southern california economic and housing market forecasts october 2009
TRANSCRIPT
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SOUTHERN CALIFORNIA ECONOMIC AND HOUSING
MARKET FORECASTSOCTOBER 2009
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SOUTHERN CALIFORNIA’S REAL ESTATE CYCLE…
YEARS 2005-2009
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DISTRESSED HOUSING TRENDS AND FORECASTS
ANNUAL DISTRESSED HOUSING LEVELSSOUTHERN CALIFORNIA
OCTOBER 2009
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
est
20
10
prj
20
11
prj
20
12
prj
20
13
prj
20
14
prj
Notices of Default Foreclosures Foreclosure Sales
5-Year Forecast
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DISTRESSED HOUSING “SHADOW INVENTORY”
ANNUAL ESTIMATE OF DISTRESSED HOUSING INVENTORYSOUTHERN CALIFORNIA
OCTOBER 2009
64 80
27,858
84,250
63,103
49,713
38,330
30,048
19,698
11,418
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009est
2010prj
2011prj
2012prj
2013prj
2014prj
5-Year Forecast
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12-MONTH CHANGE IN TOTAL HOUSING SUPPLYSOUTHERN CALIFORNIA
OCTOBER 2009
101
,017
60,
940
49,
696
42,
040
45,
394
43,
709
45,
640
54,
744
63,
665
68,
182
63,
554
64,
536
68,
993
80,
474
89,
195
93,
040
72,
528
49,
555
30,
129
17,
639
10,
927
12,
343
17,
992
30,
234
0
20,000
40,000
60,000
80,000
100,000
120,000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009est
2010prj
2011prj
2012prj
2013prj
2014prj
5-Year Forecast
HOUSING CONSTRUCTION
Record Low Construction
Activity
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NEW HOUSING SUPPLY WITH ‘SHADOW’ INVENTORY
NEW HOUSING SUPPLY + DISTRESSED INVENTORYSOUTHERN CALIFORNIA
OCTOBER 2009
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009est
2010prj
2011prj
2012prj
2013prj
2014prj
New Home Construction Shadow Inventory
5-Year Forecast
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WHAT DRIVES THE NEXT ECONOMIC CYCLE?
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STIMULUS SPENDING
STATE RELIEF, $91 B
SAFETY NET, $102 B
TAX CUTS FOR INDIVIDUALS, $168 B
TAX CUTS FOR BUSINESSES, $17 B
INFRASTRUCTURE, $322 B
California gets $24B in State
Relief
California gets a Large Share
of Infrastructure
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MEDICAL/PHARMACEUTICAL/BIO-TECH
UNITED STATES
5-Year Change
Source: Real Estate Economics; Claritas; Dataquick; Census Bureau; Bureau of Labor.
FORECAST POPULATION CHANGES FROM 2009 TO 2014
-2,000,000
-1,000,000
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
Age
< 5
Age
5-14
Age
15-24
Age
25-34
Age
35-44
Age
45-54
Age
55-64
Age
65-74
Age
75-84
Age
85+
5-Y
ear
Po
pu
lati
on
Ch
an
ge
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RENEWABLE ENERGY• PHOTOVOLTAIC
ROOFING• ‘OFF-THE-GRID’
BATTERY-RUN HOUSING
• PARABOLIC VOLTAIC ‘FARMS’
• SOLAR / ELECTRICAL VEHICLES
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ENERGY TECHNOLOGY• Lawrence Livermore Lab
began project in 2001 ($2B spent thus far)
• World’s most powerful lasers focus on bb-sized hydrogen wafer.
