2019 economic & market forecast - constant...
TRANSCRIPT
2019 Economic & Market Forecast
San Francisco Association of Realtors
November 15, 2018
Leslie Appleton-Young
SVP & Chief Economist
Value of Strategic Thinking:
“You will be surprised by the future, but you won’t be surprised
that you are surprised”
2008
Note: Not including transactions in foreclosure.
The CA Housing Market Recovery
Equity Sales (Aug 2018)
= 98.4%
Short Sales (Aug 2018)
= 0.3%
REO Sales (Aug 2018)
= 0.9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Equity Sales Short Sale REO
Equity Sales Vs. Distressed Sales
SERIES: Distressed Sales, Not Seasonally Adjusted
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2018
Macro Economic Update
3.5%
GDP 2018-Q3
1.7%
Job Growth
October 2018
3.7%
Unemployment
October 2018
Consumption
2018-Q3Core CPI
September 2018
2.2%4.0%
U.S. Economy: Our Biggest Strength
3.5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
2005 2008 2011 2014 2017 Q1-11 Q4-11 Q3-12 Q2-13 Q1-14 Q4-14 Q3-15 Q2-16 Q1-17 Q4-17 Q3 -18
An
nu
al P
erc
en
t C
ha
ng
e,
Ch
ain
-typ
e (
20
09
) $
GDP - 2017: 2.3%; 2018 Q3: 3.5%
Growth Reflects Strong Fiscal Stimulus
ANNUALLY QUARTERLY
2009 Largest Annual Drop since 1946 (-2.8%)
SERIES: GDP
SOURCE: US Dept. of Commerce, Bureau of Economic Analysis
CA Employment: All-Time High
2.0%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Ja
n-1
1
Ju
n-1
1
No
v-1
1
Ap
r-12
Se
p-1
2
Fe
b-1
3
Ju
l-1
3
De
c-1
3
Ma
y-1
4
Oc
t-1
4
Ma
r-15
Au
g-1
5
Ja
n-1
6
Ju
n-1
6
No
v-1
6
Ap
r-17
Se
p-1
7
Fe
b-1
8
Ju
l-1
8
Nonfarm Employment Growth
California U.S.
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
Ja
n-0
0
Fe
b-0
1
Ma
r-02
Ap
r-03
Ma
y-0
4
Ju
n-0
5
Ju
l-0
6
Au
g-0
7
Se
p-0
8
Oc
t-0
9
No
v-1
0
De
c-1
1
Ja
n-1
3
Fe
b-1
4
Ma
r-15
Ap
r-16
Ma
y-1
7
Ju
n-1
8
California Nonfarm Employment
2.1%
2.2%
2.2%
2.4%
2.4%
2.5%
2.8%
2.8%
2.9%
3.2%
3.5%
3.5%
3.6%
3.9%
4.8%
9.1%
9.6%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
San Mateo
Marin
San Francisco
Santa Clara
Sonoma
Napa
Orange
Alameda
Contra Costa
San Diego
Solano
Santa Cruz
Sacramento
Monterey
Los Angeles
Fresno
Kern
Unemployment Lowest in 40+ Years
SERIES: Civilian Unemployment Rate
SOURCE: CA Employment Development Division
September 2018 Unemployment Rates
October 2018: 137.9
Consumer Confidence Highest in 18 Years
137.9
0
20
40
60
80
100
120
140
160
IND
EX
, 1
00
=1
985
SERIES: Consumer Confidence
SOURCE: The Conference Board
September 2018: All Items 2.3% YTY; Core +2.2% YTY
Inflation Remains Low
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
An
nu
al P
erc
en
t C
ha
ng
e
All Items Core
SERIES: Consumer Price Index
SOURCE: US Bureau of Labor Statistics
Rates in 2018: 30 Yr. Now Above 5%1st Time since 2011
SERIES: Average 30 Yr. Fixed Mortgage Rates
SOURCE: Mortgage News Daily
Nov 5: 5.05%
January 2012 – November 2018
Fed Has Raised rates 8 Times Since Dec 2015
4.63 4.83
3.94 4.04
2.00 2.25
0
1
2
3
4
5
6
FRM
ARM
Fed Funds Rate
Fed Raise Ratethe 1st time since mid-2006
SERIES: 30Yr FRM, 5Yr ARM, Fed Funds Rate (Target Rate)
SOURCE: Freddie Mac, St. Louis Fed
MONTHLY WEEKLY
5.10%
Bankrate
RISING Rates Hit Pocketbooks Hard
Median Price $595K
20% Downpayment
INTEREST RATE
MONTHLY MORTGAGE
SERIES: Housing Affordability Index
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
$2,013$2,144
$2,279$2,419
$2,563$2,711
$2,862$3,017
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
$2,800
$3,200
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
RISING Rates Hit Pocketbooks Hard
Median Price $595K
20% Downpayment
SERIES: Housing Affordability Index
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Minimum Qualifying Income
INTEREST RATE
$107,956$113,196
$118,614$124,203
$129,958$135,871
$141,936$148,145
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
• Fiscal stimulus wears off
• Global growth outlook weakening
• US growth outpacing global growth – strong dollar hurts emerging market economies
• Trade wars/Immigration restrictions (H-1B visas)
• Stock market sell-off – could impact financial conditions that slow growth
• Markets hate uncertainty
Concerns Going Forward
• 19th largest economy - $748B GDP
• Per capital GDP = $80,000 Highest of any similar MSA
• 4.3% growth over last 3 years -- 2X as fast as U.S.
