California COVID-19 Economic/Market Update...Apr 22, 2020 · California COVID-19 Economic/Market...

California COVID-19 Economic/Market UpdateApril 22, 2020

Jordan G. LevineDeputy Chief EconomistCalifornia Association of REALTORS®

CALIFORNIA ASSOCIATION OF REALTORS®

overview

page2

01 Fundamentals First

• Still too early for most major indicators.• We started on a strong footing economically

02 Impacts of COVID-19

• Revised forecasts for economy and housing• Lots of uncertainty and forecasts change rapidly

03 Outlook & Scenarios

• Rates won’t be enough to offset this one• Housing could be a bright spot after crisis

04 Resources for YOU

• CAR has many resources available• Information & will connect you with ASSISTANCE

Review of Pre-Crisis Economy


The economy was still growing at a decent clip

-2

-1

0

1

2

3

4

5

6U.S. GDP Growth


Fastest job growth in a year

1.6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

1/1/

2010

4/1/

2010

7/1/

2010

10/1

/201

01/

1/20

114/

1/20

117/

1/20

1110

/1/2

011

1/1/

2012

4/1/

2012

7/1/

2012

10/1

/201

21/

1/20

134/

1/20

137/

1/20

1310

/1/2

013

1/1/

2014

4/1/

2014

7/1/

2014

10/1

/201

41/

1/20

154/

1/20

157/

1/20

1510

/1/2

015

1/1/

2016

4/1/

2016

7/1/

2016

10/1

/201

61/

1/20

174/

1/20

177/

1/20

1710

/1/2

017

1/1/

2018

4/1/

2018

7/1/

2018

10/1

/201

81/

1/20

194/

1/20

197/

1/20

1910

/1/2

019

1/1/

2020

U.S. vs California Job Growth

Balance of U.S. CA


Unemployment shrinks back to all-time low

0

2

4

6

8

10

12

14

1/1/

1976

12/1

/197

611

/1/1

977

10/1

/197

89/

1/19

798/

1/19

807/

1/19

816/

1/19

825/

1/19

834/

1/19

843/

1/19

852/

1/19

861/

1/19

8712

/1/1

987

11/1

/198

810

/1/1

989

9/1/

1990

8/1/

1991

7/1/

1992

6/1/

1993

5/1/

1994

4/1/

1995

3/1/

1996

2/1/

1997

1/1/

1998

12/1

/199

811

/1/1

999

10/1

/200

09/

1/20

018/

1/20

027/

1/20

036/

1/20

045/

1/20

054/

1/20

063/

1/20

072/

1/20

081/

1/20

0912

/1/2

009

11/1

/201

010

/1/2

011

9/1/

2012

8/1/

2013

7/1/

2014

6/1/

2015

5/1/

2016

4/1/

2017

3/1/

2018

2/1/

2019

1/1/

2020

Unemployment Rate

CA US


Biggest strength also big housing weakness


Consumers had been relatively confident

0

20

40

60

80

100

120

1/1/

1978

10/1

/197

97/

1/19

814/

1/19

831/

1/19

8510

/1/1

986

7/1/

1988

4/1/

1990

1/1/

1992

10/1

/199

37/

1/19

954/

1/19

971/

1/19

9910

/1/2

000

7/1/

2002

4/1/

2004

1/1/

2006

10/1

/200

77/

1/20

094/

1/20

111/

1/20

1310

/1/2

014

7/1/

2016

4/1/

2018

U. Mich. Consumer Sentiment Index

80

85

90

95

100

105

1/1/

2016

4/1/

2016

7/1/

2016

10/1

/201

6

1/1/

2017

4/1/

2017

7/1/

2017

10/1

/201

7

1/1/

2018

4/1/

2018

7/1/

2018

10/1

/201

8

1/1/

2019

4/1/

2019

7/1/

2019

10/1

/201

9

U. Mich. Consumer Sentiment Index


Consumer spending was still going strong

0

100

200

300

400

500

600

Jan-

92A

pr-9

3Ju

l-94

Oct

-95

Jan-

97A

pr-9

8Ju

l-99

Oct

-00

Jan-

02A

pr-0

3Ju

l-04

Oct

-05

Jan-

07A

pr-0

8Ju

l-09

Oct

-10

Jan-

12A

pr-1

3Ju

l-14

Oct

-15

Jan-

17A

pr-1

8Ju

l-19

U.S. Retail Sales

Retail Sales Retail (x Food/Autos)

0%

1%

2%

3%

4%

5%

6%U.S. Retail Sales Growth

Retail Growth Retail Growth (x Food/Autos)


Consumers were in good financial shape!

