Download - 2010 Real Estate Forecast
October 7, 2009
Leslie Appleton-Young
C.A.R. Vice President and Chief Economist
2010 California Real Estate Market Forecast
California REALTOR® EXPO
US and California Economic Conditions
Historic Fiscal Stimulus
Fiscal Policy: “Spend Now – Worry Later”
To date: $3 trillion in government spending
MBS purchases ($693 billion)
TARP ($372 billion)
Obama stimulus package ($304 billion)
Cash for Clunkers
First-time Buyer Tax Credit
Extension of Unemployment Benefits
Tax Cuts
Result: Federal budget deficit will reach 1.6 trillion this year
SOURCE: Federal Home Loan Mortgage Corporation
Mortgage Rates and Monetary Policy“Whatever it Takes”
0%
1%
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FRM
ARM
Federal Funds
SOURCE: Federal Home Loan Mortgage Corporation – 30-yr FRMFederal Reserve Board – 10-Year T-Bond
30-Year FRM vs. 10-Year T-Bond Above-Average Risk Premiums Associated With Mortgage Loans
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FRM
10-YearT-Bond
RiskPrem
Average. Risk
Premium: 1.6%
Lower spread in 2009 - FED purchasesfrom Fannie and Freddie
Consumer Price IndexAugust 2009: All Items -1.4% YTY; Core 1.5% YTY
-4%
-2%
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All Items
Core
PERCENT CHANGE FROM A YEAR AGO, 100=1982-1984
Gross Domestic Product
-7%
-6%
-5%
-4%
-3%
-2%
-1%
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Q3
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Q4
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Q1
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Q2
-09
2008: +0.4%; 2009P -2.6%; Q2: -0.7%
ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $
ANNUAL QTRLY
QUARTERLY PERCENT CHANGE
-4
-2
0
2
4
6
8
1Q
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1Q
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Personal Consumption2009 Q2: -0.87%
SOURCE: US Dept of Commerce, Bureau of Economic Analysis
-2%
0%
2%
4%
6%
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10%
12%
14%
Q1
-19
60
Q1
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Q1
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Q1
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08
SOURCES: BEA S&P 500
U.S. Savings Rate: 1960 – 2009Is increase Permanent or Temporary?
Consumer Behavior: Permanent Change or Temporary Hiatus From Spending?
“Credit impaired lower income consumers can’t spend the way they used to and wealth impaired affluent consumers won’t.”
UCLA Forecast 9/09
INDEX, 100=1985
Consumer Confidence Index: Better…Sort OfAugust 2009: 54.5 September 2009: 53.1
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DJIMonthly
Avg.
Dow Jones Stock Price and Consumer Confidence30 Industrial Index vs. Consumer Confidence Index 1987-2009
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
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Dow Jones 30 Industrials Consumer Confidence Index Cons. Conf.
PERCENT CHANGE FROM A YEAR AGO
Retail Sales2009 August - 6.0% YTY
-15%
-10%
-5%
0%
5%
10%
15%
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Retail Sales 6 per. Mov. Avg. (Retail Sales)
Unemployment RateCalifornia (8/09 12.2%) vs. United States (9/09 9.8%)
-4%
-2%
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14%
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US-CA CA US
SOURCE: CA Employment Development Division
Employment Growth, California vs. U.S. 8/09 CA: -4-9% YTY 9/09 US: -4.2% YTY
YEAR TO YEAR % CHANGE
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California US
SOURCE: CA Employment Development Division
Nonfarm Employment By Region
SOURCE: CA Employment Development Division
Nonfarm NonfarmEmployment Employment Percent
Aug-09 Aug-08 Change ChangeSouthern California 7,918.8 8,289.4 -370.6 -4.5%
Bay Area 3,088.7 3,243.6 -154.9 -4.8%
Central Valley 1,906.2 1,990.4 -84.2 -4.2%
Central Coast 478.0 492.0 -14 -2.8%
North Central 131.6 137.9 -6.3 -4.6%
CALIFORNIA 14,234.1 14,975.6 -741.5 -5.0%
(Thousands)
Employment by Sector
-20%
-15%
-10%
-5%
0%
5%
To
tal N
on
farm
Co
ns
tru
cti
on
Ma
nu
fac
turi
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Wh
ole
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le
Re
tail
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& U
til
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& In
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Re
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Sv
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He
alt
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are
an
d S
oc
ial
As
st
2008 2009 2010
% Change
YTY % Changes in California 2008-2010
SOURCE: CA EDD, LAEDC
New Housing PermitsCalifornia, 1988-2009: Down 48.8% YTD
0
50,000
100,000
150,000
200,000
250,000
300,0001
98
8
19
89
19
90
19
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20
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YT
D
Single Family Multi-Family
SOURCE: Construction Industry Research Board
Distressed Commercial RE Growing
J '08
F M A M J J A S O N D J '09
F M A M J$0
$20,000,000,000
$40,000,000,000
$60,000,000,000
$80,000,000,000
$100,000,000,000
$120,000,000,000
$140,000,000,000
$11,402,641,162
$58,007,939,372
$114,543,683,284
Cumulative Distress
Source: Real Capital Analytics
billions
Distressed properties include those that are in bankruptcy, foreclosures, those that have received lender forbearance, or lender REO.
