2015 california economic outlook and market outlook. san francisco bay area real estate market...
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2015 CALIFORNIA ECONOMIC & MARKET OUTLOOK
February 19, 2015San Francisco WCR & AOR
Leslie Appleton-Young, Chief Economist
OVERVIEW
• Macro-Economic Outlook
• California Housing Market Outlook
• Focus: Housing Affordability
• San Francisco Regional Market Stats
• 2015 Forecast
• In closing…
ECONOMIC OUTLOOK
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Q1-
10Q
2-10
Q3-
10Q
4-10
Q1-
11Q
2-11
Q3-
11Q
4-11
Q1-
12Q
2-12
Q3-
12Q
4-12
Q1-
13Q
2-13
Q3-
13Q
4-13
Q1-
14Q
2-14
Q3-
14Q
4-14
GROSS DOMESTIC PRODUCT
2013: 1.9% 2014: 2.4%; 2014 Q4: 2.6% 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
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Consumption Fixed Nonres. Investment Net Exports Government
Q1 2014
Q2 2014
Q3 2014
Q4 2014
ANNUAL PERCENT CHANGE
SERIES: Components of GDPSOURCE: US Dept. of Commerce, Bureau of Economic Analysis
COMPONENTS OF GDP: CONSUMPTION
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2000
Q1
2000
Q3
2001
Q1
2001
Q3
2002
Q1
2002
Q3
2003
Q1
2003
Q3
2004
Q1
2004
Q3
2005
Q1
2005
Q3
2006
Q1
2006
Q3
2007
Q1
2007
Q3
2008
Q1
2008
Q3
2009
Q1
2009
Q3
2010
Q1
2010
Q3
2011
Q1
2011
Q3
2012
Q1
2012
Q3
2013
Q1
2013
Q3
2014
Q1
2014
Q3
ANNUAL PERCENT CHANGE
CONSUMER CONFIDENCE – 7 YEAR HIGH
January 2015: 102.9
0
20
40
60
80
100
120
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
INDEX, 100=1985
SERIES: Consumer ConfidenceSOURCE: The Conference Board
UNEMPLOYMENT RATE FALLING
January 2015: US 5.7% (U6 = 11.3%) & CA 7.2%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14% US-CA CA US
SERIES: Unemployment Rate The U-6 rate covers the unemployed, underemployed and those who are not looking but who want a jobSOURCE: 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
YOUNGER WORKERS HIT HARDER
2007-2010 LOST JOBS REPLACED: JAN 2014
-8
-6
-4
-2
0
2
4 California US
ANNUAL PERCENT CHANGE
SERIES: Total Nonfarm EmploymentSOURCE: US Bureau of Labor Statistics, CA Employment Development Division
JOB LOSSES IN PRIOR RECESSIONS -RECENT CYCLE WORST BY FAR
NONFARM EMPLOYMENT BY REGION
Nov 2014 Nov 2013 Change % Change
Southern California 8,721.2 8,553.1 168.1 2.0%
Bay Area 3,555.6 3,441.0 114.6 3.3%
Central Valley 2,068.4 2,021.6 46.8 2.3%
Central Coast 514.4 503.9 10.5 2.1%
North Central 139.4 137.7 1.7 1.2%
CALIFORNIA 15,650.5 15,306.4 344.1 2.2%
Nonfarm Employment (Thousands)
SERIES: Total Nonfarm EmploymentSOURCE: CA Employment Development Division
CA JOB TRENDS – BAY AREA LEADS
1.4%
1.8%
2.1%
2.1%
2.2%
2.2%
2.6%
2.6%
2.8%
3.2%
3.6%
3.8%
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%
Los Angeles
Ventura
Modesto
Stockton MSA
Bakersfield
Orange County
Fresno MSA
Sacramento
Oakland
San Diego
San Francisco
San Jose
SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division
ANNUAL PERCENT CHANGE
November 2014: CA +2.2%, +344,100
