REAL ESTATE MARKET UPDATE May 27, 2015 Berkeley/Oakland AOR Leslie Appleton-Young Chief Economist.

REAL ESTATE MARKET UPDATE

May 27, 2015Berkeley/Oakland AOR

Leslie Appleton-Young Chief Economist

OVERVIEW

• Macro-Economic Outlook

• California Housing Market Outlook

• Housing Affordability

• Regional Market Stats

• 2015 Forecast

ECONOMIC OUTLOOK

2005

2007

2009

2011

2013

Q2-10

Q4-10

Q2-11

Q4-11

Q2-12

Q4-12

Q2-13

Q4-13

Q2-14

Q4-14

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

GDP STALLED: DROP IN CONSUMER SPENDING,LOWER EXPORTS & INVESTMENT

2013: 1.9% 2014: 2.4%; Q1 2015: .2%ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $

ANNUALLY QUARTERLY

SERIES: GDPSOURCE: US Dept. of Commerce, Bureau of Economic Analysis

SERIES: Components of GDPSOURCE: US Dept. of Commerce, Bureau of Economic Analysis

EVERY SECTOR DOWN IN Q1

Components of GDP

Consumption Fixed Nonres. Investment

Net Exports Government-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Q2 2014

Q3 2014

ANNUAL PERCENT CHANGE

UNEMPLOYMENT RATES AT 7-YEAR LOWS

CA (Mar 2015): 6.5% vs. US (Apr 2015): 5.4%

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14% US-CA CA US

SERIES: Unemployment RateSOURCE: US Bureau of Labor Statistics, CA Employment Development Division

PARTICIPATION DOWN: AGING POP & SLOW JOB GROWTH & HIGH LONG TERM UNEMPLOYMENT

CA- 62.5% (Dec. 2014) vs. USA- 62.7% (Dec. 2014)

60%

62%

64%

66%

68%

70% US CA

Labor Force Rate

SERIES: Labor Force Participation RateSOURCE: BLS, Data Buffet

JOB LOSSES IN PRIOR RECESSIONS - RECENT CYCLE WORST BY FAR

CALIFORNIA JOB GROWTH ACCELERATING AGAIN

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15-8

-6

-4

-2

0

2

4

6 California USANNUAL PERCENT CHANGE

SERIES: Total Nonfarm EmploymentSOURCE: US Bureau of Labor Statistics, CA Employment Development Division

JOB TRENDS BY CALIFORNIA METRO AREA

Ventura

Oakland

Los Angeles

Sacramento

Orange County

Fresno MSA

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

1.7%

2.4%

2.5%

2.6%

2.7%

3.1%

3.1%

3.5%

3.7%

4.4%

4.7%

5.5%

SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division


March 2015: CA +3.2%, +502,200

CALIFORNIA JOB CHANGES BY INDUSTRY

Nondurable GoodsFinance & Insurance

Durable GoodsGovernmentRetail Trade

Educational ServicesInformation

Health Care & Social AssistanceWholesale Trade

Leisure & HospitalityReal Estate & Rental & Leasing

Transportation, Warehousing & UtilitiesAdmistrative & Support & Waste Services

Professional, Scientific & Technical ServicesConstruction

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

-1.3%1.4%1.4%1.5%

2.2%3.1%3.2%

3.5%3.8%3.8%3.9%

4.9%5.2%

5.5%7.1%

SERIES: Total Nonfarm Employment By IndustrySOURCE: US Bureau of Labor Statistics, CA Employment Development Division

