1. 2011 Housing Market Update Malibu AOR June 7, 2011.
Leslie Appleton-Young Chief Economist

2. Overview US and California Economies California Housing Market
Local/Regional Housing Market
Survey Highlights
California Forecast

3. US and California Economic Conditions

4. Gross Domestic Product
2010: +2.9%; 2011 Q1: +1.8% Q2p: 2%
ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $
ANNUAL
QTRLY
Notes:
E – expected, F – forecast, P- preliminary
1929 though first quarter 2009 annual GDP figures were revised in July 2009 using 2005 benchmark.

5. Components of GDP Percent Change
1929 though first quarter 2009 annual GDP figures were revised in July 2009 using 2005 benchmark.
PUBLIC SPENDING HAS GIVEN WAY TO PRIVATE SPENDING
SOURCE: US Dept of Commerce,
Bureau of Economic Analysis 5

6. Consumer Confidence Index
March 2011: 63.4
INDEX, 100=1985 6

7. U.S. Non-farm Job Growth Month-to-Month Changes 7
SOURCE: US Dept of Labor, Bureau of Labor Statistics 7 7

8. California Nonfarm Job Growth
Month-to-Month Changes
SOURCE: CA Employment Development Division 8 8

9. Southern California Regions
Nonfarm Employment
Southern California Regions
For time series data for nonfarm employment in each individual county, see the respective “County Economic Profiles.”
SOURCE:
SOURCE: California Economic Development Dept.

10. Unemployment Rate CA v. US
Disappointing May Jobs Report
54K new jobs vs 165K in expectations.
CA: 03/ % 02/ % 01/ % 12/ % 11/ % 10/ % CA: 9/ % 8/ % 7/ % 6/ % 5/ % 4/ % 2/ % / % / % / % / %
9/ / % 7/ % 6/ % 5/ % 4/ % 3/ % 2/ % 1/ % 12/08 8.7%
US:03/11 8.8% 02/11 8.9% 01/11 9.0% 12/10 9.4% 11/10 9.8% 10/10 9.6% 9/10 9.6% 8/10 9.6% 7/ % 6/ % 5/ % 4/ % 3/ % / % /10 9.7% / % / % 11/ %
10/ % 9/09 9.8% 8/09 9.7% 7/09 9.4% 6/09 9.5% 5/09 9.4% 4/09 8.9% 3/09 8.5% 2/09 8.1% 1/09 7.6% 12/08 7.2%
California not seasonally adjusted: 12.2% February 2011.
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:
SOURCE: CA Employment Development Division

11. March 2011: All Items +2.7% YTY; Core +1.2% YTY
Consumer Price Index
March 2011: All Items +2.7% YTY; Core +1.2% YTY
PERCENT CHANGE FROM A YEAR AGO, 100=
“Core Inflation” is All Items Less Food and Energy
The CPI data is seasonally adjusted.
SOURCE:
Go to
First choose "All Items." "Monthly" and "Yr/Yr%" series.
Then find "All items less food and energy" towards the bottom of the CPI list. Do the same as above. 11

12. Oil Prices A Near Term Concern
West Texas Intermediate: Mar-11: $102.90• Mar-10: $81.20
Dollars per Barrel
CPI ( =100, NSA)
SOURCE:
Oil Price:
For CPI, go here:

13. Mortgage Rates Header Higher in 2011
SOURCE: Federal Home Loan Mortgage Corporation

14. Existing Single-Family Home Sales
Mar Sales: +6.5% YTY, Median Price: +3.5% YTY
When the National Association of REALTORS® released March existing home sales (EHS) data April 25, it revised national and regional median existing home prices back to The fixed reporting sample of representative multiple listing services was updated to reflect geographic changes over time so that the monthly samples for regional price measurements were as accurate as possible. Additionally, the regional weights were updated and aligned to the 2000 census. The changes in price patterns are consistent with previously reported data.
SOURCE:
Go to the NAR website
Scroll down to the heading Single-Family Existing-Home Sales and Prices
Click on Single-Family Only Spreadsheet for Database Work (MS Excel: 20K) 14

15. Positive Signals… Job creation Strong stock market recovery
Real Estate net worth stabilizing
Rising rents and more qualified renters
Strong demand for distressed properties
International demand is strong
Smart money chasing real estate (all cash sales)

