2016 California Economic & Market Forecast
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Transcript of 2016 California Economic & Market Forecast
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2016 CALIFORNIAECONOMIC &MARKETFORECAST
October 8, 2015
EXPO – San Jose Convention Center
Leslie Appleton-Young, Vice President & Chief Economist
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HOW DID I DO?LAST OCTOBER I TOLDYOU …
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2015 FORECAST REPORTCARD
Forecast Date: October 2015 vs. October 2014
SERIES: CA Housing Market Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
SFH Resales (000s)
% Change
Median Price ($000s)
% Change
30-Yr FRM
Housing Affordability Index
U.S. Gross Domestic Product
2014Actual
383.3
-7.6%
$447.0
9.8%
4.2%
30%
2.4%
2015Forecast
402.5
5.8%
$478.7
5.2%
4.5%
27%
3.0%
2015Projected
407.5
6.3%
$476.3
6.5%
3.9%
31%
2.4%
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ECONOMIC OUTLOOK
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-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
20
05
20
06
20
07
20
08
20
09
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10
20
11
20
12
20
13
20
14
20
15P
20
16F
Q1-
12
Q2
-12
Q3-
12
Q4
-12
Q1-
13
Q2
-13
Q3-
13
Q4
-13
Q1-
14
Q2
-14
Q3-
14
Q4
-14
Q1-
15
Q2
-15
ECONOMY HAS BEEN GROWING FOR 68 MONTHS
2014: 2.4%; 2015: 2.4%; 2016: 2.6%
ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $
ANNUALLY QUARTERLY
2009 Largest Annual Drop since 1938 (-3.4%)
SERIES: GDPSOURCE: US Dept. of Commerce, Bureau of Economic Analysis
3.9%
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KEY SECTORSOF MACRO-ECONOMY
Consumer Sector
Business Sector
Government
International Trade
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EMPLOYMENT STALLED IN SEPT:142K
3.0%
2.0%
-8
-6
-4
-2
0
2
4
6
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
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Jan
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Jul-
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Jan
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Jul-
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Jul-
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Jan
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Jan
-14
Jul-
14
Jan
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Jul-
15
California USANNUAL PERCENT CHANGE
SERIES: Total Nonfarm EmploymentSOURCE: US Bureau of Labor Statistics, CA Employment Development Division
Change Growth
United States 2,752,000 2.0%
California 470,000 3.0%
NewYork 130,500 1.4%
Texas 217,700 1.9%
198K/mo 2014 avg260K/mo 2015 avg
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UNEMPLOYMENT RATE HOLDS STEADY
September 2015: US 5.1% & August 2015:CA 6.1%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
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Jan
-10
Jul-
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Jan
-11
Jul-
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Jan
-12
Jul-
12
Jan
-13
Jul-
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Jan
-14
Jul-
14
Jan
-15
Jul-
15
US-CA CA US
SERIES: Unemployment Rate The U-6 rate covers the unemployed, underemployed and those who are not looking but who want a jobSOURCE: US Bureau of Labor Statistics, CA Employment Development Division
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UNEMPLOYMENT RATES (U6 VS. U3)
September 2015 = U3: 5.1%, U6: 10.0%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
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Jan
-09
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Jan
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Jul-
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Jan
-11
Jul-
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Jan
-12
Jul-
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Jan
-13
Jul-
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Jan
-14
Jul-
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Jan
-15
Jul-
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U3 U6
SERIES: Unemployment RatesSOURCE: US Bureau of Labor Statistics, CA Employment Development Division
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PARTICIPATION DOWN: AGING POP & SLOW JOBGROWTH & HIGH LONG TERM UNEMPLOYMENT
CA- 62.5% (Dec. 2014) vs. USA- 62.7% (Dec. 2014)
60%
62%
64%
66%
68%
70%US CA
Labor Force Rate
SERIES: Labor Force Participation RateSOURCE: BLS, Data Buffet
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JOB TRENDS BY CALIFORNIA METRO AREA
-0.2%
0.9%
1.0%
1.8%
1.9%
2.0%
2.6%
2.8%
3.0%
3.1%
3.2%
4.6%
5.5%
-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%
Bakersfield
Ventura
Modesto
Los Angeles
Oakland
Stockton MSA
Fresno MSA
Sacramento
Inland Empire
San Diego
Orange County
San Francisco
