Houston Independent Real Estate Brokers Association

HIREBA HOUSTON INDEPENDENT REAL ESTATE BROKERS ASSOCIATION 2009 Houston Housing Market g July 22, 2009 Dr. James P. Gaines Dr. James P. Gaines Research Economist Real Estate Center Real Estate Center  at Texas A&M University REAL ESTATE CENTER at TEXAS A&M UNIVERSITY Mays School of Business Mays School of Business recenter.tamu.edu Publications P bli i Tierra Grande Monthly Economic  Reports Technical Reports Market Reports RECON Newsletter REC Website 2 Topics • The Economy • The Real Estate Markets: National and Texas • Future Prospects for p Texas 3 Length of US Recessions 1900-Present 1900September‐02 May‐07 January‐10 January‐13 August‐18 January‐20 May‐23 October‐26 August 29 August‐29 May‐37 February‐45 November‐48 July‐53 August‐57 April‐60 December‐69 November‐73 January 80 January‐80 July‐81 July‐90 March‐01 December‐07 0 5 10 15 20 25 Months Duration Average  Recession is 15  months Rec cession Start Da ate Current  Recession is 19  months and  counting 30 35 40 45 50 Source: NBER “Big Picture” Economic Themes on a ModernModern Day Depression M d -D D i 1. Credit Contraction 2. Price/Asset Deflation 3. Household Wealth  3 Household Wealth Devastation 4. Profit Compression Profit Compression 5. Employment Destruction 6. Inventory Reduction 6 Inventory Reduction 7. Federal Government Intrusion 7 F d lG tI t i 5 How Much is $1 TRILLION? • 1 plus 12 zeros:  1,000,000,000,000 l • 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 • Interest on the debt is about $500 Billion per year,  fourth largest expenditure in Federal budget  (Medicare‐Medicaid, SS, defense) (M di M di id SS d f ) • Majority of Debt (65%) is held by China (22%), Japan  (18.5%), UK (11%), Caribbean Banking Centers (7%)  (18 5%) UK (11%) C ibb B ki C (7%) and Oil Exporting Countries* (6%) * Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia, the United Arab Emirates, 6 Algeria, Gabon, Libya, and Nigeria. The New Dollar 7 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 1.0 0.0 ‐1.0 ‐2.0 20 ‐3.0 ‐4.0 ‐5.0 ‐6.0 ‐7.0 ‐8.0 7.5 6.4 4.8 48 3.5 2.7 2.1 1 1.2 1.6 0.2 2.2 2.4 1.2 2.7 3.0 2.5 3.5 3.6 3.0 2.6 1.3 13 0.8 0.1 3.8 2.7 1.5 4.8 4.8 48 48 2.8 0.9 ‐0.5 ‐0.5 ‐1.4 ‐0.2 ‐0.5 ‐6.3 ‐6.1 1Q2000 3Q2000 1Q2001 3Q2001 1Q2002 2 3Q2002 2 1Q2003 3Q2003 1Q2004 4 3Q2004 4 1Q2005 3Q2005 1Q2006 3Q2006 1Q2007 3Q2007 1Q2008 3Q2008 8 Source: Bureau of Economic Analysis 1Q2009 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 -2.0 -1.0 Source: Bureau of Labor Statistics 9 Overall Inflation Rate Yr/Yr Rate of Change in the Monthly Index, US Urban, All Items, Seasonally Adjusted Jan-8 87 Jul-8 87 Jan-8 88 Jul-8 88 Jan-8 89 Jul-8 89 Jan-9 90 Jul-9 90 Jan-9 91 Jul-9 91 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 Consumer Confidence Index 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 10 Jul-07, 111.9 54.9 Consumer Confidence expanded significantly in May, but still down 51% from peak in July 2007 Source: The Conference Board (1985=100) Billions of Dollars s 11,000 10,000 6,000 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 7,000 Personal consumption represents about 70% of US economy and is y declining. 