Transcript here - REALTOR Action Center

The Economy Under
a New Administration
Global Real Estate Forum
January 27, 2017
Jordan G. Levine
Economist
[email protected]
Overview
• Post-Election Outlook
• Starting 2017 with a bang!
• Lots of uncertainty—hard time to forecast
• What to worry about, what to be hopeful for
• Economic Update
• Global, U.S., and California economy
• Full employment? Up-/Downside Risks?
• California Housing Market Outlook
• Story remains the same, plus some wild cards
• Regional Housing Market Outlook
• Lots of challenges locally—especially in the core
• Expect people to continue to be priced out of
• 2017 Forecast
• Don’t shoot the messenger!
Post-Election Outlook
The good, bad, and the ugly
• Deregulation: industry & banks
• General regulatory environment
• CFPB & Dodd-Frank
• Tax cuts on business & people
• Tax reform: repatriating profits
• Infrastructure investment
• Better trade terms?
• Economy relatively healthy
• GSEs and the FHA/HUD
• Will they stay or will they go?
• MIP reduction already gone
• Mortgage interest deduction?
• Pro-growth = higher rates
• Especially if more hawks at Fed
• Supply is already an issue here
• CA very exposed to trade war
• What does retaliation look like?
• Capital flows to/from China?
• Healthcare & Immigration
• Demand, but also Fed $$
• CA exposed there too
• Uncertainty & Market volatility
Economic Stimulus
Package
Big plans already seeing big changes
$550
billion in infrastructure investments over 10 years
• $1 trillion
• $100 billion per year in infrastructure investments
• “Rebuild our highways, bridges, tunnels, airports, schools,
hospitals.”
• Goal: boost economic growth
• Result: GDP higher… at least short-term
• More jobs = more housing demand
• Upward pressure on home prices
• Affordability already an issue
• Don’t expect much in terms of new supply
Tax Reform
Putting more money in pockets is good.
But what about homeownership
• Overhaul of the current tax code
•
•
•
•
•
•
•
•
Reduction in tax rates
Drop from 7 tax brackets to 3
Increase standard deduction
Eliminate the federal estate and gift taxes
Repeal personal exemptions & Cap itemized deductions
Repeal all taxes associated with Obamacare
Provide a child care deduction
Manufacturers to elect full expensing of plant and equipment
• What does that do to the MID?
• Good for people’s pocket books, not good for their wealth
• Historically, people just don’t save unless they have a home
• Bad for wealth accumulation, communities, and social engagement
Net effect of fiscal policies?
• Our strength could end up being our biggest weakness
• Going to boost spending and aggregate demand
• Hopefully add much needed infrastructure
• (Will California get any after immigration scuffles with administration?)
• Creates more demand for housing, but supply already tight
• That means higher home prices here in CA, less affordability
• More demand also pushes up inflation and rates
• More growth in economy drives inflation
• Could balloon deficits
• Including interest: $7.2 trillion in first decade; $20.9 trillion by 2036.
• Leads to even more inflation & higher rates to finance deficits/debt
• Result?
• Could be good for housing over the short run: more demand
• But, exacerbate our affordability problems. Can’t really afford that.
• Higher rates & smaller incentive (MID) also threaten ownership
Fannie & Freddie
Dodd- Frank
Changes to Dodd-Frank Should Help Housing
• Banks will loosen lending standards
• Lower credit score requirement (still need about 726) FICO
• Less onerous capital requirements on banks
• Provide buyers more mortgage options
• Could open up private mortgage financing
• GSEs have been dominating this cycle
• There’s always a but!
• Increase in housing demand could push up home prices
• Affordability already a significant challenge
• Heighten risks of having another housing and credit bubble
• Pendulum probably swung too far on Dodd-Fank
• But, we don’t want to go back to wild west either
Red Flag: What will happen to the GSEs?
• Market reactions suggest optimism in the future of the GSEs
• Mnuchin came out early saying “Privatize”
• Backed off privatization during confirmation hearings
• Reform may not move forward in the next four years
• How does this stack up with other priorities?
