Coganomics California Los Angeles Real Estate Market Updates - Jeff Coga

8/4/2019 Coganomics California Los Angeles Real Estate Market Updates - Jeff Coga

1/8Capital Redevelopment Group LLC | Coganomics | Volume 42 July 2

Quarterly Report

Q2- Los Angeles County

Is The Market FALLING?


2/8

Today's Market

9-year (36 quarters) Housing Equity Gain*

Los Angeles

FHA Loan Limit

40%

*Note: Equity gain reflects price appreciation only

The relatively recent correction in locahome prices wiped out most of theequity gained over the last 7 years

-17.5%

$7,733

U.S.

Los Angeles-Long Beach-Santa Ana Area

Local Market Report, Second Quarter 2011

Home Sales

State Existing Home Sales

(2011 Q2 vs 2010 Q2)

Conforming Loan Limit**

Local Trend

**Note: the 2009 loan limits for FHA and the GSEs were extended through 2010.

-$126,600

7-year (28 quarters) Housing Equity Gain*

$12,700

1-year (4-quarter) Appreciation (2011 Q2) -4.3%

California

Prices are still down from a year ago,but the trend is improving

-8.3% -12.7%

$729,250

Price Activity

$171,567$292,300Current Median Home Price (2011 Q2)

-30.2%3-year (12-quarter) Appreciation (2011 Q2)

-2.9%

3-year (12-quarter) Housing Equity Gain*

Local sales growth continues to be

weak

U.S.

$417,000

Local Median to Conforming Limit Ratio

$729,250

not comparable

-$22,400

-$36,500

-$146,100

Most buyers in this market have accesto government-backed financing$729,750

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

-40%

-30%

-20%

-10%

0%

10%

20%

30%40%

2011Q2

Q42010Q2

Q42009Q2

Q42008Q2

Q42007Q2

Q42006Q2

Q42005Q2

Q42004Q2

Q42003Q2

Q42002Q2

Median Price (Red Line) and One-year Price Growth

0

100

200

300400

500

600

700

-40%

-20%

0%

20%40%

60%

80%

100%

2011Q2

Q42010Q2

Q42009Q2

Q42008Q2

Q42007Q2

Q42006Q2

Q42005Q2

Q42004Q2

Q42003Q2

Q42002Q2

State Home Sales (Red Line) and Sales Growth1,000s


3/8

#N/A #N/A #N/A #N/A

Natural Resou 0.1% 4.5 Natural 0.6%

Construction 3.3% 170.6 Constru 0.6%

Manufacturing 10.2% 526.7 Manufa 9.0%

Trade/Transpo 18.8% 969.5 Trade/T 19.1%

Information 4.5% 230.7 Inform 2.1%

Financial Act 6.0% 310.1 Financi5.9%

Prof. & Busin 15.0% 772.1 Profes 13.2%

Educ. & Heal 13.3% 684.3 Educat 15.0%

Leisure & Ho 11.1% 573.8 Leisur 10.6%

Other Servic 3.4% 176.7 Other 4.2%

Government 14.2% 729.3 96.6% Gover 15.9% #N/A

#N/A #N/A #N/A #N/A#N/A #N/A #N/A #N/A

Information

Financial ActivitiesProf. & Business Services

Educ. & Health Services

Leisure & Hospitality

Service Providing Excluding Government Other Services

Government

Local Economic Outlook Los Angeles

9,900

NA

NA

12-month Job Change (May)

-451,800

-11,300Emplyoment continues to decline and

will weigh on demand in some areas

NotComparable

12-month Job Change (Jun)

U.S.

NotComparable

Los Angeles's unemployment rate lagsthe national average, but has improved

relative to the same period last year

NotComparable

Drivers of Local Supply and Demand

-7,200

36-month Job Change (Jun)

California's economy is stronger thanthe nation's, but slowed from last

month's 2.52% change

U.S.

-23,500

12-month Employment Change by Industry in the Los Angeles-Long Beach-Santa Ana Area (Jun - 2011)

Year-ago Unemployment Rate

9.2%

9.5%

-0.2%

11.6%

11.7%

Share of Total Employment by IndustryU.S.

