Orange County AOR October 21, 2016 Leslie Appleton-Young Chief Economist & Vice President

Transcription

1 Orange County AOR October 21, 2016 Leslie Appleton-Young Chief Economist & Vice President

2 Cadence of Accountability How did I do with last year s forecast?

3 2016 Story US economic and job growth expanding CA economy out-preforming the nation Rates rising in response to Fed policy Millennials leaving the nest as job opportunities expand Listings & new units remain low Formerly owner-occupied units now rentals Affordability challenges for first time & repeat buyers Boomers aren t moving

4 2016 Forecast Report Card 2015 Actual 2016 Forecast 2016 Projected SFH Resales (000s) % Change 6.8% 6.3% -0.4% Median Price ($000s) $474.4 $491.3 $503.9 % Change 6.2% 3.2% 6.2% 30-Yr FRM 3.9% 4.5% 3.6% Housing Affordability Index 31% 27% 33% U.S. Gross Domestic Product 2.4% 2.7% 1.5%

5 YTD 2016 CA Sales Flat Compared to 2015 Sept Sales: 425,680 Units, -0.4% YTD, +0.8% YTY 700, , , , , , ,000 - Sep-15: 422,360 Sep-16: 425,680 SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS *Sales are seasonally adjusted and annualized

6 Median Price Highest since 2007 California, Sep. 2016: $514,320, -2.3% MTM, 6.1% YTY $700,000 $600,000 P: May-07 $594,530 Sep-15: $484,670 Sep-16: $514,320 $500,000 $400,000 $300,000 T: Feb-09 $245,230-59% from peak $200,000 $100,000 $- SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

7 Peak vs. 6/16: Southern California Region Last Cyclical Peak Month Last Cyclical Peak Price Jun-16 Median %Chg From Peak Orange County Jun-07 $775,420 $759, % San Diego County May-06 $622,380 $594, % Ventura Couty Aug-06 $710,910 $674, % CALIFORNIA May-07 $594,530 $519, % Riverside County Jun-06 $431,710 $357, % Los Angeles Metro May-07 $578,700 $477, % Inland Empire Jun-06 $389,380 $319, % Los Angeles County Sep-07 $625,810 $502, % San Bernardino County Aug-06 $350,290 $245, % SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

8 Peak vs. 6/16 Median: Central Valley Region Last Cyclical Peak Month Last Cyclical Peak Price Jun-16 Median %Chg From Peak CALIFORNIA May-07 $594,530 $519, % Madera County Feb-08 $275,000 $234, % Sacramento County Aug-05 $394,450 $332, % Placer County Aug-05 $527,990 $444, % Kern (Bakersfield) County Jun-06 $299,920 $238, % Kings County Mar-06 $268,050 $211, % Tulare County Dec-05 $269,710 $211, % Fresno County Jun-06 $313,510 $242, % San Benito County May-05 $671,190 $511, % Merced County Oct-05 $344,610 $207, % SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

9 Peak vs. 6/16 Median: Bay Area Region Last Cyclical Peak Month Last Cyclical Peak Price Jun-16 Median %Chg From Cyclical Peak San Francisco County May-07 $972,010 $1,350, % San Mateo County Oct-07 $1,020,000 $1,306, % Santa Clara County Apr-07 $865,000 $1,050, % Alameda County May-07 $709,420 $803, % San Francisco Bay Area May-07 $789,250 $841, % Marin County Jun-07 $1,149,390 $1,218, % Sonoma County Jan-06 $650,330 $608, % CALIFORNIA May-07 $594,530 $519, % Napa County Aug-06 $729,170 $619, % Solano County Jun-06 $492,800 $390, % Contra Costa County May-07 $923,150 $625, % SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

10 Don t Bother Commuting in Major Metros <1 hour 1-2 hours 2+ hours Impossible! Don't bother! from Palo Alto to San Francisco? 13% 52% 20% 15% from Riverside to Irvine? 12% 51% 23% 13% Q4 - What is the average commute time

