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November Housing

Market Update
December 17, 2019

Jordan G. Levine
Deputy Chief Economist
California Association of REALTORS®
overview

01 Economy ok, for now:


02 Low rates finally kick in:

• Major macro indicators still ok • Why we are more optimistic now


• Some red flags on our radar • BUT—many of our old friends are back!

03 Selling homeownership:
04 2020 forecast IMPROVED

• Refocus conversations in light of confidence • Smaller decline in sales, but supply…


• Emphasize the long-term benefits to ownership • More growth in prices, again, supply…

CALIFORNIA ASSOCIATION OF REALTORS®


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2
Economic fundamentals solid… for now

GDP 2.1%
2019-Q3
Unemployment 3.6%
October 2019
Consumption 2.9%
2019-Q3
Job Growth 1.4%
October 2019
Core CPI 2.3%
October 2019

SOURCE: Bureau of Labor Statistics & Bureau of Economic Analysis


CALIFORNIA ASSOCIATION OF REALTORS®
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3
Unemployment at lowest
rate in 50 years
Tulare 7.6%
Bakersfield
Kings
Merced
Unemployment Rate Fresno
Madera
14 Yuba City
Stanislaus
Modesto
12 Los Angeles
Chico
10 Inland Empire
Shasta
Monterey
8 Ventura
Solano
Santa Cruz
6 Sacramento
Santa Barbara
3.9 San Diego
4 East Bay
San Luis Obispo
Orange County
2 Sonoma
South Bay
Napa
0 Marin
1/1/1976
3/1/1978
5/1/1980
7/1/1982
9/1/1984

1/1/1989
3/1/1991
5/1/1993
7/1/1995
9/1/1997

1/1/2002
3/1/2004
5/1/2006
7/1/2008
9/1/2010

1/1/2015
3/1/2017
5/1/2019
11/1/1986

11/1/1999

11/1/2012

San Francisco 1.8%


0% 1% 2% 3% 4% 5% 6% 7% 8%

CALIFORNIA ASSOCIATION OF REALTORS®


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CA US 4
Rates STILL near historic lows
Key Interest Rates
18

15

12

6 3.73

10-Yr Treasury 30-Yr FRM Fed. Funds Rate

CALIFORNIA ASSOCIATION OF REALTORS®


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5
Mortgage payment declined for 9 consecutive
months, despite higher median price
California Median Price vs.
30 Yr. FRM
6% Mortgage Payment
20%
5% 4.87%
15%
4% 3.70% 10%
6.4%

YTY% Chg.
5%
3%
0%
2% -5% -7.4%
-10%
1%

May-16

May-17

May-18

May-19
Jan-16

Jan-17

Jan-18

Jan-19
Sep-16

Sep-17

Sep-18

Sep-19
0%
May-15

May-16

May-17

May-18

May-19
Jan-15

Jan-16

Jan-17

Jan-18

Jan-19
Sep-15

Sep-16

Sep-17

Sep-18

Sep-19 Price Growth Mortgage Pmt Growth

SERIES: Price Growth vs. Mortgage Payment Growth page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
6
Mortgage payment declined for 9 consecutive
months, despite higher median price
California Median Price vs. Mortgage Payment
20%
15%
YTY% Chg.

10%
5%
0%
-5%
-7.40%
-10%
Mar-16
May-16

Mar-17
May-17

Mar-18
May-18

Mar-19
May-19
Jan-16

Jul-16

Jan-17

Jul-17

Jan-18

Jul-18

Jan-19

Jul-19
Sep-16
Nov-16

Sep-17
Nov-17

Sep-18
Nov-18

Sep-19
Nov-19
Price Growth Mortgage Pmt Growth
SERIES: Price Growth vs. Mortgage Payment Growth page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
7
Mortgage payment declined from last month
and last year
California, November 2018: $2,345, November 2019: $2,172
$3,000

$2,500
Mortgage Payment

$2,000

$1,500

$1,000

$500

$0

SERIES: Mortgage Payment of Existing SFH page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
8
Monthly mortgage: more affordable

Region Nov 2019 Nov 2018 % CHG

CA SFH $2,172 $2,345 -7.4%

Los Angeles
$2,025 $2,166 -6.5%
Metropolitan Area

Central Coast $2,560 $2,846 -10.1%

Central Valley $1,252 $1,354 -7.5%

Inland Empire $1,396 $1,539 -9.3%

S.F. Bay Area $3,406 $3,829 -11.1%

SERIES: Monthly mortgage payment page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
9
Most counties pay lower mortgage payments
Nov 2019: chg. in mortgage payment (yty%)
40%
27.6%
30%
20%
10%
0%
-10% -7.4%
-20%
-30%
-40% -33.3%

