The 2011 Economic Outlook for Real Estate Investors

January 18, 2011

Dr. Stanley D. LonghoferWSU Center for Real Estate

Real GDP Growth since 1985

-10

-8

-6

-4

-2

0

2

4

6

8

10

1985 1990 1995 2000 2005 2010Source: Bureau of Economic Analysis

Percent

Real GDP Growth since 1950

-10

-5

0

5

10

15

20

1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010Source: Bureau of Economic Analysis

Percent

Unemployment Rate

2

4

6

8

10

12

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

WichitaU.S.

Source: U.S. Bureau of Labor StatisticsData are seasonally adjusted

Percent

Total Non-Farm Employment

125,000

130,000

135,000

140,000

U.S

. Em

ploy

men

t in

1,00

0s

250

275

300

325

Wic

hita

Em

ploy

men

t in

1,00

0s

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

WichitaU.S.

Source: U.S. Bureau of Labor StatisticsData are seasonally adjusted

Wichita Office Employment

128

130

132

134

136

138

140

142

144

146

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Source: WSU Center for Real Estate using data from the U.S. Bureau of Labor Statistics

Data are seasonally adjusted

Employment in 1,000s

Wichita Retail Employment

54

55

56

57

58

59

60

61

62

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Source: WSU Center for Real Estate using data from the U.S. Bureau of Labor Statistics

Data are seasonally adjusted

Employment in 1,000s

Wichita Industrial Employment

70

80

90

100

110

120

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Source: WSU Center for Real Estate using data from the U.S. Bureau of Labor Statistics

Data are seasonally adjusted

Employment in 1,000s

WSU Economic Indices

80

90

100

110

120

130

2003 2004 2005 2006 2007 2008 2009 2010

Leading IndicatorsCurrent Conditions

Source: WSU Center for Economic Development and Business Research

Index

Consumer Inflation

-4

-2

0

2

4

6

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Consumer InflationCore Inflation

Source: U.S. Bureau of Labor Statistics

Percent

Mortgage Rates

2

4

6

8

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

30-year Fixed Rate1-year AdjustableMBA Forecast

Sources: Freddie Mac; Mortgage Bankers Association

Percent

Mortgage Underwriting Standards

-20

0

20

40

60

80

100

1990 1995 2000 2005 2010 2015

AllPrimeAlternativeSubprime

Source: Board of Governors of the Federal Reserve System

Net Percentage of Banks ReportingTightening Standard of Mortgages

Commercial Mortgage Standards

-40

-20

0

20

40

60

80

100

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010Source: Board of Governors of the Federal Reserve System

Net Percentage of Banks ReportingTightening Standard for Mortgages

Existing Home Sales Activity

3,000

4,000

5,000

6,000

7,000

U.S

. Sal

es in

1,0

00s

4,000

6,000

8,000

10,000

12,000

Wic

hita

Sal

es

2006 2007 2008 2009 2010

WichitaU.S.

Sources: NAR and South Central Kansas MLSNote: Data are seasonally-adjusted annual rates

Existing Home Sales by Month

200

400

600

800

1,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

201020092008

Source: South Central Kansas MLS

Units

Existing Home Inventories

0

2

4

6

8

10

12

2006 2007 2008 2009 2010

WichitaU.S.

Sources: NAR and South Central Kansas MLSNote: Data are seasonally adjusted

Months' Supply

U.S. New Home Activity

300

600

900

1,200

1,500

1,800

2,100

U.S

. Sin

gle-

Fam

ily B

uild

ing

Per

mits

200

400

600

800

1,000

1,200

1,400

U.S

. New

Hom

e S

ales

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

SalesPermits

Source: U.S. Bureau of the CensusData are seasonally-adjusted annual rates

New Home Sales Activity

200

400

600

800

1,000

1,200

U.S

. Sal

es in

1,0

00s

0

1,000

2,000

3,000

4,000

5,000

Kan

sas

Sal

es

2006 2007 2008 2009 2010

KansasU.S.

Sources: U.S. Census Bureau and participating Kansas REALTOR MLS systemsNote: Data are seasonally-adjusted annual rates

New Single-Family Building Permits

0

500

1,000

1,500

2,000

U.S

. SF

Per

mits

in 1

,000

s

0

50

100

150

200

250

300

Wic

hita

Are

a S

F P

erm

its

2006 2007 2008 2009 2010

WichitaU.S.

Sources: Wichita Area Builders Associaiton and U.S. Bureau of the CensusData are seasonally adjusted annual rates

Home Price Appreciation

-10

-5

0

5

10

15

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

WichitaU.S.

Source: Federal Housing Finance Agency (FHFA)

Percent

Home Price Appreciation

100.00

120.00

140.00

160.00

180.00

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

WichitaU.S.

Source: Federal Housing Finance Agency (FHFA)

Index: 2000q1 = 100

Kansas Home Price Appreciation

95.00

100.00

105.00

110.00

115.00

2007 2008 2009 2010

Kansas City Lawrence ManhattanTopeka Wichita

Source: Federal Housing Finance Agency (FHFA)

Index: 2007q1 = 100

What Can We Expect for 2011?

2010 was a tumultuous yearHard to tell the current in the market with all the ripples

How fast markets recover depends in large part on the rest of the economy

Wichita Forecast

2009 Actual

2010 Forecast

2011 Forecast

Total Home Sales

8,617 units-14.2%

8,140 units-5.5%

8,680 units+6.6%

Building Permits

1,256 units-29.2%

1,070 units-14.8%

1,080 units+0.9%

Home Price Appreciation

+0.4% -0.1% +1.4%

Sources: South Central Kansas MLS; U.S. Bureau of the Census;

Federal Housing Finance Agency; WSU Center for Real Estate

2011 Housing Markets Forecast

Kansas City

Lawrence

Manhattan Topeka Wichita

Sales25,050 units

+2.5%

1,430 units

+9.2%

620 units+3.3%

2,700 units

+1.1%

8,680 units+6.6%

Permits

2,100 units

+1.9%

220 units

+10.0%

190 units-5.0%

310 units

+14.8%

1,080 units+0.9%

Home Prices -1.3% -0.5% +0.8% -0.5% +1.4%Sources: Heartland MLS; Lawrence Board of

REALTORS®; Manhattan Association of REALTORS®; Topeka Area Association of REALTORS®; South Central

Kansas MLS; U.S. Bureau of the Census; City of Manhattan; Federal Housing Finance Agency; WSU

Center for Real Estate

Laying a Foundation for Real Estate in Kansas

WSU Center for Real Estate