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2006 Real Estate Market Forecast
Leslie Appleton-Young
Vice President and Chief Economist
Economic Conditions
Recent Economic Headlines
US jobs up 243,000 in February; revised gains of
170,000 in January and 145,000 in December
Strong but not booming
Rebound in wages
Expect benchmark Fed Funds rate to go from
4.5% to 5.0%
Strong productivity gains
Softer housing sector
Gross Domestic Product
2004: 4.2% 2005 3.5% 2006 3.5%
ANNUAL PERCENT CHANGE, CHAIN-TYPE (2000) $
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
2005f
2006f
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
7%
8%
1Q-1990
1Q-1991
1Q-1992
1Q-1993
1Q-1994
1Q-1995
1Q-1996
1Q-1997
QUARTERLY PERCENT CHANGE, ANNUAL RATE
1Q-1998
1Q-1999
1Q-2000
2005 Q4: +1.1%
1Q-2001
1Q-2002
Gross Domestic Product
1Q-2003
1Q-2004
1Q-2005
-3
-2
-1
0
1
2
3
4
5
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
YEAR TO YEAR % CHANGE
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
California
Jan-99
Jul-99
US
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Employment Growth, California vs. U.S.
Jul-05
Nonfarm Employment By Region
Nonfarm Nonfarm
Employment Employment Percent
(Thousands) January-06 January-05 Change Change
Southern California 8,304.5 8,144.1 160.4 2.0%
Bay Area 3,156.6 3,101.1 55.5 1.8%
Central Valley 1,971.8 1,909.9 61.9 3.2%
Central Coast 485.7 478.3 7.4 1.5%
North Central 136.1 133.1 3 2.3%
CALFORNIA 14,937.2 14,647.6 289.6 2.0%
SOURCE: CA Employment Development Division
100
110
120
130
140
150
40
50
60
70
80
90
Jan-88
Jan-89
Jan-90
INDEX, 100=1985
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
January 2006: 106.3
Jan-01
Jan-02
Jan-03
Consumer Confidence Index
Jan-04
Jan-05
Jan-06
-4
-3
-2
-1
0
1
2
3
4
5
6
7
1Q-1990
1Q-1991
1Q-1992
1Q-1993
1Q-1994
1Q-1995
QUARTERLY PERCENT CHANGE
1Q-1996
1Q-1997
1Q-1998
1Q-1999
2005 Q4 1.1%
1Q-2000
1Q-2001
1Q-2002
Consumer Spending
1Q-2003
1Q-2004
1Q-2005
U.S. Sales and Median Price
ANNUAL RATE
7,500,000
Existing Home Sales $220,000
7,000,000 Median Home Price $210,000
$200,000
6,500,000
$190,000
6,000,000 $180,000
5,500,000 $170,000
$160,000
5,000,000 $150,000
4,500,000 $140,000
$130,000
4,000,000
$120,000
3,500,000 $110,000
$100,000
3,000,000
$90,000
2,500,000 $80,000
2006f
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005p
Mortgage Origination
Refinance vs. Purchase
ORIGINATION (BIL $) 30-YR FIXED RATE MORTGAGE
900 12.0%
Refinance Originations (Bil $)
800 Purchase Originations (Bil $)
Fixed Rate Mortgage 10.0%
700
600 8.0%
500
6.0%
400
300 4.0%
200
2.0%
100
0 0.0%
Q1/90
Q4/90
Q3/91
Q2/92
Q1/93
Q4/93
Q3/94
Q2/95
Q1/96
Q4/96
Q3/97
Q2/98
Q1/99
Q4/99
Q3/00
Q2/01
Q1/02
Q4/02
Q3/03
Q2/04
Q1/05
SOURCE: Mortgage Bankers Association
The “Wealth” Effect
• Higher real estate values converted into cash through:
Trading “down”; Cash-out refi’s; Home equity loans
• Housing “money” created (Source: Federal Reserve Board):
• Year Money % Disposable Income
• 2000 $204 B 2.8%
• 2001 $262B 3.5%
• 2002 $398 B 5.1%
• 2003 $439 B 5.4%
• 2004 $599 B 6.9%
• In other words, this borrowing has fueled consumer spending
and it will slow as housing price gains moderate.
Longer Tenure in Home?
