Mark A. McLaughlin
Transcript of Mark A. McLaughlin
Mark A. McLaughlin Chief Executive Officer Pacific Union International, Inc.
Welcome
Special Guests
Alan P. Mark President
Krysen Heathwood Executive Vice President Managing Principal
Doug Shaw Principal
Hans Treuenfels Principal
Rupert Hoogewerf Chairman Hurun Report
Agenda Bay Area Economic Overview 2018 Nine-Market Perspective for 2018 Bay Area Similarities 2018 Questions & Answers Conclusions
Join the Conversation @PacUnion #RealEstateVision
Sponsored by
Timing is Everything
What we got wrong Rising Interest Rates
What we got Double-Digit Appreciation
Regional Key Drivers
John Burns Chief Executive Officer John Burns Real Estate Consulting
Definitions
Burns Home Value Index
Our estimate of home value appreciation for all of the homes in a given area.
Single-Family Homes Condominiums
Perspective Macro
0
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1,000,000
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3,500,000
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Year Born
2015 US Population by Place of Birth
Foreign Born
U.S. Born
Sources: U.S. Census Bureau December 2014 Population Projections; John Burns Real Estate Consulting,LLC
14 Million
27 Million
40 Million 43 Million 41 Million 44 Million 44 Million
41 Million
1930s (76-85)
1940s (66-75)
1990s (16-25)
1950s (56-65)
1960s (46-55)
1970s (36-45)
1980s (26-35)
2000s (6-15)
Savers Achievers Innovators Egalitarians Balancers Sharers Connectors Globals
Study the generations by decade born. The term “Millennial” refers to a 18+ year age gap, which is far too long to make good conclusions.
Source: U.S. Census Bureau December 2014 Population Projections
A surge in retirement will slow U.S. economic growth, and create unprecedented levels of housing demand for 65+ year-olds.
0
500,000
1,000,000
1,500,000
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1980
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Population Entering and Leaving the Labor Pool 20-Year-Olds Entering 65-Year-Olds Leaving
Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC
Unprecedented international immigration has created a surge in demand for the U.S.’ great cities.
Share of Persons Obtaining Green Cards, 2004-2013
New York
17%
Los Angeles / Orange County
9%
Miami
7%
Washington, D.C.
4%
Chicago
4%
Houston
3%
San Francisco / Oakland / San Jose
5%
Dallas / Fort Worth
2%
Boston
2%
Atlanta
2%
Source: Department of Homeland Security Yearbook of Immigration Statistics
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-1,000,000
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75-7
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85+
Change in Population by Age, 2005-2015
Source: U.S. Census Bureau Intercensal Estimates, December 2014 Population Projections
The “Urban Lifestyle Population” ages, 20-29 and 55-64, grew by a combined 15 million people in the last decade.
+4.7 million (+11.7%) +10.3 million (+33.5%)
-3,000,000
-2,000,000
-1,000,000
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70-7
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75-7
9
80-8
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Change in Population by Age, 2015-2025
Source: U.S. Census Bureau December 2014 Population Projections
Both of these age groups will grow much more slowly over the next decade.
-33,000 (-0.1%) +655,000 (+1.6%)
0
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65+
Popu
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65+ Population by Decade of Birth
1960s1950s1940s1930sPre-1930s
Sources: U.S. Census Bureau; John Burns Real Estate Consulting, LLC
66 million
48 million
ACTIVE SENIORS: The 65+ population will grow by 18 million people in 10 years – a 38% increase – and will need housing!
1. Living Alone: Only 55% of households are led by couples (49% married, 6% living together), compared to 77% of households in 1950.
2. Marrying Later: Only 22% of women aged 25-29 are married with children today, compared to 68% in 1967.
3. Cohabitation: 13% of 1980s Sharers lived together in their late 20s, double the 1960s Egalitarians. Does less marital commitment mean less likely to cosign a mortgage?
4. Never Marrying: Marital rates for those under 30 have dropped in half to 39%; and marital rates for those aged 40-54 have dropped 12+.
5. Divorcing Less: Divorce rates rose 132% from 1957 to 1979, and have fallen 37% since, creating fewer households.
6. Childless Households: Only 29% of households now have kids, meaning that good schools are not critical for 71% of households, and traditional floor plans are less relevant.
11 huge social shifts continue to delay the need to form a household or buy a home.
