1. John Husing, Ph.D. Economics & Politics, Inc. Chief Economist, IEEP
Residential Construction Issues
John Husing, Ph.D.
Economics & Politics, Inc.
Chief Economist, IEEP

2. After Losing 8. 71 Million Jobs … Now At A Record Level of Jobs U. S
After Losing 8.71 Million Jobs … Now At A Record Level of Jobs U.S. Jobs Long Slow Growth - Not Over-Heating

3. Gross Domestic Product Very Slow Growth

4. Current Consumer Confidence Very High!
128.5

5. Oil Prices: Low But Roughly Stable
$45.00

6. Consumer Spending Quite Aggressive

7. Residential Construction Spending Gaining Speed

8. Looking Six Month Ahead Consumer Confidence Lagging
87.8

9. Business Investment Spending Weak

10. Industrial Capacity Utilization
Full Capacity
82.5%
75.5%

11. U.S. Unemployment History
Prime Rate: 21%
Cold War Ends
Great Recession

12. Consumer Price Stable: Below 2.0%
Fed Target
1.1%

13. Interest Rate Environment
3.46%
1.62%

14. Required FICO Scores – 30 Year Fixed Fannie Mae
Share of Income: 36% or less … 680 if LTV 75% … 620 if Less
Share of Income: 45% or less … 700 if LTV 75% … 640 if Less
Issue: Maximum Allowable Level for Conforming Loans
FICO Report
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
6.6%
6.5%
7.1%
7.2%
7.4%
6.9%
6.2%
6.0%
5.8%
5.2%
5.0%
8.0%
8.2%
8.7%
9.0%
8.5%
8.4%
7.9%
8.8%
9.1%
9.6%
9.8%
9.9%
9.5%
9.2%
10.2%
9.7%
10.0%
10.1%
10.3%
12.8%
12.5%
12.1%
12.0%
11.9%
12.2%
12.7%
13.0%
16.4%
16.3%
16.2%
16.0%
15.9%
15.7%
15.5%
16.6%
16.8%
20.1%
19.8%
19.6%
19.4%
19.5%
18.8%
18.4%
18.1%
18.3%
16.9%
17.9%
18.7%
18.2%
18.6%
20.0%
Total
100.0%
68.1%
55.1%

15. U.S. Home Sales Remain Relatively Weak

16. U.S. Median Home Prices Soaring!

18. California Job Gains/LossesUp
1,074,272
6.8% Up
2007
15,844,325
2016
16,918,587
Recovery
2,253,330
Great
Recession
-1,179,058

19. U.S. & CA Unemployment History
Prime Rate: 21%
Cold War Ends
Great Recession

20. CA’s East-West Split in Prosperity
San Francisco-Oakland-Fremont
4.10%
Bay Area
San Jose-Sunnyvale-Santa Clara
Napa
Orange County
4.40%
So. Coast
San Luis Obispo-Paso Robles
4.60%
No. Coast
Santa Barbara-Santa Maria-Goleta
4.80%
San Diego-Carlsbad-San Marcos
5.00%
Los Angeles County
5.30%
Sacramento-Arden-Arcade-Roseville
5.50%
No. Inland
Salinas-Monterey
5.70%
Vallejo-Fairfield
Oxnard-Thousand Oaks-Ventura
5.80%
Santa Cruz-Watsonville
Riverside-San Bernardino-Ontario
6.60%
So. Inland
Chico
6.70%
Redding
6.80%
Stockton
7.80%
Central
Modesto
8.00%
Yuba City
8.10%
Madera-Chowchilla
8.30%
Fresno
8.70%
Hanford-Corcoran
8.90%
Merced
9.30%
Bakersfield-Delano
9.70%
Visalia-Porterville
10.70%
North
El Centro
23.80%

21. Job Quality & Income Split 2011-2016e Growth Period

22. Gold Mine Theory
Secondary Tier
Primary Tier

23. Construction - Strong Job Growth!
9.2%

24. CA: State Prices Almost All The Way Back
Median Price Existing Detached Homes,
$594,530
$526,580
5.8%
-11.4%
$497,520
$245,230
-59%