11 Making Traffic Disappear is Most Desired Super Power Make traffic disappear 29% Flying 26% Instant mortgage approval 21% Invisibility 19% Super strength 4.9% Q12 - Which super power would you like to have? 0% 5% 10% 15% 20% 25% 30% 35%

12 Abundance of Uncertainty

13 BREXIT: Unexpected

14 Markets Don t Like Uncertainty Financial markets meltdown after the Brexit vote Adjusted Closed S & P 500 Composite 2, % , SOURCE: Yahoo Finance

15 US Treasuries in Demand Treasury Yield - 10 Yr. Treasury Yield - 30 Yr. 06/24/16: 10 Yr. 1.57% 30 Yr. 2.43% Jan-62 Jan-65 Jan-68 Jan-71 Jan-74 Jan-77 Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 SERIES: Treasury Yield 10 Yr., Treasury Yield 30 Yr. SOURCE: Yahoo Finance

16 The Value of the U.S. Dollar August 2016: Average Exchange Value SERIES: Weighted Average Exchange Value of U.S. Dollar SOURCE: U.S. Board of Governors of Federal Reserve System

17 Oil Prices: Unexpected Dollars per Barrel $160 $140 $120 $100 $80 $60 $40 $20 $0 SERIES: Crude Oil Prices: West Texas Intermediate SOURCE: U.S. Energy Information Administration

18 Fed Policy: Uncertain

19 Mortgage Rates Lowest since Mid January 2010 September MONTHLY WEEKLY 4 3 FRM ARM / / / / / / / / / / / SERIES: 30Yr FRM, 5Yr ARM SOURCE: Freddie Mac

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22 Do you plan to leave the country if? [CATEGORY NAME] [VALUE] [CATEGORY NAME] [VALUE] [CATEGORY NAME] [VALUE]

23 Economic Outlook

24 Macro Economic Summary 1.4% 4.2% GDP 2016-Q2 5.0% Consumption 2016-Q2 1.7% Unemployment Job Growth

25 Slow Economic Growth Below 3% for 11Years US GDP 2015: 2.6%; 2016 Q1:.8% Q2: 1.4% ANNUAL PERCENT CHANGE, CHAIN-TYPE (2009) $ 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% ANNUALLY QUARTERLY 2009 Largest Annual Drop since 1946 (-2.8%) Q2-11 Q4-11 Q2-12 Q4-12 Q2-13 Q4-13 Q2-14 Q4-14 Q2-15 Q4-15 Q2-16 SERIES: GDP SOURCE: US Dept. of Commerce, Bureau of Economic Analysis

26 CA Jobs Growing Faster Than Nation Annual Percent Change California US CA 2.3% (8/16) US 1.7% (9/16) -6-8 SERIES: Total Nonfarm Employment SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

27 Unemployment Rates Near 8-year low September 2016: US 5.0% & August 2016: CA 5.5% 14% US-CA CA US 12% 10% 8% 6% 4% 2% 0% -2% -4% SERIES: Unemployment Rate The U-6 rate covers the unemployed, underemployed and those who are not looking but who want a job SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

28 Unemployment by Metro Area August 2016: California 5.5% Bakersfield Fresno MSA Modesto Stockton MSA Inland Empire Ventura Sacramento Los Angeles San Diego Oakland Orange County San Jose San Francisco 3.4% 5.8% 5.5% 5.3% 5.0% 4.7% 4.4% 4.1% 6.6% 8.0% 7.8% 8.7% 9.7% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

29 CA Jobs Are Back Recession Job Losses: 1.3 million, Since Jan 10: +2.2 million MONTH TO MONTH CHANGES 150, ,000 50, , , ,000 SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

30 Silicon Valley Leads Job Growth August 2016: CA +2.3%, +378,000 (YTY) San Jose Inland Empire Stockton Fresno MSA Sacramento Orange San Francisco Oakland Modesto Bakersfield San Diego Los Angeles Ventura 0.7% 1.8% 1.7% 2.0% 2.7% 2.7% 2.6% 2.5% 2.4% 2.3% 2.3% 3.2% 3.6% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% SERIES: Total Nonfarm Employment By Industry SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

