2010 California Real Estate Market Forecast Fresno AOR Sara Sutachan Senior Research Analyst California Association of REALTORS® December 11, 2009.

2010 California Real Estate Market Forecast

Fresno AOR

Sara SutachanSenior Research AnalystCalifornia Association of REALTORS®

December 11, 2009

www.car.org Economics Speeches

Speeches & Presentations

US and California Economic Conditions

QUARTERLY PERCENT CHANGE, ANNUAL RATE

Gross Domestic Product2009 Q3: 3.5% (advance estimate)

-8%-7%-6%-5%-4%-3%-2%-1%0%1%2%3%4%5%6%7%8%9%

1Q

-19

90

1Q

-19

91

1Q

-19

92

1Q

-19

93

1Q

-19

94

1Q

-19

95

1Q

-19

96

1Q

-19

97

1Q

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98

1Q

-19

99

1Q

-20

00

1Q

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01

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1Q

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05

1Q

-20

06

1Q

-20

07

1Q

-20

08

1Q

-20

09

SOURCE: US Dept of Commerce, Bureau of Economic Analysis

QUARTERLY PERCENT CHANGE

-4

-2

0

2

4

6

8

1Q

-19

90

1Q

-19

91

1Q

-19

92

1Q

-19

93

1Q

-19

94

1Q

-19

95

1Q

-19

96

1Q

-19

97

1Q

-19

98

1Q

-19

99

1Q

-20

00

1Q

-20

01

1Q

-20

02

1Q

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03

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04

1Q

-20

05

1Q

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06

1Q

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07

1Q

-20

08

1Q

-20

09

Personal Consumption2009 Q3: 3.4%

SOURCE: US Dept of Commerce, Bureau of Economic Analysis

INDEX, 100=1985

Consumer Confidence Index: Better…Sort OfOctober 2009: 47.7 November 2009: 49.5

20

30

40

50

60

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80

90

100

110

120

130

140

150

160

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Unemployment RateCalifornia (10/09 12.5%) vs. United States (11/09 10.0%)

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Ja

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US-CA CA US

SOURCE: CA Employment Development Division

Unemployment RateFresno County, October 2009: 15.8%

0%

5%

10%

15%

20%

25%

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SOURCE: CA Employment Development Division

Consumer Price IndexOctober 2009: All Items -0.2% 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

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

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%

SOURCE: California Association of REALTORS®

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%



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

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19

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20

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07

20

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20

09

YT

D

Single Family Multi-Family

SOURCE: Construction Industry Research Board

Distressed Commercial RE Growing

billions

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

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

Mortgage Financing – Still Challenging

SOURCE: Federal Home Loan Mortgage Corporation

Mortgage Rates and Fed Funds Rate

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%

2%

3%

4%

5%

6%

7%

8%

9%

10%

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FRM

10-YearT-Bond

RiskPrem

Average. Risk

Premium: 1.6%

Lower spread in 2009 - FED purchasesfrom Fannie and Freddie

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

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

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6

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20000

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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

0%

2%

4%

6%

8%

10%

12%

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

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Q1

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Q2

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01

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Delinquency Rate - CA Foreclosure Rate - CA

CA Mortgage Foreclosure & Delinquency RatesCalifornia: Q3-2009, NSA

SOURCE: Mortgage Bankers Association

Foreclosure Rate: Long Run Average: 1.0%

Delinquencies: Long Run Average: 4.1%

111,689

124,562

135,431

0

20000

40000

60000

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100000

120000

140000

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NODs Trustee Deeds

NODs & Trustees Deeds Filed in California2005 - 2009

Source: DataQuick Information Systems

No. of Defaults or TDs

California Real Estate Market

Sales Hit Bottom in 2007, Up in 2008 & 2009

UNITS/MEDIAN PRICE $


0

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700,000

19

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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

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150

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350

400

20

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P

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F

-30%

-20%

-10%

0%

10%

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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, October 2009 Sales: 562,400 Units, Up 28.9% YTD, Up 1.0% YTY

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

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Sales Consumer Confidence INDEXUNITS

SOURCE: California Association of REALTORS®; The Conference Board

*Sales are seasonally adjusted and annualized

Median Price of Existing Detached HomesCalifornia, October 2009: $297,500, Down 1.0% YTY


P: May-07$594,530

T: Feb-09$245,170down 59% from peak

$0

$100,000

$200,000

$300,000

$400,000

$500,000

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Median Price Annual ComparisonCalifornia, 2008: $346,410, Down 38.2% YTY


$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

19

97

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$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Jan

Fe

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Ap

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Ma

y

Jun

Jul

Au

g

Se

pt

Oc

t

No

v

De

c

2006200720082009

MONTHLYANNUAL

75%

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

.04

20

06

.07

20

06

.10

20

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.01

20

07

.04

20

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.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 +

