No Place But Up Interest Rates Rents, Prices Real Estate and the Economy But Not Oil Ted C. Jones, PhD Chief Economist Stewart Title Guaranty Company
Mega Themes More Jobs Than Ever in History Retail Boom Just Starting Residential Renting vs. Owning Entry Level Homebuyers Returning Inflation Potential Overweight in Real Estate Terrorism is Here to Stay
Percent Change in Loan Applications the First-Full Week of CFPB-TRID
U.S. Jobs Jobs (Millions) Seasonally Adjusted 143 141 139 137 135 133 131 +1.97% Prior 12 Months 142,000 Net New Jobs in September 2.725 Million in Past 12-Months 129 '07 '08 '09 '10 '11 '12 '13 '14 '15
U.S. Leisure & Hospitality Jobs Recession Millions of Jobs Seasonally-Adjusted 15.5 15 14.5 14 13.5 13 12.5 0 +2.90% 12 Months '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 12 11.5
Texas Jobs Jobs (Thousands) Seasonally Adjusted 12,000 11,750 11,500 11,250 11,000 10,750 10,500 10,250 +1.93% Prior 12 Months 224,800 Net New Jobs in Prior 12 Months 10,000 '07 '08 '09 '10 '11 '12 '13 '14 '15
Texas Leisure & Hospitality Jobs Recession Thousands of Jobs Seasonally-Adjusted 1,300 1,200 1,100 1,000 900 0 +5.44% 12 Months '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 800
State Job Growth - 12 Months Ending September 2015 State Percent State Percent State Percent Utah 3.73% Kentucky 1.76% Ohio 0.92% South Carolina 3.25% Delaware 1.73% Missouri 0.79% Washington 3.06% Maryland 1.70% New Mexico 0.78% Idaho 3.05% Colorado 1.67% Pennsylvania 0.65% Florida 2.99% Tennessee 1.65% Vermont 0.64% California 2.82% Connecticut 1.62% Rhode Island 0.63% Nevada 2.82% South Dakota 1.58% Kansas 0.62% Oregon 2.80% Alabama 1.58% New Hampshire 0.60% North Carolina 2.59% Iowa 1.53% Montana 0.60% Indiana 2.21% New York 1.39% Nebraska 0.56% Arizona 2.17% Dist of Columbia 1.36% Illinois 0.46% Georgia 2.01% Minnesota 1.32% Oklahoma 0.18% Michigan 2.01% Hawaii 1.26% Louisiana 0.13% Massachusetts 1.96% Mississippi 1.06% Alaska -0.06% Texas 1.93% New Jersey 1.00% Wyoming -0.89% Arkansas 1.89% Virginia 0.97% West Virginia -1.49% Wisconsin 1.88% Maine 0.96% North Dakota -1.57%
Texas Job Growth Rates Prior 12 Months Percent Jobs - Thousands MSA-Division Change Gain Total Abilene 1.02% 0.7 69.1 Amarillo 0.26% 0.3 117.0 Austin-Round Rock-San Marcos 3.05% 28.1 949.7 Beaumont-Port Arthur 3.18% 5.3 172.1 Brownsville - Harlingen 1.31% 1.8 139.4 College Station - Bryan 1.14% 1.2 106.3 Corpus Christi 1.43% 2.8 198.8 Dallas-Ft Worth-Arlington 3.25% 107.0 3,400.7 Dallas-Plano-Irving Metro Div 3.62% 83.7 2,397.2
Texas Job Growth Rates Prior 12 Months Percent Jobs - Thousands MSA-Division Change Gain Total El Paso 1.08% 3.2 298.3 Ft Worth-Arlington Metro Div. 2.40% 23.5 1,004.7 Houston-The Woodlands-Sugar Land 1.16% 34.3 2,983.0 Killeen-Temple 2.01% 2.7 136.7 Laredo 1.92% 1.9 100.8 Longview 1.15% 1.2 105.3 Lubbock 2.63% 3.6 140.7 McAllen Edinburg-Mission 3.61% 8.8 252.7
Texas Job Growth Rates Prior 12 Months Percent Jobs - Thousands MSA-Division Change Gain Total Midland 2.90% 2.8 99.5 Odessa 3.25% 2.6 82.7 San Angelo 1.85% 0.9 49.5 San Antonio-New Braunfels 3.68% 35.1 987.7 Sherman-Denison 1.11% 0.5 45.4 Tyler 2.12% 2.1 101.0 Waco 1.70% 1.9 113.9 Wichita Falls -2.05% (1.2) 57.3
U.S. Existing Home Sales & Median Prices Sales on a Seasonally Adjusted Annualized Rate Median Price $ Thousands Home Sales Millions $240 $225 Tax Incentive $210 6 5 $195 $180 4 $165 $150 '09 '10 '11 '12 '13 14 '15 3 National Association of REALTORS Median Price Homes Sales
