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2021 Market Forecast

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2021 Market Forecast

  1. 1. 2021 Market Forecast EXPO/Reimagine Conference & EXPO October 13, 2020 Leslie Appleton-Young Chief Economist + SVP California Association of REALTORS®
  2. 2. CALIFORNIA ASSOCIATION OF REALTORS® How did we do? page 02
  3. 3. 2020 C.A.R. Forecast Report Card: Q. How did your client find and select you to represent them? SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® page 3 SFH Resales (000s) % Change Median Price ($000s) % Change 30-Yr FRM Housing Affordability Index U.S. Gross Domestic Product 2019 Actual 398.0 -1.2% $592.4 4.0% 3.9% 31% 2.2% 2020 Forecast 393.5 0.8% $607.9 2.5% 3.7% 32% 1.6% 2020 Projected 380.1 -4.5% $640.3 8.1% 3.2% 32% -5.0%
  4. 4. The Economy
  5. 5. page 05
  6. 6. page 06
  7. 7. CALIFORNIA ASSOCIATION OF REALTORS® U.S. economy contracted at the sharpest rate on record -32.9% -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% Q1-00 Q3-00 Q1-01 Q3-01 Q1-02 Q3-02 Q1-03 Q3-03 Q1-04 Q3-04 Q1-05 Q3-05 Q1-06 Q3-06 Q1-07 Q3-07 Q1-08 Q3-08 Q1-09 Q3-09 Q1-10 Q3-10 Q1-11 Q3-11 Q1-12 Q3-12 Q1-13 Q3-13 Q1-14 Q3-14 Q1-15 Q3-15 Q1-16 Q3-16 Q1-17 Q3-17 Q1-18 Q3-18 Q1-19 Q3-19 Q1-20 Real GDP Growth Recession Real GDP Growth
  8. 8. page 8 SPEED: Over the past 6 months, nearly 62 million Americans have filed for unemployment insurance SOURCE: FRED St. Louis Fed 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 1/7/1967 1/7/1968 1/7/1969 1/7/1970 1/7/1971 1/7/1972 1/7/1973 1/7/1974 1/7/1975 1/7/1976 1/7/1977 1/7/1978 1/7/1979 1/7/1980 1/7/1981 1/7/1982 1/7/1983 1/7/1984 1/7/1985 1/7/1986 1/7/1987 1/7/1988 1/7/1989 1/7/1990 1/7/1991 1/7/1992 1/7/1993 1/7/1994 1/7/1995 1/7/1996 1/7/1997 1/7/1998 1/7/1999 1/7/2000 1/7/2001 1/7/2002 1/7/2003 1/7/2004 1/7/2005 1/7/2006 1/7/2007 1/7/2008 1/7/2009 1/7/2010 1/7/2011 1/7/2012 1/7/2013 1/7/2014 1/7/2015 1/7/2016 1/7/2017 1/7/2018 1/7/2019 1/7/2020 Thousands U.S. Initial Unemployment Insurance Claims 37 million in ~2 years 61.9 million in 27 weeks
  9. 9. CALIFORNIA ASSOCIATION OF REALTORS® Uncertain path of recovery: bounce back in H2, modest growth in 2021 Q120 Q220 Q320 Q420 2020 2021 Bank of the West -5.0% -31.7% 29.2% 3.1% -3.7% 3.6% Fannie Mae -5.0% -31.7% 30.4% 6.2% -2.6% 3.4% Mortgage Bankers Association -5.0% -31.7% 18.3% 5.4% -5.6% 4.1% NAR -5.0% -31.7% 20.0% 8.0% -6.0% 4.0% UCLA -5.0% -31.7% 28.3% 1.2% -4.2% 3.5% Wells Fargo -5.0% -31.7% 25.4% 7.2% -4.2% 4.6% page 9 * Latest updates as of 09/29/2020 2020-2021 GDP Forecasts
  10. 10. CALIFORNIA ASSOCIATION OF REALTORS®
  11. 11. page 11 Fiscal Policy: Quick Action + Bottlenecks SOURCE: California Association of REALTORS® • Coronavirus Preparedness & Response Supplemental Appropriations Act (3/6) • Families First Coronavirus Response Act (3/18) • Coronavirus Aid, Relief, and Economic Security Act ($2.2T CARES Act) (3/27) • Paycheck Protection Program & Health Care Enhancement Act (4/24)
  12. 12. page 12 Monetary Policy: Fed takes unprecedented action SOURCE: California Association of REALTORS® • Cut fed funds rate: 0% - 0.25% • Forward guidance: “rates will remain low” • Lowered discount window rate to 0.25% • Open-ended Securities purchases (QE)- Treasuries, MBS’s • Direct lending to banks, major corporate employers • Temporary relaxation of regulatory requirements • Expanded repo operations