• Homeowners may stay in their current homes
longer because they have:
– Cashed out and spent their trade-up equity
– Concerned about “property tax shock”
– Love their low-rate mortgage
– But don’t forget that “Boomers” are
inheriting wealth from their parents and are
interested in real estate for:
• Kids
• Parents
• Retirement/Investment
Consumer Price Index
January 2006: All Items 4.0% Y-T-Y; Core 2.1% Y-T-Y
PERCENT CHANGE FROM A YEAR AGO, 100=1982-1984
5.0%
All Items
4.5%
Core
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
Jul-00
Oct-00
Jul-01
Oct-01
Jul-02
Oct-02
Jul-03
Oct-03
Jul-04
Oct-04
Jul-05
Oct-05
Apr-00
Apr-01
Apr-02
Apr-03
Apr-04
Apr-05
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Fed Funds and Mortgage Rates
2000-2006: 15 Fed increases since June 2004
10%
FRM
9% ARM
8% Federal Funds Target
7%
6%
5%
4%
3%
2%
1%
SOURCE: Federal Home Loan Mortgage Corp.
0%
Jan
Jul-00
Oct-00
Jul-01
Oct-01
Jul-02
Oct-02
Jul-03
Oct-03
Jul-04
Oct-04
Jul-05
Oct-05
Apr-00
Apr-01
Apr-02
Apr-03
Apr-04
Apr-05
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Jan-91
Jul-91
Jan-92
SOURCE: FHLMC
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
FRM
ARM
Jul-00
Funds
Jan-01
Federal
Mortgage Rates
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Treasury Yield Curve
5.0 4.73
4.42 4.52 4.72
4.42 4.40 4.46
4.32 4.37 4.40 4.65
4.5
4.32 4.51
4.28 4.33 4.34
4.0 4.00 4.27 4.21
3.90 3.71
3.5
3.0 3.22
2.5 2.67
2.35
2.0
1.5 14-Jan-05
17-Nov-05
1.0
` 13-Dec-05
0.5 17-Jan-06
0.0
3 month
6 month
2 year
5 year
10 year
30 year
Why are Rates so Low?
Greenspan: It’s a “Conundrum”
• Deflationary Structural Forces
• Global Competition: Wal-Mart Effect
• Increased consumer Awareness:
Internet Effect
• Productivity gains/Greater efficiency
• Global Labor force – off-shoring
• Foreign Central Banks and Pension
funds holding more $’s
ARMs as a Percent of All Mortgages
Why isn’t this lower?
Source: Federal Housing Finance Board
70
60
50
40
30
20
10
Source: Federal Housing Finance Board
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
New Loan Products and Risk
• Types of instruments
– Zero down-payment
– Interest-only
– Stated income
– Option-ARM’s
• Concerns
– Ability to absorb rate adjustments
– Slower equity growth ahead
National Economy
• Economic growth in 2006 a moderate 3.5%
• The “Goldilocks Economy”?
• Accompanied by …
– Modest job growth – solid but not outstanding
– Inflation in check – Fed Priority
– Continued strength in Business Investment
– Consumer Spending flat
– Growing Fiscal Stimulus: Katrina
– Strong Housing Market slightly off 2005 peak
California Real Estate Market
California’s Housing Cycles and Membership
1970-2006
THOUSANDS Home Sales Membership
700,000 250,000
600,000
200,000
500,000
400,000 150,000
300,000 100,000
200,000
50,000
100,000
0 0
2006f
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
Sales of Existing Detached Homes and Pacific West Consumer Confidence
California, January 2006 Sales: 500,474 Units, Down 24.1% Y-T-D, Down 24.1% Y-T-Y
UNITS Sales Consumer Confidence INDEX
700,000 160
600,000 140
120
500,000
100
400,000
80
300,000
60
200,000
40
100,000 20
