2020 Housing Market Forecast

2020 California
Housing Market
Forecast
September 26, 2019
Leslie Appleton-Young
Chief Economist + SVP
California Association of
REALTORS®
Where is the market data?
CALIFORNIA ASSOCIATION OF REALTORS®

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Housing
Matters
Podcast

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There is no such thing as a bad
market. Markets go up and down.
Plan for it and you will succeed.
Macro Economic Outlook
UNCERTAINTY
What is everyone worried about? Everything.
Trade War
Stock market
Recession
correction
Impeachment No deal
GSE Patch
Brexit
Global
Fed Misses economic
the Mark slowdown
Inconsistent
Policies

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8
Aren’t we due for a
recession in 2020?
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9
Joel: There will be a recession sometime
before 2035.
Dave/Spike: We don’t need any more

“receptions”.
Cardinal Rule of Forecasting: Never give a

number and a date in the same
sentence.
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10
Recent Headline – Can 100+ Economists be Wrong?
Experts Say Next Recession Will Begin in 2020
The most likely triggers for the next recession are trade
policy, a stock market correction or geopolitical crisis.
Housing demand will decrease, but a housing
slowdown is not expected to cause the recession.
Jul 25, 2019

Pulsenomics
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Aren’t we due for a recession in 2020?
• 10th year of economic growth

• Yield curved inverted in August
• Q: What will drive the downturn when it comes ?
a) Global economic slowdown
b) Trade War
c) Geo-political crisis
d) Stock market correction
• Answer: All of the above (& none are housing)
• Bonus Answer: No timetable for recession

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Business Leaders are concerned
about the current environment Trade War
Tax Reform
Govt.
Shutdown
SERIES: U.S. Business Confidence Index page

SOURCE: Organization for Economic Co-operation and Development (OECD)
13
Stock market major jitters
(7/15/19 – 8/15/19) (8/13/18 – 8/15/19)

28000 28000
27500 27000
27,349
26000
27000 Down 6.4%
25000
26500 26,378
24000
26000 Down 16.1%
23000
25500 25,718
22000
25,479
25000 21000
24500 20000
SERIES: Dow 30 page

SOURCE: Yahoo! Finance 14
JP Morgan Volfefe Index: Tweets & Market Volatility
SERIES: Volfefe Index, President’s Trump tweets page

SOURCE: JP Morgan, Bloomberg
15
Consumer Confidence dropped 9 points in September
September 2019 125.1

160
140
120
INDEX, 100=1985
100
80
60
40
20
0
Sep-05
May-10
May-06
May-08
May-12
May-14
May-16
May-18
Jan-05
Jan-07
Sep-07
Jan-09
Sep-09
Jan-11
Sep-11
Jan-13
Sep-13
Jan-15
Sep-15
Jan-17
Sep-17
Jan-19
SERIES: Consumer Confidence page
SOURCE: The Conference Board
16
The Conference Board:
September News Release
“While confidence could continue hovering

around current levels for months to come, at
some point this continued uncertainty will
begin to diminish consumers' confidence in the
expansion."

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C.A.R. Google Consumer Poll: September 2019
Good time to buy? 22% Good time to sell? 46%
Do you think it’s a good time to buy a Do you think it’s a good time to sell a
home in California? home in California?
N=300 N=300
57% 56%
51% 50% 53% 51% 49% 52%
46% 48% 48% 45% 46%
27% 25%
22% 21% 22% 25% 24% 22% 22% 26% 23% 23% 22%
Sep-18
Nov-18
Jan-19
Mar-19
Apr-19
Mar-19
May-19
Jun-19
Aug-19
Sep-19
Sep-18
Nov-18
Jan-19
Apr-19
Oct-18
Dec-18
Jul-19
Dec-18
May-19
Jun-19
Aug-19
Sep-19
Oct-18
Jul-19
Feb-19
Feb-19
SERIES: 2018/2019 Google Consumer Poll page
SOURCE: NATIONAL ASSOCIATION OF REALTORS®
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Properties falling out of escrow because
buyer was unsure
0% 20% 40% 60%
Buyer changed mind and decided not to buy 47%

Buyer did not qualify for a mortgage on terms
6%
acceptable to the buyer
Buyers could not secure a mortgage because % of Properties Fallen out of
6%
of his/her credit background Escrow
Buyers could not come up with the
downpayment
4% 20%
15%
Lender's delay in approving the short sale 1% 10%
Buyers could not secure a mortgage because
1%
the appraised value was too low 0%
Sellers decided not to sell 1% 2013 2014 2015 2016 2017 2018 2019
Q. Had the property fallen out of escrowOther

prior to this sale? 35%
SERIES: 2019 Housing Market Survey page
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
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STOP THE NOISE –
Let’s look at the data

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Fundamentals appear solid and
sustainable if not spectacular…
GDP 2.0%
2019-Q2
Unemployment 3.7%
August 2019
Consumption 4.7%
2019-Q2
Job Growth 1.4%
August 2019
Core CPI 2.4%
August 2019
SOURCE: Bureau of Labor Statistics & Bureau of Economic Analysis

