June 1, 2018

Leslie Appleton-Young
Chief Economist & SVP
Overview
• Economic Update
• U.S. and California economy
• Jobs? Inflation? Interest Rates?
• California Housing Market Outlook
• Summary of recent home sales
• Regional focus: who is leading the pack?
• Identifying new trends or shifts in the market
• Understanding the drivers of that shift
• The Forecast
• Steady as she goes…
Economic Update
 Economic “Sweet Spot”

2.2% 1.0% 2.1%

GDP 2018-Q1 Consumption Core CPI

2018-Q1 Apr 2018

3.8% 1.6%

Unemployment Job Growth

May 2018 May 2018
 Growth Momentum Eased Slightly
GDP - 2017: 2.3%; 2018 Q1: 2.2%
6%

5% ANNUALLY QUARTERLY
4%
Annual Percent Change,

3%
Chain-type (2009) $

2.2%
2%

1%

0%

-1%

-2%
2009 Largest Annual Drop since 1946 (-2.8%)
-3%

-4%
2005 2008 2011 2014 2017 Q1-11 Q4-11 Q3-12 Q2-13 Q1-14 Q4-14 Q3-15 Q2-16 Q1-17 Q4-17

SERIES: GDP
SOURCE: US Dept. of Commerce, Bureau of Economic Analysis
 May ‘18 Unemployment Lowest in 19 Years
US 3.8% (May 2018) & CA 4.2% (Apr 2018) Kern 9.6%
14% Fresno 8.7%
Santa Barbara 4.4%
12% Riverside 4.2%
Los Angeles 4.1%
10% San Bernardino 3.9%
Sacramento 3.9%
8% Ventura 3.6%
San Diego 3.2%
Contra Costa 3.1%
6%
San Luis Obispo 2.9%
Alameda 2.9%
4% CA US Sonoma 2.8%
Orange 2.8%
2%
Santa Clara 2.6%
San Francisco 2.4%
0% San Mateo 2.2%
Feb-05

Feb-06

Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

Feb-13

Feb-14

Feb-15

Feb-16

Feb-17

Feb-18
Aug-05

Aug-06

Aug-07

Aug-08

Aug-09

Aug-10

Aug-11

Aug-12

Aug-13

Aug-14

Aug-15

Aug-16

Aug-17

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

SERIES: Civilian Unemployment Rate

SOURCE: CA Employment Development Division
 Yield Surged Passed 3.0% for the 1st Time since 2014
but Dipped Recently due to European politics
U.S. 10 Year Treasury Yield

SERIES: U.S. 10-Yr Treasury

SOURCE: CNBC
 Mortgage Rates Eased This Week
Moving Up in 2nd Half of 2018
January 2010 – May 31, 2018
6
MONTHLY WEEKLY
5
4.56
4.47
4 3.80
3.66

2
FRM
ARM
1

SERIES: 30Yr FRM, 5Yr ARM

SOURCE: Freddie Mac
 Perspective is everything!!
30-Year Fixed Rate Mortgage
20.00
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
How About the Market?
 CA Sales up slightly over last year
Narrow band since 2010
April 2018 Sales: 416,790 Units, +1.5% YTD, +2.2% YTY
700,000

600,000
Apr-17: Apr-18:
407,960 416,790
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
 Lower end sales declined – tightest inventroy
April 2018 (Year-to-Year)
40%
30.9%
30%
23.0%
20%
10.5%
10% 4.4%
0%

-10% -0.4% 0.0%

-6.7%
-20%

-30%
-28.9%
-40%

SERIES: Sales of Existing Detached Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Market has shifted towards higher end
Apr-17 Apr-18
30%

23%
22%
20%
16% 16% 15%
14% 14% 13% 13%
11% 11% 11%
10%
8%
6%
4%
3%

0%

SERIES: Sales of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Bay Area Sales Up Last # Months
Bay Area 6 per. Mov. Avg. (Bay Area)
30%

20%

10%
YoY % chg.

0%

-10%

-20%

-30%

SERIES: Sales of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are not seasonally adjusted and annualized
 SoCal Sales Up After 5 Months of Declines
So CA 6 per. Mov. Avg. (So CA)
YoY % chg.
40%

30%

20%

10%

0%

-10%

-20%

-30%

SERIES: Sales of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are not seasonally adjusted and annualized
 Central Valley Sales Climbed Further
YoY % chg. Central Valley 6 per. Mov. Avg. (Central Valley)
30%

20%

10%

0%

-10%

-20%

-30%

SERIES: Sales of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are not seasonally adjusted and annualized
What’s new on prices?
 Fast clip for price gains
California, April 2018: $584,460, +3.5% MTM, +8.6% YTY
P: May-07 Apr-18:
$700,000
$594,530 Apr-17: $584,460
$537,950
$600,000

$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®
 Year-over-Year Price Growth by Percentile

