2009 Economic and Housing 2009 Economic and Housing Update
Dr. James P. Gaines
Research Economist Real Estate Center Texas A&M University jpgaines@tamu.edu
1
REAL ESTATE CENTER
at TEXAS A&M UNIVERSITY Mays School of Business Mays School of Business
recenter.tamu.edu
Publications P bli ti
Tierra Grande
Monthly Economic Reports Technical Reports
Market Reports
RECON Newsletter
REC Website
2
Falling Economy 2009
• Official Economic Recession (already a year old) • Soft National Housing Market • I t Interest Rates Low with Unsettled C it l tR t L ith U ttl d Capital • • • • • •
Markets Inflation and Consumer Spending Down Employment falling and Unemployment up Corporate S C t Spending and E di d Expansion at St d till i t Standstill Political Uncertainty But Greater Involvement Federal Bail-out Programs Starting Poor Buyer Psychology with “Wait and See” Attitude Attit d
3
“Big Picture” Economic Themes on a ModernModern Day Depression M d -D D i
1. 1 2. 3. 4. 5. 6. Credit Contraction C dit C t ti Asset Deflation Household Wealth Devastation Profit Compression Employment Destruction Inventory Reduction y
4
The New Dollar
5
Total National Debt and Debt as Percent of Annual GDP
$13,000 $12,000 $11,000 $11 000 $10,000 $9,000
Billions s 130%
1946, 121.2% Top marginal tax rate > 90% p g from 1940’s thru 1960’s and ~ 70% thru 1981
120% 110%
2008, 69.5%, highest since 1954
100% 90% 80%
$8,000 $7,000 $6,000 $5,000 $4,000 $3,000 $2,000 $1,000 $0
1936 1938 1940 1942 1944 1946 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
6
1954, 71.3%
70% 60% 50%
1941, 38.6%
It took 26 years to get debt as percent of GDP back to pre‐war level.
1968, 38.2% 1974, 31.7% 1974 31 7%
40% 30% 20% 10% 0%
Source: BEA, US Treasury
How Much is $1 TRILLION?
• 1 plus 12 zeros: 1,000,000,000,000 • FY09 D fi it ill b b t $1 6 T illi FY09 Deficit will be about $1.6 Trillion • Total National Debt is about $10.7 Trillion, around $36,000 for every man, woman and child $36,000 for every man, woman and child • Majority of Debt (65%) is held by China (22%), Japan (18.5%), UK (11%), Caribbean Banking Centers (7%) and Oil Exporting Countries* (6%) ( %) d Oil i i * (6%) • Interest on the debt is about $500 Billion per year, fourth largest expenditure in Federal budget year fourth largest expenditure in Federal budget (Medicare‐Medicaid, SS, defense)
* Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, 7 Algeria, Gabon, Libya, and Nigeria.
Economic Outlook for 2009: How Much is a Trillion Dollars ? There are about 300 million people in the U.S. and about 116 million Households
Economic Outlook for 2009: How Much is a Trillion Dollars ? $ , $1,000,000,000,000 , , , 116,000,000 = $8,620 per American household
Economic Outlook for 2009: How Much is a Trillion Dollars ? The United States of America has been a country for 233 years (or 85,045 days)
Economic Outlook for 2009: How Much is a Trillion Dollars ?
$1,000,000,000,000 85,045 , = $11.7 million
The US government would have to spend g p $11.7 million dollars a day for each day since the country was founded y y to reach just $1 trillion.
Economic Outlook for 2009: How Much is a Trillion Dollars ? How many Americans would it take to pay off $1 trillion ? to pay off $1 trillion ? If Americans worked every day of If A i k d d f the year for 8 hours per day y p y and earned $20 per hour And paid 100% income tax And paid 100% income tax
Economic Outlook for 2009: How Much is a Trillion Dollars ?
