Today, let's take a look at the overall housing real estate market. The recent May data has all been updated. As you go through it, I can mention that there have been several important turning points. In fact, the Fed wants to control market rates and long-term bond rates through the benchmark interest rate policy. The reason for this is that market rates form the basis for mortgage rates that affect the entire financial market. The Fed is particularly interested in the asset market, especially the long-term bond market, because they monitor the trends in the housing market. If the housing market slows down, it could lead to an overall economic slowdown. In fact, the high proportion of housing costs in the current concerns about inflation is overwhelming. Rental fees are one of the important binding elements of the price index. Moreover, as experienced in 2008, the soundness of the mortgage market is directly related to the overall financial market stability.

The focus of the Fed is actually on the housing real estate asset market. This can be seen as affecting the overall economy. Regardless of what it takes up in GDP, it is significantly connected to various industries such as construction companies or financial retail, so its ripple effect is quite large. Depending on the fluctuation of housing prices, not only consumers' psychology but also their spending will inevitably be affected, thus having a significant impact on the overall economy. This is why the housing market reacts very sensitively to changes in interest rates. Currently, the base rate has been raised and is being maintained at a restrictive level for a long time. Nevertheless, it seems that the housing real estate market is still in the process of adjustment. Despite the decrease in transaction volume due to low inventory and high interest rates, prices are still continuing to rise.

From the perspective of the Fed, it can be seen that there is some leeway in raising interest rates for a certain period to control inflation. Generally, after raising interest rates, there is a lag time of as short as 6 months to as long as 2 years before it takes effect. Moreover, in this cycle, there has been an unprecedented situation of extreme conditions due to the pandemic, where fiscal spending has been used without any traditional constraints, leading to excess savings being poured out. Due to this liquidity effect, the timing is further delayed. Looking at it this way, based on the data confirmed in May, signs of a slowdown in supply growth have emerged, along with indications of decreasing demand. This implies that the pace of price increases is expected to moderate. If this trend continues, it can be anticipated that it will coincide with a slowdown in the overall economy or the repercussions of reduced employment, aligning with the season. I will continue to organize this further later on, but based on the data from May, signs of a slowdown in supply growth have emerged, along with indications of decreasing demand.

Changes in monetary policy will likely have an impact on the performance. It would be good to take a look at the housing real estate market in this context. As mentioned earlier, in June, the housing market index is expected to be 43, falling short of the forecast of 45, and it is currently below the baseline. The housing market index shows an inverse correlation with the unemployment rate. With the current unemployment rate at 4.0%, it could potentially rise. This data allows us to predict sufficiently. It is an indicator of the mortgage application index. The current index is positioned lower than in the 2008 crisis. Despite the significant impact of the 2008 subprime crisis on the real estate market, the fact that the current mortgage application numbers are lower than back then indicates how relatively restrictive the level of interest rates is. When looking at the changes in mortgage applications,

It is showing a decrease of about 12% level in mortgage applications, so we cannot say that the housing real estate market conditions have normalized. We should be aware that the prices reflected in this distorted trading volume may not represent the actual market situation. In fact, the market is in a situation where these prices are covering up everything. Therefore, there is a condition index for home buyers now. As of May 2024, it recorded a level of 42, which has dropped to a record low since the 1980s when it was recorded at 80. When it dropped in the 1980s, the average mortgage rate was between 12% and 19%, but now it is only around 7%, showing a significant difference. Despite this, the home buyer condition index has similarly dropped. Looking at the index after 20 years in the past 3-4 years, it has dropped significantly to around 80% level. Meanwhile, housing prices continue to

The upward trend continues, showing that the ability to purchase homes is only expected to worsen. If we first look at the sales of new homes, in May, there were recorded 619,000 units. The previous month, it was between 634,000 and 698,000 units, indicating some upward adjustments. However, you can see that the cold is decreasing, with a record of -1.4% and a continuous decrease of -11.3% in new home sales. Prices are also declining, with a 0.1% drop in median prices of new homes in May, recording 417,400 persons. Looking at the peak in October 2022, there has been a continuous decline. Overall, there is a 0.9% decrease in cold, entering a declining phase since April 2023.

A rebounding trend has emerged, but it seems to be a temporary period of volatility, and the cold itself is showing a pattern of continuous decline without a reversal of the trend. It seems that the downward trend due to the base effect of last year is continuing, and this price drop is actually a phenomenon that did not manifest significantly during the Decomb law or was an exceptional situation. The average price of new homes was recorded at 520,000 dollars, showing a 3.2% increase month-on-month and a 4.9% increase year-on-year. The trend of maintaining a trading range is emerging. Overall, sales of new homes are decreasing, and prices themselves are showing a slight decline. This seems to be the case. In addition, in May, the inventory of new homes increased sharply. Currently, looking at the sales speed, there is a supply volume of 9.3g.

