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					U.S. Real Estate Markets:

An International Perspective
NATIONAL ASSOCIATION OF REALTORS® June 26, 2002

Dr. David Lereah Chief Economist

WW II Response “A nation of homeowners is unconquerable”
Franklin Roosevelt

Sept. 11 Response “Being a secure America is to encourage homeownership”
George W. Bush

Brief Recession Turns … To Modest Recovery
$ Billions
$12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $0
105 Mo. 51 Mo. 57 Mo. 120 Mo.

Post WW-II Expansions/Recessions

92 Mo.

19 47

19 52

19 57

19 62

19 67

19 72

19 77

19 82

19 87

19 92

19 97

Source: U.S. Department of Commerce (F) NAR Forecast

20 02

Recovery Less Than Robust
• Recent Rate Reductions Not As Stimulative • Housing Impact Weaker • Rest of World Sluggish • Consumer Spending Expected To Slow • Household Income Sources Diminish • Stock Market Wealth Woes

Percent

Federal Funds Rate

20 18 16 14 12 10 8 6 4 2 0
'0 2 52 57 62 67 72 77 82 87 92 97

1.75

Source: Federal Reserve Board

World Economies
2002
8 6 4 2 0 -2 -4
World Canada Mexico Europe Japan

2001

2000

Real GDP, Percent Change

Source: Oxford Economic Forecasts

Consumer Spending
Quarterly Percent Change, Annualized

12 10 8 6 4 2 0
90 91 92 93 94 95 96 97 98 99 '00 '01 '02
Source: U.S. Bureau of Economic Analysis

Household Income Sources Diminish
• Refinances Dry Up
– $500 Billion in 2002 vs. $1.2 Trillion in 2001

• Tax Cuts
– $20 Billion in 2002 vs. $60 Billion in 2001

• Higher Energy Prices

$Billions

(Peak to Trough: $5 trillion loss)
March’00 Peak $18 trillion.

Stock Market

20000 18000 16000 14000 12000 10000 8000 6000 4000 2000 0
90 91 92 93 94 95 96 97 98 99

Sept.’01 Trough $13 trillion

'00

'01

'02

Source: Wall Street Journal

Recovery Modest, But Healthy
• 5.8% 2002 First Quarter GDP vs. 1.7% 2001 Fourth Quarter • Auto Sector Strength • Housing At/Near Record Levels • Employment Prospects Improving • Manufacturing Expanding Again • Inventory Re-stocking

Real GDP Growth
Quarterly Percent Change, Annualized

10 8 6 4 2 0 -2 -4
90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03
Source: U.S. Department of Commerce NAR Forecast

Housing Records Are Made To Be Broken
2001
• • • • • • • • • Existing-Home Sales New-Home Sales Median Existing-Home Price Home Price Appreciation Housing Starts Homeownership Rate Home Real Estate Values Home-Sale Capital Gains Cash-Out Refinancings Record 5.3 million Record 909,000 Record $153,000 20-Year High +5.8% Near 15-Yr High 1.6 million Record 67.8 pct. Record $13 trillion Record $212 billion Record $96 billion

Existing-Home Sales
Thousands of Units

6,000 5,000 4,000 3,000 2,000 1,000 0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '00 '02

Note: Shaded Area = Recession Source: NATIONAL ASSOCIATION OF REALTORS®

New-Home Sales
Thousands of Units

1,200 1,000 800 600 400 200 0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '00 '02

Note: Shaded Area = Recession Sources: Bureau of Census

Housing Starts
Thousands of Units

3,000 2,500 2,000 1,500 1,000 500 0
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '00 '02

Note: Shaded Area = Recession
Sources: Bureau of Census

Homeownership Rate
Percent

69 68 67 66 65 64 63 62 61
70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 '00 '02
Note: Shaded Area = Recession
Sources: Bureau of Census

Housing Healthy, But Slowing
• • • • First Quarter Record EHS: 5.8 million Mortgage Rates Hover at 7.0% to 7.3% Inventories Remain Lean REALTOR®/Builder Confidence Remains High • Mortgage Applications Healthy • Home Price Appreciation Slows, But No Burst of Bubble

