2019 Economic & Market Forecast - Constant Contactfiles.constantcontact.com/6b92f51a201/c337c667-1aa...2019 Economic & Market Forecast San Francisco Association of Realtors November

2019 Economic & Market Forecast

San Francisco Association of Realtors

November 15, 2018

Leslie Appleton-Young

SVP & Chief Economist

Value of Strategic Thinking:

“You will be surprised by the future, but you won’t be surprised

that you are surprised”

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 Adjusted

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2018

Macro Economic Update

3.5%

GDP 2018-Q3

1.7%

Job Growth

October 2018

3.7%

Unemployment

October 2018

Consumption

2018-Q3Core CPI

September 2018

2.2%4.0%

U.S. Economy: Our Biggest Strength

3.5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2005 2008 2011 2014 2017 Q1-11 Q4-11 Q3-12 Q2-13 Q1-14 Q4-14 Q3-15 Q2-16 Q1-17 Q4-17 Q3 -18

An

nu

al P

erc

en

t C

ha

ng

e,

Ch

ain

-typ

e (

20

09

) $

GDP - 2017: 2.3%; 2018 Q3: 3.5%

Growth Reflects Strong Fiscal Stimulus

ANNUALLY QUARTERLY

2009 Largest Annual Drop since 1946 (-2.8%)

SERIES: GDP

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

CA Employment: All-Time High

2.0%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

Ja

n-1

1

Ju

n-1

1

No

v-1

1

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r-12

Se

p-1

2

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b-1

3

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l-1

3

De

c-1

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4

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t-1

4

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r-15

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g-1

5

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6

Ju

n-1

6

No

v-1

6

Ap

r-17

Se

p-1

7

Fe

b-1

8

Ju

l-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

Ja

n-0

0

Fe

b-0

1

Ma

r-02

Ap

r-03

Ma

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4

Ju

n-0

5

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6

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g-0

7

Se

p-0

8

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9

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1

Ja

n-1

3

Fe

b-1

4

Ma

r-15

Ap

r-16

Ma

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7

Ju

n-1

8

California Nonfarm Employment

2.1%

2.2%

2.2%

2.4%

2.4%

2.5%

2.8%

2.8%

2.9%

3.2%

3.5%

3.5%

3.6%

3.9%

4.8%

9.1%

9.6%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

San Mateo

Marin

San Francisco

Santa Clara

Sonoma

Napa

Orange

Alameda

Contra Costa

San Diego

Solano

Santa Cruz

Sacramento

Monterey

Los Angeles

Fresno

Kern

Unemployment Lowest in 40+ Years

SERIES: Civilian Unemployment Rate

SOURCE: CA Employment Development Division

September 2018 Unemployment Rates

October 2018: 137.9

Consumer Confidence Highest in 18 Years

137.9

0

20

40

60

80

100

120

140

160

IND

EX

, 1

00

=1

985

SERIES: Consumer Confidence

SOURCE: The Conference Board

September 2018: All Items 2.3% 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

al P

erc

en

t C

ha

ng

e

All Items Core

SERIES: Consumer Price Index

SOURCE: US Bureau of Labor Statistics

Rates in 2018: 30 Yr. Now Above 5%1st Time since 2011

SERIES: Average 30 Yr. Fixed Mortgage Rates

SOURCE: Mortgage News Daily

Nov 5: 5.05%

January 2012 – November 2018

Fed Has Raised rates 8 Times Since Dec 2015

4.63 4.83

3.94 4.04

2.00 2.25

0

1

2

3

4

5

6

FRM

ARM

Fed Funds Rate

Fed Raise Ratethe 1st time since mid-2006

SERIES: 30Yr FRM, 5Yr ARM, Fed Funds Rate (Target Rate)

SOURCE: Freddie Mac, St. Louis Fed

MONTHLY WEEKLY

5.10%

Bankrate

RISING Rates Hit Pocketbooks Hard

Median Price $595K

20% Downpayment

INTEREST RATE

MONTHLY MORTGAGE

SERIES: Housing Affordability Index


$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%

RISING Rates Hit Pocketbooks Hard

Median Price $595K

20% Downpayment

SERIES: Housing Affordability Index


Minimum Qualifying Income

INTEREST RATE

$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%

• Fiscal stimulus wears off

• Global growth outlook weakening

• US growth outpacing global growth – strong dollar hurts emerging market economies

• Trade wars/Immigration restrictions (H-1B visas)

• Stock market sell-off – could impact financial conditions that slow growth

• Markets hate uncertainty

Concerns Going Forward

• 19th largest economy - $748B GDP

• Per capital GDP = $80,000 Highest of any similar MSA

• 4.3% growth over last 3 years -- 2X as fast as U.S.