Here, the red line is the average level after 63 years of direct descent. The average is 6 months, and now it's 9.3, showing a historically high level. We can confirm that the current position is quite exceptional. As new housing supplies accumulate, when you look at the number of new housing construction permits, the cold itself has turned, and the number of newly built houses is the same. Although the number of completed houses is showing an increasing pattern, when looking at the number of new houses under construction, a continuing decrease pattern is confirmed. Therefore, although the future housing supply continues to steadily increase, there is a high possibility that this will slow down. The number of houses under construction has already turned. I mentioned this. This aspect should be viewed in connection with the increase in new housing inventory. In the overall real estate market, only 10 to 20%

If you look at the current status where new housing sales that are not selling well are like this and the rest are mostly occupied by existing houses, in May, existing house sales continue to show a decreasing trend. If you look at the blue line on the left chart, you can clearly see the decreasing trend. In fact, sales of existing houses are staying at a level of around 4 million units annually for over a year. This is a significantly low level. In October 2023, it even dropped below 4 million units, recording 3.85 million units, reaching the lowest level in 30 years. It immediately shows how much the current existing house sales transactions have shrunk. A decrease of 2.8% was made. Speaking of transaction volume, existing houses showed a clear decreasing trend, and new houses also clearly decreased.

Patterns are emerging. In the past, there were some transactions focused on new homes, but even that trend is showing signs of weakening. As a result, although the number of construction permits, construction starts, and completions is increasing, looking ahead of completions, the number of homes under construction is decreasing. Therefore, overall housing supply is showing a slowdown. Existing home sales continue to decline, but prices are showing the opposite trend. In May, the median price of existing homes reached a record high of 419,300 KRW, marking a 3.1% monthly increase and a 5.8% yearly increase. Although there was a slight downward revision in the previous month, it is not significant, as prices have been steadily rising, continuing an upward trend for 11 consecutive months compared to the previous year. The reason for this price increase is that the inventory of existing homes is significantly

It's because it was low. However, as of May, the inventory stood at 1.28 million, which is an increase of about 6.7%. Some have hit bottom, and the trend of increasing listings has emerged. The current position has increased by more than 18% compared to a year ago, but the absolute level is still significantly low. Therefore, even though it has increased like this, the absolute level is still very low. Consequently, the upward trend in housing prices is still continuing. This is how we should see it. However, the existing housing inventory is gradually increasing, and this trend is expected to continue in the future. The reason is that the prices themselves were high, so it is inevitable that more listings will increase to realize profits at this price. Therefore, as the existing housing inventory continues to increase, it can be forecasted that this will lead to a moderation in the upward trend of housing prices. It will become a positive factor for inflation. In May, the registration of existing housing listings.

When looking at the current monthly sales rate, it can be seen as 3.7 months. Similarly, it can be seen that as the inventory increases, the sales speed is also accelerating. However, it can still be seen that the existing inventory was too low. The existing housing supply is increasing to meet market demand above a certain level. Even though there is an increasing trend due to the lack of existing housing inventory, it is not yet at a level where the rise in housing prices will be eased. This should be considered. At that time, it was February 24th, or rather it was February 2.9. But in February 3 years ago, it was 2.6, not much of a difference. However, 2.6 was at the lowest level in 20 years. It shows that the current inventory level is significantly low. Therefore, the median housing price of existing homes continues to rise.

The housing price trend of Seung-gi shows a slight slowdown in the upward trend, and if you look at yy, it is confirmed to decrease by -0.9%. Even though the new housing prices show a pattern of slight easing or slowdown in the upward trend, the scale itself is not absolute, and as seen with existing homes, the overwhelming upward trend continues. Of course, the trading volume is low. Therefore, the housing real estate price index for the entire United States continues to show a steady upward trend. In April, the S&P Case-Shiller housing price index rose by 6.28% yy, which slightly declined from the previous peak, showing a slight slowdown in the upward trend. Looking at the m index, there was a 1.17% increase, showing a certain level of volatility and a gradual easing of the upward trend. Even when narrowed down to 20 cities, the yy increase is 7.15% and the mom increase is 0.38%. The upward trend is still evident.

