coganomics california los angeles real estate market updates - jeff coga
TRANSCRIPT
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8/4/2019 Coganomics California Los Angeles Real Estate Market Updates - Jeff Coga
1/8Capital Redevelopment Group LLC | Coganomics | Volume 42 July 2
Quarterly Report
Q2- Los Angeles County
Is The Market FALLING?
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8/4/2019 Coganomics California Los Angeles Real Estate Market Updates - Jeff Coga
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Today's Market
9-year (36 quarters) Housing Equity Gain*
Los Angeles
FHA Loan Limit
40%
*Note: Equity gain reflects price appreciation only
The relatively recent correction in locahome prices wiped out most of theequity gained over the last 7 years
-17.5%
$7,733
U.S.
Los Angeles-Long Beach-Santa Ana Area
Local Market Report, Second Quarter 2011
Home Sales
State Existing Home Sales
(2011 Q2 vs 2010 Q2)
Conforming Loan Limit**
Local Trend
**Note: the 2009 loan limits for FHA and the GSEs were extended through 2010.
-$126,600
7-year (28 quarters) Housing Equity Gain*
$12,700
1-year (4-quarter) Appreciation (2011 Q2) -4.3%
California
Prices are still down from a year ago,but the trend is improving
-8.3% -12.7%
$729,250
Price Activity
$171,567$292,300Current Median Home Price (2011 Q2)
-30.2%3-year (12-quarter) Appreciation (2011 Q2)
-2.9%
3-year (12-quarter) Housing Equity Gain*
Local sales growth continues to be
weak
U.S.
$417,000
Local Median to Conforming Limit Ratio
$729,250
not comparable
-$22,400
-$36,500
-$146,100
Most buyers in this market have accesto government-backed financing$729,750
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
-40%
-30%
-20%
-10%
0%
10%
20%
30%40%
2011Q2
Q42010Q2
Q42009Q2
Q42008Q2
Q42007Q2
Q42006Q2
Q42005Q2
Q42004Q2
Q42003Q2
Q42002Q2
Median Price (Red Line) and One-year Price Growth
0
100
200
300400
500
600
700
-40%
-20%
0%
20%40%
60%
80%
100%
2011Q2
Q42010Q2
Q42009Q2
Q42008Q2
Q42007Q2
Q42006Q2
Q42005Q2
Q42004Q2
Q42003Q2
Q42002Q2
State Home Sales (Red Line) and Sales Growth1,000s
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8/4/2019 Coganomics California Los Angeles Real Estate Market Updates - Jeff Coga
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#N/A #N/A #N/A #N/A
Natural Resou 0.1% 4.5 Natural 0.6%
Construction 3.3% 170.6 Constru 0.6%
Manufacturing 10.2% 526.7 Manufa 9.0%
Trade/Transpo 18.8% 969.5 Trade/T 19.1%
Information 4.5% 230.7 Inform 2.1%
Financial Act 6.0% 310.1 Financi5.9%
Prof. & Busin 15.0% 772.1 Profes 13.2%
Educ. & Heal 13.3% 684.3 Educat 15.0%
Leisure & Ho 11.1% 573.8 Leisur 10.6%
Other Servic 3.4% 176.7 Other 4.2%
Government 14.2% 729.3 96.6% Gover 15.9% #N/A
#N/A #N/A #N/A #N/A#N/A #N/A #N/A #N/A
Information
Financial ActivitiesProf. & Business Services
Educ. & Health Services
Leisure & Hospitality
Service Providing Excluding Government Other Services
Government
Local Economic Outlook Los Angeles
9,900
NA
NA
12-month Job Change (May)
-451,800
-11,300Emplyoment continues to decline and
will weigh on demand in some areas
NotComparable
12-month Job Change (Jun)
U.S.
NotComparable
Los Angeles's unemployment rate lagsthe national average, but has improved
relative to the same period last year
NotComparable
Drivers of Local Supply and Demand
-7,200
36-month Job Change (Jun)
California's economy is stronger thanthe nation's, but slowed from last
month's 2.52% change
U.S.
-23,500
12-month Employment Change by Industry in the Los Angeles-Long Beach-Santa Ana Area (Jun - 2011)
Year-ago Unemployment Rate
9.2%
9.5%
-0.2%
11.6%
11.7%
Share of Total Employment by IndustryU.S.