0 0
Oct-00
Oct-01
Oct-02
Oct-03
Oct-04
Oct-05
Apr-00
Jul-00
Apr-01
Jul-01
Apr-02
Jul-02
Apr-03
Jul-03
Apr-04
Jul-04
Apr-05
Jul-05
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
SOURCE: California Association of REALTORS®;
The Conference Board
Median Price of Existing Detached Homes
California, January 2006: $551,300, Up 13.8% Y-T-Y
$600,000
SOURCE: California Association of REALTORS®
$500,000
$400,000
$300,000
$200,000
$100,000
$0
Jan-00
Sep-00
Jan-01
Sep-01
Jan-02
Sep-02
Jan-03
Sep-03
Jan-04
Sep-04
Jan-05
Sep-05
Jan-06
May-00
May-01
May-02
May-03
May-04
May-05
Unsold Inventory Index
California, January 2006: 6.0 Months
MONTHS
6.5
6
5.5 Average Since 1/88: 6.4 months
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
Apr-00
Jul-00
Oct-00
Apr-01
Jul-01
Oct-01
Apr-02
Jul-02
Oct-02
Apr-03
Jul-03
Oct-03
Apr-04
Jul-04
Oct-04
Apr-05
Jul-05
Oct-05
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
SOURCE: California Association of REALTORS®
Median Time on the Market
California Single-Family Homes, January 2006: 48.5 days
DAYS ON MARKET
60
50
40
30
20
10
0
Oct-00
Oct-01
Oct-02
Oct-03
Oct-04
Oct-05
Apr-00
Jul-00
Apr-01
Jul-01
Apr-02
Jul-02
Apr-03
Jul-03
Apr-04
Jul-04
Apr-05
Jul-05
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
SOURCE: California Association of REALTORS®
California’s Million-Dollar Home Sales
Increased 47% in 2005
1988 2,718
1989 4,271
1990 3,773
1991 3,362
1992 2,890
1993 2,298
1994 2,522
YEAR 1995 2,017
1996 2,651
1997 3,762
1998 5,366
1999 7,553
2000 11,364
2001 9,501
2002 13,871
2003 19,080
2004 33,107
2005 48,666
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
Source: DataQuick Information Systems NUMBER OF HOMES
Why are Home Prices Rising?
Econ 101
• Strong Demand
– Low Mortgage Rates
– Demographics: Baby Boomers
– Flight from alternative investment
choices
– Speculation?
• Restricted Supply
– Constraints on new construction
– Low inventory of homes for sale
Is There a Housing Bubble?
Yes Virginia, there is a
bubble – a bubble in the
number of articles about
the housing bubble.
BUBBLE? NO!
SOFT LANDING? YES
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
500
0
Jan-87
Jul-87
Jan-88
Jul-88
Jan-89
Jul-89
MONTHLY AVERAGE
Jan-90
Jul-90
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
NASDAQ 1987-2005
Jan-00
What is a Bubble?
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Median Price, Annual Percentage Change
California vs. U.S.
California US
30%
ANNUAL PERCENTAGE CHANGE
25%
20%
15%
10%
5%
0%
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
-5%
-10%
YEAR
ANNUAL PERCENTAGE CHANGE
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
YEAR
1990
1992
1994
Annual Percentage Change
1996
1998
2000
California Median Price 1970-2005
2002
2004
Southern California Region
Nonfarm Employment
Nonfarm Nonfarm
Employment Employment Percent
(Thousands) Jan 2006 Jan 2005 Change Change
Los Angeles 4,012.4 3,962.2 50.2 1.3%
Orange County 1,485.4 1,455.7 29.7 2.0%
Riverside/SB 1,229.3 1,184.4 44.9 3.8%
San Diego 1,284.3 1,256.1 28.2 2.2%
Ventura 293.1 285.7 7.4 2.6%
Total 8,304.5 8,144.1 160.4 2.0%
SOURCE: California Economic Development Dept.
