It’s   The Economy,       Stupid       January 12, 2012                           With your host…                         ...
2011: A Year of Economic Wild Cards                                    Political                                    Change...
•   Lenders                              •   Short Sales                              •   Interest Rates•   Federal Econom...
Economy   Housing Fraud    Politics
EconomyGovernments view of the economy could besummed up in a few short phrases: If it moves,tax it. If it keeps moving, r...
Consumer Confidence?                                                                                                 Highe...
Gross Domestic Product: Stall Speed                     2010: 2.8%; 2011 Q1: 0.4% Q2: 1.0% 2011 Q3: 2.5%  8%  7%  6%      ...
Unemployment Stubbornly High                November 2011  California (11.3%) vs. United States (8.6%)14%                 ...
Total Payroll Jobs in the U.S.(same as in 2000, but with 30 million more people)
How Many Years to Get Job  Market Back to Normal?Jobs added per month Assumed new jobs       How many years?              ...
HousingThe housing market will getworse before it gets better.                      James Wilson                     Ameri...
Wall Street Journal“Home Forecast Calls For PAIN.”        Prices to stumble through 2015
Market at a Glance
Sales of Existing Detached Homes: California    October 2011 Sales: 493,240 Units, Up 1.1% YTD, Up 8.5% YTYUNITS          ...
Median Price of Existing Detached Homes   California, October 2011: $278,060, Down 8.9% YTY$700,000                       ...
California Sales of Existing Homes         and Median Price       Housing Cycle Comparisons 1970- 2011                    ...
California vs. U.S. Median Price           US Median Price   CA Median Price$700,000$600,000$500,000$400,000$300,000$200,0...
Median Price & Affordability Index
0%                                                     10%                                                           20%  ...
0.00%                  1.00%                          2.00%                                  3.00%                        ...
Compelling AffordabilityMonthly Mortgage to buy a Median Priced Home              2005 Q2      2011 Q2San Diego     $ 2,83...
Inventory Level Says…    Sellers Market.                         SOURCE: California                   Association of REALT...
CA New Housing Permits:                                 Opportunity300,000                                        Single F...
CA Underwater Mortgages:                        Reverse Wealth Effect          Negative Equity Share in CA         Near Ne...
Proportion of Sellers      Planning to Repurchase80%70%60%50%40%30%20%10%0%      2000 2001 2002 2003 2004 2005 2006 2007 2...
Sellers with a Net Cash Loss35%30%25%                                                                                     ...
Net Cash to Sellers                                             Median$250,000$200,000$150,000$100,000                    ...
8 in 10 Americans (STILL) Agree:Buying a Home is the Best Investment One Can Make SOURCE: Pew Research Center’s “Home Swee...
8 in 10 RentersWould Like to Buy in the Future      “…renters are hardly      immune to the allure of      homeownership, ...
Direction of Home Prices:Sellers Skeptical/Buyers Hopeful                   Down   Flat   Unsure      Up  100%   90%   80%...
California Housing Market Outlook              2005    2006    2007      2008      2009     2010      2011f     2012f •SFH...
2012 Preview : State Accelerated 3% withholding 4% flat tax – including services Point of sale mandates Mortgage inter...
Federal Issues – Critical Concerns• High-cost Loan Limits - expired 10/1/11 (except  FHA)• Future of Fannie and Freddie? F...
2012 – What’s Ahead•   Stable to increasing home sales•   Stable median price•   Declining inventory of resale homes•   Ri...
It’s Time To Buy Again“Forget stocks. Dont bet ongold. After four years ofplunging home prices, themost attractive asset c...
