2016 California Economic & Market Forecast by dppre

2016 CALIFORNIA ECONOMIC & MARKET FORECAST

October 19, 2015 Deasy /Penner & Partners Leslie Appleton-Young, Vice President & Chief Economist

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2016 FORECAST

2015 FORECAST REPORT CARD 2014 Actual

2015 Forecast

2015 Projected

SFH Resales (000s)

383.3

402.5

407.5

% Change

-7.6%

5.8%

6.3%

Median Price ($000s)

$447.0

$478.7

$476.3

% Change

9.8%

5.2%

6.5%

30-Yr FRM

4.2%

4.5%

3.9%

Housing Affordability Index

30%

27%

31%

U.S. Gross Domestic Product

2.4%

3.0%

2.4%

Forecast Date: October 2015 vs. October 2014 SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

2016 FORECAST 2010 2011 2012 2013 2014 2015p 2016f SFH Resales (000s)

416.5

422.6

439.8

414.9

383.3

407.5

433.0

-12.3%

1.4%

4.1%

-5.9%

-7.6%

6.3%

Median Price ($000s) $305.0 $286.0

$319.3

$407.2

$447.0

$476.3

$491.3

% Change Housing Affordability Index

% Change

30-Yr FRM

10.9%

-6.2%

11.6%

27.5%

9.8%

6.5%

3.2%

48%

53%

51%

36%

30%

31%

27%

4.7%

4.5%

3.7%

4.0%

4.2%

3.9%

4.5%

DATE: September 2015 SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

ECONOMIC OUTLOOK

LATEST ECONOMIC NEWS • U.S. is under-performing – – – – –

Job-growth is slowing Q3 Earnings reports disappointing Consumers buying – selectively Low oil prices help – and hurt Strong dollar hurting exports

• Fed meets October 27-28 & December 15-16 – Don’t expect hike in rates until March 2016

• China is slowing: 6.9% growth in 3rd quarter – Lowest since 2009

TRENDING… BOOMERS VS MILLENIALS • Oprah likes Weight Watchers – buys 10% – Stock soars 37% on news – Wrestling with how to remain relevant

• Soul Cycle IPO – Who will win: Leslie or Joel? – “ aspirational lifestyle brand"

ECONOMY HAS BEEN GROWING FOR 68 MONTHS 2014: 2.4%; 2015: 2.4%; 2016: 2.7% ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $ 5%

ANNUALLY

QUARTERLY

4% 3% 1% 0% -1% -3% -4%

2009 Largest Annual Drop since 1938 (-3.4%)

-5% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015P 2016F Q1-12 Q2-12 Q3-12 Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q3-14 Q4-14 Q1-15 Q2-15 SERIES: GDP SOURCE: US Dept. of Commerce, Bureau of Economic Analysis

3.9%

EMPLOYMENT STALLED IN SEPT:142Kâ&#x20AC;¨

ANNUAL PERCENT CHANGE 5.25 3.5

198K/mo 2015 avg 260K/mo 2014 avg

California

1.75 0 -1.75 -3.5 -5.25 -7 1/1/05 9/1/06 5/1/08 1/1/10 9/1/11 5/1/13 1/1/15

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

Change

Growth

2,752,000

2.0%

California

470,000

3.0%

New York

130,500

1.4%

Texas

217,700

1.9%

United States

UNEMPLOYMENT RATE HOLDS STEADY September 2015: US 5.1% & August 2015:CA 6.1% CA

US-CA

30% 23% 15% 8% 0% -8% 1/1/059/1/065/1/081/1/109/1/115/1/131/1/15

SERIES: Unemployment Rate The U-6 rate covers the unemployed, underemployed and those who are not looking but who want a job SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

JOB TRENDS BY CALIFORNIA METRO AREA August 2015: CA +3.0%, +470,000 ANNUAL PERCENT CHANGE San Jose San Francisco Orange County San Diego Inland Empire Sacramento Fresno MSA Stockton MSA Oakland Los Angeles Modesto Ventura Bakersfield

5.5% 4.6% 3.2% 3.1% 3.0% 2.8% 2.6% 2.0% 1.9% 1.8% 1.0% 0.9% -0.2% -1.5%

0.0%

SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

1.5%

3.0%

4.5%

6.0%

CALIFORNIA JOB CHANGES BY INDUSTRY August 2015: CA +3.0%, +470,000 ANNUAL PERCENT CHANGE Professional, Scientific & Technical Services Construction Leisure & Hospitality Transportation, Warehousing & Utilities Admistrative & Support & Waste Services Real Estate & Rental & Leasing Wholesale Trade Health Care & Social Assistance Information Educational Services Retail Trade Government Durable Goods Finance & Insurance Nondurable Goods

