2008 Real Estate Market Forecast October 17, 2007 Palos Verdes Peninsula AOR Leslie Appleton-Young C. A. R. Vice President and Chief Economist The copyright laws of the United States (Title 17 U. S. Code) forbid the unauthorized reproduction of this report by any means, including facsimile or computerized formats. Copyright © 2006, CALIFORNIA ASSOCIATION OF REALTORS®
California Real Estate Market: 2007
Sales of Existing Detached Homes Annual Comparison California, 2006 Sales: 477, 460 Units, Down 23. 6% Y-T-Y UNITS SOURCE: California Association of REALTORS®; The Conference Board
Sales of Existing Detached Homes and Pacific West Consumer Confidence California, August 2007 Sales: 319, 200 Units, Down 20. 9% Y-T-D, Down 27. 8% Y-T-Y 2007 projected: 367, 500; lowest since 1995’s 342, 540 UNITS SOURCE: California Association of REALTORS®; The Conference Board INDEX
Statewide Market Weaker Below $1 Million; High end stable Below $500, 000 – 500 K and below - sales down 24. 6% YTD $500, 000 to $999, 999 – 999 K – 500 K - sales down 24. 2% YTD $1 million and above – Over $1 million - sales down 0. 5% YTD SOURCE: California Association of REALTORS®
Median Price Annual Comparison California, 2006: $556, 640, Up 6. 5% Y-T-Y SOURCE: California Association of REALTORS®
Median Price of Existing Detached Homes California, August 2007: $588, 970, Up 2. 0% Y-T-Y SOURCE: California Association of REALTORS®
Variability Among Local Markets SOURCE: California Association of REALTORS®
Annual Percent Change in Median Price California 1982 -2008 f SOURCE: California Association of REALTORS®
Year-to-Year Price Change By Number of Bedrooms High-End Doing Better High-End Hit Harder SOURCE: California Association of REALTORS®
Unsold Inventory Index California, Aug 2007: 11. 8 Months MONTHS Average Since 1988: Approx. 7 Months SOURCE: California Association of REALTORS®
Unsold Inventory Index California, August 2007: 11. 8 Months MONTHS SOURCE: California Association of REALTORS®
Unsold Inventory Index vs. Price Changes California, 1982 -2007 SOURCE: California Association of REALTORS®
Listings by Month, Selected Years California (1982 -2007 Average=100) SOURCE: California Association of REALTORS®
CA New Housing Permits: 1988 - 2007 Down 30. 0% Y-T-D in 2007 Household Growth: 220, 000 -250, 000/yr SOURCE: Construction Industry Research Board
California Market Stats: 2000 -2005 Four Year Housing Boom SOURCE: California Association of REALTORS®
Sub-Prime Fall-out and Foreclosures
Prime, Sub-Prime, & Other Loans As a Percentage of All Loans Outstanding in California SOURCE: Mortgage Bankers Association, C. A. R.
Percent of Buyers with Zero Downpayment First-Time Buyers vs. Repeat Buyers: 1998 - 2006
Percent of Buyers with Zero Downpayment First-Time Buyers vs. Repeat Buyers: 1998 - 2007 SOURCE: C. A. R. 2007 Annual Housing Market Survey
Foreclosures per Household August 2007 Realty. Trac Source: Realty. Trac, SF Fed
Mortgage Foreclosure & Delinquency Rates California Delinquencies: LR Avg: 3. 9% Foreclosure Rate: LR Avg: 0. 81% SOURCE: Mortgage Bankers Association
Notices of Default – California Houses & Condos • Record High No. Ds: 61, 541 in Q 1 -1996 • Record Low No. Ds: 12, 417 in Q 3 -2007 SOURCE: Data Quick Information Systems
Framing the Sub-Prime Situation 3 Types of Homeowners in Sub-Prime Category: Right $$$ House & Right Mortgage – Not in trouble - no fix necessary Right $$$ House & Wrong Mortgage – Refinance, but end is not near Wrong $$$ House & Wrong Mortgage – Mortgage resets, foreclosures, etc. Troublesome Categories
Prime Versus Sub-Prime Past Due California Q 2 -2007 Sub-Prime Past Due: LR Avg: 7. 0% Prime Past Due: LR Avg: 1. 8% SOURCE: Mortgage Bankers Association
Credit/Liquidity Situation Credit Crunch emerges in July/August Sub-prime defaults spurred volatility in financial markets Investors supply credit for mortgage market Nervous Investors sell off of mortgage-backed securities – Translates into less money to lending institutions – Less money to fund home loans Much tighter lending standards – Mortgage lenders pulling back – require higher credit scores, “exotic” products disappear Impact on CA market: Sales to slow through year end
