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Transcript of 2010 California Real Estate Market Forecast Fresno AOR Sara Sutachan Senior Research Analyst...
2010 California Real Estate Market Forecast
Fresno AOR
Sara SutachanSenior Research AnalystCalifornia Association of REALTORS®
December 11, 2009
www.car.org Economics Speeches
Speeches & Presentations
US and California Economic Conditions
QUARTERLY PERCENT CHANGE, ANNUAL RATE
Gross Domestic Product2009 Q3: 3.5% (advance estimate)
-8%-7%-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%
1Q
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SOURCE: US Dept of Commerce, Bureau of Economic Analysis
QUARTERLY PERCENT CHANGE
-4
-2
0
2
4
6
8
1Q
-19
90
1Q
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91
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Personal Consumption2009 Q3: 3.4%
SOURCE: US Dept of Commerce, Bureau of Economic Analysis
INDEX, 100=1985
Consumer Confidence Index: Better…Sort OfOctober 2009: 47.7 November 2009: 49.5
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Unemployment RateCalifornia (10/09 12.5%) vs. United States (11/09 10.0%)
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
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US-CA CA US
SOURCE: CA Employment Development Division
Unemployment RateFresno County, October 2009: 15.8%
0%
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15%
20%
25%
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SOURCE: CA Employment Development Division
Consumer Price IndexOctober 2009: All Items -0.2% YTY; Core 1.5% YTY
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
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All Items
Core
PERCENT CHANGE FROM A YEAR AGO, 100=1982-1984
Historic Fiscal Stimulus
Fiscal Policy: “Spend Now – Worry Later”
To date: $3 trillion in government spending
MBS purchases ($693 billion)
TARP ($372 billion)
Obama stimulus package ($304 billion)
Cash for Clunkers
First-time Buyer Tax Credit
Extension of Unemployment Benefits
Tax Cuts
Result: Federal budget deficit will reach 1.6 trillion this year
U.S. Economy
2004 2005 2006 2007 2008 2009f 2010f
US GDP 3.6% 3.1% 2.7% 2.1% 0.4% -2.6% 1.9%
Nonfarm Job Growth
1.1% 1.7% 1.8% 1.1% -0.4% -3.7% -1.0%
Unemployment 5.5% 5.1% 4.6% 4.6% 5.8% 9.3% 10.0%
CPI 2.7% 3.4% 3.2% 2.8% 3.8% -0.5% 1.9%
Real Disposable Income, % Change
3.4% 1.3% 4.0% 2.2% 0.5% 0.8% 2.1%
SOURCE: California Association of REALTORS®
Forecast Date: October 2009
California Economy
2004 2005 2006 2007 2008 2009f 2010f
Nonfarm Job Growth
1.0% 1.8% 1.7% 0.8% -1.2% -4.3% -1.1%
Unemployment Rate
6.2% 5.4% 4.9% 5.4% 7.2% 11.6% 12.1%
Population Growth
1.4% 1.2% 1.1% 1.1% 1.2% 1.1% 1.1%
Real Disposable Income, % Change
3.6% 1.3% 3.4% 1.5% 0.1% -0.4% 0.1%
SOURCE: California Association of REALTORS®
Forecast Date: October 2009
New Housing PermitsCalifornia, 1988-2009: Down 48.8% YTD
0
50,000
100,000
150,000
200,000
250,000
300,0001
98
8
19
89
19
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YT
D
Single Family Multi-Family
SOURCE: Construction Industry Research Board
Distressed Commercial RE Growing
billions
Distressed properties include those that are in bankruptcy, foreclosures, those that have received lender forbearance, or lender REO.
Distressed properties include those that are in bankruptcy, foreclosures, those that have received lender forbearance, or lender REO.
