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Category Archive: ‘Forecasts’

Zillow San Diego Forecast

The Zillow folks offered up their forecast for the San Diego area.  Below is the actual change in their home-value index for the 12 months ending in September, and then their forecast for 2016:

Snapshot 1 (11-20-2015 7-44 AM)

Snapshot 2 (11-20-2015 7-49 AM)

Are we heading for flatsville?  Let’s see how they did last year.

These were their predicted and actual changes in the ZHVI for the 12 months ending in October, 2015:

Zillow HVI Appreciation Forecast
La Jolla
Solana Beach
San Diego
Del Mar
Carmel Valley

They were pretty close for Del Mar!

Zillow claims to have the most sophisticated data and algorithms, yet they were way off.  It goes to show you how any forecast is really just a guess.

Posted by on Nov 20, 2015 in Forecasts, Jim's Take on the Market | 4 comments

GS Forecast

This looks like a fairly safe forecast – I’ll take the under. From HW:

Goldman Sachs sent an email to clients advising that growth in residential investments through 2016 will be solid, though not as strong as they originally hoped.  Plus, this growth will likely curtail in the years immediately following as the chart below notes.

gold sachs

The residential investment definition includes all new construction, about half the total of all construction, plus home improvement spending and commissions for real estate brokers.

“We are trimming our expectations for 2016 slightly — lowering our forecast for residential investment to 8% from 11% previously — but we still expect housing to be the top performer among the major components of GDP,” writes economist Daan Struyven, in a note to clients. “Although housing starts are likely to increase at a somewhat slower pace than in 2015, a shift in composition to more single-family building should add to residential investment next year.”

The Goldman note states that residential investment growth is hampered by housing starts, which remain below pace to match demand.

Additionally, the rising interest rate environment expected next year, something the Fed is now openly referring to as “normalization,” will impact mortgage applications, but the Goldman note is unclear to what extent.

“We continue to expect housing to be the fastest growing component of GDP next year,” Struyven adds. “Taking all the components together, we forecast a gain of 8% Q4/Q4 for 2016 residential investment, which would add about 0.3 percentage points to overall GDP growth.”

“Our outlook for new construction in 2016 is mixed. On the one hand, we expect positive but lower growth in housing starts, with 100,000 more starts in 2016 than in 2015 (1.3 million in 2016 vs 1.2 million in 2015), compared to a gain of 150,000 in 2015.

This relative slowing reflects three factors. First, the level of housing starts, while still depressed, is getting closer to its equilibrium level, implied by demographics and demolition rates. Second, unemployment should continue to decline, which should foster household formation, but at a slower pace. Third, Fed hikes, and associated higher mortgage rates, may also reduce the pace at which builders increase starts.”

Posted by on Nov 19, 2015 in Forecasts, Jim's Take on the Market | 0 comments

What Bill Said


Bill Davidson told us a couple years back that we are out of dirt. More on that:

If you think San Diego’s housing market is strained and pricey now, what will it be like in 20 years? Yes, feel free to shudder.  No one, of course, can accurately predict that far in advance. There are too many variables at play. But there is one aspect of the current housing market that would seem tough to reverse.

And that’s the ability to build.

For one thing, we have finite developable land, particularly in the city of San Diego. Secondly, a portion of our population appears unwilling to embrace density — at least in their own neighborhoods — which makes it tough on planners and builders to increase supply.

“We’ll be the Bay Area in no time,” said Borre Winckel, president and CEO of the Building Industry Association of San Diego. “We can offer very few product lines for the middle-class buyer.”

San Francisco was once a quirky, counter-cultural city that was home to a bevy of activists, artists and writers. But that city is vanishing because of sky-high housing costs. Now, only the elite can afford to live in the city and, like in Manhattan, low- and middle-income workers are forced to live further afield and make long commutes to their jobs.

San Diego is not far behind. It is already the nation’s fifth most expensive housing market, according to the National Association of Realtors. Only an estimated 25 percent of households can afford the median home price.

Even more troubling, most of the apartment units under construction are higher end, catering to wealthier millennials.

“My lament is that we’re royally screwing the housing opportunity for the middle class and young people,” Winckel said.

San Diego’s population grew by 159,000 people from 2010 to 2014, but the region added only 22,000 housing units in that time, according to the U.S. Census Bureau.

If that trend continues, experts predict housing prices will continue to rise.

Read full article here:

Posted by on Oct 26, 2015 in Davidson, Forecasts | 6 comments

Boomers Survey

This survey is dated 2014, and they should update it every year – or at least until I’m right about having a boomer liquidation sale coming down the pike!

This survey asks several different questions, but notice how 20% to 30% of the responses seemed to divulge some stress or uncertainty about their future:




Uh-oh.  It looks like this homeownership thing could be a boomer addiction:



It’s still early in the game for most boomers.

But here’s where the game changers start to come out.  Only 58% don’t plan to sell?  Fine, they aren’t going to make the market – it’s the other 42% that will determine our real estate future:


Fluff question below – of course we like our home, at least until selling it becomes a better idea:


Almost a quarter of boomers know they are already short on income, and will be hitting the housing ATM.  How many others who didn’t expect to use their equity in 2014 will eventually need to cash out for various reasons?