$1,000,000,000,000 ($20*365*8) =
17,123,287 , , It would take 17 million workers, , who work every day of the year at $20 per hour to pay back $1 Trillion $20 per hour to pay back $1 Trillion
Percent Growth in Real GDP Since 2000
Seasonally Adjusted Annual Rate y j
8.0 7.0 6.0 5.0 4.0 3.0 2.0 20 1.0 0.0 ‐1.0 1.0 ‐2.0 ‐3.0 ‐4.0 ‐5.0 ‐6.0 ‐7.0
7.5 6.4
4.8 3.5 2.7 2.1 1.6 1 1.2 0.2 1.2 2.2 2.4 2.7 3.0 2.5 3.5 3.6 3.0 2.6 1.3 0.8 0.1 3.8 2.7 1.5
4.8 4.8
2.8
0.9
‐0.5
‐0.5 ‐1.4
‐0.2
‐0.5
Revised 4Q08 issued February 27
‐6.2
1Q2000 2Q2000 3Q2000 4Q2000 1Q2001 2Q2001 3Q2001 4Q2001 1Q2002 2 2Q2002 2 3Q2002 2 4Q2002 2 1Q2003 2Q2003 3Q2003 4Q2003 1Q2004 4 2Q2004 4 3Q2004 4 4Q2004 4 1Q2005 2Q2005 3Q2005 4Q2005 1Q2006 2Q2006 3Q2006 4Q2006 1Q2007 2Q2007 3Q2007 4Q2007 1Q2008 2Q2008 3Q2008 4Q2008 Source: Bureau of Economic Analysis
14
2.0 20
1.0
3.0
4.0
5.0
6.0
7.0
0.0
-1.0
Source: Bureau of Labor Statistics
Overall Inflation Rate
Yr/Yr Rate of Change in the Monthly Index, US Urban, All Items
15
Jan-87 Jul-87 Jan-88 Jul-88 Jan-89 Jul-89 Jan-90 Jul-90 Jan-91 Jul-91 Jan-92 Jul-92 Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09
Consumer Confidence Index At AllAll-time Low
130 120 110 100 90 80 70 60 50 40 30 20 10
Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jul-08 Jan-09
16
Jul-07, 111.9
Consumer confidence has fallen 78% since July 2007
Feb-09, 25
Source: The Conference Board (1985=100)
13 12 11 10 9 8 7 6 5 4 3 2 1 0 ‐1 ‐2 ‐3
US Savings Rate
Percent of Disposable Income
Source: BEA
17
Jan‐80 Jul‐80 Jan‐81 Jul‐81 Jan‐82 Jul‐82 Jan‐83 Jul‐83 Jan‐84 Jul‐84 Jan‐85 Jul‐85 Jan‐86 Jul‐86 Jan‐87 Jul‐87 Jan‐88 Jul‐88 Jan‐89 Jul‐89 Jan‐90 Jul‐90 Jan‐91 Jul‐91 Jan‐92 Jul‐92 Jan‐93 Jul‐93 Jan‐94 Jul‐94 Jan‐95 Jul‐95 Jan‐96 Jul‐96 Jan‐97 Jul‐97 Jan‐98 Jul‐98 Jan‐99 Jul‐99 Jan‐00 Jul‐00 Jan‐01 Jul‐01 Jan‐02 Jul‐02 Jan‐03 Jul‐03 Jan‐04 Jul‐04 Jan‐05 Jul‐05 Jan‐06 Jul‐06 Jan‐07 Jul‐07 Jan‐08 Jul‐08 Jan‐09
Debt Service Payments as a Percent of Disposable Personal Income
15
Percent of Disposab Income ble
14
Households lowered debt obligations with Households lowered debt obligations with stimulus payments in 2Q2008
13
12
11
10
1Q1980 1Q1981 1Q1982 1Q1983 1Q1984 1Q1985 1Q1986 1Q1987 1Q1988 1Q1989 1Q1990 1Q1991 1Q1992 1Q1993 1Q1994 1Q1995 1Q1996 1Q1997 1Q1998 1Q1999 1Q2000 1Q2001 1Q2002 1Q2003 1Q2004 1Q2005 1Q2006 1Q2007 1Q2008
18
Source: Federal Reserve Board
What to Expect: 2009: Not a Good Year
• Low interest rates • Federal bailout of the banks/financial institutions Federal bailout of the banks/financial institutions gears up in earnest – not sure about housing • N ti GDP Negative GDP growth first two quarters (at least) th fi t t t ( t l t) • Mortgage rates fall, but tighter underwriting • Foreclosures bottom‐out by year end, maybe • Moderate inflation Moderate inflation • Significant job losses for first half, at least • P ibl t k Possible stock market rally k t ll
19
What Have We Learned In 2 Millennia? Millenni ?
“The budget should be balanced, the Treasury should be refilled, public debt should be refilled reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living li i on public assistance." bli i t "
Cicero - 55 BC
20
Texas Economy 2008
• Running ahead of US economy • Employment steady increase • Relatively Low Unemployment • Population Growth • Housing market still relatively strong • Commercial development slow down
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4 3 2 1 0 -1 -2 -3 3
Annual Employment Growth Rates for US and Texas
Texas
US
Texas was the only state reporting an increase in total jobs added between December 2007 – December 2008 with 153,700 jobs created. Every other state had fewer jobs in 12/2008 vs. 12/2007.
