Leslie Appleton-Young Chief Economist & Vice President
2017 Forecast Report Card 2016 Actual 2017 Forecast 2017 Projected SFH Resales (000s) 416.7 413.0 421.9 % Change 1.8% 1.4% 1.3% Median Price ($000s) $502.3 $525.6 $538.5 % Change 5.4% 4.3% 7.2% 30-Yr FRM 3.6% 4.0% 4.0% Housing Affordability Index 31% 29% 29% U.S. Gross Domestic Product 1.6% 2.2% 2.1%
What to expect in 2018 US economic and job growth expanding CA economy out-preforming the nation maybe not Rates rising in response to growth & Fed policy Affordability challenges for first time & repeat buyers Boomers aren t moving if they do they lease more often Millennials leaving the nest & the state getting a life Listings & new units remain low wrt trend & demand Hang-over - Formerly owner-occupied units now rentals
Macro Economic Outlook
Stronger Economic Growth in Q2 Consumer Led Economy 3.1% 3.3% GDP 2017-Q2 4.2% Consumption 2017-Q2 1.2% Unemployment Sep 2017 Job Growth Sep 2017
Economic Growth 2016: 1.6% 2017(p) 2.1% 2018(f) 2.3% 6% 5% ANNUALLY QUARTERLY Annual Percent Change, Chain-type (2009) $ 4% 3% 2% 1% 0% -1% -2% -3% -4% 2009 Largest Annual Drop since 1946 (-2.8%) 2005 2008 2011 2014 Q3-11 Q2-12 Q1-13 Q4-13 Q3-14 Q2-15 Q1-16 Q4-16 SERIES: GDP SOURCE: US Dept. of Commerce, Bureau of Economic Analysis
Consumers Driving the Economy 2016: 2.7%; 2017 Q2: 3.3% Annual Percent Change 6% 5% 4% 3% 2% 1% 0% -1% -2% ANNUAL PERCENT CHANGE ANNUALLY -3% 2005 2007 2009 2011 2013 2015 2012 Q2 2012 Q4 2013 Q2 2013 Q4 2014 Q2 2014 Q4 2015 Q2 2015 Q4 2016 Q2 2016 Q4 2017 Q2 QUARTERLY SERIES: Personal Consumption SOURCE: US Dept. of Commerce, Bureau of Economic Analysis
Confidence? Holding on to Trump Bump September 2017: 119.8 140 120 INDEX, 100=1985 100 80 60 40 20 0 SERIES: Consumer Confidence SOURCE: The Conference Board
S&P 500: Historic Highs August 2017: 2,456.2 3000 2500 Monthly Average 2000 1500 1000 500 0
Mortgage Rates: Surged Post-Election 6 5 4 3 January 2010 October 05, 2017 MONTHLY 3.81 3.16 WEEKLY 3.85 3.18 2 1 FRM ARM 0 SERIES: 30Yr FRM, 5Yr ARM SOURCE: Freddie Mac
Extremely Tight Labor Markets September 2017: US 4.2% & August 2017: CA 5.4% 14% 12% 10% US-CA CA US 8% 6% 4% 2% 0% -2% -4% SERIES: Unemployment Rate SOURCE: US Bureau of Labor Statistics, CA Employment Development Division
August 2017: California 5.4% Unemployment rate Metro Area Bakersfield Fresno MSA Stockton MSA Modesto Inland Empire Los Angeles Ventura Sacramento San Diego Oakland Orange County San Jose San Francisco 5.4% 5.3% 5.2% 4.7% 4.4% 4.2% 3.9% 3.3% 6.2% 7.5% 7.5% 8.6% 9.4% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% SERIES: Civilian Unemployment Rate SOURCE: CA Employment Development Division
California 7 Year Jobs Recovery Recession Job Losses: 1.3 million Since Jan 10: +2.4 million 150,000 MONTH TO MONTH CHANGES 100,000 50,000 0-50,000-100,000-150,000 SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division
California Job Growth Slowing 4 California US CA 1.6% US 1.4% Annual Percent Change 2 0-2 -4-6 -8 SERIES: Total Nonfarm Employment SOURCE: US Bureau of Labor Statistics, CA Employment Development Division
Employment By Region Nonfarm Employment (Thousands) SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division Aug 2017 Aug 2016 Change % Change Southern California 9,155.0 9,053.8 101.2 1.1% Bay Area 3,640.4 3,590.3 50.1 1.4% Central Valley 2,213.8 2,177.6 36.2 1.7% Central Coast 537.6 529.9 7.7 1.5% North Central 150.9 145.5 5.4 3.7% CALIFORNIA 16,777.8 16,512.7 265.1 1.6%
