2016 CALIFORNIA HOUSING MARKET OUTLOOK - … CALIFORNIA HOUSING MARKET OUTLOOK October 27,2015 Oscar Wei, Senior Economist

2016 CALIFORNIA HOUSING MARKET OUTLOOK

October 27,2015

Oscar Wei, Senior Economist

OVERVIEW

• Economic Outlook

• California Housing Market Outlook

• Regional Housing Market Outlook

• 2016 Forecast

• Market Opportunities in 2016

ECONOMIC OUTLOOK

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

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20

15P

20

16F

Q1-

12

Q2

-12

Q3-

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Q4

-12

Q1-

13

Q2

-13

Q3-

13

Q4

-13

Q1-

14

Q2

-14

Q3-

14

Q4

-14

Q1-

15

Q2

-15

ECONOMY HAS BEEN GROWING FOR 68 MONTHS

2014: 2.4%; 2015p: 2.4%; 2016f: 2.7%

ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $

ANNUALLY QUARTERLY

2009 Largest Annual Drop since 1938 (-3.4%)

SERIES: GDPSOURCE: US Dept. of Commerce, Bureau of Economic Analysis

3.9%

UNEMPLOYMENT RATES AT 7-YEAR LOWS

September 2015: US 5.1% & September 2015:CA 5.9%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

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Jan

-11

Jul-

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Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

US-CA CA US

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 STALLED IN SEPT:142K

3.0%

2.…

-8

-6

-4

-2

0

2

4

6

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

California USANNUAL PERCENT CHANGE

SERIES: Total Nonfarm EmploymentSOURCE: US Bureau of Labor Statistics, CA Employment Development Division

Change Growth

United States 2,752,000 2.0%

California 470,000 3.0%

New York 130,500 1.4%

Texas 217,700 1.9%

198K/mo 2015 avg260K/mo 2014 avg

JOB TRENDS BY CALIFORNIA METRO AREA

0.0%

1.0%

2.1%

2.1%

2.4%

2.7%

2.9%

3.2%

3.2%

3.5%

4.7%

4.7%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0%

Bakersfield

Ventura

Los Angeles

Oakland MSA

Sacramento

Inland Empire

Orange County

Santa Barbara

Fresno MSA

San Diego

San Jose

San Francisco

SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

ANNUAL PERCENT CHANGE

September 2015: CA +2.8%, +444,300

CONSUMER CONFIDENCE INDEX

September 2015: 103.0

0

20

40

60

80

100

120

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

INDEX, 100=1985

SERIES: Consumer ConfidenceSOURCE: The Conference Board

MORTGAGE RATES

January 2009 – October 2015

0%

1%

2%

3%

4%

5%

6%

FRM

ARM

MONTHLY WEEKLY

SERIES: 30Yr FRM, 1Yr ARMSOURCE: Federal Home Loan Mortgage Corporation

RATE HIKE POSTPONED, BUT NOT CANCELLED

Factors for the delay

- Global economic slowdown/Strong dollar• Emerging markets vulnerable to rising rate environment

- Heighten stock market volatility• Negative wealth effect could lead to slowdown in economic growth

- Avoid a repeat of Taper Tantrum• Fed had not articulated enough on all the moving parts and did not

want to give any surprises

WHERE ARE WE HEADED?

- Fed will likely begin normalization in early 2016 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

MARKET DOWN SHARPLY FROM THE PEAK

1,944.4

1650

1700

1750

1800

1850

1900

1950

2000

2050

2100

2150

Jan

-14

Mar

-14

May

-14

Jul-

14

Sep

-14

No

v-14

Jan

-15

Mar

-15

May

-15

Jul-

15

Sep

-15

S & P 500 Composite

MONTHLY AVERAGE

Causes of the financial market turmoil

- Highly valued asset markets

- Economic slowdown in China

- U.S. monetary policy normalization

- Collapse in energy and other commodity prices

ECONOMIC CONSEQUENCES OF THE MARKET TURMOIL

Negative Impact:

- Decline in stock prices lowers consumer spending due to adverse wealth effect

- Strong $ weakens international trade- Emerging markets struggle to adjust to lower commodity prices

Positive Impact:

- Lower interest rate environment supports housing and refinancing activity

- Lower energy prices benefit consumers in the long run, with consumer spending more than offset the hit to the energy sector

- Reduces over-valuation in asset markets and minimizes risk for a shaper downturn. Allows Fed to raise rates more slowly

U.S. ECONOMIC OUTLOOK

2010 2011 2012 2013 2014 2015p 2016f

US GDP 2.4% 1.8% 2.3% 2.2% 2.4% 2.4% 2.7%

Nonfarm Job Growth -0.7% 1.2% 1.7% 1.7% 1.9% 2.1% 1.8%

Unemployment 9.6% 8.9% 8.1% 7.4% 6.2% 5.3% 5.0%

CPI 1.6% 3.1% 2.1% 1.5% 1.6% 0.2% 2.1%

Real Disposable

Income, % Change 1.0% 2.5% 3.0% -0.2% 2.5% 3.3% 2.7%

30-Yr FRM 4.7% 4.5% 3.7% 4.0% 4.2% 3.9% 4.5%

SERIES: U.S. Economic OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

CALIFORNIA ECONOMIC OUTLOOK

2010 2011 2012 2013 2014 2015p 2016f

Nonfarm Job Growth -1.1% 1.1% 2.4% 3.0% 2.2% 2.8% 2.3%

Unemployment Rate 12.3% 11.8% 10.4% 8.9% 7.5% 6.3% 5.5%

Population Growth 0.7% 0.7% 0.7% 0.9% 0.9% 0.9% 0.9%

Real Disposable

Income, % Change 0.9% 3.4% 4.7% 0.2% 3.0% 4.3% 4.5%

SERIES: CA Economic OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

CALIFORNIA HOUSING MARKET OUTLOOK

SALES HAVE BEEN STRONG AFTER A WEAK START

California, Sep 2015 Sales: 425,030 Units, +7.3% YTD, +6.9% YTY

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

*Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Sep-15: 425,030

Sep-14: 397,490

SALES LOOKING POSITIVE FOR ‘15

SERIES: Sales of Existing Single Family Homes, Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Jan

-10

Ap

r-10

Jul-

10

Oct

-10

Jan

-11

Ap

r-11

Jul-

11

Oct

-11

Jan

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Ap

r-12

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Ap

r-13

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-13

Jan

-14

Ap

r-14

Jul-

14

Oct

-14

Jan

-15

Ap

r-15

Jul-

15

Year-over-Year % Chg 6 per. Mov. Avg. (Year-over-Year % Chg)

First sign of leveling off since early 2014

CALIFORNIA PENDING HOME SALES INDEX

110.8

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

Jan

-10

Ap

r-10

Jul-

10

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-10

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-11

Ap

r-11

Jul-

11

Oct

-11

Jan

-12

Ap

r-12

Jul-

12

Oct

-12

Jan

-13

Ap

r-13

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13

Oct

-13

Jan

-14

Ap

r-14

Jul-

14

Oct

-14

Jan

-15

Ap

r-15

Jul-

15

SERIES: Pending Home Sales IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

California: September 2015

PENDING HOME SALES BY REGION(YEAR-TO-YEAR % CHG.)

(Year-to-Year)

4.6%

10.2%

14.1%

10.9%

0%

2%

4%

6%

8%

10%

12%

14%

16%

SF Bay Area Southern California Central Valley California

Sep-15

SERIES: Sales of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

HOUSEHOLD GROWTH AFFECTED BY DEMOGRAPHIC AND ECONOMIC FACTORS

HOUSEHOLD FORMATION ACCELERATES IN 2015

MEDIAN PRICE - ANNUAL % GAINS REMAIN SUBDUED

California, Sep 2015: $482,150, -2.3% MTM, +4.3% YTY

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

P: May-07$594,530

T: Feb-09$245,230-59% frompeak

SERIES: Median Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Sep-15: $482,150

