San Marcos Area Board of Realtors® 2008 Economic and Housing Outlook
April 8, 2008
Dr. James P. Gaines Dr James P Gaines
Research Economist Real Estate Center at Texas A&M University March 25, 2008
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
Topics for Discussion p
• US, Texas and Local Economy • Housing Activity Housing Activity
– Sales – Prices – Construction – Affordability
• Mortgage and Capital Markets
– Interest Rates – Foreclosures – Regulatory Changes
• D Demographic Trends hi T d
3
2008 Very Challenging Environment E i
• Significant economic slowdown – recession? • Political uncertainty – taxes, laws, regulations, regulations spending • Financial uncertainty – credit freeze, liquidity • “Wait and see” attitude especially in housing • $3.00+ g sucking the life out of the $ gas g consumer
4
Overview: National Economy
• GDP 4Q07 = 0.6% vs. 4.9% 3Q; 3.8% 2Q • GDP in 2007 up 2.5% vs. 3.4% (2006) vs. 3.2% GDP in 2007 up 2.5% vs. 3.4% (2006) vs. 3.2% (2005) – 2008 probably around 1.5% or less • 2007 overall CPI up 2 8% vs 3 2% (2006) 2008 2007 overall CPI up 2.8% vs. 3.2% (2006) – 2008 expected to be around 2.5% • 2007 Core CPI up 2.3% vs. 2.5% (2006) – 2008 expected to be between 2.2% and 2.5% • Employment grew 1.1% in 2007, adding average of 95,000 jobs per month – 2008 expected to be around 0.8% to 0.9%, at best
5
What to Expect p
• Look for the Fed to cut interest rates further in spite of inflation • Gasoline prices will continue to increase • Massive federal bailout of the banks and financial institutions labeled as being for American consumers/borrowers • Higher inflation and higher taxes • 2008-2009: “Stagflation?” - high inflation, low economic growth, job losses
6
As income tax time approaches, did you ever notice: when you put the two words "The" and "IRS" together, it spells
“THEIRS”
7
Texas and Local Economy
• Running Ahead of US Economy • Employment Steady Increase • Low Unemployment • Personal Income Growth • Population Growth • Housing market still relatively strong
8
Top 10 Job-Creating States in 2007 Job300 250 200 150 100 50 0
N North Ca arolina Washi ington Lou uisiana Colorado Ge eorgia Illinois New w York Ala abama
9
Thousands of jobs created December 2006 to December 2007
236.90 236 90
78.00
67.60
67.10 44.90 41.60 36.20 35.40 31.40 25.00
Texas
Source: BLS
Utah
15 Top Job-Creating MSAs in 2007 Job110 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
Seattle
Raleigh
Dallas-F Worth Ft
C Charlotte
Boston
10
Denver
Atlanta
Source: BLS
Washington DC
San Antonio
H Houston
N New York
C Chicago
Austin
0%
1%
2%
3%
4%
5%
6%
7%
‐2% 2%
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 Oct‐07 Jan‐08
11
‐1%
Texas
San Marcos Non-Farm Employment NonPercent Growth
Source: BLS, Texas Workforce Commission
Hays County y y
US
Hays County Gross Sales
$4,500 $4,000 $3,500 $3,000
Millions
2,587 2,327 2,790 3,234 3,094 3,904
$2,500 $2,000 $1,500 $1,000 $500 $0
2002
2003
2004
2005
2006
3Q2007
12
Source: Texas Comptrollers Office, Greater Houston Partnership
The Texas Outlook for 2008
• US job growth less than 1% j growth rate • Texas will double the national job g • Houston, Austin and San Antonio will exceed the state level, Dallas and Ft. Worth likely to be closer to the national growth trend • Texas housing markets generally strong but “spotty” spotty • Mortgage interest rates unlikely to change much credit, • Fall in residential demand: tighter credit less investment buying? p y • Rent and occupancy rates of Texas commercial real estate will continue to rise
The Houston Outlook for 2008
