REALTOR.

COM ®

MARKET OUTLOOK
Realtor.com Economics

May 2018

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MOST COMPETITIVE SEASON ON RECORD
Key expectations from realtor.com

•Existing Home Sales Struggle to Break Out

•Supply: Inventory, Prices, Affordability
•Demand: Aging Millennials, Rents
•How Shoppers React
•Current Conditions & Trends
•California, Cross Market Demand
•Hot Markets, Generational Shopping
•Optimism Ahead?

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HOME SALES TREND SIDEWAYS
EHS down 1.8% Y/Y in March; Approx 5.5 million sales pace since mid-2015

Source: National Association of REALTORS ® Existing Home Sales Report

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 INVENTORY &
AFFORDABILITY

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INVENTORY AT RECORD LOWS
Inventory down 5.8% year-over-year in April

Source: Realtor.com®

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PRICES AT RECORD HIGHS
Median List Price at $290,000, Sales Price on Track to Surpass $263,300 (June 2017)

Source: Realtor.com® and National Association of REALTORS®

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CRISIS SHIFTED NEW HOME MARKET
Average spread 2000-2008: 12%; 2009-2017: 33%

Source: National Association of REALTORS ®, Commerce Department

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HISTORIC AFFORDABILITY DECLINING
Still 2-3 years away from affordability horizon on prices & rates

Source: Moody’s Analytics, Freddie Mac, and National Association of REALTORS ®

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 AFFORDABILITY
A Different Measure: Pros and Cons
NAR Affordability Index
• Sales Prices
• Backward Looking (Con)
• Actual Market Price (Pro)
• Median Price Point
• Median Income Family
• Easy to interpret
REALTORS® Affordability Distribution
• Listing Prices
• Forward Looking (Pro)
• May sell for more/less (Con)
• Prices of All Listings
• Income of All Families
• More work to interpret
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AFFORDABILITY HEATMAP

Source: realtor.com® and National Association of REALTORS ®

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TOP AFFORDABLE STATES
30th Percentile vs. 60th Percentile Income

State 30th %tile State 60th %ile

Affordability Affordability
Ohio 39% Ohio 71%
Indiana 38% West Virginia 69%
Kansas 37% Alaska 68%
Michigan 35% Indiana 68%
Iowa 33% Kansas 68%
Pennsylvania 31% Iowa 67%
Missouri 30% Missouri 66%
Source: realtor.com® and National Association of REALTORS ®

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LEAST AFFORDABLE STATES
30th Percentile vs. 60th Percentile Income

State 30th %tile State 60th %ile

Affordability Affordability
Rhode Island 3% Hawaii 27%
D.C. 4% Oregon 29%
California 4% California 30%
Oregon 6% D.C. 34%
Arizona 6% Colorado 34%
Massachusetts 7% Montana 35%
Nevada 7% Idaho 35%
Source: realtor.com® and National Association of REALTORS ®

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ACUTE AFFORDABLE INVENTORY SHORTAGE
More than 250,000 fewer ‘starter’ homes (<$200k) now vs. May 2015

Source: realtor.com®

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DEMAND
DRIVERS

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DEMAND DRIVERS: MILLENNIALS SHIFT TO OWN
Gen Z Entering the Rental Market
US Population by Age, End of 2016
61 million 78 million
5,000 65 million 88 million 29 million
Z Millennial X Boomer
4,500

4,000

3,500

3,000
Thousands

2,500

2,000

1,500

1,000

500

100+
12
16
20
24
28
32
36
40
44
48
52
56
60
64
68
72
76
80
84
88
92
96
0
4
8

Source: Realtor.com® Analysis of US Census Bureau Population Estimates (2016)

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CHEAPER TO RENT IN 59% OF COUNTIES
Simple monthly cost analysis favors renting now in more places

April 2018
Source: Realtor.com® Analysis of HUD Median Rents,
Nielsen Pop-Facts Demographics and Realtor.com® Data

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RENTS RISING Y/Y IN 73% OF COUNTIES
Rent increases adding to demand for buying

2018
Source: Realtor.com® Analysis of HUD Median Market Rents

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CONFIDENCE AT 15+ YEAR HIGH
Plans to purchase a home continue uptrend