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Growth slowed from 3.1% in Q1 to 2.0% in Q2
GDP: 2018: 2.9% 2019p: 2.4% 2020f: 1.7%
6%
5% ANNUALLY QUARTERLY
4% 2.0%
2.4%
Annual Percent Change,
3%
1.7%
Chain-type (2009) $
2%
1%
0%
-1%
-2%
-3%
-4%
SERIES: GDP page

SOURCE: US Dept. of Commerce, Bureau of Economic Analysis
22
Unemployment at lowest Merced
9.8%
rate in 50 years Bakersfield
Madera
Monterey
14
US California Stanislaus
12 Santa Cruz
10 Los Angeles 4.5%
8 Solano
6 Ventura
4 San Diego
Napa
2
Orange County
0
South Bay
Sep-76
Sep-78
Sep-80
Sep-82
Sep-84
Sep-86
Sep-88
Sep-90
Sep-92
Sep-94
Sep-96
Sep-98
Sep-00
Sep-02
Sep-04
Sep-06
Sep-08
Sep-10
Sep-12
Sep-14
Sep-16
Sep-18
San Francisco 2.2%
0% 5% 10% 15%

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Rates remain at historic lows – will move lower in 2020
January 2012 – September 2019
6
January 2012 MONTHLY
– April 2019 WEEKLY
5
3.62
4 3.73
3 3.36 3.49
2 FRM 2.25 2
ARM
1 Fed Funds Rate
SERIES: 30Yr FRM, 5Yr ARM, Fed Funds Rate (Target Rate) page
SOURCE: Freddie Mac, St. Louis Fed
24
U.S. economic outlook
2015 2016 2017 2018 2019p 2020f
US GDP 2.6% 1.6% 2.3% 2.9% 2.2% 1.6%
Nonfarm Job Growth 2.1% 1.8% 1.4% 1.6% 1.3% 0.8%
Unemployment 5.3% 4.9% 4.4% 3.9% 3.7% 3.9%
CPI 0.1% 1.4% 2.0% 2.4% 2.0% 2.0%
Real Disposable Income, %

3.4% 2.7% 2.1% 2.9% 2.8% 2.5%
Change

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SERIES: U.S. Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 25
California economic outlook
2015 2016 2017 2018 2019p 2020f
Nonfarm Job Growth 2.7% 2.3% 1.6% 2.0% 1.5% 1.0%
Unemployment 6.2% 5.5% 4.8% 4.2% 4.3% 4.5%
CA Population (Million) 39.0 39.2 39.5 39.7 39.9 40.1
Population Growth 0.9% 0.7% 0.7% 0.6% 0.5% 0.4%

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SERIES: U.S. Economic Outlook
California Housing Market
Doing Better: Sales dip slightly from July,
but remain above 400k
700,000 California, August 2019 Sales: 406,100 Units, -4.1% YTD, 1.6% YTY
600,000
500,000
400,000
300,000
200,000
100,000
-
May-06
May-08
May-10
May-12
May-14
May-16
May-18
Jan-05
Sep-05
Jan-07
Sep-07
Jan-09
Sep-09
Jan-11
Sep-11
Jan-13
Jan-15
Sep-15
Jan-17
Sep-17
Jan-19
Sep-13
SERIES: Sales of Existing Single Family Homes page
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First back-to-back yearly sales gain since April 2018
25% Year-over-Year % Chg 6 per. Mov. Avg. (Year-over-Year % Chg)

20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18

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Sales constrained by tight supply, particularly
at the low end
August 2019 (YTY% Chg.) Share by Price Segment
0% 10% 20% 30%
10% 6.6%
5% 2.9% 3.1% $0 - $299k 12.5%
1.5%
0% $300 - $399k 15.8%
-5% -2.3% $400 - $499k 14.0%
-10% -6.6%
$500 - $749k 25.6%
-15%
-15.0% $750 - $999k 12.2%
-20%
$1,000 - $1,999k 12.4%
$2,000k+ 3.5%
SERIES: Sales of Existing Detached Homes page

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Sales by Region
August 2019 YTY Sales Growth
August 2019 Home Sales by Region by Region (NSA)
0.0%
-1.0% -0.4%
Other Counties
-2.0%
Central 8% -1.9%
-3.0% -2.3%
Coast
-4.0%
4% -3.8%
Central -5.0%
Valley -6.0%
23% -7.0% -6.4%
S.F. Bay
Southern
Area
California
19%
46%

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California median price at all-time high for August
California, August 2019: $617,410, 1.5% MTM, 3.6% YTY