• Continued increases in population and employment • Slow but positive absorption for commercial properties • Investment demand for real estate all types estate, • Continued good demand for housing, but 2008 sales probably will again be down from 2007 • Median home price flat to slight increase • Newer projects probably will slowdown or get shelved as speculative building virtually ceases
The US Housing Market
15
Housing Market Boom 20012001-2006
1. Historically low interest rates 2. Record home price increases in selected areas, followed by 3. 3 4. 5. 6. 7. 8. 8
declines Flood of private capital led to Wall Street dominance in the residential mortgage market Extraordinary investor/speculator demand Surge in second/vacation home demand “Non traditional” loans removed former barriers to home ownership resulting i a l hi lti in leap i th h in the homeownership rate hi t Hyper-aggressive “easy credit, easy terms” financing Rise and fall of home affordability
16
2007 Housing Scorecard
National
Measure Existing SF Sales Amount
4,939k 9.2 3,320k 774k 9.6 495k
Texas
Amount
271,454 5.6 133,170
YTD %
-13.0% 43.8% 13.7% -26.4% 26 4% 54.8% -7.5% -0.3%
YTD %
-6.4% 12.0% 14.4%
Months Inventory SF Listings New Sales Months Inventory
New Homes For Sale
OFHEO (P-O Index 2007) (P-
3.5% $147,500 $181,000 $193,100 $171,325 112,040 84,469 4.8% 10.5% -28.4% -4.6%
17
Md. Ex. Pr. (12-m avg.) (12Md. Md New Pr (12-m avg ) (12- avg.) Avg. Exist. Pr. (m) Avg. New Price (m)
SF Permits (2007)
Delinq./Foreclosure Delinq./Foreclosure Properties Filed (2007)
$215,600 $242,200 $263,900 $306,500 973.3k 1,285,873
-2.8% -0.4% -2.1% 1.0% -29.4% 75.0%
3.1%
Housing Fall Off 2006-08 . . . 2006• Unlike past housing downturns, this one not preceded
by rising interest rates, unemployment or recession • Causes: – E d of “Easy Credit – E End f “E C dit Easy Terms” T ” – Excess building in fast growing markets – Sl d Slowdown i appreciation – d li i h in i ti declining home prices i – Falling affordability leading to lower user demand – Fall off of speculative building and “investor” market
18
(Percent)
70.0
US Homeownership Rate and the FHLMC 30-Year Fixed Rate 30Homeownership 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 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
63.0
1970s 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)
2Q1987 2Q1988 2Q1989 2Q1990 2Q1991 2Q1992 2Q1993 2Q1994 2Q1995 2Q1996 2Q1997 2Q1998 2Q1999 2Q2000 2Q2001 2Q2002 2Q2003 2Q2004 2Q2005 2Q2006 2Q2007 2Q2008
6 5 4
19
62.0
Source: US Census Bureau; FHLMC (4‐quarter moving average homeownership rate)
(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
20
Jan-06 Jan-07 Jan-08
$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
21
Source: NAR, Real Estate Center at Texas A&M University
o f
T h o u s a n d s
U n i t s
100
110
120
130
140
150
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
22
60 1212-Month Moving Average
70
80
90
US SF Housing Permits
Source: US Census Bureau, Real Estate Center at Texas A&M
(000s Units)
Inventory of New SF Homes For Sale
Excess of about 475,000 units plus new construction in 2008 at plus new construction in 2008 at annual sales of around 700,000 will take several years to get back to balance t b l
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
23
24
Mortgage & Capital Markets
• Problems more severe than anticipated – Pricing mortgage-backed assets – Capital requirements/solvency among institutions – Loss of confidence in debt ratings – Plethora of proposed legal/regulatory changes – Mergers, acquisitions and/or failures – Law suits • Traditional mortgage loan underwriting g y • Foreclosures high into 2009 and early 2010 • Mortgage delinquency/default contagion to business & consumer markets • Li idit in market, nobody knows how to/willing to Liquidity i k t b d k h t / illi t lend