Oct-00 Oct-01 Oct-02 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Oct-08 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08
22
Source: BLS, SAAR
Jan-09
Apr-00
Apr-01
Apr-02
Apr-03
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
2009 Projected Job Growth by MSA
Y/Y Percent Change
23
Global Insight
The Republic of Texas !! p
1 United States 2 Japan 3 Germany 3 Germany 4 China 5 United Kingdom 6 France 7 Italy 8 Canada 9 Spain 10 Brazil 10 Brazil 11 TEXAS 12 Russia 13 India
Source: World Bank and U.S. Bureau of Economic Analysis
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The Texas Outlook for 2009
• Still vulnerable t US conditions, especially l bl to diti i ll in capital markets • E Economy still strongly tied t energy till t l ti d to • Texas job growth 1% to 1.5% IF no major downsizing i energy i d t d i i in industry • Texas housing markets generally strong but “spotty” b t“ tt ” • Fall in overall residential demand: tighter credit, l dit less i investment b i t t buying, l less second d home • Si ifi Significant decline in commercial real t d li i i l l estate
25
$140 $130 $120 $110 $100 $90 $80 $ 0 $70 $60 $50 $40 $30 $20 $10
Price of West Texas Intermediate Crude C d per B Barrel l
Source: Federal Reserve Bank of Dallas
26
Jun‐08, 133.93
Jan-85 Jul-85 Jan-86 Jul-86 Jan-87 Jul-87 Jan-88 Jul-88 Jan-89 Jul-89 Jan-90 Jul-90 Jan-91 Jul-91 Jan-92 Jul-92 Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09
1,000 1 000
100
200
300
400
500
600
700
800
900
0
Rigs peaked at 1,445 in August 1981 Rig count has fallen by 197 rigs or 21.3% Rig count has fallen by 197 rigs or 21.3%
Texas Rotary Rig Count
Source: Baker Hughes, Federal Reserve Bank of Dallas
Apr‐99, 186
Sep‐08, 927
Feb‐09, 616
27
Jan-85 Jul-85 Jan-86 Jul-86 Jan-87 Jul-87 Jan-88 Jul-88 Jan-89 Jul-89 Jan-90 Jul-90 Jan-91 Jul-91 Jan-92 Jul-92 Jan-93 Jul-93 Jan-94 Jul-94 Jan-95 Jul-95 Jan-96 Jul-96 Jan-97 Jul-97 Jan-98 Jul-98 Jan-99 Jul-99 Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09
120
112
114
116
118
108 110
(1987=100) (1987 100)
122
124
126
128
130
Jan-95 5 Jun-95 5 Nov-95 5 Apr-96 6 Sep-96 6 Feb-97 7 Jul-97 7 Dec-97 7 May-98 8 Oct-98 8 Mar-99 9 Aug-99 9 Jan-00 0 Jun-00 0 Nov-00 0 Apr-01 1 Sep-01 1 Feb-02 2 Jul-02 2 Dec-02 2 May-03 3 Oct-03 3 Mar-04 4 Aug-04 4 Jan-05 5 Jun-05 5 Nov-05 5 Apr-06 6 Sep-06 6 Feb-07 7 Jul-07 7 Dec-07 7 May-08 8
28
Texas Index of Leading Indicators
Source: Federal Reserve Bank of Dallas
Oct-08 8
Percent of Housing Units with a Foreclosure Action in 2008
29
Top Ten States Based on Percent of Housing Units Filed Upon in 2008
State Rank k State S
United States 1 2 3 4 5 6 7 8 9 10 24 Nevada N d Florida Arizona California C lif i Colorado Michigan Ohio Georgia Illinois New Jersey Texas
Total Properties with Filings i h ili
2,330,483 77,693 77 693 385,309 116,911 523,624 50,396 106,058 113,570 85,254 99,488 62,514 96,157
Cumulative Percent of Filings ili
100.0% 3.3% 3 3% 19.9% 24.9% 47.4% % 49.5% 54.1% 58.9% 62.6% 66.9% 69.5%
Percent of Homes Filed Upon
1.84% 7.29% 4.52% 4.49% 3.97% 2.41% 2.35% 2.25% 2.20% 1.91% 1.80% 1.04%
30
Source: RealtyTrac, Inc.
Percent of Foreclosures Started by Type of Loan 3Q2008
United States
Type of Loan Percent of Outstanding Loans Percent of Foreclosures Started
Texas
Percent of Outstanding Loans Percent of Foreclosures Started
31
Source: Mortgage Bankers Association, National Delinquency Survey, Estimates by Real Estate Center
Monthly Foreclosure Filings y g
110,000 100,000 90,000 80,000 70,000 70 000 60,000 50,000 40,000 30,000 20,000 10,000 0
Jun‐05 Jun‐06 Jun‐07 Aug‐05 Oct‐05 Dec‐05 Feb‐06 Apr‐06 Aug‐06 Oct‐06 Dec‐06 Feb‐07 Apr‐07 Aug‐07 Oct‐07 Dec‐07 Feb‐08 Apr‐08 Jun‐08 Aug‐08 Oct‐08 Dec‐08
32
Texas foreclosures have been very moderate compared to the US trend. US f foreclosures are up 17% YTD2008 l YTD2008; Texas is down 31% YTD2008.
US
Texas
Source: RealtyTrac, Inc.
Data include Notices of Trustee Sales plus Notices of Foreclosure Sale
US Mortgages in Foreclosure at the End of the Quarter 13.0
12.0 11.0 11 0 10.0 9.0
Per rcent of Loans s
US has approximately 6.9 million subprime loans or about 12.1% of total of 56.8 million mortgage loans.
12.6
8.0 80 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0
Prime Loans
Subprime Loans
3.0
All Loans
1.6
1Q1998 2Q1998 3Q1998 4Q1998 1Q1999 2Q1999 3Q1999 4Q1999 1Q2000 2Q2000 3Q2000 4Q2000 1Q2001 2Q2001 3Q2001 4Q2001 1Q2002 2Q2002 3Q2002 4Q2002 1Q2003 2Q2003 3Q2003 4Q2003 1Q2004 2Q2004 3Q2004 4Q2004 1Q2005 2Q2005 3Q2005 4Q2005 1Q2006 2Q2006 3Q2006 4Q2006 1Q2007 2Q2007 3Q2007 4Q2007 1Q2008 2Q2008 3Q2008
Source: Mortgage Bankers Association, National Delinquency Survey
33
P Percent of Loans
0.0
Texas has approximately 475,000 subprime loans or about 12.2% of total of 3.9 million mortgage loans.
