housing market outlook silicon valley association of realtors® april 1, 2008 robert a. kleinhenz,...

Housing Market OutlookSilicon Valley Association of REALTORS®

April 1, 2008

Robert A. Kleinhenz, Ph.D.Deputy Chief EconomistCalifornia Association of REALTORS®

Economic Outlook

Gross Domestic Product

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

8%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008f

----

Q1

Q2

Q3

Q4

Year 2007: +2.5%; 2007 Q4: +0.6%

ANNUAL PERCENT CHANGE, CHAIN-TYPE (2000) $

ANNUAL QTRLY

Unemployment RateCalifornia vs. United States

-4%

-2%

0%

2%

4%

6%

8%

10%

Jan

-90

Ju

l-90

Jan

-91

Ju

l-91

Jan

-92

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Jan

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Jan

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Jan

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Jan

-08

US-CA CA US

SOURCE: CA Employment Development Division

Employment Growth, California vs. U.S.

YEAR TO YEAR % CHANGE

-3

-2

-1

0

1

2

3

4

5

Jan

-91

Ju

l-91

Jan

-92

Ju

l-92

Jan

-93

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Jan

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Jan

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Jan

-00

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Jan

-01

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Jan

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Ju

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Jan

-06

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Jan

-07

Ju

l-07

Jan

-08

California US

Year-to-Year % Change in Jobs

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

To

tal N

on

-F

arm

Co

nstr

ucti

on

Tra

ns &

Uti

l

Fin

an

ce &

Insu

ran

ce

Real E

sta

teR

en

tal/L

easin

g

Pro

f S

ci &

Tech

Svcs

Mg

mt

of

En

terp

rises

Ed

uc S

vcs

Healt

h C

are

an

d S

ocia

lA

sst

2007 2008 2009

% Change

California 2007-2009

+340K jobs

SOURCE: CA EDD, LAEDC Forecast

Consumer Price Index

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Jan

-00

Ap

r-00

Ju

l-00

Oct-

00

Jan

-01

Ap

r-01

Ju

l-01

Oct-

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Jan

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Jan

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Jan

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Jan

-05

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Jan

-06

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l-06

Oct-

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Jan

-07

Ap

r-07

Ju

l-07

Oct-

07

Jan

-08

All Items

Core

February 2008: All Items 4.1% Y-T-Y; Core 2.3% Y-T-Y

PERCENT CHANGE FROM A YEAR AGO, 100=1982-1984

Historically Low Inflation In Past 20 Yrs

0%

2%

4%

6%

8%

10%

12%

14%

16%

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

CPI-All Items

CPI-Core

Year 2007 Inflation: 2.4%

PERCENT CHANGE FROM A YEAR AGO, 100=1982-84

U.S. Economic Forecast

2003 2004 2005 2006 2007 2008f

US GDP 2.5% 3.6% 3.1% 2.9% 2.2% 1.5%

Nonfarm Job Growth

-0.3% 1.1% 1.7% 1.8% 1.1% 0.5%

Unemployment 6.0% 5.5% 5.1% 4.6% 4.6% 5.2%

CPI 2.3% 2.7% 3.4% 3.2% 2.9% 3.1%

Real Disposable Income

2.4% 3.4% 1.2% 2.6% 3.0% 2.0%

SOURCE: California Association of REALTORS®

California Economic Forecast

2003 2004 2005 2006 2007 2008f

Nonfarm Job Growth

-0.5% 1.0% 1.8% 1.8% 0.7% 0.5%

Unemployment Rate

6.8% 6.2% 5.4% 4.9% 5.4% 6.2%

Population Growth

1.7% 1.5% 1.3% 1.3% 1.1% 1.1%

Real Disposable Income, % Change

2.1% 3.1% 1.6% 1.8% 3.0% 1.0%


Economy through 2008

• GDP Growth below par: ~1 to 2%• First half of year weak, stronger in last half• Weak but positive job growth for US, CA,