• MBA, others don’t think it makes the short list
• But, we can’t rest on our laurels on this one
• Could significantly increase the cost of borrowing
• Cheaper to gamble with a guarantee than not, all else equal
• Moody’s estimated anything from 40-94 basis points
• Big increase in the cost of borrowing (see below)
The Fed
Not a question of if, but how much/quickly
• Rates rise with fiscal stimulus
• More inflation anticipated, core nearly at Fed target
• 10-year treasuries already up to 2.5%
• December rate hike
• We saw it coming, but expect more next year
• May not be as many as folks anticipate though
• Yield curve to flatten, so 30-Yr FRMs may not rise as much
• Are Janet’s day numbered? Maybe not right away, but…
• Will successor be more hawkish?
• Other vacancies to fill too—could shift the balance to hawks
• That would mean higher rates, even above current path
• Continued Fed independence questioned
Mortgage Rates: Up ~80bps Post-Election
January 2010 – January 19, 2017
6
MONTHLY
5
4.19
4
3.20
3
2
1
0
SERIES: 30Yr FRM, 5Yr ARM
SOURCE: Freddie Mac
WEEKLY
FRM
ARM
3.54
Median Monthly Mortgage Payment - CA
What Will Happen When Mortgage Rates Increase?
$2,800
MONTHLY MORTGAGE
20% Downpayment
$2,400
$2,000
Q3-2016 Median Price $515,940
$1,740
$1,853
$1,971
$2,091
4.0%
4.5%
$2,216
$2,344
$2,475
$2,609
$1,600
$1,200
$800
$400
$0
3.0%
3.5%
INTEREST RATE
SERIES: Housing Affordability Index
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
5.0%
5.5%
6.0%
6.5%
Minimum Qualifying Income - CA
What Will Happen When Mortgage Rates Increase?
Minimum Qualifying Income
20% Downpayment
$140,000
$120,000
$100,000
Q3-2016 Median Price $515,940
$93,340
$97,871
$102,555
$107,387
$112,363
$117,476
$122,720
$128,088
$80,000
$60,000
$40,000
$20,000
$0
3.0%
3.5%
4.0%
4.5%
INTEREST RATE
SERIES: Housing Affordability Index
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
5.0%
5.5%
6.0%
6.5%
Housing Affordability Index - CA
What Will Happen When Mortgage Rates Increase?
50%
% OF HOUSEHOLDS THAT CAN BUY, ALL ELSE CONSTANT
Q3-2016 Median Price $515,940
20% Downpayment
40%
34%
32%
30%
30%
28%
27%
25%
23%
21%
20%
10%
0%
3.0%
3.5%
4.0%
4.5%
5.0%
INTEREST RATE
SERIES: Housing Affordability Index
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
5.5%
6.0%
6.5%
Trade Policy
Full steam ahead, but lots of uncertainty
• Trade reform to bring jobs back to America.
Already
Withdrew
• Withdraw from the Trans-Pacific
Partnership
(TPP)
In process
• Renegotiate NAFTA
• Declare China a currency manipulator Not yet
• Tax imports from Mexico
Not yet
• Increase tariffs on Chinese imports
Not yet
• Industry-specific or product-specific tariffs Not yet
• Could impact housing demand locally
• Lots of logistics & import/export jobs in the region
The Wildcards
Important question marks for CA
• Healthcare future uncertain
• Potentially 4.6M covered under ACA
• That’s just CoveredCA and MediCal
• Still have kids on parents’ plans
• That’s health or pocketbook issue
• Could be a hidden negative for housing
• What does deportation of 12M look like?
• Politics aside, there’s practical aspects
• Reduces the number of bodies/demand
• Reductions to household income
• How do sanctuary cities fare: fed funding?
• Again, large negative for housing in CA
• Uncertainty & Market volatility
• The Twitter already jolting equities around
Economic Update
China and Japan having a tough time
East Asian Tigers doing well
Asian Exchange
Shenzhen
Colombo
Shanghai
Bursa Malaysia
Port Moresby
Hanoi
Hong Kong
Philippine
Singapore Exchange
BSE India Limited
National of India Limited
Japan Exchange Group Inc.
