Nsdcar 7-18-13
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Transcript of Nsdcar 7-18-13
State of the California Housing MarketRecovery or ….?
Discussion Points
• National Economic Picture• California Market Update• Recovery, Yes, But…?• Expectations Next Six to Twelve
Months
Mortgage Interest Rates
Mortgage Interest Rates
1.0
2.0
3.0
4.0
5.0
6.0
7.0
10-Year Treasury Note Yields and 30-Year Mortgage Interest RateJuly 2007 through July 1, 2013
10-Year Treasury Yields30-Year Mortgage Interest Rates
Inte
rest
Rat
es
Source: Federal Reserve, Freddie Mac, Wells Fargo Mort-gage
June 19, 2013 Bernanke comments cause mortgage in-terest rates to spike
53 basis points.
2003-01-01
2003-07-01
2004-01-01
2004-07-01
2005-01-01
2005-07-01
2006-01-01
2006-07-01
2007-01-01
2007-07-01
2008-01-01
2008-07-01
2009-01-01
2009-07-01
2010-01-01
2010-07-01
2011-01-01
2011-07-01
2012-01-01
2012-07-01
2013-01-01
2013-07-01 $500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
Federal Reserve, Total Assets (Millions of $)January 2003 through July 1, 2013
Fede
ral R
eser
ve B
ank
Ass
ets
As a result of QEs, Federal Reserve Bank Assets have
mushroomed from $800 bil-lion to $3.5 trillion
Mortgage Interest Rates
Federal Reserve Policy
Bernanke Has Your Back…
Q & A: Members of House Financial Services Committee, July 18, 2013
Where are we in this housing recovery cycle?
Where are we in this housing recovery cycle?
Where are we in this housing recovery cycle?
May-9
9
Nov-99
May-0
0
Nov-00
May-0
1
Nov-01
May-0
2
Nov-02
May-0
3
Nov-03
May-0
4
Nov-04
May-0
5
Nov-05
May-0
6
Nov-06
May-0
7
Nov-07
May-0
8
Nov-08
May-0
9
Nov-09
May-1
0
Nov-10
May-1
1
Nov-11
May-1
2
Nov-12
May-1
3 3,000,000
3,500,000
4,000,000
4,500,000
5,000,000
5,500,000
6,000,000
6,500,000
7,000,000
7,500,000
8,000,000
8,500,000
9,000,000
Total New and Existing Home Sales - May 1999 through May 2013
Uni
ts S
old
Median Prices up sharply in 2012 and YTD 2013
Jun-01
Dec-01Jun-02
Dec-02Jun-03
Dec-03Jun-04
Dec-04Jun-05
Dec-05Jun-06
Dec-06Jun-07
Dec-07Jun-08
Dec-08Jun-09
Dec-09Jun-10
Dec-10Jun-11
Dec-11Jun-12
Dec-12Jun-13
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
$550,000
$600,000
California Median Prices - Single Family HomeJune 2001 through June 2013
Calif
orni
a M
edia
n H
ome
Pric
e ($
)
Source: PropertyRadar.com
Inventory at or near record lows
Source: California Association of Realtors – CAR.org
Jan-90
May-9
1
Sep-92
Jan-94
May-9
5
Sep-96
Jan-98
May-9
9
Sep-00
Jan-02
May-0
3
Sep-04
Jan-06
May-0
7
Sep-08
Jan-10
May-1
1
Sep-12
0
2
4
6
8
10
12
14
16
18
20
California Unsold Inventory Index (Months of Available In-ventory) January 1990 to May 2013
Mon
ths
of U
nsol
d In
vent
ory
Source: ForeclosureRadar – www.foreclosureradar.com
Foreclosure activity slowing…
May-0
7
Sep-07
Jan-08
May-0
8
Sep-08
Jan-09
May-0
9
Sep-09
Jan-10
May-1
0
Sep-10
Jan-11
May-1
1
Sep-11
Jan-12
May-1
2
Sep-12
Jan-13
May-1
30
10,000
20,000
30,000
40,000
50,000
60,000
70,000
Foreclosure ActivityMay 2007 through May 2013
Notice of DefaultNotice of Trustee SaleForeclosure Sales
Fore
clos
ure
Noti
ces
or S
ales
Time to foreclose lengthening
Average Time to Foreclose300+ Days
Government intervention
California home building permits on the rise
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
10,000
20,000
30,000
40,000
50,000
60,000
70,000
California Total Single Family Home Construction Permits January through May, 2000 through 2013
Num
ber o
f Per
mit
s
Housing Market Recovery?
Housing Recovery Dependent on Jobs and Income
Rising Employment
Rising Incomes
California employment on the rise
1990-01-01
1990-10-01
1991-07-01
1992-04-01
1993-01-01
1993-10-01
1994-07-01
1995-04-01
1996-01-01
1996-10-01
1997-07-01
1998-04-01
1999-01-01
1999-10-01
2000-07-01
2001-04-01
2002-01-01
2002-10-01
2003-07-01
2004-04-01
2005-01-01
2005-10-01
2006-07-01
2007-04-01
2008-01-01
2008-10-01
2009-07-01
2010-04-01
2011-01-01
2011-10-01
2012-07-01
2013-04-01 11,500
12,000
12,500
13,000
13,500
14,000
14,500
15,000
15,500
Monthly California Employment Trends (thousands of employees)January 1990 to May 2013
Num
ber o
f Em
ploy
ees
San Diego employment rising at a faster clip
May 2
003
May 2
004
May 2
005
May 2
006
May 2
007
May 2
008
May 2
009
May 2
010
May 2
011
May 2
012
May 2
0131,320,000
1,340,000
1,360,000
1,380,000
1,400,000
1,420,000
1,440,000
1,460,000
1,480,000
1,500,000
Employment Trends - San Diego - Carlsbad - San Marcos Metro Area2003 to 2013
Num
ber o
f Em
ploy
ees
Source: BLS.gov
California personal income gaining ground
1999-01-01
2000-01-01
2001-01-01
2002-01-01
2003-01-01
2004-01-01
2005-01-01
2006-01-01
2007-01-01
2008-01-01
2009-01-01
2010-01-01
2011-01-01
2012-01-01
2013-01-01 $900,000
$1,000,000
$1,100,000
$1,200,000
$1,300,000
$1,400,000
$1,500,000
$1,600,000
$1,700,000
$1,800,000
California Total Personal Income (Mllions of $)Q1 1999 through Q1 2013
Pers
onal
Inco
me
(Mill
ions
of $
)
What should a housing recovery look like?
