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2019 Mid-Year

Market Forecast

July 10, 2019


Leslie Appleton-Young
SVP & Chief Economist
And Jordan Levine
Deputy Chief Economist
Economic Fundamentals
Economic fundamentals remain solid

GDP 3.1%
2019-Q1
Unemployment 3.7%
June 2019
Consumption 0.9%
2019-Q1
Job Growth 1.5%
June 2019
Core CPI 2.0%
May 2019

CALIFORNIA ASSOCIATION OF REALTORS®


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Unemployment at lowest
rate in 50 years
Kern 8.4%
Fresno 7.7%
San Joaquin 6.0%
14
US Los Angeles 4.0%
12 Riverside 3.8%
San Bernardino 3.6%
10 Santa Barbara 3.5%
8 Sacramento 3.5%
Ventura 3.2%
6 San Diego 3.0%
Contra Costa 2.8%
4
San Luis Obispo 2.6%
2 Orange 2.6%
Santa Clara 2.3%
0 San Francisco 2.1%
Sep-78
Sep-80
Sep-82
Sep-84
Sep-88
Sep-90
Sep-92
Sep-94
Sep-98
Sep-00
Sep-02
Sep-04
Sep-08
Sep-10
Sep-12
Sep-14
Sep-18
Sep-76

Sep-86

Sep-96

Sep-06

Sep-16
San Mateo 1.9%
0% 2% 4% 6% 8% 10%

CALIFORNIA ASSOCIATION OF REALTORS®


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Consumers confidence remained elevated

June 2019: 121.5


160
140
120
INDEX, 100=1985

100
80
60
40
20
0
May-06

May-08

May-10

May-12

May-14

May-16

May-18
Jan-05

Sep-05

Jan-07

Sep-07

Jan-09

Sep-09

Jan-11

Sep-11

Jan-13

Sep-13

Jan-15

Sep-15

Jan-17

Sep-17

Jan-19
SERIES: Consumer Confidence
SOURCE: The Conference Board
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CALIFORNIA ASSOCIATION OF REALTORS® 5
Fed may Lower rates in 2019 – WHAT?
January 2012 – July 2019
6
January 2012 MONTHLY
– April 2019 WEEKLY
5
3.80
4 3.75
3.48 3.45
3

2 FRM 2.5 2.5


ARM
1 Fed Funds Rate

SERIES: 30Yr FRM, 5Yr ARM, Fed Funds Rate (Target Rate)
SOURCE: Freddie Mac, St. Louis Fed
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CALIFORNIA ASSOCIATION OF REALTORS® 6
Rates drop lower mortgage payment
Q1-2019 Median Price $545,820
20% Downpayment

Monthly Mortgage $160,000 Minimum Qualifying Income


$3,200
$2,760 $135,506
$2,618 $129,827
$2,800 $140,000 $124,279
$2,479 $118,870
$2,344 $113,607
$2,212 $120,000 $108,494
$2,400 $2,085 $103,539
$1,961 $98,746
$2,000 $1,841 $100,000

$1,600 $80,000

$1,200 $60,000

$800 $40,000

$400 $20,000

$0 $-
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%

SERIES: Monthly Mortgage & Min. Qualifying Income page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
7
Mortgage payment continued to decline

California Median Price vs. Mortgage Payment


20%

15%

10%
YTY% Chg.

5%

0%

-5%

-10%

Price Growth Mortgage Pmt Growth

SERIES: Price Growth vs. Mortgage Payment Growth page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
8
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

CALIFORNIA ASSOCIATION OF REALTORS®


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Always Lots of Wildcards

• Mortgage rates
• Financial market turmoil/Fed policy
• GSE Reform

• Tax Bill Impacts

• 2019 ipo’s: uber, lyft, airbnb, slack, wework, planatir tech,


pinterest, postmates, robinhood

CALIFORNIA ASSOCIATION OF REALTORS®


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Let’s Talk Housing?
Attitude towards buying and selling

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

57% 56%
51% 50% 53% 51%
46% 48% 48% 45%

27% 25%
22% 21% 22% 25% 24% 22% 22% 26%

SERIES: 2018/2019 Google Consumer Poll page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
12
Sales down, price set record, inventory up
May 2019
-0.6% YTY Existing Home Sales
-6.0% YTD % change
(Not seasonally adjusted)

