Transcript Document

2006 Real Estate Market Forecast
Leslie Appleton-Young
Vice President and Chief Economist
Overview
•
•
•
•
Economic Conditions
California Housing Market
California Commercial Market
Regional Real Estate Markets
– Southern California
– Bay Area
– Central Valley
• 2006 Forecast
Economic Conditions
Gross Domestic Product
2004: 4.2% 2005 3.4% 2006 3.6%
ANNUAL PERCENT CHANGE, CHAIN-TYPE (2000) $
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
2006f
2005f
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
-3%
1990
-2%
Hurricane Katrina
• Will dampen growth in the short-term but
does not pose a more persistent threat to
the economy
• GDP will lose .5% in 2005 Q3,1% in 2005
Q4
• Higher energy prices will cost consumers
$50 Billion
• $25B in insurance payments and $??? B
in Government Aid sent to region
• Budget deficit will increase $10 B this
year; $10-15B next year; more in 2007+
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
12%
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
Jan-87
Jan-86
Jan-85
Jan-84
Jan-83
Jan-82
Jan-81
Jan-80
Consumer Price Index
Inflation August 2005: 3.6% Y-T-Y; 2.2% Core
PERCENT CHANGE FROM A YEAR AGO
16%
14%
All Items
Core
10%
8%
6%
4%
2%
0%
Crude Oil Prices
Dollars per Barrel of West Texas Intermediate, Adjusted by CPI (1982-84=100, SA)
80
Crude Oil
70
Crude Oil Adjusted by CPI
60
50
40
30
20
10
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
Jan-87
Jan-86
Jan-85
Jan-84
Jan-83
Jan-82
0
-1
-3
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Employment Growth, California vs. U.S.
YEAR TO YEAR % CHANGE
5
4
3
2
1
0
California
US
-2
Nonfarm Employment By Region
(Thousands)
Southern California
Bay Area
Central Valley
Central Coast
North Central
CALFORNIA
Nonfarm
Nonfarm
Employment Employment
Percent
July-05
July-04 Change Change
8,217.9
8,112.5
105.4
1.3%
3,154.4
3,127.7
26.7
0.9%
1,855.3
1,825.5
29.7
1.6%
493.0
486.4
6.6
1.4%
136.7
133.9
2.8
2.1%
14,783.4
14,593.7
189.7
1.3%
SOURCE: CA Employment Development Division
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
Consumer Confidence Index
August 2005: 103.2
INDEX, 100=1985
150
140
130
120
110
100
90
80
70
60
50
40
-4
1Q-2005
1Q-2004
1Q-2003
1Q-2002
1Q-2001
1Q-2000
1Q-1999
1Q-1998
1Q-1997
1Q-1996
1Q-1995
1Q-1994
1Q-1993
1Q-1992
1Q-1991
1Q-1990
Personal Consumption
2005 Q2: +3.0%
QUARTERLY PERCENT CHANGE
7
6
5
4
3
2
1
0
-1
-2
-3
US Sales and Median Price
ANNUAL RATE
7,500,000
$220,000
Existing Home Sales
Median Home Price
7,000,000
$210,000
$200,000
6,500,000
$190,000
6,000,000
$180,000
5,500,000
$170,000
$160,000
5,000,000
$150,000
4,500,000
$140,000
$130,000
4,000,000
$120,000
$110,000
3,500,000
$100,000
3,000,000
$90,000
2006f
2005p
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
$80,000
1989
2,500,000
Mortgage Origination
Refinance vs. Purchase
ORIGINATION (BIL $)
30-YR FIXED RATE MORTGAGE
900
12.0%
Refinance Originations (Bil $)
Purchase Originations (Bil $)
Fixed Rate Mortgage
800
10.0%
700
600
8.0%
500
6.0%
400
300
4.0%
200
2.0%
100
SOURCE: Mortgage Bankers Association
Source: Mortgage Bankers Association of America
Q1/05
Q2/04
Q3/03
Q4/02
Q1/02
Q2/01
Q3/00
Q4/99
Q1/99
Q2/98
Q3/97
Q4/96
Q1/96
Q2/95
Q3/94
Q4/93
Q1/93
Q2/92
Q3/91
Q4/90
0.0%
Q1/90
0
Mortgage Origination
Refinance Share vs. Purchase Share
REFINANCE/PURCHASE SHARE
100%
30- YR FIXED RATE MORTGAGE
Refinance Share (%)
Fixed Rate Mortgage
90%
12.0%
Purchase Share (%)
10.0%
80%
70%
8.0%
60%
50%
6.0%
40%
4.0%
30%
20%
2.0%
10%
SOURCE: Mortgage Bankers Association
Source: Mortgage Bankers Association of America
Q1/05
Q2/04
Q3/03
Q4/02
Q1/02
Q2/01
Q3/00
Q4/99
Q1/99
Q2/98
Q3/97
Q4/96
Q1/96
Q2/95
Q3/94
Q4/93
Q1/93
Q2/92
Q3/91
Q4/90
0.0%
Q1/90
0%
Home Prices, Mortgage Rates and
Consumer Spending
• Over $200 B per year in spending power has been added
from the growth of borrowing against rising home prices.
