1. 2014 Annual Housing Market Survey
December 4, 2014
Oscar Wei, Senior Research Analyst

2. Methodology
C.A.R. has conducted the Annual Housing Market Survey since The questions and methodology have stayed essentially the same throughout that time.
The survey was sent via to a random sample of 26,674 REALTORS® throughout California. The sample represented the geographical distribution of C.A.R. membership across the state. The survey asked REALTORS® to provide information from their most recent sales transaction that closed escrow in the second quarter of 2014.
The survey instrument was a questionnaire with both multiple choice and open-ended questions. There were 1,458 valid survey responses, equivalent to a response rate of 5.5 percent. The margin of error for this survey was +/- 2.6 percent at a 95 percent confidence level.

3. Today’s Market Clearly well on the road to recovering
Volume – A bit down, still reliant on investment sales
Prices up sharply, but increases slowing in most markets
Inventory remains tight
Pent-up/unrealized demand not yet translating into sales
Affordability challenges emerging once again…

4. Sales of Existing Detached Homes
California, Oct Sales: 396,220 Units, -8.8% YTD, -1.9% YTY
Oct-13:
404,000
Oct-14:
396,220
Peak:624,957 units in 2005
Valley:189,345 units in 1982
2012 annual sales up 4.3% from 2011
2011 annual sales up 1.4% from 2010
2010 annual sales down 12.3% from 2009
2009 annual sales up 24.5% from 2008
2008 annual sales up 30.4% from 2007
2007 annual sales down 33.4% from 2006
2006 annual sales down 23.8% from 2005
2005 annual sales up 0.8% from 2004
2004 annual sales up 3.8% from 2003
2003 annual sales up 7.6% from 2002
2002 annual sales up 14.1% from 2001
2001 annual sales down 4.7% from 2000 YTD
2000 annual sales up 1.4 from 1999
1999 sales up 7.3% over 1998
10/93: 41.0
Consumer Confidence
01/00:
03/03: 63.0
5/07: 128.4
2/09: 23.9
SERIES: Sales of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
*Sales are seasonally adjusted and annualized

5. Demand for Investment & Second/ Vacation Homes Drops to the Lowest since 20105%
Long Run Average: 12 %
With home prices increasing at double-digit rates for two consecutive years and housing inventory continued to deplete in the distressed market, many investors decided to pull out of the housing market. As such, the demand for investment properties in 2014 dropped to the lowest level since 2010.
Fifteen percent of all sales went to investors (as compared to 19 percent in 2013), and five percent went to second or vacation homebuyers (as compared to 6 percent in 2013). In 2000, they were 7 percent and 5 percent respectively.
While the share of investor sales in 2014 dropped to the lowest level in the last four years, it was still higher than the long-run average of 12 percent recorded since 1999.
15%
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

6. More Distressed Sales Are Being Absorbed by Investors Overtime
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

7. Equity Sales vs. REO vs. Short Sales (2014)
REO Sales
Short Sales
Share of Total Sales
93.5%
2.5%
3.6%
Median Home Price
$479,000
$280,000
$277,500
Square Footage
1,700
1,500
1,400
Price / SF
$294
$143
$183
Sales-to-List Price Ratio
100.0%
99.1%
% of Sales With Multiple Offers
51.4%
82.6%
65.0%
Avg. Number of Offers
4.2
6.5
4.6
% of All Cash Sales
21.7%
30.8%
Days on MLS 15 20 30
Days in Escrow 32 52
Over nine of ten sales are equity sales
Distressed properties are less expensive/better value = More competition in the distressed market
Short sales continue to take a longer time to close as the approval process remains a drag
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

8. Equity Sales (2011 - 2014) 2011 2012 2013 2014 Share of Total Sales
2011
2012
2013
2014
Share of Total Sales
58.7%
64.7%
80.8%
93.5%
Median Home Price
$431,000
$448,000
$456,635
$479,000
Square Footage
1,783
1,750
1,678
1,700
Price / SF
$250
$243
$270
$294
Sales-to-List Price Ratio
95.9%
97.3%
100.0%
% of Sales With Multiple Offers
35.2%
50.9%
69.0%
51.4%
Avg. Number of Offers
3.0
4.0
5.2
4.2
% of All Cash Sales
25.5%
27.3%
25.2
21.7%
Days on MLS 67 32 10 15
Days in Escrow 35 30
The share of equity sales has been growing steadily as the housing market continued to improve.
The market remained competitive as is evident in the increase in the sales-to-list price ratio and the high percentage of sales with multiple offers.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