• +26% employment growth since last recession
• 750,000 tech workers as of July 2017
• July 2016-July 2017• Net outflow o 45,670 to other parts of U.S.
• Net inflow of 58,156 form outside of the U.S.
Bay Area Economic Profile
California Realtors& Their Industry
C.A.R. Membership Up & Sales Flat
0
50,000
100,000
150,000
200,000
250,000
0
100,000
200,000
300,000
400,000
500,000
600,000
197
1
197
3
197
5
197
7
197
9
198
1
198
3
198
5
198
7
198
9
199
1
199
3
199
5
199
7
199
9
200
1
200
3
200
5
200
7
200
9
201
1
201
3
201
5
201
7
Home Sales
MembershipSales Peaks: 1978, 1988, 2004-05, 2009Membership Peaks: 1980, 1990, 2006, 2018
1972 Peak: 10.4
2007 Trough: 2.8
2016: 4.4
2017: 4.2
0
2
4
6
8
10
12
Nu
mb
er
of
Tra
nsa
ctio
ns
Long Run Average: 6.5
Member Productivity is Low½ What It Was in 1972
CA Housing Market:“A Shift is Afoot”
CA Buyers On the Sidelines
SERIES: 2018 Google Consumer Poll
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Do you think it's a good time to buy a home in California? (n=300)
Do you think it's a good time to sell a home in California? (n=300)
22%
78%
Yes No
Do you think it's a good time to buy a
home in California?
57%
43%
Yes No
Do you think it's a good time to sell a
home in California?
• Sales: 397,060 down for 6 consecutive months
• YTD down 3.7%
• Below 400,000 for the last three
• Price: $572,000 gains in mid-single digits
• Unsold inventory 3.6 months
October Market Snapshot
CA October 2018 Sales: 397,060 Units, -3.7% YTD, -7.9% YTY
October Sales Off 7.9% YTY6 months of declines
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
*Sales are seasonally adjusted and annualized
SERIES: Sales of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Oct-18:
397,060Oct-17:
431,070
CA: Declining Trend in Home Sales
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17
Year-over-Year % Chg 6 per. Mov. Avg. (Year-over-Year % Chg)
SERIES: Sales of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are seasonally adjusted and annualized
Bay Area Sales Down 3% from Last Year
-3.0%
-30%
-20%
-10%
0%
10%
20%
30%
Yo
Y %
ch
g.
Bay Area 6 per. Mov. Avg. (Bay Area)
SERIES: Sales of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are not seasonally adjusted and annualized
October 2018 (Year-to-Year)
Sales Declined in Sub-Million Dollar Markets
-20.6%
-11.1%-6.6%
-8.5%
-2.1% -2.2%
1.6%
19.1%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
SERIES: Sales of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Bay Area: 4 Counties are up YTDbut not by much
SERIES: Median Price of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Region Oct-17 Oct-18 YTD % Chg. YTY% Chg.
Alameda 981 897 1.9% -8.6%
Contra Costa 946 851 -2.4% -10.0%
Marin 170 202 2.4% 18.8%
Napa 80 104 -1.3% 30.0%
San Francisco 230 242 -0.6% 5.2%
San Mateo 378 429 0.3% 13.5%
Santa Clara 878 827 6.6% -5.8%
Solano 424 333 -7.5% -21.5%
Sonoma 349 416 -2.2% 19.2%
Bay Area 4,436 4,301 -2.4% -3.0%
California, October 2018: $572,000, -1.2% MTM, +4.7% YTY
Home Prices Still Rising – Gains Moderating
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000P:May-07
$594,530
T: Feb-09
$245,230
-59% from
peak
Oct-18:
$572,000Oct-17:
$546,430
SERIES: Median Price of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
October 2018: $282, Down 0.0% MTM, Up 4.4% YTY
Price Per Square Increased from Last Year, but Virtually Unchanged from September
$0
$50
$100
$150
$200
$250
$300
$350
$400
PR
ICE P
ER
SQ
. FT.
