2016 CALIFORNIA ECONOMIC & MARKET FORECAST October 8, 2015 EXPO – San Jose Convention Center...

2016 CALIFORNIA ECONOMIC & MARKET FORECAST

October 8, 2015EXPO – San Jose Convention Center

Leslie Appleton-Young, Vice President & Chief Economist

HOW DID I DO?LAST OCTOBER I TOLD YOU …

2015 FORECAST REPORT CARD

Forecast Date: October 2015 vs. October 2014SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

SFH Resales (000s)

% Change

Median Price ($000s)

% Change

30-Yr FRM

Housing Affordability Index

U.S. Gross Domestic Product

2014 Actual

$447.0

2015 Forecas

$478.7

2015 Project

$476.3

ECONOMIC OUTLOOK

ECONOMY HAS BEEN GROWING FOR 68 MONTHS

2014: 2.4%; 2015: 2.4%; 2016: 2.6% ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $

ANNUALLY QUARTERLY

2009 Largest Annual Drop since 1938 (-3.4%)

SERIES: GDPSOURCE: US Dept. of Commerce, Bureau of Economic Analysis

KEY SECTORS OF MACRO-ECONOMY

Consumer Sector

Business Sector

Government

International Trade

EMPLOYMENT STALLED IN SEPT:142K

California USANNUAL PERCENT CHANGE

SERIES: Total Nonfarm EmploymentSOURCE: US Bureau of Labor Statistics, CA Employment Development Division

Change Growth

United States

2,752,000

California 470,000

New York 130,500

Texas 217,700

198K/mo 2014 avg260K/mo 2015 avg

UNEMPLOYMENT RATE HOLDS STEADY

September 2015: US 5.1% & August 2015:CA 6.1%

14% US-CA CA US

SERIES: Unemployment Rate The U-6 rate covers the unemployed, underemployed and those who are not looking but who want a jobSOURCE: US Bureau of Labor Statistics, CA Employment Development Division

UNEMPLOYMENT RATES (U6 VS. U3)

September 2015 = U3: 5.1%, U6: 10.0%

18% U3 U6

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

PARTICIPATION DOWN: AGING POP & SLOW JOB GROWTH & HIGH LONG TERM UNEMPLOYMENT

CA- 62.5% (Dec. 2014) vs. USA- 62.7% (Dec. 2014)

70% US CA

Labor Force Rate

SERIES: Labor Force Participation RateSOURCE: BLS, Data Buffet

JOB TRENDS BY CALIFORNIA METRO AREA

BakersfieldVenturaModesto

Los AngelesOakland

Stockton MSAFresno MSASacramento

Inland EmpireSan Diego

Orange CountySan Francisco

San Jose

-1.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

-0.2%0.9%1.0%

1.8%1.9%2.0%

2.6%2.8%

3.0%3.1%3.2%

4.6%5.5%

SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

ANNUAL PERCENT CHANGE

August 2015: CA +3.0%, +470,000

CALIFORNIA JOB CHANGES BY INDUSTRY

Nondurable GoodsFinance & Insurance

Durable GoodsGovernmentRetail Trade

Educational ServicesInformation

Health Care & Social AssistanceWholesale Trade

Real Estate & Rental & LeasingAdmistrative & Support & Waste Services

Transportation, Warehousing & UtilitiesLeisure & Hospitality

ConstructionProfessional, Scientific & Technical Services

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

0.4%0.5%

1.3%2.0%2.0%

2.6%2.7%

3.0%3.5%3.5%3.6%

4.3%6.4%

SERIES: Total Nonfarm Employment By IndustrySOURCE: US Bureau of Labor Statistics, CA Employment Development Division

August 2015: CA +3.0%, +470,000ANNUAL PERCENT CHANGE

NONFARM EMPLOYMENT BY REGION

Aug 2015 Aug 2014 Change % Change

Southern California 8,834.4 8,626.3 208.1 2.4%

Bay Area 4,289.3 4,213.0 76.3 1.8%

Central Valley 1,540.9 1,492.4 48.5 3.2%

Central Coast 1,318.4 1,280.0 38.4 3.0%

North Central 1,391.4 1,349.0 42.4 3.1%

CALIFORNIA 294.4 291.9 2.5 0.9%

Nonfarm Employment (Thousands)

