CAR 2011 Market Forecast

CALIFORNIA HOUSING
MARKET 2012 FORECAST

Sacramento AOR
October 4, 2011
Leslie Appleton-Young, Chief Economist
Overview
US and California Economies
California Housing Market
Regional & Local Markets
2011 Annual Market Survey
2012 Housing Market Forecast
U.S. Economic Outlook
2011: A Year of Wild Cards
Oil Price Spikes
Political
Change
on
Capitol
Hill
Arab Uprising
Sovereign
Debt
Crisis in
EuroZone
Debt Limit
Ceiling &
Downgrade
of US Debt
Stock
Market
Volatility
Gross Domestic Product: Stall Speed

2010: 2.8%; 2011 Q1: 0.4% Q2: 1.0%
Q2-11
Q4-10
Q2-10
QTRLY
2010
2008
2006
2004
2002
2000
ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $

8%
7%
ANNUAL
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
-7%
-8%
Components of GDP:
Consumer Spending Weak; Govt Sector Down
Quarterly Percent Change
3.0
Q3
Q4
Q1
Q2
2.5
2.0
1.5
2010
2010
2011
2011
1.0
0.5
0.0
-0.5
-1.0
-1.5
Consumption
Fixed Nonres.
Investment
Net Exports
SOURCE: US Dept of Commerce, Bureau of Economic Analysis
Government
Consumers Pulling Back

Home Equity & Reverse Wealth Effect
Consumer Spending 2011 Q1: 2.7% Q2: 0.4%
8%
QUARTERLY PERCENT CHANGE

6%
4%
2%
0%
SOURCE: US Dept of Commerce, Bureau of Economic Analysis
1Q-2011
1Q-2010
1Q-2009
1Q-2008
1Q-2007
1Q-2006
1Q-2005
1Q-2004
1Q-2003
1Q-2002
1Q-2001
-4%
1Q-2000
-2%
Unemployment Stubbornly High

August 2011
California (12.1%) vs. United States (9.1%)

14%
CA
US
12%
10%
8%
6%
4%
2%
SOURCE: CA Employment Development Division
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
0%
U.S. Job Growth: Flat in August

Month-to-Month Changes
SOURCE: US Dept of Labor, Bureau of Labor Statistics
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
500,000
400,000
300,000
200,000
100,000
0
-100,000
-200,000
-300,000
-400,000
-500,000
-600,000
-700,000
-800,000
-900,000
Jan-08
Recession Job Losses: 8.4 million

Since Jan10: +1.8 million
California Job Growth Faltering

Month-to-Month Changes
Recession Job Losses: 1.3 million
Since Jan10: +188,100
100000
80000
60000
40000
20000
0
-20000
-40000
-60000
-80000
-100000
-120000
-140000
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
Nov-09
Sep-09
Jul-09
May-09
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
Jan-08
-160000
Where are Californias Jobs?

Employment Trends:
Construction & Financial Sectors Biggest Losers
Industry
Mining and Logging
2005
Jul-11
Year to
Date
23,600
27,600
4,000
905,300
567,300
-338,000
Manufacturing
1,502,600
1,257,600
-245,000
Trade, Transportation & Utilities
2,822,100
2,641,500
-180,600
Information
473,600
455,400
-18,200
Financial Activities
920,300
755,800
-164,500
Professional & Business Services
2,160,700
2,136,200
-24,500
Educational & Health Services
1,593,400
1,837,000
243,600
Leisure & Hospitality
1,475,200
1,531,600
56,400
505,500
484,500
-21,000
2,420,200 2,380,200
14,802,500 14,074,700
-40,000
-727,800
Construction
Other Services
Government
TOTAL
SOURCE: California Association of REALTORS
Nonfarm Employment
Sacramento-Arden Arcade-Roseville MSA, August 2011: Up 0.3% YTY
Y-T-Y PERCENT CHANGE
8%
6%
4%
2%
0%
-2%
-4%
-6%
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
-8%
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Unemployment Rate
Sacramento Metropolitan Area, August 2011 11.9%
14%
12%
10%
8%
6%
4%
2%
New Housing Permits