SERIES: Change in mortgage payment page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
10
10
15
20
25

0
5
Q1-71
Q1-72
Q1-73
Q1-74
Q1-75
Q1-76
Q1-77
Q1-78
Q1-79
Q1-80
Q1-81
Q1-82
Q1-83
Q1-84
Q1-85
Q1-86
Q1-87
Q1-88
Q1-89
Q1-90
Q1-91
Q1-92
Q1-93
Q1-94
22.6

Q1-95
Q1-96
+/-1 Std. Dev.

Q1-97
Q1-98
Q1-99
Q1-00
U.S. Capital Markets P/E Ratio

Q1-01
Q1-02
Q1-03
Q1-04
(Wilshire 5000 Market Cap / Total Corporate Profits)

Q1-05
Q1-06
Q1-07
Q1-08
Q1-09
Q1-10
Q1-11
Q1-12
Q1-13
Q1-14
Q1-15
Equities do seem overvalued–are failed IPOs GOOD?

Q1-16
CALIFORNIA ASSOCIATION OF REALTORS®

Q1-17
Q1-18
Q1-19
16.6
How About
Housing?
Sales remained above 400k
for 5th consecutive month
California, November 2019 Sales: 402,880 Units, -1.9% YTD, 5.6% YTY
700,000
600,000
500,000
400,000
300,000
200,000
100,000
-
May-06

May-08

May-10

May-12

May-14

May-16

May-18
Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

Jan-17

Jan-19
Sep-05

Sep-07

Sep-09

Sep-11

Sep-13

Sep-15

Sep-17

Sep-19
SERIES: Sales of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
13
California home sales continue to improve

25% Year-over-Year % Chg 6 per. Mov. Avg. (Year-over-Year % Chg)


20%
15%
10%
5% 5.6%
0%
-5%
-10%
-15%
-20%
-25%
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

SERIES: Sales of Existing Single Family Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
14
Sales by Region
November 2019 November 2019 Home Sales
Home Sales by Region Growth by Region
12.0% 9.5%
Other Counties 10.0%
Central 8% 8.0%
Coast 6.0% 4.6%
4.0%
4% 2.0% 0.6% 1.0%
Central
Valley 0.0%
-2.0%
22% -4.0%
-6.0% -4.8%
S.F. Bay
Southern Area
California 18%
48%

CALIFORNIA ASSOCIATION OF REALTORS®


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15
Bay Area sales growth dipped again
after two months of slight uptick
30% Bay Area 6 per. Mov. Avg. (Bay Area)
20%

10%
YoY % chg.

0%
-4.8%
-10%

-20%

-30%
May-10

May-11

May-12

May-13

May-14

May-15

May-16

May-17

May-18

May-19
Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19
Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Sep-16

Sep-17

Sep-18

Sep-19
SERIES: Sales of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
16
So. California sales grew
at slower pace in November
So CA 6 per. Mov. Avg. (So CA)
40%
30%
20%
YoY % chg.

10%
4.6%
0%
-10%
-20%
-30%
May-10

May-11

May-12

May-13

May-14

May-15

May-16

May-17

May-18

May-19
Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19
Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Sep-16

Sep-17

Sep-18

Sep-19
SERIES: Sales of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
17
Central Valley sales growth softened but
remained positive
30% Central Valley 6 per. Mov. Avg. (Central Valley)
20%

10%
YoY % chg.

0% 0.6%

-10%

-20%

-30%
May-10

May-11

May-12

May-13

May-14

May-15

May-16

May-17

May-18

May-19
Jan-10

Jan-11

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19
Sep-10

Sep-11

Sep-12

Sep-13

Sep-14

Sep-15

Sep-16

Sep-17

Sep-18

Sep-19
SERIES: Sales of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
18
Sales down at the bottom end of the market

November 2019 Share by Price Segment


(YTY% Chg.) 0% 10% 20% 30%

15% 10.6% $0 - $299k 12.7%


10% 6.3% 7.8% 7.7%
3.1% $300 - $399k
5% 1.4% 16.0%
0%
$400 - $499k 13.8%
-5%
-10% $500 - $749k 25.3%
-15%
-20% -14.9% $750 - $999k 11.5%
$1,000 - $1,999k 12.8%
$2,000k+ 3.8%

