CALIFORNIA ECONOMIC & MARKET OUTLOOK. October 29,2014 SILVAR Leslie Appleton-Young, Chief Economist

Transcription

1 CALIFORNIA ECONOMIC & MARKET OUTLOOK October 29,2014 SILVAR Leslie Appleton-Young, Chief Economist

2 OVERVIEW Economic Outlook California Housing Market Outlook Housing Affordability Regional Market 2015 Forecast

3 ECONOMIC OUTLOOK

4 P Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 ECONOMY: GAINING MOMENTUM 5% 4% 3% 2% 1% 0% -1% 2013: 1.9%; 2014: 2.2%; 2015: 3.0%; 2014 Q2: 4.6% ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $ ANNUALLY QUARTERLY -2% -3% 2009 Largest Annual Drop since 1938 (-3.4%) -4% SERIES: GDP SOURCE: US Dept. of Commerce, Bureau of Economic Analysis

5 US UNEMPLOYMENT RATE BELOW 6% CA - 7.3% (Sep. 2014) vs. US - 5.9% (Sep. 2014) 14% US-CA CA US 12% 10% 8% 6% 4% 2% 0% -2% -4% SERIES: Unemployment Rate SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

6 EMPLOYMENT GROWTH, CA VS. U.S. ANNUAL PERCENT CHANGE 4 California US SERIES: Total Nonfarm Employment SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

7 PERCENT JOB LOSSES PRIOR RECESSIONS RECENT CYCLE WORST BY FAR

8 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 EMPLOYMENT GROWTH, BY INDUSTRY September 2014: CA +2.3%, +390,600 ANNUAL PERCENT CHANGE 15% Construction Manufacturing Service 10% 5% 0% -5% -10% -15% -20% -25% SERIES: Total Nonfarm Employment By Industry SOURCE: CA Employment Development Division

9 CALIFORNIA JOB CHANGES BY INDUSTRY September 2014: CA +2.3%, +390,600 ANNUAL PERCENT CHANGE Construction Admistrative & Support & Waste Services Information Professional, Scientific & Technical Services Health Care & Social Assistance Leisure & Hospitality Real Estate & Rental & Leasing Transportation, Warehousing & Utilities Retail Trade Wholesale Trade Educational Services Durable Goods Government Finance & Insurance Nondurable Goods -1.7% -2.2% -0.3% 2.3% 2.1% 1.5% 1.5% 1.4% 1.3% 0.9% 3.3% 4.9% 4.7% 5.3% 6.2% SERIES: Total Nonfarm Employment By Industry SOURCE: US Bureau of Labor Statistics, CA Employment Development Division -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7%

10 ANNUAL PERCENT CHANGE JOB TRENDS BY CALIFORNIA METRO AREA September 2014: CA +2.3%, +390,600 San Francisco San Jose San Diego 2.5% Fresno MSA 2.5% Sacramento 2.1% Oakland 2.0% Ventura 2.0% Orange 1.9% Los Angeles 1.8% Bakersfield 1.7% Stockton MSA 1.3% Modesto 1.1% 3.5% 3.7% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

11 CONSUMER PRICE INDEX September 2014: All Items +1.7% YTY; Core +1.7% YTY ANNUAL PERCENT CHANGE 6% All Items Core 5% 4% 3% 2% 1% 0% -1% -2% -3% SERIES: Consumer Price Index SOURCE: US Bureau of Labor Statistics

12 INDEX, 100= CONSUMER CONFIDENCE: UNCERTAINTY October 2014: SERIES: Consumer Confidence SOURCE: The Conference Board

13 2009/ / / / / / / / / / / / / / / / / / / / / / / MORTGAGE RATES: WHAT HAPPENED? January 2009 October % 5% MONTHLY WEEKLY 4% 3% 2% FRM ARM 1% 0% SERIES: 30Yr FRM, 1Yr ARM SOURCE: Federal Home Loan Mortgage Corporation

