2015 CALIFORNIA ECONOMIC & MARKET OUTLOOK March 11, 2015 Palm Springs AOR Leslie Appleton-Young, Chief Economist

2015 CALIFORNIA ECONOMIC & MARKET OUTLOOK

March 11, 2015Palm Springs AOR

Leslie Appleton-Young, Chief Economist

OVERVIEW

• Macro-Economic Outlook

• California Housing Market Outlook

• Focus: Housing Affordability

• Regional Market Stats

• 2015 Forecast

• In closing…

ECONOMIC OUTLOOK

2005

2007

2009

2011

2013

Q2-10

Q4-10

Q2-11

Q4-11

Q2-12

Q4-12

Q2-13

Q4-13

Q2-14

Q4-14

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

ECONOMIC GROWTH SO-SO

GDP: 2014: 2.4%; 2014 Q4: 2.2% 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

SERIES: Components of GDPSOURCE: US Dept. of Commerce, Bureau of Economic Analysis

COMPONENTS OF GDP

Consumption Fixed Nonres. Investment

Net Exports Government-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

Q1 2014

Q2 2014

ANNUAL PERCENT CHANGE

CONFIDENCE FALTERS IN FEBUARY

February 2015: 96.4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

150

20

40

60

80

100

120INDEX, 100=1985

SERIES: Consumer ConfidenceSOURCE: The Conference Board

CONSUMER PRICE INDEX

January 2015: All Items -0.2% YTY; Core +1.6% YTY

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6% All Items Core


SERIES: Consumer Price IndexSOURCE: US Bureau of Labor Statistics

UNEMPLOYMENT RATES AT 7-YEAR LOWS

CA (Jan. 2015): 6.9% vs. US (Feb. 2015): 5.5%

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14% US-CA CA US

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

LABOR FORCE PARTICIPATION RATE DOWN

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

2007-2010 LOST JOBS REPLACED: JAN 2014

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4-8

-6

-4

-2

0

2

4 California US


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

JOB LOSSES IN PRIOR RECESSIONS - RECENT CYCLE WORST BY FAR

BAY AREA LEADS THE STATE IN NEW JOBS

Modesto

Los Angeles

Sacramento

Orange County

Fresno MSA

San Francisco

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%

1.5%

1.5%

1.7%

2.0%

2.0%

2.2%

2.3%

2.4%

2.7%

3.3%

3.7%

4.0%

SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division


December 2014: CA +2.1%, +320,300

CONSTRUCTION JOB GROWTH REMAINS STRONG

Finance & InsuranceNondurable Goods

Educational ServicesGovernment

Durable GoodsRetail Trade

Real Estate & Rental & LeasingTransportation, Warehousing & Utilities

Wholesale TradeInformation

Leisure & HospitalityHealth Care & Social Assistance

ConstructionProfessional, Scientific & Technical Services

Admistrative & Support & Waste Services

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

-1.1%-0.8%

-0.4%-0.2%

0.8%1.0%

2.0%2.1%

2.2%2.8%

3.2%3.8%

4.0%4.3%

5.3%

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

December 2014: CA +2.1%, +320,300ANNUAL PERCENT CHANGE

NONFARM EMPLOYMENT BY REGION

Dec 2014 Dec 2013 Change % Change

Southern California 8,741.4 8,562.3 179.1 2.1%

Bay Area 4,263.0 4,192.4 70.6 1.7%

Central Valley 1,515.3 1,481.8 33.5 2.3%

Central Coast 1,289.7 1,265.0 24.7 2.0%

North Central 1,376.1 1,331.6 44.5 3.3%

CALIFORNIA 297.3 291.5 5.8 2.0%

Nonfarm Employment (Thousands)

SERIES: Total Nonfarm EmploymentSOURCE: CA Employment Development Division

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

Jan-05 Dec-05 Nov-06 Oct-07 Sep-08 Aug-09 Jul-10 Jun-11 May-12 Apr-13 Mar-140%

1%

2%

3%

4%

5%

6%

7%

8% FRM ARM Federal Funds

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

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

Jan-05Jul-0

5

Jan-06Jul-0

6

Jan-07Jul-0

7

Jan-08Jul-0

8

Jan-09Jul-0

9

Jan-10Jul-1

0

Jan-11Jul-1

1

Jan-12Jul-1

2

Jan-13Jul-1

3

Jan-14Jul-1

4$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

MORTGAGE RATES DEFIED FORECASTERS IN 2014

• January 2009 – December 2014

2009

/01

2009

/05

2009

/09

2010

/01

2010

/05

2010

/09

2011

/01

2011

/05

2011

/09

2012

/01

2012

/05

2012

/09

2013

/01

2013

/05

2013

/09

2014

/01

2014

/05

2014

/09

11.0

6.14

12.0

4.14

0%

1%

2%

3%

4%

5%

6%

FRMARM

MONTHLY WEEKLY

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

IS THERE A 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 SurveySOURCE: Philadelphia Federal Reserve Survey of Professional Forecasters, Bloomberg

