MSA EHS Benchmarking

1
U.S. Real Estate Markets
An International Perspective
Dr. David Lereah Chief Economist NATIONAL
ASSOCIATION OF REALTORS June 26, 2002
2
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

3
Brief Recession Turns To Modest Recovery
Post WW-II Expansions/Recessions
Billions
120 Mo.
92 Mo.
57 Mo.
51 Mo.
105 Mo.
Source U.S. Department of Commerce
(F) NAR Forecast
4
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

5
Federal Funds Rate
Percent
1.75
Source Federal Reserve Board
6
World Economies
Real GDP, Percent Change
Source Oxford Economic Forecasts
7
Consumer Spending
Quarterly Percent Change, Annualized
Source U.S. Bureau of Economic Analysis
8
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

9
Stock Market(Peak to Trough 5 trillion loss)
Billions
March00 Peak 18 trillion.
Sept.01 Trough 13 trillion
Source Wall Street Journal
10
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

11
Real GDP Growth
Quarterly Percent Change, Annualized
NAR Forecast
Source U.S. Department of Commerce
12
Housing Records Are Made To Be Broken
2001

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

13
Existing-Home Sales
Thousands of Units
Note Shaded Area Recession
Source NATIONAL ASSOCIATION OF REALTORS
14
New-Home Sales
Thousands of Units
Note Shaded Area Recession
Sources Bureau of Census
15
Housing Starts
Thousands of Units
Note Shaded Area Recession
Sources Bureau of Census
16
Homeownership Rate
Percent
Note Shaded Area Recession
Sources Bureau of Census
17
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

18
Housings Contribution ToEconomic Growth In 2001
61
Q4 to Q4
19
US Canada GDP Growth
Percentage Change from Prior Year
Source NAR, Oxford Economic Forecasting, Spring
2002
20
Europe GDP Growth
Percentage change from prior year
Source Oxford Economic Forecasting, Spring 2002
21
Asia Pacific GDP Growth
Percentage change from prior year
Source Oxford Economic Forecasting, Spring 2002
22
GDP Growth Emerging Markets - Asia
Percentage change from prior year
Source Oxford Economic Forecasting, Spring 2002
23
GDP Growth Emerging Markets Latin America
Percentage change from prior year
Source Oxford Economic Forecasting, Spring 2002
24
GDP Growth Emerging Markets South Africa and
Eastern Europe
Percentage change from prior year
Source Oxford Economic Forecasting, Spring 2002
25
Emerging Markets

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

26
Global Economic Performance 2002

• Industrialized
• Japan
• Germany
• France
• Italy
• Belgium
• Austria
• Sweden
• Switzerland
• Netherlands

Source Oxford Economic Forecasting, Spring 2002
27
Global Economic Performance 2003
Source Oxford Economic Forecasting, Spring 2002
28
Foreign Direct Investment In U.S. By Industry,
2000
Total FDI 1,238 Billion
In Millions
Source Bureau of Economic Analysis
29
Foreign Direct Investment in U.S. Real Estate
In Millions
NAR Estimates
Source Bureau of Economic Analysis, NAR Estimates
30
Foreign Direct Investment Position in U.S. by
Region, 2000

• Top 10 Investing Countries
• United Kingdom
• Japan
• Netherlands
• Germany
• France
• Canada
• Luxembourg
• Switzerland
• Sweden
• Ireland

Source Bureau of Economic Analysis
31
Foreign Direct Investment Position in U.S. Real
Estate by Region, 2000

• Top 10 Investing Countries
• Japan
• Canada
• Netherlands
• Germany
• UK/Caribbean
• Switzerland
• Bermuda
• Bahamas
• Panama
• Hong Kong

Source Bureau of Economic Analysis
32
2001 Top Foreign Real Estate Investment Targets
in the U.S.

• Residential
• Florida
• Atlanta
• Houston
• Las Vegas

• Commercial
• New York (?)
• San Francisco
• Boston
• Washington, DC

Source Survey conducted by Association of
Foreign Investors in Real Estate, 2000
33
U.S. Direct Investment Abroad by Industry, 2000
In Millions
Source Bureau of Economic Analysis
34
U.S. Direct Investment Abroad by Region, 2000
Source Bureau of Economic Analysis
35
Immigration to U.S. by Decade
Millions
Source Immigration and Naturalization Service
36
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

37
Homeownership RatesLatin America, Europe, Asia
Pacific
Asia Pacific
Latin America
Europe
()
38
Who Will Be Worlds Most Dominant Economy By 2020?

• A. United States
• B. European Union
• C. China
• D. None of the Above
• If you answered the United States, you may be
  wrong .

39
European Union(2002 Projected GDP Billions)

• Italy 1,101
• Luxembourg 22
• Netherlands 422
• Portugal 118
• Spain 645
• Sweden 235
• United Kingdom 1,501
• Total (EU) 8,455

• Austria 209
• Belgium 252
• Denmark 176
• Finland 146
• France 1,401
• Germany 1,989
• Greece 126
• Ireland 112

Source Organization for Economic Cooperation
Development
40
United States vs. European Union 2002 Projected
GDP in Billions
10,414
8,455
Sources U.S. Department of Commerce,
Organization for Economic Cooperation
Development
41
The United States vs. The World
Note 2001 Population, 2002 Projected Nominal
GDP, 2002 Projected Real GDP growth from
previous year.
Sources U.S. Statistical Abstract, DRI-WEFA, NAR
42
U.S. Real Estate Markets
An International Perspective
Dr. David Lereah Chief Economist NATIONAL
ASSOCIATION OF REALTORS June 26, 2002