6.8% 6.4% 4.3% 3.6% 3.5% 3.5% 3.0% 2.7% 2.6% 2.0% 2.0% 1.3% 0.5% 0.4% -1.0%

-2%

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

CA METRO COMMERCIAL VACANCY RATES 2015 Q2 MSA

Office

Industrial

Retail

Multi-Family

Los Angeles

14.8%

3.6%

5.7%

3.5%

Oakland-East Bay

17.1%

8.2%

6.0%

2.8%

Orange County

16.3%

3.4%

4.6%

3.3%

Sacramento

20.3%

11.1%

10.0%

2.6%

San Bernardino/Riverside

22.4%

7.2%

9.1%

2.5%

San Diego

14.7%

6.4%

6.1%

2.8%

San Francisco

10.6%

10.4%

3.0%

3.8%

San Jose

16.3%

16.2%

4.6%

3.4%

Ventura

16.4%

8.5%

2.9%

SOURCE: National Association of REALTORS速

NONFARM EMPLOYMENT BY REGION Nonfarm Employment (Thousands) Aug 2015

Aug 2014

Change

% Change

Southern California

8,834.4

8,626.3

208.1

2.4%

Bay Area

4,289.3

4,213.0

76.3

1.8%

Central Valley

1,540.9

1,492.4

48.5

3.2%

Central Coast

1,318.4

1,280.0

38.4

3.0%

North Central

1,391.4

1,349.0

42.4

3.1%

CALIFORNIA

294.4

291.9

2.5

0.9%

SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

CONSUMER PRICE INDEX August 2015: All Items 0.2% YTY; Core +1.8% YTY ANNUAL PERCENT CHANGE All Items 6% 5% 3% 2% 0% -2% -3% 1/1/05 5/1/07 9/1/09 1/1/12 5/1/14 SERIES: Consumer Price Index SOURCE: US Bureau of Labor Statistics

Core

IS IT TIME? AH… LET’S WAIT A LITTLE LONGER

RE-CALCULATING…

MORTGAGE RATES January 2009 – October 2015 MONTHLY

FRM ARM

0% 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 2015/05 08.27.15 09.24.15 SERIES: 30Yr FRM, 1Yr ARM SOURCE: Federal Home Loan Mortgage Corporation

WEEKLY

U.S. HOME SALES UP IN 2015 U.S., Aug 2015 Sales: 4,690,000 Units, +8.1% YTD, +6.1% YTY 7,000,000

5,250,000

4,690,000

3,500,000

1,750,000

00 38353 38384 38412 38443 38473 38504 38534 38565 38596 38626 38657 38687 38718 38749 38777 38808 38838 38869 38899 38930 38961 38991 39022 39052 39083 39114 39142 39173 39203 39234 39264 39295 39326 39356 39387 39417 39448 39479 39508 39539 39569 39600 39630 39661 39692 39722 39753 39783 39814 39845 39873 39904 39934 39965 39995 40026 40057 40087 40118 40148 40179 40210 40238 40269 40299 40330 40360 40391 40422 40452 40483 40513 40544 40575 40603 40634 40664 40695 40725 40756 40787 40817 40848 40878 40909 40940 40969 41000 41030 41061 41091 41122 41153 41183 41214 41244 41275 41306 41334 41365 41395 41426 41456 41487 41518 41548 41579 41609 41640 41671 41699 41730 41760 41791 41821 41852 41883 41913 41944 41974 42005 42036 42064 42095 42125 42156 42186 42217

SERIES: Sales of Existing Single Family Homes SOURCE: NATIONAL ASSOCIATION OF REALTORS速

*Sales are seasonally adjusted and annualized

U.S. HOME PRICE GAINS MODERATING U.S., Aug 2015: $230,200, -1.4% MTM, +5.1% YTY 240,000

180,000

120,000

60,000

00 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 SERIES: Median Price of Existing Single Family Homes SOURCE: NATIONAL ASSOCIATION OF REALTORS速

U.S. HOUSING MARKET OUTLOOK 2010 2011 2012 2013 2014 2015p 2016f Existing Home Sales (000s)