• Home equity loans increase from $552 Billion in 2001 to $881
Billion in 2004
• Home equity cash out refis grew from $92 Billion 1996-1999
to $400 Billion 2002-2004
• This borrowing has fueled consumer spending and it will slow
as housing price gains moderate.
ARM
8%
Federal Funds Target
Jul-05
9%
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
Oct-02
Jul-02
Apr-02
Jan-02
Oct-01
Jul-01
Apr-01
Jan-01
Oct-00
Jul-00
Apr-00
Jan-00
Fed Funds and Mortgage Rates
2000-2005
10%
FRM
7%
6%
5%
4%
3%
2%
1%
SOURCE: Federal Home Loan Mortgage Corp.
0%
Treasury Yield Curve
5.5
4.94
5.0
4.5
4.0
3.5
3.51
3.78
3.76
4.03 3.86
4.45
4.24
4.11
4.13
4.42
4.15
3.92
3.47
3.37
3.0
2.5
2.47
2.0
1.5
1.87
13-Sep-04
12-Aug-05
13-Sep-05
1.64
1.0
`
0.5
30 year
10 year
5 year
2 year
6 month
3 month
0.0
Why are Rates so Low?
Greenspan: It’s a “Conundrum”
• Deflationary Structural Forces
• Global Competition: Wal-Mart Effect
• Increased consumer Awareness:
Internet Effect
• Productivity gains/Greater efficiency
• Global Labor force – off-shoring
• Foreign Central Banks and Pension
funds holding more $’s
ARMs as a Percent of All Mortgages
Why isn’t this lower?
70
60
50
40
30
20
10
Source: Federal Housing Finance Board
Source: Federal Housing Finance Board
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
0
New Loan Products and Risk
• Types of instruments
– Zero down-payment
– Interest-only
– Stated income
– Option-ARM’s
• Concerns
– Ability to absorb rate adjustments
– Slower equity growth ahead
National Economy
• Economic growth in 2006 a moderate 3.6%
• The “Goldilocks Economy”?
• Accompanied by …
– Modest job growth – solid but not outstanding
– Inflation in check – Fed Priority
– Continued strength in Business Investment
– Consumer Spending flat
– Growing Fiscal Stimulus: Katrina
– Strong Housing Market slightly off 2005 peak
California Real Estate Market
California’s Housing Cycles and Membership
1970-2006
THOUSANDS
Home Sales
Membership
700,000
250,000
600,000
200,000
500,000
400,000
150,000
300,000
100,000
200,000
50,000
100,000
0
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006f
0
Sales of Existing Detached Homes and Pacific West Consumer Confidence
California, July 2005 Sales: 647,913 Units, Up 3.3% Y-T-D, Up 1.3% Y-T-Y
UNITS
Sales
700,000
INDEX
Consumer Confidence
160
SOURCE: California Association of REALTORS®;
The Conference Board
140
600,000
120
500,000
100
400,000
80
300,000
60
200,000
40
100,000
20
Jul-05
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
Oct-02
Jul-02
Apr-02
Jan-02
Oct-01
Jul-01
Apr-01
Jan-01
Oct-00
Jul-00
Apr-00
0
Jan-00
0
$0
Jan-90
Jul-90
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Median Price of Existing Detached Homes
California, July 2005: $540,900, Up 17.1% Y-T-Y
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
SOURCE: California Association of REALTORS®
California’s Million-Dollar Home Sales
2,718
4,271
3,773
3,362
2,890
2,298
2,522
2,017
2,651
3,762
5,366
7,553
11,364
9,501
13,871
19,080
NUMBER OF HOMES
Source: DataQuick Information Systems
35000
30000
25000
20000
15000
10000
5000
33,107
0
YEAR
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Unsold Inventory Index
California - July 2005 : 3.2 months of supply
MONTHS
Unsold Inventory Index
Long Run Average 6.3 Months
20
18
16
14
12
10
8
6
4
2
Sep-02
Jan-99
May-95
Jan-88
Sep-91
SOURCE: California Association of REALTORS®
0
Sales Index vs. Listings Index
Sales Index (1989=100)
Listings Index (Jun 1989=100)
1989 = 100
220
200
LR Average Listings =
1.5 times sales
180
160
140
120
100
80
60
40
20
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
0
Why are Home Prices Rising?