31 California Job Changes by Industry August 2016: CA +2.3%, +378,000 (YTY) Educational Services Professional, Scientific & Technical Services Construction Leisure & Hospitality Real Estate & Rental & Leasing Health Care & Social Assistance Information Government Wholesale Trade Admistrative & Support & Waste Services Transportation, Warehousing & Utilities Retail Trade Finance & Insurance Durable Goods Nondurable Goods -0.8% -0.8% 0.3% 1.8% 1.8% 1.7% 1.6% 1.3% 3.7% 3.6% 3.3% 2.9% 2.7% 4.6% 6.3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% SERIES: Total Nonfarm Employment By Industry SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

32 Consumer Confidence: 9 Year High September 2016: INDEX, 100= SERIES: Consumer Confidence SOURCE: The Conference Board

33 U.S. Economic Outlook p 2017f US GDP 1.8% 2.3% 2.2% 2.4% 2.4% 1.5% 2.2% Nonfarm Job Growth 1.2% 1.7% 1.7% 1.9% 2.1% 1.8% 1.4% Unemployment 8.9% 8.1% 7.4% 6.2% 5.3% 4.9% 4.7% CPI 3.1% 2.1% 1.5% 1.6% 0.1% 1.4% 2.1% Real Disposable Income, % Change 2.5% 3.2% -1.4% 2.7% 3.4% 2.7% 2.7% 30-Yr FRM 4.5% 3.7% 4.0% 4.2% 3.9% 3.6% 4.0% SERIES: U.S. Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

34 California Economic Outlook p 2017f Nonfarm Job Grow th Unemployment Rate Population Grow th Real Disposable Income, % Change 1.1% 2.4% 3.0% 2.2% 2.7% 2.3% 1.6% 11.8% 10.4% 8.9% 7.5% 6.2% 5.5% 5.3% 0.7% 0.7% 0.9% 0.9% 0.9% 1.0% 1.0% 3.5% 4.7% -1.1% 3.2% 3.6% 2.9% 3.5% SERIES: CA Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

35 The New Housing Normal Lack of supply hinders sales High-end: discretionary & slowing Low/Moderate-end: demand continues unabated Urban coastal CA slowing Inland and Central and Northern CA growing Migration patterns mirror housing affordability and jobs Demographics is Destiny: Boomers aren t moving, even when they retire

36 Supply: Listings

37 Inventory Remains Low Sept. 2015: 3.6 Months; Sept. 2016: 3.5 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. SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

38 Where is the inventory? Long-Time Homeowners are not moving as in the past Low rate on current mortgage Low property taxes Capital gains hit Where can I afford to go? Could not qualify for a mortgage today Remodel and stay Are we headed for the European Model where children inherit the home of their parents? One more thing Secular decline in marriage

39 Fewer housing units being turned over since the Great Recession 10% 9% Housing Turnover Rate (Single-Family Homes only) CA US 8% 7% 6% 5% 4% 4.8% 4.2% 3% 2% 1% 0% SERIES: Percent of existing single-family homes being sold SOURCE: Census Bureau, American Community Survey, Moody s Analytics, C.A.R.

40 Years Owned Home Before Selling 12 All Sellers SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

41 Owners Investing in Staying Put? $ Billions Alterations/Additions Reach All-Time High & Gaining Steam Up 16% from 2015 YTD levels $3.9 Billion through July Year-to-Date Through July SOURCE: California Homebuilding Foundation (CHF)/Construction Industry Research Board (CIRB) Downloaded from Moody s Analytics

