april 18-19, 2009 homebuyers fair leslie appleton-young c.a.r. vice president and chief economist...

April 18-19, 2009

HOMEBUYERS FAIR Leslie Appleton-Young

C.A.R. Vice President and Chief Economist

2009 California Real Estate:Opportunities for First Time-Buyers

California Real Estate

Market Update

Sales Hit Bottom in 2007, Up in 2008

UNITS/MEDIAN PRICE $

SOURCE: California Association of REALTORS®

0

100,000

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Sales of Existing Detached Homes Median Price

California Sales of Existing Homes and Median Price

-61% -25%

-44%

Sales of Existing Detached Homes, California2008: 439,740 units, Up 26.7%

300,000

350,000

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450,000

500,000

550,000

600,000

650,00019

95

1996

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1998

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2008

UNITS


Sales of Existing Detached Homes and Pacific West Consumer Confidence

California, Feb. 2009 Sales: 620,410 Units, Up 91.6% YTD, Up 83.0% YTY

0

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120

140

160

Sales Consumer Confidence INDEXUNITS

SOURCE: California Association of REALTORS®; The Conference Board

*Sales are seasonally adjusted and annualized

4,000,000

4,200,000

4,400,000

4,600,000

4,800,000

5,000,000

5,200,000

5,400,000

5,600,000

5,800,000

6,000,000

6,200,000

6,400,000

6,600,000J

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-09

$130,000$135,000$140,000$145,000$150,000$155,000$160,000$165,000$170,000$175,000$180,000$185,000$190,000$195,000$200,000$205,000$210,000$215,000$220,000$225,000$230,000$235,000$240,000

Existing Single-Family Home Sales Median Price

US Sales and Median PriceFeb. 2009 - Sales: Down 3.6% YTY, Median Price: Down 15.0%

YTY

Median Price of Existing Detached HomesCalifornia, February 2009: $247,590, Down 40.8% YTY

$0

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82%

0%

10%

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30%

40%

50%

60%

70%

80%

90%

20

04

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20

05

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20

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.07

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.10

Under 500 500 to 999 1 Mil +

Sales By Price Range

SOURCE: Mortgage Bankers Association, C.A.R.

Financial Turmoil: 8/07-Now

Peak vs Current Price - February 2009

RegionPeak

MonthPeak Price

Feb-09 Median

% Chg From Peak

Monterey Region Aug-07 $798,210 $241,130 -69.8%

High Desert Apr-06 $334,860 $121,970 -63.6%

Palm Springs/Lower Desert Jun-05 $393,370 $156,000 -60.3%

CALIFORNIA May-07 $594,530 $247,590 -58.4%

Riverside/San Bernardino Jan-07 $415,160 $174,400 -58.0%

Sacramento Aug-05 $394,450 $168,700 -57.2%

San Francisco May-07 $853,910 $399,040 -53.3%

Northern Wine Country Jan-06 $645,080 $310,950 -51.8%

Ventura Aug-06 $710,910 $359,630 -49.4%

Los Angeles Aug-07 $605,300 $308,540 -49.0%

Santa Clara Apr-07 $868,410 $445,000 -48.8%

San Diego May-06 $622,380 $320,980 -48.4%

San Luis Obispo Jun-06 $620,540 $347,060 -44.1%

Orange County Apr-07 $747,260 $433,690 -42.0%

Northern California Aug-05 $440,420 $255,810 -41.9%

Unsold Inventory IndexCalifornia, February 2009: 6.5 Months

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2

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6

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MONTHS

76.8%75.4%

67.3%66.2%

53.8%

47.6%44.1%

42.7%

7.9%

19.9%

0%

20%

40%

60%

80%

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Distressed Sales

Distressed Sales to Total Sales RatioBi-Furcated Marketplace

Proportion of First-Time Home Buyers2008: 35.9%

38.3%

0%

10%

20%

30%

40%

50%

60%

81 83 85 87 89 91 93 95 97 99 01 03 05 07

% First-Time Home Buyers Long Run Average

Q. Was the buyer a first-time buyer?

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

20

00

Q1

20

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80%

PITI Payment as Share of Income % ChangePITI/Month

Entry-Level Monthly House Payment and Payment as Share of Median Household Income


