84: Leslie Appleton-Young, Chief Economist of the California Association of Realtors CAR

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It's my pleasure to welcome Leslie Appleton Young. I have been following her work for a long, long time. I'm talking decades. She is the chief economist with the California association of Realtors and a senior vice president with them as well. And I have been to so many of her speeches over the years when I lived in California. And she just does some great work talking about the housing market, the economy. And I know I mentioned the chief economist for the California association of Realtors, but as I've mentioned before, California is the largest state in the country. It is probably the sixth largest economy in the entire world if it were a country. So it's a big deal. And as goes California, so goes the rest of the nation. Sometimes, not always, but not always. Yeah, we'll talk about that. But that used to be the saying at least. So it's my pleasure to welcome Leslie Appleton Young. Welcome. How are you, Jason?

I'm great. Really great to see you. Thanks for asking me.

It's good to have you. I've wanted to have you on the show for a long time. So really a pleasure to have you here. Maybe we'll start off. I usually ask people where they're located. And you have now moved to Sarasota, Florida, is that correct?

Right. I'm living in Sarasota. I flew from Los Angeles on March 12th and got here just in time. I was actually planning to be bi coastal this year because I'm retiring from car at the end of this year. But with COVID it just made a lot of sense to just do it. And everyone in the company at the association is remote. So we are just all zoom all the time, and we haven't missed a beat. Really?

Yeah. I'm curious, you know, when it wasn't remote, where was your office? Was it in Los Angeles?

Yeah, absolutely. We were in downtown la, and then our lobbying office is in Sacramento.

Good stuff. So, Leslie, we are definitely living in interesting times. You know, counterintuitively, you know, so many people in February, March were predicting the end of the world. There's going to be a giant crash that may still come. I guess we'll talk about that. But the Fed and the government have come to the rescue, as I think is the new way. It's just going to always go. That's what Everybody expects now.

Well, we learned to fight the last war, Right?

Right. You meaning the Great Recession, right?

Absolutely, yeah.

Yeah, with stimulus.

So it's a lot faster and a lot bigger this time around.

No question about it. I mean, GDP down what, 30ish percent or so. This is truly a remarkable time and it's a pretty crazy and scary time too. But in the midst of that, there are definitely a lot of opportunities. I predicted very early that there would be this mass migration to suburban markets back in early February, if you can believe that. I think I might have been the first person to make that prediction. And it's certainly happening now. People are leaving high density urban areas and that trend was already underway because most of those areas are business unfriendly and you know, so there was a migration, but I think Covid accelerated it. You know, give us your take on things. I know you've got some great slides, charts and graphs to share for those of you listening via audio only and not seeing the visual. Of course it will be available on the YouTube channel, but we'll try and elaborate on the visuals so that you can relate to them even though you're not seeing them. Leslie, what do you think?

Hey, well, why don't I just start with the. With sharing my screen. I mean, it's a very big question that you're asking and I guess I'll just say there's a tremendous amount of uncertainty out there and the housing market has been incredibly strong given the constraints of very limited inventory and new construction. Right. So we've seen a very hot market certainly once the initial first round of the lockdown was lifted. So that's really been the. Been the story. And looking forward, you know, we can talk about a couple scenarios and I'm sure we will. But let me start with sharing my excellent. Sharing my screen.

You always have such fantastic charts and graphs.

So you know, I have a great, a great team behind me with Jordan Levine and Oscar Way and Samantha Oleis and Georgia. I mean they are just so I look good because they are the ultimate kind of professional, incredible people. So listen, one of the things that we've started to do, like everybody is pivot towards more high frequency data. And we're doing weekly reads of the mls, actually daily reads and calculating weekly averages of key metrics. And we're also serving our members every week. And I use this slide when I start speaking just to make a point about giving each other some grace about this pandemic. There is no consensus view on what it is and how it ought to be handled. I think our membership and the Realtors are no different than anyone else. So way back in April and May, we asked, is it too long? Are we taking too long to loosen up? Not long enough or we don't know. And it's about a third. A third, A third. And then I also start out with just the summary of where the major forecasting, financial, academic and governmental entities are with respect to what 2020 is going to look like. To make a point of nobody's got the same numbers, but everybody's got the big drop in the second quarter, which you just noted was at an annualized rate, a drop of over 30% on a quarter.

So just to elaborate on this slide a little bit, Q2 being the second quarter being the really bad one, and the predictions go from the worst being UCLA predicting a 40, I'm going to round off here a 42% reduction in GDP for the US economy in at an annualized rate.