  13. 13. CALIFORNIA ASSOCIATION OF REALTORS® Unemployment rate peaked in April & May coming down: 8.4% in August 16.4 16.4 14.9 13.5 11.4 14.7 13.3 11.1 10.2 8.4 0 2 4 6 8 10 12 14 16 18 1/1/2020 2/1/2020 3/1/2020 4/1/2020 5/1/2020 6/1/2020 7/1/2020 8/1/2020 Unemployment Rates CA US
  14. 14. page 14 Jobless claims inched up from prior week SOURCE: Department of Labor 217 3,307 6,867 866 870 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Thousands U.S. Initial Unemployment Insurance Claims (SA)
  15. 15. CALIFORNIA ASSOCIATION OF REALTORS® Job losses in March & April Gains have moderated since June 29.1 21.0 -210.5 -2,405.3 148.9 551.4 83.5 101.9 -3,000 -2,500 -2,000 -1,500 -1,000 -500 0 500 1,000 1/1/2020 2/1/2020 3/1/2020 4/1/2020 5/1/2020 6/1/2020 7/1/2020 8/1/2020 California Nonfarm Job Growth
  16. 16. Consumer Confidence Building Back 101.8 in September page 16 SERIES: Consumer Confidence – Composite Index SOURCE: The Conference Board
  17. 17. CALIFORNIA ASSOCIATION OF REALTORS® Consumers spending hits all-time highs in August 300,000 350,000 400,000 450,000 500,000 550,000 1/1/2020 2/1/2020 3/1/2020 4/1/2020 5/1/2020 6/1/2020 7/1/2020 8/1/2020 U.S. Retail Sales Retail Retail (xFood/Auto)
  18. 18. CALIFORNIA ASSOCIATION OF REALTORS® Why consumer spending matters so much Consumption 63% Government 16% Equipment/Software 6% Intellectual Property 5% Residential Construction 3% Nonresidential Construction 3% Inventories -0% Net Exports -4% Other 37% U.S. Real GDP by Component
  19. 19. CALIFORNIA ASSOCIATION OF REALTORS® Pandemic Winners
  20. 20. Retail Apocalypse
  21. 21. Commercial Office Space page 021
  22. 22. Mulit-Family page 022
  23. 23. The K-Shaped Recovery page 23 SOURCE: https://www.thestreet.com/mishtalk/economics/its-professionals-vs-everyone-else-in-the-k-shaped-recovery
  24. 24. CALIFORNIA ASSOCIATION OF REALTORS® Job losses concentrated in lower-wage industries 1,768,500 , 71% 708,100 , 29% California Job Losses by Wage Category Under $1,100/week Over $1,100/week Industry Avg. Weekly Wage Jobs Lost (Feb.-Apr.) Total Nonfarm $ 1,368 2,625,500 Accom./Food Svcs. $ 513 825,700 Health Care $ 1,030 285,700 Retail $ 733 279,400 Other Svcs. $ 813 172,700 Admin. Support $ 924 161,800 Arts/Entertainment $ 1,190 156,700 Construction $ 1,410 150,000 Manufacturing $ 1,889 133,800 Prof./Sci./Tech. Svcs. $ 2,459 84,400 Information $ 3,678 78,700 Wholesale $ 1,557 66,200 Education $ 1,082 42,200 Real Estate $ 1,403 23,400 Management $ 2,604 13,400 Finance/Insurance $ 2,599 1,500 NR/Mining $ 774 1,000
  25. 25. Disparate Impact: Unemployment rates by ethnicity (U.S.) page 25 SERIES: Unemployment rates by race and Hispanic or Latino ethnicity (seasonally adjusted 1990-2020) SOURCE:U.S. Bureau of Labor Statistics/Current Population Survey Updated with May 2020 data
  26. 26. Financial Hardship Greatest for Latinos, Blacks, Native Americans page 26 SOURCE: NPR, the Robert Wood Johnson Foundation, and Harvard’s T.H. Chan School of Public Health Survey of 3,454 U.S. adults between July 1 and August 3
  27. 27. CA Housing Market
  28. 28. September 2020: Is it a good time to buy & sell? 46% 54% 58% Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 22% 33%34% Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Do you think it’s a good time to sell a home in California? Do you think it’s a good time to buy a home in California? page 29 SERIES: Google Consumer Poll SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
  29. 29. CALIFORNIA ASSOCIATION OF REALTORS® Interest rates have NEVER been lower My Dad: 16.21 2.90 0 2 4 6 8 10 12 14 16 18 20 Selected Interest Rates 10-Year 30-Year FRM
