2010 HAR REALTOR® Expo- Ted Jones, PhD
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The document provides an economic forecast and real estate outlook by Ted C. Jones, Chief Economist at Stewart Title Guaranty Co. Some of the key points summarized are: 1. The US economy has struggled to recover jobs lost since the recession, and unemployment remains high. 2. The housing market recovery will be important to driving the broader economic recovery, as housing has led previous recession recoveries. However, the housing recovery remains uneven in different local markets. 3. Commercial real estate continues to face difficulties with high vacancy rates and falling prices. Property values have declined significantly from their peaks. 4. Jones forecasts that interest rates will rise in 2011 from current low levels, and outlines some economic concerns
2010 HAR REALTOR® Expo- Ted Jones, PhD
- 1. New Business Model For the 2011 Economy Adapt, Mutate, Migrate or Die An Economic and Real Estate Forecast Ted C. Jones, PhD Chief Economist Stewart Title Guaranty Co.
- 2. The New Business Model i.e. Things are different today…..
- 3. The New Business Model 1. Cost Control is Essential 2. Consumers Have Changed Expectations 3. Less is More
- 4. US Employment September Year Millions 2000 132.1 2010 130.2 1.9 Million Fewer Jobs 10 Years at 100,000 Per Month = 12 Million Needed Jobs
- 5. US Civilian Employment Millions of Jobs 137.0 135.0 133.0 131.0 129.0 '07 '08 '09 '10 613 Thousand Jobs Gained in 2010 7.75 Million Jobs Lost Since January 1, 2008 September 2010 95,000 Jobs Lost
- 6. Houston-Baytown-Sugar Land Jobs Percent Change from Same Month Prior Year Not Seasonally Adjusted 3.0% 0.0% 7 6 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 -3.0% -6.0% US Houston-Baytown-Sugar Land 900 Net Lost Jobs in the Past 12 Months
- 7. Recession Recovery The recovery in every recession since 1949 has been led by a recovery in the housing market
- 8. Axiom #1 There is No Such Thing as a National Real Estate Market or Economy Nor is there even a generalized Orlando Market
- 9. US Existing Home Sales Sold (Millions) 8.0 7.0 6.0 August 2010 5.0 4.0 3.0 '02 '03 '04 '05 '06 '07 '08 '09 '10 National Association of REALTORS®
- 10. Houston MSA Existing Home Sales Number Per Month 9,000 8,000 7,000 August 2010 6,000 5,000 4,000 3,000 2,000 1,000 0 2 3 4 5 6 7 8 9 0 '0 '0 '0 '0 '0 '0 '0 '0 '1
- 11. Houston Existing Home Sales Average Number Per Month For Prior 12 Months 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2 3 4 5 6 7 8 9 0 '0 '0 '0 '0 '0 '0 '0 '0 '1
- 12. Houston Existing Home Prices Median Price $175,000 $150,000 $125,000 $100,000 $75,000 $50,000 $25,000 $0 2 3 4 5 6 7 8 9 0 '0 '0 '0 '0 '0 '0 '0 '0 '1
- 13. Houston Residential Building Permits Number of Dwelling Units 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 80 82 84 86 88 90 92 94 96 98 ' 00 ' 0 2 ' 04 ' 0 6 ' 08 ' 1 0f Single Family Multi
- 14. Federal Budget Surplus (Deficit) $ Billions $0.0 '01 '02 '03 '04 '05 '06 '07 '08 '09 -$200.0 '10f '11f -$400.0 -$600.0 -$800.0 -$1,000.0 -$1,200.0 -$1,400.0 -$1,600.0
- 15. Interest Expense on Debt Outstanding $ Billions 2009 $383 Billion $500 $400 $300 $200 $100 $0 88 89 90 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 09p '
- 16. 2010 Budget Department $ Billions Agriculture 25.7 Education 46.7 Energy 26.4 Homeland Security 42.7 Housing and Urban Development 43.7 Interior 12.0 NASA 18.7 Labor 13.3 State 53.9 Transportation 73.3 Treasury 13.4 Environmental Protection Agency 10.5 Total 380.2
- 17. $533 Billion Spent Remove Temporary Census Jobs 723,000 Jobs YTD -33,000 = $772,500 $737,200 Per Job Per Job
- 18. Oil Prices & 10-Year Treasury Note Rates August 2010 Dollars 10-Year Oil Prices Treasury Rates % $140 $120 17 $100 14 $80 11 $60 8 $40 5 $20 $0 2 72 75 78 81 84 87 90 93 96 99 '02 '05 '08