CONSTRUCTION WORKERS IN DEMAND
-1.0%-0.5%
-0.1%0.7%
0.9%1.4%
1.9%2.7%
2.9%2.9%
3.4%3.6%
4.3%6.2%
6.4%
-2% -1% 0% 1% 2% 3% 4% 5% 6% 7%
Nondurable GoodsFinance & Insurance
GovernmentDurable Goods
Retail TradeTransportation, Warehousing & Utilities
Real Estate & Rental & LeasingWholesale Trade
Educational ServicesInformation
Leisure & HospitalityHealth Care & Social Assistance
Professional, Scientific & Technical ServicesAdmistrative & Support & Waste Services
Construction
SERIES: Total Nonfarm Employment By IndustrySOURCE: US Bureau of Labor Statistics, CA Employment Development Division
November 2014: CA +2.2%, +344,100; 250K new construction jobs in next 5 years
ANNUAL PERCENT CHANGE
MORTGAGE RATES UP 1% IN MID-2013SIX YEARS OF 0% FED FUNDS RATE
0%
1%
2%
3%
4%
5%
6%
7%
8% FRM ARM Federal Funds
SERIES: 30Yr FRM, 1Yr ARM, Federal FundsSOURCE: Federal Home Loan Mortgage Corporation
CPI REMAINS SUBDUED
December 2014: All Items +.8% YTY; Core +1.6% YTY
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6% All Items Core
ANNUAL PERCENT CHANGE
SERIES: Consumer Price IndexSOURCE: US Bureau of Labor Statistics
U.S. DEPOSITORY INSTITUTIONS:HIGH LEVEL OF EXCESS RESERVES SINCE 9/08
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
SERIES: Excess Reserves of Depository Institutions SOURCE: Federal Reserve Bank of Saint Louis
$ BILLIONS
MORTGAGE RATES DEFIED FORECASTERS IN 2014
• January 2009 – December 2014
0%
1%
2%
3%
4%
5%
6%
2009
/01
2009
/04
2009
/07
2009
/10
2010
/01
2010
/04
2010
/07
2010
/10
2011
/01
2011
/04
2011
/07
2011
/10
2012
/01
2012
/04
2012
/07
2012
/10
2013
/01
2013
/04
2013
/07
2013
/10
2014
/01
2014
/04
2014
/07
2014
/10
11.0
6.14
11.2
7.14
12.1
8.14
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
HOUSING CREDIT INDEX
MORTGAGE ORIGINATION SHARE
Refinance Share vs. Purchase Share
0%
1%
2%
3%
4%
5%
6%
7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Refinance Share (%) Purchase Share (%) FRM
30YR FRM
SERIES: Mortgage OriginationsSOURCE: Mortgage Bankers Association of America
NEW HOME SALES
US, Dec. 2014 Sales: 481,000 Units, +1.6% YTD, +8.8% YTY
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
SERIES: New Home Sales, Seasonally Adjusted Annualized RateSOURCE: US Census Bureau
MEDIAN PRICE OF NEW HOME SALES
US, Dec. 2014: $208,300, Up 8.3% YTY
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
SERIES: Existing Home SalesSOURCE: NATIONAL ASSOCIATION OF REALTORS®
SALES OF EXISTING HOMES
US, December 2014 Sales: 5,040,000 Units, -3.1% YTD, +3.5% YTY
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
SERIES: Existing Home SalesSOURCE: NATIONAL ASSOCIATION OF REALTORS®
MEDIAN PRICE OF EXISTING HOMES
US, December 2014: $209,500, Up 6.0% YTY
$0
$50,000
$100,000
$150,000
$200,000
$250,000
SERIES: Existing Home SalesSOURCE: NATIONAL ASSOCIATION OF REALTORS®
US: SALES OF EXISTING HOMES
Region Dec-14 Nov-14 Dec-13 MTM YTY YTD
U.S. 5,040,000 4,920,000 4,870,000 2.4% 3.5% -3.1%