State Economic Activity Index

Construction

NA-200

-3,300

-12,800

-3,200500

12,000

-4,400

Current Unemployment Rate (Jun)

36-month change (2011 - Jun)

15,600

Natural Resources and Mining

Local employment growth is poor and

needs to improve0.5%

Natural Resources/Mining/Construction

12-month change (2011 - Jun)

1-year (12 month) Job Growth Rate

Los Angeles-Long Beach-Santa Ana Area

California

-4.3%-3.4%

2.5% 2.2%

Goods Producing

-1,900Manufacturing

Trade/Transportation/Utilities

NaturalResourcesand Mining

0.1%

Construction

3.3%Manufacturi

ng10.2%

Trade/Transportation/U

tilities

18.8%

Information4.5%

FinancialActivities

6.0%Prof. &

BusinessServices15.0%

Educ. &Health

Services13.3%

Leisure &Hospitality

11.1%

OtherServices

3.4%

Government

14.2%

NaturalResourcesand Mining

0.6%

Construction

0.6% Manufacturing

9.0%

Trade/Transportation/

Utilities19.1%

Informatio2.1%Financial

Activities5.9%

Professional &

BusinessServices13.2%

Educational& HealthServices15.0%

Leisure &Hospitality

10.6%

OtherServices

4.2%

Government

15.9%


4/8

Construction is on the rise relative tolast year, suggesting that the local

inventory has stabilized

While new construction is the traditional driver of supply in real estate, foreclosures now have a strong impact oninventories, particularly at the local level. Rising inventories, through construction or foreclosure, place downwardpressure on the median home prices.

The current level of construction is

51.3% below the long-term averagenot comparable4,367

New Housing Construction

Single-Family Housing Permits (Jun 2011)12-month sum vs. a year ago

U.S.

8-year average for 12-month Sum of 1-UnitBuilding Permits

Local Fundamentals

12-month Sum of 1-unit Building Permits through

Jun 2011

Los Angeles

Reduced construction will limit newsupply to the market, allowing demand

to catch up with the inventory more

quickly

not comparable8,973

21.0% -14.5%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

State Total Foreclosure Rate vs. U.S Average(U.S. Average in Blue Dashed Line)

Source: Mortgage Bankers' Association

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Construction: 12-month Sum of Local Housing Permits(Historical Average Shown in Red Dashed Line)


5/8

82.9% 10.8% 6.3% 89.1% 5.0% 5.9%

2.7% 3.3%

3.1% 3.3%

14.3% 18.1%

15.3% 17.9%

11.7% 15.0%

11.7% 14.9%

Source: First American CoreLogic, LoanPerformance data

7.7% 8.8% 9.9% 6.8% 7.3% 7.5%

6.8% 7.7% 8.9% 5.9% 6.2% 6.4%

2.7% 3.1% 2.8% 3.3% 3.3% 2.9%

Source: First American CoreLogic, LoanPerformance data

Locally, today's foreclosure rate is lowrelative to the national average

The local subprime rate eased modestrelative to November of last year

The "foreclosure + REO rate" is the number of mortgages, by metro area, that are either in the foreclosure process or have complet

the foreclosure process and are owned by banks divided by the total number of mortgages for that area.

ALT-A:Foreclosure + REO

Rate

The alt-A foreclosure rate rose slightlyover the most recent 6 months

The decline of both the 60 and 90-daydelinquency rates over the most recen

6-month period suggests a decline inthe local foreclosure rate in the near

future.

The Los Angeles market has been ablto contain both subprime and prime

lending issues

There was a substantial decline

compared to November of last year

SUBPRIME:

Foreclosure + REORate

Los Angeles

The May rate for Los Angeles is low

compared to the national average

Prime:

Foreclosure +

REO Rate

Foreclosures by Type

U.S.

The 90-day delinquency rate in LosAngeles fell over the 6-month period

ending in May

The local 60-day delinquency rate fellover the 6-month period ending in Maysuggesting that 90-day delinquencies

will decline in the near future

Prime Foreclosures and Delinquencies in ProcessMonthly Market Data -

May 2011

Prime: 90-day

Delinquent

Monthly Market Data -

May 2011

PRIME:Foreclosure + REO

Rate Compared to the national average,today's local prime rate is low

Market Share:

Prime (blue), Alt-A(green), and Subprime

(red)

U.S.Los Angeles

Prime: 60-day

Delinquent

2.74%

3.11%

May-11Nov-11

3.26%

3.34%

May-11Nov-11

14.26

%

15.32%

May-11Nov-11

11.68%11.65

%

May-11Nov-11

18.08%17.9

3%

May-11Nov-11

15.03%14.9

0%

May-11Nov-11

82.9

%

10.8

%6.3%

89.1

%

5.0

%

5.9

%

7.68%

8.77%

9.93%

May-11Nov-11May-10

6.80%

7.25%

7.45%

May-11Nov-11May-10

5.88%

6.16%

6.42%

May-11Nov-11May-10

2.74%

3.11%2.75

%

May-11Nov-11May-10

3.26%

3.34%2.90

%

May-11Nov-11May-10

6.79%

7.74%

8.85%

May-11Nov-11May-10


6/8

Monthly Mortgage Payment to Income

Los Angeles

Los Angeles

Ratio for 2009 15.1%

U.S.

