2010 Real Estate Forecast

October 7, 2009

Leslie Appleton-Young

C.A.R. Vice President and Chief Economist

2010 California Real Estate Market Forecast

California REALTOR® EXPO

US and California Economic Conditions

Historic Fiscal Stimulus

Fiscal Policy: “Spend Now – Worry Later”

To date: $3 trillion in government spending

MBS purchases ($693 billion)

TARP ($372 billion)

Obama stimulus package ($304 billion)

Cash for Clunkers

First-time Buyer Tax Credit

Extension of Unemployment Benefits

Tax Cuts

Result: Federal budget deficit will reach 1.6 trillion this year

SOURCE: Federal Home Loan Mortgage Corporation

Mortgage Rates and Monetary Policy“Whatever it Takes”

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

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FRM

ARM

Federal Funds

SOURCE: Federal Home Loan Mortgage Corporation – 30-yr FRMFederal Reserve Board – 10-Year T-Bond

30-Year FRM vs. 10-Year T-Bond Above-Average Risk Premiums Associated With Mortgage Loans

0%

1%

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FRM

10-YearT-Bond

RiskPrem

Average. Risk

Premium: 1.6%

Lower spread in 2009 - FED purchasesfrom Fannie and Freddie

Consumer Price IndexAugust 2009: All Items -1.4% YTY; Core 1.5% YTY

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

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All Items

Core

PERCENT CHANGE FROM A YEAR AGO, 100=1982-1984

Gross Domestic Product

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

19

90

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91

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92

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09

Q3

-08

Q4

-08

Q1

-09

Q2

-09

2008: +0.4%; 2009P -2.6%; Q2: -0.7%

ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $

ANNUAL QTRLY

QUARTERLY PERCENT CHANGE

-4

-2

0

2

4

6

8

1Q

-19

90

1Q

-19

91

1Q

-19

92

1Q

-19

93

1Q

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1Q

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96

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04

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05

1Q

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06

1Q

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07

1Q

-20

08

1Q

-20

09

Personal Consumption2009 Q2: -0.87%

SOURCE: US Dept of Commerce, Bureau of Economic Analysis

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Q1

-19

60

Q1

-19

62

Q1

-19

64

Q1

-19

66

Q1

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68

Q1

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70

Q1

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72

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Q1

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Q1

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Q1

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Q1

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Q1

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Q1

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98

Q1

-20

00

Q1

-20

02

Q1

-20

04

Q1

-20

06

Q1

-20

08

SOURCES: BEA S&P 500

U.S. Savings Rate: 1960 – 2009Is increase Permanent or Temporary?

Consumer Behavior: Permanent Change or Temporary Hiatus From Spending?

“Credit impaired lower income consumers can’t spend the way they used to and wealth impaired affluent consumers won’t.”

UCLA Forecast 9/09

INDEX, 100=1985

Consumer Confidence Index: Better…Sort OfAugust 2009: 54.5 September 2009: 53.1

20

30

40

50

60

70

80

90

100

110

120

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140

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160

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DJIMonthly

Avg.

Dow Jones Stock Price and Consumer Confidence30 Industrial Index vs. Consumer Confidence Index 1987-2009

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

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140

160

Dow Jones 30 Industrials Consumer Confidence Index Cons. Conf.

PERCENT CHANGE FROM A YEAR AGO

Retail Sales2009 August - 6.0% YTY

-15%

-10%

-5%

0%

5%

10%

15%

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Retail Sales 6 per. Mov. Avg. (Retail Sales)

Unemployment RateCalifornia (8/09 12.2%) vs. United States (9/09 9.8%)

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

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US-CA CA US

SOURCE: CA Employment Development Division

Employment Growth, California vs. U.S. 8/09 CA: -4-9% YTY 9/09 US: -4.2% YTY

YEAR TO YEAR % CHANGE

-6

-5

-4

-3

-2

-1

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California US


Nonfarm Employment By Region


Nonfarm NonfarmEmployment Employment Percent

Aug-09 Aug-08 Change ChangeSouthern California 7,918.8 8,289.4 -370.6 -4.5%

Bay Area 3,088.7 3,243.6 -154.9 -4.8%

Central Valley 1,906.2 1,990.4 -84.2 -4.2%

Central Coast 478.0 492.0 -14 -2.8%

North Central 131.6 137.9 -6.3 -4.6%

CALIFORNIA 14,234.1 14,975.6 -741.5 -5.0%

(Thousands)

Employment by Sector

-20%

-15%

-10%

-5%

0%

5%

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2008 2009 2010

% Change

YTY % Changes in California 2008-2010

SOURCE: CA EDD, LAEDC

New Housing PermitsCalifornia, 1988-2009: Down 48.8% YTD

0

50,000

100,000

150,000

200,000

250,000

300,0001

98

8

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

YT

D

Single Family Multi-Family

SOURCE: Construction Industry Research Board

Distressed Commercial RE Growing

J '08

F M A M J J A S O N D J '09

F M A M J$0

$20,000,000,000

$40,000,000,000

$60,000,000,000

$80,000,000,000

$100,000,000,000

$120,000,000,000

$140,000,000,000

$11,402,641,162

$58,007,939,372

$114,543,683,284

Cumulative Distress

Source: Real Capital Analytics

billions

Distressed properties include those that are in bankruptcy, foreclosures, those that have received lender forbearance, or lender REO.