Thank You. Any questions?    GAD@SRCAR.ORG
Escrow Institute of California 1/12/12
Escrow Institute of California 1/12/12
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Escrow Institute of California 1/12/12

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Escrow Institute of California 1/12/12

  1. 1. It’s The Economy, Stupid January 12, 2012 With your host… Gene Wunderlich
  2. 2. 2011: A Year of Economic Wild Cards Political Change on Oil Price Spikes Capitol Hill Arab Spring Sovereign Debt Crisis in EuroZoneDebt Limit Stock Ceiling & MarketDowngrade Volatilityof US Debt
  3. 3. • Lenders • Short Sales • Interest Rates• Federal Economic Policy • Inflation• Regulations • Shadow Inventory• Unemployment • Global Economy• Foreclosures• Mortgage Interest Deduction• Strategic Foreclosures
  4. 4. Economy Housing Fraud Politics
  5. 5. EconomyGovernments view of the economy could besummed up in a few short phrases: If it moves,tax it. If it keeps moving, regulate it. And if itstops moving, subsidize it. Ronald Reagan American President
  6. 6. Consumer Confidence? Highest Since April November 2011: 64.5 Overall, 62 percent of those160 surveyed say they’re optimistic INDEX, about what 2012 will bring for the 100=1985 country, according to the140 Associated Press-GfK survey. And for themselves and their families,120 Americans are even more positive, with 78 percent telling pollsters100 they are personally hopeful about the year ahead. 80 60 40 20 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11
  7. 7. Gross Domestic Product: Stall Speed 2010: 2.8%; 2011 Q1: 0.4% Q2: 1.0% 2011 Q3: 2.5% 8% 7% 6% ANNUAL QTRLY 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% 2009 Largest Annual Drop since 1938 (-3.4%) -7% -8% 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Q1-09 Q3-09 Q1-10 Q3-10 Q1-11 Q3-11
  8. 8. Unemployment Stubbornly High November 2011 California (11.3%) vs. United States (8.6%)14% CA US12%10%8%6%4%2%0% Jan-00 Jan-11 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 SOURCE: CA Employment Development Division
  9. 9. Total Payroll Jobs in the U.S.(same as in 2000, but with 30 million more people)
  10. 10. How Many Years to Get Job Market Back to Normal?Jobs added per month Assumed new jobs How many years? needed for growing population per month100,000 100,000 Treading water and never back to normal200,000 100,000 6.3 years300,000 100,000 3.2 years400,000 100,000 2.1 years
  11. 11. HousingThe housing market will getworse before it gets better. James Wilson American Politician (1742 – 1798)
  12. 12. Wall Street Journal“Home Forecast Calls For PAIN.” Prices to stumble through 2015
  13. 13. Market at a Glance
  14. 14. Sales of Existing Detached Homes: California October 2011 Sales: 493,240 Units, Up 1.1% YTD, Up 8.5% YTYUNITS Sales Consumer Confidence INDEX 700,000 160 600,000 140 120 500,000 100 400,000 80 300,000 60 200,000 40 100,000 20 0 0 Jul-11 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jan-11 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 *Sales are seasonally adjusted and annualized SOURCE: The Conference Board
  15. 15. Median Price of Existing Detached Homes California, October 2011: $278,060, Down 8.9% YTY$700,000 P: May-07 $594,530$600,000$500,000 T: Feb-09 $245,230$400,000 -59% from peak$300,000$200,000$100,000 $0 Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 SOURCE: California Association of REALTORS®
  16. 16. California Sales of Existing Homes and Median Price Housing Cycle Comparisons 1970- 2011 Sales of Existing Detached Homes Median PriceUNITS/MEDIAN PRICE $ 700,000 -44% 600,000 500,000 -61% -25% 400,000 300,000 200,000 100,000 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 California Association of REALTORS®
  17. 17. California vs. U.S. Median Price US Median Price CA Median Price$700,000$600,000$500,000$400,000$300,000$200,000$100,000 $0 California Association of REALTORS®
  18. 18. Median Price & Affordability Index
  19. 19. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 2000 Q3 2000 Q1 2001 Q3 2001 Q1 2002 Q3 2002 Q1 2003 Q3 2003 Q1 2004 Q3 2004 Q1 2005 Q3 2005 Q1 2006 Q3 2006 Q1 2007 Q3 2007 California Vs. U.S. % OF HOUSEHOLDS THAT CAN BUY Q1 2008 Records Highs Q3 2008 CA Q1 2009 Q3 2009 Q1 2010 Housing Affordability: US Q3 2010 Q1 2011California Association of REALTORS®
  20. 20. 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00%2009.012009.042009.072009.102010.01 MONTHLY2010.04 FRM2010.072010.10 ARM2011.012011.042011.07 8.4.118.25.11 WEEKLY9.15.11 Mortgage Rates @ Historical Lows
  21. 21. Compelling AffordabilityMonthly Mortgage to buy a Median Priced Home 2005 Q2 2011 Q2San Diego $ 2,833 $ 1,564Miami $ 1,726 $ 853Milwaukee $ 1,014 $ 797Kansas City $ 735 $ 600
  22. 22. Inventory Level Says… Sellers Market. SOURCE: California Association of REALTORS®
  23. 23. CA New Housing Permits: Opportunity300,000 Single Family Multi-Family250,000 Average 1988-09: 138,000200,000150,000100,000 50,000 0 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2009: 36,200 2010: 39,000 2011: ?? SOURCE: CBIA. Forecast: C.A. R.
