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8/2/2019 Los Angeles Real Estate Market Update - Capital Redevelopment Group - Jeff Coga
1/10Capital Redevelopment Group LLC | Coganomics | Volume 59 February 2
Special Report
Los Angeles
Where Are We Headed?
8/2/2019 Los Angeles Real Estate Market Update - Capital Redevelopment Group - Jeff Coga
2/10
-$32,233
-$127,600
Most buyers in this market have accesto government-backed financing$729,750
-16.8%3-year (12-quarter) Appreciation (2011 Q3)
-4.3%
3-year (12-quarter) Housing Equity Gain*
Sales growth during the third quarter
was positive and improving
U.S.
$417,000
Local Median to Conforming Limit Ratio
$729,250
not comparable
-$29,733
Local Trend
**Note: the 2009 loan limits for FHA and the GSEs were extended through 2010.
-$65,800
7-year (28 quarters) Housing Equity Gain*
$33,400
1-year (4-quarter) Appreciation (2011 Q3) -6.3%
California
Prices are down compared to a yearearlier and continue to weaken
7.4% 17.0%
$729,250
Los Angeles-Long Beach-Santa Ana Area
Local Market Report, Third Quarter 2011
Home Sales
State Existing Home Sales
(2011 Q3 vs 2010 Q3)
Conforming Loan Limit**
Today's Market
9-year (36 quarters) Housing Equity Gain*
Los Angeles
FHA Loan Limit
45%
*Note: Equity gain reflects price appreciation only
The relatively recent correction in locahome prices wiped out most of theequity gained over the last 7 years
-16.0%
$2,267
U.S.
Price Activity
$169,267$324,800Current Median Home Price (2011 Q3)
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
-40%
-30%
-20%
-10%
0%
10%
20%
30%40%
2011Q3
Q12010Q3
Q12009Q3
Q12008Q3
Q12007Q3
Q12006Q3
Q12005Q3
Q12004Q3
Q12003Q3
Q12002Q3
Median Price (Red Line) and One-year Price Growth
0
100
200
300400
500
600
700
-40%
-20%
0%
20%40%
60%
80%
100%
2011Q3
Q12010Q3
Q12009Q3
Q12008Q3
Q12007Q3
Q12006Q3
Q12005Q3
Q12004Q3
Q12003Q3
Q12002Q3
State Home Sales (Red Line) and Sales Growth1,000s
8/2/2019 Los Angeles Real Estate Market Update - Capital Redevelopment Group - Jeff Coga
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#N/A #N/A #N/A #N/A
Natural Resou 0.1% 4.7 Natural 0.6%
Construction 3.3% 169.2 Constru 0.6%
Manufacturing 10.2% 524.8 Manufa 8.9%
Trade/Transpo 19.1% 982.2 Trade/T 18.9%
Information 4.5% 229.1 Inform 2.0%
Financial Act 6.0% 308.9 Financi5.7%
Prof. & Busin 15.2% 779.9 Profes 13.2%
Educ. & Heal 13.5% 695.7 Educat 15.3%
Leisure & Ho 11.2% 574 Leisur 10.0%
Other Servic 3.4% 174.8 Other 4.1%
Government 13.6% 697.5 96.6% Gover 16.9% #N/A
#N/A #N/A #N/A #N/A#N/A #N/A #N/A #N/A
Information
Financial ActivitiesProf. & Business Services
Educ. & Health Services
Leisure & Hospitality
Service Providing Excluding Government Other Services
Government
Natural Resources and Mining
Local employment growth is
respectable compared to other market0.8%
Natural Resources/Mining/Construction
12-month change (2011 - Sep)
1-year (12 month) Job Growth Rate
Los Angeles-Long Beach-Santa Ana Area
California
-2.6%-1.8%
3.0% 2.8%
Goods Producing
200Manufacturing
Trade/Transportation/Utilities
11.3%
11.9%
Share of Total Employment by IndustryU.S.
State Economic Activity Index
Construction
NA100
-3,000
-200
-3,7006,900
15,600
-4,400
Current Unemployment Rate (Sep)
36-month change (2011 - Sep)
7,200
NotComparable
Los Angeles's unemployment rate lagsthe national average, but has improved
relative to the same period last year
NotComparable
Drivers of Local Supply and Demand
22,300
36-month Job Change (Sep)
California's economy is stronger thanthe nation's, but slowed from last
month's 3.01% change
U.S.
8,600
12-month Employment Change by Industry in the Los Angeles-Long Beach-Santa Ana Area (Sep - 2011)
Year-ago Unemployment Rate
9.1%
9.6%
0.9%
U.S.