Construction Jobs Lead Growth August 2017: CA +1.6%, +265,100 (YTY) Construction Educational Services Health Care & Social Assistance Leisure & Hospitality Government Wholesale Trade Real Estate & Rental & Leasing Information Admistrative & Support & Waste Services Finance & Insurance Transportation, Warehousing & Utilities Durable Goods Retail Trade Professional, Scientific & Technical Services Nondurable Goods -1.1% -0.4% 2.7% 2.2% 1.8% 1.6% 1.5% 1.2% 1.0% 0.5% 0.2% 0.1% 0.0% 4.0% 6.0% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% Annual Percent Change SERIES: Total Nonfarm Employment By Industry SOURCE: US Bureau of Labor Statistics, CA Employment Development Division
Commercial Real Estate Outlook
Key Takeaways Office Job growth continues to fuel demand, but appears to be slowing down Firms decision to increase workplace density will continue to affect vacancy and rent growth Retail Demand for retail space continues to be affected by the growth of e-commerce (amazon Prime: 46% US households) Fundamentals ok for now, but developers concern about the future
Key Takeaways Industrial Demand for industrial space remains strong as online shopping continues to grow More supply is needed and developers are optimistic Multifamily Sustained job growth continues to fuel housing demand in the rental market Rent growth leveling off as more supply come on the market
REALTORS CRE U.S. Outlook
U.S. Economic Outlook 2012 2013 2014 2015 US GDP 2.2% 1.7% 2.4% 2.6% 1.6% 2.1% 2.3% Nonfarm Job Growth 1.7% 1.7% 1.9% 2.1% 1.8% 1.4% 1.2% Unemployment 8.1% 7.4% 6.2% 5.3% 4.9% 4.4% 4.2% CPI 2.1% 1.5% 1.6% 0.1% 1.4% 2.0% 2.2% Real Disposable I ncome, % 3.2% -1.4% 2.7% 3.4% 2.7% 2.1% 3.0% 30-Yr FRM 3.7% 4.0% 4.2% 3.9% 3.6% 4.0% 4.3% SERIES: U.S. Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 2016 2017p 2018f
California Economic Outlook Nonfarm Job Grow th Unemployment Rate CA Population (Million) Population Grow th Real Disposable Income, % Change SERIES: CA Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 2012 2013 2014 2015 2016 2017p 2018f 2.4% 3.0% 2.2% 2.7% 2.3% 1.6% 1.2% 10.4% 8.9% 7.5% 6.2% 5.5% 4.8% 4.6% 38.0 38.4 38.7 39.1 39.4 39.7 40.0 0.7% 0.9% 0.9% 0.9% 0.9% 0.8% 0.8% 4.7% -1.1% 3.2% 3.6% 3.0% 4.1% 4.3%
Abundance of Uncertainty
Tax Reform
Tax reform passes, Sales Down & Prices Flat President Trump s tax reform proposal includes changes that will increase the cost of homeownership. Do you expect its effect to be: 60% Up 50% 48% Down Same/Flat 57% 38% 37% 40% 30% 20% 14% 5% 10% 0% On Prices SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R. On Sales
Impact of Tax Reform Two Provisions on the Individual Tax Reform Proposal: - Doubling the Standard Deduction - Repeal the state and local tax deduction Impact on the housing market: - The repeal of the state and local tax deduction increases the cost of owning a home - Incentives of using MID as a tax saving tool as a homeowner would be nullified - Home values decline as these tax saving advantages vanish
Impact of Tax Reform on the Housing Market - The proposed tax reform would lead to fewer sales transactions as the tax incentives of being a homeowner vanish for many who want to purchase a property. Home sales would decline 3.4 percent if the proposed tax reform were to be implemented - The decline in home values would also lead to homeowners reluctance to put their property on the market and further tighten up the housing supply condition in California. An estimated 1.5 percent would be lost in the first year after the implementation of the tax reform.