San Jose
SERIES: Total Nonfarm EmploymentSOURCE: CA Employment Development Division
ANNUAL PERCENT CHANGE
August 2015: CA +3.0%, +470,000
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CALIFORNIA JOB CHANGES BY INDUSTRY
-1.0%
0.4%
0.5%
1.3%
2.0%
2.0%
2.6%
2.7%
3.0%
3.5%
3.5%
3.6%
4.3%
6.4%
6.8%
-2% -1% 0% 1% 2% 3% 4% 5% 6% 7% 8%
Nondurable GoodsFinance & Insurance
Durable GoodsGovernment
Retail TradeEducational Services
InformationHealth Care & Social Assistance
Wholesale TradeReal Estate & Rental & Leasing
Admistrative & Support & Waste Services
Transportation, Warehousing & UtilitiesLeisure & Hospitality
ConstructionProfessional, Scientific & Technical Services
SERIES: Total Nonfarm Employment By IndustrySOURCE: US Bureau of Labor Statistics, CA Employment Development Division
August 2015: CA +3.0%, +470,000ANNUAL PERCENT CHANGE
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NONFARM EMPLOYMENT BY REGION
Aug 2015 Aug 2014 Change % Change
Southern California 8,834.4 8,626.3 208.1 2.4%
Bay Area 4,289.3 4,213.0 76.3 1.8%
Central Valley 1,540.9 1,492.4 48.5 3.2%
Central Coast 1,318.4 1,280.0 38.4 3.0%
North Central 1,391.4 1,349.0 42.4 3.1%
CALIFORNIA 294.4 291.9 2.5 0.9%
Nonfarm Employment (Thousands)
SERIES: Total Nonfarm EmploymentSOURCE: CA Employment Development Division
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JOB LOSSES IN PRIOR RECESSIONS -RECENT CYCLE WORST BY FAR
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CONSUMER CONFIDENCE INDEX
September 2015: 103.0
0
20
40
60
80
100
120
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
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Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
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Jan
-14
Jul-
14
Jan
-15
Jul-
15
INDEX, 100=1985
SERIES: Consumer ConfidenceSOURCE: The Conference Board
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CONSUMER PRICE INDEX
August 2015: All Items 0.2%YTY; Core +1.8%YTY
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
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Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
All Items Core
ANNUAL PERCENT CHANGE
SERIES: Consumer Price IndexSOURCE: US Bureau of Labor Statistics
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IS ITTIME?AH… LET’SWAITA LITTLE LONGER
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MORTGAGE RATES
January 2009 – October 2015
0%
1%
2%
3%
4%
5%
6%
FRM
ARM
MONTHLY WEEKLY
SERIES: 30Yr FRM, 1Yr ARMSOURCE: Federal Home Loan Mortgage Corporation
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RATE HIKE POSTPONED, BUT NOTCANCELLED
Factors for the delay
- Global economic slowdown/Strong dollar• Emerging markets vulnerable to rising rate environment
- Heighten stock market volatility• Negative wealth effect could lead to slowdown in economic growth
- Avoid a repeat of Taper Tantrum• Fed had not articulated enough on all the moving parts and did not
want to give any surprises
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WHEREAREWE HEADED?
- Fed will likely begin normalization in December (maybe) andrates will gradually increase in 2016 and 2017. Action will be“data determined”
- Risk of rates increasing too fast: bringing economic growth toa halt
- Risk of rates increasing too slow: zero leverage when nextdownturn hits
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MARKET DOWN SHARPLY FROM THE PEAK
1,944.4
1650
1700
1750
1800
1850
1900
1950
2000
2050
2100
2150
Jan
-14
Mar
-14
May
-14
Jul-
14
Sep
-14
No
v-14
Jan
-15
Mar
-15
May
-15
Jul-
15
Sep
-15
S & P 500 Composite
MONTHLY AVERAGE
Causes of the financial market turmoil
- Highly valued asset markets
- Economic slowdown in China
- U.S. monetary policy normalization
- Collapse in energy and othercommodity prices
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CROSSCURRENTS NETOUT
$50 bbl Lower Oil Prices
50 bps Lower Mortgage Rates
15% $ Appreciation
5% Lower Stock Prices
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U.S. HOME SALES UP IN 2015
U.S., Aug 2015 Sales: 4,690,000 Units, +8.1%YTD, +6.1%YTY
4,690,000
-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
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Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
*Sales are seasonally adjusted and annualizedSERIES: Sales of Existing Single Family HomesSOURCE: NATIONAL ASSOCIATION OF REALTORS®
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U.S. HOME PRICE GAINS MODERATING
U.S., Aug 2015: $230,200, -1.4% MTM, +5.1%YTY
$230,200
$-
$50,000
$100,000
$150,000
$200,000
$250,000
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
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Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
SERIES: Median Price of Existing Single Family HomesSOURCE: NATIONAL ASSOCIATION OF REALTORS®
