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KELLER WILLIAMS@ REALT'l'
The Numbers That Drive U.S. Real Estate
Home Sales
Home Price
Inventory
Mortgage
Affordability
2
Home Sales Home sales are up 9.2% to 4.65 million in 2012 from 4.26 million in 2011. Annual sales levels are now close to 2007 levels.
3.0 2.9 2.9 3.2
3.4 3.5 3.5
3.8 4.0
4.7 4.7 4.6 4.5
5.0
5.4
6.2 6.0
5.7 4.9
4.7 4.6 4.4 4.3 4.3
‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 Total Annual Single Family Home Sales (in Millions) Source: NAR
3
Home Sales MONTHLY ANNUAL PACE OF SALES
(Seasonally Adj.)
The year ended on a strong note with a 12.8% increase in the monthly annual pace of sales from December 2011 to 2012. 4.99 4.83 4.63
4.62
4.60
4.69
4.62
4.47 4.37
Jan
Feb
Mar
12.8% Increase Source: NAR
4.76
4.47
4.38
Dec '11
4.94
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov Dec '12
Total Annual Home Sales (in Millions) 4
Home Price Median home prices are up 6.3% to $176,600. If prices followed a 4% appreciation rate each year, the median price would be $231,683. This implies prices may still be 23.8% undervalued, based on the trend line. $231
$222
$179
$198
$177
$166
$95
‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 Long-Term Average = 4%
Source: NAR
Annual Median Home Price (in Thousands)
5
Annual Appreciation $172,900 6.0%
$2,938 1940
Sources: Census, * NAR
5.4%
$7,354
5.5%
$11,900
$143,600
6.0% 4.4%
$96,400
$47,200
3.0% 1.9%
$17,000
1950 1960 1970 Compounded Growth Rate from Given Year to 2010
1980
1990* 2000* Median Home Price
2010*
6
Annual Appreciation Home price appreciation is back in positive territory and growing strong, thanks in part to less distressed sales and tightening inventory. 12.2% 5.9%
5.5% 2.9%
4.0% 3.1% 3.4% 2.7%
4.8% 5.2% 5.4% 3.8% 4.3%
1989-2000 3.39%
6.3%
2006-2011 - 4.6%
8.3% 7.5% 7.0% 1.3%
2001-2005 8.9%
6.3%
0.6%
-1.8%
-2.7%
-9.8% -12.5%
‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 Annual Median Home Price Appreciation Source: NAR
7
Home Price
MONTHLY
In December, the median home price was up 11.5% compared to the same month a year earlier. Prices reached a high of $188,800 during June, the highest monthly level since September 2008. The last time there were 10 consecutive monthly increases was August 2005-May 2006. $188.8 $187.8 $180.3
$184.9
$173.7
$180.8 $179.4 $178.3 $176.9
$164.8
$162.2 $154.6 $155.6
Dec '11 Jan
Feb
Mar
Apr
11.5% Increase Source: NAR
May
Jun
Jul
Aug
Sep
Oct
Nov Dec '12
Monthly Median Home Price (in Thousands) 8
Months Supply of Inventory 10.4 8.9 Balanced = 6 months
8.3
6.5
4.5
4.6
4.7
4.7
4.3
4.5
‘99
‘00
‘01
‘02
‘03
‘04
‘05
Balanced = 6 months
5.9 Seller’s Mkt
4.8
Source: NAR
8.8
9.4
Buyer’s Mkt
Annual average inventory declined 28% and is back to balanced levels for the whole of 2012. While local markets may vary considerably, year-end monthly numbers show the United States is clearly in a seller’s market.
‘06
‘07
‘08
‘09
‘10
‘11
‘12
Annual Months of Inventory 9
Months Supply of Inventory MONTHLY
6.4
6.0
6.3
6.2
6.5
6.4
6.5
6.4
6.0
5.6
5.3
4.8
Dec '11 Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov Dec '12
31% Decline Source: NAR
Months Supply of Inventory
4.4
Seller’s Mkt
Buyer’s Mkt
When looking at the monthly inventory levels, December 2011 to December 2012 months supply of inventory is down 31%. The last quarter of the year illustrates a clear move into a seller’s market.
Balanced = 6 months 10
Inventory MONTHLY
Select Local MLS
Most markets are back to a seller’s market. Pennsylvania is one of the few buyer’s markets left. 20
Buyer’s Mkt
Months Supply
15
10
0 Dec-11 Central PA Source: BrokerMetrics
Seller’s Mkt
5
Mar-11 Eastern PA
Jun-11 Houston TX
Sep-11 Miami FL
Dec-11 Mid FL
Austin TX
Mar-12 Los Angeles CA
Jun-12 San Diego CA
Sep-12
Dec-12
Balanced (6 months) 11
Residential Building Permits After a sharp decline, new home building is picking back up as inventory falls. Sep 1972 All-time high of 2,419
Sep 2005 Hit a high of 2,263
Jan 1960 1,092 Residential building permits in thousands
Existing home inventory
Sep 1975 Fell to 719
Jan 1991 786
Steeper decline than 2005-2009 higher interest rates and oil prices Source: BEA
Residential Building Permits (in Thousands)
Months Supply (in Months)
Nov 2012 900
Mar 2009 All-time low 513 12
Mortgage Rates 30-Year Fixed Mortgage rates hit a record low for the year of 2012 at 3.66%. The Federal Reserve has kept Treasury rates low and the spread, or difference, between the two has tightened since 2008. 16.6 13.7 11.2
7.4
8.0
1972
9.2 9.1 8.9 8.9 9.6
16.0 13.2
13.9 12.4 10.2 10.2 10.3 10.3 10.1
9.3
8.4
8.4 7.3
1975
1980
1985
1990
7.9 7.8 7.6
1995
6.9
7.4
8.1 7.0
2000
6.5
6.4 6.3 6.0 5.8 5.8 5.9
2005
5.0 4.7 4.5
3.7
2010 2012
Annual Mortgage Rate (%) Source: Freddie Mac
13
Mortgage Rates
MONTHLY 2006-2012
The year ended on a record-breaking low. In November 2012, monthly interest rates hit an alltime low of 3.35% and stayed through the end of the year. Rates are down 2.8 percentage points and have declined 45% since January 2006.