Sales By Price RangeOctober 2004 – present

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

Credit Freeze: 8/2007

Peak vs. Current Price - October 2009

RegionPeak

MonthPeak Price

Oct-09 Median

% Chg From Peak

High Desert Apr-06 $334,860 $118,580 -64.6%

Monterey Region Aug-07 $798,210 $300,860 -62.3%

Riverside/San Bernardino Jan-07 $415,160 $171,600 -58.7%

Palm Springs/Lower Desert Jun-05 $393,370 $164,390 -58.2%

Sacramento Aug-05 $394,450 $188,110 -52.3%

CALIFORNIA May-07 $594,530 $297,500 -50.0%

Northern Wine Country Jan-06 $645,080 $366,260 -43.2%

Los Angeles Aug-07 $605,300 $346,030 -42.8%

San Luis Obispo Jun-06 $620,540 $372,090 -40.0%

Northern California Aug-05 $440,420 $264,220 -40.0%

San Diego May-06 $622,380 $378,540 -39.2%

Ventura Aug-06 $710,910 $441,740 -37.9%

San Francisco Bay Area May-07 $853,910 $551,090 -35.5%

Orange County Apr-07 $747,260 $490,290 -34.4%

Santa Clara Apr-07 $868,410 $590,000 -32.1%


Unsold Inventory IndexCalifornia, October 2009: 4.0 Months

0

2

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6

8

10

12

14

16

18

20

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MONTHS

12.6

7.9

5.9

5.1

5.3

9.9

5.9

3.8

3.6

2.8

0 2 4 6 8 10 12 14

$1,000K+

$750-1000K

$500-750K

$300-500K

$0-300K

Pri

ce

Ra

ng

e (

Th

ou

sa

nd

s)

Months Supply

Last Year This Year

Unsold Inventory By Price RangeCalifornia - Existing Homes October 2009 vs. October 2008


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


Market Summary

Sales - strong but off early-09 paceMedian Price –

bottom at $245K in Feb 09September median at $296KUp 21% from Feb 09, but 50% below peakHave we hit bottom?

Inventory – Well below 7 month average at 4.0 months in October

Share of distressed properties sold, slightly down from March.

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

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

20

00

Q1

20

01

Q1

20

02

Q1

20

03

Q1

20

04

Q1

20

05

Q1

20

06

Q1

20

07

Q1

20

08

Q1

20

09

.Q1

PITIPITI/Month

Entry-Level Monthly House Payment including Interest, Taxes, & Insurance


Peak 2007-Q2: $3,190/moLatest 2009-Q3: $1,450/mo

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

20

09

Q3

CA US

% OF HOUSEHOLDS THAT CAN BUY


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?

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

FREE program designed to provide peace of mind to first-time buyers who are hesitant to enter the housing market due to concerns about potential job loss. Qualifying buyers can receive up to $1,500 a month for up to six months in the event of job loss, a qualified co-buyer can also receive a $750 benefit for up to six months to help pay the mortgage.

To qualify for the Mortgage Protetion Program, applicants must:• Be a first-time home buyer – someone who has not owned property in the

last three years (includes co-buyer)

• Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009 (purchase agreement cannot be dated before April 2, 2009)

• Use a California REALTOR® in the transaction

• Purchase the property in California

• Be a W-2 employee (cannot be self-employed)Visit www.carhaf.org for application and

additional program details

Fresno County

SOURCE: California Association of REALTORS®;The Conference Board

INDEXUNITS

Sales of Existing Detached Homes and Pacific West Consumer Confidence

Fresno County, October 2009: 871 Units, Up 48.4% YTD, Down 2.4% YTY

0

100

200

300

400

500

600

700

800

900

1000

1100

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

0

20

40

60

80

100

120

140

160

Sales Consumer Confidence

Median Price of Existing Detached HomesFresno County, October 2009: $152,840, Down 12.4% YTY

Trough $133,870 Feb-09

Peak $313,506 Jun-06

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

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


Median Price Annual ComparisonFresno County, 2008: $195,790, Down 29.6% YTY


$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

19

89

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

Jan

Feb

Mar

Apr

May

Jun Ju

l

Aug

Sept Oc

t

Nov

Dec

2006200720082009

ANNUAL MONTHLY

Median Home Sales PriceFresno County

Oct-09 Oct-08Yearly % Change

Fresno County $172,000 $195,000 -11.8%Clovis $255,000 $261,000 -2.3%Fresno $160,000 $176,750 -9.5%Kerman $165,000 $195,000 -15.4%Reedley $161,000 $216,000 -25.5%Sanger $159,500 $167,000 -4.5%Selma $150,000 $180,000 -16.7%

SOURCE: C.A.R.; DataQuick Information Systems. The price statistics are derived from all types of home sales -- new and existing, condos and single-family.

First-time Buyer Housing Affordability IndexFresno County, 3rd Quarter 2009: 76%


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Q

1/03

Q3/

03

Q1/

04

Q3/

04

Q1/

05

Q3/

05

Q1/

06

Q3/

06

Q1/

07

Q3/

07

Q1/

08

Q3/

08

Q1/

09

Q3/

09

% OF HOUSEHOLDS THAT CAN BUY

Housing Affordability IndexFresno, 3rd Quarter 2009: 63%

0%

10%

20%

30%

40%

50%

60%

70%

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

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02

Ja

n-0

3J

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03

Ja

n-0

4J

ul-

04

Ja

n-0

5J

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----

20

07

.22

00

8.4


QTRLYMonthly

City of Fresno

Sales of Single-Family Detached Homes

SOURCE: Clarus Market Metrics

City of Fresno, Nov. 2009: 423, Down 19.9% MTM, Up 6.3% YTY

Median Price of Single-Family Detached Homes•


City of Fresno, Nov. 2009: $142,000, Down 4.9% MTM, Down 2.1% YTY

Months Supply of Inventory City of Fresno, Nov-09: 2.6 months


2010 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®


www.car.org Market Response Center

www.car.org Economics Speeches

Speeches & Presentations

The End - - Thank You

2010 California Real Estate Market Forecast Fresno AOR Sara Sutachan Senior Research Analyst California Association of REALTORS® December 11, 2009.

Documents

us source

sheet2sheet3ca economy

mortgage financing

mortgage loansaverage

ca usca

year frm

year tbond30

long run average