Commercial Debt Crisis Ahead
2008/2009 2010 2011 2012+$0
$200,000,000,000
$400,000,000,000
$600,000,000,000
$800,000,000,000
$1,000,000,000,000
$1,200,000,000,000
$1,400,000,000,000
$1,600,000,000,000
$1,800,000,000,000
$2,000,000,000,000
$410,000,000,000 $310,000,000,0
00
$500,000,000,000
$1,800,000,000,000
Commercial Real Estate Debt Maturities
Source: Goldman Sachs and REIT filings
billions
Commercial MBS Market
$0
$50
$100
$150
$200
$250
$4 $5$14$16$15$16
$26$37
$74$57
$47$67
$52
$78$93
$169
$203
$230
$12$0.8
U.S. CMBS Issuance ($ billions)
Source: Commercial Mortgage Alert
billions
California Real Estate Market
THOUSANDS
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
19
70
19
72
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20
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0
50,000
100,000
150,000
200,000
250,000
Home Sales Membership
California’s Housing Cycles and Membership1970-2009
Sales Hit Bottom in 2007, Up in 2008 & 2009
UNITS/MEDIAN PRICE $
SOURCE: California Association of REALTORS®
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
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Sales of Existing Detached Homes Median Price
California Sales of Existing Homes and Median Price
-61% -25%
-44%
129 132
181
224
282
327
266
194
152 146 148
26%
16%
-19%
-27%-22%
-4%1%
37%
2%
24%
0
50
100
150
200
250
300
350
400
20
00
20
01
20
02
20
03
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P
20
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F
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
$ Volume of Sales Percent Change% Change$ in Billion
Dollar Volume of Sales Peaked in ’05Down 55% Thru ‘09
SOURCE: California Association of REALTORS®
-55%
Sales of Existing Detached Homes and Pacific West Consumer Confidence
California, August 2009 Sales: 526,970 Units, Up 38.2% YTD, Up 9.0% YTY
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
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140
160
Sales Consumer Confidence INDEXUNITS
SOURCE: California Association of REALTORS®; The Conference Board
*Sales are seasonally adjusted and annualized
Median Price of Existing Detached HomesCalifornia, August 2009: $292,960, Down 16.9% YTY
SOURCE: California Association of REALTORS®
T: Feb-09$245,170
-59% frompeak
P: May-07$594,530
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000J
an
-00
Ju
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74%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
20
04
.10
20
05
.01
20
05
.04
20
05
.07
20
05
.10
20
06
.01
20
06
.04
20
06
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20
06
.10
20
07
.01
20
07
.04
20
07
.07
20
07
.10
20
08
.01
20
08
.04
20
08
.07
20
08
.10
20
09
.01
20
09
.04
20
09
.07
Under 500 500 to 999 1 Mil +
Sales By Price RangeOctober 2004 – present
SOURCE: Mortgage Bankers Association, C.A.R.
Credit Freeze: 8/2007
California vs U.S. Median Prices 1970-2009 1970: CA $24,640 US $23,000
2009: CA $271,000 US $172,600
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,00019
70
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
California
US
CA Price Trend
SOURCE: California Association of REALTORS®SOURCE: California Association of REALTORS®
Peak vs Current Price - August 2009
RegionPeak
MonthPeak Price
Aug-09 Median
% Chg From Peak
High Desert Apr-06 $334,860 $111,770 -66.6%
Monterey Region Aug-07 $798,210 $298,940 -62.5%
Riverside/San Bernardino Jan-07 $415,160 $166,600 -59.9%
Palm Springs/Lower Desert Jun-05 $393,370 $169,080 -57.0%
Sacramento Aug-05 $394,450 $192,050 -51.3%
CALIFORNIA May-07 $594,530 $292,960 -50.7%
Northern Wine Country Jan-06 $645,080 $347,920 -46.1%
Los Angeles Aug-07 $605,300 $339,980 -43.8%
Northern California Aug-05 $440,420 $255,600 -42.0%
