sell homes before they hit the market - realty executives santa … · 2016. 11. 18. · realty...

Realty Executives Santa Clarita November 17, 2016

Leslie Appleton-Young Chief Economist & Vice President

[email protected]

“Nobody had it priced in and the uncertainty Is absolutely enormous”

Every Wall Street Analyst After 11/8/16

Economic Stimulus Package

Key considerations

• $1 trillion in infrastructure investments over a 10-year period as part of an economic stimulus package. $100 billion per year in infrastructure investments to “rebuild our highways, bridges, tunnels, airports, schools, hospitals.” • Boost economic growth – GDP higher at least short-term • More jobs = more housing demand • Upward pressure on home prices

Trade Policy

Key considerations

•  Trump made it very clear in his campaign message that the current trade deals are not working and he wanted a trade reform to bring jobs back to America.

• Withdraw from the Trans-Pacific Partnership (TPP) • Renegotiate the North American Free Trade Agreement

(NAFTA) •  Declare China a currency manipulator •  Tax imports from Mexico (Corona anyone?) •  Increase tariffs on Chinese imports

Tax Reform

Key considerations

•  Tax Plan – Overhaul of the current tax code • Reduction in taxes paid by individuals and by corporations. • Collapse the current 7personal tax brackets to 3 brackets •  Increase standard deduction for both single & married

Eliminate the federal estate and gift taxes • Repeal personal exemptions & Cap itemized deductions • Repeal all taxes associated with Obamacare • Provide a child care deduction • Allow U.S. based manufacturers to elect full expensing of

plant and equipment

The Fed

Days Numbered?

January 2010 – November 10, 2016 NerdWallet Survey 11/14/16 4.10%

0

1

2

3

4

5

6

2010/01 2010/09 2011/05 2012/01 2012/09 2013/05 2014/01 2014/09 2015/05 2016/01 2016/09 10.20.16

FRM ARM

3.57 3.54 2.88

Mortgage Rates: Rising Post-Election

MONTHLY WEEKLY

SERIES: 30Yr FRM, 5Yr ARM SOURCE: Freddie Mac

FHA Fannie & Freddie

Dodd- Frank

Key considerations

Republican stance has been to: •  Shrink Freddie Mac and Fannie Mae •  Reform FHA •  Reduce the government footprint in housing.

Unclear how Trump reacts to both the needs of the voters and the platform of the Republican party when it comes to housing.” (Nela Richardson, Redfin)

Key considerations

•  Changes to Dodd-Frank financial regulation: A clear positive would be the lifting of compliance costs imposed on small-sized banks. Around 10,000 local and community banks fund construction and land development loans. With less regulatory burden, these small banks can make more loans and will boost home building activity • Changes to financial regulations on large banks like

Goldman Sachs and Wells Fargo could again lead us back to the days of cowboy capitalism and consequent exposure to a massive taxpayer bailout.” (Lawrence Yun, NAR)

EPA’s Land Use Policy?

Student Debt? Drones?

Lead Paint?

Immigrants Buying Homes?

Fair Housing Act?

CA Market Update

Cadence of Accountability How did I do with last year’s forecast?

2016 Forecast Report Card

SFH Resales (000s)

% Change

Median Price ($000s)

% Change

30-Yr FRM

Housing Affordability Index

U.S. Gross Domestic Product

2015 Actual

408.8

6.8%

$474.4

6.2%

3.9%

31%

2.4%

2016 Forecast

433.0

6.3%

$491.3

3.2%

4.5%

27%

2.7%

2016 Projected

407.3

-0.4%

$503.9

6.2%

3.6%

33%

1.5%

Sales of Existing Detached Homes California, Oct. 2016 Sales: 442,970 Units, +0.4% YTD, +8.0% YTY

-

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-16: 442,970

Oct-15: 410,310

Sales of Existing Detached Homes

So.CA Oct-2016 Sales: 11,039 Units, +0.5% YTD, +1.6% YTY

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®


Southern California Region

SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Los Angeles 3,638 3,660 3,761 -0.6% -3.3% -1.1%Orange County 1,516 1,563 1,403 -3.0% 8.1% -0.1%

