Silicon Valley Bank Startup Outlook 2012 Webinar Presentation
Economic and Real Estate Outlook Silicon Valley (October 2015)
-
Upload
susan-katherine-rits -
Category
Real Estate
-
view
203 -
download
1
Transcript of Economic and Real Estate Outlook Silicon Valley (October 2015)
Economic and Real Estate Outlook
By Lawrence Yun, Ph.D.Chief Economist
National Association of REALTORS®
Presentation at Silicon Valley Association of REALTORS®San Jose, CA
October 13, 2015
How’s the Economy?
GDP Quarterly Activity(Awesome?)
2007 - Q1
2007 - Q3
2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
2010 - Q3
2011 - Q1
2011 - Q3
2012 - Q1
2012 - Q3
2013 - Q1
2013 - Q3
2014 - Q1
2014 - Q3
2015 - Q1
-10
-8
-6
-4
-2
0
2
4
6
Annualized Growth Rate
Annual GDP … Below 3% for 10 straight years
19501953
19561959
19621965
19681971
19741977
19801983
19861989
19921995
19982001
20042007
20102013
-4
-2
0
2
4
6
8
10
GDP Annual Growth Rate
Sluggish Growth + Gap after Recession ($1.7 trillion gap … $5,000 per person)
1998 - Q1
1998 - Q3
1999 - Q1
1999 - Q3
2000 - Q1
2000 - Q3
2001 - Q1
2001 - Q3
2002 - Q1
2002 - Q3
2003 - Q1
2003 - Q3
2004 - Q1
2004 - Q3
2005 - Q1
2005 - Q3
2006 - Q1
2006 - Q3
2007 - Q1
2007 - Q3
2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
2010 - Q3
2011 - Q1
2011 - Q3
2012 - Q1
2012 - Q3
2013 - Q1
2013 - Q3
10000
11000
12000
13000
14000
15000
16000
17000
18000
GDP in 2009 Dollars
Real GDP Real GDP W/O Recession
3% Growth Line
2.2% Growth Line
Jobs(8 million lost … 12 million gained)
2000 - Jan 2001 - Dec2003 - Nov2005 - Oct 2007 - Sep2009 - Aug 2011 - Jul 2013 - Jun2015 - May120,000
125,000
130,000
135,000
140,000
145,000In thousands
Fresh Unemployment Insurance Claims
2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr 2014 - Jan250
300
350
400
450
500
550
600In thousands
Unemployment Rate Falling
2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr 2014 - Jan0
2
4
6
8
10
12
But Employment Rate Not Rising
2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr 2014 - Jan54
56
58
60
62
64
66
Top and Bottom States for JobsThe Best % Gain in 12
months
Utah 4.5%
Florida 3.6%
Nevada 3.6%
Washington 3.5%
Oregon 3.5%
California 3.2%
Idaho 3.1%
South Carolina 3.0%
North Carolina 2.9%
Indiana 2.7%
The Worst % Gain in 12 months
West Virginia -1.8%
North Dakota -0.5%
Wyoming 0.4%
Alaska 0.6%
Louisiana 0.7%
San Francisco and Oakland Total Jobs
2000 - Jan2002 - Jan2004 - Jan2006 - Jan2008 - Jan2010 - Jan2012 - Jan2014 - Jan800
850
900
950
1000
1050
1100
1150
San Jose Metro Total Jobs
2000 - Jan2002 - Jan2004 - Jan2006 - Jan2008 - Jan2010 - Jan2012 - Jan2014 - Jan800
850
900
950
1000
1050
1100
Monetary Policy and Mortgage Credit
Fed Policy and Mortgage Rate
2000 - Jan 2002 - Jan 2004 - Jan 2006 - Jan 2008 - Jan 2010 - Jan 2012 - Jan 2014 - Jan0
1
2
3
4
5
6
7
8
9
Mortgage Rate Fed Funds Rate
What Determines Bond Yields?