SERIES: Total Nonfarm EmploymentSOURCE: CA Employment Development Division

JOB LOSSES IN PRIOR RECESSIONS - RECENT CYCLE WORST BY FAR

CONSUMER CONFIDENCE INDEX

September 2015: 103.0

120INDEX, 100=1985

SERIES: Consumer ConfidenceSOURCE: The Conference Board

CONSUMER PRICE INDEX

August 2015: All Items 0.2% YTY; Core +1.8% YTY

6% All Items Core

ANNUAL PERCENT CHANGE

SERIES: Consumer Price IndexSOURCE: US Bureau of Labor Statistics

IS IT TIME? AH… LET’S WAIT A LITTLE LONGER

MORTGAGE RATES

January 2009 – October 2015

FRMARM

MONTHLY WEEKLY

SERIES: 30Yr FRM, 1Yr ARMSOURCE: Federal Home Loan Mortgage Corporation

RATE HIKE POSTPONED, BUT NOT CANCELLED

Factors for the delay

- Global economic slowdown/Strong dollar• Emerging markets vulnerable to rising rate environment

- Heighten stock market volatility• Negative wealth effect could lead to slowdown in

economic growth

- Avoid a repeat of Taper Tantrum• Fed had not articulated enough on all the moving parts

and did not want to give any surprises

WHERE ARE WE HEADED?

- Fed will likely begin normalization in December (maybe) and rates will gradually increase in 2016 and 2017. Action will be “data determined”

- Risk of rates increasing too fast: bringing economic growth to a halt

- Risk of rates increasing too slow: zero leverage when next downturn hits

MARKET DOWN SHARPLY FROM THE PEAK

1,944.4

S & P 500 Composite

MONTHLY AVERAGE

Causes of the financial market turmoil

- Highly valued asset markets

- Economic slowdown in China

- U.S. monetary policy normalization

- Collapse in energy and other commodity prices

CROSS CURRENTS NET OUT

$50 bbl Lower Oil Prices

50 bps Lower Mortgage Rates

15% $ Appreciation

5% Lower Stock Prices

U.S. HOME SALES UP IN 2015

U.S., Aug 2015 Sales: 4,690,000 Units, +8.1% YTD, +6.1% YTY

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

4,690,000

*Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family HomesSOURCE: NATIONAL ASSOCIATION OF REALTORS®

U.S. HOME PRICE GAINS MODERATING

U.S., Aug 2015: $230,200, -1.4% MTM, +5.1% YTY

$50,000

$100,000

$150,000

$200,000

$250,000 $230,200

SERIES: Median Price of Existing Single Family HomesSOURCE: NATIONAL ASSOCIATION OF REALTORS®