Riverside County 1,944 2,134 1,875 -8.9% 3.7% 4.3%San Bernardino 1,239 1,309 1,227 -5.3% 1.0% 1.6%

San Diego 1,956 2,011 1,827 -2.7% 7.1% 0.5%Ventura 549 536 585 2.4% -6.2% -3.3%

Santa Barbara 197 212 191 -7.1% 3.1% 0.9%

Y-t-YCounty Oct-16 Sep-16 Oct-15 M-t-M Y-t-D

MEDIAN PRICE OF EXISTING DETACHED HOMES

California, Oct. 2016: $513,520, +1.2% MTM, +7.3% YTY

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000 P: May-07 $594,530

T: Feb-09 $245,230

-59% from peak

SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Oct-16: $513,520 Oct-15:

$478,780

Median Price of Existing Detached Homes

Southern California, Oct-2016: $490,880, +6.2% YTY

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Median Price of Existing Detached Homes

Southern California Region

SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Los Angeles $533,370 $546,920 $509,570 -2.5% 4.7%Orange County $750,000 $739,000 $700,000 1.5% 7.1%

Riverside County $355,950 $352,250 $330,000 1.1% 7.9%San Bernardino $247,590 $254,330 $231,330 -2.7% 7.0%

San Diego $576,620 $569,000 $520,500 1.3% 10.8%Ventura $631,330 $629,420 $604,610 0.3% 4.4%

Santa Barbara $595,000 $732,500 $725,000 -18.8% -17.9%

Y-t-YCounty Oct-16 Sep-16 Oct-15 M-t-M

Peak vs. 6/16: Southern California

SERIES:MedianPriceofExistingDetachedHomesSOURCE:CALIFORNIAASSOCIATIONOFREALTORS®

RegionLastCyclicalPeakMonth

LastCyclicalPeakPrice

Jun-16Median

%ChgFromPeak

OrangeCounty Jun-07 $775,420 $759,490 -2.1%

SanDiegoCounty May-06 $622,380 $594,430 -4.5%

VenturaCouty Aug-06 $710,910 $674,310 -5.1%

CALIFORNIA May-07 $594,530 $519,440 -12.6%

RiversideCounty Jun-06 $431,710 $357,810 -17.1%

LosAngelesMetro May-07 $578,700 $477,230 -17.5%

InlandEmpire Jun-06 $389,380 $319,100 -18.0%

LosAngelesCounty Sep-07 $625,810 $502,190 -19.8%

SanBernardinoCounty Aug-06 $350,290 $245,220 -30.0%

Peak vs. 6/16 Median: Central Valley




Jun-16Median

%ChgFromPeak

CALIFORNIA May-07 $594,530 $519,440 -12.6%

MaderaCounty Feb-08 $275,000 $234,720 -14.6%

SacramentoCounty Aug-05 $394,450 $332,580 -15.7%

PlacerCounty Aug-05 $527,990 $444,590 -15.8%

Kern(Bakersfield)County Jun-06 $299,920 $238,400 -20.5%

KingsCounty Mar-06 $268,050 $211,110 -21.2%

TulareCounty Dec-05 $269,710 $211,820 -21.5%

FresnoCounty Jun-06 $313,510 $242,240 -22.7%

SanBenitoCounty May-05 $671,190 $511,500 -23.8%

MercedCounty Oct-05 $344,610 $207,580 -39.8%

Peak vs. 6/16 Median: Bay Area




Jun-16Median

%ChgFromCyclicalPeak

SanFranciscoCounty May-07 $972,010 $1,350,000 38.9%

SanMateoCounty Oct-07 $1,020,000 $1,306,250 28.1%

SantaClaraCounty Apr-07 $865,000 $1,050,000 21.4%

AlamedaCounty May-07 $709,420 $803,000 13.2%

SanFranciscoBayArea May-07 $789,250 $841,960 6.7%

MarinCounty Jun-07 $1,149,390 $1,218,500 6.0%

SonomaCounty Jan-06 $650,330 $608,000 -6.5%

ContraCostaCounty May-07 $698,420 $625,000 -10.5%

CALIFORNIA May-07 $594,530 $519,440 -12.6%

NapaCounty Aug-06 $729,170 $619,000 -15.1%

SolanoCounty Jun-06 $492,800 $390,000 -20.9%

Don’t Bother Commuting in Major Metros

Q4 - What is the average commute time …

…from Riverside to Irvine?

