los angeles real estate market update - capital redevelopment group - jeff coga

8/2/2019 Los Angeles Real Estate Market Update - Capital Redevelopment Group - Jeff Coga

1/10Capital Redevelopment Group LLC | Coganomics | Volume 59 February 2

Special Report

Los Angeles

Where Are We Headed?


2/10

-$32,233

-$127,600

Most buyers in this market have accesto government-backed financing$729,750

-16.8%3-year (12-quarter) Appreciation (2011 Q3)

-4.3%

3-year (12-quarter) Housing Equity Gain*

Sales growth during the third quarter

was positive and improving

U.S.

$417,000

Local Median to Conforming Limit Ratio

$729,250

not comparable

-$29,733

Local Trend

**Note: the 2009 loan limits for FHA and the GSEs were extended through 2010.

-$65,800

7-year (28 quarters) Housing Equity Gain*

$33,400

1-year (4-quarter) Appreciation (2011 Q3) -6.3%

California

Prices are down compared to a yearearlier and continue to weaken

7.4% 17.0%

$729,250

Los Angeles-Long Beach-Santa Ana Area

Local Market Report, Third Quarter 2011

Home Sales

State Existing Home Sales

(2011 Q3 vs 2010 Q3)

Conforming Loan Limit**

Today's Market

9-year (36 quarters) Housing Equity Gain*

Los Angeles

FHA Loan Limit

45%

*Note: Equity gain reflects price appreciation only

The relatively recent correction in locahome prices wiped out most of theequity gained over the last 7 years

-16.0%

$2,267

U.S.

Price Activity

$169,267$324,800Current Median Home Price (2011 Q3)

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

-40%

-30%

-20%

-10%

0%

10%

20%

30%40%

2011Q3

Q12010Q3

Q12009Q3

Q12008Q3

Q12007Q3

Q12006Q3

Q12005Q3

Q12004Q3

Q12003Q3

Q12002Q3

Median Price (Red Line) and One-year Price Growth

0

100

200

300400

500

600

700

-40%

-20%

0%

20%40%

60%

80%

100%

2011Q3

Q12010Q3

Q12009Q3

Q12008Q3

Q12007Q3

Q12006Q3

Q12005Q3

Q12004Q3

Q12003Q3

Q12002Q3

State Home Sales (Red Line) and Sales Growth1,000s


3/10

#N/A #N/A #N/A #N/A

Natural Resou 0.1% 4.7 Natural 0.6%

Construction 3.3% 169.2 Constru 0.6%

Manufacturing 10.2% 524.8 Manufa 8.9%

Trade/Transpo 19.1% 982.2 Trade/T 18.9%

Information 4.5% 229.1 Inform 2.0%

Financial Act 6.0% 308.9 Financi5.7%

Prof. & Busin 15.2% 779.9 Profes 13.2%

Educ. & Heal 13.5% 695.7 Educat 15.3%

Leisure & Ho 11.2% 574 Leisur 10.0%

Other Servic 3.4% 174.8 Other 4.1%

Government 13.6% 697.5 96.6% Gover 16.9% #N/A

#N/A #N/A #N/A #N/A#N/A #N/A #N/A #N/A

Information

Financial ActivitiesProf. & Business Services

Educ. & Health Services

Leisure & Hospitality

Service Providing Excluding Government Other Services

Government

Natural Resources and Mining

Local employment growth is

respectable compared to other market0.8%

Natural Resources/Mining/Construction

12-month change (2011 - Sep)

1-year (12 month) Job Growth Rate

Los Angeles-Long Beach-Santa Ana Area

California

-2.6%-1.8%

3.0% 2.8%

Goods Producing

200Manufacturing

Trade/Transportation/Utilities

11.3%

11.9%

Share of Total Employment by IndustryU.S.

State Economic Activity Index

Construction

NA100

-3,000

-200

-3,7006,900

15,600

-4,400

Current Unemployment Rate (Sep)

36-month change (2011 - Sep)

7,200

NotComparable

Los Angeles's unemployment rate lagsthe national average, but has improved

relative to the same period last year

NotComparable

Drivers of Local Supply and Demand

22,300

36-month Job Change (Sep)

California's economy is stronger thanthe nation's, but slowed from last

month's 3.01% change

U.S.

8,600

12-month Employment Change by Industry in the Los Angeles-Long Beach-Santa Ana Area (Sep - 2011)

Year-ago Unemployment Rate

9.1%

9.6%

0.9%

U.S.

