1. 2016 ECONOMIC & MARKET UPDATE March 23, 2016 Oakland/Berkeley AOR Doubletree Hilton, Berkeley Leslie Appleton-Young, C.A.R. Chief Economist

2. HOW DID I DO? LAST OCTOBER SAID …

3. 2015 FORECAST REPORT CARD Forecast Date: October 2015 vs. October 2014 SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® SFH Resales (000s) % Change Median Price ($000s) % Change 30-Yr FRM Housing Affordability Index U.S. Gross Domestic Product 2014 Actual 383.3 -7.6% $447.0 9.8% 4.2% 30% 2.4% 2015 Forecast 402.5 5.8% $478.7 5.2% 4.5% 27% 3.0% 2015 Projected 407.5 6.3% $476.3 6.5% 3.9% 31% 2.4%

4. ECONOMIC OUTLOOK

5. U.S. Recession Risk Higher – Stock sell off in January – China grew 6.9% in 2015 – lowest in 25 years – Low oil prices both help – and hurt – Strong dollar hurting exports – Bank exposure to emerging markets is significant LATEST ECONOMIC NEWS

6. US GDP: AT RISK FROM WEAK GLOBAL GROWTH? 2014: 2.4% 2015: 2.4%; 2015 Q4: 1.0% 2016(F): 2.5% ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $ ANNUALLYQUARTERLY 2009 Largest Annual Drop since 1938 (-3.4%) SERIES: GDP SOURCE: US Dept. of Commerce, Bureau of Economic Analysis

7. OIL PRICES – HOW LOW CAN THEY GO? Dollars per Barrel SERIES: Crude Oil Spot Price SOURCE: U.S. Energy Information Administration

8. STOCKS HAVE RECOVERED FROM ROUGH START TO 2016 MONTHLY AVERAGE DJIA

9. U.S. DOLLAR: HIGHER & HIGHER Average Exchange Value SERIES: Weighted Average Exchange Value of U.S. Dollar SOURCE: U.S. Board of Governors of Federal Reserve System

10. “You only find out who is swimming naked when the tide goes out.” Warren Buffet REMEMBER:

11. EMPLOYMENT NUMBERS ARE SOLID Recession Job Losses: 8.8 million --- Since Jan’10: +14.0 million MONTH TO MONTH CHANGE SERIES: Employment Growth SOURCE: US Bureau of Labor Statistics

12. U.S. UNEMPLOYMENT RATE AT 8-YEAR LOW February 2016 4.9% 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

13. UNEMPLOYMENT RATES (U6 VS. U3) February 2016 = U3: 4.9%, U6: 9.7% SERIES: Unemployment Rates SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

14. JOB TRENDS BY CALIFORNIA METRO AREA SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division ANNUAL PERCENT CHANGE December 2015: CA +2.9%, +459,400

15. NONFARM EMPLOYMENT BY REGION SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

16. CONSUMER CONFIDENCE WANING? February 2016: 92.2 -- lowest since July 2015 INDEX, 100=1985 SERIES: Consumer Confidence SOURCE: The Conference Board

17. HOUSEHOLD FORMATION REBOUNDING

18. FED PARES PLANS FOR RATE INCREASES SERIES: 30Yr FRM, 1Yr ARM, Federal Funds SOURCE: Federal Home Loan Mortgage Corporation

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

20. CALIFORNIA ECONOMIC OUTLOOK SERIES: CA Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

21. CALIFORNIA HOUSING MARKET OUTLOOK

22. MEMBERSHIP FOLLOWS SALES WITH 1-2 YEAR LAG

23. Fundamentals are strong – Job & Income growth are positive – Mortgage rates are low – Lending standards more reasonable – Household formation is rebounding And yet… – Supply well below long-run average – Boomers are not moving – Share of first-time buyers LOW – Affordability-constrained Millennials looking outside CA 2016 - WHERE ARE WE HEADED?

24. SALES OF EXISTING DETACHED HOMES California, Feb. 2016 Sales: 393,340 Units, +7.6% YTD, +6.4% YTY *Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Feb-16: 393,340 Feb-15: 369,620

25. CA HOUSING MARKET RECOVERY IN ONE CHART SERIES: Distressed Sales, Not Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 93.7% 3.3% 2.7%

26. MEDIAN PRICE OF EXISTING DETACHED HOMES California, Feb. 2016: $446,460, -4.7% MTM, +3.8% YTY SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Feb-16: $446,460 Feb-15: $429,930

27. PRICE PER SQUARE FOOT Feb. 2016: $222, Down 2.1% MTM, Up 1.4% YTY PRICE PER SQ. FT. SERIES: Median Price Per Square Feet SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Feb-16: $222 Feb-15: $219