CREDIT AVAILABILITY UP VERYSLIGHTLY

http://blog.metrotrends.org/wp-content/uploads/2015/01/FigOne1.jpg

CALIFORNIA HOUSING MARKET OUTLOOK

MARKET & MEMBERSHIP DISCONNECT

1970-2014

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

0

50,000

100,000

150,000

200,000

250,000Home Sales Membership

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

2014 SALES OFF 7.6%; JAN ‘15 LOWEST SINCE 2008

California, Jan. 2015 Sales: 351,890 Units, -2.7% YTD, -2.7% YTY

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15 -

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®

Jan-15: 351,89

0

Jan-14: 361,79

0

WHAT DOES A HOUSING RECOVERY LOOK LIKE?

Jan-

09

Apr-0

9

Jul-0

9

Oct-0

9

Jan-

10

Apr-1

0

Jul-1

0

Oct-1

0

Jan-

11

Apr-1

1

Jul-1

1

Oct-1

1

Jan-

12

Apr-1

2

Jul-1

2

Oct-1

2

Jan-

13

Apr-1

3

Jul-1

3

Oct-1

3

Jan-

14

Apr-1

4

Jul-1

4

Oct-1

40%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

90.5%

4.8%

4.3%

Equity Sales Short Sale REO

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

REO & SHORT SALES

Percent of Total Sales, Southern California: Dec 2014

Los Angeles Orange Riverside San Bernardino

San Diego0%

2%

4%

6%

8%

10%

12%

14%

16%

2% 2%

7%

9%

2%

7%

4%

5%

5%

4%

REO Sales Short Sales

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

SOURCE: California Association of REALTORS®

REO & SHORT SALES: SOUTHERN CALIFORNIA(PERCENT OF TOTAL SALES)

Los AngelesOrange

RiversideSan

Bernardino San Diego

0%

20%

40%

60%

80%

100%

20%12%

35% 49%

19%

24%

20%

26%14%

8%

Aug 2011

Short SalesREO Sales

RIVERSIDE COUNTY

Preforeclosure: 1,907 • Auction: 1,147 • Bank Owned: 601

SOURCE: PropertyRadar on 03/09/15

RIVERSIDE COUNTY



RIVERSIDE COUNTY



PALM SPRINGS MARCH 2015

Preforeclosure: 42 • Auction: 24 • Bank Owned: 13


PALM SPRINGS MARCH 2011

Source: ForeclosureRadar.com as of 03/29/11


LA QUINTA



CATHEDRAL CITY



ANNUAL PRICE GAINS CONTINUE TO DROP

California, Jan. 2015: $426,790, -5.9% MTM, +3.4% YTY

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15 $-

$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% frompeak

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

Jan-15: $426,79

0

Jan-14: $412,82

0

PRICE PER SQUARE FOOT

January 2015: $203, Down 3.5% MTM, Up 1.8% YTY

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15$0

$50

$100

$150

$200

$250

$300

$350

$400PRICE PER SQ. FT.

SERIES: Median Price Per Square FeetSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

PRICE GAINS DOWN SHARPLY SINCE MID 2013

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50% Condo Single-Family Homes

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

YTY% Chg. in Price

INVENTORY IMPROVING BUT STILL LOW

Jan 2015: 5.0 Months; Jan 2014: 4.3 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 HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

INVENTORY RISING ACROSS THE BOARD

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) Jan-15 Dec-14 Jan-14

$1,000K+ 7.6 4.3 6.9

$750-999K 5.5 3.1 5.0

$500-749K 4.9 3.0 4.1

$400-499K 4.7 3.0 4.0

$300-399K 4.9 3.2 4.0

$200-299K 4.5 3.3 4.0

$0-199K 4.5 3.4 4.0

SERIES: Unsold Inventory Index of Existing Single Family HomesSOURCE: 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- MLS (aka “pocket’) listings not being

counted in listing stats

REGIONAL & LOCAL HOUSING MARKETS

RIVERSIDE COUNTY

SALES OF RESIDENTIAL HOMES

Riverside County, February 2015: 2,017 Units Up 1.5% MTM, Up 22.4% YTY

SOURCE: Clarus Market Metrics

MEDIAN PRICE OF RESIDENTIAL HOMES

Riverside County, February 2015: $296,000Up 5.7% MTM, Up 9.6% YTY


FOR SALE PROPERTIES

Riverside County, February 2015: 15,239 Units Down 0.9% MTM, Up 37.4% YTY


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.

MONTH’S SUPPLY OF INVENTORY

Riverside County, February 2015: 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.

