housing market forecast from c.a.r. july 10, 2014

2014 HOUSING MARKET UPDATE

July 10, 2014WSGVAR Leslie Appleton-Young, Chief Economist California Association of REALTORS®

C.A.R. NEWS

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2014 EXPO: October 7-9 Anaheim

Terri SjodinBest-selling author of Small Message, Big Impact

Captain Chesley

“Sully” SullenbergerBest-selling author of Highest Duty

Leslie Appleton-YoungC.A.R. Vice President and Chief Economist

Tuesday Wednesday Thursday

THE ECONOMY

2005

2007

2009

2011

2013

Q1-10

Q3-10

Q1-11

Q3-11

Q1-12

Q3-12

Q1-13

Q3-13

Q1-14

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Gross Domestic Product2013: 1.9%; 2014 Q1: -2.9%

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

Consumption Fixed Nonres. Investment

Net Exports Government-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Q2 2013

Q3 2013

ANNUAL PERCENT CHANGE

2005

2007

2009

2011

2013

2010

Q1

2010

Q3

2011

Q1

2011

Q3

2012

Q1

2012

Q3

2013

Q1

2013

Q3

2014

Q1

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

Personal Consumption2013: 2.0%; 2014 Q1: 1.03%


ANNUALLY QUARTERLY

SERIES: Personal ConsumptionSOURCE: US Dept. of Commerce, Bureau of Economic Analysis

Jan-08Jul-08Jan-09Jul-09Jan-10Jul-10Jan-11Jul-11Jan-12Jul-12Jan-13Jul-13Jan-14-1,000,000

-800,000

-600,000

-400,000

-200,000

0

200,000

400,000

600,000

800,000

U.S. Non-farm Job GrowthRecession Job Losses: 8.8 millionSince Jan’10: +8.9 million

MONTH TO MONTH CHANGE

SERIES: Employment GrowthSOURCE: US Bureau of Labor Statistics

Nonfarm Employment By Region

May 2014 May 2013 Change % Change

Southern California 8,561.5 8,385.8 175.7 2.1%

Bay Area 4,193.3 4,104.0 89.3 2.2%

Central Valley 1,478.3 1,455.7 22.6 1.6%

Central Coast 1,254.6 1,225.3 29.3 2.4%

North Central 1,342.7 1,313.4 29.3 2.2%

CALIFORNIA 292.6 287.4 5.2 1.8%

Nonfarm Employment (Thousands)

SERIES: Total Nonfarm EmploymentSOURCE: CA Employment Development Division

Job Trends by California Metro Area

SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division


Modesto

Bakersfield

Oakland

Orange County

Ventura

San Diego

Los Angeles

Inland Empire

Stockton MSA

Sacramento

San Francisco

San Jose

Fresno MSA

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5%

1.2%

1.4%

1.6%

1.9%

2.0%

2.2%

2.2%

2.4%

2.5%

2.7%

2.8%

4.0%

4.1%

April 2014: CA +2.2%, +340,200

California Job Changes by Industry

SERIES: Total Nonfarm Employment By IndustrySOURCE: US Bureau of Labor Statistics, CA Employment Development Division

Finance & InsuranceNondurable Goods

GovernmentDurable Goods

Wholesale TradeTransportation, Warehousing & Utilities

Retail TradeLeisure & Hospitality

Real Estate & Rental & LeasingInformation

Health Care & Social AssistanceEducational Services

Professional, Scientific & Technical ServicesAdmistrative & Support & Waste Services

Construction

-3% -1% 1% 3% 5% 8%

-1.9%

-1.6%

0.6%

0.6%

1.9%

2.0%

2.1%

2.3%

2.8%

3.2%

3.4%

3.5%

3.7%

4.7%

6.4%

April 2014: CA +2.2%, +340,200ANNUAL PERCENT CHANGE

Unemployment Rate Falling California (7.8%) vs. United States (6.1%)

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-

14-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14% US-CA CA US

SERIES: Unemployment RateSOURCE: US Bureau of Labor Statistics, CA Employment Development Division

“The sustainability of the housing market going forward depends on the strength of economic growth, household formation and job creation”