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
Y-T-Y PERCENT CHANGE
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
SOURCE: CA Employment Development Division
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Nonfarm Employment
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Los Angeles County, January 2006: Up 1.3% Y-T-Y
-10%
-5%
0%
5%
10%
15%
Q1/89
Q3/89
Q1/90
Q3/90
Q1/91
Q3/91
Q1/92
Q3/92
Q1/93
ANNUAL PERCENT CHANGE
Q3/93
Q1/94
Q3/94
Q1/95
Q3/95
Q1/96
Q3/96
Q1/97
Q3/97
Q1/98
Q3/98
Q1/99
Taxable Sales
Q3/99
Los Angeles County
Q1/00
Q3/00
Q1/01
Q3/01
Q1/02
Q3/02
Q1/03
Q3/03
Q1/04
SOURCE: CA State Board of Equalization
Q3/04
Sales of Existing Detached Homes and Pacific West Consumer Confidence
Southern California January 2006 Sales: 8,823 Units, Down 19.5% Y-T-D, Down 19.5% Y-T-Y
UNITS Sales Consumer Confidence INDEX
18,000 160.0
16,000 140.0
14,000
120.0
12,000
100.0
10,000
80.0
8,000
60.0
6,000
40.0
4,000
2,000 20.0
0 0.0
Oct-98
Oct-99
Oct-00
Oct-01
Oct-02
Oct-03
Oct-04
Oct-05
Apr-98
Jul-98
Apr-99
Jul-99
Apr-00
Jul-00
Apr-01
Jul-01
Apr-02
Jul-02
Apr-03
Jul-03
Apr-04
Jul-04
Apr-05
Jul-05
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
SOURCE: California Association of REALTORS®;
The Conference Board
Sales of Existing Detached Homes
County Jan-06 Dec-05 Jan-05 M-t-M Y-t-Y Y-t-D
High Desert 916 1,205 875 -24.0% 4.7% 4.7%
Los Angeles 3,545 4,396 4,637 -19.4% -23.5% -23.5%
Orange 1,195 1,458 1,577 -18.0% -24.2% -24.2%
Palm Springs 508 608 570 -7.5% -8.9% -8.9%
Riverside/SB 953 1,475 1,178 -35.4% -19.1% -19.1%
San Diego 1,200 1,624 1,503 -26.1% -20.2% -20.2%
Sta. Barbara Area 117 157 152 -25.5% -23.0% -23.0%
Ventura 389 530 465 -26.6% -16.3% -16.3%
SOURCE: California Association of REALTORS®
Home Sales in Southern California Regions
5000
4500 Jan-05
4000 Jan-06
3500
3000
2500
2000
1500
1000
500
0
High Los Orange Palm Rivers/SB San Santa Ventura
Desert Angeles Springs Diego Barbara
SOURCE: California Association of REALTORS®
Median Price of Existing Detached Homes
Southern California, January 2006: $531,043 Up 12.2%% Y-T-Y
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
Jan-00
Sep-00
Jan-01
Sep-01
Jan-02
Sep-02
Jan-03
Sep-03
Jan-04
Sep-04
Jan-05
Sep-05
May-00
May-01
May-02
May-03
May-04
May-05
SOURCE: California Association of REALTORS®
Median Price of Existing Detached Homes
Southern California Regions
County Jan-06 Dec-05 Jan-05 M-t-M Y-t-Y
High Desert $ 321,504 $ 320,490 $ 252,444 0.3% 27.4%
Los Angeles $ 560,736 $ 552,762 $ 475,805 1.4% 17.8%
Orange $ 699,065 $ 702,291 $ 634,277 -0.5% 10.2%
Palm Springs $ 385,074 $ 369,333 $ 380,603 4.3% 1.2%
Riverside/SB $ 391,246 $ 394,787 $ 338,778 -0.9% 15.5%
San Diego $ 605,603 $ 603,679 $ 580,215 0.3% 4.4%
Sta. Barbara-So. Coast $ 1,120,000 $ 1,200,000 $ 1,170,000 -6.7% -4.3%
Sta. Barbara-North Cnty. $ 469,350 $ 468,890 $ 443,750 0.1% 5.8%
Ventura $ 682,247 $ 675,675 $ 638,130 1.0% 6.9%
SOURCE: California Association of REALTORS®
Orange County
Sales of Existing Detached Homes and Pacific West Consumer Confidence
Orange County, January 2006: 1,195 Units, Down 24.2% Y-T-D, Down 24.2% Y-T-Y
UNITS Sales Consumer Confidence INDEX
3000 160
140
2500
120
2000
100
1500 80
60
1000
40
500
20
0 0
Jul-90
Jul-91
Jul-92
Jul-93
Jul-94
Jul-95
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
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
SOURCE: California Association of REALTORS®;
The Conference Board
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$0
Jan-88
Jul-88