  30. 30. CALIFORNIA ASSOCIATION OF REALTORS® Buyers fueling strong demand for mortgages 13.41 -20 -15 -10 -5 0 5 10 15 20 3/6 3/13 3/20 3/27 4/3 4/10 4/17 4/24 5/1 5/8 5/15 5/22 5/29 6/5 6/12 6/19 6/26 7/3 7/10 7/17 7/24 7/31 8/7 8/14 8/21 8/28 9/4 9/11 9/18 Weekly Change in New Mortgage Purchase Applications All Purchase Loans Conventional Government 25.5% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 3/6 3/20 4/3 4/17 5/1 5/15 5/29 6/12 6/26 7/10 7/24 8/7 8/21 9/4 9/18 Year-to-Year Change in New Mortgage Purchase Applications
  31. 31. CALIFORNIA ASSOCIATION OF REALTORS® Job losses haven’t hit potential homebuyers as hard Retail 279,400 Information 78,700 Healthcare 285,700 Hotels/Bars/Restaurants 825,700 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 JobsLost(Feb.–Apr.2020) 2019 Avg. Weekly Wage California Jobs Losses vs. 2019 Avg. Weekly Wage by Industry
  32. 32. Existing Home Sales % change -41.4% YTY CA May Market Snapshot Sales down sharply, Median price down, Supply up page 033 Price $588,070 -3.7% Y2Y Unsold Inventory Index 4.3 months 34.4% Y2Y Median Days on Market 17 days -5.6% Y2Y Sales Price to List Price Ratio 99.7% 0.4% Y2Y May 2020 CALIFORNIA ASSOCIATION OF REALTORS® -12.9% YTD
  33. 33. Existing Home Sales % change +14.6% YTY CA August Market Snapshot: Sales up, Prices up, Supply down page 034 Price $706,900 +14.5% Y2Y Unsold Inventory Index 2.1 months -34.4% Y2Y Median Days on Market 13 days -43.5% Y2Y Sales Price to List Price Ratio 100.0% +1.3% Y2Y August 2020 CALIFORNIA ASSOCIATION OF REALTORS® -6.8% YTD
  34. 34. Sales momentum continues – highest in over 10 years. page 35 California, August 2020 Sales: 465,400 Units, -6.8% YTD, +14.6% YTY, +6.3% MTM - 100,000 200,000 300,000 400,000 500,000 600,000 700,000 Jan-05 Sep-05 May-06 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19 Sep-19 May-20 SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
  35. 35. CALIFORNIA ASSOCIATION OF REALTORS® Sales by Region page 36 0.5% 10.8% 5.5% 15.4% 8.6% 33.3% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% August 2020 Home Sales Growth by Region Central Valley 21% S.F. Bay Area 19% Southern California 46% Central Coast 4% Far North 3% Other Counties 7% August 2020 Home Sales by Region
  36. 36. Low supply hampers sales of affordable homes Strong sales gains from $750K+ page 37 August 2020 (YTY% Chg.) -26.0% -4.8% -1.8% 8.7% 22.8% 40.9% 71.3% -40% -20% 0% 20% 40% 60% 80% 38% 40% 22% 46% 38% 16% $0 - $499k $500 - $999k $1M+ Share by Price Segment 2020 2019 SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
  37. 37. What lies ahead: Pending sales slowing page 38 -1.1% -40% -20% 0% 20% 40% 60% 80% MTM%Chg.inPendingSales SERIES: Percent Change in Pending Sales SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
  38. 38. $706,900 -- CA median price reaches all-time high page 39 August 2020: $706,900, +6.1% MTM, +14.5% YTY $- $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 Jan-05 Sep-05 May-06 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19 Sep-19 May-20 SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
  39. 39. Price growth up by double digits in all percentiles; strongest gain in the top end page 40 SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 13.7% 14.3% 15.1% 18.6% 26.6% 27.5% 25.0% 28.2% 34.4% 0% 5% 10% 15% 20% 25% 30% 35% 40% 0-20 20-40 40-60 60-80 80-100 80-85 86-90 91-95 96-100 Percentile Year-over-Year Price Growth
