2018 Housing Market Forecast Leslie Appleton-Young Chief Economist & Vice President

2017 Forecast Report Card SFH Resales (000s) % Change Median Price ($000s) 30-Yr FRM Housing Affordability Index U.S. Gross Domestic Product 2016 Actual 416.7 1.8% $502.3 5.4% 3.6% 31% 1.6% 2017 Forecast 413.0 1.4% $525.6 4.3% 4.0% 29% 2.2% 2017 Projected 421.9 1.3% $538.5 7.2% 4.0% 29% 2.1% The numbers in both “% change” in the “2017 Forecast” column were calculated based on 2016 projected figures, instead of the 2016 actual figures.  Because the 2016 Actual sales and price are different from the 2016 projected sales and price, the “% changes” in the “2017 Forecast” column are into consisitent with those numbers. We appear to be right on for the 30-YR FRM between the forecast and the projected, but there is a bit of luck involved.  If we were to do the forecast after the election, we would have predicted a higher interest rate instead. 

What to expect in 2018 US economic and job growth expanding CA economy out-preforming the nation – maybe not Rates rising in response to growth & Fed policy Affordability challenges for first time & repeat buyers Boomers aren’t moving – if they do they lease more often Millennials leaving the nest & the state “getting a life” Listings & new units remain low wrt trend & demand Hang-over - Formerly owner-occupied units now rentals

Macro Economic Outlook

Stronger Economic Growth in Q2 Consumer – Led Economy 3.1% GDP 2017-Q2 3.3% Consumption 2017-Q2 4.2% Unemployment Sep 2017 1.2% Job Growth Sep 2017

2009 Largest Annual Drop since 1946 (-2.8%) Economic Growth 2016: 1.6% 2017(p) 2.1% 2018(f) 2.3% ANNUALLY QUARTERLY Notes: E – expected, F – forecast, P- preliminary 1929 though first quarter 2009 annual GDP figures were revised in July 2009 using 2005 benchmark. 2009 Largest Annual Drop since 1946 (-2.8%) SERIES: GDP SOURCE: US Dept. of Commerce, Bureau of Economic Analysis 7

Consumers Driving the Economy 2016: 2.7%; 2017 Q2: 3.3% ANNUAL PERCENT CHANGE ANNUALLY QUARTERLY SERIES: Personal Consumption SOURCE: US Dept. of Commerce, Bureau of Economic Analysis 8

Confidence? Holding on to “Trump Bump” September 2017: 119.8 Trump “bump”: 100.8 in Oct 2016 to 109.4 right after the election SERIES: Consumer Confidence SOURCE: The Conference Board

S&P 500: Historic Highs August 2017: 2,456.2 SOURCE: http://www.haverselect.com/dlx/home.htm (MUST HAVE A LOGIN AND PASSWORD) Click on Quick Order - put in code SP500 - and order

Mortgage Rates: Surged Post-Election January 2010 – October 05, 2017 MONTHLY WEEKLY Monthly from 2009 to present, weekly for the past 8 weeks SERIES: 30Yr FRM, 5Yr ARM SOURCE: Freddie Mac