March 2015: CA +3.2%, +502,200ANNUAL PERCENT CHANGE

MAY: UPTICK IN CONFIDENCE

May 2015: 95.4

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

150

20

40

60

80

100

120INDEX, 100=1985

SERIES: Consumer ConfidenceSOURCE: The Conference Board

STILL NO INFLATION IN SIGHT…

March 2015: All Items 0% YTY; Core +1.8% YTY

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6% All Items Core


SERIES: Consumer Price IndexSOURCE: US Bureau of Labor Statistics

MORTGAGE RATES BACK TO 2013 LOWS

• January 2009 – March 2015

2009

/01

2009

/05

2009

/09

2010

/01

2010

/05

2010

/09

2011

/01

2011

/05

2011

/09

2012

/01

2012

/05

2012

/09

2013

/01

2013

/05

2013

/09

2014

/01

2014

/05

2014

/09

2015

/01

02.2

6.15

03.2

6.15

0%

1%

2%

3%

4%

5%

6%

FRMARM

MONTHLY WEEKLY

SERIES: 30Yr FRM, 1Yr ARMSOURCE: Federal Home Loan Mortgage Corporation

U.S. DEPOSITORY INSTITUTIONS:HIGH LEVEL OF EXCESS RESERVES SINCE 9/08

Jan-05Jul-0

5

Jan-06Jul-0

6

Jan-07Jul-0

7

Jan-08Jul-0

8

Jan-09Jul-0

9

Jan-10Jul-1

0

Jan-11Jul-1

1

Jan-12Jul-1

2

Jan-13Jul-1

3

Jan-14Jul-1

4$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

SERIES: Excess Reserves of Depository Institutions SOURCE: Federal Reserve Bank of Saint Louis

$ BILLIONS

IS THERE A FORECAST BIAS FOR RISING RATES?

Percent

0

1

2

3

4

5

6

0

1

2

3

4

5

6

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Actual 10-year Treasury yield (solid black line)

Predictions out to five quarters ahead of professional forecasters (hatched lines)

Percent

SERIES: Loan Officer SurveySOURCE: Philadelphia Federal Reserve Survey of Professional Forecasters, Bloomberg

CALIFORNIA ECONOMIC OUTLOOK

2009 2010 2011 2012 2013 20142015f

Nonfarm Job Growth -6.0% -1.1% 1.1% 2.4% 3.0% 2.2% 2.4%

Unemployment Rate 11.3% 12.3% 11.8% 10.4% 8.9% 7.5% 6.6%

Population Growth 0.6% 0.7% 0.7% 0.7% 0.9% 0.9% 1.0%Real Disposable Income, % Change -1.3% 0.9% 3.4% 4.7% 0.2% 3.0% 4.3%

SERIES: CA Economic OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

CALIFORNIA HOUSING MARKET OUTLOOK

CALIFORNIA HOUSING MARKET FORECAST

2009 2010 2011 2012 2013 20142015f

SFH Resales (000s) 474.9 416.5 422.6 439.8 414.9 383.3 398.4

% Change 24.5% -12.3% 1.4% 4.1% -5.9% -7.6% 3.9%

Median Price ($000s) $275.0 $305.0 $286.0 $319.3 $407.2 $447.0 $473.1

% Change -21.1% 10.9% -6.2% 11.6% 27.5% 9.8% 5.8%Housing Affordability Index 51% 48% 53% 51% 36% 30% 29%

30-Yr FRM 5.0% 4.7% 4.5% 3.7% 4.0% 4.3% 4.1%

SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

SLOW START; SALES NOW UP 4.1% YEAR TO DATE

California, Apr. 2015 Sales: 427,620 Units, +4.1% YTD, +9.3% YTY

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15 -

100,000

200,000

300,000

400,000

500,000

600,000

700,000

*Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Apr-15: 427,62

0

Apr-14: 391,33

0

CALIFORNIA SALES UP YEAR-OVER-YEAR

SERIES: Sales of Existing Single Family Homes, Not Seasonally AdjustedSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Jan-

00

Sep-

00

May

-01

Jan-

02

Sep-

02

May

-03

Jan-

04

Sep-

04

May

-05

Jan-

06

Sep-

06

May

-07

Jan-

08

Sep-

08

May

-09

Jan-

10

Sep-

10

May

-11

Jan-

12

Sep-

12

May

-13

Jan-

14

Sep-

14-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

Year-over-Year % ChgMoving average (Year-over-Year % Chg)

CHANGE IN SALES BY PRICE RANGE

(Year-to-Year)

$0 -

$199

k

$200

- $2

99k

$300

- $3

99k

$400

- $4

99k

$500

- $7

49k

$750

- $9

99k

$1,0

00 -

$1,9

99k

$2,0

00k+

-20%-15%-10%

-5%0%5%

10%15%20%25%30%

-16.5%

4.6%

9.7%

17.0%14.0%

24.0%21.1%

12.6%

Apr-15

SERIES: Sales of Existing Detached HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

SALES BY REGION(EXISTING SFH)

SERIES: Sales, Not Seasonally AdjustedSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Jan-

13

Mar

-13

May

-13

Jul-1

3

Sep-

13

Nov-1

3

Jan-

14

Mar

-14

May

-14

Jul-1

4

Sep-

14

Nov-1

4

Jan-

15

Mar

-15

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

Bay Area Central Valley So CA

SALES LOOKING POSITIVE SO FAR FOR ‘15

SERIES: Sales of Existing Single Family Homes, Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Jan-