Rising Prices
Increase in Market Activity
Increase in Building Activity
Market Activity Slows…
Feb-06
Jun-06
Oct-06
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-130
10,000
20,000
30,000
40,000
50,000
60,000
Monthly Trend of California Real Estate SalesDistressed vs. Non-Distressed Sales
February 2006 to June 2013
Distressed SalesNon-Distressed Sales
Sale
s Vo
lum
e
Source: PropertyRadar.-com
Sales volume down 5.9% in June
Jan-Jun 2005
Jan-Jun 2006
Jan-Jun 2007
Jan-Jun 2008
Jan-Jun 2009
Jan-Jun 2010
Jan-Jun 2011
Jan-Jun 2012
Jan-Jun 2013
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
California Total Single Family Home and Condominium SalesJanuary to June Year-to-Date Sales Comparisons
2005 through 2013
Distressed Sales
Non-Distressed Sales
Sale
s Vo
lum
e
Year-to-Date Jan-June sales nearly down
5.9 percent Y-o-Y
What about San Diego County……?
Source: PropertyRadar.com
Feb-06
Jun-06
Oct-06
Feb-07
Jun-07
Oct-07
Feb-08
Jun-08
Oct-08
Feb-09
Jun-09
Oct-09
Feb-10
Jun-10
Oct-10
Feb-11
Jun-11
Oct-11
Feb-12
Jun-12
Oct-12
Feb-13
Jun-130
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Monthly Trend of San Diego Real Estate SalesDistressed vs. Non-Distressed Sales
February 2006 to June 2013
Distressed SalesNon-Distressed Sales
Sale
s Vo
lum
e
Source: PropertyRadar.-com
What about San Diego County……?
Source: PropertyRadar.com
Jan-Jun 2005
Jan-Jun 2006
Jan-Jun 2007
Jan-Jun 2008
Jan-Jun 2009
Jan-Jun 2010
Jan-Jun 2011
Jan-Jun 2012
Jan-Jun 2013
0
5,000
10,000
15,000
20,000
25,000
30,000
San Diego County Total Single Family Home and Condominium SalesJanuary to June Year-to-Date Sales Comparisons
2005 through 2013
Distressed SalesNon-Distressed Sales
Sale
s Vo
lum
e
Year-to-Date Jan-June sales up in San
Diego County
What a difference a year makes!
Source: PropertyRadar.com
Distressed Property Sales as a % of Total Sales
County Q2-11 Q2-12 Q2-13
San Diego 51.8% 47.2% 27.1%
Contra Costa 60.9% 54.5% 29.8%
Riverside 62.8% 55.7% 37.2%
Sacramento 68.1% 61.7% 38.2%
San Bernardino 68.7% 61.5% 42.1%
Negative Equity on the Decline
Homeowner equity criticalto housing recovery
Negative equity on the decline
Source: CoreLogic – www.corelogic.com
Q4 2009
Q1 2010
Q2 2010
Q3 2010
Q4 2010
Q1 2011
Q2 2011
Q3 2011
Q4 2011
Q1 2012
Q2 2012
Q3 2012
Q4 201224%
28%
32%
36%
California Negative Equity (%)Q4 2009 to Q4 2012
Neg
ative
Equ
ity
Shar
e (%
)
Negative Equity - California
Negative Equity - California
5% 10% 15% 20% 25%0
200
400
600
800
1,000
1,200
Number of California Homeowners that Exit Negative Equity Positions
Increase In California Home Prices
Num
ber o
f Cal
iforn
ia H
omeo
wne
rs (i
n Th
ousa
nds)
Approximately 500,000 California homeowners
exit their negative equity positions if home prices
go up 10%
Approximately 900,000 Cali-fornia homeowners exit
their negative equity posi-tions if home prices go up
20%
Source: PropertyRadar.com
Negative Equity – San Diego
The Answer to the California Housing Market Recovery
Question?Yes, but….
Recovery?
Recovery? Yes, but…
ExpectationsNext 6 to 12 Months
Demand will remain strong
• Despite jawboning by the Fed, QE 3 will likely continue at current levels well into 2014
• In many parts of CA rents higher than house payments
• Many early foreclosure “victims” now qualify for a mortgage and are choosing to buy
Supply will remain tight
• Government intervention will continue to slow foreclosures, ie. CA Homeowner’s Bill of Rights
• Many homeowners with equity waiting for higher prices
• Nearly 2 million underwater homeowners can’t buy or sell (except short)
• New home supply lagging demand• Lack of REO inventory• Short sales CA hampered by legislative
uncertainty
Home prices will rise
• Lack of supply, and continued demand will put upward pressure on prices
• But increases will be constrained:– Interest rate volatility– By credit terms– By appraisals– By affordability and ROI
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Negative equity in Escondido, CA
…..compared to Carlsbad
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$550,000
Find owner via linked in or…?
$550,000
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$550,000
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