• +26% employment growth since last recession

• 750,000 tech workers as of July 2017

• July 2016-July 2017• Net outflow o 45,670 to other parts of U.S.

• Net inflow of 58,156 form outside of the U.S.

Bay Area Economic Profile

California Realtors& Their Industry

C.A.R. Membership Up & Sales Flat

0

50,000

100,000

150,000

200,000

250,000

0

100,000

200,000

300,000

400,000

500,000

600,000

197

1

197

3

197

5

197

7

197

9

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

201

3

201

5

201

7

Home Sales

MembershipSales Peaks: 1978, 1988, 2004-05, 2009Membership Peaks: 1980, 1990, 2006, 2018

1972 Peak: 10.4

2007 Trough: 2.8

2016: 4.4

2017: 4.2

0

2

4

6

8

10

12

Nu

mb

er

of

Tra

nsa

ctio

ns

Long Run Average: 6.5

Member Productivity is Low½ What It Was in 1972

CA Housing Market:“A Shift is Afoot”

CA Buyers On the Sidelines

SERIES: 2018 Google Consumer Poll

SOURCE: 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 a

home in California?

57%

43%

Yes No

Do you think it's a good time to sell a

home in California?

• Sales: 397,060 down for 6 consecutive months

• YTD down 3.7%

• Below 400,000 for the last three

• Price: $572,000 gains in mid-single digits

• Unsold inventory 3.6 months

October Market Snapshot

CA October 2018 Sales: 397,060 Units, -3.7% YTD, -7.9% YTY

October Sales Off 7.9% YTY6 months of 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 Homes


Oct-18:

397,060Oct-17:

431,070

CA: Declining Trend in Home Sales

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17

Year-over-Year % Chg 6 per. Mov. Avg. (Year-over-Year % Chg)


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are seasonally adjusted and annualized

Bay Area Sales Down 3% from Last Year

-3.0%

-30%

-20%

-10%

0%

10%

20%

30%

Yo

Y %

ch

g.

Bay Area 6 per. Mov. Avg. (Bay Area)


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are not seasonally adjusted and annualized

October 2018 (Year-to-Year)

Sales Declined in Sub-Million Dollar Markets

-20.6%

-11.1%-6.6%

-8.5%

-2.1% -2.2%

1.6%

19.1%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

SERIES: Sales of Existing Detached Homes


Bay Area: 4 Counties are up YTDbut not by much

SERIES: Median Price of Existing Detached Homes


Region Oct-17 Oct-18 YTD % Chg. YTY% Chg.

Alameda 981 897 1.9% -8.6%

Contra Costa 946 851 -2.4% -10.0%

Marin 170 202 2.4% 18.8%

Napa 80 104 -1.3% 30.0%

San Francisco 230 242 -0.6% 5.2%

San Mateo 378 429 0.3% 13.5%

Santa Clara 878 827 6.6% -5.8%

Solano 424 333 -7.5% -21.5%

Sonoma 349 416 -2.2% 19.2%

Bay Area 4,436 4,301 -2.4% -3.0%

California, October 2018: $572,000, -1.2% MTM, +4.7% YTY

Home Prices Still Rising – Gains Moderating

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000P:May-07

$594,530

T: Feb-09

$245,230

-59% from

peak

Oct-18:

$572,000Oct-17:

$546,430

SERIES: Median Price of Existing Single Family Homes


October 2018: $282, Down 0.0% MTM, Up 4.4% YTY

Price Per Square Increased from Last Year, but Virtually Unchanged from September

$0

$50

$100

$150

$200

$250

$300

$350

$400

PR

ICE P

ER

SQ

. FT.