Consumer Confidence IndexJune 2014: 85.2

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-

140

20

40

60

80

100

120INDEX, 100=1985

SERIES: Consumer ConfidenceSOURCE: The Conference Board

Mortgage Rates • January 2009 – July 2014

2009

/01

2009

/05

2009

/09

2010

/01

2010

/05

2010

/09

2011

/01

2011

/05

2011

/09

2012

/01

2012

/05

2012

/09

2013

/01

2013

/05

2013

/09

2014

/01

2014

/05

5.15

.14

6.12

.14

0%

1%

2%

3%

4%

5%

6%

FRMARM

MONTHLY WEEKLY

SERIES: 30Yr FRM, 1Yr ARMSOURCE: Federal Home Loan Mortgage Corporation

Forecasters have been expecting long term interest rates to rise… for a decade, now.

19

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

Source: Philadelphia Federal Reserve Survey of Professional Forecasters, BloombergSource: Philadelphia Federal Reserve Survey of Professional Forecasters, Bloomberg

U.S. Depository Institutions:High Level of Excess Reserves

Jan-05Jul-0

5

Jan-06Jul-0

6

Jan-07Jul-0

7

Jan-08Jul-0

8

Jan-09Jul-0

9

Jan-10Jul-1

0

Jan-11Jul-1

1

Jan-12Jul-1

2

Jan-13Jul-1

3

Jan-14

$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

Affordability Eroding as Rates & Prices Rise

California vs. U.S.

0%

10%

20%

30%

40%

50%

60%

70%

80%

33%

59%

CA US% OF HOUSEHOLDS THAT CAN BUY

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

Affordability Peaked in 2012; Dropping Since Then

HAI Peak vs. Current

US CA SFH CA Condo/Townhomes

Los Angeles Metropolitan

Area

Inland Empire S.F. Bay Area

0%

10%

20%

30%

40%

50%

60%

70%

80%

59%

33% 41%34%

48%

22%

Q1-2014 Q1-2012

SERIES: Distressed Sales, Not Seasonally AdjustedSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Buyers: Financing Difficult to Obtain

1 2 3 4 5 6 7 8 9 100%

5%

10%

15%

20%

25%

30%

35%

40%

0% 0% 0% 0%

6% 6%

11%

6%

38%

33%

20132013

Q. Please rate how easy or difficult it was to obtain financing on a scale of 1 to 10 with 1 being very easy and 10 being very difficult.

EASY DIFFICULT

Average: 8.6

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

Maybe a new mortgage process is part of creating the sustainable housing market …

Squeaky Clean Credit Required 80% 700 or Above

2007

2007

2008

2008

2009

2009

2010

2010

2011

2011

2012

2012

2013

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Low RiskAverage RiskHigh Risk

Source: Equifax Credit Trends 4.0; Low risk defined as accounts with an Equifax Risk Score ≥ 700; high risk defined as accounts with ERS <620; Average risk defined as accounts with 620 ≤ ERS ≤ 700

Fannie & Freddie are the Market: 85%

Source: LPS

U.S. Economic Outlook 2014

Indicator 2009 2010 2011 2012 20132014p 2015f

US GDP -3.4% 2.4% 1.8% 2.8% 1.9% 2.0% 3.0%

Nonfarm Job Growth -4.4% -0.7% 1.2% 1.7% 1.7% 1.7% 2.0%

Unemployment 9.3% 9.6% 8.9% 8.1% 7.4% 6.4% 6.0%

CPI -0.4% 1.6% 3.1% 2.1% 1.5% 1.9% 2.3%Real Disposable Income, % Change 0.9% 1.8% 1.3% 1.5% 0.7% 2.3% 3.2%

SERIES: U.S. Economic OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

California Economic Outlook 2014

SERIES: CA Economic OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Indicator 2009 2010 2011 2012 20132014p2015f

Nonfarm Job Growth -6.0% -1.1% 1.1% 2.4% 3.0% 2.2% 2.4%

Unemployment Rate 11.3% 12.3% 11.8% 10.4% 8.9% 7.7% 6.8%

Population Growth 0.6% 0.7% 0.7% 0.7% 0.9% 0.9% 1.0%Real Disposable Income, % Change -3.9% 1.0% 1.9% 1.1% 0.9% 3.0% 3.8%

HOW ARE WE DOING?

