1. 2015 CALIFORNIA ECONOMIC & MARKET FORECAST October 9,2014 EXPO - Anaheim Convention Center Leslie Appleton-Young, Vice President & Chief Economist

2. AS I WAS SAYING…

3. FORECAST REPORT CARD NOTE: Average FICO score for 2014 is based on data from January 2014 through August 2014 Forecast Date: October 2014 vs. October 2013 SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®, Ellie Mae SFH Resales (000s) % Change Median Price ($000s) % Change 30-Yr FRM Housing Affordability Index FICO Score U.S. Gross Domestic Product 2013 Actual 414.3 -5.8% $407.2 27.5% 4.0% 36.0% 738 1.9% 2014 Forecast 444.0 3.2% $432.8 6.0% 5.3% 28.2% -- 2.8% 2014 Projected 380.5 -8.2% $455.0 11.8% 4.3% 30.0% 726* 2.2%

4. HOUSING FUNDAMENTALS ARE POSITIVE Mortgage rates are low & lending is loosening up a bit Affordability is still good and price gains are slowing Foreclosure & delinquency rates are low & distressed sales are less than 10% of the market Investors are leaving creating more opportunity for buyers needing financing Overall homeownership rate has stabilized International demand for housing in CA still strong Construction is up – residential and non-residential

5. ECONOMIC FUNDAMENTALS ARE BETTER Economic growth is accelerating Unemployment rate 5.9% - lowest since ? 248,000 new jobs in Sept Construction jobs +230,000 in last 12 months

6. BUT...DEMOGRAPHICS AS DESTINY? Affordability is worsening Homeownership rate for 18-34 - year-olds still falling Household formation is VERY slow Census: US added 476,000 HH v. 1.3 m HH prior 2 years Majority of new households rent: “Renter Nation” Millennials delaying “adulthood”: Getting married later or not at all; Student loans; dim job prospects Baby boomers delaying “retirement” and staying put longer; they will love their loans when rates do rise Inventory is better but still well below “normal”.

7. AND… FIRST TIME BUYERS FACE MANY OBSTACLES Lot’s of competition for existing housing stock Affordability constraints Lack of a down-payment Lack of information about the home-buying process Fear of financing: “I can’t qualify” Job prospects/security still dim for many Many who have jobs are under-employed

8. #1 TRANSACTIONS

9. CA HOME SALES: 1995 – 2014 SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® UnitsYOY % Chg

10. CA HOME SALES 2010 – 2014 California, Aug. 2014 Sales: 394,280 Units -10.1% YTD, -9.3% YTY *Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Aug-14: 394,280 Aug-13: 434,910

11. WE’VE COME A LONG WAY: EQUITY SALES NOW 9 OUT OF 10 TRANSACTIONS SERIES: Distressed Sales, Not Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

12. DISTRESSED SALES: NORTHERN CA Percent of Total Sales SERIES: Distressed Sales, Not Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

13. DISTRESSED SALES: BAY AREA Percent of Total Sales SERIES: Distressed Sales, Not Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

14. DISTRESSED SALES: CENTRAL VALLEY Percent of Total Sales SERIES: Distressed Sales, Not Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

15. DISTRESSED SALES: CENTRAL COAST Percent of Total Sales SERIES: Distressed Sales, Not Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

16. DISTRESSED SALES: SOUTHERN CA Percent of Total Sales SERIES: Distressed Sales, Not Seasonally Adjusted SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

17. CHANGE IN SALES BY PRICE RANGE (Year-to-Year) SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

18. INVENTORY IMPROVING FROM LAST YEAR August 2013: 3.0 Months; August 2014: 4.0 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®

19. INVENTORY HIGHER AT UPPER PRICE RANGES 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®

20. #2 HOUSING PRICES

21. CALIFORNIA VS. U.S. MEDIAN PRICES 1970-2014 SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

22. CA HOME MEDIAN PRICE: 1995 – 2014 SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Median PriceYOY % Chg

23. PRICE PLATEAU AHEAD; ANNUAL GAINS SLOWING California, Aug 2014: $480,280, Up 8.9% YTY SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Aug-14: $480,280 Aug-13: $441,010

24. TROUGH VS. CURRENT PRICE By Counties, August 2014 SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® RegionTrough Month Trough Price Aug-14 Median %Chg Fr Trough Santa BarbaraMar-09$296,590$806,030171.8% MontereyMay-09$203,500$492,500142.0% AlamedaJan-09$346,236$732,220111.5% LakeJun-11$85,620$178,330108.3% CaliforniaFeb-09$245,230$480,28095.8% Santa ClaraFeb-09$445,000$865,00094.4% MercedJan-10$96,670$186,67093.1% Los AngelesMay-10$248,850$474,64090.7% TehamaFeb-11$83,330$156,00087.2% RiversideApr-09$171,480$318,64085.8%