42 Boomers Not Moving as Often 71% of Californian s aged 55+ haven t moved since 1999 California Homeowners by Length of Tenure, % Under % 30% 25% 20% 24.4% 21.3% 24.0% 15% 10% 5% 0% 9.0% 14.2% 12.4% 11.0% 12.0% 10.7% 8.9% 7.3% 5.7% 0.9% 0.8% 1.9% 1978 & Earlier 1979 to to to to to to to 2013 SERIES: Distribution of Home Ownership by Year Moved In SOURCE: U.S. Census Bureau, 2013 American Housing Survey

43 Most Have Equity in their Home No, 8% Yes, 92% Do you have equity in your home? SERIES: 2016 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

44 Majority Do Not Plan to Sell Home When they Retire Yes, 36% No, 64% Do you plan to sell your current home when you retire? SERIES: 2016 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

45 Do you worry about your children not having the same opportunities to succeed as you did? About the same, 24% No, they will have have better opportunities, 24% Yes, they will have worse opportunities, 52% Do you worry about your children or grandchildren not having the same opportunities to succeed as you did? SERIES: 2016 Generations / Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

46 Time to talk: ¾ Plan of have already Helped Children with Down Payment No, 23% Yes, I have already helped, 24% Yes, I am planning to help, 53% Are you planning to provide help for your children to buy a home by contributing to their down payment or mortgage payments? SERIES: 2016 Generations / Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

47 California s Single-Family Housing Stock 7,500,000 Owner-Occupied (left) Renter-Occupied (right) 3,000,000 7,000,000 2,500,000 6,500,000 2,000,000 1,500,000 6,000,000 1,000,000 5,500, ,000 5,000, SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS) Downloaded from the National Bureau of Economic Research (NBER) 0

48 More Single Family Units Now Rentals 8,000,000 7,000,000 Potentially between 400,000 and 700,000 SF Rentals that Used to be Owner-Occupied 6,919,164 6,527,730 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 1,940,607 2,674,808 0 SF Owners SF Renters SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS) Downloaded from the National Bureau of Economic Research (NBER)

49 Supply: New Houisng Units

50 Missing 65,000 New Units Annually : 95,822 (42,959 sf, 52,863 mf) 2016p: 98,300 total units Single Family Multi-Family Household Growth: 165,000/yr SERIES: California New Housing Permits SOURCE: Construction Industry Research Board

51 Most Underbuilt Counties in California 450, , , , , , , ,000 50,000 0 New Jobs vs. New Permits ( ) 381, , , , ,162 95,245 98, ,586 88,134 35,426 44,923 40,434 18,141 14,901 18,108 31,255 Jobs Permits 66,054 44,772 6,349 10,890 SOURCE: California Employment Development Department, Construction Industry Research Board

52 Affordability

53 Housing Affordability: CA v. US Q2: % able to purchase median-priced home SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

54 CA Housing Affordability Peaked Q California vs. U.S % OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME 80% 70% 60% CA US Annual Quarterly 57% 50% 40% 30% 31% 20% 10% 0% SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

55 Wages v. Income Required to Qualify California $130, Annual Mean Wage $126,560 $110,000 $90,000 $70,000 $72,360 $67,920 $93,550 $92,170 $101,260 $92,571 $50,000 $45,810 $30,000 $28,430 $10,000 -$10,000 Retail Salespersons Chefs and Head Cooks Elementary School Teachers Firefighters Police and Sherriff's Patrol Officers Computer Programmers Registered Nurses Software Developers (Applications) Min. Inc Required to Buy a Med. Home SOURCE: Bureau of Labor Statistics, C.A.R.

56 50% Share of First-Time Buyers remains Below Long-Run Average % First-Time Home Buyers Long Run Average 40% Long Run Average = 38% 30% 29.5% 20% 10% 0% SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

57 Los Angeles: Net Exit to Inland Empire and Kern County County Moved To/From Total Number Moved to Los Angeles County Total Number Moved from Los Angeles County Total Net Migration Inland Empire 25,777 50,531-24,754 Kern 2,466 10,460-7,816 Orange 23,887 31,435-7,548 San Diego 8,916 7,240 1,676 Ventura 7,464 7,543-79

58 San Francisco: Affordability & Jobs Drive Migration County Moved To/From Total Number Moved to San Francisco County Total Number Moved from San Francisco County Total Net Migration Alameda San Mateo Contra Costa Sonoma Marin Napa Solano Santa Clara

59 The median income in Oakland is $47,000, which translates to $1,175/month for rent, but the average monthly rent in Oakland is $3,000.