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U.S. COMMERCIAL VACANCY RATES
SOURCE: NATIONAL ASSOCIATION OF REALTORS®
Commercial R.E. Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 2014 2015 2016
Office 15.1% 15.9% 15.8% 15.5% 15.3% 15.1% 14.9% 14.8% 16.0% 15.6% 15.0%
Industrial 11.3% 10.8% 10.3% 9.8% 9.4% 9.0% 8.5% 8.4% 12.0% 11.7% 8.8%
Retail 13.7% 13.2% 13.0% 12.7% 12.3% 12.1% 11.9% 11.6% 13.8% 13.2% 12.0%
Multifamily 8.4% 6.6% 6.7% 6.6% 6.6% 6.6% 6.6% 6.7% 6.6% 7.1% 7.1%
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CA METRO COMMERCIAL VACANCY RATES
2015 Q2
SOURCE: National Association of REALTORS®
MSA Office Industrial Retail Multi-Family
Los Angeles 14.8% 3.6% 5.7% 3.5%
Oakland-East Bay 17.1% 8.2% 6.0% 2.8%
Orange County 16.3% 3.4% 4.6% 3.3%
Sacramento 20.3% 11.1% 10.0% 2.6%
San Bernardino/Riverside 22.4% 7.2% 9.1% 2.5%
San Diego 14.7% 6.4% 6.1% 2.8%
San Francisco 10.6% 10.4% 3.0% 3.8%
San Jose 16.3% 16.2% 4.6% 3.4%
Ventura 16.4% - 8.5% 2.9%
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HOUSEHOLD GROWTH AFFECTED BYDEMOGRAPHIC AND ECONOMIC FACTORS
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HOUSEHOLD FORMATION ACCELERATES IN 2015
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U.S. ECONOMIC OUTLOOK
2010 2011 2012 2013 2014 2015p 2016f
US GDP 2.4% 1.8% 2.3% 2.2% 2.4% 2.4% 2.7%
Nonfarm Job Growth -0.7% 1.2% 1.7% 1.7% 1.9% 2.1% 1.8%
Unemployment 9.6% 8.9% 8.1% 7.4% 6.2% 5.3% 5.0%
CPI 1.6% 3.1% 2.1% 1.5% 1.6% 0.2% 2.1%
Real Disposable
Income, % Change 1.0% 2.5% 3.0% -0.2% 2.5% 3.3% 2.7%
30-Yr FRM 4.7% 4.5% 3.7% 4.0% 4.2% 3.9% 4.5%
SERIES: U.S. Economic OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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U.S. HOUSING MARKET OUTLOOK
2010 2011 2012 2013 2014 2015p 2016f
Existing Home Sales (000s) 4,190 4,260 4,660 5,090 4,940 5,292 5,471
% Change -3.5% 1.7% 9.4% 9.2% -2.9% 7.1% 3.4%
Median Price ($000s) $172.9 $166.1 $176.8 $197.1 $208.3 $221.4 $231.0
% Change 0.2% -3.9% 6.4% 11.5% 5.7% 6.3% 4.3%
SERIES: U.S. Existing home sales of single-family homes and condo/coopsSOURCE: NATIONAL ASSOCIATION OF REALTORS®
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CALIFORNIA ECONOMIC OUTLOOK
2010 2011 2012 2013 2014 2015p 2016f
Nonfarm Job Growth -1.1% 1.1% 2.4% 3.0% 2.2% 2.8% 2.3%
Unemployment Rate 12.3% 11.8% 10.4% 8.9% 7.5% 6.3% 5.5%
Population Growth 0.7% 0.7% 0.7% 0.9% 0.9% 0.9% 0.9%
Real Disposable
Income, % Change 0.9% 3.4% 4.7% 0.2% 3.0% 4.3% 4.5%
SERIES: CA Economic OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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CALIFORNIA HOUSING MARKETOUTLOOK
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MEMBERSHIP FOLLOWS SALESWITH 1-2YEAR LAG
2015p: 181,000
2016f: 183,000
0
50,000
100,000
150,000
200,000
250,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1971
1973
1975
1977
1979
198
1
198
3
198
5
198
7
198
9
199
1
199
3
199
5
199
7
199
9
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15p
Home Sales MembershipUnits of Home Sold # of Members
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2015 SALES DID NOT DISAPPOINT
California, Aug 2015 Sales: 431,800 Units, +7.4%YTD, +9.3%YTY
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
*Sales are seasonally adjusted and annualizedSERIES: Sales of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Aug-15:431,800
Aug-14:395,080
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CA SALES RE-GAINED MOMENTUM IN 2015
SERIES: Sales of Existing Single Family Homes, Seasonally AdjustedSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Jan
-10
Ap
r-10
Jul-
10
Oct
-10
Jan
-11
Ap
r-11
Jul-
11
Oct
-11
Jan
-12
Ap
r-12
Jul-
12
Oct
-12
Jan
-13
Ap
r-13
Jul-
13
Oct
-13
Jan
-14
Ap
r-14
Jul-
14
Oct
-14
Jan
-15
Ap
r-15
Jul-
15
Year-over-Year % Chg 6 per. Mov. Avg. (Year-over-Year % Chg)
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HOME PRICE GAINS HAVE SLOWED
California, Aug 2015: $493,420, 1.0% MTM, +2.5%YTY
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
Jan
-05
Jul-
05
Jan
-06
Jul-
06
Jan
-07
Jul-
07
Jan
-08
Jul-
08
Jan
-09
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
P: May-07$594,530
T: Feb-09$245,230-59% frompeak
SERIES: Median Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Aug-15:$493,420
Aug-14:$481,250
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-20%
-10%
0%
10%
20%
30%
40%
50%
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15
Condo Single-Family Homes
HOME PRICE APPRECIATIONS HAVEMODERATED SINCE MID 2013
SERIES: Sales of SFH and Condo UnitsSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
YTY% Chg. in Price
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CALIFORNIA VS. U.S. MEDIAN PRICES
1970-2015
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
