CAR Chief Economist Leslie Appleton Young provides an economic update to the Murrieta Temecula Group and the Southwest Riverside County Association of Realtors
5. 2011: A Year of Wild Cards
Political
Change
on
Oil Price Spikes Capitol
Hill
Arab Uprising
Sovereign
Debt
Crisis in
EuroZone
Debt Limit
Ceiling &
Downgrade Stock
of US Debt Market
Volatility
7. Components of GDP:
Consumer Spending Weak; Gov’t Sector Down
Quarterly Percent Change
3.0
2.5 Q3 2010
Q4 2010
2.0
Q1 2011
1.5 Q2 2011
1.0
0.5
0.0
-0.5
-1.0
-1.5
Consumption Fixed Nonres. Net Exports Government
Investment
SOURCE: US Dept of Commerce, Bureau of Economic Analysis
8. Consumers Pulling Back
Home Equity & Reverse Wealth Effect
Consumer Spending 2011 Q1: 2.7% Q2: 0.4%
8%
QUARTERLY PERCENT CHANGE
6%
4%
2%
0%
-2%
-4%
1Q-2000
1Q-2001
1Q-2002
1Q-2003
1Q-2004
1Q-2005
1Q-2006
1Q-2007
1Q-2008
1Q-2009
1Q-2010
1Q-2011
SOURCE: US Dept of Commerce, Bureau of Economic Analysis
9. Unemployment Stubbornly High
August 2011
California (12.1%) vs. United States (9.1%)
14%
CA US
12%
10%
8%
6%
4%
2%
0%
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
SOURCE: CA Employment Development Division
10. U.S. Job Growth: Flat in August
Month-to-Month Changes
Recession Job Losses: 8.4 million
Since Jan’10: +1.8 million
500,000
400,000
300,000
200,000
100,000
0
-100,000
-200,000
-300,000
-400,000
-500,000
-600,000
-700,000
-800,000
-900,000
Jan-08
Apr-08
Jan-09
Apr-09
Jan-10
Apr-10
Jan-11
Apr-11
Jul-08
Oct-08
Jul-09
Oct-09
Jul-10
Oct-10
Jul-11
SOURCE: US Dept of Labor, Bureau of Labor Statistics
12. Where are California’s Jobs?
Employment Trends:
Construction & Financial Sectors Biggest Losers
Year to
Industry 2005 Jul-11
Date
Mining and Logging 23,600 27,600 4,000
Construction 905,300 567,300 -338,000
Manufacturing 1,502,600 1,257,600 -245,000
Trade, Transportation & Utilities 2,822,100 2,641,500 -180,600
Information 473,600 455,400 -18,200
Financial Activities 920,300 755,800 -164,500
Professional & Business Services 2,160,700 2,136,200 -24,500
Educational & Health Services 1,593,400 1,837,000 243,600
Leisure & Hospitality 1,475,200 1,531,600 56,400
Other Services 505,500 484,500 -21,000
Government 2,420,200 2,380,200 -40,000
TOTAL 14,802,500 14,074,700 -727,800
SOURCE: California Association of REALTORS®
27. California vs. U.S. Sales
US Home Sales CA Home Sales
7,000,000 700,000
6,000,000 600,000
5,000,000 500,000
4,000,000 400,000
3,000,000 300,000
2,000,000 200,000
1,000,000 100,000
0 0
SOURCE: California Association of REALTORS®
28. California vs. U.S. Median Price
US Median Price CA Median Price
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
SOURCE: California Association of REALTORS®
29. Housing Affordability: Records Highs
California Vs. U.S.
CA US
100%
% OF HOUSEHOLDS THAT CAN BUY
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Q1 2000
Q3 2000
Q1 2001
Q3 2001
Q1 2002
Q3 2002
Q1 2003
Q3 2003
Q1 2004
Q3 2004
Q1 2005
Q3 2005
Q1 2006
Q3 2006
Q1 2007
Q3 2007
Q1 2008
Q3 2008
Q1 2009
Q3 2009
Q1 2010
Q3 2010
Q1 2011
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
30. CA Underwater Mortgages
Negative Equity Share in CA Near Negative Equity Share in CA
40%
35%
30.2%
30%
25%
20%
15%
10%
4.6%
5%
0%
Q4-2009
Q1-2010
Q2-2010
Q3-2010
Q4-2010
Q1-2011
Q2-2011
SOURCE: CoreLogic
34. 1872 W. Admiral, 92801
•3 bd, 2.5 ba, built in 1982
•Purchased in Sept 2005
for $594,000 with 30%
down.
•In April 2006, added a
second for $57,000.
•In Oct 2006, refinanced
the second into a new
second for $100,000.
•Defaulted in 2010
•Zestimate of current value
= $364,000.