Oct-18:
$282Oct-17:
$270
SERIES: Median Price Per Square Feet of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
October 2018: 98.1%, -0.4% MTM, -0.8% YTY
Sales Price -to-List Price Hit the Lowest Level in 21 Months
90%
92%
94%
96%
98%
100%
Sa
les-
to-L
ist P
ric
e R
ati
o
Oct-18:
98.1%
Oct-17:
98.9%
SERIES: Sales to List Ratio of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Bay Area: Peak v. Current Price
SERIES: Median Price of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Region
Peak
Month
Peak
Price Oct-18%Chg Fr
Peak
Alameda May-07 $709,420 $900,000 26.9%
Contra Costa May-07 $698,420 $657,000 -5.9%
Marin Jun-07 $1,149,390 $1,450,000 26.2%
Napa Jun-07 $729,170 $709,500 -2.7%
San Francisco May-07 $972,010 $1,600,000 64.6%
San Mateo Oct-07 $1,020,000 $1,588,000 55.7%
Santa Clara Oct-07 $865,000 $1,290,000 49.1%
Solano Jun-07 $492,800 $430,000 -12.7%
Sonoma Jan-06 $650,330 $650,000 -0.1%
Bay Area May-07 $789,250 $958,800 21.5%
So Cal: Orange & SD Above Prior Peak
SERIES: Median Price of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
RegionPeak
Month
Peak
PriceAug-18
%Chg Fr
Peak
Orange Jun-07 $775,420 $838,500 8.1%
San Diego May-06 $622,380 $660,000 6.0%
Los Angeles Sep-07 $625,812 $607,490 -2.9%
So CA Jun-07 $589,710 $555,000 -5.9%
Ventura Aug-06 $710,910 $660,000 -7.2%
Riverside Jun-06 $431,710 $400,750 -7.2%
San Bernardino Aug-06 $350,290 $290,000 -17.2%
Central Coast: SC & SLO
SERIES: Median Price of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
RegionPeak
Month
Peak
PriceAug-18
%Chg Fr
Peak
Santa Cruz Oct-07 $865,000 $917,500 6.1%
San Luis Obispo Oct-05 $619,950 $630,000 1.6%
Monterey Aug-07 $777,000 $599,000 -22.9%
Santa Barbara Jul-07 $878,120 $572,500 -34.8%
Central Valley: All Below Prior Peak
SERIES: Median Price of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
RegionPeak
Month
Peak
PriceAug-18
%Chg Fr
Peak
Sacramento County Aug-05 $394,450 $369,950 -6.2%
Madera County Feb-08 $275,000 $254,900 -7.3%
Placer County Aug-05 $527,990 $475,000 -10.0%
Fresno County Jun-06 $313,500 $280,000 -10.7%
San Joaquin County Jun-06 $426,830 $380,000 -11.0%
Tulare County Dec-05 $269,710 $239,000 -11.4%
Stanislaus County Sep-05 $370,100 $319,900 -13.6%
San Benito County May-05 $671,190 $575,000 -14.3%
Kings County Mar-06 $268,050 $227,750 -15.0%
Merced County Oct-05 $344,610 $288,396 -16.3%
Kern County Jun-06 $299,920 $247,000 -17.6%
Glenn County Feb-07 $312,500 $225,500 -27.8%
October 2017: 3.0 Months; October 2018: 3.6 Months
Inventory Index Dipped in October
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.
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
SERIES: Unsold Inventory Index of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Unsold Inventory by County
2.1
2.63.0
5.0
1.9 1.9
2.4
3.4 3.3
0
1
2
3
4
5
6A
lam
ed
a
Co
ntr
a
Co
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Sa
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Fra
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ate
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Sa
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Cla
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So
lan
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So
no
ma
Un
sold
In
ve
nto
ry I
nd
ex
Oct-17 Oct-18
SERIES: UII of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Active Listings: Up 7th Consecutive Month
SERIES: Active Listing of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
28.0%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Year-over-Year % Chg
Housing Supply Improved Across the Board, Except Low-End
Oct 2018
SERIES: Active Listings of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
-6.2%
14.5%
31.7%
43.9%40.1%
30.7%
9.1%
28.0%
-10%
0%
10%
20%
30%
40%
50%
Active Listing
Inventory Index Highest in Millions
SERIES: Unsold Inventory Index of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
3.12.8 2.7 2.7
3.22.4
3.6 3.7
4.6
9.4
3.0
3.4 3.3 3.4 3.54.0
3.1
4.2 4.04.6
8.2
3.6
0
1
2
3
4
5
6
7
8
9
10Unsold Inventory Index
Oct-17 Oct-18
Share of Listings with a Reduced Price: 43.6%; Median Reduction Amount: -4.4%
Reduced-Price Listings Rise With Actives
SERIES: Listing Price of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
43.6%
4.4%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1/1
/201
0
4/1
/201
0
7/1
/201
0
10/1
/20
10
1/1
/201
1
4/1
/201
1
7/1
/201
1
10/1
/20
11
1/1
/201
2
4/1
/201
2
7/1
/201
2
10/1
/20
12
1/1
/201
3
4/1
/201
3
7/1
/201
3
10/1
/20
13
1/1
/201
4
4/1
/201
4
7/1
/201
4
10/1
/20
14
1/1
/201
5
4/1
/201
5
7/1
/201
5
10/1
/20
15
1/1
/201
6
4/1
/201
6
7/1
/201
6
10/1
/20
16
1/1
/201
7
4/1
/201
7
7/1
/201
7
10/1
/20
17
1/1
/201
8
4/1
/201
8
7/1
/201
8
10/1
/20
18
Reduced-Price Listings
Median Reduction
California, October 2018: 26.0 Days
Days on Market Rising as Market Slows
0
10
20
30
40
50
60
70
80
DA
YS O
N M
AR
KET
SERIES: Median Time of Market of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Days on Market by County
15.0 16.0
22.0
41.0
15.012.0 14.0
39.0
47.5
0
10
20
30
40
50
60
70A
lam
ed
a
Co
ntr
a
Co
sta
Ma
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Na
pa
Sa
n
Fra
nc
isc
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Sa
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ate
o
Sa
nta
Cla
ra
So
lan
o
So
no
ma
Da
ys
on
Ma
rke
t
Oct-17 Oct-18
SERIES: Days on Market of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
“At some point a supply problem becomes a demand problem.”