8,000 , 9,000 9 000 Personal Consumption Expenditures Source:  Department of Commerce -4% 0% 1% 2% 3% 4% 5% -2% -1% -5% 5% Jan-01 Apr-01 Jul-01 Oct-01 Jan-02 Apr-02 Jul-02 Oct-02 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 12 -3% 3% Houston H Annual Employment Growth Rates for US, US Texas and DFW Source: BLS, Real Estate Center at Texas A&M University US Jan-09 Apr-09 Texas Small Business Outlook “Planning To Hire People In The Next Six Months” 25 20 Ne % of Respo et ondents 15 10 5 0 -5 -10 Jan n-98 Jan n-99 Jan n-00 Jan n-01 Jan n-02 Jan n-03 Jan n-04 Jan n-05 Jan n-06 Jan n-07 Jan n-08 Jan n-09 Source: National Federation of Independent Business Debt Service Payments as a Percent of Disposable Personal Income 15 Percent of Disposab Income ble 14 It would take either a 25% slice in debt, a 32% surge in income debt or a 200bp plunge in interest rates to achieve a 10.5% D-I ratio. 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 1Q2009 14 Source: Federal Reserve Board Corporate Profits (Quarterly With Inventory Valuation & Capital Consumption Adjustment) $1,300 $1,200 $1,100 $ $1,000 $900 Billions $800 $700 $600 $500 $400 $300 $200 1Q1990 0 1Q1991 2 1Q1992 1Q1993 3 1Q1994 4 1Q1995 5 1Q1996 6 1Q1997 7 1Q1998 8 1Q1999 9 1Q2000 0 1Q2001 2 1Q2002 1Q2003 3 1Q2004 4 1Q2005 5 1Q2006 6 1Q2007 7 1Q2008 8 1Q2009 9 Source: Bureau of Economic Analysis A Thought from Maxine "BAIL EM OUT! ????” Wow, Wow back in 1990 the Government 1990, seized the Mustang Ranch brothel in Nevada for tax evasion and, as required by law, tried to run it. They failed, and it closed. failed closed Now we are trusting the economy of our country, the auto industry, the banking system and healthcare to the same nit-wits who couldn't make money running a whore house and selling whiskey! End the Recession 1. Businesses make profits 2. Financial/Credit systems operate normally 3. 3 Consumers spend 4. Households’ balance sheets normalized 5. Employment stabilizes and grows 6. Home prices stabilize and i 6 H i t bili d increase 7. Investor confidence returns 17 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 18 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 probably down about 2% for th f the year unless significant change i l i ifi t h in second half • T Texas h housing markets “ i k t “spotty” tt ” • Continued fall in overall residential sales • Significant decline in commercial real estate 19 $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 Price fell 71% from peak before rebounding Source: Federal Reserve Bank of Dallas 20 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 1 000 900 800 700 600 500 400 300 200 Texas Rotary Rig Count Sep‐08, 927 Rig count has fallen 61% since September 2008  Rig count has fallen 61% since September 2008 and by half since January 2009 Jan‐09, 730 May‐09, 365 Apr‐99, 186 100 0 Jan-85 Jan-86 Jan-87 Jan-88 Jan-89 Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 21 Source: Baker Hughes, Federal Reserve Bank of Dallas Jan-09 110 115 100 105 120 125 130 135 90 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 22 95 (1987=100) (1987 100) Texas Index of Leading Indicators Index has fallen 21% since October 2007 peak Source: Federal Reserve Bank of Dallas 128.2 101.3 Oct-08 8 Mar-09 9 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 23 Foreclosures 24 Seriously Delinquent by State 1Q2009 Seriously Delinquent  Rate Greater than 9.95% 7.25% ‐ 9.95% 0 ‐ 7.24% National Rate = 7.24% Source: Mortgage Bankers Association, National Delinquency Survey, (90-days delinquent + FC Inventory) Total Delinquency & Foreclosure Filings 2008 & YTD 2009 • US 3,132,382, up 43% • US 1,569,728, up 31% •T Texas 127,833, d 127 833 down 15 0% 15.0% •T Texas 52,024, d 52 024 down 12 0% 12.0% • California 831,228, up 80% • California 454,130, up 46% • Florida 498 020 up 78% 498,020, • Florida 257 811 up 56% 257,811, • Ohio 144,151, up -6% • Idaho 9,119, up 145% • Michigan 141,572, up 4% g , , p % • Illinois 68,652, up 59% , , p % • Arizona 152,707, up 118% • Arizona 84,779, up 62% • Nevada 123,183, up 89% • Nevada 83,449, up 131% • Georgia 115,536, up 26% • Oregon 18,411, up 135% • Utah 12,577, up 105% Source:  RealtyTrac, Inc. Data include all default, delinquency and foreclosure filings reported. The same property often has more than one filing. Monthly Foreclosure Filings y g 120,000 110,000 100,000 , 90,000 80,000 70,000 60,000 50,000 , 40,000 30,000 20,000 10,000 0 Oct-05 Oct-06 Oct-07 Aug-05 Aug-08 Jun-05 Feb-06 Jun-06 Feb-07 Jun-07 Feb-08 Jun-08 Oct-08 Aug-06 Aug-07 Dec-05 Dec-06 Dec-07 Dec-08 27 Texas foreclosures have been modest compared to US trend. US foreclosures were up 19% in 2008. Texas was down 30.5%. US Jan-Feb YTD 2009 filings : US up 41%, Texas is down 29% Texas Feb-09 Apr-06 Apr-07 Apr-08 Source:  RealtyTrac, Inc.  Data include Notices of Trustee Sales plus Notices of Foreclosure Sale Per rcent of Loans s 15.0 14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 60 5.0 4.0 3.0 30 2.0 1.0 0.0 Prime Loans Subprime Loans US Mortgages in Foreclosure at the End of the Quarter Source: Mortgage Bankers Association, National Delinquency Survey All Loans 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 4Q2008 1Q2009 3.9 2.49 2 49 14.3 P Percent of Loans 0.0 Prime Loans 1.0 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 Q Source: Mortgage Bankers Association, National Delinquency Survey Subprime Loans All Loans 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 4Q2008 8 1Q2009 9 1.66 0.92 5.9 The US Housing Market 30 National Housing Market YTD 2009 Nat o a ous g a et 009 Existing Home Sales declined 12% g Median Existing Home Prices fell by 14.6%; months  inventory increased from 8.7 to 10 months New Home Sales declined 37.5%, months of  inventory ballooned to 13.6 months New Home Construction plummeted  36% N H C t ti l t d 36% 1990’s underwriting; ample funds for prime  mortgages and FHA mortgages and FHA Refis dominating the mortgage market Affordability operative market word Affordability operative market word New and Existing SF Home Sales U.S. 7,000 , 6,500 6,000 5,500 5,000 4,500 4 500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 1 000 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jul-98 Jul-99 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 32 1,450 , Existing SF sales are down 36% from 2005 peak (left scale) 9.6 months supply 1,350 1,250 1,150 1,050 950 850 New SF sales are down N l d 75% from 2005 peak (right scale) 10.1 months supply 750 650 550 450 350 250 Sources: US Census Bureau , NAR, NAHB, NBER, 000s of units (000, SAAR) Annual New Home Sales -74% 2005 Peak to Current 1,203 1,283 1,088 1,400 1 400 1,300 1,200 1,100 1,000 900 Average Annual Sales by Decade: 60s 513 70s 656 80s 609 90s 698 00-06 1,055 07-09 533 -50% 1977 Peak to Trough -28% 1986 Peak to Trough 972 909 885881877 1,051 820 818 748 709 688 639 622 545 535 436 805 758 666670665 608 776 800 700 600 500 400 300 200 -28% 1972 Peak to Trough 718 633 647 657 575 560565 488490 486 461 449 672675 650 550 519 483 507 413 309 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 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 2008 2009 Source: US Census Bureau, NAHB, Real Estate Center 33 Existing SF Home Sales 7,000 7 000 6,000 5,000 4,000 3,000 2,000 1,000 0 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 34 2480 2334 2254 2273 2021 1 1 1567593613 3987 3828 3646 3478 3483 3428 3066 2972 2418 1990 3122 2817 2684 1978-1982 sales declined 50% 2005-2009YTD sales down 34% 6,179 5,959 5,677 5,443 4,974 4733 4651 4604 4495 3964 3797 3544519 