real estate markets in a tentative economic...
TRANSCRIPT
Real Estate Markets in a
Tentative Economic Landscape
GEORGE RATIU Director, Quantitative & Commercial Research
National Association of REALTORS®
Bay Area Real Estate Council | Annual Economic Outlook Tampa, FL | February 17, 2016
“There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.” ― John Kenneth Galbraith
• U.S. Economy – Secular Stagnation?
– The New Normal?
– Centennial Transition
• Real Estate Markets – Residential Renewal
– Commercial Ascent
– Capital Trends
• Outlook
U.S. Population Grows by 26M in Last Decade
0
50000
100000
150000
200000
250000
300000
350000
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97
20
00
20
03
20
06
20
09
20
12
20
15
U.S. Estimate of Resident Population ('000)
2015: 321 million
U.S. Labor Force Grows by 8M in Last Decade
130000
135000
140000
145000
150000
155000
160000
20
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20
15
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20
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.Se
p
Civilian Labor Force: 16 Yr + (SA, '000s)
Source: BLS
2015.12: 158 million
U.S. Economy
“Trickle-down theory - the less than elegant metaphor that if one feeds the horse enough oats, some will pass through to the road for the sparrows.” ― John Kenneth Galbraith
Monetary policy designed to bring economy out of Great Recession
• Quantitative easing / low cost of money designed to stabilize banks
• Stable bank balance sheets translate into lending
• Increased credit boosts consumer/business spending
• Consumer/business spending drives economic growth
0.0000
1.0000
2.0000
3.0000
4.0000
5.0000
6.0000
7.0000
200
0.J
an
200
0.O
ct
20
01
.Ju
l
200
2.A
pr
200
3.J
an
20
03.O
ct
20
04
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200
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pr
200
6.J
an
20
06.O
ct
20
07
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200
8.A
pr
200
9.J
an
20
09.O
ct
20
10
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l
201
1.A
pr
201
2.J
an
20
12.O
ct
20
13
.Ju
l
201
4.A
pr
201
5.J
an
20
15.O
ct
FRB Funds Target Rate (EOP, %)
Source: Federal Reserve Board
Subpar GDP growth despite unprecedented monetary policy
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
20
00
.Q1
20
00
.Q3
20
01
.Q1
20
01
.Q3
20
02
.Q1
20
02
.Q3
20
03
.Q1
20
03
.Q3
20
04
.Q1
20
04
.Q3
20
05
.Q1
20
05
.Q3
20
06
.Q1
20
06
.Q3
20
07
.Q1
20
07
.Q3
20
08
.Q1
20
08
.Q3
20
09
.Q1
20
09
.Q3
20
10
.Q1
20
10
.Q3
20
11
.Q1
20
11
.Q3
20
12
.Q1
20
12
.Q3
20
13
.Q1
20
13
.Q3
20
14
.Q1
20
14
.Q3
20
15
.Q1
20
15
.Q3
Real GDP (SAAR, Chn.2009$) % Chg - Annual Rate
Source: BEA
Consumers remain economic growth engine
-2000.0
0.0
2000.0
4000.0
6000.0
8000.0
10000.0
12000.0
14000.0
16000.0
18000.0
Real GDP (SAAR, Bil.Chn.2009$)
Consumer Spending Investments Net Exports Government Spending
CONSUMER CONSUMPTION = 70% OF ECONOMY
2015.Q4: $16.5 T 2007.Q4: $15.0 T
Source: BEA
Florida outpaces U.S. economic activity
120
130
140
150
160
170
180
190
200
0 -
Jan
20
00
- J
un
20
00
- N
ov
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pr
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01