…from Palo Alto to San Francisco?

12%

13%

51%

52%

23%

20%

13%

15%

<1 hour 1-2 hours 2+ hours Impossible! Don't bother!

Making Traffic Disappear is Most Desired Super Power

Q12 - Which super power would you like to have?

4.9%

19%

21%

26%

29%

0% 5% 10% 15% 20% 25% 30% 35%

Super strength

Invisibility

Instant mortgage approval

Flying

Make traffic disappear

Do you plan to leave the country if…?

[CATEGORY NAME] [VALUE]



Economic Outlook

Macro Economic Summary

2.9%

GDP 2016-Q3

1.7%

Job Growth 2016-09

5.0%

Unemployment 2016-09

3.6%

Consumption 2016-Q3

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

2005 2007 2009 2011 2013 2015 Q2-11 Q4-11 Q2-12 Q4-12 Q2-13 Q4-13 Q2-14 Q4-14 Q2-15 Q4-15 Q2-16

AN

NU

AL

PER

CEN

T C

HA

NG

E, C

HA

IN-T

YPE

(200

9) $

Slow Economic Growth – Below 3% for 11Years

US GDP 2015: 2.6%; 2016 Q1: .8% Q2: 1.4% Q3: 2.9%

ANNUALLY QUARTERLY

2009 Largest Annual Drop since 1946 (-2.8%)

SERIES: GDP SOURCE: US Dept. of Commerce, Bureau of Economic Analysis

Consumer Confidence Dropped in October Next Release 11/29/16

October 2016: 98.6

0

20

40

60

80

100

120

IND

EX, 1

00=

1985

SERIES:ConsumerConfidenceSOURCE:TheConferenceBoard

Unemployment Rate Falling

September 2016: US 5.0% & CA 5.5%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14% US-CA CA US

SERIES: Unemployment Rate SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

The U-6 rate covers the unemployed, underemployed and those who are not looking but who want a job

Unemployment by CA Metro

3.2%

3.8%

4.1%

4.4%

4.7%

5.2%

5.4%

5.5%

6.2%

7.5%

7.5%

8.3%

9.2%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

San Francisco

San Jose

Orange County

Oakland

San Diego

Los Angeles

Sacramento

Ventura

Inland Empire

Modesto

Stockton MSA

Fresno MSA

Bakersfield

SERIES:TotalNonfarmEmploymentSOURCE:CAEmploymentDevelopmentDivision

September 2016: California 5.5%

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

MO

NTH

TO

MO

NTH

CH

AN

GES

CA Jobs Are Back

Recession Job Losses: 1.3 million, Since Jan’10: +2.2 million


Ca Leads Nation in Job Growth 2.3 v. 1.7

-8

-6

-4

-2

0

2

4

6

AN

NU

AL

PER

CEN

T C

HA

NG

E

California US

SERIES:TotalNonfarmEmploymentSOURCE:USBureauofLaborStatistics,CAEmploymentDevelopmentDivision

California Job Growth by Industry

-1.6% -1.3%

0.4% 1.1%

1.7% 1.7% 1.7%

2.3% 2.9% 3.1%

3.4% 3.6%

4.0% 4.8%

6.3%

-2% -1% 0% 1% 2% 3% 4% 5% 6% 7%

Nondurable Goods Durable Goods

Finance & Insurance Retail Trade

Wholesale Trade Government

Transportation, Warehousing & Utilities Information

Admistrative & Support & Waste Services Health Care & Social Assistance

Real Estate & Rental & Leasing Leisure & Hospitality

Construction Professional, Scientific & Technical Services

Educational Services

SERIES:TotalNonfarmEmploymentByIndustrySOURCE:USBureauofLaborStatistics,CAEmploymentDevelopmentDivision

