Building Industry Association · SACRAMENTO--ROSEVILLE--ARDEN-ARCADE, CA MSA Source: John Burns...

Copyright © 2016 by John Burns Real Estate Consulting, LLC

Building Industry Association

November 2nd, 2017

Sacramento Regional Housing Forecast

Presented by:

Dean Wehrli, Senior Vice President

[email protected]

916.947.3263

Trusted Analysis for Executive

Decisions

mailto:[email protected]


1. Demographic Profile

2. Housing Market Overview

3. Sacramento Buzz

Presentation Outline


2016 US POPULATION BY PLACE OF B IRTH,

SACRAMENTO--ROSEVILLE- -ARDEN-ARCADE, CA MSA

321 million Americans identify well with

people their own age2015 US POPULATION BY PLACE OF B IRTH

27 M

40 M43 M

41 M

44 M44 M

41 M

1930s SaversAge 77-86

1970s BalancersAge 37-46

1980s SharersAge 27-36

1990s ConnectorsAge 17-26

1940s AchieversAge 67-76

Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau 2014 National Projections

1950s InnovatorsAge 57-66

14 M

1960s EqualersAge 47-56

US Born Alive TodayForeign Born


Population – Sacramento MSA

Sacramento has an even population distribution by cohort.

2016 US POPULATION BY PLACE OF B IRTH,


Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau 2016 ACS via FactFinder

39K

55K

82K

117K

139K

152K 150K 149K143K

149K

157K

167K

157K152K 153K

147K

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

US born Foreign born

1980s

Sharers

1970s

Balancers

1960s

Equalers

1950s

Innovators

1940s

Achievers

1930s

Savers

2000s

Globals

1990s

Connectors


Women receive 58% of college degreesPERCENT OF ALL BACHELOR’S AND MASTER’S DEGREES CONFERRED

Source: John Burns Real Estate Consulting, LLC calculations of National Center for Education Statistics data


Education – Sacramento MSA

Nearly 35% of young women have a college degree – 5% higher than young men.SHARE OF POPULATION 25 -34 WITH A BACHELOR’S DEGREE OR HIGHER,


Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau 2005-2016 ACS via FactFinder

20%

22%

24%

26%

28%

30%

32%

34%

36%

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

Male Female


Real female incomes grew much faster than men’s from 1970 through 2000FULL-TIME, YEAR-ROUND WORKERS BY MEDIAN INCOME AND SEX (2013 DOLLARS)

Source: US Census Bureau, Current Population Survey, Annual Social and Economic Supplements


Income – Sacramento MSA

Real female incomes have grown over the last decade while real male incomes have fallen.

FULL-T IME, YEAR-ROUND WORKERS BY MEDIAN INCOME AND SEX ( 2016 $ ) ,


Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau American Community Survey via FactFinder

$60,429

$48,491

$56,709

$49,310

2006

2006

2016

2016

$-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Male Female


Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau, Current Population Survey,

Annual Social and Economic Supplements via IPUMS-CPS

The percentage of women married with children in their late 20s has plungedPERCENT OF 25 –29 YEAR-OLDS MARRIED WITH CHILDREN


Young Adult Households – Sacramento MSA

Young adults are much more likely to be single without children than 10 years ago (but let’s not forget cohabitation).

25–29 YEAR-OLDS BY MARITAL STATUS AND CHILDREN,


Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau 2005 & 2015 ACS via IPUMS

27.2%

16.2%12.9%

43.7%

15.8%

11.2% 10.8%

62.2%

0%

10%

20%

30%

40%

50%

60%

70%

Married with children Married without children Single with children Single without children

2005 2015


More immigrants legally moved to the US from 1990-2009 than the prior 60 yearsLEGAL IMMIGRATION BY DECADE

8.2 M

6.3 M

4.3 M

700K 857K

2.5 M

3.2 M

4.1 M

6.2 M

9.8 M

10.3 M

Source: Department of Homeland Security, legal green card recipients only, fiscal years ending September


The foreign-born population doubled in 20 years to 40 million peopleFOREIGN-BORN POPULATION IN THE UNITED STATES, 1900 –2010

10.3

13.5 13.9 14.2

11.610.3 9.7 9.6

14.1

19.8

31.1

39.9

Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau Decennial Census


Foreign-Born – Sacramento MSA

18.2% of Sacramento’s population is foreign-born, compared to 13.5% nationally. Heightened in younger cohorts.

