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My recent housing overview for the City of Canyon Lake, CA Economic Development Broker Breakfast.
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It’s The Economy,Stupid
January 25, 2012
With your host…
Gene Wunderlich
STILL
Japanese
Earthquak
e
&
Tsunam
i
Sovereign Debt
Crisis in EuroZone
Oil Price Spikes
2011: A Year of Economic Wild Cards
Arab Spring
Political
Change on
Capitol Hill
Debt Limit Ceiling & Downgrad
e of US Debt
Stock Market
Volatility
Too many
&
• Federal Economic Policy• Regulations• Unemployment• Foreclosures• Mortgage Interest Deduction• Strategic Foreclosures
• Lenders• Short Sales• Interest Rates• Inflation• Shadow Inventory• Global Economy
Economy Housing
PoliticsFraud
Economy
Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.
Ronald ReaganAmerican President
Consumer Confidence?Highest Since April
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November 2011: 64.5
INDEX, 100=1985
Overall, 62 percent of those surveyed say they’re optimistic about what 2012 will bring for the country, according to the Associated Press-GfK survey. And for themselves and their families, Americans are even more positive, with 78 percent telling pollsters they are personally hopeful about the year ahead.
-8%-7%-6%
-5%-4%-3%
-2%-1%
0%1%2%
3%4%
5%6%7%
8%1
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Q1
-09
Q3
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Q1
-10
Q3
-10
Q1
-11
Q3
-11
2010: 2.8%; 2011 Q1: 0.4% Q2: 1.0% 2011 Q3: 2.5%
ANNUAL QTRLY
2009 Largest Annual Drop since 1938 (-3.4%)
Gross Domestic Product: Stall Speed
SOURCE: CA Employment Development Division 36
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63
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25
0%
2%
4%
6%
8%
10%
12%
14%CA US
Unemployment Stubbornly High November 2011
California (11.3%) vs. United States (8.6%)
Total Payroll Jobs in the U.S. (same as in 2000, but with 30 million more people)
How Many Years to Get Job Market Back to Normal?
Jobs added per month Assumed new jobs needed for growing population per month
How many years?
100,000 100,000 Treading water and never back to normal
200,000 100,000 6.3 years
300,000 100,000 3.2 years
400,000 100,000 2.1 years
Housing
The housing market will get worse before it gets better.
James Wilson American Politician
(1742 – 1798)
Wall Street Journal
“Home Forecast Calls For PAIN.”
Prices to stumble through 2015
Market at a Glance
Sales of Existing Detached Homes: California October 2011 Sales: 493,240 Units, Up 1.1% YTD, Up 8.5% YTY
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100,000
200,000
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700,000
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Sales Consumer Confidence INDEXUNITS
SOURCE: The Conference Board
*Sales are seasonally adjusted and annualized
P: May-07$594,530
T: Feb-09$245,230
-59% frompeak
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000J
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Median Price of Existing Detached HomesCalifornia, October 2011: $278,060, Down 8.9% YTY
SOURCE: California Association of REALTORS®
California Sales of Existing Homes and Median Price
Housing Cycle Comparisons 1970- 2011
UNITS/MEDIAN PRICE $
California Association of REALTORS®
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
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Sales of Existing Detached Homes Median Price
-61% -25%
-44%
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$696,385
$158,489
Peak to trough-77% in 24 months
Canyon Lake Median Price
California Association of REALTORS®
California vs. U.S. Median Price
19701973
19771980
19821984
19861988
19901992
19941996
19982000
20022004
20062008
2010$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
US Median Price CA Median Price
Median Price & Affordability Index
Housing Affordability: Records Highs
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Q1
2000
Q3
2000
Q1
2001
Q3
2001
Q1
2002
Q3
2002
Q1
2003
Q3
2003
Q1
2004
Q3
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Q1
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Q3
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Q1
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Q3
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Q1
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Q3
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Q1
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Q3
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Q1
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Q3
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Q1
2010
Q3
2010
Q1
2011
CA US
% OF HOUSEHOLDS THAT CAN BUY
California Association of REALTORS®
California Vs. U.S.
2009
.01
2009
.03
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.05
2009
.07
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.09
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.11
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.01
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.03
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.05
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.07
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.09
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.11
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.01
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.03
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.05
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.07
7.28
.11
8.11
.11
8.25
.11
9.8.
11
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
FRM ARM
MONTHLY
WEEKLY
Mortgage Rates @ Historical Lows
Compelling AffordabilityMonthly Mortgage to buy a Median Priced Home
2005 Q2 2011 Q2
San Diego $ 2,833 $ 1,564
Miami $ 1,726 $ 853
Milwaukee $ 1,014 $ 797
Kansas City $ 735 $ 600
0
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100,000
150,000
200,000
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300,0001
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Single Family Multi-Family
2009: 36,200 2010: 39,000 2011: ??
Average 1988-09: 138,000
SOURCE: CBIA. Forecast: C.A. R.
CA New Housing Permits:Opportunity
CA Underwater Mortgages:
Reverse Wealth Effect
Q4-2009
Q1-2010
Q2-2010
Q3-2010
Q4-2010
Q1-2011
Q2-2011
0%
5%
10%
15%
20%
25%
30%
35%
40%
30.2%
4.6%
Negative Equity Share in CA Near Negative Equity Share in CA
Proportion of Sellers Planning to Repurchase
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110%
10%
20%
30%
40%
50%
60%
70%
80%
Q. Is the seller planning on purchasing another home?
California Association of REALTORS®
Sellers with a Net Cash Loss
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21.8%
What was the net cash gain or net loss to the seller as a result of this sale?