Oct-18:

$282Oct-17:

$270

SERIES: Median Price Per Square Feet of Existing Single Family Homes


October 2018: 98.1%, -0.4% MTM, -0.8% YTY

Sales Price -to-List Price Hit the Lowest Level in 21 Months

90%

92%

94%

96%

98%

100%

Sa

les-

to-L

ist P

ric

e R

ati

o

Oct-18:

98.1%

Oct-17:

98.9%

SERIES: Sales to List Ratio of Existing Single Family Homes


Bay Area: Peak v. Current Price



Region

Peak

Month

Peak

Price Oct-18%Chg Fr

Peak

Alameda May-07 $709,420 $900,000 26.9%

Contra Costa May-07 $698,420 $657,000 -5.9%

Marin Jun-07 $1,149,390 $1,450,000 26.2%

Napa Jun-07 $729,170 $709,500 -2.7%

San Francisco May-07 $972,010 $1,600,000 64.6%

San Mateo Oct-07 $1,020,000 $1,588,000 55.7%

Santa Clara Oct-07 $865,000 $1,290,000 49.1%

Solano Jun-07 $492,800 $430,000 -12.7%

Sonoma Jan-06 $650,330 $650,000 -0.1%

Bay Area May-07 $789,250 $958,800 21.5%

So Cal: Orange & SD Above Prior Peak



RegionPeak

Month

Peak

PriceAug-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



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



RegionPeak

Month

Peak

PriceAug-18

%Chg Fr

Peak

Sacramento 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%

October 2017: 3.0 Months; October 2018: 3.6 Months

Inventory Index Dipped in October

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.

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

SERIES: Unsold Inventory Index of Existing Single Family Homes


Unsold Inventory by County

2.1

2.63.0

5.0

1.9 1.9

2.4

3.4 3.3

0

1

2

3

4

5

6A

lam

ed

a

Co

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Na

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Sa

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So

lan

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So

no

ma

Un

sold

In

ve

nto

ry I

nd

ex

Oct-17 Oct-18

SERIES: UII of Existing Single Family Homes


Active Listings: Up 7th Consecutive Month

SERIES: Active Listing of Existing Single Family Homes


28.0%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Year-over-Year % Chg

Housing Supply Improved Across the Board, Except Low-End

Oct 2018

SERIES: Active Listings of Existing Single Family Homes


-6.2%

14.5%

31.7%

43.9%40.1%

30.7%

9.1%

28.0%

-10%

0%

10%

20%

30%

40%

50%

Active Listing

Inventory Index Highest in Millions

SERIES: Unsold Inventory Index of Existing Single Family Homes


3.12.8 2.7 2.7

3.22.4

3.6 3.7

4.6

9.4

3.0

3.4 3.3 3.4 3.54.0

3.1

4.2 4.04.6

8.2

3.6

0

1

2

3

4

5

6

7

8

9

10Unsold Inventory Index

Oct-17 Oct-18

Share of Listings with a Reduced Price: 43.6%; Median Reduction Amount: -4.4%

Reduced-Price Listings Rise With Actives

SERIES: Listing Price of Existing Single Family Homes


43.6%

4.4%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1/1

/201

0

4/1

/201

0

7/1

/201

0

10/1

/20

10

1/1

/201

1

4/1

/201

1

7/1

/201

1

10/1

/20

11

1/1

/201

2

4/1

/201

2

7/1

/201

2

10/1

/20

12

1/1

/201

3

4/1

/201

3

7/1

/201

3

10/1

/20

13

1/1

/201

4

4/1

/201

4

7/1

/201

4

10/1

/20

14

1/1

/201

5

4/1

/201

5

7/1

/201

5

10/1

/20

15

1/1

/201

6

4/1

/201

6

7/1

/201

6

10/1

/20

16

1/1

/201

7

4/1

/201

7

7/1

/201

7

10/1

/20

17

1/1

/201

8

4/1

/201

8

7/1

/201

8

10/1

/20

18

Reduced-Price Listings

Median Reduction

California, October 2018: 26.0 Days

Days on Market Rising as Market Slows

0

10

20

30

40

50

60

70

80

DA

YS O

N M

AR

KET

SERIES: Median Time of Market of Existing Single Family Homes


Days on Market by County

15.0 16.0

22.0

41.0

15.012.0 14.0

39.0

47.5

0

10

20

30

40

50

60

70A

lam

ed

a

Co

ntr

a

Co

sta

Ma

rin

Na

pa

Sa

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Fra

nc

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Sa

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o

Sa

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Cla

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So

lan

o

So

no

ma

Da

ys

on

Ma

rke

t

Oct-17 Oct-18

SERIES: Days on Market of Existing Single Family Homes


“At some point a supply problem becomes a demand problem.”