• Federal Reserve’s short-term rate changes• Inflation and erosion of purchasing power• Foreign capital flow and demand for dollar• Savings rate• U.S. budget deficit• Printing of money• …
Federal Deficit - Shrinking( $ million, 12 month total)
2000 - Jan 2002 - Jan 2004 - Jan 2006 - Jan 2008 - Jan 2010 - Jan 2012 - Jan 2014 - Jan
-1600000
-1400000
-1200000
-1000000
-800000
-600000
-400000
-200000
0
200000
400000
Federal Debt … Cumulative ( $ million; debt held by public excluding intra-governmental holdings)
2001 - Jan 2002 - Dec 2004 - Nov 2006 - Oct 2008 - Sep 2010 - Aug 2012 - Jul 2014 - Jun0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
U.S. Dollar Reversing the Decline … Stronger and Stronger
2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr 2014 - Jan80
90
100
110
120
130
140
Dollar Strength Index – Trade Weighted
No CPI Inflation – Yet
2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr 2014 - Jan
-3
-2
-1
0
1
2
3
4
5
6
Rents Rising at 7-year high
2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr 2014 - Jan
-1
0
1
2
3
4
5
Renters' Rent
Rental Vacancy Rate(30-year low)
2000 - Q1
2000 - Q4
2001 - Q3
2002 - Q2
2003 - Q1
2003 - Q4
2004 - Q3
2005 - Q2
2006 - Q1
2006 - Q4
2007 - Q3
2008 - Q2
2009 - Q1
2009 - Q4
2010 - Q3
2011 - Q2
2012 - Q1
2012 - Q4
2013 - Q3
2014 - Q2
2015 - Q1
5
6
7
8
9
10
11
12
Monetary Policy
• Quantitative Easing … Finished
• Fed Funds Rate hike … September/October
• 10-year Treasury reaching – 2.3% by end of 2015 – 3.0% by end of 2016
Credit Box Opens?• FICO New Method
• Fannie/Freddie– Lower down payment products
• FHA premiums … lowered
• Portfolio Lending … historic low mortgage default rates on recent vintages (2010-2014)
Housing Market
Annual Home Sales
20002001
20022003
20042005
20062007
20082009
20102011
20122013
20142015
0
1000000
2000000
3000000
4000000
5000000
6000000
7000000
8000000
9000000
NewExisting
Home Sales in San Mateo and Santa Clara Counties
– Home Sales … up 6% in August
– Median Price … up 13%
– Business $ volume … up 21%
Home Price IndexSan Jose vs San Fran vs Phoenix
1995 - Q1
1996 - Q1
1997 - Q1
1998 - Q1
1999 - Q1
2000 - Q1
2001 - Q1
2002 - Q1
2003 - Q1
2004 - Q1
2005 - Q1
2006 - Q1
2007 - Q1
2008 - Q1
2009 - Q1
2010 - Q1
2011 - Q1
2012 - Q1
2013 - Q1
2014 - Q1
2015 - Q1
0
50
100
150
200
250
300
350
400
New Price Bubble?
2005-2006 Bubble
• 7.2 m existing home sales
• 1.3 m new home sale
• Loose Credit
• 2.1 m housing starts
2015
• 5.3 m existing home sales
• 0.6 m new home sales
• Tight Credit and all-cash
• 1.1 m housing starts
Trade-Up Opportunitiesfrom Housing Equity
2000 - Q1
2000 - Q4
2001 - Q3
2002 - Q2
2003 - Q1
2003 - Q4
2004 - Q3
2005 - Q2
2006 - Q1
2006 - Q4
2007 - Q3
2008 - Q2
2009 - Q1
2009 - Q4
2010 - Q3
2011 - Q2
2012 - Q1
2012 - Q4
2013 - Q3
2014 - Q2
2015 - Q1
0
5000
10000
15000
20000
25000
Real Estate Value Mortgage Debt
$ billion
First-time Buyers (mostly Millennials)
2009 - Jan
2009 - May
2009 - Sep
2010 - Jan
2010 - May
2010 - Sep
2011 - Jan
2011 - May
2011 - Sep
2012 - Jan
2012 - May
2012 - Sep
2013 - Jan
2013 - May
2013 - Sep
2014 - Jan
2014 - May
2014 - Sep
2015 - Jan
2015 - May
0
10
20
30
40
50
60
Inventory of Homes For Sale
2000 - Jan 2001 - Oct 2003 - Jul 2005 - Apr 2007 - Jan 2008 - Oct 2010 - Jul 2012 - Apr 2014 - Jan0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
Shadow Inventory(% of mortgages in foreclosure or late payment)
2000 - Q1
2001 - Q1
2002 - Q1
2003 - Q1
2004 - Q1
2005 - Q1
2006 - Q1
2007 - Q1
2008 - Q1
2009 - Q1
2010 - Q1
2011 - Q1
2012 - Q1
2013 - Q1
2014 - Q1
2015 - Q1
0
2
4
6
8
10
12
14
NJCA
Housing Starts Recovering … Too Slowly
1970 - Jan 1975 - Jul 1981 - Jan 1986 - Jul 1992 - Jan 1997 - Jul 2003 - Jan 2008 - Jul 2014 - Jan0
500
1000
1500
2000
2500
3000Thousand units
Housing Starts in San Jose-Santa Clara
20032004
20052006
20072008
20092010
20112012
20132014
20150
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
MultifamilySingle-family
Time to Sell a New Spec Home(in months)
2000 - Jan 2002 - Jan 2004 - Jan 2006 - Jan 2008 - Jan 2010 - Jan 2012 - Jan 2014 - Jan0
2
4
6
8
10
12
14
16
American Inequality?