Joel Singer, CEO C.A.R. 2017
San Francisco Bay Area
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
SF Bay Area, Oct. 2018 Sales: 4,301 Units, -2.4% YTD, -3.0% YTY
Sales of Existing Detached Homes
SERIES: Sales of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Bay Area: Sales off 2.4% YTD
SERIES: Median Price of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Region Oct-17 Oct-18 YTD % Chg. YTY% Chg.
Alameda 981 897 1.9% -8.6%
Contra Costa 946 851 -2.4% -10.0%
Marin 170 202 2.4% 18.8%
Napa 80 104 -1.3% 30.0%
San Francisco 230 242 -0.6% 5.2%
San Mateo 378 429 0.3% 13.5%
Santa Clara 878 827 6.6% -5.8%
Solano 424 333 -7.5% -21.5%
Sonoma 349 416 -2.2% 19.2%
Bay Area 4,436 4,301 -2.4% -3.0%
SF Bay Area, October 2018: $958,800, Up 7.9% YTY
Median Price of Existing Detached Homes
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
SERIES: Median Price of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
SF Bay Area, October 2018: 2.5 Months
Unsold Inventory Index
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
Note: The Unsold Inventory Index represents the number of months it would take to deplete the remaining inventory at the end
of a particular month with the sales rate of the month in consideration. Inventory includes listings with “Active”, “Pending”, and “Contingent” (when available) statuses.
SERIES: Unsold Inventory Index of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
SF Bay Area, October 2018: 26 Days
Median Time on the Market
0.0
10.0
20.0
30.0
40.0
50.0
60.0
SERIES: Median Time of Market of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
San Francisco & Marin
• Sales tapering
• Price gains moderating
• Active listings increasing
• Price reductions increasing
• Time on market increasing
What’s Up? From Great to Good
Up YTD in SF, but Softening Recently
SERIES: Home Sales
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
0
100
200
300
400
500
600
Ja
n-0
9
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Ju
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l-1
8
San Francisco Home Sales (SF + Condo)
(+5.6% YTD)
Existing SFR Condo
Marin Sales Off Slightly YTD
SERIES: Home Sales
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
0
50
100
150
200
250
300
350
Marin County Home Sales (SF + Condo)
(-1.4% YTD)
Existing SFR Condo
SF is 2/3 of SF/Marin Market
SERIES: Home Sales
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
San Francisco
63%
San Rafael
9%
Novato
9%
Mill Valley
5%
San Anselmo
2%
Tiburon
2%Sausalito
1%
Corte
Madera
1%Fairfax
1%
Greenbrae
1%
Larkspur
1%
Kentfield
1%
Belvedere
1%Ross
1%
Other
5%
2018 Home Sales
City Performance is Mixed
SERIES: Home Sales
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
5.6%3.7%
-6.9%
0.0%1.7%
-5.9%
-23.7%
-18.3%
-4.5%
17.0%
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
San
Francisco
San Rafael Novato Mill Valley San
Anselmo
Tiburon Sausalito Corte
Madera
Fairfax Greenbrae
Year-to-Date Sales Growth by City
“Affordable” Segment VERY Thin (11%)
$500K & Below
3%
$500-
$750K
8%
$750-$1M
18%
$1-$2M
51%
$2-$3M
13%
$3M +
7%
2018 Home Sales
Bottom End Struggling, High End Slowing
-26.8%
-22.0%
-12.8%
12.9%
24.9%
10.4%
2.9%
-30%
-20%
-10%
0%
10%
20%
30%
$500K & Below $500-$750K $750-$1M $1-$2M $2-$3M $3M + Total
2018 Sales Growth by Price Range
SF + Marin
Price Growth De-celerating in SF
1,507,500
1,395,000
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
Ja
n-0
9
Ap
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Ju
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9
Oc
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9
Ja
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Ap
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Ju
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Oc
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Ja
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1
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Ju
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1
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2
Ap
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Ju
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2
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3
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Ja
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4
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Ju
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4
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Ap
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Ju
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6
Ja
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7
Ap
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Ju
l-1
7
Oc
t-1
7
Ja
n-1
8
Ap
r-18
Ju
l-1
8
Existing Single-Family Median Home Prices
San Francisco Marin
