2019 Housing Market Forecast - CCARToday

2019 Housing Market Forecast

Contra Costa Association of REALTORS®

October 24, 2018

Joel Singer

Chief Executive Officer

Economic Update

4.2%

GDP 2018-Q2

1.7%

Job Growth

September 2018

3.7%

Unemployment

September 2018

Consumption

2018-Q2Core CPI

August 2018

2.2%3.8%

U.S. Economy Our Biggest Strength

4.2%

-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

An

nu

al P

erc

en

t C

ha

ng

e,

Ch

ain

-typ

e (

20

09

) $

GDP - 2017: 2.3%; 2018 Q2: 4.2%

Growth Up Strong due to Fiscal Stimulus

ANNUALLY QUARTERLY

2009 Largest Annual Drop since 1946 (-2.8%)

SERIES: GDP

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

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-12

Se

p-1

2

Fe

b-1

3

Jul-1

3

De

c-1

3

Ma

y-1

4

Oc

t-1

4

Ma

r-15

Au

g-1

5

Jan

-16

Jun

-16

No

v-1

6

Ap

r-17

Se

p-1

7

Fe

b-1

8

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

Fe

b-0

1

Ma

r-02

Ap

r-03

Ma

y-0

4

Jun

-05

Jul-0

6

Au

g-0

7

Se

p-0

8

Oc

t-0

9

No

v-1

0

De

c-1

1

Jan

-13

Fe

b-1

4

Ma

r-15

Ap

r-16

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.

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)

Down 831 pts

30 Yr. FRM Hit 5%, 1st Time since Early 2011

SERIES: Average 30 Yr. Fixed Mortgage Rates

SOURCE: 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 time since mid-2006

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

SOURCE: Freddie Mac, St. Louis Fed

MONTHLY WEEKLY

September 2018: All Items 2.3% YTY; Core +2.2% YTY

Inflation at Fed’s Target Range

-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

Wild Card - How Tariffs Threaten the Economy

SOURCES: US Chamber

The Impact of Trade Tariffs

• Slow down world trade activities and

global economic growth

• Result in exchange rate fluctuation

• Increase inflationary pressure and put

upward pressure on interest rates

• Increase costs of construction

• Disrupt local economic activities in

areas/businesses that rely heavily on

import/export

California Housing Market Outlook

CA Consumer Poll: Sept 2018

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?

September 2018 Sales: 382,550 Units, -3.3% YTD, -12.4% YTY

CA Sales Had the Largest Decline since March 2014

-

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


Sep-18:

382,550Sep-17:

427,460

September 2018 (Year-to-Year)

Sales Declined in Every Segment

-33.2%

-21.1%

-16.9% -16.8% -16.2%

-11.5%

-3.9%

-11.7%

-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

SERIES: Sales of Existing Detached Homes


September 2017: 3.2 Months; September 2018: 4.2 Months

Inventory Index Reached the Highest Level in 31 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.

0.0

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


Active Listings Continued to Increase for the 6th Consecutive Month

SERIES: Active Listing of Existing Single Family Homes


20.4%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

Year-over-Year % Chg

Housing Supply Improved across the Board, Except for the Sub-$200k Price Segment

Sept 2018

SERIES: Active Listings of Existing Single Family Homes


-12.7%

11.2%

23.9%

33.6%

26.4%21.6%

7.1%

20.4%

-20%

-10%

0%

10%

20%

30%

40%

Active Listing

Active Listings Increased in All Regions

-16%-18%

-14% -15%

44%

23%

13%

4%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

San Francisco Bay

Area

Southern California Central Valley Central Coast

Ye

ar-

to-Y

ea

r %

Ch

gSales Active Listings

Sept 2018

SERIES: Sales and Listings of Existing Single Family Homes


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

California, September 2018: 24.0 Days

Listings Taking Longer to Sell

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


More Listings With Price Reductions

SERIES: Listing Price of Existing Single Family Homes


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/Townhomes


-4.5%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

200

7 0

1

200

7 0

4

200

7 0

7

200

7 1

0

200

8 0

1

200

8 0

4

200

8 0

7

200

8 1

0

200

9 0

1

200

9 0

4

200

9 0

7

200

9 1

0

201

0 0

1

201

0 0

4

201

0 0

7

201

0 1

0

201

1 0

1

201

1 0

4

201

1 0

7

201

1 1

0

201

2 0

1

201

2 0

4

201

2 0

7

201

2 1

0

201

3 0

1

201

3 0

4

201

3 0

7

201

3 1

0

201

4 0

1

201

4 0

4

201

4 0

7

201

4 1

0

201

5 0

1

201

5 0

4

201

5 0

7

201

5 1

0

201

6 0

1

201

6 0

4

201

6 0

7

201

6 1

0

201

7 0

1

201

7 0

4

201

7 0

7

201

7 1

0

201

8 0

1

201

8 0

4

201

8 0

7

California $1M Homes: Sales vs. List Price Growth

Typically 4-6 month lag

List Price Sales Price

Despite the uptake in inventory, fewer units have been turned over since the Great Recession