Year-over-Year Price Growth

14% 13.0%
11.8%
12% 11.1% 11.4%

10% 9.3% 9.0% 8.6%

8.2% 8.2%
8%

6%

4%

2%

0%
0-20 20-40 40-60 60-80 80-100 80-85 86-90 91-95 96-100
Percentile

SERIES: Median Price of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Price Gains Strong for Homes and Condos
50% Condo Single-Family Homes
40%
30%
20%
YTY% Chg. in Price

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

SERIES: Median Price of Existing Condo/Townhomes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Bay Area: Peak v. Current Price
Peak Peak %Chg Fr
Month Price Apr-18 Peak
Region
San Mateo Oct-07 $1,020,000 $1,770,000 73.5%
San Francisco May-07 $972,010 $1,650,000 69.8%
Santa Clara Oct-07 $865,000 $1,425,000 64.7%
Alameda May-07 $709,420 $969,300 36.6%
Bay Area May-07 $789,250 $1,010,000 28.0%
Marin Jun-07 $1,149,390 $1,385,000 20.5%
Sonoma Jan-06 $650,330 $685,000 5.3%
Contra Costa May-07 $698,420 $689,660 -1.3%
Napa Jun-07 $729,170 $682,500 -6.4%
Solano Jun-07 $492,800 $447,500 -9.2%

SERIES: Median Price of Existing Detached Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Southern California: Peak vs. Current Price

Peak Peak %Chg Fr

Region Apr-18
Month Price Peak
Orange Jun-07 $775,420 $818,000 5.5%
San Diego May-06 $622,380 $635,000 2.0%
So CA Jun-07 $589,710 $557,060 -5.5%
Ventura Aug-06 $710,910 $665,000 -6.5%
Riverside Jun-06 $431,710 $400,000 -7.3%
Los Angeles Sep-07 $625,812 $528,550 -15.5%
San Bernardino Aug-06 $350,290 $289,900 -17.2%
Santa Barbara Jul-07 $878,120 $650,750 -25.9%

SERIES: Median Price of Existing Detached Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Central Coast: Peak vs. Current Price

Peak Peak %Chg Fr

Region Apr-18
Month Price Peak
Santa Cruz Oct-07 $865,000 $899,000 3.9%
San Luis Obispo Oct-05 $619,950 $597,500 -3.6%
Monterey Aug-07 $777,000 $607,750 -21.8%
Santa Barbara Jul-07 $878,120 $650,750 -25.9%

SERIES: Median Price of Existing Detached Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Central Valley: Peak v. Current Price

Peak Peak %Chg Fr

Region Apr-18
Month Price Peak
Sacramento County Aug-05 $394,450 $369,000 -6.5%
Placer County Aug-05 $527,990 $489,000 -7.4%
Madera County Feb-08 $275,000 $244,000 -11.3%
San Joaquin County Jun-06 $426,830 $374,990 -12.1%
Kings County Mar-06 $268,050 $235,000 -12.3%
Tulare County Dec-05 $269,710 $229,250 -15.0%
San Benito County May-05 $671,190 $567,220 -15.5%
Fresno County Jun-06 $313,500 $260,000 -17.1%
Stanislaus County Sep-05 $370,100 $306,000 -17.3%
Kern County Jun-06 $299,920 $235,000 -21.6%
Merced County Oct-05 $344,610 $259,000 -24.8%
Glenn County Feb-07 $312,500 $215,000 -31.2%

SERIES: Median Price of Existing Detached Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Other Counties in California: Peak v. Current
Price
Peak Peak %Chg Fr
Month Price Apr-18 Peak
Region
Yuba May-06 $310,000 $285,000 -8.1%
Butte Jun-06 $357,780 $316,000 -11.7%
Humboldt Feb-06 $352,080 $309,000 -12.2%
Sutter Apr-06 $326,920 $280,000 -14.4%
Shasta Mar-06 $314,920 $258,950 -17.8%
Lake Jun-06 $348,330 $285,000 -18.2%
Nevada Oct-05 $500,000 $408,738 -18.3%
Amador May-06 $412,500 $335,000 -18.8%
Mendocino Jul-07 $553,570 $430,000 -22.3%
Tuolumne Jun-06 $398,280 $305,000 -23.4%
Siskiyou Jan-05 $290,620 $217,250 -25.2%
Calaveras Jan-06 $490,000 $340,000 -30.6%
Mariposa Feb-08 $562,500 $344,850 -38.7%
Mono May-07 $1,125,000 $520,000 -53.8%
SERIES: Median Price of Existing Detached Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Condo/Townhome Prices Trending Up
$500,000 Condo
$450,000
$400,000
$350,000 Apr-18:
Apr-17: $476,010
Median Price

$300,000 $436,390
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Jan-05
Jun-05
Nov-05
Apr-06
Sep-06
Feb-07
Jul-07
Dec-07

Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12

Mar-14
Aug-14
Jan-15
Jun-15
Nov-15
Apr-16
Sep-16
Feb-17
Jul-17
Dec-17
May-08
Oct-08

May-13
Oct-13
SERIES: Median Prices of Existing Condos/Townhomes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Price Per Square Foot – Same

April 2018: $281, Up 1.8% MTM, Up 7.7% YTY

$400

$350 Apr-18:
Apr-17: $281
$300 $261
PRICE PER SQ. FT.

