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MARK VITNER
POLLING INSTRUCTIONS
Text narmidyear to 22333
MARK VITNER
WELLS FARGO SECURITIES, LLC
Managing Director, Senior Economist
Mark Vitner is a managing director and senior economist at Wells Fargo, responsible for tracking U.S.
and regional economic trends. Based in Charlotte, he also writes for the companys Monthly Economic
Outlook report, the Weekly Economic & Financial Commentary, and provides regular updates on the
housing markets, commercial real estate, regional economies, and inflation. Marks commentary has
been featured in the New York Times, Wall Street Journal, Bloomberg, and many other publications.
Mark joined Wachovia (then First Union) in 1993. Before that, he spent nine years as an economist for
Barnett Banks in Jacksonville, Fla. Originally from Atlanta, Mark earned his B.B.A. in economics from
the University of Georgia, an M.B.A. from the University of North Florida, and has completed further
graduate work in economics at the University of Florida. He also completed the National Association of
Business Economics (NABE) Advanced Training in Economics program at Carnegie Mellon University.
Mark is a member of the National Association of Business Economists and co-founded its Charlotte
chapter, The Charlotte Economics Club. He serves as a distinguished lecturer and practitioner at the
University of Georgia. He is also a member of the American Economic Association, the American Real
Estate and Urban Economics Association, and the Charlotte Chapter of the Association for Corporate
Growth. Mark currently chairs the Economic Advisory Council for the California Chamber of
Commerce and serves as the chief economist for the North Carolina CCIM.
PRESENTATION
IN
WASHINGTON, D.C.
Midwest
South
West
Industrial
160.0
140.0
140.0
120.0
120.0
100.0
100.0
80.0
80.0
60.0
60.0
40.0
40.0
20.0
20.0
0.0
0.0
Office
APARTMENT
%
OFFICE
%
INDUSTRIAL-WAREHOUSE
%
RETAIL
%
-0.1
2008.Q4
2009.Q1
2009.Q2
2009.Q3
2009.Q4
2010.Q1
2010.Q2
2010.Q3
2010.Q4
2011.Q1
2011.Q2
2011.Q3
2011.Q4
2012.Q1
2012.Q2
2012.Q3
2012.Q4
2013.Q1
2013.Q2
2013.Q3
2013.Q4
2014.Q1
2014.Q2
2014.Q3
2014.Q4
2015.Q1
2015.Q2
2015.Q3
-0.2
-0.3
-0.4
0.2
0.1
-50%
2008.Q4
2009.Q1
2009.Q2
2009.Q3
2009.Q4
2010.Q1
2010.Q2
2010.Q3
2010.Q4
2011.Q1
2011.Q2
2011.Q3
2011.Q4
2012.Q1
2012.Q2
2012.Q3
2012.Q4
2013.Q1
2013.Q2
2013.Q3
2013.Q4
2014.Q1
2014.Q2
2014.Q3
2014.Q4
2015.Q1
2015.Q2
2015.Q3
-100%
200%
150%
100%
50%
0%
Small Business
Administration
REITs
80%
Regional Banks
100%
Pvt/Other
90%
Reg'l/Local
Bank
80%
70%
Nat'l Bank
Public Cos.