Taipei Exchange
Korea Exchange
Chittagong
Dhaka
NZX Limited
Australian
Sydney
Taiwan
Indonesia
The of Thailand
Hochiminh
SERIES: Domestic Market Capitalization Growth (%)
SOURCE: World Federation of Exchanges
% Chg. Dec-16
-11.6%
-10.5%
-9.8%
-5.2%
-4.4%
-0.5%
0.3%
0.4%
1.5%
3.0%
3.3%
3.4%
3.7%
4.1%
6.7%
8.5%
9.8%
10.9%
12.5%
15.7%
22.8%
25.4%
29.3%
European Exchange
Ukrainian
Athens (ATHEX)
BME Spanishs
SIX Swiss
Cyprus
Irish
Bucharest
Nasdaq Nordics
Deutsche Boerse AG
Malta
Warsaw
Stock of Mauritius
Wiener Borse
Euronext
Zagreb
Oslo Bors
Bourse de Casablanca
Budapest
Luxembourg
Moscow
Belarusian
% Chg. Dec-16
-22.1%
-10.5%
-9.7%
-6.9%
-5.8%
-5.5%
-2.5%
-0.6%
1.0%
1.6%
2.2%
5.1%
5.3%
5.6%
9.6%
20.7%
26.4%
29.3%
30.5%
61.7%
132.0%
Americas hot while Africa struggles
Central/South American
Bolsa Mexicana de Valores
Bolsa de Valores de Panama
Barbados
Nasdaq - US
Jamaica
NYSE
Bolsa de Comercio de Santiago
Bolsa de Comercio de Buenos Aires
Bolsa de Valores de Colombia
Bolsa Nacional de Valores
TMX Group
Bermuda
Bolsa de Valores de Lima
BM&FBOVESPA S.A.
African
Nigerian
The Egyptian
Tunis
Namibian
Johannesburg
SERIES: Domestic Market Capitalization ($USD) Growth (%)
SOURCE: World Federation of Exchanges
% Chg. Dec-16
-17.1%
3.0%
5.0%
6.8%
9.7%
10.0%
11.6%
13.8%
20.3%
24.0%
28.2%
36.3%
41.7%
57.8%
-42.2%
-41.8%
-4.2%
23.2%
30.3%
Middle East Exchange
Borsa Istanbul
Ljubljana
Tel-Aviv
LSE Group
Amman
BRVM
Bahrain Bourse
Palestine
Muscat Securities Market
Beirut
Saudi (Tadawul)
Abu Dhabi Securities
Qatar
Dubai Financial Market
Kazakhstan
Tehran
Seychelles
% Chg. Dec-16
-16.5%
-12.0%
-11.8%
-9.9%
-3.5%
-0.1%
0.6%
1.5%
4.9%
6.5%
6.6%
8.1%
8.7%
9.9%
15.0%
15.8%
122.5%
Fewer areas seeing prices fall last year
Home Price Growth
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
2015
SERIES: International Home Price Index
SOURCE: Federal Reserve Bank of Dallas
2016
Who is speeding up and slowing down
Acceleration in Home Prices in 2016
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
SERIES: International Home Price Index
SOURCE: Federal Reserve Bank of Dallas
How’s the economy closer to home?
Jumping off from a decent starting point
3.5%
2.8%
GDP 2016-Q3
Consumption
2016-Q3
4.7%
1.5%
Unemployment
December 2016
Job Growth
December 2016
US GDP: Improve in Q3 after a Weak 1st Half
Consumer Spending Remained Solid; Net Exports Surged
2015: 2.6%; 2016 Q3: 3.5%
ANNUAL PERCENT CHANGE, CHAIN-TYPE (2009) $
6%
ANNUALLY
5%
QUARTERLY
4%
3.5%
3%
2%
1%
0%
-1%
2009 Largest Annual Drop since 1946 (-2.8%)
-2%
-3%
-4%
2005 2007 2009 2011 2013 2015
SERIES: GDP
SOURCE: U.S. Bureau of Economic Analysis
Q2-11 Q4-11 Q2-12 Q4-12 Q2-13 Q4-13 Q2-14 Q4-14 Q2-15 Q4-15 Q2-16
Unemployment Rates Near 8-year low
US 4.7% (December 2016) & CA 5.2% (December 2016)
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
SERIES: Unemployment Rate
SOURCE: U.S. Bureau of Labor Statistics, CA Employment Development Dept.