$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$-
May-14
Jan-05
Sep-05
Jan-07
Sep-07
Jan-09
Sep-09
Jan-11
Sep-11
Jan-13
Sep-13
Jan-15
Sep-15
Jan-17
Sep-17
Jan-19
May-06
May-08
May-10
May-12
May-16
May-18
SERIES: Median Price of Existing Single Family Homes page
32
Single-family homes had the largest
price gain in 10 months
50% Condo Single-Family Homes
40%
30%
20%
YTY% Chg. in Price
10%
0%
-10%
-20%
-30%
-40%
-50%
Sep-05
Sep-09
Sep-11
Sep-13
Sep-15
Jan-05
May-06
Jan-07
May-08
Jan-09
May-10
Jan-11
May-12
Jan-13
May-14
Jan-15
May-16
Jan-17
May-18
Jan-19
Sep-07
Sep-17
SERIES: Median Price of Existing Condo/Townhomes page
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Price/Square Foot slightly down
from last month and inched up from last year
$400 August 2019: $287, -1.0% MTM, 1.4% YTY

$350
PRICE PER SQ. FT.
$300
$250
$200
$150
$100
$50
$0
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
SERIES: Median Price Per Square Feet of Existing Single Family Homes page
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Top percentile saw decline in price growth - uncertainty
California Year-over-Year Price Growth by Quintile (August 2019)

7% 6.3%
6% 5.5%
5%
4%
2.9%
3%
2%
1% 0.3%
0.0%
0%
-1%
-2% -1.3%
-1.9% -1.6%
-3% -2.5%
0-20 20-40 40-60 60-80 80-100 80-85 86-90 91-95 96-100
Percentile
SERIES: Median Price of Existing Single Family Homes page

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Inventory index down due primarily
to drop in active listings
18.0
16.0 August 2018: 3.3 Months; August 2019: 3.2 Months
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
SERIES: Unsold Inventory Index of Existing Single Family Homes page

36
Supply improved only at the
upper end of the market
August 2019
Active Listing
20%
10.8%
10%
4.5%
0%
-3.8%
-10%
-8.9%
-14.3% -12.8%
-20% -17.5%
SERIES: Active Listings of Existing Single Family Homes page

37
Regional inventory mostly flat
9.0
8.0 Bay Area So CA Central Valley
7.0
6.0
5.0
4.0
3.3
3.0 2.8
2.0 2.5
1.0
0.0
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-18
Jan-19
Jul-09
Jul-10
Jul-11
Jul-12
Jul-13
Jul-14
Jul-15
Jul-16
Jul-17
Jul-18
Jul-19
SERIES: Unsold Inventory Index of Existing Single Family Homes page
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Active listings in August 2019 had the
largest drop since Dec 2017
Year-over-Year % Chg
40%
30%
20%
10%
0%
-10%
-8.9%
-20%
Jul-16
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
May-15
Jul-15
Nov-15
May-16
Nov-16
May-18
Jul-18
Nov-18
Jan-15
Sep-15
Jan-16
Sep-16
May-17
Jul-17
Nov-17
Jan-17
Sep-17
Jan-18
Sep-18
May-19
Jul-19
Jan-19
SERIES: Active Listing of Existing Single Family Homes page
39
Time on market up as market ends its
peak season
California, August 2019: 23.0 Days
80
70
60
DAYS ON MARKET
50
40
30
20
10
0
May-06
Jan-05
Sep-05
Jan-07
Sep-07
Jan-09
Sep-09
Jan-11
Sep-11
Jan-13
Sep-13
Jan-15
Sep-15
Jan-17
Sep-17
Jan-19
May-08
May-10
May-12
May-14
May-16
May-18
SERIES: Median Time of Market of Existing Single Family Homes page
40
Reduced-Price Listings Rising
Share of Listings with a Reduced Price: 41.0%; Median Reduction Amount: -4.3%
50% 0%
45% -1%
40% -2%
35% -3%
30% -4%
25% -5%
20% -6%
15% -7%
10% -8%
5% -9%
0% -10%
5/1/2013
1/1/2010
5/1/2010
9/1/2010
1/1/2011
5/1/2011
9/1/2011
1/1/2012
5/1/2012
9/1/2012
1/1/2013
9/1/2013
1/1/2014
5/1/2014
9/1/2014
1/1/2015
5/1/2015
9/1/2015
1/1/2016
5/1/2016
9/1/2016
1/1/2017
5/1/2017
9/1/2017
1/1/2018
5/1/2018
9/1/2018
1/1/2019
5/1/2019
Share Reduced Median Reduction
SERIES: Listing Price of Existing Single Family Homes page

41
One more look at the last 15 years: flat sales with a very
strong economy & low rates & pop growth
700,000 California, August 2019 Sales: 406,100 Units, -4.1% YTD, 1.6% YTY
600,000
500,000
400,000
300,000
200,000
100,000
-
May-06
May-08
May-10
May-12
May-14
May-16
May-18
Jan-05
Sep-05
Jan-07
Sep-07
Jan-09
Sep-09
Jan-11
Jan-13
Sep-13
Jan-15
Sep-15
Jan-17
Sep-17
Jan-19
Sep-11
42
How Did We Get Here?
More of everything, except…
California Population California REALTORS® California Home Sales California Permits

45,000,000 250,000 450,000 300,000
39,740,508 402,750
40,000,000 393,983
400,000 255,559
205,074
250,000
35,000,000 200,000 350,000
30,000,000 300,000 200,000

