MARKET OUTLOOK FOR SAN MATEO Jonathan Smoke Chief Economist August 2, 2016
NATIONAL TRENDS 2
JOB CREATION REBOUNDED IN JUNE 229,000 jobs created by month in 2015; 172,000 average this year Employment and Unemployment Nonfarm Employment Unemployment Rate 150,000 12.0 145,000 10.0 140,000 8.0 135,000 6.0 130,000 4.0 125,000 2.0 120,000 0.0 Source: Bureau of Labor Statistics 3 2000.01 2000.05 2000.09 2001.01 2001.05 2001.09 2002.01 2002.05 2002.09 2003.01 2003.05 2003.09 2004.01 2004.05 2004.09 2005.01 2005.05 2005.09 2006.01 2006.05 2006.09 2007.01 2007.05 2007.09 2008.01 2008.05 2008.09 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 2014.09 2015.01 2015.05 2015.09 2016.01 2016.05 Thousands
BEST SPRING IN A DECADE Sales continued to grow in June; up 3% year-over-year Existing Home Sales and Prices EHS SAAR Med Exist Home Price 8,000,000 $300,000 7,000,000 $250,000 6,000,000 5,000,000 $200,000 4,000,000 $150,000 3,000,000 $100,000 2,000,000 1,000,000 $50,000 0 $0 Source: National Association of REALTORS Existing Home Sales Report 4 2000.01 2000.05 2000.09 2001.01 2001.05 2001.09 2002.01 2002.05 2002.09 2003.01 2003.05 2003.09 2004.01 2004.05 2004.09 2005.01 2005.05 2005.09 2006.01 2006.05 2006.09 2007.01 2007.05 2007.09 2008.01 2008.05 2008.09 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 2014.09 2015.01 2015.05 2015.09 2016.01 2016.05
INVENTORY HAS BEEN A CONSTRAINT 46 straight months of existing home supply below normal Months' Supply of Homes for Sale Existing New 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Source: National Association of REALTORS, Commerce Department 5 2000.01 2000.05 2000.09 2001.01 2001.05 2001.09 2002.01 2002.05 2002.09 2003.01 2003.05 2003.09 2004.01 2004.05 2004.09 2005.01 2005.05 2005.09 2006.01 2006.05 2006.09 2007.01 2007.05 2007.09 2008.01 2008.05 2008.09 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 2014.09 2015.01 2015.05 2015.09 2016.01 2016.05
NEW CONSTRUCTION BUMPY Starts up 11% in 2015; down 2% in June over last year (SF +13%) Residential Construction Single-Family Starts Multi-Family Starts 2,500 2,000 Thousands 1,500 1,000 500 0 Source: Commerce Department 6
HOME PRICE RECOVERY VARIES Markets not recovered face the most existing inventory challenges Source: Realtor.com 7
SOLID JUNE FOR NEW CONTRACTS Seasonally adjusted pace of sales +1% y/y for pending, +25% new Home Sales (New Contracts) SAAR Pending Home Sales (Existing) New Home Sales 140.0 1,600,000 120.0 1,400,000 100.0 1,200,000 80.0 1,000,000 800,000 60.0 600,000 40.0 400,000 20.0 200,000 0.0 0 Source: National Association of REALTORS, Commerce Department 8 2001.01 2001.05 2001.09 2002.01 2002.05 2002.09 2003.01 2003.05 2003.09 2004.01 2004.05 2004.09 2005.01 2005.05 2005.09 2006.01 2006.05 2006.09 2007.01 2007.05 2007.09 2008.01 2008.05 2008.09 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 2014.09 2015.01 2015.05 2015.09 2016.01 2016.05
TIGHT INVENTORY QUICKENS PACE Inventory grew 3% in June but median age remained flat Listings and Median Age of Inventory Listings Median Age of Inventory 2,500,000 2,000,000 1,500,000 1,000,000 500,000 - Source: Realtor.com 120 100 80 60 40 20 0 9 2013.02 2013.03 2013.04 2013.05 2013.06 2013.07 2013.08 2013.09 2013.10 2013.11 2013.12 2014.01 2014.02 2014.03 2014.04 2014.05 2014.06 2014.07 2014.08 2014.09 2014.10 2014.11 2014.12 2015.01 2015.02 2015.03 2015.04 2015.05 2015.06 2015.07 2015.08 2015.09 2015.10 2015.11 2015.12 2016.01 2016.02 2016.03 2016.04 2016.05 2016.06
