Which Way “Real Estate”? - Milken Institute ... 1 Sarasota-Bradenton-Venice, FL $376...

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Transcript of Which Way “Real Estate”? - Milken Institute ... 1 Sarasota-Bradenton-Venice, FL $376...

  • Which Way “Real Estate”?

  • 0% 5% 10% 15%

    NAREIT (Public Real Estate)

    NCREIF (Private Real Estate)

    Russell 2000

    S&P 500

    NASDAQ

    U.S. Govt. Bonds

    Sources: NAREIT; NCREIF; Russell 2000; Standard & Poor’s; NASDAQ; Merrill Lynch

    U.S. Real Estate Returns Have Been Stellar For a Decade…

    Average Annual Return,

    1997 through 2006

  • 5%

    6%

    7%

    8%

    9%

    10%

    11%

    Industrial

    Suburban Office

    Retail

    CBD Office

    Apartment

    Source: Real Capital Analytics

    O v

    e ra

    ll C

    a p

    it a

    li z a

    ti o

    n R

    a te

    2001 2002 2003 2004 2005 2006

    Driven By Lower Cap Rates...

  • -150

    0

    150

    300

    2001 2002 2003 2004 2005 2006

    A b

    s o

    rp ti

    o n

    S F

    ( m

    il li o

    n s )

    9%

    10%

    11%

    12%

    A v a il a b

    il it

    y R

    a te

    Absorption Availability Rate

    Industrial Demand Has Been Solid…

    Sources: CBRE Torto Wheaton Research; CBRE Investors

  • The Office Market Has Steadily Recovered…

    Sources: CBRE Torto Wheaton Research; CBRE Investors

    -100

    -50

    0

    50

    100

    2001 2002 2003 2004 2005 2006

    A b

    s o

    rp ti

    o n

    S F

    ( m

    il li o

    n s )

    10%

    12%

    14%

    16%

    18%

    V a

    c a

    n c

    y R

    a te

    Absorption Vacancy Rate

  • Sales Growth Has Maintained Moderate Retail Availabilities…

    0

    2

    4

    6

    8

    2001 2002 2003 2004 2005 2006

    R e ta

    il S

    a le

    s

    A n

    n u

    a l

    P e

    rc e

    n t

    C h

    a n

    g e

    0

    3

    6

    9

    12

    S h

    o p

    p in

    g C

    e n

    te r

    A v a il a b

    il it

    y R

    a te

    Retail Sales Growth Shopping Center Availability Rate

    Sources: Moody’s Economy.com; CBRE Torto Wheaton Research

  • Apartment Rents Have Increased While Condo Prices Have Cooled...