September 2016: CA +2.3%, +379,800 (YTY)

ANNUAL PERCENT CHANGE

Silicon Valley Still Leads But Central Valley Has Housing

1.2%

1.6%

1.6%

1.7%

2.2%

2.3%

2.6%

2.6%

2.6%

2.8%

2.8%

2.9%

3.6%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%

Ventura

Los Angeles

Bakersfield

Stockton

San Diego

Inland Empire

Fresno MSA

San Francisco

Oakland

Modesto

Orange

Sacramento

San Jose


September 2016: CA +2.3%, +379,800 (YTY)

U.S. Economic Outlook

SERIES: U.S. Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2011 2012 2013 2014 2015 2016p 2017f

US GDP 1.8% 2.3% 2.2% 2.4% 2.4% 1.5% 2.2%

Nonfarm Job Growth

1.2% 1.7% 1.7% 1.9% 2.1% 1.8% 1.4%

Unemployment 8.9% 8.1% 7.4% 6.2% 5.3% 4.9% 4.7%

CPI 3.1% 2.1% 1.5% 1.6% 0.1% 1.4% 2.1%

Real Disposable Income, % Change

2.5% 3.2% -1.4% 2.7% 3.4% 2.7% 2.7%

30-Yr FRM 4.5% 3.7% 4.0% 4.2% 3.9% 3.6% 4.0%

California Economic Outlook

SERIES: CA Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2011 2012 2013 2014 2015 2016p 2017f

Nonfarm Job Growth

1.1% 2.4% 3.0% 2.2% 2.7% 2.3% 1.6%

Unemployment Rate

11.8% 10.4% 8.9% 7.5% 6.2% 5.5% 5.3%

Population Growth

0.7% 0.7% 0.9% 0.9% 0.9% 1.0% 1.0%

Real Disposable Income, % Change

3.5% 4.7% -1.1% 3.2% 3.6% 2.9% 3.5%

The “New” Normal

The “New” Housing Normal

•  Lack of supply hinders sales • High-end: discretionary & slowing •  Low/Moderate-end: demand continues unabated • Urban coastal CA slowing •  Inland and Central and Northern CA growing • Migration patterns mirror housing affordability and jobs • Demographics is Destiny: Boomers aren’t moving, even when

they retire

Supply: Listings

UII remained at low levels Below last year

Oct. 2015: 3.6 Months; Oct. 2016: 3.4 Months

Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.

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®

So Cal supply down in all counties San Bernardino dropping most

-3%

8%

4% 1%

7%

-6%

3% 2%

-10%

-3%

-7% -8% -5%

-2%

16%

-6%

-20%

-10%

0%

10%

20%

Sales Active Listings Year-to-Year % Chg.

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

October 2016

Where is the inventory?

Long-Time Homeowners are not moving as in the past Low rate on current mortgage Low property taxes Capital gains hit Where can I afford to go? Could not qualify for a mortgage today Remodel and stay

Are we headed for the “European Model” where children inherit the home of their parents? One more thing…Secular decline in marriage

Fewer housing units being turned over since the Great Recession

4.2%

4.8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

CA US

SERIES:Percentofexistingsingle-familyhomesbeingsoldSOURCE:CensusBureau,AmericanCommunitySurvey,Moody’sAnalytics,C.A.R.

Housing Turnover Rate (Single-Family Homes only)

Years Owned Home Before Selling

10

0

2

4

6

8

10

12 All Sellers

SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Owners Investing in Staying Put ?

$3.9 Billion through July

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16

$ Bi

llio

ns

Year-to-Date Through July

Alterations/Additions Reach All-Time High & Gaining Steam Up 16% from 2015 YTD levels

SOURCE: California Homebuilding Foundation (CHF)/Construction Industry Research Board (CIRB) Downloaded from Moody’s Analytics

Boomers Not Moving as Often

0.9% 0.8% 1.9%

5.7%

10.7%

21.3% 24.0%

31.8%

24.4%

9.0% 11.0%

12.4% 14.2%

12.0% 8.9%

7.3%

0%

5%

10%

15%

20%

25%

30%

35%

1978 & Earlier 1979 to 1984 1985 to 1989 1990 to 1994 1995 to 1999 2000 to 2005 2005 to 2009 2010 to 2013

California Homeowners by Length of Tenure, 2013

Under 55 55+

SERIES: Distribution of Home Ownership by Year Moved In SOURCE: U.S. Census Bureau, 2013 American Housing Survey

71% of Californian’s aged 55+ haven’t moved since 1999

Most Have Equity in their Home

Do you have equity in your home?