1.0
Prime Loans All Loans Subprime Loans
2.0
4.0
5.0
6.0
7.0
3.0 30
8.0 80
Texas Mortgages in Foreclosure at the End of the Quarter
Source: Mortgage Bankers Association, National Delinquency Survey
34
5.87
1.43
1Q1998 8 2Q1998 8 3Q1998 8 4Q1998 8 1Q1999 9 2Q1999 9 3Q1999 9 4Q1999 9 1Q2000 0 2Q2000 0 3Q2000 0 4Q2000 0 1Q2001 1 2Q2001 1 3Q2001 1 4Q2001 1 1Q2002 2 2Q2002 2 3Q2002 2 4Q2002 2 1Q2003 3 2Q2003 3 3Q2003 3 4Q2003 3 1Q2004 4 2Q2004 4 3Q2004 4 4Q2004 4 1Q2005 5 2Q2005 5 3Q2005 5 4Q2005 5 1Q2006 6 2Q2006 6 3Q2006 6 4Q2006 6 1Q2007 7 2Q2007 7 3Q2007 7 4Q2007 7 1Q2008 8 2Q2008 8 3Q2008 8
0.63
The US Housing Market
The “Un‐Magnificent” Seven: Th “U M ifi t” S California Florida Nevada Arizona Ohio Ohio Michigan (fill in the blank) (fill in the blank)
35
$250,000
US Median Home Prices Since 1990
National House Price Bubble
$225,000
$200,000
$175,000
Prices in 2001 stayed above trend, despite a national recession.
$150,000
$125,000
$100,000
The national housing boom started around January 2002 creating a dJ 2002 i house price bubble that peaked at around $230,000 in 2006
$75,000
$50,000 Jan-90 0 Jul-90 0 Jan-91 1 Jul-91 1 Jan-92 2 Jul-92 2 Jan-93 3 Jul-93 3 Jan-94 4 Jul-94 4 Jan-95 5 Jul-95 5 Jan-96 6 Jul-96 6 Jan-97 7 Jul-97 7 Jan-98 8 Jul-98 8 Jan-99 9 Jul-99 9 Jan-00 0 Jul-00 0 Jan-01 1 Jul-01 1 Jan-02 2 Jul-02 2 Jan-03 3 Jul-03 3 Jan-04 4 Jul-04 4 Jan-05 5 Jul-05 5 Jan-06 6 Jul-06 6 Jan-07 7 Jul-07 7 Jan-08 8 Jul-08 8 Jan-09 9
36
Source: NAR, Real Estate Center at Texas A&M University
US and Texas Appreciation
3Q2008 Purchase Only Index Change Year over Year 3Q2008 Purchase Only Index Change Year over Year 3Q2008 Purchase Only Index Change Year over Year
30% 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% 30%
1Q1992 3Q1992 1Q1993 3Q1993 1Q1994 3Q1994 1Q1995 3Q1995 1Q1996 3Q1996 1Q1997 3Q1997 1Q1998 3Q1998 1Q1999 3Q1999 1Q2000 3Q2000 1Q2001 3Q2001 1Q2002 3Q2002 1Q2003 3Q2003 1Q2004 3Q2004 1Q2005 3Q2005 1Q2006 3Q2006 1Q2007 3Q2007 1Q2008 3Q2008
US = -6.0% Texas = 1.2% California = -25.6% Florida = -20.6%
California
Florida Texas
US
Arizona down 17.9%; Wash. D. C. down 7.6% Maryland down 9.4% Michigan down 9 9% 9.9% Nevada down 24.1% Rhode Island down 8.8% Virginia down 7.4%
37
Source: FHFA
20072007-2008 Bottom 10 Job-Creating States Job0 ‐50 ‐100 ‐150 200 ‐200 ‐250 ‐300
Mic chigan Cal lifornia New York w G Georgia North Ca arolina A Arizona In ndiana F Florida Illinois Ohio Pennsy ylvania ‐257.4 ‐173.0 ‐120.2 ‐119.9 ‐118.4 ‐115.4 ‐111.9 ‐100.7 100 7 ‐89.0 ‐76.2
Thousands of jobs lost December 2007 to December 2008
Loss of jobs adding to the housing problems in key states
‐255.2
Source: BLS
38
(000s)
New and Existing SF Home Sales U.S.
7,000
6,000
5,000
4,000 4 000
Existing SF sales are down 36% from 2005 peak
3,000
2,000
New SF sales are down 78% from 2005 peak
1,000
0
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08
39
Sources: US Census Bureau , NAR, NAHB, NBER
100
110
120
130
140
150
(000)
50
Jan 1990 0 Jul 1990 0 Jan 1991 1 Jul 1991 1 Jan 1992 2 Jul 1992 2 Jan 1993 3 Jul 1993 3 Jan 1994 4 Jul 1994 4 Jan 1995 5 Jul 1995 5 Jan 1996 6 Jul 1996 6 Jan 1997 7 Jul 1997 7 Jan 1998 8 Jul 1998 8 Jan 1999 9 Jul 1999 9 Jan 2000 0 Jul 2000 0 Jan 2001 1 Jul 2001 1 Jan 2002 2 Jul 2002 2 Jan 2003 3 Jul 2003 3 Jan 2004 4 Jul 2004 4 Jan 2005 5 Jul 2005 5 Jan 2006 6 Jul 2006 6 Jan 2007 7 Jul 2007 7 Jan 2008 8 Jul 2008 8
40
60 1212-Month Moving Average
70
80
90
US SF Housing Permits
Source: US Census Bureau, Real Estate Center at Texas A&M
100 260 300 340
(000s Units)
140
180
220
380
420
460
500
540
580
620
660
700
740
780
820
Excess units plus new construction in 2008 at annual sales of around 500,000 will take several years to get back to balance.