25. TROUGH VS. CURRENT PRICE By Counties, August 2014 SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® RegionTrough Month Trough Price Aug-14 Median %Chg Fr Trough Kern (Bakersfield)Apr-09$115,000$210,90083.4% SolanoFeb-12$179,020$328,28083.4% San MateoJan-09$551,000$1,000,00081.5% MaderaJul-11$92,500$166,67080.2% San BenitoMar-12$232,350$415,00078.6% AmadorMar-12$118,750$211,11077.8% NapaApr-11$306,820$541,67076.5% San BernardinoMay-09$120,410$209,20073.7% Santa CruzFeb-09$380,000$657,60073.1% SacramentoJan-12$162,290$272,75068.1%

26. TROUGH VS. CURRENT PRICE By Counties, August 2014 SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® RegionTrough Month Trough Price Aug-14 Median %Chg Fr Trough VenturaFeb-09$359,630$602,06067.4% TulareApr-11$111,600$184,44065.3% MendocinoJun-11$181,430$291,67060.8% San FranciscoJan-12$561,270$900,91060.5% KingsJul-11$114,290$183,33060.4% OrangeJan-09$442,170$699,43058.2% Contra CostaJan-12$476,470$750,00057.4% San DiegoMar-09$326,830$510,86056.3% FresnoJan-12$131,070$203,76055.5%

27. TROUGH VS. CURRENT PRICE By Counties, August 2014 SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® RegionTrough Month Trough Price Aug-14 Median %Chg Fr Trough SonomaFeb-09$312,340$484,64055.2% PlacerFeb-12$251,450$388,72054.6% MarinFeb-11$632,580$977,46054.5% SiskiyouMay-11$85,000$127,50050.5% ShastaFeb-12$141,900$212,50049.5% TuolumneJan-12$147,140$214,71045.9% San Luis ObispoFeb-11$328,750$475,00044.5% ButteFeb-12$177,860$255,00043.4% HumboldtAug-12$218,750$255,26016.7%

28. #3 MORTGAGE RATES & HOUSING FINANCE

29. FORECASTS OF 30-YR FRM 2013 Projected 2013 Actual 2014 Forecast 2014 Projected 2015 Forecast Fannie Mae 4.1%4.0%5.1%4.2%4.4% Freddie Mac 4.1%4.0%5.0%4.3%4.7% Mortgage Banker Association 4.1%4.0%4.9%4.3%5.0% National Association of REALTORS® 4.2%4.0%5.3%4.3%5.1% California Association of REALTORS® 4.1%4.0%5.3%4.3%4.5% SOURCE: Fannie Mae, Freddie Mac, MBAA, NAR, Wells Fargo, CALIFORNIA ASSOCIATION OF REALTORS®

30. FORECASTERS HAVE BEEN EXPECTING RATES TO RISE Percent SERIES: Loan Officer Survey SOURCE: Philadelphia Federal Reserve Survey of Professional Forecasters, Bloomberg

31. MORTGAGE RATES + 1% SPRING 2013 ACTUAL TAPERING NO IMPACT SERIES: 30Yr FRM, 1Yr ARM, Federal Funds SOURCE: Federal Home Loan Mortgage Corporation

32. U.S. DEPOSITORY INSTITUTIONS: HIGH LEVEL OF EXCESS RESERVES SERIES: Excess Reserves of Depository Institutions SOURCE: Federal Reserve Bank of Saint Louis $ BILLIONS

33. MORTGAGE RATES January 2009 – August 2014 MONTHLY WEEKLY SERIES: 30Yr FRM, 1Yr ARM SOURCE: Federal Home Loan Mortgage Corporation

34. LOAN OFFICERS SURVEY SAY LENDING STANDARDS ARE EASING Net Percentage SERIES: Loan Officer Survey SOURCE: US Board of Governors of the Federal Reserve System

35. LOOSENED CREDIT REQUIREMENTS: FICO Scores Trending Down Since 2012 SERIES: Average FICO Score on Closed Loans SOURCE: Ellie Mae

36. SAY WHAT?

37. #4 HOUSING AFFORDABILITY

38. REAL ENEMY OF THE FUTURE OF CALIFORNIA? Housing Affordability The Achilles Heel of the California Economy What happens when housing costs are too high? Impact on jobs and economic growth Impact on neighborhoods and family stability