10

Apr-1

0

Jul-1

0

Oct-1

0

Jan-

11

Apr-1

1

Jul-1

1

Oct-1

1

Jan-

12

Apr-1

2

Jul-1

2

Oct-1

2

Jan-

13

Apr-1

3

Jul-1

3

Oct-1

3

Jan-

14

Apr-1

4

Jul-1

4

Oct-1

4

Jan-

15-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Year-over-Year % ChgMoving average (Year-over-Year % Chg)

SHARE OF EQUITY SALES NEAR 90% SINCE MID - 2014

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

150%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

91.0%

3.8%4.8%

Equity Sales Short Sale REO

SERIES: Distressed Sales, Not Seasonally AdjustedSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

NINE OF TEN SALES WERE EQUITY SALES

REOs; 4.8%Short Sales;

3.8%Other Distressed Sales (Not Speci-

fied); 0.4%

Equity Sales; 91.0%

SERIES: Distressed Sales, Not Seasonally AdjustedSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

California: Mar 2015

OAKLAND

Preforeclosure: 148 • Auction: 180 • Bank Owned: 39

SOURCE: PropertyRadar on 5/26/15

BERKELEY



CITY OF ALAMEDA



ALAMEDA COUNTY



ALAMEDA COUNTY



ALAMEDA COUNTY



CONTRA COSTA COUNTY



CONTRA COSTA COUNTY



CONTRA COSTA COUNTY



INVENTORY DROPPED SIGNIFICANTLY IN THE BAY AREA SINCE 2009

BUT REMAINED TIGHT

Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.

Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-150.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2.4

3.7

4.1


SERIES: Unsold Inventory Index of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

APRIL MEDIAN HIGHEST SINCE NOV 2007

California, Apr. 2015: $481,760, +2.8% MTM, +7.4% YTY

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15 $-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000 P: May-07$594,530

T: Feb-09$245,230-59% frompeak

SERIES: Median Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Apr-15: $481,76

0

Apr-15: $448,72

0

HOME PRICE APPRECIATIONS HAVE MODERATED SINCE MID 2013

Jan-

05

Jul-0

5

Jan-

06

Jul-0

6

Jan-

07

Jul-0

7

Jan-

08

Jul-0

8

Jan-

09

Jul-0

9

Jan-

10

Jul-1

0

Jan-

11

Jul-1

1

Jan-

12

Jul-1

2

Jan-

13

Jul-1

3

Jan-

14

Jul-1

4

Jan-

15-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50% Condo Single-Family Homes

SERIES: Sales of SFH and Condo UnitsSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

YTY% Chg. in Price

SALES-TO-LIST RATIO

April 2015: 98.8%, Up 0.5% MTM, Down 0.2% YTY

86%

88%

90%

92%

94%

96%

98%

100%

102%

98.8%

Sales-to-List Price Ratio

SERIES: Sales-to-List RatioSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

INVENTORY DROPPED SLIGHTLY FROM LAST YEAR

Apr 2014: 3.6 Months; Apr 2015: 3.5 Months


0

2

4

6

8

10

12

14

16

18


UNSOLD INVENTORY INDEX (MONTHS)


Price Range (Thousand) Apr-15 Mar-15 Apr-14

$1,000K+ 4.5 5.0 4.8

$750-999K 3.5 4.0 3.9

$500-749K 3.4 3.6 3.5

$400-499K 3.1 3.5 3.4

$300-399K 3.2 3.6 3.5

$200-299K 3.4 3.6 3.3

$0-199K 3.3 3.7 3.1


INVENTORY TIGHTEST IN THE BAY AREA


Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-150.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2.2

3.53.7



WHERE IS THE INVENTORY?