Peak 2007-Q2: $3,380/moLatest 2008-Q4: $1,630/mo

First-time Buyer Housing Affordability IndexCalifornia Vs. U.S. 2003-2008

0%

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100%

Q1

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08

CA US

% OF HOUSEHOLDS THAT CAN BUY


Buyers See Opportunities in This Market…

10%

9%

67%

22%

39%

Price decreases motivated us

Low interest rates helped us move to abetter location, neighborhood

Likelihood that interest rates will move upmotivated us

Low interest rates helped us buy a largerhome

Moved to an area where it was moreaffordable

The Role Of Market ConditionsIn The Decision To Buy

Southern California Region

Economic Profile

Home Sales in Southern California Regions

0

500

1000

1500

2000

2500

3000

3500

High Desert Los Angeles Orange PalmSprings

Riverside/SB San Diego Sta. BarbaraArea

Ventura

Feb-08

Feb-09


High Desert 1,252 1,315 413 -4.8% 203.1% 218.5%Los Angeles 3,374 3,762 1,993 -10.3% 69.3% 77.1%Orange 1,191 1,073 820 11.0% 45.2% 59.5%Palm Springs 628 533 369 17.8% 70.2% 60.8%Riverside/SB 1,620 1,784 649 -9.2% 149.6% 152.1%San Diego 2,092 2,097 948 -0.2% 120.7% 129.7%Sta. Barbara Area 120 132 118 -9.1% 1.7% 17.2%Ventura 382 351 236 8.8% 61.9% 70.1%

Y-t-DY-t-YCounty Feb-09 Jan-09 Feb-08 M-t-M

Sales of Existing Detached Homes


Southern California Regions

Sales of Existing Detached HomesLos Angeles County, 2008 Sales: 40,913 Units, Up 16.3% YTY


UNITS

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No

v

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2006200720082009

ANNUAL MONTHLY

County Feb-09 Jan-09 Feb-08

Los Angeles 7.7 7.6 18.5Orange 9.1 9.9 16.2Riverside/SB 5.6 5.5 19.3San Diego 3.9 4.0 14.5Santa Barbara 8.9 7.2 7.5Ventura 4.7 6.0 NASouthern California 6.4 6.5 17.2

Unsold Inventory Index (Months)


Sales of Existing Detached Homes and Pacific West Consumer Confidence

Los Angeles County, Feb. 2009 Sales: 3,374 Units, Up 76.2% YTD, Up 69.3% YTY

1,000

2,000

3,000

4,000

5,000

6,000

7,000

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160Sales Consumer Confidence

SOURCE: California Association of REALTORS®; The Conference Board

INDEXUNITS

High Desert 121,967$ 127,750$ 220,378$ -4.5% -44.7%Los Angeles 308,538$ 304,747$ 478,354$ 1.2% -35.5%

433,690$ 423,101$ 609,968$ 2.5% -28.9%Palm Springs 155,999$ 153,147$ 334,905$ 1.9% -53.4%

174,405$ 176,184$ 289,663$ -1.0% -39.8%320,977$ 325,257$ 450,707$ -1.3% -28.8%715,000$ 900,000$ 1,295,000$ -20.6% -44.8%

Sta. Barbara-North Cnty. 228,260$ 225,000$ 333,928$ 1.4% -31.6%359,632$ 364,534$ 520,270$ -1.3% -30.9%

Y-t-Y

San Diego

County Feb-09 Jan-09 Feb-08 M-t-M

Orange

Riverside/SB

Ventura

Sta. Barbara-So. Coast

Median Price of Existing Detached HomesSouthern California Regions


Median Price of Existing Detached HomesSouthern California, Feb. 2009: $261,810 Down 39.6% YTY

$0

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Median Price Annual ComparisonLos Angeles County, 2008: $402,110, Down 32.3% YTY


$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Jan

Feb Mar

Ap

r

May

Jun

Jul

Au

g

Sep

t

Oct

No

v

Dec

2006200720082009

MONTHLYANNUAL

Unsold Inventory IndexLos Angeles County, February 2009: 7.7 Months

0

5

10

15

20

25

30

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Jul-

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MONTHS


Foreclosures

SOURCE: Real Estate Research Council

0

2

4

6

8

10

12

14

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/90

Q3

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THOUSANDS

Los Angeles County

2009 Forecast

California Housing Market Summary

2003 2004 2005 2006 2007 2008 2009F

SFH Resales (000s)

601.8 624.7 625.0 477.5 346.9 439.8 550.0

% Change 5.1% 3.8% 0.03% -23.6% -27.3% 26.8% 25.0%

Median Price ($000s)

$371.5 $450.8 $522.7 $556.4 $560.3 $346.4 $248.0

% Change 17.5% 21.3% 16.0% 6.5% 0.7% -38.2% -28.4%

30-Yr FRM 5.8% 5.8% 5.9% 6.4% 6.3% 6.1% 5.1%

1-Yr ARM 3.8% 3.9% 4.5% 5.5% 5.5% 5.2% 4.8%


April 2009

First-Time Buyer Housing Affordability Index

First-Time Buyer Housing Affordability

• Median Price: The First-time Buyer (FTB) purchases a home at the entry-level price, which is 85 percent of the median home price for the area.

