2019 economic & market forecast - santa clara county ... · 2019 economic & market forecast santa...

2019 Economic & Market Forecast

Santa Clara County Association of RealtorsNovember 16, 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”

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 AdjustedSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Macro Economic Update

3.5%

GDP 2018-Q3

1.7%

Job GrowthOctober 2018

3.7%

UnemploymentOctober 2018

Consumption2018-Q3

Core CPISeptember 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

Ann

ual P

erce

nt C

hang

e,

Cha

in-ty

pe

(200

9) $

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

Growth Reflects Strong Fiscal Stimulus

ANNUALLY QUARTERLY

2009 Largest Annual Drop since 1946 (-2.8%)

SERIES: GDPSOURCE: 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%

Jan-

11Ju

n-11

Nov

-11

Ap

r-12

Sep

-12

Feb

-13

Jul-1

3D

ec-1

3M

ay-

14O

ct-1

4M

ar-1

5A

ug-1

5Ja

n-16

Jun-

16N

ov-1

6A

pr-1

7Se

p-1

7Fe

b-1

8Ju

l-18

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-

00Fe

b-0

1M

ar-0

2A

pr-0

3M

ay-

04Ju

n-05

Jul-0

6A

ug-0

7Se

p-0

8O

ct-0

9N

ov-1

0D

ec-1

1Ja

n-13

Feb

-14

Ma

r-15

Ap

r-16

Ma

y-17

Jun-

18

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 MateoMarin

San FranciscoSanta Clara

SonomaNapa

OrangeAlameda

Contra CostaSan Diego

SolanoSanta Cruz

SacramentoMonterey

Los AngelesFresno

Kern

Unemployment Lowest in 40+ Years

SERIES: Civilian Unemployment RateSOURCE: 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 ConfidenceSOURCE: The Conference Board

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

Inflation Remains Low

-3.0-2.0-1.00.01.02.03.04.05.06.0

Ann

ual P

erce

nt C

hang

e

All Items Core

SERIES: Consumer Price IndexSOURCE: US Bureau of Labor Statistics

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

SERIES: Average 30 Yr. Fixed Mortgage RatesSOURCE: 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

FRMARMFed 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 IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

$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 HardMedian Price $595K

20% Downpayment

SERIES: Housing Affordability IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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%

• 7 tax brackets• 0%, 10%, 12%, 22%, 24%, 32%,

35%, and 37%

• MID Caps at $750K• Existing loans grandfathered

• SALT capped at $10K• Double standard deduction• Expand child tax credit $2K• 401K still deductible

Tax Reform: Homeownership Took a Hit

• 2nd Homes survived• Eliminate HELOC deduction• Cap gains exclusion survives• 1031 exchange survives• Pass-through income

deduction of 20%• Maintains expense

deductions• Corporate rate of 21%

• Lock in effect on MID cap• Less supply, eroded affordability

• Raises costs for $937K +• Less price pressure at top end

• Rents rise at bottom end• More money in pockets• Might not translate to prices at bottom -> no incentive to own

• SALT cap will affect roughly half of the market – not totally offset by lower tax rates

Consequences?

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Potential Inflation

Full Employment

Higher Demand

Growth is good, but has its side effects too

There’s also the bond market to consider

Tax Cuts Bigger DeficitsMore

Potential Inflation

And then there’s this…

SERIES: Dow 30SOURCE: Yahoo Finance

21000

22000

23000

24000

25000

26000

27000

(Jan 2018 – Nov 2018)

26,828

24,443

25,462

23000

23500

24000

24500

25000

25500

26000

26500

27000

27500

(9/1/18 – 11/5/18)

Market Shift: Home Sales Softening

Region Aug-18 Jul-18 Aug-17 MTM YTY

U.S. 4,750,000 4,750,000 4,800,000 0.0% -1.0%

Northeast 600,000 560,000 610,000 7.1% -1.6%

Midwest 1,210,000 1,180,000 1,210,000 2.5% 0.0%

South 1,950,000 1,970,000 1,920,000 -1.0% 1.6%

West 990,000 1,040,000 1,060,000 -4.8% -6.6%

SERIES: Existing Single-Family Home SalesSOURCE: NATIONAL ASSOCIATION OF REALTORS®