-381,100
44,800Employment has held up and is on an
upward trend
NotComparable
12-month Job Change (Sep)
17,500
NA
NA
12-month Job Change (Aug)
Local Economic Outlook Los Angeles
NaturalResourcesand Mining
0.1%
Construction
3.3%Manufacturing
10.2%
Trade/Transportation/U
tilities
19.1%
Information4.5%
FinancialActivities
6.0%Prof. &
BusinessServices15.2%
Educ. &Health
Services13.5%
Leisure &Hospitality
11.2%
OtherServices
3.4%
Government
13.6%
NaturalResourcesand Mining
0.6%
Construction
0.6% Manufacturing
8.9%
Trade/Transportation/
Utilities18.9%
Informatio2.0%Financial
Activities5.7%
Professional &
BusinessServices13.2%
Educational& HealthServices15.3%
Leisure &Hospitality
10.0%
OtherServices
4.1%
Government
16.9%
8/2/2019 Los Angeles Real Estate Market Update - Capital Redevelopment Group - Jeff Coga
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Reduced construction will limit newsupply to the market, allowing demand
to catch up with the inventory more
quickly
not comparable8,801
11.1% -10.3%Single-Family Housing Permits (Sep 2011)
12-month sum vs. a year ago
U.S.
8-year average for 12-month Sum of 1-UnitBuilding Permits
Local Fundamentals
12-month Sum of 1-unit Building Permits through
Sep 2011
Los Angeles
New Housing Construction
The current level of construction is
51.8% below the long-term averagenot comparable4,241
While new construction is the traditional driver of supply in real estate, foreclosures now have a strong impact oninventories, particularly at the local level. Rising inventories, through construction or foreclosure, place downwardpressure on the median home prices.
Construction is on the rise relative tolast year, suggesting that the local
inventory has stabilized
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
State Total Foreclosure Rate vs. U.S Average(U.S. Average in Blue Dashed Line)
Source: Mortgage Bankers' Association
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Construction: 12-month Sum of Local Housing Permits(Historical Average Shown in Red Dashed Line)
8/2/2019 Los Angeles Real Estate Market Update - Capital Redevelopment Group - Jeff Coga
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85.0% 10.6% 4.4% 90.9% 4.9% 4.1%
2.5% 3.2%
3.0% 3.4%
14.8% 18.9%
15.0% 18.2%
11.8% 15.2%
12.0% 15.2%
Source: First American CoreLogic, LoanPerformance data
28.5% 30.2% 30.4% 26.6% 27.8% 27.5%
6.3% 7.5% 8.3% 5.8% 6.2% 6.3%
2.5% 3.0% 2.9% 3.2% 3.4% 3.2%
Source: First American CoreLogic, LoanPerformance data
Monthly Market Data -
August 2011
PRIME:Foreclosure + REO
Rate Compared to the national average,today's local prime rate is low
Market Share:
Prime (blue), Alt-A(green), and Subprime
(red)
U.S.Los Angeles
Prime: 60-day
Delinquent
U.S.
The 90-day delinquency rate in LosAngeles fell over the 6-month period
ending in August
The local 60-day delinquency rate fellover the 6-month period ending in
August suggesting that 90-daydelinquencies will decline in the near
future
Foreclosures by Type
Locally, today's foreclosure rate is lowrelative to the national average
The local subprime rate eased modestrelative to March of last year
The "foreclosure + REO rate" is the number of mortgages, by metro area, that are either in the foreclosure process or have complet
the foreclosure process and are owned by banks divided by the total number of mortgages for that area.
ALT-A:Foreclosure + REO
Rate
The local alt-A rate eased slightlyrelative to March of last year
The decline of both the 60 and 90-daydelinquency rates over the most recen
6-month period suggests a decline inthe local foreclosure rate in the near
future.
The Los Angeles market has been ablto contain both subprime and prime
lending issues
There was a substantial decline
compared to March of last year
SUBPRIME:
Foreclosure + REORate
Los Angeles
The August rate for Los Angeles is low
compared to the national average
Prime:
Foreclosure +
REO Rate
Prime Foreclosures and Delinquencies in ProcessMonthly Market Data -
August 2011
Prime: 90-day
Delinquent
2.55%
3.04%
Aug-11Mar-11
3.15%
3.43%
Aug-11Mar-11
14.79
%
14.96%
Aug-11Mar-11
11.82%
12.02%
Aug-11Mar-11
18.88%18.1
5%
Aug-11Mar-11
15.18%
15.21%
Aug-11Mar-11
85.0
%
10.6
%
4.4%
90.9
%
4.9
%
4.1
%
28.52%
30.22%
30.37%
Aug-11Mar-11Aug-10
26.60%
27.80%
27.52%
Aug-11Mar-11Aug-10
5.82%
6.24%
6.25%
Aug-11Mar-11Aug-10
2.55%
3.04%
2.92%
Aug-11Mar-11Aug-10
3.15%
3.43%3.17
%
Aug-11Mar-11Aug-10
6.32%
7.46%
8.32%
Aug-11Mar-11Aug-10
8/2/2019 Los Angeles Real Estate Market Update - Capital Redevelopment Group - Jeff Coga
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Monthly Mortgage Payment to Income
Historical Average
U.S.