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ep
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02
- F
eb
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ul
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02
- D
ec
20
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- M
ay
20
03
- O
ct
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- M
ar
20
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- A
ug
200
5 -
Jan
20
05
- J
un
20
05
- N
ov
20
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- A
pr
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- S
ep
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- F
eb
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- J
ul
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- D
ec
20
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- M
ay
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08
- O
ct
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- M
ar
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- A
ug
201
0 -
Jan
20
10
- J
un
20
10
- N
ov
20
11
- A
pr
20
11
- S
ep
20
12
- F
eb
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- J
ul
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12
- D
ec
20
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- M
ay
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- O
ct
20
14
- M
ar
20
14
- A
ug
201
5 -
Jan
20
15
- J
un
20
15
- N
ov
Philadelphia FRB: Coincident Economic Activity Index
U.S. Florida
Nonfarm payroll employment Unemployment rate Avg. hours worked in manufacturing Wages and salaries
Housing recovery boosts economic activity
0
10
20
30
40
50
60
0
1000
2000
3000
4000
5000
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7000
8000
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- J
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ct
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ul
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- A
pr
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an
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- O
ct
Tho
usa
nd
s
EHS (SAAR, Units) Distressed Sales (%)
–Housing supply continues to hover below 6 - 7 month equilibrium
–Distressed properties decline: only 6% of total sales in 2015, down from high of 40% in 2008 and 2009
Housing supply does not keep pace with population
0
200
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.Jan
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00
.Se
p
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p
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.Jan
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.Se
p
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.May
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.Jan
20
12
.Se
p
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13
.May
20
14
.Jan
20
14
.Se
p
20
15
.May
New SF Home Sales (SAAR, '000s)
SF Housing Starts (SAAR, '000s)
Source: Census Bureau -500
0
500
1000
1500
2000
2500
Net Household Formation ('000)
Source: Census
Shortage of inventory pushes home prices upward
0
50000
100000
150000
200000
250000
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- M