Commercial Debt Crisis Ahead

2008/2009 2010 2011 2012+$0

$200,000,000,000

$400,000,000,000

$600,000,000,000

$800,000,000,000

$1,000,000,000,000

$1,200,000,000,000

$1,400,000,000,000

$1,600,000,000,000

$1,800,000,000,000

$2,000,000,000,000

$410,000,000,000 $310,000,000,0

00

$500,000,000,000

$1,800,000,000,000

Commercial Real Estate Debt Maturities

Source: Goldman Sachs and REIT filings

billions

Commercial MBS Market

$0

$50

$100

$150

$200

$250

$4 $5$14$16$15$16

$26$37

$74$57

$47$67

$52

$78$93

$169

$203

$230

$12$0.8

U.S. CMBS Issuance ($ billions)

Source: Commercial Mortgage Alert

billions

California Real Estate Market

THOUSANDS

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

19

70

19

72

19

74

19

76

19

78

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

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96

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98

20

00

20

02

20

04

20

06

20

08

20

10

0

50,000

100,000

150,000

200,000

250,000

Home Sales Membership

California’s Housing Cycles and Membership1970-2009

Sales Hit Bottom in 2007, Up in 2008 & 2009

UNITS/MEDIAN PRICE $

SOURCE: California Association of REALTORS®

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

19

70

19

72

19

74

19

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20

00

20

02

20

04

20

06

20

08

Sales of Existing Detached Homes Median Price

California Sales of Existing Homes and Median Price

-61% -25%

-44%

129 132

181

224

282

327

266

194

152 146 148

26%

16%

-19%

-27%-22%

-4%1%

37%

2%

24%

0

50

100

150

200

250

300

350

400

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

P

20

10

F

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

$ Volume of Sales Percent Change% Change$ in Billion

Dollar Volume of Sales Peaked in ’05Down 55% Thru ‘09


-55%

Sales of Existing Detached Homes and Pacific West Consumer Confidence

California, August 2009 Sales: 526,970 Units, Up 38.2% YTD, Up 9.0% YTY

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

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0

20

40

60

80

100

120

140

160

Sales Consumer Confidence INDEXUNITS

SOURCE: California Association of REALTORS®; The Conference Board

*Sales are seasonally adjusted and annualized

Median Price of Existing Detached HomesCalifornia, August 2009: $292,960, Down 16.9% YTY


T: Feb-09$245,170

-59% frompeak

P: May-07$594,530

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000J

an

-00

Ju

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74%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

20

04

.10

20

05

.01

20

05

.04

20

05

.07

20

05

.10

20

06

.01

20

06

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20

06

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20

06

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20

07

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20

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20

07

.07

20

07

.10

20

08

.01

20

08

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20

08

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20

08

.10

20

09

.01

20

09

.04

20

09

.07

Under 500 500 to 999 1 Mil +

Sales By Price RangeOctober 2004 – present

SOURCE: Mortgage Bankers Association, C.A.R.

Credit Freeze: 8/2007

California vs U.S. Median Prices 1970-2009 1970: CA $24,640 US $23,000

2009: CA $271,000 US $172,600

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,00019

70

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

California

US

CA Price Trend

SOURCE: California Association of REALTORS®SOURCE: California Association of REALTORS®