– Affordability challenge for repeat buyers• Low mortgage- mortgage Lock-In Effect• Low property taxes• Why list when there is nowhere to go I can

afford?– Foreclosure pipeline is dry – Investors renting instead of flipping– New construction recovering but LOW– Off- MLS (aka “pocket’) listings not being counted

in listing stats

HOUSING DEMAND OUTPACED SUPPLY IN THE BAY AREA AND SO CAL

San Francisco Bay Area Southern California Central Valley-20%

-10%

0%

10%

20%

8%9%

7%

-11%

3%

11%

Sales Active ListingsYear-to-Year % Chg

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

April 2015

HOUSING DEMAND OUTPACED SUPPLY IN THE BAY AREA

Alam

eda

Contra

Cos

ta

Mar

in

Napa

San

Fran

cisco

San

Mat

eo

Sant

a Cla

ra

Solano

Sono

ma

San

Fran

cisco

Bay

Are

a-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

4% 1%

-6%-13%

2%

-4%

11%

36%

23%

8%

-16%-9%

-22%

-7%

-38%

-25%

-15%

20%

-4%-11%

Sales Active ListingsYear-to-Year % Chg


April 2015

ANNUAL HOUSING MARKET SURVEY:

2014 FINDINGS

MULTIPLE OFFERS DECLINE - LESS INTENSE MARKET COMPETITION

AFTER PEAKING IN 2013

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

70%

80%

0

1

2

3

4

5

6

772%

53%5.7

4.3

% with Multiple Offers# of Multiple offers (Average)

SERIES: 2014 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

60%

50%

33%

% of Sales above Asking Price

Long Run Average = 19%

FEWER HOMES SOLD ABOVE THE ASKING PRICE AS MARKET COMPETITION COOLED IN

2014

QUESTION: What was the original list sales price of the property? What was the final sales price of the property? SERIES: 2014 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

49 % SOLD BELOW ASKING IN 2014

20% or more

10% to 19.99%

5% to 9.99%

Less than 5%

0% 10% 20% 30% 40% 50% 60%

7%

11%

28%

54%

% of Price Reduction(Properties Sold Below Asking Price)

49%

18%

33%

Sale Price to Asking Price

Below Asking Price At Asking Price

Above Asking Price


Median Reduction: 4.5% of List Price

INVESTMENT BUYERS DROPPING : 15% MARKET SHARE

19992000200120022003200420052006200720082009201020112012201320140%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20% 19%

15%

Long Run Average: 12 %


BUYING TO RENT V. FLIP; CHANGE IN PREFERRED INVESTMENT STRATEGY

2013: 18%

2014: 30%

2013: 82%

2014: 70%

Investment to Flip

Rental Property


REGIONAL & LOCAL HOUSING MARKETS

ALAMEDA COUNTY

SALES OF RESIDENTIAL HOMES

Alameda County, April 2015: 1,228 Units Up 18.0% MTM, Up 3.7% YTY

SOURCE: Clarus Market Metrics

MEDIAN PRICE OF RESIDENTIAL HOMES

Alameda County, April 2015: $660,000Up 3.4% MTM, Up 13.8% YTY


FOR SALE PROPERTIES

Alameda County, April 2015: 2,931 UnitsUp 7.9% MTM, Down 14.7% YTY

Note: “For Sale Properties” represents the overall supply that exist throughout the entire month, including any listings that appear as “Active” any point in time during the month.


MONTH’S SUPPLY OF INVENTORY

Alameda County, April 2015: 0.9 Months

Note: “Month’s Supply of Inventory” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “For Sale” on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month.