60 Demand & Desire for Homeownership

61 Millennials: American Dream is still Important 40% 35% 30% 25% 20% 15% 34% 31% 25% 10% 5% 4% 6% 0% Not at All Important Of Little Importance Moderately Important Important Very Important How important is fulfilling the 'American Dream' to you? SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

62 And Homeownership is part of it 20% 18% 16% 14% 12% 10% 18% 18% 16% 14% 12% 11% 10% 8% 6% 4% 2% 0% Owning a home A fulfilling job Having a family Education Seeing the world Helping others Becoming wealthy Which factors contribute to your ideal of the `American Dream` SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

63 50% 45% 40% 35% Many Millennials Also Believe Buying a Home Is a Safe Investment 45% 37% 30% 25% 20% 15% 12% 10% 5% 0% 1% 5% Strongly Disagree Disagree Neighter Agree nor Disagree Agree Strongly Agree Q. Do you think home purchase is still a safe investment? SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

64 Nearly ½ Renters Plan to Buy a Home No plans to buy 28% Not sure 24% In 5+ Years 11% 3-5 Years 14% In 2 Years 13% Within a year 9.6% Q. When do you plan to buy your next home? 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 64

65 55% of Renters Have Made Preparations to Buy a Home No preparations 45% Searched for homes 34% Searched for home buying process information online 21% Spoken to a REALTOR 16% Consulted credit counselor/financial advisor 12.0% Pre-qualified with a lender 9.0% Other 1.0% Q. Have you made any of the following preparations to buy a home? Please select all that apply. 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 65

66 69% of Millennial renters would look into purchasing if knew about lower down-payments All Millennial Owners No, 31% Yes, 69% If You knew you could qualify with lower down-payment, would you start to look for a house? SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

67 Only 19% Know about FHA Loans Are you aware of FHA Loans? Yes, [VALUE] No, [VALUE] FHA backed loans only require a 3.5% down-payment. SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

68 Student Loan Debt: 47% (34 or Under)

69 Student Debt Delayed Decisions to Move out of Family Member s Home After College? % of Loan borrowers SERIES: 2016 Student Loan Debt and Housing Report SOURCE: National Association of Realtors

70 2016: Market Conditions Annual Housing Market survey

71 Market Remained Very Competitive 80% 70% 60% 50% 40% 30% 20% 10% 0% % with Multiple Offers # of Multiple offers (Average) 53% 52% SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

72 Net Cash Gain to Sellers Highest since 2007 $250,000 $200,000 $175,000 $150,000 $100,000 $50,000 $ Q. What was the net cash gain or net loss to the seller as a result of this sale? SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

73 Sellers - More than Half Plan to Buy Another Home 80% 70% 60% 50% 72% 63% 52% 46% 49% 48% 53% 52% 40% 39% 33% 38% 40% 30% 20% 10% 0% SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

74 Investor Buyers? Dropping Still Have Demand in Lower-Priced Segments Demand for Investment Properties remained at the Lowest level since 2009 % to Total Sales 30% Investment/Rental Property Vacation/Second Home 25% 20% 15% 10% 5% 0% SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

75 International Buyers Dropping 9% 8% 8% The share of international buyers dropped to the lowest level in 9 years 8% 7% 6% 5% 6% 5% 6% 6% 6% 4% 3% 2% 1% 4% 3% 0% 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: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

76 Regional Housing Markets

77 Fountain Valley

78 Sales of Single Family Homes Fountain Valley, September 2016: 23 Units +8.0% 2015, +7.1% 2016 YTD, -34.3% YTY SOURCE: Clarus Market Metrics