25
Total HH Home Mortgage Borrowing
1,100 1,000 900 800 700
$Billions
$0.5 trillion in home mortgages between 1972 and 1979; $1.5 trillion in home mortgages between 1980 and 1989; $2.12 trillion in home mortgages between 1990 and 1999; $2 12 illi i h b 1990 d 1999 $6.1 trillion in home mortgages between 2000 and 2007
709
1,029 988 940
856
655
600
507
500 400 300 200 100
34 40 37 40 86 58 106 117 127 90 67 47 105 180 199 222 216 225 199 174 171 157 167 154 206 216 379 386
302
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
26
Source: Federal Reserve, Flow of Funds, D-2, 3/6/2008
Current Residential Finance Conditions
• 65% of US owner-occupied homes have a mortgage (64% in Texas) – 76% fixed-rate • About 7.5 million, 13%-14% of all mortgages, are subprime loans • 75 percent of all subprime loans originated since 2003 • About two-thirds of subprime loans in ‘05 and ‘06 were two thirds ARMs • Total home equity is less than 50% and as many as 10% q y y of homeowners have negative equity • Falling home prices in key areas is the key factor to defaults d f d f lt and foreclosures l
27
Mortgage Status of Owner-Occupied OwnerHomes in T Texas
Number of OwnerOccupied Homes Percent of Total Units Percent with of Total Mortgage O-O Units
Total Housing units with a mortgage, contract to H i it ith t t tt purchase, or similar debt: First Mortgage only: No second mortgage and no home equity loan q y With either a second mortgage or home equity loan, but not both: Second mortgage only Home equity loan only With both a second mortgage and home equity loan Housing units without a mortgage
5,291,045 3,368,890 2,987,396 88.7% 369,986 173,269 196,717 11,508 1,922,155 11.0% 5.1% 5.8% 0.3% 36.3% 63.7%
28
Source: U.S. Census Bureau, 2006 American Community Survey
Percent of Foreclosures Started by T b Type of Loan 4Q2007 fL 4Q200
Type of Loan Percent of Outstanding Loans Percent of Foreclosures Started
California and Florida have 39% of all prime ARM loans, but 47% of foreclosure starts for prime ARMS; the two states have 29% of Subprime ARMs and 36% of subprime ARM foreclosures. 4Q06 4Q07 foreclosures in FL tripled; CA doubled. subprime ARM foreclosures 4Q06‐4Q07 foreclosures in FL tripled; CA doubled
Source: Mortgage Bankers Association, National Delinquency Survey, March 6, 2008
29
US Mortgage Delinquency Rates
18.0 18 0 17.0 16.0 15.0 14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 10
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
17.3
Subprime Mortgages
All Mortgages (average = 4.7%)
Prime Mortgages (average = 2.5%)
5.8
3.2
30
Source: Mortgage Bankers Association, National Delinquency Survey
10.0 9.0 8.0 7.0 6.0 5.0 4.0 40 3.0 2.0 20 1.0
1Q1998 2Q1998 3Q1998
US Mortgages in Foreclosure at the End of the Quarter
8.65
Subprime Loans
All Loans (average 1.24%) oa s (a e age 4%) Prime Loans (average 0.5%)
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
2.04 0.96
2Q2007
31
3Q2007
Source: Mortgage Bankers Association, National Delinquency Survey
4Q2007
0.0
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%
32
Monthly Foreclosure Filings y g
100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 20 000 10,000 0
Jul‐05 Aug‐05 Sep‐05 Oct‐05 Nov‐05 Jan‐06 Mar‐06 May‐06 Jul‐06 Aug‐06 Sep‐06 Oct‐06 Nov‐06 Jan‐07 Mar‐07 May‐07 Jul‐07 Aug‐07 Sep‐07 Oct‐07 Nov‐07
33
Texas foreclosures have been moderate compared to US trend. US foreclosures were up 97% Dec 06 to Dec 07. Texas was down 13.7% Dec 06 to Dec 07 .
US
Texas
Jun‐05 Jun‐06 Feb‐06 Apr‐06 Feb‐07 Dec‐05 Dec‐06 Apr‐07 Jun‐07 Dec‐07
Source: RealtyTrac, Inc.
