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Leslie Appleton-Young

Chief Economist & Vice President
2017 Forecast Report Card
2016 2017 2017
Actual Forecast Projected
SFH Resales (000s) 416.7 413.0 421.9
% Change 1.8% 1.4% 1.3%
Median Price ($000s) $502.3 $525.6 $538.5
% Change 5.4% 4.3% 7.2%
30-Yr FRM 3.6% 4.0% 4.0%
Housing Affordability Index 31% 29% 29%
U.S. Gross Domestic Product 1.6% 2.2% 2.1%
What to expect in 2018

• US economic and job growth expanding
• CA economy out-preforming the nation – maybe not
• Rates rising in response to growth & Fed policy
• Affordability challenges for first time & repeat buyers
• Boomers aren’t moving – if they do they lease more often
• Millennials leaving the nest & the state “getting a life”
• Listings & new units remain low wrt trend & demand
• Hang-over - Formerly owner-occupied units now rentals
Macro Economic Outlook
Stronger Economic Growth in Q2
Consumer – Led Economy
3.1% 3.3%

GDP 2017-Q2 Consumption
2017-Q2

4.2% 1.2%

Unemployment Job Growth
Sep 2017 Sep 2017
Economic Growth
2016: 1.6% 2017(p) 2.1% 2018(f) 2.3%
6%

5% ANNUALLY QUARTERLY
4%
Annual Percent Change,

3%
Chain-type (2009) $

2%

1%

0%

-1%

-2%

-3%
2009 Largest Annual Drop since 1946 (-2.8%)

-4%
2005 2008 2011 2014 Q3-11 Q2-12 Q1-13 Q4-13 Q3-14 Q2-15 Q1-16 Q4-16

SERIES: GDP
SOURCE: US Dept. of Commerce, Bureau of Economic Analysis
Consumers Driving the Economy
2016: 2.7%; 2017 Q2: 3.3%
ANNUAL PERCENT CHANGE
6%
5% ANNUALLY QUARTERLY
Annual Percent Change

4%
3%
2%
1%
0%
-1%
-2%
-3%
2005

2007

2009

2011

2013

2015

2012 Q2

2012 Q4

2013 Q2

2013 Q4

2014 Q2

2014 Q4

2015 Q2

2015 Q4

2016 Q2

2016 Q4

2017 Q2
SERIES: Personal Consumption
SOURCE: US Dept. of Commerce, Bureau of Economic Analysis
Confidence? Holding on to “Trump Bump”
September 2017: 119.8
140

120

100
INDEX, 100=1985

80

60

40

20

0

SERIES: Consumer Confidence
SOURCE: The Conference Board
S&P 500: Historic Highs
August 2017: 2,456.2
3000

2500
Monthly Average

2000

1500

1000

500

0
Mortgage Rates: Surged Post-Election
January 2010 – October 05, 2017
6
MONTHLY WEEKLY
5

4 3.81 3.85

3.16 3.18
3

2
FRM
ARM
1

0

SERIES: 30Yr FRM, 5Yr ARM
SOURCE: Freddie Mac
Extremely Tight Labor Markets
September 2017: US 4.2% & August 2017: CA 5.4%
14%
12% US-CA CA US
10%
8%
6%
4%
2%
0%
-2%
-4%

SERIES: Unemployment Rate
SOURCE: US Bureau of Labor Statistics, CA Employment Development Division
Unemployment rate Metro Area
August 2017: California 5.4%
Bakersfield 9.4%
Fresno MSA 8.6%
Stockton MSA 7.5%
Modesto 7.5%
Inland Empire 6.2%
Los Angeles 5.4%
Ventura 5.3%
Sacramento 5.2%
San Diego 4.7%
Oakland 4.4%
Orange County 4.2%
San Jose 3.9%
San Francisco 3.3%

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%

SERIES: Civilian Unemployment Rate
SOURCE: CA Employment Development Division
California 7 Year Jobs Recovery
Recession Job Losses: 1.3 million
Since Jan’10: +2.4 million
150,000
MONTH TO MONTH CHANGES