14 FORECASTERS HAVE BEEN EXPECTING RATES TO RISE Percent 6 6 Percent Actual 10-year Treasury yield (solid black line) Predictions out to five quarters ahead of professional forecasters (hatched lines) SERIES: Loan Officer Survey SOURCE: Philadelphia Federal Reserve Survey of Professional Forecasters, Bloomberg

15 MORTGAGE RATES + 1% SPRING 2013 ACTUAL TAPERING? NO IMPACT? 8% FRM ARM Federal Funds 7% 6% 5% 4% 3% 2% 1% 0% SERIES: 30Yr FRM, 1Yr ARM, Federal Funds SOURCE: Federal Home Loan Mortgage Corporation

16 $ BILLIONS $3,000 U.S. DEPOSITORY INSTITUTIONS: HIGH LEVEL OF EXCESS RESERVES SINCE 9/08 $2,500 $2,000 $1,500 $1,000 $500 $0 SERIES: Excess Reserves of Depository Institutions SOURCE: Federal Reserve Bank of Saint Louis

17 U.S. ECONOMIC FORECAST P 2015 F Gross Domestic Product 1.8% 2.8% 1.9% 2.2% 3.0% Nonfarm Job Growth 1.2% 1.7% 1.7% 1.8% 2.2% Unemployment Rate 8.9% 8.1% 7.4% 6.2% 5.8% Consumer Price Index 3.1% 2.1% 1.5% 2.0% 2.2% Real Disposable Income, % Change 1.3% 1.5% 0.7% 2.6% 2.6% SERIES: U.S. Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

18 CALIFORNIA ECONOMIC FORECAST P 2015 F Nonfarm Job Growth 1.1% 2.4% 3.0% 2.2% 2.4% Unemployment Rate 11.8% 10.4% 8.9% 7.5% 6.7% Population Growth 0.7% 0.7% 0.9% 0.9% 0.9% Real Disposable Income, % Change 1.9% 1.1% 0.9% 3.0% 3.8% SERIES: CA Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

19 CALIFORNIA HOUSING MARKET OUTLOOK

20 TODAY S MARKET Clearly well on the road to recovering - Bay Area strongest regional market Volume A bit down, still reliant on investment sales Prices up sharply, but increases slowing in most markets Inventory remains tight but up from last year Pent-up/unrealized demand not yet translating into sales Affordability challenges emerging once again

21 CA SALES FLAT SINCE SPRING 2014 California, Sep Sales: 396,440 Units, -9.5% YTD, -4.2% YTY 700, , ,000 Sep-13: 413,850 Sep-14: 396, , , , ,000 - SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS *Sales are seasonally adjusted and annualized

22 80% 70% MULTIPLE OFFERS DECLINE WITH LESS INTENSE MARKET COMPETITION IN 2014 AFTER PEAKING IN 2013 % with Multiple Offers # of Multiple offers (Average) 72% % % 5 50% 40% 30% % 2 10% 1 0% SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

23 49 % SOLD BELOW ASKING IN 2014 Sale Price to Asking Price % of Price Reduction (Properties Sold Below Asking Price) Below Asking Price At Asking Price Above Asking Price Less than 5% 54% 33% 49% 5% to 9.99% 28% 10% to 19.99% 11% Median Reduction: 4.5% of List Price 18% 20% or more 7% 0% 20% 40% 60% SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

24 FEWER HOMES SOLD ABOVE THE ASKING PRICE AS MARKET COMPETITION COOLED IN % 50% 40% % of Sales above Asking Price 50% 33% 10% 9% 8% 7% 6% Median Price Discount & Weeks on Market Med. Price Discount Med. Weeks on MLS % 5% 8 20% 10% Long Run Average = 19% 4% 3% 2% 1% 0%, 2.1 weeks % % QUESTION: What was the original list sales price of the property? What was the final sales price of the property? How many weeks did the property remain on the MLS? SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

