2019 economic & market forecast - the joel toller team · 2019 economic & market forecast...
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2019 Economic & Market Forecast
REImagine
October 11, 2018
Leslie Appleton-Young
SVP & Chief Economist
California Vs. U.S. – 9.5% gap in 2017
Homeownership Rates
53.7%
Peak: 60.2%54.4%
64.5%
Peak: 69.0%
63.9%
45%
50%
55%
60%
65%
70%
75% CA US
SERIES: Homeownership RatesSOURCE: U.S. Census Bureau
CA: Ownership Rebound?
54.3
64.4
50
55
60
65
70
75
Homeownership Rate
CA U.S.
CA: Majority Renter State by 2025
SERIES: Homeownership RateSOURCE: U.S. Census Bureau, American Community Survey, C.A.R. projection
57.1%
59.7%
56.1%
41.0%
47.3%
44.2%
30%
40%
50%
60%
70%
2000 2005 2010 2015 2020 2025 2030 2035 2040
California Homeownership Rate
Fast Slow Avearge
30 Yr. FRM Hit 5%, 1st Time since Early 2011
SERIES: Average 30 Yr. Fixed Mortgage Rates
SOURCE: Mortgage News Daily
Oct 10: 5.00%
January 2012 – October 2018
Fed Has Raised rates 8x Since Dec 2015
4.63 4.71
3.94 4.01
2.00 2.25
0
1
1
2
2
3
3
4
4
5
5
FRM
ARM
Fed Funds Rate
Fed Raise Ratethe 1st time since mid-2006
SERIES: 30Yr FRM, 5Yr ARM, Fed Funds Rate (Target Rate)
SOURCE: Freddie Mac, St. Louis Fed
MONTHLY WEEKLY
Rates Rising Recently, but Keep Perspective
SERIES: 30Yr FRM, 5Yr ARM
SOURCE: Freddie Mac
0
2
4
6
8
10
12
14
16
18
20
30-Year Fixed Rate Mortgage
Higher Rates Hurt Affordabiity
Q2-2018 Median Price $596,730
20% Down-payment
INTEREST RATE
MONTHLY MORTGAGE
SERIES: Housing Affordability Index
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Minimum Qualifying Income
INTEREST RATE
$2,013$2,144
$2,279$2,419
$2,563$2,711
$2,862$3,017
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
$2,800
$3,200
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
$107,956$113,196
$118,614$124,203
$129,958$135,871
$141,936$148,145
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
Statewide Home Sales Off 5.5% YOY
*Sales are seasonally adjusted and annualized
SERIES: Sales of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
11.8%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18
Year-over-Year % Chg
Avg. year-over-year
% chg. = -5.5%
Last 4+ consecutive mo. with decline:
Avg. year-over-year % chg. = -1.9%
California, August 2018: $596,410, +0.8% MTM, +5.5% YTY
Price Growth Also Slowing Down
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000 Peak: May-07
$594,530
Trough: Feb-09
$245,230
-59% from
peak
Aug-18: $596,410Aug-17:
$565,320
SERIES: Median Price of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%Y
TY%
Ch
g.
in P
ric
eCondo Single-Family Homes
Price Gains Slowing Across the State
SERIES: Median Price of Existing Condo/Townhomes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Price Gains Slowing Across the State
SERIES: Median Price of Existing Condo/Townhomes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
0%
2%
4%
6%
8%
10%
12%
14%Y
TY%
Ch
g.
