San Diego Regional Housing Market: Are We Headed For A Crisis? Gary - PowerPoint PPT Presentation

The London Group Realty Advisors San Diego Regional Housing Market: Are We Headed For A Crisis? Gary London (619) 269-4010 glondon@londongroup.com

Housing Crisis = Economic Crisis  There is a basic deficiency and maldistribution in the amount of housing units demanded and the number being supplied.  A maldistribution of the types of housing we are supplying – mostly multifamily and not single family.  A pricing and availability problem.  And ultimately an economic problem which will challenge, and perhaps even damage, our economy.

There is a basic deficiency and maldistribution in the amount of housing units demanded and the number being supplied.

Regional Jobs & Housing Cumulative Growth Since 1996 700,000 Historical Forecasted 600,000 500,000 400,000 300,000 200,000 100,000 0 1996 2000 2005 2010 2012 2020 2025 2030 2035 2040 2045 2050 Job Growth Housing Growth

Maldistribution of Jobs and Housing North County – Adding More Jobs than Housing 160,000 Historical Forecasted 140,000 120,000 50,000 100,000 80,000 22,000 60,000 40,000 20,000 0 1996 2000 2005 2010 2012 2020 2025 2030 2035 2040 2045 2050 Job Growth Housing Growth

Looming North County Housing Shortage Demand Based on Job Growth vs. SANDAG Forecast 70,000 Historical Forecasted 60,000 22,287 50,000 40,000 30,000 20,000 10,000 0 2012 2020 2025 2030 2035 2040 2045 2050 Housing Demand (1.38 Jobs Per DU) Forecasted Supply

The Geographical Disconnect Shortage / Surplus of Housing Units (2012-2050) San Marcos Carlsbad -10,413 -8,739 Unincorporated San Diego 15,620 Chula Vista -5,240

Inferior Agriculture Land is on the Rise Superior vs. Inferior Farmland in San Diego County 160,000 140,000 120,000 100,000 80,000 60,000 40,000 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Superior Farmland Acres Inferior Farmland Acres

A maldistribution of the types of housing we are supplying – mostly multifamily and not single family.

Are We Building What They Want? Single Family Multifamily Mobile Homes 100% 4% 90% 36% 80% (418,065) 70% 82% 60% (273,522) 50% 40% 60% 30% (697,162) 20% 18% 10% (60,337) 0% Current Stock Forecasted Growth Source: The London Group Realty Advisors, US Census, SANDAG

Are We Building What They Want? Single Family Multifamily Mobile Homes 100% 4% 90% 36% 80% (418,065) 70% 82% 60% (273,522) 50% What does this 40% look like? 60% 30% (697,162) 20% 18% 10% (60,337) 0% Current Stock Forecasted Growth Source: The London Group Realty Advisors, US Census, SANDAG

Peak Urban Millennials San Diego Millennials = 31% of Population 85 years + 80 to 84 years 75 to 79 years 70 to 74 years 65 to 69 years 60 to 64 years 55 to 59 years 50 to 54 years 45 to 49 years 40 to 44 years 35 to 39 years 30 to 34 years 983,818 25 to 29 years (31%) 20 to 24 years 15 to 19 years 10 to 14 years 5 to 9 years Under 5 years 150,000 100,000 50,000 0 50,000 100,000 150,000 200,000 Male Female

Millennials May Become Less Urban Current Would Live if They Could 50% 50% 46% 40% 40% 30% 37% 30% 29% 20% 24% 20% 10% 10% 0% 0% City Suburbs City Suburbs Source: ULI- America in 2015

A pricing and availability problem.