7. Delaying Childbirth: Women are having their first child 2 years later than their mother did.
8. Unwed Mothers: 40% of children are born to unmarried women, double the percentage in 1983.
9. Single-Parent Households: Only 46% of 1990s Connectors lived with both parents in 2013, compared to 73% of 1940s Achievers in 1960.
10. Women are the Breadwinners: • 37% of women graduate from college vs. 31% of men. • 38% of women earn more than their husband, up from 24% in 1987. • Since 1973, real female incomes are up 36% and male incomes are down
5%.
11. Raising Kids in a Rental Home: 15.3 million households now live in a single-family rental home, 4.1 million more than in 2007.
11 huge social shifts continue to delay the need to form a household or buy a home.
URBAN, SUBURBAN AND “SURBAN”: Urban and suburban will grow faster than usual, at the expense of rural.
6%7% 10% 8%
21%
15%
71%
79%
69%
77%71%
79%
23%
14%
21%
15%
8% 6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1970-1980 1980-1990 1990-2000 2000-2010 2010-2015P 2015P-2025P
Share of Household Growth by Decade
Today's Urban
Today's Suburbs
Today's Rural
Source: U.S. Census Bureau Decennial Census; John Burns Real Estate Consulting, LLC
“Surban” areas are redeveloped suburban downtowns, with elements of urban living with suburban affordability.
1. 1929–33 (43 mos.): Consumers borrowed money to buy stocks
2. 1957–58 (8 mos.): Consumers amassed credit card debts 3. 1980–82 (22 mos.)***: Bad bank loans to Latin America; oil
price increase 4. 1990–91 (8 mos.): Junk bonds for Leveraged Buy Outs;
real estate speculation fueled by S&L lending 5. 2000–01 (8 mos.): Tech stock speculation 6. 2007-09 (18 mos.): Housing speculation fueled by
subprime
1. 1937–38 (13 mos.): Post-New Deal 2. 1945 (8 mos.): End of WWII 3. 1948–49 (11 mos.): Post-WWII 4. 1953–54 (10 mos.): Post-Korean War 5. 1969–70 (11 mos.): First Vietnam War
spending cutback
1973–75 (16 mos.): Removal of gold standard, oil price increase
*The leading factors were summarized for the sake of simplicity. **This does not capture every cause of past recessions.
***We grouped the double-dip recessions
Note: We have excluded the small recession in the 1960s from our analysis. Sources: National Bureau of Economic Research; John Burns Real Estate Consulting, LLC (Pub: Aug-15)
Speculative Bubbles Usually fueled by debt
Government Spending Cuts Usually after running up big deficits / debts
Other Gold Standard
The biggest macro concern is excessive debt, which has preceded 11 of the last 12 recessions.
1. $1.2 trillion+ in student debt 2. Mortgage debt for 10%+ of homeowners who still have negative equity 3. Recent surge in debt-fueled private equity acquisitions 4. Foreign government debt 5. State and local government debt and unfunded pensions 6. $146k+ per household in U.S. government debt ($18 trillion) 7. $990k+ per household in unfunded U.S. retirement obligations
We have many excessive debt worries today.
Source: John Burns Real Estate Consulting US Housing Analysis and Forecast, September 2015
22 short-term early indicators project normal economic growth ahead.
We are going to discuss 5 economic engines known as MSAs that include 8 counties.
Area Definitions: 1. San Francisco includes San Francisco,
Marin, and San Mateo counties. 2. East Bay includes Alameda and Contra
Costa counties. 3. San Jose includes Santa Clara County. 4. Sonoma is Sonoma County and includes
Santa Rosa 5. Napa is Napa County.
Venture capital funding to Bay Area companies is approaching levels last seen in 2000.
$25.3 billion in venture capital funding was invested in Bay Area companies in 2014, the highest since 2000 when $33.4 billion was invested.