U.S. Existing Home Sales Sales Not Seasonally Adjusted - Thousands 600 2014 2015 500 400 300 200 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec National Association of REALTORS
U.S. Existing Home Sales Median Price Not Seasonally Adjusted - $Thousands $250 2014 2015 $225 $200 $175 $150 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec National Association of REALTORS
U.S. Existing Home Sales Months Inventory Seasonally Adjusted 12 10 8 6 4 2 0 '09 '10 '11 '12 '13 '14 '15 National Association of REALTORS Normal
Texas Residential Home Sales Number Per Month 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Texas Residential Home Sales Average Number of Closings Per Month for Prior 12 Months 26,000 +5.72% 24,000 22,000 20,000 18,000 16,000 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Texas Residential Home Sales Median Price $220,000 $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Texas Residential Home Sales Median Price 12 Month Moving Average $200,000 +7.84% $180,000 $160,000 $140,000 $120,000 $100,000 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15f Texas Residential Building Permits Number of Dwelling Units 250,000 200,000 Single Family Multi 150,000 100,000 50,000 0 166,462 Permits is the past 12 months, 224,800 New Jobs 1.35 New Jobs Per New Dwelling Unit
http://osd.texas.gov/data/tpepp/projections/tool?fid=61ff485d03554f928e7313cb43ba3732 Texas Population Forecasts
Texas Population Forecast 2000-2010 Migration Scenario 10-Year Growth Age 2015 2020 2025 Growth Percent 00-04 2,005,834 2,179,887 2,380,842 375,008 18.7% 05-09 1,988,878 2,067,542 2,247,847 258,969 13.0% 10-14 2,077,796 2,152,675 2,233,576 155,780 7.5% 15-19 2,046,689 2,274,641 2,368,765 322,076 15.7% 20-24 2,033,564 2,224,693 2,492,434 458,870 22.6% 25-29 1,957,574 2,206,673 2,432,032 474,458 24.2% 30-34 1,994,939 2,115,832 2,395,873 400,934 20.1% 35-39 1,874,670 2,131,261 2,266,977 392,307 20.9% 40-44 1,855,532 1,977,411 2,254,375 398,843 21.5% Texas State Data Center
Texas Population Forecast 2000-2010 Migration Scenario 10-Year Growth Age 2015 2020 2025 Growth Percent 45-49 1,751,261 1,926,609 2,058,207 306,946 17.5% 50-54 1,791,030 1,789,434 1,977,332 186,302 10.4% 55-59 1,684,622 1,809,257 1,815,496 130,874 7.8% 60-64 1,407,281 1,671,980 1,803,801 396,520 28.2% 65-69 1,143,187 1,375,699 1,641,150 497,963 43.6% 70-74 803,001 1,081,697 1,308,829 505,828 63.0% 75-79 547,204 714,641 969,757 422,553 77.2% 80-84 380,092 440,399 580,656 200,564 52.8% 85+ 352,130 401,647 471,358 119,228 33.9% Texas State Data Center
U.S. Real Retail & Food Service Sales $ Billions Seasonally Adjusted $190 $180 $170 $160 $150 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Light Weight Vehicle Sales Millions Seasonally Adjusted Annual Rate 20 16 12 8 4 0 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 Bureau of Economic Analysis
Household Debt Service as a Percent of Household Disposable Income Percent 14 13 12 11 10 9 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11 '13 '15 FED Board of Governors, BEA
U.S. Property Returns Q2 2015 - TTM 12-Month Property Return All 12.38% Hotel 13.30% Apartment 11.13% Retail 12.93% Industrial 14.04% Office 12.28% Tax-Exempt Investments All Cash Purchase Cash Flow + Value Change Only Pay Property Taxes $443 Billion of Properties 6,971 Properties Source: NCREIF http://www.ncreif.org/property-index-returns.aspx?region=n