Housing Affordability Median Multiple (Median Price / Median Income) Broken Housing Ladder = More Expensive Homes 10.0 $600,000 9.1 8.8 9.0 8.7 8.3 $500,000 8.0 7.0 6.7 6.8 7.0 6.4 $400,000 6.2 Median Multiple 6.0 5.9 Median Home Price 6.0 5.3 5.1 5.1 5.0 4.9 4.8 4.9 4.8 4.8 5.0 $300,000 4.6 4.5 4.4 4.4 4.2 4.3 4.3 4.0 3.9 4.1 4.1 3.9 3.9 3.7 3.5 3.5 3.6 4.0 $200,000 3.0 2.0 $100,000 1.0 0.0 $0 2016 Est. 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Median Multiple Median Home Price

Housing Affordability Median Multiple (By City) as of May 2016 Broken Housing Ladder = More Expensive Homes 16.0 $1,800,000 15.15 13.76 $1,600,000 14.0 $1,400,000 12.0 11.02 11.16 $1,200,000 10.0 Median Home Price 9.22 Median Multiple 8.80 8.82 8.77 $1,000,000 8.18 7.99 7.79 8.0 7.44 7.37 7.26 $800,000 6.45 6.46 6.38 6.0 5.45 $600,000 4.0 $400,000 2.0 $200,000 0.0 $0 Santee Chula Vista Poway Lemon Grove Oceanside La Mesa San Diego Imperial Beach National City Carlsbad Vista El Cajon Escondido San Marcos Encinitas Solana Beach Del Mar Coronado Median Multiple Median Home Price

Housing Affordability – 2000 vs. 2016 % of Income Spent on Housing Broken Housing Ladder = More Expensive Homes 50.0% 47% 2000 2016 44% 44% 45.0% 42% 42% 39% 40.0% 37% 36% 36% 34% 35.0% 33% 30% 30.0% 25.0% 20.0% Chula Vista Carlsbad Vista Escondido San Marcos Encinitas

And ultimately an economic problem which will challenge, and perhaps even damage, our economy.

Regional Workforce San Diego County Imports Works in 4 of 5 Categories 700,000 600,000 500,000 400,000 300,000 200,000 100,000 - Management, Service Sales and office Natural Production, business, occupations occupations resources, transportation, science, and arts construction, and and material occupations maintenance moving occupations occupations San Diego County Workforce Working in San Diego County

Employer Dissatisfaction Housing is the issue businesses are most dissatisfied with Ability to find reasonably priced housing for 27.7% employees that is close to work Ability to attract new employees that live outside 10.4% the region Ability to recruit experienced, high-level talent 7.9% Ability to find qualified entry to mid-level 6.9% employees Ability to retain valued employees over time 6.9% Access to relevant vendors and suppliers 3.0% Access to capital 3.0% Access to clients and customers 2.0% 0% 10% 20% 30%

Employer Difficulty Retaining, recruiting and replacing workers close to work Retaining valuable employees who want to purchase 69.3% housing within a reasonable distance from work Recruiting employees who can find adequate housing within 67.3% a reasonable distance from work 65.8% Replacing retired workers with qualified employees Retaining valuable employees who could move up within the 64.4% organization Recruiting non-entry level employees with adequate skills 64.4% and industry experience Recruiting entry-level employees with appropriate training 61.4% and education Providing training programs so current employees are productive and stay up-to date on changing technology and 50.0% industry requirements Providing training opportunities so current employees are 49.0% able to advance within the organization 0% 20% 40% 60% 80%

Workforce Conclusions The price and availability of housing will have a growing impact upon the quality and quantity of the regional workforce.  The labor market is tightening (10% to 4.5%) and demographic profile is greying (21% to 23%)  Almost half (47%) of SDC renters spend over 35 percent of their gross income on housing – housing costs drive affordability in the region.  Average commute times from 2011 to 2015 are increasing and will make it more costly to commute from the same distance in the future

Workforce Conclusions San Diego County businesses are increasingly dissatisfied with their ability to retain workers who want to live in and around their workplace  Over a quarter of businesses are dissatisfied with their ability to find housing close to their work location  Small and medium sized businesses are more likely to indicate dissatisfaction with the workforce housing(>35%) options in the region  Lack of housing impacts industries differently, but the impacts are considerable

What We Are Facing Quote in SD UT, April 23, 2016. One citizen’s reaction to the proposed 2,100 home Newland Sierra Development: “…to take it an put it right next to the freeway…is irrational.” VOSD, February 23, 2016, former coastal North County Supervisor Pam Slater-Price “You would have to be a complete idiot to be openly pro-development.”