Econ 101
• Strong Demand
– Low Mortgage Rates
– Demographics: Baby Boomers
– Flight from alternative investment
choices
– Speculation?
• Restricted Supply
– Constraints on new construction
– Low inventory of homes for sale
Is There a Housing Bubble?
Yes Virginia, there is a
bubble – a bubble in the
number of articles about
the housing bubble.
BUBBLE? NO!
SOFT LANDING? YES
Jan-87
Jul-87
Jan-88
Jul-88
Jan-89
Jul-89
Jan-90
Jul-90
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
What is a Bubble?
NASDAQ 1987-2005
MONTHLY AVERAGE
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
Median Price, Annual Percentage Change
California vs. U.S.
California
US
25%
20%
15%
10%
5%
-10%
YEAR
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
-5%
1972
0%
1970
ANNUAL PERCENTAGE CHANGE
30%
-5%
-10%
YEAR
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
ANNUAL PERCENTAGE CHANGE
California Median Price 1970-2005
Annual Percentage Change
30%
25%
20%
15%
10%
5%
0%
Annual Housing Market Survey
2005-2006: Market in Transition
Median Price Discount And
Weeks On Market
7%
Med. Price Discount
Med. Weeks on MLS
6%
16
14
12
5%
10
4%
8
3%
6
2%
2.1
1%
4
2
0
Q. What was the original list sales price of the property?
What was the final sales price of the property?
How many weeks did the property remain on the MLS?
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
0%
0
Median Net Cash To Sellers
$240,000
$220,643
$220,000
$200,000
$180,000
$160,000
$140,000
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
Q. What was the net cash gain or net loss to the seller as a result of this sale?
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
$0
Type of Residence
Single-Fam ily Detached
Condo/Tow nhom e
100%
90%
80%
72.2%
70%
60%
50%
40%
30%
19.8%
20%
10%
0%
1997 1998 1999 2000 2001 2002 2003 2004 2005
Q. What type of residence was purchased?
Note: Figures do not total 100% due to “other” types of homes sold.
Proportion of First-Time Homebuyers
(Single-Family Detached vs. Condo/Townhome)
Single-Fam ily Detached
Condo/Tow nhom e
100%
90%
80%
70%
60%
50.0%
50%
40%
25.9%
30%
20%
10%
0%
1997 1998 1999 2000 2001 2002 2003 2004 2005
Q. Was the buyer a first-time buyer?
Proportion of First-Time Homebuyers
California
60%
50%
40%
30.5%
30%
20%
10%
0%
81
83
85
Q. Was the buyer a first-time buyer?
87
89
91
93
95
97
99
01
03
05
Median Downpayment
First-Time Homebuyers Vs. Repeat Homebuyer
First-Time Buyers
Repeat Buyers
$119,000
$120,000
$100,000
$80,000
$60,000
$40,000
$25,000
$20,000
$0
1997 1998 1999 2000 2001 2002 2003 2004 2005
Q. What was the amount of downpayment?
Median Downpayment
Single-Family Detached Vs. Condo/Townhomes
Single-Family Detached
Condo/Townhome
$96,800
$100,000
$80,000
$60,000
$47,750
$40,000
$20,000
$0
1997
1998
1999
Q. What was the amount of downpayment?
2000
2001
2002
2003
2004
2005
Types Of New First Mortgages
FRM
ARM
1992
1994
100%
Other
80%
60%
40%
2004
2002
2000
1998
1996
0%
1990
20%
Proportion of Transactions
With Second Mortgages
60%
50%
38.1%
40%
30%
20%
10%
0%
81
83
85
87
89
91
93
95
97
Q. In addition to the first mortgage or assumption, was there a second
mortgage?