• Down payment: The FTB is assumed to make a 10 percent downpayment. The Monthly Payment Including Taxes and Insurance (PITI) is calculated according to the above underlying assumptions:– 10 percent down payment– Effective Composite ARM mortgage rate– 1.038 percent assumed insurance costs and property

taxes.• 40% Qualifying Ratio: It is then assumed that the monthly

PITI can be no more than 40 percent of a household's income.

Methodology/Assumptions

First-time Buyer Housing AffordabilitySouthern California - 4th Quarter 2008

0 10 20 30 40 50 60 70 80

United States

California

High Desert

Riverside-San Bernardino

Palm Springs

San Diego

Ventura

Santa Barbara

Orange County

Los Angeles

Q4/07 Q4/08


To Rent or Buy in 2009

To Rent or Buy in 2009

• Household renting a 3bedroom 2 bath apartment at the prevailing rent of $1,855 per month and purchases rental insurance for $20 per month.

• The household considers the purchase of anentry-level home: priced at $248,000, or 85 percent of the prevailing median-priced home of $291,800.

• The monthly payment including taxes and insurance (PITI) is $1,630, assuming:– 10 percent down payment– 40 percent qualifying ratio– Prevailing one-year ARM mortgage rate, – 1.038 percent for insurance costs and property taxes– $8,000 First-time buyer tax credit

Assumptions

Renting Versus Buying in 2009

Renters

Year 1 Year 2 Year 3 Year 4 Year 5 Year 1 - Year 5Household Income $48,900 $48,900 $48,900 $48,900 $48,900 $48,900Standard IRS Deduction Married Filing Jointly n/a n/a n/a n/a n/a $10,900Mortgage Interest Deduction $13,364 $13,195 $13,015 $12,825 $12,622 n/aProperty Tax Deduction $2,480 $2,480 $2,480 $2,480 $2,480 n/a Total Deduction $15,844 $15,675 $15,495 $15,305 $15,102 $10,900Total Taxable Income $33,056 $33,225 $33,405 $33,595 $33,798 $38,000Total Taxes Owed ($4,958) ($4,984) ($5,011) ($5,039) ($5,070) ($5,700)

Homebuyer Tax Credit $8,000 n/a

Annual Tax Liability $3,042 ($4,984) ($5,011) ($5,039) ($5,070) ($5,700)x 5 Years 5

5 Year Total Tax Liability ($28,500)

First-time Buyer 2009 5-Year Tax Savings

First-Time Buyers

n/a

($17,062)

$11,438

5 Year Tax Savings Outlook

SOURCE: C.A.R.

First-time Buyer Purchasing in 2009 saves over $11k in 5 Years under these assumptions


10% Downpayment Buying a Home - First-time Buyers

Renting a 3Bdr/2Ba Apartment

Mortgage Payment/Rent $1,340 $1,855Taxes & Insurance/Renter's Insurance $290 $20PITI/Total Rental Costs $1,630 $1,875

Monthly SavingsAnnual Savings5-Year Savings $14,700

$245$2,940

Out-of-Pocket Cost Analysis – 10% Downpayment

SOURCE: C.A.R.

Assumes all pmts/costs remain constant


20% Downpayment Buying a Home - First-time Buyers




$395$4,740

Out-of-Pocket Cost Analysis – 20% Downpayment

SOURCE: C.A.R.

Using the same assumptions, EXCEPT:

Increasing the Down Payment to 20%(instead of 10%): Monthly Savings Increase by $150 Annual Savings Increase by $1,8005-Year Savings Increase by $9,000

Note: 5-Yr Tax Savings goes down to $10,355, a $1,038 drop due to lower interest payments.


Entry-Level Condo @ 10% Down Buying a Home - First-time Buyers




$495$5,940

Out-of-Pocket Cost Analysis –Entry-level Condo

SOURCE: C.A.R.

Using the same assumptions, EXCEPT:

Using Entry-Level Median Priced Condo at $210,830 with 10% Downpayment:

Note: 5-Yr Tax Savings goes down to $9,700, a $1,741 drop due to lower interest payments.

