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CHANGES IN REAL ESTATE CHANGES IN REAL ESTATE An Economic & Demographic Outlook for 2015 An Economic & Demographic Outlook for 2015

HAR Networking 11.13.2014

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CHANGES IN REAL ESTATECHANGES IN REAL ESTATE““An Economic & Demographic Outlook for 2015An Economic & Demographic Outlook for 2015””

The Houston Region is now the most ethnically and culturally diverse large

metropolitan area in the country.

Houston region is an influential global market leader with impact worldwide.

The Houston region :

• Busiest U.S. port in foreign tonnage

• Top Metro Exporter: $110.298 Billion

• More than 90 consulate offices;

• 20 foreign banks, representing 9 nations;

• 765 foreign-owned firms;

• 395 companies with branches in 143 other nations; and

• More than 3,300 firms, foreign government offices, & nonprofits conducting international business.

Demographic Changes in Surrounding Counties

Houston’s Foreign Born Population

Houston’s Population by Age & Ethnicity

Houston MSAMSA – Trends by Race2014-2019

Sales to International Buyers Increased

International Transactions by Country of Origin

Where do Houstonians want to live?

National Outlook for 2015National Outlook for 2015

Federal Monetary Policy

• Quantitative Easing … Finished

• Fed Funds Rate … hike in 2015 Q1/Q2

• Earlier Move to Tighten because of Inflation Pressure

National Economic Forecast

2013 2014 Likely 2015 Forecast 2016 Forecast

GDP Growth 2.2% 2.2% 2.7% 2.9%

Job Growth +2.3 million +2.5 million +2.5 million +2.6 million

CPI Inflation 1.5% 1.6% 2.7% 3.3%

Consumer Confidence 73 87 95 98

10-year Treasury 2.5% 2.6% 3.2% 4.3%

National Housing Forecast

20132014

Likely2015

Forecast2016

Forecast

Housing Starts 925,000 1.0 million 1.3 million 1.4 million

New Home Sales 430,000 440,000 620,000 700,000

Existing Home Sales 5.1 million 4.9 million 5.3 million 5.4 million

Median Price Growth + 11.5% + 5.3% + 4% + 4%

30-year Rate 4.0% 4.2% 4.9% 6.0%

Underwriting Standards Strict Strict Transition Normal

Where Are Young Buyers Hiding?

• 57 million Americans or 18.1% of the population lived in a multi-generational family household in 2012,

– Double the number who lived in such households in 1980

• Of those who are 25-34:

– 20% of the unemployed live with parents; and

– 12% of employed live with parents.

Pew Research, Federal Reserve Bank of New York

Houston’s Economic Outlook

What’s Up With Oil Prices

What’s Up With Oil Prices

Potential Impact

Regionally:

•Employment growth will slow from its current pace of 4.3% to a more sustainable pace, perhaps 2.4%;

•At that rate, the region would still create 70,000 jobs per year; and

•Office construction likely would slow, and vacancies in Class B and C space would rise as tenants move to new Class A space.

How We Compare

Houston’s Houston’s Real Estate Real Estate Outlook for Outlook for

20152015

Houston Real Estate Snapshot

• 90,124 homes sold in the 12 months ending September ‘14; an 4.4% increase over the 86,324 sold in’13;

• Dollar volume approached $22.8 billion in the 12 months ending September ’14; a 14.3% increase from $20.1 billion recorded in’13;

• Total for dollar volume has now set a record for 18 consecutive months; and

• September marks first time in Houston’s history that the 12-month period total exceeded 90,000 units.

What Economist Agree On…

The Houston real estate market is strong, and it will likely stay strong through 2015;

Economic conditions are favorable;

Home prices are rising; and

Unemployment rate is among the lowest in the nation for a large metro area.

CHANGES IN REAL ESTATECHANGES IN REAL ESTATE““An Economic & Demographic Outlook for 2015An Economic & Demographic Outlook for 2015””