in P
ric
eCondo Single-Family Homes
Decelerating Growth
Bay Area: All But Contra Costa & Solano
SERIES: Median Price of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Region
Peak
Month
Peak
Price Aug-18%Chg Fr
Peak
San Francisco May-07 $972,010 $1,550,000 59.5%
Santa Clara Oct-07 $865,000 $1,295,000 49.7%
San Mateo Oct-07 $1,020,000 $1,500,000 47.1%
Alameda May-07 $709,420 $960,000 35.3%
Bay Area May-07 $789,250 $935,000 18.5%
Marin Jun-07 $1,149,390 $1,222,500 6.4%
Napa Jun-07 $729,170 $752,500 3.2%
Sonoma Jan-06 $650,330 $670,000 3.0%
Contra Costa May-07 $698,420 $650,000 -6.9%
Solano Jun-07 $492,800 $455,000 -7.7%
III. Shift
Shift Started in January 2018; Tipped in April
SERIES: Growth in Active Listings
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
17.2%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
+ 17.2 % Active Listings in August
Biggest Gains At Low End
SERIES: Unsold Inventory Index of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
7.0%
8.0%
7.0%
3.5%2.9%
2.4%
0.5%0.0%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Under $300K $300-$500K $500-750K $750-1000K $1-1.5M $1.5-2M $2-$3M $3M +
Active Listings Growth
Discrepancies Point to Weaker DemandWhere did the buyers go?
7.0% 8.0% 7.0%
3.5% 2.9% 2.4%0.5% 0.0%
-21.1%
-7.3% -7.0%
0.9%
10.2%8.2%
-1.1%
8.6%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Under $300K $300-$500K $500-750K $750-1000K $1-1.5M $1.5-2M $2-$3M $3M +
Sales vs. Active Listings Growth
Listings Sales
Listings Taking Longer to Sell
SERIES: Median Time of Market of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
20
0
10
20
30
40
50
60
70
80
1/1
/20
05
7/1
/20
05
1/1
/20
06
7/1
/20
06
1/1
/20
07
7/1
/20
07
1/1
/20
08
7/1
/20
08
1/1
/20
09
7/1
/20
09
1/1
/20
10
7/1
/20
10
1/1
/20
11
7/1
/20
11
1/1
/20
12
7/1
/20
12
1/1
/20
13
7/1
/20
13
1/1
/20
14
7/1
/20
14
1/1
/20
15
7/1
/20
15
1/1
/20
16
7/1
/20
16
1/1
/20
17
7/1
/20
17
1/1
/20
18
7/1
/20
18
Median Time on Market (Days)
More Listings With Price Reductions
SERIES: Listing Price of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
39.9%
4.3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018
Reduced-Price Listings
Share Reduced Median Reduction
Listing & Sale Prices Dropping > $1M
SERIES: Median Price of Existing Condo/Townhomes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
-4.5%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
200
7 0
1
200
7 0
4
200
7 0
7
200
7 1
0
200
8 0
1
200
8 0
4
200
8 0
7
200
8 1
0
200
9 0
1
200
9 0
4
200
9 0
7
200
9 1
0
201
0 0
1
201
0 0
4
201
0 0
7
201
0 1
0
201
1 0
1
201
1 0
4
201
1 0
7
201
1 1
0
201
2 0
1
201
2 0
4
201
2 0
7
201
2 1
0
201
3 0
1
201
3 0
4
201
3 0
7
201
3 1
0
201
4 0
1
201
4 0
4
201
4 0
7
201
4 1
0
201
5 0
1
201
5 0
4
201
5 0
7
201
5 1
0
201
6 0
1
201
6 0
4
201
6 0
7
201
6 1
0
201
7 0
1
201
7 0
4
201
7 0
7
201
7 1
0
201
8 0
1
201
8 0
4
201
8 0
7
California $1M Homes: Sales vs. List Price Growth
Typically 4-6 month lag
List Price Sales Price
State of the Housing Market -Study of Housing: Insight, Forecast, Trends (S.H.I.F.T)
• C.A.R. has conducted the Annual Housing Market Survey since 1981.
• E-mailed to a random sample of 30,355 REALTORS® throughout CA
• Asked about their most recent transaction (Q2 2018).
• 1,492 valid survey responses, 4.9 percent response rate.
• The margin of error +/- 2.5 percent at a 95 percent confidence level.