3 3427 4,939 4,350 4,050 Thousands 3150 3010 2914885 2 Source: US Census Bureau, NAHB Annual U.S. Median Home Price Percent Change 20.0% 18.0% 16.0% 14.0% 14 0% 12.0% 10.0% 8.0% 6.0% 6 0% 4.0% 2.0% 0.0% -2.0% -2 0% -4.0% -6.0% -8.0% -10.0% -10 0% -12.0% -14.0% -16.0% -18.0% 18.0% -20.0% 14.4% 13.5% 12.6% 11.7% 10.7% 10.3% 8.5% 7.8% 8.2% 7.7% 7.9% 6.8% 5.5% 6.6% 6.4% 5.9% 5.5% 8.3% 7.5% 7.0% 6.3% 12.2% 4.3% 3.7% 3.0% 2.1% 4.3% 2.9% 5.2% 5 5.4% 4.8% 4 8% 2% 4.3% 4.0% 3.8% 3.4% 3.1% 2.7% 1.3% -1.8% Through May 2009 the median existing home price is down 15% -14.6% 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 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 2008 Source: NAR 35 Implications for Housing • “Tax credit” appears to be stimulating buyers • V Vacant homes up to 6 million th t 6 illi • Sales of foreclosed homes and Homebuilder  concessions affecting value changes • Appraisals becoming major issue in purchases • Lenders making purchase mortgages difficult to  obtain • Bank examiners bias against real estate loans,  especially ADC  especially ADC Implications for Commercial Real Estate • Heavy downward rent pressure in industrial,  office and retail • Cap rates revert back to pre‐2002 levels Cap rates revert back to pre 2002 levels • Big wave of foreclosures coming unless TALF  extended to CMBS and whole loans extended to CMBS and whole loans • No new office, retail or industrial construction  until 2012 or 2013 til 2012 2013 • FRANNIE financing led to gross overbuilding in  multi‐family which has fallen off significantly Texas and Houston Housing Markets 38 Texas Single- Family Market SingleSales May 2008 May 2008 May 2009 May 2009 YTD 2008 YTD 2008 YTD 2009 YTD 2009 23,996 23 996 19,057 , ‐21.0% Average  Average Price $197,900 $197 900 $191,900 , ‐3.0% Months Median Price Inventory $150,600 $150 600 $ $149,900 , ‐0.5% 6.8 68 7.3 73 98,559 98 559 76,412 ‐22.5% $ $191,983 , 12‐mo MA $ $147,100 , 12‐mo MA $185,583 ‐3.3% $143,875 ‐2.2% 39 Source: Real Estate Center at Texas A&M University 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 40 2009p 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 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 41 US and Texas Median Home Price $250,000 $225,000 $200,000 $175,000 $150,000 $125,000 $100,000 $75,000 $50,000 Texas remains a housing bargain, but not  by as much. The gap between the US and Texas  median price widened to 38%, but has  narrowed to  16% 42 Source: NAR; Real Estate Center at Texas A&M University 2009p p 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 $110,000 $110 000 $100,000 $120,000 $130,000 $140,000 $150,000 $160,000 $80,000 $90,000 $90 000 1212-Month Moving Average Texas Median Home Price Source: Real Estate Center at Texas A&M University Ja an-98 Ma ay-98 Se ep-98 Ja an-99 Ma ay-99 Se ep-99 Ja an-00 Ma ay-00 Se ep-00 Ja an-01 Ma ay-01 Se ep-01 Ja an-02 Ma ay-02 Se ep-02 Ja an-03 Ma ay-03 Se ep-03 Ja an-04 Ma ay-04 Se ep-04 Ja an-05 Ma ay-05 Se ep-05 Ja an-06 Ma ay-06 Se ep-06 Ja an-07 Ma ay-07 Se ep-07 Ja an-08 Ma ay-08 Se ep-08 Ja an-09 $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 44 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 5.50 5.30 5.10 4.90 4.70 4.50 4.30 4.10 3.90 3.70 3.50 3 50 3.30 3.10 2.90 2.70 2 70 2.50 2.30 2.10 Median Home Prices as a Multiple of Median Household Income US New Homes (avg = 4.33) US Existing Homes  (avg = 3 77) = 3.77) 4.37 4 37 3.36 Texas Homes (avg = 2.83) 3.09 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 45 Source: US Census Bureau, NAR, Real Estate Center at Texas A&M University 2008e