- 19. Oil Prices & Exchange Rates $US Per Euro Oil in August 2010 Dollars Dollars Per Oil Prices Oil Price Euro $140 $1.65 $120 $100 $1.45 $80 $1.25 $60 $1.05 $40 $20 $0.85 '02 '03 '04 '05 '06 '07 '08 '09 '10
- 20. Why Interest Rates Are Going To Increase Japanese Buyer of 2-Year Treasury Note in September 2008 Dollar-Yen Exchange Date Event U.S. Dollars Rate Yen 9-2008 Purchase the Bond $ (100,000.00) 106.6 $ (10,660,000) 3-2009 Interest Payment $ 480.00 97.9 $ 46,992 9-2009 Interest Payment $ 480.00 91.3 $ 43,824 3-2010 Interest Payment $ 480.00 90.7 $ 43,536 9-2010 Interest Payment $ 480.00 83.3 $ 39,984 9-2010 Bond Redempetion $ 100,000.00 83.3 $ 8,330,000 Total (With No Time Value of Money) $ (2,155,664) Return (No Time Value of Money) -20.2%
- 21. Rates Up 100 Basis Points Ted’s Forecast ‘10 Big 2011 9-1-2010 to 12-31-10 Upside…
- 22. Commercial Sales Percent $ Billion Change 2007 $ 557.8 2008 $ 181.6 -67.4% 2009 $ 54.4 -70.0% $58 Billion Q1+Q2+Q3 2010 Forecast 2010 = $77.3 2010 +42%
- 24. Mortgage Bankers Association Office Building Washington, DC Purchased 2007 $79.0 Million Sold Feb 2010 $41.3 Million Loss $37.7 Million 47.7 Percent
- 25. MIT Real Estate Group NCREIF
- 26. Estimated Current Property Value Compared to Q2 2010 Property Type Acquisiton Date Apartments Industrial Office Retail 2000 Q1 41.3% 16.9% 26.7% 40.2% Q2 35.8% 13.9% 23.5% 43.6% Q3 30.5% 10.5% 20.7% 43.9% Q4 29.3% 10.9% 20.1% 50.2% 2001 Q1 30.8% 6.9% 21.1% 53.4% Q2 21.5% 4.1% 24.0% 46.1% Q3 22.2% 5.3% 28.7% 43.1% Q4 22.4% 7.7% 32.6% 44.4% 2002 Q1 21.3% 13.1% 26.8% 40.7% Q2 25.0% 10.6% 31.3% 37.5% Q3 24.5% 9.1% 22.9% 32.0% Q4 20.5% 4.3% 25.1% 24.2% 2003 Q1 21.6% 8.2% 23.7% 25.4% Q2 22.3% 3.8% 25.5% 17.7% Q3 18.7% -2.0% 21.7% 28.5% Q4 18.0% -2.9% 21.3% 20.2% 2004 Q1 19.3% -4.2% 21.1% 15.5% Q2 14.7% -10.0% 16.5% 10.0% Q3 8.5% -9.3% 15.4% 3.8% Q4 6.2% -9.7% 11.1% -0.3% 2005 Q1 -2.2% -6.7% 8.0% 1.2% Q2 -2.4% -25.1% -1.4% -17.8% Q3 -17.1% -26.0% -7.7% -20.6% Q4 -20.9% -25.7% -15.9% -20.6%
- 27. Estimated Current Property Value Compared to Q2 2010 Estimated Percent Change in Value Since Acquisition Property Type Acquisiton Date Apartments Industrial Office Retail 2006 Q1 -23.8% -32.8% -19.4% -21.8% Q2 -21.8% -34.1% -19.5% -24.0% Q3 -21.1% -32.6% -24.5% -25.6% Q4 -21.4% -38.3% -28.6% -27.3% 2007 Q1 -19.6% -39.6% -30.9% -28.3% Q2 -24.0% -43.6% -35.2% -28.1% Q3 -27.7% -41.8% -35.7% -27.1% Q4 -27.2% -37.8% -35.3% -25.8% 2008 Q1 -26.8% -38.0% -33.7% -21.9% Q2 -25.5% -33.1% -28.0% -21.0% Q3 -24.5% -31.7% -26.6% -21.3% Q4 -13.0% -24.9% -20.8% -18.3% 2009 Q1 -8.3% -5.4% -17.3% -14.8% Q2 -1.4% -5.4% -6.2% -5.6% Q3 -1.1% -4.1% -0.6% -1.2% Q4 8.0% -2.1% 9.2% 4.3% 2010 Q1 5.4% 5.5% 5.0% 5.2% Q2 0.0% 0.0% 0.0% 0.0%
- 29. Commercial Lending Four Quarter Moving Average Q1 2001 = 100 350 300 250 200 150 100 50 0 3 4 5 6 7 8 9 0 '0 '0 '0 '0 '0 '0 '0 '1
- 30. Apartment Price Index 100.00% 90.00% 80.00% 70.00% 60.00% 50.00% '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10
- 31. Texas Multifamily Prices Down 10 to 15 Percent Since 2007 Peak Texas Industrial Cap Rates Up 100 Basis Points From 6.5 Percent Value Down 13+ Percent
- 34. Multifamily Assessed Value 2007 Percent Texas Years Change Apartment 2007-2008 -1.4% Resales 2007-2008 22.6% 2007-2008 59.4% 2007-2009 -3.2% 2007-2009 8.7% 2007-2009 20.6%
- 35. 2011 Economic Concerns • Wall Street—Washington DC—Liquidity • Jobs – Stimulus Not Working GDP=C+I+G • Time Bomb Loans Now Commercial • Cold War II—Terrorists • Inflation (and Cap Rates)--Recession • Tax Cut Clock Ticking……………. • Energy: US Imports 70+ Percent of Oil • Real Estate-Autos-Credit Cards-Banks
- 37. Ted C. Jones, PhD Chief Economist Stewart Title Guaranty Co. http://blog.stewart.com/