2014 - 2015 california economic & Market Forecast€¦ · 2015 CALIFORNIA ECONOMIC & MARKET OUTLOOK January 21,2015 Laguna Association of Realtors Leslie Appleton-Young, Chief Economist

2015 CALIFORNIA ECONOMIC & MARKET OUTLOOK

January 21,2015

Laguna Association of Realtors

Leslie Appleton-Young, Chief Economist

OVERVIEW

• Macro-Economic Outlook

• California Housing Market Outlook

• Housing Affordability

• Regional Market Stats

• 2015 Forecast

ECONOMIC OUTLOOK

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

Q1-

10

Q2

-10

Q3-

10

Q4

-10

Q1-

11

Q2

-11

Q3-

11

Q4

-11

Q1-

12

Q2

-12

Q3-

12

Q4

-12

Q1-

13

Q2

-13

Q3-

13

Q4

-13

Q1-

14

Q2

-14

Q3-

14

GROSS DOMESTIC PRODUCT

2013: 1.9%; 2014 Q3: 5.0%

ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $

ANNUALLY QUARTERLY

2009 Largest Annual Drop since 1938 (-3.4%)

SERIES: GDP SOURCE: US Dept. of Commerce, Bureau of Economic Analysis

PERSONAL CONSUMPTION

2014 Q3: 3.2%

-6%

-4%

-2%

0%

2%

4%

6%QUARTERLY PERCENT CHANGE

SERIES: Personal Consumption SOURCE: US Dept. of Commerce, Bureau of Economic Analysis

UNEMPLOYMENT RATE FALLING

December 2014: US 5.6% & CA 7.2%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14% US-CA CA US

SERIES: Unemployment Rate SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

EMPLOYMENT GROWTH, CA & U.S.

-8

-6

-4

-2

0

2

4 California US

ANNUAL PERCENT CHANGE

SERIES: Total Nonfarm Employment SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

JOB LOSSES IN PRIOR RECESSIONS - RECENT CYCLE WORST BY FAR

NONFARM EMPLOYMENT BY REGION

Nov 2014 Nov 2013 Change % Change

Southern California 8,721.2 8,553.1 168.1 2.0%

Bay Area 3,555.6 3,441.0 114.6 3.3%

Central Valley 2,068.4 2,021.6 46.8 2.3%

Central Coast 514.4 503.9 10.5 2.1%

North Central 139.4 137.7 1.7 1.2%

CALIFORNIA 15,650.5 15,306.4 344.1 2.2%

Nonfarm Employment (Thousands)

SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

CA JOB TRENDS – BAY AREA LEADS

1.4%

1.8%

2.1%

2.1%

2.2%

2.2%

2.6%

2.6%

2.8%

3.2%

3.6%

3.8%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

Los Angeles

Ventura

Modesto

Stockton MSA

Bakersfield

Orange County

Fresno MSA

Sacramento

Oakland

San Diego

San Francisco

San Jose

SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division


November 2014: CA +2.2%, +344,100

CONSTRUCTION WORKERS IN DEMAND

-1.0%

-0.5%

-0.1%

0.7%

0.9%

1.4%

1.9%

2.7%

2.9%

2.9%

3.4%

3.6%

4.3%

6.2%

6.4%

-2% -1% 0% 1% 2% 3% 4% 5% 6% 7%

Nondurable GoodsFinance & Insurance

GovernmentDurable Goods

Retail TradeTransportation, Warehousing & Utilities

Real Estate & Rental & LeasingWholesale Trade

Educational ServicesInformation

Leisure & HospitalityHealth Care & Social Assistance

Professional, Scientific & Technical ServicesAdmistrative & Support & Waste Services

Construction

SERIES: Total Nonfarm Employment By Industry SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

November 2014: CA +2.2%, +344,100 ANNUAL PERCENT CHANGE

CPI REMAINS SUBDUED

December 2014: All Items +.8% YTY; Core +1.6% YTY

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6% All Items Core


SERIES: Consumer Price Index SOURCE: US Bureau of Labor Statistics

MORTGAGE RATES UP 1% IN MID-2013 SIX YEARS OF 0% FED FUNDS RATE

0%

1%

2%

3%

4%

5%

6%

7%

8% FRM ARM Federal Funds

SERIES: 30Yr FRM, 1Yr ARM, Federal Funds SOURCE: Federal Home Loan Mortgage Corporation