e 1991 2001 Median Home Prices as a Multiple of Median Household Income Selected Texas MSAs Amarillo, TX Corpus Christi, TX Houston-Baytown-Sugar Land, TX Austin-Round Rock, TX Dallas-Fort Worth-Arlington, TX San Antonio, TX Beaumont-Port Arthur, TX El Paso, TX 4.0 3.9 3.8 3.7 3.6 3.5 3.4 34 3.3 3.2 3.1 3.0 2.9 29 2.8 2.7 2.6 2.5 2.4 2.3 2.2 2.1 2.0 1.9 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 3.8 3.2 Houston Dallas 2.5 2.4 24 2006 6 2007 7 2008 8 46 Sources: National Association of Realtors®, Median Existing Single-Family House Price; Moody's Economy.com, Median Household Income; Joint Center for Housing Studies, Harvard University 2009:1 1 Houston Home Sales 9,000 8,500 8,000 , 7,500 7,000 6,500 6,000 5,500 , 5,000 4,500 4,000 3,500 3,000 , Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 47 2007 2005 2004 2003 2009 2008 2006 2009YTD sales down 23% Dec Source: Real Estate Center at Texas A&M University 2,000 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 48 4,000 5,000 6,000 7,000 8,000 3,000 3 000 Houston Home Sales Source: Real Estate Center at Texas A&M University Jan‐0 09 Jul‐0 09 1212-Month Moving Average Mo ing A erage Houston Annual Home Sales 90,000 80,000 70,000 60,000 51,433 52,459 53,856 60,732 56,563 Estimate that  2009 might look  like 2001‐2002 period 66,979 80,994 77,668 72,800 65,070 58,500 55,000 50,000 40,000 33,617 32,491 40,673 36,894 30,080 30,783 32,371 33,386 48,767 30,000 30 000 20,000 29,726 , 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 2009 9 Sales 1,000 7,000 2,000 3,000 4,000 5,000 6,000 $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 > 50 0 2008 Sales Distribution and EOY Months Inventory 8,000 Source: Real Estate Center Months Inventory 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 11 10 12 0 1 2 3 4 5 6 7 8 9 Houston Months Inventory of Homes For Sale and FHFA Appreciation Rate Source: FHFA, Real Estate Center at Texas A&M University 0.0% 1.0% 3.0% 4.0% 5.0% 2.0% 2 0% -3.0% -2.0% -1.0% 51 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 Jul-09 9 6.0% 7.0% 8.0% 9.0% Houston Median Home Prices 1212-Month Moving Average 160,000 150,000 150 000 140,000 130,000 120,000 110,000 100,000 90,000 80,000 80 000 70,000 60,000 Jan-95 Jun-95 Nov-95 Apr-96 Sep-96 Feb-97 Jul-97 Dec-97 May-98 Oct-98 Mar-99 Aug-99 Jan-00 Jun-00 Nov-00 Apr-01 Sep-01 Feb-02 Jul-02 Dec-02 May-03 Oct-03 Mar-04 Aug-04 Jan-05 Jun-05 Nov-05 Apr-06 Sep-06 Feb-07 Jul-07 Dec-07 May-08 Oct-08 Mar-09 Aug-09 Source: Real Estate Center at Texas A&M University 52 Median home prices have increased steadily, but started falling last Fall but has since leveled out Houston Median Home Price g g 3-Month Moving Average $170,000 $160,000 $150,000 $140,000 $137,833 $137 833 $159,633 $130,000 Apr-05, $136,300 $120,000 $110,000 $100,000 $90,000 $80,000 , 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 May-09 Source: Real Estate Center at Texas A&M University 53 Houston Median Home Prices 160,000 150,000 140,000 140 000 130,000 121,800 151,800 151,800 2008 median price was flat 1H2009 median is down 1.5% at $149,500 133,100 134,300 129,700 148,700 141,400 120,000 110,000 101,100 113,900 100,000 90,000 80,000 72,400 78,400 79,900 78,200 78,300 88,900 83,000 94,700 70,000 70 000 60,000 50,000 66,000 65,800 66 000 65 800 1989 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 54 Price Distribution of MLS Homes Sold 13.0 13 0 12.0 11.0 10.0 10 0 P Percent of Hom Sold mes 1998 2008 10.5 9.6 96 8.2 8.4 98 Median 03 Median 11.5 10.6 9.8 8.7 7.7 6.6 5.9 5.9 4.8 4.3 3.1 08 Median Median Price 1998 $ 94,700 2003 $ 