Extremely Tight Labor Markets September 2017: US 4.2% & August 2017: CA 5.4% CA: 5/14 7.6% 4/13 7.8% 3/14 8.1% 2/14 8.0% 1/14 8.1% 12/13 8.3% 11/13 8.5% 10/13 8.7% 9/13 8.7% 8/13 8.9% 7/13 8.5% 6/13 8.5% 5/13 8.6% 4/13 9.0% 3/13 9.4% 2/13 9.6% 1/13 9.8% 12/12 9.8% 11/12 9.9% 10/12 10.1% 9/12 10.2% 8/12 10.4% 7/12 10.6% 6/12 10.6% 5/12 10.7% 4/12 10.7% 3/12 10.7% 2/1210.8% 1/12 11.0% 12/11 11.2% 11/11 11.4% 10/11 11.6% 09/11 11.8% 08/11 11.9% 07/11 12.0% 06/11 11.9% 05/11 11.9% 04/11 11.8% 03/11 11.9% 02/11 12.0% 01/11 12.1% 12/10 12.2% 11/10 12.3% 10/10 12.4% 9/10 12.4% 8/10 12.4% 7/10 12.4% 6/10 12.3% 5/10 12.3% 4/10 12.3% 3/10 12.4% 2/10 9 12.4% 1/10 12.3% 12/09 12.3% 11/09 12.2% 10/09 12.1% 9/09 12.0% 8/09 11.9% 7/09 11.7% 6/09 11.5% 5/09 11.2% 4/09 10.9% 3/09 10.6% 2/09 10.1% 1/09 9.7% US: 6/14 6.1% 5/14 6.3% 4/13 6.3% 3/14 6.7% 2/14 6.7% 1/14 6.6% 12/13 6.7% 11/13 7.0% 10/13 7.3% 09/13 7.2% 08/13 7.3% 07/13 7.4% 06/13 7.6% 05/13 7.6% 04/13 7.5% 03/13 7.6% 02/13 7.7% 01/13 7.9% 12/12 7.8% 11/12 7.8% 10/12 7.9% 9/12 7.8% 8/12 8.1% 7/12 8.2% 6/12 8.2% 5/12 8.2% 4/12 8.1% 3/12 8.2% 2/12 8.3% 1/12 8.3% 12/11 8.5% 11/11 8.6% 10/11 8.9% 09/11 9.0% 08/11 9.0% 07/11 9.0% 06/11 9.1% 05/11 9.0% 04/11 9.0% 03/11 8.9% 02/11 9.0% 01/11 9.1% 12/10 9.3% 11/10 9.8% 10/10 9.5% 9/10 9.5% 8/10 9.5% 7/10 9.5% 6/10 9.4% 5/10 9.6% 4/10 9.9% 3/10 9.9% 2/10 9.8% 1/10 9.8% 12/09 9.9% 11/09 9.90% 10/09 10.0% 9/09 9.8% 8/09 9.6% 7/09 9.5% 6/09 9.5% 5/09 9.4% 4/09 9.0% 3/09 8.7% 2/09 8.3% 1/09 7.8% Based on revised figures during EDD’s early-2009 rebenchmarking, CA job market has been on a par with US market over past several months. SOURCE: http://www.labormarketinfo.edd.ca.gov/?pageid=164 SERIES: Unemployment Rate SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

Unemployment rate Metro Area August 2017: California 5.4% Source: http://www.labormarketinfo.edd.ca.gov/LMID/Employment_by_Industry_Data.html SERIES: Civilian Unemployment Rate SOURCE: CA Employment Development Division

California 7 Year Jobs Recovery Recession Job Losses: 1.3 million Since Jan’10: +2.4 million http://www.labormarketinfo.edd.ca.gov/?pageid=130; Total nonfarm, seasonally adjusted; subtracted current month with previous month. SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division 14

California Job Growth Slowing US 1.4% April and May 2017: CA below US for the first time since 2012 SERIES: Total Nonfarm Employment SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

Employment By Region SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

Construction Jobs Lead Growth August 2017: CA +1.6%, +265,100 (YTY) Source: http://www.labormarketinfo.edd.ca.gov/LMID/Employment_by_Industry_Data.html SERIES: Total Nonfarm Employment By Industry SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

Commercial Real Estate Outlook

Key Takeaways Office Job growth continues to fuel demand, but appears to be slowing down Firms’ decision to increase workplace density will continue to affect vacancy and rent growth Retail Demand for retail space continues to be affected by the growth of e-commerce (amazon Prime: 46% US households) Fundamentals “ok” for now, but developers concern about the future

Key Takeaways Industrial Demand for industrial space remains strong as online shopping continues to grow More supply is needed and developers are optimistic Multifamily Sustained job growth continues to fuel housing demand in the rental market Rent growth leveling off as more supply come on the market California could be overbuilding high-end multifamily housing, and might have saturated that segment of the market.

REALTORS® CRE U.S. Outlook As the economic underpinnings advance at a moderate pace, commercial fundamentals are expected to maintain an upward trajectory. With employment in business and professional services still driving growth, demand for offices should remain solid. The industrial sector continues to ride the tail winds of trade and e-commerce. Even as store closures have dampened the outlook for the retail sector, demand for space is likely to continue, driven by consumer spending and changing shopping patterns. Multifamily properties benefit from a double-dose of boost—rising household formation and a shortage of residential housing— which will keep vacancies in check, even with rising new supply.

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

California Economic Outlook SERIES: CA Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Abundance of Uncertainty

In this fascinating book, New Yorker business columnist James Surowiecki explores a deceptively simple idea: Large groups of people are smarter than an elite few, no matter how brilliant—better at solving problems, fostering innovation, coming to wise decisions, even predicting the future.  With boundless erudition and in delightfully clear prose, Surowiecki ranges across fields as diverse as popular culture, psychology, ant biology, behavioral economics, artificial intelligence, military history, and politics to show how this simple idea offers important lessons for how we live our lives, select our leaders, run our companies, and think about our world.