MORTGAGE RATES

• January 2009 – December 2014

0%

1%

2%

3%

4%

5%

6%

20

09

/01

20

09

/04

20

09

/07

20

09

/10

20

10/0

1

20

10/0

4

20

10/0

7

20

10/1

0

20

11/0

1

20

11/0

4

20

11/0

7

20

11/1

0

20

12/0

1

20

12/0

4

20

12/0

7

20

12/1

0

20

13/0

1

20

13/0

4

20

13/0

7

20

13/1

0

20

14/0

1

20

14/0

4

20

14/0

7

20

14/1

0

11.0

6.1

4

11.2

7.14

12.1

8.1

4

FRM

ARM

MONTHLY WEEKLY

SERIES: 30Yr FRM, 1Yr ARM SOURCE: Federal Home Loan Mortgage Corporation

FORECAST BIAS FOR RISING RATES

Percent

0

1

2

3

4

5

6

0

1

2

3

4

5

6

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Actual 10-year Treasury yield (solid black line)

Predictions out to five quarters ahead of professional forecasters (hatched lines)

Percent

SERIES: Loan Officer Survey SOURCE: Philadelphia Federal Reserve Survey of Professional Forecasters, Bloomberg

CONSUMER CONFIDENCE INDEX

December 2014: 92.6

0

20

40

60

80

100

120INDEX, 100=1985

SERIES: Consumer Confidence SOURCE: The Conference Board

U.S. DEPOSITORY INSTITUTIONS: HIGH LEVEL OF EXCESS RESERVES SINCE 9/08

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

SERIES: Excess Reserves of Depository Institutions SOURCE: Federal Reserve Bank of Saint Louis

$ BILLIONS

U.S. ECONOMIC OUTLOOK 2014 - 2015

2009 2010 2011 2012 2013 2014p 2015f

US GDP -3.4% 2.4% 1.8% 2.8% 1.9% 2.5% 3.0%

Nonfarm Job Growth -4.4% -0.7% 1.2% 1.7% 1.7% 2.0% 2.3%

Unemployment 9.3% 9.6% 8.9% 8.1% 7.4% 6.2% 5.6%

CPI -0.4% 1.6% 3.1% 2.1% 1.5% 1.5% 1.6%

Real Disposable

Income, % Change 0.9% 1.8% 1.3% 1.5% 0.7% 2.4% 2.4%

SERIES: U.S. Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

CALIFORNIA ECONOMIC FORECAST

SERIES: CA Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Nonfarm Job Growth

Unemployment Rate

Population Growth

Real Disposable Income, % Change

2011

1.1%

11.8%

0.7%

1.9%

2012

2.4%

10.4%

0.7%

1.1%

2013

3.0%

8.9%

0.9%

0.9%

2014 P

2.2%

7.5%

0.9%

3.0%

2015 F

2.4%

6.7%

0.9%

3.8%

CALIFORNIA HOUSING MARKET OUTLOOK

CALIFORNIA’S HOUSING CYCLES AND MEMBERSHIP

1970-2014

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

0

50,000

100,000

150,000

200,000

250,000

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

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

14p

Home Sales Membership

*Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2014 HOME SALES DOWN 7.6%

California, Dec. 2014 Sales: 366,000 Units, -7.6% YTD, +0.6% YTY

-

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 Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Dec-14: 366,000

Dec-13: 363,740

SHARE OF EQUITY SALES REMAINED STEADY AT THE HIGHEST LEVEL SINCE LATE 2007

90.5%

4.8%

4.3% 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

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

Equity Sales Short Sale REO

SERIES: Distressed Sales, Not Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