133,100 2008 $ 151,800 10.1 9.3 9.0 8.0 7.0 70 6.0 5.0 4.0 3.0 2.0 1.0 $29,999 or less o 30,000 - 39,999 3 40,000 - 49,999 4 7.4 6.7 67 5.2 4.7 3.3 4.7 3.6 2.8 1.7 2.7 1.8 2 3.1 2.3 4.4 2.9 2.9 1.3 1.7 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 39,999 140,000 - 15 59,999 160,000 - 17 79,999 180,000 - 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 55 0.0 Source: Real Estate Center at Texas A&M University Houston SF Building Permits 60,000 50,000 40,000 36,237 1984 53% of 1982 peak 1985 25% of 1982 peak 1986 21% of 1982 peak 2007 75% of 2006 peak 2008p 51% of 2006 peak 2009e 31% of 2006 peak 49,101 44,019 38,781 36,873 30,000 20,000 10,000 0 19,095 29,215 27,348 26,696 23,570 25,610 23,917 22,248 22 21,743 248 17,936 16,482 14,375 15,000 13,486 13,309 13,051 12,499 11,587 25,000 8,3969,086 6,899 6,788 5,8696,123 2008p Source:  U. S. Census Bureau, Real Estate Center 2009e 56 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 Texas – Poised for a 21st Century Boom C t B • • • • • • Population and Economic growth Population and Economic growth Low cost, available labor Pro Growth Attitude Pro Growth Attitude Migration into State from elsewhere Attractive Retirement Area Att ti R ti tA Pressure on infrastructure, government  services, public finance i bli fi • Most affordable state for land, housing  and overall cost of living d ll t f li i 57 Texas Is An Urban State 2007 and 2040 T d Texas Metropolitan Area Population Estimates M li A P l i E i MSA Austin Dallas-Ft. Worth Houston San Antonio Total 4 MSAs Total All MSAs Texas Percent In MSAs 2007 Population (millions) 1.6 6.1 5.6 2.0 15.3 21.0 23.8 88.2% 2040 Population (millions) 4.0 14.8 11.7 3.2 33.7 41.5 44.9 92.6% Percent Increase 150.0% 142.6% 108.9% 60.0% 120.3% 97.6% 88.7% 58 Source: U.S. Census Bureau; Texas State Data Center 2008 Population Projections, 2000-2007 Scenario View of Lake Conroe Today  59 Source: Texas Fishing Online.net Lake Conroe in 2050? 60 Central Texas Triangle 61 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 62 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 63 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 64 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 Major Texas MSAs Population to 2030 11,500,000 10,500,000 9,500,000 8,500,000 7,500,000 7 500 000 6,500,000 5,500,000 4,500,000 3,500,000 2,500,000 1,500,000 500,000 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 2010 2015 2020 65 Total Population in Four MSAs: 1980 7.91 million 1990 10.05 million 2000 12.90 million 2010 16 00 million 16.00 million 2020 20.02 million 2030 25.08 million 2025 Source: US Census Bureau, Texas State Data Center and Demographer 2030 Austin, Brazoria, Chambers, Fort Bend, Galveston, Harris, Liberty, Montgomery, San Jacinto & Waller Houston MSA Population 11,000,000 10,000,000 9,000,000 8,000,000 7,000,000 6,000,000 , , 5,302,908 5,597,958 At 50% 1990-2000 rate of immigration At 2000-2007 rate of immigration At 100% 1990 2000 rate of immigration 1990-2000 10,000,884 9,504,335 Between 2.1 and 4.7 million more people by 2030 p p y 6,754,896 7,400,720 5,000,000 4,246,398 4,000,000 4 000 000 3,000,000 2,000,000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2010 2010 2010 2015 2015 2015 2020 2020 2020 2025 2025 2025 2030 66 2030 Source: US Census Bureau, Texas State Data Center and Demographer 2008 Projections 2030 HIREBA HOUSTON INDEPENDENT REAL ESTATE BROKERS ASSOCIATION 2009 Houston Housing Market g July 22, 2009 Dr. James P. Gaines Dr. James P. Gaines Research Economist Real Estate Center Real Estate Center  at Texas A&M University