Tax Reform

Tax reform passes, Sales Down & Prices Flat President Trump’s tax reform proposal includes changes that will increase the cost of homeownership. Do you expect its effect to be: Range since 1988: Low: 1.3 months in April 2004 High: 18.8 months in Apr 1991 Long-run average: 6.9 months SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R.

Impact of Tax Reform Two Provisions on the Individual Tax Reform Proposal: Doubling the Standard Deduction Repeal the state and local tax deduction Impact on the housing market: The repeal of the state and local tax deduction increases the cost of owning a home Incentives of using MID as a tax saving tool as a homeowner would be nullified Home values decline as these tax saving advantages vanish

Impact of Tax Reform on the Housing Market The proposed tax reform would lead to fewer sales transactions as the tax incentives of being a homeowner vanish for many who want to purchase a property. Home sales would decline 3.4 percent if the proposed tax reform were to be implemented The decline in home values would also lead to homeowners’ reluctance to put their property on the market and further tighten up the housing supply condition in California. An estimated 1.5 percent would be lost in the first year after the implementation of the tax reform.

Incentives for Homeownership Obliterated First-time buyers ($100K income, $437K home) - federal tax incentive to own vs. rent drops from $3,291 to zero in the first year. Typical buyers ($120K income, $533.5K home): $5,782 to $362 in the first year. Mid-range buyers ($150K income, $615K home): $8,099 to $1,334 in the first year. High-end buyers/SF/LA Metro Buyers ($200K income, $1.2M home): $16,615 to $5,725 in the first year.

Tax Expenditures Estimates: CA

Housing Market Trends

C.A.R. Membership & SF Sales Sales Peaks: 1978, 1988, 2004-05 Membership Peaks: 1980, 1990, 2006 Membership has been rising since 2012 Variable dues formula compliance program

Sales: Stalled with Strong Fundamentals August 2017 Sales: 427,630 Units, +2.7% YTD, +1.3% YTY Aug-16: 422,190 Aug-17: 427,630 SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are seasonally adjusted and annualized

Sales Began 2017 Strong … Growth Slowing Slower than expected economic growth rate is partly to blame for the lackluster home sales in California Supply shortage constraining the housing market SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® *Sales are seasonally adjusted and annualized

CA Median Price Continues to Rise August 2017: $565,330, +2.9% MTM, +7.2% YTY Aug -17: $565,330 Aug-16: $527,490 SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Southern California: Peak vs. Aug 2017 SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Central Valley: Peak v. Current Price SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Bay Area: Peak v. Current Price SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Supply

“At some point a supply problem becomes a demand problem” – Joel Singer

Inventory Remains on a Downward Trend August 2017: 2.9 Months; August 2016: 3.4 Months Active listing declining for last 26 months Range since 1988: Low: 1.3 months in April 2004 High: 18.8 months in Apr 1991 Long-run average: 6.9 months 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®

Supply Declined Most in the Lower End August 2017 SERIES: Active Listings of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Inventory Continued to Drop Across All Regions 3.0 2.8 1.9 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®

Inventory Index Highest in Millions

Turnover Rate Very Low: US & CA Housing Turnover Rate (Single-Family Homes only) Long-Time Homeowners are not moving as in the past because: Capital gains hit Low property taxes Low rate on current mortgage Demographic shift Where can I afford to go? CA turnover rate trend SERIES: Percent of existing single-family homes being sold SOURCE: Census Bureau, American Community Survey, Moody’s Analytics, C.A.R.

Affordability

Housing Affordability In CA: 29% 2017-Q2: % able to purchase median-priced home SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Housing Affordability Peaked Q1 2012 California, 1984-2017 Annual Quarterly C.A.R.’s traditional Housing Affordability Index (HAI) was replaced with the First-Time Buyer Housing Affordability Index (FTB-HAI) in 2006. Note this slide takes the average of the 3 months in each of the quarters. C.A.R. began producing its Housing Affordability Index (HAI) in 1984. At that time, fixed-rate mortgages were the prevailing form of financing a home purchase, while the calculations used to produce the HAI reflected a 20 percent down payment. The methodology also assumed a monthly payment for principal, interest, taxes and insurance that was no more than 30 percent of a household’s income. In the more than two decades since the CALIFORNIA ASSOCIATION OF REALTORS® first conceived the HAI, the mortgage finance landscape has changed dramatically. The range of mortgage products available to buyers as well as underwriting criteria has changed. C.A.R. developed the new index measuring affordability for first-time home buyers to better reflect the realities of today’s real estate market. SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