70%
Private Investors
60%
60%
Other
Int'l Bank
50%
Insurance
40%
30%
Gov't Agency
50%
National Banks
40%
Local/Comm. Banks
30%
20%
International banks
10%
Credit Unions
20%
Financial
10%
CMBS
0%
CMBS
0%
2011
2012
2013
2014
2015
2016
Source: NAR
Yes
No
90%
70%
60%
50%
41%
New/proposed US legislative
and regulatory initiatives
40%
59%
30%
20%
Slow-down in
pooling/packaging of CMBS
10%
0%
Source: NAR
27%
90%
33%
30%
28%
26%
Other
100% Cash
50%
55%
60%
65%
70%
75%
80%
85%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2011
2012
2013
2014
2015
2016
Eased Significantly
70%
Eased Somewhat
60%
50%
Not Changed
40%
30%
Tightened Somewhat
20%
10%
Tightened Significantly
0%
2011
2012
2013
2014
2015
2016
ECONOMIC BACKDROP
ANNUAL GDP
BELOW 3% FOR 11 STRAIGHT YEARS
3% Growth Line
$ million
MANUFACTURING JOBS
WIDENING JOBS
MOBILE AND CHARLESTON SC
WIDENING JOBS
NASHVILLE AND MEMPHIS
WIDENING JOBS
GRAND RAPIDS AND FLINT
JOBS
(8 MILLION LOST 14 MILLION GAINED)
In thousands
% Gain in 12
months
The Worst
% Gain in 12
months
Idaho
3.8
Wyoming
0.2
Utah
3.5
Oklahoma
0.1
Nevada
3.4
Louisiana
-0.4
Florida
3.0
West Virginia
-1.8
Washington
3.0
North Dakota
-2.0
California
2.9
South Carolina
2.9
Oregon
2.7
Arizona
2.3
QUANTITATIVE EASING
U.S. DOLLAR
REVERSING THE DECLINE STRONGER AND STRONGER
NOVEMBER
MARK VITNER
The Feds initial rate hike came late in the cycle, amid
Monetary Policy
Global
Economy
Economic Outlook
Economic Growth
Real GDP growth has been disappointing throughout most of this recovery and has also been
unusually volatile. Much of the recent volatility is due to swings in international trade and
business inventories. Private final domestic demand is growing more solidly and consistently.
Real GDP Forecast
Bars = CAGR
Bars = CAGR
10%
10%
8%
8%
6%
8%
6%
6%
Forecast
6%
4%
4%
4%
2%
2%
2%
2%
0%
0%
0%
0%
-2%
-2%
-2%
-2%
-4%
-4%
-4%
-4%
-6%
-6%
-6%
-6%
-8%
-8%
-8%
-8%
-10%
-10%
-12%
2000
Forecast
4%
-10%
2000
2002
2004
2006
2008
2010
2012
2014
2016
Economic Outlook
49
-10%
-12%
2002
2004
2006
2008
2010
2012
2014
2016
Employment Situation
Solid month to month job gains have largely put recession fears to rest. Unemployment
continues to trend lower and is close to most measures of full employment. The Fed is taking
its queue from the strengthening labor market but taking a big picture view.
Nonfarm Employment
Unemployment Rate
600
400
400
200
200
12%
12%
10%
-200
-200
-400
-400
-600
-600
-800
-800
10%
8%
8%
6%
6%
4%
4%
2%
2%
Unemployment Rate: Apr @ 5.0%
Hourly Earnings - Yr/Yr % Change: Apr @ 2.5%
-1,000
2008
2009
2010
2011
2012
2013
2014
2015
0%
2016
Economic Outlook
0%
65
50
70
75
80
85
90
95
00
05
10
15
Expanding
3%
Seattle
More than 6%
Las Vegas
Baltimore
Detroit
San Francisco
Minneapolis
2%
Washington, D.C.
Chicago
Dallas
Philadelphia
St. Louis
1%
Atlanta
Los Angeles
Phoenix
San Jose
San Diego
New York
Charlotte
Tampa
Richmond
0%
Miami
Houston
-1%
-2%
0.0%
Decelerating
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Economic Outlook
3.5%
4.0%
4.5%
Consumer Confidence
Consumer Confidence has fallen back a bit in recent months, reflecting growing concerns
about slower global economic conditions and financial market volatility.
Consumer Confidence
Conference Board
160
2,400
140
2,100
120
1,800
100
1,500
80
1,200
60
900
40
600
20
300
250
250
200
200
150
150
100
100
50
Confidence: Apr @ 94.2 (Left Axis)
50
0
94
96
98
00
02
04
06
08
10
12
14
16
Source: The Conference Board, S&P and Wells Fargo Securities, LLC
Economic Outlook
0
87
52
89
91
93
95
97
99
01
03
05
07
09
11
13
15
Demographic Breakdown
6
G.I. Gen: 1%
Millennials: 33%
Gen X: 24%
Boomers: 30%
0
16
26
36
46
56
66
53
76
86
96
Despite some recent setbacks, we continue to look for a gradual recovery in homebuilding.