San Diego May-06 $622,380 $375,710 -39.6%
San Luis Obispo Jun-06 $620,540 $382,560 -38.4%
San Francisco Bay Area May-07 $853,910 $531,580 -37.7%
Santa Clara Apr-07 $868,410 $555,000 -36.1%
Ventura Aug-06 $710,910 $466,200 -34.4%
Orange County Apr-07 $747,260 $499,440 -33.2%
SOURCE: California Association of REALTORS®
Unsold Inventory IndexCalifornia, August 2009: 4.3 Months
0
2
4
6
8
10
12
14
16
18
20
Ja
n-8
8J
ul-
88
Ja
n-8
9J
ul-
89
Ja
n-9
0J
ul-
90
Ja
n-9
1J
ul-
91
Ja
n-9
2J
ul-
92
Ja
n-9
3J
ul-
93
Ja
n-9
4J
ul-
94
Ja
n-9
5J
ul-
95
Ja
n-9
6J
ul-
96
Ja
n-9
7J
ul-
97
Ja
n-9
8J
ul-
98
Ja
n-9
9J
ul-
99
Ja
n-0
0J
ul-
00
Ja
n-0
1J
ul-
01
Ja
n-0
2J
ul-
02
Ja
n-0
3J
ul-
03
Ja
n-0
4J
ul-
04
Ja
n-0
5J
ul-
05
Ja
n-0
6J
ul-
06
Ja
n-0
7J
ul-
07
Ja
n-0
8J
ul-
08
Ja
n-0
9J
ul-
09
SOURCE: California Association of REALTORS®
MONTHS
Price Range (Thousand) Aug-09 Jul-09 Aug-08
$1,000K+ 12.8 9.6 10.8$750-1000K 6.1 5.2 7.6$500-750K 4.2 3.9 6.5$300-500K 3.9 3.5 6.3$0-300K 2.9 3.1 6.4Total 4.3 3.9 7.0
Unsold Inventory Index (Months)
SOURCE: California Association of REALTORS®
Unsold Inventory Index: Over & Under $500K
0
5
10
15
20
25
30
35
Jan
-90
Jul-
90Ja
n-9
1Ju
l-91
Jan
-92
Jul-
92Ja
n-9
3Ju
l-93
Jan
-94
Jul-
94Ja
n-9
5Ju
l-95
Jan
-96
Jul-
96Ja
n-9
7Ju
l-97
Jan
-98
Jul-
98Ja
n-9
9Ju
l-99
Jan
-00
Jul-
00Ja
n-0
1Ju
l-01
Jan
-02
Jul-
02Ja
n-0
3Ju
l-03
Jan
-04
Jul-
04Ja
n-0
5Ju
l-05
Jan
-06
Jul-
06Ja
n-0
7Ju
l-07
Jan
-08
Jul-
08Ja
n-0
9Ju
l-09
UII - Over $500k
UII - Under $500k
SOURCE: California Association of REALTORS®SOURCE: California Association of REALTORS®
Regional Markets
Home Sales in Northern California
0
50
100
150
200
250
300
350
400
450
Chico Paradise Humboldt LakeCounty
PlacerCounty
Shasta SiskiyouCounty
TahoeSierra
Aug-08 Aug-09
SOURCE: California Association of REALTORS®SOURCE: California Association of REALTORS®
Chico 271,428$ 295,237$ 291,176$ -8.1% -6.8%Humboldt 230,405$ 280,128$ 296,153$ -17.8% -22.2%Lake County 145,833$ 160,000$ 218,750$ -8.9% -33.3%Paradise 174,999$ 172,499$ 195,999$ 1.4% -10.7%Placer County 309,406$ 301,770$ 346,575$ 2.5% -10.7%Shasta County 203,125$ 198,499$ 231,632$ 2.3% -12.3%Siskiyou County 170,000$ 166,666$ 208,333$ 2.0% -18.4%Tahoe Sierra 547,619$ 551,136$ 687,499$ -0.6% -20.3%
Y-t-YRegion Aug-09 Jul-09 Aug-08 M-t-M
Median Price of Existing Detached Homes
SOURCE: California Association of REALTORS®
Northern California
SOURCE: California Association of REALTORS®
Home Sales in Northern Wine Country
0
50
100
150
200
250
300
350
400
450
500
Mendocino Napa Sonoma
Aug-08
Aug-09
SOURCE: California Association of REALTORS®
Mendocino 218,750$ 258,333$ 322,222$ -15.3% -32.1%Napa 337,096$ 369,642$ 455,882$ -8.8% -26.1%Sonoma 361,792$ 365,966$ 382,945$ -1.1% -5.5%
Y-t-YRegion Aug-09 Jul-09 Aug-08 M-t-M
Median Price of Existing Detached HomesNorthern Wine Country
SOURCE: California Association of REALTORS®
Home Sales in Bay Area Counties
0
100
200
300
400
500
600
700
800
900
1000
Alameda ContraCosta
Marin SanFrancisco
San Mateo SantaClara
SantaCruz
Solano Sonoma
Aug-08
Aug-09
SOURCE: California Association of REALTORS®
Median Price of Existing Detached HomesBay Area Counties
Alameda 447,802$ 450,515$ 514,974$ -0.6% -13.0%Contra Costa 627,747$ 628,099$ 701,298$ -0.1% -10.5%Marin 835,000$ 762,500$ 929,999$ 9.5% -10.2%San Francisco 655,405$ 704,645$ 789,773$ -7.0% -17.0%San Mateo 672,500$ 755,000$ 787,500$ -10.9% -14.6%Santa Clara 555,000$ 587,000$ 650,000$ -5.5% -14.6%Santa Cruz 500,000$ 535,000$ 582,000$ -6.5% -14.1%Solano 210,577$ 209,066$ 267,592$ 0.7% -21.3%Sonoma 361,792$ 365,966$ 382,945$ -1.1% -5.5%
Aug-08 M-t-M Y-t-YCounty Aug-09 Jul-09
SOURCE: California Association of REALTORS®
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Aug-08