Sep-14: $462,380

-20%

-10%

0%

10%

20%

30%

40%

50%

Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

Condo Single-Family Homes

HOME PRICE APPRECIATIONS HAVE MODERATED SINCE MID 2013

SERIES: Sales of SFH and Condo UnitsSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

YTY% Chg. in Price

PRICE PER SQUARE FOOT

Sep 2015: $236, Up 0.3% MTM, Up 2.5% YTY

$0

$50

$100

$150

$200

$250

$300

$350

$400

Jan

-07

Ap

r-0

7Ju

l-0

7O

ct-0

7Ja

n-0

8A

pr-

08

Jul-

08

Oct

-08

Jan

-09

Ap

r-0

9Ju

l-0

9O

ct-0

9Ja

n-1

0A

pr-

10Ju

l-10

Oct

-10

Jan

-11

Ap

r-11

Jul-

11O

ct-1

1Ja

n-1

2A

pr-

12Ju

l-12

Oct

-12

Jan

-13

Ap

r-13

Jul-

13O

ct-1

3Ja

n-1

4A

pr-

14Ju

l-14

Oct

-14

Jan

-15

Ap

r-15

Jul-

15

PRICE PER SQ. FT.

SERIES: Median Price Per Square FeetSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

CALIFORNIA VS. U.S. MEDIAN PRICES

1970-2015

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

1970

1972

1974

1976

1978

198

0

198

2

198

4

198

6

198

8

199

0

199

2

199

4

199

6

199

8

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

California US CA Price Trend


INVENTORY CONTINUED TO DECLINE FROM LAST YEAR

Sep 2014: 4.2 Months; Sep 2015: 3.7 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.

0

2

4

6

8

10

12

14

16

18

Jan

-05

Jul-

05

Jan

-…

Jul-

06

Jan

-07

Jul-

07

Jan

-…

Jul-

08

Jan

-…

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

SERIES: Unsold Inventory Index of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

DEMAND OUTPACING SUPPLY

0%

10%

13%

-6%-7%

-4%

-10%

0%

10%

20%

San Francisco Bay Area Southern California Central Valley

Sales Active ListingsYear-to-Year % Chg


Sep 2015

HOUSING DEMAND OUTPACED SUPPLY IN SO CAL

10%

14%10% 9%

5%

35%

3%

10%

-9%

-4% -3% -4%

-15%

-7%

3%

-7%

-20%

-10%

0%

10%

20%

30%

40%

Sales Active ListingsYear-to-Year % Chg


Sep 2015

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

– Foreclosure pipeline is dry – Investors renting instead of flipping– 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


DECLINE IN # OF TRADE UP BUYERS DUE TO POPULATION LOSS & DROP IN HOMEOWNERSHIP RATE


“MISSING” 100,000 UNITS ANNUALLY, AT LEAST

2015p: 98,500 (42,190 sf, 56,310 mf)

2016f: 124,600 total units

SERIES: New Housing PermitsSOURCE: Construction Industry Research Board

0

50000

100000

150000

200000

250000

300000

350000

Single Family Multi-Family

Household Growth:

165,000/yr

HOUSING AFFORDABILITY PEAKED Q1 2012PRICES V. LOW RATES AND INCOME GROWTH

California vs. U.S. – 1984-2015% OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME

SERIES: Housing Affordability Index of Traditional BuyersSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

56%

30%

71%

57%

0%

10%

20%

30%

40%

50%

60%

70%

80% CA USAnnual Quarterly

HOUSING AFFORDABILITY IN CA: BY COUNTY

62

57 56 55 5450 50

47 4644

41 4037

30 3028 27

25 25 2523

21 20 19 18 18 17 1613

10

0

10

20

30

40

50

60

70 2015 Q2

SERIES: Housing Affordability IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

% able to purchase median priced home

$27,010

$45,340

$69,990 $71,630

$87,520 $89,250

$98,400

$119,970

$95,978

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

RetailSalespersons

Chefs andHead Cooks

ElementarySchool

Teachers

Firefighters Police andSherriff's

PatrolOfficers

ComputerProgrammers

RegisteredNurses

SoftwareDevelopers

(Applications)

Min. IncRequired toBuy a Med.