Inventory of New SF Homes For Sale
Source: US Census Bureau, NAHB
41
Jan-00 Mar-00 May-00 Jul-00 Oct-00 Dec-00 Feb-01 Apr-01 Jun-01 Aug-01 Oct-01 Dec-01 Feb-02 Apr-02 Jun-02 Aug-02 Oct-02 Dec-02 Feb-03 Apr-03 Jun-03 Aug-03 Oct-03 Dec-03 Feb-04 Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb-05 Apr-05 Jun-05 Aug-05 Oct-05 Dec-05 Feb-06 Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08
Months Inventory
3
4
5
6
7
8
9
12 11
10
3.5
4.5
5.5
7.5
8.5
9.5
6.5 6
11.5
10.5
Texas Housing Markets
42
Texas MSAs 2008
Sales S l
Amarillo Austin Beaumont B Brownsville Bryan–College Station Corpus Christi Dallas El Paso Fort Worth Houston Laredo Longview‐Marshall Lubbock Port Arthur San Antonio Tyler Victoria Waco TEXAS 3,009 22,404 2,107 908 2,471 3,773 50,291 4,776 9,658 65,070 65 070 970 2,297 3,245 924 19,367 3,078 854 2,330 231,371
Change from Change from 2007
down 9% down 20% down 15% d 15% down 16% down 2% down 16% down 16% down 23% down 16% down 16% down 16% down 8% down 11% down 7% down 9% down 19% down 14% down 7% down 1% down 16%
Median Price
$124,600 $188,200 $130,100 $130 100 $92,700 $144,200 $138,900 $156,100 $134,600 $117,100 $151,800 $151 800 $123,200 $125,000 $110,300 $114,700 $148,400 $133,800 $ $126,100 , $111,000 $146,900
Change from Change from 2007
up 5% up 2% up 3% 3% down 19% up 4% up 2% down 2% up 2% down 1% flat down 8% up 1% up 6% up 8% flat Flat up 5% p Down 4% flat
Months Months' Inventory
5.7 5.4 6.9 69 Na 5.0 9.4 5.8 11.2 5.6 5.8 58 8.8 6.5 5.3 6.3 7.6 10.2 5.9 7.6 6.4
43
Source: Real Estate Center at Texas A&M University
Texas Home Sales
35,000
2008 sales equal 2003-2004 levels
2006
30,000
2007
25,000
2005
2004 2003 2008
20,000
15,000 15 000
2008 sales down 16%
10,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
44
Dec
Source: Real Estate Center at Texas A&M University
‐5 0 5
‐20 10 15 20
Jan‐9 92 Jul‐9 92 Jan‐9 93 Jul‐9 93 Jan‐9 94 Jul‐9 94 Jan‐9 95 Jul‐9 95 Jan‐9 96 Jul‐9 96 Jan‐9 97 Jul‐9 97 Jan‐9 98 Jul‐9 98 Jan‐9 99 Jul‐9 99 Jan‐0 00 Jul‐0 00 Jan‐0 01 Jul‐0 01 Jan‐0 02 Jul‐0 02 Jan‐0 03 Jul‐0 03 Jan‐0 04 Jul‐0 04 Jan‐0 05 Jul‐0 05 Jan‐0 06 Jul‐0 06 Jan‐0 07 Jul‐0 07 Jan‐0 08 Jul‐0 08 Jan‐0 09
45
‐15
‐10
Texas Home Sales Cycles
Y/Y Percentage Rate of Change in 12-M h Moving Average P R f Ch i 12-Month M i A
Source: Real Estate Center at Texas A&M University
Months Months Inventory
Months Inventory of Homes For Sale and FHFA Appreciation Rate
Average Annual Appreciation = 4.1%
Appreciation Appreciation Rate
11 10 9 8 7 6 5 4 3 2
Jan-92 2 Jan-93 3 Jan-94 4 Jan-95 5 Jan-96 6 Jan-97 7 Jan-98 8 Jan-99 9 Jan-00 0 2 Jan-02 Jan-03 3 Jan-04 4 Jan-05 5 Jan-06 6 Jan-07 7 Jan-08 8 Jan-01 Jul-92 2 Jul-93 3 Jul-94 4 Jul-95 5 Jul-96 6 Jul-97 7 Jul-98 8 Jul-99 9 Jul-00 0 Jul-02 2 Jul-03 3 Jul-04 4 Jul-05 5 Jul-06 6 Jul-07 7 Jul-08 8 Jul-01
9.0% 8.0%
FHFA Appreciation Rate
7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
Source: FHFA, Real Estate Center at Texas A&M University
46
Annual Texas Home Sales
310,000 310 000
292,805
290,000 270,000 250,000 230,000 210,000 190,000 170,000 150,000 150 000 130,000 110,000 90,000 70,000 50,000 ,
2007 = about 6% decline from 2006. 2008 = 16% less than ’07 2009 = sales down 10% to 15% from 2008 to 2001-2003 levels
216,147
275,582 266,842
241,020 231,371 208,234
201,528 201 528 196,401 184,056 170,638 146,395 138,123 138 123 122,134 116,604 107,107 100,047 99,619 121,823 188,738