Mortgage Financing – Still Challenging
SOURCE: Federal Home Loan Mortgage Corporation
Mortgage Rates and Fed Funds Rate
0%
1%
2%
3%
4%
5%
6%
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8%
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FRM
ARM
Federal Funds
SOURCE: Federal Home Loan Mortgage Corporation – 30-yr FRMFederal Reserve Board – 10-Year T-Bond
30-Year FRM vs. 10-Year T-Bond Above-Average Risk Premiums Associated With Mortgage Loans
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9%
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FRM
10-YearT-Bond
RiskPrem
Average. Risk
Premium: 1.6%
Lower spread in 2009 - FED purchasesfrom Fannie and Freddie
FHA Loans in CA# of Total Loans in CA & US
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
Oc
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20000
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100000
120000
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160000
180000
200000
CA Total US Total
CA Tops All States with a 10% Market Share of all FHA Lending in US (Source: Inside FHA Lending)
Source: HUD
CA Endorsements US Endorsements
0%
2%
4%
6%
8%
10%
12%
Q1
-19
79
Q2
-19
80
Q3
-19
81
Q4
-19
82
Q1
-19
84
Q2
-19
85
Q3
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86
Q4
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87
Q1
-19
89
Q2
-19
90
Q3
-19
91
Q4
-19
92
Q1
-19
94
Q2
-19
95
Q3
-19
96
Q4
-19
97
Q1
-19
99
Q2
-20
00
Q3
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01
Q4
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Q1
-20
04
Q2
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Q3
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Q4
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Q1
-20
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Delinquency Rate - CA Foreclosure Rate - CA
CA Mortgage Foreclosure & Delinquency RatesCalifornia: Q3-2009, NSA
SOURCE: Mortgage Bankers Association
Foreclosure Rate: Long Run Average: 1.0%
Delinquencies: Long Run Average: 4.1%
111,689
124,562
135,431
0
20000
40000
60000
80000
100000
120000
140000
20
05
.3
20
05
.4
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.1
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06
.2
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.1
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.2
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09
.3
NODs Trustee Deeds
NODs & Trustees Deeds Filed in California2005 - 2009
Source: DataQuick Information Systems
No. of Defaults or TDs
California Real Estate Market
Sales Hit Bottom in 2007, Up in 2008 & 2009
UNITS/MEDIAN PRICE $
SOURCE: California Association of REALTORS®
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
19
70
19
72
19
74
19
76
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19
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19
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19
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19
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Sales of Existing Detached Homes Median Price
California Sales of Existing Homes and Median Price
-61% -25%
-44%
129 132
181
224
282
327
266
194
152 146 148
26%
16%
-19%
-27%-22%
-4%1%
37%
2%
24%
0
50
100
150
200
250
300
350
400
20
00
20
01
20
02
20
03
20
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P
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F
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
$ Volume of Sales Percent Change% Change$ in Billion
Dollar Volume of Sales Peaked in ’05Down 55% Thru ‘09
SOURCE: California Association of REALTORS®
-55%
Sales of Existing Detached Homes and Pacific West Consumer Confidence
California, October 2009 Sales: 562,400 Units, Up 28.9% YTD, Up 1.0% YTY
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
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Sales Consumer Confidence INDEXUNITS
SOURCE: California Association of REALTORS®; The Conference Board
*Sales are seasonally adjusted and annualized
Median Price of Existing Detached HomesCalifornia, October 2009: $297,500, Down 1.0% YTY
SOURCE: California Association of REALTORS®
P: May-07$594,530
T: Feb-09$245,170down 59% from peak
$0
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$200,000
$300,000
$400,000
$500,000
$600,000
$700,000J
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Median Price Annual ComparisonCalifornia, 2008: $346,410, Down 38.2% YTY
SOURCE: California Association of REALTORS®
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
19
97
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$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
Jan
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b
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Ap
r
Ma
y
Jun
Jul
Au
g
Se
pt
Oc
t
No
v
De
c
2006200720082009
MONTHLYANNUAL
75%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
20
04
.10
20
05
.01
20
05
.04
20
05
.07
20
05
.10
20
06
.01
20
06
.04
20
06
.07
20
06
.10
20
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.01
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07
.04
20
07
.07
20
07
.10
20
08
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.04
20
08
.07
20
08
.10
20
09
.01
20
09
.04
20
09
.07
Under 500 500 to 999 1 Mil +
Sales By Price RangeOctober 2004 – present
SOURCE: Mortgage Bankers Association, C.A.R.
