Orange County Update & Forecast

According to the latest data from Hanley Wood (and included in my presentation at the BIS '09 "Town Square", which you can find here), new home sales in Orange County in Sep. 2009 were the same as in 2008, which could mean that we've hit bottom in new home sales for this area. Still, YTD sales are down by 23% to 1,242 units.

Absorption, although averaging a still-anemic 1.42 sales per month, are up by 37% over Sep. of 2008, and YTD they're running at 1.63 per project. Can rates remain in the low double digits, and median prices are starting to rebound, hitting $584,000 for September and $521,000 for 2009 YTD. Value ratios, however, continue to fall, declining by 6.5% to $276 per square foot.

At current sales rates, the total number of units in current and future phases would take nearly 3 years to sell, although this total is down by 20% from the same time of 2008. The bigger story, however, is for standing inventory, which although rising by 9% to 156 units, would take just 1.44 months to sell. See below for a summary table of stats for Orange County:

Category	9/09	% YOY	2009 YTD	% YOY
Net Sales	108	0%	1,242	-23.4%
Absorption	1.42	36.8%	1.63	1.2%
Can. Rate	11.5%	D-18.2%	12.5%	D-13.7%
Median Price	$584k	23.5%	$521k	4.2%
SFD Price	$783k	-10.7%	$808k	-9.1%
Median $/SF	$276	-6.5%	$285	-4.7%
SFD $/SF	$267	-10.7%	$280	-7.8%
Inventory	3,563	-20.5%	-	-
Months Inv.	32.99	D-41.5	-	-
Standing Inv.	156	9.1%	-	-
Months SI	1.44	U-1.32	-	-

Looking ahead to 2010, population growth should come in at 0.9%, with the unemployment rate continued to rise to nearly 10% as employers continue to shed jobs. Still, the decline in non-farm employment of 2% will be less than half of what it's expected to total in 2009, or -4.8%.

Housing permits countywide should come in at just under 1,300 units in 2009, rising to 1,375 in 2010. New home sales are estimate to total 1,543 for 2009, with a median single-family home price of $715,000. These forecasts are summarized in the table below:

Category	2009	2010
Population	1.0%	0.9%
Non-Farm Employment	1,413m	1,384m
Annual Change NFE	-4.8%	-2.0%
Unemployment Rate	8.8%	9.7%
Personal Income	-3.5%	-0.1%
Housing Permits	1,295	1,375
Non-Res. Permits	$867m	$830m
Ann. New Home Sales	1,543	-
New SF Home Price	$715k	-

L.A./Ventura Update & Forecast

According to the latest data from Hanley Wood (and included in my presentation at the BIS '09 "Town Square", which you can find here), new home sales in the L.A/Ventura region are definitely seeming to stabilize, rising by 1.3% between Jan-Sep 2008 and the same period of 2009. For September alone, net sales rose by nearly 19% over the same time of 2008, although that bump could also be due to buyers trying to nab tax credits they thought were expiring at the end of November.

Buyers today are also more serious, as evidenced by the sharp drop in cancellation rates to the low double digits versus 26% in Sep. of 2008 and just 9% for the first 9 months of 2009.

Overall new home prices continue to drop, with a median of $421,000 in Sep. 2009, or $332 per square foot. For single-family homes alone, however, prices actually rose by 15% to $614,000 during Sept. 2009, although YTD they're still down by nearly 11% to the low $400,000s.

Although total new home inventory -- those units currently available for sale as well as those planned in future phases -- would still take 3 years to absorb at current sales rates, completed inventory, although rising by 18% over the past year, stands at just 6.51 months, which is very close to market equilibrium.

For more information on current conditions for other counties of Southern California, click here for the entire presentation. A summary table is included below:

Category	9/09	% YOY	2009 YTD	% YOY
Net Sales	282	18.5%	3,362	1.3%
Absorption	1.44	46.3%	1.77	22.4%
Can. Rate	11.3%	D-26.1%	9.0%	D-20.9%
Median Price	$421k	-6.8%	$420k	-10.7%
SFD Price	$614k	14.9%	$423k	-10.7%
Median $/SF	$332	22.8%	$320	11.9%
SFD $/SF	$234	12.2%	$178	-12.4%
Inventory	10,212	-20%	-	-
Months Inv.	36.21	D-53.60	-	-
Standing Inv.	1,836	17.8%	-	-
Months SI	6.51	D-6.55	-	-

Looking ahead to 2010 and according to the LAEDC, although population in L.A. County will continue to increase given its enormous base, the employment picture is a bit different. During 2009 the county will lose 4.1% of its non-farm jobs base, and although the pain will continue in 2010, it will be half as bad, or 2.0%. This, of course, will continue to be a drag on housing demand until at least 2012 as the unemployment rate rises to approach 13% in 2010.

Inflation, which is now under control due to temporary deflationary influences in the marketplace, will re-emerge to 1.6% in 2010 but certainly be kept under control by stagnant demand for all but the necessities of life.

Housing permits are estimated to total 6,465 units in 2009 and rise slightly to 6,855 in 2010, but the commercial sector will be under great pressure, with non-residential permits falling below $2.4 billion.

According to projections I just completed for Hanley Wood's latest LA/Ventura Market Monitor, annual new home sales will total 4,000 units in 2009 and rise by about 15% in 2010 to 4,500 homes. Prices, which seem to have bottomed out this year, will end at $420,000 and rise by 5% next year to $440,000. See table below for summaries on these forecasts, and for the complete presentation, click here.

Category	2009	2010
Population	0.8%	0.7%
Non-Farm Employment	3,902m	3,823m
Annual Change NFE	-4.1%	-2.0%
Unemployment Rate	11.7%	12.8%
Personal Income	-1.6%	1.0%
CPI Change	-0.7%	1.6%
Housing Permits	6,465	6,855
Non-Res. Permits	$2,470m	$2,370m
Ann. New Home Sales	4,000	4,600
New SF Home Price	$420k	$440k

Southern California housing update & economic forecast

If you missed my presentation for the Town Square at the 2009 Building Industry Show in Long Beach, you can find it here.