Sacramento MSA August 2011: 255 Units, Down 12.7% YTD
3000
Single Family
2500
Multi-Family
2000
1500
1000
500
SOURCE: Construction Industry Research Board
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
Unemployment Rate
Sacramento County August 2011
Area Name
Arden Arcade CDP
Carmichael CDP
Citrus Heights city
Elk Grove CDP
Fair Oaks CDP
Florin CDP
Folsom city
Foothill Farms CDP
Galt city
Gold River CDP
Isleton city
La Riviera CDP
Laguna CDP
Labor Force
Rate
55,800
28,800
49,500
34,700
16,800
12,700
26,500
9,600
10,800
4,700
400
6,800
20,100
12.3%
9.6%
8.7%
10.1%
6.7%
19.1%
5.7%
16.8%
19.8%
2.4%
16.2%
7.4%
6.8%
CCD Census County Division

CDP Census Designated Place
SOURCE: CA Employment Development Department
Unemployment Rate
Sacramento County August 2011
Area Name
Laguna West Lakeside CDP
North Highlands CDP
Orangevale CDP
Parkway South Sacramento CDP
Rancho Cordova City
Rancho Murieta CDP
Rio Linda CDP
Rosemont CDP
Sacramento city
Vineyard CDP
Walnut Grove CDP
Wilton CDP
Sacramento County
Labor Force
Rate
5,200
22,500
15,600
16,000
30,600
2,200
5,800
13,700
213,600
5,800
500
2,700
671,200
8.9%
19.0%
8.5%
21.4%
14.1%
4.1%
19.2%
10.4%
14.4%
6.4%
29.3%
8.5%
12.4%
CCD Census County Division

CDP Census Designated Place
SOURCE: CA Employment Development Department
20
Jul-11
Jan-11
Jul-10
Jan-10
Jul-09
Jan-09
Jul-08
Jan-08
Jul-07
Jan-07
Jul-06
Jan-06
Jul-05
Jan-05
Jul-04
Jan-04
Jul-03
Jan-03
Jul-02
Jan-02
Jul-01
Jan-01
Jul-00
Jan-00
Consumer Confidence Slipping

Marginal Gains in September
September 2011: 45.4
160
INDEX, 100=1985
140
120
100
80
60
40
Crisis of Confidence:
Small Business Optimism Down
Source: National Federation of Independent Business
Consumer Prices Low but Heading Higher

CPI August 2011: All Items +3.8% YTY; Core +2.0% YTY
PERCENT CHANGE FROM A YEAR AGO, 100=1982-1984
6%
All Items
5%
Core
4%
3%
2%
1%
0%
-1%
-2%
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
-3%
Monetary Policy
Mortgage Rates @ Historical Lows

Debt Down Grade Ignited Flight to Quality
FRM
ARM
6.00%
MONTHLY
WEEKLY
5.00%
4.00%
3.00%
2.00%
1.00%
9.15.11
8.25.11
8.4.11
2011.07
2011.04
2011.01
2010.10
2010.07
2010.04
2010.01
2009.10
2009.07
2009.04
2009.01
0.00%
Classic Liquidity Trap: Consumers Deleveraging

Low Rates and Low Borrowing
10%
9%
8%
7%
6%
5%
4%
3%
FRM
2%
ARM
1%
Federal Funds
SOURCE: Federal Home Loan Mortgage Corporation
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
0%
Fiscal Policy
US Deficit Highest in Decades

2010: 11% of GDP (Revenues Expenses)
4.0%
Deficit as a % of GDP
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-10.0%
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
-12.0%
Source: US Treasury, BEA, compiled by C.A.R.

Note: Positive = Surplus
US Debt Jumped as Government

Responded to Financial Crisis
2010: 93% of GDP
100.0%
90.0%
Debt as a % of GDP
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
0.0%
Source: US Treasury, compiled by C.A.R.
Obama Jobs Proposal

What:
$450 Billion stimulus: Tax cuts ($250B) and infrastructure
spending ($200B)
Why:
Economy is stalled/Avoid double-dip
Zero job growth in August/high unemployment
Stabilize confidence: consumer, business, investor
How:
Increase taxes on the rich
Entitlement Reform
Tax Reform
Housing
California vs. U.S. Sales

US Home Sales
CA Home Sales
7,000,000
700,000
6,000,000
600,000
5,000,000
500,000
4,000,000
400,000
3,000,000
300,000
2,000,000
200,000
1,000,000
100,000
California vs. U.S. Median Price