Unsold Median Days Sales Price to


Price Inventory Index on Market List Price Ratio

$611,190 3.2 months 18 days 99.3%


+1.7% Y2Y +6.7% Y2Y +20.0% Y2Y -0.7% Y2Y

CALIFORNIA ASSOCIATION OF REALTORS®


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Sales above 400k for the first time in 10 months

California, May 2019 Sales: 406,960 Units


700,000
600,000
500,000
400,000
300,000
200,000
100,000
-
May-10
Sep-05

Sep-07

Sep-09

Sep-11

Sep-13

Sep-15

Sep-17
Jan-05

May-06
Jan-07

May-08
Jan-09

Jan-11

May-12
Jan-13

May-14
Jan-15

May-16
Jan-17

May-18
Jan-19
SERIES: Sales of Existing Single Family Homes page
*Sales are seasonally adjusted and annualized SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
14
Underperform in low and high price ranges

May 2019 (YTY% Chg.)

8% 5.2%
6% 3.8%
4% 1.8% 2.0%
2%
0%
-2% -0.3%
-4%
-6% -4.2%
-8%
-10%
-12%
-14% -13.0%

SERIES: Sales of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
15
Sales by region

May 2019 Home Sales by Region May 2019 Home Sales Growth
by Region
Other 2.0%
0.8%
Counties, 1.0%
Central 0.0%
Coast, 7% Central -1.0%
4% Valley, -2.0% -0.9% -0.9%
22% -3.0%
-2.7%
-4.0%
-5.0% -4.2%

Southern S.F. Bay


California, Area,
47% 20%
CALIFORNIA ASSOCIATION OF REALTORS®
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Bay Area sales up for the first time since July 2018

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


Alameda 1,013 1,034 2.1% 0.9%
Contra Costa 1,090 1,172 7.5% -5.5%
Marin 239 244 2.1% 2.6%
Napa 104 115 10.6% -8.3%
San Francisco 236 234 -0.8% 2.4%
San Mateo 452 420 -7.1% -1.8%
Santa Clara 1,097 1,017 -7.3% -8.7%
Solano 427 433 1.4% -3.1%
Sonoma 390 420 7.7% -5.5%

SERIES: Sales of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
17
So. California sales began to trend up

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

Los Angeles 3,987 3,989 0.1% -6.7%

Orange 1,725 1,691 -2.0% -7.6%

Riverside 2,328 2,363 1.5% -6.5%

San Bernardino 1,373 1,227 -10.6% -12.5%

San Diego 2,208 2,213 0.2% -2.5%

Ventura 461 492 6.7% -1.0%

SERIES: Sales of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
18
Sales of existing single-family homes – Central Valley

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


Fresno 828 764 -7.7% -10.4%
Glenn 31 18 -41.9% 27.6%
Kern 624 549 -12.0% -2.3%
Kings 104 113 8.7% -5.9%
Madera 177 195 10.2% 9.5%
Merced 145 162 11.7% -4.9%
Placer 614 629 2.4% -1.3%
Sacramento 1,693 1,596 -5.7% -9.3%
San Benito 65 49 -24.6% -28.0%
San Joaquin 631 638 1.1% -5.2%
Stanislaus 507 545 7.5% -1.1%
Tulare 350 355 1.4% -1.8%

SERIES: Sales of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
19
Sales of existing single-family homes – Central Coast

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

Monterey 2,574 2,578 0.2% -10.2%

San Luis Obispo 3,106 2,970 -4.4% -4.6%

Santa Barbara 2,697 2,483 -7.9% -1.1%

Santa Cruz 1,826 1,793 -1.8% -16.1%

SERIES: Sales of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
20
Sales of existing single-family homes – Other counties

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


Butte 166 179 7.8% 36.3%
Calaveras 130 107 -17.7% -12.0%
Del Norte 19 14 -26.3% -26.3%
El Dorado 299 288 -3.7% -15.0%
Humboldt 113 127 12.4% 2.4%
Lake 81 81 0.0% -15.2%
Lassen 29 29 0.0% 0.0%
Mariposa 18 21 16.7% 13.0%
Mendocino 57 62 8.8% 12.3%
Mono 10 6 -40.0% 21.1%