Homeownership Rate(50-year low)
1990 - Q1 1992 - Q4 1995 - Q3 1998 - Q2 2001 - Q1 2003 - Q4 2006 - Q3 2009 - Q2 2012 - Q1 2014 - Q463
64
65
66
67
68
69
70
Renters(8 million more households)
2005 - Q1
2005 - Q3
2006 - Q1
2006 - Q3
2007 - Q1
2007 - Q3
2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
2010 - Q3
2011 - Q1
2011 - Q3
2012 - Q1
2012 - Q3
2013 - Q1
2013 - Q3
2014 - Q1
2014 - Q3
2015 - Q1
30
32
34
36
38
40
42
44
Homeowners (2.5 million fewer households)
2005 - Q1
2005 - Q3
2006 - Q1
2006 - Q3
2007 - Q1
2007 - Q3
2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
2010 - Q3
2011 - Q1
2011 - Q3
2012 - Q1
2012 - Q3
2013 - Q1
2013 - Q3
2014 - Q1
2014 - Q3
2015 - Q1
74.0
74.5
75.0
75.5
76.0
76.5
77.0
Household Net Worth($5,500 vs. $195,500)
Renter Homeowner$0
$50,000
$100,000
$150,000
$200,000
$250,000
1998 2001 2004 2007 2010 2013
x31 x46x36 x34x46
Homeowner net worth ranges from 31 to 46 times that of renters x36
Source: Federal Reserve Survey of Consumer Finances
Younger Buyers Have Optimism—View of Home as Good Financial Investment
2014 Profile of Home Buyers and Sellers
34 and younger
35 to 49 50 to 59 60 to 68 69 to 890
102030405060708090
42 39 40 39 38
30 30 26 26 20
12 13 12 1215
Better than stocksAbout as good as stocks
84% 82% 77% 77% 72%
Most Difficult Steps of Home Buying Process
Finding the right prope
rty 53%
Paperwork 24%
Under-
standing the proces
s 16%
Getting a
mortgage
14%No
difficult
steps16%
Saving for the down payme
nt12%
24% of Baby Boomers noted there were no difficult steps compared to only 9% of Millennials
Paperwork and understandingthe process was more difficult for Millennials than any othergeneration
Finding the right property was ranked highest among all generations for the MOST DIFFICULT STEP in home buying
2014 Profile of Home Buyers and Sellers
Forecast and Risks
Economic Forecast2013 2014 2015
Forecast2016
ForecastGDP Growth 2.2% 2.6% 2.3% 3.0%
Job Growth +2.3 million +3.0 million +2.4 million
+2.7 million
CPI Inflation 1.5% 1.6% 0.3% 3.2%
Consumer Confidence
73 87 99 101
10-year Treasury
2.5% 2.6% 2.2% 3.3%
Housing Forecast2013 2014 2015
Forecast2016
ForecastHousing Starts 925,000 1 million 1.1 million 1.4 million
New Home Sales
430,000 437,000 570,000 720,000
Existing Home Sales
5.1 million 4.9 million 5.3 million 5.5 million
Median Price Growth
+ 11.5% + 5.7% + 6% + 4%
30-year Rate 4.0% 4.2% 4.0% 5.2%
Underwriting Standards
Strict Strict Transition Normal
2/3 of Members used 1031 Like-Kind Exchanges
40%
14%4%
5%
37%
Exhibit 3-1: Number of LKE Transactions for All Members 2011-14
1 - 34 - 67 - 12More than 12None
1031 and Economic Impact
Less than 10%
10% to 24%
25% to 49%
50% to 100%
Greater than 100%
Not applicable
16%
55%
16%
5%
1%
7%
Exhibit 3-9: Average Capital Investment in Property Improvements (% of Property's Fair Market Value)