8

10

12

14

16

18

20

Q1-

80Q

4-80

Q3-

81Q

2-82

Q1-

83Q

4-83

Q3-

84Q

2-85

Q1-

86Q

4-86

Q3-

87Q

2-88

Q1-

89Q

4-89

Q3-

90Q

2-91

Q1-

92Q

4-92

Q3-

93Q

2-94

Q1-

95Q

4-95

Q3-

96Q

2-97

Q1-

98Q

4-98

Q3-

99Q

2-00

Q1-

01Q

4-01

Q3-

02Q

2-03

Q1-

04Q

4-04

Q3-

05Q

2-06

Q1-

07Q

4-07

Q3-

08Q

2-09

Q1-

10Q

4-10

Q3-

11Q

2-12

Q1-

13Q

4-13

Q3-

14Q

2-15

Q1-

16Q

4-16

Q3-

17Q

2-18

Q1-

19

Consumer Debt and Financial Obligations

Debt Service Ratio Financial Obligations Ratio

Why This Should BeTaken Seriously, Economically

Financial markets impact people’s wealth & confidence

page12

SERIES: Dow 30, Nikkei, FTSESOURCE: Yahoo! Finance, Bloomberg

10,000

15,000

20,000

25,000

30,000

35,000

4/21

/201

5

6/21

/201

5

8/21

/201

5

10/2

1/20

15

12/2

1/20

15

2/21

/201

6

4/21

/201

6

6/21

/201

6

8/21

/201

6

10/2

1/20

16

12/2

1/20

16

2/21

/201

7

4/21

/201

7

6/21

/201

7

8/21

/201

7

10/2

1/20

17

12/2

1/20

17

2/21

/201

8

4/21

/201

8

6/21

/201

8

8/21

/201

8

10/2

1/20

18

12/2

1/20

18

2/21

/201

9

4/21

/201

9

6/21

/201

9

8/21

/201

9

10/2

1/20

19

12/2

1/20

19

2/21

/202

0

Dow Jones Industrial Average


Poorer population is a good predicter of recession

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Q1-

68Q

1-69

Q1-

70Q

1-71

Q1-

72Q

1-73

Q1-

74Q

1-75

Q1-

76Q

1-77

Q1-

78Q

1-79

Q1-

80Q

1-81

Q1-

82Q

1-83

Q1-

84Q

1-85

Q1-

86Q

1-87

Q1-

88Q

1-89

Q1-

90Q

1-91

Q1-

92Q

1-93

Q1-

94Q

1-95

Q1-

96Q

1-97

Q1-

98Q

1-99

Q1-

00Q

1-01

Q1-

02Q

1-03

Q1-

04Q

1-05

Q1-

06Q

1-07

Q1-

08Q

1-09

Q1-

10Q

1-11

Q1-

12Q

1-13

Q1-

14Q

1-15

Q1-

16Q

1-17

Q1-

18Q

1-19

YoY % Change in U.S. Real Net Worth Per Capita


If confidence is also impacted, not much to fall back on

-3

-2

-1

0

1

2

3

4

5

6U.S. GDP Growth by Component

Consumers Everything Else

Biggest monthly decline ever in consumer confidence

page15

March 2020 120.0

SERIES: Consumer ConfidenceSOURCE: The Conference Board


New record for retail sales declines

-66.6%

-53.6%

-80%

-60%

-40%

-20%

0%

20%

40%

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20

U.S. Retail Sales Growth

Retail Growth Retail Growth (x Food/Autos)