ay
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ep
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ay
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ay
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ep
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ay
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ep
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ay
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ep
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ay
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ep
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ay
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ep
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ay
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ep
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- M
ay
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ep
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- J
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- M
ay
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- S
ep
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- J
an
20
12
- M
ay
20
12
- S
ep
20
13
- J
an
20
13
- M
ay
20
13
- S
ep
20
14
- J
an
20
14
- M
ay
20
14
- S
ep
20
15
- J
an
20
15
- M
ay
20
15
- S
ep
EHS Median Sales Price ($)
–Home prices rose 11.5%, 5.7%, and 5.9% over the past 3 years while wages have only been rising around 2%
Tampa MSA Housing
0
50
100
150
200
250
20
03
- Q
1
20
03
- Q
3
20
04
- Q
1
20
04
- Q
3
20
05
- Q
1
20
05
- Q
3
20
06
- Q
1
20
06
- Q
3
20
07
- Q
1
20
07
- Q
3
20
08
- Q
1
20
08
- Q
3
20
09
- Q
1
20
09
- Q
3
20
10
- Q
1
20
10
- Q
3
20
11
- Q
1
20
11
- Q
3
20
12
- Q
1
20
12
- Q
3
20
13
- Q
1
20
13
- Q
3
20
14
- Q
1
20
14
- Q
3
20
15
- Q
1
20
15
- Q
3
Tampa-St Petersburg-Clearwater: Median Price ($, '000)
SF Home Condo
0
5
10
15
20
25
20
00
- Q
1
20
00
- Q
4
20
01
- Q
3
20
02
- Q
2
20
03
- Q
1
20
03
- Q
4
20
04
- Q
3
20
05
- Q
2
20
06
- Q
1
20
06
- Q
4
20
07
- Q
3
20
08
- Q
2
20
09
- Q
1
20
09
- Q
4
20
10
- Q
3
20
11
- Q
2
20
12
- Q
1
20
12
- Q
4
20
13
- Q
3
20
14
- Q
2
20
15
- Q
1
Tampa-St Petersburg-Clearwater: Months' Supply of Homes
Capital holders ride growth wave
0.000
10000.000
20000.000
30000.000
40000.000
50000.000
60000.000
70000.000
80000.000
20
00
.Q1
20
00
.Q4
20
01
.Q3
20
02
.Q2
20
03
.Q1
20
03
.Q4
20
04
.Q3
20
05
.Q2
20
06
.Q1
20
06
.Q4
20
07
.Q3
20
08
.Q2
20
09
.Q1
20
09
.Q4
20
10
.Q3
20
11
.Q2
20
12
.Q1
20
12
.Q4
20
13
.Q3
20
14
.Q2
20
15
.Q1
Households & Nonprofit Org: Total Financial Assets (NSA, Bil.$)
2007.Q3: $52.6 > 2014.Q3: $68.9T
Source: Federal Reserve Board
0.000
5000.000
10000.000
15000.000
20000.000
25000.000
30000.000
20
00
.Q1
20
00
.Q4
20
01
.Q3
20
02
.Q2
20
03
.Q1
20
03
.Q4
20
04
.Q3
20
05
.Q2
20
06
.Q1
20
06
.Q4
20
07
.Q3
20
08
.Q2
20
09
.Q1
20
09
.Q4
20
10
.Q3
20
11
.Q2
20
12
.Q1
20
12
.Q4
20
13
.Q3
20
14
.Q2
20
15
.Q1
Households & Nonprofit Organizations: Total Real Estate Holdings (NSA, Bil.$) FRB
2006.Q4: $25.0 > 2015.Q3: $24.9T
Consumers without assets lag on low wages
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
8.00
10.00
19
60
.Q1
19
62
.Q2
19
64
.Q3
19
66
.Q4
19
69
.Q1
19
71
.Q2
19
