National Relocation Conference

RAC Trac: The Relocation Appraisal Forum Dr. James P. Gaines D J PG i Research Economist Real Estate Center  at Texas A&M University College Station, Texas recenter.tamu.edu Topics for Today Topics for Today • Economic Overview Economic Overview • Chaos in the Mortgage and  Capital Markets Capital Markets • Relocation and Housing Markets • Demographic Trends and Outlook hi d d l k 2 Challenging and Uncertain Economy  2008 • D fi i E Definite Economic Slowdown: Recession? i Sl d R i ? • Soft Housing Market • Interest Rates and Capital Markets • Inflation and Consumer Spending • Unemployment • Corporate spending and expansion p p g p • Political uncertainty • “Wait and See” attitude pervasive Wait and See attitude pervasive 3 Percent Growth in Real GDP Since 1990 (Percent Change From Previous Quarter) 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 ‐1.0 ‐2.0 ‐3.0 ‐4.0 7.3 6.7 6.2 5.5 4.7 4.2 3.9 4 6.2 6.4 7.5 5.3 4.8 4.8 5.1 4.5 4.7 4.8 4.5 3.8 3.1 2.8 2.5 2.4 2.1 4.8 4.9 4.5 4.1 3.3 33 3 2.9 2.6 1.9 1.9 2 2.1 2.3 3.4 3.1 3 3.4 3.4 2.7 2.1 1.6 2.7 2.2 2.4 3.5 3 2.7 3.5 3.6 1 0.5 0 1.1 0.7 1 1.2 1.2 1.2 1.1 0.6 0.6 0.6 0.2 ‐0.5 ‐0.5 ‐1.4 ‐2 2 ‐3 1Q1 1990 3Q1 1990 1Q1 1991 3Q1 1991 1Q1 1992 3Q1 1992 1Q1 1993 3Q1 1993 1Q1 1994 3Q1 1994 1Q1 1995 3Q1 1995 1Q1 1996 3Q1 1996 1Q1 1997 3Q1 1997 1Q1 1998 3Q1 1998 1Q1 1999 3Q1 1999 1Q2 2000 3Q2 2000 1Q2 2001 3Q2 2001 1Q2 2002 3Q2 2002 1Q2 2003 3Q2 2003 1Q2 2004 3Q2 2004 1Q2 2005 3Q2 2005 1Q2 2006 3Q2 2006 1Q2 2007 3Q2 2007 1Q2 2008 Source: Bureau of Economic Analysis 4 0.5 1.0 2.0 2.5 3.0 ‐1.5 0.0 1.5 15 ‐1.0 ‐0.5 Jan‐00 Apr‐00 Jul‐00 Oct‐00 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 ‐2.0 20 U. S. Employment Growth Rate U. S. Employment Growth Rate Source: BLS, Texas Workforce Commission 5 Oct‐07 Jan‐08 1.0 Source:  Bureau of Labor Statistics 2.0 20 3.0 4.0 5.0 6.0 7.0 Overall Inflation Rate Yr/Yr Rate of Change in the Monthly Index, US Urban, All Items 6 Jan-8 86 Jul-8 86 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 We Finally Got There !! y 7 Business Spending Percent Change From Previous Quarter in Non‐Residential Fixed Investment  in  Structures and Equipment 5.0 4.0 40 3.0 2.0 20 1.0 0.0 ‐1.0 ‐2.0 ‐2.3 0.6 0.3 0 ‐0.1 ‐0.2 ‐1 ‐1.3 1.4 1.1 0.6 0.3 0.1 0.7 0 1.4 1.1 2.4 2.5 2.4 1.9 1.6 1.3 1.2 2 1.9 4.5 4.6 3.9 2.8 ‐0.4 ‐0.6 ‐3.0 1Q20 000 2Q20 000 3Q20 000 4Q20 000 1Q20 001 2Q20 001 3Q20 001 4Q20 001 1Q20 002 2Q20 002 3Q20 002 4Q20 002 1Q20 003 2Q20 003 3Q20 003 4Q20 003 1Q20 004 2Q20 004 3Q20 004 4Q20 004 1Q20 005 2Q20 005 3Q20 005 4Q20 005 1Q20 006 2Q20 006 3Q20 006 4Q20 006 1Q20 007 2Q20 007 8 3Q20 007 4Q20 007 Source: BEA What to Expect • Fed to stop cutting interest rates • Food and gas prices will continue to increase • Look for a federal bailout of the banks and financial  institutions • Rise in unemployment rate • 2008‐2009: “Stagflation” ‐ high inflation, low  economic growth, job losses – without high interest  rates t 9 TEXAS 10 Texas Economy • Running Ahead of US Economy Running Ahead of US Economy • Employment Steady Increase • Low Unemployment • Personal Income Growth • Population Growth • Housing market still relatively strong Housing market still relatively strong • Not immune to national‐global economic  forces 11 0.0 1.0 2.0 3.0 4.0 ‐1.0 Jan‐00 Apr‐00 Jul‐00 Oct‐00 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 ‐2.0 20 Texas Annual Employment Growth  Rates for US