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

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

CA US Linear (CA)

CA turnover rate trend

Long-Time Homeowners are not

moving as in the past because:

• Demographic shift

• Low rate on current mortgage

• Low property taxes

• Capital gains hit

• Where can I afford to go?

Sellers Are Not Moving as Often as Before

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 has produced less housing per capita than other 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 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 Supply Gap Will Be Over 2 Million at Current Construction Pace

-1.02

-2.34

-3.36

1.34

-2.02

since 2005 Additional

Demand

Total

Demand

New supply Gap to fill

California Housing Supply Gap

(in millions)

SERIES: Housing Supply Gap

SOURCE: Calculation by CALIFORNIA ASSOCIATION OF REALTORS®

• With housing needs increasing

at a rate of 180,000 every year,

California will need more than

3.3 million units by 2030 to fill the

housing demand and bring it

back to 2005 level.

• At the current construction

pace, however, California will

have a backlog of over 2 million

by 2030

•Community Resistance – Blocking/delaying new housing

•Project Reviews and CEQA

• Land Availability/Bias Toward Commercial Development

California Not Building Enough Because

• Shortage of Land: • Production shortfall greatest in cities where need is most critical

• High Costs of Development• Fees in most California communities are higher than elsewhere in

US

• Infill development costs higher than suburban development costs

• Environmental policies, etc increase costs

• Lengthy permitting process increases cost per unit produced and favors deep pockets

Why the production shortfall?

Building in California is expensive

SERIES: Homeownership RateSOURCE: CA Legislative Analyst Office

• 2 to 4 times higher on California (CA) Coasts

• High land costs usually mean more units being

built on each plot of land, but not the case in

CA’s coastal metros

• During the 2000’s housing density of a typical

neighborhood in CA’s coastal metro rose only

4%, considerably less than the 11% average

increase in the comparison group

• The new housing unit in the comparison group

was also 40% more dense than that built in CA.

Land Costs Building Costs

• $50k to $75 higher in California (CA)

• Include labor, building material and

government fees, all higher in CA than other

states

• Development fees are higher in California than the rest of the country. A 2012 national

survey found that the average development

fee levied by California local governments

(excluding water-related fees) was $22,000

per single family home, as compared to the

$6,000 per single-family home in the rest of the country.

Case Study: Restrictive Zoning in L.A.

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

• Los Angeles was zoned to

accommodate 10 million people

in 1960

• Today, the city is zoned for only

4.3 million people after decades

of population growth and

increase in housing demand.

Los Angeles Zoned Residential Capacity

The More “Underbuilding”, the higher the price growth

-2

0

2

4

6

8

10

12

-40% -20% 0% 20% 40% 60% 80% 100% 120%

Un

de

rbu

ildin

g

(Ne

w J

ob

s/N

ew

Pe

rmits)

Price Growth (%)

CA Underbuilding and Price Growth (2010-2015)

SERIES: Nonfarm Job Growth, New Housing Permits, Existing Median Prices

SOURCE: CA EDD, C.A.R., Construction Industry Research Board

California, September 2018: $578,850, -2.9% MTM, +4.2% YTY

CA Median Price Continued to Grow but Had the Smallest Increase since Dec 2012

$-

$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

Sept-18: $578,850Sept-17:

$555,400

SERIES: Median Price of Existing Single Family Homes


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

535352515049484847464545454443434242414139383838383737333332302928262625

2322222020201918161614141412

0

10

20

30

40

50

60

70

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

SERIES: Housing Affordability Index of Traditional Buyers


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 $269,000 740.6%

Higher Rates Hurt Affordability

Q2-2018 Median Price $596,730

20% Down-payment

INTEREST RATE

MONTHLY MORTGAGE

SERIES: Housing Affordability Index


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%

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%

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Ca

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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”*