Joel Singer, CEO C.A.R. 2017

San Francisco Bay Area

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

SF Bay Area, Oct. 2018 Sales: 4,301 Units, -2.4% YTD, -3.0% YTY

Sales of Existing Detached Homes



Bay Area: Sales off 2.4% YTD



Region Oct-17 Oct-18 YTD % Chg. YTY% Chg.

Alameda 981 897 1.9% -8.6%

Contra Costa 946 851 -2.4% -10.0%

Marin 170 202 2.4% 18.8%

Napa 80 104 -1.3% 30.0%

San Francisco 230 242 -0.6% 5.2%

San Mateo 378 429 0.3% 13.5%

Santa Clara 878 827 6.6% -5.8%

Solano 424 333 -7.5% -21.5%

Sonoma 349 416 -2.2% 19.2%

Bay Area 4,436 4,301 -2.4% -3.0%

SF Bay Area, October 2018: $958,800, Up 7.9% YTY

Median Price of Existing Detached Homes

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

SERIES: Median Price of Existing Single Family Homes


SF Bay Area, October 2018: 2.5 Months

Unsold Inventory Index

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Note: The Unsold Inventory Index represents the number of months it would take to deplete the remaining inventory at the end

of a particular month with the sales rate of the month in consideration. Inventory includes listings with “Active”, “Pending”, and “Contingent” (when available) statuses.

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

SF Bay Area, October 2018: 26 Days

Median Time on the Market

0.0

10.0

20.0

30.0

40.0

50.0

60.0

SERIES: Median Time of Market of Existing Single Family Homes


San Francisco & Marin

• Sales tapering

• Price gains moderating

• Active listings increasing

• Price reductions increasing

• Time on market increasing

What’s Up? From Great to Good

Up YTD in SF, but Softening Recently

SERIES: Home Sales


0

100

200

300

400

500

600

Ja

n-0

9

Ap

r-09

Ju

l-0

9

Oc

t-0

9

Ja

n-1

0

Ap

r-10

Ju

l-1

0

Oc

t-1

0

Ja

n-1

1

Ap

r-11

Ju

l-1

1

Oc

t-1

1

Ja

n-1

2

Ap

r-12

Ju

l-1

2

Oc

t-1

2

Ja

n-1

3

Ap

r-13

Ju

l-1

3

Oc

t-1

3

Ja

n-1

4

Ap

r-14

Ju

l-1

4

Oc

t-1

4

Ja

n-1

5

Ap

r-15

Ju

l-1

5

Oc

t-1

5

Ja

n-1

6

Ap

r-16

Ju

l-1

6

Oc

t-1

6

Ja

n-1

7

Ap

r-17

Ju

l-1

7

Oc

t-1

7

Ja

n-1

8

Ap

r-18

Ju

l-1

8

San Francisco Home Sales (SF + Condo)

(+5.6% YTD)

Existing SFR Condo

Marin Sales Off Slightly YTD

SERIES: Home Sales


0

50

100

150

200

250

300

350

Marin County Home Sales (SF + Condo)

(-1.4% YTD)

Existing SFR Condo

SF is 2/3 of SF/Marin Market

SERIES: Home Sales


San Francisco

63%

San Rafael

9%

Novato

9%

Mill Valley

5%

San Anselmo

2%

Tiburon

2%Sausalito

1%

Corte

Madera

1%Fairfax

1%

Greenbrae

1%

Larkspur

1%

Kentfield

1%

Belvedere

1%Ross

1%

Other

5%

2018 Home Sales

City Performance is Mixed

SERIES: Home Sales


5.6%3.7%

-6.9%

0.0%1.7%

-5.9%

-23.7%

-18.3%

-4.5%

17.0%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

San

Francisco

San Rafael Novato Mill Valley San

Anselmo

Tiburon Sausalito Corte

Madera

Fairfax Greenbrae

Year-to-Date Sales Growth by City

“Affordable” Segment VERY Thin (11%)

$500K & Below

3%

$500-

$750K

8%

$750-$1M

18%

$1-$2M

51%

$2-$3M

13%

$3M +

7%

2018 Home Sales

Bottom End Struggling, High End Slowing

-26.8%

-22.0%

-12.8%

12.9%

24.9%

10.4%

2.9%

-30%

-20%

-10%

0%

10%

20%

30%

$500K & Below $500-$750K $750-$1M $1-$2M $2-$3M $3M + Total

2018 Sales Growth by Price Range

SF + Marin

Price Growth De-celerating in SF

1,507,500

1,395,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

Ja

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Ja

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Existing Single-Family Median Home Prices