SERIES: Sales of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
21
Sales of existing single-family homes – Other counties

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


Nevada 121 137 13.2% 4.7%
Plumas 39 25 -35.9% 16.2%
Shasta 271 297 9.6% 9.1%
Siskiyou 50 46 -8.0% -10.7%
Sutter 92 73 -20.7% -20.1%
Tehama 35 49 40.0% 44.6%
Tuolumne 73 73 0.0% -15.0%
Yolo 180 146 -18.9% -9.6%
Yuba 85 91 7.1% 0.0%

SERIES: Sales of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
22
Price hit new high but slow growth

$700,000 California, May 2019: $611,190, +1.4% MTM, +1.7% YTY


$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$-
Jan-05
Sep-05

Jan-07

Jan-09

Jan-15
May-06

Sep-07
May-08

Sep-09

Jan-11

Jan-13
May-10

Sep-11
May-12

Sep-13
May-14

Sep-15

Jan-17

Jan-19
May-16

Sep-17
May-18
SERIES: Median Price of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
23
Soft at the high-end

California Year-over-Year Price Growth by Quintile (May 2019)


7% 6.3%
6%
5%
4% 3.5%
3%
2%
1.0%
1%
0.1%
0%
-1% -0.7% -0.5%
-2% -1.4% -1.7% -1.4%
-3%
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®
24
Median price – Bay Area

County May-18 May-19 YTY% Chg.


Alameda $1,025,000 $959,000 -6.4%
Contra Costa $687,500 $700,355 1.9%
Marin $1,415,000 $1,400,000 -1.1%
Napa $702,500 $725,000 3.2%
San Francisco $1,620,000 $1,697,500 4.8%
San Mateo $1,600,000 $1,766,500 10.4%
Santa Clara $1,400,000 $1,335,000 -4.6%
Solano $451,000 $446,000 -1.1%
Sonoma $698,500 $666,000 -4.7%

SERIES: Median Price of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
25
Median price – Southern California

County May-18 May-19 YTY% Chg.


Los Angeles $536,940 $539,480 0.5%
Orange $838,000 $845,000 0.8%
Riverside $409,920 $420,000 2.5%
San Bernardino $285,000 $315,000 10.5%
San Diego $640,000 $650,000 1.6%
Ventura $670,000 $659,500 -1.6%

SERIES: Median Price of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
26
Median price – Central Valley

County May-18 May-19 YTY% Chg.


Fresno $279,980 $284,900 1.8%
Glenn $230,000 $245,000 6.5%
Kern $247,750 $252,000 1.7%
Kings $235,000 $260,000 10.6%
Madera $259,000 $270,000 4.2%
Merced $262,000 $285,000 8.8%
Placer $499,650 $514,900 3.1%
Sacramento $375,000 $385,000 2.7%
San Benito $579,900 $600,000 3.5%
San Joaquin $367,860 $380,000 3.3%
Stanislaus $325,000 $335,000 3.1%
Tulare $234,950 $248,000 5.6%

SERIES: Median Price of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
27
Median price – Central Coast

County May-18 May-19 YTY% Chg.

Monterey $677,000 $639,000 -5.6%

San Luis Obispo $638,660 $640,000 0.2%

Santa Barbara $680,000 $696,000 2.4%

Santa Cruz $865,000 $935,000 8.1%

SERIES: Median Price of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
28
Median price – Other counties

County May-18 May-19 YTY% Chg.


Butte $324,100 $359,000 10.8%
Calaveras $329,000 $375,000 14.0%
Del Norte $214,000 $256,850 20.0%
El Dorado $552,000 $521,380 -5.5%
Humboldt $314,900 $315,000 0.0%
Lake $263,400 $267,000 1.4%
Lassen $215,000 $205,000 -4.7%
Mariposa $320,000 $295,000 -7.8%
Mendocino $420,000 $388,500 -7.5%
Mono $852,500 $564,500 -33.8%

SERIES: Median Price of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
29
Median price – Other counties

County May-18 May-19 YTY% Chg.