Aug-09
Home Sales in Central Valley Region
SOURCE: California Association of REALTORS®
133,250$ 133,750$ 180,000$ -0.4% -26.0%149,047$ 146,707$ 189,506$ 1.6% -21.3%107,586$ 110,571$ 134,761$ -2.7% -20.2%192,047$ 183,835$ 220,894$ 4.5% -13.1%Sacramento
Y-t-Y
Merced
County Aug-09 Jul-09 Jul-08 M-t-M
Bakersfield
Fresno
Median Price of Existing Detached HomesCentral Valley Regions
SOURCE: California Association of REALTORS®
Home Sales in Central Coast Region
0
50
100
150
200
250
300
350
400
MontereyAtascadero PasoRobles
PismoCoast
San LuisObispo
LompocValley
SantaBarbara
SantaMaria
Aug-08
Aug-09
SOURCE: California Association of REALTORS®SOURCE: California Association of REALTORS®
Monterey 235,000$ 230,000$ 302,000$ 2.2% -22.2%
Atascadero 372,727$ 343,750$ 391,666$ 8.4% -4.8%Paso Robles 309,375$ 338,235$ 341,176$ -8.5% -9.3%Pismo Coast 433,333$ 500,000$ 531,250$ -13.3% -18.4%San Luis Obispo 512,500$ 468,749$ 515,625$ 9.3% -0.6%
Lompoc Valley 208,333$ 188,000$ 291,666$ 10.8% -28.6%Santa Barbara 828,750$ 882,500$ 1,000,000$ -6.1% -17.1%Santa Maria 250,000$ 257,895$ 262,500$ -3.1% -4.8%
Monterey County
San Luis Obispo County
Santa Barbara County
Y-t-YRegion Aug-09 Jul-09 Aug-08 M-t-M
Median Price of Existing Detached Homes
SOURCE: California Association of REALTORS®SOURCE: California Association of REALTORS®
Home Sales in Southern California Regions
0
500
1000
1500
2000
2500
3000
3500
4000
4500
High Desert Los Angeles Orange PalmSprings
Riverside/SB San Diego Sta. BarbaraArea
Ventura
Aug-08
Aug-09
SOURCE: California Association of REALTORS®
High Desert 111,771$ 110,653$ 169,203$ 1.0% -33.9%Los Angeles 339,982$ 339,432$ 394,869$ 0.2% -13.9%
499,437$ 500,212$ 511,268$ -0.2% -2.3%Palm Springs 169,076$ 163,077$ 221,944$ 3.7% -23.8%
166,601$ 165,465$ 225,394$ 0.7% -26.1%375,706$ 372,645$ 388,712$ 0.8% -3.3%828,750$ 882,500$ 1,000,000$ -6.1% -17.1%
Sta. Barbara-North Cnty. 244,047$ 243,477$ 266,666$ 0.2% -8.5%466,197$ 456,435$ 478,408$ 2.1% -2.6%
Riverside/SB
Ventura
Sta. Barbara-So. Coast
Y-t-Y
San Diego
County Aug-09 Jul-09 Aug-08 M-t-M
Orange
Median Price of Existing Detached HomesSouthern California Regions
SOURCE: California Association of REALTORS®
A Tale of Two Markets:San Mateo & Hayward
Source: ForeclosureRadar.com, C.A.R.
San Mateo, Sep 2009: Median Price: $698,000 Down 15% YTY 54 SF Det Units Sold, Up 26% YTY 2.0 Months of Supply, Down 45% YTY 206 Properties For Sale, Down 20% YTY 173 NODs, 119 Foreclosures, 42 REOS
Hayward, Sep 2009: Median Price: $280,000 Down 12% YTY 116 SF Det Units Sold, Down 13% YTY 1.0 Month of Supply, Down 77% YTY 391 Properties For Sale, Down 65% YTY 895 NODs, 811 Foreclosures, 324 REOS
A Tale of Two Markets:Pleasanton & Brentwood
Source: ForeclosureRadar.com, C.A.R.
Pleasanton, Sep 2009: Median Price: $685,000, Down 13% YTY 63 SF Det Units Sold, Up 91% YTY 3.0 Months of Supply, Down 55% YTY 239 Properties For Sale, Down 34% YTY 165 NODs, 97 Foreclosures, 29 REOS
Brentwood, Sep 2009: Median Price: $283,600 Down 19% YTY 70 SF Det Units Sold, Down 33% YTY 1.2 Months of Supply, Down 74% YTY 322 Properties For Sale, Down 46% YTY 476 NODs, 424 Foreclosures, 190 REOS
A Tale of Two Markets:Walnut Creek & Concord
Source: ForeclosureRadar.com, C.A.R.
Concord, Sep 2009: Median Price: $290,000, Down 16% YTY 66 SF Det Units Sold, Down 35% YTY 1.0 Month of Supply, Down 72% YTY 283 Properties For Sale, Down 52% YTY 605 NODs, 413 Foreclosures, 239 REOS
Walnut Creek, Sep 2009: Median Price: $650,000 Down 13% YTY 39 SF Det Units Sold, Up 18% YTY 3.0 Months of Supply, Down 34% YTY 216 Properties For Sale, Down 19% YTY 207 NODs, 132 Foreclosures, 59 REOS
A Tale of Two Markets:Laguna Beach & Temecula
Source: ForeclosureRadar.com, C.A.R.