25 INVESTMENT HOMES : 15% MARKET SHARE 20% 18% 19% 16% 15% 14% 12% Long Run Average: 12 % 10% 8% 6% 4% 2% 0% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

26 Jan-09 WE VE COME A LONG WAY SINCE 2009: EQUITY SALES: 9 OUT OF 10 TRANSACTIONS Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul % 90% 80% 70% 60% 50% 40% 30% 20% Equity Sales Short Sale REO 91.0% 10% 0% 4.6% 4.0% SERIES: Distressed Sales, Not Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

27 DISTRESSED SALES: BAY AREA Percent of Total Sales Aug-14 Aug-12 60% 60% 50% 40% 30% 20% 10% 0% 36% 32% 23% 22% 25% 13% 2.5% 2.9% 1.8% 4.5% 4.2% Alameda Contra Costa Marin Napa Solano Sonoma SERIES: Distressed Sales, Not Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

28 SANTA CLARA COUNTY Preforeclosure: 486 Auction: 465 Bank Owned: 71 SOURCE: PropertyRadar.com as of 10/14/14

29 SANTA CLARA COUNTY Preforeclosure: 486 Auction: 465 Bank Owned: 71 SOURCE: PropertyRadar.com as of 10/14/14

30 SANTA CLARA COUNTY Preforeclosure: 486 Auction: 465 Bank Owned: 71 SOURCE: PropertyRadar.com as of 10/14/14

31 SAN JOSE Preforeclosure: 326 Auction: 321 Bank Owned: 51 SOURCE: PropertyRadar.com as of 10/14/14

32 CITY OF SANTA CLARA Preforeclosure: 19 Auction: 24 Bank Owned: 0 SOURCE: PropertyRadar.com as of 10/14/14

33 PALO ALTO Preforeclosure: 1 Auction: 2 Bank Owned: 0 SOURCE: PropertyRadar.com as of 10/14/14

34 SALES GROWING IN HIGHER PRICE RANGES Year-over-Year % Chg. in Sales Sep-14 40% 30% 28.3% 20% 18.5% 10% 0% -10% -0.7% -2.9% 4.9% 5.9% 2.8% -20% -30% -22.9% SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

35 CHANGE IN SALES BY PRICE RANGE 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% (Year-to-Year) $0 - $200k $500k+ $200 - $300k $300 - $400k $400 - $500k 9.0% 4.9% -0.7% -2.9% -22.9% SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

36 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 PRICE PLATEAU AHEAD; ANNUAL GAINS SLOWING California, Sep. 2014: $460,940, Up 7.6% YTY $700,000 $600,000 P: May-07 $594,530 Sep-13: $428,290 Sep-14: $460,940 $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

37 TROUGH VS. CURRENT PRICE By Counties, August 2014 Region Trough Month Trough Price Aug-14 Median %Chg Fr Trough Santa Barbara Mar-09 $296,590 $806, % Monterey May-09 $203,500 $492, % Alameda Jan-09 $346,236 $732, % Lake Jun-11 $85,620 $178, % California Feb-09 $245,230 $480, % Santa Clara Feb-09 $445,000 $865, % Merced Jan-10 $96,670 $186, % Los Angeles May-10 $248,850 $474, % Tehama Feb-11 $83,330 $156, % Riverside Apr-09 $171,480 $318, % SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

38 CALIFORNIA VS. U.S. MEDIAN PRICES $600,000 California US $500,000 $400,000 $300,000 $200,000 $100,000 $- SERIES: Median Price of Existing Single Family Homes SOURCE: SOURCE: CALIFORNIA CALIFORNIA ASSOCIATION ASSOCIATION OF OF REALTORS

39 INVENTORY IMPROVING FROM LAST YEAR Sept 2013: 3.6 Months; Sept 2014: 4.2 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

40 INVENTORY HIGHER AT UPPER PRICE RANGES Price Range (Thousand) Sep-14 Aug-14 Sep-13 $1,000K $ K $ K $ K $ K $ K $0-199K 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