and its regions• Unemployment rate up slightly• Inflation a concern but in check• Uncertainty about economy, credit crunch,

and housing market

California HousingMarket Outlook

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Jan

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Ap

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Oct-

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Jan

-06

Ap

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Jan

-07

Ap

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Ju

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Oct-

07

Jan

-08

0

20

40

60

80

100

120

140

160

Sales Consumer Confidence INDEXUNITS

Sales of Existing Detached Homes & Pacific West Consumer Confidence

California, February 2008 Sales: Down 29.1% Y-T-D, Down 28.5% Y-T-Y

SOURCE: California Association of REALTORS®; The Conference Board

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000Jan

-00

Ju

l-00

Jan

-01

Ju

l-01

Jan

-02

Ju

l-02

Jan

-03

Ju

l-03

Jan

-04

Ju

l-04

Jan

-05

Ju

l-05

Jan

-06

Ju

l-06

Jan

-07

Ju

l-07

Jan

-08

Median Price of Existing Detached HomesCalifornia, February 2008: $409,240, Down 26.2% Y-T-Y


-32%

-27.7%-32.5%

-36.4%

-52.4%

-26.4%

-3.4%

-60%

-50%

-40%

-30%

-20%

-10%

0%

Below $500,000 $500,000-999,999 Over $1 Million

Aug-07 Sep-07

Lower Price Ranges Hit Hardest, but…Percentage Change in Sales YTY


…Credit Crunch slammed high end in September

Before Credit Crunch-Peak vs Current Price

RegionPeak

Month Peak PriceAug-07 Median

% Chg From Peak

Northern California Aug-05 $440,420 $370,390 -15.9%Sacramento Aug-05 $394,450 $332,510 -15.7%Central Valley Aug-05 $363,680 $309,740 -14.8%High Desert Apr-06 $334,860 $287,390 -14.2%Riverside San Bernardino Jan-07 $415,160 $377,130 -9.2%Northern Wine Country Jan-06 $645,080 $600,000 -7.0%Ventura Aug-06 $710,910 $669,870 -5.8%Orange County Apr-07 $747,260 $710,380 -4.9%San Diego May-06 $622,380 $595,070 -4.4%Palm Springs/Lower Desert Jun-05 $393,370 $377,920 -3.9%San Luis Obispo Jun-06 $620,540 $598,400 -3.6%San Francisco May-07 $853,910 $832,760 -2.5%Santa Clara Apr-07 $868,410 $860,000 -1.0%Monterey Region Aug-07 $798,210 $798,210 0.0%Los Angeles Aug-07 $605,300 $605,300 0.0%

Peak vs Current Price-February 2008

RegionPeak

Month Peak PriceFeb-08 Median

% Chg From Peak

Sacramento Aug-05 $394,450 $258,680 -34.4%High Desert Apr-06 $334,860 $220,380 -34.2%CALIFORNIA Apr-07 $597,640 $409,240 -31.5%Northern Wine Country Jan-06 $645,080 $449,000 -30.4%Riverside San Bernardino Jan-07 $415,160 $289,660 -30.2%San Diego May-06 $622,380 $450,710 -27.6%Ventura Aug-06 $710,910 $520,270 -26.8%San Luis Obispo Jun-06 $620,540 $471,740 -24.0%Los Angeles Aug-07 $605,300 $467,200 -22.8%Monterey Region Aug-07 $798,210 $619,790 -22.4%Northern California Aug-05 $440,420 $347,650 -21.1%Orange County Apr-07 $747,260 $596,520 -20.2%San Francisco May-07 $853,910 $706,880 -17.2%Palm Springs/Lower Desert Jun-05 $393,370 $334,910 -14.9%Central Valley*(Aug 2007) Aug-05 $363,680 $309,740 -14.8%Santa Clara Apr-07 $868,410 $780,000 -10.2%