CONTRA COSTA COUNTY


Contra Costa County, April 2015: 1,243 Units Up 14.0% MTM, Up 4.5% YTY



Contra Costa County, April 2015: $495,000Up 5.0% MTM, Up 6.7% YTY


FOR SALE PROPERTIES

Contra Costa County, April 2015: 3,312 UnitsUp 4.2% MTM, Down 8.5% YTY




Contra Costa County, April 2015: 1.1 Months



OAKLAND


Oakland, April 2015: 286 Units Up 7.5% MTM, Down 11.5% YTY



Oakland, April 2015: $600,000Up 24.4% MTM, Up 29.0% YTY


FOR SALE PROPERTIES

Oakland, April 2015: 803 Units Up 6.6% MTM, Down 20.9% YTY




Oakland, April 2015: 1.0 Months



BERKELEY


Berkeley, April 2015: 57 Units Even 0% MTM, Up 7.5% YTY



Berkeley, April 2015: $1,000,000Up 3.6% MTM, Up 4.2% YTY


FOR SALE PROPERTIES

Berkeley, April 2015: 115 UnitsDown 5.7% MTM, Down 20.1% YTY




Berkeley, April 2015: 0.7 Months



CITY OF ALAMEDA


City of Alameda, April 2015: 45 Units Up 15.4% MTM, Up 25.0% YTY



City of Alameda, April 2015: $788,000Up 1.0% MTM, Up 9.7% YTY


FOR SALE PROPERTIES

City of Alameda, April 2015: 100 UnitsUp 23.5% MTM, Up 12.4% YTY




City of Alameda, April 2015: 0.6 Months



2015 FORECAST

CALIFORNIA HOUSING MARKET OUTLOOK

2009 2010 2011 2012 2013 20142015f

SFH Resales (000s) 474.9 416.5 422.6 439.8 414.9 383.3 398.4

% Change 24.5% -12.3% 1.4% 4.1% -5.9% -7.6% 3.9%

Median Price ($000s) $275.0 $305.0 $286.0 $319.3 $407.2 $447.0 $473.1

% Change -21.1% 10.9% -6.2% 11.6% 27.5% 9.8% 5.8%Housing Affordability Index 51% 48% 53% 51% 36% 30% 29%

30-Yr FRM 5.0% 4.7% 4.5% 3.7% 4.0% 4.3% 4.1%

SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

HOUSING AFFORDABILITY:CRISIS BREWING

CALIFORNIA PRICES MORE VOLATILE AND HIGHER THAN THE NATION

1970-2014


1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

p $-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000 California US

The difference between California’s prices and national home prices increasedfrom $10K in 1970 to $246K today

SERIES: Median Price of Existing Single Family HomesSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2014 Dollar Value

HOUSING AFFORDABILITY DOWN SHARPLY SINCE Q1 2012

California vs. U.S. – 1984-2014% OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME

SERIES: Housing Affordability Index of Traditional BuyersSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

19841986

19881990

19921994

19961998

20002002

20042006

20082010

2012

Q2 2012

Q4 2012

Q2 2013

Q4 2013

Q2 20140%

10%

20%

30%

40%

50%

60%

70%

80% CA USAnnual Quarterly

IN MOST COUNTIES FEWER THAN 1 IN 3 HOUSEHOLDS QUALIFY

SERIES: Housing Affordability IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

HAI

0

10

20

30

40

50

60

7064

59 57 56 56 53 5350 49

4541

31 29 29 28 27 27 26 24 23 22 21 21 2017 15 15 14

% able to purchase median priced home2014 Q4

INCOME TO BUY MEDIAN-PRICED HOME IN CA:

UP SHARPLY IN TWO

2012 Q1 2014 Q2$0

$20,000

$40,000

$60,000

$80,000

$100,000

$56,324

$93,593• Change in minimum required income:

$37,269

• Increase in income attributed to interest rate increase: $836 (2.2% of total change)

• Increase in income attributed to price increase : $36,433 (97.8% of total change)

SERIES: Housing Affordability IndexSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Retail Sales-

persons

Auto. Mechan-

ics

Chefs and Head Cooks

Elemen-tary

School Teachers

Fire-fighters

Computer Pro-

gram-mers

Regis-tered

Nurses

Software Develop-ers (Ap-

plications)

Min. Inc Required to Buy a

Med. Home

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$26,870

$42,610 $44,330

$72,720

$82,830$86,840

$93,180

$103,790

$91,297

HOW WAGES MEASURED AGAINST INCOME REQUIRED TO BUY A HOME

SOURCE: Bureau of Labor Statistics, C.A.R.

Annual Mean Wage

Los Angeles

SHARE OF FIRST-TIME BUYERS UP IN ’14 BUT STILL BELOW LONG-RUN AVERAGE

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140%

10%

20%

30%

40%

50%

28.1%30.5%

% First-Time Home Buyers Long Run Average

Long Run Average = 38%

QUESTION: Was the buyer a first-time buyer?SERIES: 2014 Housing Market SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

HOMEOWNERSHIP RATES STABILIZING AFTER A LARGE DROP

California Vs. U.S.