California’s 10-year jobs streak comes to an end

-99,500

-150,000

-100,000

-50,000

0

50,000

100,000

150,000Ja

n-11

Apr

-11

Jul-1

1O

ct-1

1Ja

n-12

Apr

-12

Jul-1

2O

ct-1

2Ja

n-13

Apr

-13

Jul-1

3O

ct-1

3Ja

n-14

Apr

-14

Jul-1

4O

ct-1

4Ja

n-15

Apr

-15

Jul-1

5O

ct-1

5Ja

n-16

Apr

-16

Jul-1

6O

ct-1

6Ja

n-17

Apr

-17

Jul-1

7O

ct-1

7Ja

n-18

Apr

-18

Jul-1

8O

ct-1

8Ja

n-19

Apr

-19

Jul-1

9O

ct-1

9Ja

n-20

California Nonfarm Jobs Base (Monthly Change)


Other records we’re breaking

• Biggest drop in housing starts since 1984

• Largest decline in builder sentiment – ever

• Empire manufacturing index drops to lowest level – ever

• Industrial production at lowest level since 1946

• Philly Fed index at lowest level in 40 years

• Nearly 5 million households in forbearance

Retail store sales by category

page19SOURCE: Mortgage Bankers Association

page20

U.S. movie theaters struggle

SOURCE: BoxOfficeMojo.com, J.P. Morgan

Domestic movie theater box office receipts

*Greylines are data for 2017-2019

page21

Broadway hits a new bottom

SOURCE: BroadwayWorld.com, J.P. Morgan

Broadway theater box office receipts


page22

NBA attendance drops to zero

SOURCE: espn.com, J.P. Morgan

Attendance at NBA basketball games


(Average)

page23

Restaurant bookings slide

SOURCE: OpenTable.com, J.P. Morgan

Seated restaurant diners tracked by OpenTable.comyty% chg.

page24

Grocery delivery surges but food delivery fails to increase

SOURCE: SimilarWeb.com, J.P. Morgan

Website traffic growth over 2018-2019 average

*Data through March 14

page25

Hotel occupancy tumbles

SOURCE: Smith Travel, J.P. Morgan

U.S. hotel occupancy rate


page26

Fewer commercial flights

SOURCE: Flightradar24 (March 27, 2020), BBC

Number of daily flights in March

Daily GDP lost by state

page27SOURCE: Wall Street Journal, Moody’s Analytics

page28

Where the rubber meets the road…

SOURCE: FRED St. Louis Fed

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000U.S. Initial Unemployment Insurance Claims

~22 millionin 4 weeks

37 millionin ~2 years

Concerns in Real EstateRamped Up Quickly


Dates

page30

• Week 1 (n=266): March 6-8• Week 2 (n=1,085): March 14-16• Week 3 (n=749): March 20-23• Week 4 (n=923): March 27-30• Week 5 (n=749): April 3-6• Week 6 (n=722): April 10-13• Week 7 (n=609): April 17-20

SERIES: 2020 Membership SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Members continue to feel the impact

page31

53%47%

78%

22%

96%

4%

97%

3%

96%

4%

97%

3%

95%

5%

Yes No

March 6-8March 14-16March 20-23March 27-30April 3-6April 10-13April 17-20

Q: Do you feel that Coronavirus has or will have a negative impact on your personal Real Estate business?


Percent of members seeing buyers withdraw their offer remains in mid-40’s

page32

36%

64%

42%

58%

43%

57%

44%

56%48%

52%

Yes No

March 20-23March 27-30April 3-6April 10-13April 17-20

Q: Have you had any buyers withdraw an offer due to Coronavirus?


Sellers continuing to remove homes from market

page33

13%

54%

33%31%

39%

30%

44%

32%

24%

46%

30%24%

54%

26%19%

57%

27%

16%

Yes No Not sure

March 14-16March 20-23March 27-30April 3-6April 10-13April 17-20

Q: Have you seen any sellers remove their home from the market completely due to Coronavirus?