Northeast 660,000 680,000 640,000 -2.9% 3.1% -3.0%
Midwest 1,090,000 1,130,000 1,120,000 -3.5% -2.7% -5.0%
South 2,170,000 2,090,000 2,020,000 3.8% 7.4% 0.0%
West 1,120,000 1,020,000 1,090,000 9.8% 2.8% -7.6%
SERIES: Existing Home SalesSOURCE: NATIONAL ASSOCIATION OF REALTORS®
REGIONAL PRICE TRENDS UP SHARPLY
Region Dec-14 Nov-14 Dec-13 MTM YTY
U.S. $209,500 $207,200 $197,700 1.1% 6.0%
Northeast $246,600 $247,000 $239,000 -0.2% 3.2%
Midwest $159,100 $160,800 $151,100 -1.1% 5.3%
South $184,100 $178,100 $172,700 3.4% 6.6%
West $299,600 $295,300 $283,700 1.5% 5.6%
SERIES: Existing Home SalesSOURCE: NATIONAL ASSOCIATION OF REALTORS®
November October
Core Logic Home Price Index 5.5% 5.4%
Zillow Home Value Index 6.6% 5.4%
Existing-Homes, Median Sales Price 5.0% 5.5%
New Homes, Median Sales Price 5.2% 12.3%
FHFA House Price Index 5.3% 4.3%
S&P/Case-Shiller Home Price Index 4.7% 4.6%
Year Over Year % IncreaseHome Price Measure
NATIONAL HOME PRICE MEASURES:PRICE GAINS MODERATING
SERIES: Home Price MeasuresSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
C.A.R. LENDERPERFORMANCE INDEX
OBJECTIVES
The Index seeks to efficiently combine experiences from REALTORS® and survey feedback to address the performance of lenders throughout the lending process. The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) updates the index on a semi-annually basis in order to gauge the overall climate of the real estate finance environment as it relates to consumers and REALTORS®. The Index measures the satisfaction REALTORS® have in their most recent housing transaction and when tracked over time, the Index will illustrate the current performance of lenders from the REALTORS® perspective.
LENDER PERFORMANCE IMPROVING
3133
41
56
66
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014
SOURCE: California Association of REALTORS®
LENDER SATISFACTION HAS IMPROVED SIGNIFICANTLY OVER THE PAST FOUR YEARS
1 2 3 4 5
The timeliness of responses to your inquiries
Knowledge/professionalism of therepresentative you worked with
Length of time to obtain approval/disapprovalof the short sale transaction
Expectations of financial contributions fromthe seller at or after closing
Timeliness of buyer's financing approval
Your overall satisfaction with this lender
3.74
3.92
3.5
3.7
3.64
3.71
3.30
3.57
2.92
3.39
3.42
3.23
2.80
3.10
2.38
3.09
2.73
2011
2012
2013
2014
Very Dissatisfied Very Satisfied
SOURCE: California Association of REALTORS®
EASE OF CLOSING
0% 10% 20% 30% 40% 50%
1
2
3
4
5
27%
23%
11%
19%
20%
16%
18%
10%
28%
27%
12%
13%
15%
28%
31%
8%
11%
13%
19%
49%
2011
2012
2013
2014
Extremely Easy
Extremely Difficult
SOURCE: California Association of REALTORS®
U.S. ECONOMIC OUTLOOK 2014 - 2015
2009 2010 2011 2012 2013 2014p 2015f
US GDP -3.4% 2.4% 1.8% 2.8% 1.9% 2.5% 3.0%
Nonfarm Job Growth -4.4% -0.7% 1.2% 1.7% 1.7% 2.0% 2.3%
Unemployment 9.3% 9.6% 8.9% 8.1% 7.4% 6.2% 5.6%
CPI -0.4% 1.6% 3.1% 2.1% 1.5% 1.5% 1.6%Real Disposable Income, % Change 0.9% 1.8% 1.3% 1.5% 0.7% 2.4% 2.4%