25. CA: Sales of Existing Detached Homes Annualized & Seasonally Adjusted
620,000
429,520
420,360
-2.2%
235,000

26. Housing Permits, Single Family Residential Seasonally Adjusted Annual Rate

27. Housing Permits, Attached Seasonally Adjusted Annual Rate

28. Bay Area Existing Single Family Homes Sales
% Year to Year
6 Mos. Moving Average
30%
20%
10% 0%
-10%
-20%

29. So. Calif. Existing Single Family Homes Sales
% Year to Year
6 Mos. Moving Average
30%
20%
10% 0%
-10%
-20%

30. Central Valley Single Family Home Sales
% Year to Year
6 Mos. Moving Average
30%
20%
10% 0%
-10%
-20%

31. Change In Sales Demand vs. Supply of Active Listings August 2015-2016
Active Listings: Supply 8% 7% 6%
-2%
-4%
-9%
Bay Area Southern California Central Valley

32. Months of Housing Supply Available
By California Region
Bay Area
So. CA
Central Valley
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
3.6
3.2
2.4

33. High Priced Bay Area & Central Coast
Affordability
Median Price
Payment
Required Income
San Francisco
13%
$1,375,000
$6,740
$269,601
San Mateo
14%
$1,330,000
$6,519
$260,778
Marin
18%
$1,225,000
$6,005
$240,190
Santa Clara
19%
$1,085,000
$5,318
$212,740
Alameda
20%
$825,700
$4,047
$161,898
Napa
25%
$630,000
$3,088
$123,526
Contra-Costa
32%
$628,150
$3,079
$123,164
Sonoma
26%
$585,000
$2,868
$114,703
Solano
45%
$386,000
$1,892
$75,684
Central Coast
Affordability
Median Price
Payment
Required Income
Santa Cruz
17%
$799,000
$3,917
$156,663
Santa Barbara
20%
$703,460
$3,448
$137,930
San Luis Obispo
27%
$546,620
$2,679
$107,178
Monterey
25%
$535,000
$2,622
$104,899

34. Mix Priced So. California Low Priced Central Valley
Affordability
Median Price
Payment
Required Income
Orange County
22%
$742,220
$3,638
$145,530
Ventura
29%
$647,320
$3,173
$126,922
San Diego
26%
$589,910
$2,892
$115,666
Los Angeles
30%
$480,040
$2,353
$94,123
Riverside County
41%
$355,320
$1,742
$69,669
San Bernardino
56%
$242,370
$1,188
$47,522
Central Valley
Affordability
Median Price
Payment
Required Income
Placer County
46%
$438,490
$2,149
$85,976
Sacramento
45%
$323,710
$1,587
$63,471
San Joaquin
$313,840
$1,538
$61,536
Stanislaus
48%
$271,940
$1,333
$53,320
Fresno
50%
$235,020
$1,152
$46,081
Kern (Bakersfield)
54%
$228,950
$1,122
$44,891
Madera
$221,700
$1,087
$43,469
Kings County
56%
$212,660
$1,042
$41,697
Merced
52%
$212,080
$1,040
$41,583
Tulare
$207,700
$1,018
$40,724

35. Families Forced Inland

36. Legislative Craziness

37. CEQA Repeatedly Abused
NIMBYS Wanting To Stop Projects, Drive Up Their Costs
Lawyers Using Threat Of Suits As A Cash Cow
Business Wanting To Drive Up The Costs Of Their Competitors
Unions Using Threat of Suits To Force Developers To Use Their Members

38. SB 350 Home & Building Retrofit
Pick A Census Year … What Share of CA Homes Will Need To Be Retrofitted?
Will They Be Allowed To Sell Without Retrofit Given CARB Command & Control Approach?
Who Will Pay For Retrofit?

39. Political Keys (42-45 Votes)
Moderate Democrats from Poor Districts Their Party is Hurting Their Constituents (14-17)
Combined With Republicans Create Legislation Rolling Back Regulators (28)
CEQA
AQMD
CARB

40. Some Legislative Ideas
CEQA Reform
Extend CEQA litigation transparency from amicus briefs and attorney fee motions to CEQA petitions, so courts know who is suing and why. 
Ending duplicative CEQA lawsuits against implementation of projects and plans for which a legally adequate EIR has already been approved. 
Apply statewide the judicial remedy rule for the Kings Arena project, allowing deficient CEQA studies to be fixed (with more mitigation if needed) but allowing the project to be completed – unless it would cause significant risk to public health, natural ecology or irreplaceable tribal resources.
Legislative Review of CARB and AQMD Proposed Rules With Eye To Unintended Consequences of Cumulative Impacts On Poverty, Public Health
Pending Legislation on Cumulative Impact of Regulation (Two Examples)
AB 12 (Cooley) – Eliminate Duplicative & Out of Date Regulation
AB 1286 (Mayes) – Creation of CA Regulatory Reform Council like Little Hoover Commission To Research Cumulative Impact of Regulation And Advise The Legislature