US Median Price
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
CA Median Price
Housing Affordability: Records Highs

California Vs. U.S.
CA
US
100%
% OF HOUSEHOLDS THAT CAN BUY

90%
80%
70%
60%
50%
40%
30%
20%
10%
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
Q1 2011
Q3 2010
Q1 2010
Q3 2009
Q1 2009
Q3 2008
Q1 2008
Q3 2007
Q1 2007
Q3 2006
Q1 2006
Q3 2005
Q1 2005
Q3 2004
Q1 2004
Q3 2003
Q1 2003
Q3 2002
Q1 2002
Q3 2001
Q1 2001
Q3 2000
Q1 2000
0%
CA Underwater Mortgages
40%
Negative Equity Share in CA
Near Negative Equity Share in CA
35%
30.2%
30%
25%
20%
15%
10%
4.6%
5%
0%
Q2-2011
Q1-2011
Q4-2010
Q3-2010
Q2-2010
Q1-2010
Q4-2009
SOURCE: CoreLogic
Mortgage Originations: 1990-2010

Refinance vs. Purchase
ORIGINATION (BIL $)
30-YR FIXED RATE MORTGAGE
900
12.0%
Refinance Originations (Bil $)

Purchase Originations (Bil $)
Fixed Rate Mortgage
800
10.0%
700
600
8.0%
500
6.0%
400
300
4.0%
200
2.0%
100
Source: Mortgage Bankers Association of America
Q1/10
Q1/09
Q1/08
Q1/07
Q1/06
Q1/05
Q1/04
Q1/03
Q1/02
Q1/01
Q1/00
Q1/99
Q1/98
Q1/97
Q1/96
Q1/95
Q1/94
Q1/93
Q1/92
Q1/91
0.0%
Q1/90
What Happened?
Trustee Sales in Anaheim

Scheduled for 10/7/10
1872 W. Admiral, 92801
3 bd, 2.5 ba, built in 1982

Purchased in Sept 2005
for $594,000 with 30%
down.
In April 2006, added a
second for $57,000.
In Oct 2006, refinanced
the second into a new
second for $100,000.
Defaulted in 2010
Zestimate of current value
= $364,000.
1572 W. Orangewood, 92802

3 bd, 2 ba, 2,016 sq ft
built in 1977.
Purchased in June 2003
for $455,000 with 30%
down.
March 2004: added a
second for $75,000;
added a third for $90,500;
added a fourth for
$80,000.
Within one year of
purchase, the property had
$565,000 in debt on it!
Defaulted in 2010.
Zestimate of current value
= $442,000.
8871 Regal, 92804
3 bd, 2 ba, 1,314 sq ft

built in 1956.
Purchased as REO in
2007 for $417,000 with
zero down.
Had previously sold for
$568,000 in 2005.
Defaulted in 2010.
Zestimate of current
value = $367,500.
2414 E. Underhill, 92806
3 bd, 2 ba, 1,459 sq ft

built in 1957.
Purchased for $640,000
in July 2006 with
piggyback financing:
$500,000 first and
$140,000 second, i.e.
zero down.
Defaulted in 2010.
Zestimate of current
value = $387,000.
Conclusions
Excessive borrowing against home equity is the
untold part of the foreclosure story.
House Prices, Home Equity-Based Borrowing, and
the U.S. Household Leverage Crisis by Mian and
Sufi: American Economic Review :
39% of new defaults from 2006 to 2008
attributable to home equity borrowing
Understanding the
Financial Crisis
Federal Issues Critical Concerns

High-cost Loan Limit - expires 10/1/11
Future of Fannie and Freddie in flux - Increase
guarantee fee likely
FHA targeted for market share drop
Tax Reform on the horizon MID?
QRM (Qualified Residential Mortgage)
20% Down Is the future of the 30 year
mortgage in doubt?
U.S. Economic Outlook

2005
2006
2007
2008
2009
2010 2011f 2012f
US GDP
3.1% 2.7% 2.0% 0.0% -2.6% 2.9% 1.7% 2.0%
Nonfarm Job
Growth
1.7% 1.8% 1.1% -0.6% -4.4% -0.7% 1.0% 0.9%
Unemployment
5.1% 4.6% 4.6% 5.8% 9.3% 9.6% 9.0% 8.9%
CPI
3.4% 3.2% 2.8% 3.8% -0.4% 1.6% 3.2% 2.3%
Real Disposable
Income, %
Change
1.3% 4.0% 2.2% 0.5% 0.9% 1.4% 1.7% 1.5%
Forecast Date: September 2011