99
01
03
05
California’s Housing Crisis
Jan-88
Jul-88
Jan-89
Jul-89
Jan-90
Jul-90
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Housing Affordability Index
California Vs. U.S.
% OF HOUSEHOLDS THAT CAN BUY
70%
US-CA
CA
US
60%
50%
40%
30%
20%
10%
SOURCE: California Association of REALTORS®
0%
California vs. U.S. Median Prices
1970-2004
$500,000
$450,000
California
US
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
SOURCE: California Association of REALTORS®
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
$0
California vs. U.S. Household Income
1980 - 2004
CURRENT DOLLARS
$60,000
California
US
$50,000
$40,000
$30,000
$20,000
$10,000
SOURCE: U.S. Census Bureau, CA Dept of Finance
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
$0
2004
2003
CA
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
Homeownership Rates
California (59.7%) vs. U.S. (69.0%)
70%
65%
60%
55%
US
50%
Sources of Population Growth
California 1981-2004
THOUSANDS
1000
Net Migration
Natural Increase
800
600
400
200
-200
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
2000
2001
2002
2003
2004
0
SOURCE: CA Dept. of Finance
New Housing Permits: CA
Single Family
Multi-Family
Housing Needs
350,000
350,000
SOURCES: CAR; Construction Industry Research Board; CSHP
2005p
2003
2001
1999
1997
1995
1993
1991
0
1989
50,000
1987
50,000
1985
100,000
1983
100,000
1981
150,000
1979
150,000
1977
200,000
1975
200,000
1973
250,000
1971
250,000
1969
300,000
1967
300,000
0
California’s Commercial
Market
Commercial Outlook
Apartments
– Favorable demographics in Southern Cal
– Los Angeles & Inland Empire two of strongest US
markets
– Gradually increasing stability in Bay Area and
Sacramento
Commercial Outlook
Office
– Improving vacancy rates with economic expansion
and creation of jobs
– Ventura, Orange, Inland Empire, & S.D. among
strongest US markets
– Gradual absorption of capacity in Bay Area
Commercial Outlook
Industrial
– Better in Southern California than Bay Area
– Powerhouse in Inland Empire
Commercial Outlook
Retail
– Good fundamentals across markets of the state
– San Francisco, San Diego, San Jose, Ventura,
Oakland, and Sacramento in US Top 10 for lowest
vacancy rates.
Regional Market:
Southern California
Nonfarm Employment
Southern California
(Thousands)
Nonfarm
Nonfarm
Employment Employment
Percent
Jul 2005
Jul 2004 Change Change
Los Angeles
4,001.7
3,961.0
40.7
1.0%
Orange County
1,488.9
1,464.0
24.9
1.7%
Riverside/SB
1,163.6
1,144.5
19.1
1.7%
San Diego
1,277.3
1,258.4
18.9
1.5%
286.4
284.6
1.8
0.6%
8,217.9
8,112.5
105.4
1.3%
Ventura
Total
SOURCE: California Economic Development Dept.