1970
1972
1974
1976
1978
198
0
198
2
198
4
198
6
198
8
199
0
199
2
199
4
199
6
199
8
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
California US CA Price Trend
SERIES: Median Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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• Housing market has recovered – Welcometo the new normal– Low mortgage rates
– Job & Income growth are positive
• And yet…– Supply well below long-run average
– Share of first-time buyers LOW
– Affordability key concern for everyone
• It’s not an easy market/transaction foranyone .
2015 - WHERE ARE WE ?
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UNDERWATER MORTGAGESRISING PRICES HAVE REVERSED EQUITY LOSSES
7.3%
1.7%
0%
5%
10%
15%
20%
25%
30%
35%
40% Negative Equity Share in CA Near Negative Equity Share in CA
SERIES: Underwater MortgagesSOURCE: CoreLogic
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INVENTORY CONTINUED TODECLINE FROM LASTYEAR
Aug 2014: 4.0 Months; Aug 2015: 3.6 Months
Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. Theremaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) anddivide the sum by the number of “Sold” properties for the month in question.
0
2
4
6
8
10
12
14
16
18
Jan
-05
Jul-
05
Jan
-…
Jul-
06
Jan
-07
Jul-
07
Jan
-…
Jul-
08
Jan
-…
Jul-
09
Jan
-10
Jul-
10
Jan
-11
Jul-
11
Jan
-12
Jul-
12
Jan
-13
Jul-
13
Jan
-14
Jul-
14
Jan
-15
Jul-
15
SERIES: Unsold Inventory Index of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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WHERE IS THE INVENTORY?
– Affordability challenge for repeat buyers• Low rate on current mortgage• Low property taxes• Why list when there is nowhere to go I can afford?• Could not qualify for a mortgage today
– Foreclosure pipeline is dry– Investors renting instead of flipping– New construction recovering but LOW– Measurement error? Off- MLS (aka “pocket’) listings not
being counted in listing stats– Demographics: Trade-up buyer pool is smaller
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FEWER MIDDLE-AGE ADULTS IN RECENTYEARS
Source: Harvard Joint Center of Housing Studies, Census Bureau
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DROP IN HOMEOWNERSHIP
Source: Harvard Joint Center of Housing Studies, Census Bureau
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DECLINE IN # OF TRADE UP BUYERS DUE TO POPULATION LOSS &DROP IN HOMEOWNERSHIP RATE
Source: Harvard Joint Center of Housing Studies, Census Bureau
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REGIONAL HOUSING MARKETS
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CA AUG. 2015 MEDIAN PRICESYTY
SERIES: Median Price of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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CA 2015YTD SALES
SERIES:Year to Date Sales of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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$346,1805% YTY
www.car.org/marketdata
12% YTD8% YTY
4.6 32.7 95.8%NAUII
Months Days
MTM Price
Per Sq Ft
Sales
To List Ratio
Median PriceSales
NORTHERN CALIFORNIA AUG 2015
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NORTHERN CALIFORNIAAUG. 2015 MEDIAN PRICES
SERIES: Median Price of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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NORTHERN CALIFORNIA2015YTD SALES
SERIES:Year to Date Sales of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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$550,12015% YTY
6% YTD14% YTY
3.6 46.1 NANAUII
Months Days
MTM Price
Per Sq Ft
Sales
To List Ratio
www.car.org/marketdata
Median PriceSales
NORTHERN WINE AUG 2015
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NORTHERN WINEAUG. 2015 MEDIAN PRICES
SERIES: Median Price of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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NORTHERN WINE2015YTD SALES
SERIES:Year to Date Sales of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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$804,19010% YTY
5% YTD0.2% YTY
2.3 22.3 103.4%$509UII
Months Days
MTM Price
Per Sq Ft
Sales
To List Ratio
www.car.org/marketdata
Median PriceSales
BAY AREA AUG 2015
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BAY AREAAUG. 2015 MEDIAN PRICES
SERIES: Median Price of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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BAY AREA2015YTD SALES
SERIES:Year to Date Sales of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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$276,9007% YTY
10% YTD12% YTY
3.6 24.4 97.3%NAUII
Months Days
MTM Price
Per Sq Ft
Sales
To List Ratio
www.car.org/marketdata
Median PriceSales
CENTRAL VALLEY AUG 2015
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CENTRAL VALLEYAUG. 2015 MEDIAN PRICES