California Economic Outlook
2005
2006
2007
2008
Nonfarm Job
Growth
1.8%
1.7%
0.8%
-1.3% -6.0% -1.4%
Unemployment
Rate
5.4%
4.9%
5.4%
7.2% 11.4% 12.4% 12.0% 11.2%
Population
Growth
1.2%
1.1%
1.1%
1.2%
1.1%
0.9%
0.9%
0.9%
Real Disposable
Income, %
Change
1.3%
3.4%
1.5%
0.1%
-2.2%
1.6%
1.5%
2.0%

2009
2010
2011f 2012f
1.5%
2.1%
California Housing Market
California Sales of Existing Homes

and Median Price
Housing Cycle Comparisons 1970- 2011
Sales of Existing Detached Homes
UNITS/MEDIAN PRICE $
Median Price
700,000
-44%
600,000
500,000
-25%
-61%
400,000
300,000
200,000
100,000
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
Dollar Volume of Sales

Down 5% in 2011, Up 3% in 2012
$ in Billion
$ Volume of Sales
$350
% Change
Percent Change
50%
$327
37%
40%
$300
30%
24%
$250
26%
$200
20%
16%
10%
2%
$150
3%
$129
-2% -1.0%
$100
$150
-19%
-5%
$143
0%
-10%
$147
-20%
-22%
$50
-30%
-27%
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
-40%
2000
$0
Sales of Existing Detached Homes and

Pacific West Consumer Confidence
California, August 2011 Sales: 497,390 Units, Down 0.4% YTD, Up 10.2% YTY
UNITS
Sales
Consumer Confidence
INDEX
700,000
160
600,000
140
120
500,000
100
400,000
80
300,000
60
200,000
40
100,000
20
0
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
SOURCE: California Association of REALTORS; The Conference Board

*Sales are seasonally adjusted and annualized
Median Price of Existing

Detached Homes
California, August 2011: $297,060, Down 7.4% YTY
P: May-07
$594,530
$700,000
$600,000
T: Feb-09
$245,230
-59% from
peak
$500,000
$400,000
$300,000
$200,000
$100,000
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
$0
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
Jan-88
Unsold Inventory Index
California, August 2011: 5.0 Months
MONTHS
20
18
16
14
12
10
Unsold Inventory Index (Months)
Price Range (Thousand)

$1,000K+
$750-1000K
$500-750K
$300-500K
$0-300K
Aug-10 Jul-11 Aug-11

11.1
7.0
6.4
5.7
4.8
9.2
6.9
6.3
5.6
5.1
9.1
6.2
5.6
5.2
4.6
Unsold Inventory By Price Range

Jan 2005 August 2011
MONTHS
30
$0 - 300K
$300-500K
25
$500-750K
$750-1000K
20
$1,000K+All
15
10
5
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
Oct-06
Jul-06
Apr-06
Jan-06
Oct-05
Jul-05
Apr-05
Jan-05
Market Breakdown:
Equity v. Distressed
Sales
Share of Distressed Sales to Total Sales
Aug-10
60%
Jul-11
Aug-11
44.5%
42.9%
43.7%
40%
24.7%
25.2%
24.4%
19.3%
20%
17.5%
18.9%
0%
REOs
Short Sales
Distressed Sales
Tight Supply of Inventory

for REO Sales
Aug-11
Unsold
Inventory Index
(Months)
9
8
7
6
5
4
3
2
1
0
8.1
5.7
2.6
Equity Sales
REO Sales
Short Sales
REO & Short Sales: Central Valley

(Percent of Total Sales)
Aug 2011
100%
Short Sales
80%
REO Sales
7%
60%
30%
23%
40%
67%
20%
36%
37%
24%
19%
38%
41%
0%
Madera
Merced
San Benito
Sacramento
Kern
REO & Short Sales: Bay Area

100%
Aug 2011
80%
Short Sales
REO Sales
60%
26%
40%
20%
20%
15%
13%
28%
15%
11%
0%
Marin
Napa
San
Mateo
21%
18%
45%
10%
Santa
Clara
24%
Solano
Sonoma
REO & Short Sales: Southern