U.S. Commercial Real Estate Sales Volume $ Billions Trailing 12 Months +25.1% $600 $500 $400 $300 Property and Portfolio Sales $2.5 Million and Up 15.6% Below 2007 Peak $200 $100 $0-88.1% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
U.S. Commercial Real Estate Sales Volume Number of Transactions Trailing 12 Months 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Property and Portfolio Sales $2.5 Million and Up +12.9% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
U.S. Commercial Real Estate Sales Volume Average Per Transaction $ Millions TTM $25 Property and Portfolio Sales $2.5 Million and Up $20 $15 $10 $5 $0 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
Texas Commercial Real Estate Sales Volume $ Billions Trailing 12 Months $50 Property and Portfolio Sales $2.5 Million and Up $40 $30 $20 $10 $0-88.5% Peak To Trough '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15
10-Year Treasury Rate
30-Year Residential Rates Expect 5.6 to 6 Percent in Next 12 Months 4.7% 4.5% 4.3% 3.79% 4.1% 3.9% 3.7% 3.5% 3.3% 5-Jan 10-May 13-Sep 17-Jan 23-May 26-Sep 30-Jan 5-Jun 16-Oct 19-Feb 25-Jun
Refinance and Purchase Lending Volumes $ Billions Percent Change Q2 2015 = Lending Volumes Compared to Q2 2015 August 2015 Forecast Refinance Lending Volumes - $ Billions Percent Fannie Freddie Change Mae Mac MBA Average Q2 2015 14-Q1 116.0 110.0 123.0 116.3 14-Q2 122.0 121.6 118.0 120.5 14-Q3 142.0 147.0 115.0 134.7 14-Q4 127.0 165.0 128.0 140.0 15-Q1 207.0 199.5 175.0 193.8 15-Q2 218.0 217.5 170.0 201.8 0.0% 15-Q3 134.0 152.0 127.0 137.7-31.8% 15-Q4 105.0 99.8 98.0 100.9-50.0% 16-Q1 103.0 104.0 98.0 101.7-49.6% 16-Q2 98.0 118.5 96.0 104.2-48.4% 16-Q3 89.0 101.4 95.0 95.1-52.9% 16-Q4 83.0 63.8 91.0 79.3-60.7% 15-Q2 0.0% 15-Q3-31.8% 15-Q4-50.0% 16-Q1-49.6% 16-Q2-48.4% 16-Q3-52.9% 16-Q4-60.7%
Annualized Averages $ Billions Refinance Purchase Percent 2015 2016 Change $ 634.3 $ 380.2-40.1% Percent 2015 2016 Change $ 781.4 $ 871.1 11.5% Average Fannie Mae Freddie Mac MBA Averages as of August 2015
Oil Prices & Unemployment Rates WTI Crude $140 $120 $100 $80 US Texas Unemployment Rates 11 10 9 8 7 $60 $40 $20 $0 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 6 5 4 3 2
Natural Gas Price Delivered to Commercial Customers vs. WTI Crude Oil -- Gas Per 1,000 Cubic Feet, Oil Per Barrel Natural Gas Oil $30 $25 $20 $15 $10 $5 $0 '88 '91 '94 '97 '00 '03 '06 '09 '12 '15 $120 $100 $80 $60 $40 $20 $0
U.S. Dollars - Millions Month Exports Imports Balance Jan-15 9,552.0 38,158.4-28,606.4 Feb-15 8,699.8 31,240.1-22,540.3 Mar-15 9,887.2 41,121.9-31,234.7 Apr-15 9,316.8 35,795.1-26,478.3 May-15 8,758.8 39,211.2-30,452.4 Jun-15 9,687.8 41,145.1-31,457.3 TOTAL 2015 55,902.5 226,671.8-170,769.3 Annualized $ 111,805 $ 453,344 $ (341,539) Source: U.S. Census Bureau U.S. China Trade
China Impact on U.S. Economy U.S. 2015 GDP $17.84 Trillion (Q2 2015 Annualized Rate) Purchases by China of U.S. Goods $111.8 Billion (2015 est) Impact = 6/10ths of 1 Percent of U.S. GPD
2016 Economic Concerns Election Year - Politicians Government Revenues & Regulations GSEs Fannie Mae & Freddie Mac Renewables Negative Impacts Inflation & Interest Rates Newton s Third Law of Motion
Telling It Like It Is Ted Twitter DrTCJ blog.stewart.com/ted It is What it Is Ted C. Jones, PhD Chief Economist Stewart Title Guaranty Company