December 28th, 2009, 6:00 am
Interview with homebuilder consultant Mark Boud of Real Estate Economics
Eyeball: Did Orange County housing have a bottom in 2009 — full or partial?
Mark: We formed a price floor around June 2009 and have since seen improvements. We actually formed a floor in sales volume back in January 2008, and have since seen improvements. Prices always lag sales volume — both up and down — by as much as 2 years. Some are forecasting a “double dip” or “W” recession where housing prices continue to deteriorate — partly due to a deluge of distressed inventory to be unleashed on the market. I don’t buy it. At current levels of undervaluation, distressed inventory is being absorbed faster than it is being introduced, and this trend will continue in Orange County and throughout California. 2010 won’t feel like a dramatic improvement in either price or sales volume, but small, incremental economic and market improvements will continue through next year, with more dramatic improvements forecast for 2011.
Eyeball: Driving forces in local housing — good or bad — in 2010?
Mark: Unfortunately, the main driving force won’t be job growth until the latter part of 2010. The main driver in housing sales during 2010 will be under valuation. Home prices remain grossly undervalued relative to incomes when the present mortage cost-to-income relationship is compared to long-term trends. Undervaluation will be increasingly realized as we move closer to economic growth. Sidelined buyers will re-enter the market in larger numbers to take advantage of distressed housing, low priced resales, and reduced priced new homes.
Eyeball: Predict 2010 gain in DataQuick’s OC median home-sale price
Mark: We predict a 2.1% positive change in the median price of housing in Orange County during 2010; our forecast for 2011 is +4.0%; and we forecast an +8.0% change by 2014.
Eyeball: A year from now, what surprise might we be talking about?
Mark: The new home market may rebound more dramatically than the overall housing market. For example, new homes being offered on the Irvine Ranch may absorb and appreciate faster than anyone anticipates – partly due to the lack of competitive new home inventory and partly due to a faster-than-anticipated drop in distressed housing inventory. As early as January, there may be a bit of a new home ‘frenzy’ on the Irvine Ranch.
Eyeball: Thinking back over this decade, list “lessons learned” from the roller coaster ride?
Mark: Most of the problems we face now are because we deregulated the mortgage market during this decade. By reducing our mortgage standards, we allowed non-traditional buyers — speculators, investors and unqualified buyers — to enter the market en masse, and encouraged the housing market to transition to an investment market. We’re paying a deep price for such foolishness.
http://www.realestateeconomics.com/
Wednesday, April 7, 2010
Wednesday, March 24, 2010
Tucson, AZ Employment & Demographic Trends
Employment Trends and Forecasts
Twelve month changes in the total non-farm job base are shown in the chart below:
After reaching historic levels estimated at 7.4% unemployment in 2009, it is forecast peak at 7.5% in 2010, before gradually receding toward more normal levels thereafter.
Demographic Trends and Forecasts
The distribution of the population by age bracket in this region is shown in the chart below:
The population distribution by age compares estimates for 2009 and forecasts for 2014 with Census data from the year 2000. Changes in the population between 2009 and 2014 are more clearly shown in the next chart:
The main long-term foundational driver in terms of housing sales volume and price support is a given region’s employment base. The following table presents historical trends and a 5-year forecast of employment and unemployment levels for the Tucson, AZ MSA:
Patterns in total non-farm jobs in this region are shown graphically in the following table:
Twelve month changes in the total non-farm job base are shown in the chart below:
As shown, this region is estimated to have lost 19,625 non-farm jobs during 2009 – an unprecedented 5.1% loss of the total non-farm job base for the biggest loss in decades. During Year 2010, an additional loss of 4,850 jobs is forecast. Thereafter, the impact from the national stimulus package will increasingly be felt, and combined with improved financial markets, should lead the national economic recovery towards regional economic expansion. By 2014, a healthy 2.6% growth rate is forecast for non-farm jobs in this region.
For a complete report Click Here
Patterns in unemployment are shown below:
After reaching historic levels estimated at 7.4% unemployment in 2009, it is forecast peak at 7.5% in 2010, before gradually receding toward more normal levels thereafter.