73
.Q3
19
75
.Q4
19
78
.Q1
19
80
.Q2
19
82
.Q3
19
84
.Q4
19
87
.Q1
19
89
.Q2
19
91
.Q3
19
93
.Q4
19
96
.Q1
19
98
.Q2
20
00
.Q3
20
02
.Q4
20
05
.Q1
20
07
.Q2
20
09
.Q3
20
11
.Q4
20
14
.Q1
Real Personal Income Excluding Transfer Receipts (SAAR, Chn.2009$) %Chg YoY
Source: BEA
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
20
00
.Jan
20
00
.Se
p
20
01
.May
20
02
.Jan
20
02
.Se
p
20
03
.May
20
04
.Jan
20
04
.Se
p
20
05
.May
20
06
.Jan
20
06
.Se
p
20
07
.May
20
08
.Jan
20
08
.Se
p
20
09
.May
20
10
.Jan
20
10
.Se
p
20
11
.May
20
12
.Jan
20
12
.Se
p
20
13
.May
20
14
.Jan
20
14
.Se
p
20
15
.May
Consumer Confidence (SA, 1985=100)
Consumer Sentiment (NSA, Q1.66=100)
Sources: The Conference Board, University of Michigan
Employment maintains momentum…
0
2
4
6
8
10
12
-1000
-800
-600
-400
-200
0
200
400
600
20
00
- J
an
20
00
- M
ay
20
00
- S
ep
20
01
- J
an
20
01
- M
ay
20
01
- S
ep
20
02
- J
an
20
02
- M
ay
20
02
- S
ep
20
03
- J
an
20
03
- M
ay
20
03
- S
ep
20
04
- J
an
20
04
- M
ay
20
04
- S
ep
20
05
- J
an
20
05
- M
ay
20
05
- S
ep
20
06
- J
an
20
06
- M
ay
20
06
- S
ep
20
07
- J
an
20
07
- M
ay
20
07
- S
ep
20
08
- J
an
20
08
- M
ay
20
08
- S
ep
20
09
- J
an
20
09
- M
ay
20
09
- S
ep
20
10
- J
an
20
10
- M
ay
20
10
- S
ep
20
11
- J
an
20
11
- M
ay
20
11
- S
ep
20
12
- J
an
20
12
- M
ay
20
12
- S
ep
20
13
- J
an
20
13
- M
ay
20
13
- S
ep
20
14
- J
an
20
14
- M
ay
20
14
- S
ep
20
15
- J
an
20
15
- M
ay
20
15
- S
ep
Chg in Total Nonfarm Employment (SA, '000s) Unemployment Rate (SA, %)
2010 - 15: 13.8M jobs added
J.08-D.09: 8.7M jobs cut
…With service industries driving employment gains
-1000 -500 0 500 1000 1500 2000 2500 3000 3500 4000
Mining & Logging
Construction
Manufacturing
Trade, transportation & utilities
Information
Financial activities
Prof & business services
Education & health services
Leisure & hospitality
Other services
Government
2010-15: Payroll Employment Growth by Sector (SA, 000s)
Source: BLS
Tampa MSA employment
2
4
6
8
10
12
14
20
00
- J
an
20
00
- S
ep
20
01
- M
ay
20
02
- J
an
20
02
- S
ep
20
03
- M
ay
20
04
- J
an
20
04
- S
ep
20
05
- M
ay
20
06
- J
an
20
06
- S
ep
20
07
- M
ay
20
08
- J
an
20
08
- S
ep
20
09
- M
ay
20
10
- J
an
20
10
- S
ep
20
11
- M
ay
20
12
- J
an
20
12
- S
ep
20
13
- M
ay
20
14
- J
an
20
14
- S
ep
20
15
- M
ay
Unemployment Rate (%)
U.S. FL Tampa MSA
-600
-400
-200
0
200
400
600
20
00
- J
an
20
00
- S
ep
20
01
- M
ay
20
02
- J
an
20
02
- S
ep
20
03
- M
ay
20
04
- J
an
20
04
- S
ep
20
05
- M
ay
20
06
- J
an
20
06
- S
ep
20
07
- M
ay
20
08
- J
an
20
08
- S
ep
20
09
- M
ay
20
10
- J
an
20
10
- S
ep
20
11
- M
ay
20
12
- J
an
20
12
- S
ep
20
13
- M
ay
20
14
- J
an
20
14
- S
ep
20
15
- M
ay
Payroll Employment YoY Chg (SA, '000)
FL Tampa MSA
TPA 2010-15: 1.5M new jobs
Labor force participation returns to 1970s level
59
60
61
62
63
64
65
66
67
68
20
00
- J
an
20
00
- M
ay
20
00
- S
ep
20
01
- J
an
20
01
- M
ay
20
01
- S
ep
20
02
- J
an
20
02
- M
ay
20
02
- S
ep
20
03
- J
an
20
03
- M
ay
20
03
- S
ep
20
04
- J
an
20
04
- M
ay
20
04
- S
ep
20
05
- J
an
20
05
- M
ay
20
05
- S
ep
20
06
- J
an
20
06
- M
ay
20
06
- S
ep
20
07
- J
an
20
07
- M
ay
20
07
- S
ep
20
08
- J
an
20
08
- M
ay
20
08