CA: Housing Cycles and MembershipCurrently Moving in Opposite Directions

1970-2014

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

0

50,000

100,000

150,000

200,000

250,000Home Sales Membership

*Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

New vs. Renewing Members~ LR Average: 16% - 84% Split ~

0

50,000

100,000

150,000

200,000

250,000

New Renewing

C.A.R. Membership vs. DRE Licensees~ Moving in Tandem ~

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

050,000

100,000150,000200,000250,000300,000350,000400,000450,000500,000550,000600,000650,000

Membership

Peak trough: -

24%2006 - 2012

Peak trough: -

26%2007 - 2013

THE CALIFORNIA RESIDENTIAL REAL ESTATE MARKET

Sales of Existing Detached HomesCalifornia, May. 2014 Sales: 391,030 Units, -11.2% YTD, -9.5% YTY

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 -

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®

Peak vs. Current Price – April 2014

RegionPeak

MonthPeak Price

Apr-14 Median

% Chg From Peak

High Desert Apr-06 $334,860 $178,990 -46.5%Monterey Region Aug-07 $789,290 $451,500 -42.8%CALIFORNIA May-07 $594,530 $369,770 -37.8%Los Angeles Sep-07 $625,810 $406,750 -35.0%Sacramento Aug-05 $394,450 $267,260 -32.2%Northern Wine Country Jan-06 $645,080 $469,920 -27.2%San Luis Obispo Jun-06 $617,260 $465,300 -24.6%Northern California Aug-05 $410,040 $311,210 -24.1%Palm Springs/Lower Desert Jun-05 $393,370 $304,070 -22.7%San Diego May-06 $622,380 $492,080 -20.9%Riverside/San Bernardino Jun-06 $389,380 $309,240 -20.6%Ventura Aug-06 $710,910 $575,390 -19.1%Orange County Jun-07 $775,420 $679,820 -12.3%San Francisco Bay Area May-07 $821,540 $768,110 -6.5%Santa Clara Apr-14 $900,000 $900,000 0.0%

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

REO & Short SalesPercent of Total Sales, Southern California: Apr 2014

Los Angeles Orange Riverside San Bernardino

San Diego0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

3%1%

8%

11%

3%

8%

5%

7%

6%

1%

REO Sales Short Sales


Equity Sales Dominate the Market

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

88.4%

5.9%

5.3%

Equity Sales Short Sale REO


Nine of Ten Sales Were Equity Sales

REOs, 5.4%

Short Sales; 5.9%

Other Dis-tressed

Sales (Not Specified);

0.5%

Equity Sales; 88.4%


California: Apr 2014

Median Price of Existing Detached HomesCalifornia, May 2014: $465,960, Up 11.7% YTY

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 $-

$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®

Unsold Inventory IndexCalifornia, May 2014: 3.6 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

SERIES: Unsold Inventory Index of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

More Inventory at Higher 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) Apr-14 Mar-14 Apr-13

$1,000K+ 4.8 5.6 4.8

$750-1000K 3.9 4.4 3.2

$500-750K 3.5 3.8 2.8

$300-500K 3.4 3.7 2.6

$0-300K 3.2 3.6 2.5


Unsold Inventory Index By Price RangeCalifornia, May 2014

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-

140

5

10

15

20

25

30

$0 - 300K$300-500K$500-750K$750-1000K$1,000K+-


Why was/is Inventory so Low?

• Demand Side• Housing affordability was at historic highs

• Low rates hurt investment alternatives• Supply Side

• Little new construction for last 5 years• Underwater homeowners are stuck• Foreclosure pipeline drying up • Investors are renting instead of flipping• Off-market (aka “pocket’) listings

Asking Rents for Class A&B ApartmentsCalifornia, 2013 Q4: $1,615, Up 6.5% YTY

Q1/05Q3/05

Q1/06Q3/06

Q1/07Q3/07

Q1/08Q3/08

Q1/09Q3/09

Q1/10Q3/10

Q1/11Q3/11

Q1/12Q3/12

Q1/13Q3/13

$-

$250

$500

$750

$1,000

$1,250

$1,500

$1,750

SERIES: Asking RentsSOURCE: Realfacts

19801982

19841986

19881990

19921994

19961998

20002002

20042006

20082010

20120

50000

100000

150000

200000

250000

300000

350000 Single Family Multi-Family

CA New Home Construction Moving Higher

2013: 80,319 Units, Up 37.2% from 2012

Household Growth: 220,000-250,000/yr

SERIES: Residential PermitsSOURCE: Moody’s Analytics

DISTRESSED MARKET UPDATE

“The weight of the lingering stock of distressed homes on the housing recovery will be small.”