Right. So that's important to say. Right?

Yeah. And bank of America maybe being the most optimistic OR no, sorry, JPMorgan Chase being the most optimistic at a 25% decline. So it's kind of all over the board. Goldman Sachs has been a really good. A lot of people quoted that one. They're saying 39%. So this is pretty incredible. I mean, these numbers are staggering.

They all have the same trajectory, though, Right. They all have the Q2 being the big hit and then a gradual recovery after that with the decline for the year as a whole between 5 and 11%. So there is a lot of leeway. But there's a general story that at the time, and this is as of the end of June, all of these forecasts was the assumption that there wouldn't be a second wave and there wouldn't be a second lockdown. And that is not clear at this point. Right. As states like Texas are backing back down and the whole confusion over schools and all that. So it could be worse and hopefully it will be better. But I just again want to make that point that forecasting is always dangerous, but it's particularly fraught right now. One of the things, as I mentioned, we're doing weekly surveys, we're doing polling. This is a monthly poll that we started in the fall of 2018, just a Google poll once a month. California consumers, is it a good time to buy? Is it a good time to sell? And the buy side is really strong. It's currently above what the norm was until the pandemic. And to that I think you can attribute the A couple of things. But certainly record low rates. Right. With the 30 year fixed rate conventional mortgage under 3% is an incredible stimulus. Coupled with the coronavirus fear and as you mentioned earlier, a flight to the suburbs and a desire for homes with more space around them and then the work from home, work from anywhere world where you don't have to live within a horrible commuting distance from where you work. Anywhere for some jobs. Right. For white collar. So I would say the buy side is definitely out of the COVID coma. I mean, the buyers are ready to go. I describe it as let's pretend it's January again, where the buyers are ready to go. And on the sell side, you've had not only more hesitancy, but you had a huge drop between March and April in the perception of the desirability of selling. And I think that was. I don't want people that might be sick in my home. I've heard prices are going to soften. I don't think this is a good time for me to go put my home on the market. But you can see over the last couple of months that started to heal and come back, I think, and reflective of that hot market that I described in the introduction.

So, Leslie, let's parse this. And I don't know if you have data on this, so if you don't, just say you don't. But can we parse this up at all? When people talk about the housing market, it drives me crazy. I'm sure it does you too, because it's more than one market, obviously. Right. So it's, you know, geographically, it's by price segment, housing style. But you know, price segment might be a good one to really look at. The market is booming. It's. I mean, these interest rates are so low, it's just literally negative. Interest rates are all segments of the market doing this. You know, what about the extreme high end, the middle market, you know, the low end, certainly necessity. Housing is booming. We all know that. Can you drill down on this at all for us?

Yeah, I think it's really important to talk not just about the demand side, but the supply side. And the low end has been constrained because there's literally almost no inventory. I mean, if you look in California, you know, under 400, under 300,000, there's just very, very little there. And the upper end has been interesting because the last two months of data have shown a resurgence of activity at what I'll call the high end in California, maybe the ultra high end in other parts of the country, but in the over 2 million. And it's one of the reasons why in the June data, which is unfortunately the last monthly data that I had, we had an all time high in our median home price of 625,000. Highest monthly, highest annual median home price in California. And again, it was two parts. It was more homes sold at the upper end and it was price appreciation in every single category. So I would never disagree with what your point about real estate being local. But I will tell you that my experience over the 30 plus years I've been doing this is that there are common themes.

That tell a story. Right. That it's hard to evade. And certainly one of the really interesting things that we're seeing in California is just really hot activity in the Central Valley. The people from Los Angeles looking at homes in Bakersfield. Right. And it used to be just an affordable housing driven migration story, and now it's also a quality of life Covid generation story.

A social distancing story.

Right. Yeah. Okay, let's move on. So just at a glance, here's what we saw in June. And I won't go in any detail, but we're running year to date in California down about 12% from 2009.

Down, meaning down sales volume.

Sales year to date. Yeah. Sales. No number of transactions. Yeah. Sales volume. Okay.

So the important thing I just want you to make sure, and you alluded to it a moment ago, it's inventory. So you know what? People commonly, I think are misled by some of these stats because they think, oh well, sales volume is down, that must be. The market is bad. But especially in the housing world, when you don't have inventory, you can't have any sales. Okay. So it's not that people don't want to buy. You know, sales volume being down might be a sign that it's a seller's market and everybody wants to buy, but there's just nothing to buy.

