Last week, I attended a presentation by Leslie Appleton-Young, who is the Chief Economist for the California Association of Realtors (CAR). She gave a very interesting presentation, most of which was actually about what’s happened so far in 2016, finishing up with a California 2017 real estate market forecast. Listening to what she has to say really helps understand why the California real estate market looks the way it does today.
While much of her discussion was about today’s real estate market, she did devote considerable time to where the market is headed in 2017. I recorded the audio of the presentation on my iPhone, and downloaded her deck of PowerPoint slides. I married up the audio with the slides to create a video presentation – it’s nearly 50 minutes long, and you can view right here:
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Video Presentation: California 2017 Real Estate Market Forecast
There’s a whole lot of detail and a ton of interesting insights into the California economy and housing markets, and if you do have the time, it’s highly worth listing to and watching. But in case you don’t, I wanted to pull out a few tidbits, quotes, and statistics I think you will find interesting. They are here:
- According to Leslie, the Bay Area economy is strongest, fastest growing economy in the country
- CAR is projecting a 6.2% median home price increase for 2016
- California as a whole has a median price that remains 12.6% below the prior peak
- Santa Cruz county is up 5.6% over prior peak
- Santa Clara up 21.4%
- San Mateo up 28.1%
- San Francisco up 38.9%
- Number of homes sold mostly unchanged over the last 5 years
- about 450K units per year even, though economy and population has grown. Peak was 2005 with 624,957 units.
- New normal = inventory of 3-4 months supply of homes
- Boomers are not leaving their homes as they have been expected to
- 32,400 net new jobs in bay area August 2015-August 2016, a 0.9% increase, which is lagging other parts of the state considerably
- This is probably due to lack of workers rather than slowing growth.
- Money spent on Home remodeling is $3.9 billion through July 2016, up 16% YTD
- While the U.S. economy has problems, globally, it could be considered “the cleanest dirty shirt in the hamper.”
- You need $92,571 in income to buy a median priced home in California.
- Jobs in California area growing much faster than in the nation, having created 2.2 million jobs since January 2010. We have created 378,000 jobs from August 2015-August 2016.
- Fastest growing job market in California is in San Jose.
- Lowest unemployment rates by metro area in California are San Jose and San Francisco
- Turnover rate used to be 8-9% per year in California, now we are at half that with only 4.2% of housing stock turning over every year
- 71% of Californians over age 55 haven’t moved since at least 1999
- Households in California are growing by 165,000 per year but only 100,000 housing units per year are being built
- In the past, we built 250,000-300,000 housing units per year in California.
- Santa Clara County is the 2nd most under-built county in California when comparing new jobs vs. new housing units
- Housing affordability 2016 Q2:
- USA 57%
- California as a whole 31%
- Santa cruz 17%
- Santa Clara 19%
- Monterey 25%
- 29.5% of buyers in 2016 are first time buyers, long run average is 38%
- 2017 Predictions:
- US GDP: 2.2% (was 1.8% in 2016),
- Unemployment averaging 4.7%
- Inflation up 2.1%
- Disposable income up 2.7%
- 30 year fixed rate mortgage at 4.0%
- California job growth of 1.6%
- Real disposable income up 3.5%
- Sales volume expected to increase 1.4% over 2016
- median price up 4.3% in 2017
I think that all of this data really helps to show how we got in the current situation in California: very low inventory, and rising prices – with no relief in sight in 2017.
As I have said before, buyers looking for home price relief or significantly more inventory are just going to have to wait for a recession to come. That will wipe out some of these jobs and open up some housing stock as the unemployed are forced to sell and relocate – as sad and as painful as that is. The only other way out would is to start building a lot more housing units – but there is so little impetus to build our way out of the housing shortage, we shouldn’t hold our breath on that one.