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Real Estate Market Outlook: Peering Through the Clouds

Paul C. Bishop, Ph.D. Managing Director, Research NATIONAL ASSOCIATION OF REALTORS ®. Real Estate Market Outlook: Peering Through the Clouds. OHIO ASSOCIATION OF REALTORS ® Winter Conference January 14, 2008 . Overview. The Market Setting Sales are down and consumers are skittish

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Real Estate Market Outlook: Peering Through the Clouds

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  1. Paul C. Bishop, Ph.D. Managing Director, Research NATIONAL ASSOCIATION OF REALTORS® Real Estate Market Outlook:Peering Through the Clouds OHIO ASSOCIATION OF REALTORS® Winter Conference January 14, 2008

  2. Overview • The Market Setting • Sales are down and consumers are skittish • The Outlook • Partly cloudy • What do Buyers and Sellers Expect from You in this Market? • Expertise and guidance

  3. Buyers and Sellers are Jittery about the U.S. Economy • Unemployment: 5% (Dec), up from 4.7% • Job growth: +18,000 (Dec) • GDP: +4.9% (Q3) • Consumer spending: +2.8% (Q3) • Business investment: +9.3% (Q3) • Residential investment: -20.5% (Q3) • Exports: +19.1% (Q3) • Oil prices: $100/bbl • Stock market: Up, Down and Sideways

  4. New Construction HasBeen Hit Hard thousands of units 38% decline from peak Source: U.S. Census

  5. Consumers RethinkNew Home Purchase Plans thousands of units 40% decline from peak Source: U.S. Census

  6. Existing Home Sales Have Also Fallen thousands of units 20% decline from peak Source: NAR

  7. More Sellers than Buyers = Rising Inventory months supply Source: U.S. Census, NAR

  8. As a Result PricesHave Declined % New Home Prices: -2.1% Existing Home Prices: -1.9% Source: NAR

  9. Some Markets Remain Quite Robust Source: NAR, 2007Q3

  10. But Others are Suffering Source: NAR, 2007Q3

  11. Tough Job Situationin Ohio thousands Decline from peak:-195,000; -3.5% Source: BLS

  12. Areas of Strength and Weakness in Local Job Market Source: BLS

  13. No Upturn in Existing Home Sales in Ohio Yet Q3 06 to Q3 07 U.S: -13.7% Ohio: -11.6% Indiana: -9.4% Kentucky: -7.2% Michigan: -4.0% Pennsylvania: -3.2% West Virginia: -19.0% 11% decline from peak thousands of units Source: NAR

  14. Median Prices Weak in Many Ohio Markets Source: NAR, 2007Q3

  15. Subprime Loan Implosion • Homeowners facing higher resetting rates and foreclosures • Wall Street reassessing risk • Sub-prime brokers getting out or being pushed out • Potential home buyers left out in the cold

  16. Mortgage Delinquencies:A Tale of Two Sectors % Stagnant prices limit ability to refinance out of high risk loans Housing boom permits re-financing and lowers delinquency rate Job losses push up Delinquency rate Source: Mortgage Bankers Assn

  17. Foreclosure Rates Far Higher Among Subprime % Source: Mortgage Bankers Assn (3Q07)

  18. Share of Subprime Loans is Relatively Small… Source: NAR Estimate

  19. …But Subprime Loans Account for Most Foreclosures Source: NAR Estimate

  20. Wide Regional Differences in Foreclosure Rates % Source: Mortgage Bankers Assn (3Q07)

  21. Highest Foreclosure Rates in the Upper Midwest % Source: Mortgage Bankers Assn (3Q07)

  22. U.S. Economic Outlook Source: NAR, January 2008 forecast

  23. U.S. HousingMarket Outlook Source: NAR, January 2008 forecast

  24. Getting to KnowToday’s Buyer and Sellers • In today’s market, what do buyers and sellers want? • First-time buyers are the leading edge of the home buying market • Evolving demographics influence who is in the market to purchase a home • Generational differences affect preferences for location, features, search process and reasons for buying or selling a home

  25. What do Buyers do First When Looking for a Home? 91% used the Internet during their home search Desire for a smaller home is one of the top reasons for buying Over half blog or use social network sites at least a few times a week Over half visited an open house Source: 2007 NAR Profile of Home Buyers and Sellers Age of Home Buyer

  26. Buyers Look for Information Online… Age of Home Buyer Source: 2007 NAR Profile of Home Buyers and Sellers

  27. …But Most Find their Agent Through Referrals Source: 2007 NAR Profile of Home Buyers and Sellers

  28. Sellers Also Depend on Referrals When Choosing an Agent Source: 2007 NAR Profile of Home Buyers and Sellers

  29. What Buyers Want Most from Real Estate Agents Small differences among demographic groups Source: 2007 NAR Profile of Home Buyers and Sellers

  30. Trust and Reputation are Key in Buyers’ Use of Agent Source: 2007 NAR Profile of Home Buyers and Sellers

  31. What Sellers Want Most from Real Estate Agents Source: 2007 NAR Profile of Home Buyers and Sellers

  32. Educating Sellers – Your Role as an Expert 24% of homes were on the market for 17 or more weeks Weeks home was on the market Source: 2007 NAR Profile of Home Buyers and Sellers

  33. What Does it All Mean • Big changes in the real estate market • Sluggish activity in many (but not all) regions • Foreclosures will hold back market in some areas • Pent-up demand will lift many markets in the next year or so • In a tough market, buyers and sellers need your expertise • Real estate remains one of the best investments for most households

  34. For more information: Paul C. Bishop NAR Research Division 202-383-1246 pbishop@realtors.org www.realtor.org/research

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