2016 California Economic & Market outlook

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Presentation transcript:

2016 California Economic & Market outlook January 13,2016 Coronado Real Estate Association Oscar Wei, Senior Economist

Overview Economic Outlook California Housing Market Outlook Regional Housing Market Outlook 2016 Forecast

Economic outlook

Economy has been growing for 68 months 2014: 2.4%; 2015p: 2.4%; 2016f: 2.7% ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $ ANNUALLY QUARTERLY Notes: E – expected, F – forecast, P- preliminary 1929 though first quarter 2009 annual GDP figures were revised in July 2009 using 2005 benchmark. 2009 Largest Annual Drop since 1938 (-3.4%) SERIES: GDP SOURCE: US Dept. of Commerce, Bureau of Economic Analysis 4

Unemployment Rates at 7-year lows November 2015: US 5.0% & CA 5.7% CA: 5/14 7.6% 4/13 7.8% 3/14 8.1% 2/14 8.0% 1/14 8.1% 12/13 8.3% 11/13 8.5% 10/13 8.7% 9/13 8.7% 8/13 8.9% 7/13 8.5% 6/13 8.5% 5/13 8.6% 4/13 9.0% 3/13 9.4% 2/13 9.6% 1/13 9.8% 12/12 9.8% 11/12 9.9% 10/12 10.1% 9/12 10.2% 8/12 10.4% 7/12 10.6% 6/12 10.6% 5/12 10.7% 4/12 10.7% 3/12 10.7% 2/1210.8% 1/12 11.0% 12/11 11.2% 11/11 11.4% 10/11 11.6% 09/11 11.8% 08/11 11.9% 07/11 12.0% 06/11 11.9% 05/11 11.9% 04/11 11.8% 03/11 11.9% 02/11 12.0% 01/11 12.1% 12/10 12.2% 11/10 12.3% 10/10 12.4% 9/10 12.4% 8/10 12.4% 7/10 12.4% 6/10 12.3% 5/10 12.3% 4/10 12.3% 3/10 12.4% 2/10 9 12.4% 1/10 12.3% 12/09 12.3% 11/09 12.2% 10/09 12.1% 9/09 12.0% 8/09 11.9% 7/09 11.7% 6/09 11.5% 5/09 11.2% 4/09 10.9% 3/09 10.6% 2/09 10.1% 1/09 9.7% US: 6/14 6.1% 5/14 6.3% 4/13 6.3% 3/14 6.7% 2/14 6.7% 1/14 6.6% 12/13 6.7% 11/13 7.0% 10/13 7.3% 09/13 7.2% 08/13 7.3% 07/13 7.4% 06/13 7.6% 05/13 7.6% 04/13 7.5% 03/13 7.6% 02/13 7.7% 01/13 7.9% 12/12 7.8% 11/12 7.8% 10/12 7.9% 9/12 7.8% 8/12 8.1% 7/12 8.2% 6/12 8.2% 5/12 8.2% 4/12 8.1% 3/12 8.2% 2/12 8.3% 1/12 8.3% 12/11 8.5% 11/11 8.6% 10/11 8.9% 09/11 9.0% 08/11 9.0% 07/11 9.0% 06/11 9.1% 05/11 9.0% 04/11 9.0% 03/11 8.9% 02/11 9.0% 01/11 9.1% 12/10 9.3% 11/10 9.8% 10/10 9.5% 9/10 9.5% 8/10 9.5% 7/10 9.5% 6/10 9.4% 5/10 9.6% 4/10 9.9% 3/10 9.9% 2/10 9.8% 1/10 9.8% 12/09 9.9% 11/09 9.90% 10/09 10.0% 9/09 9.8% 8/09 9.6% 7/09 9.5% 6/09 9.5% 5/09 9.4% 4/09 9.0% 3/09 8.7% 2/09 8.3% 1/09 7.8% Based on revised figures during EDD’s early-2009 rebenchmarking, CA job market has been on a par with US market over past several months. SOURCE: http://www.labormarketinfo.edd.ca.gov/?pageid=164 SERIES: Unemployment Rate The U-6 rate covers the unemployed, underemployed and those who are not looking but who want a job SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

Employment Bounced back in October ANNUAL PERCENT CHANGE SERIES: Total Nonfarm Employment SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