Sales of Existing Detached Homes
Southern California July 2005 Sales: 13,214 Units, Down 2.0% Y-T-D, -3.6% Y-T-Y
UNITS
18,000
16,000
160
SOURCE: California Association of REALTORS®;
The Conference Board
140
14,000
120
12,000
100
10,000
80
8,000
60
6,000
40
4,000
20
2,000
0
Jan-98
Apr-98
Jul-98
Oct-98
Jan-99
Apr-99
Jul-99
Oct-99
Jan-00
Apr-00
Jul-00
Oct-00
Jan-01
Apr-01
Jul-01
Oct-01
Jan-02
Apr-02
Jul-02
Oct-02
Jan-03
Apr-03
Jul-03
Oct-03
Jan-04
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
Jul-05
0
Annual Percent Change in Sales
Southern California – Existing Homes
PERCENT CHANGE IN SALES
30%
20.2%
20%
15.1%
12.8%
10.4%
10%
5.7%
0.5%
1.6% 0.8%
0%
-4.2% -2.0%
-10%
-10.8%
-20%
2005p
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-30%
Median Home Price
Southern California, 1990-2005
ANNUAL MEDIAN SALES PRICE
$550,000
$500,000
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
2005p
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
$100,000
Annual Percent Change in Home Price
Southern California, 1990-2005
PERCENT CHANGE IN PRICE
30%
20%
10%
-10%
2005p
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
0%
Median Home Price
Southern California Regions
County
Jul-05
$ 298,946
Los Angeles
$ 543,888
Orange
$ 706,824
Palm Springs
$ 371,394
Riverside/SB
$ 384,906
San Diego
$ 616,053
Sta. Barbara-So. Coast
$ 1,325,000
Sta. Barbara-North Cnty. $
462,686
Ventura
$ 694,689
High Desert
SOURCE: California Association of REALTORS®
Jun-05
Jul-04
$
290,506
$
518,276
$
702,400
$
393,366
$
373,858
$
614,125
$ 1,250,000
$
463,380
$
685,759
$ 234,523
$ 451,547
$ 648,588
$ 340,251
$ 317,815
$ 582,492
$ 1,049,000
$ 389,609
$ 626,506
M-t-M
2.9%
4.9%
0.6%
-5.6%
3.0%
0.3%
6.0%
-0.1%
1.3%
Y-t-Y
27.5%
20.4%
9.0%
9.2%
21.1%
5.8%
26.3%
18.8%
10.9%
Supply Indicators
Southern California
July
2005
June
2005
July
2004
26.6 Days
25.8 Days
21.4 Days
Unsold Inventory Index
3.6 Mos.
3.0 Mos.
3.4 Mos.
Median Sales Price-toMedian List Price Ratio
89.3%
89.4%
91.0%
Median Time on the Market
SOURCE: California Association of REALTORS®
Housing Affordability
July 2005
United States
California
High Desert
Riverside-San Bernardino
Los Angeles
Ventura
Santa Barbara
Palm Springs
Orange County
San Diego
0
SOURCE: California Association of REALTORS®
5
10
15
20
25
30
35
40
45
50
New Housing Permits: Southern California
Need:110,000 units
Single Family
Multi-Family
180,000
SOURCES: CAR; Construction Industry Research Board; CCSCE
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
2009
2007
2005p
2003
2001
99
97
95
93
91
89
87
85
83
81
79
77
75
73
71
69
67
0
Nonresidential Permits, Valuations
7 Southern California Counties (1989-2004)
$$ MILLIONS
Industrial Bldgs
Retail Bldgs
Office Bldgs
Other(Gap to Non Res Total)
10000
9000
SOURCE:U.S. Real Estate Research Council of Northern California
8000
7000
6000
5000
4000
3000
2000
1000
0
1989
1991
1993
1995
1997
1999
2001
2003
Regional Market:
Bay Area
Nonfarm Employment
Bay Area Region
Nonfarm Employment (Thousands)
Jul 2005
Jul 2004
Change % Change
San Francisco
945.2
937.0
8.2
0.9%
1,035.1
1,019.2
15.9
1.6%
San Jose
863.6
862.9
0.7
0.1%
Napa/Solano
127.0
125.9
1.1
0.9%
Sonoma
183.5
182.7
0.8
0.4%
3,154.4
3,127.7
26.7
0.9%
Oakland
Total
SOURCE: California Economic Development Dept.