Price Growth De-celerating in SF
1,157,500
682,500
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000Ja
n-0
9
Ap
r-09
Ju
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9
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Ja
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Ap
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Ja
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Ja
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4
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Ju
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4
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Ja
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5
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Ju
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Ju
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Ju
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7
Oc
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7
Ja
n-1
8
Ap
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Ju
l-1
8
Condo Median Home Prices
San Francisco Marin
Region Peak Month Peak Price Sep-18 %Chg Fr Peak
San Mateo Oct-07 $1,020,000 $1,600,000 56.9%
San Francisco May-07 $972,010 $1,507,500 55.1%
Santa Clara Oct-07 $865,000 $1,250,000 44.5%
Alameda May-07 $709,420 $900,000 26.9%
Marin Jun-07 $1,149,390 $1,395,000 21.4%
Sonoma Jan-06 $650,330 $654,500 0.6%
California May-07 $594,530 $578,850 -2.6%
Contra Costa May-07 $698,420 $650,000 -6.9%
Napa Jun-07 $729,170 $685,000 -6.1%
Solano Jun-07 $492,800 $451,500 -8.4%
Bay Area Recovery Reflects Job Growth
Most Active Listings in Past 4 Years
0
200
400
600
800
1,000
1,200
1,400
1,600
Active Listings (+22% in September)
Condos Existing SFRs
Increasing Across All Price Points
SERIES: Active Listings of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
-7.0%
45.7%
29.6% 29.7%
46.9%
10.2%
25.6%
-10%
0%
10%
20%
30%
40%
50%
$500K & Below $500-$750K $750-$1M $1-$2M $2-$3M $3M + Total
Growth in Active Listings by Price
Days on Market Hasn’t Risen Yet
23
0
10
20
30
40
50
60
70
80
Ja
n-0
9
Ju
n-0
9
No
v-0
9
Ap
r-10
Se
p-1
0
Fe
b-1
1
Ju
l-1
1
De
c-1
1
Ma
y-1
2
Oc
t-1
2
Ma
r-13
Au
g-1
3
Ja
n-1
4
Ju
n-1
4
No
v-1
4
Ap
r-15
Se
p-1
5
Fe
b-1
6
Ju
l-1
6
De
c-1
6
Ma
y-1
7
Oc
t-1
7
Ma
r-18
Au
g-1
8
Median Time on Market
71
39
27
24
1715
23
0
10
20
30
40
50
60
70
80
Under $300K $300-$500K $500-$750K $750-$1M $1-$2M $2-$3M $3M +
Median Time on Market
2017 2018
Smaller Premiums, But Little Discounting
102.1%
92%
94%
96%
98%
100%
102%
104%
106%
108%
110%
Ja
n-0
9
Ma
y-0
9
Se
p-0
9
Jan
-10
Ma
y-1
0
Se
p-1
0
Ja
n-1
1
Ma
y-1
1
Se
p-1
1
Ja
n-1
2
Ma
y-1
2
Se
p-1
2
Ja
n-1
3
Ma
y-1
3
Se
p-1
3
Ja
n-1
4
Ma
y-1
4
Se
p-1
4
Ja
n-1
5
Ma
y-1
5
Se
p-1
5
Ja
n-1
6
Ma
y-1
6
Se
p-1
6
Ja
n-1
7
Ma
y-1
7
Se
p-1
7
Ja
n-1
8
Ma
y-1
8
Se
p-1
8
Median Sales/List Price Ratio
100.0%100.0%
100.9%
102.6%
107.2%
105.5%
100.0%
103.7%
96%
98%
100%
102%
104%
106%
108%
2018 Median Sales-to-List Price
Most Active Listings Reduced Since 2011
SERIES: Listing Price of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
42.4%
4.4%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
1/1
/201
0
4/1
/201
0
7/1
/201
0
10/1
/20
10
1/1
/201
1
4/1
/201
1
7/1
/201
1
10/1
/20
11
1/1
/201
2
4/1
/201
2
7/1
/201
2
10/1
/20
12
1/1
/201
3
4/1
/201
3
7/1
/201
3
10/1
/20
13
1/1
/201
4
4/1
/201
4
7/1
/201
4
10/1
/20
14
1/1
/201
5
4/1
/201
5
7/1
/201
5
10/1
/20
15
1/1
/201
6
4/1
/201
6
7/1
/201
6
10/1
/20
16
1/1
/201
7
4/1
/201
7
7/1
/201
7
10/1
/20
17
1/1
/201
8
4/1
/201
8
7/1
/201
8
Reduced-Price Listings
Share Reduced Median Reduction
Fewer Actives Reduced Here, but Rising
55.7%
45.6%
41.8% 41.4%
19.8%
0%
10%
20%
30%
40%
50%
60%
Share of Active Listings Reduced by County
CA v US: Lower Housing Turnover – New Normal?
SERIES: Percent of existing single-family homes being sold
SOURCE: Census Bureau, American Community Survey, Moody’s Analytics, C.A.R.
Housing Turnover Rate
(Single-Family Homes only)
4.6%
5.3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
19
70
19
71
19
72
19
73
19
74
19
75
19
76
19
77
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
CA US Linear (CA)
CA turnover rate trend
Sellers Moving Less Frequently
11.5
0
2
4
6
8
10
12
14Years Owned Home Before Selling
SERIES: 2018 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
5
8
15
30
0 20 40
Millennials
Gen X's
Baby Boomers
Silent
Generations
Older Generations Don’t Move As Often As
Younger Generations
And California Is Not Building Enough
SERIES: California New Housing Permits
SOURCE: Construction Industry Research Board
0
50000
100000
150000
200000
250000
300000
350000
Single Family Multi-FamilyCA HCD Projected
Housing Needs:
180,000/yr.
2017: 112,886 (55,779 sf, 57,107 mf )
2018f: 127,780 (64,900 sf, 62,880 mf)
CA building less housing per capita than:AZ, NV, WA, OR, NY(2005 – 2016)
SOURCE: U.S. Census Bureau, C.A.R.
