2019 Economic & Market Forecast - Top Producer® Website · 10/11/2018 · 2019 Economic & Market...
Transcript of 2019 Economic & Market Forecast - Top Producer® Website · 10/11/2018 · 2019 Economic & Market...
2019 Economic & MarketForecast
REImagine
October 11, 2018
Leslie Appleton-Young
SVP & Chief Economist
2008
Note: Not including transactions in foreclosure.
The CA Housing Market Recovery
Equity Sales (Aug 2018)= 98.4%
Short Sales (Aug 2018)= 0.3%
REO Sales (Aug 2018)= 0.9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Equity Sales Short Sale REO
Equity Sales Vs. Distressed Sales
SERIES: Distressed Sales, Not Seasonally AdjustedSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2018
Assault onHomeownership
California Vs. U.S. – 9.5% gap in 2017
Homeownership Rates
53.7%
Peak: 60.2%54.4%
64.5%
Peak: 69.0%
63.9%
45%
50%
55%
60%
65%
70%
75% CA US
SERIES: Homeownership RatesSOURCE: U.S. Census Bureau
CA: Ownership Rebound?
54.3
64.4
50
55
60
65
70
75
Homeownership Rate
CA U.S.
California Homeownership Rates by Race and Ethnicity (2010-2014 Average)
… Homeownership Varies Sharply by Ethnicity
SERIES: Homeownership rate by ethnicitySOURCE: CA HCD, PolicyLink, USC Program for Environmental and Regional Equity
CA: Majority Renter State by 2025
SERIES: Homeownership RateSOURCE: U.S. Census Bureau, American Community Survey, C.A.R. projection
57.1%
59.7%
56.1%
41.0%
47.3%
44.2%
30%
40%
50%
60%
70%
2000 2005 2010 2015 2020 2025 2030 2035 2040
California Homeownership Rate
Fast Slow Avearge
42 of 142 Big Cities ALREADY Majority Renter
50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Ha
wth
orn
eG
len
da
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ng
ele
sElC
ajo
nC
ost
aM
esa
Bu
rba
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Sa
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Ba
rba
raSa
nta
Cla
raLy
nw
oo
dA
lam
ed
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Cru
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nn
yva
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ieg
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cra
me
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Sto
ckto
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ed
wo
od
City
We
stm
inst
er
Co
mp
ton
Sa
nM
ate
oP
alo
Alto
Re
dd
ing
Ba
ldw
inP
ark
Lan
ca
ste
rP
itts
bu
rgC
itru
sH
eig
hts
Ca
rmic
ha
el
Sa
nLe
an
dro
Ch
ula
Vis
taD
aly
City
Ne
wp
ort
Be
ac
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hittie
rV
isa
liaH
em
et
Co
nc
ord
Clo
vis
Tem
ec
ula
Sa
nM
arc
os
Lake
Els
ino
reSa
nC
lem
en
teW
aln
ut
Cre
ek
Fon
tan
aH
esp
eria
Sim
iVa
lley
Lake
wo
od
Live
rmo
reC
ast
roV
alle
yM
en
ife
eY
orb
aLi
nd
a
2017 California Renter Rate by City
Majority Renter Cities
76.0%
50.7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Ha
wth
orn
e
Sa
nta
Mo
nic
a
Ea
stLo
sA
ng
ele
s
Gle
nd
ale
Ing
lew
oo
d
Sa
nFr
an
cis
co
Los
An
ge
les
Be
llflo
we
r
Alh
am
bra
ElC
ajo
n
Flo
ren
ce
-Gra
ha
m
Oa
kla
nd
Co
sta
Me
sa
Me
rce
d
Lon
gB
ea
ch
Bu
rba
nk
Ard
en
-Arc
ad
e
Mo
un
tain
Vie
w
Sa
nta
Ba
rba
ra
ElM
on
te
Pa
sad
en
a
Sa
nta
Cla
ra
So
uth
Ga
te
Ch
ico
Lyn
wo
od
Be
rke
ley
An
ah
eim
Ala
me
da
Sa
lina
s
Sa
nta
An
a
Sa
nta
Cru
z
Da
vis
Ma
de
ra
Su
nn
yva
le
Irv
ine
Tust
in
Sa
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ieg
o
Fre
sno
Lod
i
Sa
cra
me
nto
Sa
nB
ern
ard
ino
Esc
on
did
o
2017 California Renter Rate by City
Where will our childrenlive?