Methodology
International Buyers: Flat for 3 Years
8%
6%
5%6% 6%
8%
6%
4%
3% 3%3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
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.?
SERIES: 2018 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
The share of international buyers dropped to the lowest level in at least ten years
Sellers Aren’t Not Moving
11.5
0
2
4
6
8
10
12
14Years Owned Home Before Selling
Long-Time Homeowners are not
moving as in the past because:
• Low rate on current mortgage
• Low property taxes
• Capital gains hit
• Where can I afford to go?
• Why not remodel and stay?
SERIES: 2018 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
29% Of Sellers Moving Out of CaliforniaUp 10% from 2013
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Within the same county 38% 41% 37% 45% 47% 42% 49% 49% 46% 44% 44% 40% 38% 36%
In another county in
California23% 18% 24% 17% 21% 21% 19% 18% 20% 21% 20% 21% 20% 21%
In another state 31% 28% 29% 27% 19% 20% 20% 22% 19% 22% 22% 25% 28% 29%
Out of US 1% 2% 1% 1% 2% 1% 1% 1% 0% 1% 1% 1% 1% 1%
Don't Know/Not sure 7% 11% 9% 10% 12% 16% 10% 10% 15% 13% 13% 13% 14% 13%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Location of Seller’s New Home
SERIES: 2018 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
4. CA soon to be a majority renter state
54.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
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Homeownership Rate
California: 2nd lowest in nation
SERIES: Homeownership RatesSOURCE: U.S. Census Bureau (Current Population Survey)
U.S. Economic Outlook
SERIES: U.S. Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2013 2014 2015 2016 2017 2018p 2019f
US GDP 1.7% 2.4% 2.6% 1.6% 2.3% 3.0% 2.4%
Nonfarm Job Growth 1.7% 1.9% 2.1% 1.8% 1.4% 1.6% 1.3%
Unemployment 7.4% 6.2% 5.3% 4.9% 4.4% 3.9% 3.7%
CPI 1.5% 1.6% 0.1% 1.4% 2.0% 2.5% 2.4%
Real Disposable Income, % Change -1.4% 2.7% 3.4% 2.7% 2.1% 2.8% 2.6%
30-Yr FRM 4.0% 4.2% 3.9% 3.6% 4.0% 4.7% 5.2%
California Economic Outlook
SERIES: CA Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2013 2014 2015 2016 2017 2018p 2019f
Nonfarm Job Growth 3.0% 2.2% 2.7% 2.3% 1.6% 2.0% 1.4%
Unemployment 8.9% 7.5% 6.2% 5.5% 4.8% 4.3% 4.3%
CA Population (Million) 38.4 38.7 39.1 39.4 39.6 39.9 40.2
Population Growth 0.9% 1.0% 0.8% 0.6% 0.8% 0.7% 0.7%
Real Disposable Income, % Change -2.1% 5.6% 3.9% 1.6% 1.6% 2.4% 3.0%
California Housing Market Outlook
SERIES: CA Housing Market Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2013 2014 2015 2016 2017 2018p 2019f
SFH Resales (000s) 414.9 382.7 409.4 417.7 424.1 410.5 396.8
% Change -5.9% -7.8% 7.0% 2.0% 1.5% -3.2% -3.3%
Median Price ($000s) $407.2 $446.9 $476.3 $502.3 $538.0 $575.8 $593.4
% Change 27.5% 9.8% 6.6% 5.4% 7.2% 7.0% 3.1%
Housing Affordability
Index36% 30% 31% 31% 29% 28% 25%
30-Yr FRM 4.0% 4.2% 3.9% 3.6% 4.0% 4.7% 5.2%
• Listings are up & prices are favorable for sellers
• Call frustrated potential buyers and tell them the good news
• Rates are rising – don’t wait
• Provide sellers a teachable moment
• Know where people are moving and why and work your referral network
• Get involved in the political process – this is your future
Opportunities
Read This: California’s Housing Future