27,052,000
150,000
25,000,000 250,000
112,491
150,000
20,000,000 200,000
100,000 114,370
15,000,000 150,000 100,000
10,000,000 100,000
50,000
50,000
5,000,000 50,000
0 0 0 0
1986 2018 1986 2018 1986 2018 1988* 2018

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44
3.5
Million
This Photo by Unknown Author is licensed under CC BY-SA-NC

Number of new housing units off by all measures…
California Housing Permits
300,000
250,000
HCD Estimated
200,000 Need: 180,000
150,000
114,370
100,000
50,000
0
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Permits HCD Estimate page
46
LAO agrees

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47
So does the data…
California New Jobs vs. New Construction
2010-2018
1,424,208
845,833
379,967 386,467
183,111 134,437 111,792

28,670
SoCal Bay Area Central Valley Central Coast

New Jobs Permits
SERIES: Nonfarm Job Growth & New Housing Permits page

SOURCE: CA EDD, Construction Industry Research Board
48
And so do the cities, really…
(RHNA = Regional Housing Needs Assessment)
Current RHNA Allocations
25,000 SAN DIEGO, 21,977
20,000 LOS ANGELES, 20,427
15,000
10,000
SAN JOSE, 9,233 FRESNO, 7,859
RIVERSIDE, 7,173
5,000 KERN COUNTY, 4,888 SAN FRANCISCO,
6,234
CHULA VISTA, 3,209
0
0 50 100 150 200 250 300 350 400
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0%
20%
60%
80%
40%
100%
-80%
-60%
-40%
-20%
WESTMINSTER
RANCHO ST. MARGARITA
YOUNTVILLE
SAINT HELENA
LOMITA
WEST HOLLYWOOD
MONTE SERENO
SOLANO COUNTY
SHASTA LAKE
CARPINTERIA
MISSION VIEJO
HALF MOON BAY
IMPERIAL BEACH
NORWALK
PINOLE
ARCATA
CUDAHY
LAKEWOOD
BELMONT
Most cities are failing…
PASO ROBLES
PARADISE
SARATOGA
SANTA BARBARA COUNTY
NEVADA COUNTY
MILLBRAE
YUCCA VALLEY
HERCULES
SAN RAFAEL
BELLFLOWER
OAKLEY
Normalized RHNA Progress
RIVERBANK
CUPERTINO
WOODLAND
DALY CITY
RICHMOND
GLENDALE
STANISLAUS COUNTY
WILDOMAR
INDIO
FAIRFIELD
SAN MATEO
SANTA ROSA
MILPITAS
SAN MARCOS
ANAHEIM
FONTANA
SUNNYVALE
ROSEVILLE
CHULA VISTA
SAN JOSE
50
page
In fact, 91% are behind… Average:
• 28.6% Behind
Normalized RHNA Progress
Worst Performer:
On • 58.3% Behind
Track
9% (6-Way Tie, all SD)
Best Performer:
• 74.1% Ahead
Behind (Parlier in Fresno
91% County)

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51
How It Hurts
California Right Now
0
2
4
6
8
10
12
Q1-90
Q4-90
Q3-91
Q2-92
Q1-93
Q4-93
Q3-94
Q2-95
Q1-96
than incomes
Q4-96
Q3-97 Avg. 5.0
Q2-98
Q1-99
Q4-99
Q3-00
Q2-01
Q1-02
Q4-02
Q3-03
Q2-04
Q1-05
10.2
Q4-05
Prices have grown much faster
Q3-06
Q2-07
Q1-08
Q4-08
California Price/Income Ratio
4.1
Q3-09
Q2-10
Q1-11
Q4-11
Q3-12
Q2-13
Q1-14
Q4-14
Q3-15
Q2-16
Q1-17
Q4-17
Q3-18
Q2-19
7.5
54
page
Minimum Annual Income Required
During Affordability Peak vs. Current
Region 2012 Q1 2019 Q2 % CHG
CA SFH $56,320 $122,960 118.3%
CA
$44,440 $95,960 115.9%
Condo/Townhomes
Los Angeles
$53,780 $109,090 102.8%
Metropolitan Area
Inland Empire $35,170 $76,760 118.3%
S.F. Bay Area $90,370 $197,970 119.1%
US $32,000 $56,480 76.5%
SERIES: Housing Affordability Index of Existing Detached Homes page

55
Mortgage payment continued to drop;
rates lowest in 34 months
California Median Price vs. Mortgage Payment
20%
15%
YTY% Chg.
10%
5%
0%
-5%
-10% -7.35%
Jan-16
Mar-16
Mar-17
Mar-19
May-16
Jul-16
Sep-16
Nov-16
Jan-17
May-17
Nov-17
Jan-18
Mar-18
Jul-17
Sep-17
May-18
Nov-18
Jan-19
Jul-18
Sep-18
May-19
Jul-19
Price Growth Mortgage Pmt Growth
SERIES: Price Growth vs. Mortgage Payment Growth page

56
Buyers aren’t responding like they used to …
Purchase Mortgage Applications

70
60
50
Weekly % Change
40
30
20
10
0
-10
-20
-30
1/4/2019 2/1/2019 3/1/2019 3/29/2019 4/26/2019 5/24/2019 6/21/2019 7/19/2019