Jan-89
Jul-89
Jan-90
Jul-90
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
SOURCE: California Association of REALTORS®
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Orange County, January 2006: $699,070, Up 10.2% Y-T-Y
Median Price of Existing Detached Homes
0
5
10
15
20
25
30
Jan-92
Jul-92 MONTHS
Jan-93
Jul-93
Jan-94
Jul-94
Jan-95
Jul-95
Jan-96
SOURCE: California Association of REALTORS®
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Unsold Inventory Index
Jan-03
Jul-03
Jan-04
Jul-04
Orange County, January 2006: 8.9 Months
Jan-05
Jul-05
Jan-06
Median Time on the Market
Orange County - Single-Family Homes, 2005 Q4: 37.3 days
120
SOURCE: California Association of REALTORS®
100
80
60
40
20
0
Q1/88
Q4/88
Q3/89
Q2/90
Q1/91
Q4/91
Q3/92
Q2/93
Q1/94
Q4/94
Q3/95
Q2/96
Q1/97
Q4/97
Q3/98
Q2/99
Q1/00
Q4/00
Q3/01
Q2/02
Q1/03
Q4/03
Q3/04
Q2/05
1000
1500
2000
2500
3000
3500
4000
4500
0
500
Jan-88
Jul-88
Jan-89
Jul-89
Jan-90
Jul-90
Jan-91
Jul-91
Jan-92
Jul-92
Jan-93
Jul-93
Jan-94
SOURCE: Construction Industry Research Board
Jul-94
Jan-95
Jul-95
Jan-96
Jul-96
Jan-97
Jul-97
Jan-98
Jul-98
Jan-99
Jul-99
Jan-00
Single Family
Jul-00
Jan-01
New Housing Permits
Jul-01
Jan-02
Jul-02
Jan-03
Multi-Family
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Orange County, January 2006: 1,137 Units, Up 298.9% Y-T-D
Sources of Population Growth
Orange County (1981-2004)
THOUSANDS SOURCE: CA Department of Finance
Natural Increase
70
Net Migration
60
50
40
30
20
10
0
-10
-20
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
00
01
02
03
04
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
19
20
20
20
20
20
Top 10 Home Buyer Surnames
Orange County (2005)
NGUYEN
KIM
LEE
TRAN
GARCIA
SOURCE: DataQuick Information Systems
HERNANDEZ
GONZALEZ
RODRIGUEZ
MARTINEZ
LOPEZ
0 50 100 150 200 250 300 350 400
Number of Buyers
Where are new OC households coming from?
• Los Angeles (19,522)
• Riverside (4,477)
• San Diego (3,336)
• San Bernardino (2,698)
• Santa Clara (970)
• Total incoming for 2004: 51,803
• Total outgoing for 2004: 58,935
• Source: NAR Relocation Report 2004 – IRS Data; Item 187-06037
2006 Forecast
U.S. Economic Forecast
2001 2002 2003 2004 2005 2006f
US GDP 0.8% 1.6% 2.7% 4.2% 3.5% 3.5%
Nonfarm Jobs % 0.03% -1.1% -0.3% 1.1% 1.6% 1.5%
Unemployment 4.7% 5.8% 6.0% 5.5% 5.1% 4.9%
CPI 2.8% 1.6% 2.3% 2.7% 3.5% 3.0%
30-Year 7.0% 6.5% 5.8% 5.8% 5.9% 6.5%
1-Year ARM 5.8% 4.6% 3.8% 3.9% 4.5% 5.4%
SOURCE: California Association of REALTORS®
e-expected, f-forecast
U.S. Housing Market Forecast
2001 2002 2003 2004 2005 2006f
US Resales
5.30 5.57 6.18 6.78 7.07 6.79
(millions)**
% Change 3.7% 5.1% 11.0% 9.7% 4.2% -4.0%
Median Price
$147.8 $158.2 $169.5 $185.2 $208.7 $219.7
($_thousands)**
% Change 6.3% 7.0% 7.1% 9.3% 12.7% 5.3%
SOURCE: National Association of REALTORS®
**Existing home sales of single-family homes and condo/coops
California Economic Forecast
2001 2002 2003 2004 2005 2006f
Nonfarm Job
0.8% -1.0% -0.5% 1.0% 1.6% 1.5%
Growth
Unemployment
5.4% 6.7% 6.7% 6.1% 5.3% 5.1%
Rate
Population
1.7% 1.5% 1.5% 1.5% 1.5% 1.5%
Growth
Real Personal
Income, % 0.4% 0.2% 2.0% 3.2% 3.9% 3.1%
Change
SOURCE: California Association of REALTORS®
California Housing Market Forecast
2001 2002 2003 2004 2005e 2006f
SFH Resales
504.0 572.6 601.8 624.7 625.0 612.5
(thousands)
% Change -5.9% 13.6% 5.1% 3.8% 0.03% -2.0%
Median Price
$262.4 $316.1 $372.7 $451.0 $525.0 $575.4
($ thousands)
% Change 8.7% 20.5% 17.9% 21.0% 16.4% 10.0%
Housing
Affordability 34% 29% 27% 20% 16% 15%