6.76% 6.15% 4.81% 3.35% Jan '06
Jan '07
Jan '08
Jan '09
Jan '10
Jan '11
Jan '12
Dec '12
Monthly Mortgage Rate Source: Freddie Mac
14
Affordability
PERCENTAGE OF THE MEDIAN FAMILY INCOME REQUIRED FOR MEDIAN PRICE HOME PAYMENT
It takes a smaller slice of the typical family’s income to pay the mortgage on a median-priced home.
Historically:
2012: 12.9%
21.6% Everything Else Principal and Interest Payment
78.4% Source: NAR
87.1% 15
Affordability
PERCENTAGE OF THE MEDIAN FAMILY INCOME REQUIRED FOR MEDIAN PRICE HOME PAYMENT
It has never been more affordable to own a home—the United States breaks another record.
36.3%
Long-Term Average = 21.6%
23.2%
17%
‘70
Source: NAR
12.9%
‘75
‘80
‘85
‘90
‘95
‘00
‘05
‘10
‘12
16
The Good Old Days McDonald’s only had one arch and hamburgers were 15 cents
A night in the hospital was15 dollars
Gas was 20 cents per gallon
Postage stamps were 3 cents
17
Affordability in Perspective 1989
2012
New Car: $15,350
New Car: $30,000
Gas:
$0.97
Gas:
$3.54
Bread:
$0.67
Bread:
$1.99
Source: BEA
18
Affordability in Perspective
1989
Median Home Price: $94,000 Mortgage Rate: 10% Monthly P&I Payment: $825 Sources: NAR, Freddie Mac
2012
Median Home Price: $176,600 Mortgage Rate: 3.4% Monthly P&I Payment: $626 19
The Numbers That Drive Canadian Real Estate
Home Sales
Home Price
Inventory
Mortgage
Affordability
20
Home Sales Home sales were stable in 2012 and are expected to be the same in 2013. New mortgage regulations are working as intended by spurring a tightening of the market.
382 317
295 246
321
298 298
419 434
460
484 483
521 465 447 457 453 432
324 331 315 335 334 261
‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 Source: CREA
Annual Home Sales (in Thousands)
21
Home Price Home prices were stable in 2012, rising by only 0.3% after a period of strong growth. Prices are above the 4.4% trend line, implying that prices may be overvalued in Canada. The government has taken measures to help cool the market, which is a positive indicator for long-term stability. 2002-12
7.1%
1986-89 1981-85
1.5%
16.3%
1990-01
1.4%
67 76 72 77 76 80 94 110 130 147 142 149 150 153 158 151 151 155 152 158 165 172 189 208 227 249 277 307 305 320 339 363 364
‘80 ‘81 ‘82 ‘83 ‘84 ‘85 ‘86 ‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 Average Home Price (in Thousands $) Source: CREA
‘80-’00 Compounded Growth Rate (CAGR) = 4.4%
‘80-’12 CAGR = 5.4% 22
Inventory 63% 47% 40%
61% 62%
59% 47%
52% 53% 52%
39%
Buyer’s Mkt
33%
44% 42% 42%
48% 50% 50%
56% 56%
66% 64% 64%
Balanced
71%
Seller’s Mkt
Inventory remains firmly balanced in Canada. Local markets may vary.
‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 Source: CREA
23
Inventory
Local Markets
Seller’s Mkt
100%
Balanced
75%
50%
0% 1980
Buyer’s Mkt
25%
1982
1984
1986
Winnipeg Source: CREA
1988 Calgary
1990
1992
1994
1996
Kitchener-Waterloo
1998
2000
2002
Vancouver Island
2004 40%
2006
2008
2010
2012
60% 24
Mortgage Rates 5-Year Fixed Mortgage rates continue to be at all-time lows. 13.4% 12.1% 11.1% 9.5%
9.5% 9.2% 8.8%
7.9%
7.1% 6.9%
7.6%
8.4%
7.4% 7%
6.4% 6.2% 6%
7.1% 7.1% 6.7%
5.6% 5.6% 5.4% 5.24%
‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 Source: Bank of Canada
25
Affordability
PERCENTAGE OF MEDIAN PRE-TAX HOUSEHOLD INCOME REQUIRED TO SERVICE THE COST OF MORTGAGE PAYMENTS (PRINCIPAL, INTEREST, PROPERTY TAXES, AND UTILITIES)
Homeownership costs remained fairly stable over the last two years. Lower mortgage rates helped lessen the costs of owning a home in Canada. - Two storey homes have led the charge in deteriorating affordability, compared to the historic average. - Bungalows and condos remain fairly close to the norms.