3,971
5,592
533
1,142
1,090
559
1,101
California
Texas
Oregon
Washington
New York
Nevada
Arizona
Population Added
1,000 People
1,072,121
1,728,257
174,466
374,157
379,019
202,332
416,330
California
Texas
Oregon
Washington
New York
Nevada
Arizona
Housing Units Added
Number
270
309
327
328
348
362
378
California
Texas
Oregon
Washington
New York
Nevada
Arizona
Ratio of Housing Units Added to
Population Added
Units per 1,000 People
+40%
“Housing affordability is the Achilles heel of the California Economy”
Joel Singer, CEO C.A.R. 1982
Housing Affordability Peaked at Q1 2012
California, 1984-2018
SERIES: Housing Affordability Index of Traditional Buyers
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
26%
53%
0%
10%
20%
30%
40%
50%
60%
70%
80%
% O
F H
OU
SEH
OLD
S T
HA
T C
AN
BU
Y A
MED
IAN
-PR
ICED
HO
ME
Annual Quarterly
Housing Affordability In CA: By County
64
535352515049484847464545454443434242414139383838383737333332302928262625
2322222020201918161614141412
0
10
20
30
40
50
60
70
2018-Q2: % able to purchase median-priced home
SERIES: Housing Affordability Index of Traditional Buyers
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Minimum Annual Income Required During Affordability Peak vs. Current
SERIES: Housing Affordability Index of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Region 2012 Q1 2018 Q2 % CHG
CA SFH $56,320 $126,490 124.6%
CA Condo/Townhomes $44,440 $101,270 127.9%
Los Angeles Metropolitan Area $53,780 $112,340 108.9%
Inland Empire $35,170 $76,310 117.0%
S.F. Bay Area $90,370 $219,380 142.8%
US $32,000 $57,020 78.2%
Housing Affordability Still the Main Reason for Outmigration
SERIES: 2018 Annual Housing Market Survey
SOURCE: California Association of REALTORS®
28%
16%
12%
8%
7%
5%
5%
5%
1%
15%
21%
14%
11%
5%
9%
9%
8%
6%
1%
18%
0% 5% 10% 15% 20% 25% 30%
Housing affordability
Quality of life
Closer to family/relative
Second home
Job change
Shorter commute to work/school
Quality of school
Retired
Quality of community services
Other
2018 2017
All Buyers
Q. What was the primary reason for changing county?
It’s a Much Bigger Problem for First-Time Buyers
SERIES: 2018 Annual Housing Market Survey
SOURCE: California Association of REALTORS®
49%
19%
11%
1%
5%
2%
5%
0%
1%
8%
18%
14%
12%
12%
7%
5%
5%
7%
1%
18%
0% 10% 20% 30% 40% 50% 60%
Housing affordability
Quality of life
Closer to family/relative
Second home
Job change
Shorter commute to work/school
Quality of school
Retired
Quality of community services
Other
First-Time Buyers Repeat Buyers
California Vs. U.S. – 9.5% gap in 2017
Homeownership update – CA inched up from 2016 but remained at low level
53.7%
Peak: 60.2%54.4%
64.5%
Peak: 69.0%
63.9%
45%
50%
55%
60%
65%
70%
75% CA US
SERIES: Homeownership RatesSOURCE: U.S. Census Bureau
54.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Ne
w Y
ork
Ca
lifo
rnia
Ne
va
da
Ha
wa
ii
Rh
od
e Isl
an
d
Ma
ssa
ch
use
tts
Texa
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Ore
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Da
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Ge
org
ia
Wa
shin
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Co
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Flo
rid
a
Ne
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Arizo
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Ark
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sas
Illin
ois
Ala
ska
Ka
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Oh
io
Co
nn
ec
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ut
Lou
isia
na
Ne
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ska
No
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Ca
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a
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exic
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Ten
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Virg
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Mis
sou
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Mo
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na
So
uth
Da
ko
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Wis
co
nsi
n
Pe
nn
sylv
an
ia
Okla
ho
ma
Ida
ho
Ala
ba
ma
De
law
are
Ind
ian
a
Iow
a
Ke
ntu
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Wyo
min
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Ma
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Mis
siss
ipp
i
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nt
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am
psh
ire
Min
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So
uth
Ca
rolin
a
Mic
hig
an
We
st V
irg
inia
Homeownership Rate
California still ranked the 2nd lowest amongst all states
SERIES: Homeownership RatesSOURCE: U.S. Census Bureau (Current Population Survey)
Homeownership will deteriorate further if the trend continues
SERIES: Homeownership RateSOURCE: U.S. Census Bureau, American Community Survey, C.A.R. projection
57.1%
59.7%
56.1%
41.0%
47.3%
44.2%
30%
40%
50%
60%
70%
2000 2005 2010 2015 2020 2025 2030 2035 2040
California Homeownership Rate
Fast Slow Avearge
Despite the slight bounce back,
homeownership will remain low in
the next couple years due to:
• Interest rate hike
• Price growth
• Low turn-over rates
• Lack of new constructions
• Short-term Costa-Hawkins Repeal
Impact
More Sellers Continue to Move out of California; Highest since 2007
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Within the same county 38% 41% 37% 45% 47% 42% 49% 49% 46% 44% 44% 40% 38% 36%
In another county in
California23% 18% 24% 17% 21% 21% 19% 18% 20% 21% 20% 21% 20% 21%
In another state 31% 28% 29% 27% 19% 20% 20% 22% 19% 22% 22% 25% 28% 29%
Out of US 1% 2% 1% 1% 2% 1% 1% 1% 0% 1% 1% 1% 1% 1%
Don't Know/Not sure 7% 11% 9% 10% 12% 16% 10% 10% 15% 13% 13% 13% 14% 13%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Location of Seller’s New Home
SERIES: 2018 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Case Study: Seller Leaving California
SERIES: 2018 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Seller’s Profile
Age: 56
Marital Status: Married Couple with Dependents
Income: $200,000
Yrs. Owned: 25
Net cash gain: $1,050,000
Reason for selling: Desired larger home
State moving to: Utah
Characteristics of Home
Size: 1,948 sq. ft
Property Type: Single-Family Home
Location: Los Angeles County
Price: $1,175,000
“We doubled the size of our house
and lowered our mortgage
payment.”*
*Lopez, S. (2017) ‘They’re leaving California for Las Vegas for find middle-class life
that eluded them’. Los Angles Times, 3 December
“L.A would have been my first
choice, and I didn’t want to have
to leave California. I couldn’t
afford to stay there”*
Where Are We?