$250

$200

$150

$100

$50

$0

SERIES: Median Price Per Square Feet of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Inventory easing a bit
Tipping point?
Wait and see.
 Active Listings by Month
2017 2018
60,000

50,000

40,000

30,000

20,000

10,000

0
 Active listings increased for 1st time in 34 mon.

15%
10%
5% 1.9%
0%
-5%
-10%
-15%
-20%

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: Active Listing of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Inventory Index Down Slightly
April 2017: 3.3 Months; April 2018: 3.2 Months
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
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 at High – end
12
10.6
10
8.4
8

6 5.5
4.2 4.3 4.4
4 3.5 3.5 3.3 3.0 3.5 3.6 3.3 3.1
2.9 3.0 2.8 2.7 2.9 2.9 3.1 2.9

Apr-17 Apr-18

SERIES: Unsold Inventory Index of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Supply improved in many price segments
Active Listings Growth
10%
7.1% 6.7%
5.8% 5.6%
4.6%
5%
3.0%
1.9%

0%

-5%

-10%

-15% -13.3%
Under $300K $300-$500K $500-750K $750-1000K $1-1.5M $1.5-2M $2-$3M $3M +

SERIES: Active Listings of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Listings higher Central & South
April 2018

Sales Active Listings

10%

6%
4%
Year-to-Year % Chg

3%
2%
0%
0%

-4%

-10%
San Francisco Bay Area Southern California Central Valley

SERIES: Sales and Listings of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Overall inventory remains tight
9.0 Bay Area So CA Central Valley

8.0

7.0

6.0

5.0

4.0 3.5
3.0 2.9
2.0 2.1
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®
 Sellers Are Not Moving as Often as Before
Older Generations Don’t Move as Often as
12 Years Owned Home Before Selling
11 Young Generations
0 10 20 30
10
Millennials 4
8

6 Gen X's 10

4
Baby Boomers 15

2
Silent
27
Generations
0

SERIES: 2017 Housing Market Survey

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 Sellers were in their home a median of 7 years
before selling
14% Median: 7 years 13%
12%
11%
10% 10% 10%
10% 9%
8%
8% 7%
6%
6%
5% 5%
4% 3% 3%
2%
2%

0%
0 1 2 3 4 5 6 7 8 9 10 11-15 16-20 More
than
Q: How many years did you own the home before selling? (n=272) 20

Source: 2018 C.A.R. Housing Consumer Survey

 And California Is Not Building Enough
2017: 112,886 (55,779 sf, 57,107 mf )
2018f: 127,780 (64,900 sf, 62,880 mf)
350000

300000 CA HCD Projected

Single Family Multi-Family Housing Needs:
250000 180,000/yr.
200000

150000

100000

50000

SERIES: California New Housing Permits

SOURCE: Construction Industry Research Board
Tight Means
Competitive
 Median Time on the Market
California, April 2018: 16.0 Days
80

70

60
DAYS ON MARKET

50

40

30

20

10

0
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

Jan-16

Jul-16

Jan-17

Jul-17

Jan-18
SERIES: Median Time of Market of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
 30 % of Listings Have Price Reductions

Share Reduced Median Reduction

50% 0.0%
45% -1.0%
40% -2.0%

Median Reduction
Shared Reduced

35% -3.0%
30% -4.0%
25% -5.0%
20% -6.0%
15% -7.0%
10% -8.0%
5% -9.0%
0% -10.0%
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

SERIES: Listing Price of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2018 (revised) Forecast
 California Housing Market Outlook

2018f
2012 2013 2014 2015 2016 2017 2018f
(revised)

SFH Resales (000s) 439.8 414.9 382.7 409.4 417.7 421.9 423.2 428.3

% Change 4.1% -5.9% -7.8% 7.0% 2.0% 1.5% 0.3% 1.0%

Median Price ($000s) $319.3 $407.2 $446.9 $476.3 $502.3 $538.0 $555.6 $582.0

% Change 11.6% 27.5% 9.8% 6.6% 5.4% 7.2% 3.2% 8.2%

Housing Affordability
51% 36% 30% 31% 31% 29% 26% 27%
Index

30-Yr FRM 3.7% 4.0% 4.2% 3.9% 3.6% 4.0% 4.6% 4.7%

SERIES: CA Housing Market Outlook

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
C.A.R. Economic/Data
Resources
Where is the Market Data?
 Interactive market stats

http://www.car.org/marketdata/interactive/
 Interactive market stats

http://www.car.org/marketdata/interactive/
Thank You