Bernanke Bounce: September 18, 2007 “…tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth. ” Unexpectedly large. 5% cut in Fed Funds rate from 5. 25% to 4. 75%. First cut in over four years Dow up 336 points, biggest 1 day gain since 2002 Prime rate cut to 7. 75% by key banks – will affect $800 billion in credit card debt Goal: Boost confidence and prevent recession
Dow 30 Industrial Index 7/19/07 14, 000 ----- Market Turmoil -----10/9/07 14, 164 Daily Close SOURCE: Dow Jones
Economic Fundamentals
Gross Domestic Product Year 2006: 2. 9%; 2007 2. 0% ANNUAL PERCENT CHANGE, CHAIN-TYPE (2000) $ SOURCE: Bureau of Economic Analysis
Employment Growth, California vs. U. S. 2007 P: CA 1. 2% US 1. 3% YEAR TO YEAR % CHANGE SOURCE: CA EDD, Bureau of Labor Statistics
Share of Total Job Growth Q 3 2003 – Q 3 2006 Professional and business services 1 19% Housing 23% Health care and social assistance 17% Leisure and hospitality 16% Source: Moody’s Economy. com Note: 1 Excluding housing Retail and wholesale 1 23% Other 16%
Year-to-Year % Change in Jobs California 2005 -2007 % Change SOURCE: CA EDD, UCLA Anderson Forecast
Unemployment Rate California vs. United States SOURCE: CA Employment Development Division
Nonfarm Employment By Region SOURCE: CA Employment Development Division
Consumer Confidence Index August 2007: 105. 6, Sept 2007: 99. 8 INDEX, 100=1985 SOURCE: The Conference Board
Personal Consumption 2007 Q 2: +1. 4% QUARTERLY PERCENT CHANGE SOURCE: Bureau of Economic Analysis
Taxable Sales California ANNUAL PERCENT CHANGE SOURCE: California State Board of Equalization
Consumer Price Index August 2007: All Items 2. 0% Y-T-Y; Core 2. 1% Y-T-Y PERCENT CHANGE FROM A YEAR AGO, 100=1982 -1984 SOURCE: Bureau of Labor Statistics
Mortgage Rates Fed cuts to 4. 75% on 9/18/07 SOURCE: Federal Home Loan Mortgage Corporation
Economy through 2008: Razor’s Edge Sub par economic growth (below 3. 0%) Weak but positive job growth Unemployment rate up slightly Inflation a concern but in check Uncertainty about economy/credit crunch KEY CONCERN: Will turmoil in the housing market tip the economy into recession?
Southern California Region The copyright laws of the United States (Title 17 U. S. Code) forbid the unauthorized reproduction of this report by any means, including facsimile or computerized formats. Copyright © 2006, CALIFORNIA ASSOCIATION OF REALTORS®
Sales of Existing Detached Homes and Pacific West Consumer Confidence Southern California August 2007 Sales: 8, 329 Units, Down 27. 9% Y-T-Y, Down 22. 5% Y-T-D UNITS SOURCE: California Association of REALTORS®; The Conference Board INDEX
Home Sales in Southern California Regions SOURCE: California Association of REALTORS®
New Home Sales Southern California Counties * Thru Q 2 2007 SOURCE: C. A. R. /Data. Quick Information Systems
Year-to-Year Change in New Home Sales Southern California Counties * Thru Quarter 2 of 2007 SOURCE: C. A. R. /Data. Quick Information Systems
Median Price of Existing Detached Homes Southern California, August 2007: $576, 230 Up 3. 8% Y-T-Y SOURCE: California Association of REALTORS®
Median Price of Existing Detached Homes Southern California Regions SOURCE: California Association of REALTORS®
Notices of Default – So CAL County/R egion 200 7 Q 2 200 7 Q 1 200 6 Q 2 Los Angeles 10, 3 93 8, 84 3 4, 58 6 Orange 2, 98 4 2, 64 4 1, 25 5 San Diego 4, 38 3 3, 93 1 1, 77 8 Riverside 6, 64 8 5, 75 0 2, 28 7 San Bernardin o 5, 14 1 4, 35 7 1, 83 9 Ventura 1, 05 9 965 452 So. Cal* 30, 8 28 26, 7 48 12, 2 71 * Includes additional counties SOURCE: Data Quick Information Systems QTQ% Chg YTY% Chg 17. 5% 126. 6 % 12. 9% 137. 8 % 11. 5% 146. 5 % 15. 6% 190. 7 % 18. 0% 179. 6 % 9. 7% 134. 3 % 15. 3% 151. 2 %
Non-Residential Permits, Valuations 7 Southern California Counties (1989 -2006) Millions of Dollars SOURCE: Real Estate Research Council of Southern California
Los Angeles County Economic Profile The copyright laws of the United States (Title 17 U. S. Code) forbid the unauthorized reproduction of this report by any means, including facsimile or computerized formats. Copyright © 2006, CALIFORNIA ASSOCIATION OF REALTORS®