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

-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

Regional Housing Market Update

Contra Costa

0

200

400

600

800

1,000

1,200

1,400

Contra Costa County, Sep. 2018: 765 Units, -1.5% YTD, -17.3% YTY

County YTD Sales Turned Negative as of Sept 2018

SERIES: Sales of Existing Single Family Homes


Contra Costa County, Sep. 2018: $650,000, Up 7.4% YTY

Price Growth Decelerated but Remained Solid

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

SERIES: Median Price of Existing Single Family Homes


0.0

2.0

4.0

6.0

8.0

10.0

12.0

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

Jul-1

5

Jan

-16

Jul-1

6

Jan

-17

Jul-1

7

Jan

-18

Jul-1

8

Contra Costa County, September 2018: 2.9 Months

Inventory Started Rising but Remained Low

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 Single Family Homes


Sales Dropped Big in Some Cities

SERIES: Sales of Existing Detached Homes


City Sep-18 Aug-18 Sep-17 MTM% Chg YTY% Chg

Antioch 80 127 96 -37.0% -16.7%

Corcord 94 110 91 -14.5% 3.3%

Walnut Creek 32 46 47 -30.4% -31.9%

Sales of Existing Single-Family Homes

Price Appreciation Losing Steam

SERIES: Median Price of Existing Detached Homes


City Sep-18 Aug-18 Sep-17 MTM%Chg YTY%Chg

Antioch $450,000 $457,000 $430,500 -1.5% 4.5%

Corcord $616,000 $635,250 $599,000 -3.0% 2.8%

Walnut Creek $1,090,000 $1,052,500 $1,175,000 3.6% -7.2%

Median Price of Existing Single-Family Homes

Inventory Condition Improved in All Areas

SERIES: Active Listing of Existing Detached Homes


City Sep-18 Aug-18 Sep-17 MTM%Chg YTY%Chg

Antioch 318 320 177 -0.6% 79.7%

Corcord 198 207 124 -4.3% 59.7%

Walnut Creek 182 170 162 7.1% 12.3%

Active Listing of Existing Single-Family Homes

Listings Continued to Have Short Shelf Life

SERIES: Days on Market of Existing Detached Homes


County Sep-18 Aug-18 Sep-17

Antioch 15 14 12

Corcord 16 16 12

Walnut Creek 16 13 12

Days on Market of Existing Single-Family Homes

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%

California Housing Market Outlook

SERIES: CA Housing Market Outlook


2013 2014 2015 2016 2017 2018p 2019f

SFH Resales (000s) 414.9 382.7 409.4 417.7 424.1 410.5 396.8

% 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 Affordability

Index36% 30% 31% 31% 29% 28% 25%

30-Yr FRM 4.0% 4.2% 3.9% 3.6% 4.0% 4.7% 5.2%

• The market shift is underway with sales down and price softening

• High level of economic and market uncertainty is affecting home buying decisions and putting buyers on the sideline.

• While the fundamentals are still solid, the ride in the next 12 months will be bumpy

• Despite an improvement in housing supply, affordability remains an issue and will lead to further outmigration and lower homeownership rate.

Key Takeaways

Help Pass Prop 5 and Defeat Prop 10

Property Tax Fairness Initiative

The Problem:

Seniors and the disabled are stuck in homes ill-suited to their needs because they can’t afford to pay higher property taxes.

Prop 5


The Background:

Prop 13 keeps property taxes from escalating with home values, but when someone sells and buys a new home, they can end up paying

more in property taxes. Seniors and the disabled often can’t afford the new taxes and are stuck where they are.

We call these increased taxes a “moving penalty.”

Those on fixed incomes can’t afford to pay it.

Prop 5


The Solution:

Prop 5, C.A.R’s Tax Fairness Initiative• Allows seniors, the disabled and natural disaster victims to transfer

some of their property tax savings to a new home.• Also creates homeownership opportunities for other families.

VOTE YES ON PROP 5

Prop 5

Repeal of Costa-Hawkins Limitations on Rent Control

Current Law (Costa-Hawkins)

Local governments can enact rent control laws with these limitations:

• Can’t apply to new buildings;

• Can’t apply to single-family homes; and

• When a unit is voluntarily vacated, the rent can be reset to market value.

Prop 10


What Prop 10 will do:

It removes all these limitations.

• Local governments will be able to set rents on single-family homes.

• They will be able to apply rent control to new buildings.

• And rents could be controlled without limit.

Prop 10


The Consequences of Prop 10

There will be fewer rental units available:• Owners will convert their units or take them off the market.

New rental units won’t be built• Builders will have little incentive to create rental housing if they may

not even be able to break even.

Prop 10


VOTE NO ON PROP 10

Prop 10

Register to Vote

Vote YES on Prop 5 and NO on Prop 10

Volunteer to Help at your local association

Help spread the word

How You Can Help

Thank You

This presentation can be found on

www.car.org/marketdata

Speeches & Presentations

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Documents

2019 Housing Market Forecast - CCARToday