Source: The Conference Board, Moody’s Analytics

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HOW HOME SHOPPERS REACT
Survey of March home shoppers

• Sticking Around: Nearly three-quarters of shoppers started their search in 2017

• Know It’s Tough: 35 percent of shoppers anticipate “a lot of competition” and 94
percent are actively employing strategies to compete
• Key Strategy Categories: (1) Stay Informed and (2) Use Cash

• Remain Optimistic: More than 70 percent expect to close in 2018

• Rising Rents a Trigger: Millennials cited rising rent as a reason for home purchase
• Adjusting to Market Conditions: Roughly 4 in 5 shoppers have adapted their home
search to cope with rising interest rates and home prices
• Key Adjustments: (1) Smaller home, (2) Less expensive home, (3) Different neighborhood, (4) Larger
Down Payment, (5) Increase monthly budget

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 CURRENT
CONDITIONS

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TOP 8 CA COUNTIES BY OUTBOUND TRAFFIC
Areas Have 1.3 to 6.1 Times More Outbound Traffic

Outbound/Inbound Median List Price

County
Views Ratio (March 2018)
Santa Clara, CA 6.1 1,299,000
Alameda, CA 4.8 799,000
San Mateo, CA 4.4 1,504,000
San Francisco, CA 3.0 1,298,000
Los Angeles, CA 2.0 690,000
Orange, CA 1.7 849,000
Marin, CA 1.4 1,344,000
Sonoma, CA 1.3 713,000

Source: Realtor.com®

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CROSS MARKET DEMAND
Shoppers From Santa Clara Look to Sacramento

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HOTTEST MARKETS
Areas see short time on market and lots of views per listing

April April Median Age of Views per Listing

11 Hottest Markets
Rank Inventory (Days) vs. US
Midland, TX 1 30 2.7
Boston-Cambridge-Newton, MA-NH 2 31 2.3
San Francisco-Oakland-Hayward, CA 3 24 1.8
Columbus, OH 4 32 2.3
Vallejo-Fairfield, CA 5 31 2.0
Colorado Springs, CO 6 30 1.7
Racine, WI 7 37 2.2
Sacramento--Roseville--Arden-Arcade, CA 8 34 1.8
Stockton-Lodi, CA 9 32 1.8
Ann Arbor, MI 10 36 2.0
San Jose-Sunnyvale-Santa Clara, CA 11 19 1.6
Source: Realtor.com®

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HOTTEST MARKETS
West Coast, Rocky Mountains, and Midwest are Hottest

Source: Realtor.com®

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GENERATIONAL PROPENSITY
Interest in Zips by Age Groups in N. Illinois (Q1 2018)

Source: Realtor.com
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PHOENIX AND PITTSBURGH ATTRACT SENIORS
Minneapolis attracts ages 35-44; Cincinnati is top among 25-34

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AMAZON HQ2 CITIES
19 U.S. candidate ‘cities’ plus Toronto

Source: Realtor.com® Depiction of Amazon Announcement

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JEFF BEZOS VS. HQ2 CITY HOUSING
Bezos’ $112 Billion net worth could purchase all active listings in each city

Area Multiple Area Multiple

Atlanta 7.1 Nashville 24.8
Austin 25.4 Philadelphia 13.9
Boston 13.6 Pittsburgh 39.2
Chicago 5.1 Raleigh 41.6
Columbus 57.8 Washington, DC 70.7
Dallas 11.0 Newark 87.6
Denver 15.3 Montgomery, MD 47.2
Indianapolis 72.7 New York City 3.0
Los Angeles 3.5 Northern Virginia 14.7
Miami 2.4 COMBINED 0.51
Source: Realtor.com® Analysis

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OPTIMISM
AHEAD

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SIGN THAT LISTINGS DECLINE IS SLOWING?
Not a turnaround, but decline has to slow before stopping

Source: Realtor.com®

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 Economic Research
realtor.com®

economics@realtor.com
@RDC_Economics
Access market data, research, and presentations at
https://www.realtor.com/research

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THANK
YOU
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