100,000

50,000

0

-50,000

-100,000

-150,000

SERIES: Total Nonfarm Employment
SOURCE: CA Employment Development Division
California Job Growth Slowing
4 CA 1.6%
California US
US 1.4%
2
Annual Percent Change

0

-2

-4

-6

-8

SERIES: Total Nonfarm Employment
SOURCE: US Bureau of Labor Statistics, CA Employment Development Division
Employment By Region
Nonfarm Employment (Thousands)

Aug 2017 Aug 2016 Change % Change

Southern California 9,155.0 9,053.8 101.2 1.1%

Bay Area 3,640.4 3,590.3 50.1 1.4%

Central Valley 2,213.8 2,177.6 36.2 1.7%

Central Coast 537.6 529.9 7.7 1.5%

North Central 150.9 145.5 5.4 3.7%

CALIFORNIA 16,777.8 16,512.7 265.1 1.6%
SERIES: Total Nonfarm Employment
SOURCE: CA Employment Development Division
Construction Jobs Lead Growth
August 2017: CA +1.6%, +265,100 (YTY)
Construction 6.0%
Educational Services 4.0%
Health Care & Social Assistance 2.7%
Leisure & Hospitality 2.2%
Government 1.8%
Wholesale Trade 1.6%
Real Estate & Rental & Leasing 1.5%
Information 1.2%
Admistrative & Support & Waste Services 1.0%
Finance & Insurance 0.5%
Transportation, Warehousing & Utilities 0.2%
Durable Goods 0.1%
Retail Trade 0.0%
Professional, Scientific & Technical Services -0.4%
Nondurable Goods -1.1%
-2% -1% 0% 1% 2% 3% 4% 5% 6% 7%
Annual Percent Change

SERIES: Total Nonfarm Employment By Industry
SOURCE: US Bureau of Labor Statistics, CA Employment Development Division
Commercial Real Estate
Outlook
Key Takeaways
Office
• Job growth continues to fuel demand, but appears to be
slowing down
• Firms’ decision to increase workplace density will continue to
affect vacancy and rent growth

Retail
• Demand for retail space continues to be affected by the
growth of e-commerce (amazon Prime: 46% US households)
• Fundamentals “ok” for now, but developers concern about
the future
Key Takeaways
Industrial
• Demand for industrial space remains strong as online
shopping continues to grow
• More supply is needed and developers are optimistic

Multifamily
• Sustained job growth continues to fuel housing demand in
the rental market
• Rent growth leveling off as more supply come on the market
REALTORS® CRE U.S. Outlook
U.S. Economic Outlook

2012 2013 2014 2015 2016 2017p 2018f

US GDP 2.2% 1.7% 2.4% 2.6% 1.6% 2.1% 2.3%
Nonfarm Job
1.7% 1.7% 1.9% 2.1% 1.8% 1.4% 1.2%
Growth
Unemployment 8.1% 7.4% 6.2% 5.3% 4.9% 4.4% 4.2%

CPI 2.1% 1.5% 1.6% 0.1% 1.4% 2.0% 2.2%
Real Disposable
3.2% -1.4% 2.7% 3.4% 2.7% 2.1% 3.0%
I ncome, %
30-Yr FRM 3.7% 4.0% 4.2% 3.9% 3.6% 4.0% 4.3%

SERIES: U.S. Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
California Economic Outlook

2012 2013 2014 2015 2016 2017p 2018f
Nonfarm Job
2.4% 3.0% 2.2% 2.7% 2.3% 1.6% 1.2%
Grow th
Unemployment
10.4% 8.9% 7.5% 6.2% 5.5% 4.8% 4.6%
Rate
CA Population
38.0 38.4 38.7 39.1 39.4 39.7 40.0
(Million)
Population
0.7% 0.9% 0.9% 0.9% 0.9% 0.8% 0.8%
Grow th
Real Disposable
4.7% -1.1% 3.2% 3.6% 3.0% 4.1% 4.3%
Income, % Change

SERIES: CA Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Abundance of Uncertainty
Tax Reform
Tax reform passes, Sales Down & Prices Flat
President Trump’s tax reform proposal includes changes that will increase
the cost of homeownership. Do you expect its effect to be:
60%
Up Down Same/Flat 57%
50%
48%