San Francisco Marin

Price Growth De-celerating in SF

1,157,500

682,500

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000Ja

n-0

9

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Condo Median Home Prices

San Francisco Marin

Region Peak Month Peak Price Sep-18 %Chg Fr Peak

San Mateo Oct-07 $1,020,000 $1,600,000 56.9%

San Francisco May-07 $972,010 $1,507,500 55.1%

Santa Clara Oct-07 $865,000 $1,250,000 44.5%

Alameda May-07 $709,420 $900,000 26.9%

Marin Jun-07 $1,149,390 $1,395,000 21.4%

Sonoma Jan-06 $650,330 $654,500 0.6%

California May-07 $594,530 $578,850 -2.6%

Contra Costa May-07 $698,420 $650,000 -6.9%

Napa Jun-07 $729,170 $685,000 -6.1%

Solano Jun-07 $492,800 $451,500 -8.4%

Bay Area Recovery Reflects Job Growth

Most Active Listings in Past 4 Years

0

200

400

600

800

1,000

1,200

1,400

1,600

Active Listings (+22% in September)

Condos Existing SFRs

Increasing Across All Price Points

SERIES: Active Listings of Existing Single Family Homes


-7.0%

45.7%

29.6% 29.7%

46.9%

10.2%

25.6%

-10%

0%

10%

20%

30%

40%

50%

$500K & Below $500-$750K $750-$1M $1-$2M $2-$3M $3M + Total

Growth in Active Listings by Price

Days on Market Hasn’t Risen Yet

23

0

10

20

30

40

50

60

70

80

Ja

n-0

9

Ju

n-0

9

No

v-0

9

Ap

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Fe

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Au

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Ja

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4

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4

Ap

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Se

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Fe

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6

Ju

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6

De

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6

Ma

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7

Oc

t-1

7

Ma

r-18

Au

g-1

8

Median Time on Market

71

39

27

24

1715

23

0

10

20

30

40

50

60

70

80

Under $300K $300-$500K $500-$750K $750-$1M $1-$2M $2-$3M $3M +

Median Time on Market

2017 2018

Smaller Premiums, But Little Discounting

102.1%

92%

94%

96%

98%

100%

102%

104%

106%

108%

110%

Ja

n-0

9

Ma

y-0

9

Se

p-0

9

Jan

-10

Ma

y-1

0

Se

p-1

0

Ja

n-1

1

Ma

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1

Se

p-1

1

Ja

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2

Ma

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2

Se

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2

Ja

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3

Ma

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Ja

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4

Ma

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Ja

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Ma

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5

Se

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Ja

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6

Ma

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6

Se

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Ja

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7

Ma

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7

Se

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7

Ja

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8

Ma

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8

Se

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8

Median Sales/List Price Ratio

100.0%100.0%

100.9%

102.6%

107.2%

105.5%

100.0%

103.7%

96%

98%

100%

102%

104%

106%

108%

2018 Median Sales-to-List Price

Most Active Listings Reduced Since 2011

SERIES: Listing Price of Existing Single Family Homes


42.4%

4.4%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

1/1

/201

0

4/1

/201

0

7/1

/201

0

10/1

/20

10

1/1

/201

1

4/1

/201

1

7/1

/201

1

10/1

/20

11

1/1

/201

2

4/1

/201

2

7/1

/201

2

10/1

/20

12

1/1

/201

3

4/1

/201

3

7/1

/201

3

10/1

/20

13

1/1

/201

4

4/1

/201

4

7/1

/201

4

10/1

/20

14

1/1

/201

5

4/1

/201

5

7/1

/201

5

10/1

/20

15

1/1

/201

6

4/1

/201

6

7/1

/201

6

10/1

/20

16

1/1

/201

7

4/1

/201

7

7/1

/201

7

10/1

/20

17

1/1

/201

8

4/1

/201

8

7/1

/201

8

Reduced-Price Listings

Share Reduced Median Reduction

Fewer Actives Reduced Here, but Rising

55.7%

45.6%

41.8% 41.4%

19.8%

0%

10%

20%

30%

40%

50%

60%

Share of Active Listings Reduced by County

CA v US: Lower Housing Turnover – New Normal?

SERIES: Percent of existing single-family homes being sold

SOURCE: Census Bureau, American Community Survey, Moody’s Analytics, C.A.R.