The homeownership rate has begun to stabilize.
Homeownership
70%
Thousands
24%
3.0
3.0
Renters: Q1 @ 0.4M
Homeowners: Q1 @ 0.2M
18%
69%
12%
68%
2.0
2.0
6%
67%
1.5
1.5
0%
66%
1.0
1.0
-6%
65%
0.5
0.5
-12%
64%
0.0
0.0
63%
-0.5
-0.5
62%
-1.0
-18%
-24%
88
90
92
94
96
98
00
02
04
06
08
10
12
14
16
54
2.5
-1.0
02
Source: NAR, CoreLogic, U.S. Department of Commerce and Wells Fargo Securities, LLC
2.5
04
06
08
10
12
14
16
Thousands
Household Formations
Housing Starts
Millions of Units
2.4
2.1
2.4
Multifamily Starts
Multifamily Forecast
Single-family Starts
Single-family Forecast
2.1
1.8
1.8
Forecast
1.5
1.2
1.2
0.9
0.9
0.6
0.6
0.3
0.3
0.0
0.0
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Economic Outlook
1.5
55
Interest Rates
5.0%
4.5%
4.0%
5.0%
March 2016 Median Response
December 2015 Median Response
December 2014 Median Response
Futures Market: May 6
4.5%
4.0%
3.5%
3.5%
3.0%
3.0%
2.5%
2.5%
2.0%
2.0%
1.5%
1.5%
1.0%
1.0%
0.5%
0.5%
0.0%
2016
2017
2018
Source: Federal Reserve Board, Bloomberg LP and Wells Fargo Securities, LLC
Economic Outlook
56
Longer Run
0.0%
Probability of Recession
120%
120%
Two-Quarter Ahead Recession Probability: Q1 @ 25.7%
100%
100%
80%
80%
60%
60%
40%
40%
20%
20%
0%
0%
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
Economic Outlook
57
Global Economy
Global Forecast
7.5%
6.0%
6.0%
Period Average
4.5%
WF
Forecast
3.0%
3.0%
1.5%
1.5%
0.0%
0.0%
-1.5%
-1.5%
1980
1985
1990
1995
2000
Economic Outlook
4.5%
59
2005
2010
2015
Global Exports
25%
25%
20%
20%
15%
15%
10%
10%
5%
5%
0%
0%
-5%
-5%
-10%
-10%
-15%
-15%
Real Exports: Feb @ -0.2%
-20%
-20%
-25%
92
94
96
98
00
02
04
Economic Outlook
60
06
08
10
12
14
16
Negative Rates
3.00%
3.00%
2.50%
2.50%
2.00%
2.00%
1.50%
1.50%
1.00%
1.00%
0.50%
0.50%
0.00%
0.00%
-0.50%
-1.00%
-1.50%
2012
-1.00%
-1.50%
2013
2014
Economic Outlook
-0.50%
61
2015
2016
$600
$600
$500
$500
$400
$400
$300
$300
$200
$200
$100
$100
$0
$0
-$100
-$100
-$200
-$200
-$300
-$300
04
05
06
07
08
09
10
11
12
Source: U.S. Department of the Treasury and Wells Fargo Securities, LLC
Economic Outlook
62
13
14
15
16
16%
16%
14%
14%
12%
12%
10%
WF
Fcst.
10%
8%
8%
6%
6%
4%
4%
2%
2%
Year-over-Year Percent Change: Q1 @ 6.7%
0%
2000
2002
2004
2006
2008
Economic Outlook
63
2010
2012
2014
2016
0%
2018
Real Estate
$100
Europe: Q1 @ $19.3B
Canada: Q1 @$18.0B
Middle East & Africa: Q1 @$12.9B
Asia: Q1 @ $22.0B
Australia: Q1 @ $1.9B
Latin America: Q1 @ $1.4B
$90
$80
$70
$90
$80
$70
$60
$60
$50
$50
$40
$40
$30
$30
$20
$20
$10
$10
$0
$0
01
02
03
04
05
06
07
08
Economic Outlook
65
09
10
11
12
13
14
15
16
Cross-Border Investment
Over the past five years, Manhattan, Los Angeles, Boston and Dallas have been preferred
markets for foreign investors.