California
100%
Aug 2011
80%
Short Sales
REO Sales
60%
40%
20%
26%
14%
24%
20%
20%
35%
49%
8%
12%
0%
19%
Los
Angeles
Orange
Riverside
San
Bernardino
San Diego
REO & Short Sales: Rest of California

100%
Aug 2011
80%
60%
Short Sales
REOs
11%
40%
7%
48%
20%
25%
8%
7%
34%
13%
57%
25%
0%
5%
36%
32%
9%
20%
39%
15%
51%
California Foreclosure Filings

August 2011
NTS: 24,260, -16.9% YTD NOD: 32,338, -21.5% YTD

Notice of Trustee Sale - Counts
Notice of Defaults - Counts
65,000
60,000
6 Month Average:
NTSs: 23,806
55,000
50,000
NODs: 23,625
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
SOURCE: ForeclosureRadar.com
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
Nov-09
Sep-09
Jul-09
May-09
Mar-09
Jan-09
Nov-08
Sep-08
Jul-08
May-08
Mar-08
Jan-08
Nov-07
Sep-07
Jul-07
May-07
Mar-07
Jan-07
5,000
0
CA Foreclosure Outcomes
August 2011
REO: -12.2% YTD 3rd Party: -4.1% YTD Cancel: -19.7% YTD
REOs
Sold to 3rd Party
Cancellations
6 Month Average:
30,000
REO: 10,880
3rd Party: 3,616
25,000
Cancelled: 14,447
20,000
15,000
10,000
5,000
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
CA Foreclosure Inventories
August 2011
Preforeclosure: -17.5% YTD Schedule for Sale: -17.8% YTD
Bank Owned: 7.0% YTD
6 Month Average:
Preforeclosure
Scheduled for Sale
Bank Owned Preforeclosure: 115,742
Schedule for Sale:

105,138
200,000
Bank Owned: 108,635

150,000
100,000
50,000
Jul-11
Apr-11
Jan-11
Oct-10
Jul-10
Apr-10
Jan-10
Oct-09
Jul-09
Apr-09
Jan-09
Oct-08
Jul-08
Apr-08
Jan-08
Oct-07
Jul-07
Apr-07
Jan-07
Sacramento
Preforeclosure: 2,667 Auction: 1,792 Bank Owned: 1,281
Source: ForeclosureRadar.com as of 10/03/11
Sacramento
Sacramento
Sacramento
Roseville
Preforeclosure: 394 Auction: 322 Bank Owned: 162
Citrus Heights
Orangevale
Regional Housing
Markets
Homes Sales and Consumer Confidence

Sacramento County, August 2011: 1,707 Units, Up 5.4% YTD, Up 14.3% YTY
Sales
Consumer Confidence
UNITS
2600
INDEX
160
2400
140
2200
2000
120
1800
100
1600
1400
80
1200
1000
60
800
40
600
400
20
200
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS; The Conference Board

Home sales: Existing Single Family Detached
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Sales of Existing Detached Homes

Sacramento County, 2010: 17,420 Units, Down 12.8%
YTY
MONTHLY
ANNUAL
UNITS
25,000
2,500
20,000
2,000
15,000
1,500
10,000
1,000
2008
2009
5,000
500
2010
2011
Dec
Nov
Oct
Sept
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2010
2007
2004
2001
1998
1995
1992
1989
Median Price of Existing Detached Homes

Sacramento County, August 2011: $167,040, Down 10.6% YTY
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
Jan-92
Jan-91
Jan-90
Jan-89
$0
Median Price Annual Comparison

Sacramento County, 2010: $184,170, Up 2.0% YTY
MONTHLY
ANNUAL
$400,000
$400,000
$350,000
$350,000
$300,000
$300,000
$250,000
$250,000
$200,000
$200,000
$150,000
$150,000
$100,000
$100,000
2008
2009
2010
Dec
Nov
Oct
Sept
Aug
Jul
Jun
May
Apr
Mar
Feb
2011
Jan
2010
2007
2004
2001
1998
$-
1995
$1992
$50,000
1989
$50,000
Median Home Sales Price