- S
ep
20
09
- J
an
20
09
- M
ay
20
09
- S
ep
20
10
- J
an
20
10
- M
ay
20
10
- S
ep
20
11
- J
an
20
11
- M
ay
20
11
- S
ep
20
12
- J
an
20
12
- M
ay
20
12
- S
ep
20
13
- J
an
20
13
- M
ay
20
13
- S
ep
20
14
- J
an
20
14
- M
ay
20
14
- S
ep
20
15
- J
an
20
15
- M
ay
20
15
- S
ep
Labor Force Participation Rate (%)
Source: Bureau of Labor Statistics
Consumer credit grows…as does student debt
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
Jan
.20
00
Sep
.20
00
May
.20
01
Jan
.20
02
Sep
.20
02
May
.20
03
Jan
.20
04
Sep
.20
04
May
.20
05
Jan
.20
06
Sep
.20
06
May
.20
07
Jan
.20
08
Sep
.20
08
May
.20
09
Jan
.20
10
Sep
.20
10
May
.20
11
Jan
.20
12
Sep
.20
12
May
.20
13
Jan
.20
14
Sep
.20
14
May
.20
15
Consumer Credit - YoY % Change (EOP, SA, Bil.$)
Revolving Nonrevolving
Source: Federal
0.00000
200.00000
400.00000
600.00000
800.00000
1000.00000
1200.00000
1400.00000
Jan
.20
00
Sep
.20
00
May
.20
01
Jan
.20
02
Sep
.20
02
May
.20
03
Jan
.20
04
Sep
.20
04
May
.20
05
Jan
.20
06
Sep
.20
06
May
.20
07
Jan
.20
08
Sep
.20
08
May
.20
09
Jan
.20
10
Sep
.20
10
May
.20
11
Jan
.20
12
Sep
.20
12
May
.20
13
Jan
.20
14
Sep
.20
14
May
.20
15
Commercial Banks Savings Institutions
Finance Companies Credit Unions
Federal Government Nonfinancial Businesses
Securitized Assets
Source: Federal Reserve Board
2000: $84B
2015: $946B
Consumer spending concentrated on durable goods
-40.00
-30.00
-20.00
-10.00
0.00
10.00
20.00
30.00
40.00
50.00
20
00
.Q1
20
00
.Q4
20
01
.Q3
20
02
.Q2
20
03
.Q1
20
03
.Q4
20
04
.Q3
20
05
.Q2
20
06
.Q1
20
06
.Q4
20
07
.Q3
20
08
.Q2
20
09
.Q1
20
09
.Q4
20
10
.Q3
20
11
.Q2
20
12
.Q1
20
12
.Q4
20
13
.Q3
20
14
.Q2
20
15
.Q1
20
15
.Q4
Personal Consumption (SAAR, Chn.2009$) % Chg Annual Rate
Durable goods Nondurable goods Services
Source: BEA
0.0000
5.0000
10.0000
15.0000
20.0000
25.0000
Jan
.20
00
Sep
.20
00
May
.20
01
Jan
.20
02
Sep
.20
02
May
.20
03
Jan
.20
04
Sep
.20
04
May
.20
05
Jan
.20
06
Sep
.20
06
May
.20
07
Jan
.20
08
Sep
.20
08
May
.20
09
Jan
.20
10
Sep
.20
10
May
.20
11
Jan
.20
12
Sep
.20
12
May
.20
13
Jan
.20
14
Sep
.20
14
May
.20
15
Jan
.20
16
Total Light Truck Retail Sales [Imported+Domestic] (SAAR, Mil. Units)
Total Car Retail Sales [Imported+Domestic] (SAAR, Mil. Units)
Total Light Vehicle Retail Sales [Imported+Domestic] (SAAR, Mil. Units)
Source: Autodata
Business investments lose momentum…
-30.00
-25.00
-20.00
-15.00
-10.00
-5.00
0.00
5.00
10.00
15.00
20.00
25.00
Real Business Spending (SAAR, Chn2009$) % Chg Annual Rate
Source: BEA
…As activity throttles back…
300000
350000
400000
450000
500000
550000
600000
650000
700000
20
00
.Jan
20
00
.Se
p
20
01
.May
20
02
.Jan
20
02
.Se
p
20
03
.May
20
04
.Jan
20
04
.Se
p
20
05
.May
20
06
.Jan
20
06
.Se
p
20
07
.May
20
08
.Jan
20
08
.Se
p
20
09
.May
20
10
.Jan
20
10
.Se
p
20
11
.May
20
12
.Jan
20
12
.Se
p
20
13
.May
20
14
.Jan
20
14
.Se
p
20
15
.May
Manufacturers' Activity (EOP, SA, Mil.$)
Shipments New orders Inventories
Source: Census Bureau
30.0
35.0
40.0
45.0
50.0
55.0
60.0
65.0
20
00
.Jan
20
00
.Se
p
20
01
.May
20
02
.Jan
20
02
.Se
p
20
03
.May
20
04
.Jan
20
04
.Se
p
20
05
.May
20
06
.Jan
20
06
.Se
p
20
07
.May
20
08
.Jan
20
08
.Se
p
20
09
.May
20
10
.Jan
20