79 Median Price of Single Family Homes Fountain Valley, September 2016: $770,000 Up 1.3% MTM, Up 5.6% YTY SOURCE: Clarus Market Metrics

80 For Sale Properties Fountain Valley, September 2016: 72 Units +9.6% 2015, -8.2% 2016 YTD, -18.2% 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. SOURCE: Clarus Market Metrics

81 Huntington Beach

82 Sales of Single Family Homes Huntington Beach, September 2016: 119 Units +8.9% 2015, +0.2% 2016 YTD, +12.3% YTY SOURCE: Clarus Market Metrics

83 Median Price of Single Family Homes Huntington Beach, September 2016: $800,000 Down 2.4% MTM, Up 3.2% YTY SOURCE: Clarus Market Metrics

84 For Sale Properties Huntington Beach, September 2016: 384 Units +0.5% 2015, -1.6% 2016 YTD, -11.9% 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. SOURCE: Clarus Market Metrics

85 Newport Beach

86 Sales of Single Family Homes Newport Beach, September 2016: 54 Units +6.6% 2015, -6.0% 2016 YTD, -11.5% YTY SOURCE: Clarus Market Metrics

87 Median Price of Single Family Homes Newport Beach, September 2016: $2,051,500 Up 14.3% MTM, Up 0.6% YTY SOURCE: Clarus Market Metrics

88 For Sale Properties Newport Beach, September 2016: 401 Units 0% 2015, +10.0% 2016 YTD, +17.6% 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. SOURCE: Clarus Market Metrics

89 2017 Forecast

90 Varying Market Expectations for % 90% 80% 70% 47% 31% 36% 62% 60% 50% 40% 30% 40% 44% 35% Up Flat Down 20% 10% 0% 35% 25% 29% 13% 3.0% Prices Sales Inventory Interest rates Q1 - What do you think will happen to the California real estate market in 2017?

91 California Housing Market Outlook p 2017f SFH Resales (000s) % Change 1.4% 4.1% -5.9% -7.8% 6.8% -0.4% 1.4% Median Price ($000s) $286.0 $319.3 $407.2 $446.9 $474.4 $503.9 $525.6 % Change -6.2% 11.6% 27.5% 9.8% 6.2% 6.2% 4.3% Housing Affordability Index 53% 51% 36% 30% 31% 33% 29% 30-Yr FRM 4.5% 3.7% 4.0% 4.2% 3.9% 3.6% 4.0% SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

92 Sales down for 2016 but Improve in 2017; Price will Grow Steadily this Year and Next Units (Thousand) Sales of Existing Detached Homes Price (Thousand) Median Price $600 $500 $504 $ $400 $300 $ $ f $ f SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

93 CA: Dollar Volume Up 5.8% in 2016, Up 5.8% in 2017 $ in Billion % Change $400 30% $ Volume of Sales Percent Change $350 $300 $250 $200 $150 $100 $301 $244 $164 $133 $131 $127 $121 $140 $169 $171 $194 $205 $217 20% 10% 0% -10% -20% $50 $ p 2017f -30% -40% SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

94 2017 Challenges & Opportunities

95 Lack of Affordability Biggest Challenge Mortagage rate increase, 10% [CATEGORY NAME], 6% Lack of inventory, 28% [CATEGORY NAME], [VALUE] Q2 - What will be the biggest challenge for the housing market in 2017?

96 2017 Wild Cards Unexpected rise in rates Economic collapse Tech giants crumble Other Black Swans Hit to equities Global instability Outcome of November Election

97 2017 Opportunities Up your game Always a good option What business are YOU in? Educate first time-home buyers talk to their parents Become well versed on down payment assistance programs, debt management and improving credit to turn renters into buyers. Don t give up on international buyers Stay involved & stay current Get married!

98 Book Recommendations

99 SPF Book Recommendations

100 Leslie s Book Recommendations

101 Stay Connected with C.A.R. Research CARResearchGroup CARResearchInfo On.car.org/CARResearch Housingmatters.car.org

102