U.S. COMMERCIAL VACANCY RATES

SOURCE: NATIONAL ASSOCIATION OF REALTORS®

Commercial R.E. Q115 Q215 Q315 Q415 Q116 Q216 Q316 Q416 2014 2015 2016

Office 15.1% 15.9% 15.8% 15.5% 15.3% 15.1% 14.9% 14.8% 16.0% 15.6% 15.0%

Industrial 11.3% 10.8% 10.3% 9.8% 9.4% 9.0% 8.5% 8.4% 12.0% 11.7% 8.8%

Retail 13.7% 13.2% 13.0% 12.7% 12.3% 12.1% 11.9% 11.6% 13.8% 13.2% 12.0%

Multifamily 8.4% 6.6% 6.7% 6.6% 6.6% 6.6% 6.6% 6.7% 6.6% 7.1% 7.1%

CA METRO COMMERCIAL VACANCY RATES

2015 Q2

SOURCE: National Association of REALTORS®

MSA Office Industrial Retail Multi-Family

Los Angeles 14.8% 3.6% 5.7% 3.5%

Oakland-East Bay 17.1% 8.2% 6.0% 2.8%

Orange County 16.3% 3.4% 4.6% 3.3%

Sacramento 20.3% 11.1% 10.0% 2.6%

San Bernardino/Riverside 22.4% 7.2% 9.1% 2.5%

San Diego 14.7% 6.4% 6.1% 2.8%

San Francisco 10.6% 10.4% 3.0% 3.8%

San Jose 16.3% 16.2% 4.6% 3.4%

Ventura 16.4% - 8.5% 2.9%

HOUSEHOLD GROWTH AFFECTED BY DEMOGRAPHIC AND ECONOMIC

FACTORS

HOUSEHOLD FORMATION ACCELERATES IN 2015

U.S. ECONOMIC OUTLOOK

2010 2011 2012 2013 20142015p 2016f

US GDP 2.4% 1.8% 2.3% 2.2% 2.4% 2.4% 2.7%

Nonfarm Job Growth -0.7% 1.2% 1.7% 1.7% 1.9% 2.1% 1.8%

Unemployment 9.6% 8.9% 8.1% 7.4% 6.2% 5.3% 5.0%

CPI 1.6% 3.1% 2.1% 1.5% 1.6% 0.2% 2.1%Real Disposable Income, % Change 1.0% 2.5% 3.0% -0.2% 2.5% 3.3% 2.7%

30-Yr FRM 4.7% 4.5% 3.7% 4.0% 4.2% 3.9% 4.5%

SERIES: U.S. Economic OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

U.S. HOUSING MARKET OUTLOOK

2010 2011 2012 2013 20142015p 2016f

Existing Home Sales (000s) 4,190 4,260 4,660 5,090 4,940 5,292 5,471

% Change -3.5% 1.7% 9.4% 9.2% -2.9% 7.1% 3.4%

Median Price ($000s) $172.9 $166.1 $176.8 $197.1 $208.3 $221.4 $231.0

% Change 0.2% -3.9% 6.4% 11.5% 5.7% 6.3% 4.3%

SERIES: U.S. Existing home sales of single-family homes and condo/coopsSOURCE: NATIONAL ASSOCIATION OF REALTORS®

CALIFORNIA ECONOMIC OUTLOOK

2010 2011 2012 2013 20142015p2016f

Nonfarm Job Growth -1.1% 1.1% 2.4% 3.0% 2.2% 2.8% 2.3%

Unemployment Rate 12.3% 11.8% 10.4% 8.9% 7.5% 6.3% 5.5%

Population Growth 0.7% 0.7% 0.7% 0.9% 0.9% 0.9% 0.9%Real Disposable Income, % Change 0.9% 3.4% 4.7% 0.2% 3.0% 4.3% 4.5%

SERIES: CA Economic OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

CALIFORNIA HOUSING MARKET OUTLOOK

MEMBERSHIP FOLLOWS SALES WITH 1-2 YEAR LAG

100,000

200,000

300,000

400,000

500,000

600,000

700,000

50,000

100,000

150,000

200,000

250,000

2015p: 181,000

2016f: 183,000

Home Sales MembershipUnits of Home Sold # of Members

2015 SALES DID NOT DISAPPOINT

California, Aug 2015 Sales: 431,800 Units, +7.4% YTD, +9.3% 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 HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Aug-15:

431,800

Aug-14:

395,080

CA SALES RE-GAINED MOMENTUM IN 2015

SERIES: Sales of Existing Single Family Homes, Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Year-over-Year % ChgMoving average (Year-over-Year % Chg)

HOME PRICE GAINS HAVE SLOWED

California, Aug 2015: $493,420, 1.0% MTM, +2.5% 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% frompeak

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

Aug-15: $493,42

Aug-14: $481,25

Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15-20%

50% Condo Single-Family Homes

HOME PRICE APPRECIATIONS HAVE MODERATED SINCE MID 2013

SERIES: Sales of SFH and Condo UnitsSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

YTY% Chg. in Price

CALIFORNIA VS. U.S. MEDIAN PRICES

1970-2015

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000 California CA Price Trend US

• Housing market has recovered – Welcome to the new normal – Low mortgage rates– Job & Income growth are positive

• And yet…– Supply well below long-run average– Share of first-time buyers LOW– Affordability key concern for everyone

• It’s not an easy market/transaction for anyone .

2015 - WHERE ARE WE ?

UNDERWATER MORTGAGESRISING PRICES HAVE REVERSED EQUITY LOSSES

Negative Equity Share in CA Near Negative Equity Share in CA

SERIES: Underwater MortgagesSOURCE: CoreLogic

INVENTORY CONTINUED TO DECLINE FROM LAST YEAR

Aug 2014: 4.0 Months; Aug 2015: 3.6 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.

SERIES: Unsold Inventory Index of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

WHERE IS THE INVENTORY?