Absolutely. It's not even a nuance. That's a huge point. You've got to look at both sides. So we have 2.7 months of inventory in June.

Okay. What would be considered like a normal.

Month supply of inventory for you up.

Until 2013, looking back a couple decades, I would have told you six to seven months supply is normal is like.

An even keel market.

Right. Since 2013, I will tell you it's three to four months of supply, in fact, in other words, we had in California, and this is a national phenom, not just California, we have been at unusually low levels of inventory. So 2.7 months is a very rapid market.

So I think that's really all. And then look in June how low rates were, and they were headed even lower. And then we also look at price per square foot as just. I'm very agnostic when it comes to data. I just want to understand the methodology. So people talk about median price, they talk about average price, they talk about price per square foot. And typically things track. Right. Typically you don't see a different measure and go, oh my God, the story's totally different. It's typically not. And we're seeing that with the price per square foot data as well. So this is a history lesson in 15 years of looking at sales in California. And what's a little bit sad is to look at the first two months of 2020 and just the anticipation that this was going to be just a banner breakout, breakout year in real estate because we were above sales from 2019 and really looking forward to a great year. I also want you to see the V shaped recovery during the Great Recession. And then eyeballing this starting in 2011, we have essentially had a flat trend in home sales at a time when we have had job growth, income growth, household formation growth, and very low rates. So this market has been held 20 to 25% below what you would expect inventory expect sales volume to be because of two reasons, inventory and affordability. Right. So there's just a lot we can talk about about those two things. But I just want everybody to understand that we have not had a breakout market over the last eight or nine years because of those constraints.

Right. So what Leslie's showing here, if you're not seeing the video, is a graph showing sales volume. You can see that the volume went down precipitously from 2005, bottoming out in late 2007, I guess. And then it started going up. And so that's the V shaped recovery, you know, until 2009. And then it sort of stays relatively flat along the way until maybe this is. I'm going to guess that is about February where it really.

April is when it dropped.

Okay. And now it's going way back up. But it can only go up as much as there is inventory to supply the demand.

Right. And I think that the hesitancy in the market today is on the sale, the sell side, and that's kind of where we are. So we have, as I mentioned, pivoted to what I'll call high frequency data. So we are looking at the MLS data for the state of California on a daily basis and calculating a couple of averages. So this is a look at what's happened to average daily closed sales in the major regions of California and for the state as a whole. And you can see they, they can be a little noisy. Right. These are like week to week changes. But in a market like we have today, set in the economy that we have today, we don't have the luxury of waiting till the middle of August to know what happened in July. Right. We need to kind of track things and what you can see. And I'll just focus here on the set of bars that describe the state of as a whole, that when we were in the first week of March, we were looking at 631 average daily closed sales in the state. And the week ending the first week in August, we are looking at 774 average daily close sales, which is down pretty sharply from from the week before. And I'm going to move ahead here to show you. The drop in closed sales was almost 26% on a week to week basis. So that's something we're watching very carefully in terms of its relationship to the resurgence of cases and the tighter lockdown regulations that can vary from county to county. Right. And there's no one, one situation. So we came back, this market is ready to go. It's being fueled by low rates and a change in how people want to live. And yet it's really the virus that is setting. And it's the virus and the reaction to it by the government that's determining, I think, the path of the overall recovery. So you asked me before about.

Price points, if you will, and I made the point that the low end of the market is constrained by really tight supply. And the high end of the market in June was up almost 7% on a year over year basis. Properties under 300,000 were constrained, dropped on a year over year basis by 21.5%.

Amazing. You know, maybe it's a good time to ask you, you know, kind of our previous conversation off air, just about the general vibe with California. I mean, people have been leaving the state for many years. I left the state, you left the state. I mean, what, what does the future look like for California? Just as a kind of a general comment, you know.

Yeah. I think in general the country's rebalancing towards the middle and the south. And we've been tracking net domestic migration that you get through the Census Bureau, the American Community Survey for many years. There's kind of a myth out there that it's our tax Structure. And the reality is we're not losing millionaires. There's actually a small net gain in terms of people that are making higher incomes into California. But the story has been that we are losing young people and we are losing the working middle class.

Working class because they can't afford housing in California, be it ownership housing or even rental housing. I think now overlaid on top of this is going to be. Obviously, it's too early to see in any data. Certainly we have anecdotal stories, but I think you're seeing an acceleration of this change fueled by the work from anywhere environment for white collar workers.