Peak vs Current Price - August 2009

RegionPeak

MonthPeak Price

Aug-09 Median

% Chg From Peak

High Desert Apr-06 $334,860 $111,770 -66.6%

Monterey Region Aug-07 $798,210 $298,940 -62.5%

Riverside/San Bernardino Jan-07 $415,160 $166,600 -59.9%

Palm Springs/Lower Desert Jun-05 $393,370 $169,080 -57.0%

Sacramento Aug-05 $394,450 $192,050 -51.3%

CALIFORNIA May-07 $594,530 $292,960 -50.7%

Northern Wine Country Jan-06 $645,080 $347,920 -46.1%

Los Angeles Aug-07 $605,300 $339,980 -43.8%

Northern California Aug-05 $440,420 $255,600 -42.0%

San Diego May-06 $622,380 $375,710 -39.6%

San Luis Obispo Jun-06 $620,540 $382,560 -38.4%

San Francisco Bay Area May-07 $853,910 $531,580 -37.7%

Santa Clara Apr-07 $868,410 $555,000 -36.1%

Ventura Aug-06 $710,910 $466,200 -34.4%

Orange County Apr-07 $747,260 $499,440 -33.2%


Unsold Inventory IndexCalifornia, August 2009: 4.3 Months

0

2

4

6

8

10

12

14

16

18

20

Ja

n-8

8J

ul-

88

Ja

n-8

9J

ul-

89

Ja

n-9

0J

ul-

90

Ja

n-9

1J

ul-

91

Ja

n-9

2J

ul-

92

Ja

n-9

3J

ul-

93

Ja

n-9

4J

ul-

94

Ja

n-9

5J

ul-

95

Ja

n-9

6J

ul-

96

Ja

n-9

7J

ul-

97

Ja

n-9

8J

ul-

98

Ja

n-9

9J

ul-

99

Ja

n-0

0J

ul-

00

Ja

n-0

1J

ul-

01

Ja

n-0

2J

ul-

02

Ja

n-0

3J

ul-

03

Ja

n-0

4J

ul-

04

Ja

n-0

5J

ul-

05

Ja

n-0

6J

ul-

06

Ja

n-0

7J

ul-

07

Ja

n-0

8J

ul-

08

Ja

n-0

9J

ul-

09


MONTHS

Price Range (Thousand) Aug-09 Jul-09 Aug-08

$1,000K+ 12.8 9.6 10.8$750-1000K 6.1 5.2 7.6$500-750K 4.2 3.9 6.5$300-500K 3.9 3.5 6.3$0-300K 2.9 3.1 6.4Total 4.3 3.9 7.0

Unsold Inventory Index (Months)


Unsold Inventory Index: Over & Under $500K

0

5

10

15

20

25

30

35

Jan

-90

Jul-

90Ja

n-9

1Ju

l-91

Jan

-92

Jul-

92Ja

n-9

3Ju

l-93

Jan

-94

Jul-

94Ja

n-9

5Ju

l-95

Jan

-96

Jul-

96Ja

n-9

7Ju

l-97

Jan

-98

Jul-

98Ja

n-9

9Ju

l-99

Jan

-00

Jul-

00Ja

n-0

1Ju

l-01

Jan

-02

Jul-

02Ja

n-0

3Ju

l-03

Jan

-04

Jul-

04Ja

n-0

5Ju

l-05

Jan

-06

Jul-

06Ja

n-0

7Ju

l-07

Jan

-08

Jul-

08Ja

n-0

9Ju

l-09

UII - Over $500k

UII - Under $500k


Regional Markets

Home Sales in Northern California

0

50

100

150

200

250

300

350

400

450

Chico Paradise Humboldt LakeCounty

PlacerCounty

Shasta SiskiyouCounty

TahoeSierra

Aug-08 Aug-09


Chico 271,428$ 295,237$ 291,176$ -8.1% -6.8%Humboldt 230,405$ 280,128$ 296,153$ -17.8% -22.2%Lake County 145,833$ 160,000$ 218,750$ -8.9% -33.3%Paradise 174,999$ 172,499$ 195,999$ 1.4% -10.7%Placer County 309,406$ 301,770$ 346,575$ 2.5% -10.7%Shasta County 203,125$ 198,499$ 231,632$ 2.3% -12.3%Siskiyou County 170,000$ 166,666$ 208,333$ 2.0% -18.4%Tahoe Sierra 547,619$ 551,136$ 687,499$ -0.6% -20.3%

Y-t-YRegion Aug-09 Jul-09 Aug-08 M-t-M

Median Price of Existing Detached Homes


Northern California


Home Sales in Northern Wine Country

0

50

100

150

200

250

300

350

400

450

500

Mendocino Napa Sonoma

Aug-08

Aug-09


Mendocino 218,750$ 258,333$ 322,222$ -15.3% -32.1%Napa 337,096$ 369,642$ 455,882$ -8.8% -26.1%Sonoma 361,792$ 365,966$ 382,945$ -1.1% -5.5%


Median Price of Existing Detached HomesNorthern Wine Country


Home Sales in Bay Area Counties

0

100

200

300

400

500

600

700

800

900

1000

Alameda ContraCosta

Marin SanFrancisco

San Mateo SantaClara

SantaCruz

Solano Sonoma

Aug-08

Aug-09


Median Price of Existing Detached HomesBay Area Counties

Alameda 447,802$ 450,515$ 514,974$ -0.6% -13.0%Contra Costa 627,747$ 628,099$ 701,298$ -0.1% -10.5%Marin 835,000$ 762,500$ 929,999$ 9.5% -10.2%San Francisco 655,405$ 704,645$ 789,773$ -7.0% -17.0%San Mateo 672,500$ 755,000$ 787,500$ -10.9% -14.6%Santa Clara 555,000$ 587,000$ 650,000$ -5.5% -14.6%Santa Cruz 500,000$ 535,000$ 582,000$ -6.5% -14.1%Solano 210,577$ 209,066$ 267,592$ 0.7% -21.3%Sonoma 361,792$ 365,966$ 382,945$ -1.1% -5.5%