Here’s where the real trouble starts below – 46%???





The best question towards the end of the survey once respondents have loosened up – and lo and behold, 61% of boomers aren’t sleeping that well.

If it only ends up being 20% to 30% of boomers who make a move, that’s still at least 15 million people in America who will be deciding our market!

The biggest concern?

Elderly folks who haven’t moved in a generation (or two), who know their money is running out and happen to see a couple of lower-priced sales nearby.  In a effort to bank as much equity as possible, they hit the panic button and grab the first realtor they find who then dumps their house for 95% of value.

It’s a downward spiral that could pick up steam quickly.

Posted by on Oct 12, 2015 in Boomer Liquidations, Boomers, Forecasts, Jim's Take on the Market, Thinking of Buying?, Thinking of Selling?, This Is America, Why You Should List With Jim | 19 comments

2016 Real Estate Forecast

The California Association of Realtors published their 2016 Forecast last week, and it’s a whopper – 131 pages (scroll down to bottom of page for full report).

Here are the highlights:


2015 forecast

2015 where are we

where is the inventory

yty prices by county

San Diego County prices and sales are positive, which is a healthy sign.  The median sales price was up 9.1%, and the number of sales increased 11.5%.

I’m going to take the under for 2016, and guess that we’ll have fewer SD sales next year, mostly because on the remaining graphs below:

socal prices

socal sales

fewer adults

international buyers

multiple offers

years owned

2015 EXPO Forecast Final

Posted by on Oct 12, 2015 in Forecasts, Jim's Take on the Market, Sales and Price Check | 10 comments

The Next Ten Years


A big shout out to the commenters on Thursday’s 10th Anniversary Show – your involvement is appreciated!  Rob Dawg suggested that the next ten years will be more interesting – indeed!

What about the next ten years?

Let’s start with identifying where buyers are today – they have arrived.

The inventory of homes for sale is online, and available to everyone 24/7.  The gadgets and gizmos help buyers explore each house thoroughly, and in the future those gimmicks should expand to include full 360-degree video tours, heat-imagery scans, mortgage history, inspection reports, history of insurance claims, title reports , etc.  Most of these are available now, but not for widespread consumer use.

But are buyers interested in more stuff?

The analytical buyers will love digging around for more data, but most people will be happy reviewing a few photos or video before ordering a personal tour. Once there, gut instinct and emotions take over, and an offer is made.  The listing agent will then dictate how much you will pay, and if acceptable, then the deal is made.  Hopefully you like the price, because for the most part, it isn’t very negotiable.

Wouldn’t that change if we transition back to a buyer’s market?

It might soften up a bit, but note this fact:

Everyone in the real-estate-selling business is on the sellers’ side.  Why?  Because nobody gets paid unless sellers say so – and they only agree when they are mostly happy about getting their price.

It is different now – there aren’t distress sales in popular areas, and we know that if people get in trouble, foreclosures are unlikely – they will get bailed out instead by the Homeowners’ Bill of Rights and government support. Hence, we are stuck with elective sellers – especially in popular areas.

Besides, nobody will side with buyers, unless a fee-only or hourly pay structure is implemented.  But buyers are very reluctant to commit to an open-ended pay package when all they want to do is look at a few houses for sale.

So we have a lop-sided playing field, with agents and vendors (escrow, title insurance, banks, appraisers, portals, etc.) on the sellers’ side, hoping to coax buyers into paying the right price. If the buyers aren’t willing to pay the happy price, they are told to go back to the sidelines – because confronting the seller about going down in price is almost unheard of these days (it’s easier and more dramatic to act offended).

The one thing that could bring a wholesale change to this equation is the auction format.  But that would just level the playing field, and give buyers a more-equitable shot at paying a fair price – though it could be more!

In the meantime, these could happen:

  1. A big disruptor could come in and break the mold.  But it would only be a platform of sorts, and somebody’s staff will still need to do the work of sales.
  2. Realtors love to spoon their new listings to their buddies at under-market prices and get both sides of the commission.  Could we see a district attorney take down a few of the worst offenders over the next ten years, and teach the industry a lesson?  Yes.
  3. A national MLS will likely develop, which will create a uniform presentation of the listings across the country.  But don’t we already have that with Zillow?  There might be jostling between portals, but the eyeballs will follow the best.
  4. Zillow could develop a brokerage side, and would be able to sell it easily.
  5. Any discount brokerage could rise to prominence, if they are willing to advertise like crazy.  The brokerage that advertises the most, will win the game – Zillow has shown how good advertising trumps all.
  6. Better and more efficient transportation (battery cars) combined with working at home could allow for housing developments to be built further out.
  7. Zestimates become accepted as close enough.  Buyers don’t care about pricing precision, they just want a house.
  8. First-time buyers dominate the market – primarily foreigners.  Those who already have a house here aren’t as desperate, and won’t pay as much.
  9. Multi-generational buyers will increase – they would rather combine finances to afford better housing, than to live where they can afford separately.
  10. Reality TV fluff continues to be popular, and helps to form opinions.
  11. Real estate smarts keep you on the sidelines – the less-informed are making the market.
  12. Prices keep going up.