Izzy Come Back!
4.2%
GDP 2018-Q2
1.7%
Job GrowthSeptember 2018
3.7%
UnemploymentSeptember 2018
Consumption2018-Q2
Core CPIAugust 2018
2.2%3.8%
U.S. Economy Our Biggest Strength
Employment: All-Time High
2.0%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Jan
-11
Jun
-11
No
v-1
1
Ap
r-1
2
Se
p-1
2
Feb
-13
Jul-1
3
De
c-1
3
Ma
y-1
4
Oc
t-14
Ma
r-15
Au
g-1
5
Jan
-16
Jun
-16
No
v-1
6
Ap
r-1
7
Se
p-1
7
Feb
-18
Jul-1
8
Nonfarm Employment Growth
California U.S.
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
Jan
-00
Feb
-01
Ma
r-02
Ap
r-0
3
Ma
y-0
4
Jun
-05
Jul-0
6
Au
g-0
7
Se
p-0
8
Oc
t-09
No
v-1
0
De
c-1
1
Jan
-13
Feb
-14
Ma
r-15
Ap
r-1
6
Ma
y-1
7
Jun
-18
California Nonfarm Employment
Unemployment Lowest in 40+ Years
2.4%
9.3%
0% 2% 4% 6% 8% 10%
San Francisco
South Bay
Sonoma
Orange County
San Diego
Ventura
Solano
Los Angeles
Monterey
Chico
Stanislaus
Modesto
Fresno
Merced
Tulare
0
2
4
6
8
10
12
14
Jan
-76
Ma
r-78
Ma
y-8
0
Jul-8
2
Se
p-8
4
No
v-8
6
Jan
-89
Ma
r-91
Ma
y-9
3
Jul-9
5
Se
p-9
7
No
v-9
9
Jan
-02
Ma
r-04
Ma
y-0
6
Jul-0
8
Se
p-1
0
No
v-1
2
Jan
-15
Ma
r-17
Unemployment Rate
California U.S.
September 2018: 138.4
Consumer ConfidenceHighest in 18 Years
138.4
0
20
40
60
80
100
120
140
160
IND
EX
,1
00
=1
98
5
SERIES: Consumer ConfidenceSOURCE: The Conference Board
August 2018: All Items 2.7% YTY; Core +2.2% YTY
Inflation Remains Low
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
An
nu
alP
erc
en
tC
ha
ng
e
All Items Core
SERIES: Consumer Price IndexSOURCE: US Bureau of Labor Statistics
Wild Card – Financial Markets
SERIES: Dow 30SOURCE: Yahoo Finance
21000
22000
23000
24000
25000
26000
27000
(Jan 2018 – Oct 2018)
24800
25000
25200
25400
25600
25800
26000
26200
26400
26600
26800
27000
(9/1/18 – 10/10/18)
Down831 pts
30 Yr. FRM Hit 5%, 1st Time since Early 2011
SERIES: Average 30 Yr. Fixed Mortgage RatesSOURCE: Mortgage News Daily
Oct 10: 5.00%
January 2012 – October 2018
Fed Has Raised rates 8x Since Dec 2015
4.63 4.71
3.94 4.01
2.00 2.25
0
1
1
2
2
3
3
4
4
5
5
FRM
ARM
Fed Funds Rate
Fed Raise Ratethe 1st timesince mid-2006
SERIES: 30Yr FRM, 5Yr ARM, Fed Funds Rate (Target Rate)SOURCE: Freddie Mac, St. Louis Fed
MONTHLY WEEKLY
Rates Rising Recently, but Keep Perspective
SERIES: 30Yr FRM, 5Yr ARMSOURCE: Freddie Mac
0
2
4
6
8
10
12
14
16
18
20
30-Year Fixed Rate Mortgage
Higher Rates Hurt Affordabiity
Q2-2018 Median Price $596,730
20% Down-payment
INTEREST RATE
MONTHLY MORTGAGE
SERIES: Housing Affordability IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Minimum Qualifying Income
INTEREST RATE
$2,013$2,144
$2,279$2,419
$2,563$2,711
$2,862$3,017
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
$2,800
$3,200
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
$107,956$113,196
$118,614$124,203
$129,958$135,871
$141,936$148,145
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
II. California HousingMarket
California, August 2018 Sales: 399,600 Units, -2.1% YTD, -6.6% YTY
Market Off 2.1% YTD – 4 Months of YTY Declines
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
*Sales are seasonally adjusted and annualized
SERIES: Sales of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Aug-18:399,600
Aug-17:427,630
Statewide Home Sales Off 5.5% YOY
*Sales are seasonally adjusted and annualized
SERIES: Sales of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