US-CA
CA
US
CA Jobs Growing Faster Than Nation
Annual Percent Change
6
4
2
0
-2
-4
-6
-8
SERIES: Total Nonfarm Employment
SOURCE: U.S. Bureau of Labor Statistics, CA Employment Development Dept.
California
US
CA 2.0% (12/16)
US 1.5% (12/16)
Unemployment rate by California Metro Area
October 2016: California 5.5%
San Francisco
3.2%
San Jose
3.9%
Orange County
4.1%
Oakland
4.4%
San Diego
4.8%
Los Angeles
5.1%
Sacramento
5.2%
Ventura
5.3%
Inland Empire
6.1%
Stockton MSA
7.6%
Modesto
7.9%
Bakersfield
9.1%
Fresno MSA
0.0%
SERIES: Total Nonfarm Employment
SOURCE: CA Employment Development Dept.
9.2%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Job Trends by California Metro Area
October 2016: CA +2.4%, +389,500 (YTY)
Modesto
San Jose
Sacramento
Orange
Oakland
San Francisco
San Diego
Inland Empire
Los Angeles
Stockton
Ventura
Bakersfield
Fresno MSA
0.0%
SERIES: Total Nonfarm Employment
SOURCE: CA Employment Development Dept.
3.9%
3.2%
2.6%
2.6%
2.5%
2.4%
2.1%
1.8%
1.6%
1.6%
1.5%
1.2%
1.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
Housing Market Trends
Recent Trends in
Homeownership
Homeownership Dropped, Big Gap in CA
Homeownership Rate, 2005-2016
Homeownership Gap (Smoothed)
70
11.5
68
11.0
63.5
Percent
64
62
60
58
56
54
Percentage Points
66
10.5
10.0
9.5
9.0
53.2
52
8.5
50
SERIES: Homeownership Rate (%)
SOURCE: U.S. Census Bureau, Housing Vacancy Survey (HVS)
Q2-16
Q3-15
Q4-14
Q1-14
Q2-13
Q3-12
Q4-11
Q1-11
Q2-10
Q3-09
Q4-08
Q1-08
Q2-07
Q3-06
California
Q4-05
U.S.
Q1-05
8.0
Similar Phenomenon Locally
LA/OC Homeownership Rate
56 55.0
54
52
50
48
46
44
42
40
SERIES: Homeownership Rate (%)
SOURCE: U.S. Census Bureau, Housing Vacancy Survey (HVS)
44.7
Achieving
Homeownership in
California
Interest rates were the saving grace
California Price/Income Ratio
12
Payments vs. Incomes
80,000
90%
70,000
10
$64,833
60,000
8
$53,915
$48,459
50,000
40,000
6
$40,525
20,000
10,000
0
0
Q1-90
Q2-91
Q3-92
Q4-93
Q1-95
Q2-96
Q3-97
Q4-98
Q1-00
Q2-01
Q3-02
Q4-03
Q1-05
Q2-06
Q3-07
Q4-08
Q1-10
Q2-11
Q3-12
Q4-13
Q1-15
Q2-16
2
SOURCE: Calculations by California Association of REALTORS®
60%
45,451
24,955
80%
70%
$57,717
34,097
30,000
4
$67,836
51.4%50%
34,900
40%
23,078
30%
17,756
20%
10%
0%
Q3-95
Q3-00
Incomes
Q3-05
Q3-10
Payment
Q3-15
Q4-16
Affordability
Homeownership Challenges by Race
California Transaction Surplus/Deficit by Race/Ethnicity
Percent of Transactions Relative to Percent of Population
20%
Asian
Black
Hispanic
White
15%
10%
5%
0%
-5%
-10%
-15%
-20%
2005
2006
2007
2008
SERIES: Surplus/Deficit of Home Sales Relative to Population Base
SOURCE: U.S. Census Bureau, American Community Survey
2009
2010
2011
2012
2013
2014
Supply & Affordability:
Connecting the Dots
Affordability a Problem—Especially Here
70%
60%
Housing Affordability Index
57.2%
50%
40%
30%
20%
10%
0%
SERIES: Housing Affordability Index
SOURCE: California Association of REALTORS®
31.0%
22.9%
“Missing” 65,000 New Units Annually
2015: 95,822 (42,959 sf, 52,863 mf); 2016p: 98,300 total units
350000
300000
250000
200000
Single Family
Multi-Family
Household Growth:
165,000/yr.