Long Run Average = 11.2%
California Association of REALTORS®
Net Cash to Sellers
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011$0
$50,000
$100,000
$150,000
$200,000
$250,000
$75,000
Median
Q. What was the net cash gain or net loss to the seller as a result of this sale?
California Association of REALTORS®
8 in 10 Americans (STILL) Agree: Buying a Home is the Best Investment One Can Make
SOURCE: Pew Research Center’s “Home Sweet Home. Still. Five Years After the Bubble Burst”
Direction of Home Prices: Sellers Skeptical/Buyers Hopeful
Sellers Buyers0%
10%20%30%40%50%60%70%80%90%
100%
Down Flat Unsure Up
California Association of REALTORS®
Regional Housing SummaryTemecula, Murrieta, Lake Elsinore, Menifee, Wildomar, Canyon Lake
Single Family Residential - Full Value Sales Prepared by [email protected]
2004 2005 2006 2007 2008 2009 2010 2011Temecula
# Sales 1,975 1,742 1,141 805 1,569 1,334 1,987 1,902Median $ $437,159 $484,978 $526,237 $475,522 $337,732 $289,857 $300,234 $301,279
Gross Sales Revenue $863,389,025 $844,831,676 $600,436,417 $382,795,210 $529,901,508 $386,669,238 $596,564,958 $573,032,658
Murrieta
# Sales 1,679 1,661 1,252 687 2,054 1,666 2,236 1,978Median $ $432,511 $488,757 $530,912 $473,562 $304,466 $271,107 $270,878 $269,948
Gross Sales Revenue $726,185,969 $811,825,377 $664,701,824 $325,337,094 $625,373,164 $451,664,262 $605,683,208 $533,957,144
Wildomar
# Sales 361 327 317 218 473 287 398 388Median $ $393,540 $442,018 $463,920 $435,608 $296,054 $225,739 $220,745 $224,634
Gross Sales Revenue $142,067,940 $144,539,886 $147,062,640 $94,962,544 $140,033,542 $64,787,093 $87,856,510 $87,157,992
Lake Elsinore
# Sales 914 1,054 700 335 1,154 959 1,387 1,237Median $ $306,607 $363,543 $431,158 $366,358 $183,819 $179,965 $182,925 $176,353
Gross Sales Revenue $280,238,798 $383,174,322 $301,810,600 $122,729,930 $212,127,126 $172,586,435 $253,716,975 $218,148,661
Menifee
# Sales 820 763 520 498 1,005 651 1,142 1,672Median $ $323,138 $364,695 $418,974 $370,671 $259,504 $201,866 $206,414 $185,131
Gross Sales Revenue $264,973,160 $278,262,285 $217,866,480 $184,594,158 $260,801,520 $131,414,766 $235,724,788 $309,539,032
Canyon Lake
# Sales 468 342 286 133 330 306 379 281Median $ $443,384 $480,200 $567,071 $548,205 $300,561 $241,416 $251,006 $256,420
Gross Sales Revenue $207,503,712 $164,228,400 $162,182,306 $72,911,265 $99,185,130 $73,873,296 $95,131,274 $72,054,020
Sales by Type
3/09 6/09 9/09 12/09 3/10 6/10 9/10 12/10 3/11 6/11 9/11 12/11$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Temecula Murrieta Linear (Murrieta) Lake ElsinoreMenifee Wildomar Canyon Lake Polynomial (Canyon Lake)
Up 2% over 2010Up 6% over 2009
Median Price
<100 100-200 200-300 300-400 400-500 500-600 600-700 700-800 800-900 900-1,000 1,000+0
10
20
30
40
50
60
Active Pending Sold
Least expensive: $30,000 on Lake DriveMost expensive: $2,999,000 on San Joaquin
Data courtesy of CRMLS
Canyon LakeSales by Price Break
Price point in 2006
On Market (Supply) Pending Closed (Demand) Days on Market Months Supply Absorption rate *0
50
100
150
200
250
300
350
400
450
500
473
225
185
97
2.55675675675676
145
391
247
170
97
2.3
130
294
170
10888
2.72222222222222
121
465
233
137
87
3.39416058394161
92109
30 27
114
4.03703703703703
108
80
55
31
74
2.58064516129032
97
Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar* Absorption rate - # of new listings for the month/# of sold listings for the month
Demand Chart - December
2012 Preview : State
Accelerated 3% withholding
4% flat tax – including services
Point of sale mandates
Mortgage interest deduction
40+ ballot propositions
Taxes, taxes, Texas
Federal Issues – Critical Concerns
• High-cost Loan Limits - expired 10/1/11 (except
FHA)
• Future of Fannie and Freddie? FHA?
• Tax Reform on the horizon
Mortgage Interest Deduction?
Capital Gains?
• QRM (Qualified Residential Mortgage) 20%
Down
Is the future of the 30 year mortgage in
doubt?
2012 – What’s Ahead• Stable to increasing home sales• Stable median price• Declining inventory of resale homes• Rising rents• Lack of new home inventory• Compelling affordability• Record low interest rates
Pent up demand
It’s Time To Buy Again
SOURCE: “Real estate: It’s time to buy again”Fortune Magazine’s 3/28/11 article written by Shawn Tully
“Forget stocks. Don't bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.”