ORANGE COUNTY

Preforeclosure: 1,210 • Auction: 1,009 • Bank Owned: 226

SOURCE: PropertyRadar on 1/20/14

ORANGE COUNTY



ORANGE COUNTY



LAGUNA BEACH

Preforeclosure: 17 • Auction: 3 • Bank Owned: 4


IRVINE



NEWPORT BEACH



MEDIAN PRICE OF EXISTING DETACHED HOMES

California, Dec. 2014: $452,570, +1.7% MTM, +3.1% YTY

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000 P: May-07 $594,530

T: Feb-09 $245,230 -59% from peak

SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Dec-14: $452,570

Dec-13: $444,830

PRICE GAINS DOWN SHARPLY SINCE MID 2013

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50% Condo Single-Family Homes

SERIES: Sales of SFH and Condo Units SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

YTY% Chg. in Price

INVENTORY IMPROVING FROM LAST YEAR

Dec 2013: 3.0 Months; Dec 2014: 3.3 Months

Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.

0

2

4

6

8

10

12

14

16

18

SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

UNSOLD INVENTORY INDEX (MONTHS)

Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.

Price Range (Thousand) Dec-14 Nov-14 Dec-13

$1,000K+ 4.3 5.5 4.3

$750-999K 3.1 4.2 3.2

$500-749K 3.0 4.1 2.7

$400-499K 3.0 3.9 2.6

$300-399K 3.2 4.2 2.8

$200-299K 3.3 4.3 3.0

$0-199K 3.4 4.5 3.1

SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

WHERE IS THE INVENTORY?

– Investors renting instead of flipping –Mortgage Lock-In Effect –Where will I go? – Foreclosure pipeline is dry –New construction recovering but LOW – Off-market (aka “pocket’) listings not eing

counted in listing stats

PRICE PER SQUARE FOOT

December 2014: $210, Down 1.3% MTM, Up 4.9% YTY

$0

$50

$100

$150

$200

$250

$300

$350

$400

Jan

-07

Ap

r-0

7

Jul-

07

Oct

-07

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

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

PRICE PER SQ. FT.

SERIES: Median Price Per Square Feet SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

SALES-TO-LIST RATIO

December 2014: 97.0%, Down 0.2% MTM, Down 1.2% YTY

97.5%

$1

$1

$1

$1

$1

$1

$1

$1

$1

Jan

-07

Ap

r-0

7

Jul-

07

Oct

-07

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

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

PRICE PER SQ. FT.

SERIES: Median Price Per Square Feet SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

ANNUAL HOUSING MARKET SURVEY:

2014 FINDINGS

MULTIPLE OFFERS DECLINE - LESS INTENSE MARKET COMPETITION

AFTER PEAKING IN 2013

72%

53% 5.7

4.3

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

% with Multiple Offers # of Multiple offers (Average)

SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

49 % SOLD BELOW ASKING IN 2014

7%

11%

28%

54%

0% 20% 40% 60%

20% or more

10% to 19.99%

5% to 9.99%

Less than 5%

% of Price Reduction (Properties Sold Below Asking Price)

49%

18%

33%

Sale Price to Asking Price

Below Asking Price At Asking Price Above Asking Price


Median Reduction: 4.5% of List Price

INVESTMENT BUYERS DROPPING : 15% MARKET SHARE

19%

15%

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

Long Run Average: 12 %


BUYING TO RENT V. FLIP; CHANGE IN PREFERRED INVESTMENT STRATEGY

Investment to Flip

Rental Property


REGIONAL & LOCAL HOUSING MARKETS

ORANGE COUNTY

MEDIAN PRICE OF RESIDENTIAL HOMES

Orange County, December 2014: $565,000

Down 1.9% MTM, Up 2.7% YTY

SOURCE: Clarus Market Metrics

SALES OF RESIDENTIAL HOMES

Orange County, December 2014: 2,177 Units

Up 13.0% MTM, Down 2.6% YTY, Down 8.7% YTD


FOR SALE PROPERTIES

Orange County, December 2014: 8,225 Units

Down 17.0% MTM, Down 7.7% YTY


MONTH’S SUPPLY OF INVENTORY

Orange County, December 2014: 3.1 Months


Note: “Month’s Supply of Inventory” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “For Sale” on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month.