PALM SPRINGS


Palm Springs, February 2015: 112 Units Down 6.7% MTM, Down 1.8% YTY



Palm Springs, February 2015: $277,500Down 6.7% MTM, Down 9.8% YTY


FOR SALE PROPERTIES

Palm Springs, February 2015: 1,022 UnitsUp 4.7% MTM, Up 7.0% YTY




Palm Springs, February 2015: 3.5 Months



LA QUINTA


La Quinta, February 2015: 91 Units Up 18.2% MTM, Down 24.8% YTY



La Quinta, February 2015: $405,000Down 12.5% MTM, Up 11.0% YTY


FOR SALE PROPERTIES

La Quinta, February 2015: 1,179 UnitsUp 1.7% MTM, Up 5.1% YTY




La Quinta, February 2015: 7.2 Months



CATHEDRAL CITY


Cathedral City, February 2015: 51 Units Up 18.6% MTM, Up 37.8% YTY



Cathedral City, February 2015: $225,500Up 0.2% MTM, Up 15.6% YTY


FOR SALE PROPERTIES

Cathedral City, February 2015: 414 Units Down 0.7% MTM, Down 0.5% YTY




Cathedral City, February 2015: 3.6 Months



ANNUAL HOUSING MARKET SURVEY:

2014 FINDINGS

MULTIPLE OFFERS DECLINE - LESS INTENSE MARKET COMPETITION

AFTER PEAKING IN 2013

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

70%

80%

0

1

2

3

4

5

6

772%

53%5.7

4.3

% with Multiple Offers# of Multiple offers (Average)

SERIES: 2014 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

50%

33%

% of Sales above Asking Price

Long Run Average = 19%

FEWER HOMES SOLD ABOVE THE ASKING PRICE AS MARKET COMPETITION COOLED IN

2014

QUESTION: What was the original list sales price of the property? What was the final sales price of the property? SERIES: 2014 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

49 % SOLD BELOW ASKING IN 2014

20% or more

10% to 19.99%

5% to 9.99%

Less than 5%

0% 10% 20% 30% 40% 50% 60%

7%

11%

28%

54%

% 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

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

0%

5%

10%

15%

20%

25%

$70,000

20%

Median Down Payment % of Down Payment to Price

Q. What was the amount of downpayment?

20% REMAINS THE MEDIAN DOWN PAYMENT


INVESTMENT BUYERS DROPPING : 15% MARKET SHARE

19992000200120022003200420052006200720082009201020112012201320140%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20% 19%

15%

Long Run Average: 12 %


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

2013: 18%

2014: 30%

2013: 82%

2014: 70%

Investment to Flip

Rental Property


Property Management & Investment Section

Provides residential and small multi-family property management professionals with:

E-newsletter with the latest legal, market and industry newsSpecial discountsNetworking opportunities and more

Annual

subscripti

on only

$39

Join TODAY! http://www.car.org/members/pmi/

.

http://www.car.org/members/pmi/

http://www.car.org/members/pmi/

HOUSING AFFORDABILITY:CRISIS BREWING

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

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

28.1%30.5%

% First-Time Home Buyers Long Run Average

Long Run Average = 38%

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

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 BuyersSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

19841986

19881990

19921994

19961998

20002002

20042006

20082010

2012

Q2 2012

Q4 2012

Q2 2013

Q4 2013

Q2 20140%

10%

20%

30%

40%

50%

60%

70%

80% CA USAnnual Quarterly

HOMEOWNERSHIP RATE FALLING

California Vs. U.S.

40%

45%

50%

55%

60%

65%

70%

75%

53.7%

Peak: 60.2%

54.9%

64.5%

Peak: 69.0%

64.8%

CA US

SERIES: Homeownership RatesSOURCE: U.S. Census Bureau

MILLENNIAL HOMEOWNERSHIP FALLING

SOURCE: Census Bureau

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

P $-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000 California US

CA PRICES UPWARD MARCH WILL SLOW

1970-2014



CA V. US REAL PRICE GAP: $10K TO $246K

1970-2014


1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

p $-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000 California US

$10K to $246


2014 Dollar Value

INCOME TO BUY MEDIAN-PRICED HOME IN CA:

UP SHARPLY IN TWO

2012 Q1 2014 Q2$0

$20,000

$40,000

$60,000

$80,000

$100,000

$56,324

$93,593• 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 IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

REASONS FOR RENTING INSTEAD OF BUYING

Can't afford to buy

Renting is easier

Flexibility/Freedom if renting

Plan to / Saving for down

Disabled/On disability

44%

9%

6%

6%

6%

5%

5%

3%

2%

SERIES: 2013 Renter SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

DOWN PAYMENT RESOURCE DIRECTORYDOWNPAYMENT.CAR.ORG

Down Payment Resource™ Homeownership Program

Index’s Key Findings:

·Over 300 programs in California

·59% provide direct down payment

& closing cost assistance

·10% provide mortgage credit up

to $2,000 for the life of the loan

·26% are available to repeat

buyers

There are hundreds of homeownership programs available to help motivate buyers. Visit

downpayment.car.org to find them.