Los Angeles County Profile Characteristic State Rank 2007 Population Estimate 10, 331, 939 1 % Population Change 1990 -2000 7. 4% 47 % Population Change 1980 -1990 18. 5% 41 % White 2003 29. 98% % Hispanic 2003 46. 31% % Black 2003 8. 69% % Asian & Pacific Islander 2003 13. 00% 2005 Per Capita Income $22, 727 2005 Median Household Income $47, 275 2004 Median Age 33. 4 Land Area Square Miles 4, 061 11 2000 Total Establishments 226, 282 1 2004 Civilian Employment 4, 710, 269
Sales of Existing Detached Homes and Pacific West Consumer Confidence Los Angeles County, August 2007 Sales: 3, 426 Units, Down 15. 2% Y-T-D, Down 23. 9% Y-T-Y UNITS SOURCE: California Association of REALTORS®; The Conference Board INDEX
Sales of Existing Detached Homes Annual Comparison Los Angeles County, 2006 Sales: 49, 662 Units, Down 20. 1% Y-T-Y UNITS SOURCE: California Association of REALTORS®; The Conference Board
Median Price of Existing Detached Homes Los Angeles County, August 2007: $605, 300, Up 2. 6% Y-T-Y SOURCE: California Association of REALTORS®
Median Price Annual Comparison Los Angeles County, 2006: $584, 820, Up 10. 5% Y-T-Y SOURCE: California Association of REALTORS®
Median Home Sales Price Cont. Los Angeles County SOURCE: C. A. R. ; Data. Quick Information Systems. The price statistics are derived from all types of home sales -new and existing, condos and single-family.
Median Home Sales Price Cont. Los Angeles County SOURCE: C. A. R. ; Data. Quick Information Systems. The price statistics are derived from all types of home sales -new and existing, condos and single-family.
Median Home Sales Price Cont. Los Angeles County SOURCE: C. A. R. ; Data. Quick Information Systems. The price statistics are derived from all types of home sales -new and existing, condos and single-family.
Unsold Inventory Index Los Angeles County, August 2007: 13. 3 Months MONTHS SOURCE: California Association of REALTORS®
Unsold Inventory By Price Range Los Angeles Existing Homes August 2007 vs. August 2006 Monthly Supply SOURCE: California Association of REALTORS®
Median Time on the Market Single-Family Homes – Los Angeles County, 2007 Q 2: 50. 4 Days SOURCE: California Association of REALTORS®
Foreclosures Los Angeles County THOUSANDS SOURCE: Real Estate Research Council
Proportion of Foreclosures in Housing Transfers Los Angeles County SOURCE: Real Estate Research Council
Asking Rents for Class A&B Apartments Los Angeles County, 2007 Q 2: $1, 660 Up 6. 5% Y-T-Y SOURCE: California Association of REALTORS®
Vacancy Rates for Class A&B Apartments Los Angeles County, 2007 Q 2: 4. 4% VACANCY RATE SOURCE: California Association of REALTORS®
New Housing Permits LA County, August 2007: 1, 768 Units, Down 19. 3% Y-T-D SOURCE: Construction Industry Research Board
Median Price for New Homes Los Angeles County 2 Q 07 Detached: $456, 229, Attached: $527, 000 SOURCE: California Association of REALTORS®; Hanley Wood
New Home Sales Los Angeles County (Attached), 2007 Q 2 Sales: 1, 126 Units SOURCE: California Association of REALTORS®; Hanley Wood
New Home Sales Los Angeles County (Detached), 2007 Q 2 Sales: 750 Units SOURCE: California Association of REALTORS®; Hanley Wood
Nonfarm Employment Los Angeles County, August 2007: Up 0. 9% Y-T-Y PERCENT CHANGE SOURCE: CA Employment Development Division
Taxable Sales Los Angeles County ANNUAL PERCENT CHANGE SOURCE: CA State Board of Equalization
Sources of Population Growth Los Angeles County (1981 -2005) SOURCE: CA Department of Finance
Net Immigration Vs. Domestic Migration Los Angeles County SOURCE: CA Department of Finance
Where are new Los Angeles County households coming from? • • Orange County (14, 943) San Bernardino (8, 963) San Diego (4, 685) Ventura (4, 138) Riverside (4, 118) Total incoming for 2005: 96, 000 Total outgoing for 2005: 136, 116 Source: NAR Relocation Report 2005 – IRS Data; Item 187 -06061
Top 10 Home Buyer Surnames Los Angeles County (2005) SOURCE: Data. Quick Information Systems
2008 Forecast
U. S. Economic Forecast SOURCE: California Association of REALTORS®
California Economic Forecast SOURCE: California Association of REALTORS®
Sales More Volatile Than Prices Price Stickiness in Down Market …Most Owners Don’t Sell UNITS/MEDIAN PRICE $ SOURCE: California Association of REALTORS®
California Housing Market Forecast SOURCE: California Association of REALTORS®
Thank You lesliea@car. org
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