Property Type
Q3 2011
Q3 2012
Q3/Q3 Change
Avg. Since 1985
Q3 2012 Vs. Avg
Detached bungalow
42.7%
42.0%
-0.7%
39.4%
+2.6%
Standard two-storey
48.8%
47.8%
-1.0%
43.8%
+4%
Standard condo
29.0%
28.0%
-1.0%
27.1%
+0.9%
An increase in cost (%) represents deteriorated affordability ( ) A decrease in cost (%) represents improved affordability ( ) Source: RBC
26
The United States Economy
Gross Domestic Product
Unemployment
Inflation
27
Gross Domestic Product
ANNUALLY
2012 marks the third year in a row of positive growth. 3.6%
3.4% 1.9%
4.1% 2.9%
3.7%
4.5% 4.4%
4.8%
4.1%
3.5%
2.5% 1.1%
1.8%
2.5%
-0.2%
3.1%
2.7%
3% 1.9%
1.7%
2.2%
-0.3%
-3.5%
‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 Real GDP Year-over-Year Change Source: BEA
28
Gross Domestic Product
QUARTERLY
After six quarters of strong growth, Q4 GDP disappoints with a slight contraction—the first since Q2 2009. 3.6%
3.0%
0.5%
4.1%
4.0% 1.7%
1.4%
1.3%
2.3% 2.2% 2.6% 2.4%
2.5% 0.1%
1.3%
2.0%
3.1% 1.3% -0.1%
-0.3% -1.8% -3.7% -5.3% -8.9% Q1 ‘07
Q3 ‘07
Q1 ‘08
Q3 ‘08
Q1 ‘09
Q3 ‘09
Q1 ‘10
Q3 ‘10
Q1 ‘11
Q3 ‘11
Q1 ‘12
Q3 ‘12
Real GDP Growth Rate, Quarterly, Seasonally Adjusted Source: BEA
29
Unemployment
ANNUALLY
Although the annual level of unemployment spiked in a recession spurred on by the Fed in the early 80s, monthly unemployment hit 10% in October 2009, the highest since World War II. 9.7% 1982
9.6% 2010
New Normal? = 6.5%
8.1% 2012
Historical standard = 5.6%
3.9% 1947
1947 Source: BLS
4.6% 2006-7
2.9% 1953 1950
1960
1970
1980 1990 Annual Unemployment
2000
2012 30
Unemployment 9 0 0 2 t
p m Oc
10.0%
u 10% J p o
10.0%
MONTHLY
Steady Gradu
Since hitting 1
al Decline
0% in Octobe
r 2009, now a t 7.9%
t r 8 a 0 0 h S 2
7.5%
m o Fr
i %
5
7.9%
an J n
5.0% 5.0%
2.5%
0%
Jan08
Source: BLS
May08
Sep08
Jan09
May09
Sep09
Jan10
May10
Sep10
Jan11
May11
Sep11
Jan12
May12
Sep12
Jan13 31
Inflation Inflation remains close to the 2% target rate.
5.0% 4.5%
1.7%
1.4%
1989
1991
1993
1995
1997
CIP (includes energy) Source: BEA
1999
2001
2003
Core CIP (excludes energy)
1.0%
2005
2007
2009
2011
Target = 2% 32
The Canadian Economy
Gross Domestic Product
Unemployment
Inflation
33
Gross Domestic Product After rebounding sharply in 2010, economic growth has slowed but remains positive. 5.6% 5.3% 3.9% 2.7% 1.4%
2.1%
3.1% 3.0% 2.8%
3.4% 2.4%
2.3%
1.9%
0.9%
-3.0% ‘98
‘99
Source: Statistics Canada
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
Real GDP Year-over-Year Change
‘08
‘09
‘10
‘11
‘12 34
Unemployment Unemployment continues a downward trend, improving the conditions for employees and job seekers. 12.0 11.1 11.4 10.5
11.211.4 10.4 10.3
9.6 8.4 8.1 7.1
8.8 7.5 7.5 7.6
‘76 Source: Statistics Canada
‘80
7.8 7.5
9.5 9.6
8.3
8.2
‘85 ‘90 Long-Term Average = 8.5%
9.1 7.6 6.8
‘95
7.7 7.6 7.3 7.2
‘00 Unemployment
8.3 8.0 6.8
‘05
7.5
7.1
6.3 6.1 6.2
‘10 35
Inflation
Consumer Price Index
Since the early ‘90s, core inflation, which excludes energy, has been fairly stable.
4.5%
2.4% 1.7%
1.3%
‘85
‘90 CIP (includes energy)
Source: Statistics Canada
‘95
‘00 Core CIP (excludes energy)
‘05
‘10
‘12
Target = 2% 36
Events That Drive the Numbers in the United States
Industry
Worldwide
Government
37
Sides Per Agent
The average transactions available per agent
As the number of agents continues to decline and the number of sales increases, the number of available sales is up to a 7-year high. 13.8 14.0
13.8 13.6 13.5 13.3
12.7 11.6
11.1
8.7
8.5 7.6
6.7
Source: NAR
10.3
823
9.2
1,000
11.2
10.1
9.5
8.2
8.0 7.9
7.0
9.9
12.9 12.6 12.3
7.5
718
7.8 7.9
8.4
10.1
6.9
6.4
486
‘76
9.9 9.6 9.4 9.1 9.3 9.5
10.7 10.7
12.2
1,358 14.2
4.4
‘80
‘85 Sides Per Agent
‘90
‘95 Agents (in Thousands)
‘00 ‘05 Available Sides (in Millions)
‘10
‘12
38
Sides Per Agent
The average transactions available per agent
2012 is up 57% from the all-time low in 2008 and just 20% down from the 20-year high in 1998.