State Economic Activity Index
Construction
NA-200
-3,300
-12,800
-3,200500
12,000
-4,400
Current Unemployment Rate (Jun)
36-month change (2011 - Jun)
15,600
Natural Resources and Mining
Local employment growth is poor and
needs to improve0.5%
Natural Resources/Mining/Construction
12-month change (2011 - Jun)
1-year (12 month) Job Growth Rate
Los Angeles-Long Beach-Santa Ana Area
California
-4.3%-3.4%
2.5% 2.2%
Goods Producing
-1,900Manufacturing
Trade/Transportation/Utilities
NaturalResourcesand Mining
0.1%
Construction
3.3%Manufacturi
ng10.2%
Trade/Transportation/U
tilities
18.8%
Information4.5%
FinancialActivities
6.0%Prof. &
BusinessServices15.0%
Educ. &Health
Services13.3%
Leisure &Hospitality
11.1%
OtherServices
3.4%
Government
14.2%
NaturalResourcesand Mining
0.6%
Construction
0.6% Manufacturing
9.0%
Trade/Transportation/
Utilities19.1%
Informatio2.1%Financial
Activities5.9%
Professional &
BusinessServices13.2%
Educational& HealthServices15.0%
Leisure &Hospitality
10.6%
OtherServices
4.2%
Government
15.9%
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Construction is on the rise relative tolast year, suggesting that the local
inventory has stabilized
While new construction is the traditional driver of supply in real estate, foreclosures now have a strong impact oninventories, particularly at the local level. Rising inventories, through construction or foreclosure, place downwardpressure on the median home prices.
The current level of construction is
51.3% below the long-term averagenot comparable4,367
New Housing Construction
Single-Family Housing Permits (Jun 2011)12-month sum vs. a year ago
U.S.
8-year average for 12-month Sum of 1-UnitBuilding Permits
Local Fundamentals
12-month Sum of 1-unit Building Permits through
Jun 2011
Los Angeles
Reduced construction will limit newsupply to the market, allowing demand
to catch up with the inventory more
quickly
not comparable8,973
21.0% -14.5%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
State Total Foreclosure Rate vs. U.S Average(U.S. Average in Blue Dashed Line)
Source: Mortgage Bankers' Association
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Construction: 12-month Sum of Local Housing Permits(Historical Average Shown in Red Dashed Line)
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82.9% 10.8% 6.3% 89.1% 5.0% 5.9%
2.7% 3.3%
3.1% 3.3%
14.3% 18.1%
15.3% 17.9%
11.7% 15.0%
11.7% 14.9%
Source: First American CoreLogic, LoanPerformance data
7.7% 8.8% 9.9% 6.8% 7.3% 7.5%
6.8% 7.7% 8.9% 5.9% 6.2% 6.4%
2.7% 3.1% 2.8% 3.3% 3.3% 2.9%
Source: First American CoreLogic, LoanPerformance data
Locally, today's foreclosure rate is lowrelative to the national average
The local subprime rate eased modestrelative to November of last year
The "foreclosure + REO rate" is the number of mortgages, by metro area, that are either in the foreclosure process or have complet
the foreclosure process and are owned by banks divided by the total number of mortgages for that area.
ALT-A:Foreclosure + REO
Rate
The alt-A foreclosure rate rose slightlyover the most recent 6 months
The decline of both the 60 and 90-daydelinquency rates over the most recen
6-month period suggests a decline inthe local foreclosure rate in the near
future.
The Los Angeles market has been ablto contain both subprime and prime
lending issues
There was a substantial decline
compared to November of last year
SUBPRIME:
Foreclosure + REORate
Los Angeles
The May rate for Los Angeles is low
compared to the national average
Prime:
Foreclosure +
REO Rate
Foreclosures by Type
U.S.
The 90-day delinquency rate in LosAngeles fell over the 6-month period
ending in May
The local 60-day delinquency rate fellover the 6-month period ending in Maysuggesting that 90-day delinquencies
will decline in the near future
Prime Foreclosures and Delinquencies in ProcessMonthly Market Data -
May 2011
Prime: 90-day
Delinquent
Monthly Market Data -
May 2011
PRIME:Foreclosure + REO
Rate Compared to the national average,today's local prime rate is low
Market Share:
Prime (blue), Alt-A(green), and Subprime
(red)
U.S.Los Angeles
Prime: 60-day
Delinquent
2.74%
3.11%
May-11Nov-11
3.26%
3.34%
May-11Nov-11
14.26
%
15.32%
May-11Nov-11
11.68%11.65
%
May-11Nov-11
18.08%17.9
3%
May-11Nov-11
15.03%14.9
0%
May-11Nov-11
82.9
%
10.8
%6.3%
89.1
%
5.0
%
5.9
%
7.68%
8.77%
9.93%
May-11Nov-11May-10
6.80%
7.25%
7.45%
May-11Nov-11May-10
5.88%
6.16%
6.42%
May-11Nov-11May-10
2.74%
3.11%2.75
%
May-11Nov-11May-10
3.26%
3.34%2.90
%
May-11Nov-11May-10
6.79%
7.74%
8.85%
May-11Nov-11May-10
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Monthly Mortgage Payment to Income
Los Angeles
Los Angeles
Ratio for 2009 15.1%
U.S.