28. UNDERWATER MORTGAGES RISING PRICES HAVE REVERSED EQUITY LOSSES SERIES: Underwater Mortgages SOURCE: CoreLogic

29. INVENTORY CONTINUED TO DECLINE FROM LAST YEAR Feb. 2016: 4.6 Months; Feb. 2015: 4.9 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®

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

31. – Affordability challenge for repeat buyers Low rate on current mortgage Low property taxes Capital gains hit is onerous Why sell when there is nowhere to go I can afford? Could not qualify for a mortgage today – Demographics: Trade-up buyer pool is smaller – Foreclosure pipeline is dry – Investors renting instead of flipping – New construction recovering but LOW – Measurement error? Off- MLS listings not counted WHERE IS THE INVENTORY?

32. FEWER HOUSING UNITS BEING TURNED OVER SINCE THE GREAT RECESSION SERIES: Percent of existing single-family homes being sold SOURCE: Census Bureau, American Community Survey, Moody’s Analytics, C.A.R. Housing Turnover Rate (Single-Family Homes only)

33. YEARS OWNED BEFORE SALE HIGHEST IN 30 YEARS Q: How long had the seller lived in their home? SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

34. 1970-2015 CALIFORNIA PRICES MORE VOLATILE AND MUCH HIGHER THAN THE NATION SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 2015 Dollar Value

35. CA HOUSING AFFORDABILITY BY COUNTY SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 2015-Q4 % able to purchase median priced home

36. AFFORDABLE INVENTORY AVAILABLE TO MEDIAN-INCOME HOUSEHOLDS Affordable inventory available to median-income households SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 2015 Q2

37. HOW WAGES MEASURED AGAINST INCOME REQUIRED TO BUY A HOME SOURCE: Bureau of Labor Statistics, C.A.R. Annual Mean Wage California

38. WHERE ARE THE FIRST-TIME BUYERS? SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

39. ALAMEDA COUNTY : MIGRATION PATTERNS MIRROR HOUSING COSTS Census Bureau, 2014 American Community Survey

40. REASONS FOR CHANGING COUNTY ALL BUYERS (2014 VS. 2015) SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

41. 2015p: 98,500 (42,190 sf, 56,310 mf) 2016f: 124,600 total units “MISSING” 100,000 NEW UNITS ANNUALLY SERIES: New Housing Permits SOURCE: Construction Industry Research Board Household Growth: 165,000/yr

42. REGIONAL MARKETS

43. ALAMEDA COUNTY

44. SALES OF SINGLE FAMILY HOMES Alameda County, February 2016: 458 Units +3.0% 2015 YTD, +2.2% 2016 YTD, -4.4% YTY SOURCE: Clarus Market Metrics

45. MEDIAN PRICE OF SINGLE FAMILY HOMES Alameda County, February 2016: $715,000 Up 2.9% MTM, Up 13.5% YTY SOURCE: Clarus Market Metrics

46. FOR SALE PROPERTIES Alameda County, February 2016: 1,518 Units -4.8% 2015 YTD, -18.5% 2016 YTD, -13.9% YTY SOURCE: Clarus Market Metrics 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.

47. OAKLAND

48. SALES OF SINGLE FAMILY HOMES Oakland, February 2016: 120 Units -1.1% 2015 YTD, +7.6% 2016 YTD, +7.1% YTY SOURCE: Clarus Market Metrics

49. MEDIAN PRICE OF SINGLE FAMILY HOMES Oakland, February 2016: $523,500 Down 4.8% MTM, Up 10.6% YTY SOURCE: Clarus Market Metrics

50. FOR SALE PROPERTIES Oakland, February 2016: 456 Units -9.5% 2015 YTD, -15.5% 2016 YTD, -12.5% 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

51. BERKELEY

52. SALES OF SINGLE FAMILY HOMES Berkeley, February 2016: 18 Units -7.5% 2015 YTD, +33.3% 2016 YTD, 0% YTY SOURCE: Clarus Market Metrics

53. MEDIAN PRICE OF SINGLE FAMILY HOMES Berkeley, February 2016: $912,500 Up 0.7% MTM, Down 0.3% YTY SOURCE: Clarus Market Metrics

54. FOR SALE PROPERTIES Berkeley, February 2016: 67 Units -4.5% 2015 YTD, -19.6% 2016 YTD, -16.3% YTY SOURCE: Clarus Market Metrics 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.