  40. 40. Inventory down as sales improved and fewer new listings being added page 41 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 Jan-05 Sep-05 May-06 Jan-07 Sep-07 May-08 Jan-09 Sep-09 May-10 Jan-11 Sep-11 May-12 Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17 May-18 Jan-19 Sep-19 May-20 MonthsofSupply SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Aug 2019: 3.2 Months; Aug 2020: 2.1 Months
  41. 41. Active listings plunged as pent up demand remained robust page 42 -50.3%-60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Year-over-Year % Chg SERIES: Active Listing of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
  42. 42. Big Cities
  43. 43. The Suburbs
  44. 44. The Resorts
  45. 45. The High-End
  46. 46. 2020 Annual Housing Market Survey
  47. 47. Share of First Time Buyers Highest in 10 years 38.4% 0% 10% 20% 30% 40% 50% % First-Time Home Buyers Long Run Average Long Run Average = 37.2% SERIES: 2020 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® page 61 1
  48. 48. Housing affordability improved in 2020 but still an issue 26% 49% 32% 45% 49% 48% 37% 0% 10% 20% 30% 40% 50% 60% 2014 2015 2016 2017 2018 2019 2020 % of First-Time Buyers who Changed County Because of Housing Affordability Q. What was the primary reason for changing county? SERIES: 2020 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® page 62
  49. 49. Investor Buyers lowest since 2001 Vacation/Second Home share up 8.1% 6.0% 0% 5% 10% 15% 20% 25% 30% 19992001200320052007200920112013201520172019 Vacation/Second Home Investment/Rental Property % to Total Sales SERIES: 2020 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Rent page 63 Flip 2014: 30% 2015: 26% 2016: 20% 2017: 24% 2018: 26% 2019: 18% 2020: 27% 2014: 70% 2015: 74% 2016: 80% 2017: 76% 2018: 74% 2019: 82% 2020: 73% VS.
  50. 50. International Buyers down sharply 7.8% 6.0% 5.3% 5.7% 5.8% 8.0% 6.2% 3.7% 2.9% 3.1% 2.7% 3.8% 1.8% 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 SERIES: 2019 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® page 64
  51. 51. Quality of life overtook housing affordability as buyer’s main reason for relocating 22.2% 21.0% 15.5% 12.3% 8.1% 5.7% 5.5% 4.9% 4.5% 2.9% 1.4% 0% 5% 10% 15% 20% 25% Quality of life Housing affordability Closer to family/relative Other Second home Job change Shorter commute to work/school Ability to work from home Quality of school Retired Quality of community services 2020 2019 Q. What was the primary reason for changing county? SERIES: 2020 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® page 65
  52. 52. More Sellers Continue to Move out of California; Highest since 2005 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Within the same county 38% 41% 37% 45% 47% 42% 49% 49% 46% 44% 44% 40% 38% 36% 35% 36% In another county in California 23% 18% 24% 17% 21% 21% 19% 18% 20% 21% 20% 21% 20% 21% 20% 18% In another state 31% 28% 29% 27% 19% 20% 20% 22% 19% 22% 22% 25% 28% 29% 30% 30% Out of US 1% 2% 1% 1% 2% 1% 1% 1% 0% 1% 1% 1% 1% 1% 0% 1% Don't Know/Not sure 7% 11% 9% 10% 12% 16% 10% 10% 15% 13% 13% 13% 14% 13% 14% 15% Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Location of Seller’s New Home SERIES: 2020 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® page 66
  53. 53. CALIFORNIA ASSOCIATION OF REALTORS® Migration Trends: Where are we headed? page 067
  54. 54. Housing affordability peaked at Q2-2012 page 68 California, 1984-2020 CA, Q2 2020, 33% US, Q2 2020, 57% 0% 10% 20% 30% 40% 50% 60% 70% 80% %OFHOUSEHOLDSTHATCAN BUYAMEDIAN-PRICEDHOME Annual Quarterly SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