California’s Single-Family Housing Stock SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS) Downloaded from the National Bureau of Economic Research (NBER)

More Single Family Units Now Rentals Potentially between 400,000 and 700,000 SF Rentals that Used to be Owner-Occupied SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS) Downloaded from the National Bureau of Economic Research (NBER)

Most Underbuilt Counties in California SOURCE: California Employment Development Department, Construction Industry Research Board

Q: “How‘s the Market? A: It’s Complicated 2017 Annual Housing Market Survey

Methodology Started in 1981 – 36 years ago On-line survey In the field July and August 2017 The survey was sent via email to a random sample of 25,804 REALTORS® throughout California. The sample represented the geographical distribution of C.A.R. membership across the state. Asks about closed transactions in Q2 2017 Questionnaire with both multiple choice and open-ended questions. There were 1,303 valid survey responses, equivalent to a response rate of 5.0 percent. The margin of error for this survey was +/- 2.6 percent at a 95 percent confidence level.

Who is Buying in California? Median Age: 45 31% Age 20 – 37 40% Age 38 – 52 24% Age 53 – 71 4% 72 and older SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Who is Selling in California? Median Age: 57 11% Age 20 – 37 27% Age 38 – 52 48% Age 53 – 71 14% 72 and older SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Tight Supply Pushed up Home Prices 1/3 Sold Above Asking Long Run Average = 20% SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Market Competitiveness Up in 2017 6 out of 10 had Multiple Offers SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

…Even Within So CA Inland Empire LA/OC/SD Southern California   Inland Empire LA/OC/SD Southern California California % with Multiple Offer 54.8% 62.7% 58.8% 60.4% % of Sales Above Asking Price 24.3% 33.4% 28.5% 32.9% Days on Market 18.5 14 13 SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Competitiveness by Price Range: LA/OC/SD   $0 -$300k $301k - $500k $501k - $750k $751k - $1000k $1001 and up All Prices % with Multiple Offer 58.3% 67.2% 71.6% 73.5% 48.2% 62.7% % of Sales Above Asking Price 46.2% 32.3% 33.3% 40.0% 22.6% 33.4% Days on Market 8 10 13.5 8.5 25 14 SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

… By Region SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Most Competitive for First-Time Buyers …   First-time Buyers Repeat Buyers All Buyers % with Multiple Offer 68.8% 55.5% 60.4% % of Sales Above Asking Price 41% 28.8% 32.9% Days on Market 10 14 13 SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

…Partly Because Many of Them Live in the Supply Constraint Bay Area SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Share of 1sTime Buyers Up but Below LR Average National Share is 50% SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

International Buyers 3% of Transactions The share of international buyers dropped to the lowest level in 9 years 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: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

International Buyers: Metro Areas Preferred SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Cash Outflow Restrictions Had a Negative Effect on the Share of Chinese Buyers 2016 2017 China (53%) China (31%) Mexico (10%) Mexico (6%) India (10%) India (9%) Q. What country did the (international) buyer come from? SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Share of Cash Buyers Steady One-fifth of buyers paid with all cash The share of all cash buyers is virtually unchanged in the last 4 years SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Investor Buyers Inched Up in 2017; More Flippers in the Market Vs. Flip Rent 2014: 30% 2015: 26% 2016: 20% 2017: 24% 2014: 70% 2015: 74% 2016: 80% 2017: 76% SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 69

Net Cash Gain to Sellers Highest since 2006 Q. What was the net cash gain or net loss to the seller as a result of this sale? SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Sellers with Net Cash Loss Dropped to the Lowest Level in the last 11 years Long Run Average = 11.2% Q. What was the net cash gain or net loss to the seller as a result of this sale? SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Sellers Are Not Moving as Often as Before Long-Time Homeowners are not moving as in the past because: Capital gains hit Low property taxes Low rate on current mortgage Where can I afford to go? Remodel and stay SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Sellers Who Planned to Buy Another Home Reached the Highest Level since 2006 SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Sellers Moving out of California: Highest since 2007 Location of Seller’s New Home   2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Within the same county 37% 45% 47% 42% 49% 46% 44% 40% 38% In another county in California 24% 17% 21% 19% 18% 20% In another state 29% 27% 22% 25% 28% Out of US 1% 2% 0% Don't Know/Not sure 9% 10% 12% 16% 15% 13% 14% Total 100% SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

FHA Loans Lowest since 2007 Q. Please indicate the type of mortgage. SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

