California Housing Market Outlookassets-ccartoday.s3.amazonaws.com/_pdfs/... · Market Outlook Big Event –Contra Costa AOR October 16, 2019 Joel Singer Chief Executive Officer

California Housing Market Outlook

Big Event – Contra Costa AOR

October 16, 2019

Joel Singer

Chief Executive Officer

CALIFORNIA ASSOCIATION OF REALTORS®

Overview

• Housing market conditions remain soft

• Price hit record high but growth near lowest

level since early 2012

• Economic fundamentals are still solid

• Lots of wildcards and threats to the market

though

page

2

C.A.R. Google Consumer Poll: September 2019

page

3

57%56%51%

46%48%50%53%48%45%

51%49%52%

46%

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22%21%27%25%22%25%24%22%22%

26%23%23%22%

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Do you think it’s a good time to sell a

home in California?N=300

Do you think it’s a good time to buy a

home in California?N=300

SERIES: 2018/2019 Google Consumer Poll

SOURCE: NATIONAL ASSOCIATION OF REALTORS®

Existing Home Sales

% change+1.6% YTY

Sales up, price set record again, supply down

page

04

Price

$617,410+3.6% Y2Y

Unsold Inventory Index

3.2 months-3.0% Y2Y

Median Days on Market

23 days+9.5% Y2Y

Sales Price to List Price Ratio

98.7%-0.3% Y2Y

Aug 2019


-4.1% YTD

California home sales have the first back-to back yearly gain since April 2018

page

5

-15%

-10%

-5%

0%

5%

10%

Year-over-Year % Chg 3 per. Mov. Avg. (Year-over-Year % Chg)

SERIES: Sales of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Rates remain at historic lows – will move lower in 2020

page

6

January 2012 – April 2019

3.61 3.57

3.38 3.35

22

0

1

2

3

4

5

6

FRM

ARM

Fed Funds Rate

MONTHLY WEEKLY

January 2012 – October 2019

SERIES: 30Yr FRM, 5Yr ARM, Fed Funds Rate (Target Rate)

SOURCE: Freddie Mac, St. Louis Fed

Mortgage payment continued to drop;rates lowest in 34 months

page

7

-7.35%-10%

-5%

0%

5%

10%

15%

20%

Ja

n-1

6

Ma

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6

Ma

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YTY

% C

hg

.

California Median Price vs. Mortgage Payment

Price Growth Mortgage Pmt Growth

SERIES: Price Growth vs. Mortgage Payment Growth


Monthly mortgage: more affordable

page

8SERIES: Monthly mortgage payment


Region Aug 2019 Aug 2018 % CHG

CA SFH $2,251.18 $2,429.74 -7.3%

Los Angeles

Metropolitan Area$1,987.16 $2,140.57 -7.2%

Central Coast $2,545.02 $2,753.31 -7.6%

Central Valley $1,250.63 $1,325.12 -5.6%

Inland Empire $1,385.54 $1,451.51 -4.5%

S.F. Bay Area $3,281.54 $3,812.26 -13.9%

Down payment: remain elevated for most areas

page

9SERIES: Down payment


Region Aug 2019 Aug 2018 % CHG

CA SFH $123,482 $119,184 3.6%

Los Angeles

Metropolitan Area$109,000 $105,000 3.8%

Central Coast $139,600 $135,056 3.4%

Central Valley $68,600 $65,000 5.5%

Inland Empire $76,000 $71,200 6.7%

S.F. Bay Area $180,000 $187,000 -3.7%

California median price at all-time high for August

page

10

California, August 2019: $617,410, 1.5% MTM, 3.6% YTY

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Ja

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5

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8

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SERIES: Median Price of Existing Single Family Homes