SERIES: Median Price of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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CENTRAL VALLEY2015YTD SALES
SERIES:Year to Date Sales of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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$520,8304% YTY
www.car.org/marketdata
11% YTD6% YTY
3.9 29.1 97.7%NAUII
Months Days
MTM Price
Per Sq Ft
Sales
To List Ratio
Median PriceSales
CENTRAL COAST AUG 2015
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CENTRAL COASTAUG. 2015 MEDIAN PRICES
SERIES: Median Price of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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CENTRAL COAST2015YTD SALES
SERIES:Year to Date Sales of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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$464,4003% YTY
www.car.org/marketdata
9% YTD7% YTY
3.9 41.9 98.6%NAUII
Months Days
MTM Price
Per Sq Ft
Sales
To List Ratio
Median PriceSales
SOUTHERN CALIFORNIA AUG 2015
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SOUTHERN CALIFORNIAAUG. 2015 MEDIAN PRICES
SERIES: Median Price of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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SOUTHERN CALIFORNIA2015YTD SALES
SERIES:Year to Date Sales of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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ANNUAL HOUSING MARKETSURVEY:
2015 FINDINGS
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SHARE OF SECOND/ VACATION HOMES HIGHERAFTER TWOYEARS’ OF DECLINE
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
5.3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% to Total Sales
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SHARE OF INVESTMENT PROPERTIES DROPS TO THELOWEST LEVEL SINCE 2009
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
13.1%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% to Total Sales
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FIRST-TIME BUYERS FINDING IT HARD TO BUY
29.5%
0%
10%
20%
30%
40%
50%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% First-Time Home Buyers Long Run Average
Long Run Average = 38%
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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SHARE OF CASH BUYERSLOWEST SINCE 2009
21%
0%
5%
10%
15%
20%
25%
30%
35%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% of All Cash Sales
• Almost one-fourth of buyers paid with all cash
• The share of all cash buyers is the lowest in the last 6 years
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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THE SHARE OF INTERNATIONAL BUYERSLOWEST IN 8YEARS
4%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2008 2009 2010 2011 2012 2013 2014 2015
Q. Was the buyer an international buyer – a person who was a citizen of another country who wished topurchase residential real estate in the U.S.?
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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71%
14%
6% 4% 2% 4%
72%
12%6%
3% 2%5%
77%
9%5%
3% 1%4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0 1 2 3 4 5 or more
2013
2014
2015
# of Properties Sold to International Buyers in the Last 12 Months
% Who Sold to International Buyers
Q. How many properties have you sold to an international buyer in the last 12 months?SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
23% OF CA REALTORS® WORKED WITH ANINTERNATIONAL BUYER IN THE PAST 12 MONTHS
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43%
8% 8%0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
China Mexico South Korea
COUNTRY OF INTERNATIONAL BUYER
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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THE MEDIAN DOWN PAYMENT INCHED UP FROM 2014
$74,500
20%
0%
5%
10%
15%
20%
25%
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Median Down Payment % of Down Payment to Price
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Q. What was the amount of downpayment?
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MARKET COMPETITION COOLS DOWNAFTER PEAKING IN 2013
53% 53%
4.34.0
0
1
2
3
4
5
6
7
0%
10%
20%
30%
40%
50%
60%
70%
80%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% with Multiple Offers # of Multiple offers (Average)
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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YEARS OWNED HOME BEFORE SELLING
10
0
2
4
6
8
10
12 All Sellers
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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NET CASH GAIN TO SELLERS HIGHEST SINCE 2007
$120,000
$0
$50,000
$100,000
$150,000
$200,000
$250,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Q. What was the net cash gain or net loss to the seller as a result of this sale?