– Affordability challenge for repeat buyers• Low rate on current mortgage • Low property taxes• Why list when there is nowhere to go I can

afford?• Could not qualify for a mortgage today

– Foreclosure pipeline is dry – Investors renting instead of flipping– New construction recovering but LOW– Measurement error? Off- MLS (aka “pocket’)

listings not being counted in listing stats– Demographics: Trade-up buyer pool is smaller

FEWER MIDDLE-AGE ADULTS IN RECENT YEARS

Source: Harvard Joint Center of Housing Studies, Census Bureau

DROP IN HOMEOWNERSHIP

DECLINE IN # OF TRADE UP BUYERS DUE TO POPULATION LOSS & DROP IN HOMEOWNERSHIP RATE

REGIONAL HOUSING MARKETS

CA AUG. 2015 MEDIAN PRICES YTY

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

CA 2015 YTD SALES

SERIES: Year to Date Sales of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

$346,180 5% YTY

www.car.org/marketdata

12% YTD 8% YTY

4.6 32.7 95.8%NAUII

Months Days

MTM Price

Per Sq Ft

To List Ratio

Median PriceSales

NORTHERN CALIFORNIA AUG 2015

NORTHERN CALIFORNIA AUG. 2015 MEDIAN

PRICES

NORTHERN CALIFORNIA 2015 YTD SALES

$550,120 15% YTY

6% YTD 14% YTY

3.6 46.1 NANAUII

Months Days

MTM Price

Per Sq Ft

To List Ratio

Median PriceSales

NORTHERN WINE AUG 2015

NORTHERN WINEAUG. 2015 MEDIAN

PRICES

NORTHERN WINE2015 YTD SALES

$804,190 10% YTY

5% YTD 0.2% YTY

2.3 22.3 103.4%

$509UII

Months Days

MTM Price

Per Sq Ft

To List Ratio

Median PriceSales

BAY AREA AUG 2015

BAY AREAAUG. 2015 MEDIAN

PRICES

BAY AREA2015 YTD SALES

$276,900 7% YTY

10% YTD 12% YTY

3.6 24.4 97.3%NAUII

Months Days

MTM Price

Per Sq Ft

To List Ratio

Median PriceSales

CENTRAL VALLEY AUG 2015

CENTRAL VALLEYAUG. 2015 MEDIAN

PRICES

CENTRAL VALLEY2015 YTD SALES

$520,830 4% YTY

11% YTD 6% YTY

3.9 29.1 97.7%NAUII

Months Days

MTM Price

Per Sq Ft

To List Ratio

Median PriceSales

CENTRAL COAST AUG 2015

CENTRAL COASTAUG. 2015 MEDIAN

PRICES

CENTRAL COAST2015 YTD SALES

$464,400 3% YTY

9% YTD 7% YTY

3.9 41.9 98.6%NAUII

Months Days

MTM Price

Per Sq Ft

To List Ratio

Median PriceSales

SOUTHERN CALIFORNIA AUG 2015

SOUTHERN CALIFORNIAAUG. 2015 MEDIAN

PRICES

SOUTHERN CALIFORNIA2015 YTD SALES

ANNUAL HOUSING MARKET SURVEY:

2015 FINDINGS

SHARE OF SECOND/ VACATION HOMES HIGHER AFTER TWO YEARS’ OF DECLINE

SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

% to Total Sales

SHARE OF INVESTMENT PROPERTIES DROPS TO THE LOWEST LEVEL SINCE 2009

% to Total Sales

FIRST-TIME BUYERS FINDING IT HARD TO BUY

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150%

% First-Time Home Buyers Long Run Average

Long Run Average = 38%

SHARE OF CASH BUYERS LOWEST SINCE 2009

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150%

% of All Cash Sales

• Almost one-fourth of buyers paid with all cash

• The share of all cash buyers is the lowest in the last 6 years

THE SHARE OF INTERNATIONAL BUYERS LOWEST IN 8 YEARS

2008 2009 2010 2011 2012 2013 2014 20150%

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.?