FOREIGN BORN POPULATION,



354K

360K 361K 362K 362K

367K

390K 392K

404K 404K

414K

419K

320,000

340,000

360,000

380,000

400,000

420,000

440,000

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


Immigration has completely shiftedNET INCREASE IN US RESIDENTS BORN IN INDIA

Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau Decennial Census,

2013 American Community Survey

38,704

155,087

244,319

572,146

757,770

609,317

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

1960s 1970s 1980s 1990s 2000s 2010-2015


Immigration has completely shiftedNET INCREASE IN US RESIDENTS BORN IN CHINA



72,397

113,988

243,717

459,020

619,238

510,171

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

1960s 1970s 1980s 1990s 2000s 2010-2015


Immigration has completely shiftedNET INCREASE IN US RESIDENTS BORN IN MEXICO



183,809

1,439,510

2,098,793

4,879,473

2,533,616

-67,805

-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

1960s 1970s 1980s 1990s 2000s 2010-2015


Mexico27.0%

Other Central America3.0%

Philippines9.4%

Vietnam5.9%

Other South Eastern Asia5.3%

China, excluding Hong Kong and Taiwan

6.6%

Other Eastern Asia4.8%

India5.3%

Other South Central Asia6.2%

Europe14.8%

Oceania3.3%

Africa2.8%

Western Asia2.1% South America

1.8%

North America1.1%

Caribbean…

Ethnicity – Sacramento MSA

30% of Sacramento’s foreign-born population is from Latin/Central America and 44% from Asia.

FOREIGN BORN POPULATION BY PLACE OF B IRTH,




Source: John Burns Real Estate Consulting, LLC calculation of US Census Bureau Population Estimates and 2014

National Projections; includes Census Bureau assumptions of average annual net immigration ~860,000 20-64 year-

olds and Census Bureau assumptions for mortality; colors based on the decade of entry (turning 20)

The traditional US labor force will grow 75% slower, slowing the economy and putting upward pressure on wagesGROWTH RATE OF US RESIDENT POPULATION AGED 20 –64


Working Age Population – Sacramento MSA

The “working age” population (ages 20-64) is growing by just 1% per year, as the Boomers age into retirement. This will constrain job growth.

GROWTH RATE OF POPULATION AGED 20 –64 ,


Source: John Burns Real Estate Consulting LLC calculations of US Census Bureau data

0%

1%

2%

3%

4%

5%

6%


The 1950s Innovators will drive an explosion of 18 million more people aged 65+ over6 5 + P O P U L AT I ON B Y D E C A D E O F B I RT H

Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau Population Estimates

and 2014 National Projections


Retirees – Sacramento MSA

Sacramento’s retiree population (aged 65+) grew 46% from 2006 to 2016, growing by nearly 14,000 people each year.

65+ POPULATION, SACRAMENTO --ROSEVILLE- -ARDEN-ARCADE, CA MSA

X

60,504

339,988

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

196

9

197

1

197

3

197

5

197

7

197

9

198

1

198

3

198

5

198

7

198

9

199

1

199

3

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

201

3

201

5


Innovators are 7% more likely than the Achievers to be working in their early 60sLABOR FORCE PARTICIPATION AT AGE 60 –64

55.5%

48.9%

44.7%

Source: Bureau of Labor Statistics; John Burns Real Estate Consulting, LLC


Retirees – Sacramento MSA

Workaholic 1950s Innovators are working more than their predecessors.

Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau 2006 & 2016 ACS via FactFinder

47.4%

51.1%

0%

10%

20%

30%

40%

50%

1940s Achievers 1950s Innovators

LABOR FORCE PARTICIPATION AT AGE 60 –64 ,



Retirees Had Double the Economic Growth

that their Children Have Had

Source: John Burns Real Estate Consulting, LLC calculations of Bureau of Economic Analysis data

*Prime working years not yet complete

AVERAGE GDP GROWTH PER PERSON— PRIME WORKING YEARS (25-54)

2.4%

2.1%

1.9%

1.5%

1.1%1.0%

1980s

Sharers*

1970s

Balancers*

1960s

Equalers*

1950s

Innovators

1940s

Achievers

1930s

Savers


Homeownership – Sacramento MSA

Nearly every age group has lower homeownership than 10 years ago.

Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau 2006 & 2016 ACS via FactFinder

HOMEOWNERSHIP RATE BY AGE,


11%

41%

65%

74%78%

80%78%

65%

9%

32%

54%

62%

71%

76%

80%

69%

2006

2006

2006

2006

20062006

2006

2006

2016

2016

2016

2016

2016

2016

2016

2016

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

15-24 25-34 35-44 45-54 55-64 65-74 75-84 85+


Household Growth – Sacramento MSA

Source: John Burns Real Estate Consulting, LLC calculations of Decennial US Census

SHARE OF HOUSEHOLD GROWTH BY DECADE,


23%

9%16%

29%

45%

45% 33%

43%

10%

11%

9%

-2%

15%

27%32%

22%

7% 8% 9%7%

-20%

0%

20%

40%

60%

80%

100%

1980-1990 1990-2000 2000-2010 2010-2016

Sacramento city Sacramento County Balance El Dorado County Placer County Yolo County

Strong growth in Sacramento County, particularly in city of Sacramento.


Urban Growth is Slowing as Demand is

Shifting to Family and Retirement Years

FUTURE CHANGE IN ADULT POPULATION BY AGE 2015–2025

Source: John Burns Real Estate Consulting, LLC calculations of US Census Bureau Population Estimates and 2014 National Projections

NE

T N

UM

BE

R O

F P

EO

PL

E

YEAR

-3,000,000

-2,000,000

-1,000,000

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85+

-33,000

(-0.1%)

+655,000

(+1.6%)

55–64

Empty Nester Years

20–29

Young Adult Urban Years


Demographics to Watch

Source: John Burns Real Estate Consulting, LLC

Living with strangers

Extra rooms

Pad income / affordable rent

Autonomous Driving

Licensed drivers aged 20-24 has

fallen from 93% to 78%

Assisted living?

Increased propensity to rent

Mobility, down payment

Home ownership 61% by 2025

More build to rent new homes


Demographics to Watch

Source: John Burns Real Estate Consulting, LLC

Immigration a real hot button

Any new policies are sure to

impact housing, as well as

experience backlash

Experiences are the new brag

Proximity to cool things more

important than the home itself

Divorce rate for those over 50 is

climbing. Related?




3. Sacto Buzz



Current Value: Assuming Today’s 3.8% Mortgage Rate,

Home Prices in Most Top Metros Are Not Overvalued

Source: John Burns Real Estate Consulting, Regional Analysis and Forecast September 2017

Based on today’s mortgage rate of 3.8%, 6 of the top 30 markets are undervalued, and 23 are

fairly valued.

Note: % equals the

home price above/

below the intrinsic

value based on current

mortgage rates (3.8%

for October).

Please see our

detailed methodology

for explanation on our

Intrinsic Home Value

Index.

Overvalued

Undervalued

Fairly valued


Intrinsic Value: At a 6% Mortgage Rate, Homes in 25 of the

Top 30 Markets Are Overvalued Today; Rates Matter!

Source: John Burns Real Estate Consulting, Regional Analysis and Forecast September 2017

Assuming a 6% mortgage rate, which we believe is the right long-term mortgage rate

assumption, 8 of the top markets are fairly valued.

% equals the home

price above / below the

intrinsic value based on

a 6% mortgage rate.