196,665
Source: Real Estate Center at Texas A&M University
47
2009p
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
$120,000 $130,000 $140,000 $150,000 $160,000
$110,000
$100,000 $100 000
$60,000
$70,000
$80,000
$90,000
1212-Month Moving Average g g
First time the moving average has actually declined! g g y
Texas Median Home Price
Source: Real Estate Center at Texas A&M University
48
Jan-91 Jul-91 2 Jan-92 Jul-92 2 Jan-93 3 Jul-93 3 Jan-94 4 Jul-94 4 Jan-95 5 Jul-95 5 Jan-96 6 Jul-96 6 Jan-97 7 Jul-97 7 Jan-98 8 Jul-98 8 Jan-99 9 Jul-99 9 Jan-00 0 Jul-00 0 Jan-01 Jul-01 2 Jan-02 Jul-02 2 Jan-03 3 Jul-03 3 Jan-04 4 Jul-04 4 Jan-05 5 Jul-05 5 Jan-06 6 Jul-06 6 Jan-07 7 Jul-07 7 Jan-08 8 Jul-08 8 Jan-09 9
$110,000
$100,000
$120,000
$140,000
$150,000
$160,000
$130,000 $130 000
$90,000
$80,000 ,
Texas Median Home Price g g 3-Month Moving Average
Source: Real Estate Center at Texas A&M University
49
Jan-98 May-98 Sep-98 Jan-99 May-99 Sep-99 Jan-00 May-00 Sep-00 Jan-01 May-01 Sep-01 Jan-02 May-02 Sep-02 Jan-03 May-03 Sep-03 Jan-04 May-04 Sep-04 Jan-05 May-05 Sep-05 Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09
4Q2008 FHFA Home Price Index
3Q2008 to 4Q2008 Q Q 4Q2007 to 4Q2008 Q Q
2.7% 0.1% 4.4% 3.1% ‐2.6% 2.6% 5.5% 1.8% 1.9% ‐0.4% 1.2% 3.7% 2.5% 4.7% 1.9% 4.5% 0.1% 10.4% ‐2.7% 4.1% ‐1.6% 1.6% 2.0% 1.1% 1.0% 6.2% ‐1 7% 1.7% ‐2.0% 2.1%
50
Texas was one of only six states with positive home price appreciation between between 4Q2007 and 4Q2008.
Abilene Amarillo Austin‐Round Rock Beaumont‐Port Arthur Brownsville Harlingen Brownsville‐Harlingen College Station‐Bryan Corpus Christi Dallas‐Plano‐Irving El Paso Fort Worth Arlington Fort Worth‐Arlington Houston Killeen‐Temple‐Fort Hood Laredo Longview Lubbock McAllen‐Edinburg‐Mission Midland Odessa San Angelo San Antonio San Antonio Sherman‐Denison Texarkana, TX, AR Tyler Victoria Waco Wichita Falls TEXAS
1.5% ‐0.9% ‐0.1% 2.6% ‐0.6% 0.6% ‐0.5% 2.5% 0.2% ‐0.3% 1.1% 0.0% 0.6% 8.5% ‐1.1% 0.8% ‐2.8% 6.3% ‐6.8% 3.4% ‐1.6% 1.6% ‐1.9% ‐0.2% 1.9% 1.5% ‐1 4% 1.4% 0.6% 0.2%
Source: Federal Housing Finance Agency, 4Q 2008 HPI Report, February 24, 2009
Texas Median Home Prices
$160,000 $160 000 $150,000 $140,000 $130,000 $120,000
112,100 119,400
Essentially flat in 2008 +0.75% to -3% in 2009.
130,100 127,700 124,500
148,000
147,300 146,900 143,100 136,800
143,000
$110,000
100,900
$100,000
90,600
96,200
$90,000 $90 000 $80,000
71,200 78,200 75,200 68,500 68,100 80,000 81,600
86,400
$70,000 $60,000 $50,000
Source: Real Estate Center at Texas A&M University
2009p p
51
1989 9
1990 0
2 1992
1993 3
1994 4
1995 5
1996 6
1997 7
1998 8
1999 9
2000 0
2 2002
2003 3
2004 4
2005 5
2006 6
2007 7
2008 8
1991
2001
Texas SF Building Permits
180,000 160,000 140,000 120,000
103,252
1984 82% of 1983 peak 1985 66% of 1983 peak 1986 57% of 1983 peak 1987 43% of 1983 peak 1988 35% of 1983 peak
2006 98% of 2005 peak 2007 72% of 2005 peak 2008p 48% of 2005 peak 2009e 36% of 2005 peak
166,203 163,032 151,384 137,493 122,913
120,366
111,915 108,782 101,928 99,912
100,000
84,565
80,000 60,000 40,000 20,000 0
1980 1981
78,714 67,870 67 870 161 66,161 66 67,964 67 964 59,143
83,132 82,228 70,452 70,421 69,964 59,543 46,209
80,000
60,000
43,975
38,233 36,658 35,908
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Source: US Census Bureau, Real Estate Center at Texas A&M
2008p
2009
52
Texas Population Growth
Lake Travis in 2050?