40% 37% 38%
30%

20%
14%
10% 5%
0%

On Prices On Sales
SERIES: 2017 EXPO FUN SURVEY
SOURCE: C.A.R.
Impact of Tax Reform

Two Provisions on the Individual Tax Reform Proposal:
- Doubling the Standard Deduction
- Repeal the state and local tax deduction

Impact on the housing market:
- The repeal of the state and local tax deduction increases the cost of
owning a home
- Incentives of using MID as a tax saving tool as a homeowner would be
nullified
- Home values decline as these tax saving advantages vanish
Impact of Tax Reform on the Housing Market

- The proposed tax reform would lead to fewer sales transactions as
the tax incentives of being a homeowner vanish for many who
want to purchase a property. Home sales would decline 3.4
percent if the proposed tax reform were to be implemented

- The decline in home values would also lead to homeowners’
reluctance to put their property on the market and further tighten
up the housing supply condition in California. An estimated 1.5
percent would be lost in the first year after the implementation of
the tax reform.
Incentives for Homeownership Obliterated

• First-time buyers ($100K income, $437K home) - federal tax
incentive to own vs. rent drops from $3,291 to zero in the first year.

• Typical buyers ($120K income, $533.5K home):
$5,782 to $362 in the first year.

• Mid-range buyers ($150K income, $615K home):
$8,099 to $1,334 in the first year.

• High-end buyers/SF/LA Metro Buyers ($200K income, $1.2M home):
$16,615 to $5,725 in the first year.
Tax Expenditures Estimates: CA
Deductions for Mortgage Interest and
Property Taxes in California
(FY2018-2027)
250 226.7
200
173.8
150

100 74.5
50 34.8 34.8
0.0
0
Mortgage Interest Property Tax Deduction Mortgage Interest &
Deduction Property Tax Coimbined

Current Law Comprehensive Tax Reform Option
Housing Market Trends
C.A.R. Membership & SF Sales
Home Sales
Membership 250,000
600,000
Sales Peaks: 1978, 1988, 2004-05
Membership Peaks: 1980, 1990, 2006 200,000
500,000

400,000 150,000

300,000
100,000
200,000

50,000
100,000

0 0
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
Sales: Stalled with Strong Fundamentals
August 2017 Sales: 427,630 Units, +2.7% YTD, +1.3% YTY
700,000

600,000
Aug-16: Aug-17:
422,190 427,630
500,000

400,000

300,000

200,000

100,000

-

SERIES: Sales of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are seasonally adjusted and annualized
Sales Began 2017 Strong … Growth Slowing
Year-over-Year % Chg
20%

15%
11.8%
10%

5%

0%

-5%

-10%
Avg. year-over-year % chg. = 3%
-15%
Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17

SERIES: Sales of Existing Single Family Homes
*Sales are seasonally adjusted and annualized
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
CA Median Price Continues to Rise
August 2017: $565,330, +2.9% MTM, +7.2% YTY
P: May-07
$700,000
$594,530 Aug -17:
Aug-16: $565,330
$600,000 $527,490

$500,000
T: Feb-09
$245,230
$400,000 -59% from
peak
$300,000

$200,000

$100,000

$-

SERIES: Median Price of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Southern California: Peak vs. Aug 2017
Peak Peak %Chg Fr
Region Aug-17
Month Price Peak
Orange Jun-07 $775,420 $789,000 1.8%
San Diego May-06 $622,380 $605,000 -2.8%
California May-07 $594,530 $565,330 -4.9%
Los Angeles Sep-07 $625,812 $575,130 -8.1%
Ventura Aug-06 $710,910 $640,000 -10.0%
Riverside Jun-06 $431,710 $388,500 -10.0%
Inland Empire Jun-06 $389,380 $341,340 -12.3%
LA Metro May-07 $578,700 $499,970 -13.6%
San Bernardino Aug-06 $350,290 $269,950 -22.9%