SERIES: Sales of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
19
High-end home sales showing improvement
in recent months
25% $0 - $299k $300 - $399k $400 - $499k $500 - $749k
20% $750 - $999k $1,000 - $1,999k $2,000k+
15%
YTY % Chg. in Sales

10%
5%
0%
-5%
-10%
-15%
-20%
-25%

SERIES: Percent Change in Sales page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
20
Pending sales continued to rise since
mid-2019
20%
15.2%
YTY % Chg. in Pending Sales

15%
10%
5%
0%
-5%
-10%
-15%
-20%

SERIES: Percent Change in Pending Sales page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
21
Inventory &
Active Listings
Active listings tightened up

California Active Listings by Month


70,000
60,000
50,000
40,000
30,000
20,000
10,000
0

2018 2019

CALIFORNIA ASSOCIATION OF REALTORS®


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23
Active listings dropped by double-digits;
largest yearly decline in over 61/2 years
Year-over-Year % Chg
40%
30%
20%
10%
0%
-10%
-20%
-22.5%
-30%
Mar-15
May-15

Mar-16
May-16

Mar-17
May-17

Mar-18
May-18

Mar-19
May-19
Jan-15

Jul-15

Jan-16

Jul-16

Jan-17

Jul-17

Jan-18

Jul-18

Jan-19

Jul-19
Sep-15
Nov-15

Sep-16
Nov-16

Sep-17
Nov-17

Sep-18
Nov-18

Sep-19
Nov-19
SERIES: Active Listing of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
24
Housing supply tightened up in all regions

Nov-18 Nov-19
35,000
30,033
30,000
Active Listings

25,000
21,496
20,000
15,000
11,119
10,000 8,659
6,288 4,747
5,000 2,542 2,159
0
San Francisco Bay Southern California Central Valley Central Coast
Area
SERIES: Active Listings of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
25
All regions dropped by double-digits in supply

November 2019
Sales Active Listings

10%
4.6%
0.6% 1.0%
Year-to-Year % Chg

0%
-4.8%
-10%

-20% -15.1%
-22.1%
-30% -24.5%
-28.4%
-40%
San Francisco Bay Southern California Central Valley Central Coast
Area
SERIES: Sales and Listings of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
26
Supply improved slightly only
at the upper end of the market
November 2019

10% Active Listing


3.2%
YTY % Change

0%
-10%
-20% -13.5%

-30% -23.8% -23.0% -22.5%


-25.9%
-30.6%
-40%

SERIES: Active Listings of Existing Single Family Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
27
Unsold Inventory Index declined
as a result of more sales and fewer listings
18.0
16.0 November 2018: 3.7 Months; November 2019: 3.1 Months
14.0
Months of Supply

12.0
10.0
8.0
6.0
4.0
2.0
0.0
May-06

May-08

May-10

May-12

May-14

May-16

May-18
Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

Jan-17

Jan-19
Sep-05

Sep-07

Sep-09

Sep-11

Sep-13

Sep-15

Sep-17

Sep-19
SERIES: Unsold Inventory Index of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
28
Market
Competitiveness
Time on market not increasing anymore

80 California, November 2019: 25.0 Days


70
Days on Market

60
50
40
30 25.0
20
10
0
May-06

May-08

May-10

May-12

May-14

May-16

May-18
Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

Jan-17

Jan-19
Sep-05

Sep-07

Sep-09

Sep-11

Sep-13

Sep-15

Sep-17

Sep-19
SERIES: Median Time of Market of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
30
Median time on market up in top percentiles

Median Time on Market


40

32
30 28 27 28 28 27 27
Days on Market

26 26 25 26
23 24 24 24 23 24 24
21 22
20

10

0
0-20 20-40 40-60 60-80 80-100 80-85 86-90 91-95 96-100 Total
Percentile
Nov-18 Nov-19

SERIES: Median Time on Market of Existing Single Family Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
31
Sales price-to-list Price ratio up from last year

November 2019: 98.4%, -0.1% MTM, 0.6% YTY


100%
Sales-to-List Price Ratio

98%

96%

94%

92%

90%
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
SERIES: Sales to List Ratio of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
32
Sales-to-list price ratio down at top percentile

California Sales-to-List Price Ratio by Quintile


100.5%
100.0% 100.0% 100.0%
100.0%
99.5% 99.4%
99.1% 99.2%
98.9% 99.0%
99.0%
98.5%
98.0% 97.8%
97.5%
97.0%
96.5%
0-20 20-40 40-60 60-80 80-100 80-85 86-90 91-95 96-100
Nov-18 Nov-19
SERIES: Sales to List Ratio of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
33
Reduced-Price Listings