54
2000 – 2008 States with Population Increases > 1 million
State Texas California Florida o da Georgia Arizona North Carolina Population p Increase 3,475,163 2,885,016 2,345,527 ,3 5,5 1,498,932 1,369,573 1 369 573 1,175,914 Percent Increase 16.7% 8.5% 14.7% % 18.3% 26.7% 26 7% 14.6% 2008 Population 24,326,974 36,756,666 18,328,340 8,3 8,3 0 9,685,744 6,500,180 6 500 180 9,222,414
Source: U.S. Census Bureau
Table 4: Cumulative Estimates of the Components of Resident Population Change for the United States, Regions, States, and Puerto Rico: April 1, 2000 to July 1, 2008 (NST‐EST2008‐04),) December 22, 2008
55
Projected Texas Population
(000s)
45,000 45 000
2000 - 2030
At 50% 1990-2000 rate of immigration At 2000-2007 rate of immigration At 100% 1990-2000 rate of immigration
41,118
40,000
37,285
35,000
Between 9 and 18 million more residents between 2005 and 2030
32,737 31,831 30,858
30,000
28,006
25,000
22,811 20,946
24,327
20,000
15,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 ... 2010 2010 2010 2015 2015 2015 2020 2020 2020 2025 2025 2025 2030 2030
56
Source: U.S. Census Bureau, Texas State Demographer 2008 Projections
2030
Averaging the projections results in an increase of 13 9 million p pl b 2030 i f 13.9 illi people by 2030.
Over the next 25 years, equivalent of adding: another 12-county Dallas-Ft. 12DallasWorth metropolitan area, plus area another 10-county Houston 10metropolitan area, plus another 8-county San Antonio 8metropolitan area, plus another Corpus Christi h C Ch i i
57
Central Texas Triangle
58
Texas Age Distribution 2005-2030 2005650,000 600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 8 85+
Age
650,000
2005
Boomers
600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0
2010
Boomers
Age
650,000 600,000 550,000 500,000 450,000 50,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0
0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85+
Age
650,000
2020
Boomers
600,000 550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0
10 15 20 25 30
2030
Boomers
59
35 40 45 50 55 60 65 70 75 80 0 5
Age
85+
8 85+
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
0
5
2009 Economic and Housing 2009 Economic and Housing Update
Dr. James P. Gaines
Research Economist Real Estate Center Texas A&M University jpgaines@tamu.edu
60
61
Austin Home Sales
3,500 3,000 ,
2007
2,500
2005 2004
2006
2,000
2003
1,500
2008
1,000
2008 sales down 20%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
62
500 Dec
Source: Real Estate Center at Texas A&M University
2,000
2,500
3,000
1,000 ,
1,500 1 500
500
Jan‐9 96 Jul‐9 96 Jan‐9 97 Jul‐9 97 Jan‐9 98 Jul‐9 98 Jan‐9 99 Jul‐9 99 Jan‐0 00 Jul‐0 00 Jan‐0 01 Jul‐0 01 Jan‐0 02 Jul‐0 02 Jan‐0 03 Jul‐0 03 Jan‐0 04 Jul‐0 04 Jan‐0 05 Jul‐0 05 Jan‐0 06 Jul‐0 06 Jan‐0 07 Jul‐0 07 Jan‐0 08 Jul‐0 08
63
Source: Real Estate Center at Texas A&M University Jan‐0 09
Austin Home Sales
1212-Month Moving Average Mo ing A erage
Austin Annual Home Sales
35,000 30,000 25,000 20,000
15,583
Estimate that 2009 might look like 1999 2002 period 1999-2002 period. A 15% decline from 2008
22,567 19,793 18,621 18,392 18,716 18,135
30,284 28,048 28 048 26,905
22,393
19,000 18,000
15,000
12,597 12 439 12,439 11,459 9,926 8,503 6,426 7,159 7,581 10,571
10,000 5,000 5 000 0 1989 9 1990 0 1991 1
1992 2
1993 3
1994 4
1995 5
1996 6
1997 7
1998 8
1999 9
2000 0
2001 1
2002 2
2003 3
2004 4
2005 5
2006 6
2007 7
2008 8
Source: Real Estate Center at Texas A&M University
2009 9
Sales
500
1,500
2,000
2,500
1,000
3,000
3,500
$1-$19,999 $20,0 000-$29,999 $30,0 000-$39,999 $40,0 000-$49,999 $50,0 000-$59,999 $60,0 000-$69,999 $70,0 000-$79,999 $80,0 000-$89,999 $90,0 000-$99,999 $100,00 00-$109,999 $110,00 00-$119,999 $120,00 00-$129,999 $130,00 00-$139,999 $140,00 00-$149,999 $150,00 00-$159,999 $160,00 00-$169,999 $170,00 00-$179,999 $180,00 00-$189,999 $190,00 00-$199,999 $200,00 00-$249,999 $250,00 00-$299,999 $300,00 00-$399,999 $400,00 00-$499,999 $500,00 00-$599,999 $600,00 00-$699,999 $700,00 00-$799,999 $800,00 00-$899,999 $900,00 00-$999,999 $1 1,000,000 > 65