-381,100

44,800Employment has held up and is on an

upward trend

NotComparable

12-month Job Change (Sep)

17,500

NA

NA

12-month Job Change (Aug)

Local Economic Outlook Los Angeles

NaturalResourcesand Mining

0.1%

Construction

3.3%Manufacturing

10.2%

Trade/Transportation/U

tilities

19.1%

Information4.5%

FinancialActivities

6.0%Prof. &

BusinessServices15.2%

Educ. &Health

Services13.5%

Leisure &Hospitality

11.2%

OtherServices

3.4%

Government

13.6%

NaturalResourcesand Mining

0.6%

Construction

0.6% Manufacturing

8.9%

Trade/Transportation/

Utilities18.9%

Informatio2.0%Financial

Activities5.7%

Professional &

BusinessServices13.2%

Educational& HealthServices15.3%

Leisure &Hospitality

10.0%

OtherServices

4.1%

Government

16.9%


4/10

Reduced construction will limit newsupply to the market, allowing demand

to catch up with the inventory more

quickly

not comparable8,801

11.1% -10.3%Single-Family Housing Permits (Sep 2011)

12-month sum vs. a year ago

U.S.

8-year average for 12-month Sum of 1-UnitBuilding Permits

Local Fundamentals

12-month Sum of 1-unit Building Permits through

Sep 2011

Los Angeles

New Housing Construction

The current level of construction is

51.8% below the long-term averagenot comparable4,241

While new construction is the traditional driver of supply in real estate, foreclosures now have a strong impact oninventories, particularly at the local level. Rising inventories, through construction or foreclosure, place downwardpressure on the median home prices.

Construction is on the rise relative tolast year, suggesting that the local

inventory has stabilized

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

State Total Foreclosure Rate vs. U.S Average(U.S. Average in Blue Dashed Line)

Source: Mortgage Bankers' Association

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Construction: 12-month Sum of Local Housing Permits(Historical Average Shown in Red Dashed Line)


5/10

85.0% 10.6% 4.4% 90.9% 4.9% 4.1%

2.5% 3.2%

3.0% 3.4%

14.8% 18.9%

15.0% 18.2%

11.8% 15.2%

12.0% 15.2%

Source: First American CoreLogic, LoanPerformance data

28.5% 30.2% 30.4% 26.6% 27.8% 27.5%

6.3% 7.5% 8.3% 5.8% 6.2% 6.3%

2.5% 3.0% 2.9% 3.2% 3.4% 3.2%

Source: First American CoreLogic, LoanPerformance data

Monthly Market Data -

August 2011

PRIME:Foreclosure + REO

Rate Compared to the national average,today's local prime rate is low

Market Share:

Prime (blue), Alt-A(green), and Subprime

(red)

U.S.Los Angeles

Prime: 60-day

Delinquent

U.S.

The 90-day delinquency rate in LosAngeles fell over the 6-month period

ending in August

The local 60-day delinquency rate fellover the 6-month period ending in

August suggesting that 90-daydelinquencies will decline in the near

future

Foreclosures by Type

Locally, today's foreclosure rate is lowrelative to the national average

The local subprime rate eased modestrelative to March of last year

The "foreclosure + REO rate" is the number of mortgages, by metro area, that are either in the foreclosure process or have complet

the foreclosure process and are owned by banks divided by the total number of mortgages for that area.

ALT-A:Foreclosure + REO

Rate

The local alt-A rate eased slightlyrelative to March of last year

The decline of both the 60 and 90-daydelinquency rates over the most recen

6-month period suggests a decline inthe local foreclosure rate in the near

future.

The Los Angeles market has been ablto contain both subprime and prime

lending issues

There was a substantial decline

compared to March of last year

SUBPRIME:

Foreclosure + REORate

Los Angeles

The August rate for Los Angeles is low

compared to the national average

Prime:

Foreclosure +

REO Rate

Prime Foreclosures and Delinquencies in ProcessMonthly Market Data -

August 2011

Prime: 90-day

Delinquent

2.55%

3.04%

Aug-11Mar-11

3.15%

3.43%

Aug-11Mar-11

14.79

%

14.96%

Aug-11Mar-11

11.82%

12.02%

Aug-11Mar-11

18.88%18.1

5%

Aug-11Mar-11

15.18%

15.21%

Aug-11Mar-11

85.0

%

10.6

%

4.4%

90.9

%

4.9

%

4.1

%

28.52%

30.22%

30.37%

Aug-11Mar-11Aug-10

26.60%

27.80%

27.52%

Aug-11Mar-11Aug-10

5.82%

6.24%

6.25%

Aug-11Mar-11Aug-10

2.55%

3.04%

2.92%

Aug-11Mar-11Aug-10

3.15%

3.43%3.17

%

Aug-11Mar-11Aug-10

6.32%

7.46%

8.32%

Aug-11Mar-11Aug-10


6/10

Monthly Mortgage Payment to Income

Historical Average

U.S.