10
.Se
p
20
11
.May
20
12
.Jan
20
12
.Se
p
20
13
.May
20
14
.Jan
20
14
.Se
p
20
15
.May
20
16
.Jan
ISM Index (SA, 50+ Increasing)
ISM Manufacturing ISM Nonmanufacturing
Source: Institute for
…And net exports feel the squeeze of a strong dollar
1000.0
1200.0
1400.0
1600.0
1800.0
2000.0
2200.0
2400.0
2600.0
2800.0
20
00
.Q1
20
00
.Q4
20
01
.Q3
20
02
.Q2
20
03
.Q1
20
03
.Q4
20
04
.Q3
20
05
.Q2
20
06
.Q1
20
06
.Q4
20
07
.Q3
20
08
.Q2
20
09
.Q1
20
09
.Q4
20
10
.Q3
20
11
.Q2
20
12
.Q1
20
12
.Q4
20
13
.Q3
20
14
.Q2
20
15
.Q1
20
15
.Q4
International Trade (SAAR, Bil.Chn.2009$)
Real Exports Real Imports
Source: BEA
0.8000
0.9000
1.0000
1.1000
1.2000
1.3000
1.4000
1.5000
1.6000
1.7000
20
00
.Jan
20
00
.Se
p
20
01
.May
20
02
.Jan
20
02
.Se
p
20
03
.May
20
04
.Jan
20
04
.Se
p
20
05
.May
20
06
.Jan
20
06
.Se
p
20
07
.May
20
08
.Jan
20
08
.Se
p
20
09
.May
20
10
.Jan
20
10
.Se
p
20
11
.May
20
12
.Jan
20
12
.Se
p
20
13
.May
20
14
.Jan
20
14
.Se
p
20
15
.May
20
16
.Jan
Exchange Rate: US$/Euro (EOP)
source: Federal
Corporate balance sheets remain healthy
0.0
200.0
400.0
600.0
800.0
1000.0
1200.0
1400.0
1600.0
1800.0
2000.0
20
00
.Q1
20
00
.Q4
20
01
.Q3
20
02
.Q2
20
03
.Q1
20
03
.Q4
20
04
.Q3
20
05
.Q2
20
06
.Q1
20
06
.Q4
20
07
.Q3
20
08
.Q2
20
09
.Q1
20
09
.Q4
20
10
.Q3
20
11
.Q2
20
12
.Q1
20
12
.Q4
20
13
.Q3
20
14
.Q2
20
15
.Q1
Real Corporate Profits After Tax (SAAR, Bil.Chn.2009$)
2015.Q3: $1.67 Trillion
Source: BEA
0
500
1000
1500
2000
2500
20
00
.Q1
20
00
.Q4
20
01
.Q3
20
02
.Q2
20
03
.Q1
20
03
.Q4
20
04
.Q3
20
05
.Q2
20
06
.Q1
20
06
.Q4
20
07
.Q3
20
08
.Q2
20
09
.Q1
20
09
.Q4
20
10
.Q3
20
11
.Q2
20
12
.Q1
20
12
.Q4
20
13
.Q3
20
14
.Q2
20
15
.Q1
Corporate Cash/Cash Equivalent Holdings (NSA, Bil.$)
2015.Q3 = $2.00 Trillion
Source: Federal
Inflation remains contained…
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
20
00
.Jan
20
00
.May
20
00
.Se
p
20
01
.Jan
20
01
.May
20
01
.Se
p
20
02
.Jan
20
02
.May
20
02
.Se
p
20
03
.Jan
20
03
.May
20
03
.Se
p
20
04
.Jan
20
04
.May
20
04
.Se
p
20
05
.Jan
20
05
.May
20
05
.Se
p
20
06
.Jan
20
06
.May
20
06
.Se
p
20
07
.Jan
20
07
.May
20
07
.Se
p
20
08
.Jan
20
08
.May
20
08
.Se
p
20
09
.Jan
20
09
.May
20
09
.Se
p
20
10
.Jan
20
10
.May
20
10
.Se
p
20
11
.Jan
20
11
.May
20
11
.Se
p
20
12
.Jan
20
12
.May
20
12
.Se
p
20
13
.Jan
20
13
.May
20
13
.Se
p
20
14
.Jan
20
14
.May
20
14
.Se
p
20
15
.Jan
20
15
.May
20
15
.Se
p
Overall CPI Core CPI (1982-84=100, %Chg YoY)
Source: BLS
…Aided by dropping oil/gas prices
0.00
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
20
00
.Jan
20
00
.Se
p
20
01
.May
20
02
.Jan
20
02
.Se
p
20
03
.May
20
04
.Jan
20
04
.Se
p
20
05
.May
20
06
.Jan
20
06
.Se
p
20
07
.May
20
08
.Jan
20
08
.Se
p
20
09
.May
20
10
.Jan
20
10
.Se
p
20
11
.May
20
12
.Jan
20
12
.Se
p
20
13
.May
20
14
.Jan
20
14
.Se
p
20
15
.May
20
16
.Jan
Brent Nominal (EU Mkt Price, $/Barrel)
Cushing West Texas Intermediate (Spot FOB, EOP,$/Barrel)
Jan 2016: $32
Jan 2016: $34
Source: EIA
0.00
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00
20
00
.Jan
20
00
.Se
p
20
01
.May
20
02
.Jan
20
02
.Se
p
20
03
.May
20
04
.Jan
20
04
.Se
p
20
05
.May
20
06
.Jan
20
06
.Se
p
20
07
.May
20
08
.Jan
20
08
.Se
p
20
09