How Client Found Their Agent Q. How did your client find and select you to represent them? SERIES: 2017 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Regional Housing Markets

$390,000 Northern California -0.2% YTD 6.6% YTY 9.9% YTY 3.6 20.0 $213 Sales Median Price $390,000 9.9% YTY -0.2% YTD 6.6% YTY UII MTM Price Sales 3.6 20.0 $213 98.2% Months Days Per Sq Ft To List Ratio

2017 Northern California YTD Sales: Mixed Bag

2017 Northern California Median Prices YTY

$613,500 Northern Wine -2.9% YTD 3.9% YTY 7.8% YTY 3.5 40.0 $359 Sales Median Price $613,500 7.8% YTY -2.9% YTD 3.9% YTY UII MTM Price Sales 3.5 40.0 $359 100.0% Months Days Per Sq Ft To List Ratio

2017 Northern Wine YTD Sales

2017 Northern Wine Median Prices YTY

$856,200 Bay Area 2.6% YTD 6.5% YTY 10.2% YTY 1.9 15.0 $489 101.9% Sales Median Price $856,200 10.2% YTY 2.6% YTD 6.5% YTY UII MTM Price Sales 1.9 15.0 $489 101.9% Months Days Per Sq Ft To List Ratio

2017 Bay Area YTD Sales

2017 Bay Area Median Prices YTY

$315,000 Central Valley 1.5% YTD 4.6% YTY 8.6% YTY 2.8 15.0 $185 99.2% Sales Median Price $315,000 8.6% YTY 1.5% YTD 4.6% YTY UII MTM Price Sales 2.8 15.0 $185 99.2% Months Days Per Sq Ft To List Ratio

2017 Central Valley YTD Sales

2017 Central Valley Median Prices YTY

$635,000 Central Coast 1.3% YTD 7.1% YTY -2.1% YTY 4.3 24.0 $376 97.9% Sales Median Price $635,000 -2.1% YTY 1.3% YTD 7.1% YTY UII MTM Price Sales 4.3 24.0 $376 97.9% Months Days Per Sq Ft To List Ratio

2017 Central Coast YTD Sales

2017 Central Coast Median Prices YTY

$528,000 Southern California 3.4% YTD 4.8% YTY 6.7% YTY 3.0 20.0 $301 Sales Median Price $528,000 6.7% YTY 3.4% YTD 4.8% YTY UII MTM Price Sales 3.0 20.0 $301 98.9% Months Days Per Sq Ft To List Ratio

2017 Southern Cal YTD Sales

2017 Southern Cal Median Prices YTY

2017 Forecast

How’s the market? A tad hot. How would you describe the real estate market in your area today? SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R.

Prices Up, Sales Flat, Rates Up, Affordability What do you think will happen for the CA market in 2018? SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R.

Challenges: Affordability and Supply What will be the biggest challenge for the housing market in 2018? SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R.

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

Sales and Price up in 2017 and in 2018 SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

CA: Dollar Volume Up 8.6% in 2017, Up 5.2% in 2018 $ in Billion % Change SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

2017 Challenges & Opportunities

SMD’s: Slow Moving Disasters CA Housing Affordability Crisis CA Pension Funds Boomers: Not prepared for Retirement Millennials: Student Loan Debt Skewing of the Income Distribution Institutional Investor ownership of SFH Tax Reform

Lack of Affordability Biggest Challenge Q2 - What will be the biggest challenge for the housing market in 2017?

2018 Opportunities Up your game – Do YOU. What is your WHY? Selling houses or changing lives? Revisit: What business are YOU in? Find your niche Reconnect: Who are YOUR clients? Educate first time-home buyers – Focus on Financial Literacy Become well versed on down payment assistance programs, debt management and improving credit Reach out to Boomers Think globally – We may be affordable for some

One more thing…

All Creatures Great and Small Do you have a pet / Do you consider your pet a part of your family SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R.

4 out of 10 – Pet Drives Moving Decisions If you were to move, would your pets' needs be paramount in your purchase decision. SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R.

Speaking of independence… What about a different kind of animal... Do you live with a Millennial? Do you pay for their cell phone plan? SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R.

The 2% - Have you done your part? SERIES: 2017 EXPO FUN SURVEY SOURCE: C.A.R.

Thank You & Congratulations Joanie and Coy Trisha and Michael Miriam and Anthony Andaya SDAR – former board President – proposed at his inaugration Joanie & Coy Trisha & Michael Miriam & Anthony

The Economy of Love Give Freely Receive Graciously Thank You