Data include Notices of Trustee Sales plus Notices of Foreclosure Sale
2.6 2.4 2.2 2.0 1.8 1.6 16 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0
1Q1998 2Q1998
Percent of Texas Mortgage Loans Entering Foreclosure
Subprime Foreclosures Started
All Loans Foreclosures Started
Prime Loans Foreclosures Started
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
34
Source: Mortgage Bankers Association, National Delinquency Survey
Texas Te as and Houston ous o Housing Markets
35
Texas Home Sales
35,000
2007 failed to “stack” on the previous years, but ended better than 2005.
30,000
2007
25,000
2006 2005 2004
20,000
2003 2002
15,000 15 000
2007 Sales down 6.4%
10,000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
36
Dec
Source: Real Estate Center at Texas A&M University
Texas Home Sales
1212-Month Moving Average Mo ing A erage
26,000 24,000 22,000 20,000 18,000 16,000 14,000 12,000 10,000 8,000
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
37
Sales Bubble Sales “Bubble” Reverting to long‐term trend
Source: Real Estate Center
Jan‐0 09
Units
Texas Home Sales per 1,000 Households
Sales velocity > 20/1,000HH when the mortgage interest rate went below 8% Sales elocit > 20/1 000HH hen the mortgage interest rate ent belo 8% in 1996. By 1999 velocity surged to 25 units/1,000HH and > 30 units with rates around 6%.
35.6 33.4 30.9
45 40 35 30 25
20.2 21.0
Percent
18 17 16 15 14
32.8
13 12 11 10 9 8 7 6 5
Annual Average FHLMC 30-yr Fixed Rate ( g (right scale) )
24.0
28.1 25.4 25.5 26.2 26.7
20 15 10 5 0
18.4 15.8 13.0 15.8 16.3 15.6 14.2 15.6 16.5 16.1 14.9 16.9
18.1
18.7
18.2
14.9
4 3 2 1 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
38
Source: US Census Bureau , Real Estate Center at Texas A&M
Annual Texas Home Sales
310,000 310 000 290,000 270,000 250,000 230,000 210,000 190,000 170,000 150,000 150 000 130,000 110,000 90,000 70,000 50,000 ,
2008p
39
107,107 100,047 99,619 116,604 122,134121,823 146,395 146 395 138,123 170,638
2007 Trend
2007 = 272,200 along the trend line, about 5% decline. YTD = 234,453, down 5%. 2008 = 260,000 (5% less) to 285,000 (trend) 2009 = 260,000 (30 sales/1,000 HH) to 296,750 (trend) , ( )
184,056 188,738
290,003
296,750 285,000
272,177
266,519
260,000 ,
240,870
216,099 196,401 201,528
Source: Real Estate Center at Texas A&M University
2009p
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Annual Texas Home Sales
310,000 310 000 290,000 270,000 250,000 230,000 210,000 190,000 170,000 150,000 150 000 130,000 110,000 90,000 70,000 50,000 ,
2008p
40
107,107 100,047 99,619 116,604 122,134121,823 146,395 146 395 138,123 170,638 184,056 188,738
2003 Trend
2007 = 272,200 along the trend line, about 5% decline. YTD = 234,453, down 5%. 2008 = 262,000 (30 sales/1,000 HH, 5% less) 2009 = 272,000 (equal to 2007)
290,003
y = 9676x + 78095
240,870
266,519
272,177 261,939
271,615
216,099 196,401 201,528
Source: Real Estate Center at Texas A&M University
2009p
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
San Marcos Monthly MLS Home Sales
60 55 50 45 40 35 30 25 20 15 10
2007 home sales declined 21.9%
2006
2005 2007
Sept S
Jan J
Feb F
Mar M
Apr A
Source: Real Estate Center
May M
Jun J
Jul J
Aug A
Oct O
Nov N
Dec D
US and Texas Median Home Prices
$240,000 $215,000 $190,000 $165,000 , $140,000 $115,000 $90,000 $65,000 $40,000 ,
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
42
Source: NAR; Real Estate Center at Texas A&M University
2007
US, Texas and Austin Appreciation
4Q2007 HPI Percent Change Year over Year 4Q2007 HPI Percent Change Year over Year Q g
14% 13% 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 = 5.4% Texas average = 4.0% US = 0 8% 0.8% Texas = 5.2%
US Austin
Texas
43
Source: OFHEO
Texas Homes Appreciate !