.May
20
10
.Jan
20
10
.Se
p
20
11
.May
20
12
.Jan
20
12
.Se
p
20
13
.May
20
14
.Jan
20
14
.Se
p
20
15
.May
20
16
.Jan
Natural Gas Price (Henry Hub, LA, $/mmbtu)
Source: Wall Street
Rents and Owners’ Equivalent Rent components of CPI rising at over 3.0%
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
20
00
.Jan
20
00
.May
20
00
.Se
p
20
01
.Jan
20
01
.May
20
01
.Se
p
20
02
.Jan
20
02
.May
20
02
.Se
p
20
03
.Jan
20
03
.May
20
03
.Se
p
20
04
.Jan
20
04
.May
20
04
.Se
p
20
05
.Jan
20
05
.May
20
05
.Se
p
20
06
.Jan
20
06
.May
20
06
.Se
p
20
07
.Jan
20
07
.May
20
07
.Se
p
20
08
.Jan
20
08
.May
20
08
.Se
p
20
09
.Jan
20
09
.May
20
09
.Se
p
20
10
.Jan
20
10
.May
20
10
.Se
p
20
11
.Jan
20
11
.May
20
11
.Se
p
20
12
.Jan
20
12
.May
20
12
.Se
p
20
13
.Jan
20
13
.May
20
13
.Se
p
20
14
.Jan
20
14
.May
20
14
.Se
p
20
15
.Jan
20
15
.May
20
15
.Se
p
CPI-U Commodities ex F&E CPI-U Services ex Energy (1982-84=100, % Chg YoY)
Source: BLS
Economic outlook—moderately positive
JANUARY 2016
2013 2014 2015 2016
Annual Growth Rate, %
Real GDP 2.2 2.4 2.4 2.8
Nonfarm Payroll Employment 1.7 1.9 2.1 1.3 Consumer Prices 1.5 1.6 0.2 2.5
Level
Consumer Confidence 73 87 98 96
Percent
Unemployment 7.4 6.2 5.3 4.9 Fed Funds Rate 0.1 0.1 0.1 0.9 3-Month T-bill Rate 0.1 0.1 0.1 0.9 Corporate Aaa Bond Yield 4.3 4.2 3.9 4.4 10-Year Gov’t Bond 2.6 2.5 2.1 2.6 30-Year Gov’t Bond 3.4 3.3 2.8 3.5
Source: National Association of REALTORS®
Commercial Real Estate Markets
CRE fundamentals in line with economy…
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
20
09
.Q2
20
09
.Q3
20
09
.Q4
20
10
.Q1
20
10
.Q2
20
10
.Q3
20
10
.Q4
20
11
.Q1
20
11
.Q2
20
11
.Q3
20
11
.Q4
20
12
.Q1
20
12
.Q2
20
12
.Q3
20
12
.Q4
20
13
.Q1
20
13
.Q2
20
13
.Q3
20
13
.Q4
20
14
.Q1
20
14
.Q2
20
14
.Q3
20
14
.Q4
20
15
.Q1
20
15
.Q2
20
15
.Q3
20
15
.Q4
% C
han
ge, Q
uar
ter-
ove
r-q
uar
ter
New Construction Leasing Volume
Source: National Association of Realtors®
-15%
-10%
-5%
0%
5%
10%
15%
20%
Per
cen
t C
han
ge, Q
uar
terl
y
REALTOR® Commercial Leasing Trends
Leasing Volume Leasing Rates
Lease Concessions
Source: National Association of Realtors®
…As rising demand leads to lower vacancies
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
REALTORS® Commercial Vacancy Rates
Office Industrial Retail Multifamily Hotel
Source: National Association of Realtors®
CRE investment sales close 2015 at $504 B
0
60
120
180
240
$0
$100
$200
$300
$400
$500
$600
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
billions
Individual Portfolio Entity CPPI*
Source: Real Capital Analytics, Moody's/RCA CPPI
Tampa CRE sales up 25% YoY in 2015
5,685.3
Atlanta
Broward
Charlotte
Jacksonville
Memphis
Miami
Nashville
Orlando
Palm Beach
Raleigh/Durham
Tampa
CRE Sales Volume: Southeast 2015 ($M)
Source: Real Capital Analytics
998.7
509.2
915.9
2,468.0
684.5
109.0
Tampa Sales by Property: 2015 ($M)
Dev Site
Hotel
Apartment
Retail
Industrial
Office
Capital in search of yield drives prices
50
100
150
200
250
300
'09 '10 '11 '12 '13 '14 '15
Commercial Property Price Index
Apartment
Industrial
Retail
CBD-Office
Sub-Office
Hotel
Source: Real Capital Analytics, Moody's/RCA CPPI
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