11.8%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18
Year-over-Year % Chg
Avg. year-over-year% chg. = -5.5%
Last 4+ consecutive mo. with decline:Avg. year-over-year % chg. = -1.9%
California, August 2018: $596,410, +0.8% MTM, +5.5% YTY
Price Growth Also Slowing Down
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000 Peak: May-07$594,530
Trough: Feb-09$245,230
-59% frompeak
Aug-18:$596,410Aug-17:
$565,320
SERIES: Median Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
YTY
%C
hg
.in
Pric
e
Condo Single-Family Homes
Price Gains Slowing Across the State
SERIES: Median Price of Existing Condo/TownhomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Price Gains Slowing Across the State
SERIES: Median Price of Existing Condo/TownhomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
0%
2%
4%
6%
8%
10%
12%
14%
YTY
%C
hg
.in
Pric
e
Condo Single-Family Homes
DeceleratingGrowth
So Cal: Orange & SD Above Prior Peak
SERIES: Median Price of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
RegionPeak
MonthPeakPrice
Aug-18%Chg Fr
Peak
Orange Jun-07 $775,420 $838,500 8.1%
San Diego May-06 $622,380 $660,000 6.0%
Los Angeles Sep-07 $625,812 $607,490 -2.9%
So CA Jun-07 $589,710 $555,000 -5.9%
Ventura Aug-06 $710,910 $660,000 -7.2%
Riverside Jun-06 $431,710 $400,750 -7.2%
San Bernardino Aug-06 $350,290 $290,000 -17.2%
Central Coast: SC & SLO
SERIES: Median Price of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
RegionPeak
Month
Peak
PriceAug-18
%Chg Fr
Peak
Santa Cruz Oct-07 $865,000 $917,500 6.1%
San Luis Obispo Oct-05 $619,950 $630,000 1.6%
Monterey Aug-07 $777,000 $599,000 -22.9%
Santa Barbara Jul-07 $878,120 $572,500 -34.8%
Central Valley: All Below Prior Peak
SERIES: Median Price of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
RegionPeak
Month
Peak
PriceAug-18
%Chg Fr
PeakSacramento County Aug-05 $394,450 $369,950 -6.2%
Madera County Feb-08 $275,000 $254,900 -7.3%
Placer County Aug-05 $527,990 $475,000 -10.0%
Fresno County Jun-06 $313,500 $280,000 -10.7%
San Joaquin County Jun-06 $426,830 $380,000 -11.0%
Tulare County Dec-05 $269,710 $239,000 -11.4%
Stanislaus County Sep-05 $370,100 $319,900 -13.6%
San Benito County May-05 $671,190 $575,000 -14.3%
Kings County Mar-06 $268,050 $227,750 -15.0%
Merced County Oct-05 $344,610 $288,396 -16.3%
Kern County Jun-06 $299,920 $247,000 -17.6%
Glenn County Feb-07 $312,500 $225,500 -27.8%
Bay Area: All But Contra Costa & Solano
SERIES: Median Price of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Region
Peak
Month
Peak
Price Aug-18%Chg Fr
Peak
San Francisco May-07 $972,010 $1,550,000 59.5%
Santa Clara Oct-07 $865,000 $1,295,000 49.7%
San Mateo Oct-07 $1,020,000 $1,500,000 47.1%
Alameda May-07 $709,420 $960,000 35.3%
Bay Area May-07 $789,250 $935,000 18.5%
Marin Jun-07 $1,149,390 $1,222,500 6.4%
Napa Jun-07 $729,170 $752,500 3.2%
Sonoma Jan-06 $650,330 $670,000 3.0%
Contra Costa May-07 $698,420 $650,000 -6.9%
Solano Jun-07 $492,800 $455,000 -7.7%
III. Shift
CA Consumer Poll: Sept 2018
SERIES: 2018 Google Consumer PollSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®Do you think it's a good time to buy a home in California? (n=300)
Do you think it's a good time to sell a home in California? (n=300)
22%
78%
Yes No
Do you think it's a good time to buy ahome in California?