0 1 2 3 4 5 or more0%

6% 4% 2% 4%

3% 2%5%

9%5% 3% 1%

# of Properties Sold to International Buyers in the Last 12 Months

% Who Sold to International Buyers

Q. How many properties have you sold to an international buyer in the last 12 months? SERIES: 2015 Housing Market Survey

23% OF CA REALTORS® WORKED WITH AN INTERNATIONAL BUYER IN THE PAST 12 MONTHS

China Mexico South Korea0%

COUNTRY OF INTERNATIONAL BUYER

THE MEDIAN DOWN PAYMENT INCHED UP FROM 2014

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$74,500

Median Down Payment % of Down Payment to Price

Q. What was the amount of downpayment?

MARKET COMPETITION COOLS DOWN AFTER PEAKING IN 2013

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150%

53% 53%

4.34.0

% with Multiple Offers# of Multiple offers (Average)

YEARS OWNED HOME BEFORE SELLING

All Sellers

NET CASH GAIN TO SELLERS HIGHEST SINCE 2007

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015$0

$50,000

$100,000

$150,000

$200,000

$250,000

$120,000

Q. What was the net cash gain or net loss to the seller as a result of this sale?

HOUSING AFFORDABILITY:CRISIS BREWING

CALIFORNIA PRICES MORE VOLATILE AND MUCH HIGHER THAN THE NATION

1970-2015

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000 California US

The difference between California’s prices and national home prices increasedfrom $10K in 1970 to $255K today

2015 Dollar Value

HOUSING AFFORDABILITY PEAKED Q1 2012PRICES V. LOW RATES AND INCOME GROWTH

California vs. U.S. – 1984-2015% OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME

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

CA USAnnual Quarterly

HOUSING AFFORDABILITY IN CA: BY COUNTY

Tulare

Stanisl

San Jo

aquin CA

Los Angel

San Luis

Obispo

Orange

Contra

rancis

57 56 55 5450 50

47 46 4441 40

30 30 28 27 25 25 25 23 21 20 19 18 18 17 1613

2015 Q2

SERIES: Housing Affordability IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

% able to purchase median priced home

AFFORDABLE INVENTORY AVAILABLE TO MEDIAN-INCOME HOUSEHOLDS

2015 Q2

Retail Sales-

persons

Chefs and Head

Elemen-tary

School Teachers

Fire-fighters

Police and

Sherriff's Patrol Of-

ficers

Com-puter Pro-

grammers

Regis-tered

Nurses

Software Devel-opers

(Applica-tions)

Min. Inc Required to Buy a

Med. Home

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$27,010

$45,340

$69,990$71,630

$87,520$89,250

$98,400

$119,970

$95,978

HOW WAGES MEASURED AGAINST INCOME REQUIRED TO BUY A HOME

SOURCE: Bureau of Labor Statistics, C.A.R.

2014 Annual Mean Wage

California

Retail Sales-

persons

Auto. Mechan-

Chefs and Head Cooks

Elemen-tary

School Teachers

Fire-fighters

Computer Pro-

gram-mers

Regis-tered

Nurses

Software Develop-ers (Ap-

plications)

Med. Home

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$30,340

$52,690$49,230

$70,680$88,390

$97,570

$124,980$118,690

$267,783

San Francisco

Retail Sales-

persons

Auto. Mechan-

Elemen-tary

School Teachers

Fire-fighters

Computer Pro-

gram-mers

Regis-tered

Nurses

plications)

Med. Home

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$26,610

$46,790$50,730

$67,300

$58,520

$75,980

$105,390$103,730

$57,581

Sacramento

Retail Sales-

persons

Auto. Mechan-

Elemen-tary

School Teachers

Fire-fighters

Computer Pro-

gram-mers

Regis-tered

Nurses

plications)

Med. Home

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$26,870

$42,610$44,330

$72,720

$82,830$86,840

$93,180

$103,790

$88,082

Los Angeles

CALIFORNIA’S MAJOR METROS ARE LESS AFFORDABLE THAN THE AVERAGE U.S.

SOURCE: Legislative Analyst’s Office

SHARE OF FIRST-TIME BUYERS REMAINS BELOW LONG-RUN AVERAGE

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150%

% First-Time Home Buyers Long Run Average

Long Run Average = 38%

HOMEOWNERSHIP RATES

California Vs. U.S.

Peak: 60.2%

Peak: 69.0%

SERIES: Homeownership RatesSOURCE: U.S. Census Bureau

“MISSING” 100,000 UNITS ANNUALLY, AT LEAST

2015p: 98,500 (42,190 sf, 56,310 mf)2016f: 124,600 total units

SERIES: New Housing PermitsSOURCE: Construction Industry Research Board

100000

150000

200000

250000

300000

350000

Single Family Multi-Family

Household Growth:

165,000/yr

THE BOOMERS AND THEIR NEXT MOVE

BOOMERS – BORN BETWEEN 1946-1964

What is your age?