Unsold Inventory IndexCalifornia, February 2008: 14.3 Months

0

2

4

6

8

10

12

14

16

18

20

Jan

-88

Ju

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Jan

-89

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Jan

-92

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Jan

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-08


MONTHS

Listings by Month, Selected YearsCalifornia (1982-2007 Average=100)

0

1020

30

4050

60

7080

90

100110

120

130140

150

160170

180

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2006 2007 2008


Record High: March 1983 200May 1992 176

Record Low: Feb 2004 26

2008

Credit Crunch ≠ Tighter Underwriting

Tighter Underwriting Standards • Subprime and other less-qualified borrowers initially.• Later spread to well-qualified borrowers.

Credit or Liquidity Crunch • Investors who normally provide funds to Lenders on

sidelines. Source for jumbo loans.• $$$ in safe havens (Treasuries) because of risk

elsewhere.• Fewer $$$ available, even for well-qualified borrowers

in recent months.

SOURCE: Federal Home Loan Mortgage Corporation

Mortgage Rates

6.7%

0%

1%

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3%

4%

5%

6%

7%

8%

9%

10%

Jan

-91

Jul-

91Ja

n-9

2Ju

l-92

Jan

-93

Jul-

93Ja

n-9

4Ju

l-94

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-95

Jul-

95Ja

n-9

6Ju

l-96

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-97

Jul-

97Ja

n-9

8Ju

l-98

Jan

-99

Jul-

99Ja

n-0

0Ju

l-00

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-01

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01Ja

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n-0

8

FRM

ARM

Federal Funds

SOURCE: Federal Home Loan Mortgage Corporation – 30-yr FRMFederal Reserve Board – 10-Year T-Bond

30-Year FRM vs. 10-Year T-Bond

0%

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FRM

10-YearT-Bond

RiskPrem

Average. Risk

Premium: 1.6%

5.4%

2.2%

0%

1%

2%

3%

4%

5%

6%

7%

Q1/7

4Q

1/7

5Q

1/7

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1/7

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1/7

9Q

1/8

0Q

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7

Delinquency Rate Foreclosure Rate

Mortgage Foreclosure & Delinquency RatesCalifornia

SOURCE: Mortgage Bankers Association

Delinquencies: Long Run Average: 3.9%

Foreclosure Rate: Long Run Average: 0.81%

Framing the Sub-Prime* Situation

Right $$$ House & Right Mortgage • Not in trouble - no fix necessary

Right $$$ House but Wrong Mortgage • Can refinance out of problem

Wrong $$$ House and Wrong Mortgage • Defaults, workouts, foreclosures, etc.

Troublesome

Categories

* Really should be “Non-Prime” Situation

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1 2

003

Q2 2

003

Q3 2

003

Q4 2

003

Q1 2

004

Q2 2

004

Q3 2

004

Q4 2

004

Q1 2

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006

Q2 2

006

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006

Q4 2

006

Q1 2

007

Q2 2

007

Q3 2

007

Q4 2

007

CA US

% OF HOUSEHOLDS THAT CAN BUY

First-time Buyer Housing Affordability IndexCalifornia Vs. U.S. 2003-2007


Local Outlook

Nonfarm EmploymentBay Area Region

SOURCE: California Economic Development Dept.

Jan 2008 Jan 2007 Change % Change

San Francisco 985.4 964.5 20.9 2.2%

Oakland 1,033.0 1,032.2 0.8 0.1%

San Jose 903.7 892.3 11.4 1.3%

Napa/Solano 124.4 124.5 -0.1 -0.1%

Sonoma 189.2 186.7 2.5 1.3%

Total 3,235.7 3,200.2 35.5 1.1%

Nonfarm Employment (Thousands)