Sheet1

RegionAug-18Jul-18Aug-17MTMYTY

U.S.4,750,0004,750,0004,800,0000.0%-1.0%

Northeast600,000560,000610,0007.1%-1.6%

Midwest1,210,0001,180,0001,210,0002.5%0.0%

South1,950,0001,970,0001,920,000-1.0%1.6%

West990,0001,040,0001,060,000-4.8%-6.6%

Regional Price Gains Slowing

Region Aug-18 Jul-18 Aug-17 MTM YTY

U.S. $267,300 $271,900 $254,800 -1.7% 4.9%

Northeast $291,300 $310,800 $286,200 -6.3% 1.8%

Midwest $210,200 $210,900 $203,100 -0.3% 3.5%

South $234,200 $239,600 $225,600 -2.3% 3.8%

West $397,400 $397,700 $378,100 -0.1% 5.1%

SERIES: Existing Single-Family Home SalesSOURCE: NATIONAL ASSOCIATION OF REALTORS®

Sheet1

RegionAug-18Jul-18Aug-17MTMYTY

U.S.$267,300$271,900$254,800-1.7%4.9%

Northeast$291,300$310,800$286,200-6.3%1.8%

Midwest$210,200$210,900$203,100-0.3%3.5%

South$234,200$239,600$225,600-2.3%3.8%

West$397,400$397,700$378,100-0.1%5.1%

Q: How long can the eoncomy be strong if

housing isn’t?

• 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

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

Home SalesMembership

Sales 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

Num

ber o

f Tra

nsac

tions

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 PollSOURCE: 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 HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Oct-18: 397,060

Oct-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)

SERIES: Sales of Existing Single Family HomesSOURCE: 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%

YoY

% c

hg.

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

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

Bay Area: 4 Counties are up YTDbut not by much

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

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%

Sheet1

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

Alameda9818971.9%-8.6%

Contra Costa946851-2.4%-10.0%

Marin1702022.4%18.8%

Napa80104-1.3%30.0%

San Francisco230242-0.6%5.2%

San Mateo3784290.3%13.5%

Santa Clara8788276.6%-5.8%

Solano424333-7.5%-21.5%

Sonoma349416-2.2%19.2%

Bay Area4,4364,301-2.4%-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

$700,000 P:May-07$594,530

T: Feb-09$245,230

-59% frompeak

Oct-18: $572,000Oct-17:

$546,430

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

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

PRIC

E PE

R SQ

. FT.

Oct-18: $282Oct-17:

$270

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

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%

Sale

s-to

-List

Pric

e Ra

tio

Oct-18: 98.1%

Oct-17: 98.9%

SERIES: Sales to List Ratio of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Bay Area: Peak v. Current Price


RegionPeak

MonthPeak 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%

Sheet1

RegionPeak MonthPeak PriceOct-18%Chg Fr Peak

AlamedaMay-07$709,420$900,00026.9%

Contra CostaMay-07$698,420$657,000-5.9%

MarinJun-07$1,149,390$1,450,00026.2%

NapaJun-07$729,170$709,500-2.7%

San FranciscoMay-07$972,010$1,600,00064.6%

San MateoOct-07$1,020,000$1,588,00055.7%

Santa ClaraOct-07$865,000$1,290,00049.1%

SolanoJun-07$492,800$430,000-12.7%

SonomaJan-06$650,330$650,000-0.1%

Bay AreaMay-07$789,250$958,80021.5%

So Cal: Orange & SD Above Prior Peak


Region Peak MonthPeak Price Aug-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%