4,190

4,260

4,660

5,090

4,940

5,292

5,471

% Change

-3.5%

1.7%

9.4%

9.2% -2.9%

7.1%

3.4%

$172.9 $166.1 $176.8 $197.1 $208.3

$221.4

$231.0

6.3%

4.3%

Median Price ($000s) % Change

0.2%

-3.9%

SERIES: U.S. Existing home sales of single-family homes and condo/coops SOURCE: NATIONAL ASSOCIATION OF REALTORS速

6.4% 11.5%

5.7%

U.S. ECONOMIC OUTLOOK 2010 2011

2012 2013 2014 2015p 2016f

US GDP

2.4%

1.8%

2.3%

2.2%

2.4%

2.7%

Nonfarm Job Growth

-0.7%

1.2%

1.7%

1.9%

2.1%

1.8%

Unemployment

9.6%

8.9%

8.1%

7.4%

6.2%

5.3%

5.0%

CPI Real Disposable Income, % Change

1.6%

3.1%

2.1%

1.5%

1.6%

0.2%

2.1%

1.0%

2.5%

3.0%

-0.2%

2.5%

3.3%

2.7%

30-Yr FRM

4.7%

4.5%

3.7%

4.0%

4.2%

3.9%

4.5%

SERIES: U.S. Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

CALIFORNIA ECONOMIC OUTLOOK

2010 2011

2012 2013 2014 2015p 2016f

Nonfarm Job Growth

-1.1%

1.1%

2.4%

3.0%

2.2%

2.8%

2.3%

Unemployment Rate

12.3%

11.8%

10.4%

8.9%

7.5%

6.3%

5.5%

0.7%

0.9%

3.4%

4.7%

0.2%

3.0%

4.3%

4.5%

Population Growth Real Disposable Income, % Change

SERIES: CA Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

CALIFORNIA HOUSING MARKET OUTLOOK

C.A.R. MEMBERSHIP FOLLOWS SALES   WITH 1-2 YEAR LAG

Membership

Units of Home Sold

Home Sales

# of Members

600,000

220

450,000

165

300,000

110

150,000

2015p

2013

2011

2009

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

1979

1977

1975

1973

1971

SALES OF EXISTING DETACHED HOMES California, Sep 2015 Sales: 425,030 Units, +7.3% YTD, +6.9% YTY 700,000

Sep-14: Sep-15: 397,490 425,030

525,000

350,000

175,000

SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

*Sales are seasonally adjusted and annualized

MEDIAN PRICE OF EXISTING DETACHED HOMES California, Sep 2015: $482,150, -2.3% MTM, +4.3% YTY 600,000

P: May-07 $594,530 Sep-14: $462,380

450,000

T: Feb-09 $245,230 -59% from peak

300,000

150,000

Sep-15: $482,150

HOME PRICE APPRECIATIONS HAVE   MODERATED SINCE MID 2013

YTY% Chg. in Price

Condo

Single-Family Homes

50% 38% 25% 13% 0% -13% -25% 1/1/1010/1/107/1/11 4/1/12 1/1/1310/1/137/1/14 4/1/15

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

PRICE PER SQUARE FOOT Sep 2015: $236, Up 0.3% MTM, Up 2.5% YTY PRICE PER SQ. FT. $400

$300

$200

$100

$0 1/1/07 9/1/07 5/1/08 1/1/09 9/1/09 5/1/10 1/1/11 9/1/11 5/1/12 1/1/13 9/1/13 5/1/14 1/1/15 9/1/15

SERIES: Median Price Per Square Feet SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

CALIFORNIA VS. U.S. MEDIAN PRICES 1970-2015 $

600,000

450,000

300,000

150,000

California

00 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015P SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA CALIFORNIA ASSOCIATION OFOF REALTORS速 SOURCE: ASSOCIATION REALTORS速

2015 - WHERE ARE WE ? • Housing market has recovered – Welcome to the new normal – Low mortgage rates – Job & Income growth are positive

• And yet… – Supply well below long-run average – Share of first-time buyers LOW – Affordability key concern for everyone

• It’s not an easy market/transaction for anyone .

INVENTORY CONTINUED TO   DECLINE FROM LAST YEAR

Sep 2014: 4.2 Months; Sep 2015: 3.7 Months 18

13.5

4.5

0 1/1/05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 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.