  55. 55. Housing Affordability in CA by county page 69 2020-Q2: % able to purchase median-priced home 68% 57% 33% 17% 0% 10% 20% 30% 40% 50% 60% 70% 80% SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
  56. 56. CALIFORNIA ASSOCIATION OF REALTORS® More of everything, except… page 70 27,102,237 39,512,223 0 5,000,000 10,000,000 15,000,000 20,000,000 25,000,000 30,000,000 35,000,000 40,000,000 45,000,000 California Population 1986 2019 115,212 206,974 0 50,000 100,000 150,000 200,000 250,000 California REALTORS® 1986 2,019 393,983 397,910 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 California Home Sales 1986 2,019 255,559 111,870 0 50,000 100,000 150,000 200,000 250,000 300,000 California Permits 1988* 2019
  57. 57. CALIFORNIA ASSOCIATION OF REALTORS® 46 of 143 largest cities already majority renter 72% 50% 0% 10% 20% 30% 40% 50% 60% 70% 80% SantaMonica Hawthorne Glendale Inglewood LosAngeles SanFrancisco Bellflower Davis ElMonte SantaBarbara EastLosAngeles Pasadena CostaMesa LongBeach SantaCruz Florence-Graham MountainView Arden-Arcade Burbank ElCajon Oakland SantaClara Berkeley SouthGate SantaAna Irvine Richmond Sunnyvale Alhambra Merced Salinas RedwoodCity Chico Vista Anaheim Fresno Alameda Downey SanDiego Westminster Madera SanBernardino Sacramento Escondido Stockton SanMateo 2019 California Renter Rate by City
  58. 58. San Francisco Bay Area
  59. 59. CALIFORNIA ASSOCIATION OF REALTORS® Step 1: Core Bay Area to Cheaper Counties -76,431 -18,613 -12,705 -8,630 -7,140 -5,074 -8,364 -7,950 -7,714 -90,000 -80,000 -70,000 -60,000 -50,000 -40,000 -30,000 -20,000 -10,000 0 East Bay Sacramento MSA Sonoma County San Joaquin County Washington Oregon Nevada (ST) Santa Barbara County Sierra Nevadas San Francisco-Marin-San Mateo Net Domestic Migration 2010-2018 (Cumulative) - Top 10 Destinations In State Out of State
  60. 60. CALIFORNIA ASSOCIATION OF REALTORS® Step 2: Cheaper Counties Leaving the State -5,375 -4,995 -8,920 -7,035 -6,537 -5,478 -3,819 -3,374 -3,071 -2,644 -10,000 -9,000 -8,000 -7,000 -6,000 -5,000 -4,000 -3,000 -2,000 -1,000 0 Nevada (ST) Idaho Oregon Colorado San Luis Obispo County Sutter & Yuba Counties Oklahoma Utah Arizona Washington Sacramento MSA Net Domestic Migration 2010-2018 (Cumulative) - Top 10 Destinations In State Out of State
  61. 61. Southern California
  62. 62. CALIFORNIA ASSOCIATION OF REALTORS® Step 1: Los Angeles mostly to the Inland Empire -199,327 -80,270 -44,375 -19,182 -18,922 -61,164 -53,073 -44,532 -27,760 -25,529 -250,000 -200,000 -150,000 -100,000 -50,000 0 Inland Empire Orange County Texas Nevada (ST) Arizona Kern County Oregon Washington Ventura County Santa Barbara County Los Angeles County Net Domestic Migration 2010-2018 (Cumulative) - Top 10 Destinations In State Out of State
  63. 63. CALIFORNIA ASSOCIATION OF REALTORS® Step 2: Inland Empire mostly out of state -9,307 -27,434 -23,704 -13,254 -12,183 -9,845 -9,397 -9,102 -5,634 -4,988 -30,000 -25,000 -20,000 -15,000 -10,000 -5,000 0 Arizona Texas Utah Nevada (ST) Georgia Idaho Kern County North Carolina Colorado Oregon Inland Empire Net Domestic Migration 2010-2018 (Cumulative) - Top 10 Destinations In State Out of State
  64. 64. Climate change will lead to more and bigger wildfires in the future page 78 SOURCE: The New York Times Magazine: How Climate Migration Will Reshape America By 2070, some 28 million people across the country could face Manhattan-size megafires. In Northern California , they could become an annual event.