35. 1572 W. Orangewood, 92802
•3 bd, 2 ba, 2,016 sq ft
built in 1977.
•Purchased in June 2003
for $455,000 with 30%
down.
•March 2004: added a
second for $75,000;
added a third for $90,500;
added a fourth for
$80,000.
•Within one year of
purchase, the property had
$565,000 in debt on it!
•Defaulted in 2010.
•Zestimate of current value
•= $442,000.
36. 8871 Regal, 92804
•3 bd, 2 ba, 1,314 sq ft
built in 1956.
•Purchased as REO in
2007 for $417,000 with
zero down.
•Had previously sold for
$568,000 in 2005.
•Defaulted in 2010.
•Zestimate of current
value = $367,500.
37. 2414 E. Underhill, 92806
•3 bd, 2 ba, 1,459 sq ft
built in 1957.
•Purchased for $640,000
in July 2006 with
piggyback financing:
$500,000 first and
$140,000 second, i.e.
zero down.
•Defaulted in 2010.
•Zestimate of current
value = $387,000.
38. Conclusions
• Excessive borrowing against home equity is the
untold part of the foreclosure story.
• “House Prices, Home Equity-Based Borrowing, and
the U.S. Household Leverage Crisis” by Mian and
Sufi: American Economic Review :
• 39% of new defaults from 2006 to 2008
• attributable to home equity borrowing
40. Federal Issues – Critical Concerns
High-cost Loan Limit - expires 10/1/11
Future of Fannie and Freddie in flux - Increase
guarantee fee likely
FHA targeted for market share drop
Tax Reform on the horizon – MID?
QRM (Qualified Residential Mortgage)
20% Down – Is the future of the 30 year
mortgage in doubt?
41. U.S. Economic Outlook
2005 2006 2007 2008 2009 2010 2011f 2012f
•
US GDP 3.1% 2.7% 2.0% 0.0% -2.6% 2.9% 1.7% 2.0%
Nonfarm Job
1.7% 1.8% 1.1% -0.6% -4.4% -0.7% 1.0% 0.9%
Growth
Unemployment 5.1% 4.6% 4.6% 5.8% 9.3% 9.6% 9.0% 8.9%
CPI 3.4% 3.2% 2.8% 3.8% -0.4% 1.6% 3.2% 2.3%
Real Disposable
Income, % 1.3% 4.0% 2.2% 0.5% 0.9% 1.4% 1.7% 1.5%
Change
Forecast Date: September 2011
SOURCE: California Association of REALTORS®
42. California Economic Outlook
2005 2006 •
2007 2008 2009 2010 2011f 2012f
Nonfarm Job
1.8% 1.7% 0.8% -1.3% -6.0% -1.4% 1.5% 2.1%
Growth
Unemployment
5.4% 4.9% 5.4% 7.2% 11.4% 12.4% 12.0% 11.2%
Rate
Population
1.2% 1.1% 1.1% 1.2% 1.1% 0.9% 0.9% 0.9%
Growth
Real Disposable
Income, % 1.3% 3.4% 1.5% 0.1% -2.2% 1.6% 1.5% 2.0%
Change
Forecast Date: September 2011
SOURCE: California Association of REALTORS®
54. Share of Distressed Sales to Total Sales
60% Aug-10 Jul-11 Aug-11
44.5% 42.9% 43.7%
40%
24.7% 25.2% 24.4%
19.3% 18.9%
20% 17.5%
0%
REOs Short Sales Distressed Sales
SOURCE: California Association of REALTORS®
55. Tight Supply of Inventory
for REO Sales
Aug-11
Unsold
Inventory Index
(Months)
8.1
9
8
7 5.7
6
5
4 2.6
3
2
1
0
Equity Sales REO Sales Short Sales
56. REO & Short Sales: Southern
California
(Percent of Total Sales)
100% Aug 2011
80% Short Sales
REO Sales
60%
14%
26%
40%
24%
20% 20%
20% 35% 49%
12% 8%
0%
19%
Los
Angeles Orange
Riverside
San
Bernardino San Diego
SOURCE: California Association of REALTORS®
57. REO & Short Sales: Central Valley
(Percent of Total Sales)
100% Aug 2011
Short Sales
80% REO Sales
7%
60%
23% 30%
40% 24% 19%
67%
20% 36%
37%
38% 41%
0%
Madera
Merced
San Benito
Sacramento
Kern
SOURCE: California Association of REALTORS®
58. REO & Short Sales: Bay Area
(Percent of Total Sales)
100% Aug 2011
80% Short Sales
REO Sales
60%
26%
40% 20%
15%
20% 18%
28% 15% 21% 45%
13%
0% 11%
10% 24%
Marin
Napa
San
Mateo Santa
Clara Solano
Sonoma
SOURCE: California Association of REALTORS®
59. REO & Short Sales: Rest of California
(Percent of Total Sales)
100% Aug 2011
80%
Short Sales
REOs
60%
11% 7%
40% 8% 25%
5%
48% 7% 57%
13% 9%
20% 34%