Temecula, Sep 2009: Median Price: $270,000 Down 7% YTY 153 SF Det Units Sold, Down 19% YTY 1.0 Months of Supply, Down 80% YTY 667 Properties For Sale, Down 56% YTY 845 NODs, 821 Foreclosures, 276 REOS
Laguna Beach, Sep 2009: Median Price: $1,370,000, -20% YTY 29 SF Det Units Sold, Up 142% YTY 12.0 Months of Supply, Down 48% YTY 388 Properties For Sale, Up 2% YTY 75 NODs, 52 Foreclosures, 14 REOS
A Tale of Two Markets:Santa Barbara & Santa Maria
Source: ForeclosureRadar.com, C.A.R.
Santa Barbara, Sep 2009: Median Price: $760,200, Down 26% YTY 54 SF Det Units Sold, Down 4% YTY 7.0 Months of Supply, Down 36% YTY 463 Properties For Sale, Down 4% YTY 147 NODs, 139 Foreclosures, 48 REOS
Santa Maria, Sep 2009: Median Price: $262,750 Up 2% YTY 64 SF Det Units Sold, Down 36% YTY 2.0 Months of Supply, Down 69% YTY 2208 Properties For Sale, Down 65% YTY 432 NODs, 432 Foreclosures, 180 REOS
-100%
-50%
0%
50%
100%
150%
200%
250%
300%
20
05
.10
20
06
.01
20
06
.04
20
06
.07
20
06
.10
20
07
.01
20
07
.04
20
07
.07
20
07
.10
20
08
.01
20
08
.04
20
08
.07
20
08
.10
20
09
.01
20
09
.04
20
09
.07
Under 500 500 to 999 1 Mil + Total
Year-to-Year Percent Change in Sales
SOURCE: Mortgage Bankers Association, C.A.R.
By Price Interval
SOURCE: California Association of REALTORS®
-15%
-10%
-5%
0%
5%
10%
15%
20
05
.10
20
06
.01
20
06
.04
20
06
.07
20
06
.10
20
07
.01
20
07
.04
20
07
.07
20
07
.10
20
08
.01
20
08
.04
20
08
.07
20
08
.10
20
09
.01
20
09
.04
20
09
.07
Under 500 500 to 999 1 Mil +
Year-to-Year Percent Change in Median Price
SOURCE: Mortgage Bankers Association, C.A.R.
Within Price Interval
SOURCE: California Association of REALTORS®
26%36%
40% 41%
51%56% 58%
66%73%
78% 80%
0%
20%
40%
60%
80%
100%
Ma
rin
Sa
n L
uis
Ob
isp
o
Me
nd
oci
no
Ora
ng
e
So
no
ma
Na
pa
Lo
s A
ng
ele
s
Sa
cra
me
nto
Ke
rn
So
lan
o
Riv
ers
ide
/Sa
nB
ern
ard
ino
Distressed Sales to Total Sales Ratio(Aug 2009)
SOURCE: California Association of REALTORS®
County/Region Mar-09 Jun-09 Jul-09 Aug-09
Marin 33.1% 21.6% 26.9% 26.4%San Luis Obispo 50.5% 41.8% 38.4% 35.5%Mendocino 41.9% 51.1% 40.0% 40.0%Orange 56.7% 44.5% 40.6% 41.4%Sonoma 67.1% 56.6% 46.8% 51.3%Napa 69.4% 51.9% 52.0% 55.7%Los Angeles 69.2% 61.2% 58.9% 57.6%Sacramento 70.5% 70.6% 65.9% 66.4%Kern 83.5% 76.9% 73.7% 72.9%Solano 88.4% 84.0% 83.3% 78.1%Riverside/San Bernardino 87.1% 83.5% 82.2% 79.5%
Distressed Sales to Total Sales Ratio
SOURCE: California Association of REALTORS®
Distressed Sales vs. Non Distressed Sales
DistressedNon-Distressed
Median Home Price $250,000 $485,000
Price/SF $154 $277
Percent of Sales with Multiple Offers 68.1% 44.7%
Number of Offers (Average) 6.1 4.0
Percent of All Cash Sales 22.4% 17.1%
Number of Days on MLS 43 50
Number of Days in Escrow 45 35
Percent of Sales with Net Cash Loss 68.9% 17.9%
Net Cash Gain/Net Cash Loss to Seller -$100,000 $85,000
Source: C.A.R. 2009 Housing Market Survey
5.0%
19.5%
11.1%
26.8%
14.4%
5.3%
0%
10%
20%
30%
Foreclosures REOs Short Sales
2008 2009
Percent of Distressed Properties
Q. Was the property purchased/sold as a foreclosure, REO, short sale, or none of the above?
Source: C.A.R. 2009 Housing Market Survey
2009 Housing Market Survey
0%
1%
2%
3%
4%
5%
6%
7%
8%
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
0
2
4
6
8
10
12
14
16Med. Price DiscountMed. Weeks on MLS
Median Price Discount And Weeks On Market
Q. What was the original list sales price of the property? What was the final sales price of the property? How many weeks did the property remain on the MLS?