and Texas R f US d T Source: BLS, Texas Workforce Commission US 12 Oct‐07 Jan‐08 Top 10 Job‐Creating States in 2007 300 250 200 150 100 50 0 N North  Ca arolina Washi ington Lou uisiana Colorado California eorgia Ge New w York Illinois 13 Thousands of jobs created December 2006 to December 2007 236.90 236 90 78.00 67.60 67.10 44.90 41.60 40.70 36.20 35.40 31.40 Texas Source: BLS Utah 15 Top Job‐Creating MSAs in 2007 110 100 90 80 70 60 50 40 30 20 10 0 Thousands of jobs created December 2006 to December 2007 94.2 75.3 66.5 46 35.8 23.2 22.7 22 21.5 21.1 21 20.6 19.5 19.2 18.8 San Fr rancisco Salt Lake City L C Charlotte H Houston Seattle Raleigh C Chicago N New York Dallas-F Worth Ft Boston 14 Denver Atlanta Austin Source: BLS Washington DC San Antonio Chaos in the Mortgage and  Capital Markets 15 Total HH Home Mortgage Borrowing 1,100 1,000 900 800 700 $Billions 600 500 400 300 200 100 34 $0.5 trillion in home mortgages between  1972 and 1979; $1.5 trillion in home mortgages between  $1 5 illi i h b 1980 and 1989; $2.12 trillion in home mortgages between  1990 and 1999;  $6.1 trillion in home mortgages between  2000 and 2007 379 302 222 216 225 1,029 988 940 856 709 655 507 386 180 106 117 127 90 67 47 105 199 199 174 171 157 167 154 206 216 86 40 37 40 58 0 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 Source: Federal Reserve, Flow of Funds, D‐2, 3/6/2008 16 The Residential Mortgage Market Chaos Mortgage Market Chaos Subprime Stop p Alt‐A Stop Piggyback Stop Hybrids Stop Jumbos ?? Prime ?? Global Banks Sovereign Nations The Conduits ?? Hedge Funds Pensions/Insurance Endowments • • • Moody’s S&P Fitch Fi h Bond Rating R i Services Money Mkt Accts ?? 17 Banks Are Short on Capital Reserves 18 The Fed’s Moral Hazard • Increase Rates – Wreck the banking system the stock market Wreck the banking system, the stock market,  the housing market and cause a recession. • Cut Rates Cut Rates – Oil, gold and commodities go through the roof – Makes US investments look cheap Makes US  investments look cheap – Increases the risk of future inflation – Return to “Greenspan Put” or “Helicopter Ben” p p • Ultimately, the Fed will have to cut rates to  p y g y restore profitability to the banking system  and allow homeowners to refinance. 19 Residential Foreclosure Situation • Sub‐primes are not the only iceberg in the  choppy waters • $515B in ARMs reset in 2007 • $680B in ARMs reset in 2008 • The foreclosure pressure will continue to  p increase into mid‐2010 and then drop off  dramatically • Look for an extraordinary bailout of the  residential market to limit foreclosures 20 Percent of Foreclosures Started by Type  of Loan 4Q2007 fL 4Q2007 Type of Loan Percent of P t f Outstanding Loans Percent of P t f Foreclosures Started Source: Mortgage Bankers Association, National Delinquency Survey, March 6, 2008 21 Total Delinquency & Foreclosure Filings 2007 • US 2,203,295, up 75% • Texas 149 703 down 4 6% (1 of only 6 down) Texas 149,703, down 4.6% (1 of only 6 down) – – – – – – – – – – California 481,392, up 238% Florida 279,325, up 124% Ohio 153,196, up 88% Michigan 136,205, up 68% Arizona 69,970, up 151% o a 69,9 0, up 5 % Nevada 66,316, up 215% Virginia 24,199, up 456% Maryland 25,109, up 455% Maryland 25 109 up 455% Connecticut 23,470, up 100% Massachusetts 41,487, up 161% Source:  RealtyTrac, Inc. Data include all default, delinquency and foreclosure filings reported. The same property often has more than one filing. 