• Ignites ‘mini sun’ that generates 500+ trillion watts of peak power
• Clean energy• 1st fusion power plant
slated for 2030
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EMPLOYMENTSOUTHERN CALIFORNIA
Total Non-Farm
7,21
7,65
8
7,03
8,20
0
6,83
4,26
7
6,73
0,90
0
6,76
8,60
0
6,89
3,93
3
7,02
0,36
7
7,23
7,30
0
7,48
2,65
0
7,70
3,55
8
7,91
8,16
7
8,01
5,39
2
8,00
7,50
8
8,03
5,45
0
8,15
9,83
3
8,31
0,35
0
8,47
8,40
8
8,51
4,22
5
8,36
5,09
2
8,02
1,08
3
7,95
1,65
0
8,00
3,25
0
8,09
1,01
7
8,21
6,71
7
8,39
2,36
7
6,000,000
6,500,000
7,000,000
7,500,000
8,000,000
8,500,000
9,000,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
est
2010
prj
2011
prj
2012
prj
2013
prj
2014
prj
5-Year Forecast
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12-MONTH JOB CHANGESOUTHERN CALIFORNIATotal Non-Farm 12-Month Change
0
-179
,458
-203
,933
-103
,367
37,7
00
125,
333
126,
433
216,
933
245,
350
220,
908
214,
608
97,2
25
-7,8
83
27,9
42
124,
383
150,
517
168,
058
35,8
17
-149
,133
-344
,008
-69,
433
51,6
00
87,7
67
125,
700
175,
650
-400,000
-300,000
-200,000
-100,000
0
100,000
200,000
300,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
est
2010
prj
2011
prj
2012
prj
2013
prj
2014
prj
5-Year Forecast
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UNEMPLOYMENTSOUTHERN CALIFORNIA
Civilian Unemployment
5.4%
7.5%
9.1%
9.3%
8.4%
7.4%
7.1%
6.0%
5.5%
4.8%
4.8%
5.1%
6.1%
6.2%
5.7%
4.9%
4.4%
4.9%
7.0%
12.1
%
12.4
%
10.9
%
9.2%
7.8%
6.7%
0%
2%
4%
6%
8%
10%
12%
14%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
est
2010
prj
2011
prj
2012
prj
2013
prj
2014
prj
5-Year Forecast
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HOUSING PERMIT ACTIVITY
ANNUAL RESIDENTIAL PERMIT ACTIVITYSOUTHERN CALIFORNIA
OCTOBER 2009
0
20,000
40,000
60,000
80,000
100,000
120,000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009est
2010prj
2011prj
2012prj
2013prj
2014prj
Single Family Multi-Family
5-Year Forecast
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HOUSING CONSTRUCTION PATTERNS
12-MONTH CHANGE IN TOTAL HOUSING SUPPLYSOUTHERN CALIFORNIA
OCTOBER 2009
10
1,0
17
60
,94
0
49
,69
6
42
,04
0
45
,39
4
43
,70
9
45
,64
0
54
,74
4
63
,66
5
68
,18
2
63
,55
4
64
,53
6
68
,99
3
80
,47
4
89
,19
5
93
,04
0
72
,52
8
49
,55
5
30
,12
9
17
,63
9
10
,92
7
12
,34
3
17
,99
2
30
,23
4
0
20,000
40,000
60,000
80,000
100,000
120,000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009est
2010prj
2011prj
2012prj
2013prj
2014prj
5-Year Forecast
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NEW HOUSING SUPPLY WITH ‘SHADOW’ INVENTORY
NEW HOUSING SUPPLY + DISTRESSED INVENTORYSOUTHERN CALIFORNIA
OCTOBER 2009
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009est
2010prj
2011prj
2012prj
2013prj
2014prj
New Home Construction Shadow Inventory
5-Year Forecast
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30-YEAR FIXED MORTGAGE INTEREST RATES
30-YEAR FIXED RATE MORTGAGESNATIONAL AVERAGES
OCTOBER 2009
10
.1%
9.2
%
8.4
%
7.3
%
8.4
%
8.0
%
7.8
%
7.6
%
6.9
%
7.4
%
8.1
%
7.0
%
6.6
%
5.8
%
5.8
%
5.9
%
6.4
%
6.3
%
6.0
%
5.1
%
5.2
%
5.5
%
5.9
%
6.4
%
7.2
%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009est
2010prj
2011prj
2012prj
2013prj
2014prj
5-Year Forecast
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POPULATION GROWTH
SOUTHERN CALIFORNIA
5-Year Change
Source: Real Estate Economics; Claritas; Dataquick; Census Bureau; Bureau of Labor.