Yeah, no question about it. And if you're a billionaire or a DECA millionaire or a centimillionaire, it doesn't matter. You're just going to live where you want to live.

You can afford to live here. They're not the people that are hurting.

Right, right.

But they may not be happy. I know they're not happy about their taxes, but I just look at the data, Right.

And they have all sorts of teams of accountants and lawyers to get them out of the taxes because they can do all sorts of special sophisticated things to try and cope with the tax burden. But you know, if someone's just. You said millionaire, and I think we got to revise our saying on that, because a millionaire ain't what it used to be. Adjusted for inflation, it's really no big deal to be a millionaire anymore.

Let me tell you, there's a lot of people who just lost their $600 unemployment supplement today that would see that as quite a. Quite a big amount of money. I mean, I know what you mean, but.

No, I agree with you, but I'm just saying that those people at the lower end of the socioeconomic ladder, they don't have a very high tax burden. Even in California. Yes, the cost of living is high, but the taxes are not that high. Where it hits people is those people making a million bucks a year. That's the ones that really just get creamed, tax wise?

Well, I'm just saying that there's a net inflow in that category.

Yeah. In the higher end. And so is that an inflow, Leslie, or is it people that have risen to that level of economic achievement? I'm wondering.

We can't tell. We essentially just know the income of the people coming and going. So in terms of what their journey to that income level, we have no idea.

Yeah. Okay. Okay, good. Go ahead.

This is just a chart that looks at the various price segments. It's the 2 million or more price category that actually had the increase in June and added to that price number. Here's a look at the kind of distribution of home sales by region and you might be surprised to know that the San Francisco Bay area is only 19% of the total state. Even though they're huge disproportionate share of the economic activity compared to the home sales and population numbers. Southern California is about 45%. Central Valley 23 and all of the major metropolitan areas had a drop on a year over year basis from June of 2020. The other counties categories are very rural and are benefiting again from what you talked about earlier, a flight to less den density and more open space. So looking forward, we felt very confident about our June numbers because pending sales in April, I'm sorry, in May were so high. And then looking at the data that we'll be getting in the next couple of days, pending sales increased by 22.5%. Not the 60 plus percent we saw the month before, but still pending is going to tell you where sales are headed. So what you see here is just a big bounce back in housing once the regulations were lifted. And you've had a huge adaptation of technology in the real estate industry. And we've been kind of tracking this with using Zoom calls with clients and using virtual staging and doing virtual tours and all of the tools that have been available for quite some time. All of a sudd became not an option but a necessity. And that I think has been a huge facilitator as and I think that's.

Really good news for the economy overall. It's so convenient. And the funny thing is none of this technology is new. You know, it's been here for many years. I mean people have been making Skype calls for many, many years. And WebEx was around I think 20 years ago, you know, but now everybody's been forced to adopt it. So necessity is the mother of invention. And it's great news because there's a certain amount of creative destruction going on in all these old inconvenient. It's making things a lot more frictionless and I think that's good for the economy. It's going to increase the velocity of transactions, velocity of money in many industries. I'm looking for a new car now and I haven't even been to a dealership. It's great. They're doing like showcases where they give you these really detailed online tours via Zoom. It's incredible. It's really convenient. A lot of apartment leasing offices are really adopting this technology really nicely. Yeah, it's good.

Yeah. I don't think there'll be any going back. And certainly the younger generations are so comfortable in a virtual world. And this is just kind of force the oldsters to get with the, with the program. So a couple of. I think I've indicated caution going forward. About 40% of our members last month said they expect they were noticing a slowdown in activity. And again, this was correlated with the kind of resurgence of cases. So the price side is a whole other story. As I mentioned, we were at a historic high median home price in June. The specific number was $626,170, 6.5% up from May and 2.5% up on a year over year, year over year basis. So that has been really incredible. And as we look at it, across all price categories in the state, every. Every price category, you know, is seeing, is seeing a gain. And the biggest gains are at what I would call the top 20% of the market. And most of the pain of job losses is hitting people that are not homeowners. Right. It's hitting renters more because they're in the service industries which are lower paid. And it's really the white collar. And you can see that in these statistics that they are the ones that really are the lucky ones in all this, that are able to take advantage of if they need a mortgage.