16. Federal Issues High-cost Loan Limit - expires 10/1/11
Future of Fannie and Freddie in flux
MID and Tax Reform on the horizon
FHA targeted for market share drop
QRM (Qualified Residential Mortgage) 20% Down – 30 year mortgage???
Short Sales – Standardization,
Transparency and Communication 16

17. % Over 90-Days Delinquent (All Mortgages FRMs +ARMs)
SF Mortgages Originated between 2001 – 2008
SOURCE: Federal Housing Finance Agency (using data from Fannie Mae, Freddie Mac, and CoreLogic, Inc.), Mortgage Bankers Association

18. Now You See Fannie/Freddie Sales…
California, 2010 Sales: 494,900 Units,
2010 Conforming Share of CA Mtgs: 92%*
UNITS
SOURCE: California Association of REALTORS® *Based on C.A.R. estimates, includes All Conforming: Fannie/Freddie/FHA/VA 18

19. …Now You Don’t!
Without Fannie & Freddie Worst Case Scenario: No Private Response
2010 Conforming Share of CA Mtgs: 92%*
UNITS
SOURCE: California Association of REALTORS® *Based on National Share of Fannie/Freddie Share from Inside Mortgage Finance Estimates 19

20. QRM – Qualified Residential Mortgage
Strict Proposed Requirements (March 2011)
20% Down
28/36 Debt to Income
25% equity stake to refi
30% equity for cash-out refi
Squeaky clean credit
Exempt
Fannie and Freddie (under conservatorship)
FHA and VA
Estimates of rate differential: .75% to 3%
Comment period ends June 10
Bullets From Matt Roberts

21. On Average over last 12 years, Less than 1 in 5 Fannie/Freddie Loans Would Have Met QRM
SOURCE: Federal Housing Finance Agency
SOURCE: Mortgage Bankers Association, C.A.R.

22. Mortgage Originations: 1990-2010
Refinance vs. Purchase
ORIGINATION (BIL $)
30-YR FIXED RATE MORTGAGE
The Quarterly FRM is derived from FHLMC 3 month average.
Source: Mortgage Bankers Association of America

23. What Happened?

24. Trustee Sales in Anaheim Scheduled for 10/7/10

25. 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.

26. 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.

27. 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.

28. 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.

29. attributable to home equity borrowing
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 (forthcoming):
39% of new defaults from 2006 to 2008
attributable to home equity borrowing

30. Understanding the
Financial Crisis

31. Definition of Credit Default Swap
Financial instrument for swapping the risk of debt default. Credit default swaps may be used for emerging market bonds, mortgage backed securities, corporate bonds and local government bond The buyer of a credit default swap pays a premium for effectively insuring against a debt default. Buyer receives a lump sum payment if the debt instrument is defaulted. The seller of a credit default swap receives monthly payments from the buyer. If the debt instrument defaults they have to pay the agreed amount to the buyer of the credit default swap.

32. Concerns About CDS’s
The size of the credit default market dwarfs that of the stock market and the bond market they represent. Therefore, this shows that credit default swaps are being used for speculation and not insuring against actual bonds. Credit Default Swaps are unregulated and because they get traded so frequently there is uncertainty of who owns them and whether the holders can actually pay in the event of a negative credit event.

33. Credit Default Swaps and Credit Crisis
Did credit default swaps exacerbated the financial crisis of 2008? Yes: One example, when Lehman Brother went bankrupt, the swaps that WaMu bought to hedge their exposure after purchasing MBS’s were nullified. No: Credit default is only an instrument reflecting changes in risk and are not the cause of the underlying liquidity problems

34. U.S. Economic Outlook Forecast Date: May 2011
SOURCE: California Association of REALTORS®

35. California Economic Outlook
Forecast Date: May 2011
SOURCE: California Association of REALTORS®

36. California Housing Market

37. California’s Housing Cycles and Membership 1970-2010
THOUSANDS

38. Hitting Bottom: Sales 2007, Prices 2009
California Sales of Existing Homes and Median Price
UNITS/MEDIAN PRICE $
-44%
-25%
-61%
Peak to trough
1980s: -61%
1990s: -25%
2000s: -47%
SOURCE: California Association of REALTORS® 38

39. Dollar Volume of Sales 2011 Projection: +4%
$ in Billion
% Change
-54%
$ Volume of Sales = Median Price x Annual Sales
SOURCE: California Association of REALTORS®