Job Trends by California Metro Area November 2015: CA +2.6%, +417,100 ANNUAL PERCENT CHANGE Source: http://www.labormarketinfo.edd.ca.gov/LMID/Employment_by_Industry_Data.html SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

Unemployment rate by California Metro Area November 2015: California 5.7% ANNUAL PERCENT CHANGE Source: http://www.labormarketinfo.edd.ca.gov/LMID/Employment_by_Industry_Data.html SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

Unemployment Rate San Diego County, November 2015: 4.8% California not seasonally adjusted: 8.7% October 2013. Based on revised figures during EDD’s 2010 rebenchmarking. SOURCE: http://www.labormarketinfo.edd.ca.gov/LMID/Employment_by_Industry_Data.html SERIES: Unemployment Rate SOURCE: CA Employment Development Division

Nonfarm Employment San Diego County, November 2015: Up 2.7% YTY Sectoral Strengths: Professional and Business Services State and Local Government Retail Trade Leisure and Hospitality SOURCE: http://www.labormarketinfo.edd.ca.gov/LMID/Employment_by_Industry_Data.html SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

Job Changes by Industry San Diego County, November 2015: +2.7%, +37,800 Jobs ANNUAL PERCENT CHANGE Source: http://www.labormarketinfo.edd.ca.gov/LMID/Employment_by_Industry_Data.html SERIES: Total Nonfarm Employment By Industry SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

Consumer Confidence Index December 2015: 96.5 INDEX, 100=1985 SERIES: Consumer Confidence SOURCE: The Conference Board

Mortgage Rates January 2009 – December 2015 MONTHLY WEEKLY Monthly from 2009 to present, weekly for the past 8 weeks SERIES: 30Yr FRM, 1Yr ARM SOURCE: Federal Home Loan Mortgage Corporation

Where are we headed? Fed began normalization in December 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

U.S. Economic Outlook SERIES: U.S. Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

California Economic Outlook SERIES: CA Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

San Diego County Employment

San Diego County Employment Growth

San Diego County Personal Income and Taxable Sales growth

California housing market outlook

Sales of Existing Detached Homes California, Nov 2015 Sales: 369,680 Units, +6.0% YTD, -1.6% YTY Nov-14: 375,740 Nov-15: 369,680 Peak:624,957 units in 2005 Valley:189,345 units in 1982 2012 annual sales up 4.3% from 2011 2011 annual sales up 1.4% from 2010 2010 annual sales down 12.3% from 2009 2009 annual sales up 24.5% from 2008 2008 annual sales up 30.4% from 2007 2007 annual sales down 33.4% from 2006 2006 annual sales down 23.8% from 2005 2005 annual sales up 0.8% from 2004 2004 annual sales up 3.8% from 2003 2003 annual sales up 7.6% from 2002 2002 annual sales up 14.1% from 2001 2001 annual sales down 4.7% from 2000 YTD 2000 annual sales up 1.4 from 1999 1999 sales up 7.3% over 1998 10/93: 41.0 Consumer Confidence 01/00: 148.6 03/03: 63.0 5/07: 128.4 2/09: 23.9 SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are seasonally adjusted and annualized

California Sales (Jan 2010 – Present) SERIES: Sales of Existing Single Family Homes, Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 22

Pending Home Sales Continued to Improve California SERIES: Pending Home Sales Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Median Price of Existing Detached Homes California, Nov 2015: $475,000, -0.2% MTM, +6.8% YTY Nov-15: $475,000 Nov-14: $444,630 SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Inventory Continued to Decline From Last Year Nov 2014: 4.3 Months; Nov 2015: 4.2 Months Range since 1988: Low: 1.3 months in April 2004 High: 18.8 months in Feb 1991 Long-run average: 6.9 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 Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Inventory Dropped Significantly in the Bay Area since 2009 But Remained 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. SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Demand outpacing Supply in All regions Nov 2015 SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Housing Demand outpaced Supply in So CAl Nov 2015 SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Household Formation accelerates in 2015 Apartment sector appears to be at a mature phase in the real estate cycle One sector where operating fundamentals and valuations are garnering attention is apartments. The apartment sector remains healthy as labor market conditions and rising household formations, which are still heavily tilted toward renter-occupied units, continue to strengthen. With young adults steadily securing full-time jobs and gradually leaving the comfort of their parents’ home, the apartment sector has more room to grow. Moreover, population projections for this age cohort by the U.S. Census Bureau also suggest demand will remain robust in the coming years.