150000
100000
50000
0
SERIES: California New Housing Permits
SOURCE: Construction Industry Research Board
SERIES: New Housing Permits
SOURCE: Construction Industry Research Board
Most Underbuilt Counties in California
New Jobs vs. New Permits (2010-2015)
450,000
400,000
Jobs
381,300
Permits
350,000
300,000
250,000
200,000
174,833
162,740
127,542
150,000
100,000
50,000
141,162
95,245
88,134
35,426
44,923
0
18,141
40,434
14,901
98,149
18,108
105,586
66,054
31,255
6,349
44,772
10,890
SOURCE: California Employment Development Department, Construction Industry Research Board
SERIES: Nonfarm Job Growth & New Housing Permits
SOURCE: CA EDD, Construction Industry Research Board
More “Underbuilding,” More Price Growth
Underbuilding (New Jobs/New Permits)
14
CA Underbuilding and Price Growth (2010-2015)
12
10
8
6
4
2
0
-20%
0%
20%
40%
-2
-4
Price Growth (%)
SERIES: Nonfarm Job Growth, New Housing Permits, Existing Median Prices
SOURCE: CA EDD, C.A.R., Construction Industry Research Board
60%
80%
100%
Lack of Turnover:
Causes and
Consequences
Inventory Very Tight by Historical Standards
20
Unsold Inventory Index
18
16
14
12
10
8
6
2.6
4
2
Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in
question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and
“Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.
SERIES: Unsold Inventory Index of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Apr-16
Jul-15
Oct-14
Jan-14
Apr-13
Jul-12
Oct-11
Jan-11
Apr-10
Jul-09
Oct-08
Jan-08
Apr-07
Jul-06
Oct-05
Jan-05
Apr-04
Jul-03
Oct-02
Jan-02
Apr-01
Jul-00
Oct-99
Jan-99
Apr-98
Jul-97
Oct-96
Jan-96
Apr-95
Jul-94
Oct-93
Jan-93
Apr-92
Jul-91
Oct-90
Jan-90
0
Where is the Inventory?
• Long-Time Homeowners are not moving as in the past
•
•
•
•
•
Low rate on current mortgage
Low property taxes
Capital gains hit
Where can I afford to go?
Could not qualify for a mortgage today
• Remodel and stay
• Are we headed for the “European Model” where children
inherit the home of their parents?
• One more thing…Secular decline in marriage
Fewer Units Turning Over Since the Great Recession
10%
Housing Turnover Rate
(Single-Family Homes only)
CA
9%
US
8%
7%
6%
4.8%
5%
4.2%
4%
3%
2%
1%
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
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
0%
SERIES: Percent of existing single-family homes being sold
SOURCE: Census Bureau, American Community Survey, Moody’s Analytics, C.A.R.
Years Owned Home Before Selling
12
10
8
6
4
2
0
SERIES: 2016 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
All Sellers
10
Boomers Not Moving as Often
71% of Californian’s aged 55+ haven’t moved since 1999
California Homeowners by Length of Tenure, 2013
35%
Under 55
55+
31.8%
30%
25%
24.4%
24.0%
21.3%
20%
15%
9.0%
10%
11.0%
12.4%
14.2%
10.7%
12.0%
8.9%
5.7%
5%
0.9%
0.8%
7.3%
1.9%
0%
1978 & Earlier
1979 to 1984
1985 to 1989
SERIES: Distribution of Home Ownership by Year Moved In
SOURCE: U.S. Census Bureau, 2013 American Housing Survey
1990 to 1994
1995 to 1999
2000 to 2005
2005 to 2009
2010 to 2013
Owners Investing in Staying Put ?