Sheet1

RegionPeak MonthPeak PriceAug-18%Chg Fr Peak

Orange Jun-07$775,420$838,5008.1%

San DiegoMay-06$622,380$660,0006.0%

Los AngelesSep-07$625,812$607,490-2.9%

So CAJun-07$589,710$555,000-5.9%

VenturaAug-06$710,910$660,000-7.2%

Riverside Jun-06$431,710$400,750-7.2%

San BernardinoAug-06$350,290$290,000-17.2%

Central Coast: SC & SLO



%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%

Sheet1

RegionPeak MonthPeak PriceAug-18%Chg Fr Peak

Santa CruzOct-07$865,000$917,5006.1%

San Luis ObispoOct-05$619,950$630,0001.6%

MontereyAug-07$777,000$599,000-22.9%

Santa BarbaraJul-07$878,120$572,500-34.8%

Central Valley: All Below Prior Peak



%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%

Sheet1

RegionPeak MonthPeak PriceAug-18%Chg Fr Peak%Chg Fr Peak

Sacramento CountyAug-05$394,450$369,950-6.2%

Madera CountyFeb-08$275,000$254,900-7.3%

Placer CountyAug-05$527,990$475,000-10.0%

Fresno CountyJun-06$313,500$280,000-10.7%

San Joaquin CountyJun-06$426,830$380,000-11.0%

Tulare CountyDec-05$269,710$239,000-11.4%

Stanislaus CountySep-05$370,100$319,900-13.6%

San Benito CountyMay-05$671,190$575,000-14.3%

Kings CountyMar-06$268,050$227,750-15.0%

Merced CountyOct-05$344,610$288,396-16.3%

Kern CountyJun-06$299,920$247,000-17.6%

Glenn CountyFeb-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 HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Unsold Inventory by Bay Area County

2.12.6

3.0

5.0

1.9 1.92.4

3.4 3.3

0

1

2

3

4

5

6A

lam

eda

Con

traC

osta

Ma

rin

Nap

a

San

Fra

ncisc

o

San

Mat

eo

Sant

aC

lara

Sola

no

Sono

ma

Unso

ld In

vent

ory

Inde

x

Oct-17 Oct-18

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

Active Listings: Up 7th Consecutive Month

SERIES: Active Listing of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

28.0%

-20%-15%-10%-5%0%5%

10%15%20%25%30%35%

Year-over-Year % Chg

Statewide Inventory Up Across the Board

Oct 2018

SERIES: Active Listings of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

-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 Highest at High End


3.1 2.8 2.7 2.73.2

2.43.6 3.7

4.6

9.4

3.0

3.4 3.3 3.4 3.54.0

3.14.2 4.0

4.6

8.2

3.6

0123456789

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 HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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/

2010

4/1/

2010

7/1/

2010

10/1

/201

01/

1/20

114/

1/20

117/

1/20

1110

/1/2

011

1/1/

2012

4/1/

2012

7/1/

2012

10/1

/201

21/

1/20

134/

1/20

137/

1/20

1310

/1/2

013

1/1/

2014

4/1/

2014

7/1/

2014

10/1

/201

41/

1/20

154/

1/20

157/

1/20

1510

/1/2

015

1/1/

2016

4/1/

2016

7/1/

2016

10/1

/201

61/

1/20

174/

1/20

177/

1/20

1710

/1/2

017

1/1/

2018

4/1/

2018

7/1/

2018

10/1

/201

8

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

ARK

ET

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

Days on Market by County

15.0 16.022.0

41.0

15.012.0 14.0

39.0

47.5

0

10

20

30

40

50

60

70A

lam

eda

Con

traC

osta

Ma

rin

Nap

a

San

Fra

ncisc

o

San

Mat

eo

Sant

aC

lara

Sola

no

Sono

ma

Days

on

Mar

ket

Oct-17 Oct-18

SERIES: Days on Market of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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

Joel Singer, CEO C.A.R.