41 WHY WAS/IS INVENTORY SO LOW? Demand Side Housing affordability was at historic highs Low rates hurt investment alternatives International buyers Supply Side Little new construction for last 5 years Underwater homeowners are stuck Mortgage Lock-In Effect No inventory to move up Foreclosure pipeline drying up Investors are renting instead of flipping Off-market (aka pocket ) listings

42 BUYING TO RENT V. FLIP; CHANGE IN PREFERRED INVESTMENT STRATEGY Investment to Flip Rental Property SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

43 HOUSING AFFORDABILITY

44 REAL ENEMY OF THE FUTURE OF CALIFORNIA? Housing Affordability The Achilles Heel of the California Economy What happens when housing costs are too high? Impact on jobs and economic growth Impact on neighborhoods and family stability

45 HOUSING AFFORDABILITY DOWN SHARPLY SINCE Q % OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME California vs. U.S % CA US 70% 60% 50% 40% 30% 20% 10% 0% Annual Quarterly SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

46 PITI/Month $4,000 SOME GOOD NEWS:MEDIAN CA HOUSE PAYMENT WELL BELOW PEAK PEAK Peak: $3,668/mo (2007 Q2) $3,500 $3,000 Latest: $2,340/mo (2014 Q2) $2,500 $2,000 $1,500 $1,000 $500 $- Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan Q1 SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

47 MINIMUM QUALIFYING INCOME ALSO WELL BELOW PEAK Min. Income $160,000 Peak: $146,701/yr (2007 Q2) $140,000 $120,000 Latest: $93,593/yr (2014 Q2) $100,000 $80,000 $60,000 $40,000 $20,000 $- Jan-80 Jan-82 Jan-84 Jan-86 Jan-88 Jan-90 Jan-92 Jan-94 Jan- 96 Jan-98 Jan-00 Jan-02 Jan Q Q1 SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

48 HOUSE PAYMENT (INFLATION ADJUSTED) IS AT LATE 1970 S LEVEL PITI/Month (ADJUSTED FOR INFLATION) $1,000 Peak: $928/mo (2006) $900 $800 $700 Latest: $458/mo (2013) $600 $500 $400 $300 $200 $100 $ SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

49 MINIMUM QUALIFYING INCOME IS THE SAME AS 35 YEARS AGO Min. Income (Adjusted for Inflation) Peak: $37,122 (2006) $40,000 Latest: $18,337 (2013) $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $ SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

50 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% HOUSING AFFORDABILITY INDEX What Will Happen When MORTGAGE RATES Increase? % OF HOUSEHOLDS THAT CAN BUY, ALL ELSE CONSTANT 35% 34% 32% 29% Q Median Price $457,140 20% Down payment 27% 26% 24% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS INTEREST RATE 22%

51 MEDIAN MONTHLY MORTGAGE PAYMENT What Will Happen When Mortgage Rates Increase? MONTHLY MORTGAGE Q Median Price $457,140 $2,312 $2,193 $2,400 20% Down payment $2,076 $1,963 $1,746 $1,853 $2,000 $1,642 $1,542 $1,600 $1,200 $800 $400 $0 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% INTEREST RATE SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

52 MINIMUM QUALIFYING INCOME MONTHLY MORTGAGE $120,000 $100,000 $80,000 What Will Happen When Mortgage Rates Increase? Q Median Price $457,140 20% Down payment $90,867 $95,149 $86,717 $82,703 $99,557 $104,087 $108,734 $113,490 $60,000 $40,000 $20,000 $0 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% INTEREST RATE SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

53 INCOME REQUIRED TO BUY A MEDIAN- PRICED HOME IN CA: (PEAK VS. CURRENT) $100,000 $80,000 $60,000 $56,324 $93,593 Change in minimum required income: $37,269 Increase in income attributed to interest rate increase: $836 (2.2% of total change) $40,000 $20,000 Increase in income attributed to price increase : $36,433 (97.8% of total change) $ Q Q2 SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