30-Yr FRM 7.0% 6.5% 5.8% 5.8% 5.9% 6.5%
1-Yr ARM 5.8% 4.6% 3.8% 3.9% 4.5% 5.4%
SOURCE: California Association of REALTORS®
2006 Forecast Risks
• Interest Rate Risk: Higher rates from:
– Unexpectedly high inflation
– Budget deficit run up in rates
– Sell off of U.S. debt by foreign investors and
central banks
• Consumer Spending Risk: Weaker than expected,
hindering expansion and job growth
– Refi boom slows; less equity to tap
2006 Market Opportunities
• Baby boomers – retiring and diversifying
• Singles – largest share of homebuyers
• Multi-cultural and immigrant buyers – Latinos
are fastest growing group of buyers
• Condos/Infill in metro areas – driven by
affordability or quality of life issues
• Continued strength in entry- and mid-range
County Economic Profiles
Ultimate Information Source
Based on data from:
• C.A.R. Research and Surveys
• U.S. Census Bureau
• California Department of Finance
• Federal Home Loan Mortgage Corporation
• Construction Industry Research Board
• Dataquick Information Services
Valuable Sales Tool
Contains over 20 easy-to-read charts covering:
Available in 12-month subscription
or on a one-time basis. • Home resale activity and consumer confidence
• Median home prices and mortgage rates
Delivered via e-mail in PowerPoint
presentation format. • Housing affordability index
• Current economic indicators
For more information: • Foreclosure rates
cep@car.org . . . and much more!
www.rebs.com
213.739.8217
C.A.R. Research Products
INTERNET vs. TRADITIONAL BUYER
– From internet use to buyer
satisfaction, a thorough
investigation of the home buying
process.
MEMBER USE OF TECHNOLOGY SURVEY
– Highlights current technology trends and
tools linked to REALTORS® success.
SURVEY OF CALIFORNIA
HOME SELLERS
– Detailed information on
the home selling process
at the consumer level.
C.A.R. Research Products
STATE OF THE CALIFORNIA
HOUSING MARKET All reports are also available in
electronic PDF file on
– Strategic marketing
information produced www.rebsreports.com
annually.
2005 SURVEY OF TOP PRODUCERS
– Advice and innovative strategies
used by successful REALTORS®.
MEMBER PROFILE
– Evaluates REALTOR®
business practices and
personal
characteristics.
Consumers are looking at these sites –
are you?
www.zillow.com
www.Trulia.com
www.redfin.com
www.Movoto.com
www.PropertyShark.com
www.HomeThinking.com
www.HomePages.com
www.onboardllc.com
www.move.com
2005 Internet vs. Traditional Home
Buyer Study
Internet Buyers Vs. Traditional Buyers
Percentage of All Homebuyers Surveyed
Internet Buyers Traditional Buyers
80%
72%
70%
63%
60% 59% 56% 62%
55%
50%
40% 45% 38%
41% 44%
37%
30%
28%
20%
10%
0%
2000 2001 2002 2003 2004 2005
Weeks Spent Investigating
Before Contacting Agent
Internet Buyers Traditional Buyers
5
4.76 4.72
4.58 4.51
4 4.39
3
2
1.88 1.78 1.70 1.65 1.64
1
0
2001 2002 2003 2004 2005
Weeks Spent Looking For Home With Agent
Internet Buyers Traditional Buyers
8
7.1 7.0
6.4 6.6 6.7
7
6
5
4
3
2.1 2.0 2.0 1.9 2.0
2
1
0
2001 2002 2003 2004 2005
Number Of Homes You Visited With Your
Real Estate Agent Prior To Purchase
Internet buyers 6.2
Traditional
14.5
buyers
Distance Between Previous Residence and
New Residence (Miles)
Internet 444
buyers 100
Mean
Median
Traditional 47
buyers 11
When You Started Using The Internet As
Part Of Your Home Buying Process
Before I started looking for a
87%
specific home
After I started looking for a
home, but before I contacted 13%
a real estate agent
How Did You First See The Home You
Purchased?