While active listings had the largest drop since Dec 2017

page

11

-8.9%

-20%

-10%

0%

10%

20%

30%

40%

Ja

n-1

5

Ma

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5

Ma

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Year-over-Year % Chg

SERIES: Active Listing of Existing Single Family Homes


Inventory remains tight

page

12

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


August 2018: 3.3 Months; August 2019: 3.2 Months

Supply improved only at the upper end of the market

page

13

August 2019

-17.5%-14.3% -12.8%

-3.8%

4.5%

10.8%

-8.9%

-20%

-10%

0%

10%

20% Active Listing

SERIES: Active Listings of Existing Single Family Homes



More of everything, except…

page

14

27,052,000

39,740,508

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

California Population

1986 2018

112,491

205,074

0

50,000

100,000

150,000

200,000

250,000

California REALTORS®

1986 2018

393,983402,750

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

California Home Sales

1986 2018

255,559

114,370

0

50,000

100,000

150,000

200,000

250,000

300,000

California Permits

1988* 2018

So does the data…

page

15

1,424,208

845,833

386,467

111,792

379,967

183,111 134,437

28,670

SoCal Bay Area Central Valley Central Coast

California New Jobs vs. New Construction

2010-2018

New Jobs Permits

SERIES: Nonfarm Job Growth & New Housing Permits

SOURCE: CA EDD, Construction Industry Research Board

Housing affordability remains an issue

page

16

California, 1984-2019

CA, 32%

US, 57%

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

SERIES: Housing Affordability Index of Traditional Buyers


Minimum annual income required during affordability peak vs. current

page

17

Region 2012 Q1 2019 Q2 % CHG

CA SFH $56,320 $122,960 118.3%

CA

Condo/Townhomes$44,440 $95,960 115.9%

Los Angeles

Metropolitan Area$53,780 $109,090 102.8%

Inland Empire $35,170 $76,760 118.3%

S.F. Bay Area $90,370 $197,970 119.1%

US $32,000 $56,480 76.5%

SERIES: Housing Affordability Index of Existing Detached Homes


Housing affordability still the main reason for outmigration

page

18

21%

20%

14%

9%

8%

6%

6%

4%

1%

12%

28%

16%

12%

8%

7%

5%

5%

5%

1%

15%

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

2019 2018

All BuyersQ. What was the primary reason

for changing county?

SERIES: 2019 Housing Market Survey



Why low rates aren’t spurring even more home sales

• Rates aren’t everything

• Financial incentives to trade-up have

disappeared: SALT cap

• Home prices at all time highs

• Inventory is still constrained – lots of competition;

little choice

• 1st time buyers have limited options

page

19

Regional Housing Market

Update

Bay Area Home Sales August 2019

page

21SERIES: Sales of Existing Detached Homes


County Aug-18 Aug-19 YTY% Chg. YTD% Chg.

Alameda 940 942 0.2% -3.2%

Contra Costa 1,018 1,014 -0.4% -5.1%

Marin 210 193 -8.1% 1.9%

Napa 124 99 -20.2% -4.0%

San Francisco 183 166 -9.3% -1.9%

San Mateo 374 341 -8.8% -3.9%

Santa Clara 940 875 -6.9% -7.7%

Solano 431 467 8.4% -0.1%

Sonoma 445 393 -11.7% -3.1%

Median price – Bay Area

page

22SERIES: Median Price of Existing Detached Homes


County Aug-18 Aug-19 YTY% Chg.

Alameda $960,000 $905,500 -5.7%

Contra Costa $650,000 $672,750 3.5%

Marin $1,222,500 $1,230,000 0.6%

Napa $752,500 $699,000 -7.1%

San Francisco $1,550,000 $1,602,500 3.4%

San Mateo $1,500,000 $1,545,000 3.0%

Santa Clara $1,295,000 $1,190,000 -8.1%

Solano $455,000 $459,700 1.0%

Sonoma $670,000 $712,000 6.3%

Contra Costa


Contra Costa sales down 12 of last 13 months

page

25SERIES: Sales of Existing Detached Homes


0

200

400

600

800

1,000

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1,400

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-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