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

DEMAND OUTPACING SUPPLY Sep 2015 Sales

Active Listings

Year-to-Year % Chg

13.4%

14% 10.4%

11% 7% 4% 0%

-0.0%

-4% -7%

-4.4% -6.2%

-7.4%

-11% San Francisco Bay Area

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

Southern California

Central Valley

HOUSING DEMAND OUTPACED   SUPPLY IN THE BAY AREA Sep 2015 Sales

Active Listings

Year-to-Year % Chg

40% 27.1%

30%

17.4%

20% 10%

5.4%

2.7%

7.2%

4.1% 3.2%

0% -10%

-3.9% -4.7%

-4.6%

-2.2%

-20%

-3.9% -4.3%

-17.1%

-19.5%

-22.5%

ap a Sa n Fr an cis co Sa n M at eo Sa nt aC lar a So lan o So no m a Sa n Fr an cis co Ba yA re a

M ar in

ta Co s

tra Co n

-40%

ed a

-30%

-8.8%

-0.0% -6.2%

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

-39.8%

HOUSING DEMAND OUTPACED   SUPPLY IN SO CAL Sep 2015 Sales

Active Listings

Year-to-Year % Chg

40%

34.7%

30% 20% 13.8% 10%

10.4%

9.6%

10.4%

9.2% 4.8%

2.6%2.9%

0% -3.3%

-4.2%

-10%

-4.0%

-6.8%

-8.7%

-7.4%

ia rn Ca lifo rn ut he So

a tu r Ve n

Sa nt aB ar ba ra

ve r

Sa n

na rd in o Sa n

Be r

Co u sid e

ra ng e

Co u

nt y

s ng ele sA Lo

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

ieg o

-14.8%

-20%

WHERE IS THE INVENTORY?

– Affordability challenge for repeat buyers • Low rate on current mortgage • Low property taxes • Concerned with capital gains • Why list when there is nowhere to go I can afford? • Could not qualify for a mortgage today – Foreclosure pipeline is dry – Investors renting instead of flipping – New construction recovering but LOW – Demographics: Trade-up buyer pool is smaller – Measurement error? Off- MLS (aka “pocket’) listings not being counted in listing stats

LOS ANGELES COUNTY Preforeclosure: 5,480 • Auction: 3,926 • Bank Owned: 5,200

SOURCE: PropertyRadar on 10/02/15

LOS ANGELES COUNTY Preforeclosure: 5,480 • Auction: 3,926 • Bank Owned: 5,200

SOURCE: PropertyRadar on 10/02/15

LOS ANGELES COUNTY Preforeclosure: 5,480 • Auction: 3,926 • Bank Owned: 5,200

SOURCE: PropertyRadar on 10/02/15

PASADENA

PASADENA Preforeclosure: 56 • Auction: 46 • Bank Owned: 47

SOURCE: PropertyRadar on 10/15/15

SALES OF RESIDENTIAL HOMES Pasadena, September 2015: 143 Units Down 3.4% MTM, Up 11.7% YTY

SOURCE: Clarus Market Metrics

MEDIAN PRICE OF RESIDENTIAL HOMES Pasadena, September 2015: $675,000 Down 3.6% MTM, Down 0.7% YTY

SOURCE: Clarus Market Metrics

FOR SALE PROPERTIES Pasadena, September 2015: 589 Units Down 0.5% MTM, Down 3.4% 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.

SOURCE: Clarus Market Metrics

MONTH’S SUPPLY OF INVENTORY Pasadena, September 2015: 2.6 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.

SOURCE: Clarus Market Metrics

SOUTH PASADENA

SOUTH PASADENA Preforeclosure: 9 • Auction: 2 • Bank Owned: 2

SOURCE: PropertyRadar on 10/15/15

SALES OF RESIDENTIAL HOMES South Pasadena, September 2015: 22 Units Down 12.0% MTM, Up 57.1% YTY

SOURCE: Clarus Market Metrics

MEDIAN PRICE OF RESIDENTIAL HOMES South Pasadena, September 2015: $1,133,500 Up 2.3% MTM, Up 36.3% YTY

SOURCE: Clarus Market Metrics

FOR SALE PROPERTIES South Pasadena, September 2015: 54 Units Down 15.6% MTM, Down 31.6% 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.