50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 680%

Age (Years)

SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Average: 59

MAJORITY ARE MARRIED

What is your marital status?

Married 56%

Single 26%

Other 18%

BABY BOOMERS LESS DIVERSE THAN MILLENNIALS

What is your ethnic background?

Cau-casian/ White

Asian African American/

Hispanic/ Latino

Other0%

9%4% 4%

Boomers Millennials

3/4 BABY BOOMERS ARE HOME OWNERS

What is your current living situation?

Own 75%

Rent 22%

Other 3%

HOME OWNERSHIP RATE NEARLY 4 TIMES HIGHER AMONG BOOMERS

Baby Boomers

OwnRentOther

Millennials

OwnRentOther

What is your current living situation?

MOST HAVE EQUITY IN THEIR HOME

Do you have equity in your home?

Yes; 92%

No; 8%

MOST DON’T PLAN TO USE HOME EQUITY FOR INCOME DURING RETIREMENT

Are you planning on using this equity for income during retirement?

Yes; 23%

No; 77%

MAJORITY DO NOT PLAN TO SELL HOME WHEN THEY RETIRE

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

Yes; 10%

No; 59%

Don't know/

unsure; 32%

MAJORITY WON’T SELL BECAUSE THEY LIKE THEIR HOME

Why do you not plan to sell your current home when you retire?

I like my homeI cannot afford to buy another retirement homeI plan to give the home to my child(ren)Another reason

¼ POSTPONED RETIREMENT BECAUSE …

Did you have to postpone your date of retirement due to any of the following?

Death of significant other

Loss of pension

Medical bills

Loss of home

Loss of retirement income

Loss of assets/ income due to 2008 economic recession

Loss of employment

Did not save enough money yet for retirement

0% 2% 4% 6% 8% 10% 12% 14%

> ½ DO NOT FEEL THEY HAVE SAVED ENOUGH MONEY TO RETIRE COMFORTABLY

Do you feel you have saved enough money to retire comfortably?

Yes; 46%No; 54%

MAJORITY WORRY ABOUT CHILDRENS’ ABILITY TO BECOME HOME OWNERS

Do you worry about your children’s ability to become home owners in the future?

Yes; 55%

No; 45%

2/5 PLAN TO HELP CHILDREN WITH DOWN PAYMENT

Do you plan to help your children with their down payment to purchase a home?

Yes; 43%No; 57%

WHAT FINANCIAL DECISION WOULD BOOMERS CHANGE?

If you could change one financial decision that you made within the past 10 years, what would it be?

Moving to the wrong location

Cash out/ open IRA

Carry less debt/ poor credit

Retiring prematurely

Seek better job

Invest in real estate

Better investment decisions

Saving more/ spending less

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

WHAT KEEPS BOOMERS UP AT NIGHT?

What keeps you up at night?