$1,200
$1,350
$1,500
$1,650
$1,800
$1,950
$2,100
$2,250
$2,400
$2,550
$2,700
$2,850
$3,000
$3,150
$0
$1
$2
$3
$4
$5
$6
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N.Cal Bay Area: Total Venture Capital Dollars Invested vs. Apartment Rents($ Billions)
Total Venture Capital $Bil (left-axis)
San Francisco Avg. Apartment Rent (right-axis)
San Jose Avg. Apartment Rent (right-axis)
Source: John Burns Real Estate Consulting, LLC; PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report (Q2-2015); Axiometrics
55 Bay Area-headquartered companies have had initial public offerings since January 2014.
Source: John Burns Real Estate Consulting, LLC; Renaissance Capital (through August 2015)
Company Proceeds ($millions)
LendingClub $870 Fitbit $732
GoPro $427 8point3 Energy Partners LP $420
Virgin America $307 Sunrun $251
TriNet Group $240 Arista Networks $226 A10 Networks $188
Natera $180 Castlight Health $178
Box $175 Coupons.com $168
Aimmune Therapeutics $160 FibroGen $146 Versartis $126
Nevro $126 Dermira $125
Ultragenyx Pharmaceutical $121
Company Proceeds ($millions)
Ooma $65 Ardelyx $60 Xactly $56
Intersect ENT $55 Atara Biotherapeutics $55 Corium International $52
Zosano Pharma $50 Adamas Pharmaceuticals $48
Invuity $48 TubeMogul $44
CareDx $40 SteadyMed $40 Aqua Metals $33
Energous $24 Sysorex Global Holdings $20
Jaguar Animal Health $20 BioPharmX $10
Company Proceeds ($millions)
Global Blood Therapeutics $120 Aduro Biotech $119
New Relic $115 Avalanche Biotechnologies $102
Invitae $102 Zendesk $100
MobileIron $100 Hortonworks $100
Revance Therapeutics $96 Apigee $87
Coherus BioSciences $85 Calithera Biosciences $80
TriVascular Technologies $78 Aerohive Networks $75
Yodlee $75 Achaogen $72
Five9 $70 Avinger $65
Carbylan Therapeutics $65
The 3 major metro areas have a similar number of jobs, although the East Bay has more residents and commuters.
Area Definitions: San Francisco includes San Francisco, Marin, and San Mateo counties. The East Bay includes Alameda and Contra Costa counties. San Jose includes Santa Clara County. Sonoma and Napa are their counties.
71,900
197,700
1,062,800
1,085,900
1,179,400
142,800
506,800
1,977,900
2,769,800
1,896,000
Napa
Sonoma
San Jose
East Bay
San Francisco
Total Population and Employment
Population Employment
Sources: BLS, Census Bureau, John Burns Real Estate Consulting
The economies are growing much faster than their populations, bringing unemployment down and creating income growth for many.
Area Definitions: San Francisco includes San Francisco, Marin, and San Mateo counties. The East Bay includes Alameda and Contra Costa counties. San Jose includes Santa Clara County. Sonoma and Napa are their counties.
2.1%
2.6%
5.5%
1.9%
4.4%
0.6%
1.0%
1.0%
1.4%
1.0%
Napa
Sonoma
San Jose
East Bay
San Francisco
Population and Employment Growth
Population Employment
Sources: BLS, Census Bureau, John Burns Real Estate Consulting
San Francisco is the most expensive of the 5 metro areas. Because incomes are lower elsewhere, affordability is actually even more of a problem in Napa, San Jose, and Sonoma.
Area Definitions: San Francisco includes San Francisco, Marin, and San Mateo counties. The East Bay includes Alameda and Contra Costa counties. San Jose includes Santa Clara County. Sonoma and Napa are their counties.
$544,000
$510,000
$898,300
$582,900
$1,188,800
Napa
Sonoma
San Jose
East Bay
San Francisco
Median Home Price and % Who Can Afford It
Sources: BLS, Census Bureau, John Burns Real Estate Consulting
27.0%
40.0%
39.0%
31.0%
42.0%
Market Summary
Dean Wehrli Senior Vice President John Burns Real Estate Consulting
Sonoma County
Sonoma County • Vineyards and tech • Middle income profile ($63,000 and rising
decently) • Prices +10% YOY at $500k+ • But modest gains ahead (2-4%) • Only about 150 sales YOY • Should be doing better? Jobs v HHs. • Great potential active adult locale • SMART train on track – but what impact? • Vacation rentals and Airbnb heightening
housing shortage?
Sonoma County
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition: Sonoma County.
0
1,000
2,000
3,000
4,000
5,000
6,000
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
Sonoma County - SFH Sales Volume and Units Sold
Sales Volume Units Sold SFH
Sonoma Valley
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition: B1300.
