1. California Housing Market Update
September 20, 2017
Jordan Levine, Senior Economist

2. Economy still lumbering along
2016: 1.5%; 2017 Q2: 3.0%
ANNUALLY
QUARTERLY
Notes:
E – expected, F – forecast, P- preliminary
1929 though first quarter 2009 annual GDP figures were revised in July 2009 using 2005 benchmark.
2009 Largest Annual Drop since 1946 (-2.8%)
SERIES: GDP
SOURCE: US Dept. of Commerce, Bureau of Economic Analysis 2

3. More jobs but first chinks in armor are showing

4. Sales are up from July, but pace is slowing
August 2017 Sales: 427,630 Units, +2.7% YTD, +1.3% YTY
SERIES: Sales of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
*Sales are seasonally adjusted and annualized

5. Sales decelerate, prices accelerate #Supply

6. Prices at highest level in a decade
California, August 2017: $565,330, +2.9% MTM, +7.2% YTY
Jul-17: $565,330
Jul-16: $527,490
SERIES: Median Price of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

7. It all comes back to supply
August 2016: 3.4 Months; August 2017: 2.9 Months
Range since 1988:
Low: 1.3 months in April 2004
High: 18.8 months in Apr 1991
Long-run average: 6.9 months
Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.
SERIES: Unsold Inventory Index of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

8. It’s really a tale of two markets right now

9. Sales not really being constrained at top

10. But with tight inventory, prices rise faster

11. They sell much quicker…

12. …and for top dollar #GoodTime2BeASeller

13. Sellers still in the driver’s seat

14. No relief in sight over near term #StructuralIssues
SERIES: Active Listings of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 14

15. Dearth of listings pretty unusual

16. Jobs matter for housing demand, and there, we’re ok

18. Mortgage Rates: Lowest Level since the Election
January 2010 – September 14, 2017
MONTHLY
WEEKLY
Monthly from 2009 to present, weekly for the past 8 weeks
SERIES: 30Yr FRM, 5Yr ARM
SOURCE: Freddie Mac

19. Demand is there SERIES: Annual Household Growth
SOURCE: CA Department of Finance

20. What are the consequences
Good new for existing owners
Building good equity
Accumulating wealth
Good news for sellers
Commanding top dollar
Home will sell quickly
No pressure to cut deals
Headwinds for buyers
Homes are selling for more
Homes are selling much quicker
Virtually no discounting
This Photo by Unknown Author is licensed under CC BY-NC-SA

21. Housing affordability taking it on the chin
2017-Q2: % able to purchase median-priced home
SERIES: Housing Affordability Index of Traditional Buyers
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

22. What Will Happen When Mortgage Rates Increase?
Q Median Price $553,260
20% Downpayment
MONTHLY MORTGAGE
Minimum Qualifying Income
INTEREST RATE
INTEREST RATE
SERIES: Housing Affordability Index
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

23. Most Cannot Afford to Purchase a Home with a Single Income
California
2016 Annual Mean Wage
- Wage data is from May 2016; Min. income to buy a med. Home from Q216
SOURCE: Bureau of Labor Statistics, C.A.R.

24. Putting it all together
Economy still lumbers along
Few red flags in labor market
In terms of trends…
Sales continue to defy gravity
Prices are accelerating
Lack of supply driving market
Tight at bottom, moving at top
Rates are still really low
Household formation rising
Market more competitive
Homes moving quickly
Virtually no discounting
Keeping it really real
There’s some challenges
Lack of new listings
Market will remain tight
Rates are expected to rise… gradually, but going to hurt
Plus, we still have structural stuff
Still…
Demand is there from economy
High end has room to run
Market IS defying gravity
Forecast remains for 2017: ~1%

25. The all-new Housing Matters Podcast is your housing hub for market analysis, economic trends, and housing news from the CALIFORNIA ASSOCIATION OF REALTORS®® (C.A.R.) and its institute the Center for California Real Estate. Be sure to subscribe on iTunes to hear the latest episode every other Friday to learn what you need to know about the market from C.A.R. experts who will give you their take on the week’s top real estate stories.

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