57%
43%
Yes No
Do you think it's a good time to sell ahome in California?
Inventory is Growing
SERIES: Unsold Inventory Index of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
3.3
0
2
4
6
8
10
12
14
16
18
Jan
-05
Jun
-05
No
v-0
5
Ap
r-0
6
Se
p-0
6
Feb
-07
Jul-0
7
De
c-0
7
Ma
y-0
8
Oc
t-08
Ma
r-09
Au
g-0
9
Jan
-10
Jun
-10
No
v-1
0
Ap
r-1
1
Se
p-1
1
Feb
-12
Jul-1
2
De
c-1
2
Ma
y-1
3
Oc
t-13
Ma
r-14
Au
g-1
4
Jan
-15
Jun
-15
No
v-1
5
Ap
r-1
6
Se
p-1
6
Feb
-17
Jul-1
7
De
c-1
7
Ma
y-1
8
Shift Started in January 2018; Tipped in April
SERIES: Growth in Active ListingsSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
17.2%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
+ 17.2 % Active Listings in August
Biggest Gains At Low End
SERIES: Unsold Inventory Index of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
7.0%
8.0%
7.0%
3.5%2.9%
2.4%
0.5%0.0%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Under $300K $300-$500K $500-750K $750-1000K $1-1.5M $1.5-2M $2-$3M $3M +
Active Listings Growth
Discrepancies Point to Weaker DemandWhere did the buyers go?
7.0% 8.0% 7.0%
3.5% 2.9% 2.4%0.5% 0.0%
-21.1%
-7.3% -7.0%
0.9%
10.2%8.2%
-1.1%
8.6%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Under $300K $300-$500K $500-750K $750-1000K $1-1.5M $1.5-2M $2-$3M $3M +
Sales vs. Active Listings Growth
Listings Sales
Listings Taking Longer to Sell
SERIES: Median Time of Market of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
20
0
10
20
30
40
50
60
70
80
1/1
/200
5
7/1
/200
5
1/1
/200
6
7/1
/200
6
1/1
/200
7
7/1
/200
7
1/1
/200
8
7/1
/200
8
1/1
/200
9
7/1
/200
9
1/1
/201
0
7/1
/201
0
1/1
/201
1
7/1
/201
1
1/1
/201
2
7/1
/201
2
1/1
/201
3
7/1
/201
3
1/1
/201
4
7/1
/201
4
1/1
/201
5
7/1
/201
5
1/1
/201
6
7/1
/201
6
1/1
/201
7
7/1
/201
7
1/1
/201
8
7/1
/201
8
Median Time on Market (Days)
More Listings With Price Reductions
SERIES: Listing Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
39.9%
4.3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018
Reduced-Price Listings
Share Reduced Median Reduction
Listing & Sale Prices Dropping > $1M
SERIES: Median Price of Existing Condo/TownhomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
-4.5%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
200
70
12
00
70
42
00
70
72
00
71
02
00
80
12
00
80
42
00
80
72
00
81
02
00
90
12
00
90
42
00
90
72
00
91
02
01
00
12
01
00
42
01
00
72
01
01
02
01
10
12
01
10
42
01
10
72
01
11
02
01
20
12
01
20
42
01
20
72
01
21
02
01
30
12
01
30
42
01
30
72
01
31
02
01
40
12
01
40
42
01
40
72
01
41
02
01
50
12
01
50
42
01
50
72
01
51
02
01
60
12
01
60
42
01
60
72
01
61
02
01
70
12
01
70
42
01
70
72
01
71
02
01
80
12
01
80
42
01
80
7
California $1M Homes: Sales vs. List Price GrowthTypically 4-6 month lag
List Price Sales Price
State of the Housing Market -Study of Housing: Insight, Forecast, Trends (S.H.I.F.T)
• C.A.R. has conducted the Annual Housing Market Survey since 1981.
• E-mailed to a random sample of 30,355 REALTORS® throughout CA
• Asked about their most recent transaction (Q2 2018).
• 1,492 valid survey responses, 4.9 percent response rate.
• The margin of error +/- 2.5 percent at a 95 percent confidence level.