FORECAST POPULATION CHANGES FROM 2009 TO 2014
-100,000
0
100,000
200,000
300,000
400,000
500,000
Age
< 5
Age
5-14
Age
15-24
Age
25-34
Age
35-44
Age
45-54
Age
55-64
Age
65-74
Age
75-84
Age
85+
5-Y
ear
Po
pu
lati
on
Ch
an
ge
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HOUSEHOLD INCOME GROWTH
SOUTHERN CALIFORNIA
5-Year Change
Source: Real Estate Economics; Claritas; Dataquick; Census Bureau; Bureau of Labor.
FORECAST HOUSEHOLD INCOME CHANGES FROM 2009 TO 2014
-150,000
-100,000
-50,000
50,000
100,000
150,000
200,000
250,000
Less than $50k $50k - $100k $100k - $150k $150k - $200k $200k - $250k $250k +Houshold Income Range
5 Y
r. C
han
ge
in N
o.
of
Ho
use
ho
lds
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HOUSING MARKET SUMMARY
SOUTHERN CALIFORNIA
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Southern California HousingAverage Price and Price/Sq.Ft.
$5
77
,88
2
$3
62
,40
6
$3
41
,02
1
$328.36
$215.81$199.27
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
Aug of '07 Aug of '08 Aug of '09
$0
$50
$100
$150
$200
$250
$300
$350
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Southern California HousingHousing Transactions By Price Range
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
< $200k $200k-$400k $400k-$600k $600k-$800k $800k-$1.0m $1.0m+
Two Years Ago One Year Ago Current Period
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Southern California HousingHousing Transaction Volume By Type
1557
14334
1209213141
12723032
14119
6662
4733
9918
9123
1984
0
2000
4000
6000
8000
10000
12000
14000
16000
Aug of '07 Aug of '08 Aug of '09
Resale New Foreclosure Fore. Sale
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HOUSING MARKET FIVE-YEAR FORECASTS
SOUTHERN CALIFORNIA
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HOUSING DEMAND AND SUPPLY
SOUTHERN CALIFORNIA
* Over/Under supply measures based on current jobs-to-housing relationship relative to long-term relationship between jobs and housing.
Source: Bureau of Labor Statistics; Census Bureau; National Assoc. of Realtors; Real Estate Economicswww.realestateeconomics.com
HOUSING DEMAND AND SUPPLY PATTERNS
5,500,000
6,000,000
6,500,000
7,000,000
7,500,000
8,000,000
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10 prj
Jan-11 prj
Jan-12 prj
Jan-13 prj
Jan-14 prjU
nit
s D
em
an
d/S
up
plie
d
Supply of Housing Demand for Housing*
5-Year Forecast
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HOUSING OVER/UNDER SUPPLY
SOUTHERN CALIFORNIA
* Over/Under supply measures based on current jobs-to-housing relationship relative to long-term relationship between jobs and housing. Source: Bureau of Labor Statistics; Census Bureau; National Assoc. of Realtors; Real Estate Economicswww.realestateeconomics.com
OV
ER
BU
ILT
HOUSING (OVER)/UNDER SUPPLY PATTERNS
U
ND
ER
BU
ILT
(500,000)
(400,000)
(300,000)
(200,000)
(100,000)
-
100,000
200,000
300,000
400,000
500,000
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10 prj
Jan-11 prj
Jan-12 prj
Jan-13 prj
Jan-14 prj
5-Year Forecast
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HOUSING VALUATIONSOUTHERN CALIFORNIA
* Over/Under valuation based on value of housing (inclusive of mortgage rates) relative to long-term relationship between housing value & household incomes.