Tight supply created more market Competition Update with average multiple offers SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Where is the inventory? Affordability challenge for repeat buyers Low rate on current mortgage Low property taxes Concerned with capital gains Why list when there is nowhere to go I can afford? Could not qualify for a mortgage today New construction recovering but LOW Demographics: Trade-up buyer pool is smaller Measurement error? Off- MLS (aka “pocket’) listings not being counted in listing stats

Fewer Middle-Age Adults in Recent years Source: Harvard Joint Center of Housing Studies, Census Bureau

Drop in Homeownership Source: Harvard Joint Center of Housing Studies, Census Bureau

Decline in # of Trade Up Buyers Due to population loss & drop in Homeownership Rate Source: Harvard Joint Center of Housing Studies, Census Bureau

“missing” 100,000 units annually, at least 2015p: 98,500 (42,190 sf, 56,310 mf) 2016f: 124,600 total units Household Growth: 165,000/yr SERIES: New Housing Permits SOURCE: Construction Industry Research Board

Housing Affordability peaked q1 2012 prices v Housing Affordability peaked q1 2012 prices v. low rates and income growth California vs. U.S. – 1984-2015 % OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME Annual Quarterly C.A.R.’s traditional Housing Affordability Index (HAI) was replaced with the First-Time Buyer Housing Affordability Index (FTB-HAI) in 2006. Note this slide takes the average of the 3 months in each of the quarters. C.A.R. began producing its Housing Affordability Index (HAI) in 1984. At that time, fixed-rate mortgages were the prevailing form of financing a home purchase, while the calculations used to produce the HAI reflected a 20 percent down payment. The methodology also assumed a monthly payment for principal, interest, taxes and insurance that was no more than 30 percent of a household’s income. In the more than two decades since the CALIFORNIA ASSOCIATION OF REALTORS® first conceived the HAI, the mortgage finance landscape has changed dramatically. The range of mortgage products available to buyers as well as underwriting criteria has changed. C.A.R. developed the new index measuring affordability for first-time home buyers to better reflect the realities of today’s real estate market. SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Housing Affordability In CA: by county 2015-Q3: % able to purchase median priced home SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

How Wages measured against Income Required to buy a Home California 2014 Annual Mean Wage http://www.bls.gov/oes/current/oessrcma.htm - Wage data is from May 2014; Min. income to buy a med. Home from Q215 SOURCE: Bureau of Labor Statistics, C.A.R.

How Wages measured against Income Required to buy a Home San Diego Annual Mean Wage http://www.bls.gov/oes/current/oes_34900.htm- Wage data is from May 2014; Min. income to buy a med. Home from Q115 SOURCE: Bureau of Labor Statistics, C.A.R.

Share of First-Time Buyers remains Below Long-Run Average SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Share of Cash Buyers Is the Lowest Since 2009 One-fifth of buyers paid with all cash The share of all cash buyers is the lowest in the last 6 years SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

The Share of International Buyers Dropped to the lowest level in 8 years 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: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Regional Housing Market Outlook

San Diego County

Sales of Residential Homes San Diego County, December 2015: 2,965 Units Up 26.3% MTM, Up 2.6% YTY SOURCE: Clarus Market Metrics

Median Price of Residential Homes San Diego County, December 2015: $464,450 Down 0.1% MTM, Up 7.8% YTY SOURCE: Clarus Market Metrics

SOURCE: Clarus Market Metrics For Sale Properties San Diego County, December 2015: 9,116 Units Down 17.3% MTM, Down 19.1% YTY Note: “For Sale Properties” represents the overall supply that exist throughout the entire month, including any listings that appear as “Active” any point in time during the month. SOURCE: Clarus Market Metrics

Month’s Supply of Inventory San Diego County, December 2015: 2.3 Months Note: “Month’s Supply of Inventory” 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 “For Sale” on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics

Housing Affordability Index San Diego County 3rd Quarter 2015: 24% % OF HOUSEHOLDS THAT CAN BUY Low: Nov 2005: 8% High: 9/93, 11/93 – 1/94, 2009.1: 44% SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