Internet Buyers Traditional Buyers
70%
Real estate
agent
97%
30%
On your own
3% 89% saw home on the Internet
Internet Site Where You
Found Your Real Estate Agent
Internet listing of a home that I
was interested in
87%
Realtor.com 7%
Real estate company web site 3%
Individual real estate agent's web
site
3%
Number Of Agents Interviewed Prior To Selecting
The Agent Used In Home Purchase
1.4
Internet
buyers
1.0
Mean
Median
3.3
Traditional
buyers
3.0
Agent’s Online Presence
Internet Buyers Traditional Buyers
100%
Have an e-mail address?
85%
Have a web site for their real estate 100%
brokerage firm? 7%
100%
Have listings on the Internet?
5%
Update you on your home closing by e- 99%
mail? 0%
Have his or her own, individual web 84%
site? 3%
Use electronic or online forms in the 17%
transaction? 0%
Means Of Communication With Real Estate
Agent
Telephone 45%
calls 100%
85%
E-mail
0% Internet Buyers
Traditional Buyers
0%
In person
32%
0%
Fax
2%
About How Often Did You Receive
Communications From Your Real Estate Agent?
Every "x" Days
4.3
Internet
3.7
buyers
3.7
6.3
Traditional
6.2
buyers
6.3
2003 2004 2005
Typical response time Expected from Agent
Internet Buyers Traditional Buyers
Instantly 21%
2%
Within 30 Minutes 23%
0%
Within 1 Hour 2%
11%
Within 2 Hours 3%
8%
Within 4 Hours 17%
14%
Same day 16%
38%
1 business day 18%
28%
Satisfaction With Real Estate Agent’s
Response Time
Mean Score On A 5-point Scale
5 Is “Exceedingly Surpassed Expectations” And 1 Is “Fell Way Below
Expectations”
Internet
3.5
buyers
Traditional
3.1
buyers
First time
3.1
home buyers
Repeat home
3.4
buyers
If You Were to Use a Real Estate Agent,
Would You Use the Same Agent?
Internet Buyers Traditional Buyers
98%
Yes
79%
2%
No
3%
0%
Unsure
18%
Satisfaction With Aspects Of Home Buying
Process
Mean Score On A 5-point Scale. 5 Is “Most Satisfied” And 1 Is “Least Satisfied”
Internet Buyers Traditional Buyers
Information on neighborhood: schools, 4.7
crime, etc. 4.2
4.6
Understanding the home buying process 4.3
Your real estate agent's negotiating skills 4.6
4.2
The assistance your real estate agent 4.7
provided in searching for a home 4.1
Overall, how well your real estate agent 4.6
kept you informed 3.9
4.8
Overall process of finding a home 4.1
Value received for what you paid your 4.4
real estate agent 4.2
Overall satisfaction with your real estate 4.9
agent 4.3
Overall Satisfaction With Agent Used
Internet Buyers Traditional Buyers
89%
Very satisfied
36%
10%
Satisfied
61%
Neither satisfied 1%
nor dissatisfied 3%
0%
Dissatisfied
0%
0%
Very Dissatisfied
0%
Satisfaction With Aspects of Home Buying Process:
How Well Real Estate Agent Kept Client Informed
Internet Buyers Traditional Buyers
67%
Very satisfied
23%
31%
Satisfied
49%
Neither satisfied 0%
nor dissatisfied 25%
1%
Dissatisfied
1%
0%
Very Dissatisfied
1%
Reasons For Satisfaction With The
Real Estate Agent You Used
Always quick to respond 93%
37%
Worked hard on my behalf 75%
41%
Helped find the best home for me 52%
58%
Listened to what we needed 30%
63%
Negotiated good deal on my behalf 52%
36%
Kept me up to date on transaction 20%
41%
Made sure changes, repairs were taken care of 10%
30%
Internet Buyers Traditional Buyers
From the bookshelf…
California was once an island…
Thank You