Share of Listings with a Reduced Price: 39.2%; Median Reduction Amount: -4.4%

50% 0%
45% -1%
40% -2%
35% -3%
30% -4%
25% -5%
20% -6%
15% -7%
10% -8%
5% -9%
0% -10%
1/1/2010
5/1/2010
9/1/2010
1/1/2011
5/1/2011
9/1/2011
1/1/2012
5/1/2012
9/1/2012
1/1/2013
5/1/2013
9/1/2013
1/1/2014
5/1/2014
9/1/2014
1/1/2015
5/1/2015
9/1/2015
1/1/2016
5/1/2016
9/1/2016
1/1/2017
5/1/2017
9/1/2017
1/1/2018
5/1/2018
9/1/2018
1/1/2019
5/1/2019
9/1/2019
Share Reduced Median Reduction
SERIES: Listing Price of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
34
Growth in Reduced-Price Listings

Growth in Share of Listings with a Reduced Price: -3.2%


Growth in Median Reduction Amount: 0.0%
8% 0.05%
6% 0.00%
4% -0.05%
-0.10%
2%
-0.15%
0% -0.20%
-2% -0.25%
-4% -0.30%
11/1/2015

11/1/2016

11/1/2017

11/1/2018

11/1/2019
1/1/2015
3/1/2015
5/1/2015
7/1/2015
9/1/2015

1/1/2016
3/1/2016
5/1/2016
7/1/2016
9/1/2016

1/1/2017
3/1/2017
5/1/2017
7/1/2017
9/1/2017

1/1/2018
3/1/2018
5/1/2018
7/1/2018
9/1/2018

1/1/2019
3/1/2019
5/1/2019
7/1/2019
9/1/2019
Share Reduced Median Reduction

SERIES: Listing Price of Existing Single Family Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
35
Price Growth
Stabilizing
Median price fell below 600k for 1st time in 7
months, but had largest gain in 16 months
California, November 2019: $589,770, -2.6% MTM, 6.4% YTY

$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$-
May-06

May-08

May-10

May-12

May-14

May-16

May-18
Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

Jan-17

Jan-19
Sep-05

Sep-07

Sep-09

Sep-11

Sep-13

Sep-15

Sep-17

Sep-19
SERIES: Median Price of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
37
Condo/Townhome median price growth
picked up – the strongest gain in 13 months
50% Condo Single-Family Homes
40%
30%
20%
YTY% Chg. in Price

10%
0%
-10%
-20%
-30%
-40%
-50%
May-06

May-08

May-10

May-12

May-14

May-16

May-18
Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

Jan-17

Jan-19
Sep-05

Sep-07

Sep-09

Sep-11

Sep-13

Sep-15

Sep-17

Sep-19
SERIES: Median Price of Existing Condo/Townhomes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
38
Price/Square Foot growth rate remained soft

November 2019: $288, -0.3% MTM, 2.1% YTY


$400
$350
PRICE PER SQ. FT.

$300
$250
$200
$150
$100
$50
$0
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16
Jul-16
Jan-17
Jul-17
Jan-18
Jul-18
Jan-19
Jul-19
SERIES: Median Price Per Square Feet of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
39
Top end of market rebounds, finally

Year-over-Year Price Growth


9%
8% 7.7%
7%
6% 5.6%
5.0%
5%
4% 3.6%
3.1%
3% 2.4%
2% 1.7%
1% 0.6%
0%
-1% -0.6%
0-20 20-40 40-60 60-80 80-100 80-85 86-90 91-95 96-100
Percentile

SERIES: Median Price of Existing Single Family Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
40
Top-end had first yearly price gain in 2019

12% 0-20 20-40 40-60 60-80 80-100


10%
8%
6%
YTY% Chg. in Price

4%
2%
0%
-2%
-4%
-6%

SERIES: Percent Change in Price page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
41
Evidence of
Price Drops?
Growth of list price vs. sales price

40%
Listing Price Sales Price
30%
YTY% Chg. in Price

20%

10%

0%

-10%

-20%
May-12

May-13

May-14

May-15

May-16

May-17

May-18

May-19
Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19
Sep-12

Sep-13

Sep-14

Sep-15

Sep-16

Sep-17

Sep-18

Sep-19
SERIES: Sales to List Ratio of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
43
Market Velocity

50.0%

-50.0%
100.0%
150.0%

-150.0%
-100.0%
0.0%
Dec-08
Mar-09
Jun-09
Sep-09
Dec-09
Mar-10
Jun-10
Price Growth