Methodology
Case Study: First-Time Buyer in San Francisco
SERIES: 2018 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Buyer’s ProfileAge: 45Marital Status: Married with dependentsIncome: $120,000Down Payment: $150,000Down Payment Source: Sales of personal assets
(other than real property)Reason to Buy: Tired of Renting
Characteristics of HomeSize: 1,200 sq. ftProperty Type: CondominiumLocation: San Francisco CountyPrice: $755,000
“Have you looked into the housingmarket into the Bay Area? It is
RIDICULOUSLY impossiblycompetitive.”*
*Quotes from first-time buyers from the 2018 State of the Consumer Report
“Finding a home I could afford[was the most difficult part ofthe process] – the worst part
about the buying process is thatthe list prices are fake.”*
First Time Buyers: Below LT Trend
34.8%
0%
10%
20%
30%
40%
50%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
% First-Time Home Buyers Long Run Average
Long Run Average = 37.4%
SERIES: 2018 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Affordability: Big Problem for First-Time Buyers
SERIES: 2018 Annual Housing Market SurveySOURCE: California Association of REALTORS®
49%
19%
11%
1%
5%
2%
5%
0%
1%
8%
18%
14%
12%
12%
7%
5%
5%
7%
1%
18%
0% 10% 20% 30% 40% 50% 60%
Housing affordability
Quality of life
Closer to family/relative
Second home
Job change
Shorter commute to work/school
Quality of school
Retired
Quality of community services
Other
First-Time Buyers Repeat Buyers
Q: Primary reason for changing county?
International Buyers: Flat for 3 Years
8%
6%
5%6% 6%
8%
6%
4%
3% 3%3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Q. Was the buyer an international buyer – a person who was a citizen ofanother country who wished to purchase residential real estate in the U.S.?
SERIES: 2018 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
The share of international buyers dropped to the lowest level in at least ten years
Case Study: Seller Leaving California
SERIES: 2018 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Seller’s ProfileAge: 56Marital Status: Married Couple with DependentsIncome: $200,000Yrs. Owned: 25Net cash gain: $1,050,000Reason for selling: Desired larger homeState moving to: Utah
Characteristics of HomeSize: 1,948 sq. ftProperty Type: Single-Family HomeLocation: Los Angeles CountyPrice: $1,175,000
“We doubled the size of our houseand lowered our mortgage
payment.”*
*Lopez, S. (2017) ‘They’re leaving California for Las Vegas for find middle-class lifethat eluded them’. Los Angles Times, 3 December
“L.A would have been my firstchoice, and I didn’t want to have
to leave California. I couldn’tafford to stay there”*
Sellers Aren’t Not Moving
11.5
0
2
4
6
8
10
12
14Years Owned Home Before Selling
Long-Time Homeowners are notmoving as in the past because:
• Low rate on current mortgage• Low property taxes• Capital gains hit• Where can I afford to go?• Why not remodel and stay?
SERIES: 2018 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
29% Of Sellers Moving Out of CaliforniaUp 10% from 2013
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Within the same county 38% 41% 37% 45% 47% 42% 49% 49% 46% 44% 44% 40% 38% 36%
In another county inCalifornia
23% 18% 24% 17% 21% 21% 19% 18% 20% 21% 20% 21% 20% 21%
In another state 31% 28% 29% 27% 19% 20% 20% 22% 19% 22% 22% 25% 28% 29%
Out of US 1% 2% 1% 1% 2% 1% 1% 1% 0% 1% 1% 1% 1% 1%
Don't Know/Not sure 7% 11% 9% 10% 12% 16% 10% 10% 15% 13% 13% 13% 14% 13%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Location of Seller’s New Home
SERIES: 2018 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
IV. New Housing Supply
Permits: CA Not Building Enough
SERIES: California New Housing PermitsSOURCE: Construction Industry Research Board
0
50000
100000
150000
200000
250000
300000
350000
Single Family Multi-FamilyCA HCD Projected
Housing Needs:
180,000/yr.
2017: 112,886 (55,779 sf, 57,107 mf )
2018f: 127,780 (64,900 sf, 62,880 mf)
CA: Less new housing per capita thanother states (2005 – 2016)
SOURCE: U.S. Census Bureau, C.A.R.