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HOUSING AFFORDABILITY:CRISIS BREWING
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CALIFORNIA PRICES MORE VOLATILE AND MUCHHIGHER THAN THE NATION
1970-2015
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000 California US
The difference between California’s prices and national home prices increasedfrom $10K in 1970 to $255K today
SERIES: Median Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2015 Dollar Value
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HOUSING AFFORDABILITY PEAKED Q1 2012PRICES V. LOW RATES AND INCOME GROWTH
California vs. U.S. – 1984-2015% OF HOUSEHOLDS THAT CAN BUYA MEDIAN-PRICED HOME
SERIES: Housing Affordability Index of Traditional BuyersSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
56%
30%
71%
57%
0%
10%
20%
30%
40%
50%
60%
70%
80% CA USAnnual Quarterly
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HOUSING AFFORDABILITY IN CA: BY COUNTY
62
57 56 55 5450 50
47 4644
41 4037
30 3028 27
25 25 2523
21 20 19 18 18 17 1613
10
0
10
20
30
40
50
60
70 2015 Q2
SERIES: Housing Affordability IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
% able to purchase median priced home
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AFFORDABLE INVENTORY AVAILABLE TOMEDIAN-INCOME HOUSEHOLDS
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
67.2%
28.5%
2.1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2015 Q2
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$27,010
$45,340
$69,990 $71,630
$87,520 $89,250
$98,400
$119,970
$95,978
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
RetailSalespersons
Chefs andHead Cooks
ElementarySchool
Teachers
Firefighters Police andSherriff's
PatrolOfficers
ComputerProgrammers
RegisteredNurses
SoftwareDevelopers
(Applications)
Min. IncRequired toBuy a Med.
Home
HOW WAGES MEASURED AGAINST INCOMEREQUIRED TO BUY A HOME
SOURCE: Bureau of Labor Statistics, C.A.R.
2014 Annual Mean Wage
California
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$30,340
$52,690 $49,230
$70,680$88,390
$97,570
$124,980 $118,690
$267,783
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
RetailSalespersons
Auto.Mechanics
Chefs andHead Cooks
ElementarySchool
Teachers
Firefighters ComputerProgrammers
RegisteredNurses
SoftwareDevelopers
(Applications)
Min. IncRequired toBuy a Med.
Home
HOW WAGES MEASURED AGAINST INCOMEREQUIRED TO BUY A HOME
SOURCE: Bureau of Labor Statistics, C.A.R.
2014 Annual Mean Wage
San Francisco
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$26,610
$46,790$50,730
$67,300
$58,520
$75,980
$105,390 $103,730
$57,581
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
RetailSalespersons
Auto.Mechanics
Chefs andHead Cooks
ElementarySchool
Teachers
Firefighters ComputerProgrammers
RegisteredNurses
SoftwareDevelopers
(Applications)
Min. IncRequired toBuy a Med.
Home
HOW WAGES MEASURED AGAINST INCOMEREQUIRED TO BUY A HOME
SOURCE: Bureau of Labor Statistics, C.A.R.
2014 Annual Mean Wage
Sacramento
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$26,870
$42,610 $44,330
$72,720
$82,830$86,840
$93,180
$103,790
$88,082
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
RetailSalespersons
Auto.Mechanics
Chefs andHead Cooks
ElementarySchool
Teachers
Firefighters ComputerProgrammers
RegisteredNurses
SoftwareDevelopers
(Applications)
Min. IncRequired toBuy a Med.
Home
HOW WAGES MEASURED AGAINST INCOMEREQUIRED TO BUY A HOME
SOURCE: Bureau of Labor Statistics, C.A.R.
2014 Annual Mean Wage
Los Angeles
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CALIFORNIA’S MAJOR METROS ARE LESSAFFORDABLE THAN THE AVERAGE U.S. METRO
SOURCE: Legislative Analyst’s Office
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SHARE OF FIRST-TIME BUYERS REMAINSBELOW LONG-RUN AVERAGE
29.5%
0%
10%
20%
30%
40%
50%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% First-Time Home Buyers Long Run Average
Long Run Average = 38%
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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HOMEOWNERSHIP RATES
California Vs. U.S.
53.7%
Peak: 60.2%
54.9%
64.5%
Peak: 69.0%
64.8%
40%
45%
50%
55%
60%
65%
70%
75% CA US
SERIES: Homeownership RatesSOURCE: U.S. Census Bureau
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“MISSING” 100,000 UNITS ANNUALLY, AT LEAST
2015p: 98,500 (42,190 sf, 56,310 mf)
2016f: 124,600 total units
SERIES: New Housing PermitsSOURCE: Construction Industry Research Board
0
50000
100000
150000
200000
250000
300000
350000
Single Family Multi-Family
Household Growth:
165,000/yr
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THE BOOMERS ANDTHEIR NEXT MOVE
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THE BOOMERS ANDTHEIR NEXT MOVE
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BOOMERS – BORN BETWEEN 1946-1964
What is your age?