Incentives for Homeownership Obliterated First-time buyers ($100K income, $437K home) - federal tax incentive to own vs. rent drops from $3,291 to zero in the first year. Typical buyers ($120K income, $533.5K home): $5,782 to $362 in the first year. Mid-range buyers ($150K income, $615K home): $8,099 to $1,334 in the first year. High-end buyers/sf/la Metro Buyers ($200K income, $1.2M home): $16,615 to $5,725 in the first year.
Tax Expenditures Estimates: CA Deductions for Mortgage Interest and Property Taxes in California (FY2018-2027) 226.7 250 200 173.8 150 100 50 74.5 34.8 34.8 0.0 0 Mortgage Interest Deduction Current Law Property Tax Deduction Mortgage Interest & Property Tax Coimbined Comprehensive Tax Reform Option
Housing Market Trends
C.A.R. Membership & SF Sales Home Sales 250,000 Membership 600,000 Sales Peaks: 1978, 1988, 2004-05 Membership Peaks: 1980, 1990, 2006 500,000 200,000 400,000 150,000 300,000 100,000 200,000 50,000 100,000 2017 2015 2013 2011 2009 2007 2005 2003 2001 1999 1997 1995 1993 1991 1989 1987 1985 1983 1981 1979 1977 1975 1973 0 1971 0
Sales: Stalled with Strong Fundamentals August 2017 Sales: 427,630 Units, +2.7% YTD, +1.3% YTY 700,000 600,000 500,000 Aug-16: 422,190 Aug-17: 427,630 400,000 300,000 200,000 100,000 - SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS *Sales are seasonally adjusted and annualized
Sales Began 2017 Strong Growth Slowing Year-over-Year % Chg 20% 15% 11.8% 10% 5% 0% -5% -10% -15% Aug-14 Avg. year-over-year % chg. = 3% Dec-14 Apr-15 *Sales are seasonally adjusted and annualized Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
CA Median Price Continues to Rise August 2017: $565,330, +2.9% MTM, +7.2% YTY $700,000 P: May-07 $594,530 Aug-16: $527,490 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS T: Feb-09 $245,230-59% from peak Aug -17: $565,330
Southern California: Peak vs. Aug 2017 Region Peak Month Peak Price Aug-17 %Chg Fr Peak Orange Jun-07 $775,420 $789,000 1.8% San Diego May-06 $622,380 $605,000-2.8% California May-07 $594,530 $565,330-4.9% Los Angeles Sep-07 $625,812 $575,130-8.1% Ventura Aug-06 $710,910 $640,000-10.0% Riverside Jun-06 $431,710 $388,500-10.0% Inland Empire Jun-06 $389,380 $341,340-12.3% LA Metro May-07 $578,700 $499,970-13.6% San Bernardino Aug-06 $350,290 $269,950-22.9% SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
Central Valley: Peak v. Current Price Region Peak Month Peak Price Aug-17 %Chg Fr Peak Madera County Feb-08 $275,000 $263,500-4.2% California May-07 $594,530 $565,330-4.9% San Benito County May-05 $671,190 $600,000-10.6% Sacramento County Aug-05 $394,450 $348,000-11.8% Placer County Aug-05 $527,990 $462,000-12.5% Kings County Mar-06 $268,050 $225,000-16.1% Tulare County Dec-05 $269,710 $224,900-16.6% San Joaquin County Jun-06 $426,830 $355,000-16.8% Fresno County Jun-06 $313,500 $259,000-17.4% Stanislaus County Sep-05 $370,100 $294,290-20.5% Kern County Jun-06 $299,920 $235,100-21.6% Merced County Oct-05 $344,610 $250,000-27.5% Glenn County Feb-07 $312,500 $225,000-28.0% SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
Bay Area: Peak v. Current Price Region Peak Month Peak Price Aug-17 %Chg Fr Peak San Francisco May-07 $972,010 $1,380,000 42.0% San Mateo Oct-07 $1,020,000 $1,375,000 34.8% Santa Clara Oct-07 $865,000 $1,150,000 32.9% Alameda May-07 $709,420 $867,500 22.3% Marin Jun-07 $1,149,390 $1,207,120 5.0% Sonoma Jan-06 $650,330 $625,500-3.8% California May-07 $594,530 $565,330-4.9% Contra Costa May-07 $698,420 $627,860-10.1% Napa Jun-07 $729,170 $654,000-10.3% Solano Jun-07 $492,800 $410,000-16.8% SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
Supply
At some point a supply problem becomes a demand problem Joel Singer