39. HOUSING AFFORDABILITY DOWN SHARPLY SINCE Q1 2012 % OF HOUSEHOLDS THAT CAN BUY SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

40. HOMEOWNERSHIP RATES California Vs. U.S. SERIES: Homeownership Rates SOURCE: U.S. Census Bureau

41. HOMEOWNERSHIP RATE BY AGE OF HOUSEHOLDER SOURCE: Census Bureau

42. INCOME REQUIRED TO BUY A MEDIAN- PRICED HOME IN CA: (PEAK VS. CURRENT) Change in minimum required income: $37,269 Increase in income attributed to interest rate increase: $836 (2.2% of total change) Increase in income attributed to price increase : $36,433 (97.8% of total change) SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

43. DROP IN INCOME CONTRIBUTED TO THE DECLINE IN HAI HAI declined from 56 to 30 from 2012 Q1 to 2014 Q2 Median household income slipped from $58,553 in 2012 to $58,504 in 2014 The decline in household income alone led HAI to drop by about 2 index points. SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

44. HOUSING AFFORDABILITY:BAY AREA SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

45. HOUSING AFFORDABILITY: CENTRAL VALLEY SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

46. HOUSING AFFORDABILITY: SO CAL SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

47. HOUSING AFFORDABILITY INDEX What Will Happen When MORTGAGE RATES Increase? Q2-2014 Median Price $457,140 20% Down payment INTEREST RATE % OF HOUSEHOLDS THAT CAN BUY, ALL ELSE CONSTANT SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

48. MEDIAN MONTHLY MORTGAGE PAYMENT What Will Happen When Mortgage Rates Increase? INTEREST RATE MONTHLY MORTGAGE SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Q2-2014 Median Price $457,140 20% Down payment

49. MINIMUM QUALIFYING INCOME What Will Happen When Mortgage Rates Increase? INTEREST RATE MONTHLY MORTGAGE SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Q2-2014 Median Price $457,140 20% Down payment

50. MEDIAN CA HOUSE PAYMENT WELL BELOW PEAK SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® PITI/Month Peak: $3,668/mo (2007 Q2) Latest: $2,340/mo (2014 Q2)

51. … MINIMUM QUALIFYING INCOME BELOW PEAK Min. Income Peak: $146,701/yr (2007 Q2) Latest: $93,593/yr (2014 Q2) SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

52. SHARE OF FIRST-TIME BUYERS UP BUT STILL BELOW LONG-RUN AVERAGE Long Run Average = 38% QUESTION: Was the buyer a first-time buyer? SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

53. FIRST-TIME BUYERS GETTING OLDER SERIES: 2014 C.A.R. Annual Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Years

54. #5 2014 CA HOUSING MARKET SURVEY

55. MULTIPLE OFFERS DECLINE WITH LESS INTENSE MARKET COMPETITION IN 2014 AFTER PEAKING IN 2013 SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

56. Long Run Average = 19% FEWER HOMES SOLD ABOVE THE ASKING PRICE AS MARKET COMPETITION COOLED IN 2014 QUESTION: 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? SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

57. FEWER HOMES SOLD ABOVE ASKING IN 2014 SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Median Reduction = 4.5% of List Price

58. IN 2009 OVER 2/3 SOLD BELOW ASKING PRICE SERIES: 2009 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Median Reduction = 9.1% of List Price

59. SHARE OF CASH BUYERS IS THE LOWEST SINCE 2009 SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

60. SHARE OF FHA STILL SIGNIFICANTLY HIGHER THAN 2007, BUT WAS THE LOWEST IN 7 YEARS (FIRST MORTGAGE) QUESTION: Please indicate the type of mortgage. SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

61. INVESTMENT HOMES : 15% MARKET SHARE Long Run Average: 12 % SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

62. BUYING TO RENT V. FLIP; CHANGE IN PREFERRED INVESTMENT STRATEGY 2013: 18% 2014: 30% 2013: 82% 2014: 70% Investment to Flip Rental Property SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

63. SHARE OF INTERNATIONAL BUYERS OFF FROM 2013, 2ND HIGHEST IN THE LAST 6 YEARS QUESTION: 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: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

64. INTERNATIONAL BUYERS: CHINA! China (36%) Canada (10%) India (12%) SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