Aug-08 M-t-M Y-t-YCounty Aug-09 Jul-09


0

200

400

600

800

1000

1200

1400

1600

1800

2000

Aug-08

Aug-09

Home Sales in Central Valley Region


133,250$ 133,750$ 180,000$ -0.4% -26.0%149,047$ 146,707$ 189,506$ 1.6% -21.3%107,586$ 110,571$ 134,761$ -2.7% -20.2%192,047$ 183,835$ 220,894$ 4.5% -13.1%Sacramento

Y-t-Y

Merced

County Aug-09 Jul-09 Jul-08 M-t-M

Bakersfield

Fresno

Median Price of Existing Detached HomesCentral Valley Regions


Home Sales in Central Coast Region

0

50

100

150

200

250

300

350

400

MontereyAtascadero PasoRobles

PismoCoast

San LuisObispo

LompocValley

SantaBarbara

SantaMaria

Aug-08

Aug-09


Monterey 235,000$ 230,000$ 302,000$ 2.2% -22.2%

Atascadero 372,727$ 343,750$ 391,666$ 8.4% -4.8%Paso Robles 309,375$ 338,235$ 341,176$ -8.5% -9.3%Pismo Coast 433,333$ 500,000$ 531,250$ -13.3% -18.4%San Luis Obispo 512,500$ 468,749$ 515,625$ 9.3% -0.6%

Lompoc Valley 208,333$ 188,000$ 291,666$ 10.8% -28.6%Santa Barbara 828,750$ 882,500$ 1,000,000$ -6.1% -17.1%Santa Maria 250,000$ 257,895$ 262,500$ -3.1% -4.8%

Monterey County

San Luis Obispo County

Santa Barbara County


Median Price of Existing Detached Homes


Home Sales in Southern California Regions

0

500

1000

1500

2000

2500

3000

3500

4000

4500

High Desert Los Angeles Orange PalmSprings

Riverside/SB San Diego Sta. BarbaraArea

Ventura

Aug-08

Aug-09


High Desert 111,771$ 110,653$ 169,203$ 1.0% -33.9%Los Angeles 339,982$ 339,432$ 394,869$ 0.2% -13.9%

499,437$ 500,212$ 511,268$ -0.2% -2.3%Palm Springs 169,076$ 163,077$ 221,944$ 3.7% -23.8%

166,601$ 165,465$ 225,394$ 0.7% -26.1%375,706$ 372,645$ 388,712$ 0.8% -3.3%828,750$ 882,500$ 1,000,000$ -6.1% -17.1%

Sta. Barbara-North Cnty. 244,047$ 243,477$ 266,666$ 0.2% -8.5%466,197$ 456,435$ 478,408$ 2.1% -2.6%

Riverside/SB

Ventura

Sta. Barbara-So. Coast

Y-t-Y

San Diego

County Aug-09 Jul-09 Aug-08 M-t-M

Orange

Median Price of Existing Detached HomesSouthern California Regions


A Tale of Two Markets:San Mateo & Hayward

Source: ForeclosureRadar.com, C.A.R.

San Mateo, Sep 2009: Median Price: $698,000 Down 15% YTY 54 SF Det Units Sold, Up 26% YTY 2.0 Months of Supply, Down 45% YTY 206 Properties For Sale, Down 20% YTY 173 NODs, 119 Foreclosures, 42 REOS

Hayward, Sep 2009: Median Price: $280,000 Down 12% YTY 116 SF Det Units Sold, Down 13% YTY 1.0 Month of Supply, Down 77% YTY 391 Properties For Sale, Down 65% YTY 895 NODs, 811 Foreclosures, 324 REOS

A Tale of Two Markets:Pleasanton & Brentwood


Pleasanton, Sep 2009: Median Price: $685,000, Down 13% YTY 63 SF Det Units Sold, Up 91% YTY 3.0 Months of Supply, Down 55% YTY 239 Properties For Sale, Down 34% YTY 165 NODs, 97 Foreclosures, 29 REOS

Brentwood, Sep 2009: Median Price: $283,600 Down 19% YTY 70 SF Det Units Sold, Down 33% YTY 1.2 Months of Supply, Down 74% YTY 322 Properties For Sale, Down 46% YTY 476 NODs, 424 Foreclosures, 190 REOS

A Tale of Two Markets:Walnut Creek & Concord


Concord, Sep 2009: Median Price: $290,000, Down 16% YTY 66 SF Det Units Sold, Down 35% YTY 1.0 Month of Supply, Down 72% YTY 283 Properties For Sale, Down 52% YTY 605 NODs, 413 Foreclosures, 239 REOS

Walnut Creek, Sep 2009: Median Price: $650,000 Down 13% YTY 39 SF Det Units Sold, Up 18% YTY 3.0 Months of Supply, Down 34% YTY 216 Properties For Sale, Down 19% YTY 207 NODs, 132 Foreclosures, 59 REOS