  24. 24. CA Underwater Mortgages: Reverse Wealth Effect Negative Equity Share in CA Near Negative Equity Share in CA40%35% 30.2%30%25%20%15%10% 4.6%5%0% Q4-2009 Q1-2010 Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011
  25. 25. Proportion of Sellers Planning to Repurchase80%70%60%50%40%30%20%10%0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q. Is the seller planning on purchasing another home? California Association of REALTORS®
  26. 26. Sellers with a Net Cash Loss35%30%25% 21.8%20% Long Run Average = 11.2%15%10%5%0% 2008 2011 2000 2001 2002 2003 2004 2005 2006 2007 2009 2010 What was the net cash gain or net loss to the seller as a result of this sale? California Association of REALTORS®
  27. 27. Net Cash to Sellers Median$250,000$200,000$150,000$100,000 $75,000 $50,000 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Q. What was the net cash gain or net loss to the seller as a result of this sale? California Association of REALTORS®
  28. 28. 8 in 10 Americans (STILL) Agree:Buying a Home is the Best Investment One Can Make SOURCE: Pew Research Center’s “Home Sweet Home. Still. Five Years After the Bubble Burst”
  29. 29. 8 in 10 RentersWould Like to Buy in the Future “…renters are hardly immune to the allure of homeownership, even in the face of the five-year decline in prices. Asked if they rent out of choice or because they cannot afford to buy a home, just 24% say they rent out of choice.”SOURCE: Pew Research Center’s “Home Sweet Home. Still. Five Years After the Bubble Burst”
  30. 30. Direction of Home Prices:Sellers Skeptical/Buyers Hopeful Down Flat Unsure Up 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Sellers Buyers California Association of REALTORS®
  31. 31. California Housing Market Outlook 2005 2006 2007 2008 2009 2010 2011f 2012f •SFH Resales 625.0 477.5 346.9 441.8 546.9 491.5 491.1 496.2(000s)% Change 0.03% -23.6% -27.3% 27.3% 23.8% -10.1% -0.1% 1.0%MedianPrice $522.7 $556.4 $560.3 $348.5 $275.0 $303.1 $291.0 $296.0($000s)% Change 16.0% 6.5% 0.7% -37.8% -21.1% 10.2% -4.0% 1.7%30-Yr FRM 5.9% 6.4% 6.3% 6.0% 5.1% 4.7% 4.5% 4.7% 1-Yr ARM 4.5% 5.5% 5.6% 5.2% 4.7% 3.5% 3.0% 3.1% Forecast Date: September 2011 California Association of REALTORS®
  32. 32. 2012 Preview : State Accelerated 3% withholding 4% flat tax – including services Point of sale mandates Mortgage interest deduction 40+ ballot propositions Taxes, taxes, Texas
  33. 33. Federal Issues – Critical Concerns• High-cost Loan Limits - expired 10/1/11 (except FHA)• Future of Fannie and Freddie? FHA?• Tax Reform on the horizon Mortgage Interest Deduction? Capital Gains?• QRM (Qualified Residential Mortgage) 20% Down Is the future of the 30 year mortgage in doubt?
  34. 34. 2012 – What’s Ahead• Stable to increasing home sales• Stable median price• Declining inventory of resale homes• Rising rents• Lack of new home inventory• Compelling affordability• Record low interest rates Pent up demand
  35. 35. It’s Time To Buy Again“Forget stocks. Dont bet ongold. After four years ofplunging home prices, themost attractive asset classin America is housing.”SOURCE: “Real estate: It’s time to buy again”Fortune Magazine’s 3/28/11 article written by Shawn Tully
  36. 36. Thank You. Any questions? GAD@SRCAR.ORG

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