13.8
10.3
10.7
10.7
11.6
13.6
13.5
12.2
13.3
12.9
12.6
12.3 11.2
U
9.5 7.5
‘93 Source: NAR
‘94
‘95
‘96
‘97
‘98
‘99
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
6.9
‘08
% 7 p5
7.8
7.9
‘09
‘10
10.1
8.4
‘11
‘12 39
Credit Conditions Lending has been up since Q2 2011 but fell in Q4, likely due to uncertainty around the fiscal cliff. 17.1%
8.8% 2.4%
0% -8.7% 1986
1988
1990
1992
1994
1996
1998
2000
Annual Growth Rate in All Bank Credit Source: Federal Reserve
2002
2004
2006
2008
2010
2012
0% 40
Foreclosures Distressed property sales stabilized in mid-2012, which is an important key to a healthy overall market. 24% of the market is distressed—split evenly between short sales and foreclosures. 49% 40%
38% 34%
35% 31%
29%
29% 22%
Oct '08
Feb ’09
Jun '09
Oct ‘09
Feb ’10
Jun '10 Foreclosures
Source: NAR
Oct ‘10
Feb ‘11
Jun ‘11
Oct ‘11
Feb ‘12
Jun ‘12
24%
Oct ‘12
Short Sales 41
European Debt Crisis The outlook for Europe is bleak. GDP for the Eurozone contracted by 0.5%. Contraction has taken root in many countries, with Germany, the strongest Eurozone economy, contracting in Q4 2012. This is the first year the currency area has not posted positive growth in any quarter dating back to 1995. Unemployment averaged 11.8% in November 2012 but is much worse in struggling countries (Spain, Italy, Greece) and among the youth who have an average 24.4% unemployment. - Spain’s overall unemployment is 25% and 57% for their youth.
Sources: The Wall Street Journal, European Central Bank, Goldman Sachs
42
Fiscal Policies: Cliffs, Sequesters, and Debt Ceiling The fiscal cliff referred to a list of across-the-board tax increases and automatic spending cuts that would have taken place in 2013 without legislative action. It was averted in part by the American Taxpayer Relief Act of 2013 passed January 2 this year. - Bush-era tax rates were extended, payroll tax was not - The automatic spending cuts were pushed to March. A new deadline for part II of this conversation—averting automatic spending cuts—is March 1.
Sources: The Wall Street Journal, European Central Bank
43
Mortgage Settlement In January 2013, an $8.5 billion deal was agreed upon between ten big mortgage lenders and regulators to increase efficiency and end the loan-by-loan review of foreclosures. This was to address the Independent Foreclosure Review that was intended to review loans foreclosed from 2009-2010. This review was said to be poorly designed and executed. The $8.5 billion includes cash contributions, changes in loan terms, and mortgage forgiveness. It pays up to $125,000 to homeowners who were victims of improper foreclosure proceedings. There are concerns that this may “allow banks to skirt what they owe and sweep past abuses under the rug ...� Source: The Wall Street Journal
44
Events That Drive the Numbers in Canada
Industry
Credit
Government
45
Sides Per Agent Available sides per agent is down 3.5% from last year but remains relatively steady since 2008. 12.2 9.2
‘98 Source: CREA
10.1
12.6
12.2
12.0
11.7
10.5
10.9
11.1 8.9
‘99
‘00
‘01
‘02
‘03
‘04
‘05
‘06
‘07
‘08
9.5
‘09
8.8
8.8
8.5
‘10
‘11
‘12 46
Monetary Policy Canadians continue to benefit from record-low interest rates thanks to continuing supportive monetary policy.
12.1
13.4 Long-Term Average = 9.8%
11.1 9.5
9.5 9.2 8.8
7.9
7.1 6.9 7.6
8.4
7.4 7.0
6.4 6.2 6.0
7.1 7.1 6.7
5.6 5.6 5.4 5.2
‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 Source: Bank of Canada
47
Rising Household Debt A major concern in Canada is the steadily rising household debt, which surpassed that of the United States in 2012. 170% 160%
140% 120% 100%
U.K.
U.S. Canada 1980
1984
Source: Bank of Canada Review; Winter 2011-2012 Crawford, Faruqui
80%
Europe 1988
1992
1996
2000
2004
2008
60% 2011 48
Strong Currency Persistent strength of the Canadian dollar will continue to hinder Canada’s competitiveness in the global market, restraining its exports and widening the trade deficit. However, it is a signal of the strength of the Canadian economy.
Source: Bank of Canada
2011
1 CAD
= .97 USD
2012
1 CAD
= 1.02 USD
49
Mortgage Regulations Tighten Decrease the maximum (insured by the Housing Corporation) amortization length to 25 years. - The difference between a 25-year and 30-year amortization can be $200-300 per month. Many prospective home buyers jumped on before the rule took effect. - Shortening the repayment period decreases the amount of mortgage a family can qualify for. A household income of $75,000 may now qualify for $50,000 less in their mortgage. - This may discourage homeownership, encourage families to purchase smaller homes, or push back the first-time home buyer age across the country.