A Tale of Two Markets:Laguna Beach & Temecula


Temecula, Sep 2009: Median Price: $270,000 Down 7% YTY 153 SF Det Units Sold, Down 19% YTY 1.0 Months of Supply, Down 80% YTY 667 Properties For Sale, Down 56% YTY 845 NODs, 821 Foreclosures, 276 REOS

Laguna Beach, Sep 2009: Median Price: $1,370,000, -20% YTY 29 SF Det Units Sold, Up 142% YTY 12.0 Months of Supply, Down 48% YTY 388 Properties For Sale, Up 2% YTY 75 NODs, 52 Foreclosures, 14 REOS

A Tale of Two Markets:Santa Barbara & Santa Maria


Santa Barbara, Sep 2009: Median Price: $760,200, Down 26% YTY 54 SF Det Units Sold, Down 4% YTY 7.0 Months of Supply, Down 36% YTY 463 Properties For Sale, Down 4% YTY 147 NODs, 139 Foreclosures, 48 REOS

Santa Maria, Sep 2009: Median Price: $262,750 Up 2% YTY 64 SF Det Units Sold, Down 36% YTY 2.0 Months of Supply, Down 69% YTY 2208 Properties For Sale, Down 65% YTY 432 NODs, 432 Foreclosures, 180 REOS

-100%

-50%

0%

50%

100%

150%

200%

250%

300%

20

05

.10

20

06

.01

20

06

.04

20

06

.07

20

06

.10

20

07

.01

20

07

.04

20

07

.07

20

07

.10

20

08

.01

20

08

.04

20

08

.07

20

08

.10

20

09

.01

20

09

.04

20

09

.07

Under 500 500 to 999 1 Mil + Total

Year-to-Year Percent Change in Sales


By Price Interval


-15%

-10%

-5%

0%

5%

10%

15%

20

05

.10

20

06

.01

20

06

.04

20

06

.07

20

06

.10

20

07

.01

20

07

.04

20

07

.07

20

07

.10

20

08

.01

20

08

.04

20

08

.07

20

08

.10

20

09

.01

20

09

.04

20

09

.07

Under 500 500 to 999 1 Mil +

Year-to-Year Percent Change in Median Price


Within Price Interval


26%36%

40% 41%

51%56% 58%

66%73%

78% 80%

0%

20%

40%

60%

80%

100%

Ma

rin

Sa

n L

uis

Ob

isp

o

Me

nd

oci

no

Ora

ng

e

So

no

ma

Na

pa

Lo

s A

ng

ele

s

Sa

cra

me

nto

Ke

rn

So

lan

o

Riv

ers

ide

/Sa

nB

ern

ard

ino

Distressed Sales to Total Sales Ratio(Aug 2009)


County/Region Mar-09 Jun-09 Jul-09 Aug-09

Marin 33.1% 21.6% 26.9% 26.4%San Luis Obispo 50.5% 41.8% 38.4% 35.5%Mendocino 41.9% 51.1% 40.0% 40.0%Orange 56.7% 44.5% 40.6% 41.4%Sonoma 67.1% 56.6% 46.8% 51.3%Napa 69.4% 51.9% 52.0% 55.7%Los Angeles 69.2% 61.2% 58.9% 57.6%Sacramento 70.5% 70.6% 65.9% 66.4%Kern 83.5% 76.9% 73.7% 72.9%Solano 88.4% 84.0% 83.3% 78.1%Riverside/San Bernardino 87.1% 83.5% 82.2% 79.5%

Distressed Sales to Total Sales Ratio


Distressed Sales vs. Non Distressed Sales

DistressedNon-Distressed

Median Home Price $250,000 $485,000

Price/SF $154 $277

Percent of Sales with Multiple Offers 68.1% 44.7%

Number of Offers (Average) 6.1 4.0

Percent of All Cash Sales 22.4% 17.1%

Number of Days on MLS 43 50

Number of Days in Escrow 45 35

Percent of Sales with Net Cash Loss 68.9% 17.9%

Net Cash Gain/Net Cash Loss to Seller -$100,000 $85,000

Source: C.A.R. 2009 Housing Market Survey

5.0%

19.5%

11.1%

26.8%

14.4%

5.3%

0%

10%

20%

30%

Foreclosures REOs Short Sales

2008 2009

Percent of Distressed Properties

Q. Was the property purchased/sold as a foreclosure, REO, short sale, or none of the above?

Source: C.A.R. 2009 Housing Market Survey

2009 Housing Market Survey

0%

1%

2%

3%

4%

5%

6%

7%

8%

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

0

2

4

6

8

10

12

14

16Med. Price DiscountMed. Weeks on MLS

Median Price Discount And Weeks On Market

Q. What was the original list sales price of the property? What was the final sales price of the property? How many weeks did the property remain on the MLS?