Credit Freeze: 8/2007
Peak vs. Current Price - October 2009
RegionPeak
MonthPeak Price
Oct-09 Median
% Chg From Peak
High Desert Apr-06 $334,860 $118,580 -64.6%
Monterey Region Aug-07 $798,210 $300,860 -62.3%
Riverside/San Bernardino Jan-07 $415,160 $171,600 -58.7%
Palm Springs/Lower Desert Jun-05 $393,370 $164,390 -58.2%
Sacramento Aug-05 $394,450 $188,110 -52.3%
CALIFORNIA May-07 $594,530 $297,500 -50.0%
Northern Wine Country Jan-06 $645,080 $366,260 -43.2%
Los Angeles Aug-07 $605,300 $346,030 -42.8%
San Luis Obispo Jun-06 $620,540 $372,090 -40.0%
Northern California Aug-05 $440,420 $264,220 -40.0%
San Diego May-06 $622,380 $378,540 -39.2%
Ventura Aug-06 $710,910 $441,740 -37.9%
San Francisco Bay Area May-07 $853,910 $551,090 -35.5%
Orange County Apr-07 $747,260 $490,290 -34.4%
Santa Clara Apr-07 $868,410 $590,000 -32.1%
SOURCE: California Association of REALTORS®
Unsold Inventory IndexCalifornia, October 2009: 4.0 Months
0
2
4
6
8
10
12
14
16
18
20
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SOURCE: California Association of REALTORS®
MONTHS
12.6
7.9
5.9
5.1
5.3
9.9
5.9
3.8
3.6
2.8
0 2 4 6 8 10 12 14
$1,000K+
$750-1000K
$500-750K
$300-500K
$0-300K
Pri
ce
Ra
ng
e (
Th
ou
sa
nd
s)
Months Supply
Last Year This Year
Unsold Inventory By Price RangeCalifornia - Existing Homes October 2009 vs. October 2008
SOURCE: California Association of REALTORS®
County/Region Mar-09 Jun-09 Jul-09 Aug-09
Marin 33.1% 21.6% 26.9% 26.4%San Luis Obispo 50.5% 41.8% 38.4% 35.5%Mendocino 41.9% 51.1% 40.0% 40.0%Orange 56.7% 44.5% 40.6% 41.4%Sonoma 67.1% 56.6% 46.8% 51.3%Napa 69.4% 51.9% 52.0% 55.7%Los Angeles 69.2% 61.2% 58.9% 57.6%Sacramento 70.5% 70.6% 65.9% 66.4%Kern 83.5% 76.9% 73.7% 72.9%Solano 88.4% 84.0% 83.3% 78.1%Riverside/San Bernardino 87.1% 83.5% 82.2% 79.5%
Distressed Sales to Total Sales Ratio
SOURCE: California Association of REALTORS®
Market Summary
Sales - strong but off early-09 paceMedian Price –
bottom at $245K in Feb 09September median at $296KUp 21% from Feb 09, but 50% below peakHave we hit bottom?
Inventory – Well below 7 month average at 4.0 months in October
Share of distressed properties sold, slightly down from March.
The Bottom Line: Great Time to be a First Time Buyer
$0
$500
$1,000
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$3,500
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PITIPITI/Month
Entry-Level Monthly House Payment including Interest, Taxes, & Insurance
SOURCE: California Association of REALTORS®
Peak 2007-Q2: $3,190/moLatest 2009-Q3: $1,450/mo
First-time Buyer Housing Affordability IndexCalifornia Vs. U.S. 2000-2009
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CA US
% OF HOUSEHOLDS THAT CAN BUY
SOURCE: California Association of REALTORS®
Proportion of First-Time HomebuyersCalifornia
47.0%
38.6%
0%
10%
20%
30%
40%
50%
60%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09
% First-Time Home Buyers Long Run Average
Q. Was the buyer a first-time buyer?
20%
0% 0% 0%0% 0%
19% 20%
8%
18%
30%
0%
55%
0%5%
16%
42%
14% 16%
7%3%
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80%
Desiredlarger home
Desiredbetter/other
location
Mortgagepaymentwent up(reindex)
Moved torental to
save money
Job loss Troublemaking
mortgagepayments
2006 2007 2008 2009
Signs of Distress in 2008-2009
Sellers Are Reacting to Financial Stress
The Role of Market Conditions In the Decision to Sell
SOURCE: C.A.R. 2009 Survey of Home Sellers
While Buyers See Opportunities …
10%
9%
67%
22%
39%
Price decreases motivated us
Low interest rates helped us move toa better location, neighborhood
Likelihood that interest rates will moveup motivated us
Low interest rates helped us buy alarger home
Moved to an area where it was moreaffordable
The Role Of Market ConditionsIn The Decision To Buy
SOURCE: C.A.R. 2009 Survey of Home Buyers
FREE program designed to provide peace of mind to first-time buyers who are hesitant to enter the housing market due to concerns about potential job loss. Qualifying buyers can receive up to $1,500 a month for up to six months in the event of job loss, a qualified co-buyer can also receive a $750 benefit for up to six months to help pay the mortgage.