Home

HOW WAGES MEASURED AGAINST INCOME REQUIRED TO BUY A HOME

SOURCE: Bureau of Labor Statistics, C.A.R.

2014 Annual Mean Wage

California

$27,050

$45,440

$74,740$81,790 $81,790

$89,520

$103,200

$141,112

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

RetailSalespersons

Chefs and HeadCooks

ElementarySchool

Teachers

Police andSherriff's Patrol

Officers

ComputerProgrammers

RegisteredNurses

SoftwareDevelopers,Applications

Min. IncRequired toBuy a Med.

Home

HOW WAGES MEASURED AGAINST INCOME REQUIRED TO BUY A HOME

SOURCE: Bureau of Labor Statistics, C.A.R.

2014 Annual Mean Wage

Orange

CALIFORNIA’S MAJOR METROS ARE LESS AFFORDABLE THAN THE AVERAGE U.S. METRO

SOURCE: Legislative Analyst’s Office

AFFORDABLE INVENTORY AVAILABLE TO MEDIAN-INCOME HOUSEHOLDS


67.2%

28.5%

10.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

2015 Q2

SHARE OF FIRST-TIME BUYERS REMAINS BELOW LONG-RUN AVERAGE

29.5%

0%

10%

20%

30%

40%

50%

% First-Time Home Buyers Long Run Average

Long Run Average = 38%

SERIES: 2015 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

MILLENNIAL “TRUE” HOMEOWNERSHIP FALLING …

… AS AN INCREASING NUMBER OF THEM STILL LIVE WITH THEIR PARENTS

SOURCE: U.S. Dept. of Commerce, Wells Fargo Securities LLC

MANY OF THEM, HOWEVER, PLAN TO LEAVE THE NEST BY 2018

SOURCE: 2013 Demand Institute Housing & Community Survey; 2013 Demand Institute Housing Forecasts

MILLENNIALS PUT OFF MARRIAGE, BUT IT IS STILL IN THEIR PLAN

SOURCE: American Community Survey; 2013 Demand Institute Housing & Community Survey

MILLENNIALS BELIEVE IN HOMEOWNERSHIP

SOURCE: 2013 Demand Institute Housing & Community Survey

THE BOOMERS AND THEIR NEXT MOVE

HOME OWNERSHIP RATE NEARLY 4 TIMES HIGHER AMONG BOOMERS

Baby Boomers

75%

22%

3%

Own

Rent

Other

Millennials

20%

41%

39%

Own

Rent

Other

Q. What is your current living situation?SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

REASONS FOR BUYING MILLENNIALS VS. BABY BOOMERS

Q. What was the single most important reason for selling/buying the property?

41%

18%

11%

10%

6%

6%

0%

0%

1%

7%

13%

13%

18%

16%

5%

3%

10%

7%

0%

14%

0% 10% 20% 30% 40% 50%

Tired of Renting

Desired Larger Home

Desired Better Location

Investment/ Tax Considerations

Change in Family Status

Changed Jobs

Retirement/Move to Retirement Community

Desired Smaller Home

Foreclosure/Short Sale/Default

Other

Millennials

Baby Boomers


MAJORITY WORRY ABOUT CHILDRENS’ ABILITY TO BECOME HOME OWNERS

Do you worry about your children’s ability to become home owners in the future?

Yes, 55%

No, 45%

SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2/5 PLAN TO HELP CHILDREN WITH DOWN PAYMENT

Do you plan to help your children with their down payment to purchase a home?