Domestic Markets
(2011-2015)
Total Number
of Properties
Total Volume
(In Billions)
Canada
Other
Manhattan
Los Angeles
297
$57.52
257
$14.77
Boston
160
$11.40
Norway
629
312
84
163
194
170
4,733
6,999
$10.55
$10.13
$9.64
$8.54
$6.86
$6.02
$93.30
$228.74
Germany
Dallas
Chicago
Washington, D.C.
San Francisco
Houston
Seattle
Other
Total
$17.2B
Singapore
$14.9B
$8.5B
$7.1B
China
$6.0B
UAE
$5.1B
Qatar
$4.5B
South Korea
$3.3B
Australia
$2.9B
$0
Economic Outlook
$24.9B
66
$5
As of 2015
$10
$15
$20
$25
$30
Nonresidential Construction
Forecast
40%
40%
30%
30%
20%
20%
10%
10%
0%
0%
-10%
-10%
-20%
-20%
-30%
-30%
-40%
-40%
-50%
-50%
94
96
98
00
02
04
06
08
10
Economic Outlook
50%
67
12
14
16
18
Vacancy Rates
20%
24%
Office Vacancy Rate: Q1 @ 16.1%
Industrial Vacancy Rate: Q1 @ 5.8%
Retail Vacancy Rate: Q1 @ 10.0%
Apartment Vacancy Rate: Q1 @ 4.5%
16%
16%
12%
12%
8%
8%
4%
4%
0%
0%
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: REIS, Inc., CoStar Realty Information and Wells Fargo Securities, LLC
Economic Outlook
20%
68
Effective Revenue
10%
Forecast
5%
5%
0%
0%
-5%
-5%
-10%
-10%
-15%
-20%
2009
2010
2011
2012
2013
2014
2015
2016
Source: Reis, Inc., CoStar Realty Information, Inc. and Wells Fargo Securities, LLC
Economic Outlook
69
2017
Rent Growth
3%
3%
2%
2%
1%
1%
0%
0%
-1%
-1%
-2%
-2%
-3%
-3%
-4%
Source: REIS, Inc., CoStar Realty Information and Wells Fargo Securities, LLC
Economic Outlook
70
Construction Supply
Completions as a Percent of Inventory
Percent
10%
10%
Avg. '85-'89=4.8%
8%
6%
8%
6%
Avg. '97-'01=2.5%
4%
4%
Avg. '04-'08=1.3%
Avg. '12-'16F=0.98%
2%
2%
0%
0%
-2%
-2%
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Apartment
3- Yr.
Supply
Growth
17.5%
New York
15.9%
Inland Empire
14.5%
Oklahoma C ity
C harlotte
4.5%
Nashville
13.0%
C leveland
10.5%
Atlanta
10.1%
Nashville
8.3%
Richmond
4.4%
C harlotte
10.6%
Miami
10.3%
9.2%
Austin
8.1%
Raleigh-Durham
3.7%
C harleston
10.5%
Boston
9.8%
Las Vegas
8.4%
Dallas
7.9%
Kansas C ity
3.6%
Seattle
10.2%
9.1%
Austin
8.4%
Houston
6.2%
C incinnati
3.6%
Hotel Metro
3- Yr.
Supply
Growth
Warehouse
3- Yr.
Supply
Growth
Office
3- Yr.
Supply
Growth
11.3%
Retail
3- Yr.