4.6%, 6.4 weeks

69%

0%

20%

40%

60%

80%

100%

Percent with Price DiscountSelling price below listing price

Long Run Average = 68%

Q. What was the original list sales price of the property? What was the final sales price of the property?

$220,640

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

$220,000

$240,000

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

Median Net Cash To Sellers2005: $220K 2009: $50K

Q. What was the net cash gain or net loss to the seller as a result of this sale?

$50,000

Sellers Reporting a Net Cash LossPercent of All Sellers

32.9%

0%

5%

10%

15%

20%

25%

30%

35%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Q. What was the net cash gain or net loss to the seller as a result of this sale?

Long Run Average = 9.3%

Proportion of Home Sellers Planning to Repurchase

39.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

89 90 91 92 93 94 95 96 97 98 00 01 02 03 04 05 06 07 08 09

Q. Is the seller planning on purchasing another home?

Proportion of First-Time HomebuyersCalifornia

47.0%

38.6%

0%

10%

20%

30%

40%

50%

60%

81 83 85 87 89 91 93 95 97 99 01 03 05 07 09

% First-Time Home Buyers Long Run Average

Q. Was the buyer a first-time buyer?

FHA and VA Mortgages(First Mortgage)

Q. Please indicate the type of mortgage

32.0%

4.7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2001 2002 2003 2004 2005 2006 2007 2008 2009

FHA VA

FHA vs. Conventional(New First Mortgages)

FHA Conventional

Median Home Price $261,500 $455,000

Median Down Payment (Dollar) $9,888 $92,000

Median Down Payment (% to Price) 3.5% 20.0%

Share of All Home Sales 32.0% 63.3%Percent of Mortgages with Distressed Property 62.6% 37.4%

Percent of First-Time Buyers 75.8% 40.2%

55.4%

5.14

0%

10%

20%

30%

40%

50%

60%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0

1

2

3

4

5

6% with Multiple Offers

# of Multiple offers (Average)

Multiple Offers:Over 1/2 homes sold 2009 had multiple offers

0%

10%

20%

30%

40%

50%

1998 2000 2002 2004 2006 2008

All Hombuyers First-Time BuyersRepeat Buyers

Percent of Buyers with Zero Down PaymentFirst-Time Buyers vs. Repeat Buyers

5.0%

3.7%

2.8%

19.6%

0%

2%4%

6%8%

10%12%

14%16%

18%20%

22%

Percent of All Cash Sales

12.1%

5.2%

0%

5%

10%

15%

20%

1998 2000 2002 2004 2006 2008

Investment/Rental Property Vacation/Second Home

Buyer Use of Property(All Homes)

10.2%

4.1%

0%

5%

10%

15%

1998 2000 2002 2004 2006 2008


Buyer Use of Property(Single-Family Detached Homes)

16.3%

10.6%

0%

5%

10%

15%

20%

25%

30%

1998 2000 2002 2004 2006 2008


Buyer Use of Property(Condos/Townhomes)

20%

0% 0% 0%0% 0%

19% 20%

8%

18%

30%

0%

55%

0%5%

16%

42%

14% 16%

7%3%

0%

15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Desiredlarger home

Desiredbetter/other

location

Mortgagepaymentwent up(reindex)

Moved torental to

save money

Job loss Troublemaking

mortgagepayments

2006 2007 2008 2009

Signs of Distress in 2008-2009

Sellers Are Reacting to Financial Stress

The Role of Market Conditions In the Decision to Sell

SOURCE: C.A.R. 2009 Survey of Home Sellers

While Buyers See Opportunities …

10%

9%

67%

22%

39%

Price decreases motivated us

Low interest rates helped us move toa better location, neighborhood

Likelihood that interest rates will moveup motivated us

Low interest rates helped us buy alarger home

Moved to an area where it was moreaffordable

The Role Of Market ConditionsIn The Decision To Buy

SOURCE: C.A.R. 2009 Survey of Home Buyers

The Bottom Line: Great Time to be a First Time Buyer

First-time Buyer Housing Affordability IndexCalifornia Vs. U.S. 2000-2009

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20

00

Q1

20

00

Q3

20

01

Q1

20

01

Q3

20

02

Q1

20

02

Q3

20

03

Q1

20

03

Q3

20

04

Q1

20

04

Q3

20

05

Q1

20

05

Q3

20

06

Q1

20

06

Q3

20

07

Q1

20

07

Q3

20

08

Q1

20

08

Q3

20

09

Q1

CA US

% OF HOUSEHOLDS THAT CAN BUY


Federal First-Time Buyer Tax Credit

• Legislation Passed February 2009

• Retroactive to January 1, 2009

• Extended/modified version of 2008 Tax Credit– Current expiration November 30, 2009– 6 month extension under deliberation

• National Impact – 1.4 million families in US (IRS)

• California Results – 39% of first-timers would not have bought in 2009 w/o tax credit (C.A.R. Survey)

Bought Home Regardless of Federal First-Time Home Buyer Tax Credit?