-12%
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Nonfarm Employment
Santa Clara County, July 2005: Up 0.1% Y-T-Y
Y-T-Y PERCENT CHANGE
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
SOURCE: CA Employment Development Division
-14%
Nonfarm Employment
Santa Clara vs.California
SANTA CLARA
Santa Clara
CA
CA
1,200
16,000
14,000
1,000
12,000
800
10,000
600
8,000
6,000
400
4,000
200
2,000
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jan-01
Jul-00
Jan-00
Jul-99
Jan-99
Jul-98
SOURCE: CA
Employment
Development
Division
0
Jan-98
0
Sales of Existing Detached Homes
Bay Area, July 2005: 4,549 Units, Down 10.6% Y-T-D, Down 16.3% Y-T-Y
UNITS
7,000
6,000
SOURCE: California Association of REALTORS®;
The Conference Board
5,000
4,000
3,000
2,000
1,000
Jan-98
Apr-98
Jul-98
Oct-98
Jan-99
Apr-99
Jul-99
Oct-99
Jan-00
Apr-00
Jul-00
Oct-00
Jan-01
Apr-01
Jul-01
Oct-01
Jan-02
Apr-02
Jul-02
Oct-02
Jan-03
Apr-03
Jul-03
Oct-03
Jan-04
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
Jul-05
0
Annual Percent Change in Sales
Bay Area – Existing Homes
PERCENT CHANGE IN SALES
30%
25.1%
20%
17.7%
15.8%
11.2%
10%
7.1%
6.3%
6.3%
0%
-10%
-8.1%
-10.6%
-11.9%
-20%
-21.3%
2005 YTD
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-30%
Median Home Price in Bay Area Counties
County
Alameda
Contra Costa
Marin
San Francisco
San Mateo
Santa Clara
Santa Cruz
Solano
Sonoma
Jul-05
Jun-05
$ 672,981
$ 690,814
$ 1,006,410
$ 854,316
$ 880,000
$ 750,000
$ 759,000
$ 473,999
$ 644,292
$ 676,673
$ 697,719
$ 1,040,816
$ 860,641
$ 900,000
$ 760,000
$ 793,000
$ 474,752
$ 645,944
SOURCE: California Association of REALTORS®
Jul-04
$
$
$
$
$
$
$
$
$
595,273
656,474
879,120
720,121
770,000
640,000
635,000
386,770
513,889
M-t-M
-0.5%
-1.0%
-3.3%
-0.7%
-2.2%
-1.3%
-4.3%
-0.2%
-0.3%
Y-t-Y
13.1%
5.2%
14.5%
18.6%
14.3%
17.2%
19.5%
22.6%
25.4%
Median Home Price
Bay Area, 1990-2005
ANNUAL MEDIAN SALES PRICE
$750,000
$700,000
$650,000
$600,000
$550,000
$500,000
$450,000
$400,000
$350,000
$300,000
$250,000
2005 YTD
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
$200,000
Median Price of Existing Detached Homes
Bay Area, July 2005: $724,890, Up 11.3% Y-T-Y
$800,000
SOURCE: California Association of REALTORS®
$750,000
$700,000
$650,000
$600,000
$550,000
$500,000
$450,000
$400,000
$350,000
Jul-05
Apr-05
Jan-05
Oct-04
Jul-04
Apr-04
Jan-04
Oct-03
Jul-03
Apr-03
Jan-03
Oct-02
Jul-02
Apr-02
Jan-02
Oct-01
Jul-01
Apr-01
Jan-01
Oct-00
Jul-00
Apr-00
Jan-00
$300,000
Annual Percent Change in Home Price
Bay Area, 1990-2005
PERCENT CHANGE IN PRICE
30%
SOURCE: California Association of REALTORS®
20%
10%
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
2005 YTD
-10%
1992
1991
0%
Supply Indicators
Bay Area
July
2005
June
2005
July
2004
39.4 Days
38.0 Days
41.3 Days
Unsold Inventory Index
1.7 Mos.
1.5 Mos.
1.1 Mos.
Median Sales Price-toMedian List Price Ratio
92.4%
96.0%
98.8%
Median Time on the
Market
SOURCE: California Association of REALTORS®
Housing Affordability