And really, I think society needs to reevaluate and you know, this is just something that happens kind of slowly, but reevaluate the amount of pay people get that do food service and grocery stores. I mean, why are these people so underpaid? It's kind of strange because these are the people that as we've realized, society has depended on.

I mean, yeah, they are the essential workers. Right?

These are the essential workers. These are the heroes, of course, the healthcare workers too. But you know, they're mostly paid pretty well. But you know, the people at the grocery store and the people making your food at a restaurant, and it's probably takeout food. Why are they so underpaid? I mean, it's just kind of strange how that sort of came about that way. I don't understand it sometimes.

Yeah, it's called pricing power.

Yeah, yeah, pricing power.

Well, you know, lack of minimum wages in many, many areas. So it's, it's something to look at.

For sure it is, it is just as a society. But the skills needed to do those jobs are not rare. And so that's obviously the reason, you know, the demand is big now, but the skills aren't, you know, they're easily, you know, a lot of people have those skills.

Yeah.

Okay, go ahead.

So just, I thought this was really fascinating. This was the weekly survey of our members and we asked, hey, were the people that you talked to last week the buyers expecting prices to go down? And in the initial stages of this, when we started asking this at the end Of May, early June, 63%, 67% said yes. My buyers are expecting to see lower prices. And now you get to the first week in August and less than half are. So you've just had a gradual realization that sellers are not with the program in terms of reducing their, their prices. Right. They're not seeing a need to do that in this market. So a gradual, I think, shift in expectations about what's happening with prices on the part of buyers.

So buyers are feeling a sense of urgency and they're not expecting any deals?

Well, less than half. Fewer are expecting deals today than were 10 weeks ago. But it's still, it's just a little bit below half. And 15% of the realtors said they had a buyer who tried to renegotiate a purchase price before the close of escrow. So there's still some of that going on. So here's a look at. You asked me a question earlier about what was normal inventory and I said that up until 2012, if I took a 30 year average, it would have been between six and seven months. And if you look at this inventory index, that again goes back 15 years to 2005. You can see starting in the beginning of 2013, the average has been between a three and a four month supply. So we've just entered a new normal, if you will. And 2.7 is low, but it's nothing we haven't encountered before during this period. And again I mentioned all of the factors that were growing, but what hasn't grown is new construction, at least in our state. So that's been an issue. And boomers are staying in their homes longer. Right. There's a financial incentive they don't want to pay. The capital gains gains tax is certainly one of the reasons. Prop 13 is another. But when I started in the 80s, people moved in California about every seven years and now it's about every 18 years.

Wow. Staggering.

Yeah, a huge shift and we're becoming a little bit more like the European model.

That's exactly what I was going to say. Europe has this very stagnant market where there's just not much trading going on.

Well, people Kids inherit their parents homes.

And I attributed that, Leslie, to the fact that obviously Prop 13, I think actually hurts the market in a lot of ways because it makes people stay put to some extent.

Yes, absolutely. I mean, just do the math. Right?

Yeah. So Prop 13 is the Howard Jarvis back from, I think 1978, the thing that capped property tax increases in the state of California. So people won't trade their house because they're going to have to pay such a higher tax bill on the new property because of the higher prices but also the very low mortgage rates. I think it's kind of another thing that it's not as big because people can always refi, but sometimes the mortgage rates encourage people to trade houses when they're really cheap because they get an automatic refi when they trade and they get another house that they ostensibly like better. If those mortgage rates are higher, it really keeps people stuck and makes the market more stagnant because you just don't want to lose that great mortgage you have. And I think that's one of the dangers of these very low interest rates in the long term is that it really causes the market to just be less active. What do you attribute this dramatic rise from 7 to 18 years to? Is it mostly Prop 13 issues or what?

I think it's just doing the math. You know, there's certainly societal factors, right? I mean, 70 is the new 50. You know, people are more active. They don't want to move to Sun City or Leisure World like their parents did and quote unquote, retire and sit on a golf cart all day. So they're just more with the mix. But you know, what you find is there's a lot of people who really don't need a five bedroom home anymore, but the math just doesn't work out for them. And what we hear over and over again is it's really the capital gains issue. Now we have a proposition on the ballot in California coming up, Prop 19, that'll help people over 55 to move and take their tax basis and so on. So that might help a little bit. But we can't do anything about the fact that people have huge gains. If someone's been in their home 30 years in Palo Alto, you can imagine there just is not going to be a way to have it work out in terms of the numbers.