$ Billions
Alterations/Additions Reach All-Time High & Gaining Steam
Up 16% from 2015 YTD levels
4.5
$3.9 Billion
through July
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Year-to-Date Through July
SOURCE: California Homebuilding Foundation (CHF)/Construction Industry Research Board (CIRB)
Downloaded from Moody’s Analytics
More Single Family Units Now Rentals
8,000,000
7,000,000
Potentially between 400,000 and 700,000 SF Rentals that Used to be Owner-Occupied
6,919,164
6,527,730
6,000,000
5,000,000
4,000,000
3,000,000
2,674,808
1,940,607
2,000,000
1,000,000
0
SF Owners
SF Renters
2000
2005
2010
2015
SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS)
Downloaded from the National Bureau of Economic Research (NBER)
The Forecast
U.S. Economic Outlook
2011
2012
2013
2014
2015
2016p
2017f
US GDP
1.6%
2.2%
1.7%
2.4%
2.6%
1.6%
2.1%
Nonfarm Job Growth
1.2%
1.7%
1.7%
1.9%
2.1%
1.8%
1.3%
Unemployment
8.9%
8.1%
7.4%
6.2%
5.3%
4.9%
4.7%
CPI
3.1%
2.1%
1.5%
1.6%
0.1%
1.4%
2.4%
Real Disposable Income, % Change
2.5%
3.2%
-1.4%
2.7%
3.4%
2.7%
3.0%
30-Yr FRM
4.5%
3.7%
4.0%
4.2%
3.9%
3.6%
4.4%
SERIES: U.S. Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
California Economic Outlook
2011
2012
2013
2014
2015
2016p
2017f
Nonfarm Job Growth
1.1%
2.4%
3.0%
2.2%
2.7%
2.3%
1.9%
Unemployment Rate
11.8%
10.4%
8.9%
7.5%
6.2%
5.5%
5.4%
Population Growth
0.7%
0.7%
0.9%
0.9%
0.9%
0.9%
1.0%
Real Disposable Income, % Change
3.5%
4.7%
-1.1%
3.2%
3.6%
3.0%
4.5%
SERIES: CA Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
California Housing Market Outlook
2011
2012
2013
2014
2015
2016
2017f
SFH Resales (000s)
422.6
439.8
414.9
382.7
409.4
416.3
419.6
% Change
1.4%
4.1%
-5.9%
-7.8%
7.0%
1.7%
0.8%
Median Price ($000s)
$286.0
$319.3
$407.2
$446.9
$476.3
$502.3
$525.4
% Change
-6.2%
11.6%
27.5%
9.8%
6.6%
5.4%
4.6%
Housing Affordability Index
53%
51%
36%
30%
31%
31%
28%
30-Yr FRM
4.5%
3.7%
4.0%
4.2%
3.9%
3.6%
4.4%
SERIES: CA Housing Market Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Sales and Price up in 2016 and in 2017
Sales of Existing Detached Homes
Median Price
Price
(Thousand)
700
600
500
419.6
416.3
400
Thousands
Thousands
Units
(Thousand)
$600
$502
$500
$525
$400
$300
300
$200
200
100
$100
0
$0
2005
2007
2009
2011
2013
SERIES: CA Housing Market Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2015
2017f
2005
2007
2009
2011
2013
2015
2017f
CA: Dollar Volume
Up 7.2% in 2016, Up 5.4% in 2017
$ in Billion
% Change
$400
$ Volume of Sales
30%
Percent Change
$350
$300
20%
$301
10%
$244
$250
$195
$200
$220
$169 $171
$164
$150
$209
$133 $131
$127
$121
0%
-10%
$140
-20%
$100
$50
-30%
$0
-40%
2005
2006
2007
SERIES: CA Housing Market Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
2008
2009
2010
2011
2012
2013
2014
2015 2016p 2017f
Conclusions
Fasten seatbelts for bumpy ride
• Lots of political uncertainty
•
•
•
•
Big stimulus, how does that affect our housing imbalances
Threats to MID, Fannie/Freddie, FHA? MID is the one to worry about.
Trade, healthcare, immigration, federal funding, interest rates
All potential negatives
• Economy and housing market doing ok for now, but…
• Several threats to homeownership in California
•
•
•
•
•
•
Lack of housing and its effects on affordability
Low turnover rate further restricts supply
High prices and downpayment requirements
Rising interest rate environment is expected
Future policy changes: GSEs, Mortgage Interest Deduction?
Outmigration to more affordable areas
• Many of these fundamental issues aren’t abating any time soon
• That means fighting for market share in a relatively flat market
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