4.6%, 6.4 weeks
69%
0%
20%
40%
60%
80%
100%
Percent with Price DiscountSelling price below listing price
Long Run Average = 68%
Q. What was the original list sales price of the property? What was the final sales price of the property?
$220,640
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
$200,000
$220,000
$240,000
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Median Net Cash To Sellers2005: $220K 2009: $50K
Q. What was the net cash gain or net loss to the seller as a result of this sale?
$50,000
Sellers Reporting a Net Cash LossPercent of All Sellers
32.9%
0%
5%
10%
15%
20%
25%
30%
35%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Q. What was the net cash gain or net loss to the seller as a result of this sale?
Long Run Average = 9.3%
Proportion of Home Sellers Planning to Repurchase
39.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
89 90 91 92 93 94 95 96 97 98 00 01 02 03 04 05 06 07 08 09
Q. Is the seller planning on purchasing another home?
Proportion of First-Time HomebuyersCalifornia
47.0%
38.6%
0%
10%
20%
30%
40%
50%
60%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
% First-Time Home Buyers Long Run Average
Q. Was the buyer a first-time buyer?
FHA and VA Mortgages(First Mortgage)
Q. Please indicate the type of mortgage
32.0%
4.7%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2001 2002 2003 2004 2005 2006 2007 2008 2009
FHA VA
FHA vs. Conventional(New First Mortgages)
FHA Conventional
Median Home Price $261,500 $455,000
Median Down Payment (Dollar) $9,888 $92,000
Median Down Payment (% to Price) 3.5% 20.0%
Share of All Home Sales 32.0% 63.3%Percent of Mortgages with Distressed Property 62.6% 37.4%
Percent of First-Time Buyers 75.8% 40.2%
55.4%
5.14
0%
10%
20%
30%
40%
50%
60%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
0
1
2
3
4
5
6% with Multiple Offers
# of Multiple offers (Average)
Multiple Offers:Over 1/2 homes sold 2009 had multiple offers
0%
10%
20%
30%
40%
50%
1998 2000 2002 2004 2006 2008
All Hombuyers First-Time BuyersRepeat Buyers
Percent of Buyers with Zero Down PaymentFirst-Time Buyers vs. Repeat Buyers
5.0%
3.7%
2.8%
19.6%
0%
2%4%
6%8%
10%12%
14%16%
18%20%
22%
Percent of All Cash Sales
12.1%
5.2%
0%
5%
10%
15%
20%
1998 2000 2002 2004 2006 2008
Investment/Rental Property Vacation/Second Home
Buyer Use of Property(All Homes)
10.2%
4.1%
0%
5%
10%
15%
1998 2000 2002 2004 2006 2008
Investment/Rental Property Vacation/Second Home
Buyer Use of Property(Single-Family Detached Homes)
16.3%
10.6%
0%
5%
10%
15%
20%
25%
30%
1998 2000 2002 2004 2006 2008
Investment/Rental Property Vacation/Second Home
Buyer Use of Property(Condos/Townhomes)
20%
0% 0% 0%0% 0%
19% 20%
8%
18%
30%
0%
55%
0%5%
16%
42%
14% 16%
7%3%
0%
15%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Desiredlarger home
Desiredbetter/other
location
Mortgagepaymentwent up(reindex)
Moved torental to
save money
Job loss Troublemaking
mortgagepayments
2006 2007 2008 2009
Signs of Distress in 2008-2009
Sellers Are Reacting to Financial Stress
The Role of Market Conditions In the Decision to Sell
SOURCE: C.A.R. 2009 Survey of Home Sellers
While Buyers See Opportunities …
10%
9%
67%
22%
39%
Price decreases motivated us
Low interest rates helped us move toa better location, neighborhood
Likelihood that interest rates will moveup motivated us
Low interest rates helped us buy alarger home
Moved to an area where it was moreaffordable
The Role Of Market ConditionsIn The Decision To Buy
SOURCE: C.A.R. 2009 Survey of Home Buyers
The Bottom Line: Great Time to be a First Time Buyer
First-time Buyer Housing Affordability IndexCalifornia Vs. U.S. 2000-2009
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
20
00
Q1
20
00
Q3
20
01
Q1
20
01
Q3
20
02
Q1
20
02
Q3
20
03
Q1
20
03
Q3
20
04
Q1
20
04
Q3
20
05
Q1
20
05
Q3
20
06
Q1
20
06
Q3
20
07
Q1
20
07
Q3
20
08
Q1
20
08
Q3
20
09
Q1
CA US
% OF HOUSEHOLDS THAT CAN BUY
SOURCE: California Association of REALTORS®
Federal First-Time Buyer Tax Credit
• Legislation Passed February 2009
• Retroactive to January 1, 2009
• Extended/modified version of 2008 Tax Credit– Current expiration November 30, 2009– 6 month extension under deliberation
• National Impact – 1.4 million families in US (IRS)
• California Results – 39% of first-timers would not have bought in 2009 w/o tax credit (C.A.R. Survey)
Bought Home Regardless of Federal First-Time Home Buyer Tax Credit?