LISTING PRICES GREW 7% Y/Y IN JUNE Median list price increases are widespread June 2016 Source: Realtor.com 10
RENTS CONTINUE TO OUTPACE PRICES Asking rents up 9% y/y in June compared to list prices up 7% National Home Price and Rent Trends Median Existing List Price Median Asking Rent $2,000 $270,000 $1,900 $250,000 $1,800 $230,000 $1,700 $210,000 $1,600 $190,000 $1,500 $170,000 $1,400 $150,000 $1,300 2013.02 2013.03 2013.04 2013.05 2013.06 2013.07 2013.08 2013.09 2013.10 2013.11 2013.12 2014.01 2014.02 2014.03 2014.04 2014.05 2014.06 2014.07 2014.08 2014.09 2014.10 2014.11 2014.12 2015.01 2015.02 2015.03 2015.04 2015.05 2015.06 2015.07 2015.08 2015.09 2015.10 2015.11 2015.12 2016.01 2016.02 2016.03 2016.04 2016.05 2016.06 Source: Realtor.com and Altos Research 11
RENTS RISING Y/Y IN 76% OF COUNTIES Rent increases adding to demand for buying 2016 Source: Realtor.com Analysis of HUD Median Market Rents 12
CHEAPER TO BUY IN 65% OF COUNTIES Simple monthly cost analysis favors buying 2016 Source: Realtor.com Analysis of HUD Median Rents, Nielsen Pop-Facts Demographics and Realtor.com Data 13
THE AFFORDABLE ERA ISN T OVER Low rates continue to enable incredible affordability Affordability and Mortgage Rates Housing Affordability Index Composite (Left Axis) Average 30-Year Conforming Rate (%, Right Axis) 250.00 200.00 May 158 150.00 100.00 50.00 Jun 3.57 0.00 20 18 16 14 12 10 8 6 4 2 0 14 Jan-71 Feb-72 Mar-73 Apr-74 May-75 Jun-76 Jul-77 Aug-78 Sep-79 Oct-80 Nov-81 Dec-82 Jan-84 Feb-85 Mar-86 Apr-87 May-88 Jun-89 Jul-90 Aug-91 Sep-92 Oct-93 Nov-94 Dec-95 Jan-97 Feb-98 Mar-99 Apr-00 May-01 Jun-02 Jul-03 Aug-04 Sep-05 Oct-06 Nov-07 Dec-08 Jan-10 Feb-11 Mar-12 Apr-13 May-14 Jun-15 Source: Moody s Analytics, Freddie Mac, and National Association of REALTORS
CONFIDENCE IS STRONG Consumer confidence rebounded in June despite election concerns Consumer Confidence and Plans to Purchase a Home Consumer Confidence Index Plans to Purchase 160 10.0% 140 9.0% 120 8.0% 7.0% 100 6.0% 80 5.0% 60 4.0% 40 3.0% 2.0% 20 1.0% 0 0.0% 2000.01 2000.06 2000.11 2001.04 2001.09 2002.02 2002.07 2002.12 2003.05 2003.10 2004.03 2004.08 2005.01 2005.06 2005.11 2006.04 2006.09 2007.02 2007.07 2007.12 2008.05 2008.10 2009.03 2009.08 2010.01 2010.06 2010.11 2011.04 2011.09 2012.02 2012.07 2012.12 2013.05 2013.10 2014.03 2014.08 2015.01 2015.06 2015.11 2016.04 Source: The Conference Board, Moody s Analytics 15
DEMAND DRIVERS 16
DEMOGRAPHICS SET THE TABLE When viewed by age, importance of Millennials becomes clearer 5,000 4,500 US Population by Age, End of 2015 61 million 84 million 61 million 79 million 36 million Z Millennial X Boomer 4,000 3,500 Thousands 3,000 2,500 2,000 1,500 1,000 500 0 0 4 8 12 16 20 24 28 32 36 40 44 48 52 56 60 64 68 72 76 80 84 88 92 96 Source: Realtor.com Analysis of US Census Bureau Population Estimates (2015) 17
MILLENNIAL OWNERSHIP VARIES Strong correlation with affordable markets Source: Nielsen Demographics PopFacts 2016, Realtor.com Analysis 18