0
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$0
$100,000,000
$200,000,000
$300,000,000
$400,000,000
$500,000,000
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2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
Sonoma Valley - SFH Sales Volume and Units Sold
Sales Volume Units Sold SFH
Sonoma County - Key Drivers
Napa County
Napa County • Luxury vacation homes to north • More middle class to south • $75k median income going up • Prices up 8% YOY, but appreciation will
slow • Investor activity lower but stable at ¼ of
market • Slow growth and limited supply • But some recent new home activity • 4th highest concentration of $1 million-plus
homes in the nation
Napa County
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition: Napa County.
0
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400
600
800
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1200
1400
1600
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
Napa County - SFH Sales Volume and Units Sold
Sales Volume Units Sold SFH
Napa County - Key Drivers
Lake Tahoe/Truckee
Lake Tahoe/Truckee • Resort 2nd home getaway for the Bay • Older homes and rare new development • Population growing while supply is not • Watch Bay – still great, but likely to slow • Tahoe SFR pricing $575-675k, condos
$350-450k • Inventory healthy – 7 mos. SFR, 10 mos.
condos • If El Nino brings snow maybe a little boomlet? • Big new developments possible in Martis
Valley and Canyon Springs
Lake Tahoe/Truckee
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition areas: North Shore, West Shore, Alpine/Squaw Valley, Northstar, Truckee, Tahoe Donner, Lahontan, and Out of Area (Tahoe Sierra MLS).
0
200
400
600
800
1000
1200
1400
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
Lake Tahoe/Truckee - SFH Sales Volume and Units Sold
Sales Volume Units Sold SFH
Lake Tahoe/Truckee
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition areas: North Shore, West Shore, Alpine/Squaw Valley, Northstar, Truckee, Tahoe Donner, Lahontan, and Out of Area (Tahoe Sierra MLS).
0
50
100
150
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$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
Lake Tahoe/Truckee - Condos Sales Volume and Units Sold
Sales Volume Units Sold SFH
Lake Tahoe/Truckee - Key Drivers
Contra Costa County
Contra Costa County
• Mostly commuters • Suburban detached at $600k median (up
17% YOY) • Jobs are here but not like Silicon Valley and
City • Strong incomes - $86k median and still
growing • But finally seeing price resistance • The word is “normalizing” • New Highway 4 BART extension • Open up Oakley? • Old money likes condos in Lamorinda
Contra Costa County
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition cities: Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek.
0
500
1,000
1,500
2,000
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3,000
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4,000
$0 $500,000,000
$1,000,000,000 $1,500,000,000 $2,000,000,000 $2,500,000,000 $3,000,000,000 $3,500,000,000 $4,000,000,000 $4,500,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
Contra Costa County - SFH Sales Volume and Units Sold
Sales Volume Units Sold SFH
Contra Costa County - Key Drivers
Alameda County
Alameda County • More affordable, more commuters • Jobs solid, but again not Silicon Valley • Incomes great – median $79k and rising
+/- 4% annually ahead • Resale prices way up – 27% in 2014 and
10% YOY • Did I mention “normalizing”? • Oakland the new hotspot • Also the southwest – Fremont, etc. • Dublin more supply too – Wallis Ranch,
Dublin Crossing
Alameda County
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition cities and ZIPs: Alameda, Albany, Berkeley, El Cerrito, Kensington, Piedmont, and Oakland ZIP codes 94602, 94609, 94610, 94611, 94618, 94619, and 94705.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
Alameda County - SFH Sales Volume and Units Sold
Sales Volume Units Sold SFH
Alameda County - Key Drivers
Marin County
Marin County
• Rich if not famous –$105k and will pass $120k in 2018
• You work in the city or you own something
• Anti-growth = no new homes • And equals median resale price at $963k • Resale price + 30% 2012-2014, but flat
YOY and will also slow here • Many buyers – especially younger –
priced out • Will tech be moving north?
Marin County
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition cities: Belvedere, Corte Madera, Fairfax, Greenbrae, Kentfield, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon.
0
500
1,000
1,500
2,000
2,500
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
Marin County - SFH Sales Volume and Units Sold
Sales Volume Units Sold SFH
Marin County - Key Drivers
The Peninsula
San Mateo County • “Surban” paradise • Split commuters between 2 massive jobs
nodes • Affluent and working - $98k income, 3.1%
unemployment • Jobs will slow • Pricey ($1.1M+ new median) but prices will
slow too • So an exporter of demand • $1M homes in DC, Bay Meadows filling out
– what’s next?