54 SHARE OF FIRST-TIME BUYERS UP BUT STILL BELOW LONG-RUN AVERAGE 50% 40% Long Run Average = 38% % First-Time Home Buyers Long Run Average 30% 28.1% 30.5% 20% 10% 0% QUESTION: Was the buyer a first-time buyer? SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

55 WHY DO WE CARE ABOUT LOW LEVEL OF FIRST-TIME BUYER? It signals a constrained flow of new households in the housing market Trade-up market cannot be replenished in the long run First-time buyers represent the main impulse that drives the state s homeownership rate

56 FINANCIAL CHARACTERISTICS: FIRST-TIME VS. REPEAT First-time Buyers Repeat Buyers All Buyers Median Household Income $80,000 $120,000 $100,000 Median Monthly Mortgage Payment $1,477 $1,868 $1,800 Median Downpayment (in $$) $32,500 $100,000 $70,000 Median Downpayment (in % to Price) 10% 20% 19.7% SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

57 REASONS FOR RENTING INSTEAD OF BUYING Can't afford to buy 44% Poor credit / Can't qualify Renting is easier Young/Starting out/not ready Flexibility/Freedom if renting Cost/Upkeep/Responsibility Plan to / Saving for down Never considered it/no interest Disabled/On disability 9% 6% 6% 6% 5% 5% 3% 2% SERIES: 2013 Renter Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

58 STUDENT LOAN DEBT AN ISSUE FOR 25% OF RENTERS Student Loan Debt Amount of Debt <$10,000 78% Refused, 2% $10-$20K 8% No, 75% Yes, 23% $20-$50K $50-$100K 6% 3% > $100K 2% Refused 2% SERIES: 2013 Renter Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

59 STUDENT DEBT: DRAGS ON HOME SALES

60 HOMEOWNERSHIP RATE LOWER IN CA California Vs. U.S. 75% CA US 70% 65% 60% 55% 50% 45% 40% SERIES: Homeownership Rates SOURCE: U.S. Census Bureau

61 HOMEOWNERSHIP RATE BY AGE OF HOUSEHOLDER SOURCE: Census Bureau

62 MILLENNIAL HOMEOWNERSHIP FALLING SOURCE: Census Bureau

63 CALIFORNIA S HOUSING DELEMMA Even with everything (or at least most things) going right, our homeownership market is in trouble The rental market, even with the conversion of 500,000 SFH s, is still exhibiting inadequate supply

64 HOW TO MAKE IT MORE AFFORDABLE? ONE WORD: SUPPLY CA Housing Needs = Minimally 165,000 Units Annually Regulatory Problem Impact Fees Public Attitudes

65 CA PERMITS UP BUT MORE UNITS NEEDED 2013: 57,496 Units, Up 43.0% from Single Family Multi-Family Household Growth: 220, ,000/yr SERIES: New Housing Permits SOURCE: Construction Industry Research Board

66 REGIONAL HOUSING MARKETS

67 SANTA CLARA COUNTY

68 SALES OF RESIDENTIAL HOMES Santa Clara County, September 2014: 844 Units Down 9.8% MTM, Down 11.9% YTY SOURCE: Clarus Market Metrics

69 MEDIAN PRICE OF RESIDENTIAL HOMES Santa Clara County, September 2014: $852,500 Down 0.9% MTM, Up 10.0% YT SOURCE: Clarus Market Metrics

70 FOR SALE PROPERTIES Santa Clara County, September 2014: 2,598 Units Down 4.0% MTM, Down 10.8% 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

71 MONTH S SUPPLY OF INVENTORY Santa Clara County, September 2014: 1.5 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

72 CITY OF SANTA CLARA

73 SALES OF RESIDENTIAL HOMES City of Santa Clara, September 2014: 57 Units Up 21.3% MTM, Up 16.3% YTY SOURCE: Clarus Market Metrics