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

Jan

-98

Ap

r-98

Jul-9

8O

ct-9

8Ja

n-9

9A

pr-

99Ju

l-99

Oct

-99

Jan

-00

Ap

r-00

Jul-0

0O

ct-0

0Ja

n-0

1A

pr-

01Ju

l-01

Oct

-01

Jan

-02

Ap

r-02

Jul-0

2O

ct-0

2Ja

n-0

3A

pr-

03Ju

l-03

Oct

-03

Jan

-04

Ap

r-04

Jul-0

4O

ct-0

4Ja

n-0

5A

pr-

05Ju

l-05

Oct

-05

Jan

-06

Ap

r-06

Jul-0

6O

ct-0

6Ja

n-0

7A

pr-

07Ju

l-07

Oct

-07

Jan

-08

0

20

40

60

80

100

120

140

160Sales Consumer Confidence

SOURCE: California Association of REALTORS®; The Conference Board

INDEXUNITS

Sales of Existing Detached Homes and Pacific West Consumer Confidence

Bay Area, February 2008: 1,532 Units, Down 36.4% Y-T-D, Down 32.5% Y-T-Y

2007 Sales Down 44% from Peak Year 2004

Alameda 325 276 537 17.8% -39.5% -42.7%Contra Costa 132 122 243 8.2% -45.7% -37.3%Marin 92 81 138 13.6% -33.3% -30.0%San Francisco 182 143 186 27.3% -2.2% -16.0%San Mateo 213 154 273 38.3% -22.0% -31.8%Santa Clara 433 349 694 24.1% -37.6% -40.1%Santa Cruz 73 69 133 5.8% -45.1% -42.3%Solano 155 137 199 13.1% -22.1% -30.3%Sonoma 177 160 251 10.6% -29.5% -33.1%

Y-t-DY-t-YCounty Feb-08 Jan-08 Feb-07 M-t-M

Sales of Existing Detached HomesBay Area Counties


$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000Jan

-00

Ap

r-00

Ju

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Oct-

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-01

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Jan

-08

Median Price of Existing Detached HomesBay Area, February 2008: $706,880, Down 5.0% Y-T-Y


Median Price of Existing Detached Homes

Alameda 574,292$ 596,774$ 657,271$ -3.8% -12.6%Contra Costa 693,877$ 666,666$ 811,747$ 4.1% -14.5%Marin 964,285$ 1,062,500$ 963,414$ -9.2% 0.1%San Francisco 769,737$ 816,964$ 843,220$ -5.8% -8.7%San Mateo 910,950$ 875,000$ 870,000$ 4.1% 4.7%Santa Clara 780,000$ 750,000$ 790,000$ 4.0% -1.3%Santa Cruz 685,000$ 606,000$ 720,000$ 13.0% -4.9%Solano 338,793$ 321,428$ 446,491$ 5.4% -24.1%Sonoma 447,435$ 510,870$ 589,285$ -12.4% -24.1%

Feb-07 M-t-M Y-t-YCounty Feb-08 Jan-08

Bay Area Counties



UNITS

Sales of Existing Detached HomesSanta Clara County Sales, 2007: -22.5% YTY, 2008: -40.1% YTD

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1989

1991

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2007

0

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400

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800

1,000

1,200

1,400

1,600

1,800

2,000

Jan

Feb

Mar

Ap

r

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Jun

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Au

g

Sep

t

Oct

No

v

Dec

20062004200520072008

ANNUAL MONTHLY

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000Jan

-89

Ju

l-89

Jan

-90

Ju

l-90

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-08


Median Price of Existing Detached HomesSanta Clara County, February 2008: $780,000, Down 1.3% Y-T-Y

Median Home Sales PriceSanta Clara County

Feb-08 Feb-07Yearly % Change

Campbell $655,000 $671,500 -2.5%Gilroy $510,000 $696,000 -26.7%Milpitas $650,000 $649,000 0.2%Mountain View $784,000 $758,000 3.4%San Jose $597,500 $659,000 -9.3%Santa Clara $620,000 $645,000 -3.9%Sunnyvale $741,750 $704,750 5.3%

SOURCE: C.A.R.; DataQuick Information Systems. The price statistics are derived from all types of home sales -- new and existing, condos and single-family.