Yes, 43%

No, 57%

SERIES: 2014 Baby Boomer SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

SHARE OF INVESTMENT PROPERTIES DROPS TO THE LOWEST LEVEL SINCE 2009


13.1%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

199

9

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

% to Total Sales

SHARE OF SECOND/ VACATION HOMES HIGHERAFTER TWO YEARS’ OF DECLINE


5.3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

% to Total Sales

SHARE OF CASH BUYERSLOWEST SINCE 2009

21%

0%

5%

10%

15%

20%

25%

30%

35%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

% of All Cash Sales

• Almost one-fourth of buyers paid with all cash

• The share of all cash buyers is the lowest in the last 6 years


THE SHARE OF INTERNATIONAL BUYERS LOWEST IN 8 YEARS

4%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

2008 2009 2010 2011 2012 2013 2014 2015

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.?


43%

8% 8%0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

China Mexico South Korea

COUNTRY OF INTERNATIONAL BUYER


DEMOGRAPHICS OF BUYERS: ETHNICITY

56%

17%

14%

10%4%

White

Asian

Hispanic

Other

Black


SHARE OF MINORITY HOME BUYERS HAS GROWN OVER TIME …

Q. What was the race/ethnicity of the head of household buying the property

68.5%

5.0%

14.1%

7.5%

55.8%

4.2%

19.9%

12.5%

56.3%

3.6%

14.0%16.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

White/Non-Hispanic African-American Hispanic Asian

1995 2005 2015


HOUSING DEMAND WILL INCREASE, LARGELY DRIVEN BY MINORITIES

SOURCE: Urban Institute

2.7 4.6 2.2 2.18.9 11.6

1.34.8 1.9 2.5

9.1 10.4

0

2

4

6

8

10

12

14

White Hispanic Black, Non-Hispanic

Other, Non-Hispanic

Total Minority Total

Projected household growth, 2010-2010

Projected household growth, 2020-2030

Net new households, millions

23%

46%39%

18%

12%

18%19%

100%

100%

88%77%

24%

2010-2020

REGIONAL HOUSING MARKET OUTLOOK

ORANGE COUNTY

SOUTHERN CALIFORNIA UNEMPLOYMENT RATE

ORANGE COUNTY EMPLOYMENT

0

500

1,000

1,500

2,000

2,500

3,000

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

Jul-

09

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Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

SALES OF EXISTING DETACHED HOMES

Orange County, Sept. 2015: 1,575 Units, +11.0% YTD, +13.8% YTY

SERIES: Sales of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

MEDIAN PRICE OF EXISTING DETACHED HOMES

Orange County, Sept 2015: $707,700, Up 1.7% YTY

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

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08

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-09

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15


UNSOLD INVENTORY INDEX

Orange County, September 2015: 3.7 Months

Note: The Unsold Inventory Index represents the number of months it would take to deplete the remaining inventory at the end of a particular month with the sales rate of the month in consideration. Inventory includes listings with “Active”, “Pending”, and “Contingent” (when available) statuses.

0

5

10

15

20

25

Jan

-05

Jul-

05

Jan

-…

Jul-

06

Jan

-07

Jul-

07

Jan

-…

Jul-

08

Jan

-…

Jul-

09

Jan

-10

Jul-

10

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

SERIES: Unsold Inventory Index of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

NEWPORT BEACH

SALES OF RESIDENTIAL HOMES

Newport Beach, September 2015: 94 Units

Up 9.3% MTM, Up 40.3% YTY

SOURCE: Clarus Market Metrics

MEDIAN PRICE OF RESIDENTIAL HOMES

Newport Beach, September 2015: $1,387,500

Down 14.2% MTM, Up 0.9% YTY


FOR SALE PROPERTIES

Newport Beach, September 2015: 453 Units

Down 1.5% MTM, Down 10.1% 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.

MONTH’S SUPPLY OF INVENTORY

Newport Beach, September 2015: 4.8 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.