16 states  doubled or  more; D.C.  DC was up  608% 22 Conclusions • Great time to buy or refinance a house if  interest rates start going up in next couple  i t t t t t i i t l of years • Homebuilding needs to fall even further Don t panic when you hear bad news  • Don’t panic when you hear bad news about financial institutions, that will  actually be the sign of the bottom actually be the sign of the bottom 23 Relocations and  Relocations and Housing Markets Housing Markets 24 (Percent) 70.0 US Homeownership Rate and the  FHLMC 30 Year Fixed Rate FHLMC 30‐Year Fixed Rate Homeownership Rate (left scale) 1980-1985 Mortgage interest rate exceeds 12%; Homeownership plummets (Percent) 20 19 18 17 16 15 14 69.0 68.0 67.0 Since 1997 Low interest rate and new mortgage products; Homeownership explodes 13 12 11 10 9 8 7 66.0 65.0 64.0 64 0 63.0 1970s 1970 Baby Boomers enter market; homeownership grows 2Q1971 2Q1972 2Q1973 2Q1974 2Q1975 2Q1976 2Q1977 2Q1978 2Q1979 2Q1980 2Q1981 2Q1982 2Q1983 2Q1984 2Q1985 2Q1986 FHLMC 30‐Year Rate (right scale) 6 5 4 62.0 2Q1987 2Q1988 2Q1989 2Q1990 2Q1991 2Q1992 2Q1993 2Q1994 2Q1995 2Q1996 2Q1997 2Q1998 2Q1999 2Q2000 2Q2001 2Q2002 2Q2003 2Q2004 2Q2005 2Q2006 2Q2007 25 Source: US Census Bureau; FHLMC (4‐quarter moving average homeownership rate) 2Q2008 (000s) 1,000 2,000 3,000 5,000 6,000 7,000 4,000 4 000 0 Jan-68 Jan-69 Jan-70 Jan-71 Jan-72 Jan-73 Jan-74 Jan-75 Jan-76 Jan-77 Jan-78 Jan-79 Jan-80 Jan-81 Jan-82 Jan-83 Jan-84 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 New and Existing SF Home Sales U.S. Sources: US Census Bureau , NAR, NAHB, NBER Existing SF S l E i ti Sales New SF Sales 26 Jan-06 Jan-07 Jan-08 250 225 200 175 150 125 100 75 1990 Divergent US Median HH Income and  Median Home Prices Median Home Prices 1990=100 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: US Census Bureau, NAR 27 2006 U.S. and Texas Median Home Price $250,000 $225,000 $200,000 $175,000 $150,000 $125,000 $125 000 $100,000 $75,000 $50,000 , Texas is a housing bargain. The gap between the US and Texas median  price has widened from around 25% to  33%.  1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 28 Source: NAR; Real Estate Center at Texas A&M University 2007 5.50 5.25 5.00 5 00 4.75 4.50 4.25 4 25 4.00 3.75 3.50 3 50 3.25 3.00 2.75 2 75 2.50 2.25 2.00 2 00 1989 1990 Median Home Prices to Median  Household Income Household Income US New Homes US Existing Homes Texas Existing Homes 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: US Census Bureau, NAR; Real Estate Center at Texas A&M University 29 2005 Texas Housing Affordability Median 2005 HH income US = $46,242; Texas = $42,139 Median 2005 Home Value US = $167,500; Texas = $106,000 US Ratio Median Value/Median Income  3.62; Texas ratio 2.52 US Ratio Median Value/Median Income = 3.62; Texas ratio = 2.52 Median House Value to Median Household Income 1990 State Ratio Rank US Texas 2.48 2.18 41 2000 Ratio 2.85 2.76 State Rank 50 2005 Ratio 3.62 2.52 State Rank 44 30 Source: US Census Bureau, Real Estate Center at Texas A&M University Oklahoma Kansas Iowa Texas West Virginia Arkansas Mississippi Nebraska South Dakota Indiana Alabama Kentucky Louisiana South Carolina Ohio Tennessee Missouri Pennsylvania Wyoming North Carolina Michigan Georgia Wisconsin New Mexico Alaska Utah Idaho U.S. Montana Illinois Illi i Minnesota Maine Vermont New Hampshire Delaware Virginia Colorado