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57
Why rates aren’t
spurring even more sales
• Home prices at all time highs

• Big down payments
• Inventory is tight
• Market still competitive
• 1st time buyers have limited options
• Tax reform: FTBs and Trade-ups
• Rates aren’t everything
page
CALIFORNIA ASSOCIATION OF REALTORS® 58
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Puerto Rico
Nebraska
Wyoming
South Dakota
North Dakota
Kentucky
Arkansas
Maine
Iowa
West Virginia
Kansas
Montana
Utah
Oklahoma
Tennessee
Wisconsin
Alaska
Mississippi
Missouri
Rhode Island
Ohio
Alabama
Indiana
Idaho
Pennsylvania
North Carolina
Minnesota
Virginia
Cost Burdened
Delaware
California has no money left over
District of Columbia
Georgia
Washington
New Mexico
New Hampshire
Texas
Vermont
Michigan
South Carolina
Arizona
Nevada
Illinois
Massachusetts
Maryland
Colorado
Connecticut
Louisiana
Oregon
New Jersey
New York
Hawaii
California
43.2%
Florida
59
page
Housing affordability peaked at Q2-2012
California, 1984-2019
80%
Annual Quarterly
% OF HOUSEHOLDS THAT CAN
BUY A MEDIAN-PRICED HOME
70%
60% US, 55%
50%
40%
CA, 30%
30%
20%
10%
0%
SERIES: Housing Affordability Index of Traditional Buyers page

60
Many simply can’t afford to buy
2019-Q1: % able to purchase median-priced home
70%
63%
60% 57%
50%
40% 32%
30%
20% 10%
10%
0%
SERIES: Housing Affordability Index of Traditional Buyers page

61
How It Hurts
California Later
Homeownership is not rebounding
Homeownership Rate
75
CA U.S.
70
65
60 59.9
55
53.2
50

page
63
We’re in questionable company now
Q2-19 Homeownership Rate

80
70
60 53.2
50
40
30
20
10
0

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64
0%
10%
20%
30%
40%
50%
60%
70%
Hawthorne
80% 76.0%
Santa Monica
East Los Angeles
Glendale
Inglewood
San Francisco
Los Angeles
Bellflower
Alhambra
El Cajon
Florence-Graham
Oakland
Costa Mesa
Merced
Long Beach
Burbank
Arden-Arcade
Mountain View
Santa Barbara
El Monte
Pasadena
Santa Clara
South Gate
Chico
By 2025: CA majority Renter State
Lynwood
Berkeley
Anaheim
Alameda
Salinas
Santa Ana
Santa Cruz
2017 California Renter Rate by City
Davis
Madera
Sunnyvale
Irvine
Tustin
San Diego
Fresno
Lodi
SERIES: Homeownership Rates
SOURCE: U.S. Census Bureau
Sacramento
San Bernardino
Escondido
50.7%
65
page
Homeownership still aspirational
How important is homeownership to you?

n: 1663
29%
30%
27%
23%
Percent
20%
13%
10% 8%
0%

page
66
Population growth slowing
California Population Growth
12%
10%
8%
6%
4%
2%
0.4%
0%
1901
1906
1911
1916
1921
1931
1936
1941
1946
1951
1961
1966
1971
1976
1981
1986
1991
1996
2001
2006
2011
2016
1926
1956
page
67
NOT our “job creators”
Net Migration by Income

5,000 1,678 566
0
-5,000
-10,000
-15,000
-20,000
-25,000
-30,000
-35,000 -33,491 -34,887
-40,000 -37,853
$25K or Less $25-$50K $50-$100K $100-$200K $200K +

page
68
-5%
-3%
-2%
-1%
0%
1%
2%
3%
4%
-4%
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Hitting us economically
CA
Jan-14
May-14
Sep-14
Jan-15
May-15
US
CA vs. US Job Growth
Sep-15
Jan-16
May-16
Sep-16
Jan-17
May-17
Sep-17
Jan-18
May-18
Sep-18
Jan-19
May-19
69
page
Net Domestic Migration by Occupation
Losing the Computer & Mathematical 4,067
workers we Military Specific

Architecture & Engineering
3,900
3,604
need Business & Financial Operations 3,481
Healthcare Practitioners & Technical 1,503
Legal 1,259
Arts, Design, Entertainment, Sports, & Media 869
Life, Physical, & Social Science 639
Farming, Fishing, & Forestry -167
Community & Social Service -523
Healthcare Support -1,938
Unemployed -2,039
Protective Service -2,403
Educational Instruction & Library -2,474
Personal Care & Service -2,685
Installation, Maintenance, & Repair -3,510
Food Preparation & Serving Related -5,103
Management -5,646
Production -7,504
Construction & Extraction -7,854
Building & Grounds Cleaning & Maintenance -8,019
Sales & Related -9,526
Transportation & Material Moving
page
-13,220
Office & Administrative Support -15,865
70
Conclusion:
A downshift driven by
supply & affordability
constraints
Annual Housing
Market Survey
2019: A shift is afoot
Market not as Competitive as Prior Years
Median Price Discount & Weeks on Market
60%
% of Sales above Asking Price
10% 16
Med. Price Discount
50% 9% 14
Med. Weeks on MLS
8%
12
40% 7%
6% 10
Long Run Average = 20%
30% 27% 5% 8
4% 6
20% 3% 1.3%,
4
2% 2.4 wks.
10% 1% 2
0% 0
0%