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 Lagging -2.4% YTD

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

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%

Sheet1

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

Alameda9818971.9%-8.6%

Contra Costa946851-2.4%-10.0%

Marin1702022.4%18.8%

Napa80104-1.3%30.0%

San Francisco230242-0.6%5.2%

San Mateo3784290.3%13.5%

Santa Clara8788276.6%-5.8%

Solano424333-7.5%-21.5%

Sonoma349416-2.2%19.2%

Bay Area4,4364,301-2.4%-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


Bay Area: Peak v. October 2018


RegionPeak

MonthPeak 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%

Sheet1

RegionPeak MonthPeak PriceOct-18%Chg Fr Peak

AlamedaMay-07$709,420$900,00026.9%

Contra CostaMay-07$698,420$657,000-5.9%

MarinJun-07$1,149,390$1,450,00026.2%

NapaJun-07$729,170$709,500-2.7%

San FranciscoMay-07$972,010$1,600,00064.6%

San MateoOct-07$1,020,000$1,588,00055.7%

Santa ClaraOct-07$865,000$1,290,00049.1%

SolanoJun-07$492,800$430,000-12.7%

SonomaJan-06$650,330$650,000-0.1%

Bay AreaMay-07$789,250$958,80021.5%

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.


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


Santa Clara County

• Sales tapering • Price gains moderating• Active listings increasing• Price reductions increasing• Time on market increasing

What’s Up? From Great to Good

Unsold Inventory by County

2.12.6

3.0

5.0

1.9 1.92.4

3.4 3.3

0

1

2

3

4

5

6A

lam

eda

Con

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Ma

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Nap

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San

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Unso

ld In

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ory

Inde

x

Oct-17 Oct-18

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

Days on Market by County

15.0 16.022.0

41.0

15.012.0 14.0

39.0

47.5

0

10

20

30

40

50

60

70A

lam

eda

Con

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Ma

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Nap

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San

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San

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Days

on

Mar

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Oct-17 Oct-18

SERIES: Days on Market of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Santa Clara County

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

Santa Clara County, Oct 2018 Sales: 827 Units, -6.6% YTD, -5.8% YTY

Sales of Existing Detached Homes


Santa Clara County, Oct 2018: $1,290,000, Up 3.8% YTY

Median Price of Existing Detached Homes

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000


Santa Clara County, October 2018: 2.4 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.


Santa Clara County, October 2018: 14.0 Days

Median Time on the Market

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0


Sales Dropping Across the Board

228 200449

237 62324 248

34396 187 296

4,432

40474

225513

$0$500

$1,000$1,500$2,000$2,500$3,000$3,500$4,000$4,500$5,000

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San

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2017 YTD 2018 YTD


Declined Big in Some Markets

-23.5%

-2.9%

-15.3% -15.1%-18.4%

-10.5%

0.4%

-15.0%

-7.7% -7.4%

-0.7%

-5.1%

8.1%

-9.0% -8.9%

6.7%

-30%

-25%

-20%

-15%

-10%

-5%

0%

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YTY

% C

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n Pr

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Home Prices Increased in Most Cities

1,495,000

2,574,888

760,000

3,400,000

5,525,000

2,125,000

1,075,000

4,500,000

951,203

2,240,000

3,023,000

1,147,0001,267,075

1,305,000

2,700,000

1,800,000

$400,000

$1,400,000

$2,400,000

$3,400,000

$4,400,000

$5,400,000

$6,400,000

Cam

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San

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San

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Sunn

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Med

ian

Pric

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Oct-17 Oct-18

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

Price Growth Is Slowing in Many Markets

2.9%

26.2%

7.5%13.3%

51.4%

16.1%

3.4%

61.4%

0.9% 4.9%

-1.9%

6.9%

-31.9%

-7.3%

7.9%2.6%

-40%

-20%

0%

20%

40%

60%

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YTY

% C

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

Active Listings Up for All Markets

34 2680

24 2091

455

7833 61

720

1670 44 60

0

100

200

300

400

500

600

700

800C

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Act

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Oct-17 Oct-18


Listings on the Market Longer

19

1517

8.5 9

17.514.5

12

28

10 10.5

15

25

14 13 13

0

5

10

15

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Oct-17 Oct-18


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

Joel Singer, CEO C.A.R. 1982

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%

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

CA US Linear (CA)