40. Sales of Existing Detached Homes and Pacific West Consumer Confidence
California, April 2011 Sales: 499,830 Units, Up 1.3% YTD, Up 5.0% YTY
UNITS
INDEX
16th month of sales above 500k
Raw sales have averaged a 0.1% mtm drop in dec since 1982, this month raw sales volume increased 3.3%
Home buyer tax credit, fed propping secondary market for mbs are continued support for the housing market has led to non-seasonal variations in dec.
The size of the year-to-year percentage gains has diminished substantially since the beginning of this year. With sales being strong in the fourth quarter of 2008, any increase from last year is expected to be very moderate in the coming months. If the expected pace of approximately 540,000 sales holds up through the year, year-to-year differences will shrink considerably in the last quarter of 2009.
Sales numbers revised from April 2008 to May 2009
Peak: 624,957 units in 2005
Valley: 189,345 units in 1982
SOURCE: California Association of REALTORS®; The Conference Board
*Sales are seasonally adjusted and annualized 40

41. Median Price of Existing Detached Homes
California, April 2011: $293,570, Down 4.4% YTY
The monthly gain was the 12th in a row
Now up 24% from trough in Feb-09
SOURCE: California Association of REALTORS® 41

42. Unsold Inventory Index
California, April 2011: 5.4 Months
MONTHS
Please note that UII from have been revised following an audit of our data.
Range since 1988:
Low: 1.3 months in April 2004
High: 18.8 months in Feb 1991
Long-run average: 7.2 months
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

43. Unsold Inventory Index (Months)
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

44. Unsold Inventory By Price Range
Jan 2005 – March 2011
MONTHS
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

45. Housing Affordability Index
California Vs. U.S.
% OF HOUSEHOLDS THAT CAN BUY
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 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.
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

46. Malibu

47. Sales of Residential Homes
Malibu, May 2011: 18 Units, Up 20.0% MTM, Down 18.2% YTY
SOURCE: Clarus Market Metrics

48. Median Price of Residential Homes
Malibu, May 2011: $1,877,500, Up 41.7% MTM, Up 30.8% YTY
SOURCE: Clarus Market Metrics

49. SOURCE: Clarus Market Metrics
For Sale Properties
Malibu, May 2011: 476 Units, Up 3.0% MTM, Down 3.4% YTY
SOURCE: Clarus Market Metrics

50. Months Supply of Inventory
Malibu, May 2011: 13.2 Months
SOURCE: Clarus Market Metrics

51. Santa Monica

52. Sales of Residential Homes
Santa Monica, Apr. 2011: 43 Units, Down 25.9% MTM, Down 23.2% YTY
SOURCE: Clarus Market Metrics

53. Median Price of Residential Homes
Santa Monica, May 2011: $807,000, Down 1.0% MTM, Up 6.9% YTY
SOURCE: Clarus Market Metrics

54. SOURCE: Clarus Market Metrics
For Sale Properties
Santa Monica, Apr. 2011: 363 Units, Up 2.5% MTM, Down 26.8% YTY
SOURCE: Clarus Market Metrics

55. Months Supply of Inventory
Santa Monica, May 2011: 4.1 Months
SOURCE: Clarus Market Metrics

56. Beverly Hills

57. Sales of Residential Homes
Beverly Hills, May 2011: 31 Units, Down 6.1% MTM, Even 0% YTY
SOURCE: Clarus Market Metrics

58. Median Price of Residential Homes
Beverly Hills, May 2011: $1,590,000, Down 34.4% MTM, Down 5.9% YTY
SOURCE: Clarus Market Metrics

59. SOURCE: Clarus Market Metrics
For Sale Properties
Beverly Hills, May 2011: 428 Units, Even 0% MTM, Down 17.4% YTY
SOURCE: Clarus Market Metrics

60. Months Supply of Inventory
Beverly Hills, May 2011: 7.6 Months
SOURCE: Clarus Market Metrics

61. Distressed Properties

62. Distressed Sales by County (Percent of Total Sales)
SOURCE: California Association of REALTORS®

63. REO Sales & Short Sales by County
Mar 2011
SOURCE: California Association of REALTORS®

65. Preforeclosure: 61 • Auction: 66 • Bank Owned: 12
Malibu
Preforeclosure: 61 • Auction: 66 • Bank Owned: 12
Source: ForeclosureRadar.com as of 06/06/11

66. Preforeclosure: 65 • Auction: 82 • Bank Owned: 24
Santa Monica
Preforeclosure: 65 • Auction: 82 • Bank Owned: 24
Source: ForeclosureRadar.com as of 06/06/11