Dismal ScientistMay 27, 2014.

CA Underwater MortgagesReverse Wealth Effect v. Squatter Economy

0%

5%

10%

15%

20%

25%

30%

35%

40%

11.2%

2.2%

Negative Equity Share in CA Near Negative Equity Share in CA

SERIES: Underwater MortgagesSOURCE: CoreLogic

0%

2%

4%

6%

8%

10%

12%Delinquency Rate Foreclosure Rate

Mortgage Foreclosure & Delinquency RatesCalifornia: Q1-2014

Delinquencies: Long Run Average: 4.5%

Foreclosure Rate: Long Run Average: 1.3%

SERIES: Mortgage Foreclosure & Delinquency RatesSOURCE: Mortgage Bankers Association

• Preforeclosure: 5,215• Auction: 4,835 • Bank Owned: 912

Los Angeles County

SOURCE: PropertyRadar.com as of 07/07/14

• Preforeclosure: 17 • Auction: 13 • Bank Owned: 0

San Gabriel



Alhambra



Monterey Park


LOCAL MARKET CONDITIONS

LOS ANGELES COUNTY

Sales of Residential Homes• Los Angeles County, June 2014: 4,457 Units • Down 0.1% MTM, Down 8.5% YTY

SOURCE: Clarus Market Metrics

Median Price of Residential Homes• Los Angeles County, June 2014: $500,000• Up 0.2% MTM, Up 8.7% YTY


For Sale Properties• Los Angeles County, June 2014: 20,233 Units

• Down 0.1% MTM, Down 0.4% 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.


Month’s Supply of Inventory • Los Angeles County, June 2014: 2.4 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 GABRIEL

Sales of Residential Homes• San Gabriel, June 2014: 36 Units • Up 89.5% MTM, Up 24.1% YTY


Median Price of Residential Homes• San Gabriel, June 2014: $635,000• Up 39.6% MTM, Down 0.3% YTY


For Sale Properties• San Gabriel, June 2014: 111 Units• Down 5.9% MTM, Down 25.5% YTY



Month’s Supply of Inventory • San Gabriel, June 2014: 3.2 Months


ALHAMBRA

Sales of Residential Homes• Alhambra, June 2014: 38 Units • Up 18.8% MTM, Up 35.7% YTY


Median Price of Residential Homes• Alhambra, June 2014: $480,000• Down 5.4% MTM, Up 10.3% YTY


For Sale Properties• Alhambra, June 2014: 170 Units• Up 17.2% MTM, Up 16.4% YTY



Month’s Supply of Inventory • Alhambra, June 2014: 2.5 Months


MONTEREY PARK

Sales of Residential Homes• Monterey Park, June 2014: 31 Units • Up 3.3% MTM, Up 10.7% YTY


Median Price of Residential Homes• Monterey Park, June 2014: $515,000• Up 4.3% MTM, Up 19.4% YTY


For Sale Properties• Monterey Park, June 2014: 145 Units• Up 2.1% MTM, Up 0.7% YTY



Month’s Supply of Inventory • Monterey Park, June 2014: 2.2 Months


2013 ANNUAL HOUSING MARKET SURVEY

2005

2006

2007

2008

2009

2010

2011

2012

2013

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

1

2

3

4

5

6

772%

5.7

% with Multiple Offers

Multiple Offers at Record Highs

Share of home sales with multiple offers highest in at least the last 15 years

SERIES: 2013 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Q. Please indicate the type of mortgage.

Share of FHA Lowest in 6 Years

2005 2006 2007 2008 2009 2010 2011 2012 20130%

10%

20%

30%

40%

17%

6%

FHA VA


Share of First-Time Buyers is the Lowest Since 2006

Q. Was the buyer a first-time buyer?2005 2006 2007 2008 2009 2010 2011 2012 2013

0%

10%

20%

30%

40%

50%

28%

% First-Time Home Buyers Long Run Average

Long Run Average = 38%


Investment Homes : 19% Market Share

19%


0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Investment/Rental Property

Investment/Rental Property

Long Run Average: 11 %

Buying to Rent: Winning Investment Strategy

18%

82%

Investment to Flip

Rental Property


Share of Cash Buyers decreases for the first time after 7 years of continuous Increase

0%

5%

10%

15%

20%

25%

30%

35%

27%

% of All Cash Sales

• Almost one-third of buyers paid with all cash

• The share of all cash buyers has been on the rise since 2006


International Buyers are Getting a Bigger Slice of the Market than Before

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.?

