The State of Residential Real Estate A Macro to Micro Perspective

Transcription

1 The State of Residential Real Estate A Macro to Micro Perspective Ralph B McLaughlin, PhD Chief Zillow 1 Group, Inc. All rights reserved

2 2

3 3 Rental Demand Is High, and Inventory is Low

4 Rents vs. Prices 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% Prices Rents -6.0% 4

5 5 New Household Formation

6 Homeownership Rates, Homeownership Rate (%)

7 Why Are More Renters Forming New Households? Many households still reeling from foreclosure history Millennials delaying homeownership Low inventory of entry level for-sale homes 7

8 Unemployment Rate by Tenure Unemployment Rate 8

9 9 Share of Renters in SFH Growing

10 18 34 Year Olds Living with Parents or Relatives 45% 40% 35% 30% % 25% 20% 15% 10% 5% 0%

11 Millennials Homeownership, Marriage, and Child Rates 11

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13 Low-tier Priced Homes Constrained by Negative Equity 13

14 14 Buying Is Cheaper than Renting

15 Why Is There No Rush of New Buyers? Buying is cheaper than renting, but: Inventory is tight Saving for a down payment is difficult Southern California is no exception 15

16 16 Nationally, Buying is ~35% Cheaper Than Renting

17 17 In LA/OC, Buying is ~27% Cheaper Than Renting

18 In Riverside/SB, Buying is ~36% Cheaper than Renting 18

19 In Riverside/SB, Buying is ~36% Cheaper than Renting 19

20 20 Why No Rush Of New Buyers?

21 Difficult to Save For Down Payment in SoCal 12 Years to save for a down payment, year olds Los Angeles County Orange County Las Vegas Metro Riverside/SB Metro 21

22 22 SoCal, Las Vegas, Rental Markets to Remain Strong

23 Other Fundamentals of Rental Market Remain Strong Los Angeles/Riverside economies strong and growing Base industries consist of high share of rental households Rents up, but recently so are vacancies 23

24 24 Los Angeles Economy Healthy

25 25 Los Angeles Economy Strong but Moderating

26 Los Angeles Economy Strong Non-farm payrolls up 1.7% yoy, but down from 2.3% early in 16 Unemployment rate down 11.75% in % in 2016 Led by employment growth in education and health services, leisure and hospitality 26

27 LA/OC Industry Growth Consist of High Share of Renter Households Leisure and hospitality 3.1% (28,100 jobs) yoy Education and Health Services 3.1% (30,300 jobs) yoy 27

28 28 Riverside Unemployment Drops

29 29 Riverside Job Growth Moderating

30 Riverside Economy Healthy Non-farm payrolls up 2.5% yoy Unemployment rate down 13.5% in % in 2015 Led by employment growth in construction and government 30

31 Riverside Industry Growth Consist of High Share of Renter Households Government 4.5% (10,700 jobs) yoy Construction growth 5.3% (4,700 jobs) yoy 31

32 32 Las Vegas Unemployment Rate Dives

33 33 Las Vegas Job Growth Moderating

34 Las Vegas Economy Healthy Non-farm payrolls up 2% yoy Unemployment rate down 14.8% in % in 2016 Led by employment growth in construction and education and health services 34

35 Las Vegas Industry Growth Consist of High Share of Renter Households Education and Health Services 4.5% (4,600 jobs) yoy Construction growth 14.7% (7,900 jobs) yoy 35

36 Rents Catching up With Price Growth in LA/OC 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% Rents Prices -10.0%

37 Rents Growing in RV/SB, But Prices Growing Faster 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% Rents Prices -10.0% 37

38 Rents Grow Slow in LV, Prices Growing Much Faster 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Rents Prices 38

39 Cities with Most YOY Rent Growth, LA/OC # City YOY Change 1 Bell Gardens 12.7% 2 Pearblossom 12.6% 3 Coto de Caza 11.9% 4 Palos Verdes Peninsula 10.6% 5 Littlerock 10.3% 39

40 Cities with Most YOY Rent Growth, RIV/SB # City YOY Change 1 Indian Wells 24.4% 2 La Quinta 17.6% 3 Rancho Mirage 16.1% 4 Thousand Palms 11.9% 5 Palm Desert 11.9% 40

41 N Hoods with Most YOY Rent Growth, Las Vegas # Neighborhood YOY Change 1 Huntridge 6.2% 2 Pioneer Park 5.7% 3 Michael Way 5.2% 4 Downtown East 5.1% 5 Twin Lakes 4.7% 41

42 Vacancy Rate Stable in LA, Falling in LV/SB/RIV % Point Change Las Vegas LA/OC RIV/SB 42

43 Homeownership Rate Dropping % Rate LA/OC Riverside/SB LV -8 43

44 Cap Rates Converging Across SoCal, LV 14% 12% 10% Cap Rate 8% 6% 4% 2% 0% LA/OC RIV/SB LV 44

45 45 Flipping Trends

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49 Key Takeaways Rental demand is high, supply low Buying is cheaper than renting, but not a threat to rental market because of low inventory. Southern California, Las Vegas rental markets will remain strong, but cap rates may decrease as market stabilizes and job growth moderates Flipping activity is up in most markets, but moderating. 49

50 50 Thank You!

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