CA turnover rate trend

Sellers Moving Less Frequently

11.5

0

2

4

6

8

10

12

14 Years Owned Home Before Selling

SERIES: 2018 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

5

8

15

30

0 20 40

Millennials

Gen X's

Baby Boomers

SilentGenerations

Older Generations Don’t Move As Often As Younger Generations

And California Is Not Building Enough

SERIES: California New Housing PermitsSOURCE: 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 Example: More Single Family Units Now Rentals6,919,164

1,940,607

6,527,730

2,674,808

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

SF Owners SF Renters

2000 2005 2010 2015

SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS). Downloaded from the National Bureau of Economic Research (NBER)

Potentially between 400,000 and 700,000 SF Rentals that Used to be Owner-Occupied

Top 10 Markets in Need of More Housing

Metro Area # of permits required

1. New York 218,541

2. Dallas 132,482

3. San Francisco 127,412

4. Miami 118,937

5. Chicago 94,457

6. Atlanta 93,627

7. Seattle 73,135

8. San Jose, CA 69,042

9. Denver 67,403

10. San Diego 55,825

SOURCE: National Association of Realtors®, Census Bureau

Top 10 Markets in Need of More Single-Family Housing Starts

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 Added1,000 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 AddedNumber

270

309

327

328

348

362

378

California

Texas

Oregon

Washington

New York

Nevada

Arizona

Ratio of Housing Units Added to Population AddedUnits per 1,000 People

+40%

Housing Affordability Peaked at Q1 2012

California, 1984-2018

SERIES: Housing Affordability Index of Traditional BuyersSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

26%

53%

0%

10%

20%

30%

40%

50%

60%

70%

80%

% O

F H

OUS

EHO

LDS

THA

T C

AN

BUY

A

MED

IAN

-PRI

CED

HO

ME

Annual Quarterly

Housing Affordability In CA: By County

64

5353525150494848474645454544434342424141393838383837373333323029282626252322222020201918161614141412

0

10

20

30

40

50

60

702018-Q2: % able to purchase median-priced home


Minimum Annual Income Required During Affordability Peak vs. Current

SERIES: Housing Affordability Index of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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%

Sheet1

Region2012 Q12018 Q2% CHG

CA SFH $56,320$126,490124.6%

CA Condo/Townhomes$44,440$101,270127.9%

Los Angeles Metropolitan Area$53,780$112,340108.9%

Inland Empire$35,170$76,310117.0%

S.F. Bay Area$90,370$219,380142.8%

US$32,000$57,02078.2%

Housing Affordability Still the Main Reason for Outmigration

SERIES: 2018 Annual Housing Market SurveySOURCE: 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 2017All 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 SurveySOURCE: 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%

New

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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 California 23% 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 ProfileAge: 56Marital Status: Married Couple with DependentsIncome: $200,000Yrs. Owned: 25Net cash gain: $1,050,000Reason for selling: Desired larger homeState moving to: Utah

Characteristics of HomeSize: 1,948 sq. ftProperty Type: Single-Family HomeLocation: Los Angeles CountyPrice: $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”*

Global Housing Demand Has Softened

International Buyers for CA Housing:Flat for 3 Years; Peaked in 2013

8%

6%5%

6% 6%

8%

6%

4%3% 3% 3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Q. Was the buyer an international buyer – a person who was a citizen of another country who wished to purchase residential real estate in the U.S.?


The share of international buyers dropped to the lowest level in at least ten years