Connecticut Arizona Florida Washington Oregon Maryland New Jersey Rhode Island New York Nevada Massachusetts D.C. Hawaii California 2006 Median Home Value/Median HH Income 2.44 2.52 2.53 2.54 2.56 2.57 2.57 2.62 2.63 2.66 2.76 2.82 2.92 2.98 3.04 3.05 3.08 3.14 3.14 3.22 3.25 3 25 3.35 3.35 3.48 3.59 3.67 3.82 Most Housing Affordable States 3.82 3.83 3.85 3 85 3.85 3.93 4.05 4.24 4.30 4.34 4.48 4.71 5.00 5.07 5.09 5.12 5.14 Least Housing Affordable States 5.69 5.71 5.90 5.95 6.18 8.44 8.66 9.46 0.00 1.00 2.00 3.00 4.00 5.00 6.00 Source: 2006 American Community Survey, U.S. Census Bureau 7.00 8.00 9.00 31 10.00 (000s) Annual New Home Sales & Starts 1,716 1,800 Sales 1,600 1,451 1 451 1,433 Starts 1,359 1,302 1,273 1,271 1,231 1,611 1,499 1,465 1,400 1,200 , 1,000 892 852 895 840 805 705 709 647 663 622 545 436 639 688 748 672 675 650 608 535 507 666 670 665 758 885 881 877 909 1,194 1,162 1,179 1,146 1,0681,0841,072 1,081 1,003 1,030 1,198 1,126 1 126 1,161 1,134 1 134 1,076 1,283 1,203 1,088 1,051 972 1,046 800 600 550 820 818 776 680 526 400 200 413 Source: US Census Bureau, NAHB, Real Estate Center 32 Mar-08 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 (000s Units) Inventory of New SF Homes For Sale Excess units plus new construction in 2008  at annual sales of around 600,000 will take  several years to get back to balance. several years to get back to balance Months Inventory 800 750 700 650 600 550 500 450 400 350 300 250 200 150 100 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 10 9.5 9 8.5 8 7.5 7 6.5 6 5.5 5 4.5 4 3.5 3 Source: US Census Bureau, NAHB 33 So far this year, the public builders are reporting that, overall: Revenue is down 34% Revenue is down 34% Deliveries are down 34% Net Orders are down 43% Cancellation rates are running at 31% Source: John Burns Real Estate Consulting, Irvine, California 34 US and Texas Appreciation Purchase Only Index Change Year over Year 12% 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% 1% 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 US average increase = 5.2% Texas average increase = 4.1% US 4Q2007 = -0.3% Texas 4Q2007 = 3.5% US Texas Source: OFHEO 35 US Median Home Prices in 2008 $250,000 7/06 6/07 8/05 $229,600 $230,900 $229,200 $225,000 $200,000 $175,000 $150,000 $125,000 $100,000 $75,000 At 2001 Trend, 2008 median prices should be  between $185,000 and $190,000.    2007 = $217,900, if 2008 = $187,500 along trend  line, down 14%; if 2008 = $200,000, down 8.5%. Jan-90 0 Jul-90 0 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 $50,000 36 Source: NAR, Real Estate Center at Texas A&M University 16.0% 14.0% 12.0% Annual U.S. Median Home Price Percent  Change 14.4% 13.5% 12.6% 11.7% 10.7% 10.3% 8.5% 8.2% 7.8% 7.7% 8.3% 7.5% 7.0% 6.3% 5.5% 5 5% 5.4% 5.2% 4.8% 4.3% 3.8% 12.2% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% 4.0% -6.0% -8.0% -8.3% -1.8% 7.9% 6.8% 5.5% 4.3% 3.7% 3.0% 2.1% 6.6% 6.4% 5.9% 4.3% 2.9% 4.0% 3.4% 3.1% 2.7% 1.3% -10.0% 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 Mar-08 Source: NAR 37 Annual Texas Median Home Price Percent  Change 12.0% 10.0% 10 0% 8.0% 6.0% 4.6% 5.6% 5.9% 4.9% 4.0% 6.2% 4.9% 4.3% 6.5% 6 5% 5.1% 4.6% 3.1% 2.3% 2.6% 2.0% 1.9% 11.1% 4.0% 2.0% 0.0% ‐0.6% ‐2.0% 1993 2003 1990 0 1991 1 1992 2 4 1994 1995 5 1996 6 1997 7 1998 8 1999 9 2000 0 2001 1 2002 2 4 2004 2005 5 2006 6 2007 7 38 Source: Real Estate Center at Texas A&M Percent of Mortgaged Homeowners  Spending 30 Percent or More of Household  Income on Monthly Housing Costs in 2006 y g United States: 36.9% 33.7% 39 Source: U.S. Census Bureau, 2006 American Community Survey Median Monthly Housing Costs for  Owner‐Occupied Housing Units With a  Mortgage (Dollars): 2006  Mortgage (Dollars): 2006 United States: Estimate: 1,402 Dollars 1,309 40 Source: U.S. Census Bureau, 2006 American Community Survey Demographic  Trends Labor Shortage? Labor Shortage? 