Abilene 2.09% Fort Worth 2.89% San Antonio 8.25% Amarillo 5.25% Houston 4.79% Sherman ‐0.77% Austin 7.95% Killeen 6.35% Tyler 3.67% Beaumont 7.31% Laredo 7 31% Laredo 9.31% Victoria 8.84% 9 31% Victoria 8 84% Brownsville 3.87% Longview 3.14% Waco 10.14% College Station 0.96% Lubbock 0.34% Wichita Falls 4.01% Corpus Christi 5.15% C Ch i i % McAllen ll 2.13% 2 3% Dallas 2.95% Midland 12.31% El Paso 6.86% Odessa 19.08%
Source: OFHEO, 4Q2007
44
Texas Median Home Prices
$170,000 $170 000 $160,000 $150,000 $140,000 $130,000 $120,000 $120 000 $110,000
100,900 112,100
Median Home Price of $159,000 by 2010 equals a 7.8% increase over 2007. Annual average increase of 4.4% 1990‐2007; Annual increases of 1.7% in 2008 and 3% in 2009 and 2010.
159,000 154,500 150,000
147,500 143,100 136,800
130,100 127,700 124,500 119,400
$100,000
90,600
96,200
$90,000 $80,000
71,200 78,200 75,200 68,500 68 100 68,100 80,000 81,600
86,400
$70,000 $70 000 $60,000 $50,000
2008p p
2009p p
Source: Real Estate Center at Texas A&M
2010p p
45
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
1991
2001
$115,000
$100,000
$130,000
$145,000
$160,000
$175,000
$190,000 $190 000
$205,000
$220,000 $220 000
$235,000
$250,000
San Marcos Average Home Price
Source: Real Estate Center at Texas A&M University
Jan-05 5 Feb-05 5 Mar-05 5 Apr-05 5 May-05 5 Jun-05 5 Jul-05 5 Aug-05 5 Sep-05 5 Oct-05 5 Nov-05 5 Dec-05 5 Jan-06 6 Feb-06 6 Mar-06 6 Apr-06 6 May-06 6 Jun-06 6 Jul-06 6 Aug-06 6 Sep-06 6 Oct-06 6 Nov-06 6 Dec-06 6 Jan-07 7 Feb-07 7 Mar-07 7 Apr-07 7 May-07 7 Jun-07 7 Jul-07 7 Aug-07 7 Sep-07 7 Oct-07 7 Nov-07 7 Dec-07 7 Jan-08 8 Feb-08 8 Mar-08 8
Percent of Tota Sales al
10
12
14
16
0
$29,999 or less 9 30,000 - 39,999 40,000 - 49,999 50,000 - 59,999 60,000 - 69,999 70,000 - 79,999 80,000 - 89,999 90,000 - 99,999 100,000 - 119,999 120,000 - 139,999 140,000 - 159,999 160,000 - 179,999
2
4
6
8
1997 and 2007 San Marcos Home Sales by Price 1997 and 2007 San Marcos Home Sales by Price
Source: Real Estate Center at Texas A&M
180,000 - 199,999 200,000 - 249,999 250,000 - 299,999 300,000 - 399,999 400,000 - 499,999 500,0 and 000 m more
1997 2007
Texas SF Permits
1212-Month Moving Average
15,000
2003 Trend line has very tight fit with actual.
14,000 14 000
A construction “bubble” from 2004 to mid-2006.