1. CA is NOT Affordable
Only Lassen County Beats US Affordability
64
535352515049484847464545454443434242414139383838383737333332302928262625
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0
10
20
30
40
50
60
70
2018-Q2: % able to purchase median-priced home
SERIES: Housing Affordability Index of Traditional Buyers
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2. CA is Home to Record Number of
Homeless
Largest Number of Homeless People
SERIES: Estimates of Homeless People in January 2017
SOURCE: The U.S. Department of Housing & Urban Development
Estimates of Homeless People – By State, 2017
Top 5 State with Largest Increases
(2016 – 2017)
• California 16,136/13.7%
• New York 3,151/3.6%
• Oregon 715/5.4%
• Nevada 435/5.9%
• Texas 426/1.8%
3. CA is Losing Workers to More Affordable
States: Two Step
~750K People Have Left Since 2010
-169,336
-57,563
-24,972
-60,839
-41,362
-104,317
-163,922
-105,210
-180,000
-160,000
-140,000
-120,000
-100,000
-80,000
-60,000
-40,000
-20,000
0
2010 2011 2012 2013 2014 2015 2016 2017
California Net Domestic Migration
Step 1: Coastal to Cheaper Markets
-8,559 -9,005-11,659
-12,408-13,053
-15,244
-17,697
-25,843
-30,268
-42,777
Merced Solano Washington Stanislaus Santa Cruz Texas Nevada (ST) Oregon San Joaquin Sacramento
MSA
Core San Francisco Bay Area Out Migration (2010-2016)
Elsewhere in CA
Another State
Step 2: Pricing Prior Residents Out of State
-2,260-2,715 -2,917
-3,596-4,002 -4,029 -4,179
-5,020 -5,127
-8,166
Kentucky Santa Cruz Oklahoma Colorado Sutter &
Yuba
San Luis
Obispo
San
Bernardino
Oregon Idaho Nevada (ST)
Sacramento MSA Out Migration
(2010-2016)
Elsewhere in CA
Another State
Step 1: Coastal to Cheaper Markets
-19,854-21,935
-34,217 -40,361-42,503
-48,609
-65,534
-79,132
-101,914
-124,148
Santa
Barbara
Colorado Oregon Washington Kern Nevada (ST) Arizona Texas San
Bernardino
Riverside
Coastal Southern California Out Migration (2010-2016)
Elsewhere in CA
Another State
Step 2: Pricing Prior Residents Out of State
-3,575
-5,117
-7,732 -7,970 -8,344
-10,604-10,680
-10,699
-16,374
-17,859
Hawaii Colorado Nevada (ST) Idaho North
Carolina
Utah Georgia Kern County Arizona Texas
Inland Empire Out Migration
(2010-2016)
Elsewhere in CA
Another State
4. CA will soon be a majority renter state
54.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Ne
w Y
ork
Ca
lifo
rnia
Ne
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Ha
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ii
Rh
od
e Isl
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Texa
s
Ore
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No
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Da
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Ge
org
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Wa
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Co
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Flo
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Ne
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Arizo
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Ark
an
sas
Illin
ois
Ala
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Ka
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Oh
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Co
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Lou
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Ne
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No
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Ca
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Ne
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Ma
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Ten
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Mis
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Mo
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So
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Da
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Wis
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Okla
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Ida
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Ala
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De
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Ind
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Ke
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Homeownership Rate
California: 2nd lowest in nation
SERIES: Homeownership RatesSOURCE: U.S. Census Bureau (Current Population Survey)
California Vs. U.S. – 9.5% gap in 2017
Homeownership Rates
53.7%
Peak: 60.2%54.4%
64.5%
Peak: 69.0%
63.9%
45%
50%
55%
60%
65%
70%
75% CA US
SERIES: Homeownership RatesSOURCE: U.S. Census Bureau
CA: Ownership Rebound?
54.3
64.4
50
55
60
65
70
75
Homeownership Rate
CA U.S.