SERIES: Median Price of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Central Valley: Peak v. Current Price
Peak Peak %Chg Fr
Region Aug-17
Month Price Peak
Madera County Feb-08 $275,000 $263,500 -4.2%
California May-07 $594,530 $565,330 -4.9%
San Benito County May-05 $671,190 $600,000 -10.6%
Sacramento County Aug-05 $394,450 $348,000 -11.8%
Placer County Aug-05 $527,990 $462,000 -12.5%
Kings County Mar-06 $268,050 $225,000 -16.1%
Tulare County Dec-05 $269,710 $224,900 -16.6%
San Joaquin County Jun-06 $426,830 $355,000 -16.8%
Fresno County Jun-06 $313,500 $259,000 -17.4%
Stanislaus County Sep-05 $370,100 $294,290 -20.5%
Kern County Jun-06 $299,920 $235,100 -21.6%
Merced County Oct-05 $344,610 $250,000 -27.5%
Glenn County Feb-07 $312,500 $225,000 -28.0%

SERIES: Median Price of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Bay Area: Peak v. Current Price
Peak Peak %Chg Fr
Month Price Aug-17 Peak
Region
San Francisco May-07 $972,010 $1,380,000 42.0%
San Mateo Oct-07 $1,020,000 $1,375,000 34.8%
Santa Clara Oct-07 $865,000 $1,150,000 32.9%
Alameda May-07 $709,420 $867,500 22.3%
Marin Jun-07 $1,149,390 $1,207,120 5.0%
Sonoma Jan-06 $650,330 $625,500 -3.8%
California May-07 $594,530 $565,330 -4.9%
Contra Costa May-07 $698,420 $627,860 -10.1%
Napa Jun-07 $729,170 $654,000 -10.3%
Solano Jun-07 $492,800 $410,000 -16.8%

SERIES: Median Price of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Supply
“At some point a supply problem becomes a
demand problem” – Joel Singer
Inventory Remains on a Downward Trend
August 2017: 2.9 Months; August 2016: 3.4 Months Active listing declining for last 26 months

18 CA Unsold Inventory Index (Months) Year-over-Year % Chg

16 15%
14 10%
12 5%
10 0%
8
-5%
6
-10%
4
-15%
2 -11.9%
0
-20%

Jan-15

May-15

Nov-15
Jan-16

May-16

Nov-16
Jan-17

May-17
Mar-15

Jul-15
Sep-15

Mar-16

Jul-16
Sep-16

Mar-17

Jul-17
Jan-05

Jan-07

Jan-09

Jan-11

Jan-13

Jan-15

Jan-17
Sep-05
May-06

Sep-07
May-08

Sep-09
May-10

Sep-11
May-12

Sep-13
May-14

Sep-15
May-16

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.

SERIES: Unsold Inventory Index of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Supply Declined Most in the Lower End
August 2017
Active Listing
10%
1.9%
0%

-10% -7.6% -7.8%
-11.2% -10.0% -11.5%
-20% -17.1%

-30%
-29.0%

-40%

SERIES: Active Listings of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Inventory Continued to Drop Across All Regions

9.0 Bay Area So CA Central Valley

8.0

7.0

6.0

5.0

4.0
3.0
3.0 2.8
2.0 1.9
1.0

0.0

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.

SERIES: Unsold Inventory Index of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Inventory Index Highest in Millions
14

12 11.5
9.7
10

8
6.4
6 4.7 4.9
4.5
4 2.73.1 3.03.7 3.3 3.6 3.6 3.4
2.93.1 2.6 3.0 3.1
2.6
2.6 2.9
2

0

Aug-17 Aug-16
Turnover Rate Very Low: US & CA

Housing Turnover Rate
10% (Single-Family Homes only) Long-Time Homeowners are not
9% CA US Linear (CA)
moving as in the past because:
8% CA turnover rate trend

7%
• Capital gains hit
6%
5.3% • Low property taxes
5%
• Low rate on current mortgage
4.6%
4%
• Demographic shift
3%
• Where can I afford to go?
2%

1%

0%
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016

SERIES: Percent of existing single-family homes being sold
SOURCE: Census Bureau, American Community Survey, Moody’s Analytics, C.A.R.
Affordability
Housing Affordability In CA: 29%
2017-Q2: % able to purchase median-priced home
70