LAGUNA BEACH


Laguna Beach, December 2014: $1,875,000

Up 17.7% MTM, Up 28.5% YTY



Laguna Beach, December 2014: 31 Units

Down 13.9% MTM, Down 8.8% YTY, Down 1.9% YTD


FOR SALE PROPERTIES

Laguna Beach, December 2014: 217 Units




Laguna Beach, December 2014: 6.3 Months



IRVINE


Irvine, December 2014: $749,000

Up 4.1% MTM, Up 12.4% YTY



Irvine, December 2014: 177 Units

Up 1.1% MTM, Up 1.7% YTY, Down 10.3% YTD


FOR SALE PROPERTIES

Irvine, December 2014: 689 Units




Irvine, December 2014: 2.9 Months



NEWPORT BEACH


Newport Beach, December 2014: $1,525,000

Up 15.5% MTM, Up 5.2% YTY



Newport Beach, December 2014: 67 Units

Up 8.1% MTM, Down 2.9% YTY, Down 4.7% YTD


FOR SALE PROPERTIES

Newport Beach, December 2014: 354 Units

Down 15.7% MTM, Up 1.4% YTY



Newport Beach, December 2014: 6.0 Months



LA JOLLA


La Jolla, December 2014: 56 Units

Up 33.3% MTM, Up 3.7% YTY, Down 6.4% YTD



La Jolla, December 2014: $1,282,500

Up 28.3% MTM, Down 15.3% YTY


FOR SALE PROPERTIES

La Jolla, December 2014: 321 Units


Note: “For Sale Properties” represents the overall supply that exist throughout the entire month, including any listings that appear as “Active” any point in time during the month.



La Jolla, December 2014: 4.6 Months



CARMEL


Carmel, December 2014: 16 Units

Down 23.8% MTM, Down 20.0% YTY, Up 21.1% YTD



Carmel, December 2014: $1,013,500



FOR SALE PROPERTIES

Carmel, December 2014: 128 Units


Note: “For Sale Properties” represents the overall supply that exist throughout the entire month, including any listings that appear as “Active” any point in time during the month.



Carmel, December 2014: 5.9 Months



HOUSING AFFORDABILITY

REAL ENEMY OF THE FUTURE OF CALIFORNIA?

• Housing Affordability

• The Achilles Heel of the California Economy

• What happens when housing costs are too high?

• Impact on jobs and economic growth

• Impact on neighborhoods and family stability

HOUSING AFFORDABILITY DOWN SHARPLY SINCE Q1 2012

California vs. U.S. – 1984-2014

% OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME

SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

0%

10%

20%

30%

40%

50%

60%

70%

80% CA USAnnual Quarterly

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000 California US

CA PRICES UPWARD MARCH WILL SLOW

1970-2014

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

HOUSING AFFORDABILITY INDEX

What Will Happen When MORTGAGE RATES Increase?

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%

35% 34%

32% 29% 27% 26%

24% 22%

Q2-2014 Median Price $457,140

20% Down payment

INTEREST RATE

% OF HOUSEHOLDS THAT CAN BUY, ALL ELSE CONSTANT

SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

INCOME REQUIRED TO BUY A MEDIAN-PRICED HOME IN CA: (PEAK VS. CURRENT)

$56,324

$93,593

$0

$20,000

$40,000

$60,000

$80,000

$100,000

2012 Q1 2014 Q2

• Change in minimum required income: $37,269

• Increase in income attributed to interest rate increase: $836 (2.2% of total change)

• Increase in income attributed to price increase : $36,433 (97.8% of total change)

SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

SHARE OF FIRST-TIME BUYERS UP IN ’14 BUT STILL BELOW LONG-RUN AVERAGE

28.1% 30.5%

0%

10%

20%

30%

40%

50%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

% First-Time Home Buyers Long Run Average

Long Run Average = 38%

QUESTION: Was the buyer a first-time buyer? SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

WHY DO WE CARE ABOUT LOW LEVEL OF FIRST-TIME BUYERS?