  65. 65. CALIFORNIA ASSOCIATION OF REALTORS® Q: Where do we go from here? A: Home. page 079
  66. 66. CALIFORNIA ASSOCIATION OF REALTORS® There’s No Place Like Home page 80
  67. 67. JORDAN LEVINE OSCAR WEI Research & Economics Team SAMANTHA OLESSAMANTHA OLES GEORGIA FUNNELL GUILLERMO FLORES
  68. 68. CALIFORNIA ASSOCIATION OF REALTORS® PAULA GREEN
  69. 69. The Forecast
  70. 70. CALIFORNIA ASSOCIATION OF REALTORS® Coronavirus remains the biggest wildcard 12,807 3,146 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 California Daily New Cases 95 0 50 100 150 200 250 1-Mar 1-Apr 1-May 1-Jun 1-Jul 1-Aug 1-Sep California Coronavirus Deaths Deaths Smoothed
  71. 71. page 86 ~24 million Americans still receiving unemployment SOURCE: U.S. Dept. of Labor 2,057 22,794 12,441 7,793 11,511 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Thousands U.S. Continuing Unemployment Insurance Claims + PUA Claims (NSA) US UI Claims US PUA Claims
  72. 72. CALIFORNIA ASSOCIATION OF REALTORS® U.S. economic outlook: ongoing recovery, but slower pace SERIES: U.S. Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 2015 2016 2017 2018 2019 2020p 2021f US GDP 2.6% 1.6% 2.3% 3.0% 2.2% -5.0% 4.2% Nonfarm Job Growth 2.1% 1.8% 1.6% 1.6% 1.3% -6.5% 3.0% Unemployment 5.3% 4.9% 4.4% 3.9% 3.7% 8.8% 7.1% CPI 0.1% 1.4% 2.1% 2.4% 1.8% 0.6% 1.7% Real Disposable Income, % Change 3.4% 2.7% 2.9% 4.0% 2.9% 3.8% -1.6% page 87
  73. 73. CALIFORNIA ASSOCIATION OF REALTORS® Foreclosures could become a problem, size of impact will be more like 2015 than 2008 The Bad News: • Potentially 600,000 foreclosures nationwide • That suggests 60,000 in California • Currently a moratorium through end of 2020 • Eventually delinquencies will be reckoned with • Serious delinquencies up a lot in June • Could impact prices (but single digit impacts) Reasons to Be Hopeful: • Government on board this time • 5-year + workouts • Lots of home equity/minimal cashing out • No NINJA loans/option ARMs
  74. 74. CALIFORNIA ASSOCIATION OF REALTORS® Many homeowners still have skin in the game $348.4 $134.2 $0 $50 $100 $150 $200 $250 $300 $350 $400 Combined Volume of Cash-out and 2nd Mortgages/HELOC Consolidation
  75. 75. CALIFORNIA ASSOCIATION OF REALTORS® Not as many fundamental problems in mortgage market 27.4% 24.0% 33.5% 5.0% 7.0% 6.6% 7.1% 33.8% 37.6% 47.3% 8.6% 16.2% 14.5% 15.6% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 1995 2000 2005 2010 2015 2018 2019 U.S. ARM Lending % of Applications % of Volume
  76. 76. CALIFORNIA ASSOCIATION OF REALTORS® Household balance sheets were in much better shape 8 10 12 14 16 18 20 Q1-80 Q1-81 Q1-82 Q1-83 Q1-84 Q1-85 Q1-86 Q1-87 Q1-88 Q1-89 Q1-90 Q1-91 Q1-92 Q1-93 Q1-94 Q1-95 Q1-96 Q1-97 Q1-98 Q1-99 Q1-00 Q1-01 Q1-02 Q1-03 Q1-04 Q1-05 Q1-06 Q1-07 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 Q1-14 Q1-15 Q1-16 Q1-17 Q1-18 Q1-19 Q1-20 Household Debt and Financial Obligations Debt Service Ratio Financial Obligations Ratio
  77. 77. CALIFORNIA ASSOCIATION OF REALTORS® Prices weren’t as inflated as they were in 2005 72.6% 43.2% 0% 10% 20% 30% 40% 50% 60% 70% 80% California Median Mortgage Payment to Income Ratio Payment/Income Historical Avg.