Historical Average 3.4
Ratio for 2011 Q2
2.4
Median Home Price to Income
Affordability
15.4%
17.1% Historically strong and an improvemenover the first quarter of 2011
Historical Average
U.S.
2.8
2.5
2.7
2.4
14.7%
Weaker affordability than most market22.0%26.4%
The price-to-income ratio has fallen anis below the historical average
Less affordable than most markets
Ratio for 2011 Q2
Ratio for 2010
0%
5%
10%
15%
20%
25%
30%
35%40%
45%
2010200820062004200220001998199619941992
Long-Term Trend: Ratio of Local Mortgage Servicing Cost to Income(Local Historical Average Shown in Red, U.S. Average in Green)
0%
5%
10%
15%
20%
25%
30%
2011 Q22011 Q12010 Q42010 Q32010 Q22010 Q12009 Q42009 Q3
Recent Trend - Local Mortgage Servicing Cost to Income(Historical Average Shown in Red Dashed Line)
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The Mortgage Market
A steady flow of progressively weaker economic news reported in May and June combined to weigh on Treasury bonds ithe 2nd quarter, driving the yield on the 10-year Treasury near record lows. The rate on the 30-year fixed rate mortgage
followed suit, but the gap between the two opened up as investors sought out better returns than MBS as well as to avoidthe risk of refinances. Concerns about the U.S. government's debt along with the sluggish economy are unlikely to be
resolved in the near term. Furthermore, the Federal Reserve has made it clear that it will actively support an environmenthat would foster economic growth through low rates. As result, mortgage rates are expected to remain low through thefall and into 2012. The low rates will help consumers and businesses alike to navigate this economic soft patch, but the
will also remove a layer of urgency from the home buying process, which could drag on home sales.
0
40
80
120
160
200
240
280
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2011 Q2Q42010 Q2Q42009 Q2Q42008 Q2Q42007 Q2Q42006 Q2
30-year Fixed Mortgage Rate and Treasury Bond Yield
Spread (left axis) 30-Year FRM (Right axis) 10-Year Treasury Bond (Right Axis)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2010200820062004200220001998199619941992
Ratio of Local Median Home Price to Local Average Income(Local Historical Average Shown in Red, U.S. Average in Green )
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126,846 989,842
27.1% 20.2%
23.0% 0.1
A Closer LookFHA Role Locally
FHA's market share fell sharply during thehousing boom. Home sellers preferred to
work with non-FHA lenders in order to avoidthe FHA's more stringent and time
consuming underwriting. Since the power inthe housing market resided with the sellers atthat time, usage of FHA loans fell off. As thereal estate market shifted, so did the FHA's
market share. FHA's market share this yearis higher than the historical average, but
down from the height of last year's tax-credit
induced sales surge. The tax credit broughtin many low-income and first time buyers,FHA's target market. Locally, the FHA's
share of originations in Los Angeles fell from27.1% in 2010 to 23.0% in the first quarter ofthis year. The FHA's market share is likely toremain historically elevated until the housing
market returns to normal in the coming years.
More information on the OMB's geographic definitions can be found at http://www.whitehouse.gov/omb/inforeg_statpolicy/
FHA Market Share Los Angeles U.S.
2010 Market Share
2010 FHA Originations
2011 Q1 Market Share
Los Angeles County, Los Angeles County, Orange County, and Orange County
The Los Angeles area referred to in this report covers the geographic area of the Los Angeles-Long Beach-Santa Anametro area as officially defined by the Office of Management and Budget of the U.S. Government. The official coverage
area includes the following counties:
Geographic Coverage for this Report
0% 5% 10% 15% 20% 25% 30% 35% 40%
Utah
California
Maryland
Delaware
Virginia
Rhode Island
District of Columbia
Colorado
Connecticut
New JerseyMichigan
Pennsylvania
Washington
Arizona
Indiana
Oregon
Louisiana
New Mexico
North Dakota
Vermont
Minnesota
Texas
Nevada
Missouri
Alabama
New HampshireNew York
Georgia
Tennessee
Nebraska
South Carolina
Florida
Illinois
Oklahoma
Idaho
Kentucky
North Carolina
Kansas
Mississippi
Massachusetts
Arkansas
West Virginia
Iowa
South Dakota
Ohio
Wisconsin
Hawaii
Maine
FHA Market Share as of Q1 2010