California Homeownership Rates by Race and Ethnicity (2010-2014 Average)
… Homeownership Varies Sharply by Ethnicity
SERIES: Homeownership rate by ethnicity
SOURCE: CA HCD, PolicyLink, USC Program for Environmental and Regional Equity
CA: Majority Renter State by 2025
SERIES: Homeownership RateSOURCE: U.S. Census Bureau, American Community Survey, C.A.R. projection
57.1%
59.7%
56.1%
41.0%
47.3%
44.2%
30%
40%
50%
60%
70%
2000 2005 2010 2015 2020 2025 2030 2035 2040
California Homeownership Rate
Fast Slow Avearge
42 of 142 Big Cities ALREADY Majority Renter
50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Ha
wth
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Gle
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Los
An
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2017 California Renter Rate by City
Majority Renter Cities
76.0%
50.7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Ha
wth
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Sa
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Mo
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Ea
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os
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2017 California Renter Rate by City
Q: What needs to be done?
A: Build More Housing
Lakewood CA 1950
Global Capitals Do Density
#10 Shanghai
#69 Paris
#27 Mexico City#35 Rio de Janerio
#43 London
Source: citymayors.com
#90 Los Angeles
#104 San Francisco/Oakland
#107 San Jose
#119 Honolulu
#120 Las Vegas
#121 Miami
U.S. Cities Ranked by Density
Global Ranking 1-125
www.citymayors.com
Case Study: Restrictive Zoning in L.A.
SERIES: Los Angeles Zoned Residential CapacitySOURCE: Morrow (2016), the White House: Housing Development Toolkit
• 1960: Los Angeles zoned to accommodate 10 million people
• Today: LA is zoned for only 4.3 million people after decades of population growth and increase in housing demand.
Los Angeles Zoned Residential Capacity
CA vs US Median Price
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
U.S CA CA Price Trend
SERIES: Median Price of Existing Single-Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
USC Dornsife/LA Times Poll (10/18)
Only 13% of CA voters think too little home building is a primary
contributor to the state’s affordability issues.
The Forecast
U.S. Economic Outlook
SERIES: U.S. Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2013 2014 2015 2016 2017 2018p 2019f
US GDP 1.7% 2.4% 2.6% 1.6% 2.3% 3.0% 2.4%
Nonfarm Job Growth 1.7% 1.9% 2.1% 1.8% 1.4% 1.6% 1.3%
Unemployment 7.4% 6.2% 5.3% 4.9% 4.4% 3.9% 3.7%
CPI 1.5% 1.6% 0.1% 1.4% 2.0% 2.5% 2.4%
Real Disposable Income, % Change -1.4% 2.7% 3.4% 2.7% 2.1% 2.8% 2.6%
30-Yr FRM 4.0% 4.2% 3.9% 3.6% 4.0% 4.7% 5.2%
California Economic Outlook
SERIES: CA Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2013 2014 2015 2016 2017 2018p 2019f
Nonfarm Job Growth 3.0% 2.2% 2.7% 2.3% 1.6% 2.0% 1.4%
Unemployment 8.9% 7.5% 6.2% 5.5% 4.8% 4.3% 4.3%
CA Population (Million) 38.4 38.7 39.1 39.4 39.6 39.9 40.2
Population Growth 0.9% 1.0% 0.8% 0.6% 0.8% 0.7% 0.7%
Real Disposable Income, % Change -2.1% 5.6% 3.9% 1.6% 1.6% 2.4% 3.0%
CA Housing Market Outlook – Most Likely Case
SERIES: CA Housing Market Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2013 2014 2015 2016 2017 2018p 2019f
SFH Resales (000s) 414.9 382.7 409.4 417.7 424.1 398.4 371.1
% Change -5.9% -7.8% 7.0% 2.0% 1.5% -6.2% -6.9%
Median Price ($000s) $407.2 $446.9 $476.3 $502.3 $538.0 $575.7 $574.5
% Change 27.5% 9.8% 6.6% 5.4% 7.2% 7.0% -0.2%
Housing Affordability
Index36% 30% 31% 31% 29% 28% 26%
30-Yr FRM 4.0% 4.2% 3.9% 3.6% 4.0% 4.7% 5.2%
• Listings are up & prices are favorable for sellers
• Call frustrated potential buyers and tell them the good news
• Rates are rising – don’t wait
• Provide sellers a teachable moment
• Know where people are moving and why and work your referral network
• Get involved in the political process – this is your future
Opportunities
Read This: California’s Housing Future
"I very frequently get the question: 'What's going to change in the next 10 years?' I almost never get the question: 'What's not going to change in the next 10 years?' And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time..… Customers want:
•Large selection
•Low Prices
•Fast Delivery
Jeff Bezos: Amazon
How Client Found Their Agent
Q. How did your client find and select you to represent them?
0% 5% 10% 15% 20% 25%
Represented Them in Previous Home…Client was Friend/Relative/Neighbor
Referral from a clientRecommendations of Friends
Refferal from Business AssociatesOpen House
Web page/InternetDoor-to-Door FarmingDirect Mail Marketing
Relocation ReferralWalk in /Floor Call
Yard SignsListing Agent for Home Purchased
Social MediaMobile App
Telephone MarketingPrint Ads/Newspaper & Magazine
Other
All Buyers
SERIES: 2018 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Identify. Develop. Connect
Focus is keyWhen Creating a Consistent Customer Experience
Focus is key