July 2005
United States
California
Santa Clara
San Mateo
Alameda
Bay Area
Marin
Sonoma
Monterey/Santa Cruz
San Francisco
SOURCE:
Contra Costa
California
Association of
0
REALTORS®
5
10
15
20
25
30
35
40
45
50
New Housing Permits: SF Bay Area
Need 34,600 units
80,000
Single Family
Multi-Family
70,000
60,000
50,000
40,000
30,000
20,000
10,000
2009
2007
2005
2003
99
97
95
93
91
89
87
85
2001
SOURCES: CAR; Construction Industry Research Board; CCSCE
83
81
79
77
75
73
71
69
67
0
Non-Residential Permits Valuations
9 Bay-Area Counties (1989-2004)
MILLIONS OF DOLLARS
SOURCE:U.S. Real Estate Research Council of Northern California
7500
7000
6500
6000
5500
Industrial Bldgs
Retail Bldgs
Office Bldgs
Other(Gap to Non Res Total)
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Regional Market:
Central Valley
Nonfarm Employment
Central Valley Region
Nonfarm Employment (Thousands)
Jul 2005
Jul 2004
867.4
856.5
10.9
1.3%
55.9
55.5
0.4
0.7%
Bakersfield
214.1
209.5
4.6
2.2%
Fresno
292.2
286.1
6.1
2.1%
Modesto
161.1
160.2
0.9
0.6%
Stockton
206.4
202.2
4.2
2.1%
Tulare
17.9
17.4
0.5
2.6%
Sutter-Yuba
40.3
38.1
2.2
5.8%
1,855.3
1,825.5
29.8
1.6%
Sacramento
Merced
Total
SOURCE: California Economic Development Dept.
Change % Change
Sales of Existing Detached Homes
Central Valley, July 2005 Sales: 4,765 Units, Down 2.9% Y-T-D, Down 0.3% Y-T-Y
UNITS
6,000
SOURCE: California Association of REALTORS®;
The Conference Board
5,000
4,000
3,000
2,000
1,000
Jan-98
Apr-98
Jul-98
Oct-98
Jan-99
Apr-99
Jul-99
Oct-99
Jan-00
Apr-00
Jul-00
Oct-00
Jan-01
Apr-01
Jul-01
Oct-01
Jan-02
Apr-02
Jul-02
Oct-02
Jan-03
Apr-03
Jul-03
Oct-03
Jan-04
Apr-04
Jul-04
Oct-04
Jan-05
Apr-05
Jul-05
0
Annual Percent Change in Sales
Central Valley – Existing Homes
PERCENT CHANGE IN SALES
30.00%
27.1%
26.1%
20.9%
20.00%
16.4%
11.2%
11.7%
10.3%
10.00%
4.0%
0.00%
-0.8%
-2.9%
-10.00%
-12.3%
2005 YTD
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
-20.00%
Median Home Price
Central Valley, 1990-2005
ANNUAL MEDIAN SALES PRICE
$400,000
$350,000
$279,526
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
2005 YTD
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
$0
Annual Percent Change in Home Price
Central Valley, 1990-2005
PERCENT CHANGE IN PRICE
40%
SOURCE: California Association of REALTORS®
30%
24.00%
20%
10%
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
2005 Q2
-10%
1992
1991
0%
Median Home Price in Central Valley Regions
County
Bakersfield
Fresno
Lodi
Manteca
Merced
Modesto
Oakdale
Sacramento
Stockton
Tracy
Turlock
Jul-05
$
$
$
$
$
$
$
$
$
$
$
295,025
362,903
435,577
325,842
345,975
364,285
387,812
361,080
525,240
360,317
SOURCE: California Association of REALTORS®
Jun-05
$
$
$
$
$
$
$
$
$
$
$
298,635
358,823
408,088
326,811
336,730
345,454
381,993
344,852
527,273
351,724
Jul-04
$
$
$
$
$
$
$
$
$
$
$
191,076
241,145
291,378
327,059
228,977
255,027
279,999
322,289
261,342
430,808
266,875
M-t-M
n.a.
-1.2%
1.1%
6.7%
-0.3%
2.7%
5.5%
1.5%
4.7%
-0.4%
2.4%
Y-t-Y
n.a.
