2015 Economic Forecast Appraisal Institute Sacramento Sierra Chapter Presented By John Schleimer,...

2015 Economic Forecast

Appraisal Institute

Sacramento Sierra Chapter

Presented ByJohn Schleimer, MIRM

President, Market Perspectives

Residential Real Estate

Source: US Census Bureau

Source: Moody’s Analytics

Source: Moody’s Analytics

Source: US Bureau of Labor Statistics

Sources: US Census Bureau, NAHB

Rank Q4 2016Bottom 20%

20% to 40%

40% to 60%

60% to 80%

Top 20%

The Long Road Back to Normal

< 75%

76% - 80%

81% - 93%

94% - 101%

102% <

Relative to Normal

This map shows how the states rank in the return to more normal levels of housing production.By the end of 2016, the top 40% will be back to near normal production levels.The bottom 20% will be below 75% of normal production.

Sacramento RegionNew Home Sales

Source: The Gregory Group New Home Database

Inconsistent Sales:

4Q14 6513Q14 6082Q14 8081Q14 6724Q13 3823Q13 5822Q13 7241Q13 770

2000 = 12,216

2004 = 17,155

2011 = 1,668

2012 = 2,782

2014 = 2,739

Sacramento RegionNew Home Inventory

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

4th-

99

2nd-

00

4th-

00

2nd-

01

4th-

01

2nd-

02

4th-

02

2nd-

03

4th-

03

2nd-

04

4th-

04

2nd-

05

4th-

05

2nd-

06

4th-

06

2nd-

07

4th-

07

2nd-

08

4th-

08

2nd-

09

4th-

09

2nd-

10

4th-

10

2nd-

11

4th-

11

2nd-

12

4th-

12

2nd-

13

4th-

13

2nd-

14

4th-

14

0

50

100

150

200

250

300

350

400

450

500

New-Home Unsold Inventory Number of Projects

Source: The Gregory Group New Home Database

From 375 active projects in 2007 to just over 100 today

Sacramento RegionNew Home Pricing

Source: The Gregory Group New Home Database

2000 median price = $261,900

2005 median price = $459,900 or up 76%

2011 median price = $295,970 or down 36%

2014 median price - $417,880 or up 41% from trough and 10% from 2005 high

Source: MLS, The Gregory Group

NUMBER OF LISTINGS VERSUS NUMBER OF SALESSACRAMENTO REGION

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

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-14Number of Listings Number of Sales

Existing home sales down 6% from 2013 to 2104

Source: MLS, The Gregory Group

MONTHS OF INVENTORYSACRAMENTO REGION

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

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

Months of Inventory

Inventory remaining low means seller’s market

but puts pressure on pricing

Source: MLS, The Gregory Group

REO SALES/SHORT SALES/NON-DISTRESSED SALESSACRAMENTO REGION

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

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

REO Sales Short Sales Non-Distressed Sales

Distressed property sales trending positively…down half from 2013

Existing home market is affordable alternative to new homes

• National price average between a new home to similar resale is 15%

• Current Sacramento area average difference is 26%

“Drivers” of Housing Markets

• Non-farm job growth

Recent MSA Non-Farm Job Growth

790

800

810

820

830

840

850

860

870

880

890

2011 2012 2013 2014

• 2012 at 18,800• 2013 at 22,600• 2014 estimate at

18,500

“Drivers” of Housing Markets

• Non-farm job growth

• Good paying jobs

“Drivers” of Housing Markets

• Non-farm job growth

• Good paying jobs

• Good consumer confidence

“Drivers” of Housing Markets

• Non-farm job growth

• Good paying jobs

• Good consumer confidence

• Immigrating households

“Drivers” of Housing Markets

• Non-farm job growth

• Good paying jobs

• Good consumer confidence

• Immigrating households

• Housing affordability

Affordability Score Card

• Sacramento = 48%

• Placer = 44%

• San Francisco = 15%

• California = 30%

• United States = 57%

Source: CAR, 3rd quarter 2014

Let’s see what John’s crystal ball

says about the housing market for

2015

2015 Concerns…

• New home sales remain inconsistent at 3,000±

2015 Concerns…

• New home sales remain inconsistent at 3,000±

• Land and lot prices remain too high

2015 Concerns…

• New home sales remain inconsistent at 3,000±

• Land and lot prices remain too high

• Affordability becoming more of an issue – especially for new homes

2015 Concerns…

• New home sales remain inconsistent at 3,000±

• Land and lot prices remain too high

• Affordability becoming more of an issue

• Resale market about the same at 25,000± sales

2015 Concerns…

• When will the Millennials become home buyers?

2015 Concerns…

• When will the Millennials become home buyers?

• Will household incomes start to grow?

2015 Positives…

• Synergism of downtown, the railyard and West Sacramento

2015 Positives…

• Synergism of downtown, the railyard and West Sacramento

• Re-opening of North Natomas

2015 Positives…

• Synergism of downtown, the railyard and West Sacramento

• Re-opening of North Natomas

• Expansion of West Roseville

2015 Positives…

• Synergism of downtown, the railyard and West Sacramento

• Re-opening of North Natomas

• Expansion of West Roseville

• 55+ housing market

Questions?