Inventory Remains on a Downward Trend August 2017: 2.9 Months; August 2016: 3.4 Months Active listing declining for last 26 months CA Unsold Inventory Index (Months) 18 Year-over-Year % Chg 16 15% 14 10% 12 5% 10 0% 8-5% 6-10% 4-15% 2-11.9% Jul-17 May-17 Mar-17 Jan-17 Nov-16 Sep-16 Jul-16 May-16 Mar-16 Jan-16 Nov-15 Sep-15 Jul-15 May-15 Mar-15 Jan-17 May-16 Sep-15 Jan-15 May-14 Sep-13 Jan-13 May-12 Sep-11 Jan-11 May-10 Sep-09 Jan-09 May-08 Sep-07 Jan-07 May-06 Sep-05 Jan-05 Jan-15-20% 0 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
Supply Declined Most in the Lower End August 2017 Active Listing 10% 1.9% 0% -10% -11.2% -20% -30% -17.1% -29.0% -40% SERIES: Active Listings of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS -7.6% -7.8% -10.0% -11.5%
Inventory Continued to Drop Across All Regions 9.0 Bay Area So CA Central Valley 8.0 7.0 6.0 5.0 4.0 3.0 3.0 2.8 2.0 1.9 1.0 0.0 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
Inventory Index Highest in Millions 14 11.5 12 9.7 10 8 6.4 6 4 2.93.1 2.6 3.0 2.73.1 3.1 2.6 3.03.7 2.6 3.3 3.6 4.7 2 0 Aug-17 Aug-16 3.6 4.5 4.9 2.9 3.4
Turnover Rate Very Low: US & CA Housing Turnover Rate (Single-Family Homes only) 10% CA 9% 8% US Long-Time Homeowners are not moving as in the past because: Linear (CA) CA turnover rate trend 7% 6% 5.3% 5% 4.6% 4% 3% 2% 1% SERIES: Percent of existing single-family homes being sold SOURCE: Census Bureau, American Community Survey, Moody s Analytics, C.A.R. 2016 2014 2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 0% Capital gains hit Low property taxes Low rate on current mortgage Demographic shift Where can I afford to go?
Affordability
Housing Affordability In CA: 29% 2017-Q2: % able to purchase median-priced home 70 60 50 57 54 53 52 52 51 48 47 47 47 47 46 45 44 44 43 43 43 42 40 30 20 10 0 SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 40 39 39 38 36 35 33 31 29 28 27 27 26 26 25 25 21 21 19 17 17 17 16 14 12
Housing Affordability Peaked Q1 2012 California, 1984-2017 % OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME 80% 70% 60% Annual Quarterly 57% 50% 40% 30% 20% 10% 0% SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 29%
California s Single-Family Housing Stock 7,500,000 Owner-Occupied (left) 3,000,000 Renter-Occupied (right) 2,500,000 7,000,000 2,000,000 6,500,000 1,500,000 6,000,000 1,000,000 5,500,000 500,000 5,000,000 0 2000 2003 2006 2009 2012 2015 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)
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 2,674,808 3,000,000 1,940,607 2,000,000 1,000,000 0 SF Owners SF Renters 2000 2005 2010 2015 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)
Most Underbuilt Counties in California New Jobs vs. New Permits (2010-2015) 450,000 Jobs 400,000 381,300 Permits 350,000 300,000 250,000 174,833 200,000 150,000 100,000 50,000 0 162,740 127,542 88,134 35,426 44,923 18,141 141,162 95,245 40,434 14,901 98,149 18,108 105,586 31,255 66,054 6,349 44,772 10,890 SOURCE: California Employment Development Department, Construction Industry Research Board
Q: How s the Market? A: It s Complicated 2017 Annual Housing Market Survey
Methodology Started in 1981 36 years ago On-line survey In the field July and August 2017 The survey was sent via email to a random sample of 25,804 REALTORS throughout California. The sample represented the geographical distribution of C.A.R. membership across the state. Asks about closed transactions in Q2 2017 Questionnaire with both multiple choice and open-ended questions. There were 1,303 valid survey responses, equivalent to a response rate of 5.0 percent. The margin of error for this survey was +/- 2.6 percent at a 95 percent confidence level.