Loan AvailabilityFHA

Borrower Eligibility Requirements

Market Share by Loan Type

YearConforming Loan Limit

Down-payment %*

Median Price

Conforming Share of Sales

Jumbo Share of

Sales2003 322,700$ 20% 371,520$ 75% 25%2004 333,700$ 20% 450,770$ 63% 37%2005 359,650$ 16% 524,020$ 37% 63%2006 417,000$ 12% 556,640$ 40% 60%2007 417,000$ 15% 560,270$ 43% 57%2008 729,750$ 20% 281,180$ 82% 18%

Jumbo Vs Conforming

SOURCE: C.A.R.

CA Existing Single-Family Home Sales

*Down Payment Source: C.A.R.’s Annual Housing Market Survey

Source: C.A.R. 2008-2009 State of the California Housing Market Report

18.8%

2.7%

0%

5%

10%

15%

20%

25%

30%

2001 2002 2003 2004 2005 2006 2007 2008

FHA VA

FHA and VA Mortgages(First Mortgage)

FHA Eligibility Requirements

• Must occupy home as primary residence • Must be legal resident:

– US Citizen– Lawful permanent resident aliens– Non-permanent resident aliens

• Must have valid SSN. (T.I.N. unacceptable)• Only allowed 1 FHA loan• Borrowers can hold title in Living Trust• Can be/have co-borrowers/co-signers

For more info contact your REALTOR®www.fha.gov

1-800-Call-FHA (1-800-225-5342)

Borrower Eligibility

FHA Eligibility Requirements

• 1 – 4 Unit Dwellings • SFR, PUD, Condo

– (Attached, Detached, High/Low rise)• Manufactured Homes• Existing or New Construction• Must Meet HUD Minimum Property Requirements • Owner Occupancy Required

For more info contact your REALTOR®

www.fha.gov

1-800-Call-FHA (1-800-225-5342)

Property Eligibility

Condos vs Single-Family Detached

Median Price of Existing HomesCondos vs. Single-Family Detached

($36,470)

-$150,000

-$100,000

-$50,000

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

$550,000

$600,0001

98

0

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

04

20

06

20

08

$ Differential Condos SF Detached

Price Difference - L/R Avg: ($48,510)


First-Time Buyer Housing AffordabilityCondos vs. Single-Family Detached

0%

1000%

2000%

3000%

4000%

5000%

6000%

7000%

20

00

Q1

20

00

Q3

20

01

Q1

20

01

Q3

20

02

Q1

20

02

Q3

20

03

Q1

20

03

Q3

20

04

Q1

20

04

Q3

20

05

Q1

20

05

Q3

20

06

Q1

20

06

Q3

20

07

Q1

20

07

Q3

20

08

Q1

20

08

Q3

Year

Condos SF Detached


2008 First Time Home Buyer Study

California Association of REALTORS

Methodology

500 telephone surveys with California consumers who had purchased a home in 2008.

Surveys results are projectable at two standard deviations (a 95%) confidence level which yields a maximum sampling error of +/-4.5%.