Yes, 92%

No, 8%

SERIES: 2016 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Majority Do Not Plan to Sell Home When they Retire

Do you plan to sell your current home when you retire?

Yes, 36%

No, 64%

SERIES: 2016 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Do you worry about your children not having the same opportunities to succeed as you did?

Do you worry about your children or grandchildren not having the same opportunities to succeed as you did?

Yes, they will have worse

opportunities, 52%

No, they will have have

better opportunities,

24%

About the same, 24%

SERIES: 2016 Generations / Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Time to talk: ¾ Plan of have already Helped Children with Down Payment

Are you planning to provide help for your children to buy a home by contributing to their down payment or mortgage payments?

Yes, I am planning to help, 53% Yes, I have

already helped, 24%

No, 23%

SERIES: 2016 Generations / Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

California’s Single-Family Housing Stock

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

5,000,000

5,500,000

6,000,000

6,500,000

7,000,000

7,500,000

2000 2003 2006 2009 2012 2015

Owner-Occupied (left) Renter-Occupied (right)

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

6,919,164

1,940,607

6,527,730

2,674,808

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

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)

Potentially between 400,000 and 700,000 SF Rentals that Used to be Owner-Occupied

Supply: New Housing Units

“Missing” 65,000 New Units Annually

SERIES: California New Housing Permits SOURCE: Construction Industry Research Board

0

50000

100000

150000

200000

250000

300000

350000

Single Family Multi-Family

Household Growth:

165,000/yr.

2015: 95,822 (42,959 sf, 52,863 mf) 2016p: 98,300 total units

Most Underbuilt Counties in California

381,300

174,833 162,740 127,542 141,162

95,245 98,149 105,586 66,054

44,772 88,134

35,426 44,923 18,141

40,434 14,901 18,108 31,255

6,349 10,890 0

50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000

New Jobs vs. New Permits (2010-2015)

Jobs

Permits

SOURCE: California Employment Development Department, Construction Industry Research Board

Affordability

Housing Affordability Best in C.V.

57 56 56 54 52 50 50 50

48 46 45 45 45

41

32 31 30 29

27 26 26 25 25 22

20 20 19 18 17 14 13

0

10

20

30

40

50

60

SERIES:HousingAffordabilityIndexSOURCE:CALIFORNIAASSOCIATIONOFREALTORS®

2016-Q2: % able to purchase median-priced home

CA Housing Affordability Peaked Q1 2012

California vs. U.S. 1984-2016 % OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME

SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

31%

57%

0%

10%

20%

30%

40%

50%

60%

70%

80% CA US

Annual Quarterly

$28,430

$45,810

$72,360 $67,920

$93,550 $92,170

$101,260

$126,560

$92,571

-$10,000

$10,000

$30,000

$50,000

$70,000

$90,000

$110,000

$130,000

Retail Salespersons

Chefs and Head Cooks

Elementary School

Teachers

Firefighters Police and Sherriff's Patrol

Officers

Computer Programmers

Registered Nurses

Software Developers

(Applications)

Min. Inc Required to Buy a Med.

Home

Wages v. Income Required to Qualify

SOURCE:BureauofLaborStatistics,C.A.R.