Who is Buying in California? Median Age: 45 31% Age 20 37 SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 40% 24% Age 38 52 Age 53 71 4% 72 and older
Who is Selling in California? Median Age: 57 11% Age 20 37 SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 27% 48% Age 38 52 Age 53 71 14% 72 and older
Tight Supply Pushed up Home Prices 1/3 Sold Above Asking % of Sales Above Asking Price 60% 50% 40% 30% Long Run Average = 20% 20% 10% 0% SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 32% 33%
Market Competitiveness Up in 2017 6 out of 10 had Multiple Offers % with Multiple Offers # of Multiple offers (Average) 80% 7 70% 60% 60% 5 52% 50% 40% 4.0 4.1 4 3 30% 2 20% 10% 1 0% 0 2005200620072008200920102011201220132014201520162017 SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 6
Even Within So CA Inland Empire LA/OC/SD Southern California California % with Multiple Offer 54.8% 62.7% 58.8% 60.4% % of Sales Above Asking Price 24.3% 33.4% 28.5% 32.9% Days on Market 18.5 14 14 13 SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
Competitiveness by Price Range: LA/OC/SD $0 -$300k $301k $500k $501k $750k $751k $1000k $1001 and up All Prices % with Multiple Offer 58.3% 67.2% 71.6% 73.5% 48.2% 62.7% % of Sales Above Asking Price 46.2% 32.3% 33.3% 40.0% 22.6% 33.4% Days on Market 8 10 13.5 8.5 25 14 SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
By Region % of Multiple Offer 90% 80% 70% 77% 60% 70% 59% 60% 59.8% Days on Market 10 SF Bay Area 50% 50% 50% % of Sales Above Asking Price 40% 28.5% 30% 30% 14 So CA 40% 23.8% Other Counties in CA 15 20% 20% 10% 10% 13 California 0% 0% SF Bay Area So CA Rest of CA SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS SF Bay Area So CA Rest of CA 0 10 20
Most Competitive for First-Time Buyers First-time Buyers Repeat Buyers All Buyers % with Multiple Offer 68.8% 55.5% 60.4% % of Sales Above Asking Price 41% 28.8% 32.9% Days on Market 10 14 13 SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
Partly Because Many of Them Live in the Supply Constraint Bay Area Where are the buyers? Bay Area So CA % of First-Time Buyers Rest of CA 45% 40% First-Time Buyers 24% 54% 22% 40% 35% 30% 30% 30% 32% 25% 20% 15% Repeat Buyers 17% 59% 24% 10% 5% 0% 0% 50% SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 100% Bay Area So CA Rest of CA California
Share of 1sTime Buyers Up but Below LR Average National Share is 50% % First-Time Home Buyers Long Run Average 50% Long Run Average = 37.4% 40% 30% 20% 10% 0% SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 31.7%
International Buyers 3% of Transactions The share of international buyers dropped to the lowest level in 9 years 9% 8% 8% 8% 7% 6% 6% 5% 6% 6% 6% 5% 4% 4% 3% 3% 3% 2016 2017 2% 1% 0% 2008 2009 2010 2011 2012 2013 2014 2015 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: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
International Buyers: Metro Areas Preferred Where are the properties? % of International Buyers Bay Area 5% 9% 3.6% 20% 3.1% 3.0% 2.2% 2% 1% Rest of CA 4.4% 4% 3% So CA 1.1% 0% SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 71%
Cash Outflow Restrictions Had a Negative Effect on the Share of Chinese Buyers 2016 China (53%) 2017 China (31%) Mexico (10%) Mexico (6%) India (10%) India (9%) Q. What country did the (international) buyer come from? SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
Share of Cash Buyers Steady 35% % of All Cash Sales 30% 25% 20% 15% 10% One-fifth of buyers paid with all cash 5% The share of all cash buyers is virtually unchanged in the last 4 years 0% SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 22%
Investor Buyers Inched Up in 2017; More Flippers in the Market % to Total Sales 30% Vacation/Second Home Vs. Investment/Rental Property 25% 20% 4.1% 15% 10% 13.8% 5% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0% SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS Flip Rent 2014: 30% 2015: 26% 2016: 20% 2017: 24% 2014: 70% 2015: 74% 2016: 80% 2017: 76%