SERIES: U.S. Economic 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
CALIFORNIA’S HOUSING CYCLES AND MEMBERSHIP
1970-2014
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
0
50,000
100,000
150,000
200,000
250,000
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
p
Home Sales Membership
*Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2014 SALES DOWN 7.6%; JAN LOWEST SINCE 2008
California, Jan. 2015 Sales: 351,890 Units, -2.7% YTD, -2.7% YTY
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
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
*Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Jan-15: 351,890
Jan-14: 361,790
HOME SALES IN BAY AREA COUNTIES
0
100
200
300
400
500
600 January-15 January-14
SERIES: Sales of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
SHARE OF EQUITY SALES REMAINED STEADY AT THE HIGHEST LEVEL SINCE LATE 2007
90.5%
4.8%
4.3%0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jan-
09
Apr
-09
Jul-0
9
Oct
-09
Jan-
10
Apr
-10
Jul-1
0
Oct
-10
Jan-
11
Apr
-11
Jul-1
1
Oct
-11
Jan-
12
Apr
-12
Jul-1
2
Oct
-12
Jan-
13
Apr
-13
Jul-1
3
Oct
-13
Jan-
14
Apr
-14
Jul-1
4
Oct
-14
Equity Sales Short Sale REO
SERIES: Distressed Sales, Not Seasonally AdjustedSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
BAY AREA REO & SHORT SALES
Percent of Total Sales: Dec 2014
1%2% 2% 2% 2% 1%
6%
3%2%
3%
1%1%
0% 1%
5%
3%
0%
2%
4%
6%
8%
10%
12%
Alameda ContraCosta
Marin Napa San Mateo Santa Clara Solano Sonoma
REO Sales Short Sales
SERIES: Distressed Sales, Not Seasonally AdjustedSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
SAN FRANCISCO
Preforeclosure: 140 • Auction: 108 • Bank Owned: 8
SOURCE: PropertyRadar on 2/19/15
MARIN COUNTY
Preforeclosure: 64 • Auction: 37 • Bank Owned: 17
SOURCE: PropertyRadar on 2/15/15
SAN RAFAEL
Preforeclosure: 12 • Auction: 7 • Bank Owned: 3
SOURCE: PropertyRadar on 2/15/15
OAKLAND
Preforeclosure: 255 • Auction: 146 • Bank Owned: 66
SOURCE: PropertyRadar on 2/2/15
ALAMEDA COUNTY
Preforeclosure: 635 • Auction: 433 • Bank Owned: 148
SOURCE: PropertyRadar on 2/2/15
ALAMEDA COUNTY
Preforeclosure: 635 • Auction: 433 • Bank Owned: 148
SOURCE: PropertyRadar on 2/2/15
ALAMEDA COUNTY
Preforeclosure: 635 • Auction: 433 • Bank Owned: 148
SOURCE: PropertyRadar on 2/2/15
MEDIAN PRICE OF EXISTING DETACHED HOMES
California, Dec. 2014: $452,570, +1.7% MTM, +3.1% YTY
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000 P: May-07$594,530
T: Feb-09$245,230-59% frompeak
SERIES: Median Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Dec-14: $452,570
Dec-13: $444,830
PRICE PER SQUARE FOOT
January 2015: $203, Down 3.5% MTM, Up 1.8% YTY
$0
$50
$100
$150
$200
$250
$300
$350
$400
Jan-
07A
pr-0
7Ju
l-07
Oct
-07
Jan-
08A
pr-0
8Ju
l-08
Oct
-08
Jan-
09A
pr-0
9Ju
l-09
Oct
-09
Jan-
10A
pr-1
0Ju
l-10
Oct
-10
Jan-
11A
pr-1
1Ju
l-11
Oct
-11
Jan-
12A
pr-1
2Ju
l-12
Oct
-12
Jan-
13A
pr-1
3Ju
l-13
Oct
-13
Jan-
14A
pr-1
4Ju
l-14
Oct
-14
Jan-
15
PRICE PER SQ. FT.