Sacramento County
Aug-10
Aug-11
Yearly %
Change
ANTELOPE
$176,500
$160,000
-9.4%
CARMICHAEL
$240,000
$187,100
-22.0%
CITRUS HEIGHTS
$165,000
$138,000
-16.4%
ELK GROVE
$230,000
$211,500
-8.0%
ELVERTA
$111,000
$131,000
18.0%
FAIR OAKS
$260,000
$219,000
-15.8%
FOLSOM
$330,000
$284,000
-13.9%
GALT
$155,000
$135,250
-12.7%
SOURCE: DataQuick Information Systems. The price statistics are derived from
all types of home sales -- new and existing, condos and single-family.
Median Home Sales Price

Sacramento County
Aug-10
Aug-11
Yearly %
Change
$182,500
$160,500
-12.1%
$90,000
$80,000
-11.1%
ORANGEVALE
$206,500
$177,000
-14.3%
RANCHO CORDOVA
$211,250
$195,000
-7.7%
RIO LINDA
$151,000
$114,000
-24.5%
SACRAMENTO
$139,000
$131,500
-5.4%
SLOUGHHOUSE
$214,000
$340,000
58.9%
WILTON
$444,500
$330,000
-25.8%
SACRAMENTO COUNTY
$172,000
$159,000
-7.6%
MATHER
NORTH HIGHLANDS
SOURCE: DataQuick Information Systems. The price statistics are derived from
all types of home sales -- new and existing, condos and single-family.
Unsold Inventory Index

Sacramento County, August 2011: 2.3 Months
MONTHS
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Jan-95
Jan-94
Jan-93
0.0
Median Time on the Market

Sacramento, August 2011: 38.6 Days
70
60
50
40
30
20
10
Jan-11
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
Jan-99
Jan-98
Jan-97
Jan-96
Asking Rents for Class A&B Apartments

Sacramento MSA, 2011 Q2: $952, Up 2.6% YTY
$1,000
$800
$600
$400
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS;

REALFACTS
Q1/11
Q2/10
Q3/09
Q4/08
Q1/08
Q2/07
Q3/06
Q4/05
Q1/05
Q2/04
Q3/03
Q4/02
Q1/02
Q2/01
Q3/00
Q4/99
Q1/99
Q2/98
$0
Q3/97
$200
0%
1990
1992
1994
Q4/95
Q4/96
Q3/97
Q1/98
Q3/98
Q1/99
Q3/99
Q1/00
Q3/00
Q1/01
Q3/01
Q1/02
Q3/02
Q1/03
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
Q1/10
Q3/10
Q1/11
Vacancy Rates for Class A&B Apartments

Sacramento MSA, 2011 Q2: 6.4%
VACANCY RATE
9%
8%
7%
6%
5%
4%
3%
2%
1%
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS; REALFACTS
Sacramento
Sales of Single Family Homes

Sacramento, August 2011: 620 Units
, Up 20.6% MTM, Up 15.9% YTY
700
600
500
400
300
200
100
0
Aug-09
Nov-09
Feb-10
May-10
SOURCE: SACRAMENTO ASSOCIATION of REALTORS
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Median Price of SF Homes

Sacramento, August 2011: $131,000
Down 3.0% MTM, Down 5.8% YTY
$200,000
$150,000
$100,000
$50,000
$0
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Roseville

Roseville, August 2011: 231 Units
, Up 40.9% MTM, Up 33.5% YTY
250
200
150
100
50
0
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11

Roseville, August 2011: $251,000
Up 3.8% MTM, Down 6.0% YTY
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Citrus Heights

Citrus Heights, August 2011: 102 Units
Down 3.8% MTM, Up 13.3% YTY
140
120
100
80
60
40
20
0
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11

Citrus Heights, August 2011: $140,050
$200,000
$150,000
$100,000
$50,000
$0
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
Orangevale

Orangevale, August 2011: 43 Units,
Up 19.4% MTM, Up 7.5% YTY
60
50
40
30
20
10
0
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11

Orangevale, August 2011: $179,000,
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Aug-09
Nov-09
Feb-10
May-10
Aug-10
Nov-10
Feb-11
May-11
Aug-11
2011 Annual Housing