2008 2009 2010 2011 2012 20130%

1%

2%

3%

4%

5%

6%

7%

8%

9%

8%


Country of International Buyer

• China (30%)

• Canada (9%)

• India (6%)

• Mexico (13%)

CALIFORNIA HOUSING MARKET FORECASTJune 2014

California Housing Market Outlook

Indicator 2009 2010 2011 2012 20132014p2015f

SFH Resales (000s) 474.9 416.5 422.6 439.8 413.9 395.7 417.9

% Change 24.5% -12.3% 1.4% 4.1% -5.9% -4.4% 5.6%

Median Price ($000s) $275.0 $305.0 $286.0 $319.3 $407.2 $447.8 $463.7

% Change -21.1% 10.9% -6.2% 11.6% 27.5% 10.0% 3.5%

30-Yr FRM 5.0% 4.7% 4.5% 3.7% 4.0% 4.6% 5.3%

1-Yr ARM 4.7% 3.8% 3.0% 2.7% 2.6% 2.5% 3.0%

SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Sales Down for 2014 but Improve in 2015; Price Continues to Grow this Year and Next Year

Units (Thousand)

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014p

2015f

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

395,740417,900

Sales of Existing Detached Homes

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014p

2015f

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$447,780

$463,660

Median PricePrice

(Thousand)


CA: Dollar Volume Steadily Improving

Up 5.2% in 2014 & 9.3% in 2015

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014p 2015f$0

$50

$100

$150

$200

$250

$300

$350

$400

$301

$244

$164 $133 $131 $127 $121

$140 $169 $177

$194

$ Volume of Sales

$ in Billion

-60%


MARKET OPPORTUNITIES

Many Market Opportunities

• First-time Buyers• Formerly “Underwater” Homeowners• Property Management • International Clients• New Construction• Embrace Learning

STORM CLOUDS ON THE HORIZON?

Storm Clouds – Prepare for Discontinuous Change

• Fall of Independent Contractor Status• Rise of the “Team”• Turbo-Tax for real estate?• Marginalization of the traditional brokerage

• GSE’s out – new and more expensive capital sources in

• Millennials priced out of the market – housing affordability tightens its grip

• Google buys Zillow and dominates market

2014 C.A.R. Strategic Planning Books

http://beingwrongbook.com/synopsis

2014 “Good Reads Recommendations”

BEST PRACTICES

What makes a good REALTOR?

• Local knowledge• Visibility• Tech Saavy• Communication• Ethical/Honest/Trustworthy• Social Media Guru• Follow-through• Organized with attention to detail• Transparency• Good Listener • Visible in the community

FACT: MOST BUYERS SAY THEY FOUND THEIR AGENT ON-LINE

Best Practice: Be visible on the web

Most Buyers Find Agents Online

20102011

20122013

2014

0%10%20%30%40%50%60%70%80%90%

100%

13% 29%21% 28%

28%

21%12%

11% 9%7%

55% 59%66% 63%

65%

0.02

Relationships/Contacts AdvertisingInternet Other

Q. How did you find your real estate agent?

FACT: MOST SELLERS & BUYERS INTERVIEW MULTIPLE AGENTS

Best Practice: Create opportunities to connect with new clients. Networking & prospecting are worth it!

Most Buyers & Sellers Interviewed Multiple Agents

Buyers

1 agent

2 agent

s3 agents

4 agent

s

5 agent

s

6 agent

s 7 agents

Sellers

1 agent2

agents

3 agents

4 agents

5 agents

6 agents

Source: C.A.R. 2014 Home Buyer Survey, C.A.R. 2013 Home Seller SurveyQ. How many agents did you interview prior to selecting the agent you used in your recent home purchase/sale?