    -5%

    0%

    5%

    10%

    15%

    20%

    1999 2000 2001 2002 2003 2004 2005 2006

    A n

    n u

    a l

    C h

    a n

    g e

    Apartment Rent

    Condo Prices

    Sources: REIS, Inc.; National Association of Realtors

  • -25%

    -20%

    -15%

    -10%

    -5%

    0%

    5%

    10%

    15%

    20%

    25%

    Existing Homes

    New Homes

    2001 2002 2003 2004 2005 2006

    Residential Sales Are Dropping…

    Sources: National Association of Realtors; U.S. Census Bureau; CBRE Investors

    Y e

    a r-

    O v

    e r-

    Y e

    a r

    S a

    le s

    C h

    a n

    g e

    S ix

    M o

    n th

    M o

    v in

    g A

    v e

    ra g

    e

    2007

  • Real GDP Growth

    United States, 2000 Prices

    20062005200420032002200120001999199819971996

    5

    4

    3

    2

    1

    0

    Percent Change, Year Ago

    Source: Global Insight

  • 20072006200520042003200220012000199919981997

    6.5

    6.0

    5.5

    5.0

    4.5

    4.0

    3.5

    4

    3

    2

    1

    0

    -1

    -2

    Percent Percent Change, Year Ago

    Unemployment Rate - L Civilian Employment - R

    U.S. Employment Picture

    Unemployment Rate & Employment Growth

    Source: Global Insight

  • Real Consumer Spending

    United States

    0601969186

    6

    5

    4

    3

    2

    1

    0

    -1

    Percent Change, Year Ago

    Source: Global Insight

  • Consumer Confidence Index

    Conference Board

    20072006200520042003200220012000199919981997

    160

    140

    120

    100

    80

    60

    40

    Index 1985 = 100

    Source: Global Insight

  • Employment Growth

    California vs. United States

    20072006200520042003200220012000199919981997

    4

    3

    2

    1

    0

    -1

    -2

    -3

    Percent Change, Year Ago

    California United States

    Source: Global Insight

  • Interest Rates Fed Funds Rate and 10-year Government Bond

    20072006200520042003200220012000199919981997

    8

    6

    4

    2

    0

    Percent

    Fed Funds Rate 10-year Government Bond

    Source: Global Insight

  • Yield Curve

    10-year Government Bond Minus Fed Funds Rate

    20072006200520042003200220012000199919981997

    4

    3

    2

    1

    0

    -1

    -2

    Percent

    Source: Global Insight

  • Wages and Unemployment

    Average Hourly Earnings and Unemployment

    200720062005200420032002200120001999199819971996

    6.5

    6.0

    5.5

    5.0

    4.5

    4.0

    3.5

    4

    3

    2

    1

    0

    -1

    -2

    -3

    Percent Percent Change, Year Ago

    Unemployment Rate - L Average Hourly Earnings - R

    Source: Global Insight

  • Civilian Unemployment Rate

    United States

    05009590858075706560

    11

    10

    9

    8

    7

    6

    5

    4

    3

    Percent

    Source: Global Insight

  • Real Estate Investment Trusts Sector

    Net Acquisition of Financial Assets

    20062005200420032002200120001999199819971996

    400

    300

    200

    100

    0

    US$ Billions

    Source: Global Insight

  • Foreign Purchases of U.S. Securities

    Net Foreign Purchases

    20072006200520042003200220012000199919981997

    200

    150

    100

    50

    0

    US$ Billions

    Source: Global Insight

  • Housing Affordability Index

    Seasonally Adjusted

    05009590858075

    160

    140

    120

    100

    80

    60

    40

    Base = 100

    Source: National Assoc. of Realtors

  • Consumer Inflation Rate

    Consumer Prices and Wages

    20072006200520042003200220012000199919981997

    4.5

    4.0

    3.5

    3.0

    2.5

    2.0

    1.5

    1.0

    Percent Change, Year Ago

    Core CPI Average Hourly Earnings

    Source: Global Insight

  • Consumer Price Index

    Food and Energy

    0705030199979593918987

    30

    20

    10

    0

    -10

    -20

    -30

    Percent Change, Year Ago

    Food Energy

    Source: Global Insight

  • Consumer Price Index

    Housing CPI vs. Education CPI

    20072006200520042003200220012000199919981997

    180

    160

    140

    120

    100

    80

    Index 1997=100

    Education CPI Housing CPI

    Source: Global Insight

  • S&P 500 Yield

    Dividend / Price Ratio

    0601969186

    4.5

    4.0

    3.5

    3.0

    2.5

    2.0

    1.5

    1.0

    0.5

    Ratio

    Source: Global Insight

  • Mortgage Rates

    United States

    20072006200520042003200220012000199919981997

    9

    8

    7

    6

    5

    4

    3

    Rate

    30-Year Fixed

    15-Year Fixed

    1-Year ARM

    Sources: Freddie Mac, Economy.com

  • 1-Month LIBOR

    London Interbank Offered Rate

    20072006200520042003200220012000199919981997

    7

    6

    5

    4

    3

    2

    1

    0

    Rate

    Sources: Freddie Mac, Economy.com

  • Construction Put in Place

    Private Residential vs. Private Nonresidential

    20072006200520042003200220012000199919981997

    30

    20

    10

    0

    -10

    -20

    -30

    Percent Change, Year Ago

    Residential Construction Nonresidential Construction

    Sources: U.S. Census, Economy.com

  • Single-Family Housing Starts United States, SAAR

    20072006200520042003200220012000199919981997

    2.0

    1.8

    1.6

    1.4

    1.2

    1.0

    Millions

    Sources: U.S. Census, Economy.com

  • Multi-Family Housing Starts United States, SAAR

    20072006200520042003200220012000199919981997

    500

    450

    400

    350

    300

    250

    200

    Thousands

    Sources: U.S. Census, Economy.com

  • Existing Single-Family Home Sales United States, SAAR

    2006200520042003200220012000199919981997

    6.5

    6.0

    5.5

    5.0

    4.5

    4.0

    3.5

    Millions

    Sources: NAR, Economy.com