'09 '10 '11 '12 '13 '14 '15
Capitalization Rates
Industrial
CBD-Office
Apartment
Retail
Sub-Office
Hotel
CRE remains a tale of two markets
-100%
-50%
0%
50%
100%
150%
200%
20
08
.Q4
20
09
.Q2
20
09
.Q4
20
10
.Q2
20
10
.Q4
20
11
.Q2
20
11
.Q4
20
12
.Q2
20
12
.Q4
20
13
.Q2
20
13
.Q4
20
14
.Q2
20
14
.Q4
20
15
.Q2
20
15
.Q4
Sales Volume (YoY % Chg)
Real Capital Analytics CRE Markets
REALTOR® CRE Markets
-40.0%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
20
08
.Q4
20
09
.Q2
20
09
.Q4
20
10
.Q2
20
10
.Q4
20
11
.Q2
20
11
.Q4
20
12
.Q2
20
12
.Q4
20
13
.Q2
20
13
.Q4
20
14
.Q2
20
14
.Q4
20
15
.Q2
20
15
.Q4
Sales Prices (YoY % Chg)
Real Capital Analytics CRE Markets
REALTOR® CRE Markets
Sources: NAR, Real Capital Analytics
Smaller markets offer yield premium
0
200
400
600
800
1000
1200
10
Q1
10
Q2
10
Q3
10
Q4
11
Q1
11
Q2
11
Q3
11
Q4
12
Q1
12
Q2
12
Q3
12
Q4
13
Q1
13
Q2
13
Q3
13
Q4
14
Q1
14
Q2
14
Q3
14
Q4
15
Q1
15
Q2
15
Q3
15
Q4
CRE Spreads: Cap Rates to 10-Yr. T-Notes (bps)
RCA Cap Rates REALTORS Cap Rates
Sources: NAR, Real Capital Analytics
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Office Industrial Retail Apartment Hotel
Cap Rates - 2015.Q4
RCA Markets REALTOR® Markets
Capital markets flush with liquidity at high end
Commercial Real Estate Debt: $3.54 Trillion
Commercial Real Estate Equity: $2.64 Trillion
Lending conditions improve…
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015
Change in Lending Conditions over Past Year
EasedSignificantly
Eased Somewhat
Not Changed
TightenedSomewhat
TightenedSignificantly
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015
Average Loan-to-Value for CRE Transactions
Other
100% Cash
50%
55%
60%
65%
70%
75%
80%
85%
90%
…But capital landscape remains bifurcated
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015
REALTORS® - CRE Financing
Small BusinessAdministrationREITs
Regional Banks
Public Cos.
Private Investors
Other
National Banks
Local/Comm. Banks
Life Insurance Cos.
International banks
Credit Unions
CMBS
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015
Real Capital Analytics – CRE Financing
Pvt/Other
Reg'l/Local Bank
Nat'l Bank
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Commercial real estate outlook
NAR Commercial Property Price Forecast
2008 2009 2010 2011 2012 2013 2014 2015 2016 NCREIF 215.2 165.1 168.2 186.5 195.2 211.9 224.9 249.6 245.3 Green St. Advisors 86.1 63.5 74.4 87.1 92.2 99.4 106.7 118.0 116.0 Sources: NAR, NCREIF, Green Street Advisors, Real Capital Analytics
Commercial Real Estate Vacancy Forecast (%)
2015.Q2 2015.Q3 2015.Q4 2016.Q1 2016.Q2 2016.Q3 2016.Q4 2017.Q1 2014 2015 2016
Office 15.9 16.0 15.6 15.2 14.9 14.8 14.8 14.6 16.0 15.6 14.9 Industrial 10.8 11.5 11.1 10.9 10.5 10.1 9.7 9.5 12.0 11.2 10.3 Retail 13.2 13.0 12.6 12.2 11.8 11.6 11.3 11.0 13.8 13.1 11.7 Multifamily 6.6 7.4 6.1 7.0 6.9 7.1 7.3 8.3 6.6 7.1 7.1 Source: National Association of REALTORS®
www.realtor.org/reports/expectations-and-market-realities-in-real-estate
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• GEORGE RATIU | @GeorgeRatiu • Director, Quantitative & Commercial Research
• National Association of REALTORS®