3,971
5,592
533
1,142
1,090
559
1,101
California
Texas
Oregon
Washington
New York
Nevada
Arizona
Population Added1,000 People
1,072,121
1,728,257
174,466
374,157
379,019
202,332
416,330
California
Texas
Oregon
Washington
New York
Nevada
Arizona
Housing Units AddedNumber
270
309
327
328
348
362
378
California
Texas
Oregon
Washington
New York
Nevada
Arizona
Ratio of Housing Units Added toPopulation AddedUnits per 1,000 People
+40%
VI. What Are theConsequences?
1. CA is NOT Affordable
California, 1984-2018
Housing Affordability is Off Sharply
SERIES: Housing Affordability Index of Traditional BuyersSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
26%
53%
0%
10%
20%
30%
40%
50%
60%
70%
80%
%O
FH
OU
SEH
OLD
STH
AT
CA
NB
UY
AM
ED
IAN
-PR
ICED
HO
ME
Annual Quarterly
Only Lassen County Beats US Affordability
64
535352515049484847464545454443434242414139383838383737333332302928262625
2322222020201918161614141412
0
10
20
30
40
50
60
70
2018-Q2: % able to purchase median-priced home
SERIES: Housing Affordability Index of Traditional BuyersSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
• Los Angeles
• San Diego
• San Jose
• Oxnard
• San Francisco
Realtor.com 4/18/2018
Least Affordable Metros are in CA
2. CA is Home toRecord Number of
Homeless
#2: Largest Number of Homelessness
SERIES: Estimates of Homeless People in January 2017SOURCE: The U.S. Department of Housing & Urban Development
Estimates of Homeless People – By State, 2017
Top 5 State with Largest Increases(2016 – 2017)
• California 16,136/13.7%
• New York 3,151/3.6%
• Oregon 715/5.4%
• Nevada 435/5.9%
• Texas 426/1.8%
3. CA is Losing Workersto More Affordable
States: Two Step
~750K People Have Left Since 2010
-169,336
-57,563
-24,972
-60,839
-41,362
-104,317
-163,922
-105,210
-180,000
-160,000
-140,000
-120,000
-100,000
-80,000
-60,000
-40,000
-20,000
0
2010 2011 2012 2013 2014 2015 2016 2017
California Net Domestic Migration
Step 1: Coastal to Cheaper Markets
-19,854-21,935
-34,217 -40,361-42,503
-48,609
-65,534
-79,132
-101,914
-124,148
SantaBarbara
Colorado Oregon Washington Kern Nevada (ST) Arizona Texas SanBernardino
Riverside
Coastal Southern California Out Migration (2010-2016)
Elsewhere in CA
Another State
Step 2: Pricing Prior Residents Out of State
-3,575
-5,117
-7,732 -7,970 -8,344
-10,604-10,680
-10,699
-16,374
-17,859
Hawaii Colorado Nevada (ST) Idaho NorthCarolina
Utah Georgia Kern County Arizona Texas
Inland Empire Out Migration(2010-2016)
Elsewhere in CA
Another State
4. CA soon to be amajority renter state
54.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Ne
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ork
Ca
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Okla
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Homeownership Rate
California: 2nd lowest in nation
SERIES: Homeownership RatesSOURCE: U.S. Census Bureau (Current Population Survey)
5. CA is pricing itself outof its future
Q: What needs to bedone?
A: Build More Housing
Lakewood CA 1950
Global Capitals Do Density
#10 Shanghai
#69 Paris
#27 Mexico City#35 Rio de Janerio
#43 London
Source: citymayors.com
#90 Los Angeles
#104 San Francisco/Oakland
#107 San Jose
#119 Honolulu
#120 Las Vegas
#121 Miami
U.S. Cities Ranked by Density
Global Ranking 1-125www.citymayors.com
The Forecast
What do YOU think?
• E-mail survey to 866 members of the Board of Directors.
• There were 451 survey responses, equivalent to a response rate of52.1%.
• The margin of error for this survey was ±3.2% at a 95% confidence level.