19841986

19881990

19921994

19961998

20002002

20042006

20082010

201250%

55%

60%

65%

70% CA US

SERIES: Homeownership RatesSOURCE: U.S. Census Bureau

HOMEOWNERSHIP RATE BY AGE OF HOUSEHOLDER

SOURCE: Census Bureau

“MISSING” 100,000 UNITS ANNUALLY, AT LEAST

2014p: 83,000 (43,000 sf, 40,000 mf)2015f: 101,000 total units

SERIES: New Housing PermitsSOURCE: Construction Industry Research Board

0

50000

100000

150000

200000

250000

300000

350000

Single Family Multi-Family

Household Growth: 165,000/yr

HOUSING CONSTRUCTION HAS SLOWED IN THE CALIFORNIA’S COASTAL METROSTotal Number of SFH Building Permits by Region

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

0

20,000

40,000

60,000

80,000

100,000

120,000

Inland Coastal

SERIES: New Single Family Housing PermitsSOURCE: Construction Industry Research Board

FICO SCORE AT ORIGINATION FOR PURCHASE LOANS

1.5 MILLION PURCHASE LOANS MISSING DUE TO LACK OF CREDIT AVAILABILITY

LENDING STANDARD DROVE 50% OF THE DECLINE BETWEEN 2001 AND 2012

2009 2010 2011 2012 2009 - 2012-200,000

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

-5,485165,105

223,058

575,156

957,834

Households not formed

NUMBER OF HOUSEHOLDS LOST IN THE GREAT RECESSION

SOURCE: California Dept. of Finance; compiled by C.A.R.

CALIFORNIA’S HOUSING DILEMMA

• Even with everything (or at least most things) going right, our homeownership market is in trouble…

• The rental market, even with the conversion of 500,000 SFH’s, is still exhibiting inadequate supply and rising rents

• CA Housing Needs = Minimally 165,000 Units Annually– Regulatory Problem– Impact Fees– Public Attitudes

THE FINANCE HELPLINE

finance.car.org(213)739-8383

[email protected]

DOWN PAYMENT RESOURCE DIRECTORYDOWNPAYMENT.CAR.ORG

Down Payment Resource™ Homeownership Program

Index’s Key Findings:

·Over 300 programs in California

·59% provide direct down payment

& closing cost assistance

·10% provide mortgage credit up

to $2,000 for the life of the loan

·26% are available to repeat

buyers

There are hundreds of homeownership programs available to help motivate buyers. Visit

downpayment.car.org to find them.

INTERNATIONAL BUYERSMAKE THEIR MARK

1/3 FROM CHINA

Please tell us about your last closed transaction with an international client. What is your client’s country of permanent residence?

India

Japan

Mexico

Canada

China/Hong Kong

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

3.8%

4.7%

8.3%

14.2%

34.8%

INTENDED USE FOR PROPERTY? HOME

Other

Vacation/Second Home

Investment/Rental Property

Primary Residence

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

4%

27%

38%

30%

0%

2%

7%

91%

US BuyerInternational Buyer

What was the intended use of the property in your last closed transaction with an international client?

ALL CASH INTERNATIONAL BUYERS

International buyers Traditional buyers0%

20%

40%

60%

80%

100%

69%

27%

31%

73%

All cash Obtained financing

SOURCE: 2013 International Client Survey, 2013 Annual Housing Market SurveyHow did your last international buyer pay for the property?

MILLENNIALS: TOMORROW’S HOME OWNERS?

OVER 1/3 LIVE WITH THEIR PARENTS

What is your current living situation?

I rent I live with my parents

I own I live in a dorm

Other:0%

5%

10%

15%

20%

25%

30%

35%

40%

45%41%

36%

20%

1%1%

SERIES: 2014 Millennials SurveySOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

ATTITUDE TOWARD THE HOME BUYING PROCESS – MIXED RESULTS

SOURCE: How would you describe your attitude towards the home buying process?C.A.R. 2014 Millennial Survey

Positive Negative Neutral N/A Other0%

10%

20%

30%

40%

50%

60%50%

34%

8%4%

4%

MOST MILLENNIALS UNCERTAIN/DOUBTFUL THAT THEY COULD OBTAIN A MORTGAGE

NOW?AMILLENNIAL ETHNICITY

SOURCE: C.A.R. 2014 Millennial SurveyQ: Could you obtain a mortgage if you applied now ?

Yes 22%

No 33%

Don't know 45%

PEOPLE WOULD PREFER THE FOLLOWING OVER GOING THROUGH THE HOME MORTGAGE

PROCESS AGAIN:

SOURCE: Guaranteed Rate Mortgage Survey of 1,000 adults 25 and older USA Today April 2014

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WHAT IS A HEALTHY ORGANIZATION?

• Smart is permission to play – no company has a comparative advantage based on knowledge anymore

• Healthy is simple; not complicated or sophisticated

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REAL ESTATE MARKET UPDATE May 27, 2015 Berkeley/Oakland AOR Leslie Appleton-Young Chief Economist.

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