0%
1%
2%
3%
4%
5%
6%
7%
8%
50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68
Age (Years)
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Average:59
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MAJORITY ARE MARRIED
What is your marital status?
Married 56%
Single 26%
Other 18%
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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BABY BOOMERS LESS DIVERSE THAN MILLENNIALS
What is your ethnic background?
0%
10%
20%
30%
40%
50%
60%
70%
80%
Caucasian/White
Asian AfricanAmerican/
Black
Hispanic/Latino
Other
79%
9%4% 4%
4%
38%
18%
7%
35%
4%
Boomers Millennials
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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3/4 BABY BOOMERS ARE HOME OWNERS
What is your current living situation?
Own 75%
Rent 22%
Other 3%
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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HOME OWNERSHIP RATE NEARLY 4 TIMES HIGHERAMONG BOOMERS
Baby Boomers
75%
22%
3%
Own
Rent
Other
Millennials
20%
41%
39%
Own
Rent
Other
What is your current living situation?
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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MOST HAVE EQUITY IN THEIR HOME
Do you have equity in your home?
Yes, 92%
No, 8%
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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MOST DON’T PLAN TO USE HOME EQUITY FORINCOME DURING RETIREMENT
Are you planning on using this equity for income during retirement?
Yes, 23%
No, 77%
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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MAJORITY DO NOT PLAN TO SELL HOMEWHEN THEY RETIRE
Do you plan to sell your current home when you retire?
Yes, 10%
No, 59%
Don't know/unsure, 32%
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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MAJORITY WON’T SELL BECAUSE THEY LIKE THEIRHOME
Why do you not plan to sell your current home when you retire?
78%
10%
8%
5%
I like my home
I cannot afford to buy anotherretirement home
I plan to give the home to mychild(ren)
Another reason
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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¼ POSTPONED RETIREMENT BECAUSE …
Did you have to postpone your date of retirement due to any of the following?
0% 2% 4% 6% 8% 10% 12% 14%
Death of significant other
Loss of pension
Medical bills
Loss of home
Loss of retirement income
Other
Loss of assets/ income due to 2008 economic recession
Loss of employment
Did not save enough money yet for retirement
1%
1%
2%
2%
3%
4%
7%
9%
14%
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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> ½ DO NOT FEEL THEY HAVE SAVED ENOUGH MONEYTO RETIRE COMFORTABLY
Do you feel you have saved enough money to retire comfortably?
Yes, 46%
No, 54%
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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MAJORITY WORRY ABOUT CHILDRENS’ ABILITY TOBECOME HOME OWNERS
Do you worry about your children’s ability to become home owners in the future?
Yes, 55%
No, 45%
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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2/5 PLAN TO HELP CHILDREN WITH DOWN PAYMENT
Do you plan to help your children with their down payment to purchase a home?
Yes, 43%
No, 57%
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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WHAT FINANCIAL DECISIONWOULD BOOMERS CHANGE?
If you could change one financial decision that you made within the past 10 years, what would it be?
1%
2%
4%
5%
7%
8%
19%
22%
0% 5% 10% 15% 20% 25%
Moving to the wrong location
Cash out/ open IRA
Carry less debt/ poor credit
Retiring prematurely
Seek better job
Invest in real estate
Better investment decisions
Saving more/ spending less
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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WHAT KEEPS BOOMERS UP AT NIGHT?
What keeps you up at night?
1%
2%
2%
3%
3%
4%
4%
4%
4%
6%
13%
39%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Economy
World politics
TV/ internet
Health concerns
Insomnia
Ache/ pain
Job security
Work
Family issues
Stress/ anxiety
Bills/ finances
Nothing
SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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CRAFTSMAN BUNGALOW IS DREAM HOME FOR1/3 HOME OWNERS