73
Less than Half of Sales Received Multiple Offers
% with Multiple Offers

# of Multiple offers (Average)
80% 7
70% 6
60% 5
50% 48%
4
40% 3.7 3
30%
20% 2
10% 1
0% 0

74
Record Home Prices Pushed up Down Payments
Median Down Payment

$120,000 25%
$100,000
$100,000 20%
$80,000 19.8%
15%
$60,000
10%
$40,000
$20,000 5%
$0 0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

75
Housing Affordability Still the Main Reason
for Outmigration
Q. What was the primary reason All Buyers
for changing county?
0% 5% 10% 15% 20% 25% 30%
Housing affordability 21%

28%
Quality of life 20%
16%
Closer to family/relative 14%
12%
Second home 9%
8%
Job change 8%
7%
Shorter commute to work/school 6% 2019 2018
5%
Quality of school 6%
5%
Retired 4%
5%
Quality of community services 1%
1%
Other 12%
15%
76
Housing Affordability Has Been a Consistent Issue for
First-Time Buyers over the Last Few Years
% of First-Time Buyers who Changed County

60% Because of Housing Affordability
49% 49% 48%
50% 45%
40%
32%
30% 26%
20%
10%
0%
2014 2015 2016 2017 2018 2019
Q. What was the primary reason for changing county?

77
Share of First Time Buyers Dipped after Reaching
Highest Level since 2012
% First-Time Home Buyers Long Run Average
50%
1 40% Long Run Average = 37.2%

32.0%
30%
20%
10%
0%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
78
Investor Buyers Share Dropped to the Lowest
since 2008; Fewer Flippers in the Market
% to Total Sales Vacation/Second Home
30%
Investment/Rental
25% Property Rent
Vs.
20% Flip
15% 4.7%
10% 2014: 30% 2014: 70%
2015: 26% 2015: 74%
5% 11.8%
2016: 20% 2016: 80%
0% 2017: 24% 2017: 76%
2018: 26% 2018: 74%
2019: 18% 2019: 82%

79
Investor Buyers Have the Financial
Advantage over First-Time Buyers
First-time Buyers Investor Buyers
Median Sales Price $516,500 $495,000
Median Square Footage 1,500 1,400
Median Household Income $90,000 $200,000
Median Downpayment (in $$) $35,500 $100,000

80
Fewer Investors Selling Their properties;
4 out of 5 Are Landlords
Sellers Who Owned the Property
as an Investment
30%
Long Run Average = 20%
25%
20% 19%
20%
15%
10%
5%
0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Q. How was the property occupied?

81
International Buyers Bounced back from
2018 Low
9%
7.8% 8.0%
8%
7%
6.0% 6.2%
6% 5.7% 5.8%
5.3%
5%
4% 3.7% 3.8%
2.9% 3.1%
3% 2.7%
2%
1%
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

82
Sellers staying put: owned for a median of 11 years
14
Years Owned Home Before Selling
12 11
10

83
…Especially for older generations
(with consumer survey definition)
Years Owned Home Before Selling
0 10 20 30
Millennials 4
Gen X's 8
Baby Boomers 15
Silent Generations 25

84
More Sellers Continue to Move out of California;
Highest since 2005
Location of Seller’s New Home
2005 2009 2015 2019
Within the same county 38% 47% 44% 35%
In another county in California 23% 21% 20% 20%
In another state 31% 19% 22% 30%
Out of US 1% 2% 1% 0%
Don't Know/Not sure 7% 12% 13% 14%
Total 100% 100% 100% 100%

85
Share of cash buyers lowest in 10 years
35% % of All Cash Sales
30%
25%
19.7%
20%
• One-fifth of buyers paid 15%

with all cash 10%
• The share of all cash buyers 5%

dipped below 20% for the
0%
1st time since 2009
2009
2005
2006
2007
2008
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
86
Where is
everyone going?
1841: Westward Ho!

page
88
2010: Eastward Ho!

page
89
~750k people have left since 2010
California Net Domestic Migration

0
-20,000
-40,000 -24,972
-41,362
-60,000
-57,563 -60,839
-80,000
-100,000
-120,000 -104,317 -105,210
-140,000
-160,000
-180,000 -169,336 -163,922
2010 2011 2012 2013 2014 2015 2016 2017

page
90
Step 1: SF Bay to Cheaper Markets
Core San Francisco Bay Area Out Migration (2010-2016)
-8,559 -9,005
-11,659
-12,408
-13,053
-15,244
-17,697
-25,843
Elsewhere in CA -30,268
Another State
-42,777
Merced Solano Washington Stanislaus Santa Cruz Texas Nevada (ST) Oregon San Joaquin Sacramento
MSA

page
91
Step 2: Pricing Prior Residents Out of State
Sacramento MSA Out Migration