• Field dates: October 1- 8, 2018
Methodology
SERIES: 2018 Director’s SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Which choice best applies to your one-year outlookfor California home values? (n=441)
SERIES: 2018 Director’s SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
One-Year Outlook
25%
38%
37%
There is risk to the upside
There is risk to the downside
The risk is balanced
Which choice best applies to yourfive-year outlook for California home values? (C.A.R.n=437, Pulsenomics n=112)
SERIES: 2018 Director’s SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
5-Year Outlook: Directors more optimistic
25%
40%
34%
17%
55%
28%
There is risk to the upside
There is risk to the downside
The risk is balanced
C.A.R. DirectorsPulsenomics Experts
What’s your outlook for the number oftransactions in California next year? (n=443)
SERIES: 2018 Director’s SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2019 Sales Forecast?
3%
37%
29%27%
4%
Down downdown
Down slightly Flat Up slightly Up a lot
When do you expect Californiahousing market conditions to shift decidedlyin favor of home buyers? (C.A.R. n=438, Pulsenomics US n= 98, West n=91)
SERIES: 2018 Director’s SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
When Will Market Conditions Shift?
30%
8%
27%23%
6%
1%4%
2%6%
8%
14%
28%
20%
14%
10%
5%7%
13%
43%
18%
6%9%
Shiftedalready
Prior toyear-end
2018
2019 2020 2021 2022 Sometimeafter 2022
Never
C.A.R. Directors
Pulsenomics West
Pulsenomics United States
What is the price of an entry-level homein your market? (n=438)
SERIES: 2018 Director’s SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Entry Level Home Price
5%
16%
25%28%
17%
10%
The prevailing rate for a 30-year fixed rate mortgage is 4.75. What do you expect it to beOne year from now? (C.A.R. n=425, Pulsenomics n=100)At the time you expect the current business cycle will reach its peak?(C.A.R. n=374, Pulsenomics n=94)
SERIES: 2018 Director’s SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Expected Rate for a 30-Year FRM
1 year:C.A.R. Directors: 5.25%Pulsenomics Experts: 5.00%
At cycle peak:C.A.R. Directors: 6.00%Pulsenomics Experts: 5.25%
U.S. Economic Outlook
SERIES: U.S. Economic OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2013 2014 2015 2016 2017 2018p 2019f
US GDP 1.7% 2.4% 2.6% 1.6% 2.3% 3.0% 2.4%
Nonfarm Job Growth 1.7% 1.9% 2.1% 1.8% 1.4% 1.6% 1.3%
Unemployment 7.4% 6.2% 5.3% 4.9% 4.4% 3.9% 3.7%
CPI 1.5% 1.6% 0.1% 1.4% 2.0% 2.5% 2.4%
Real Disposable Income, % Change -1.4% 2.7% 3.4% 2.7% 2.1% 2.8% 2.6%
30-Yr FRM 4.0% 4.2% 3.9% 3.6% 4.0% 4.7% 5.2%
California Economic Outlook
SERIES: CA Economic OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2013 2014 2015 2016 2017 2018p 2019f
Nonfarm Job Growth 3.0% 2.2% 2.7% 2.3% 1.6% 2.0% 1.4%
Unemployment 8.9% 7.5% 6.2% 5.5% 4.8% 4.3% 4.3%
CA Population (Million) 38.4 38.7 39.1 39.4 39.6 39.9 40.2
Population Growth 0.9% 1.0% 0.8% 0.6% 0.8% 0.7% 0.7%
Real Disposable Income, % Change -2.1% 5.6% 3.9% 1.6% 1.6% 2.4% 3.0%
California Housing Market Outlook
SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2013 2014 2015 2016 2017 2018p 2019f
SFH Resales (000s) 414.9 382.7 409.4 417.7 424.1 410.5 396.8
% Change -5.9% -7.8% 7.0% 2.0% 1.5% -3.2% -3.3%
Median Price ($000s) $407.2 $446.9 $476.3 $502.3 $538.0 $575.8 $593.4
% Change 27.5% 9.8% 6.6% 5.4% 7.2% 7.0% 3.1%
Housing AffordabilityIndex
36% 30% 31% 31% 29% 28% 25%
30-Yr FRM 4.0% 4.2% 3.9% 3.6% 4.0% 4.7% 5.2%
• Listings are up & prices are favorable for sellers
• Call frustrated potential buyers and tell them the goodnews
• Rates are rising – don’t wait
• Provide sellers a teachable moment
• Know where people are moving and why and work yourreferral network
• Get involved in the political process – this is your future
Opportunities
Read This: California’s Housing Future