60 57
54 53 52 52
51
50 48 47 47 47 47 46
45 44 44 43 43 43
42
40 39 39 38
40 36 35
33 31
29 28 27
30 27 26 26 25
25
21 21 19
20 17 17 17 16
14
12
10

0

SERIES: Housing Affordability Index of Traditional Buyers
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Housing Affordability Peaked Q1 2012
California, 1984-2017
80%
Annual Quarterly
% OF HOUSEHOLDS THAT CAN BUY A

70%

60%
57%
MEDIAN-PRICED

50%
HOME

40%

30% 29%

20%

10%

0%

SERIES: Housing Affordability Index of Traditional Buyers
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
California’s Single-Family Housing Stock
7,500,000 Owner-Occupied (left) Renter-Occupied (right) 3,000,000

2,500,000
7,000,000

2,000,000
6,500,000

1,500,000

6,000,000
1,000,000

5,500,000
500,000

5,000,000 0
2000 2003 2006 2009 2012 2015
SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS)
Downloaded from the National Bureau of Economic Research (NBER)
More Single Family Units Now Rentals
8,000,000 Potentially between 400,000 and 700,000 SF Rentals that Used to be Owner-Occupied
6,919,164
7,000,000 6,527,730

6,000,000

5,000,000

4,000,000

3,000,000 2,674,808
1,940,607
2,000,000

1,000,000

0
SF Owners SF Renters
2000 2005 2010 2015
SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS)
Downloaded from the National Bureau of Economic Research (NBER)
Most Underbuilt Counties in California

New Jobs vs. New Permits (2010-2015)
450,000 Jobs
400,000 381,300 Permits
350,000
300,000
250,000
200,000 174,833 162,740
127,542 141,162
150,000 105,586
88,134 95,245 98,149
100,000 66,054
35,426 44,923 40,434 31,255 44,772
50,000 18,141 14,901 18,108 6,349 10,890
0

SOURCE: California Employment Development Department, Construction Industry Research Board
Q: “How‘s the Market?
A: It’s Complicated

2017 Annual Housing
Market Survey
Methodology

• Started in 1981 – 36 years ago
• On-line survey In the field July and August 2017
• The survey was sent via email to a random sample of 25,804
REALTORS® throughout California. The sample represented the
geographical distribution of C.A.R. membership across the state.
• Asks about closed transactions in Q2 2017
• Questionnaire with both multiple choice and open-ended
questions. There were 1,303 valid survey responses, equivalent to a
response rate of 5.0 percent. The margin of error for this survey
was +/- 2.6 percent at a 95 percent confidence level.
Who is Buying in California?
Median Age: 45

31% 40% 24% 4%
Age 20 – 37 Age 38 – 52 Age 53 – 71 72 and older
SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Who is Selling in California?
Median Age: 57

11% 27% 48% 14%
Age 20 – 37 Age 38 – 52 Age 53 – 71 72 and older
SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Tight Supply Pushed up Home Prices
1/3 Sold Above Asking
60%
% of Sales Above Asking Price
50%

40%

32% 33%

30%
Long Run Average = 20%

20%

10%

0%

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Market Competitiveness Up in 2017
6 out of 10 had Multiple Offers
% with Multiple Offers
# of Multiple offers (Average)
80% 7

70% 6
60%
60%
52% 5
50%
4
4.0 4.1
40%
3
30%
2
20%

10% 1

0% 0
2005200620072008200920102011201220132014201520162017

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
…Even Within So CA

Southern
Inland Empire LA/OC/SD California
California

% with Multiple
54.8% 62.7% 58.8% 60.4%
Offer

% of Sales Above
24.3% 33.4% 28.5% 32.9%
Asking Price

Days on Market 18.5 14 14 13

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Competitiveness by Price Range: LA/OC/SD

$301k - $501k - $751k - $1001 and
$0 -$300k All Prices
$500k $750k $1000k up

% with Multiple
58.3% 67.2% 71.6% 73.5% 48.2% 62.7%
Offer

% of Sales
Above 46.2% 32.3% 33.3% 40.0% 22.6% 33.4%
Asking Price

Days on Market 8 10 13.5 8.5 25 14

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
… By Region
% of Multiple Offer % of Sales Above Days on Market
90% Asking Price
70%
80% 77%
59.8% SF Bay Area 10
60%
70%
59% 50%
60%
50% So CA 14
50% 40%