1 in 4 members reporting a transaction that fell out of escrow

page34

21%

79%

29%

71%

27%

73%

28%

72%

31%

69%

Yes No

March 20-23March 27-30April 3-6April 10-13April 17-20

Q: Have you had a transaction fall out of escrow due to Coronavirus?


9 in 10 buyers now expecting lower prices

page35

Q: In general, are home buyers expecting lower prices now?

89%

11%

90%

10%

Yes No

April 10-13April 17-20


30%

70%

Yes No

April 17-20

Q: Have you had a buyer attempt to renegotiate the purchase price prior to close?


Sellers aren’t on the same page

33%

67%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Yes No

Have any of your home sellers recently reduced price to

attract buyers?

Apr. 17-20

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

3/8

3/10

3/12

3/14

3/16

3/18

3/20

3/22

3/24

3/26

3/28

3/30 4/1

4/3

4/5

4/7

4/9

4/11

4/13

4/15

4/17

4/19

California Active Listings

Discounted Original Price

Market Environment Will Remain Challenging During SIP


Closed sales now follow the pending sales down

page39

104

325

22

135

631

81

229

1897

461

Bay Area So CA Central Coast Central Valley California

Average Daily Closed SalesMar 1 - 7 Mar 8 - 14 Mar 15 - 21 Mar 22 - 28 Mar 29 - Apr 4 Apr 5 - 11 *Apr 12- 17

**Closed sales for the latest week will likely be revised upward due to recording delays.


Double-digit decline for the state and most regions

page40

9.7%5.4%

16.3%

4.8% 6.7%

-10.1%-13.2%

-9.6%-14.2% -12.4%


% Chg. in Closed Sales from Prior Week (Daily Average)

Mar 8 - 14 Mar 15 - 21 Mar 22 - 28 Mar 29 - Apr 4 Apr 5 - 11 *Apr 12- 17



Big markets leading the slide

page41

2023

41

5

10

21

11 9

2018

2 2 35

18

9

6

Alameda ContraCosta

Marin Napa SanFrancisco

San Mateo Santa Clara Solano Sonoma




Closed sales by county (Southern California)

page42

98

45

65

4755

15

66

3344

37 38

11

Los Angeles Orange Riverside San Bernardino San Diego Ventura




Closed sales by county (Central Coast)

page43

5

10

5

23

7 6

2

Monterey San Luis Obispo Santa Barbara Santa Cruz




Closed sales by county (Central Valley)

page44

22

1

16

3 3 4

15

33

1

14 12 1114

1

10

3 3 49

22

1

13 11 8



March data was tip of the iceberg

page45

California, March 2020 Sales: 373,070 Units, 3.1% YTD, -6.1% YTY

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Jan-

05

Sep

-05

May

-06

Jan-

07

Sep

-07

May

-08

Jan-

09

Sep

-09

May

-10

Jan-

11

Sep

-11

May

-12

Jan-

13

Sep

-13

May

-14

Jan-

15

Sep

-15

May

-16

Jan-

17

Sep

-17

May

-18

Jan-

19

Sep

-19

SERIES: Sales of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®


New listings leveling off?

page46

182

511

40

240

1,068

110

282

21146

602


Average Daily New ListingsMar 1 - 7 Mar 8 - 14 Mar 15 - 21 Mar 22 - 28 Mar 29 - Apr 4 Apr 5 - 11 *Apr 12- 17


More properties listed in latest week

page47

-14.2% -11.6% -12.4%-6.5% -10.8%

4.9%14.4%

-0.8%

3.8%8.7%


% Chg. in New Listings from Prior Week (Daily Average)

Mar 8 - 14 Mar 15 - 21 Mar 22 - 28 Mar 29 - Apr 4 Apr 5 - 11 *Apr 12- 17


Too early to tell, but encouraging signs

page48

3538

7 6 5

17

38

18 1818

26

4 4 2

10

22

12 12

Alameda ContraCosta





New listings by county (Southern California)

page49

151

7595 87

78

24

84

3453

4156

14




New listings by county (Central Coast)

page50

10

13

108

5 6 7

4




New listings by county (Central Valley)

page51

30

1

31

49 6

27

63

3

28 241519

1

17

4 6 3

15

42

1

15 11 12



Pending sales bottoming out?