Nevada $404,000 $420,000 4.0%
Plumas $310,000 $350,500 13.1%
Shasta $264,000 $285,000 8.0%
Siskiyou $210,000 $235,000 11.9%
Sutter $281,000 $319,900 13.8%
Tehama $197,500 $243,000 23.0%
Tuolumne $300,000 $310,000 3.3%
Yolo $476,500 $469,500 -1.5%
Yuba $297,500 $311,000 4.5%

SERIES: Median Price of Existing Detached Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
30
Inventory Index up due primarily
to increase in active listings
18.0
May 2018: 3.0 Months; May 2019: 3.2 Months
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
May-08
May-06

May-10

May-12

May-14

May-16

May-18
Jan-05

Sep-05

Jan-07

Sep-07

Jan-09

Sep-09

Jan-11

Sep-11

Jan-13

Sep-13

Jan-15

Sep-15

Jan-17

Sep-17

Jan-19
SERIES: Unsold Inventory Index of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
31
Inventory Index Highest in Millions

California Unsold Inventory Index by Segment


9 8.4
8 7.5
7
6
5 4.4
3.9 4.1 3.9
4 3.6 3.4
3.3
2.8 2.9 2.8 2.8 2.8 3.0 2.8 3.0 3.0 3.0 3.2
3
2
1
0
Under $300- $500- $750K-$1M $1-$1.25M $1.25- $1.5-$2M $2-$3M $3M + Total
$300K $500K $750K $1.5M
May-18 May-19

SERIES: Unsold Inventory Index of Existing Single Family Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
32
Active listings had smallest
growth since April 2018

40%
Year-over-Year % Chg

30%

20%

10% 7.4%

0%

-10%

-20%
Jan-15
Mar-15

Jul-15

Jul-16

Nov-16
Jan-17
Mar-17

Jul-17

Nov-17
Jan-18
Mar-18

Jul-18

Jan-19
Mar-19
May-15

Sep-15
Nov-15
Jan-16
Mar-16
May-16

Sep-16

May-17

May-18

Sep-18
Nov-18

May-19
Sep-17
SERIES: Active Listing of Existing Single Family Homes page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
33
Supply improved in all but
the lowest price segment
May 2019
Active Listing
20% 16.0%
15.9%
12.1% 11.0%
10% 7.4%
1.1%
0%

-10% -6.9%

SERIES: Active Listings of Existing Single Family Homes page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
34
Active listings increased
in all regions
May-18 May-19
35,000
30,000 27,680 28,998
25,000
Active Listings

20,000
15,000
10,284 10,407
10,000 8,024
6,148
5,000 2,618 2,721
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®
35
Active listings increased
in all regions
May 2019
Sales Active Listings
40%
30.5%
Year-to-Year % Chg

30%

20%

10%
4.8% 3.9%
0.8% 1.2%
0%
-0.9% -2.7% -4.2%
-10%
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®
36
Housing affordability remains an issue
California, 1984-2019
80%
Annual Quarterly
% OF HOUSEHOLDS THAT CAN
BUY A MEDIAN-PRICED HOME

70%
60% US, 57%
50%
40%
CA, 32%
30%
20%
10%
0%

SERIES: Housing Affordability Index of Traditional Buyers page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
37
Many simply can’t afford to buy
2019-Q1: % able to purchase median-priced home
70%
63%
60% 57%
50%
40% 32%
30%
20% 10%
10%
0%

SERIES: Housing Affordability Index of Traditional Buyers page


SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
38
How wages stack up against prices?
California
2018 Annual Mean Wage
$140,000 $127,950 $126,490
$120,000 $101,380 $106,950
$100,000 $81,580
$80,100
$80,000
$60,000
$31,460
$40,000
$20,000
$0
Retail Teachers Firefighters Police Nurses Developers Min. Inc
Salespersons Required to
Buy a Med.
Home

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


CALIFORNIA ASSOCIATION OF REALTORS®
39
CA’s Homeownership< U.S.

