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

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US and California Economic Conditions

QUARTERLY PERCENT CHANGE, ANNUAL RATE Gross Domestic Product 2009 Q3: 3.5% (advance estimate) SOURCE: US Dept of Commerce, Bureau of Economic Analysis

QUARTERLY PERCENT CHANGE Personal Consumption 2009 Q3: 3.4% SOURCE: US Dept of Commerce, Bureau of Economic Analysis

INDEX, 100=1985 Consumer Confidence Index: Better…Sort Of October 2009: 47.7 November 2009: 49.5

Unemployment Rate California (10/ %) vs. United States (11/ %) SOURCE: CA Employment Development Division

Unemployment Rate Fresno County, October 2009: 15.8% SOURCE: CA Employment Development Division

Consumer Price Index October 2009: All Items -0.2% YTY; Core 1.5% YTY PERCENT CHANGE FROM A YEAR AGO, 100=

Historic Fiscal Stimulus Fiscal Policy: “Spend Now – Worry Later” To date: $3 trillion in government spending MBS purchases ($693 billion) TARP ($372 billion) Obama stimulus package ($304 billion) Cash for Clunkers First-time Buyer Tax Credit Extension of Unemployment Benefits Tax Cuts Result: Federal budget deficit will reach 1.6 trillion this year

U.S. Economy SOURCE: California Association of REALTORS® Forecast Date: October 2009

California Economy SOURCE: California Association of REALTORS® Forecast Date: October 2009

New Housing Permits California, : Down 48.8% YTD SOURCE: Construction Industry Research Board

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

Mortgage Financing – Still Challenging

SOURCE: Federal Home Loan Mortgage Corporation Mortgage Rates and Fed Funds Rate

SOURCE: Federal Home Loan Mortgage Corporation – 30-yr FRM Federal Reserve Board – 10-Year T-Bond 30-Year FRM vs. 10-Year T-Bond Above-Average Risk Premiums Associated With Mortgage Loans Average. Risk Premium: 1.6% Lower spread in FED purchases from Fannie and Freddie

FHA Loans in CA # of Total Loans in CA & US CA Tops All States with a 10% Market Share of all FHA Lending in US (Source: Inside FHA Lending) Source: HUD CA EndorsementsUS Endorsements

CA Mortgage Foreclosure & Delinquency Rates California: Q3-2009, NSA SOURCE: Mortgage Bankers Association Foreclosure Rate: Long Run Average: 1.0% Delinquencies: Long Run Average: 4.1%

NODs & Trustees Deeds Filed in California Source: DataQuick Information Systems No. of Defaults or TDs

California Real Estate Market

Sales Hit Bottom in 2007, Up in 2008 & 2009 UNITS/MEDIAN PRICE $ SOURCE: California Association of REALTORS® California Sales of Existing Homes and Median Price -61% -25% -44%

% Change$ in Billion Dollar Volume of Sales Peaked in ’05 Down 55% Thru ‘09 SOURCE: California Association of REALTORS® -55%

Sales of Existing Detached Homes and Pacific West Consumer Confidence California, October 2009 Sales: 562,400 Units, Up 28.9% YTD, Up 1.0% YTY INDEXUNITS SOURCE: California Association of REALTORS®; The Conference Board *Sales are seasonally adjusted and annualized

Median Price of Existing Detached Homes California, October 2009: $297,500, Down 1.0% YTY SOURCE: California Association of REALTORS®

Median Price Annual Comparison California, 2008: $346,410, Down 38.2% YTY SOURCE: California Association of REALTORS® MONTHLY ANNUAL

Sales By Price Range October 2004 – present SOURCE: Mortgage Bankers Association, C.A.R. Credit Freeze: 8/2007

Peak vs. Current Price - October 2009 SOURCE: California Association of REALTORS®

Unsold Inventory Index California, October 2009: 4.0 Months SOURCE: California Association of REALTORS® MONTHS

Unsold Inventory By Price Range California - Existing Homes October 2009 vs. October 2008 SOURCE: California Association of REALTORS®

Distressed Sales to Total Sales Ratio SOURCE: California Association of REALTORS®

Market Summary Sales - strong but off early-09 pace Median Price – bottom at $245K in Feb 09 September median at $296K Up 21% from Feb 09, but 50% below peak Have we hit bottom? Inventory – Well below 7 month average at 4.0 months in October Share of distressed properties sold, slightly down from March.

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

PITI/Month Entry-Level Monthly House Payment including Interest, Taxes, & Insurance SOURCE: California Association of REALTORS® Peak 2007-Q2: $3,190/mo Latest 2009-Q3: $1,450/mo

First-time Buyer Housing Affordability Index California Vs. U.S % OF HOUSEHOLDS THAT CAN BUY SOURCE: California Association of REALTORS®

Proportion of First-Time Homebuyers California Q. Was the buyer a first-time buyer?

Signs of Distress in Sellers Are Reacting to Financial Stress The Role of Market Conditions In the Decision to Sell SOURCE: C.A.R Survey of Home Sellers

While Buyers See Opportunities … The Role Of Market Conditions In The Decision To Buy SOURCE: C.A.R Survey of Home Buyers

FREE program designed to provide peace of mind to first-time buyers who are hesitant to enter the housing market due to concerns about potential job loss. Qualifying buyers can receive up to $1,500 a month for up to six months in the event of job loss, a qualified co-buyer can also receive a $750 benefit for up to six months to help pay the mortgage. To qualify for the Mortgage Protetion Program, applicants must: Be a first-time home buyer – someone who has not owned property in the last three years (includes co-buyer) Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009 (purchase agreement cannot be dated before April 2, 2009) Use a California REALTOR® in the transaction Purchase the property in California Be a W-2 employee (cannot be self-employed) Visit for application and additional program details

Fresno County

SOURCE: California Association of REALTORS®; The Conference Board INDEXUNITS Sales of Existing Detached Homes and Pacific West Consumer Confidence Fresno County, October 2009: 871 Units, Up 48.4% YTD, Down 2.4% YTY

Median Price of Existing Detached Homes Fresno County, October 2009: $152,840, Down 12.4% YTY SOURCE: California Association of REALTORS®

Median Price Annual Comparison Fresno County, 2008: $195,790, Down 29.6% YTY SOURCE: California Association of REALTORS® ANNUAL MONTHLY

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

First-time Buyer Housing Affordability Index Fresno County, 3 rd Quarter 2009: 76% SOURCE: California Association of REALTORS® % OF HOUSEHOLDS THAT CAN BUY

Housing Affordability Index Fresno, 3 rd Quarter 2009: 63% SOURCE: California Association of REALTORS® QTRLYMonthly

City of Fresno

Sales of Single-Family Detached Homes SOURCE: Clarus Market Metrics City of Fresno, Nov. 2009: 423, Down 19.9% MTM, Up 6.3% YTY

Median Price of Single-Family Detached Homes SOURCE: Clarus Market Metrics City of Fresno, Nov. 2009: $142,000, Down 4.9% MTM, Down 2.1% YTY

Months Supply of Inventory City of Fresno, Nov-09: 2.6 months SOURCE: Clarus Market Metrics

2010 Forecast

California Housing Market Outlook Source: CALIFORNIA ASSOCIATION OF REALTORS® Forecast Date: October 2009

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