2.7

2.8

2.7

2.3

Weaker affordability than most market22.0%26.3%

The price-to-income ratio rose, but isbetter than the historic average

Less affordable than most markets

Ratio for 2011 Q3

Ratio for 2010

Historically strong, but weaker than thesecond quarter of 2011

Affordability

16.4%

17.1%

13.9%

Los Angeles

Los Angeles

Ratio for 2010 15.1%

U.S.

Ratio for 2011 Q3

Median Home Price to Income

Historical Average 3.4

2.4

0%

5%

10%

15%

20%

25%

30%

35%40%

45%

2010200820062004200220001998199619941992

Long-Term Trend: Ratio of Local Mortgage Servicing Cost to Income(Local Historical Average Shown in Red, U.S. Average in Green)

0%

5%

10%

15%

20%

25%

30%

2011 Q32011 Q22011 Q12010 Q42010 Q32010 Q22010 Q12009 Q4

Recent Trend - Local Mortgage Servicing Cost to Income(Historical Average Shown in Red Dashed Line)


7/10

After a soft second quarter, the economy was shocked by three events that came together nearly within the same weak; deadlock in Congress and near miss on the budget extension, renewed concerns about the Greek debt crisis impacting

the US, and a sharp, downward revision to 1st and 2nd quarter GDP estimates. The result was a 15% or more correctionin the equity indexes, which sent investors into US Treasuries seeking a risk free asset. The yield on the 10-yearTreasury reached near record lows and the 30-year FRM followed suit, slipping under 4% multiple times. However, thegap between the 10-year Treasury and the 30-year fixed opened up as the risk to MBS investors of increased refinancingrose, creating resistance for falling mortgage rates. Fuel prices eased in the 3rd quarter and are likely to do so through

the fall. At the same time there is little core inflation pressure, which combined with the Federal Reserves operationtwist that is intended to flatten the yield curve putting downward pressure on long-term rates, should sustain a near-record low mortgage rate environment through the fall.

The Mortgage Market

0

40

80

120

160

200

240

280

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2011 Q3Q12010 Q3Q12009 Q3Q12008 Q3Q12007 Q3Q12006 Q3

30-year Fixed Mortgage Rate and Treasury Bond Yield

Spread (left axis) 30-Year FRM (Right axis) 10-Year Treasury Bond (Right Axis)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2010200820062004200220001998199619941992

Ratio of Local Median Home Price to Local Average Income(Local Historical Average Shown in Red, U.S. Average in Green )


8/10

8.6%

More information on the OMB's geographic definitions can be found at http://www.whitehouse.gov/omb/inforeg_statpolicy/

Los Angeles County and Orange County

The Los Angeles area referred to in this report covers the geographic area of the Los Angeles-Long Beach-Santa Anametro area as officially defined by the Office of Management and Budget of the U.S. Government. The official coverage

area includes the following counties:

Geographic Coverage for this Report

Rental Vacancy Rate Los Angeles U.S.Ratio for 2010 6.7% 10.2%

The rental vacancy rate in Los Angelerose in 2010

Ratio for 2011 Q3 5.0% 9.8%

Historical Average 5.3%

Instead of falling after the end of the housing market boom, the national rental vacancy rate peaked at 11.1% in the 3rd

quarter of 2010. Job losses, stagnant incomes, and credit issues forced some families to double-up and many youngadults to move back in with their parents. The stabilization of the national economy in 2010 and subsequent three

quarters of job creation has helped to improve the rental market pushing the rental vacancy rate down to 9.8% in the 3rdquarter of 2011. In addition, many would-be buyers have been forced to rent due to a sharp increase in credit anddownpayment requirements in recent years. Rent growth was strong in the first 3 quarter of 2011 and is expected to growwith increases of 3.2% and 3.5% in 2012 and 2013, respectively. Locally, there was a decline in the rental vacancy ratefor Los Angeles from its recent peak of 7.2% in the 3rd quarter of 2009 to 5.0% in the 3rd quarter of 2011.

A Closer LookLocal Rental

Vacancy Rates

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

201020082006200420022000199819961994199219901988

U.S. (blue) and Local (red) Rental Vacancy Rates


9/10

Will we see a huge influx ofinventory next month?I think so

KEY INDICATORS AND STRATEGIES


10/10

KEY INDICATORS AS YOU CAN CLEARLY SEE YEAR-TO-YEAR FROMLAST YEAR SOME POCKETS IN LOS ANGELES IS STILL DECLINING

Some Over -100%!!!)

los angeles real estate market update - capital redevelopment group - jeff coga

Documents