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August 2019 Sales: 1,014 Units, -5.1% YTD, -0.4% YTY

Median home price still on an upward trend but leveling off

page

26SERIES: Median Price of Existing Detached Homes


$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

Ja

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0%

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30%

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August 2019: $672,750, Up 3.5% YTY

Inventory remains tight

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

page

27SERIES: Unsold Inventory Index of Existing Single Family Homes


August 2018: 2.2 Months; August 2019: 2.2 Months

Local

Housing Market Update





Outlook


Economic fundamentals solid… for now

page

34

SOURCE: Bureau of Labor Statistics & Bureau of Economic Analysis

GDP 2.0%2019-Q2

Consumption 4.7%2019-Q2

Unemployment 3.5%September 2019

Core CPI 2.4%September 2019

Job Growth 1.4%September 2019


Unemployment at lowest rate in 50 years

page

35

0

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6

8

10

12

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US California

2.2%

4.5%

9.8%

0% 5% 10% 15%

San Francisco

South Bay

Orange County

Napa

San Diego

Ventura

Solano

Los Angeles

Santa Cruz

Stanislaus

Monterey

Madera

Bakersfield

Merced

0

20

40

60

80

100

120

140

160

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IND

EX

, 1

00

=1

98

5Consumer Confidence dropped 9 points in September

page

36

September 2019 125.1

SERIES: Consumer Confidence

SOURCE: The Conference Board


What is everyone worried about? Everything.

page

37

Recession

No deal

BrexitGSE PatchImpeachment

Global

economic

slowdown

Stock market

correction

Fed Misses

the Mark

Trade War

Inconsistent

Policies

U.S. – China Tariff War

page

38

SOURCE: CNBC, PIIE, USTR, International Trade Center,

China’s finance ministry

Impact of U.S. – China trade restrictions

page

39

Difference from baseline after 2 to 3 years

SOURCE: OECD

Stock market volatility

page

40

27,349

25,479

27,220

26,079

24500

25000

25500

26000

26500

27000

27500

28000

(7/15/19 – 10/02/19)

20000

21000

22000

23000

24000

25000

26000

27000

28000

(9/10/18 – 9/30/19)

SERIES: Dow 30

SOURCE: Yahoo! Finance


Down

16.1%

Down 6.2%

Up

16.0%

Up 6.2%

Threats to the market


Wildfire insurance crisis

page

42

• California homeowners struggle to buy fire insurance

• Stung by $24 billion in losses, insurers are raising rates and

dumping customers

• Homeowners are finding their premium up by thousands of

dollars


Wildfires caused many to have insurance issues

page

43

27% have had issues with fire

insurance (either themselves

or their clients)

Have you or your clients had difficulties with fire insurance/homeowner’s insurance that covers damage due to fire? (n=3,224)


Issues encountered

page

44

• 42% had difficulty in obtaining insurance

• 32% had an increase in premium

• 24% had a policy cancellation

Which of the following issues have been encountered? Please select all that apply. (n=1,687)


Inability to obtain insurance is hurting the housing market

page

45

34%had a potential buyer

decide not to buy because

they had difficulty obtaining

fire insurance

Have you had any potential buyer who decided not to buy because they had difficulty obtaining fire insurance? (n=1,687)

CALIFORNIA ASSOCIATION OF REALTORS® page

46

iBuyer:

a niche, a real threat or

an opportunity?

The industry has seen new internal

models…


Shift of power: broker to agentTechnology is the driving vehicle

page

48

Broker-centric Agent-centric

1960s-1970s

Main frame

computerBroker has all the

information

1980s-1990s

Personal computersAgents have more

information access


The next shift: agent to consumer???

page

49

Agent-centric

1980s-1990s

Personal computersAgents have more

information access

2000s – 2010s

Internet and mobileConsumers have all

the information

Consumer-centric

CALIFORNIA ASSOCIATION OF REALTORS® page

50

How do the venture

capitalists see us?

