Southern California - Carey Hagglund Condy · 2020. 11. 9. · • 5-year + workouts ... • No NINJA loans/option ARMs. CALIFORNIA ASSOCIATION OF REALTORS® Many homeowners still

SouthernCalifornia

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 OrangeCounty

Texas Nevada (ST) Arizona Kern County Oregon Washington VenturaCounty

SantaBarbaraCounty

Los Angeles County Net Domestic Migration2010-2018 (Cumulative) - Top 10 Destinations

In State Out of State


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 NorthCarolina

Colorado Oregon

Inland Empire Net Domestic Migration2010-2018 (Cumulative) - Top 10 Destinations

In State Out of State

Climate change will lead to more and bigger wildfires in the future

page78SOURCE: 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.


Q: Where do we go from here?A: Home.

page079


There’s No Place Like Home

page80

JORDAN LEVINE

OSCAR WEI

Research & EconomicsTeam

SAMANTHA OLESSAMANTHA OLES

GEORGIA FUNNELL

GUILLERMO FLORES


PAULA GREEN

TheForecast


Coronavirus remains the biggest wildcard

12,807

3,146

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000California 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 DeathsDeaths Smoothed

page86

~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

Thou

sand

s

U.S. Continuing Unemployment Insurance Claims + PUA Claims (NSA) US UI Claims US PUA Claims


U.S. economic outlook: ongoing recovery, but slower pace

SERIES: U.S. Economic OutlookSOURCE: 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%

page87


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


Many homeowners still have skin in the game

$348.4

$134.2

$0

$50

$100

$150

$200

$250

$300

$350

$400Combined Volume of Cash-out and 2nd Mortgages/HELOC Consolidation


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


Household balance sheets were in much better shape

8

10

12

14

16

18

20

Q1-

80Q

1-81

Q1-

82Q

1-83

Q1-

84Q

1-85

Q1-

86Q

1-87

Q1-

88Q

1-89

Q1-

90Q

1-91

Q1-

92Q

1-93

Q1-

94Q

1-95

Q1-

96Q

1-97

Q1-

98Q

1-99

Q1-

00Q

1-01

Q1-

02Q

1-03

Q1-

04Q

1-05

Q1-

06Q

1-07

Q1-

08Q

1-09

Q1-

10Q

1-11

Q1-

12Q

1-13

Q1-

14Q

1-15

Q1-

16Q

1-17

Q1-

18Q

1-19

Q1-

20

Household Debt and Financial Obligations

Debt Service Ratio Financial Obligations Ratio


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.


California housing market outlook (Most Likely)

2015 2016 2017 2018 2019 2020p 2021f

SFH Resales (000s) 409.4 417.7 424.9 402.6 398.0 380.1 392.5

% Change 7.0% 2.0% 1.7% -5.2% -1.2% -4.5% 3.3%

Median Price ($000s) $476.3 $502.3 $537.9 $569.5 $592.4 $640.3 $648.8

% Change 6.6% 5.4% 7.1% 5.9% 4.0% 8.1% 1.3%

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 OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

page93


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


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


California housing market outlook (Worst Case)

2015 2016 2017 2018 2019 2020p 2021f

SFH Resales (000s) 409.4 417.7 424.9 402.6 398.0 366.6 330.6

% Change 7.0% 2.0% 1.7% -5.2% -1.2% -7.9% -9.8%

Median Price ($000s) $476.3 $502.3 $537.9 $569.5 $592.4 $618.4 $517.0

% Change 6.6% 5.4% 7.1% 5.9% 4.0% 4.4% -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 OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

page96


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 MarketREO Market Share and Typical Discount (Relative to Market)

REO Share of Market Typical REO Discount


Still bullish on California long term

5th Largest

Economy

25 MillionInternational

Arrivals Annually

Top Global

Universities

$175 Billion

In Annual Exports

Thank YouThis presentation can be found on

www.car.org/marketdataSpeeches & Presentations

[email protected]

Southern California - Carey Hagglund Condy · 2020. 11. 9. · • 5-year + workouts ... • No NINJA loans/option ARMs. CALIFORNIA ASSOCIATION OF REALTORS® Many homeowners still

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