EMPLOYMENT BEGETS OPPORTUNITY 916,000 jobs created in last 12 months for 25-34 year olds Year-Over-Year Gains in Civilian Employment 4.0% Civilian Employment 25-34 Employment 3.0% 2.0% 30% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% 26% 13% 33% 25% 13% 32% -6.0% Source: Bureau of Labor Statistics, Realtor.com Analysis 19
BOOMERS KEEP DISTURBING Boomer wave is causing a major population shift 400,000,000 Population by Age (US) Under 25 25-34 35-54 55-64 65+ 350,000,000 300,000,000 250,000,000 200,000,000 15% 26% Over the next 5 years: Population grows 4% 17% 13% 13% 65+ grows 18% 55-64 grows 5% 25% 150,000,000 100,000,000 13% 35-54 is flat 25-34 grows 1% 13% 50,000,000 33% Under 25 grows 1% 32% 0 2016 2021 Source: Nielsen Demographics Pop-Facts 2016 20
WE COULD DO 21
CREDIT ACCESS REMAINS TIGHT Credit access down 2 % year-over-year in June; down 7% since Oct 1000 Mortgage Credit Availability Index Mar-2012=100 900 800 30% 700 600 500 26% 25% 400 300 13% 13% 200 100 33% 32% 119.8 0 Source: Mortgage Bankers Association, Haver Analytics 22
CREDIT METRICS MOVED UP In June the average FICO score on a closed mortgage was 726 Average FICO Scores US and By Mortgage Type FICO Population Distribution (Apr 2015) US All Closed Loan Conv Purch FHA Purch VA Purch 780 760 740 720 700 680 660 640 620 26% 13% 33% 2011.08 2011.10 2011.12 2012.02 2012.04 2012.06 2012.08 2012.10 2012.12 2013.02 2013.04 2013.06 2013.08 2013.10 2013.12 2014.02 2014.04 2014.06 2014.08 2014.10 2014.12 2015.02 2015.04 2015.06 2015.08 2015.10 2015.12 2016.02 2016.04 2016.06 750-799 18.2 800-850 19.9 13% 700-749 16.6 300-499 4.9 500-549 7.6 650-699 13 550-599 9.4 600-649 10.3 Source: Ellie Mae and Fair Isaac Corporation 23
IMPEDIMENTS TO PURCHASE Biggest issues for buyers are supply- and time-related What's Getting in the Way of Making a Home Purchase? Serious First-Time All Buyers Having difficulty qualifying for a mortgage Currently on a lease Can't sell current home 30% I owe more on my current home than it is worth Lack enough funds for down payment 26% Need to improve credit score Haven't decided on a specific neighborhood/town 13% Just starting to explore Always overbid by other buyers 33% Cannot find a good house in my budget range 25% 13% 32% Have not yet found a house that meets my needs 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00% 50.00% Source: Realtor.com Survey of Buyer Traffic, June 2016 24
2016 CURRENT FORECAST Key economic and housing metrics from NAR and realtor.com National Association of REALTORS Macro Forecast: GDP grows 1.6% Nonfarm payroll employment grows 1.6% Unemployment declines to 4.8% realtor.com housing forecast: Existing home prices appreciate 6% Existing home sales grow 3% to 5.43 million New home sales grow 13% to 567,000 Housing starts increase 6% to 1.17 million 30-year fixed conforming rate ends 2016 at 3.9% 25
LOCATION LOCATION LOCATION 26