Historical Average 3.4

Ratio for 2011 Q2

2.4

Median Home Price to Income

Affordability

15.4%

17.1% Historically strong and an improvemenover the first quarter of 2011

Historical Average

U.S.

2.8

2.5

2.7

2.4

14.7%

Weaker affordability than most market22.0%26.4%

The price-to-income ratio has fallen anis below the historical average

Less affordable than most markets

Ratio for 2011 Q2

Ratio for 2010

0%

5%

10%

15%

20%

25%

30%

35%40%

45%

2010200820062004200220001998199619941992

Long-Term Trend: Ratio of Local Mortgage Servicing Cost to Income(Local Historical Average Shown in Red, U.S. Average in Green)

0%

5%

10%

15%

20%

25%

30%

2011 Q22011 Q12010 Q42010 Q32010 Q22010 Q12009 Q42009 Q3

Recent Trend - Local Mortgage Servicing Cost to Income(Historical Average Shown in Red Dashed Line)


7/8

The Mortgage Market

A steady flow of progressively weaker economic news reported in May and June combined to weigh on Treasury bonds ithe 2nd quarter, driving the yield on the 10-year Treasury near record lows. The rate on the 30-year fixed rate mortgage

followed suit, but the gap between the two opened up as investors sought out better returns than MBS as well as to avoidthe risk of refinances. Concerns about the U.S. government's debt along with the sluggish economy are unlikely to be

resolved in the near term. Furthermore, the Federal Reserve has made it clear that it will actively support an environmenthat would foster economic growth through low rates. As result, mortgage rates are expected to remain low through thefall and into 2012. The low rates will help consumers and businesses alike to navigate this economic soft patch, but the

will also remove a layer of urgency from the home buying process, which could drag on home sales.

0

40

80

120

160

200

240

280

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2011 Q2Q42010 Q2Q42009 Q2Q42008 Q2Q42007 Q2Q42006 Q2

30-year Fixed Mortgage Rate and Treasury Bond Yield

Spread (left axis) 30-Year FRM (Right axis) 10-Year Treasury Bond (Right Axis)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2010200820062004200220001998199619941992

Ratio of Local Median Home Price to Local Average Income(Local Historical Average Shown in Red, U.S. Average in Green )


8/8

126,846 989,842

27.1% 20.2%

23.0% 0.1

A Closer LookFHA Role Locally

FHA's market share fell sharply during thehousing boom. Home sellers preferred to

work with non-FHA lenders in order to avoidthe FHA's more stringent and time

consuming underwriting. Since the power inthe housing market resided with the sellers atthat time, usage of FHA loans fell off. As thereal estate market shifted, so did the FHA's

market share. FHA's market share this yearis higher than the historical average, but

down from the height of last year's tax-credit

induced sales surge. The tax credit broughtin many low-income and first time buyers,FHA's target market. Locally, the FHA's

share of originations in Los Angeles fell from27.1% in 2010 to 23.0% in the first quarter ofthis year. The FHA's market share is likely toremain historically elevated until the housing

market returns to normal in the coming years.

More information on the OMB's geographic definitions can be found at http://www.whitehouse.gov/omb/inforeg_statpolicy/

FHA Market Share Los Angeles U.S.

2010 Market Share

2010 FHA Originations

2011 Q1 Market Share

Los Angeles County, Los Angeles County, Orange County, and Orange County

The Los Angeles area referred to in this report covers the geographic area of the Los Angeles-Long Beach-Santa Anametro area as officially defined by the Office of Management and Budget of the U.S. Government. The official coverage

area includes the following counties:

Geographic Coverage for this Report

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

Utah

California

Maryland

Delaware

Virginia

Rhode Island

District of Columbia

Colorado

Connecticut

New JerseyMichigan

Pennsylvania

Washington

Arizona

Indiana

Oregon

Louisiana

New Mexico

North Dakota

Vermont

Minnesota

Texas

Nevada

Missouri

Alabama

New HampshireNew York

Georgia

Tennessee

Nebraska

South Carolina

Florida

Illinois

Oklahoma

Idaho

Kentucky

North Carolina

Kansas

Mississippi

Massachusetts

Arkansas

West Virginia

Iowa

South Dakota

Ohio

Wisconsin

Hawaii

Maine

FHA Market Share as of Q1 2010

Documents

Coganomics California Los Angeles Real Estate Market Updates - Jeff Coga