Top 20 Markets for International Traffic

SOURCE: Realtor.com

September 2018 – realtor.comSearch Data

Rank Market

1 Miami-Fort Lauderdale-West Palm Beach, FL

2 LA-Long Beach - Anaheim, CA

3 Bellingham, WA

4 Santa Cruz – Watsonville, CA

5 Orlando-Kissimmee-Sanford, FL

6 New York-Newark-Jersey City, NY/NJ/PA

7 Kahului-Wailuku-Lahaina, HI

8 Urban Honolulu, HI

9 Houston- The Woodlands-Sugar Land, TX

10 El Centro, CA

Rank Market

11 Tampa-St. Petersburg-Clearwater, FL

12 Phoenix-Mesa-Scottsdale, AZ

13 Cape Coral-Fort Myers, FL

14 San Francisco – Oakland -Hayward, CA

15 Washington-Arlington-Alexandria, DC-VA-MD-WV

16 Dallas-Fort Worth-Arlington, TX

17 Seattle-Tacoma-Bellevue, WA

18 Lakeland-Winter Haven, FL

19 Naples-Immokalee –Macro Island, FL

20 Chicago-Naperville-Elgin, IL-IN-WI

Five States Accounted for 52% of Foreign Purchases

SERIES: 2018 Profile of International Home Buying ActivitySOURCE: NATIONAL ASSOCIATION OF REALTORS®

19%

14%

9%

5% 5%4% 4%

3% 3% 3% 3% 3%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Florida California Texas Arizona New York Georgia NewJersey

Ohio Virginia NorthCarolina

Illinois Michigan

Share of All Foreign Buyers

Dollar Volume of Sales to Foreign BuyersDeclined in 2018 (Billions)


China includes buyers from the People’s Republic of China, Hong Kong, and Taiwan.Estimates from 2010 through 2015 include some commercial transactions. From 2016, the estimates include only residential transactions

Number of Sales to Foreign Buyers Down



Average Purchase Price for Foreign Buyers



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

702018-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 2017SOURCE: 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

-42,777Merced Solano Washington Stanislaus Santa Cruz Texas Nevada (ST) Oregon San Joaquin Sacramento

MSA

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

Elsewhere in CAAnother 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

-8,166Kentucky Santa Cruz Oklahoma Colorado Sutter &

YubaSan LuisObispo

SanBernardino

Oregon Idaho Nevada (ST)

Sacramento MSA Out Migration(2010-2016)


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

SantaBarbara

Colorado Oregon Washington Kern Nevada (ST) Arizona Texas SanBernardino

Riverside

Coastal Southern California Out Migration (2010-2016)


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 NorthCarolina

Utah Georgia Kern County Arizona Texas

Inland Empire Out Migration(2010-2016)


4. CA will soon be a majority renter state

54.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

New

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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

75Homeownership Rate

CA U.S.

California Homeownership Rates by Race and Ethnicity (2010-2014 Average)

… Homeownership Varies Sharply by Ethnicity

SERIES: Homeownership rate by ethnicitySOURCE: 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%

Haw

thor

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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%

Haw

thor

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Mon

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East

Los

Ang

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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 1-125www.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 HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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 OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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 OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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 OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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 Index 36% 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. C onnect