90 80 70 60 50 40 30 20 10 0 1925‐1945 1946‐1965 1966‐1979 1980‐2001 42 Baby Boom Echo Boom Pre-boom Baby Bust Source: National Center for Health Statistics U. S. Population Pyramids: 2000 and 2020 Boomers:  1946‐1964: 54‐36 years old Boomers 1946 1964 54 36 years old Prime Income Earning Years Boomers:  1946‐1964: 74‐56 years old Boomers 1946 1964 74 56 years old Retirees and Near Retirees Population Pyramid 2000 Age Cohort  g 85+ 80 - 84 75 - 79 70 - 74 65 - 69 60 - 64 55 - 59 50 - 54 45 - 49 40 - 44 35 - 39 30 - 34 25 - 29 20 - 24 15 - 19 10 - 14 5-9 0-4 Population Pyramid 2020 Male Female Male Female Percent of Total Population Percent of Total Population 43 Age Distribution of the United States 2005-2030 2005 Boomers 41‐59 2010 Boomers 46‐64 2020 Boomers 56‐74 2030 Boomers 66‐84 44 US Population Growth 2007‐2012 Source: Global Insight, Inc. 45 Top and Bottom 10 States by Domestic Migration: 2000 to 2007 New York California Illinois New Jersey N J Michigan Louisiana Massachusetts Ohio Connecticut Kansas Virginia Washington Tennessee South Carolina Nevada Georgia North Carolina N th C li Texas Arizona Florida ‐1,449,169 ‐1,223,992 ‐551,311 ‐377,159 377 159 ‐359,758 ‐335,216 ‐305,690 ‐301,848 301,848 ‐78,064 ‐67,315 155,205 155,491 217,129 228,133 364,683 484,919 490,907 490 907 582,078 655,354 1,286,175 ‐2,000,000 ‐1,500,000 ‐1,000,000 ‐500,000 0 500,000 1,000,000 1,500,000 46 Sources: "Domestic Net Migration in the United States: 2000 to 2007," US Census Bureau; US Census Population Estimates Program Percent of People Who Lived in a  Different State One Year Ago:  2006 United States: 2.7 Percent or about 3.2  million households moved to another  illi h h ld dt th state during 2006 82% of Texas  households  that lived in a  different house  1 year ago,  moved from  another house  within the  e state.  18%  moved to  Texas from  another state  or country. t 2.7%; ~222,000  Households 47 Source: U.S. Census Bureau, 2006 American Community Survey 200,000 996,463 947,907 9 900,276 88 87,678 803,1 100 484,6 631 472,112 82 459,48 442,90 01 405,515 385,489 375,572 332,315 319,492 311,341 2 282,427 400,000 600,000 800,000 1,000,000 1 000 000 1,200,000 0 Top Growth MSAs 2000‐2007 Source:  U.S. Census Bureau 271,266 48 270,712 Texas is an Urban State Texas is an Urban State MSA 2005 Population (millions) Percent of Total State Population Austin A i Dallas-Ft. Worth Houston San Antonio Total 4 MSAs Total All MSAs Texas 1.5 5.8 5.4 1.9 14.6 19.9 22.9 Source: U.S. Census Bureau 6.6 25.3 23.6 8.3 63.8 86.9 100.0 49 Projected Texas Population 2000 ‐ 2030 (000s) 45,000 45 000 40,000 At 50% 1990-2000 rate of immigration At 2000-2004 rate of immigration At 100% 1990 2000 rate of i 1990-2000 t f immigration i ti 36,682 41,118 36,333 35,000 32,737 32 737 33,158 31,831 30,253 29,897 30,000 26,157 29,214 27,581 26,059 25,106 24,331 23,508 22,518 21,762 20,952 28,006 25,000 20,000 15,000 2000 2001 2002 2003 2004 2005 2006 2010 2010 2010 2015 2015 2015 