Sales of Existing Detached Homes


San Mateo County Sales, 2007: -16.0% YTY, 2008: -31.8% YTD

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1991

1993

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1999

2001

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2007 0

100

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700

Jan

Feb

Mar

Apr

May

Jun Ju

l

Aug

Sept Oc

t

Nov

Dec

20062004200520072008

UNITS ANNUAL MONTHLY

Median Price of Existing Detached Homes

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000Jan

-91

Ju

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Jan

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San Mateo County, February 2008: $910,950, Up 4.7% Y-T-Y

Median Home Sales PriceSan Mateo County

Feb-08 Feb-07Yearly % Change

Daly City $554,000 $684,500 -19.1%Pacifica $590,000 $662,500 -10.9%Redwood City $875,000 $767,500 14.0%San Mateo $750,000 $772,500 -2.9%

SOURCE: C.A.R.; DataQuick Information Systems. The price statistics are derived from all types of home sales -- new and existing, condos and single-family.

Notices of Default – Bay AreaHouses and Condos

SOURCE: Data Quick Information Systems

County/Region 2007Q3 2007Q2 2006Q3 QTQ%Chg YTY%Chg

San Francisco 252 257 149 -1.90% 69.10%

Alameda 2,126 1,612 803 31.90% 164.80%

Contra Costa 3,216 2,316 1,012 38.90% 217.80%

Santa Clara 1,655 1,275 670 29.80% 147.00%

San Mateo 581 463 290 25.50% 100.30%

Marin 172 118 89 45.80% 93.30%

Solano 1,513 1,065 510 42.10% 196.70%

Sonoma 749 462 231 62.10% 224.20%

Napa 163 128 43 27.30% 279.10%

Bay Area 10,427 7,696 3,797 35.50% 174.60%

Median Household Income

SOURCE: American Community Survey (Census Bureau), Compiled by California Association of REALTORS®

$56,600

$77,900 $80,800

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California San Mateo County Santa Clara County

Santa Clara, San Mateo, and California

California Forecast

California Housing Market Forecast

2003 2004 2005 2006 2007 2008f

SFH Resales (thousands)

601.8 624.7 625.0 477.5 353.3 332.1

% Change 5.1% 3.8% 0.04% -23.6% -26.0% -6.0%

Median Price ($ thousands)

$372.7 $450.8 $524.0 $556.6 $558.1 $424.0

% Change 17.9% 20.9% 16.2% 6.2% 0.3% -24.0%

30-Yr FRM 5.8% 5.8% 5.9% 6.4% 6.3% 5.8%

1-Yr ARM 3.8% 3.9% 4.5% 5.5% 5.6% 5.0%


Sales More Volatile Than Prices

UNITS/MEDIAN PRICE $


0

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Sales of Existing Detached Homes Median Price

California Sales of Existing Homes and Median Price

-61% -25%

-47%

Summary

•Existing Home Sales: 2007: -26%, 2008: -6%

•Statewide Median Price: Continuing decrease (15-25%)

•Low end weak…Payment resets, Foreclosures

•High end weak…Credit/Liquidity Crunch

•Tighter Underwriting Standards…maybe too tight

•Affordability to remain low, THEREFORE…

•Stabilizing sales, no significant recovery in next 6-12 months

The Bottom Line for Households

•Homeowners are generally in a positive equity position if

bought before 2005, so don’t panic!

•Sell if you must, hold if you can.

•If you must sell, then price home to sell and not to sit.

•Buyers should not expect bargains in all markets. Must do

homework and consult with a REALTOR®

•Find a home that meets needs and fits budget…buy it!

•Opportunities for investors, but must do homework.

Thank You!

housing market outlook silicon valley association of realtors® april 1, 2008 robert a. kleinhenz,...

Documents

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