• It signals a constrained flow of new households in the housing market

• Trade-up market cannot be replenished in the long run

• First-time buyers represent the main impulse that drives the state’s homeownership rate

AVERAGE AGE OF BUYERS RISING

40 41 41 41 44

41 40 38 37 36 35

38

48

0

10

20

30

40

50

60

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Average Age

Q. What is your age?

CA BUYERS: MINORITIES THE MAJORITY

White 36%

Hispanic 26%

Black 12%

Asian/Pacific Islander 26%

Q. How would you describe your ethnic background?

$70,000

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

Median Down Payment % of Down Payment to Price

Q. What was the amount of downpayment?

20% REMAINS THE MEDIAN DOWN PAYMENT


BUYERS DIDN’T PURCHASE SOONER BECAUSE…

57% • Not many good housing options

53% • Waited to see when prices would stabilize

36% • No real buying urgency

30% • Difficulty qualifying for mortgage

21% • Needed to sell existing home

20% • Needed to save for down payment

15% • Waited until finances improved

Q. Why didn’t you buy a home sooner?

SERIES: 2014 Home Buyer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

REASONS FOR RENTING INSTEAD OF BUYING

44%

9%

6%

6%

6%

5%

5%

3%

2%

Can't afford to buy

Poor credit / Can't qualify

Renting is easier

Young/Starting out/Not ready

Flexibility/Freedom if renting

Cost/Upkeep/Responsibility

Plan to / Saving for down

Never considered it/No interest

Disabled/On disability

SERIES: 2013 Renter Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

STUDENT LOAN DEBT:25% OF RENTERS

Yes, 23%

No, 75%

Refused, 2%

Student Loan Debt

SERIES: 2013 Renter Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

78%

8%

6%

3%

2%

2%

<$10,000

$10-$20K

$20-$50K

$50-$100K

> $100K

Refused

Amount of Debt

STUDENT DEBT: DRAGS ON HOME SALES

HOMEOWNERSHIP RATE LOWER IN CA

California Vs. U.S.

40%

45%

50%

55%

60%

65%

70%

75% CA US

SERIES: Homeownership Rates SOURCE: U.S. Census Bureau

MILLENNIAL HOMEOWNERSHIP FALLING

SOURCE: Census Bureau

CALIFORNIA’S HOUSING DELIMMA

• Even with everything (or at least most things) going right, our homeownership market is in trouble…

• The rental market, even with the conversion of 500,000 SFH’s, is still exhibiting inadequate supply

• CA Housing Needs = Minimally 165,000 Units Annually – Regulatory Problem – Impact Fees – Public Attitudes

CA PERMITS UP BUT MORE UNITS NEEDED

2013: 57,496 Units, Up 43.0% from 2012

SERIES: New Housing Permits SOURCE: Construction Industry Research Board

0

50000

100000

150000

200000

250000

300000

350000 Single Family Multi-Family

Household Growth: 220,000-250,000/yr

SERIES: New Housing Permits SOURCE: Construction Industry Research Board

NEW HOUSING PERMITS

California, August. 2014: 5,810 Units, Down 2.1% YTD

0

5,000

10,000

15,000

20,000

25,000

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

Single Family Multi-Family

2015 FORECAST

CALIFORNIA HOUSING MARKET FORECAST

SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

SFH Resales (000s)

% Change

Median Price ($000s)

% Change

Housing Affordability Index

30-Yr FRM

2011

422.6

1.4%

$286.0

-6.2%

53%

4.5%

2012

439.8

4.1%

$319.3

11.6%

51%

3.7%

2013

413.3

-5.8%

$407.2

27.5%

36%

4.0%

2014 P

380.5

-8.2%

$455.0

11.8%

30%

4.3%

2015 F

402.5

5.8%

$478.7

5.2%

27%

4.5%

CALIFORNIA HOUSING MARKET OUTLOOK

Sales Down for 2014 but will Improve in 2015; Price Gains Slowing

Units (Thousand)

380 403

0

100

200

300

400

500

600

700

2005 2007 2009 2011 2013 2015f

Th

ou

san

ds

Sales of Existing Detached Homes

$455

$479

$0

$100

$200

$300

$400

$500

$600

2005 2007 2009 2011 2013 2015f

Th

ou

san

ds

Median Price Price

(Thousand)


CA: DOLLAR VOLUME UP FOR 4TH YEAR

$301

$244

$164

$133 $131 $127 $121 $140

$169 $173 $193

-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 2014p 2015f

$ Volume of Sales Percent Change

% Change $ in Billion

-60%


Up 2.7% in 2014, Up 11.3% in 2015

INTERNATIONAL BUYERS MAKE THEIR MARK

1/3 FROM CHINA

Please tell us about your last closed transaction with an international client. What is your client’s country of permanent residence?