Q. Which of the following is your dream home?
32%
craftsman bungalow
19%
neo colonial
14%
dream mansion Frank Lloyd Wright
desert modernism art nouveau/art moderne modern townhome downtown loft
brick urban rowhome
8.5%
12%
5.7% 5.1% 2.6%
1.6%
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2/3 HOME OWNERS PREFER A NIGHT IN WITHFAMILY/FRIENDS FOR FUN
Q. In which of the following activities would you like to participate? Select all that apply.
0% 10% 20% 30% 40% 50% 60% 70%
Burning Man
Woodstock in 1969
A "Hangover" weekend in Vegas
A week camping/fishing
A concert with your favorite artist
A fantastic movie
A trip to New York City
A trip to Paris
A quiet night in with friends/family
10%
16%
21%
37%
52%
53%
56%
57%
65%
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DIVERSITY IN HOMEOWNERSHIP
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SHARE OF MINORITY HOME BUYERSHAS GROWN OVER TIME …
Q. What was the race/ethnicity of the head of household buying the property
68.5%
5.0%
14.1%
7.5%
55.8%
4.2%
19.9%
12.5%
56.3%
3.6%
14.0%16.5%
0%
10%
20%
30%
40%
50%
60%
70%
80%
White/Non-Hispanic African-American Hispanic Asian
1995 2005 2015
SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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HOUSING DEMAND WILL INCREASE,LARGELY DRIVEN BY MINORITIES
SOURCE: Urban Institute
2.7 4.6 2.2 2.18.9 11.6
1.34.8 1.9 2.5
9.1 10.4
0
2
4
6
8
10
12
14
White Hispanic Black, Non-Hispanic Other, Non-Hispanic Total Minority Total
Projected household growth, 2010-2010
Projected household growth, 2020-2030
Net new households, millions
23%
46%39%
18%
12%
18%19%
100%
100%
88%77%
24%
2010-2020
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2010-2020
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
West Midwest South Northeast
Source: Dowell Myers and John Pitkin, “Immigrant Contributions to the HousingMarket…” RIHA, Mortgage Bankers Association, 2013
IMMIGRANT SHARE OF GROWTH INHOME OWNERS
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2016 FORECAST
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CALIFORNIA HOUSING MARKET OUTLOOK
2010 2011 2012 2013 2014 2015p 2016f
SFH Resales (000s) 416.5 422.6 439.8 414.9 383.3 407.5 433.0
% Change -12.3% 1.4% 4.1% -5.9% -7.6% 6.3% 6.3%
Median Price ($000s) $305.0 $286.0 $319.3 $407.2 $447.0 $476.3 $491.3
% Change 10.9% -6.2% 11.6% 27.5% 9.8% 6.5% 3.2%
Housing Affordability
Index 48% 53% 51% 36% 30% 31% 27%
30-Yr FRM 4.7% 4.5% 3.7% 4.0% 4.2% 3.9% 4.5%
SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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SALES UP FOR 2015 AND CONTINUE TO IMPROVE IN 2015;PRICE WILL GROW STEADILY THISYEAR AND NEXT
Units(Thousand)
407433
0
100
200
300
400
500
600
700
2005 2007 2009 2011 2013 2015p
Sales of Existing Detached Homes
$476$491
$0
$100
$200
$300
$400
$500
$600
2005 2007 2009 2011 2013 2015p
Median Price
Price(Thousand)
SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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CA: DOLLAR VOLUMEUP 13.3% IN 2015, UP 9.6% IN 2016
$301
$244
$164
$133 $131 $127 $121$140
$169 $171$194
$213
-40%
-30%
-20%
-10%
0%
10%
20%
30%
$0
$50
$100
$150
$200
$250
$300
$350
$400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015p 2016f
$ Volume of Sales Percent Change
% Change$ in Billion
-60%
SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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WILD CARDS
– Stock market volatility
– Slower growth: China
– Further collapse in energy/commodity prices
– Geo-political tensions
– Terrorism
– El Nino/Water Shortage
– 2016 Presidential election
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MARKET OPPORTUNITIES IN 2016
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MARKETOPPORTUNITIES
– Millennials
• Turn renters into first-time buyers
• First-time buyers who bought with tax credit back in 2009are ready to trade-up
• Understand the differences in needs between Millennialfirst-time buyers and Millennial trade-up buyers
– Baby Boomers
• Ready to downsize
• Understand Boomers’ priorities: investment and retirement
• If we can’t keep them in CA, help them find a place out ofstate. Network with REALTORS® outside of CA
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MARKETOPPORTUNITIES
– Minorities
• Minorities have grown in homebuyer share over time
• Surge in the number of minority households will play a bigrole in the increase in housing demand in the next 10 years
• Develop programs and marketing material tailored towardsminority home buyers of different ethnicity
– Investor sellers
• Investor buyers who purchased bargain properties a fewyears ago are ready to sell as home prices start leveling off
– Everyone else…
• Low interest rates will be here a little longer
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MOST MILLENNIALS UNCERTAIN/DOUBTFUL THATTHEY COULD OBTAIN A MORTGAGE
NOW?AMILLENNIAL ETHNICITY
SOURCE: C.A.R. 2014 Millennial SurveyQ: Could you obtain a mortgage if you applied now ?
Yes 22%
No 33%
Don't know45%
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#TBTC.A.R.110
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#TBT…. SACRAMENTO 110YEARS AGO
730 N Street
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#TBT…. SAN FRANCISCO 110YEARS AGO
500 block of Liberty Street
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#TBT…. FRESNO 110YEARS AGO
Brix Mansion 2844 Fresno St
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#TBT…. SUMMER OF LOVE
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THANKYOU!
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