22.3%
24.5%
33.2%
42.3%
35.7%
30.1%
20.3%
38.2%
21.9%
35.0%
Housing Affordability
July 2005
United States
California
Stanislaus
Fresno
Central Valley
Sacramento
Merced
San Joaquin
SOURCE:
California
Association of
0
REALTORS®
5
10
15
20
25
30
35
40
45
50
Nonresidential Permits Valuations
Sacramento County (1989-2004)
SOURCE:U.S. Real Estate Research Council of Northern California
MILLIONS OF DOLLARS
800
Industrial Bldgs
Retail Bldgs
Office Bldgs
Other(Gap to Non Res Total)
700
600
500
400
300
200
100
0
1989
1991
1993
1995
1997
1999
2001
2003
2006 Forecast
2006 U.S. Economic Forecast
US GDP
Nonfarm Jobs %
2001
2002
2003
2004 2005e 2006f
0.8%
1.6%
2.7%
4.2%
3.4%
3.6%
0.03% -1.1% -0.3%
1.1%
1.6%
1.4%
Unemployment
4.7%
5.8%
6.0%
5.5%
5.2%
5.1%
CPI
2.8%
1.6%
2.3%
2.7%
3.5%
2.5%
30-Year
7.0%
6.5%
5.8%
5.8%
5.8%
6.4%
1-Year ARM
5.8%
4.6%
3.8%
3.9%
4.4%
5.1%
SOURCE: California Association of REALTORS®
2006 U.S. Housing Market Forecast
2001
2002
2003
2004
2005e
2006f
US Resales
(millions)
5.30
5.57
6.18
6.78
7.02
6.80
% Change
3.1%
5.1%
11.0%
9.7%
3.4%
-3.1%
Median Price
$147.8
($_thousands)
$158.2
$169.5
$185.2
$205.1
$215.5
7.0%
7.1%
9.3%
10.7%
5.1%
% Change
6.3%
SOURCE: National Association of REALTORS®
2006 California Economic Forecast
Nonfarm Job
Growth
Unemployment
Rate
Population
Growth
Real Personal
Income, %
Change
2001
2002
2003
2004
2005e
2006f
0.8%
-1.0%
-0.5%
1.0%
1.7%
1.5%
5.4%
6.7%
6.7%
6.1%
5.4%
5.3%
1.7%
1.5%
1.5%
1.5%
1.5%
1.5%
0.4%
0.2%
2.0%
3.2%
3.9%
3.6%
SOURCE: California Association of REALTORS®
2006 California Housing Market Forecast
2001
2002
2003
SFH
Resales
503,990
572,550
601,770
% Change
-5.9%
13.6%
5.1%
Median
Price
% Change
Housing
Afford.
30-Yr
FRM
1-Yr
ARM
2004
2005e
624,740 643,480
3.8%
3.0%
2006f
630,610
-2.0%
$262,350 $316,130 $372,720 $450,990 $523,150 $575,500
8.7%
20.5%
17.9%
21.0%
16.0%
10.0%
34%
29%
27%
20%
17%
15%
7.0%
6.5%
5.8%
5.8%
5.8%
6.4%
5.8%
4.6%
3.8%
3.9%
4.4%
5.1%
SOURCE: California Association of REALTORS®
Sales and Median Home Price
California, 1990-2006
SALES ACTIVITIES
ANNUAL MEDIAN SALES PRICE
700,000
650,000
$700,000
Existing Home Sales
Median Home Price
$600,000
600,000
550,000
$500,000
500,000
450,000
$400,000
400,000
$300,000
350,000
300,000
$200,000
250,000
200,000
$100,000
150,000
100,000
SOURCE: California Association of REALTORS®
2006f
2005p
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
$0
Forecast Summary
• Market in Transition
• Bay Area and So Cal Coastal areas median
price up 6-12%
• Central Valley and Inland Empire growing most
rapidly; median price up 10-18%
• No Bubble – Soft landing
2006 Forecast Risks
• Interest Rate Risk: Higher rates from:
– Unexpectedly high inflation
– Budget deficit run up in rates
– Sell off of U.S. debt by foreign investors and
central banks
• Consumer Spending Risk: Weaker than expected,
hindering expansion and job growth
– Refi boom slows; less equity to tap
2006 Market Opportunities
• Baby boomers – retiring and diversifying
• Singles – larger share of homebuyers
• Condos/Infill in metro areas – affordability and
quality of life issues
• Continued strength in entry- and mid-range
• Multi-cultural and immigrant buyers
• Internet marketing – reaching Gen X
• Life-long Learning – explore new productivity
tools – Relay, Wireless, Tablet, Research etc.
Thank You