2020 2020 2020 2025 2025 2025 2030 2030 50 Source:  U.S. Census Bureau, Texas State Demographer 2030 ... Averaging the projections results in an  increase of 13.6 million people by 2030. increase of 13 6 million people by 2030 Over the next 25 years, equivalent of adding: another 12-county Dallas-Ft. Worth metropolitan area, plus another 10-county Houston 10metropolitan area, plus area another 8-county San Antonio 8y metropolitan area, plus another Corpus Christi 51 Texas Age Distribution 2005‐2030 2005 Boomers 2010 Boomers 2020 Boomers 2030 Boomers 52 Percent of Households With  Retirement Income: 2006 United States: Estimate: 17.4 percent 13.9%,  1,127,205  Households 53 Source: U.S. Census Bureau, 2006 American Community Survey Percent of the Total Population  Who Are 65 Years and Over:  2006 United States: Estimate: 12.4 percent 9.9%,  2,250,000  People 54 Percent Anglo and Hispanic Reverse by 2030 60% Anglo 49.5% Black Hispanic Other % 51.3% 32.5% 10.0% 9.5% 6.1% 50% 40% 53.1 1% 45.9% 42 2.4% 1.9% 41 38.6% 39.0% % 45.1% 20% 10% 0% 2000 11.6% 32.0% 30% 11.4% 35.3% 11.2% 10.8% 10.5% 35.7% 48.2% 3.3% 3.8% 4.3% 4.9% 2005 2010 2015 2020 5.4% 2025 2030 55 Source: Texas State Data Center and Demographer, Average of Projections 6.7% 80 70 60 50 40 30 20 10 0 Percent of Texas Population by Age  Group and Ethnicity, 2000 Group and Ethnicity 2000 Anglo Hispanic Workforce Age Group 57.2 53 47.8 44 39.5 45 41.6 41.3 38 38.4 45 43.1 43 1 40.5 44.4 38.6 35.3 30.5 26.7 24.2 22.4 22 4 63.5 60.2 72.6 66.4 67.1 20.6 20.3 16.7 < 5 yea ars Source: Texas State Data Center and Office of the State Demographer; Real Estate Center 5‐9 yea ars 10‐14 y years 15‐19 y years 20‐24 y years 25‐29 y years 30‐34 y years 35‐39 y years 40‐44 y years 45‐49 y years 50‐54 y years 55‐59 y years 60‐64 y years 56 65+ yea ars 80 70 60 50 40 30 20 10 0 Percent of Texas Population by Age  Group and Ethnicity, 2040* Group and Ethnicity 2040* 69.9 Anglo 67.8 66.5 65.5 66 66 66.4 64.3 64 3 62.6 60.6 Hispanic 56.7 55.2 52.3 39.8 37.4 Workforce Age Group 25.3 17.7 19.3 19.9 20.3 19.8 19.3 19.4 20.5 20.6 21.9 21 9 26.5 27.2 < 5 years s 65+ year rs ears 10‐14 ye Source: Texas State Data Center and Office of the State Demographer; Real Estate Center *Projections for the 1.0 scenario 5‐9 years 15‐19 ye ears 20‐24 ye ears 25‐29 ye ears 30‐34 ye ears 35‐39 ye ears 40‐44 ye ears 45‐49 ye ears 50‐54 ye ears 55‐59 ye ears 60‐64 ye ears 57 Expect the Unexpected:  Congress and Regulators will … Congress and Regulators will • Re write accounting rules Re‐write accounting rules • Re‐write mortgage rules g g • Re‐write bank capital requirement  rules l Re write Fannie/Freddie rules • Re‐write Fannie/Freddie rules • Re‐write bankruptcy rules The Long Run g • Higher rate of inflation • Higher income taxes • Higher capital gains and dividends Higher capital gains and dividends  taxes • Higher cost of borrowing h fb • Higher underwriting standards g g • Higher government scrutiny and  regulation The Long Run Response g p Protect Yourself from Inflation – Quality real estate – Quality fine art Quality fine art – Foreign Assets (financial or real estate) – Gold – Borrow all you can and pay it back with  cheaper dollars in the future – Don’t own bonds RAC Trac: The Relocation Appraisal Forum Current T Trends and Outlook Dr. James P. Gaines D J PG i Research Economist Real Estate Center  at Texas A&M University College Station, Texas recenter.tamu.edu