2015 Economic Forecast

Appraisal Institute

Sacramento Sierra Chapter

Presented ByJohn Schleimer, MIRM

President, Market Perspectives

Residential Real Estate

Source: US Census Bureau

Source: Moody’s Analytics

Source: Moody’s Analytics

Source: US Bureau of Labor Statistics

Sources: US Census Bureau, NAHB

Rank Q4 2016Bottom 20%

20% to 40%

40% to 60%

60% to 80%

Top 20%

The Long Road Back to Normal

< 75%

76% - 80%

81% - 93%

94% - 101%

102% <

Relative to Normal

This map shows how the states rank in the return to more normal levels of housing production.By the end of 2016, the top 40% will be back to near normal production levels.The bottom 20% will be below 75% of normal production.

Sacramento RegionNew Home Sales

Source: The Gregory Group New Home Database

Inconsistent Sales:

4Q14 6513Q14 6082Q14 8081Q14 6724Q13 3823Q13 5822Q13 7241Q13 770

2000 = 12,216

2004 = 17,155

2011 = 1,668

2012 = 2,782

2014 = 2,739

Sacramento RegionNew Home Inventory

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

4th-

99

2nd-

00

4th-

00

2nd-

01

4th-

01

2nd-

02

4th-

02

2nd-

03

4th-

03

2nd-

04

4th-

04

2nd-

05

4th-

05

2nd-

06

4th-

06

2nd-

07

4th-

07

2nd-

08

4th-

08

2nd-

09

4th-

09

2nd-

10

4th-

10

2nd-

11

4th-

11

2nd-

12

4th-

12

2nd-

13

4th-

13

2nd-

14

4th-

14

0

50

100

150

200

250

300

350

400

450

500

New-Home Unsold Inventory Number of Projects

Source: The Gregory Group New Home Database

From 375 active projects in 2007 to just over 100 today

Sacramento RegionNew Home Pricing

Source: The Gregory Group New Home Database

2000 median price = $261,900

2005 median price = $459,900 or up 76%

2011 median price = $295,970 or down 36%

2014 median price - $417,880 or up 41% from trough and 10% from 2005 high

Source: MLS, The Gregory Group

NUMBER OF LISTINGS VERSUS NUMBER OF SALESSACRAMENTO REGION

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

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-14Number of Listings Number of Sales

Existing home sales down 6% from 2013 to 2104

Source: MLS, The Gregory Group

MONTHS OF INVENTORYSACRAMENTO REGION

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

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

Months of Inventory

Inventory remaining low means seller’s market

but puts pressure on pricing

Source: MLS, The Gregory Group

REO SALES/SHORT SALES/NON-DISTRESSED SALESSACRAMENTO REGION

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

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

REO Sales Short Sales Non-Distressed Sales

Distressed property sales trending positively…down half from 2013

Existing home market is affordable alternative to new homes

• National price average between a new home to similar resale is 15%

• Current Sacramento area average difference is 26%

“Drivers” of Housing Markets

• Non-farm job growth

Recent MSA Non-Farm Job Growth

790

800

810

820

830

840

850

860

870

880

890

2011 2012 2013 2014

• 2012 at 18,800• 2013 at 22,600• 2014 estimate at

18,500

“Drivers” of Housing Markets

• Non-farm job growth

• Good paying jobs

“Drivers” of Housing Markets

• Non-farm job growth

• Good paying jobs

• Good consumer confidence

“Drivers” of Housing Markets

• Non-farm job growth

• Good paying jobs

• Good consumer confidence

• Immigrating households

“Drivers” of Housing Markets

• Non-farm job growth

• Good paying jobs

• Good consumer confidence

• Immigrating households

• Housing affordability

Affordability Score Card

• Sacramento = 48%

• Placer = 44%

• San Francisco = 15%

• California = 30%

• United States = 57%

Source: CAR, 3rd quarter 2014

Let’s see what John’s crystal ball

says about the housing market for

2015

2015 Concerns…

• New home sales remain inconsistent at 3,000±

2015 Concerns…

• New home sales remain inconsistent at 3,000±

• Land and lot prices remain too high

2015 Concerns…

• New home sales remain inconsistent at 3,000±

• Land and lot prices remain too high

• Affordability becoming more of an issue – especially for new homes

2015 Concerns…

• New home sales remain inconsistent at 3,000±

• Land and lot prices remain too high

• Affordability becoming more of an issue

• Resale market about the same at 25,000± sales

2015 Concerns…

• When will the Millennials become home buyers?

2015 Concerns…

• When will the Millennials become home buyers?

• Will household incomes start to grow?

2015 Positives…

• Synergism of downtown, the railyard and West Sacramento

2015 Positives…

• Synergism of downtown, the railyard and West Sacramento

• Re-opening of North Natomas

2015 Positives…

• Synergism of downtown, the railyard and West Sacramento

• Re-opening of North Natomas

• Expansion of West Roseville

2015 Positives…

• Synergism of downtown, the railyard and West Sacramento

• Re-opening of North Natomas

• Expansion of West Roseville

• 55+ housing market

Questions?