40% 28.5%
30% Other Counties
23.8% 15
30% in CA
20%
20%
10%
10% California 13

0% 0%
SF Bay Area So CA Rest of CA SF Bay Area So CA Rest of CA 0 10 20

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Most Competitive for First-Time Buyers …

First-time Buyers Repeat Buyers All Buyers

% with Multiple Offer 68.8% 55.5% 60.4%

% of Sales Above
41% 28.8% 32.9%
Asking Price

Days on Market 10 14 13

SERIES: 2016 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
…Partly Because Many of Them Live in the Supply
Constraint Bay Area
Where are the buyers? % of First-Time Buyers
Bay Area So CA Rest of CA
45%
40%
40%

35% 32%
First-Time Buyers 24% 54% 22% 30% 30%
30%

25%

20%

15%
Repeat Buyers 17% 59% 24% 10%

5%

0%
Bay Area So CA Rest of CA California
0% 50% 100%

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Share of 1sTime Buyers Up but Below LR Average
National Share is 50%
% First-Time Home Buyers Long Run Average

50%

Long Run Average = 37.4%
40%

31.7%
30%

20%

10%

0%

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
International Buyers 3% of Transactions

9%
The share of international buyers dropped to the lowest level in 9 years
8% 8%
8%

7%
6% 6%
6% 6% 6%
5%
5%

4% 4%
3% 3%
3%

2%

1%

0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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.?

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
International Buyers: Metro Areas Preferred

% of International Buyers Where are the properties?
Bay Area So CA Rest of CA
5%
4.4%
9%
4% 3.6%
20%
3.0% 3.1%
3%
2.2%
2%
1.1%
1%

0%
71%

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Cash Outflow Restrictions Had a Negative
Effect on the Share of Chinese Buyers

2016 2017
• China (53%) • China (31%)

• Mexico (10%) • Mexico (6%)

• India (10%) • India (9%)

Q. What country did the (international) buyer come from?

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Share of Cash Buyers Steady
% of All Cash Sales
35%

30%

25%
22%
20%

15%

10%

• One-fifth of buyers paid with all cash 5%

• The share of all cash buyers is virtually 0%
unchanged in the last 4 years

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Investor Buyers Inched Up in 2017;
More Flippers in the Market

% to Total Sales Vacation/Second Home
30%
Investment/Rental Property
Vs.

25%

20% 4.1%
15% Flip Rent

10%
2014: 30% 2014: 70%
13.8%
5% 2015: 26% 2015: 74%
2016: 20% 2016: 80%
0%
2017: 24% 2017: 76%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Net Cash Gain to Sellers Highest since 2006
$250,000

$200,000
$200,000

$150,000

$100,000

$50,000

$0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Q. What was the net cash gain or net loss to the seller as a result of this sale?

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Sellers with Net Cash Loss Dropped to the
Lowest Level in the last 11 years
35% Long Run Average = 11.2%

30%

25%

20%

15%

10%

5%
2.1%
0%

Q. What was the net cash gain or net loss to the seller as a result of this sale?

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Sellers Are Not Moving as Often as Before
12 11
Years Owned Home Before Selling
Long-Time Homeowners are not
10
moving as in the past because:
8
• Capital gains hit
6
• Low property taxes
4 • Low rate on current mortgage
• Where can I afford to go?
2
• Remodel and stay
0

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Sellers Who Planned to Buy Another Home
Reached the Highest Level since 2006
80%
0% 50% 100%
70%

60% Millennials 76%
54%
50%

40%
Gen X's 63%

30%
Baby Boomers 60%
20%

10%
Silent
28%
0% Generations

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Sellers Moving out of California: Highest since 2007

Location of Seller’s New Home

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Within the same county 37% 45% 47% 42% 49% 49% 46% 44% 44% 40% 38%

In another county in
24% 17% 21% 21% 19% 18% 20% 21% 20% 21% 20%
California

In another state 29% 27% 19% 20% 20% 22% 19% 22% 22% 25% 28%

Out of US 1% 1% 2% 1% 1% 1% 0% 1% 1% 1% 1%

Don't Know/Not sure 9% 10% 12% 16% 10% 10% 15% 13% 13% 13% 14%

Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
FHA Loans Lowest since 2007

FHA VA
40%

30%

20%
5.8%

10%
14.8%

0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Q. Please indicate the type of mortgage.

SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
How Client Found Their Agent
All Buyers
0% 5% 10% 15% 20% 25%
Represented Them in Previous Home…
Client was Friend/Relative/Neighbor
Referral from a client
Recommendations of Friends
Refferal from Business Associates
Other
Web page/Internet
Open House
Door-to-Door Farming
Relocation Referral
Walk in /Floor Call
Direct Mail Marketing
Yard Signs
Listing Agent for Home Purchased
Social Media
Telephone Marketing
Print Ads/Newspaper & Magazine

Q. How did your client find and select you to represent them?
SERIES: 2017 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Regional Housing Markets
Northern California

Sales Median Price
-0.2% YTD $390,000
6.6% YTY 9.9% YTY

UII MTM Price Sales
3.6 20.0 $213 98.2%
Months Days Per Sq Ft To List Ratio
2017 Northern California
YTD Sales: Mixed Bag
2017 Northern California
Median Prices YTY
Northern Wine

Sales Median Price
-2.9% YTD $613,500
3.9% YTY 7.8% YTY

UII MTM Price Sales
3.5 40.0 $359 100.0%
Months Days Per Sq Ft To List Ratio
2017 Northern Wine
YTD Sales
2017 Northern Wine
Median Prices YTY
Bay Area

Sales Median Price
2.6% YTD $856,200
6.5% YTY 10.2% YTY

UII MTM Price Sales
1.9 15.0 $489 101.9%
Months Days Per Sq Ft To List Ratio
2017 Bay Area
YTD Sales
2017 Bay Area
Median Prices YTY
Central Valley

Sales Median Price
1.5% YTD $315,000
4.6% YTY 8.6% YTY

UII MTM Price Sales
2.8 15.0 $185 99.2%
Months Days Per Sq Ft To List Ratio
2017 Central Valley
YTD Sales
2017 Central Valley
Median Prices YTY
Central Coast

Sales Median Price
1.3% YTD $635,000
7.1% YTY -2.1% YTY

UII MTM Price Sales
4.3 24.0 $376 97.9%
Months Days Per Sq Ft To List Ratio
2017 Central Coast
YTD Sales
2017 Central Coast
Median Prices YTY
Southern California

Sales Median Price
3.4% YTD $528,000
4.8% YTY 6.7% YTY

UII MTM Price Sales
3.0 20.0 $301 98.9%
Months Days Per Sq Ft To List Ratio
2017 Southern Cal
YTD Sales
2017 Southern Cal
Median Prices YTY
2017 Forecast
How’s the market? A tad hot.
How would you describe the real estate market in your area today?
43%
37%

20%

Too hot Too cold Just right

SERIES: 2017 EXPO FUN SURVEY
SOURCE: C.A.R.
Prices Up, Sales Flat, Rates Up, Affordability

What do you think will happen for the CA market in 2018?

80%
Up Down Same/Flat 72%
70%
64% 64%
60%

50% 45% 42%
39%
40%
29% 30% 33%
30% 24% 21%
20%
19%
7% 8%
10%
3%
0%
Home prices Home Sales Inventory Mortgage interest Affordability
rates
SERIES: 2017 EXPO FUN SURVEY
SOURCE: C.A.R.
Challenges: Affordability and Supply

What will be the biggest challenge for the housing market in 2018?
60%

50%
50%

40% 36%
30%

20%

10% 6% 6%
2%
0%

Lack of Lack of Increase in New brokerage Recession
inventory affordability mortgage rates models (Open
Door, Instant
Offer, etc)
SERIES: 2017 EXPO FUN SURVEY
SOURCE: C.A.R.
California Housing Market Outlook
2012 2013 2014 2015 2016 2017p 2018f