Net Cash Gain to Sellers Highest since 2006 $250,000 $200,000 $200,000 $150,000 $100,000 $50,000 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q. What was the net cash gain or net loss to the seller as a result of this sale? SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
Sellers with Net Cash Loss Dropped to the Lowest Level in the last 11 years 35% Long Run Average = 11.2% 30% 25% 20% 15% 10% 5% 0% Q. What was the net cash gain or net loss to the seller as a result of this sale? SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 2.1%
Sellers Are Not Moving as Often as Before 12 Years Owned Home Before Selling 10 11 Long-Time Homeowners are not moving as in the past because: 8 6 4 2 0 SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS Capital gains hit Low property taxes Low rate on current mortgage Where can I afford to go? Remodel and stay
Sellers Who Planned to Buy Another Home Reached the Highest Level since 2006 80% 0% 50% 100% 70% 60% 54% Millennials 76% 50% 40% Gen X's 63% 30% 20% 10% 0% SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS Baby Boomers Silent Generations 60% 28%
Sellers Moving out of California: Highest since 2007 Location of Seller s New Home 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Within the same county 37% 45% 47% 42% 49% 49% 46% 44% 44% 40% 38% In another county in California 24% 17% 21% 21% 19% 18% 20% 21% 20% 21% 20% In another state 29% 27% 19% 20% 20% 22% 19% 22% 22% 25% 28% Out of US 1% 1% 2% 1% 1% 1% 0% 1% 1% 1% 1% Don't Know/Not sure 9% 10% 12% 16% 10% 10% 15% 13% 13% 13% 14% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Total SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
FHA Loans Lowest since 2007 FHA 40% VA 30% 20% 5.8% 10% 14.8% 0% 2005 2006 2007 2008 Q. Please indicate the type of mortgage. SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 2009 2010 2011 2012 2013 2014 2015 2016 2017
How Client Found Their Agent All Buyers 0% 5% 10% 15% Represented Them in Previous Home Client was Friend/Relative/Neighbor Referral from a client Recommendations of Friends Refferal from Business Associates Other Web page/internet Open House Door-to-Door Farming Relocation Referral Walk in /Floor Call Direct Mail Marketing Yard Signs Listing Agent for Home Purchased Social Media Telephone Marketing Print Ads/Newspaper & Magazine Q. How did your client find and select you to represent them? SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 20% 25%
Regional Housing Markets
Northern California Sales -0.2% YTD 6.6% YTY UII 3.6 Months MTM 20.0 Days Median Price $390,000 9.9% YTY Price $213 Per Sq Ft Sales 98.2% To List Ratio
2017 Northern California YTD Sales: Mixed Bag
2017 Northern California Median Prices YTY
Northern Wine Sales -2.9% YTD 3.9% YTY UII 3.5 Months MTM 40.0 Days Median Price $613,500 7.8% YTY Price $359 Per Sq Ft Sales 100.0% To List Ratio
2017 Northern Wine YTD Sales
2017 Northern Wine Median Prices YTY
Bay Area Sales 2.6% YTD 6.5% YTY UII 1.9 Months MTM 15.0 Days Median Price $856,200 10.2% YTY Price $489 Per Sq Ft Sales 101.9% To List Ratio
2017 Bay Area YTD Sales
2017 Bay Area Median Prices YTY
Central Valley Sales 1.5% YTD 4.6% YTY UII 2.8 Months MTM 15.0 Days Median Price $315,000 8.6% YTY Price $185 Per Sq Ft Sales 99.2% To List Ratio
2017 Central Valley YTD Sales
2017 Central Valley Median Prices YTY
Central Coast Sales 1.3% YTD 7.1% YTY UII 4.3 Months MTM 24.0 Days Median Price $635,000-2.1% YTY Price $376 Per Sq Ft Sales 97.9% To List Ratio
2017 Central Coast YTD Sales
2017 Central Coast Median Prices YTY
Southern California Sales 3.4% YTD 4.8% YTY UII 3.0 Months MTM 20.0 Days Median Price $528,000 6.7% YTY Price $301 Per Sq Ft Sales 98.9% To List Ratio
2017 Southern Cal YTD Sales
2017 Southern Cal Median Prices YTY
2017 Forecast
How s the market? A tad hot. How would you describe the real estate market in your area today? 43% 37% 20% Too hot SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R. Too cold Just right