JOBS AT RECORD HIGHS Unemployment rate down substantially near record lows Employment and Unemployment Rate in San Francisco MSA Total Nonfarm Employment (SA) Unemployment Rate (% SA) 2,500,000 12.00 2,000,000 10.00 8.00 1,500,000 6.00 1,000,000 4.00 500,000 2.00 0 0.00 Jan-90 Sep-90 May-91 Jan-92 Sep-92 May-93 Jan-94 Sep-94 May-95 Jan-96 Sep-96 May-97 Jan-98 Sep-98 May-99 Jan-00 Sep-00 May-01 Jan-02 Sep-02 May-03 Jan-04 Sep-04 May-05 Jan-06 Sep-06 May-07 Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11 Jan-12 Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16 Source: BLS, Moody s Analytics 27
NEW CONSTRUCTION MIXED Starts up 12% compared to last year in May, but SF -24% New Construction Starts in San Francisco MSA Single-family (SA) Multi-family (SA) 25,000 20,000 15,000 10,000 5,000 0 Jan-90 Aug-90 Mar-91 Oct-91 May-92 Dec-92 Jul-93 Feb-94 Sep-94 Apr-95 Nov-95 Jun-96 Jan-97 Aug-97 Mar-98 Oct-98 May-99 Dec-99 Jul-00 Feb-01 Sep-01 Apr-02 Nov-02 Jun-03 Jan-04 Aug-04 Mar-05 Oct-05 May-06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09 Jun-10 Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14 Feb-15 Sep-15 Apr-16 Source: Commerce Department, Moody s Analytics 28
MEDIAN SALES PRICE $1.1 million, up 4% year-over-year in San Mateo (May 2016) Source: Realtor.com 29
LIST PRICES KEEP MOMENTUM List prices still up 5% year-over-year in San Mateo (June 2016) Source: Realtor.com 30
FOCUS ON SAN MATEO COUNTY 1/4 of zips seeing 20%+ price growth Y/Y (June 2016) Source: Realtor.com 31
AGE OF INVENTORY Inventory moving 15% slower Y/Y in San Mateo (June 2016) Source: Realtor.com 32
HOTTEST MARKETS Q2 2016 San Mateo ranked #46 out of 1000 largest counties in US Source: Realtor.com Q1 2016 Market Hotness Report. 33
FOCUS ON SAN MATEO COUNTY 10 zips in county ranked in the top 10% nationally (Q2 2016) Source: Realtor.com Q1 2016 Market Hotness Report. 34
FOCUS ON SAN MATEO COUNTY Dominant age group by zip code (Spring 2016) Source: Realtor.com Generational Propensity Report Spring 2016. 35
FOCUS ON SAN MATEO COUNTY Interest by age group (Spring 2016) Source: Realtor.com Generational Propensity Report Spring 2016. 36
BOOMERS AND KIDS! Key millennial home buying age in decline 7,000,000 Population by Age (San Mateo) Under 25 25-34 35-54 55-64 65+ 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 15% 29% 13% Over the next 5 years: 17% 13% Population grows 6% 14% 65+ grows 21% 55-64 grows 9% 35-54 grows 2% 25-34 declines 8% 28% 11% 1,000,000 29% Under 25 grows 6% 29% 0 2016 2021 Source: Nielsen Demographics Pop-Facts 2016 37
HOTTEST HOMES LAST 60 DAYS Hottest homes get 3-6 times more views than metro average 38
RENT VS BUY Relative to income, 2X cheaper to rent in San Mateo Source: Realtor.com Analysis of Nielsen Pop-Facts Demographics, HUD Median Rents and Realtor.com Data 39
RENTS RISING Rents up 9% year-over-year in San Mateo Source: Realtor.com Analysis of HUD Median Rents 40
HOME OWNERSHIP VARIES GREATLY Overall home ownership rate in county is 60% Source: Nielsen Demographics Pop-Facts 2016 41
MILLENNIAL OWNERSHIP 25-34 home ownership rate in county is 27% Source: Nielsen Demographics Pop-Facts 2016 42
HOUSEHOLD GROWTH 2016-2021 2/3 of zips expected to see 5%+ growth in the next five years Source: Nielsen Demographics Pop-Facts 2016 43
Jonathan Smoke Chief Economist realtor.com jonathan.smoke@realtor.com @SmokeonHousing Access market data, research, and presentations at research.realtor.com 44