page52

121

369

24

175

744

65

196

13

130

441


Average Daily Pending SalesMar 1 - 7 Mar 8 - 14 Mar 15 - 21 Mar 22 - 28 Mar 29 - Apr 4 Apr 5 - 11 *Apr 12- 17


Glimpse of hope in Bay Area and Central Valley

page53

8.6%

-3.6%

4.7%0.5%

-0.5%

7.3%

-9.8%-5.0%

7.7%

-1.5%


% Chg. in Pending Sales from Prior Week (Daily Average)Mar 8 - 14 Mar 15 - 21 Mar 22 - 28 Mar 29 - Apr 4 Apr 5 - 11 *Apr 12- 17


Pending sales also show hopeful signs

page54

25

32

4 46

11

24

8 7

1214

2 2 25

15

85

Alameda ContraCosta





Pending sales by county (Southern California)

page55

101

52

78

62 63

14

52

22

40 36 38

9


Average Daily Pending Sales

Mar 1 - 7 Mar 8 - 14 Mar 15 - 21 Mar 22 - 28


Pending sales by county (Central Coast)

page56

6

9

7

33

4 4

2




Pending sales by county (Central Valley)

page57

25

0

22

5 5 6

17

46

1

18 16 1420

1

14

4 4 3

14

36

1

13 11 10


Mortgage applications declined sharply from last year

page58SOURCE: Mortgage Bankers Association Weekly Application Survey

Week-over-week % Chg. Year-over-Year %Chg.

Week ending 4/10/2020




CA 16.4% -38.0% -52.5% -59.9%NY 1.8% -15.9% -49.0% -47.5%WA 0.8% -31.3% -58.4% -55.4%US -1.0% -12.0% -35.0% -33.0%

Note: Not seasonally adjusted, home purchase applications only


Not much impact to prices yet

$382

$569

$214

$505

$361

$545

$213

$451

$0

$100

$200

$300

$400

$500

$600

Southern California Bay Area Central Valley Central Coast

California Median Prices Per Square Foot by Week

10 11 12 13 14 15 16 17


List prices down a little from early March

-3.0%

-8.4%

0.4%

-4.6%

-9%

-8%

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

Southern California Bay Area Central Valley Central Coast

Median Price Per Sq. Ft.3/2-3/8 vs. 4/13-4/19

Real Estate Poised for Strong, Eventual, Recovery


Rates are low, and poised to remain low

3.310

0

2

4

6

8

10

12

14

16

18

20Key Interest Rates

10-Yr. Treasury 30-Yr. FRM


Could eventually drop even lower

2.69

Historical Avg. 1.70

-1

0

1

2

3

4

5

6Mortgage Rate Spread (30-Yr. FRM – 10-Yr. Treasury)


Market might make real estate look more attractive

Sales highest in nearly 2 years

page65

California, February 2020 Sales: 421,670 Units, 8.0% YTD, 5.9% YTY

-

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Jan-

05

Sep

-05

May

-06

Jan-

07

Sep

-07

May

-08

Jan-

09

Sep

-09

May

-10

Jan-

11

Sep

-11

May

-12

Jan-

13

Sep

-13

May

-14

Jan-

15

Sep

-15

May

-16

Jan-

17

Sep

-17

May

-18

Jan-

19

Sep

-19

SERIES: Sales of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Median price remained below 600kbut grew solidly from last year