Source: Bureau of Labor Statistics; Census Bureau; National Assoc. of Realtors; Real Estate Economicswww.realestateeconomics.com
HOUSING VALUATION PATTERNS
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
$550,000
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10 prj
Jan-11 prj
Jan-12 prj
Jan-13 prj
Jan-14 prj
Med
ian
Ho
usi
ng
Val
ue
Historical/Forecast Median Home Price Supportable Median Home Price*
5-Year Forecast
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HOUSING OVER/UNDER VALUATION
SOUTHERN CALIFORNIA
* Over/Under valuation based on value of housing (inclusive of mortgage rates) relative to long-term relationship between housing value & household incomes. Source: Bureau of Labor Statistics; Census Bureau; National Assoc. of Realtors; Real Estate Economicswww.realestateeconomics.com
U
ND
ER
VA
LU
ED
OV
ER
VA
LU
ED
HOUSING (OVER)/UNDER VALUATION PATTERNS
($200,000)
($150,000)
($100,000)
($50,000)
$0
$50,000
$100,000
$150,000
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10 prj
Jan-11 prj
Jan-12 prj
Jan-13 prj
Jan-14 prj
5-Year Forecast
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MEDIAN HOME PRICESMEDIAN HOME PRICES
SOUTHERN CALIFORNIAOCTOBER 2009
$1
85
,20
8
$1
90
,00
8
$1
87
,17
9
$1
80
,26
9
$1
75
,20
8
$1
65
,32
0
$1
63
,96
1
$1
71
,82
6
$1
85
,76
5
$1
94
,04
2
$2
13
,00
0
$2
30
,11
4
$2
67
,86
5
$3
18
,95
8
$3
89
,45
1
$4
61
,42
4
$4
93
,50
3
$4
86
,99
8
$3
41
,69
0
$2
86
,85
3
$2
91
,82
2
$2
99
,34
2
$3
11
,62
5
$3
32
,27
5
$3
58
,91
7
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
$550,000
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
est
20
10
prj
20
11
prj
20
12
prj
20
13
prj
20
14
prj
5-Year Forecast
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MEDIAN HOME PRICESCHANGES IN MEDIAN HOME PRICES
SOUTHERN CALIFORNIAOCTOBER 2009
0 2.6
%
-1.5
%
-3.7
%
-2.8
%
-5.6
%
-0.8
%
4.8
%
8.1
%
4.5
%
9.8
%
8.0
%
16
.4%
19
.1%
22
.1%
18
.5%
7.0
%
-1.3
%
-29
.8%
-16
.0%
1.7
%
2.6
%
4.1
%
6.6
%
8.0
%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
est
20
10
prj
20
11
prj
20
12
prj
20
13
prj
20
14
prj
5-Year Forecast
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HISTORICAL AND FORECAST MEDIAN NEW HOME PRICE CHANGES CALIFORNIA
13.8%
18.7%18.3%
8.2%
3.8%2.3%
4.9%
11.5%
6.3%
18.4%16.6%
3.6%
-0.5%
5.2%7.3%
8.7%11.0%
8.7%
16.0%
6.5%
0.3%1.5%
5.0%6.3%
7.8%9.8%
13.0%
17.3%
7.8%
-1.0%-3.3%
-1.5%0.0%1.0%
2.3%
17.5%21.3%20.5%
-1.8%-1.7%-0.1% -1.2%
-4.5% -3.7%
1.0%
-1.0%
-3.0%
-34.0%
-40.00%
-30.00%
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
19
78
19
79
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
e
20
10
p2
01
1p
20
12
p
20
13
p
20
14
p2
01
5p
20
16
p
20
17
p
20
18
p2
01
9p
20
20
p
20
21
p
20
22
p
20
23
p2
02
4p
20
25
p
California Long-Term Forecast Housing Price Appreciation
Ideal Land Acquisition = Yr. 2009-10Ideal Market Entry = Yr. 2011-12
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SUMMARY AND CONCLUSIONS
• Southern California’s economy is in turmoil, with unprecedented job losses, but job losses are easing.
• Housing Construction is at an all-time low.• Housing Affordability is an all-time high.• Distressed Housing Inventory is burning off at a rapid
rate.• Significant levels (but not a flood) of distressed land
inventory will soon be released.• Banks will soon begin to work with Asset Management
Teams.• Economic growth resumes the latter half of Year 2010.• Marginal price appreciation begins in Year 2010, and
builds toward another cycle of double-digit appreciation.
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REE Member Services• Monthly National O/R Report• Webinar Sponsorship Opportunities• Full nationwide real estate consulting services• Support for Financial Entities in determining:
– Asset Valuation,– Asset optimization,– ‘Workout/Build out’ strategies,– Liquidation/Distribution strategies
Principal - Mark Robbins Boud [email protected](949) 502-5151 x101Director of Sales and Marketing – Judy [email protected](949) 502-5151 x114Customer Service - Sandy [email protected](949) 502-5151 x108
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Mark Robbins Boud [email protected] REAL ESTATE ECONOMICS 8961 Research Drive Ste 200 Irvine, CA 92618 P: (949) 502-5151 F: (949) 502-5155