Market Survey
2 in 5 Homes Sold Were

Distressed Properties
2008
2009
2010
2011
59%
60%
40%
20%
20%
20%
0%
REOs
Q. Was the property purchased/sold as a
foreclosure, REO, short sale, or none of the above?
Short Sales
Equity Sales
Equity vs. REO vs. Short Sales

Equity Sales
REO Sales
Short Sales
Share of Total Sales
58.7%
19.7%
20.2%
Median Home Price
$431,000
$240,000
$287,000
Square Footage
1,783
1,500
1,600
Price / SF
$250
$112
$175
Sales-to-List Price Ratio
95.9%
98.0%
95.9%
% of Sales With Multiple Offers
35.2%
58.3%
57.5%
3.0
3.0
3.6
25.5%
34.0%
23.3%
Days on MLS
67
50
141
Days in Escrow
35
35
45
Avg. Number of Offers

% of All Cash Sales
1 in 3 Sellers Sold Because They

Were in Distress
35%
Sold due to foreclosure/Short sale/Default
30%
30%
25%
20%
15%
10%
5%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Q. What was the single most important reason for
selling/buying the property?
Sellers with a Net Cash Loss

35%
30%
25%
21.8%
20%
Long Run Average = 11.2%
15%
10%
5%
Q. What was the net cash gain or net loss to

the seller as a result of this sale?
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0%
Net Cash to Sellers

Median
$250,000
$200,000
$150,000
$100,000
$75,000
$50,000
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Q. What was the net cash gain or net loss to the seller as a result of this sale?
Median Price Discount &

Weeks On Market
3.9%, 10.5 weeks
8%
7%
Med. Price Discount

Med. Weeks on MLS
16
14
6%
12
5%
10
4%
3%
2%
1%
0%
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
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?
Multiple Offers
%with M ultiple Offers
# of M ultiple offers (Average)
60%
50%
40%
30%
20%
10%
0%
0
2000
2002
2004
2006
2008
2010
Proportion of Sellers Planning to

Repurchase
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Q. Is the seller planning on purchasing another home?
Reasons Sellers Not Planning to

Buy Another Home
19.8%
Seller is a lender/bank
Seller prefers to have less financial obligation
11.4%
Poor credit background
10.9%
Lack of cash for down payment
5.7%
Out of work/unemployment
4.9%
Decide to live with family/friends
4.7%
Waiting for market to bottom
2.7%
40.0%
Other
0%
10%
Q. Why is the seller not planning to purchase another home?
20%
30%
40%
50%
Reasons For Selling

All Home Sellers
Foreclosure/Short
Sale/Default
Change in Family Status
Retirement/Move to
Retirement Community
Investment/ Tax
Consderations
Desired Better Location
Desired Smaller Home
Changed Jobs
Desired Larger Home
Other
0%
5%
10%
15%
20%
Q. What was the single most important reason for selling/buying the property?
25%
30%
35%
Cash Sales on the Rise

% of All Sales
30%
25%
20%
15%
10%
5%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Investments & Second/

Vacation Homes
Investment/Rental Property
Vacation/Second Home
25%
20%
7%
15%
10%
5%
0%
17%
Foreign Buyers
10%
% of Foreign Buyers
8%
8%
6%
6%
5%
6%
4%
2%
0%
2008
Q. Was the buyer a foreign buyer?
2009
2010
2011
Years Owned Home Before Selling

(All Sellers and Second Home/Investment Home Sellers
All Sellers
Second Home and Investment Home Sellers
14
12
10
8
6
4
2
0
7.0
6.0
California Housing
Market Forecast
Forecast Progress Report
SFH Resales
(000s)
% Change
Median Price
($000s)
% Change
2010
Projected
October
2010
2010 Actual
2011
Forecast
October
2010
2011
Projected
492.0
491.5
502.0
491.1
-10.0%
-10.1%
2.0%
-0.1%
$306.5
$303.1
$312.5
$291.0
11.5%
10.2%
2.0%
-4.0%
Forecast Date: September 2011 vs October 2010