Home equity loans can have a maximum LTV of 80%, down from 85%. Mortgages must be insured if the down payment is less than 20%. The limits are now back to where they were in 2006 before the government modified the rules so more households could qualify. This new regulation went into effect July 9. Source: RBC
50
Luxury Real Estate
The Wealthy Inventory
Days on Market
List-to-Sell Opportunity
51
The World’s Wealthy The world’s population of high net worth individuals (HNWI) remained fairly consistent with the previous year’s numbers and are up from 2006. Year
HNWI in US (in Thousands)
HNWI in Canada (in Thousands)
Global HNWI (in Millions)
Wealth of Global HNWIs (in US$ Trillions)
2005 2006 2007 2008 2009 2010 2011
2,669 2,920 3,019 2,460 2,866 3,104 3,068
232 248 281 231 251 282 280
8.8 9.5 10.1 8.6 10.0 10.9 11
$33.4 $37.2 $40.7 $32.8 $39.0 $42.7 $42.0
2006 - 2011
5.1% increase
12.9% increase
15.8% increase
12.9% increase
Sources: Merrill Lynch Global Wealth Management and Capgemini
52
Allocation of Financial Assets Real estate continues to make up a sizable portion of HNWIs’ investment portfolio.
Year
Real Estate
Cash/ Deposits
Fixed Income
Equities
Alternative Investments
2004
16%
13%
24%
28%
19%
2005
16%
13%
21%
30%
20%
2006
24%
14%
21%
31%
10%
2007
14%
17%
27%
33%
9%
2008
18%
21%
29%
25%
7%
2009
18%
17%
31%
29%
6%
2010
19%
14%
29%
33%
5%
2012*
15%
11%
29%
38%
8%
Sources: Merrill Lynch Global Wealth Management and Capgemini * No data for 2011, 2012 is a projection.
53
Months Supply of Inventory Months supply of inventory dropped at the beginning of 2012 and has remained fairly stable throughout the year. Luxury ended with 10.9 months supply, down 72% from December 2008. Luxury = Buyer’s Market
Move Up = Balanced Market
Starter = Seller’s Market
Months Supply
39.4
22.9
19.2 14.5
12.9
6 Dec '08
11.3
10.9
5.6
6.7
7.8
6.3 3.9
Dec '09 Luxury
Sample of MLS data from 10 cities
8.4
11.6 8.2
Move Up
Dec '10 Starter
Dec '11 Balanced (6 months)
Dec '12 54
Days on Market Days on market continues to be more volatile as the price point increases. 181 160 128
121
126 109
123
101
92
107
90
Dec '08
82 Dec '09 Luxury
Sample of MLS data from 10 cities
Move Up
Dec '10 Starter
Dec '11 Balanced (6 months)
93 82 80 Dec '12 55
List-to-Sell List-to-sell ratios hit a 4-year high during 2012. There continues to be more opportunity to negotiate a bargain in luxury price points. The gap between luxury and move up tightened in mid-2012 and has loosened since. 95% 94% 91%
89% 88% 86%
Dec '08 Sample of MLS data from 10 cities
Dec '09 Move Up
Dec '10 Starter
Dec '11 Luxury
Dec '12 56
Opportunities Move-up buyers who can sell in a balanced market and buy in a buyer’s market. International buyers who are cash rich and with a strong appetite for U.S. luxury properties. Investors who stand ready to take advantage of undervalued properties—most are focused on the starter price points but there are bigger discounts at the luxury level. 57
Commercial Real Estate
Economic
Industry
Government
58
Job Growth
Monthly
After falling dramatically from 2008-2009, job growth has followed a fairly normal positive trend from 2010 onward.
Net Jobs Added, in Thousands
675
516
507
450
262
196
225
0 -225 -450
-302
-331
-675 -900
-803
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: REIS
59
Vacancy Rates 17.6%
17%
11.7%
10.8% 9.1% 7.9% 7.1% 3.8% 1999
8.3% 7.9%
8%
7.3%
10.7%
11%
10.1%
6.9%
6.4%
4.5%
3.2% 2000
2001
Office Source: REIS
17%
2002
2003
2004
Retail
2005
2006
2007
2008
Industrial
2009
2010
2011
2012
Apt 60
Vacancy Rates By Commercial Real Estate Sector CANADA Sector
Source: CBRE
2010
2011
2012
Office
9.4%
8.4%
8.3%
Industrial
7.4%
6.3%
6.3%
Retail
4.2%
3.9%
4.9%
Multi-Family
2.6%
2.2%
2.2%
61
Loan Delinquency Rate
Quarterly, 1991-2012
Commercial Real Estate Loan Delinquency Rate
After a period of low delinquency rates from 1997-2008, rates spiked in 2011 but have been steadily decreasing since. 12.06
Jan ‘91 Source: REIS
8.78
4.56 1.06 Jan ‘93
Jan ‘95
Jan ‘97
Jan ‘99
Jan ‘01
Jan ‘03
Jan ‘05
Jan ‘07
Jan ‘09
Jan ‘11
Jul ‘12 62
Commercial Property Price Index Commercial Property Price Index, 2000=100
From November 2011-2012, prices for apartments grew by 10.6%, offices in a central business district grew by 18.1%, industrial grew 3.4%, while retail fell by 4.9% and offices in suburban areas fell by 7.4%. 187 186 165
200 150
169 146
100
102 50 0 2000
2001
2002
Apartment Source: REIS
2003
2004
2005
2006
2007
Commercial Price Index 2000=100 All Properties
2008
2009
2010
2011
2012
Core Commercial All Properties Excluding Apartments 63
How Do We Recover?
Four Steps to Recovery
64
Four Steps to Housing Recovery
65
What Can NAR Tell Us?
