2016 ECONOMIC AND HOUSING MARKET FORECAST

OVERVIEW

  • Economic Outlook
  • California Housing Market Outlook
  • Regional Housing Market Outlook
  • 2016 Forecast

ECONOMIC OUTLOOK

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WHERE ARE WE HEADED?

  • Fed takes a more dovish tone, leave interest rates unchanged, will gradually increase rates in 2016 and 2017. Action will be “data determined”
  • Risk of rates increasing too fast: bringing economic growth to a halt
  • Risk of rates increasing too slow: zero leverage when next downturn hits

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CALIFORNIA HOUSING MARKET OUTLOOK

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WHERE IS THE INVENTORY?

  • Affordability challenge for repeat buyers
    • Low rate on current mortgage
    • Low property taxes
    • Concerned with capital gains
    • Why list when there is nowhere to go I can afford?
    • Could not qualify for a mortgage today
  • New construction recovering but LOW
  • Demographics: Trade-up buyer pool is smaller
  • Measurement error? Off-MLS (aka “pocket’) listings not being counted in listing stats

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BAY AREA HOUSING MARKET

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SAN FRANCISCO COUNTY

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OAKLAND

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MARIN COUNTY

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2016 FORECAST

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KEY TAKEAWAYS

  • Both CA home sales and prices will be up mid -single digits in 2016
  • Fundamental demand drivers (jobs; rates; household formation) are strong
  • Housing affordability an insurmountable hurdle for many
  • Trading up/down is too expensive for Boomers
  • CA will see accelerating out-migration of Millennials in search of housing they can afford

MARKET OPPORTUNITIES

  • Millennials
    • Turn renters into first-time buyers
    • First-time buyers who bought with tax credit back in 2009 are ready to trade-up
    • Understand the differences in needs between Millennial first-time buyers and Millennial trade-up buyers
  • Baby Boomers
    • Ready to downsize
    • Understand Boomers’ priorities: investment and retirement
    • If we can’t keep them in CA, help them find a place out of state. Network with REALTORS® outside of CA
  • Minorities
    • Minorities have grown in homebuyer share over time
    • Surge in the number of minority households will play a big role in the increase in housing demand in the next 10 years
    • Develop programs and marketing material tailored towards minority home buyers of different ethnicity
  • Investor sellers
    • Investor buyers who purchased bargain properties a few years ago are ready to sell as home prices start leveling off
  • Everyone else…
    • Low interest rates will be here a little longer