Housing Turnover Rate

(Single-Family Homes only)

4.6%

5.3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

19

70

19

71

19

72

19

73

19

74

19

75

19

76

19

77

19

78

19

79

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

CA US Linear (CA)

CA turnover rate trend

Sellers Moving Less Frequently

11.5

0

2

4

6

8

10

12

14Years Owned Home Before Selling

SERIES: 2018 Housing Market Survey


5

8

15

30

0 20 40

Millennials

Gen X's

Baby Boomers

Silent

Generations

Older Generations Don’t Move As Often As

Younger Generations

And California Is Not Building Enough

SERIES: California New Housing Permits

SOURCE: 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 building less housing per capita than:AZ, NV, WA, OR, NY(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 Added

1,000 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 Added

Number

270

309

327

328

348

362

378

California

Texas

Oregon

Washington

New York

Nevada

Arizona

Ratio of Housing Units Added to

Population Added

Units per 1,000 People

+40%

“Housing affordability is the Achilles heel of the California Economy”

Joel Singer, CEO C.A.R. 1982

Housing Affordability Peaked at Q1 2012

California, 1984-2018

SERIES: Housing Affordability Index of Traditional Buyers


26%

53%

0%

10%

20%

30%

40%

50%

60%

70%

80%

% O

F H

OU

SEH

OLD

S T

HA

T C

AN

BU

Y A

MED

IAN

-PR

ICED

HO

ME

Annual Quarterly

Housing Affordability In CA: By County

64

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0

10

20

30

40

50

60

70

2018-Q2: % able to purchase median-priced home



Minimum Annual Income Required During Affordability Peak vs. Current

SERIES: Housing Affordability Index of Existing Detached Homes


Region 2012 Q1 2018 Q2 % CHG

CA SFH $56,320 $126,490 124.6%

CA Condo/Townhomes $44,440 $101,270 127.9%

Los Angeles Metropolitan Area $53,780 $112,340 108.9%

Inland Empire $35,170 $76,310 117.0%

S.F. Bay Area $90,370 $219,380 142.8%

US $32,000 $57,020 78.2%

Housing Affordability Still the Main Reason for Outmigration

SERIES: 2018 Annual Housing Market Survey

SOURCE: California Association of REALTORS®

28%

16%

12%

8%

7%

5%

5%

5%

1%

15%

21%

14%

11%

5%

9%

9%

8%

6%

1%

18%

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

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

2018 2017

All Buyers

Q. What was the primary reason for changing county?

It’s a Much Bigger Problem for First-Time Buyers

SERIES: 2018 Annual Housing Market Survey

SOURCE: 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

California Vs. U.S. – 9.5% gap in 2017

Homeownership update – CA inched up from 2016 but remained at low level

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

54.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Ne

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Ca

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Ne

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Homeownership Rate

California still ranked the 2nd lowest amongst all states

SERIES: Homeownership RatesSOURCE: U.S. Census Bureau (Current Population Survey)

Homeownership will deteriorate further if the trend continues

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

Despite the slight bounce back,

homeownership will remain low in

the next couple years due to:

• Interest rate hike

• Price growth

• Low turn-over rates

• Lack of new constructions

• Short-term Costa-Hawkins Repeal

Impact

More Sellers Continue to Move out of California; Highest since 2007

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 in

California23% 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



Case Study: Seller Leaving California



Seller’s Profile

Age: 56

Marital Status: Married Couple with Dependents

Income: $200,000

Yrs. Owned: 25

Net cash gain: $1,050,000

Reason for selling: Desired larger home

State moving to: Utah

Characteristics of Home

Size: 1,948 sq. ft

Property Type: Single-Family Home

Location: Los Angeles County

Price: $1,175,000

“We doubled the size of our house

and lowered our mortgage

payment.”*

*Lopez, S. (2017) ‘They’re leaving California for Las Vegas for find middle-class life

that eluded them’. Los Angles Times, 3 December

“L.A would have been my first

choice, and I didn’t want to have

to leave California. I couldn’t

afford to stay there”*

Where Are We?