2015 Annual Mean Wage

California

Share of First-Time Buyers remains Below Long-Run Average

29.5%

0%

10%

20%

30%

40%

50%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

% First-Time Home Buyers Long Run Average

Long Run Average = 38%


Los Angeles: Net Exit to Inland Empire and Kern County

County Moved To/From

Total Number

Moved to Los Angeles

County

Total Number

Moved from Los Angeles

County Total Net Migration

Inland Empire 25,777 50,531 -24,754

Kern 2,466 10,460 -7,816

Orange 23,887 31,435 -7,548

San Diego 8,916 7,240 1,676

Ventura 7,464 7,543 -79

San Francisco: Affordability & Jobs Drive Migration

County Moved To/From

Total Number Moved to San Francisco County

Total Number Moved from San Francisco County Total Net Migration

Alameda 3983 10345 -6362

San Mateo 6161 7984 -1823

Contra Costa 1856 2998 -1142

Sonoma 557 1602 -1045

Marin 1428 1918 -490

Napa 0 243 -243

Solano 796 815 -19

Santa Clara 4041 2691 1350

The median income in Oakland is $47,000, which translates to $1,175/month for rent, but the average monthly rent in Oakland is $3,000.

Austin: 70% Raleigh: 40% Portland: 30%

Demand & Desire for Homeownership

Real Estate is Still Considered the Best Long Term Investment

SOURCE: Gallup

Millennials: American Dream is still Important

4% 6%

34% 31%

25%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Not at All Important Of Little Importance Moderately Important Important Very Important

How important is fulfilling the 'American Dream' to you? SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

…And Homeownership is part of it

18% 18% 16%

14%

12% 11%

10%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Owning a home A fulfilling job Having a family Education Seeing the world Helping others Becoming wealthy

Which factors contribute to your ideal of the `American Dream` SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Many Millennials Also Believe Buying a Home Is a Safe Investment

SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

1%

5%

12%

45%

37%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Strongly Disagree Disagree Neighter Agree nor Disagree

Agree Strongly Agree

Q.  Do you think home purchase is still a safe investment?

Nearly ½ Renters Plan to Buy a Home

77

Q.  When do you plan to buy your next home?

9.6%

13%

14%

11%

24%

28%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Within a year

In 2 Years

3-5 Years

In 5+ Years

Not sure

No plans to buy

55% of Renters Have Made Preparations to Buy a Home

78

1.0%

9.0%

12.0%

16%

21%

34%

45%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Other

Pre-qualified with a lender

Consulted credit counselor/financial advisor

Spoken to a REALTOR®

Searched for home buying process information online

Searched for homes

No preparations

Q.  Have you made any of the following preparations to buy a home? Please select all that apply.

69% of Millennial renters would look into purchasing if knew about lower down-payments

No, 31%

Yes, 69%

All Millennial Owners

If You knew you could qualify with lower down-payment, would you start to look for a house? SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Only 19% Know about FHA Loans

Yes, [VALUE]

No, [VALUE]

Are you aware of FHA Loans?

FHA backed loans only require a 3.5% down-payment. SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Student Loan Debt: 47% (34 or Under)

Student Debt Delayed Decisions to Move out of Family Member’s Home After College?

SERIES: 2016 Student Loan Debt and Housing Report SOURCE: National Association of Realtors®

% o

f Lo

an

bo

rro

we

rs

2016: Market Conditions Annual Housing Market survey

Market Remained Very Competitive

53% 52%

4.0 4.0

0

1

2

3

4

5

6

7

0%

10%

20%

30%

40%

50%

60%

70%

80%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

% with Multiple Offers # of Multiple offers (Average)


Investor Buyers? Dropping Still Have Demand in Lower-Priced Segments


0%

5%

10%

15%

20%

25%

30%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Investment/Rental Property Vacation/Second Home % to Total Sales

Demand for Investment Properties remained at the Lowest level since 2009

International Buyers Dropping

8%

6%

5% 6% 6%

8%

6%

4%

3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2008 2009 2010 2011 2012 2013 2014 2015 2016

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.?


The share of international buyers dropped to the lowest level in 9 years

Local Housing Markets

Valencia

Sales of Single Family Homes

Valencia, October 2016: 62 Units +8.2% 2015, +0.8% 2016 YTD, -1.6% YTY

SOURCE:ClarusMarketMetrics

Median Price of Single Family Homes

Valencia, October 2016: $580,000 Down 1.4% MTM, Up 6.9% YTY


For Sale Properties

Valencia, October 2016: 242 Units -0.5% 2015, -5.4% 2016 YTD, +3.0% YTY


Note: “For Sale Properties” represents the overall supply that exist throughout the entire month, including any listings that appear as “Active” any point in time during the month.