More than ¾ Buyers Interviewed at Least 2 Agents

1 2 3 4 5 6 70%

5%

10%

15%

20%

25%24% 23%

10%

18%16%

5%4%

# of Agents Interviewed

Q. How many agents did you interview prior to selecting the agent you used in your recent home purchase?

FACT: MOST BUYERS FOUND THEIR HOME ON-LINEBest Practice: Re-define your role

2007: Almost 9 out of 10 Buyers Said They Found Their Home through

Agent

8%

88%

1%2%1%

2007

Website Agent Friend/familyOpen house Driving around

Q. How did you find the home you purchased?

2014: 5 out of 10 Buyers Said They Found Their Home through Agent

3%

39%

53%

3% 2%

2014

For Sale Sign Website AgentOpen house Other

Q. How did you find the home you purchased?

FACT: CLIENTS WANT “BETTER” COMMUNICATION

Best Practice: Ask them how they want to communicate. Establish rules of engagement early in the process.

Have the DTR* conversation

with your clients first!

*Define the Relationship

Gap in Phone & Text Communication

Telephone Email Text Message In Person

17%

50%

29%

4%

51%

43%

5%

0%

Preferred Actual

Q. What was your preferred method of communicating with your agent?

Q. How did your agent actually communicate with you?

Gap in Phone & Text Communication

TelephoneEmail

Text MessageIn Person

11%

47%

40%

1%

38%

46%

15%

0%

Preferred Actual

Q. What was your preferred method of communicating with your agent?

Q. How did your agent actually communicate with you?

2010 2011 2012 2013 20140%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

38% 37%

42%44%

49%

Q. What was the typical response time you expected from your agent to return any form of communication to you?

More Buyers Expect Instant Response from Agents

Room for Improvement in Agent Response Time

-10%

0%

10%

20%

30%

40%

50%

60%49%

29%

16%

4% 2% 0% 0%

18%

7%11%

17%

24%

13%10%

Expected Actual

Q. What was the typical response time you expected from your agent to return any form of communication to you?

Q. On average, what was the actual response time of your agent to return any form of communication to you?

FACT: WE NEED MORE FIRST-TIME BUYERS

Best Practice: Understand “Millennials” and meet them on their own turf/terms.

FACT: OFF-MARKET LISTINGS ARE A PROBLEM

Best Practice: List properties on the MLS

Only 8 out of 10 Properties Listed on the MLS

Yes81%

No19%

Q. Was the home you purchased listed on a multiple listing service?

FACT: SOCIAL MEDIA IS A REALITY

Best Practice: Engage on social media

77% of Buyers Used Social Media in Buying Process

Q. Which social media websites did you use during your home buying process? N = 1073

Social Media Use Continues Rise

2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

70%

80%

52%

68%75% 77%

Q. Did you use social media (such as Facebook, Twitter, YouTube, etc.) in your home buying process?

Buyers Remain Receptive to Receiving Information Via Social Media

2011 2012 2013 20141.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.04.2 4.1 4.1

4.1

Average

Q. How receptive would you be to receiving information about the home buying process directly from your real estate agent via social media? (Scale: 1-5)

Social Media Used for Buying Tips & Neighborhood Info

Agents' YouTube

Neighborhood profiles

Home buying info

Neighborhood amenities

Neighborhood lifestlye

Agent referrals

Agent's Facebook page

Neighborhood info from friends

Buying tips, suggestions from friends

20%

23%

23%

31%

33%

35%

42%

44%

44%

Q. How did you use social media (such as Facebook, Twitter, YouTube, etc.) in your home buying process? N = 1073

FACT: MOBILE IS HEREBest Practice: Calibrate everything you do for mobile.

More Buyers Using Mobile

2013 20140%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

85%91%

Q. Did you use a mobile device in the home buying process?

91% of Buyers Used Mobile Device in Buying Process

78%

• Look for comparable prices

45%

• Search for homes

45%

• Communicate

43%

• Take photos of homes/amenities/neighborhoods

42%

• Research a particular home

41%

• Search websites

39%

• Communicate w/agent

22%

• Research communities/neighborhoods

Q. How did you use your mobile device in the home buying process? N = 1269

Zillow is Most Useful App

Q. What was the most useful app that you used during the home buying process? N = 1269

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=9sbaBZkzlzkjyM&tbnid=gh91roGUJtlR_M:&ved=0CAUQjRw&url=https://play.google.com/store/apps/details?id=com.move.realtor&ei=XjBHU6zsMIuF8gWkgIHYBQ&psig=AFQjCNEItSCpUN03ckwk_lcko5MXcBOCng&ust=1397260751413450

https://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=9sbaBZkzlzkjyM&tbnid=gh91roGUJtlR_M:&ved=0CAUQjRw&url=https://play.google.com/store/apps/details?id=com.move.realtor&ei=XjBHU6zsMIuF8gWkgIHYBQ&psig=AFQjCNEItSCpUN03ckwk_lcko5MXcBOCng&ust=1397260751413450