1. CA is NOT Affordable

Only Lassen County Beats US Affordability

64

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0

10

20

30

40

50

60

70

2018-Q2: % able to purchase median-priced home



2. CA is Home to Record Number of

Homeless

Largest Number of Homeless People

SERIES: Estimates of Homeless People in January 2017

SOURCE: 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 Workers to 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

-8,559 -9,005-11,659

-12,408-13,053

-15,244

-17,697

-25,843

-30,268

-42,777

Merced Solano Washington Stanislaus Santa Cruz Texas Nevada (ST) Oregon San Joaquin Sacramento

MSA

Core San Francisco Bay Area Out Migration (2010-2016)

Elsewhere in CA

Another State

Step 2: Pricing Prior Residents Out of State

-2,260-2,715 -2,917

-3,596-4,002 -4,029 -4,179

-5,020 -5,127

-8,166

Kentucky Santa Cruz Oklahoma Colorado Sutter &

Yuba

San Luis

Obispo

San

Bernardino

Oregon Idaho Nevada (ST)

Sacramento MSA Out Migration

(2010-2016)

Elsewhere in CA

Another State

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

Santa

Barbara

Colorado Oregon Washington Kern Nevada (ST) Arizona Texas San

Bernardino

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 North

Carolina

Utah Georgia Kern County Arizona Texas

Inland Empire Out Migration

(2010-2016)

Elsewhere in CA

Another State

4. CA will soon be a majority renter state

54.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Ne

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Ca

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Ne

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Arizo

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Ark

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Ka

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Lou

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Mis

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Da

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Min

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Homeownership Rate

California: 2nd lowest in nation

SERIES: Homeownership RatesSOURCE: U.S. Census Bureau (Current Population Survey)

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 ethnicity

SOURCE: 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%

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2017 California Renter Rate by City

Majority Renter Cities

76.0%

50.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

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2017 California Renter Rate by City

Q: What needs to be done?

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 1-125

www.citymayors.com

Case Study: Restrictive Zoning in L.A.

SERIES: Los Angeles Zoned Residential CapacitySOURCE: Morrow (2016), the White House: Housing Development Toolkit

• 1960: Los Angeles zoned to accommodate 10 million people

• Today: LA is zoned for only 4.3 million people after decades of population growth and increase in housing demand.

Los Angeles Zoned Residential Capacity

CA vs US Median Price

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

U.S CA CA Price Trend

SERIES: Median Price of Existing Single-Family Homes


USC Dornsife/LA Times Poll (10/18)

Only 13% of CA voters think too little home building is a primary

contributor to the state’s affordability issues.

The Forecast

U.S. Economic Outlook

SERIES: U.S. Economic Outlook


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 Outlook


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%

CA Housing Market Outlook – Most Likely Case

SERIES: CA Housing Market Outlook


2013 2014 2015 2016 2017 2018p 2019f

SFH Resales (000s) 414.9 382.7 409.4 417.7 424.1 398.4 371.1

% Change -5.9% -7.8% 7.0% 2.0% 1.5% -6.2% -6.9%

Median Price ($000s) $407.2 $446.9 $476.3 $502.3 $538.0 $575.7 $574.5

% Change 27.5% 9.8% 6.6% 5.4% 7.2% 7.0% -0.2%

Housing Affordability

Index36% 30% 31% 31% 29% 28% 26%

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 good news

• Rates are rising – don’t wait

• Provide sellers a teachable moment

• Know where people are moving and why and work your referral network

• Get involved in the political process – this is your future

Opportunities

Read This: California’s Housing Future

"I very frequently get the question: 'What's going to change in the next 10 years?' I almost never get the question: 'What's not going to change in the next 10 years?' And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time..… Customers want:

•Large selection

•Low Prices

•Fast Delivery

Jeff Bezos: Amazon

How Client Found Their Agent

Q. How did your client find and select you to represent them?

0% 5% 10% 15% 20% 25%

Represented Them in Previous Home…Client was Friend/Relative/Neighbor

Referral from a clientRecommendations of Friends

Refferal from Business AssociatesOpen House

Web page/InternetDoor-to-Door FarmingDirect Mail Marketing

Relocation ReferralWalk in /Floor Call

Yard SignsListing Agent for Home Purchased

Social MediaMobile App

Telephone MarketingPrint Ads/Newspaper & Magazine

Other

All Buyers



Identify. Develop. Connect

Focus is keyWhen Creating a Consistent Customer Experience

Focus is key

Documents

2019 Economic & Market Forecast - Constant Contactfiles.constantcontact.com/6b92f51a201/c337c667-1aa...2019 Economic & Market Forecast San Francisco Association of Realtors November