9. REO Sales (2011 - 2014) 2011 2012 2013 2014 Share of Total Sales 19.7%
12.3%
4.9%
2.5%
Median Home Price
$189,500
$185,000
$175,500
$280,000
Square Footage
1,500
1,400
Price / SF
$112
$116
$101
$143
Sales-to-List Price Ratio
98.0%
100.0%
99.1%
% of Sales With Multiple Offers
58.3%
70.8%
91.2%
82.6%
Avg. Number of Offers
4.3
4.2
7.4
6.5
% of All Cash Sales
34.0%
43.1%
50.0%
21.7%
Days on MLS 50 30 15 20
Days in Escrow 35 45 32
The share of REO sales declined further to less than 3 percent in 2014, after dropping to 4.9 percent in 2013.
The median home price for REO sales and the median price per square foot, meanwhile, surged by more than 40 percent when compared to 2013.
REO properties, nevertheless, remained the best bargain in the market, and the market competition was still the most intense in the REO market.
More than eight of ten REO sales received multiple offers, as compared to nine of ten in 2013.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

10. Short Sales (2011 - 2014) 2011 2012 2013 2014 Share of Total Sales
20.2%
21.7%
14.0%
3.6%
Median Home Price
$287,000
$235,000
$276,500
$277,500
Square Footage
1,600
1,650
1,400
Price / SF
$175
$154
$146
$183
Sales-to-List Price Ratio
95.9%
99.9%
103.0%
100.0%
% of Sales With Multiple Offers
57.5%
66.1%
75.7%
65.0%
Avg. Number of Offers
3.6
4.3
7.1
4.6
% of All Cash Sales
23.3%
26.7%
35.7%
30.8%
Days on MLS
141 90 14 30
Days in Escrow 45 50 60 52
With home price increasing sharply in the last couple years, many properties that were considered “underwater” were no longer “underwater”. Many of those homeowners did not have to sell their home as a short sale. As such, the share of short sales dropped significantly from 14 percent in 2013 to 3.6 percent in 2014
The short sale market was not as competitive as the REO market, but almost two-thirds of the sales received multiple offers.
The time it takes to close an escrow remained relatively high when compared to equity sales and REO sales.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

11. Market Competition Cools Down after Peaking in 2013
More than half of all home sales (53 percent) received multiple offers.
On average, each home sale received 4.3 offers, a drop from 5.7 offers in 2013.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

12. Median Reduction = 4.5% of List Price
Fewer Homes Sold above the Asking Price as Market Competition Cooled in 2014
Median Reduction = 4.5% of List Price
The California housing market has become less competitive in 2014 when compared to the previous year, and it is reflected in the number of homes being sold above their listing price. Historically, 19 percent of all homes sold above their asking price. In 2014, while the share of home sales is still significantly above the long-run average, it dropped from 50 percent in 2013 to 33 percent in 2014.
For a home sold with a price below its original asking price, the median price reduction from the list price was 4.5 percent.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

13. Fewer Homes Sold above the Asking Price as Market Competition Cooled in 2014
Long Run Average = 19%
The California housing market has become less competitive in 2014 when compared to the previous year, and it is reflected in the number of homes being sold above their listing price. Historically, 19 percent of all homes sold above their asking price. In 2014, while the share of home sales is still significantly above the long-run average, it dropped from 50 percent in 2013 to 33 percent in 2014.
A typical home sold with no discount in 2014, on par with what we have seen in The price discount remained at the lowest level since 2005, and was lower than the long run average of 2.9 percent.
After the median time on MLS reached its lowest level since 2004, it bounced back to 2.1 weeks in 2014 from 1.6 weeks in Historically, a property stayed on the market for an average of 6.1 weeks.

