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Real Estate Market Overview

Real Estate Market Overview. Stan Humphries, Chief Economist. Download this presentation at www.zillow.com/research/presentations. Zillow Home Value Index: Down 11.3% from 2007 peak. Source: Zillow (June 2014 ). Zillow Home Value Index: Annual deceleration, monthly gain.

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Real Estate Market Overview

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  1. Real Estate Market Overview Stan Humphries, Chief Economist

  2. Download this presentation at www.zillow.com/research/presentations

  3. Zillow Home Value Index: Down 11.3% from 2007 peak Source: Zillow (June 2014 )

  4. Zillow Home Value Index: Annual deceleration, monthly gain Source: Zillow (June 2014 )

  5. Five challenges for the housing market • Negative Equity • For-Sale Inventory • Household Formation Rates • Mortgage and Rental Affordability • Mortgage Rate Lock-In

  6. 1. Negative Equity

  7. But has declined steadily since 2012 Q1 Source: Zillow (2014 Q1)

  8. Negative Equity: Share of underwater homes by value tier Source: Zillow (2014 Q1)

  9. 2. For-Sale Inventory

  10. For-sale inventory has increased for the past four months Source: Zillow (June 2014 )

  11. Share of for-sale inventory is lowest in the bottom value tier Source: Zillow (June 2014 )

  12. 3. Household Formation

  13. Household formation still struggling below average Source: CPS/HVS

  14. Young adults are living at home at higher rates Housing demand will increase as they strike out on their own 13 Source: Census

  15. Renter households are forming faster than owner households 14 Source: Current Population Survey

  16. 4. Mortgage and Rental Affordability

  17. Rent affordability is at all time lows, U.S. spends 30% of income Source: Zillow (2014 Q1)

  18. United States: Mortgage affordability better than average Rent affordability worse than average Source: Zillow (2014 Q1)

  19. 5. Mortgage Rate Lock-in

  20. What “should” existing home sales be? Slower 5-year growth in home values Lower homeownership rate Low 30-yr FRM interest rate Mortgage rate lock-in* Lower annual income growth Higher vacancy rate Impact *Five-year difference in 30-yr FRM interest rates Source: Zillow Impact on home sales relative to “normal”

  21. Once interest rates exceed 5%, lock-in will be a drag on sales Source: Zillow

  22. Sales could slow in the coming year Source: NAR, Zillow

  23. Outlook

  24. Zillow Home Value Forecast for June 2015 positive Source: Zillow (June 2014)

  25. Summary and Outlook • Current recovery fueled by: • Huge reset in home prices • Low mortgage rates • Inventory constraints due to negative equity • “Normal” recoveries usually fueled by: • Household formations • Rising incomes • We are currently transitioning between these two types of recoveries, but it will be several more years before we get back to “normal” • Tailwinds for housing markets • Pent-up supply of household formations coming from doubled-up households • Increased economic growth/inflation which should filter down to wage growth

  26. About Zillow Real Estate Research- www.zillow.com/research In-depth research and monthly reports Real Estate Metrics • Zillow Home Value Index • Zillow Rent Index • Zillow Home Value Forecast • Negative equity • List prices • Sale prices • Rental prices • Home sales • $ value/square foot • $ price/square foot • Sale-to-list price ratio • % listings with price cuts • $ amount of listing price cuts • % homes sold for loss/gain • % homes foreclosed • % sales that are foreclosure re-sales • % homes increasing/decreasing in value • % homes sold in the past year • Price-to-rent ratios • Price-to-income ratios • Affordability All data is freely available on Zillow Research Most research briefs include interactive visuals

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