SOURCE: Clarus Market Metrics

MONTH’S SUPPLY OF INVENTORY South Pasadena, September 2015: 1.2 Months

SOURCE: Clarus Market Metrics

SAN MARINO

SAN MARINO Preforeclosure: 5 • Auction: 2 • Bank Owned: 0

SOURCE: PropertyRadar on 10/15/15

SALES OF RESIDENTIAL HOMES San Marino, September 2015: 6 Units Down 57.1% MTM, Down 50.0% YTY

SOURCE: Clarus Market Metrics

MEDIAN PRICE OF RESIDENTIAL HOMES San Marino, September 2015: $2,209,000 Up 4.4% MTM, Down 17.4% YTY

SOURCE: Clarus Market Metrics

FOR SALE PROPERTIES San Marino, September 2015: 61 Units Down 9.0% MTM, Down 22.8% 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.

SOURCE: Clarus Market Metrics

MONTH’S SUPPLY OF INVENTORY San Marino, September 2015: 5.2 Months

SOURCE: Clarus Market Metrics

ANNUAL HOUSING MARKET SURVEY:   2015 FINDINGS

MARKET COMPETITION COOLS DOWN   AFTER PEAKING IN 2013

% with Multiple Offers

# of Multiple offers (Average)

80%

60%

4.5

40%

20%

1.5

0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

FIRST-TIME BUYERS FINDING IT HARD TO BUY % First-Time Home Buyers Long Run Average 48%

Long Run Average = 38% 36%

24%

12%

0% 2005 2007 2009 2011 2013 2015

SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

SHARE OF CASH BUYERS  LOWEST SINCE 2009 • Almost one-fourth of buyers paid with all cash • The share of all cash buyers is the lowest in the last 6 years % of All Cash Sales 30% 27% 26.80%

30%

23%

15%

23.20% 19.60% 18.50%

22%

27% 23%

21%

12.60% 11.00% 10.80%

0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

30%

20%

27% 22%

21%

SHARE OF INVESTMENT PROPERTIES DROPS TO THE LOWEST LEVEL SINCE 2009

% to Total Sales 20%

15%

10%

0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

SHARE OF SECOND/ VACATION HOMES HIGHER  AFTER TWO YEARS’ OF DECLINE % to Total Sales 8%

0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

YEARS OWNED HOME BEFORE SELLING All Sellers 10

SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

15 20

13 20

11 20

09 20

07 20

05 20

03 20

01 20

99 19

97 19

95 19

93 19

91 19

89 19

87 19

THE BOOMERS AND   THEIR NEXT MOVE

BOOMERS – BORN BETWEEN 1946-1964 Average: 59

What is your age? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

MAJORITY ARE MARRIED

Other 18%

Single 26%

What is your marital status? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

Married 56%

BABY BOOMERS LESS DIVERSE THAN MILLENNIALS Boomers

What is your ethnic background? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

Millennials

3/4 BABY BOOMERS ARE HOME OWNERS Other 3% Rent 22%

Own 75%

What is your current living situation? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

MOST HAVE EQUITY IN THEIR HOME No 8%

Yes 92% Do you have equity in your home? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

MAJORITY DO NOT PLAN TO SELL HOME   WHEN THEY RETIRE Yes 10% Don't know/ unsure 32%

No 58%

Do you plan to sell your current home when you retire? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

MAJORITY WON’T SELL BECAUSE THEY LIKE THEIR HOME

5% 8% 10%

I like my home I cannot afford to bu I plan to give the ho Another reason

77%

Why do you not plan to sell your current home when you retire? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

¼ POSTPONED RETIREMENT BECAUSE …

Did you have to postpone your date of retirement due to any of the following? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

> ½ DO NOT FEEL THEY HAVE SAVED ENOUGH MONEY TO RETIRE COMFORTABLY

No 54%

Do you feel you have saved enough money to retire comfortably? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Yes 46%

MAJORITY WORRY ABOUT CHILDRENS’ ABILITY TO BECOME HOME OWNERS

No 45% Yes 55%

Do you worry about your children’s ability to become home owners in the future? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2/5 PLAN TO HELP CHILDREN WITH DOWN PAYMENT

Yes 43% No 57%

Do you plan to help your children with their down payment to purchase a home? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

WHAT FINANCIAL DECISION   WOULD BOOMERS CHANGE? 22% 19% 22%

more/ spending less

19%

vestment decisions

nvest in real estate

Seek better job

etiring prematurely

s debt/ poor credit

ash out/ open IRA

he wrong location

15%

23%

If you could change one financial decision that you made within the past 10 years, what would it be? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

30%

WHAT KEEPS BOOMERS UP AT NIGHT? 39% 13% 7% 39%

Nothing

13%

Bills/ finances

Stress/ anxiety

4% 4% 4% 4% 3% 3% 2% 2% 1%

Family issues Work Job security Ache/ pain Insomnia Health concerns TV/ internet World politics Economy

