Orlando, FL

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Headlines and Fundamentals
Danielle Hale Economist NATIONAL ASSOCIATION OF
REALTORS
Orlando, FL November 6, 2008
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Headlines are scary

• Headlines are scary Uncertainty reigns
• GDP Consumer Spending
• Unemployment/Jobs Lost
• Stock market volatility
• Home sales prices (CS/NAR/OFHEO)
• New Administration and Policies

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Is there another side of the story?

• Market Fundamentals Government Action
• GDP Net Exports
• Monetary and Fiscal Stimulus
• Proposed or discussed future action
• NAR accomplishments

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GDP Growth
annualized growth rate
Source BEA
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Consumer Spending
year-over-year growth rate
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U.S. Job Situation is Weakening
12-month payroll job changes in thousands
Source BLS
7
Stock MarketSP 500 Index
Source WSJ
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Stock Market Valuationof SP 500 stocks
trillion
Haver Analytics
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Stock Market Household Net Worth
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U.S. Home Prices
Highest Peak
Greatest Decline
Source WSJ
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Homeowners Net Real Estate Equity
trillion
Federal Reserve
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Consumer Price Inflation
Source BLS
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Food at home Inflation Necessitates rethinking
of budgets and spending priorities
Energy Price much worse constant reminder of
things out of whack
Source BLS
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Consumer Confidence and Sentiment
Source The Conference Board University of
Michigan
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Exports Growing
billion (2000-chain )
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Economic Outlook
Protracted Recession and Recovery
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Policy Actions Fed Funds Rate
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Policy Actions Fiscal

• Economic Stimulus bill February 13
• FHA and VA loan limits
• Tax rebates
• Housing and Economic Recovery Act July 30
• Permanently increases the FHA loan limits
• First-time Home Buyer Tax Credit
• EESA TARP October 3
• 700 billion jolt to credit markets

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Latest Housing Market Activity

• Existing Home Sales stable but trending at 10
  year ago levels
• From 1998 to 2008
• 25 million more people
• 13 million more jobs
• Comparable affordability conditions
• Is it excessive pessimism?

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Annual Existing-Home Sales
In thousand units
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Monthly National Existing-Home Sales
Stable but at 10-year ago levels September shows
improvement
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Housing Affordability Index
Source NAR
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Inventory Existing Homes
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Inventory New Homes(Already Topped Out)
Source Census
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U.S. Single-Family Housing Starts
In thousand units
Source Census
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National Housing Outlook
Huge Local Market Variations because of
location, location, and location
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Election Results
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What will President Obama do?

• Taxes
• Income Credits
• Capital Gains
• Universal Mortgage Credit, equal to 10 of
  mortgage interest paid (up to 800)
• This is equal to the interest on a 120,000 30
  year FRM in the first year at 6.7 or 123,000 at
  6.5
• At 80 LTV, that would be equal to a home worth
  150,000 at 6.5 or 153,750 at 6.7