After the big downturn, the San Diego Case-Shiller Index is lower than it was ten years ago.  Where do you think it will be in 2025?

Case-Shiller San Diego history

P.S. Speaking of disruptors, remember what Henry Ford said, “If I had asked people what they wanted, they would have said faster horses”. (h/t Jorge)

Posted by on Sep 28, 2015 in Forecasts, Foreclosures, Jim's Take on the Market, The Future | 5 comments

Bubble Talk


This is what you get when a college professor looks at today’s real estate market – faulty assumptions.  1) The graph he included shows the two years (2012-2013) of rapid appreciation; and 2) the building-permit numbers are skewed by the lack of land available, plus 3) rapidly rising rents help to reduce the home-price-to-rent ratio.

From the

If history is any guide, the L.A. housing price cycle seems to last about 12 years on average, of which seven years is spent in the bull market with at least 65% real price appreciation, and five years is spent in the bear market. We are three years into the housing recovery that started in 2012, with 27% appreciation so far. On average, there will be four more years or 38% more price growth before we reach the turning point.

Of course, it’s possible the bear market could come earlier or later than four years, but that is quite unlikely to happen in the very near future.

How can I be so sure? Often, during a bubble-making period, we see an accelerating rate of home price appreciation, as in 1988-89 and 2004-06. In the last two years, we haven’t seen that kind of rapid appreciation in Los Angeles.

Another way to understand housing price cycles is by looking at building permit numbers. Speaking roughly, if developers are investing in new properties, that’s a good sign that demand, and prices, are rising or keeping steady. If developers are holding back, that suggests demand, and prices, will soon fall.

L.A. housing permit units peaked in 1977, 1988 (50,500 units) and 2004 (26,900 units), one to three years ahead of the real housing price peaks in 1980, 1989 and 2006. Permits bottomed in 1982, 1993 (7,300 units) and 2009 (5,700 units), a few years before the housing price troughs in 1984, 1997 and 2012.

Over the last three years, we have seen L.A. building permits increase from 11,200 units in 2012 to 18,200 units in 2014. The 2015 number will most likely be higher than 2014. Therefore, we can predict the next home price peak is at least two years away.

Yet another measure of rational housing value is a simple price-to-rent ratio. The ratio is calculated by taking the median home price over the annual median rent in L.A. If the ratio is high — meaning that home prices are beyond their fundamental value based on expected rental revenues — that points to a bubble. Again, let’s look at history.

Two previous peaks were in December 1989, with a ratio of 14.8 to 1, and in February 2006, with a ratio of 24.4. According to Zillow, the current price-to-rent ratio in L.A. was 17.1 in May, which is far below the 2006 bubble level but still higher than any time before 2003.

That doesn’t worry me, though. A high ratio doesn’t spell danger for Los Angeles because, similar to New York (ratio: Manhattan 25, Brooklyn 23) and San Francisco (ratio: 21), it’s now a “superstar” city. L.A.’s size, amenities, weather and geography make its houses an investment target for the global elite. Wealthy individuals from all over the world don’t care that it might make more financial sense to rent, because they’re not simply buying Los Angeles houses to live in them, they’re also trying to diversify their financial portfolios.

Even though Los Angeles is one of the least affordable cities in the U.S., all factors indicate that it is not in a housing bubble. Of course the bull market will end eventually, but that doesn’t mean we’re heading for a devastating crash, like in 1990 or 2007. Whether you should put up a million bucks for that bungalow is another story.

Posted by on Aug 20, 2015 in Forecasts, Jim's Take on the Market, Market Buzz, Market Conditions | 2 comments

Bubble or No Bubble?


This article is talking about Oakland, California, but these conditions exist up and down the coast.  Thornberg has been one of the more level-headed bubble analysts:

An excerpt:

“This is not a bubble,” says Chris Thornberg, an economist in Los Angeles.

Though he’s just one guy, we called him because he has the dubious distinction of having predicted the 2008 market crash. His colleagues used to call him “Dr. Doom.”

He says that the money flooding the Bay Area isn’t built on speculation like the last boom.

“These are people with real money, with real incomes,” he says. “They have enough money to live in whatever cities and neighborhoods they want, so if there’s not enough high-end housing, they’ll just gentrify lower-income neighborhoods.”

And while the growth may slow, it won’t stop, Thornberg predicts. He believes the solution is a matter of adding to the housing supply. As more units come on the market, prices become more reasonable for everybody, he says.

But others argue that without policies making sure some of the housing is affordable, it’s not going to make any difference for middle-class and poor people.

“That’s completely wrong,” Thornberg says. “The evidence tends to suggest that for the most part, when you start layering rule after rule after rule on real estate developers, ultimately you end up simply hurting the supply worse.”

So what should Eaton do?

Thornberg’s answer? Buy now. Anything you can get.

Posted by on Feb 19, 2015 in Bubble-Era Pricing, Forecasts, How Hot?, Market Buzz, Market Conditions | 11 comments