Q. Would you have bought a home if there were not a Federal First-Time Home Buyer Tax Credit, or if you knew you did not qualify for the credit? CAR Telephone Survey 2009

39%

52%

26%

11%

17%

6%

51%

68%

31%

Total (N = 200)

Income Under $100K(N = 96)

Income $100K andover (N = 104)

Yes No Unsure

0% 0% 0%

5%

8%9% 9%

10%

31%

27%

0%

5%

10%

15%

20%

25%

30%

35%

1 2 3 4 5 6 7 8 9 10

Mean = 8.1 Median = 9

Scale: “1” = very easy, “10” = very difficult

Level of Difficulty to Obtain Financing(All Buyers)

Q. Please rate how easy of difficult it was to obtain financing on a scale of 1 to 10, with 1 being very easy and 10 being very difficult.

Reasons Why Property Fell Out of EscrowAll Homes

22.0%

0.0%

5.6%

36.5%

40.5%

0% 10% 20% 30% 40% 50%

Buyers could notsecure a mortgage

Buyer changed mind

Buyer did not havedown payment

Seller decided not tosell

Other

Q. Do you know why the property fell out of escrow previously?

Buyers Who Know the Terms of Their Loan

93%

88%

68%

81%

76%

79%

3%

1%

2%

2%

2%

7%

9%

30%

17%

22%

19%

0% 20% 40% 60% 80% 100%

Short Sale

REO

Regular MarketSales

Repeat Buyers

First-Time Buyers

All Buyers

Yes No Unsure

Q. Do you know the term of your loan?

FHA Loans in CA# of Total Loans in CA & US

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Oc

t-0

6

De

c-0

6

Fe

b-0

7

Ap

r-0

7

Ju

n-0

7

Au

g-0

7

Oc

t-0

7

De

c-0

7

Fe

b-0

8

Ap

r-0

8

Ju

n-0

8

Au

g-0

8

No

v-0

8

Ja

n-0

9

Ma

r-0

9

Ma

y-0

9

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

CA Total US Total

CA Tops All States with a 10% Market Share of all FHA Lending in US (Source: Inside FHA Lending)

Source: HUD

CA Endorsements US Endorsements

9.4%

5.8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Q1

-19

79

Q2

-19

80

Q3

-19

81

Q4

-19

82

Q1

-19

84

Q2

-19

85

Q3

-19

86

Q4

-19

87

Q1

-19

89

Q2

-19

90

Q3

-19

91

Q4

-19

92

Q1

-19

94

Q2

-19

95

Q3

-19

96

Q4

-19

97

Q1

-19

99

Q2

-20

00

Q3

-20

01

Q4

-20

02

Q1

-20

04

Q2

-20

05

Q3

-20

06

Q4

-20

07

Q1

-20

09

Delinquency Rate - CA Foreclosure Rate - CA

CA Mortgage Foreclosure & Delinquency RatesCalifornia: Q2-2009, NSA

SOURCE: Mortgage Bankers Association

Delinquencies: Long Run Average: 4.1%

Foreclosure Rate: Long Run Average: 1.0%

California Subprime & Alt A Loans

As of May 2009 Sub-Prime Alt-A

Number of All Loans in Category 345,505 632,215

Loans as Share of All Housing Units 3% 5%

ARMs As Share of All Loans in Category 66% 70%

Number of ARMs 226,997 440,022

Percent of ARMs…

…Already Reset 84.6% 46.9%

…To Reset Next 1-11 Months 7.9% 5.2%

…To Reset Next 12-23 Months 2.4% 7.4%

…To Reset Next 24+ Months 5.0% 40.4%

As of May 2009

SOURCE: FirstAmerican CoreLogic, LoanPerformance Data, U.S. Census Bureau, and Federal Reserve Bank of New York, compiled by C.A.R.