13,000 12,000 12 000 11,000 10,000 9,000 8,000 7,000
Jan-00 May-00 Jan-01 May-01 Jan-02 May-02 Jan-03 May-03 Jan-04 May-04 Jan-05 May-05 Jan-06 May-06 Jan-07 May-07 Jan-08 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07
48
Source: US Census Bureau, Real Estate Center at Texas A&M
Texas SFD Building Permits
180,000 160,000 140,000 120,000 100,000 80,000 80 000
70,355 70,418 62,672
Year
2002 2003 2004 2005 2006 2007 2008p
Average Permits Per Month
151,384
166,203
163,032
10,250 11,460 12,600 13,850
108,613 111,915 111 915 122,913 137,493
‐31.3%
112,040 ,
13,600 9,340 8,400
83,103 82,180
‐10%
101,000
99,831
101,848
60,000
41,654 41 654
54,798
40,000 20,000 0
38,141
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008p 49
Source: U.S. Census Bureau, Real Estate Center at Texas A&M University
2,500
Hays County Single-Family Building SinglePermits
SF Permits Down 23% in 2007
2,124 1,960 1,992
2,000
1,529
1,500
1,156 1,091
1,000
754 727 746
500
108 114 60 132 70 148 88 73 26 12 18 21 22 47 82 175 157
363
0
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: Real Estate Center
Hays County Multi-Family Building Permits Multi5+ Units per Building p g
1,200
1,019
1,000 1 000 800 600
MF permits were down 13% 2007 from 2006 2007 f 2006
738
597 509 503 470 422 427 395 360 350 370 318 230 237 158 241 202 407 436
400 200 0
8
0
0
0
0
0
0
2007 2006 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981
Source: Real Estate Center ‐ Permits for Buildings with 5+ Units
Demographics
US Population Growth 2007-2012 2007-
Source: Global Insight, Inc.
53
2000 – 2007 States with Population Increases > 1 million
Number Texas 3,052,581 California C lif i 2,681,560 2 681 560 Florida 2,268,419 Georgia 1,357,934 Arizona 1,208,140 1 208 140 North Carolina 1,014,541
Source: U.S. Census Bureau
Table 2. Cumulative Estimates of the Components of Population Change for the United States, Regions, States and Puerto Rico: April 1, 2000 to July 1, 2007 (NST‐EST 2007‐02), December 27, 2007
Percent 14.6% 7.9% 7 9% 14.2% 16.6% 23.5% 23 5% 12.6%
Top 18 Growth MSAs 2000-2007 20001,100,000 1 100 000 1,000,000 900,000 800,000 700,000
996,463
600,000 600 000 500,000 400,000 300,000 200,000 100,000 00,000 0
947,907
900,276
887,678
8 803,100
484,631
472,112
459,482
442,901
405,515
385,489
375,572
332,315
3 319,492
3 311,341
282,427
71,266 27
55
Source: U.S. Census Bureau
27 70,712
Projected Texas Population
(000s)
45,000 45 000
2000 - 2030
At 50% 1990-2000 rate of immigration At 2000-2004 rate of immigration At 100% 1990-2000 rate of immigration
36,682 41,118
40,000
35,000
Between 9 and 18 million more residents between 2005 and 2030 residents between 2005 and 2030
29,214 27,581 26,059 25,106 24,331 26,157 28,006
36,333
32,737
33,158 33 158 31,831
30,253
30,000
29,897
25,000
22,929 20,952
23,904
20,000
15,000
2000 2001 2002 2003 2004 2005 2006 2007 ... 2010 2010 2010 2015 2015 2015 2020 2020 2020 2025 2025 2025 2030 2030
56
Source: U.S. Census Bureau, Texas State Demographer
2030
60% 50% 40%
Percent Anglo and Hispanic Reverse by 2030
Anglo
53.1 1% 49.5%
Black
Hispanic
Other
% 51.3% 32.5% 10.0% 9.5% 6.1%
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
57
Source: Texas State Data Center and Demographer, Average of Projections
6.7%
Hays County Population
450,000
417,590 408,831
400,000 350,000 300,000 250,000 200,000 150,000 100,000 100 000 50,000 0
Between 1.8 and 4.4 million more people by 2030
229,995
141,480 126,498
78,956
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
2030
58
2030
Source: US Census Bureau, Texas State Data Center and Demographer, 50%, 100% and 2000-2004 immigration scenarios
2030
San Marcos Area Board of Realtors® 2008 Economic and Housing Outlook
April 8, 2008
Dr. James P. Gaines Dr James P Gaines
Research Economist Real Estate Center at Texas A&M University March 25, 2008