Presentation Transcript

1. The housing Dilemma: Sustaining THE California Housing Market Mid-Year Luncheon May 1, 2014 Joel Singer, Chief Executive Officer
2. Overview Where Are We The Long View Components of Housing Demand What Has to Happen
3. Sales Retreating Since Mid-2013 California, Mar 2014 Sales: 367,000 Units, -13.2% YTD, -12.3% YTY SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are seasonally adjusted and annualized
4. Median Price Gains Moderating California, March 2014: $435,470, Up 14.9% YTY SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
5. Inventory Has Improved but Remains Tight California, March 2014: 4.0 Months 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®
6. Household Formation Gap is Significant SOURCE: California Dept. of Finance; compiled by C.A.R.
7. # of Households Lost Since the Great Recession SOURCE: California Dept. of Finance; compiled by C.A.R.
8. Today’s Market Clearly well on the road to recovering Volume – A bit down, still reliant on investment sales Prices up sharply, but increases slowing in most markets Inventory remains tight Pent-up/unrealized demand not yet translating into sales Affordability challenges emerging once again…
9. The Long View It wasn’t always like this… Oh, maybe it was…
10. California Sales & Median Price: 1970-2013 UNITS/MEDIAN PRICE $ -49% -61% -34% California Sales of Existing Homes and Median Price: 1970-2013 SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
11. California Median Prices 1980 - 2013 Avg. Annual Price Gain: +16.4% (2002 – 2006) Avg. Annual Price Gain: +4.9% (1980 – 2001) SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
12. Mortgage Rates Heading Higher SERIES: 30Yr FRM, 1Yr ARM SOURCE: Federal Home Loan Mortgage Corporation
13. Housing Affordability Hit by Mortgage Rate Hikes and Price Gains California vs. U.S. – 1984-2013 % OF HOUSEHOLDS THAT CAN BUY, ANNUAL RATE Annual Quarterly SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
14. Median CA House PaymentWell Below Peak PITI/Month Peak: $3,668/mo (2007 Q2) Latest: $2,233/mo (2013 Q4) SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
15. … Minimum Qualifying Income Below Peak Min. Income Peak: $146,701/yr (2007 Q2) Latest: $89,320/yr (2013 Q4) SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
16. House Payment (Inflation Adjusted) Is at Late 1970’s Level PITI/Month (Adjusted for Inflation) Peak: $928/mo (2006) Latest: $458/mo (2013) SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
17. … And Minimum Qualifying Income (Inflation Adjusted) Is the Same as 35 Years ago Min. Income (Adjusted for Inflation) Peak: $37,122 (2006) Latest: $18,337 (2013) SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
18. Share of First-Time Buyers is the Lowest Since 2006 Long Run Average = 38% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
19. Student Debt: Drags On Home Sales
20. Share of FHA was the lowest in 6 Years; 24% of first-time buyers used FHA loans Q. Please indicate the type of mortgage. SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
21. Homeownership Rates Dropping California Vs. U.S. SERIES: Homeownership Rates SOURCE: U.S. Census Bureau
22. Median Monthly Mortgage Payment - CA What Will Happen When Mortgage Rates Increase? Q4-2013 Median Price $431,510 20% Downpayment MONTHLY MORTGAGE INTEREST RATE SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
23. Minimum Qualifying Income - CA What Will Happen When Mortgage Rates Increase? Q4-2013 Median Price $431,510 20% Downpayment MONTHLY MORTGAGE INTEREST RATE SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
24. California’s Housing Dilemma Even with everything (or at least most things) going right, our homeownership market is in trouble… The rental market, even with the conversion of 500,000 SFH’s, is still exhibiting inadequate supply
25. What about future housing demand?
26. Population and Households Will Continue to Grow California 1970-2020 SOURCE: Moody’s Analytics
27. Immigrant Share of Growth in Home Owners 2010-2020 Source: Dowell Myers and John Pitkin, “Immigrant Contributions to the Housing Market…” RIHA, Mortgage Bankers Association, 2013 Dowell Myers, USCPrice
28. Growth in Number of Immigrant or Native Born Owner (Millions) Source: Dowell Myers and John Pitkin, “Immigrant Contributions to the Housing Market…” RIHA, Mortgage Bankers Association, 2013
29. Future Demand The demographic demand for housing is not going to lessen… “Where Will Our Children Live ?” remains a relevant question Enduring negative impacts on the state’s economy Housing is the “Achilles heel” of the California Economy
30. Attitudes on Homeownership Remain HIGHLY POSITIVE
31. “Good Time to Buy” Took Small Dip in the Recent Market Downturn SOURCE: Thomson Reuters & University of Michigan, Survey of Consumers
32. Share of Consumers Planning to Buy a Home Up Sharply in Recent Years % Answering Yes, Jan 2000-Jan 2014, 3 Month Average, SA SERIES: Share of Consumers who Plan to Buy in 6 mos. SOURCE: The Conference Board
33. Majority of All Age Groups Think Owning Makes More Financial Sense than Renting SOURCE: Fannie Mae, National Housing Survey Q1 2012, Joint Center for Housing Studies of Harvard University
34. Homeownership Has Mattered Profoundly to Wealth Accumulation Even after Controlling for Income Note: All values are in 2010 dollars, for the middle income quintile Source: Joint Center tabulations of Board of Governors of the Federal Reserve System, Survey of Consumer Finances
35. “Make no mistake about it, the way that working-class people build wealth is through homeownership, not the stock market, not their 401(k) and not a pension.” John Taylor, President of the National Community Reinvestment Coalition,
36. Real Estate is Considered the Best Long Term Investment SOURCE: Gallup
37. Financial Constraints Weigh Heavily on Perceptions, Keeping Some Out of Market SOURCE: Hanley Wood Housing 360 Survey (2011), Joint Center for Housing Studies of Harvard University
38. Reasons for Leaving California
39. International Buyers are Getting a Bigger Slice of the Market than Before Q. Was the buyer an international buyer – a person who was a citizen of another country who wished to purchase residential real estate in the U.S.? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
40. Investment Homes : 19% Market Share 19% Long Run Average: 11 % SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
41. How to make it more affordable for home buyers?
42. One Word: Supply CA Housing Needs = Minimally 165,000 Units Annually Regulatory Problem Impact Fees Public Attitudes
43. A Healthy Price Appreciation Requires the Right Balance between Supply and Demand 2013: 80,319 Units, Up 37.2% from 2012 Household Growth: 220,000-250,000/yr SERIES: Residential Permits SOURCE: Moody’s Analytics
44. Mortgage Finance Permanent Source of Sufficient Affordable Funding GSE’s FHA Rental Housing
45. People would prefer the following over going through the home mortgage process again: Maybe a new mortgage process is part of creating the sustainable housing market … SOURCE: Guaranteed Rate Mortgage Survey of 1,000 adults 25 and older; USA Today
46. “We shape our dwellings, and afterwards our dwellings shape us.” ~Winston Churchill 1944
47. “Almost any man worthy of his salt would fight to defend his home, but no one ever heard of man going to war for his boarding house.” ~ Mark Twain
48. Thank You! www.car.org/marketdatajoels@car.org