What are the ramifications of

having so much $$$ flowing

into the real estate industry?

$519 $1,225

$2,117 $2,893

$3,419 $3,945

128

211

283

326

374 335

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

2013 2014 2015 2016 2017 2018 (thru

10/18/18)

0

50

100

150

200

250

300

350

400

Dollars ($M) Deals

VC capital changing the rules of the game

page

51SOURCE: CB INSIGHTS

Real estate tech financing trend

page

052

Growing Quickly

page

053

Impact of iBuyers on Residential Real Estate

“The iBuying Market

could reach ~3% total

transaction penetration

by 2030, the equivalent

of ~175k homes.”

(Morgan Stanley)

page

54Source: Morgan Stanley Research

iBuying Homes (000s) % Total Homes

Where could this lead? iBuyer

is a viable alternative for those focused

on convenience & certainty AND

sets a floor for home prices.

What beats a zestimate? A real offer

from an iBuyer.

Majority of buyers and sellers used an agent

90%

used an

agent

SERIES: 2018 REALTRENDS Consumer Survey


page

56

-Up 5% from 2014

-Up 9% from 2001

81%

85%

94%

91%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

55 and up

45-54

35-44

18-34

Ag

eYes No

Over half of buyers needed help with negotiating terms of sale and price

29%

24%

22%

13%

9%

3%

Negotiating terms of sale

Finding the right home

Negotiating price

Mortgage financing

Help with legal issues

Other

In which part of the transaction did you need the most assistance from your agent? (n=949)

SERIES: 2019 Consumer Survey


page

57

59%

59%

44%

34%

32%

29%

5%

Negotiating price or terms of sale

Determining listing price/strategy

Advice about selling

Timing or sequencing the sale

Help with legal issues

Home staging

Other

page

58

Sellers needed assistance with a variety of things during the sale

With which part(s) of the sale did you need assistance from your agent?(n=942)

SERIES: 2019 Consumer Survey

SOURCE: NATIONAL ASSOCIATION OF REALTORS®


How to adapt? Embrace technology

page

59

It is not going away, whether you like it or not.

• Understand it

• Invest in it

• Take advantage of it


True stars will be those who adapt, and they will dominate the future

page

60

• There will be fewer agents overall

• Fewer agents working part-time

• Productivity will trend upwards

• Professional sports analogy: stars prosper


The Industry will continue to evolve…

page

61


U.S. economic outlook

SERIES: U.S. Economic Outlook


2015 2016 2017 2018 2019p 2020f

US GDP 2.6% 1.6% 2.3% 2.9% 2.4% 1.7%

Nonfarm Job Growth 2.1% 1.8% 1.4% 1.6% 1.5% 0.9%

Unemployment 5.3% 4.9% 4.4% 3.9% 3.7% 3.8%

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

Real Disposable Income, %

Change3.4% 2.7% 2.1% 2.9% 2.2% 2.3%

page

62


California economic outlook

page

63SERIES: U.S. Economic Outlook


2015 2016 2017 2018 2019p 2020f

Nonfarm Job Growth 2.7% 2.3% 1.6% 2.0% 1.5% 1.0%

Unemployment 6.2% 5.5% 4.8% 4.2% 4.3% 4.5%

CA Population (Million) 39.0 39.2 39.5 39.7 39.9 40.1

Population Growth 0.9% 0.7% 0.7% 0.6% 0.5% 0.4%


2020 California Housing Market Forecast

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

Index31% 31% 29% 28% 32% 32%

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

SERIES: CA Housing Market Outlook


page

64

Thank You

This presentation can be found on

www.car.org/marketdata

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California Housing Market Outlookassets-ccartoday.s3.amazonaws.com/_pdfs/... · Market Outlook Big Event –Contra Costa AOR October 16, 2019 Joel Singer Chief Executive Officer