Supply
Growth
District of C olumbia
9.9%
Austin
9.0%
Phoenix
7.5%
C harlotte
5.3%
Austin
3.3%
C hattanooga
9.6%
Houston
8.6%
San Antonio
6.8%
Kansas C ity
4.6%
Winston-Salem
3.2%
Miami
8.7%
Denver
8.6%
Oklahoma C ity
6.3%
C harleston
4.4%
Baltimore
3.1%
Austin
8.6%
Minneapolis
8.5%
Nashville
6.1%
Milwaukee
4.4%
San Francisco
3.1%
Greenville
7.9%
Nashville
8.4%
Washington D.C .
5.8%
Denver
4.0%
5.0%
National
6.1%
National
National
4.7%
National
Note: Supply growth is the cumulative supply expected to be added through 2018 as a percentage of current inventory.
Source: CoStar Realty Information, Inc., Reis, Inc. , Property and Portfolio Research and Wells Fargo
Securities, LLC
Economic Outlook
71
3.5%
National
3.0%
2.1%
Although real RevPAR is still improving, the pace began slowing noticeably in the fourth
quarter of 2015 and continued to moderate in the first quarter. Moreover, the rate of real
RevPAR growth for lower-end hotels, fell into negative territory in the first quarter.
Real RevPAR vs. Real ADR
Occupancy Rate
68%
10%
Peak:
1994Q4 @ 65.2%
66%
5%
Peak?:
2015Q4 @ 65.9%
5%
Peak:
2006Q1 @ 64.1%
64%
0%
62%
Trough:
1991Q1 @ 60.9%
60%
-5%
66%
64%
62%
0%
68%
60%
-5%
58%
-10%
-10%
-15%
-15%
58%
Trough:
2001Q4 @ 57.5%
56%
54%
92
94
96
98
00
02
04
06
08
10
12
14
50%
87
16
Economic Outlook
52%
50%
-20%
88
54%
Trough:
2009Q2 @ 54.1%
52%
56%
72
89
91
93
95
97
99
01
03
05
07
09
11
13
15
Bank Lending
The net percentage of lenders reporting stronger demand for construction loans has been
edging lower in recent quarters, while the proportion of banks tightening their lending
standards has gradually edged higher. Multifamily projects have led the way.
Demand
Tightening Standards
Net Percent of Banks Tightening Standards
60%
60%
100%
40%
40%
80%
80%
20%
20%
60%
60%
0%
40%
40%
-20%
-20%
20%
20%
-40%
-40%
0%
-60%
-60%
-20%
0%
-80%
97
99
01
03
05
07
09
11
13
-40%
-60%
95
15
Economic Outlook
-20%
Total CRE (Series Ends in 2013): Q3 @ -19.2%
Nonfarm Nonresidential: Q1 @ 5.6%
Multifamily Residential: Q1 @ 22.5%
Construction & Land Development: Q1 @ 12.7%
-60%
-100%
95
0%
-40%
-80%
-100%
100%
73
97
99
01
03
05
07
09
11
13
15
Weaker Global
Growth
The Housing
Recovery
Economic Outlook
Demand for single-family homes is reviving, with firsttime homebuyers beginning to come back into the
market. Apartment construction is close to peaking.