Home Purchased

49%

35%

15%

Existing resalehome

Brand new/newlyconstructed home

Condominiumconversion

Type Of Home Purchased

51%

35%

14%

Condominium

Town home

Single-familydetached home

Share of Distressed Sales

13%

22%

1%

19%

All Homes

Single FamilyDetached Homes

Condominiums

Townhomes

Homes Listed on MLS

83%

86%

99%

72%

All Homes

Single-familydetached homes

Condominiums

Townhomes

Square Footage Of The Home Purchased

7%

28%

26%

39%

1,000 and under 1,001-1,500 1,501-2,000 2,000+

Mean = 1,678; Median = 1,700

21%

32%

25%

14%

8%

0%

5%

10%

15%

20%

25%

30%

35%

3 months orless

4-6 months 7-9 months 10-12 months Over 12 months

Mean = 6.9; Median = 6.0

Months Spent Looking for a Home Prior to Finding The Home You Bought

6.9

8.6

7.9

6.4

7.4

7.6

5.3

All Homes

Existing Resale Home

Brand New Home

Condo Conversion

Single-Family Detached Home

Condominium

Townhome

Months Spent Looking for a Home Prior to Finding The Home You Bought

“The” Primary Reason For Buying Your Home

22%

16%

12%

11%

9%

7%

23%Price decreases allowed us to buy

Tired of renting

Desired better/other location

Obtained favorable price/ financing

Job promotion, pay raise

Change in family status

Investment/Tax advantages

Role Market Conditions Played InYour Decision To Buy Your Home

39%

23%

20%

1%

67%Price decreases motivated us

Low interest rates helped us move to abetter location, neighborhood

Likelihood that interest rates will move upmotivated us

Concern that interest rates are going togo up motivated us to buy

Unsure

Direction of Home Prices In Your Neighborhood

15%

0%

28%

0%

0%

0%

25%

33%

17%

11%

55%

67%

55%

35%

54%

5%In 1 year

In 3 years

In 5 years

In 10 years

Up Down Flat Don't know

0%

4%

45%

30%

21%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

1 year or less 1-2 years 2-3 years 3-4 years 4+ year

Mean = 43.6 months; Median = 42 months

Length of Time Planned to Stay at Current Home Before Selling It

Mean = 15%, Median = 15%

8%

39%

9%

25%

18%

0%

10%

20%

30%

40%

50%

5% or less 6-10% 11-15% 16-20% 21-25%

Down Payment As a Percent of Home Price

8%

3%

6%7%

23%

9%

25%

18%

0%

5%

10%

15%

20%

25%

30%

5% 7% 8% 9% 10% 15% 20% 25%

Down Payment As a Percent of Home Price

Mean = 15%, Median = 15%

Type Of Mortgage Loan

63%

72%

54%

77%

75%

28%

85%

37%

28%

46%

23%

25%

72%

15%

0% 20% 40% 60% 80% 100%

All Homes

Town Home

Condominium

Single-Family Detached Home

Condominium Conversion

Brand New Home

Existing Resale Home

Adjustable Rate Mortgage (ARM) Fixed Rate Mortgage (FRM)

Do you know the terms of your loan?

78%

2%

20%

Yes

No

Unsure

Source of Housing Finance Assistance

13%

7%

3%

2%

0%

75%No assistance

Friends and/or relatives

A local government funded program

A federal government funded program

A state government funded program

A private funding program

0% 0% 0%

6%5%

11%10%

12%

28% 28%

0%

5%

10%

15%

20%

25%

30%

1 2 3 4 5 6 7 8 9 10

Mean = 8.15 Median = 9

Scale: “1” = very easy, “10” = very difficult

Level of Difficulty to Obtain Financing

Had you made an offer on other homes before finding and buying this one?

70%

30%

Yes

No

# of Offers Before This Purchase

Mean = 3.11

Median = 3

Reasons Offers Made Prior To Current Purchase Not Successful

34%

9%

7%

4%

47%Seller would not accept price offered

Could not get an acceptable mortgage

Dropped out because prices were stillgoing down

Lender withdrew, did not fund

Buyer's remorse (just didn't feel rightabout the obligation, deal)

Use a Real Estate Agent

89%

11%

Yes

No

Single Most Important Reason For Selecting Agent

23%

12%

10%

9%

5%

39%Seemed like he/she would be the most

aggressive on my behalf

Seemed the agent would get me thelowest price

Best prepared

Referral from relatives/ friends/co-workers

Most knowledgeable

Rebated part of commission back

Areas Needed The Most Help From Agent

43%

36%

20%

2%

34%

33%

32%

1%

56%

43%

0%

1%

40%

30%

27%

3%

Price negotiation

Determine whatcomparable homes

were selling for

Find the right home topurchase

Negotiate the terms ofsale

All Homes Existing Resale Home Brand New Home Condo Conversion

Reasons for Overall Satisfaction with Your Agent

56%

55%

50%

42%

34%

25%

58%Worked hard on my behalf

Always quick to respond

Listened to what we needed

Helped find the best home for me

Negotiated good deal on my behalf

Kept me up to date on transaction

Made sure changes, repairs were taken care of

One Thing You Would Like To Change About Your Home Buying Experience

26%

21%

13%

11%

1%

1%

45%Better understanding on where the market is

going (up/down/etc.)

Have agent negotiate better on my behalf

Escrow close on time

Faster response from my agent

Better response from selling agent

Less paperwork

Better understanding of where interest rates aregoing

Gender of First-Time Buyers

33%

67%Female

Male

Age of First-Time Buyers

45%

41%

11%

0%

0%

2%Under 25 years

25 to 34 years

35 to 44 years

45 to 54 years

55 to 64 years

65 years and older Mean = 35.7

Median = 35

Marital Status

47%

53%Married

Single

Income Category

7%

38%

37%

15%

0%

3%$35,000 to $49,999

$50,000 to $74,999

$75,000 to $99,999

$100,000 to $149,000

$150,000 to $199,000

$200,000 or more

april 18-19, 2009 homebuyers fair leslie appleton-young c.a.r. vice president and chief economist...

Documents

yty slide

mo slide

annualized slide

yty source

home sales

price range source

distressed sales

us sales