They could always rent it for a couple of years, which will never make sense in Palo Alto, and then do a 1031 exchange. But yes, I totally agree with, with you.

It's really good. So anyway, moving on here's just a look at active listings, which have been declining on a year over year basis for the last year. And in June, they were down almost 44% from June of 2019.

So that is staggering.

I know, right? So when we focus. When you mentioned the need to focus on the supply side, I could not agree more.

So let's talk about that for a moment. So a massive supply shortage, do you think California or, you know, it's really up to various municipalities, but we've got it. Well, it's not completely, but, you know, they've got to loosen up on these building requirements, you know, and maybe make it a little less expensive for builders to build homes and loosen up on the environmental restrictions. I mean, the Coastal Commission in California, you know, you can't build anything if you can see it from the ocean. It's absolutely crazy. Do you see this happening or is the state just gonna say, no, sorry, you know, tough?

I think it's that and it's also neighborhood attitudes, which you find over and over again are just simply opposed to anything and everything. And one of the things I'm really proudest of at CAR is a couple of years ago, we created a legal foundation called Californians for Housing, and we are wr letters and then going in and suing cities that essentially are forbidding a project that meets all of the qualifications. And, you know, every municipality has housing goals, right? There is a housing rent, you know, requirement that they're supposed to meet, and none of them do. So it's really time to play hardball a little bit and have people understand that this is something that can actually be a huge, huge benefit.

So here's the thing about that. I mean, you would think that the municipalities want the property tax base, right? Because that brings them revenue.

They don't want the commercial property tax base. They don't want the residential property tax base.

That's where I was going, Leslie, since nobody's going to build any retail properties anytime soon and nobody's going to build much office space because we Covid has just creative destruction. You know, the home is the center of the universe, as I've been saying. And so, you know, they're just not going to have that. They might have warehouse and distribution centers, but they're not going to see a bunch of retail construction or office construction. Right. Also, there is some light in maybe the alternate use of like hotel properties, turning them into residential, and the possibility of even converting offices or shopping malls to residential. I don't know. To me, this is a pretty Complicated, expensive venture. But the hotels for low income housing, you know, turning hotels into little condo units is pretty doable. What do you think?

I couldn't agree more. I actually have that point at the end of my presentation that that could be a real silver, silver lining. And even a mall, you know, could become a senior housing village or affordable housing vil village or a homeless village. It's got plenty of parking, you know, and there's going to be more and more of these because people's behavior has changed and it's been changing for a long time. Right. The department store has been an endangered species for decades, but this has really been kind of the end of the line for some of them, no question. So we'll see. Here's kind of looking again at the weekly data. I'll just show here the average daily pending. It's been going up and down, but going down a little bit lately. And then I wanted to also say there's been some changes that our members have seen that I think are really interesting. So 28% said they had noticed an increase in clients looking for second homes. And again, that's rarefied error. Right. But it's indicative of the kind of work from home opportunity and less density desirability. And then the other was, have you increased interest in selling investment properties? And in the first week in August, about a third of them said yes. So I think that's a whole nother topic about owning rental property in California right now, that is. And the eviction.

I mean there's, you know, people that are looking to get out. And then just in terms, we talked earlier about utilizing the tools. So over half of the realtors said yes. I'm doing a lot more virtual tours under Covid. In the first month of August, 17% said I've actually put a buyer into contract who never saw the house. And again, that's something we didn't see before. And almost half of them said they had a vacant listing. And in the world of COVID it's a lot easier to show homes that don't have a homeowner living in them. So we're seeing more of that. So those are just some of the threads that we're following in terms of the forecast. You know, everybody's got a.

You have the square root on there. I've been talking about the square root.

All right, there you go. There's just a lot to talk about here. I've been was originally in the swoosh category and now I think I'm probably in the w category. But again, so what she's referring to.

For those listening, she's referring to the shape of the recovery. Is it going to be a V, a W, a U, a square root, a swoosh, a Nike swoosh? So that's what we're talking about. Go ahead.