(2010-2016)
-2,260
-2,715 -2,917
-3,596
-4,002 -4,029 -4,179
-5,020 -5,127
Elsewhere in CA
Another State
-8,166
Kentucky Santa Cruz Oklahoma Colorado Sutter & San Luis San Oregon Idaho Nevada (ST)
Yuba Obispo Bernardino

page
92
Step 1: SoCal coastal to cheaper markets
Coastal Southern California Out Migration (2010-2016)
-19,854
-21,935
-34,217 -40,361
-42,503
-48,609
-65,534
Elsewhere in CA -79,132
Another State -101,914
-124,148

page
93
Step 2: pricing prior residents out of state
Elsewhere in CA
Inland Empire Out Migration Another State
(2010-2016)
-3,575
-5,117
-7,732 -7,970 -8,344
-10,604
-10,680
-10,699
-16,374
-17,859

page
94
Best performing cities are
everywhere Milken Institute Annual Report 2018
Top 10 best performing large cities
1 2 3 4 5
Provo-Orem, San Jose- Austin-Round San Francisco- Dallas-Plano-

Sunnyvale-Santa Redwood City-
UT MSA Rock, TX MSA Irving, TX MD
Clara, CA MSA South SF, CA MD
Change: Steady Change: +9 Change: +6 Change: Steady Change: -2
6 7 8 9 10
Raleigh, NC Orlando- Seattle Fort Collins, Salt Lake City,

MSA Kissimmee- Bellevue- CO MSA UT MSA
Sanford, FL MSA Everett, WA MD
Change: -4 Change: Steady Change: -4 Change: Steady
Change: +9
SOURCE: Milken Institute

page
96
Top 10 best performing small cities
1 2 3 4 5
Bend- St. George, Gainseville, Elkhart- Coeur

Redmond, UT MSA GA MSA Goshen, IN d’Alene, ID
OR MSA Change: Steady MSA MSA
Change: Steady
Change: Steady Change: +2 Change: +24
6 7 8 9 10
San Rafael, Medford, OR Athens-Clark Albany, OR Logan, UT-ID

CA MSA MSA County, GA MSA MSA
MSA
Change: -2 Change: +21 Change: +13 Change: +14
Change: +34

page
97
Biggest gainers 2017-2018
2018 Rank Change
Merced, CA MSA 38 56
Norwich-New London, CT MSA 123 54

Metropolitan Statistical Area (MSA)/
Tucson, AZ MSA 102 52

Metropolitan Division (MD)
Lansing-East Lansing, MI MSA 89 49
Myrtle Beach-Conway-North Myrtle Beach, SC-… 51 48
Scranton-Wilkes-Barre-Hazleton, PA MSA 85 36
Kennewick-Richland, WA MSA 148 36
Albuquerque, NM MSA 66 35
Tallahassee, FL MSA 82 35
Trenton, NJ MSA 125 35

page
98
Forecast
2019 Forecast Report Card
2018 2019 2019

Actual Forecast Projected
SFH Resales (000s) 402.8 396.8 390.2
% Change -5.2% -3.3% -3.1%
Median Price ($000s) $570.0 $593.4 $593.2
% Change 6.0% 3.1% 4.1%
30-Yr FRM 4.5% 5.2% 3.9%
Housing Affordability Index 28% 25% 32%
U.S. Gross Domestic Product 2.9% 2.4% 2.2%
Q. How did your client find and select you to represent them?
page
100
2020 California Housing Market Forecast
2015 2016 2017 2018 2019p 2020f
SFH Resales (000s) 409.4 417.7 424.9 402.8 390.2 393.5
% Change 7.0% 2.0% 1.7% -5.2% -3.1% 0.8%
Median Price ($000s) $476.3 $502.3 $537.9 $570.0 $593.2 $607.9
% Change 6.6% 5.4% 7.1% 6.0% 4.1% 2.5%
Housing Affordability
31% 31% 29% 28% 32% 32%
Index
30-Yr FRM 3.9% 3.6% 4.0% 4.5% 3.9% 3.7%
page
SERIES: CA Housing Market Outlook CALIFORNIA ASSOCIATION OF REALTORS®
Q: Thanks for the forecast
but what do I DO NOW?
A: You need a plan.
2020 Success Strategies
• Listings need to be priced right – work on your powers of

persuasion & always use data not opinion
• People are moving within and outside of CA – work and

expand your relocation network
• Financial Literacy is a scarce commodity – become an expert

and share your knowledge. Show interested buyers the #’s

page
103
2020 Success Strategies
• Rates are at historic lows & some of your past clients would
benefit from a refinance – keep in touch
• Listings need to be beautiful – the “HGTV Effect” is REAL. Buyer

expectations are high especially for millennials. If your
company has a concierge program – use it! Stage EVERYTHING.
• Know what people are looking for – smart homes, home offices,
pet amenities etc.