SERIES: Median Price Per Square FeetSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
SF: STRONGEST PRICE GAINS IN THE STATE
SF: 10 YEARS OF PRICE GAINS 2004-2014
Source: Property Shark
PRICE GAINS DOWN SHARPLY SINCE MID 2013
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50% Condo Single-Family Homes
SERIES: Sales of SFH and Condo 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
Jan-
05
Jul-0
5
Jan-
…
Jul-0
6
Jan-
07
Jul-0
7
Jan-
…
Jul-0
8
Jan-
…
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
SERIES: Unsold Inventory Index of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
MORE INVENTORY AT UPPER PRICE RANGES
Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.
Price Range (Thousand) Dec-14 Nov-14 Dec-13
$1,000K+ 4.3 5.5 4.3
$750-999K 3.1 4.2 3.2
$500-749K 3.0 4.1 2.7
$400-499K 3.0 3.9 2.6
$300-399K 3.2 4.2 2.8
$200-299K 3.3 4.3 3.0
$0-199K 3.4 4.5 3.1
SERIES: Unsold Inventory Index of Existing Single Family 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
ANNUAL HOUSING MARKET SURVEY:
2014 FINDINGS
MULTIPLE OFFERS DECLINE -LESS INTENSE MARKET COMPETITION
AFTER PEAKING IN 2013
72%
53%5.7
4.3
0
1
2
3
4
5
6
7
0%
10%
20%
30%
40%
50%
60%
70%
80%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
% with Multiple Offers # of Multiple offers (Average)
SERIES: 2014 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
50%
33%
0%
10%
20%
30%
40%
50%
60%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
% 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
7%
11%
28%
54%
0% 20% 40% 60%
20% or more
10% to 19.99%
5% to 9.99%
Less than 5%
% of Price Reduction(Properties Sold Below Asking Price)
49%
18%
33%
Sale Price to Asking Price
Below Asking Price At Asking Price Above Asking Price
SERIES: 2014 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Median Reduction:4.5% of List Price
$70,000
20%
0%
5%
10%
15%
20%
25%
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Median Down Payment % of Down Payment to Price
Q. What was the amount of downpayment?
20% REMAINS THE MEDIAN DOWN PAYMENT
SERIES: 2014 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
INVESTMENT BUYERS DROPPING : 15% MARKET SHARE
19%
15%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Long Run Average: 12 %
SERIES: 2013 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
BUYING TO RENT V. FLIP; CHANGE IN PREFERRED INVESTMENT STRATEGY
Investment to Flip
Rental Property
SERIES: 2014 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
HOUSING AFFORDABILITY:CRISIS BREWING
SHARE OF FIRST-TIME BUYERS UP IN ’14 BUT STILL BELOW LONG-RUN AVERAGE
28.1%30.5%
0%
10%
20%
30%
40%
50%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
% First-Time Home Buyers Long Run Average
Long Run Average = 38%
QUESTION: Was the buyer a first-time buyer?SERIES: 2014 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
HOUSING AFFORDABILITY DOWNSHARPLY 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®
0%
10%
20%
30%
40%
50%
60%
70%
80% CA USAnnual Quarterly
HOUSING AFFORDABILITY INDEX
San Francisco County, 4th Quarter 2014: 14%% OF HOUSEHOLDS THAT CAN BUY
0%
5%
10%
15%
20%
25%
30%
35%
SERIES: Housing Affordability Index of Traditional BuyersSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
FIRST-TIME BUYER HOUSING AFFORDABILITY INDEX
San Francisco County, 4th Quarter 2014: 33%
0%
10%
20%
30%
40%
50%
60%% OF HOUSEHOLDS THAT CAN BUY
SERIES: Housing Affordability Index of First Time Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
BAY AREA HOUSING AFFORDABILITY DROPPING
4th Quarter 2014
0 10 20 30 40 50 60 70
United States
California
S.F. Bay Area
Alameda
Contra-Costa (Central County)
Marin
Napa
San Francisco
San Mateo
Santa Clara
Solano
Sonoma
Q4/2014 Q4/2013
SERIES: Housing Affordability IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
HOMEOWNERSHIP RATE FALLING
California Vs. U.S.