25% 36% 20%
32% 39% 51%
0%
15%
SOURCE: California Association of REALTORS®
73. Sales of Existing Detached Homes and Consumer Confidence
Riverside County, August 2011: 2,320 Units, Down 2.5% YTD, Up 11.2% YTY
UNITS Sales Consumer Confidence INDEX
3500 160
3000 140
120
2500
100
2000
80
1500
60
1000
40
500 20
0 0
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
Jan-11
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®;
The Conference Board
74. Sales of Existing Detached Homes
Riverside County, 2010: 26,044 Units, Down 19.2% YTY
UNITS ANNUAL MONTHLY
35,000 3,500
30,000 3,000
25,000 2,500
20,000 2,000
15,000
1,500
10,000
1,000
2008
5,000
2009
500
2010
0 2011
1989
1992
1995
1998
2001
2004
2007
2010
0
Oct
Jun
Aug
Jan
Apr
Jul
Nov
Sept
Feb
Dec
Mar
May
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
75. Median Price of Existing Detached Homes
Riverside County, August 2011: $202,060, Down 2.9%
YTY
$500,000
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
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
Jan-11
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
76. Median Price Annual Comparison
Riverside County, 2010: $206,180, Up 12.9% YTY
ANNUAL MONTHLY
$450,000 $450,000
$400,000 $400,000
$350,000 $350,000
$300,000 $300,000
$250,000 $250,000
$200,000 $200,000
$150,000 $150,000
$100,000 $100,000 2008
2009
$50,000 2010
$50,000
2011
$- $-
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Nov
Jun
Aug
Jan
Jul
May
Sept
Oct
Feb
Apr
Dec
Mar
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
77. Median Home Sales Price
Riverside County
Yearly %
Aug-10 Aug-11
Change
AGUANGA $119,000 $25,000 -79.0%
ANZA $103,000 $172,500 67.5%
BANNING $138,000 $113,250 -17.9%
BEAUMONT $193,000 $185,000 -4.2%
BLYTHE $117,500 $159,500 35.7%
CABAZON $290,000 $48,500 -83.3%
CALIMESA $162,000 $77,000 -52.5%
CATHEDRAL CITY $160,000 $139,500 -12.8%
COACHELLA $146,000 $135,500 -7.2%
CORONA $325,000 $314,000 -3.4%
DESERT HOT SPRINGS $89,500 $89,250 -0.3%
HEMET $125,000 $120,000 -4.0%
HOMELAND $50,000 $279,000 458.0%
SOURCE: DataQuick Information Systems. The price statistics are derived from
all types of home sales -- new and existing, condos and single-family.
78. Median Home Sales Price
Riverside County
Yearly %
Aug-10 Aug-11
Change
IDYLLWILD $190,000 $186,000 -2.1%
INDIAN WELLS $415,000 $483,500 16.5%
INDIO $180,000 $160,000 -11.1%
LA QUINTA $275,000 $242,500 -11.8%
LAKE ELSINORE $200,000 $182,000 -9.0%
MECCA $55,000 $35,000 -36.4%
MENIFEE $211,000 $195,000 -7.6%
MIRA LOMA $311,500 $240,000 -23.0%
MORENO VALLEY $156,000 $159,000 1.9%
MOUNTAIN CENTER $136,500 $299,500 119.4%
MURRIETA $250,000 $242,500 -3.0%
NORCO $372,500 $340,000 -8.7%
NUEVO $155,000 $145,000 -6.5%
SOURCE: DataQuick Information Systems. The price statistics are derived from
all types of home sales -- new and existing, condos and single-family.
79. Median Home Sales Price
Riverside County
Yearly %
Aug-10 Aug-11
Change
PALM DESERT $220,000 $225,000 2.3%
PALM SPRINGS $213,500 $175,000 -18.0%
PERRIS $165,000 $150,000 -9.1%
RANCHO MIRAGE $374,500 $365,000 -2.5%
RIVERSIDE $195,000 $193,000 -1.0%
SAN JACINTO $143,000 $135,000 -5.6%
SUN CITY $165,000 $164,000 -0.6%
TEMECULA $267,750 $278,500 4.0%
THOUSAND PALMS $130,000 $135,000 3.9%
WHITE WATER $90,000 $62,500 -30.6%
WILDOMAR $226,500 $210,000 -7.3%
WINCHESTER $240,000 $227,500 -5.2%
RIVERSIDE COUNTY $200,000 $190,250 -4.9%
SOURCE: DataQuick Information Systems. The price statistics are derived
from all types of home sales -- new and existing, condos and single-family.