page
104
Find Your Niche

page
105
In Closing
How Client Found Their Agent? We asked You.
77% Found You Through a Relationship
0% 5% 10% 15% 20% 25%
Represented Them in Previous Home Transaction 20.8%
Client was Friend/Relative/Neighbor 20.8%
Referral from a client 14.1%
Recommendations of Friends 12.0%
Refferal from Business Associates 7.5%
Open House 4.6%
Web page/Internet 3.2%
Door-to-Door Farming 2.5%
Relocation Referral 1.6%
Direct Mail Marketing
Walk in /Floor Call 1.0%
Listing Agent for Home Purchased
Yard Signs 0.9%
Telephone Marketing
Social Media 0.5%
Mobile App
Print Ads/Newspaper & Magazine
Q. How did 0.2%
your client find and select you to represent them?
Other 7.5% SERIES: 2019 Housing Market Survey page
107
2020 Broker Conference - Opportunities
• Your brand is your promise – Kofi Nartey
• Be fierce about your data and market knowledge – Steve Murray
• Does your calendar match your priorities? - Ryan Gorman
• We get what we focus on – Tami Bonnell
• Relationships are a marathon not a sprint – Georgia Perez
• Following your why leads you to your LOVE – Taunee English
• Stars will win (and I see a room full of stars) – Joel Singer
page
108
Thank You

2020 Housing Market Forecast

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2020 California

CALIFORNIA ASSOCIATION OF REALTORS®

CALIFORNIA ASSOCIATION OF REALTORS®

CALIFORNIA ASSOCIATION OF REALTORS®

Dave/Spike: We don’t need any more

Cardinal Rule of Forecasting: Never give a

Experts Say Next Recession Will Begin in 2020

Jul 25, 2019

• 10th year of economic growth

CALIFORNIA ASSOCIATION OF REALTORS®

SERIES: U.S. Business Confidence Index page

(7/15/19 – 8/15/19) (8/13/18 – 8/15/19)

SERIES: Dow 30 page

SERIES: Volfefe Index, President’s Trump tweets page

September 2019 125.1

“While confidence could continue hovering

CALIFORNIA ASSOCIATION OF REALTORS®

Buyer changed mind and decided not to buy 47%

Q. Had the property fallen out of escrowOther

CALIFORNIA ASSOCIATION OF REALTORS®

SOURCE: Bureau of Labor Statistics & Bureau of Economic Analysis

SERIES: GDP page

CALIFORNIA ASSOCIATION OF REALTORS®

2015 2016 2017 2018 2019p 2020f

US GDP 2.6% 1.6% 2.3% 2.9% 2.2% 1.6%

Nonfarm Job Growth 2.1% 1.8% 1.4% 1.6% 1.3% 0.8%

Unemployment 5.3% 4.9% 4.4% 3.9% 3.7% 3.9%

CPI 0.1% 1.4% 2.0% 2.4% 2.0% 2.0%

Real Disposable Income, %

CALIFORNIA ASSOCIATION OF REALTORS®

2015 2016 2017 2018 2019p 2020f

Nonfarm Job Growth 2.7% 2.3% 1.6% 2.0% 1.5% 1.0%

Unemployment 6.2% 5.5% 4.8% 4.2% 4.3% 4.5%

CA Population (Million) 39.0 39.2 39.5 39.7 39.9 40.1

Population Growth 0.9% 0.7% 0.7% 0.6% 0.5% 0.4%

CALIFORNIA ASSOCIATION OF REALTORS®

25% Year-over-Year % Chg 6 per. Mov. Avg. (Year-over-Year % Chg)

SERIES: Sales of Existing Single Family Homes page

SERIES: Sales of Existing Detached Homes page

CALIFORNIA ASSOCIATION OF REALTORS®

California, August 2019: $617,410, 1.5% MTM, 3.6% YTY

$400 August 2019: $287, -1.0% MTM, 1.4% YTY

California Year-over-Year Price Growth by Quintile (August 2019)

SERIES: Median Price of Existing Single Family Homes page

SERIES: Unsold Inventory Index of Existing Single Family Homes page

SERIES: Active Listings of Existing Single Family Homes page

SERIES: Listing Price of Existing Single Family Homes page

California Population California REALTORS® California Home Sales California Permits

30,000,000 300,000 200,000

15,000,000 150,000 100,000

CALIFORNIA ASSOCIATION OF REALTORS®

This Photo by Unknown Author is licensed under CC BY-SA-NC

CALIFORNIA ASSOCIATION OF REALTORS®

183,111 134,437 111,792

SoCal Bay Area Central Valley Central Coast

SERIES: Nonfarm Job Growth & New Housing Permits page

20,000 LOS ANGELES, 20,427

CALIFORNIA ASSOCIATION OF REALTORS®

Region 2012 Q1 2019 Q2 % CHG

CA SFH $56,320 $122,960 118.3%

Inland Empire $35,170 $76,760 118.3%

S.F. Bay Area $90,370 $197,970 119.1%

US $32,000 $56,480 76.5%

SERIES: Housing Affordability Index of Existing Detached Homes page