1 / 93

Economic and Housing Market Forecast California Community Colleges Real Estate Education Center October 27, 2006

Economic and Housing Market Forecast California Community Colleges Real Estate Education Center October 27, 2006. Robert A. Kleinhenz, Ph.D. Deputy Chief Economist California Association of REALTORS®. Overview. California Housing Market Local & Regional Outlook 2006 Forecast

Antony
Download Presentation

Economic and Housing Market Forecast California Community Colleges Real Estate Education Center October 27, 2006

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Economic and Housing Market ForecastCalifornia Community Colleges Real Estate Education CenterOctober 27, 2006 Robert A. Kleinhenz, Ph.D.Deputy Chief EconomistCalifornia Association of REALTORS®

  2. Overview • California Housing Market • Local & Regional Outlook • 2006 Forecast • Market & Membership • Buyers & Technology

  3. California Real Estate Market

  4. Current Market Conditions • Sales down significantly from 2004-05 record • Price appreciation slowing throughout 2006 • Higher inventories than record lows of ‘04-05

  5. Sales of Existing Homes & Consumer Confidence • California, September ‘06: 444,780 Units, Down 24.0% YTD, Down 31.7% YTY Cons Conf Index Sales of Homes 2+ yrs above 600,000 SOURCE: California Association of REALTORS®; The Conference Board

  6. Median Price of Existing Detached Homes • California, September 2006: $553,050, Up 1.8% Y-T-Y SOURCE: California Association of REALTORS®

  7. Median Price, Annual Percentage Change • California vs. U.S. Greater Price Volatility in California than US SOURCE: California Association of REALTORS®

  8. Market Drivers Little Changed in 2006 • Rates higher but still at near-record low levels • Steady job & income growth • Equity wealth effect of repeat buyers • Long-run supply constraints • Higher inventory levels & smaller price gains

  9. #1- Interest Rates

  10. Mortgage Rates SOURCE: Federal Home Loan Mortgage Corporation

  11. #2 - Economic Conditions

  12. National Economy 2006 • Steady sustainable GDP growth in 3-4% range • Inflation ~ 3%+ • Solid, not outstanding, job growth • Low unemployment rate • RESULT: 2006 economy looks much like 2005

  13. Gross Domestic Product • Year 2005: +3.5%; 2006 Q3: +1.6% ANNUAL PERCENT CHANGE, CHAIN-TYPE (2000) $ Annual Quarterly

  14. Unemployment Rate • California vs. United States SOURCE: CA Employment Development Division

  15. Employment Growth, California vs. U.S. YEAR TO YEAR % CHANGE

  16. Consumer Price Index August 2006: All Items 3.8% Y-T-Y; Core 2.8% Y-T-Y PERCENT CHANGE FROM A YEAR AGO, 100=1982-1984

  17. #3 - Supply Conditions: Inventory & Time on Market

  18. Unsold Inventory, 2000-Present • California, September 2006: 7.0 Months MONTHS Average Since 1/88: 6.9 months SOURCE: California Association of REALTORS®

  19. Unsold Inventory Index, 1988-Present MONTHS SOURCE: California Association of REALTORS®

  20. Unsold Inventory Index vs. Price ChangesCalifornia, 1982-2005 Inventory below 7 mos. 13% avg price increase SOURCE: California Association of REALTORS®

  21. Listings by Month, Selected Years • California (1982-2005 Average=100) SOURCE: California Association of REALTORS®

  22. Median Time on the Market • CA Single-Family Homes, September ‘06: 53.9 days DAYS ON MARKET SOURCE: California Association of REALTORS®

  23. #4 - Demand Conditions: Repeat Buyers Dominate Market

  24. Market Share of Repeat HomebuyersCalifornia SOURCE: California Association of REALTORS®

  25. #5 - Demand Conditions: Demand > Supply in Long Run

  26. New Housing Permits California, August 2006: 13,128 Units, Down 16.7% Y-T-D Household Growth: 220,000-250,000/yr SOURCE: Construction Industry Research Board

  27. Homeownership Rates • California Vs. U.S. SOURCE: U.S, Census Bureau

  28. Market Drivers Little Changed in 2006 • Rates higher but still at near-record low levels • Steady job & income growth • Equity wealth effect of repeat buyers • Long-run supply constraints • Higher (but less than avg) inventory levels • Q: So why the slowdown in 2006?

  29. Q: So why the slowdown in 2006? • Interest Rate Expectations • Change in Market Psychology • Affordability Constraints

  30. Interest Rate Expectations • 2002-2004 • Expectations of steady/falling rates • Acceleration/deceleration in reaction to expected rate changes. • 2005-2006 • Fed raised rates with expectations of further rate hikes. • Shrinking spread between short and long rates • Uncertainty about future direction of rates

  31. Federal Funds Rate vs. 10-Year T-Bond SOURCE: Federal Home Loan Mortgage Corporation – 30-yr FRM Federal Reserve Board – 10-Year T-Bond

  32. Change in Market Psychology • 2002-2005 • Both buyers & sellers knew it was a boom market • Brisk movement in market • 2006 • Buyers expecting prices to tumble because of higher inventories • Sellers still want $$ their neighbor received+ • More market friction, longer time on market

  33. Affordability • 2004-2005 • Increase in use of alternative loan products extended the duration of market upswing • Increased pool of potential buyers as well • 2006 • Buyer purchasing power seemingly stretched to limit • Rates still near historic lows, but rate increases have eroded affordability (monthly payment up 20%+ year-to-year)

  34. First-Time Buyer Housing Affordability Index,US vs CA % OF HOUSEHOLDS THAT CAN AFFORD ENTRY LEVEL HOME SOURCE: California Association of REALTORS®

  35. Bay Area & Surrounding Counties

  36. Nonfarm Employment • Bay Area Region SOURCE: California Economic Development Dept.

  37. Sales of Existing Detached Homes and Pacific West Consumer Confidence • Bay Area, September 2006: 3,293 Units, Down 19.6% Y-T-D, Down 23.8% Y-T-Y UNITS INDEX SOURCE: California Association of REALTORS®; The Conference Board

  38. Median Price of Existing Detached Homes • Bay Area, September 2006: $725,870, Up 2.2% Y-T-Y SOURCE: California Association of REALTORS®

  39. Sales of Existing Detached Homes • Bay Area Counties SOURCE: California Association of REALTORS®

  40. Median Price of Existing Detached Homes • Bay Area Counties SOURCE: California Association of REALTORS®

  41. First-time Buyer Housing Affordability • 2nd Quarter 2006 SOURCE: California Association of REALTORS®

  42. Central Valley Region

  43. Nonfarm Employment • Central Valley Region SOURCE: California Economic Development Dept.

  44. Sales of Existing Detached Homes and Pacific West Consumer Confidence • Central Valley, September 2006 Sales: 3,189 Units, Down 32.6% Y-T-D, Down 39.7% Y-T-Y UNITS INDEX SOURCE: California Association of REALTORS®; The Conference Board

  45. Sales of Existing Detached Homes • Central Valley Region SOURCE: California Association of REALTORS®

  46. Median Price of Existing Detached Homes • Central Valley, September 2006: $348,960, Down 3.4% Y-T-Y SOURCE: California Association of REALTORS®

  47. Median Price of Existing Detached Homes • Central Valley Regions SOURCE: California Association of REALTORS®

  48. First-time Buyer Housing Affordability • 2nd Quarter 2006 SOURCE: California Association of REALTORS®

  49. Southern California Region

  50. Nonfarm Employment SOURCE: California Economic Development Dept.

More Related