San Mateo County
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition: San Mateo County.
0
1,000
2,000
3,000
4,000
5,000
6,000
$0
$1,000,000,000
$2,000,000,000
$3,000,000,000
$4,000,000,000
$5,000,000,000
$6,000,000,000
$7,000,000,000
$8,000,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
San Mateo County - SFH Sales Volume and Units Sold
Sales Volume Units Sold SFH
San Mateo County - Key Drivers
Santa Clara County (Silicon Valley) • Still booming tech and rising prices • Added over 55,000 jobs YOY, but… • Income $101k and to $123k by 2018 • Resale median up 17%, new median over $800k • So $750k townhomes in Milpitas or $800k small
lot homes in Gilroy • Or you go live in Dublin or Tracy or Manteca • But price growth will slow • Even Silicon Valley not bulletproof • Normalizing?
Santa Clara County
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition: Santa Clara County.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
$0
$2,000,000,000
$4,000,000,000
$6,000,000,000
$8,000,000,000
$10,000,000,000
$12,000,000,000
$14,000,000,000
$16,000,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
Santa Clara County - SFH Sales Volume and Units Sold
Sales Volume Units Sold SFH
Santa Clara County - Key Drivers
San Francisco
San Francisco County • Plenty of foreign buyers, but most not • Surging tech & software • Millennials want to be here even if can’t afford it • Median income of $83k and rising 5+% / year • Avg rent $3,000+, nearly double avg in 2004 • So you live somewhere else • Supply finally here with 14-15 condo buildings &
more apts • And more on the way: 1,300 condos & 4,000
apartments being built, thousands more in pipeline • Normalizing
San Francisco
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition: San Francisco County.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
San Francisco - Condos Sales Volume and Units Sold
Sales Volume Units Sold SFH
181 Fremont Fulton 555
The Harrison 450 Hayes
San Francisco Pipeline
San Francisco
Source: Terradatum/BrokerMetrics®, November 12, 2015. Definition: San Francisco County.
0
500
1,000
1,500
2,000
2,500
3,000
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
$4,000,000,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 Est
San Francisco County - SFH Sales Volume and Units Sold
Sales Volume Units Sold SFH
San Francisco County - Key Drivers
Bay Area Similarities
Bay Area Pipeline San Francisco, Oakland, Emeryville, Santa Clara County, San Mateo County
84
Pacific Union 350 Buy Side Deals – All Cash February – June 2015
Primary Residences
66%
Long-Term Investments
31%
Flipping Homes
3%
Buyer Intent International
6% Tech 12%
White Collar 42%
Retirees, Athletes, etc.
40%
Buyer Profile
3% 10%
27% 33%
0% 5% 10% 15% 20% 25% 30% 35%
Other
San Francisco
% of Cash Buyers from Tech Industry
3% 7%
24%
0% 5% 10% 15% 20% 25% 30%
Flippers Investors to Rent Investors to Hold
Long-Term Investor Profile
Existing Homes Sales Projections 32,500
1,350
16,300
18,800
6,400
33,800
1,500
16,900
20,900
6,700
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
East Bay MSA* Napa MSA San Francisco MSA** San Jose MSA Santa Rosa MSA
2015P 2016P 2017P 2018P
How We Did Last Year? JBREC Burns Home Value Index
BHVI Projections 2015 BHVI Projection Last Year 2015 BHVI Projection Near Year End Difference % Difference
East Bay MSA 156.88 169.60 12.72 8.1% Napa MSA 146.13 153.60 7.47 5.1% San Francisco MSA 180.28 207.60 27.32 15.2% San Jose MSA 171.27 189.90 18.63 10.9% Santa Rosa MSA 144.68 152.40 7.72 5.3%
80 100 120 140 160 180 200
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015P 2016P 2017P
Burns Home Value Index
East Bay MSA Napa MSA San Francisco MSA San Jose MSA Santa Rosa MSA
JBREC Burns Home Value Index
10.9%
8.4%
15.2%
13.0%
9.3%
1.7% 1.8%
0.0% 0.0%
2.0%
0%
2%
4%
6%
8%
10%
12%
14%
16%
East Bay MSA* Napa MSA San Francisco MSA** San Jose MSA Santa Rosa MSA
2015P 2016P 2017P 2018P
Q & A
Conclusions
Normalization
November 19th IPO Valuation: IPO @ $4.2B December ’14 @ $6B
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