74 MEDIAN PRICE OF RESIDENTIAL HOMES City of Santa Clara, September 2014: $840,000 Down 4.1% MTM, Up 14.9% YTY SOURCE: Clarus Market Metrics

75 FOR SALE PROPERTIES City of Santa Clara, September 2014: 77 Units Down 30.6% MTM, Down 35.8% 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

76 MONTH S SUPPLY OF INVENTORY City of Santa Clara, September 2014: 0.9 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

77 SAN JOSE

78 SALES OF RESIDENTIAL HOMES San Jose, September 2014: 444 Units Down 15.7% MTM, Down 18.4% YTY SOURCE: Clarus Market Metrics

79 MEDIAN PRICE OF RESIDENTIAL HOMES San Jose, September 2014: $746,994 Down 3.6% MTM, Up 7.5% YTY SOURCE: Clarus Market Metrics

80 FOR SALE PROPERTIES San Jose, September 2014: 1,396 Units Down 5.7% MTM, Down 12.2% 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 MONTH S SUPPLY OF INVENTORY San Jose, September 2014: 1.5 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

82 PALO ALTO

83 SALES OF RESIDENTIAL HOMES Palo Alto, September 2014: 27 Units Down 18.2% MTM, Down 6.9% YTY SOURCE: Clarus Market Metrics

84 MEDIAN PRICE OF RESIDENTIAL HOMES Palo Alto, September 2014: $2,999,890 Up 25.0% MTM, Up 58.9% YTY SOURCE: Clarus Market Metrics

85 FOR SALE PROPERTIES Palo Alto, September 2014: 83 Units Up 15.3% MTM, Up 3.8% 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

86 MONTH S SUPPLY OF INVENTORY Palo Alto, September 2014: 1.1 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

87 2015 FORECAST

88 CALIFORNIA HOUSING MARKET FORECAST P 2015 F SFH Resales (000s) % Change 1.4% 4.1% -5.8% -8.2% 5.8% Median Price ($000s) $286.0 $319.3 $407.2 $455.0 $478.7 % Change -6.2% 11.6% 27.5% 11.8% 5.2% Housing Affordability Index 53% 51% 36% 30% 27% 30-Yr FRM 4.5% 3.7% 4.0% 4.3% 4.5% SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

89 CALIFORNIA HOUSING MARKET OUTLOOK Sales Down for 2014 but will Improve in 2015; Price Gains Slowing Units (Thousand) 700 Sales of Existing Detached Homes Price (Thousand) $600 Median Price $500 $400 $300 $455 $ $ $ f $ f SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

90 CA: DOLLAR VOLUME UP FOR 4 TH YEAR Up 2.7% in 2014, Up 11.3% in 2015 $ in Billion $400 $350 $301 $300 $250 $200 $150 $244 $164 $ Volume of Sales Percent Change -60% $169 $173 $133 $131 $140 $127 $121 % Change 30% 20% 10% 0% $193-10% $100-20% $50-30% $ p 2015f -40% SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

91 REAL ESTATE IS CONSIDERED THE BEST LONG TERM INVESTMENT SOURCE: Gallup

92 Make no mistake about it, the way that workingclass people build wealth is through homeownership, not the stock market, not their 401(k) and not a pension. John Taylor, President of the National Community Reinvestment Coalition,

93 ATTITUDE TOWARD THE HOME BUYING PROCESS MIXED RESULTS 60% 50% 50% 40% 34% 30% 20% 10% 8% 4% 4% 0% Positive Negative Neutral N/A Other SOURCE: How would you describe your attitude towards the home buying process? C.A.R Millennial Survey

94 MOST MILLENNIALS UNCERTAIN/DOUBTFUL THAT THEY COULD OBTAIN A MORTGAGE NOW?AMILLENNIAL ETHNICITY Yes 22% Don't know 45% No 33% SOURCE: C.A.R Millennial Survey Q: Could you obtain a mortgage if you applied now?

95 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 April 2014

96 C.A.R. Strategic Planning Books

97 THANK YOU!