Buyers
Sellers
66
First-Time Home Buyers 47% 42%
2001
40%
40%
40%
2003
2004
2005
Source: NAR Profile of Home Buyers and Sellers
36%
2006
39%
2007
50%
41%
2008
37%
2009
2010
2011
39%
2012
67
Primary Reason for Purchasing All Buyers Desire to own a home Desire for larger home Job-related relocation or move Change in family situation Affordability of homes Desire for a home in a better area Desire to be closer to family/friends Desire to be closer to job/school/transit Desire for smaller home Retirement Establish household Home buyer tax credit Source: NAR Profile of Home Buyers and Sellers
2005
2011
2012
39% 20 11 * * * 8 * 6 3 * *
27% 10 10 8 8 5 7 4 4 5 2 --
30% 11 9 8 7 6 6 4 4 4 2 -68
Tenure in Previous Home 2011
2012
4%
3%
2 to 3 years
8
7
4 to 5 years
13
12
6 to 7 years
16
15
8 to 10 years
17
18
11 to 15 years
18
19
16 to 20 years
9
9
21 years or more
15
16
Median
9
9
1 year or less
Source: NAR Profile of Home Buyers and Sellers
Only 10% buy again in less than 4 years.
69
Buyer’s Expected Tenure 2011
2012
1%
1%
2 to 3 years
2
2
4 to 5 years
8
7
6 to 7 years
2
2
8 to 10 years
14
13
11 to 15 years
5
6
16 to 20 years
27
26
Don’t know
41
43
Median
15
15
1 year or less
Buyers expect to stay almost twice as long as they actually do. Stay in touch so that even if your client’s move is unexpected, you are top of mind. Source: NAR Profile of Home Buyers and Sellers
70
First Step in Buying Process All Buyers 2011 2012 Looked online for properties for sale
35%
41%
Contacted a real estate agent
21
18
Looked online for information about the buying process
10
11
Drove by homes/neighborhoods
8
8
Contacted a bank or mortgage lender
7
6
Talked with a friend or relative about buying process
7
6
Visited open houses
4
3
Looked in newspapers, magazines, or home-buying guides
2
1
Attended a home-buying seminar
2
1
Contacted builder/visited builder models
2
1
Source: NAR Profile of Home Buyers and Sellers
71
Weeks in Home Search
7
8
8
8
8
8
10
12
12
12
12
2001
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
The home search length is usually lower during a seller’s market when buyers need to move quickly. Source: NAR Profile of Home Buyers and Sellers
72
Info Sources Buyers Use 2011
2012
88%
90%
Real estate agent
87
87
Yard sign
55
53
Open house
45
45
Print newspaper advertisement
30
27
Home book or magazine
19
18
Home builder
16
17
Television
4
5
Billboard
4
5
Relocation company
4
4
Internet
Real estate-related Google searches have grown 253% in the past four years. Sources: NAR Profile of Home Buyers and Sellers, The Digital House Hunt
73
Where Buyers Found the Home They Purchased 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Internet
8%
11%
15%
24%
24%
29%
32%
36%
37%
40%
47%
Real estate agent
48
41
38
36
36
34
34
36
38
35
33
Yard sign/Open house sign
15
16
16
15
15
14
15
12
11
11
9
Friend, relative, or neighbor
8
7
7
7
8
8
7
6
6
6
5
Home builder or their agent Directly from sellers/knew the sellers Print newspaper advertisement
3
7
7
7
8
8
7
5
4
5
4
4
4
5
3
3
3
2
2
2
2
1
7
7
5
5
5
3
3
2
2
2
1
Home book or magazine
2
1
2
1
1
1
1
*
*
*
*
Other
3
6
4
--
--
--
--
--
--
--
--
Source: NAR Profile of Home Buyers and Sellers
74
Where Buyers Search At Home Waiting in Line At Work
77% 28%
Yes
31%
Yes
No
Yes
23%
72% No
69% No
36% of new home shoppers used their mobile device to research while watching TV. Sources: NAR 2012 Profile of Home Buyers and Sellers, Google
Yes No 75
Value of Website Features Very Useful
Somewhat Useful
Not Useful
Did Not Use / Not Avail
84%
14%
1%
1%
Detailed information about properties for sale
79
19
*
1
Virtual tours
45
33
10
12
Real estate agent contact info
44
34
13
10
Interactive maps
41
34
11
15
Neighborhood information
34
44
12
9
Detailed information about recently sold properties
33
41
15
11
Pending sales/Contract status
30
35
19
17
Information about upcoming open houses
20
31
25
24
Photos
69% of home shoppers who take action on a real estate website begin their search with a local term. Sources: NAR Profile of Home Buyers and Sellers, The Digital House Hunt
76
Length of Search Process Expect buyers to have done some research online before contacting you. 40% will have researched up to three months first. 1 in 4 will take action the same day they begin researching online. Buyers who used agent
3
9
First-time buyers
3
9
Repeat buyers
3 Weeks Searched without Agent
7 Weeks Searched with Agent
This 3 week window is the time to reach buyers online. 78% of new home buyers visit 3+ sites before taking action. Sources: NAR Profile of Home Buyers and Sellers, The Digital House Hunt
77
What Buyers Use Video For 86% 70% 54% 38%
Find out more about Tour inside home a specific community Sources: NAR The Digital House Hunt
Obtain general information
30%
24%
Understand specific Watch testimonial Watch instructional features videos 78
Websites Used in Home Search 2005
2011
2012
50%
56%
54%
REALTOR.com
54
45
51
Real estate agent website
31
46
47
Real estate company website
38
40
39
Other website with real estate listings
11
38
27
For-sale-by-owner website
*
14
13
Newspaper website
15
6
6
Real estate magazine website
6
4
4
Video hosting websites (e.g.,YouTube, etc.)
*
1
2
Social networking websites (e.g., Facebook, etc.)