page66

California, February 2020: $579,770, 0.8% MTM, 8.5% YTY

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Jan-

05

Sep

-05

May

-06

Jan-

07

Sep

-07

May

-08

Jan-

09

Sep

-09

May

-10

Jan-

11

Sep

-11

May

-12

Jan-

13

Sep

-13

May

-14

Jan-

15

Sep

-15

May

-16

Jan-

17

Sep

-17

May

-18

Jan-

19

Sep

-19

SERIES: Median Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

TheForecast

This Photo by Unknown Author is licensed under CC BY-NC-ND

https://flickr.com/photos/amuderick/46246205

https://creativecommons.org/licenses/by-nc-nd/3.0/


Gussied up guesses

page69* Latest updates as of 04/08/2020

Q120 Q220 Q320 Q420 2020

Bank of America -7.0% -30.0% -1.00% 30.0% -10.4%

Barclays 0.5% -7.0% 0.0% 2.5% -0.6%

Goldman Sachs -9.0% -34.0% 19.0% NA -6.2%

JP Morgan -10.0% -25.0% 8.0% 4.0% NA

Morgan Stanley -3.4% -37.9% 20.7% 15.9% -5.5%

Federal Reserve Bank of St. Louis NA -50% NA NA NA

UBS -2.1% -9.5% 2.1% 6.7% -0.9%

UCLA 0.4% -30.0% -5.0% 4.0% NA

Wells Fargo -1.2% -22.3% 7.2% 4.8% -3.0%

page70

Fed has taken unprecedented action

SOURCE: California Association of REALTORS®

Federal Reserve

• Cut fed funds rate down to 0% - 0.25%

• Lowered discount window rate to 0.25%

• Expanded reverse repo operation, adding liquidity to the banking system

• Restarted quantitative easing

• Created multiple new programs to help preserve market liquidity

page71

Fiscal stimulus was a good first few steps

SOURCE: California Association of REALTORS®

Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

• Forgivable Small Business Administration Loans - independent contractors who take out SBA loans between Feb. 15, 2020, and June 30, 2020 to cover payroll costs, mortgage interest, rents, and utility costs during the covered period may be forgiven.

• Pandemic Unemployment Assistance – REALTORS® not eligible for unemployment insurance will be able to obtain unemployment assistance for up to 39 weeks if they were negatively impacted as a result of COVID-19

• Direct Payments to REALTORS® – REALTORS® and their families with annual incomes of up to $75,000 will receive a rebate check of $1,200 ($2,400 for married couples with gross annual incomes up to $150,000). An additional $500 may be given per child in the household.


Worried about inflation?

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U.S. Base Money Supply


Not a major concern right now

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Decomposition of Base Money Supply

Net Monetary Base Excess Reserves

Retail markets dip during a crisis but stabilize eventually

page74

SERIES: Retail sales year-over-year growth

Covid-19 projections in California (Mar 31, 2020)

page75SOURCE: Institute for Health Metrics and Evaluation (IHME)

Note: The projections assume the continuation of strong social distancing measures and other protective measures.

Covid-19 projections in California (Apr 12, 2020) –the curve has been flattened



Covid-19 projections in California (Apr 21, 2020) –the curve has been flattened



Going hard early works

page78SOURCE: Bloomberg and health ministry data

Rush to normalcy could increase the severity

page79SOURCE: New York Times

Timing is everything for small businesses & economy

page80SOURCE: J.P. Morgan Chase

Median small business holds 27 cash buffer days in reserve

Jobs market: more like a natural disaster than recession

page81

SERIES: Louisiana jobless claimsSOURCE: St. Louis Fed, VOX

Jobless claims in Louisiana

Concluding remarks

page82

1. Economy was in good shape prior to the outbreak2. BUT, the virus has changed everything for 20203. Unprecedented in terms of size and economic scope4. Data still rolling in and weeks seem like months5. Unemployment is and will drive negative impacts6. Already seeing the effects on housing7. Key question hinges on how long the SIP lasts8. Severe pullback may be best chance for quick recovery

page83

Resources for REALTORS®

• Coronavirus Microsite

• COVID Relief Hotline

• Legal Hotline & Legal Webinars

• Transaction Rescue™ Hotline

• Ombudsman Hotline

• CARES ACT Relief for REALTORS®

• Real Estate as an Essential Service

• New FORMS for REALTORS®

• Electronic Closings

• Online Notary Services

https://www.carcovidupdates.org/

https://www.carcovidupdates.org/

Thank YouThis presentation can be found on

www.car.org/marketdataSpeeches & Presentations

[email protected]

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