2,100
$2,400
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Money Supply – M1 $ Billions – Seasonally Adjusted
Federal Reserve Board of Governors
Currency, Checking Accounts, Demand Deposits
Up 68.9 Percent Since Mid 2008
Velocity of Money Supply M1
6
7
8
9
10
11
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Velocity
8.9 Times Annual Turnover Average
Number of times one dollar is used to purchase final goods and services included in GDP
Current Level is 29 Percent Less Than Normal
$140
$150
$160
$170
$180
$190
'02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
U.S. Real Retail & Food Service Sales
$Billions – Seasonally Adjusted
Household Debt Service as a Percent of Household Disposable Income
9
10
11
12
13
14
'81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11
Percent
FED Board of Governors, BEA
0
4
8
12
16
20
'04 '05 '06 '07 '08 '09 '10 '11 '12
Light Weight Vehicle Sales Millions – Seasonally Adjusted Annual Rate
Bureau of Economic Analysis
Federal On-Budget Deficit Forecast
-$1,600.0
-$1,400.0
-$1,200.0
-$1,000.0
-$800.0
-$600.0
-$400.0
-$200.0
$0.0'0
1'0
2'0
3'0
4'0
5'0
6'0
7'0
8'0
9'1
0'1
1'1
2'1
3'1
4'1
5'1
6'1
7'1
8'1
9'2
0'2
1'2
2
$ Billions – Alternative Fiscal Scenario
Interest Expense on Federal Debt
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
88 92 96 '00 '04 '08 '12 '16 '20
$ Billions 2011 $438 Billion
2022 $1.3 Trillion
CBO Forecast
Forecast Assumes • No Added Federal Spending Programs Not Already in Budget Unless New Taxes or Cut Existing Programs • Healthcare Funding is Adequate (taxes) • 30-Year Treasury Does Not Exceed 5 Percent
In 2022, Interest on Debt Would Total 24.5 Cents of Every Tax Dollar
Fiscal Cliff
US 2012 GDP $15.6t US Debt Ceiling $16.4t US Debt Now $16.1t
Tax Cut Expiration $265 Billion Per Year
US Energy Consumption
0
20
40
60
80
100
'50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '10
Consumption – Quadrillion BTUs Restated by USEI
Oil Natural Gas
Hydro Nuclear
Biomass
Coal
Geothermal Solar & Wind
0
1,000
2,000
3,000
4,000
5,000
6,000
'87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11
Corn Used for Ethanol Production
Bushels -- Millions
Source: National Corn Growers Association, The World of Corn, 2011 and previous annual editions, http://www.ncga.com Note: Based on Marketing Year September - August (i.e., 1985 data are from September 1985-August 1986)
Corn Prices
$1.50
$2.50
$3.50
$4.50
$5.50
$6.50
$7.50
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12
Price Per Bushel
http://www.farmdoc.illinois.edu/manage/uspricehistory/USPrice.asp
Solar 0.16%
Wind 1.50%
Geothermal 0.29%
Percent of U.S. Energy 2011
Time to
Overweight
In
Real estate
$0
$100
$200
$300
$400
$500
$600
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Commercial Real Estate Sales Volume $ Billions
12-Year Average
Percent Change 2010 to 2011
Percent
$ Billions Change
All Types 291.6$ 32%
Office 74.0$ 39%
Multifamily 62.1$ 46%
Retail 58.7$ 43%
Industrial 35.9$ 8%
Hospitality 20.9$ 32%
Land Sales 19.6$ -14%
Other 20.5$ 76%
Source: CoStar
2011 Commercial Real Estate Sales
http://www.ncreif.org/property-index-returns.aspx
U.S. Industrial Property Returns
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Price and Performance Returns
Percent TTM 8.81 Percent Average Annual Return
U.S. Retail Property Returns
-20%
-10%
0%
10%
20%
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Price and Performance Returns
Percent TTM 9.89 Percent Average Annual Return
U.S. Hotel Property Returns
-30%
-20%
-10%
0%
10%
20%
30%
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Price and Performance Returns
Percent TTM 6.3 Percent Average Annual Return
U.S. Apartment Property Returns
-30%
-20%
-10%
0%
10%
20%
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Price and Performance Returns
Percent TTM 8.56 Percent Average Annual Return
U.S. Office Property Returns
-30%
-20%
-10%
0%
10%
20%
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Price and Performance Returns
Percent TTM 7.68 Percent Average Annual Return
Property Return
Retail 9.89%
Hotels 6.30%
Apartments 8.56%
Industrial 8.81%
Offices 7.68%
Source: NCREIF
Average Annual Returns Since 2000
http://www.costar.com/News/Article/Stand-Back-CREs-View-of-Fiscal-Cliff-from-Two-Months-Out/142852?ref=100&iid=304&cid=9DAB84E02030A42E4EA7AA9A13F4390B
Denver Metro Area
10-Year Returns 10-Year Total
Price Annual Annual
Change Dividend Return
Commercial Real Estate 26.30% 5.50% 8.13%
Dow Jones Indistrial Average 27.50% 2.96% 5.71%
10-Year U.S. Treasury Bond * 0.00% 5.45% 5.45%
S&P 500 22.85% 1.80% 4.08%
U.S. Existing Homes 4.17% 2.45% 2.86%
U.S. Existing Homes ** 23.70% 2.45% 4.82%
* Current 10-Year Treasury Yield 1.70 Percent Per Year
** Average 10-Year Home Price Change 1992-2012
Comparative 10-Year Investment Performance 1
2013 Economic Concerns
• Washington DC (Congress & Prez)
• Jobs – Stimulus Did Not Work GDP = Consumption + Investment + Government Spending + Exports - Imports
• Rural Land Bubble
• Fiscal Cliff
• Energy: US Imports 50+ Percent of Oil
• Government Can’t Fix Everything Newton’s Third Law of Motion
Election
11-6-2012
Maintain or Expand Spending
Increase Taxes Only on Those That Pay Taxes
Cradle to Grave
It’s Bush’s Fault
Cut Taxes
Cut Spending
Have Some of the 47 Percent Not Paying Taxes
Pay Some
Ted’s Blog
http://blog.stewart.com/ted
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