Housing’s Contribution To Economic Growth In 2001
Rest of Economy 39% Residential Construction 24%

61%
Housing Services * Q4 to Q4 37%

US & Canada: GDP Growth
Percentage Change from Prior Year

3.5 3 2.5 2 1.5 1 0.5 0 US

2001

2002E

2003E

Canada

Source: NAR, Oxford Economic Forecasting, Spring 2002

Europe: GDP Growth
Percentage change from prior year
4 3.5 3 2.5 2 1.5 1 0.5 0
y ly in ce m an It a Sp a an

2001

2002E

2003E

um

om

en ed Sw Sw it z

ia

nd

al

gi

r la

gd

tr

Be l

Fr

Au s

er

Ne t

he

G

Source: Oxford Economic Forecasting, Spring 2002

Un i

te

d

Ki n

er

la

nd

s

Asia Pacific: GDP Growth
Percentage change from prior year

4 3 2 1 0 -1 -2 2001 2002 2003
Source: Oxford Economic Forecasting, Spring 2002

Japan

Australia

GDP Growth Emerging Markets - Asia
Percentage change from prior year

9 8 7 6 5 4 3 2 1 0
na di a Ch i ne In

2001

2002E

2003E

es

Ko re a

si a

ay si a

in

pp

do

al

In

Source: Oxford Economic Forecasting, Spring 2002

Ph

Th

M

ili

ai

la

nd

GDP Growth Emerging Markets – Latin America
Percentage change from prior year
8 6 4 2 0 -2 -4 -6 -8 -10
Source: Oxford Economic Forecasting, Spring 2002
2001 2002E 2003E

Argentina

Brazil

Chile

Mexico

GDP Growth Emerging Markets – South Africa and Eastern Europe
Percentage change from prior year
6.00 5.00 4.00 3.00 2.00 1.00 0.00 South Africa Czech Hungary Republic Poland Bulgaria Russia
2001 2002E 2003E

Source: Oxford Economic Forecasting, Spring 2002

Emerging Markets
• Less affected by U.S. slowdown • Greater volatility and risk • Greater dependency on currency fluctuations • Greater opportunities

Global Economic Performance: 2002
Industrialized Emerging
•Australia

•China •U.S. •India •U.K. •Indonesia •Canada •Korea •Spain •Malaysia •Philippines •Chile •Czech Republic •Hungary •Russia

Industrialized Emerging Industrialized Emerging
•Turkey •Japan •Thailand •Germany •South Africa •France •Argentina •Brazil •Mexico •Poland

•Italy •Belgium •Austria •Sweden •Switzerland •Netherlands

Source: Oxford Economic Forecasting, Spring 2002

Global Economic Performance: 2003
Industrialized Emerging
•Canada •France •Italy •Spain •Netherlands •Australia •China •U.S. •India •U.K. •Turkey •Germany •Indonesia •Belgium •Chile •Switzerland •Korea •Austria •Malaysia •Sweden •Philippines •Thailand •Brazil •Mexico •South Africa •Czech Republic •Hungary •Russia •Argentina

Industrialized Emerging
•Poland

Industrialized
Japan

Source: Oxford Economic Forecasting, Spring 2002

Foreign Direct Investment In U.S. By Industry, 2000
In Millions

Total FDI: 1,238 Billion
496,578

600,000 500,000 400,000 300,000 200,000 100,000 0

92,856

109,611

106,403 102,955 99,134 68,619 88,082 42,300 32,091

m

W ho

ep D

os
Source: Bureau of Economic Analysis

e et ai ito lt ry ra de In st itu tio ns Fi na nc In e su ra nc R e ea lE st at e Se O rv th ic er es In du st rie s

tu rin g le s

uf ac

tro le u

Pe

al e

M an

R

Tr ad

In Millions

Foreign Direct Investment in U.S. Real Estate
NAR Estimates

50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

35,169 31,613 30,170

40,248 38,241 39,545

42,300 44,000

46,000

1994

1995

1996

1997

1998

1999

2000

2001

2002

Source: Bureau of Economic Analysis, NAR Estimates

Foreign Direct Investment Position in U.S. by Region, 2000
Asia and Pacific 15.66% Middle East 0.68% Canada 8.14%