Overvalued

Undervalued

Fairly valued


Mortgage Rates (National)

Have trended down in 2017. Will rise, but gradually.


Permit Activity – Sacramento MSA

Permit activity has increased – yet still remains below long-term norm.


Resale Inventory and Months of

Supply – Sacramento MSAInventory remains limited by historical norms.


New Home Sales Volume2016 BIA Forecast

for Sacramento MSA

2017P: 4,600 Sales


0

10,000

20,000

30,000

40,000

50,000

60,000

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Cu

rren

t

2017P

2018P

2019P

2020P

"Annual Existing Home Sales and Projections by MSA"

Sacramento MSA Stockton MSA

Vallejo MSA East Bay MSA

San Jose MSA

Source: John Burns Real Estate Consulting, LLC, CoreLogic

Resale Home Sales Volume2016 BIA Forecast for

Sacramento MSA

2017P: 37,400 Sales


New Home Median Price

New Home Median Price 2014 2015 2016 Current 2017P 2018P 2019P 2020P

Sacramento MSA $403,500 $437,700 $452,600 $463,200 4.9% 3.5% 2.2% -0.3%

Stockton MSA $405,500 $422,800 $454,200 $547,000 6.0% 4.1% 2.5% -0.2%

Vallejo MSA $395,300 $430,500 $475,800 $506,000 4.8% 3.6% 1.5% -0.4%

East Bay MSA $642,000 $674,000 $744,500 $803,900 4.4% 3.1% 0.5% -0.8%

San Jose MSA $728,400 $773,100 $808,000 $878,400 4.5% 2.5% -0.2% -1.4%

2016 BIA Forecast

for Sacramento MSA

2017P: +3.8%


$150,000

$250,000

$350,000

$450,000

$550,000

$650,000

$750,000

$850,000

$950,000

$1,050,0002000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Cu

rren

t

"Existing Home Median Price by MSA"

Sacramento MSA Stockton MSA

Vallejo MSA East Bay MSA

San Jose MSA

Source: John Burns Real Estate Consulting, LLC, CoreLogic

Resale Home Median Price

Existing Home Median Price 2014 2015 2016 Current 2017P 2018P 2019P 2020P

Sacramento MSA $295,000 $313,600 $341,000 $382,200 9.2% 6.1% 3.3% 1.1%

Stockton MSA $238,500 $262,700 $293,800 $340,500 11.6% 6.2% 3.2% 1.2%

Vallejo MSA $295,700 $322,400 $356,700 $395,000 7.5% 6.0% 3.2% 0.6%

East Bay MSA $529,200 $569,700 $606,500 $676,600 6.8% 4.3% 1.3% -0.8%

San Jose MSA $775,100 $865,500 $912,300 $1,024,300 7.7% 3.7% 3.0% -2.0%

2016 BIA Forecast

for Sacramento MSA

2017P: +5.1%


20%

25%

30%

35%

40%

45%

50%

55%

20

15

-01

20

15

-02

20

15

-03

20

15

-04

20

15

-05

20

15

-06

20

15

-07

20

15

-08

20

15

-09

20

15

-10

20

15

-11

20

15

-12

20

16

-01

20

16

-02

20

16

-03

20

16

-04

20

16

-05

20

16

-06

20

16

-07

20

16

-08

20

16

-09

20

16

-10

20

16

-11

20

16

-12

20

17

-01

20

17

-02

20

17

-03

20

17

-04

20

17

-05

20

17

-06

20

17

-07

20

17

-08

New Home Median Price Over Resale Median Price

New over Resale $ Linear (New over Resale $)

New vs Existing Median Price Gap

Sacramento MSA


0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

Sacramento MSA Vallejo MSA East Bay MSA San Jose MSA

"Apartment Rental Rate Growth Projections"

2017P 2018P 2019P 2020PSource: Reis, John Burns Real Estate Consulting

$1,167 $1,478

$2,073

$2,435

Current Rents

Apartment Rental Rate Growth




3. Sacto Buzz



Sacramento Submarkets Ratings


A Thriving Core

• 26 new retail business created in 2016, and 23 more set to open soon (e.g., The Bank, DOCO)