Source: CALIFORNIA ASSOCIATION OF REALTORS
California Housing Market Outlook

SFH Resales
(000s)
2005
2006
2007
2008
2009
2010
2011f
2012f
625.0
477.5
346.9
441.8
546.9
491.5
491.1
496.2
23.8% -10.1% -0.1%
1.0%
% Change
0.03% -23.6% -27.3% 27.3%
Median
Price
($000s)
$522.7 $556.4 $560.3 $348.5 $275.0 $303.1 $291.0 $296.0
% Change
16.0%
6.5%
0.7%
30-Yr FRM
5.9%
6.4%
6.3%
6.0%
5.1%
4.7%
4.5%
4.7%
1-Yr ARM
4.5%
5.5%
5.6%
5.2%
4.7%
3.5%
3.0%
3.1%

Source: CALIFORNIA ASSOCIATION OF REALTORS
-37.8% -21.1% 10.2% -4.0%
1.7%
Closing Thoughts
Direction of Home Prices: Sellers

Skeptical; Buyers Hopeful
Down
Flat
Unsure
Up
100%
80%
60%
40%
20%
0%
Sellers
Buyers
Q: Do you think home prices in your neighborhood will go up, down or stay flat in one year, five years and 10 years?
Real Estate: Its Time To Buy Again
Forget stocks. Don't bet on gold.

After four years of plunging home
prices, the most attractive asset
class in America is housing.
SOURCE: Real estate: Its time to buy again Fortune Magazines 3/28/11 article written by Shawn Tully
8 in 10 Americans Agree Buying a Home is

the Best Investment One Can Make
SOURCE: Pew Research Centers Home Sweet Home. Still. Five Years After the Bubble Burst
8 in 10 Renters Would Like to

Buy in the Future
renters are hardly
immune to the allure of
homeownership, even in
the face of the five-year
decline in prices. Asked if
they rent out of choice or
because they cannot
afford to buy a home, just
24% say they

rent out of
choice.
SOURCE: Pew Research Centers Home Sweet Home. Still. Five Years After the Bubble Burst
C.A.R. Strategic Planning Book Pics
Thank You
www.car.org.marketdata
lesliea@car.org

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CALIFORNIA HOUSING

MARKET 2012 FORECAST

U.S. Economic Outlook

2011: A Year of Wild Cards

Oil Price Spikes

Gross Domestic Product: Stall Speed

ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $

SOURCE: US Dept of Commerce, Bureau of Economic Analysis

Consumers Pulling Back

QUARTERLY PERCENT CHANGE

SOURCE: US Dept of Commerce, Bureau of Economic Analysis

Unemployment Stubbornly High

California (12.1%) vs. United States (9.1%)

SOURCE: CA Employment Development Division

U.S. Job Growth: Flat in August

SOURCE: US Dept of Labor, Bureau of Labor Statistics

Recession Job Losses: 8.4 million

California Job Growth Faltering

SOURCE: CA Employment Development Division

Where are Californias Jobs?

Trade, Transportation & Utilities

Professional & Business Services

Educational & Health Services

Leisure & Hospitality

SOURCE: CA Employment Development Division

SOURCE: CA Employment Development Division

Sacramento Metropolitan Area, August 2011 11.9%

New Housing Permits

SOURCE: Construction Industry Research Board

CCD Census County Division

CCD Census County Division

Consumer Confidence Slipping

Source: National Federation of Independent Business

Consumer Prices Low but Heading Higher

Mortgage Rates @ Historical Lows

Classic Liquidity Trap: Consumers Deleveraging

SOURCE: Federal Home Loan Mortgage Corporation

US Deficit Highest in Decades

Source: US Treasury, BEA, compiled by C.A.R.

US Debt Jumped as Government

Source: US Treasury, compiled by C.A.R.

Obama Jobs Proposal

California vs. U.S. Sales

SOURCE: California Association of REALTORS

California vs. U.S. Median Price

SOURCE: California Association of REALTORS

Housing Affordability: Records Highs

% OF HOUSEHOLDS THAT CAN BUY

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Negative Equity Share in CA

Near Negative Equity Share in CA

Mortgage Originations: 1990-2010

30-YR FIXED RATE MORTGAGE

Refinance Originations (Bil $)

Source: Mortgage Bankers Association of America

Trustee Sales in Anaheim

1872 W. Admiral, 92801

3 bd, 2.5 ba, built in 1982

1572 W. Orangewood, 92802

8871 Regal, 92804

3 bd, 2 ba, 1,314 sq ft

2414 E. Underhill, 92806

3 bd, 2 ba, 1,459 sq ft

39% of new defaults from 2006 to 2008