65. SHARE OF FIRST-TIME BUYERS UP BUT STILL BELOW LONG-RUN AVERAGE Long Run Average = 38% QUESTION: Was the buyer a first-time buyer? SERIES: 2014 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

66. CA PERMITS UP BUT MORE UNITS NEEDED 2013: 57,496 Units, Up 43.0% from 2012 Household Growth: 220,000-250,000/yr SERIES: New Housing Permits SOURCE: Construction Industry Research Board

67. #6 REGIONAL HOUSING MARKETS

68. 2014 CA SALES YTD SERIES: Year to Date Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

69. SERIES: Year to Year Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 2014 CA MEDIAN PRICE YTY

70. SERIES: Year to Date Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® NORTHERN CA SALES

71. NORTHERN CA PRICES SERIES: Year to Year Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

72. NORTHERN WINE SALES SERIES: Year to Date Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

73. NORTHERN WINE PRICES SERIES: Year to Year Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

74. BAY AREA SALES SERIES: Year to Date Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

75. BAY AREA PRICES SERIES: Year to Year Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

76. CENTRAL VALLEY SALES SERIES: Year to Date Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

77. CENTRAL VALLEY PRICES SERIES: Year to Year Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

78. CENTRAL COAST SALES SERIES: Year to Date Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

79. CENTRAL COAST PRICES SERIES: Year to Year Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

80. SOUTHERN CA SALES SERIES: Year to Date Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

81. SOUTHERN CA PRICES SERIES: Year to Year Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

82. #7 THE MILLENNIALS & THE FUTURE OF HOMEOWNERSHIP

83. HOMEOWNERSHIP RATES BY AGE California (2010 Census) SERIES: Homeownership Rates SOURCE: U.S. Census Bureau

84. HOMEOWNERSHIP RATE BY AGE OF HOUSEHOLDER SOURCE: Census Bureau

85. MILLENNIAL HOMEOWNERSHIP FALLING SOURCE: Census Bureau

86. YOUNGER BUYERS CONTINUE TO DECLINE Question: What is your age? SERIES: 2014 C.A.R. Home Buyers Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

87. ¾ MILLENNIALS NOT MARRIED SOURCE: C.A.R. 2014 Millennial Survey Q: What is your marital status

88. CA MILLENNIAL ETHNICITY SOURCE: C.A.R. 2014 Millennial Survey Q: What is your ethnicity?

89. YOUNGER MILLENNIALS – GREATER DIVERSITY SOURCE: C.A.R. 2014 Millennial Survey Q: What is your ethnicity?

90. # OF HOUSEHOLDS LOST SINCE THE GREAT RECESSION SOURCE: California Dept. of Finance; compiled by C.A.R.

91. SHARE OF YOUNG ADULTS LIVING WITH PARENTS SERIES: Share of Young Adults Living Parents SOURCE: U.S, Census, PUMS, ACS, NAHB Estimates.

92. STUDENT LOAN DEBT: OVER-RATED & REAL Question: Do you have any outstanding debt from student loans? How much is the outstanding student loan debt? SERIES: 2014 C.A.R. Home Buyers Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

93. BUYERS: MANY DID NOT BUY SOONER BECAUSE OF LACK OF URGENCY & UNCERTAINTY SOURCE: C.A.R. 2014 Millennial Survey Q: Why didn’t you buy sooner?

94. RENTERS: MAJORITY RENT BECAUSE THEY CANT AFFORD TO BUY SOURCE: C.A.R. 2014 Millennial Survey Q: Why do you rent instead of own?

95. FORMER OWNERS: MANY SOLD HOME BECAUSE OF FINANCIAL DISTRESS SOURCE: C.A.R. 2014 Millennial Survey Q: Why did you sell your previous home?

96. MOST 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 ?

97. 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

98. 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

99. #8 MACRO ECONOMIC ENVIRONMENT

100. ECONOMY GAINING MOMENTUM 2014 2.0% 2013: 1.9%; 2014 Q2: 4.5% 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

101. US UNEMPLOYMENT RATE BELOW 6% CA - 7.4% (Aug. 2014) vs. US - 5.9% (Sep. 2014) SERIES: Unemployment Rate SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

102. PERCENT JOB LOSSES PRIOR RECESSIONS – RECENT CYCLE WORST BY FAR

103. US V CA JOB GROWTH ANNUAL PERCENT CHANGE SERIES: Total Nonfarm Employment SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

104. JOB TRENDS BY CALIFORNIA METRO AREA SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division ANNUAL PERCENT CHANGE August 2014: CA +1.7%, +291,700