Realtor.com & Zillow are Most Useful Websites in Buying Process

0% 5% 10% 15% 20% 25% 30% 35%

4%

5%

8%

9%

10%

22%

31%

Q. What was the single most useful website that you visited during your home buying process?

Brokerage

Agent

Realtor.com & Zillow Most Useful Websites

2010 2011 2012 2013 20140%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

43%

26%24%

30%

22%

Zillow realtor.com Redfin

Q. What was the single most useful website that you visited during your home buying process?

Most Buyers Found Home on Realtor.com or Zillow

0% 5% 10% 15% 20% 25% 30% 35%

4%

5%

8%

12%

13%

26%

33%

Q. On which website did you find your home?

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=mUB1qPbSNn8tRM&tbnid=ZYV20lp1OTxxHM:&ved=0CAUQjRw&url=http://www.elgloans.com/partners/zip_realty_-_shannon_borrego/&ei=6jRHU9ytGcWnlAWaxIGQCA&psig=AFQjCNGNX3hH-PU10-RFp1xA3CG3-I5pyA&ust=1397261918417593

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=mUB1qPbSNn8tRM&tbnid=ZYV20lp1OTxxHM:&ved=0CAUQjRw&url=http://www.elgloans.com/partners/zip_realty_-_shannon_borrego/&ei=6jRHU9ytGcWnlAWaxIGQCA&psig=AFQjCNGNX3hH-PU10-RFp1xA3CG3-I5pyA&ust=1397261918417593

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=j9mdUclZJDP-4M&tbnid=P4CEXYq0LP0clM:&ved=0CAUQjRw&url=http://www.vendoralley.com/2013/07/18/homes-com-adds-parallax-design-elements-to-homepage/&ei=XjVHU8mTEonOkQWxnIGoAg&psig=AFQjCNEbE9IVqVt77DKi779ATYXhw1xJ7w&ust=1397262034168181

Realtor.com & Zillow Helped Most Buyers Find Homes

2011 2012 2013 20140%

5%

10%

15%

20%

25%

30%

35% 33%

28%30%

26%

realtor.com Zillow Redfin

Q. On which website did you find your home?

FACT: MOST REALTORS DO NOT WANT TO BE RATED BY THEIR CLEINTS

Best Practice: everyone is being YELPED whether they like it or not. Take charge of your reputation and get rated

Agent Satisfaction Ratings Improve- Average Ratings on 1-5 Scale -

2013 2014

Your real estate agent’s negotiating skills 3.2 3.4

Overall process of finding a home 3.2 3.3

Overall satisfaction with your real estate agent 3.1 3.3

Q. Please rate your degree of satisfaction with the following aspects of your home buying experience on a scale of 1-5, where 1 is “least satisfied” and 5 is “most satisfied”.

Reasons for Satisfaction With Agent

Worked hard (63%)

Negotiated good deal (38%)

Helped find best home (37%)

Always quick to respond (26%)

Listened to needs (13%)

Q. Why do you have that level of satisfaction with your agent?

Reasons for Dissatisfaction With Agent

Slow response (71%)

Didn’t communicate how client wanted (61%)

Agent communicated ineffectively/inefficiently (51%)

Not aggressive in negotiation (40%)

Agent needed to do better job of monitoring transaction/paperwork (13%)

Q. Why do you have that level of satisfaction with your agent?

More Buyers Would Work w/Agent Again

2010 2011 2012 2013 2014

72%54% 60%

52%61%

11%

11%12% 22%

33%

17%35% 28% 26%

6%

Unsure No Yes

Q. Would you work with the same agent again?

THANK YOU!www.car.org/[email protected]

housing market forecast from c.a.r. july 10, 2014

Real Estate

housing affordability

california

small message

selling author

labor statistics

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