It should be seen as being maintained. The housing price index of the Federal Housing Fund is showing a similar trend, but even if the housing price index is so robust, as I mentioned before, we need to consider that existing homes have low trading volume, so we should see that the current distorted prices. When we look at the past economic downturns and leaks, the current upward trend in housing prices is not an unusual pattern. If you look at the chart on the right, you can see that the economic downturn in the late 1970s and early 1980s had a similar pattern in housing price trends. Even before an economic downturn, housing prices can continue to rise. Of course, the global financial crisis in 2008 was different due to the subprime crisis, but this is an exceptional situation. This way, although there may be differences in housing prices, trading volume cannot lie.

In the midst of an economic downturn, the volume of housing sales shows a consistently low pattern of transactions, which still resembles the pattern of the past economic recession. Therefore, current existing home sales continue to decline, and although inventory has increased, it is still insufficient. Consequently, prices continue to rise steadily. It is necessary to confirm whether this trend will persist. Firstly, it can be confirmed that the existing housing inventory is gradually increasing. Secondly, there is preliminary data that can be examined in advance of existing home sales. If you look at it, there was a decrease of -2.1% in month-over-month and a decrease of 6.6% year-over-year, recording 70.8. This is significantly lower than the consensus forecast of 0.5% increase. The current 70.8 figure is the lowest in four years since April 2020.

What has fallen is that preliminary home sales have decreased like I mentioned earlier, the inventory in the existing home market was increasing. In the past, even if there was a shortage of inventory, the current situation where the supply is increasing, and preliminary home sales are so low, indicates a significant slump in the psychology of home purchases. It can be seen as evidence that demand has weakened. Therefore, the trend and pattern of the housing market are not in a phase of significant recovery and expansion, but rather in an overall trend of sluggishness and contraction. When you look at the level of preliminary home sales on a chart, it can be seen more intuitively. The current position is here. Preliminary home sales are an advanced indicator because they will be reflected in the existing home sales statistics in 1 to 2 months. This is how it is declining.

That's right. In fact, excluding the extreme situation of the pandemic, the current situation is at a very weak level, even lower than the periods of economic recession after 2001. If this temporary housing shortage continues, eventually, the economy will inevitably start to contract significantly. With the sharp decrease in new housing supply, property listings are quickly being withdrawn. In the future, the cooling of the housing market can only continue. This trend is expected to persist. Looking at it this way, let's review the current real estate market. Despite low inventory and high interest rates leading to a decrease in transactions, prices have continued to rise. Naturally, consumers who purchased homes at low interest rates will face higher rates if they switch properties, leading to a withdrawal of listings.

I can't offer it, so the existing housing inventory phenomenon has appeared, and the prices of existing houses are rising, while the prices of new houses have shown a slight slowdown, even a pattern of decline. Of course, there was also a difference in housing supply, so the overall housing prices can only show an upward trend, but I mentioned that it is a price without transactions. It can be evaluated as a depressed housing market overall due to high mortgage rates and low housing supply, but the trend of prices continuing to rise is still ongoing. This is how it should be viewed. Currently, the inventory is slightly increasing, and signs of decreasing demand are appearing when looking at the sharp decrease in newly built home sales. In the future, it is expected that the price increase trend will ease, but it can be expected that profit-taking demand for price increases has partially occurred due to adjusting interest rates and timing this year.

As the existing housing inventory that had fallen to the ground increases, some tightness has been relieved, but active trading has not yet taken place. Therefore, the upward trend in prices is still continuing. However, if this tightness is sufficiently relieved, there is also a possibility that prices may temporarily decline. For the time being, it can be expected that the demand from existing home buyers to realize the difference in housing price increases will continue to increase. However, this may not immediately lead to an increase in sales volume and transaction volume. Of course, there may still be lingering effects from the long-standing supply gap, but what's important is that the current inventory is increasing while demand is decreasing. Therefore, when we look at it, changes in supply and demand have occurred, and in the coming months, the upward trend in housing prices is expected to ease.

We can anticipate this, and the preliminary data shows that housing prices have dropped to the lowest level ever. In this situation, it is difficult to forecast a strong expansion in the housing market. On the contrary, it is more likely that the housing market will slow down or that a slowdown in overall economic growth will be evident. From this perspective, it is expected that housing costs will stabilize in terms of prices. Rental fees for housing are a significant component of the price index. Additionally, along with the decrease in employment throughout the economy, a slowdown in the economy is expected to continue. This is how we can summarize it. Today, we looked at the trends in the real estate market for May. Thank you.

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