124,562

135,431

0

20000

40000

60000

80000

100000

120000

1400002

00

5.3

20

05

.4

20

06

.1

20

06

.2

20

06

.3

20

06

.4

20

07

.1

20

07

.2

20

07

.3

20

07

.4

20

08

.1

20

08

.2

20

08

.3

20

08

.4

20

09

.1

20

09

.2

NODs Trustee Deeds

NODs & Trustees Deeds Filed in California2005 - 2009

Source: DataQuick Information Systems

No. of Defaults or TDs

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

Se

p-0

6

Oc

t-0

6

No

v-0

6

De

c-0

6J

an

-07

Fe

b-0

7

Ma

r-0

7A

pr-

07

Ma

y-0

7

Ju

n-0

7

Ju

l-0

7A

ug

-07

Se

p-0

7

Oc

t-0

7N

ov

-07

De

c-0

7

Ja

n-0

8

Fe

b-0

8M

ar-

08

Ap

r-0

8

Ma

y-0

8

Ju

n-0

8J

ul-

08

Au

g-0

8

Se

p-0

8O

ct-

08

No

v-0

8

De

c-0

8

Ja

n-0

9F

eb

-09

Ma

r-0

9

Ap

r-0

9M

ay

-09

Ju

n-0

9

Ju

l-0

9

Au

g-0

9

Notice of Defaults - CountsNotice of Trustee SaleREO

California Foreclosure Activity 09/06 - present

Government Intervention

SOURCE: ForeclosureRadar.com

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

Ja

n-0

8

Fe

b-0

8

Ma

r-0

8

Ap

r-0

8

Ma

y-0

8

Ju

n-0

8

Ju

l-0

8

Au

g-0

8

Se

p-0

8

Oc

t-0

8

No

v-0

8

De

c-0

8

Ja

n-0

9

Fe

b-0

9

Ma

r-0

9

Ap

r-0

9

Ma

y-0

9

Ju

n-0

9

Ju

l-0

9

Au

g-0

9

Notice of Defaults - CountsNotice of Trustee SaleREO

California Foreclosure Activity 2008 - present

September 2008: CA SB 1137 Takes Effect

September 18, 2008: Paulson asks For TARP Funds

Government Intervention

SOURCE: ForeclosureRadar.comFebruary 11 2009:Frank’s Moratorium Request

February 20, 2009: CA Foreclosure Prevention Act

March 4, 2009:Making Home Affordable/HAMP

2010 Forecast

Wild Cards

• First-time Buyer Tax Credit

• Additional Stimulus – Job Creation Prerequisite to

Sustainable Growth

• Foreclosure Pipeline

• Commercial Defaults – Impact on Credit Market

• Inflation - Will Fed monetize the deficit?

• H1N1 (Stock tip: Purell)

U.S. Economy

2004 2005 2006 2007 2008 2009f 2010f

US GDP 3.6% 3.1% 2.7% 2.1% 0.4% -2.6% 1.9%

Nonfarm Job Growth

1.1% 1.7% 1.8% 1.1% -0.4% -3.7% -1.0%

Unemployment 5.5% 5.1% 4.6% 4.6% 5.8% 9.3% 10.0%

CPI 2.7% 3.4% 3.2% 2.8% 3.8% -0.5% 1.9%

Real Disposable Income, % Change

3.4% 1.3% 4.0% 2.2% 0.5% 0.8% 2.1%


Forecast Date: October 2009

California Economy

2004 2005 2006 2007 2008 2009f 2010f

Nonfarm Job Growth

1.0% 1.8% 1.7% 0.8% -1.2% -4.3% -1.1%

Unemployment Rate

6.2% 5.4% 4.9% 5.4% 7.2% 11.6% 12.1%

Population Growth

1.4% 1.2% 1.1% 1.1% 1.2% 1.1% 1.1%

Real Disposable Income, % Change

3.6% 1.3% 3.4% 1.5% 0.1% -0.4% 0.1%



2009 Forecast vs. Actual

California Housing Market Forecast

2003 2004 2005 2006 2007 2008e 2009f

SFH Resales (000s)

601.8 624.7 625.0 477.5 353.3 395.6 445.0

% Change 5.1% 3.8% 0.04% -23.6% -26.0% 12.0% 12.5%

Median Price ($000s)

$372.7 $450.8 $524.0 $556.6 $558.1 $381.0 358.0

% Change 17.9% 20.9% 16.2% 6.2% 0.3% -31.7% -6.0%

30-Yr FRM 5.8% 5.8% 5.9% 6.4% 6.3% 5.9% 6.2%

1-Yr ARM 3.8% 3.9% 4.5% 5.5% 5.6% 5.2% 5.3%



2010 California Houisng

Market Forecast

California Housing Market Outlook

2003 2004 2005 2006 2007 2008 2009F 2010F

SFH Resales (000s)

601.8 624.7 625.0 477.5 346.9 439.8 540.0 527.5

% Change 5.1% 3.8% 0.03% -23.6% -27.3% 26.8% 22.8% -2.3%

Median Price ($000s)

$371.5 $450.8 $522.7 $556.4 $560.3 $346.4 $271.0 $280.0

% Change 17.5% 21.3% 16.0% 6.5% 0.7% -38.2% -21.8% 3.3%

30-Yr FRM 5.8% 5.8% 5.9% 6.4% 6.3% 6.0% 5.2% 5.6%

1-Yr ARM 3.8% 3.9% 4.5% 5.5% 5.6% 5.2% 4.8% 5.2%

Source: CALIFORNIA ASSOCIATION OF REALTORS®


Market Opportunities

• First time buyers: Growing share of the market

• Connect with past clients: Valuable information to share

• Educate clients: What is Responsible Homeownership?

• Educate yourself: Professional Development is Critical

• Listen to your clients

Thank [email protected]

2010 Real Estate Forecast

Documents

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