Right. And then I just got the forecast from nar, Fannie Mae MBA that really mirror the trajectory of the GDP forecast that we saw in the very beginning of my presentation with the big drop in sales on a year over year basis in the second quarter and then recovering after that. Okay. And in terms of prices, very little impact, certainly a bit of a softening, but everything in the low single digits with a delayed impact prices are typically sticky on the way down until they're not. But here you can see the big hit. And again the biggest drop was NAR's projection of a drop in the fourth quarter of 3.1% and then by the middle of 2021, definitely back on track and well above where prices were a year ago. And then this is just a look at where we are with the California association of Realtors kind of looking at where we are now to the end of the year ending up. And I believe I put in the, I didn't put in the chart, but essentially what we're looking at is about a 12% drop in home sales 2020 compared to 2019, and at this point about a 1% drop in the median home price. And we're revising our forecasts every month just because more data is very helpful in a world like this. But I would just say housing is a leading force coming out of the engineered recession this time around. And we've seen that the last couple months. And while the future looks a little bit choppy based on how we do with the virus, I think the housing, it is just ready to, you know, ready to run. And then I'll close with just a couple comments about what I think the future is going to look like and just noting, and we've talked about this, the work from home, work from anywhere, new order I think is going to be huge for housing. It's not only what type of house do I want to live in and how many of these white collar workers are now looking at needing not just one home office, but two home, two homes.

What about the kids? The kids need to be.

There you go. You know, you need a, you know, a house isn't just a house anymore. It's where you work out, it's your restaurant. And one thing we didn't really talk about was how many more houses are multi generational, you know, thinking twice about putting your parents in a system nursing.

Home where they're gonna die. Yeah, right.

You know, exactly. So this was a really funny exercise that someone initiated on Twitter a month or two ago, asking people to post a picture of their home office. And for anyone who's listening, I have six pictures that show a laptop on top of a washing machine, a laptop in a closet alcove, a laptop at the end of a loft that's about 3ft wide, a laptop in a kid's room and at the kitchen table and on a trash can outside. In other words, there were a lot of people that simply don't have the type of home that makes working from home easy to do. Right. So I think the winners.

Coming out of this will be, and as I've already said, residential real estate. Absolutely. The tech enabled agent has a huge advantage. And the good news is there are a lot more tech enabled agents today than there were six months ago. An agent who is able to leverage technology to enrich relationships with clients and the transition of commercial and retail and as you mentioned, hospitality spaces into housing. So those would be the four kind of closing points I would make. Kind of looking forward.

Good stuff. So, Leslie, I have to ask you. Thank you for that, by the way. I have to ask you, when we look at what's coming though, we still have some, definitely some clouds on the horizon. Right. I mean, we've got forbearance, we've got foreclosure moratoriums, we've got eviction moratoriums. Are these chickens going to come home to roost here at some point? Because the economy is definitely. It's very uneven. Okay. It's very uneven. Some people, like you said, doing great, some people really suffering. It's very sad and uneven in a lot of ways. What about next year or the year after? I mean, I don't know. From looking at this kind of stuff, it would seem like we're all in the clear for a long time to come, but maybe not.

No, I mean, it really, I think all comes down to the kind of relief that the government is going to grant to the unemployed over the next six months or however long the economy remains, essentially paused. But it all depends on that. When you look backwards, I would say the government did an amazing job of getting relief out quickly. And were there people that got PPP loans that shouldn't have? Of course. Are there people that are getting more in unemployment than they did when they were Working, Yes. But the general tenor of what was done was to support the economy when it was shutting down by providing people with an income necessary to pay their rent and eat. And that's what was done. And it was fabulous. And it's one of the reasons why we haven't seen these things that you're talking about, coupled with the eviction moratoria and so on going forward from today. I don't know. I think there will be some type of relief, but how long can that go? Half of the rental properties are owned by small landlords that also have mortgages to pay. So there's a lot of.

Levels to this and it certainly is the thing that's keeping me up at night. And I think we're all watching the monthly CoreLogic data to just see how many people are 90 days behind, how many people are 30 days behind. Now, I know I'm not sure what the exact number is. I think about a third of the people that got forbearance are still paying on their mortgages. Many, you know, they took it out as an insurance policy. But that's the data I think we need to keep, keep really big, big tabs on because we know from the Great Recession how quickly this can shift when people start losing their homes.

Yeah. Very interesting stuff. Leslie, do you want to share a website or just and, you know, wrap it up with a closing thought for us?

I really appreciate being here today. I'm extremely optimistic about real estate going forward. Forward with a tremendous amount of concern for keeping the economy going long enough that we can just hit the ground running. Our website is car.org and we do have information there on the market and on the virus. And we just try to keep our members informed and being able to be the best possible advisors to their clients.

Good stuff. Leslie Appleton Young, thank you for joining us.

My pleasure. Thanks for having me, Jason.

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