Prices Up, Sales Flat, Rates Up, Affordability What do you think will happen for the CA market in 2018? 80% 70% Up 64% Down Same/Flat 60% 40% 30% 20% 10% 42% 39% 45% 50% 29% 30% 24% 72% 64% 33% 21% 19% 7% 3% 8% 0% Home prices SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R. Home Sales Inventory Mortgage interest rates Affordability
Challenges: Affordability and Supply What will be the biggest challenge for the housing market in 2018? 60% 50% 50% 36% 40% 30% 20% 6% 10% 6% 2% 0% Lack of inventory SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R. Lack of affordability Increase in New brokerage mortgage rates models (Open Door, Instant Offer, etc) Recession
California Housing Market Outlook 2012 2013 2014 2015 2016 2017p 2018f SFH Resales (000s) 439.8 414.9 382.7 409.4 416.7 421.9 426.2 % Change 4.1% -5.9% -7.8% 1.3% 1.0% 7.0% 1.8% Median Price ($000s) $319.3 $407.2 $446.9 $476.3 $502.3 $538.5 $561.0 % Change 11.6% 27.5% 9.8% 6.6% 5.4% 7.2% 4.2% Housing Affordability Index 51% 36% 30% 31% 31% 29% 26% 30-Yr FRM 3.7% 4.0% 4.2% 3.9% 3.6% 4.0% 4.3% SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
Sales and Price up in 2017 and in 2018 Median Price 700 $600 600 $500 500 426.2 421.9 400 300 200 Price (Thousand) Units (Thousand) Sales of Existing Detached Homes $539 $561 $400 $300 $200 $100 100 $0 0 2005 2007 2009 2011 2013 SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 2015 2017p 2005 2007 2009 2011 2013 2015 2017p
CA: Dollar Volume Up 8.6% in 2017, Up 5.2% in 2018 $ in Billion $400 $ Volume of Sales % Change 30% Percent Change $350 $300 20% $301 10% $244 $250 $195 $200 $169 $164 $150 $133 $131 $127 $121 $209 $227 $239 0% $171-10% $140-20% $100 $50-30% $0-40% 2005 2006 2007 2008 SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS 2009 2010 2011 2012 2013 2014 2015 2016 2017p 2018f
2017 Challenges & Opportunities
SMD s: Slow Moving Disasters CA Housing Affordability Crisis CA Pension Funds Boomers: Not prepared for Retirement Millennials: Student Loan Debt Skewing of the Income Distribution Institutional Investor ownership of SFH Tax Reform
Lack of Affordability Biggest Challenge Recession, 6% Mortagage rate increase, 10% Lack of inventory, 28% Q2 - What will be the biggest challenge for the housing market in 2017? Lack of affordability, 56%
2018 Opportunities Up your game Do YOU. What is your WHY? Selling houses or changing lives? Revisit: What business are YOU in? Find your niche Reconnect: Who are YOUR clients? Educate first time-home buyers Focus on Financial Literacy Become well versed on down payment assistance programs, debt management and improving credit Reach out to Boomers Think globally We may be affordable for some
One more thing
All Creatures Great and Small Do you have a pet / Do you consider your pet a part of your family No, its just a (special) animal, 8% No I don t, 37% Yes I have a pet, 63% Yes, my pet is my family, 92% SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R.
4 out of 10 Pet Drives Moving Decisions If you were to move, would your pets' needs be paramount in your purchase decision. 42% 28% 16% No, but I double We have a equal, They complain, but I down on the treats. deliberative process. try to ignore it. SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R. 13% My pet makes the decision for me.
Speaking of independence What about a different kind of animal... Do you live with a Millennial? Yes, sigh, I live with a Millennial, 14% Nope, I'm FREE!!!!, 86% SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R. Do you pay for their cell phone plan? No, they like to pretend to be Yes, they just make lots of noise if I don't. 67%
The 2% - Have you done your part? 70% 63% 60% 50% 40% 30% 30% 20% 5% 10% 2% 0% Unfortunately, I'm happily married. SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R. No, but I may keep it Yes, I "helped" my in mind, just to help child or friends to get the real estate married. industry. Yes, I got married! Thank you Leslie for the push.
Thank You & Congratulations Joanie & Coy Trisha & Michael Miriam & Anthony
The Economy of Love Give Freely Receive Graciously Thank You