New Housing Permits San Diego County, Nov. 2015: 857 Units, +42.2% YTD 2012 annual new housing permits: 6193 units, up 18.6% from 2011 2011 annual new housing permits: 5220 units, up 56.0% from 2010 2010 annual new housing permits: 3346 units, up 11.9% from 2009 2009 annual new housing permits: 2,990 units, down 42.0% from 2008 2008 annual new housing permits: 5,154 units, down 30.8% from 2007 2007 annual new housing permits: 7,445 units, down 30.9% from 2006 2006 annual new housing permits: 10,777 units, down 29.4% from 2005 2005 annual new housing permits: 15,258 units, down 11.8% from 2004 2004 annual new housing permits: 17,306 units, down 5.5% from 2003 2003 annual new housing permits: 18,324 units, up 16.4% from 2002 2002 annual new housing permits up 0.6% from 2001 2001 annual new housing permits down 1.8% from 2000 2000 annual permits down 3.0% over 1999 SERIES: New Housing Permits SOURCE: Construction Industry Research Board

Coronado

Sales of Residential Homes Coronado, December 2015: 19 Units Up 35.7% MTM, Up 5.6% YTY SOURCE: Clarus Market Metrics

Median Price of Residential Homes Coronado, December 2015: $1,295,000 Down 22.5% MTM, Up 1.6% YTY SOURCE: Clarus Market Metrics

SOURCE: Clarus Market Metrics For Sale Properties Coronado, December 2015: 174 Units Down 12.1% MTM, Up 4.8% YTY Note: “For Sale Properties” represents the overall supply that exist throughout the entire month, including any listings that appear as “Active” any point in time during the month. SOURCE: Clarus Market Metrics

Month’s Supply of Inventory Coronado, December 2015: 8.4 Months Note: “Month’s Supply of Inventory” 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 “For Sale” on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics

Downtown San Diego Zip code: 92101 56

Sales of Residential Homes Downtown San Diego, December 2015: 75 Units Up 74.4% MTM, Down 1.3% YTY SOURCE: Clarus Market Metrics 57

Median Price of Residential Homes Downtown San Diego, December 2015: $451,000 Down 8.0% MTM, Down 5.1% YTY SOURCE: Clarus Market Metrics 58

SOURCE: Clarus Market Metrics For Sale Properties Downtown San Diego, December 2015: 279 Units Down 17.7% MTM, Down 14.7% YTY Note: “For Sale Properties” represents the overall supply that exist throughout the entire month, including any listings that appear as “Active” any point in time during the month. SOURCE: Clarus Market Metrics 59

Month’s Supply of Inventory Downtown San Diego, December 2015: 3.6 Months Note: “Month’s Supply of Inventory” 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 “For Sale” on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics 60

Carmel Valley Zip code: 92130 61

Sales of Residential Homes Carmel Valley, December 2015: 69 Units Up 43.8% MTM, Up 40.8% YTY SOURCE: Clarus Market Metrics 62

Median Price of Residential Homes Carmel Valley, December 2015: $868,000 Down 6.2% MTM, Down 2.5% YTY SOURCE: Clarus Market Metrics 63

SOURCE: Clarus Market Metrics For Sale Properties Carmel Valley, December 2015: 197 Units Down 16.5% MTM, Up 15.9% YTY Note: “For Sale Properties” represents the overall supply that exist throughout the entire month, including any listings that appear as “Active” any point in time during the month. SOURCE: Clarus Market Metrics 64

Month’s Supply of Inventory Carmel Valley, December 2015: 2.8 Months Note: “Month’s Supply of Inventory” 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 “For Sale” on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics 65

2016 forecast

California Housing Market Outlook Best case: Sale - 2015 408,500 (+6.6% yty) 2016 434,100 (+6.3% yty) Median Price – 2015 481,660 (+7.8% yty) 2016 496,860 (+3.2% yty) Worst Case: Sales – 2015 406,600 (+6.1% yty) 2016 406,600 (0% yty) 2015 465,510 (+4.1% yty) 2016 480,200 (+3.2% yty) SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Sales up for 2015 and continue to Improve in 2015; Price will Grow Steadily this Year and Next Units (Thousand) Price (Thousand) SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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The Legal Hotline App will include information from the C. A. R The Legal Hotline App will include information from the C.A.R. website such as the “What’s New” articles, Recent Laws and News from the current and previous year, all of the legal articles (Q&As), information on new and revised Standard Forms, webinar videos, quick access to zipForm® mobile, direct dialing capabilities: to the Legal Hotline, Customer Service, the Finance Helpline, the Ombudsman Hotline, Outreach Request, and RPA Class Request, as well as quick links to the social media pages.

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