Demographic Trends and Forecasts
The distribution of the population by age bracket in this region is shown in the chart below:
The population distribution by age compares estimates for 2009 and forecasts for 2014 with Census data from the year 2000. Changes in the population between 2009 and 2014 are more clearly shown in the next chart:
As shown, population gains are forecast for all brackets. Sizable growth is projected between 25 and 44 years - peak family formation years which will boost growth in the 5 to 14 years bracket. Growth in the 25 to 44 year age brackets will continue to be drawn to affordable housing and job opportunities. Conventional housing will perform well in select price points.
Population growth between 55 and 74 years of age will be especially intense, suggesting that move-down and age targeted/qualified housing in various forms are likely to perform relatively well once economic growth resumes. This influx of buyers into the mature housing market is significant since baby boomers now account for one-fourth of the regional population. The mature market is anticipated to perform very well in the next cycle.
Population growth between 55 and 74 years of age will be especially intense, suggesting that move-down and age targeted/qualified housing in various forms are likely to perform relatively well once economic growth resumes. This influx of buyers into the mature housing market is significant since baby boomers now account for one-fourth of the regional population. The mature market is anticipated to perform very well in the next cycle.
For a complete report Click Here
Mark Boud
Real Estate Economics
Wednesday, March 10, 2010
Northern California Regional Economic and Housing Trends and Forecasts
Employment Trends and Forecasts
The main long-term foundational driver in terms of housing sales volume and price support is a given region’s employment base. The following trends and a five year forecast of employment and unemployment levels for Northern California.
This region is forecast to lose 344,008 non-farm jobs during 2009 – a 4.1% loss of the total non-farm job base, for the biggest loss in decades. During Year 2010, an additional loss of 69,433 jobs is forecast. Thereafter, the impact from the national stimulus package will increasingly be felt, and combined with improved financial markets, should lead the national economic recovery towards regional economic expansion. By 2014, a healthy 2.1% growth rate is forecast for non-farm jobs in this region.
After reaching historic levels estimated at 12.1% unemployment in 2009, it is forecast to peak at 12.4% in 2010, before gradually receding toward more normal levels thereafter. State budget woes have intensified high unemployment levels.
Housing Construction Trends and Forecasts
Levels of housing construction in the Northern California closely correlate with residential permit activity. Builders cut back sharply on construction after the housing bubble burst, causing the severe decline in permit activity in 2008. Residential permit activity is anticipated to keep declining through 2009, dropping to historic lows in 2010 and remaining low through 2011.
Permit activity is expected to be at extremely depressed levels for the following two to three years before gradually increasing to improved (but still low) levels by 2013. A decline in previously permitted housing units in the outlying areas magnified the plunge.
Gradual incremental growth in the housing stock is projected due to limited development opportunities in key areas, oversupply in outlying areas, and the recessionary impact on funding and feasibility for development. Incremental increases in housing stock will be far lower than historical patterns.
Housing Price Trends and Forecasts
Declines in housing values during 2008 were devastating, with less severe drops estimated in 2009 (mostly having occurred in the 1st half) with stabilization projected during the 2nd half of the year. By 2010, demand pressures will likely cause prices to conservatively increase by 1.7%.
Median home prices have fallen 42% from their peak in 2006, to a level similar to the median price in 2002-03. Following a bottoming out in 2009, mild price appreciation patterns beginning in 2010 are likely to be relatively gradual during the next few years, but will build momentum as the economy begins to improve, distressed inventory is absorbed, and economic expansion returns.
By 2014, the median home price is forecast to increase a healthy annualized 8%. Despite this increase by 2014, the resultant forecast median price will remain well below the peak unsupportable level achieved in 2006.
Mortgage Rate Trends and Forecast
Years 2009 and 2010 will be the lowest years in terms of mortgage rates in over two decades. The super low home loan rates have been made possible by the Federal Reserve’s extraordinary efforts to prop up the housing market and the overall economy in the wake of the global financial crisis.