67. Preforeclosure: 65 • Auction: 83 • Bank Owned: 12
Beverly Hills
Preforeclosure: 65 • Auction: 83 • Bank Owned: 12
Source: ForeclosureRadar.com as of 06/06/11

68. Southern California

69. Sales of Existing Detached Homes and Pacific West Consumer Confidence
Los Angeles Metro Area April 2011 Sales: 9,102 Units, Down 7.6% YTY, Down 4.7% YTD
UNITS
INDEX
Peak: 141,159 units in 2005
Valley: 69,099 units in 2007
2010 annual sales down 13.2% from 2009
2009 annual sales up 24.2% from 2008
2008 annual sales up 45.0% from 2007
2007 annual sales down 34.4from 2006
2006 annual sales down 24.0% from 2005
2005 annual sales up 6.9% from 2004
2004 annual sales down 2.5% from 2003
2003 annual sales up 3.0% from 2002
2002 annual sales up 9.9% from 2001
2001 annual sales up 2.3% from 2000
2000 annual sales up 3.9% from 1999
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®;
The Conference Board

70. Home Sales in Los Angeles Metro Area
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

71. Median Price of Existing Detached Homes
Los Angeles Metro Area, April 2011: $277300, Down 2.4% YTY
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

72. Sales of Existing Detached Homes
Los Angeles Metro Area
SOURCE: California Association of REALTORS®

73. Median Price of Existing Detached Homes
Los Angeles Metro Area
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

74. Supply Indicators Los Angeles Metro Area April 2010 March 2011
Median Time on the Market
32.5 Days
58.0 Days
55.5 Days
Unsold Inventory Index
4.4 Mos.
5.7 Mos.
5.8 Mos.
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

75. Unsold Inventory Index (Months)
Press Release Tables UII
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

76. Notices of Default – So CAL
Houses and Condos
* Includes additional counties
SOURCE: Data Quick Information Systems

77. Foreclosures (Trustee Deeds Recorded) – So CAL
Houses and Condos
* Includes additional counties
SOURCE: Data Quick Information Systems

78. 2010 Annual Housing Market Summary

79. Home Sellers Planning to Repurchase at Historic Lows
Q. Is the seller planning on purchasing another home?

80. Net Cash To Sellers at Record Lows
$35,000
The median net cash to seller is the lowest on record, matching the record low level reached in 1995 and 1997.
Q. What was the net cash gain or net loss to the seller as a result of this sale?

81. Multiple Offers Common: Buyers Face Highly Competitive Market
People always find this very shocking– that half of the properties selling in CA have competition from other buyers – you aren’t seeing that in other states.

82. More Buyers Pay with All Cash
Percent of All Cash Sales
One of four buyers purchased their home with all cash, the highest since 1998.

83. Investor Sales Continue to Grow

84. 2010 Survey of Home Buyers

85. Became Aware of Home Purchased Through Agent
(Unweighted)
Q. Did you become aware of the home you purchased through a real estate agent? 85

86. Home Buyers Who Looked at Newspaper/Magazine Ads to Search for a Home
(Unweighted)
Q. Did you look at newspaper/magazine ads to search for a home?

87. Scale: “1” = very easy, “10” = very difficult
Level of Difficulty to Obtain Financing (All Buyers)
2009: Mean = 8.1 Median = 9
2010: Mean = 8.5, Median = 9
Scale: “1” = very easy, “10” = very difficult
Q. Please rate how easy of difficult it was to obtain financing on a scale of 1 to 10, with 1 being very easy and 10 being very difficult.

88. Buyers Who Know the Terms of Their Loan
Q. Do you know the terms of your loan? 88

89. California Housing Market Forecast

90. California Housing Market Outlook
Note:
Annual Sales were revised for 2008 and is preliminary.
2008 annual median price was updated to reflect revision in 2010.
Forecast Date: May 2011
Source: CALIFORNIA ASSOCIATION OF REALTORS®

91. Real Estate: It’s 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: It’s time to buy again” Fortune Magazine’s 3/28/11 article written by Shawn Tully

92. 8 in 10 Americans Agree Buying a Home is the Best Investment One Can Make
SOURCE: Pew Research Center’s “Home Sweet Home. Still. Five Years After the Bubble Burst”

93. 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 Center’s “Home Sweet Home. Still. Five Years After the Bubble Burst”

94. 2011 Strategic Planning Committee
Book Selections

95. www.car.org/marketdata  Speeches
Speeches & Presentations

96. THANK YOU