*
1
1
Multiple Listing Service (MLS) website
Home buyer browsers will perform an average of 11 searches prior to taking action on a real estate website. Sources: NAR Profile of Home Buyers and Sellers, The Digital House Hunt
79
Method of Home Purchase 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Through a real estate agent or broker
69%
75%
77%
77%
77%
79%
81%
77%
83%
89%
89%
Directly from builder or builder’s agent
15
14
12
12
13
12
10
8
6
7
6
Directly from the previous owner
15
9
9
9
9
7
6
5
5
4
5
Just because buyers are using the internet more doesn’t mean they’re not relying on you. In fact, the number of buyers using an agent remains at a ten year high. To keep it that way, understand your value proposition and be able to communicate it. Source: NAR Profile of Home Buyers and Sellers
80
Buyer Representation Agreement Buyer representation agreements are down compared to last year. These are a no-brainer risk mitigator for agents wanting to protect their time and income.
2011
2012
42%
40%
Yes, an oral arrangement
18
19
No
29
28
Don’t know
11
13
Yes, a written arrangement
Source: NAR Profile of Home Buyers and Sellers
81
What Buyers Want Most from Agent 50%
Help finding the right home to purchase Help with price negotiations
12%
Help negotiate terms
12% 8%
Tell me price of comparable home sales
7%
Help with paperwork Tell me how much I can afford Help with financing
4% 3%
Tell me about neighborhood or area
2%
Other
2%
Source: NAR Profile of Home Buyers and Sellers
82
How Buyers Found Their Agent 2005
2011
2012
44%
41%
40%
Internet website
7
9
11
Used agent previously to buy or sell a home
11
9
10
Visited an open house and met agent
7
7
6
Saw contact information on for sale/open house sign
6
6
6
Personal contact by agent (telephone, email, etc.)
3
3
4
Referred through employer or relocation company
4
4
4
Walked into or called office and agent was on duty
4
4
3
Newspaper,Yellow Pages, or home book ad
2
1
*
Direct mail (newsletter, flier, postcard, etc.)
1
--
*
Other
6
10
10
Referred by (or is) a friend, neighbor, or relative
The data is clear. Staying in relationship with your database is the #1 way to get more business. Source: NAR Profile of Home Buyers and Sellers, KWRI Surveys
83
Interviews by Buyers 2002
2005
2009
2010
2011
2012
One
59%
64%
66%
64%
65%
66%
Two
22
20
19
21
20
20
Three
19
10
10
10
10
8
Four or more
--
5
6
6
6
6
2 out of 3 times if you are not the first one they call there is no possibility to get their business.
Source: NAR Profile of Home Buyers and Sellers
84
Most Important Factors for Buyers The most important factors for buyers when choosing an agent 24%
Honest and trustworthy
21%
Reputation
15%
Agent is family or friend
12%
Knowledge of neighborhood
9%
Caring and good listener
6%
Timely responses Assocation with company
3%
100% accessable (Tech)
3%
Designations Other Source: NAR Profile of Home Buyers and Sellers
2% 4% 85
Home as Financial Investment 2005
2010
2011
2012
Good financial investment
94%
85%
78%
78%
- Better than stocks
*
47
45
46
- About as good as stocks
*
30
24
23
- Not as good as stocks
*
9
9
9
Not a good financial investment
1
4
8
6
Don’t know
5
11
14
16
Source: NAR Profile of Home Buyers and Sellers
86
Buyer: Repeat and Referrals? Would seller work with agent again or refer them to friends?
74%
15% Definitely Source: NAR Profile of Home Buyers and Sellers
Probably
5%
4%
2%
Probably not
Definitely not
Don’t know 87
Method Sellers Used to Find Agent Referred by (or is) a friend, neighbor, or relative Used agent previously to buy or sell a home Personal contact by agent (telephone, email, etc.) Visited an open house and met agent Referred by another real estate agent or broker Saw contact information on for sale/open house sign Referred through employer or relocation company Internet website Walked into or called office and agent was on duty Direct mail (newsletter, flier, postcard, etc.) Newspaper,Yellow Pages, or home book ad Advertising specialty (calendar, magnet, etc.) Other Source: NAR Profile of Home Buyers and Sellers
2005
2011
2012
43% 28 5 4 3 4 3 2 2 3 2 * *
39% 22 4 4 4 4 5 3 1 2 1 * 11
38% 23 5 4 4 4 4 3 2 2 1 1 11 88
Seller Interviews Number of agents sellers contacted before deciding who to list with. 2002
2010
2011
2012
One
76%
66%
66%
65%
Two
16
19
16
20
Three
8
10
13
11
Four
--
3
3
3
Five or more
--
3
2
2
Source: NAR Profile of Home Buyers and Sellers
89
What Sellers Want Most from Agent 2005
2010
2011
2012
Help sell the home within specific time frame
27%
19%
19%
22%
Help seller market home to potential buyers
*
20
24
21
Help find a buyer for home
28
21
19
19
Help price home competitively
17
23
20
18
Help seller find ways to fix up home to sell it for more
12
7
9
10
Help with negotiations and dealing with buyers
5
5
5
5
Help with paperwork/inspections/preparing for settlement
7
4
3
3
Help seller see homes available to purchase
3
1
2
1
Source: NAR Profile of Home Buyers and Sellers
90
Most Important Factors for Sellers 2005
2010
2011
2012
57%
35%
38%
37%
Agent is honest and trustworthy
*
23
20
19
Agent is friend or family member
*
16
18
13
Agent’s knowledge of the neighborhood
17
12
11
12
Agent has caring personality/good listener
*
4
4
4
Agent’s association with a particular firm
6
4
5
4
Professional designations held by agent
3
1
1
1
Other
17
4
4
5
Reputation of agent
Source: NAR Profile of Home Buyers and Sellers
91
Compensation Negotiations 2011
2012
43%
43%
Client brought up the topic and the real estate agent was willing to negotiate their commission or fee
26
22
Client did not know commissions and fees could be negotiated
13
15
Client did know commissions and fees could be negotiated but did not bring up the topic
8
11
Client brought up the topic and the real estate agent was not willing to negotiate their commission or fee
10
9
Real estate agent initiated discussion of compensation
Source: NAR Profile of Home Buyers and Sellers
92
Seller: Repeats and Referrals? Would seller work with agent again or refer them to friends?