SFH Resales (000s) 439.8 414.9 382.7 409.4 416.7 421.9 426.2

% Change 4.1% -5.9% -7.8% 7.0% 1.8% 1.3% 1.0%
Median Price
$319.3 $407.2 $446.9 $476.3 $502.3 $538.5 $561.0
($000s)
% Change 11.6% 27.5% 9.8% 6.6% 5.4% 7.2% 4.2%
Housing
51% 36% 30% 31% 31% 29% 26%
Affordability Index
30-Yr FRM 3.7% 4.0% 4.2% 3.9% 3.6% 4.0% 4.3%

SERIES: CA Housing Market Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Sales and Price up in 2017 and in 2018

Sales of Existing Detached Homes Median Price
700 $600 $561
$539
600 $500

500

Price (Thousand)
426.2 $400
Units (Thousand)

421.9
400
$300
300
$200
200

$100
100

0 $0
2005 2007 2009 2011 2013 2015 2017p 2005 2007 2009 2011 2013 2015 2017p

SERIES: CA Housing Market Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
CA: Dollar Volume
Up 8.6% in 2017, Up 5.2% in 2018
$ in Billion % Change
$400 30%
$ Volume of Sales Percent Change
$350 20%
$301
$300
10%
$244 $239
$250 $227
$209 0%
$195
$200
$164 $169 $171
-10%
$150 $133 $140
$131 $127 $121
-20%
$100

$50 -30%

$0 -40%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017p 2018f

SERIES: CA Housing Market Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2017 Challenges & Opportunities
SMD’s: Slow Moving Disasters

• CA Housing Affordability Crisis
• CA Pension Funds
• Boomers: Not prepared for Retirement
• Millennials: Student Loan Debt
• Skewing of the Income Distribution
• Institutional Investor ownership of SFH
• Tax Reform
Lack of Affordability Biggest Challenge
Recession, 6%

Mortagage rate
increase, 10%

Lack of
Lack of inventory,
28%
affordability,
56%

Q2 - What will be the biggest challenge for the housing market in 2017?
2018 Opportunities

• Up your game – Do YOU.
• What is your WHY? Selling houses or changing lives?
• Revisit: What business are YOU in? Find your niche
• Reconnect: Who are YOUR clients?
• Educate first time-home buyers – Focus on Financial Literacy
Become well versed on down payment assistance programs,
debt management and improving credit
• Reach out to Boomers
• Think globally – We may be affordable for some
One more thing…
All Creatures Great and Small

Do you have a pet / Do you consider your pet a part of your family
No, its just a (special)
animal, 8%

No I
don’t,
37%

Yes I have a
pet, 63%
Yes, my pet is
my family,
92%

SERIES: 2017 EXPO FUN SURVEY
SOURCE: C.A.R.
4 out of 10 – Pet Drives Moving Decisions
If you were to move, would your pets' needs be paramount in your
purchase decision.
42%

28%

16%
13%

No, but I double We have a equal, They complain, but I My pet makes the
down on the treats. deliberative process. try to ignore it. decision for me.
SERIES: 2017 EXPO FUN SURVEY
SOURCE: C.A.R.
Speaking of independence…
What about a different kind of Do you pay for their cell phone plan?
animal... Do you live with a
Millennial?
No, they like to
Yes, sigh, I live
with a Millennial,
pretend to be…
14%

Nope, I'm FREE!!!!, 86% Yes, they just make lots of
noise if I don't. 67%
SERIES: 2017 EXPO FUN SURVEY
SOURCE: C.A.R.
The 2% - Have you done your part?

70%
63%
60%

50%

40%
30%
30%

20%

10% 5% 2%
0%
Unfortunately, I'm No, but I may keep it Yes, I "helped" my Yes, I got married!
happily married. in mind, just to help child or friends to get Thank you Leslie for
the real estate married. the push.
industry.
SERIES: 2017 EXPO FUN SURVEY
SOURCE: C.A.R.
Thank You & Congratulations

Joanie & Coy Trisha & Michael Miriam & Anthony
The Economy of Love
Give Freely
Receive Graciously

Thank You