To qualify for the Mortgage Protetion Program, applicants must:• Be a first-time home buyer – someone who has not owned property in the
last three years (includes co-buyer)
• Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009 (purchase agreement cannot be dated before April 2, 2009)
• Use a California REALTOR® in the transaction
• Purchase the property in California
• Be a W-2 employee (cannot be self-employed)Visit www.carhaf.org for application and
additional program details
Fresno County
SOURCE: California Association of REALTORS®;The Conference Board
INDEXUNITS
Sales of Existing Detached Homes and Pacific West Consumer Confidence
Fresno County, October 2009: 871 Units, Up 48.4% YTD, Down 2.4% YTY
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Sales Consumer Confidence
Median Price of Existing Detached HomesFresno County, October 2009: $152,840, Down 12.4% YTY
Trough $133,870 Feb-09
Peak $313,506 Jun-06
$0
$50,000
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$250,000
$300,000
$350,000
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SOURCE: California Association of REALTORS®
Median Price Annual ComparisonFresno County, 2008: $195,790, Down 29.6% YTY
SOURCE: California Association of REALTORS®
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
19
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Jan
Feb
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May
Jun Ju
l
Aug
Sept Oc
t
Nov
Dec
2006200720082009
ANNUAL MONTHLY
Median Home Sales PriceFresno County
Oct-09 Oct-08Yearly % Change
Fresno County $172,000 $195,000 -11.8%Clovis $255,000 $261,000 -2.3%Fresno $160,000 $176,750 -9.5%Kerman $165,000 $195,000 -15.4%Reedley $161,000 $216,000 -25.5%Sanger $159,500 $167,000 -4.5%Selma $150,000 $180,000 -16.7%
SOURCE: C.A.R.; DataQuick Information Systems. The price statistics are derived from all types of home sales -- new and existing, condos and single-family.
First-time Buyer Housing Affordability IndexFresno County, 3rd Quarter 2009: 76%
SOURCE: California Association of REALTORS®
0%
10%
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60%
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90%
100%Q
1/03
Q3/
03
Q1/
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Q3/
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09
Q3/
09
% OF HOUSEHOLDS THAT CAN BUY
Housing Affordability IndexFresno, 3rd Quarter 2009: 63%
0%
10%
20%
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60%
70%
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----
20
07
.22
00
8.4
SOURCE: California Association of REALTORS®
QTRLYMonthly
City of Fresno
Sales of Single-Family Detached Homes
SOURCE: Clarus Market Metrics
City of Fresno, Nov. 2009: 423, Down 19.9% MTM, Up 6.3% YTY
Median Price of Single-Family Detached Homes•
SOURCE: Clarus Market Metrics
City of Fresno, Nov. 2009: $142,000, Down 4.9% MTM, Down 2.1% YTY
Months Supply of Inventory City of Fresno, Nov-09: 2.6 months
SOURCE: Clarus Market Metrics
2010 Forecast
California Housing Market Outlook
2003 2004 2005 2006 2007 2008 2009F 2010F
SFH Resales (000s)
601.8 624.7 625.0 477.5 346.9 439.8 540.0 527.5
% Change 5.1% 3.8% 0.03% -23.6% -27.3% 26.8% 22.8% -2.3%
Median Price ($000s)
$371.5 $450.8 $522.7 $556.4 $560.3 $346.4 $271.0 $280.0
% Change 17.5% 21.3% 16.0% 6.5% 0.7% -38.2% -21.8% 3.3%
30-Yr FRM 5.8% 5.8% 5.9% 6.4% 6.3% 6.0% 5.2% 5.6%
1-Yr ARM 3.8% 3.9% 4.5% 5.5% 5.6% 5.2% 4.8% 5.2%
Source: CALIFORNIA ASSOCIATION OF REALTORS®
Forecast Date: October 2009
www.car.org Market Response Center
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Speeches & Presentations
The End - - Thank You