66%
18%
Definitely
Probably
7%
7%
Probably not
Definitely not
2% Don’t know
74% of buyers would. Don’t forget to call your past buyer and seller clients to ask for referrals. Source: NAR Profile of Home Buyers and Sellers
93
Method Used To Sell Home 2001 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sold home using an agent or broker
79%
83%
82%
85%
84%
85%
84%
85%
88%
87%
88%
For-sale-by-owner (FSBO)
13
14
14
13
12
12
13
11
9
10
9
Sold to home-buying company
1
1
1
1
1
1
1
1
1
1
1
Other
7
3
3
2
3
2
2
3
3
2
2
Source: NAR Profile of Home Buyers and Sellers
94
For Sale By Owners (FSBOs) 14%
14%
13%
13%
13% 12%
12% 11% 10% 9%
2001
2003
2004
2005
2006
2007
2008
2009
2010
9%
2011
2012
For Sale By Owner (FSBO) A shifting market may mean FSBOs will increase and expireds will decrease. Take note if expireds are a big part of your lead gen strategy. Source: NAR Profile of Home Buyers and Sellers
95
Incentives Offered to Attract Buyers 2011
2012
59%
60%
Home warranty policies
23
22
Assistance with closing costs
20
17
Credit toward remodeling or repairs
7
7
Other incentives, such as a car, flat-screen TV, etc.
3
3
Assistance with condo association fees
1
*
Other
4
5
None
Source: NAR Profile of Home Buyers and Sellers
96
KW Research
MLS Study on Discounters
The State of our Commission
97
MLS Study: Percentage of Expired Listings 33% 27%
26% 21%
19%
18%
17%
14%
13% 12% 12%
11% 10%
10% 6% 6%
2005
2006
2007 Full Service
Source: KW Research
2008
2009
2010
2011
2012
Limited Service 98
MLS Study: Average Price 327.9 323.4
340.3
339.6 306.1
325.0 297.8
307.0
292.8
232.4
230.8
236.6 234.4
215.4
214.9 185.5
2005
2006
2007
2008
Full-Service Average Price (in Thousands of Dollars) Source: KW Research
2009
2010
2011
2012
Limited-Service Average Price (in Thousands of Dollars) 99
MLS Study: Average Days on Market 91 87
86 80
82
81 76
67
77
74
72 68
64
64 57
2005 Source: KW Research
2006
2007 Full Service
2008
2009
2010 Limited Service
2011
58
2012 100
MLS Study: List to Sell 99% 98%
98% 98%
98% 98% 97% 97% 96% 95% 95% 94% 94% 94% 94%
2005
2006
2007 Full Service
Source: KW Research
2008
2009
2010
2011
94% 2012
Limited Service 101
MLS Study: Market Share 3.78%
4.04% 2.65%
2005
2006
2007
2.17%
2008
2.07%
2009
2.43%
2010
1.43%
1.3%
2011
2012
Limited-Service Broker Market Share Source: KW Research
102
Commission: Total Median Percentage 5.67% 5.59% 5.50% 5.42% 5.33% 5.19%
2002 Source: KW Research
5.21%
2003
5.20%
2004
5.12%
5.10%
5.09%
2005
2006
2007
2008
2009
2010
2011
2012 103
Commission: Median Seller Percentage 2.63%
2.64%
2011
2012
2.59% 2.56% 2.50% 2.42%
2002 Source: KW Research
2.44%
2003
2.43%
2004
2.40%
2.40%
2.40%
2005
2006
2007
2008
2009
2010
104
Commission: Median Seller Amount $4,650 $3,575
2002 Source: KW Research
$3,872
$4,756
$4,780
$4,200
$4,550
$4,345
$4,471
$4,524
2010
2011
2012
$3,450
2003
2004
2005
2006
2007
2008
2009
105
Commission: Median Buyer Percentage 3.00%
2.83% 2.77%
2002
Source: KW Research
2.77%
2003
2.86%
2.87%
2010
2011
2.83%
2.78%
2004
2.71%
2.70%
2005
2006
2.68%
2007
2008
2009
2012
106
Commission: Median Buyer Amount
$4,128
2002 Source: KW Research
$4,410
2003
$4,730
2004
$5,155
$5,325
$5,350
$5,145
$5,145
$5,107
2010
2011
$4,650
2005
2006
2007
2008
2009
$5,413
2012 107
What Do You Do Now?
Up Next
108
Challenges in Markets Shifting Up - Competition with less skilled agents - Competition with sellers窶認SBOs - Commission pressure
109
The Foundation Always Stays the Same
List
ings
ge era Lev Leads
Source: The Millionaire Real Estate Agent
110
?lf!Y_
KELLER WILLIAMS@ REALT'l'