55. CITY OF ALAMEDA

56. SALES OF SINGLE FAMILY HOMES City of Alameda, February 2016: 11 Units +6.4% 2015 YTD, +34.6% 2016 YTD, -8.3% YTY SOURCE: Clarus Market Metrics

57. MEDIAN PRICE OF SINGLE FAMILY HOMES City of Alameda, February 2016: $1,010,000 Up 11.6% MTM, Up 22.4% YTY SOURCE: Clarus Market Metrics

58. FOR SALE PROPERTIES City of Alameda, February 2016: 41 Units +8.0% 2015 YTD, -26.7% 2016 YTD, -8.9% YTY SOURCE: Clarus Market Metrics 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.

59. The Boomers and their next move

60. The Boomers and their Next Move

61. BOOMERS – BORN BETWEEN 1946-1964 What is your age? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Average: 59

62. MAJORITY ARE MARRIED What is your marital status? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

63. 3/4 BABY BOOMERS ARE HOME OWNERS What is your current living situation? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

64. MOST HAVE EQUITY IN THEIR HOME Do you have equity in your home? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

65. MAJORITY DO NOT PLAN TO SELL HOME WHEN THEY RETIRE Do you plan to sell your current home when you retire? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

66. MAJORITY WORRY ABOUT CHILDRENS’ ABILITY TO BECOME HOME OWNERS 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®

67. TIME TO TALK: 2/5 PLAN TO HELP CHILDREN WITH DOWN PAYMENT 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®

68. WHAT KEEPS BOOMERS UP AT NIGHT? Q: What keeps you up at night? SERIES: 2014 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

69. MILLENNIALS: TOMORROW’S HOME OWNERS?

70. MASLOW’S HIERARCHY OF NEEDS: REVISED

71. OVER 1/3 LIVE WITH THEIR PARENTS Q: What is your current living situation? SERIES: 2014 Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

72. 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

73. MOST MILLENNIALS UNCERTAIN/DOUBTFUL THAT THEY COULD OBTAIN A MORTGAGE NOW?AMILLENNIAL ETHNICITY SOURCE: C.A.R. 2014 Millennial Survey Q: Could you obtain a mortgage if you applied now ?

74. 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

75. 2016 FORECAST

76. CALIFORNIA HOUSING MARKET OUTLOOK SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

77. 1.Both CA home sales and prices will be up mid - single digits in 2016 2.Fundamental demand drivers (jobs; rates; household formation) are strong 3.Housing affordability an insurmountable hurdle for many Millennials 4.Trading up/down is too expensive for Boomers 5.CA will see accelerating out-migration of Millennials in search of housing they can afford TAKE 5: 2016 MARKET

78. 2015 SURVEY OF CALIFORNIA BUYERS

79. 79 BEING RESPONSIVE IS IMPORTANT TO BUYERS IN SELECTING AN AGENT Q. What was the single most important reason for selecting the agent that you used in your recent home purchase?.

80. 80 TOP 5 REASONS FOR SATISFACTION WITH AGENT Q. Why do you have that level of satisfaction with your agent?

81. 81 REASONS FOR DISSATISFACTION WITH AGENT Q. Why do you have that level of satisfaction with your agent?

82. 82 MOST BUYERS WOULD RECOMMEND AGENT TO OTHERS Q. Would you recommend your agent to others?

83. 83 ADVICE TO AGENTS FROM BUYERS Q. What advice would you give to real estate agents to improve the process or the level of service?

84. 2015 SURVEY OF CALIFORNIA SELLERS

85. 85 REASON SELLER SELECTED AGENT Q: What was the single most important reason for selecting the agent you used in your recent home sale?

86. 86 SELLER ADVICE TO AGENTS Q: What advice would you give to real estate agents to improve the process or level of service?

87. BUYERS & SELLERS CREATING & MAINTAINING RELATIONSHIPS

88. THERE MUST BE TRUST

89. WHO ARE YOU? WHAT IS YOUR BRAND? Honeymaid: Love/This is Wholesome https://www.youtube.com/watch?v=cBC-pRFt9OM P&G: Thank You Mom/Pick them back up https://www.youtube.com/watch?v=6Ult4t-1NoQ Dela: Say something wonderful today https://www.youtube.com/watch?v=BHJvuwZdlZ4

90. EXPO 2016 – SAVE THE DATE - LONG BEACH REGISTRATION OPENS MAY 18

91. CARResearchGroup CARResearchInfo On.car.org/CARResearch Housingmatters.car.org STAY CONNECTED WITH RESEARCH

92. THANK YOU! www.car.org/marketdata lesliea@car.org This presentation can be found on www.car.org/marketdata Speeches & Presentations