STUDENT LOAN DEBT:25% OF RENTERS

Yes; 23%No; 75%

Refused; 2%

Student Loan Debt

SERIES: 2013 Renter SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

<$10,000

$10-$20K

$20-$50K

$50-$100K

> $100K

Refused

78%

8%

6%

3%

2%

2%

Amount of Debt

STUDENT DEBT: DRAGS ON HOME SALES

CALIFORNIA’S HOUSING DILEMMA

• 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 and rising rents

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

CA PERMITS UP BUT MORE UNITS NEEDED

2014p: 83,000 (43,000 sf, 40,000 mf)2015f: 101,000 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

2015 FORECAST

U.S. ECONOMIC OUTLOOK 2014 - 2015

2009 2010 2011 2012 20132014p 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 OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

CALIFORNIA ECONOMIC FORECAST

SERIES: CA Economic OutlookSOURCE: 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

2009 2010 2011 2012 2013 20142015f

SFH Resales (000s) 474.9 416.5 422.6 439.8 414.9 383.3 402.5

% Change 24.5% -12.3% 1.4% 4.1% -5.9% -7.6% 5.0%

Median Price ($000s) $275.0 $305.0 $286.0 $319.3 $407.2 $447.0 $478.7

% Change -21.1% 10.9% -6.2% 11.6% 27.5% 9.8% 7.1%Housing Affordability Index 51% 48% 53% 51% 36% 30% 27%

30-Yr FRM 5.0% 4.7% 4.5% 3.7% 4.0% 4.3% 4.5%

SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

CA: DOLLAR VOLUME UP FOR 4TH YEAR

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014p 2015f$0

$50

$100

$150

$200

$250

$300

$350

$400

-40%

-30%

-20%

-10%

0%

10%

20%

30%

$301

$244

$164 $133 $131 $127 $121

$140 $169 $173

$193

$ Volume of Sales Percent Change

% Change$ in Billion

-60%

SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Up 2.7% in 2014, Up 11.3% in 2015

INTERNATIONAL BUYERSMAKE 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?

India

Japan

Mexico

Canada

China/Hong Kong

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

3.8%

4.7%

8.3%

14.2%

34.8%

INTENDED USE FOR PROPERTY? HOME

Other

Vacation/Second Home

Investment/Rental Property

Primary Residence

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

4%

27%

38%

30%

0%

2%

7%

91%

US BuyerInternational Buyer

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

ALL CASH INTERNATIONAL BUYERS

International buyers Traditional buyers0%

20%

40%

60%

80%

100%

69%

27%

31%

73%

All cash Obtained financing

SOURCE: 2013 International Client Survey, 2013 Annual Housing Market SurveyHow 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?

I rent I live with my parents

I own I live in a dorm

Other:0%

5%

10%

15%

20%

25%

30%

35%

40%

45%41%

36%

20%

1%1%

SERIES: 2014 Millennials SurveySOURCE: 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 SurveySOURCE: 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

Positive Negative Neutral N/A Other0%

10%

20%

30%

40%

50%

60%50%

34%

8%4%

4%

MOST MILLENNIALS UNCERTAIN/DOUBTFUL THAT THEY 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 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

2015 Book Recommendations

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=jMxi2rU-JJN-uM&tbnid=p12cPd9vb62KoM:&ved=0CAcQjRw&url=http://entrepreneurship.columbia.edu/events/1110/&ei=bngtVPDOHdfnoATA7YA4&bvm=bv.76802529,d.cGU&psig=AFQjCNF6JQJAhkxnJG57Pu8jQRlYQSEzNg&ust=1412352489898814

THE MIRACLE OF FLIGHT

• https://www.youtube.com/watch?v=b3dYS7PcAG4

• http://www.cc.com/video-clips/1myllo/stand-up-louis-ck--the-miracle-of-flight

https://www.youtube.com/watch?v=b3dYS7PcAG4

https://www.youtube.com/watch?v=b3dYS7PcAG4

http://www.cc.com/video-clips/1myllo/stand-up-louis-ck--the-miracle-of-flight



STAY CONNECTED WITH RESEARCH

CARResearchGroup

CARResearchInfo

On.car.org/CARResearch

Housingmatters.car.org

THANK YOU!

www.car.org/[email protected]

This presentation can be found on www.car.org/marketdata

Speeches & Presentations

mailto:[email protected]

Documents

2015 CALIFORNIA ECONOMIC & MARKET OUTLOOK March 11, 2015 Palm Springs AOR Leslie Appleton-Young, Chief Economist