• Click
75% to edit Master
CA text
US styles
• Second level
70% Peak: 69.0%

Third level
•64.5%
65% 63.9%
• Fourth level
60% • Fifth level
Peak: 60.2%
54.4%
55%
53.7%
50%

45%

SERIES: Homeownership Rates


SOURCE: U.S. Census Bureau
page
CALIFORNIA ASSOCIATION OF REALTORS® 040
0%
10%
20%
30%
40%
50%
60%
70%
Hawthorne

80% 76.0%
Santa Monica
East Los Angeles
Glendale
Inglewood
San Francisco
Los Angeles
Bellflower
Alhambra
El Cajon
Florence-Graham
Oakland
Costa Mesa
Merced
Long Beach
Burbank
Arden-Arcade
Mountain View
Santa Barbara
El Monte
Pasadena
Santa Clara
South Gate
Chico
Lynwood
Berkeley
Majority renter cities will surprise you

Anaheim
Alameda
Salinas
Santa Ana
Santa Cruz
2017 California Renter Rate by City

Davis
Madera
Sunnyvale
Irvine
Tustin
San Diego
Fresno
Lodi
CALIFORNIA ASSOCIATION OF REALTORS®
SOURCE: U.S. Census Bureau
SERIES: Homeownership Rates

Sacramento
San Bernardino
Escondido
50.7%

41
page
Here’s the problem:
At some point a supply problem
becomes a demand problem.
~750k people have left since 2010

California Net Domestic Migration


0

-20,000
-24,972
-40,000
-41,362
-60,000
-57,563 -60,839
-80,000

-100,000
-104,317 -105,210
-120,000

-140,000

-160,000
-163,922
-180,000 -169,336
2010 2011 2012 2013 2014 2015 2016 2017

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43
Step 1: SF Bay to Cheaper Markets

Core San Francisco Bay Area Out Migration (2010-2016)

-8,559 -9,005
-11,659
-12,408
-13,053
-15,244
-17,697

-25,843
Elsewhere in CA -30,268
Another State

-42,777
Merced Solano Washington Stanislaus Santa Cruz Texas Nevada (ST) Oregon San Joaquin Sacramento
MSA
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44
Step 2: Pricing Prior Residents Out of State

Sacramento MSA Out Migration


(2010-2016)

-2,260
-2,715 -2,917
-3,596
-4,002 -4,029 -4,179
-5,020 -5,127

Elsewhere in CA
Another State
-8,166
Kentucky Santa Cruz Oklahoma Colorado Sutter & San Luis San Oregon Idaho Nevada (ST)
Yuba Obispo Bernardino

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45
Step 1: SoCal coastal to cheaper markets

Coastal Southern California Out Migration (2010-2016)

-19,854
-21,935
-34,217 -40,361
-42,503
-48,609
-65,534
-79,132

Elsewhere in CA
Another State -101,914

-124,148

Santa Colorado Oregon Washington Kern Nevada Arizona Texas San Riverside
Barbara (ST) Bernardino

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46
Step 2: pricing prior residents out of state

Inland Empire Out Migration


(2010-2016)

-3,575
-5,117

-7,732 -7,970 -8,344

-10,604
-10,680
Elsewhere in CA -10,699
Another State

-16,374
-17,859

Hawaii Colorado Nevada Idaho North Utah Georgia Kern Arizona Texas
(ST) Carolina County

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47
Best performing cities are
everywhere Milken Institute Annual Report 2018
the rules of the game are changing and it's all
about jobs and housing. not just about the
coasts anymore
Top 10 best performing large cities
1 2 3 4 5

Provo-Orem, San Jose- Austin-Round San Francisco- Dallas-Plano-


Sunnyvale-Santa Redwood City-
UT MSA Rock, TX MSA Irving, TX MD
Clara, CA MSA South SF, CA MD
Change: Steady Change: +9 Change: +6 Change: Steady Change: -2

6 7 8 9 10

Raleigh, NC Orlando- Seattle Fort Collins, Salt Lake City,


MSA Kissimmee- Bellevue- CO MSA UT MSA
Sanford, FL MSA Everett, WA MD
Change: -4 Change: Steady Change: -4 Change: Steady
Change: +9

page
Source: Milken Institute 50
Biggest gains among large cities
Metropolitan Statistical Area (MSA)/
Metropolitan Division (MD) 2018 Rank Change

Merced, CA MSA 38 56

Norwich-New London, CT MSA 123 54

Tucson, AZ MSA 102 52

Lansing-East Lansing, MI MSA 89 49

Myrtle Beach-Conway-North Myrtle Beach, SC-NC… 51 48

Scranton-Wilkes-Barre-Hazleton, PA MSA 85 36

Kennewick-Richland, WA MSA 148 36

Albuquerque, NM MSA 66 35

Tallahassee, FL MSA 82 35

Trenton, NJ MSA 125 35 page


Source: Milken Institute 51
Top 10 best performing small cities
1 2 3 4 5

Bend- St. George, Gainseville, Elkhart- Coeur


Redmond, UT MSA GA MSA Goshen, IN d’Alene, ID
OR MSA Change: Steady Change: Steady MSA MSA
Change: Steady Change: +2 Change: +24