  78. 78. CALIFORNIA ASSOCIATION OF REALTORS® California housing market outlook (baseline) 2015 2016 2017 2018 2019 2020p 2021f SFH Resales (000s) 409.4 417.7 424.9 402.6 398.0 398.8 411.9 % Change 7.0% 2.0% 1.7% -5.2% -1.2% 0.2% 3.3% Median Price ($000s) $476.3 $502.3 $537.9 $569.5 $592.4 $661.1 $690.3 % Change 6.6% 5.4% 7.1% 5.9% 4.0% 11.6% 4.4% Housing Affordability Index 31% 31% 29% 28% 31% 32% 31% 30-Yr FRM 3.9% 3.6% 4.0% 4.5% 3.9% 3.2% 3.1% SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® page 93
  79. 79. CALIFORNIA ASSOCIATION OF REALTORS® Baseline housing forecast key assumptions • Vaccine available in H121 • No COVID surge this flu season (modest rise) • GDP growth rate at 4.2% in 2021 • Household income growth at 3.3% in 2021 • Interest rates near record low (3.1% in 2021) • 2021 inventory unchanged from 2020 • Foreclosures at low level (< 8% of sales in 2021) • Foreclosures average <10% discount
  80. 80. CALIFORNIA ASSOCIATION OF REALTORS® Worst case housing forecast key assumptions • Vaccine not available until H221 • Flu season resurgence in COVID • California shut down for (2 months +) • Zero growth in GDP in 2021 • Household income drops 4.2% in 2021 • No new federal stimulus in 2021 • Interest rates rise slightly (>3% in 2021) • Inventory increases (+20-25% from 2020) • Foreclosures at 2009-2010 (30% of all sales) • Foreclosures average 40% discount
  81. 81. CALIFORNIA ASSOCIATION OF REALTORS® California housing market outlook (worst case) 2015 2016 2017 2018 2019 2020p 2021f SFH Resales (000s) 409.4 417.7 424.9 402.6 398.0 377.0 330.0 % Change 7.0% 2.0% 1.7% -5.2% -1.2% -5.3% -12.5% Median Price ($000s) $476.3 $502.3 $537.9 $569.5 $592.4 $620.6 $518.8 % Change 6.6% 5.4% 7.1% 5.9% 4.0% 4.8% -16.4% Housing Affordability Index 31% 31% 29% 28% 31% 33% 41% 30-Yr FRM 3.9% 3.6% 4.0% 4.5% 3.9% 3.2% 3.2% SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® page 96
  82. 82. CALIFORNIA ASSOCIATION OF REALTORS® Potential REO scenarios 60% 8% 30% 5% 60% 10% 40% 5% 0% 10% 20% 30% 40% 50% 60% 70% Jan-09 Baseline Worst Case Best Csae California REO Market REO Market Share and Typical Discount (Relative to Market) REO Share of Market Typical REO Discount
  83. 83. CALIFORNIA ASSOCIATION OF REALTORS® Still bullish on California long term 5th Largest Economy 25 Million International Arrivals Annually Top Global Universities $175 Billion In Annual Exports
  84. 84. Thank You This presentation can be found on www.car.org/marketdata Speeches & Presentations jordanl@car.org

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