Top 10 Investing Countries •United Kingdom •Japan •Netherlands •Germany •France •Canada •Luxembourg •Switzerland •Sweden
Europe 71.90%

Africa 0.17%

Latin Am erica 3.45%

•Ireland

Source: Bureau of Economic Analysis

Foreign Direct Investment Position in U.S. Real Estate by Region, 2000
Canada 14% Asia and Pacific 33%

Top 10 Investing Countries:

•Japan
•Canada •Netherlands •Germany
Europe •UK/Caribbean 37% •Switzerland Latin America 13%

Middle East 2% Africa 1%

•Bermuda •Bahamas

•Panama
•Hong Kong

Source: Bureau of Economic Analysis

2001 Top Foreign Real Estate Investment Targets in the U.S.
Commercial • New York (?) • San Francisco • Boston • Washington, DC Residential • Florida • Atlanta • Houston • Las Vegas

Source: Survey conducted by Association of Foreign Investors in Real Estate, 2000

In Millions 600,000
500,000 400,000 300,000 200,000 100,000 0

U.S. Direct Investment Abroad by Industry, 2000
497,267 343,992

105,486

88,090 37,155

79,857

92,809

ur in g

ro le um

de

itu tio ns

e

s

rv ic e

Tr a

st

Pe t

an uf a

In st

,In s, Re a

ho le s

De po si to ry

W

Source: Bureau of Economic Analysis

Fin an ce

To ta

Ot he r

lM

in du st

ct

le

al e

Se

rie

at

s

U.S. Direct Investment Abroad by Region, 2000
Asia and Pacific 24% Canada 15%

Middle East 1% Africa 2% Latin America 29%
Source: Bureau of Economic Analysis

Europe 29%

Immigration to U.S. by Decade
Millions

10 9 8 7 6 5 4 3 2 1 0 3.3 2.5 7.3

9.3

4.4

1950-60

1960-70

1970-80

1980-90

1990-2000

Source: Immigration and Naturalization Service

2001 Top Immigration Destinations
• US Total
• • • • • • California New York Texas Florida Illinois New Jersey

1.34 million
344,000 159,000 135,000 122,000 75,000 60,000

Homeownership Rates Latin America, Europe, Asia Pacific
(%) Latin America Europe Asia Pacific

90.0 77.0 75.0 70.0 80.0 61.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0
Ar ge

80.7 78.0 75.0

67.0 54.0 49.0 40.0

70.0 54.0 60.0 60.0 43.0

Ir e

Au

a in Ch a re Ko n g pa Ja Kon ng Ho alia r

ay gu ra Pa or d ua Ec il az a Br in nt

ly Ita ain Sp d lan

y an rm ds Ge lan er th Ne m ce gdo an n Fr Ki d ite Un

st

Who Will Be World’s Most Dominant Economy By 2020?
A. B. C. D. United States European Union China None of the Above

If you answered the United States, you may be wrong ….

(2002 Projected GDP: $Billions)
• • • • • • • • Austria Belgium Denmark Finland France Germany Greece Ireland $209 $252 $176 $146 $1,401 $1,989 $126 $112 • • • • • • • • Italy Luxembourg Netherlands Portugal Spain Sweden United Kingdom Total (EU) $1,101 $22 $422 $118 $645 $235 $1,501 $8,455

European Union

Source: Organization for Economic Cooperation & Development

United States vs. European Union
2002 Projected GDP in Billions
European Union 45%

$8,455

$10,414
United States 55%

Sources: U.S. Department of Commerce, Organization for Economic Cooperation & Development

The United States vs. The World
Population (mil.) GDP ($Bil) Real GDP

United States
European Union

278
324

10,414
8,455

+2.7%
+1.8%

China
World

1,273
6,157

1,286
27,049

+7.0%
+1.6%

Note: 2001 Population, 2002 Projected Nominal GDP, 2002 Projected Real GDP growth from previous year.
Sources: U.S. Statistical Abstract, DRI-WEFA, NAR

U.S. Real Estate Markets:

An International Perspective
NATIONAL ASSOCIATION OF REALTORS® June 26, 2002

Dr. David Lereah Chief Economist


				
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