0
2008 Austin Sales by Price and DOM
Source: Real Estate Center at Texas A&M University
0
50
DoM
100
150
200
250
300
350
Austin Months Inventory of Homes For Sale and OFHEO Appreciation Rate
8 7 6 5 4 3 2 1 0
Jan-92 2 Jul-92 2 Jan-93 3 Jul-93 3 Jan-94 4 Jul-94 4 Jan-95 5 Jul-95 5 Jan-96 6 Jul-96 6 Jan-97 7 Jul-97 7 Jan-98 8 Jul-98 8 Jan-99 9 Jul-99 9 Jan-00 0 Jul-00 0 Jan-01 Jul-01 Jan-02 2 Jul-02 2 Jan-03 3 Jul-03 3 Jan-04 4 Jul-04 4 Jan-05 5 Jul-05 5 Jan-06 6 Jul-06 6 Jan-07 7 Jul-07 7 Jan-08 8 Jul-08 8 Jan-09 9 Source: OFHEO, Real Estate Center at Texas A&M University
66
15.0%
Austin averages 4.8 months inventory
Austin averaged 6% per year appreciation
14.0% 13.0% 12.0% 11.0% 10.0% 9.0% 9 0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 2 0% 1.0% 0.0% -1.0%
Austin Median Home Prices
1212-Month Moving Average
$200,000 $190,000 $190 000 $180,000 $170,000 $160,000 $150,000 $140,000 $140 000 $130,000 $120,000 $110,000 $100,000
Oct-0 02 Aug-0 03 Oct-0 07 Aug-0 08 Jan-9 99 Jun-9 99 Nov-9 99 Apr-0 00 Sep-0 00 Feb-0 01 Jul-0 01 Dec-0 01 Mar-0 03 Jan-0 04 Jun-0 04 Nov-0 04 Apr-0 05 Sep-0 05 Feb-0 06 Jul-0 06 Dec-0 06 Mar-0 08 May-0 02 May-0 07 Jan-0 09
67
Median home prices are flattening
Source: Real Estate Center at Texas A&M University
Austin MSA: Bastrop, Caldwell, Hays, Travis & Williamson Counties p, , y ,
3,500,000
3,449,906
Austin MSA Population
3,000,000
At 50% 1990-2000 rate of immigration At 2000-2007 rate of immigration At 100% 1990 2000 rate of immigration 1990-2000 On average about 1,450,000 more people or roughly double the current population
3,030,478
2,500,000
2,272,224
2,000,000
1,598,161
1,500,000 1 500 000
1,265,846
1,000,000
585,051
851,898
500,000
0
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2010 2010 2010 2015 2015 2015 2020 2020 2020 2025 2025 2025
68
Source: US Census Bureau, Texas State Data Center and Demographer
2030 2030 2030
Austin Median Home Prices
200,000 190,000 180,000 170,000 170 000 160,000 150,000 140,000 140 000 130,000 120,000 110,000 100,000 90,000 80,000 , 70,000 60,000 50,000
188,200 184,200 172,200 161,300 150,600 144,500 154,500 154,800 154,100
126,600 117,900 112,600 108,700 100,500 96,000 91,600 83,700 73,000 73 000 76,400
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Source: Real Estate Center at Texas A&M University
2008
69
P Percent of Home Sold es
$29,999 or less o 30,000 - 39,999 3 40,000 - 49,999 4 50,000 - 59,999 5 60,000 - 69,999 6 70,000 - 79,999 7 80,000 - 89,999 8 90,000 - 99,999 9 100,000 - 11 19,999 120,000 - 13 39,999
03 Median
140,000 - 15 59,999 160,000 - 17 79,999
08 Median
Price Distribution of Austin MLS Homes Sold: 1998 vs. 2008 16.0
1998 2008
98 Median
Source: Real Estate Center at Texas A&M University
180,000 - 19 99,999 200,000 - 24 49,999 250,000 - 29 99,999 300,000 - 39 99,999 400,000 - 49 99,999 500,00 and 00 mo ore
70
15.0 14.0 13.0 12.0 11.0 10.0 9.0 90 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0
Median Price 1998 $ 117,900 2003 $ 154,800 2008 $ 188,200
Austin SF Building Permits
20,000 18,000 16,000 14,000 12,000 12 000 10,000
8,715 10,095 9,115 8,456 7,435 7 435 6,3696,250 8,025 10,805
1985 63% of 1984 peak 1986 59% of 1984 peak 1987 27% of 1984 peak 1988 24% of 1984 peak 1989 22% of 1984 peak
2007 69% of 2006 peak 2008 46% of 2006 peak 2009 31% of 2006 peak
17,615 17,346
14,309 13,045 11,704 11 704 12,116 11,072 12,120
8,000 8 000 6,000
4,277 4,643
7,567 7 567
5,496 5,134 4,641 2,994 2,426 2,0501,9101,916 3,464 ,
5,400
4,000 2,000 0
1980
Source: U. S. Census Bureau, Real Estate Center
2009e
71
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008