• Downtown employment has grown 38% since Golden 1 Center broke ground (May 2014)

• $1 billion in urban investment infused into Downtown since 2015

• $885 million in Downtown property sales since arena broke ground

Source: Downtown Sacramento Partnership


Employment Remains Solid

• 32,000 new jobs in 2016 (3.5% employment growth)

• Strongest growth in Education / Health Services and Hospitality sectors

• Current unemployment at 5.2%, lowest level since 2007

• Major employers have expanded into Sacramento (Amazon, Apple, etc.)

• Need higher income opportunities

Source: BLS

Source: BLS


Sacramento Migration

• Sacramento ranks top 10 “hottest housing markets of 2017” (per Zillow) for home values, unemployment, & income growth

• 12% of San Francisco Zillow users are researching Sacramento homes

• 12% of Placer Co. and 17% of Sacramento Co. in-flow is from the Bay Area (per IRS)

• Sacramento affordability in line with historical norm, while Bay continues to see prices rise beyond reach for many

Source: Zillow


Sacramento-Bay Price Gap Analysis

• “Price gap” of Sacramento new homes to Bay Area are near peak levels

Source: CoreLogic

40%

60%

80%

100%

120%

140%

160%

180%

200%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

YT

D 2

017

Sacramento-East Bay and Sacramento-San Jose Price Gap Analysis

Sacramento-East Bay New Home Sacramento-San Jose New HomeSource: CoreLogic; JBREC

% shown reflects “premium”

of median new home price

in Bay Area market relative

to Sacramento MSA.


Natomas Rebirth

• 21 active new home projects

• Selling briskly at 4 – 5 homes per month

• Affordability key - low $300Ks to low $400Ks

• +/- 10% new home appreciation YOY –outperforming other submarkets

• Hotel boom on horizon? Currently seven hotels proposed for Natomas (820 rooms)

Source: Ryness; Sacramento Business Journal

Source: New Home Source


Notable Housing Projects in Pipeline

• Urban core – Site 21, Railyards, T9, 19J, Ice Blocks, etc.

• New apartments to the suburbs next?

• Folsom Ranch and Russell Ranch to the south

• Greenbriar and others in Natomas

• Sierra Vista, Creekview, Village 7, Bickford, etc. in Placer County

• Laguna Ridge, Sterling Meadows and a casino in Elk Grove


Access to Our Nationwide Team of Experts

Florida

Lesley Deutch

(561) 998-5814

[email protected]

Northeast

Dan Fulton

(703) 447-7171

[email protected]

Jody Kahn

(603) 235-5760

[email protected]

Our consulting team has a broad range of housing expertise that spans the country. From

consumer research to feasibility studies to portfolio valuation, feel free to reach out to our

experts.

Dean Wehrli

(916) 647-3263

[email protected]

Northern California

Steve Dutra

(949) 870-1227

[email protected]

Don Walker(858) 281-7212

[email protected]

Pete Reeb(858) [email protected]

Ken Perlman(858) [email protected]

Southern California -

San Diego

Southwest

Steve Burch

(248) 797-4469

[email protected]

Texas

Lisa Marquis Jackson

(214) 389-9003

[email protected]

David Jarvis(713) 906-3829

[email protected]

Danielle Leach Todd Tomalak

Midwest

(847) 812-3925

[email protected]

(920) 373-6727

[email protected]

Southern California

- Orange County

Chris Porter(949) 870-1218

[email protected]

Rick Palacios, Jr.(949) 870-1244

[email protected]

John Burns(949) [email protected]

Adam Artunian(949) 870-1213

[email protected]

Building Industry Association · SACRAMENTO--ROSEVILLE--ARDEN-ARCADE, CA MSA Source: John Burns...

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Transcript of Building Industry Association · SACRAMENTO--ROSEVILLE--ARDEN-ARCADE, CA MSA Source: John Burns...