3.8%

4.7%

8.3%

14%

35%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

India

Japan

Mexico

Canada

China/Hong Kong

WHY INTERNATIONAL CLIENTS BUY

5%

5%

5%

7%

12%

14%

18%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20%

Investment to acquire legal permenant U.S.resident status

Tired of renting

Affordable price

Desired a better/other location

Changed jobs/relocated

To rent out property

Investment/tax advantages in U.S.

What was your clients’ main reason for buying/selling now in your last closed transaction with an international client?

WHY U.S. CLIENTS BUY

7.0%

7.0%

9.0%

10.0%

12.0%

38.0%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Promotion/raise

Tired of renting

Investment/Tax advantage

Desired better/other location

Favorable price/financing

Price decreases

What was your clients’ main reason for buying/selling now in your last closed transaction with an international client?

INTENDED USE FOR PROPERTY? HOME

4%

27%

38%

30%

0%

2%

7%

91%

0% 20% 40% 60% 80% 100%

Other

Vacation/Second Home

Investment/Rental Property

Primary Residence

US Buyer

International Buyer

What was the intended use of the property in your last closed transaction with an international client?

ALL CASH INTERNATIONAL BUYERS

0%

20%

40%

60%

80%

100%

International buyers Traditional buyers

69%

27%

31%

73%

All cash Obtained financing

SOURCE: 2013 International Client Survey, 2013 Annual Housing Market Survey How did your last international buyer pay for the property?

MILLENNIALS: TOMORROW’S HOME OWNERS?

OVER 1/3 LIVE WITH THEIR PARENTS

What is your current living situation?

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

I rent I live with myparents

I own I live in a dorm Other:

41%

36%

20%

1% 1%

SERIES: 2014 Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

MILLENNIALS’ BIGGEST CONCERNS

What are your biggest concerns about home ownership?

Price/Affordability (45%)

Problems with Credit, Mortgages, or Taxes (19%)

Maintenance/Upkeep (14%)

Satisfaction with Home/Location (7%)

Responsibility (4%)

SERIES: 2014 Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

ATTITUDE TOWARD THE HOME BUYING PROCESS – MIXED RESULTS

SOURCE: How would you describe your attitude towards the home buying process?

C.A.R. 2014 Millennial Survey

0%

10%

20%

30%

40%

50%

60%

Positive Negative Neutral N/A Other

50%

34%

8% 4%

4%

MOST MILLENNIALS UNCERTAIN/DOUBTFUL THAT THEY COULD OBTAIN A MORTGAGE

NOW?AMILLENNIAL ETHNICITY

SOURCE: C.A.R. 2014 Millennial Survey Q: Could you obtain a mortgage if you applied now ?

Yes 22%

No 33%

Don't know 45%

PEOPLE WOULD PREFER THE FOLLOWING OVER GOING THROUGH THE HOME MORTGAGE PROCESS AGAIN:

SOURCE: Guaranteed Rate Mortgage Survey of 1,000 adults 25 and older USA Today April 2014

1. Fabulous choices

2. Mortgage rates are historically low and make buyer’s affordability higher than ever.

3. Your own motivation.

4. Tax write-off (You can get a federal tax credit) instead of giving it to the IRS or landlord.

5. Life style change.

6. Seller’s equity has increased.

7. Builders are offering big discounts.

8. Buying is still cheaper than renting.

9. Seller’s time to down size or upgrade life style.

Can we help?

Why buy or sell a house now:

Documents

2014 - 2015 california economic & Market Forecast€¦ · 2015 CALIFORNIA ECONOMIC & MARKET OUTLOOK January 21,2015 Laguna Association of Realtors Leslie Appleton-Young, Chief Economist