Sep-10
Dec-10
Mar-11
Jun-11
Sep-11
Dec-11
Mar-12
Jun-12
Sep-12
Dec-12
Mar-13
Jun-13
Sep-13
Dec-13
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
Jun-16
Sep-16
Dec-16
Mar-17
Market Velocity (12 month trailing average)

Jun-17
Sep-17
Dec-17
California Market Velocity and Price Growth

Mar-18
Jun-18
Sep-18
Dec-18
Mar-19
Jun-19
Sep-19
Market Velocity

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®


SERIES: Market Velocity & Price Growth
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%

-50.0%
-40.0%
-30.0%
-20.0%
-10.0%

44

Existing SFR Median Price


Growth
page
BUT…
Challenges Remain
Is it a good time to buy or sell?

Do you think it’s a good time to buy a Do you think it’s a good time to sell a
home in California? home in California?
N=300 N=300

51%
46% 47%

25% 24%24%

SERIES: 2018/2019 Google Consumer Poll page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
46
Down payment: remain elevated for most areas

Region Nov 2019 Nov 2018 % CHG

CA SFH $117,954 $110,848 6.4%

Los Angeles
$110,000 $102,400 7.4%
Metropolitan Area

Central Coast $139,000 $134,500 3.3%

Central Valley $68,000 $64,000 6.3%

Inland Empire $75,800 $72,724 4.2%

S.F. Bay Area $185,000 $181,000 2.2%

SERIES: Down payment page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
47
Mortgage payment declined, but remains elevated

California, November 2018: $2,345, November 2019: $2,172


$3,000

$2,500
Mortgage Payment

$2,000

$1,500

$1,000

$500

$0

SERIES: Mortgage Payment of Existing SFH page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
48
Tight-inventory market rearing ugly head

18.0
16.0 November 2018: 3.7 Months; November 2019: 3.1 Months
14.0
Months of Supply

12.0
10.0
8.0
6.0
4.0
2.0
0.0
May-06

May-08

May-10

May-12

May-14

May-16

May-18
Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

Jan-17

Jan-19
Sep-05

Sep-07

Sep-09

Sep-11

Sep-13

Sep-15

Sep-17

Sep-19
SERIES: Unsold Inventory Index of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
49
So, affordability will remain an issue

2019-Q3: % able to purchase median-priced home


70% 64%
60% 56%

50%
40%
31%
30%
20% 17%
10%
0%

SERIES: Housing Affordability Index of Traditional Buyers page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
50
Big spike in out-migration last year
California Net Domestic Migration (Adults Aged 16+)
0

-36,218
-50,000

-61,114
-66,428
-75,871 -72,060

-100,000 -87,713
-92,092
-105,037 -103,987
-111,233
-121,830

-150,000 -138,782

-159,355

-200,000
-197,916

-250,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
CALIFORNIA ASSOCIATION OF REALTORS®
Over 1.4 million ADULTS lost, NET, since 2005
North Carolina, -45,588
Georgia, -54,085
Utah, -77,153

Idaho, -82,534

Texas, -317,830
Colorado, -83,257

Washington, -
136,153 Arizona, -290,462

Nevada, -215,777

Oregon, -221,264

CALIFORNIA ASSOCIATION OF REALTORS®


Don’t Just Sell Homes,
Sell HOMEOWNERSHIP!
#1: wealth creation
U.S. Median Net Worth
300

250 $231.4

200
Thousands

150

100

50
$5.0
0
1989 1992 1995 1998 2001 2004 2007 2010 2013 2016
Owner Renter or other
SOURCE: Fed Consumer Finances Survey
CALIFORNIA ASSOCIATION OF REALTORS®
page
54
#2: hedge against inflation

U.S. Median Prices vs. Rents


300

250

200

150

100 Wasted money?


50

0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
SOURCE: American Community Survey – U.S. Census Bureau
CALIFORNIA ASSOCIATION OF REALTORS®
page
55
#3: better individual outcomes

“Children of homeowners
are significantly more likely
to stay in school until age
17 than children of
renters…”
- Journal of Urban Economics

CALIFORNIA ASSOCIATION OF REALTORS®


page
56
#3: better individual outcomes

“A safe, decent, affordable


home is like a vaccine. It
literally prevents disease.”
- Dr. Megan Sandel, Boston University School of Medicine