105. CALIFORNIA JOB CHANGES BY INDUSTRY SERIES: Total Nonfarm Employment By Industry SOURCE: US Bureau of Labor Statistics, CA Employment Development Division August 2014: CA +1.7%, +291,700 ANNUAL PERCENT CHANGE

106. METRO COMMERCIAL SPACE VACANCY RATES 2014 Q2 SERIES: Commercial Vacancy Rate SOURCE: National Association of REALTORS®

107. CONSUMER PRICE INDEX August 2014: All Items +1.7% YTY; Core +1.7% YTY ANNUAL PERCENT CHANGE SERIES: Consumer Price Index SOURCE: US Bureau of Labor Statistics

108. CONSUMER CONFIDENCE: UNCERTAINTY September 2013: 79.7 INDEX, 100=1985 SERIES: Consumer Confidence SOURCE: The Conference Board

109. U.S. ECONOMIC FORECAST SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Gross Domestic Product Nonfarm Job Growth Unemployment Rate Consumer Price Index Real Disposable Income, % Change 2011 1.8% 1.2% 8.9% 3.1% 1.3% 2012 2.8% 1.7% 8.1% 2.1% 1.5% 2013 1.9% 1.7% 7.4% 1.5% 0.7% 2014 P 2.2% 1.8% 6.2% 2.0% 2.6% 2015 F 3.0% 2.2% 5.8% 2.2% 2.6%

110. CALIFORNIA ECONOMIC FORECAST SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Nonfarm Job Growth Unemployment Rate Population Growth Real Disposable Income, % Change 2011 1.1% 11.8% 0.7% 1.9% 2012 2.4% 10.4% 0.7% 1.1% 2013 3.0% 8.9% 0.9% 2014 P 2.2% 7.5% 0.9% 3.0% 2015 F 2.4% 6.7% 0.9% 3.8%

111. #9 PUBLIC POLICY

112. LEGISLATIVE & REGULATORY PRESSURES ABOUND AT ALL LEVELS OF GOVERNMENT Local: – Point of Sale – Business License Tax – Transfer Taxes State: – Affordable Housing, not Homeownership – Attacks on Ellis Act., Costa-Hawkins – Fiscal and Taxation Threats – Anti-speculation Tax (SF)

113. LEGISLATIVE & REGULATORY PRESSURES ABOUND AT ALL LEVELS OF GOVERNMENT Federal: – GSE’s: Future of Fannie & Freddie – FHA – Fees & Loan Limits – Mortgage Interest Deduction – Flood Insurance – Taxation

114. FANNIE & FREDDIE ARE THE MARKET Source: LPS

115. #10 WILD CARDS

116. REALITY: WORLD OF UNCERTAINTY – Stock market volatility – Slower growth: China & Europe – Geo-political tensions – Terrorism – Bio-terrorism – Natural Disasters – 2014 mid-term elections

117. 2015 FORECAST

119. CALIFORNIA HOUSING MARKET FORECAST SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® SFH Resales (000s) % Change Median Price ($000s) % Change Housing Affordability Index 30-Yr FRM 2011 422.6 1.4% $286.0 -6.2% 53% 4.5% 2012 439.8 4.1% $319.3 11.6% 51% 3.7% 2013 413.3 -5.8% $407.2 27.5% 36% 4.0% 2014 P 380.5 -8.2% $455.0 11.8% 30% 4.3% 2015 F 402.5 5.8% $478.7 5.2% 27% 4.5%

120. CALIFORNIA HOUSING MARKET OUTLOOK Sales Down for 2014 but will Improve in 2015; Price Gains Slowing Units (Thousand) Price (Thousand) SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

121. CA: DOLLAR VOLUME UP FOR 4 TH YEAR % Change $ in Billion -60% SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Up 2.7% in 2014, Up 11.3% in 2015

122. MARKET OPPORTUNITIES 2015

123. OPPORTUNITIES TO EXPAND YOUR BUSINESS Connect with the IPO crowd – Twitter IPO created 1400 millionaires Educate Under-informed Potential Buyers Begin conversations with Millennials Connect with Boomerang Buyers Connect with International buyers Support local and state efforts to build! Dress up and get out there!

124. mortgage.car.org MOMRTGAGE RESOURCE DIRECTORY KNOW YOUR TOOLS! MORTGAGE.CAR.ORG OUTLOOK

125. THE TRUTH “There will be enough transactions in 2015 for you to have a great year.”

127. THE ECONOMY OF LOVE Give freely Receive graciously

128. THANK YOU! www.car.org/marketdata lesliea@car.org