IRVINE


Irvine, September 2015: 264 Units

Up 29.4% MTM, Up 42.7% YTY



Irvine, September 2015: $718,450



FOR SALE PROPERTIES

Irvine, September 2015: 982 Units





Irvine, September 2015: 2.7 Months



SAN CLEMENTE


San Clemente, September 2015: 59 Units




San Clemente, September 2015: $860,000



FOR SALE PROPERTIES

San Clemente, September 2015: 395 Units





San Clemente, September 2015: 4.1 Months



2016 FORECAST

U.S. HOUSING MARKET OUTLOOK

2010 2011 2012 2013 2014 2015p 2016f

Existing Home Sales (000s) 4,190 4,260 4,660 5,090 4,940 5,292 5,471

% Change -3.5% 1.7% 9.4% 9.2% -2.9% 7.1% 3.4%

Median Price ($000s) $172.9 $166.1 $176.8 $197.1 $208.3 $221.4 $231.0

% Change 0.2% -3.9% 6.4% 11.5% 5.7% 6.3% 4.3%

SERIES: U.S. Existing home sales of single-family homes and condo/coopsSOURCE: NATIONAL ASSOCIATION OF REALTORS®

CALIFORNIA HOUSING MARKET OUTLOOK

2010 2011 2012 2013 2014 2015p 2016f

SFH Resales (000s) 416.5 422.6 439.8 414.9 383.3 407.5 433.0

% Change -12.3% 1.4% 4.1% -5.9% -7.6% 6.3% 6.3%

Median Price ($000s) $305.0 $286.0 $319.3 $407.2 $447.0 $476.3 $491.3

% Change 10.9% -6.2% 11.6% 27.5% 9.8% 6.5% 3.2%

Housing Affordability

Index 48% 53% 51% 36% 30% 31% 27%

30-Yr FRM 4.7% 4.5% 3.7% 4.0% 4.2% 3.9% 4.5%

SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

SALES UP FOR 2015 AND CONTINUE TO IMPROVE IN 2015; PRICE WILL GROW STEADILY THIS YEAR AND NEXT

Units (Thousand)

407433

0

100

200

300

400

500

600

700

2005 2007 2009 2011 2013 2015p

Th

ou

san

ds

Sales of Existing Detached Homes

$476 $491

$0

$100

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$300

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$600

2005 2007 2009 2011 2013 2015p

Th

ou

san

ds

Median Price

Price (Thousand)


CA: DOLLAR VOLUME UP 13.3% IN 2015, UP 9.6% IN 2016

$301

$244

$164

$133 $131 $127 $121 $140

$169 $171 $194

$213

-40%

-30%

-20%

-10%

0%

10%

20%

30%

$0

$50

$100

$150

$200

$250

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$350

$400

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015p 2016f

$ Volume of Sales Percent Change

% Change$ in Billion

-60%


WILD CARDS

– Stock market volatility

– Slower growth: China

– Further collapse in energy/commodity prices

– Geo-political tensions

– Terrorism

– El Nino/Water Shortage

– 2016 Presidential election

MARKET OPPORTUNITIES IN 2016

MARKET OPPORTUNITIES

– Millennials

• Turn renters into first-time buyers

• First-time buyers who bought with tax credit back in 2009 are ready to trade-up

• Understand the differences in needs between Millennial first-time buyers and Millennial trade-up buyers

– Baby Boomers

• Ready to downsize

• Understand Boomers’ priorities: investment and retirement

• If we can’t keep them in CA, help them find a place out of state. Network with REALTORS® outside of CA

MARKET OPPORTUNITIES

– Minorities

• Minorities have grown in homebuyer share over time

• Surge in the number of minority households will play a big role in the increase in housing demand in the next 10 years

• Develop programs and marketing material tailored towards minority home buyers of different ethnicity

– Investor sellers

• Investor buyers who purchased bargain properties a few years ago are ready to sell as home prices start leveling off

– Everyone else…

• Low interest rates will be here a little longer

THANK YOU!

Amir Vahdat | [email protected]

www.OCLuxuryProperty.com

mailto:[email protected]

2016 CALIFORNIA HOUSING MARKET OUTLOOK - … CALIFORNIA HOUSING MARKET OUTLOOK October 27,2015 Oscar Wei, Senior Economist

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