The Economic Outlook for Real Estate Investors and Decision
Makers
Dr. Mark G. DotzourChief Economist
Real Estate Center at Texas A&M UniversityCollege Station, Texas
Read Dotzour Blogs at http://blog.recenter.tamu.edu/
Topics for Today
•The outlook for job growth and the economy•The investment environment
Austin Business-Cycle Index
Employment Growth Rates
-6.0-5.0-4.0-3.0-2.0-1.00.01.02.03.04.05.06.07.0
Feb-05M
ay-05Aug-05N
ov-05Feb-06M
ay-06Aug-06N
ov-06Feb-07M
ay-07Aug-07N
ov-07Feb-08M
ay-08Aug-08N
ov-08Feb-09M
ay-09Aug-09N
ov-09Feb-10M
ay-10Aug-10N
ov-10Feb-11M
ay-11Aug-11N
ov-11Feb-12M
ay-12Aug-12N
ov-12Feb-13M
ay-13Aug-13N
ov-13
U.S. Texas Austin
AUSTIN – ROUND ROCK – SAN MARCOS EMPLOYMENT
Industry Dec-13 Dec-12 %ChangeTotal Nonfarm 865,900 842,200 2.81%Mining/Logging/Construct. 45,500 43,500 4.60%Manufacturing 51,200 51,300 -0.19%Wholesale Trade 46,400 44,800 3.57%Retail Trade 97,500 95,300 2.31%Trans/Warehse/Util. 15,000 14,300 4.90%Information 22,900 22,200 3.15%Financial Activities 46,600 46,100 1.08%Prof./Bus.Serv. 138,200 127,400 8.48%Education/Health 101,800 99,700 2.11%Leisure/Hospitality 98,600 94,800 4.01%Government 165,800 167,000 -0.72%Federal 10,700 11,000 -2.73%State 73,400 73,900 -0.68%Local 81,700 82,500 -0.97%
Existing Home SalesAustin
1000
1500
2000
2500
3000
3500
4000
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
2012
20132014
Source: Real Estate Center
Inventory of Unsold HomesAustin
1
2
3
4
5
6
7
8
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14M
onth
s
Source: Real Estate Center
`
Jan. 1997 to present
Single-Family Building Permits Austin, TX
02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,000
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Source: Real Estate Center
9,240 through Dec., 2013
Multi-Family Building Permits5+ Units per Building
Austin, TX
02,0004,0006,0008,000
10,00012,00014,00016,00018,000
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
Source: Real Estate Center - Permits for Buildings with 5+ Units
11,509 through Dec., 2013
Job Openings in AmericaLooking for Workers
Source: Bureau of Labor Statistics BLS release on Feb. 11, 2014
Total Job Openings 3,990,000Construction 143,000
Manufacturing 297,000Trade, Transportation, Utilities 773,000Professional & Business Services 721,000Education & Health Care 592,000Leisure & Hospitality 550,000Government 346,000
Source: The Conference Board
Consumer Confidence Index
30405060708090
100110120130140150
Aug-00Feb-01Aug-01Feb-02Aug-02Feb-03Aug-03Feb-04Aug-04Feb-05Aug-05Feb-06Aug-06Feb-07Aug-07Feb-08Aug-08Feb-09Aug-09Feb-10Aug-10Feb-11Aug-11Feb-12Aug-12Feb-13Aug-13
Personal Consumption Expenditures
General Merchandise Retail SalesSame Store Sales % Change from Year Earlier
-5
-3
-1
1
3
5
7
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Source: Redbook Instinet Research Updated 2/14/14 Haver
Consumers Paying Down Debtfor First Time in 50 Years
Household Net Worth RecoveringAfter Stock Market Rally
Households Have Lost Almost $8 Trillion in Real Estate Equity
Light Weight Vehicle Sales: Autos & Light Trucks
Internet Sales Exploding
Household Debt Service Payments as a Percent of Disposable Personal Income
The Business Sector
Corporate Profits(With Inventory Valuation Adjustment &
Capital Consumption Adjustment)
$200$400$600$800
$1,000$1,200$1,400$1,600$1,800
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
Billi
ons
Source: Department of Commerce
National Federation of Independent Business Updated 2/14/14 Haver
Small Business Outlook“Planning To Hire People In The Next Three
Months”
-10
-5
0
5
10
15
20
25
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14N
et %
of R
espo
nden
ts
Q4-13 Q3-13 Q2-13 Q1-13
More Jobs 34% 32% 32% 29%
Less Jobs 22% 24% 26% 25%
Corporate Hiring Plans:Next 6 Months
Source: Business Roundtable
Manufacturers’ New Orders:Nondefense Capital Goods Excluding Aircraft
Capacity Utilization: Manufacturing
The Government Sector
Federal Government Employment
State Government Employment
Local Government Employment
The Economy:Wage Rates Increase Slowly
Money Supply and Velocity:Actual Money Supply Increasing Modestly
Inflation Rate:CPI Remains Low Despite Food/Fuel
University of Michigan Inflation Expectation
People Who Plan to Buy a Homein the Next Six Months
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14%
of R
espo
nden
ts
Source: The Conference Board Updated 2/14/14 Haver
Builders Sentiment “Current Sales Are Good”
5152535455565758595
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14%
of R
espo
nden
ts
Source: National Association of Home Builders
Updated 2/14/14 Haver
The Investment Environment
Source: Standard and Poor’s
Corporate Earnings Per Share S&P 500 Operating Earnings
-$5
$0
$5
$10
$15
$20
$25
$30
Q1-95
Q4-95
Q3-96
Q2-97
Q1-98
Q4-98
Q3-99
Q2-00
Q1-01
Q4-01
Q3-02
Q2-03
Q1-04
Q4-04
Q3-05
Q2-06
Q1-07
Q4-07
Q3-08
Q2-09
Q1-10
Q4-10
Q3-11
Q2-12
Q1-13
Margin DebtDebit Balances at Broker/Dealers
100000
150000
200000
250000
300000
350000
400000
450000
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Mill
ions
Source: Standard and Poor’s
Updated 2/14/14
Haver
Mar 2000 Dow 11,234Mar 2001 Dow 9,106Mar 2002 Dow 7,415
Jul 2007 Dow 14,021Jul 2008 Dow 10,827Jul 2009 Dow 8,087