2019 economic & market forecast - the joel toller team · 2019 economic & market forecast...

2019 Economic & Market Forecast

REImagine

October 11, 2018

Leslie Appleton-Young

SVP & Chief Economist

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

Homeownership Rates

53.7%

Peak: 60.2%54.4%

64.5%

Peak: 69.0%

63.9%

45%

50%

55%

60%

65%

70%

75% CA US

SERIES: Homeownership RatesSOURCE: U.S. Census Bureau

CA: Ownership Rebound?

54.3

64.4

50

55

60

65

70

75

Homeownership Rate

CA U.S.

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

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

Rates Rising Recently, but Keep Perspective

SERIES: 30Yr FRM, 5Yr ARM

SOURCE: Freddie Mac

0

2

4

6

8

10

12

14

16

18

20

30-Year Fixed Rate Mortgage

Higher Rates Hurt Affordabiity

Q2-2018 Median Price $596,730

20% Down-payment

INTEREST RATE

MONTHLY MORTGAGE

SERIES: Housing Affordability Index

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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%

Statewide Home Sales Off 5.5% YOY

*Sales are seasonally adjusted and annualized

SERIES: Sales of Existing Single Family Homes


11.8%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18

Year-over-Year % Chg

Avg. year-over-year

% chg. = -5.5%

Last 4+ consecutive mo. with decline:

Avg. year-over-year % chg. = -1.9%

California, August 2018: $596,410, +0.8% MTM, +5.5% YTY

Price Growth Also Slowing Down

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000 Peak: May-07

$594,530

Trough: Feb-09

$245,230

-59% from

peak

Aug-18: $596,410Aug-17:

$565,320

SERIES: Median Price of Existing Single Family Homes


-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%Y

TY%

Ch

g.

in P

ric

eCondo Single-Family Homes

Price Gains Slowing Across the State

SERIES: Median Price of Existing Condo/Townhomes


Price Gains Slowing Across the State



0%

2%

4%

6%

8%

10%

12%

14%Y

TY%

Ch

g.

in P

ric

eCondo Single-Family Homes

Decelerating Growth

Bay Area: All But Contra Costa & Solano

SERIES: Median Price of Existing Detached Homes


Region

Peak

Month

Peak

Price Aug-18%Chg Fr

Peak

San Francisco May-07 $972,010 $1,550,000 59.5%

Santa Clara Oct-07 $865,000 $1,295,000 49.7%

San Mateo Oct-07 $1,020,000 $1,500,000 47.1%

Alameda May-07 $709,420 $960,000 35.3%

Bay Area May-07 $789,250 $935,000 18.5%

Marin Jun-07 $1,149,390 $1,222,500 6.4%

Napa Jun-07 $729,170 $752,500 3.2%

Sonoma Jan-06 $650,330 $670,000 3.0%

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

Solano Jun-07 $492,800 $455,000 -7.7%

III. Shift

Shift Started in January 2018; Tipped in April

SERIES: Growth in Active Listings


17.2%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

+ 17.2 % Active Listings in August

Biggest Gains At Low End

SERIES: Unsold Inventory Index of Existing Single Family Homes


7.0%

8.0%

7.0%

3.5%2.9%

2.4%

0.5%0.0%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

Under $300K $300-$500K $500-750K $750-1000K $1-1.5M $1.5-2M $2-$3M $3M +

Active Listings Growth

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

Listings Taking Longer to Sell

SERIES: Median Time of Market of Existing Single Family Homes


20

0

10

20

30

40

50

60

70

80

1/1

/20

05

7/1

/20

05

1/1

/20

06

7/1

/20

06

1/1

/20

07

7/1

/20

07

1/1

/20

08

7/1

/20

08

1/1

/20

09

7/1

/20

09

1/1

/20

10

7/1

/20

10

1/1

/20

11

7/1

/20

11

1/1

/20

12

7/1

/20

12

1/1

/20

13

7/1

/20

13

1/1

/20

14

7/1

/20

14

1/1

/20

15

7/1

/20

15

1/1

/20

16

7/1

/20

16

1/1

/20

17

7/1

/20

17

1/1

/20

18

7/1

/20

18

Median Time on Market (Days)

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



-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

State of the Housing Market -Study of Housing: Insight, Forecast, Trends (S.H.I.F.T)

• C.A.R. has conducted the Annual Housing Market Survey since 1981.

• E-mailed to a random sample of 30,355 REALTORS® throughout CA

• Asked about their most recent transaction (Q2 2018).

• 1,492 valid survey responses, 4.9 percent response rate.

• The margin of error +/- 2.5 percent at a 95 percent confidence level.

Methodology

International Buyers: Flat for 3 Years

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.?

SERIES: 2018 Housing Market Survey


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

Sellers Aren’t Not Moving

11.5

0

2

4

6

8

10

12

14Years Owned Home Before Selling

Long-Time Homeowners are not

moving as in the past because:

• Low rate on current mortgage

• Low property taxes

• Capital gains hit

• Where can I afford to go?

• Why not remodel and stay?



29% Of Sellers Moving Out of CaliforniaUp 10% from 2013

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



4. CA soon to be a majority renter state

54.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

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Homeownership Rate

California: 2nd lowest in nation

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

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%

• 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

2019 economic & market forecast - the joel toller team · 2019 economic & market forecast...

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