Economy

World politics

TV/ internet

Health concerns

Insomnia

Ache/ pain

Job security

Family issues

Stress/ anxiety

Bills/ finances

Nothing

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

CRAFTSMAN BUNGALOW IS DREAM HOME FOR 1/3 HOME OWNERS

Q. Which of the following is your dream home?

craftsman bungalow

neo colonial

dream mansion Frank Lloyd Wright

desert modernism art nouveau/art moderne modern townhome downtown loft

brick urban rowhome

5.7% 5.1% 2.6%

2/3 HOME OWNERS PREFER A NIGHT IN WITH FAMILY/FRIENDS FOR FUN

Q. In which of the following activities would you like to participate? Select all that apply.

Burning Man

Woodstock in 1969

A "Hangover" weekend in Vegas

A week camping/fishing

A concert with your favorite artist

A fantastic movie

A trip to New York City

A trip to Paris

A quiet night in with friends/family

0% 10% 20% 30% 40% 50% 60% 70%

DIVERSITY IN HOMEOWNERSHIP

SHARE OF MINORITY HOME BUYERS HAS GROWN OVER TIME …

Q. What was the race/ethnicity of the head of household buying the property

White/Non-Hispanic

African-American Hispanic Asian0%

14.0%16.5%

1995 2005 2015

HOUSING DEMAND WILL INCREASE, LARGELY DRIVEN BY MINORITIES

SOURCE: Urban Institute

2.7 4.6 2.2 2.18.9 11.6

1.3 4.8 1.9 2.59.1 10.4

Projected household growth, 2010-2010

Net new households, millions

46%39%

18%12%

18%19%

88%77%

2010-2020

Californ

Nevada

ington

Oregon

Arizona

Colorado

Rest of W

Illinois

Rest of M

idwest

Minnesota

Michigan

DC Region

FloridaTexa

Georgia

North Caro

Rest of S

New Jerse

New York

Massach

usetts

Connecticu

Pennsylvania

Rest of N

ortheast

TOTAL U.S.

100%West Midwest South Northeast

Source: Dowell Myers and John Pitkin, “Immigrant Contributions to the Housing Market…” RIHA, Mortgage Bankers Association, 2013

IMMIGRANT SHARE OF GROWTH IN HOME OWNERS

2016 FORECAST

CALIFORNIA HOUSING MARKET OUTLOOK

2010 2011 2012 2013 20142015p2016f

SFH Resales (000s) 416.5 422.6 439.8 414.9 383.3 407.5 433.0

% Change -12.3% 1.4% 4.1% -5.9% -7.6% 6.3% 6.3%

Median Price ($000s) $305.0 $286.0 $319.3 $407.2 $447.0 $476.3 $491.3

% Change 10.9% -6.2% 11.6% 27.5% 9.8% 6.5% 3.2%Housing Affordability Index 48% 53% 51% 36% 30% 31% 27%

30-Yr FRM 4.7% 4.5% 3.7% 4.0% 4.2% 3.9% 4.5%

SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

SALES UP FOR 2015 AND CONTINUE TO IMPROVE IN 2015; PRICE WILL GROW STEADILY THIS YEAR

AND NEXT

Units (Thousand)

100,000

200,000

300,000

400,000

500,000

600,000

700,000

407,490433,030

Sales of Existing Detached Homes

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$476,250 $491,280

Median PricePrice

(Thousand)

CA: DOLLAR VOLUME UP 13.3% IN 2015, UP 9.6% IN 2016

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015p2016f$0

$164 $133 $131 $127 $121

$140 $169 $171

$194 $213

$ Volume of Sales Percent Change

% Change$ in Billion

WILD CARDS

– Stock market volatility– Slower growth: China– Further collapse in

energy/commodity prices – Geo-political tensions– Terrorism– El Nino/Water Shortage – 2016 Presidential election

MARKET OPPORTUNITIES IN 2016

MARKET OPPORTUNITIES

– Millennials• Turn renters into first-time buyers• First-time buyers who bought with tax credit

back in 2009 are ready to trade-up• Understand the differences in needs between

Millennial first-time buyers and Millennial trade-up buyers

– Baby Boomers• Ready to downsize• Understand Boomers’ priorities: investment and

retirement• If we can’t keep them in CA, help them find a

place out of state. Network with REALTORS® outside of CA

MARKET OPPORTUNITIES

– Minorities • Minorities have grown in homebuyer share over

time • Surge in the number of minority households will

play a big role in the increase in housing demand in the next 10 years

• Develop programs and marketing material tailored towards minority home buyers of different ethnicity

– Investor sellers• Investor buyers who purchased bargain

properties a few years ago are ready to sell as home prices start leveling off

– Everyone else…• Low interest rates will be here a little longer

MOST MILLENNIALS UNCERTAIN/DOUBTFUL THAT THEY COULD OBTAIN A MORTGAGE

NOW?AMILLENNIAL ETHNICITY

SOURCE: C.A.R. 2014 Millennial SurveyQ: Could you obtain a mortgage if you applied now ?

Yes 22%

No 33%

Don't know 45%

#TBTC.A.R.110

#TBT…. SACRAMENTO 110 YEARS AGO

730 N Street

#TBT…. SAN FRANCISCO 110 YEARS AGO

500 block of Liberty Street

#TBT…. FRESNO 110 YEARS AGO

Brix Mansion 2844 Fresno St

#TBT…. SUMMER OF LOVE

THANK YOU!

www.car.org/marketdatalesliea@car.org

Facebook: CARResearchgroupTwitter: CARResearchInfo

This presentation can be found on www.car.org/marketdata

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