2.7
2.8
2.7
2.3
Weaker affordability than most market22.0%26.3%
The price-to-income ratio rose, but isbetter than the historic average
Less affordable than most markets
Ratio for 2011 Q3
Ratio for 2010
Historically strong, but weaker than thesecond quarter of 2011
Affordability
16.4%
17.1%
13.9%
Los Angeles
Los Angeles
Ratio for 2010 15.1%
U.S.
Ratio for 2011 Q3
Median Home Price to Income
Historical Average 3.4
2.4
0%
5%
10%
15%
20%
25%
30%
35%40%
45%
2010200820062004200220001998199619941992
Long-Term Trend: Ratio of Local Mortgage Servicing Cost to Income(Local Historical Average Shown in Red, U.S. Average in Green)
0%
5%
10%
15%
20%
25%
30%
2011 Q32011 Q22011 Q12010 Q42010 Q32010 Q22010 Q12009 Q4
Recent Trend - Local Mortgage Servicing Cost to Income(Historical Average Shown in Red Dashed Line)
8/2/2019 Los Angeles Real Estate Market Update - Capital Redevelopment Group - Jeff Coga
7/10
After a soft second quarter, the economy was shocked by three events that came together nearly within the same weak; deadlock in Congress and near miss on the budget extension, renewed concerns about the Greek debt crisis impacting
the US, and a sharp, downward revision to 1st and 2nd quarter GDP estimates. The result was a 15% or more correctionin the equity indexes, which sent investors into US Treasuries seeking a risk free asset. The yield on the 10-yearTreasury reached near record lows and the 30-year FRM followed suit, slipping under 4% multiple times. However, thegap between the 10-year Treasury and the 30-year fixed opened up as the risk to MBS investors of increased refinancingrose, creating resistance for falling mortgage rates. Fuel prices eased in the 3rd quarter and are likely to do so through
the fall. At the same time there is little core inflation pressure, which combined with the Federal Reserves operationtwist that is intended to flatten the yield curve putting downward pressure on long-term rates, should sustain a near-record low mortgage rate environment through the fall.
The Mortgage Market
0
40
80
120
160
200
240
280
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2011 Q3Q12010 Q3Q12009 Q3Q12008 Q3Q12007 Q3Q12006 Q3
30-year Fixed Mortgage Rate and Treasury Bond Yield
Spread (left axis) 30-Year FRM (Right axis) 10-Year Treasury Bond (Right Axis)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
2010200820062004200220001998199619941992
Ratio of Local Median Home Price to Local Average Income(Local Historical Average Shown in Red, U.S. Average in Green )
8/2/2019 Los Angeles Real Estate Market Update - Capital Redevelopment Group - Jeff Coga
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8.6%
More information on the OMB's geographic definitions can be found at http://www.whitehouse.gov/omb/inforeg_statpolicy/
Los Angeles County and Orange County
The Los Angeles area referred to in this report covers the geographic area of the Los Angeles-Long Beach-Santa Anametro area as officially defined by the Office of Management and Budget of the U.S. Government. The official coverage
area includes the following counties:
Geographic Coverage for this Report
Rental Vacancy Rate Los Angeles U.S.Ratio for 2010 6.7% 10.2%
The rental vacancy rate in Los Angelerose in 2010
Ratio for 2011 Q3 5.0% 9.8%
Historical Average 5.3%
Instead of falling after the end of the housing market boom, the national rental vacancy rate peaked at 11.1% in the 3rd
quarter of 2010. Job losses, stagnant incomes, and credit issues forced some families to double-up and many youngadults to move back in with their parents. The stabilization of the national economy in 2010 and subsequent three
quarters of job creation has helped to improve the rental market pushing the rental vacancy rate down to 9.8% in the 3rdquarter of 2011. In addition, many would-be buyers have been forced to rent due to a sharp increase in credit anddownpayment requirements in recent years. Rent growth was strong in the first 3 quarter of 2011 and is expected to growwith increases of 3.2% and 3.5% in 2012 and 2013, respectively. Locally, there was a decline in the rental vacancy ratefor Los Angeles from its recent peak of 7.2% in the 3rd quarter of 2009 to 5.0% in the 3rd quarter of 2011.
A Closer LookLocal Rental
Vacancy Rates
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
201020082006200420022000199819961994199219901988
U.S. (blue) and Local (red) Rental Vacancy Rates
8/2/2019 Los Angeles Real Estate Market Update - Capital Redevelopment Group - Jeff Coga
9/10
Will we see a huge influx ofinventory next month?I think so
KEY INDICATORS AND STRATEGIES
8/2/2019 Los Angeles Real Estate Market Update - Capital Redevelopment Group - Jeff Coga
10/10
KEY INDICATORS AS YOU CAN CLEARLY SEE YEAR-TO-YEAR FROMLAST YEAR SOME POCKETS IN LOS ANGELES IS STILL DECLINING
Some Over -100%!!!)