Canyon Country


Canyon Country, October 2016: 47 Units +17.0% 2015, +0.2% 2016 YTD, -23.0% YTY



Canyon Country, October 2016: $505,000 Up 5.2% MTM, Up 10.4% YTY


For Sale Properties

Canyon Country, October 2016: 179 Units +9.9% 2015, -10.8% 2016 YTD, -20.8% YTY



Saugus


Saugus, October 2016: 54 Units +1.2% 2015, +11.2% 2016 YTD, +20.0% YTY



Saugus, October 2016: $549,500 Up 4.6% MTM, Up 14.7% YTY


For Sale Properties

Saugus, October 2016: 207 Units -2.9% 2015, -4.6% 2016 YTD, +6.2% YTY



2017 Forecast

Varying Market Expectations for 2017

13% 25% 29%

3.0%

40%

44% 35%

35%

47%

31% 36%

62%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Prices Sales Inventory Interest rates

Up

Flat

Down

Q1 - What do you think will happen to the California real estate market in 2017?

California Housing Market Outlook

SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2011 2012 2013 2014 2015 2016p 2017f

SFH Resales (000s) 422.6 439.8 414.9 382.7 408.8 407.3 413.0

% Change 1.4% 4.1% -5.9% -7.8% 6.8% -0.4% 1.4%

Median Price ($000s)

$286.0 $319.3 $407.2 $446.9 $474.4 $503.9 $525.6

% Change -6.2% 11.6% 27.5% 9.8% 6.2% 6.2% 4.3%

Housing Affordability Index

53% 51% 36% 30% 31% 33% 29%

30-Yr FRM 4.5% 3.7% 4.0% 4.2% 3.9% 3.6% 4.0%

Sales down for 2016 but Improve in 2017; Price will Grow Steadily this Year and Next


407.3 413.0

0

100

200

300

400

500

600

700

2005 2007 2009 2011 2013 2015 2017f

Tho

usa

nd

s


$504 $526

$0

$100

$200

$300

$400

$500

$600

2005 2007 2009 2011 2013 2015 2017f

Tho

usa

nd

s

Median Price Price

(Thousand)Units

(Thousand)

CA: Dollar Volume Up 5.8% in 2016, Up 5.8% in 2017


$301

$244

$164

$133 $131 $127 $121 $140

$169 $171 $194 $205

$217

-40%

-30%

-20%

-10%

0%

10%

20%

30%

$0

$50

$100

$150

$200

$250

$300

$350

$400

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p 2017f

$ Volume of Sales Percent Change

$ in Billion % Change

Take 5 for 2017

“the more affordable the market, the better it is doing “

1.  CA home sales up slightly – down on $$$ coast; up $ inland

2.  CA median price up 4.3% – flat $$$, up $ 3.  Demand drivers (jobs; income; mortgage rates;

household formation) strong 4.  Boomers staying put 5.  Affordability concerns fuel out-migration of

Millennials in search of housing they can afford

Take 5: 2017 Market

2017 Challenges & Opportunities

[CATEGORY NAME], [VALUE] Lack of inventory,

28%

Mortagage rate increase, 10%

[CATEGORY NAME], 6%

Lack of Affordability Biggest Challenge

Q2 - What will be the biggest challenge for the housing market in 2017?

2017 Wild Cards

• Economy Under Trump • Unexpected rise in rates • Economic collapse •  Tech giants crumble • Hit to equities • Global instability • Other Black Swans…

2017 Opportunities

• Up your game – Always a good option • What business are YOU in? • Educate first time-home buyers – talk to their parents • Become well versed on down payment assistance

programs, debt management and improving credit to turn renters into buyers.

• Don’t give up on international buyers •  Stay involved & stay current • Get married!

Book Recommendations

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Leslie’s Book Recommendations

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