Q. Would you have bought a home if there were not a Federal First-Time Home Buyer Tax Credit, or if you knew you did not qualify for the credit? CAR Telephone Survey 2009
39%
52%
26%
11%
17%
6%
51%
68%
31%
Total (N = 200)
Income Under $100K(N = 96)
Income $100K andover (N = 104)
Yes No Unsure
0% 0% 0%
5%
8%9% 9%
10%
31%
27%
0%
5%
10%
15%
20%
25%
30%
35%
1 2 3 4 5 6 7 8 9 10
Mean = 8.1 Median = 9
Scale: “1” = very easy, “10” = very difficult
Level of Difficulty to Obtain Financing(All Buyers)
Q. Please rate how easy of difficult it was to obtain financing on a scale of 1 to 10, with 1 being very easy and 10 being very difficult.
Reasons Why Property Fell Out of EscrowAll Homes
22.0%
0.0%
5.6%
36.5%
40.5%
0% 10% 20% 30% 40% 50%
Buyers could notsecure a mortgage
Buyer changed mind
Buyer did not havedown payment
Seller decided not tosell
Other
Q. Do you know why the property fell out of escrow previously?
Buyers Who Know the Terms of Their Loan
93%
88%
68%
81%
76%
79%
3%
1%
2%
2%
2%
7%
9%
30%
17%
22%
19%
0% 20% 40% 60% 80% 100%
Short Sale
REO
Regular MarketSales
Repeat Buyers
First-Time Buyers
All Buyers
Yes No Unsure
Q. Do you know the term of your loan?
FHA Loans in CA# of Total Loans in CA & US
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Oc
t-0
6
De
c-0
6
Fe
b-0
7
Ap
r-0
7
Ju
n-0
7
Au
g-0
7
Oc
t-0
7
De
c-0
7
Fe
b-0
8
Ap
r-0
8
Ju
n-0
8
Au
g-0
8
No
v-0
8
Ja
n-0
9
Ma
r-0
9
Ma
y-0
9
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
200000
CA Total US Total
CA Tops All States with a 10% Market Share of all FHA Lending in US (Source: Inside FHA Lending)
Source: HUD
CA Endorsements US Endorsements
9.4%
5.8%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Q1
-19
79
Q2
-19
80
Q3
-19
81
Q4
-19
82
Q1
-19
84
Q2
-19
85
Q3
-19
86
Q4
-19
87
Q1
-19
89
Q2
-19
90
Q3
-19
91
Q4
-19
92
Q1
-19
94
Q2
-19
95
Q3
-19
96
Q4
-19
97
Q1
-19
99
Q2
-20
00
Q3
-20
01
Q4
-20
02
Q1
-20
04
Q2
-20
05
Q3
-20
06
Q4
-20
07
Q1
-20
09
Delinquency Rate - CA Foreclosure Rate - CA
CA Mortgage Foreclosure & Delinquency RatesCalifornia: Q2-2009, NSA
SOURCE: Mortgage Bankers Association
Delinquencies: Long Run Average: 4.1%
Foreclosure Rate: Long Run Average: 1.0%
California Subprime & Alt A Loans
As of May 2009 Sub-Prime Alt-A
Number of All Loans in Category 345,505 632,215
Loans as Share of All Housing Units 3% 5%
ARMs As Share of All Loans in Category 66% 70%
Number of ARMs 226,997 440,022
Percent of ARMs…
…Already Reset 84.6% 46.9%
…To Reset Next 1-11 Months 7.9% 5.2%
…To Reset Next 12-23 Months 2.4% 7.4%
…To Reset Next 24+ Months 5.0% 40.4%
As of May 2009
SOURCE: FirstAmerican CoreLogic, LoanPerformance Data, U.S. Census Bureau, and Federal Reserve Bank of New York, compiled by C.A.R.