74
U.S. Forecast
2013
Actual
2014
2015
Forecast
2016
2017
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
0.6
3.9
2.0
1.4
0.5
1.4
2.6
2.5
1.5
2.4
2.4
1.6
2.2
1.8
3.6
3.0
2.4
1.9
2.8
2.7
2.6
1.7
2.7
3.1
2.6
2.5
0.2
0.3
0.3
0.5
1.0
0.9
1.1
1.4
1.4
1.4
0.3
1.1
1.9
-0.1
0.0
0.1
0.4
1.1
1.1
1.3
1.7
1.5
1.6
0.1
1.3
2.2
-1.9
-2.7
1.5
-3.3
-2.2
-0.8
1.9
2.5
1.9
2.9
0.3
-0.9
2.0
Forecast
2016
4.6
0.6
-5.1
-11.5
-3.3
-0.7
1.9
1.9
2.0
1.7
-3.1
-0.1
1.7
92.1
90.0
92.3
94.5
89.8
88.3
88.3
90.0
75.9
78.4
91.1
89.1
93.7
5.6
5.4
5.2
5.0
4.9
4.9
4.8
4.7
7.4
6.2
5.3
4.8
4.5
0.98
1.16
1.16
1.14
1.13
1.22
1.23
1.24
0.92
1.00
1.11
1.23
1.28
0.25
0.25
0.25
0.50
0.50
0.50
0.75
1.00
0.25
0.25
0.27
0.69
1.38
3.77
3.98
3.89
3.96
3.69
3.84
3.89
3.95
3.98
4.17
3.85
3.84
4.18
10 Year Note
1.94
2.35
2.06
2.27
1.78
1.89
1.95
2.02
2.35
2.54
2.14
1.91
2.30
Millions of Units
Economic Outlook
75
International Forecast
GDP
CPI
2015
2016
2017
2015
2016
2017
3.0%
2.8%
2.8%
2.5%
3.1%
2.9%
2.6%
n/a
3.2%
n/a
3.5%
n/a
Advanced Economies 1
United States
Eurozone
United Kingdom
Japan
Korea
Canada
1.9%
2.4%
1.5%
2.3%
0.5%
2.6%
1.2%
1.7%
1.6%
1.7%
1.7%
0.0%
2.6%
1.9%
2.1%
2.2%
2.0%
1.9%
0.7%
2.9%
2.4%
0.3%
0.1%
0.0%
0.0%
0.8%
0.7%
1.1%
0.8%
1.3%
0.2%
0.8%
0.3%
0.9%
1.3%
1.8%
2.2%
1.2%
1.5%
1.0%
1.9%
1.9%
Developing Economies 1
China
India2
Mexico
Brazil
Russia
4.0%
6.9%
7.2%
2.5%
-3.9%
-3.7%
3.8%
6.4%
7.5%
2.8%
-4.0%
-0.6%
4.0%
5.8%
7.2%
3.1%
-0.9%
2.1%
4.7%
1.4%
6.0%
2.7%
9.0%
15.6%
5.5%
2.0%
4.9%
2.9%
9.0%
7.2%
5.1%
1.9%
4.7%
2.8%
7.2%
5.9%
Economic Outlook
76
Appendix
Title
Authors
U.S. Macro
May-02
Alemn
April-26
April-26
April-13
April-01
April-21
April-15
April-15
April-15
April-15
U.S. Regional
Charlotte Continues to See Strong Gains
Cleveland Retools Its Economy
California Employment Conditions: March 2016
New York Employment Conditions: March 2016
North Carolina Employment Conditions: March 2016
Vitner
Vitner & Feik
Vitner & Batcheller
Vitner
Vitner & Batcheller
May-02
Bryson
April-29
April-29
Alemn
April-28
Quinlan
April-27
Bryson
Silvia
Silvia
Silvia & Brown
Silvia & Nelson
Silvia & Moehring
April-29
Real Estate
Is the Housing Market Finally Becoming Unstuck?
April-29
April-26
April-20
Global Econom y
April-27
April-20
April-13
April-06
March-30
March-31
Economic Outlook
78
Economists
Diane Schumaker-Krieg
.diane.schumaker@wellsfargo.com
Global Head of Research & Economics
Chief Economist
......................
john.silvia@wellsfargo.com
sarah.house@wellsfargo.com
michael.a.brown@wellsfargo.com
Economic Analysts
Senior Economists
Mark Vitner, Senior Economist..... .
eric.viloria@wellsfargo.com
mark.vitner@wellsfargo.com
erik.f.nelson@wellsfargo.com
alex.v.moehring@wellsfargo.com
misa.n.batcheller@wellsfargo.com
michael.d.pugliese@wellsfargo.com
julianne.causey@wellsfargo.com
sam.bullard@wellsfargo.com
Administrative Assistants
. anika.khan@wellsfargo.com
donna.lafleur@wellsfargo.com
dawne.howes@wellsfargo.com
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Economic Outlook
79
MARK VITNER