CALIFORNIA ASSOCIATION OF REALTORS®


page
57
the punchline

“While studies simulating the


financial returns to owning and
renting find that renting is often
more likely to be beneficial, in
practice renters rarely accumulate
any wealth.”
- Harvard Joint Center for Housing Studies, 2013

CALIFORNIA ASSOCIATION OF REALTORS®


page
58
You don’t NEED housing to rise as fast

Home Stocks

Investment 500,000 100,000

Amount YOU Invest 100,000 100,000

Appreciation 3% 15%

Profit 15,000 15,000

CALIFORNIA ASSOCIATION OF REALTORS®


page
59
So how can YOU HELP
potential buyers to attain
homeownership?
Homeownership still aspirational
How important is homeownership to you?
n: 1663
Percent

29%
30%
27%
23%

20%
13%

10% 8%

0%

SOURCE: C.A.R. Renter Survey


CALIFORNIA ASSOCIATION OF REALTORS®
page
61
vastly over estimate downpayment
How much downpayment is required to purchase a home?
n: 1681
Percent

40%
40%
33%
30%

19%
20%

10%
4% 4%

0%

SOURCE: C.A.R. Renter Survey


CALIFORNIA ASSOCIATION OF REALTORS®
page
62
most renters would buy with little down
If you could qualify for a mortgage with a much lower down-payment would you buy?
n: 1716
Percent

69%

60%

40%
31%

20%

0%

SOURCE: C.A.R. Renter Survey


CALIFORNIA ASSOCIATION OF REALTORS®
page
63
only 30% know of low-down loans
Are you aware of (FHA) backed loans that require only a 3.5% downpayment
n: 1716
Percent

72%

60%

40%

28%

20%

0%

SOURCE: C.A.R. Renter Survey


CALIFORNIA ASSOCIATION OF REALTORS®
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64
lots of potentially eligible renters
Income-Eligible Renters in California
Hispanic, 353,432
Black, 80,629

Asian, 150,233

40% of Income
Other, 51,143
85% of Median Price
4.11% 30-yr FRM
3.5% Downpayment
1.38% Taxes/Insurance
1% Annual PMI Fee
White, 611,381

Not Qualified,
4,620,979

SOURCE: U.S. Census Bureau


CALIFORNIA ASSOCIATION OF REALTORS®
page
65
The Forecast
U.S. economic outlook

2015 2016 2017 2018 2019p 2020f

US GDP 2.6% 1.6% 2.3% 2.9% 2.2% 1.6%

Nonfarm Job Growth 2.1% 1.8% 1.4% 1.6% 1.3% 0.8%

Unemployment 5.3% 4.9% 4.4% 3.9% 3.7% 3.9%

CPI 0.1% 1.4% 2.0% 2.4% 2.0% 2.0%

Real Disposable Income, %


3.4% 2.7% 2.1% 2.9% 2.8% 2.5%
Change

CALIFORNIA ASSOCIATION OF REALTORS®


page
SERIES: U.S. Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 67
California housing market outlook

2015 2016 2017 2018 2019p 2020f

SFH Resales (000s) 409.4 417.7 424.9 402.8 390.2 393.5

% Change 7.0% 2.0% 1.7% -5.2% -3.1% 0.8%

Median Price ($000s) $476.3 $502.3 $537.9 $570.0 $593.2 $607.9

% Change 6.6% 5.4% 7.1% 6.0% 4.1% 2.5%

Housing Affordability
31% 31% 29% 28% 32% 32%
Index

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

page
SERIES: CA Housing Market Outlook CALIFORNIA ASSOCIATION OF REALTORS®
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 68
Key takeaways

• Market has improved with low rates


• Price growth appears to have stabilized for now
• Market competitiveness holds steady, finally
• Still a lot of challenges: affordability, supply, confidence
• 2020 more difficult than 2019, but we’re less pessimistic
• Need to not only sell the homes, but sell homeownership

CALIFORNIA ASSOCIATION OF REALTORS®


page
69
How CAR
Has Your Back
Where is the market data?
CALIFORNIA ASSOCIATION OF REALTORS® page
71
Where is the market data?
CALIFORNIA ASSOCIATION OF REALTORS®
Housing Market Overview Report
Where is the consumer data?
CALIFORNIA ASSOCIATION OF REALTORS® page
75
Where is the consumer data?
CALIFORNIA ASSOCIATION OF REALTORS®
Where is the consumer data?
CALIFORNIA ASSOCIATION OF REALTORS®
Housing
Matters
Podcast

CALIFORNIA ASSOCIATION OF REALTORS®


page
79
Thank You

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