124,562
135,431
0
20000
40000
60000
80000
100000
120000
1400002
00
5.3
20
05
.4
20
06
.1
20
06
.2
20
06
.3
20
06
.4
20
07
.1
20
07
.2
20
07
.3
20
07
.4
20
08
.1
20
08
.2
20
08
.3
20
08
.4
20
09
.1
20
09
.2
NODs Trustee Deeds
NODs & Trustees Deeds Filed in California2005 - 2009
Source: DataQuick Information Systems
No. of Defaults or TDs
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
Se
p-0
6
Oc
t-0
6
No
v-0
6
De
c-0
6J
an
-07
Fe
b-0
7
Ma
r-0
7A
pr-
07
Ma
y-0
7
Ju
n-0
7
Ju
l-0
7A
ug
-07
Se
p-0
7
Oc
t-0
7N
ov
-07
De
c-0
7
Ja
n-0
8
Fe
b-0
8M
ar-
08
Ap
r-0
8
Ma
y-0
8
Ju
n-0
8J
ul-
08
Au
g-0
8
Se
p-0
8O
ct-
08
No
v-0
8
De
c-0
8
Ja
n-0
9F
eb
-09
Ma
r-0
9
Ap
r-0
9M
ay
-09
Ju
n-0
9
Ju
l-0
9
Au
g-0
9
Notice of Defaults - CountsNotice of Trustee SaleREO
California Foreclosure Activity 09/06 - present
Government Intervention
SOURCE: ForeclosureRadar.com
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
55,000
60,000
65,000
Ja
n-0
8
Fe
b-0
8
Ma
r-0
8
Ap
r-0
8
Ma
y-0
8
Ju
n-0
8
Ju
l-0
8
Au
g-0
8
Se
p-0
8
Oc
t-0
8
No
v-0
8
De
c-0
8
Ja
n-0
9
Fe
b-0
9
Ma
r-0
9
Ap
r-0
9
Ma
y-0
9
Ju
n-0
9
Ju
l-0
9
Au
g-0
9
Notice of Defaults - CountsNotice of Trustee SaleREO
California Foreclosure Activity 2008 - present
September 2008: CA SB 1137 Takes Effect
September 18, 2008: Paulson asks For TARP Funds
Government Intervention
SOURCE: ForeclosureRadar.comFebruary 11 2009:Frank’s Moratorium Request
February 20, 2009: CA Foreclosure Prevention Act
March 4, 2009:Making Home Affordable/HAMP
2010 Forecast
Wild Cards
• First-time Buyer Tax Credit
• Additional Stimulus – Job Creation Prerequisite to
Sustainable Growth
• Foreclosure Pipeline
• Commercial Defaults – Impact on Credit Market
• Inflation - Will Fed monetize the deficit?
• H1N1 (Stock tip: Purell)
U.S. Economy
2004 2005 2006 2007 2008 2009f 2010f
US GDP 3.6% 3.1% 2.7% 2.1% 0.4% -2.6% 1.9%
Nonfarm Job Growth
1.1% 1.7% 1.8% 1.1% -0.4% -3.7% -1.0%
Unemployment 5.5% 5.1% 4.6% 4.6% 5.8% 9.3% 10.0%
CPI 2.7% 3.4% 3.2% 2.8% 3.8% -0.5% 1.9%
Real Disposable Income, % Change
3.4% 1.3% 4.0% 2.2% 0.5% 0.8% 2.1%
SOURCE: California Association of REALTORS®
Forecast Date: October 2009
California Economy
2004 2005 2006 2007 2008 2009f 2010f
Nonfarm Job Growth
1.0% 1.8% 1.7% 0.8% -1.2% -4.3% -1.1%
Unemployment Rate
6.2% 5.4% 4.9% 5.4% 7.2% 11.6% 12.1%
Population Growth
1.4% 1.2% 1.1% 1.1% 1.2% 1.1% 1.1%
Real Disposable Income, % Change
3.6% 1.3% 3.4% 1.5% 0.1% -0.4% 0.1%
SOURCE: California Association of REALTORS®
Forecast Date: October 2009
2009 Forecast vs. Actual
California Housing Market Forecast
2003 2004 2005 2006 2007 2008e 2009f
SFH Resales (000s)
601.8 624.7 625.0 477.5 353.3 395.6 445.0
% Change 5.1% 3.8% 0.04% -23.6% -26.0% 12.0% 12.5%
Median Price ($000s)
$372.7 $450.8 $524.0 $556.6 $558.1 $381.0 358.0
% Change 17.9% 20.9% 16.2% 6.2% 0.3% -31.7% -6.0%
30-Yr FRM 5.8% 5.8% 5.9% 6.4% 6.3% 5.9% 6.2%
1-Yr ARM 3.8% 3.9% 4.5% 5.5% 5.6% 5.2% 5.3%
SOURCE: California Association of REALTORS®
Forecast Date: October 2008
2010 California Houisng
Market Forecast
California Housing Market Outlook
2003 2004 2005 2006 2007 2008 2009F 2010F
SFH Resales (000s)
601.8 624.7 625.0 477.5 346.9 439.8 540.0 527.5
% Change 5.1% 3.8% 0.03% -23.6% -27.3% 26.8% 22.8% -2.3%
Median Price ($000s)
$371.5 $450.8 $522.7 $556.4 $560.3 $346.4 $271.0 $280.0
% Change 17.5% 21.3% 16.0% 6.5% 0.7% -38.2% -21.8% 3.3%
30-Yr FRM 5.8% 5.8% 5.9% 6.4% 6.3% 6.0% 5.2% 5.6%
1-Yr ARM 3.8% 3.9% 4.5% 5.5% 5.6% 5.2% 4.8% 5.2%
Source: CALIFORNIA ASSOCIATION OF REALTORS®
Forecast Date: October 2009
Market Opportunities
• First time buyers: Growing share of the market
• Connect with past clients: Valuable information to share
• Educate clients: What is Responsible Homeownership?
• Educate yourself: Professional Development is Critical
• Listen to your clients
Thank [email protected]