53.7%
Peak: 60.2%
54.9%
64.5%
Peak: 69.0%
64.8%
40%
45%
50%
55%
60%
65%
70%
75% CA US
SERIES: Homeownership RatesSOURCE: U.S. Census Bureau
MILLENNIAL HOMEOWNERSHIP FALLING
SOURCE: Census Bureau
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000 California US
CA PRICES UPWARD MARCH WILL SLOW
1970-2014
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®SERIES: Median Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
CA V. US REAL PRICE GAP: $10K TO $246K
1970-2014
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000 California US
$10K to $246
SERIES: Median Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2014 Dollar Value
INCOME TO BUY MEDIAN-PRICED HOME IN CA:UP SHARPLY IN TWO
$56,324
$93,593
$0
$20,000
$40,000
$60,000
$80,000
$100,000
2012 Q1 2014 Q2
• Change in minimum required income: $37,269
• Increase in income attributed to interest rate increase: $836 (2.2% of total change)
• Increase in income attributed to price increase : $36,433 (97.8% of total change)
SERIES: Housing Affordability IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
REASONS FOR RENTING INSTEAD OF BUYING
44%
9%
6%
6%
6%
5%
5%
3%
2%
Can't afford to buy
Poor credit / Can't qualify
Renting is easier
Young/Starting out/Not ready
Flexibility/Freedom if renting
Cost/Upkeep/Responsibility
Plan to / Saving for down
Never considered it/No interest
Disabled/On disability
SERIES: 2013 Renter SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
STUDENT LOAN DEBT:25% OF RENTERS
Yes, 23%
No, 75%
Refused, 2%
Student Loan Debt
SERIES: 2013 Renter SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
78%
8%
6%
3%
2%
2%
<$10,000
$10-$20K
$20-$50K
$50-$100K
> $100K
Refused
Amount of Debt
STUDENT DEBT: DRAGS ON HOME SALES
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
REGIONAL & LOCAL HOUSING MARKETS
SAN FRANCISCO NEIGHBORHOODS
SAN FRANCISCO NEIGHBORHOODS
SAN FRANCISCO NEIGHBORHOODS
SAN FRANCISCO
SALES OF RESIDENTIAL HOMES
San Francisco, January 2015: 254 Units Down 38.8% MTM, Down 18.8% YTY
SOURCE: Clarus Market Metrics
MEDIAN PRICE OF RESIDENTIAL HOMES
San Francisco, January 2015: $952,500Down 2.3% MTM, Up 2.4% YTY
SOURCE: Clarus Market Metrics
FOR SALE PROPERTIES
San Francisco, January 2015: 714 UnitsDown 2.2% MTM, Down 31.3% 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.
SOURCE: Clarus Market Metrics
MONTH’S SUPPLY OF INVENTORY
San Francisco, January 2015: 1.8 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.
SOURCE: Clarus Market Metrics
ALAMEDA COUNTY
SALES OF RESIDENTIAL HOMES
Alameda County, January 2015: 624 Units Down 40.9% MTM, Down 15.4% YTY
SOURCE: Clarus Market Metrics
MEDIAN PRICE OF RESIDENTIAL HOMES
Alameda County, January 2015: $555,000Down 2.6% MTM, Up 11.1% YTY
SOURCE: Clarus Market Metrics
FOR SALE PROPERTIES
Alameda County, January 2015: 1,932 Units Down 1.7% MTM, Down 25.7% YTY
SOURCE: Clarus Market Metrics
MONTH’S SUPPLY OF INVENTORY
Alameda County, January 2015: 1.2 Months
SOURCE: Clarus Market Metrics
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.
OAKLAND
SALES OF RESIDENTIAL HOMES
Oakland, January 2015: 151 Units Down 43.2% MTM, Down 23.0% YTY
SOURCE: Clarus Market Metrics
MEDIAN PRICE OF RESIDENTIAL HOMES
Oakland, January 2015: $420,000Down 11.3% MTM, Up 22.6% YTY
SOURCE: Clarus Market Metrics
FOR SALE PROPERTIES
Oakland, January 2015: 533 Units Down 7.3% MTM, Down 38.5% YTY
SOURCE: Clarus Market Metrics
MONTH’S SUPPLY OF INVENTORY
Oakland, January 2015: 1.6 Months
SOURCE: Clarus Market Metrics
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.