A window of opportunity exists to refinance or purchase a home at historically low rates, allowing for much more relatively affordable housing costs for most buyers. By 2011 mortgage rates are likely to increase as economic growth increasingly stimulates inflationary pressures, and as the world demands higher payments to service the nation’s enormous debt load.
Household Income Trends and Forecasts
Increases in median household incomes are likely to be marginal during Years 2009 and 2010 – a reflection of the current economic downturn. Thereafter, income growth is likely to begin to normalize, reaching an annualized 2.8% gain by Year 2014.
The number of households making between $100,000 and $200,000, and above $250,000, per year is likely to increase dramatically during the next five years as the population matures and as economic growth resumes.
For a full report of this are click here
Mark Boud
Real Estate Economics
http://www.RealEstateEconomics.com
The main long-term foundational driver in terms of housing sales volume and price support is a given region’s employment base. The following trends and a five year forecast of employment and unemployment levels for Northern California.
This region is forecast to lose 344,008 non-farm jobs during 2009 – a 4.1% loss of the total non-farm job base, for the biggest loss in decades. During Year 2010, an additional loss of 69,433 jobs is forecast. Thereafter, the impact from the national stimulus package will increasingly be felt, and combined with improved financial markets, should lead the national economic recovery towards regional economic expansion. By 2014, a healthy 2.1% growth rate is forecast for non-farm jobs in this region.
After reaching historic levels estimated at 12.1% unemployment in 2009, it is forecast to peak at 12.4% in 2010, before gradually receding toward more normal levels thereafter. State budget woes have intensified high unemployment levels.
Housing Construction Trends and Forecasts
Levels of housing construction in the Northern California closely correlate with residential permit activity. Builders cut back sharply on construction after the housing bubble burst, causing the severe decline in permit activity in 2008. Residential permit activity is anticipated to keep declining through 2009, dropping to historic lows in 2010 and remaining low through 2011.
Permit activity is expected to be at extremely depressed levels for the following two to three years before gradually increasing to improved (but still low) levels by 2013. A decline in previously permitted housing units in the outlying areas magnified the plunge.
Gradual incremental growth in the housing stock is projected due to limited development opportunities in key areas, oversupply in outlying areas, and the recessionary impact on funding and feasibility for development. Incremental increases in housing stock will be far lower than historical patterns.
Housing Price Trends and Forecasts
Declines in housing values during 2008 were devastating, with less severe drops estimated in 2009 (mostly having occurred in the 1st half) with stabilization projected during the 2nd half of the year. By 2010, demand pressures will likely cause prices to conservatively increase by 1.7%.
Median home prices have fallen 42% from their peak in 2006, to a level similar to the median price in 2002-03. Following a bottoming out in 2009, mild price appreciation patterns beginning in 2010 are likely to be relatively gradual during the next few years, but will build momentum as the economy begins to improve, distressed inventory is absorbed, and economic expansion returns.
By 2014, the median home price is forecast to increase a healthy annualized 8%. Despite this increase by 2014, the resultant forecast median price will remain well below the peak unsupportable level achieved in 2006.
Mortgage Rate Trends and Forecast
Years 2009 and 2010 will be the lowest years in terms of mortgage rates in over two decades. The super low home loan rates have been made possible by the Federal Reserve’s extraordinary efforts to prop up the housing market and the overall economy in the wake of the global financial crisis.
A window of opportunity exists to refinance or purchase a home at historically low rates, allowing for much more relatively affordable housing costs for most buyers. By 2011 mortgage rates are likely to increase as economic growth increasingly stimulates inflationary pressures, and as the world demands higher payments to service the nation’s enormous debt load.
Household Income Trends and Forecasts
Increases in median household incomes are likely to be marginal during Years 2009 and 2010 – a reflection of the current economic downturn. Thereafter, income growth is likely to begin to normalize, reaching an annualized 2.8% gain by Year 2014.
The number of households making between $100,000 and $200,000, and above $250,000, per year is likely to increase dramatically during the next five years as the population matures and as economic growth resumes.
For a full report of this are click here
Mark Boud
Real Estate Economics
http://www.RealEstateEconomics.com
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