6 7 8 9 10

San Rafael, Medford, OR Athens-Clark Albany, OR Logan, UT-ID


CA MSA MSA County, GA MSA MSA
MSA
Change: -2 Change: +21 Change: +13 Change: +14
Change: +34

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Source: Milken Institute 52
Homeownership? Aspirational v. Attainable

The desire
•• Click for homeownership
to edit remains strong
Master text styles
• Second level
• First-time buyers face often insurmountable obstacles
• Third level
• Fourth level
• Government policies do not support housing as in the past
• Fifth level

• More Millennials are making the difficult choice to leave

• Their ability to build wealth over time is compromised

• Where will our children live?

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53
Homeownership still aspirational

How important is homeownership to you?


n: 1663

29%
30%
27%
23%
Percent

20%
13%

10% 8%

0%

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But vastly over-estimate downpayment

How much downpayment is required to purchase a home?


n: 1681

40%
40%
33%
30%
Percent

19%
20%

10%
4% 4%

0%

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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
69%

60%
Percent

40%
31%

20%

0%

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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%

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The Industry
Membership gains outstripping sales

Sales Peaks: 1978, 1988, 2004-05


Membership Peaks: 1980, 1990, 2006
250,000
600,000

500,000 200,000

Membership
Home Sales

400,000 150,000
300,000
100,000
200,000
50,000
100,000

0 0
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
Home Sales Membership
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Number of Transactions

10
12

0
2
4
6
8
1971
1972
1973

10.4
1974
1975 1972 Peak:
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2.8
Member productivity has started declining

2008
2009
2007 Trough:

2010
2011
2012
2013
2014
2015
2016
Long Run Average: 6.5

2017
CALIFORNIA ASSOCIATION OF REALTORS®
2017: 4.2

2018
2018: 3.9

2019p
60
page
… drop in average earning triggers drop in membership

Earnings Peaks: 1978, 1988, 2004-05


Membership Peaks: 1980, 1990, 2006
250,000 $60,000

$50,000
200,000

$40,000
150,000
$30,000
100,000
$20,000

50,000
$10,000

0 $0
1979

1985
1971

1973

1975

1977

1981

1983

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017
Membership Avg. Member Earning
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Your Competition:
You yesterday and every agent
working harder than you do.
Don’t let them.
The Forecast
U.S. economic outlook

2015 2016 2017 2018 2019f

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

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

Unemployment 5.3% 4.9% 4.4% 3.9% 3.7%

CPI 0.1% 1.4% 2.0% 2.4% 2.0%

Real Disposable Income, % Change 3.4% 2.7% 2.1% 2.9% 2.4%

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

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SERIES: U.S. Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 64
California housing market outlook

2019p
2015 2016 2017 2018 2019p
(revised)

SFH Resales (000s) 409.4 417.7 424.9 402.8 375.1 385.5

% Change 7.0% 2.0% 1.7% -5.2% -6.9% -4.3%

Median Price ($000s) $476.3 $502.3 $537.9 $570.0 $568.8 $593.0

% Change 6.6% 5.4% 7.1% 6.0% -0.2% 4.0%

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

30-Yr FRM 3.9% 3.6% 4.0% 4.5% 4.4% 4.0%

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SERIES: CA Housing Market Outlook CALIFORNIA ASSOCIATION OF REALTORS®
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 65
Key takeaways

• Low rates help sales but is the momentum is sustainable


• Price set new high but growth will remain soft to modest
• Uncertainties put downward pressure on rates; possible rate cuts in H219
• Many want to buy but affordability remains an issue
• Market remains competitive, productivity/earning likely to decline

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Where is the market data?

CALIFORNIA ASSOCIATION OF REALTORS®


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Housing
Matters
Podcast

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Thank You
This presentation can be found on
www.car.org/marketdata
Speeches & Presentations
lesliea@car.org