MARIN COUNTY
MEDIAN PRICE OF RESIDENTIAL HOMES
Marin County, January 2015: $823,120Down 6.5% MTM, Up 1.4% YTY
SOURCE: Clarus Market Metrics
SALES OF RESIDENTIAL HOMES
Marin County, January 2015: 114 Units Down 34.5% MTM, Down 20.3% YTY
SOURCE: Clarus Market Metrics
FOR SALE PROPERTIES
Marin County, January 2015: 478 UnitsDown 7.0% MTM, Down 18.2% 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.
SOURCE: Clarus Market Metrics
MONTH’S SUPPLY OF INVENTORY
Marin County, January 2015: 1.6 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.
SOURCE: Clarus Market Metrics
SAN RAFAEL
SALES OF RESIDENTIAL HOMES
San Rafael, January 2015: 22 Units Down 54.2% MTM, Down 15.4% YTY
SOURCE: Clarus Market Metrics
MEDIAN PRICE OF RESIDENTIAL HOMES
San Rafael, January 2015: $755,000Down 7.8% MTM, Up 28.1% YTY
SOURCE: Clarus Market Metrics
FOR SALE PROPERTIES
San Rafael, January 2015: 115 Units Up 9.5% MTM, Down 12.9% YTY
SOURCE: Clarus Market Metrics
MONTH’S SUPPLY OF INVENTORY
San Rafael, January 2015: 1.4 Months
SOURCE: Clarus Market Metrics
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.
2015 FORECAST
CALIFORNIA HOUSING MARKET OUTLOOK
2009 2010 2011 2012 2013 2014 2015f
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®
CALIFORNIA HOUSING MARKET OUTLOOK
Sales Down for 2014 but will Improve in 2015; Price Gains Slowing
Units (Thousand)
380 403
0
100
200
300
400
500
600
700
2005 2007 2009 2011 2013 2015f
Sales of Existing Detached Homes
$455
$479
$0
$100
$200
$300
$400
$500
$600
2005 2007 2009 2011 2013 2015f
Median PricePrice
(Thousand)
SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
CA: DOLLAR VOLUME UP FOR 4TH YEAR
$301
$244
$164 $133 $131 $127 $121
$140 $169 $173
$193
-40%
-30%
-20%
-10%
0%
10%
20%
30%
$0
$50
$100
$150
$200
$250
$300
$350
$400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014p 2015f
$ Volume of Sales Percent Change
% Change$ in Billion
-60%
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?
3.8%
4.7%
8.3%
14%
35%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%
India
Japan
Mexico
Canada
China/Hong Kong
INTENDED USE FOR PROPERTY? HOME
4%
27%
38%
30%
0%
2%
7%
91%
0% 20% 40% 60% 80% 100%
Other
Vacation/Second Home
Investment/Rental Property
Primary Residence
US Buyer
International Buyer
What was the intended use of the property in your last closed transaction with an international client?
ALL CASH INTERNATIONAL BUYERS
0%
20%
40%
60%
80%
100%
International buyers Traditional buyers
69%
27%
31%
73%
All cash Obtained financing
SOURCE: 2013 International Client Survey, 2013 Annual Housing Market 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?
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
I rent I live with myparents
I own I live in a dorm Other:
41%
36%
20%
1%1%
SERIES: 2014 Millennials 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
0%
10%
20%
30%
40%
50%
60%
Positive Negative Neutral N/A Other
50%
34%
8%4%
4%
MOST MILLENNIALS UNCERTAIN/DOUBTFUL THAT THEY COULD OBTAIN A MORTGAGE
NOW?AMILLENNIAL ETHNICITY
SOURCE: C.A.R. 2014 Millennial SurveyQ: Could you obtain a mortgage if you applied now ?
Yes 22%
No 33%
Don't know45%
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
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.
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