10%

What keeps you up at night? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

20%

30%

40%

CRAFTSMAN BUNGALOW IS DREAM HOME FOR 1/3 HOME OWNERS

12%

craftsman bungalow • 32%

neo colonial • 19%

8.5%

dream mansion • 14%

Frank Lloyd Wright

5.7%

desert modernism

art nouveau/art moderne

1.6%

Q. Which of the following is your dream home?

modern townhome

5.1%

downtown loft

brick urban rowhome

2.6%

2/3 HOME OWNERS PREFER A NIGHT IN WITH FAMILY/FRIENDS FOR FUN

Q. In which of the following activities would you like to participate? Select all that apply.

INTERNATIONAL BUYERS  MAKE THEIR MARK

THE SHARE OF INTERNATIONAL BUYERS   LOWEST IN 8 YEARS

0% 2008

2009

2010

2011

2012

2013

2014

Q. Was the buyer an international buyer – a person who was a citizen of another country who wished to purchase residential real estate in the U.S.? SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2015

23% OF CA REALTORS速 WORKED WITH AN INTERNATIONAL BUYER IN THE PAST 12 MONTHS

# of Properties Sold to International Buyers in the Last 12 Months % Who Sold to International Buyers 80% 77% 71%0.724 2012 2013 2014 2015

60%

40%

20%

14% 0.117 9%

6%0.0635%

4%0.0263%

0% 0

2%0.0191%

Q. How many properties have you sold to an international buyer in the last 12 months? SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

4%0.0514% 5 or more

COUNTRY OF INTERNATIONAL BUYER

50%

43% 38%

25%

13%

Mexico

South Korea

0% China SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

INTENDED USE FOR PROPERTY? HOME

91%

ry Residence

30% 7%

ntal Property

38% 2%

econd Home

Other

US Buyer International Buyer

27% 0% 4% 0%

25%

50%

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

75%

100%

ALL CASH INTERNATIONAL BUYERS Obtained financing All cash

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

MILLENNIALS: TOMORROW’S HOME OWNERS?

OVER 1/3 LIVE WITH THEIR PARENTS

SERIES: 2014 Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

What is your current living situation?

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

MOST MILLENNIALS UNCERTAIN/DOUBTFUL THAT THEY COULD OBTAIN A MORTGAGE NOW?AMILLENNIAL ETHNICITY

Yes 22%

Don't know 45%

No 33% SOURCE: C.A.R. 2014 Millennial Survey Q: Could you obtain a mortgage if you applied now ?

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

2016 FORECAST

CALIFORNIA HOUSING MARKET OUTLOOK 2010 2011 2012 2013 2014 2015p 2016f SFH Resales (000s)

416.5

422.6

439.8

414.9

383.3

407.5

433.0

-12.3%

1.4%

4.1%

-5.9%

-7.6%

6.3%

Median Price ($000s) $305.0 $286.0

$319.3

$407.2

$447.0

$476.3

$491.3

% Change Housing Affordability Index

% Change

30-Yr FRM

10.9%

-6.2%

11.6%

27.5%

9.8%

6.5%

3.2%

48%

53%

51%

36%

30%

31%

27%

4.7%

4.5%

3.7%

4.0%

4.2%

3.9%

4.5%

SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

SALES UP FOR 2015 AND CONTINUE TO IMPROVE IN 2015; PRICE WILL GROW STEADILY THIS YEAR AND NEXT

Units (Thousand)

Sales of Existing Detached Homes

600,000

450,000

Price (Thousand) $600,000

433,030 407,490

$450,000

300,000

$300,000

150,000

$150,000

$0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015p 2016f

SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

2005 2011

Median Price

CA: DOLLAR VOLUME   UP 13.3% IN 2015, UP 9.6% IN 2016

$ in Billion

% Change $ Volume of Sales

$400

Percent Change

40% 30%

$300

$301

20%

-60%

$244 $200

$169

$164 $133

$131

$127

$121

$171

$194

$213

10% 0%

$140

-10%

$100

-20% -30%

-40% 2005

2006

2007

2008

2009

SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2010

2011

2012

2013

2014

2015p

2016f

C.A.R. STRATEGIC PLANNING BOOKS

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THANK YOU! www.car.org/marketdata lesliea@car.org Facebook: CARResearchgroup Twitter: CARResearchInfo This presentation can be found on www.car.org/marketdata