Focus is keyWhen Creating a Consistent Customer Experience Focus is key

2019 Economic & Market ForecastValue of Strategic Thinking:��“You will be surprised by the future, but you won’t be surprised that you are surprised”�2008�The CA Housing Market Recovery2018Macro Economic UpdateU.S. Economy: Our Biggest StrengthGrowth Reflects Strong Fiscal StimulusCA Employment: All-Time HighUnemployment Lowest in 40+ YearsConsumer Confidence Highest in 18 YearsInflation Remains LowRates in 2018: 30 Yr. Now Above 5%� 1st Time since 2011 Fed Has Raised rates 8 Times Since Dec 2015RISING Rates Hit Pocketbooks HardRISING Rates Hit Pocketbooks HardTax Reform: Homeownership Took a HitConsequences?Growth is good, but has its side effects tooThere’s also the bond market to considerAnd then there’s this…Slide Number 22Market Shift: Home Sales Softening ��Regional Price Gains SlowingQ: How long can the eoncomy be strong if housing isn’t?�Concerns Going Forward Bay Area Economic ProfileCalifornia Realtors�& Their IndustryC.A.R. Membership Up & Sales FlatSlide Number 30Member Productivity is Low� ½ What It Was in 1972CA Housing Market:� “A Shift is Afoot”CA Buyers On the SidelinesOctober Market SnapshotOctober Sales Off 7.9% YTY�6 months of declines CA: Declining Trend in Home SalesBay Area Sales Down 3% from Last YearSales Declined in Sub-Million Dollar MarketsBay Area: 4 Counties are up YTD� but not by muchHome Prices Still Rising – Gains ModeratingPrice Per Square Increased from Last Year, but Virtually Unchanged from SeptemberSales Price -to-List Price Hit the Lowest Level in 21 MonthsBay Area: Peak v. Current PriceSo Cal: Orange & SD Above Prior PeakCentral Coast: SC & SLOCentral Valley: All Below Prior PeakInventory Index Dipped in OctoberUnsold Inventory by Bay Area CountyActive Listings: Up 7th Consecutive MonthStatewide Inventory Up Across the BoardInventory Highest at High EndReduced-Price Listings Rise With ActivesDays on Market Rising as Market SlowsDays on Market by CountySlide Number 55San Francisco Bay AreaSales Lagging -2.4% YTDBay Area: Sales off 2.4% YTDMedian Price of Existing Detached HomesBay Area: Peak v. October 2018Unsold Inventory IndexMedian Time on the MarketSanta Clara CountyWhat’s Up? From Great to Good Unsold Inventory by CountyDays on Market by CountySanta Clara County�Sales of Existing Detached HomesMedian Price of Existing Detached HomesUnsold Inventory IndexMedian Time on the MarketSales Dropping Across the BoardDeclined Big in Some MarketsHome Prices Increased in Most CitiesPrice Growth Is Slowing in Many MarketsActive Listings Up for All MarketsListings on the Market LongerSlide Number 78CA v US: Lower Housing Turnover – New Normal? Sellers Moving Less FrequentlyAnd California Is Not Building EnoughCA Example: More Single Family Units Now RentalsTop 10 Markets in Need of �More HousingCA building less housing per capita than:� AZ, NV, WA, OR, NY(2005 – 2016)Housing Affordability Peaked at Q1 2012Housing Affordability In CA: By CountyMinimum Annual Income Required During Affordability Peak vs. CurrentHousing Affordability Still the Main Reason for OutmigrationIt’s a Much Bigger Problem for First-Time BuyersHomeownership update – CA inched up from 2016 but remained at low levelCalifornia still ranked the 2nd lowest �amongst all statesHomeownership will deteriorate further if the trend continues More Sellers Continue to Move out of California; Highest since 2007Case Study: Seller Leaving CaliforniaGlobal Housing Demand Has SoftenedInternational Buyers for CA Housing:� Flat for 3 Years; Peaked in 2013Top 20 Markets for International Traffic Five States Accounted for 52% � of Foreign PurchasesDollar Volume of Sales to Foreign Buyers� Declined in 2018 (Billions)Number of Sales to Foreign Buyers Down�Average Purchase Price �for Foreign BuyersWhere Are We? 1. CA is NOT AffordableOnly Lassen County Beats US Affordability2. CA is Home to Record Number of HomelessLargest Number of Homeless People3. CA is Losing Workers to More Affordable States: Two Step~750K People Have Left Since 2010Step 1: Coastal to Cheaper MarketsStep 2: Pricing Prior Residents Out of StateStep 1: Coastal to Cheaper MarketsStep 2: Pricing Prior Residents Out of State4. CA will soon be a majority renter stateCalifornia: 2nd lowest in nation�Homeownership Rates CA: Ownership Rebound?… Homeownership Varies Sharply by EthnicityCA: Majority Renter State by 202542 of 142 Big Cities ALREADY Majority RenterMajority Renter CitiesQ: What needs to be done?�� A: Build More Housing Lakewood CA 1950Global Capitals Do DensityU.S. Cities Ranked by Density�Case Study: Restrictive Zoning in L.A. CA vs US Median PriceUSC 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 ForecastU.S. Economic OutlookCalifornia Economic OutlookCA Housing Market Outlook – Most Likely CaseOpportunitiesRead This: California’s Housing Future�Slide Number 134Jeff Bezos: AmazonHow Client Found Their AgentSlide Number 137Slide Number 138Focus is keySlide Number 140

2019 economic & market forecast - santa clara county ... · 2019 economic & market forecast santa...

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