14. Price Reduction Prior to an Offer Being Made
Avg. Reduction $ = $10,000
Almost three out of ten sellers made adjustment to their list price prior to an offer was being made to their property. More than one-third of them reduced their list price by $1,000 or less, 18 percent made a price reduction between $1,000 to $10,000, and 45 percent made a reduction of more than $10,000. The average reduction in 2014 was $10,000.
Q. Was there any price reduction made to the list price prior to an offer being made to the property?
Q. How much was the price reduction?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

15. Share of Cash Buyers Is the Lowest Since 2009
More than one-fifth of all homebuyers paid with all cash in 2014, and it continues to stay above the long-run average of 15.1 percent since 1998.
However, the share of all cash buyers decreased for the second consecutive year, after peaking at 30 percent in The share of all cash buyers is the lowest in the last five years.
With the current statewide median price significantly higher than what it was in 2012, it was not surprise to see the number of all cash buyers gradually dropping in recent years.
Almost one-fourth of buyers paid with all cash
The share of all cash buyers is the lowest in the last 5 years
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

16. The Share of International Buyers Declines from 2013, but Still the 2nd Highest in the Last 6 Years
The share of international buyers is the second highest in the last six years.
More than a third (37%) of all international buyers paid with all cash, and the share was much higher than that of the total sales.
69 percent of all international buyers bought the property as primary residence, 16 percent as investment/rental property, 11 percent as second/vacation home, and 5 percent as investment to flip.
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: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

17. REALTORS® Worked with International Buyers in the Past 12 Months
# of Properties Sold to International Buyers in the Last 12 Months
% Who Sold to International Buyers
Almost three of ten REALTORS® worked with an international buyers in the past 12 months
69 percent of all international buyers bought the property as primary residence, 16 percent as investment/rental property, 11 percent as second/vacation home, and 5 percent as investment to flip.
Q. How many properties have you sold to an international buyer in the last 12 months?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

18. Reasons to Buy in California
Mild year-around weather
Advanced Educational Opportunities
System
# of Campuses
Examples
University of California 10
University of California, Berkeley
University of California, Los Angeles
University of California, Riverside
University of California, San Diego
California State University 23
Cal State University, Fullerton
Cal State University, Northridge
Cal State Polytechnic University, Pomona
California Community College
109+
Santa Monica College
Pasadena City College
Private University
Hundreds
California Institute of Technology
Pepperdine University
Stanford University
University of Southern California
Amazing outdoor environment
You can't beat the south and central California coast for pleasant temperatures year round. Long Beach, Los Angeles, San Diego, Santa Barbara and Santa Maria all have average daily highs no lower than the mid-60s for any month of the year. Nor does it get really hot. Temperatures in summer generally stay around 85 degrees. Plus there's little rain, typically fewer than 20 inches a year.
For most Californians the ocean is very close. It is one of the reasons that the weather is so mild and nice throughout the year.
The ocean also provides lots of opportunities for recreation. Activities like swimming, sunbathing, surfing, scuba diving, snorkeling, sailing, riding jet skis, body boarding, and a host of other activities.
Along with the ocean, California also has many other features that make recreational activities possible. There are mountains, lakes, and rivers, deserts, flatlands, among others. These afford visitors with access to hiking, biking, rock climbing, running, rock climbing, and many other activities.
California is a great place for postsecondary education as there are many prestigious colleges/universities reside in the state, including Stanford, UC Berkeley, UCLA, and USC.

19. Country of International Buyer
China (36%)
Canada (10%)
India (12%)
China, India, and Canada were the top 3 Countries of Origin for International buyers.
2013 Numbers:
China 34.4%
Mexico 14.8%
Canada 9.8%
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

20. Price Plateau Ahead; Annual Gains Slowing
California, Oct. 2014: $450,620, Up 5.4% YTY
Oct-14:
$450,620
Oct-13:
$427,540
Now up 8.7% from trough in Feb-09
Peak: $560,270 in 2007
Valley: $177,270 in 1996
High: May 2007: $594,530
2000 annual median price up 11.0% over 1999
2001 annual median price up 8.7% from 2000
2002 annual median price up 20.5% from 2001
2003 annual median price up 17.5% from 2002
2004 annual median price up 21.3% from 2003
2005 annual median price up 16.0% from 2004
2006 annual median price up 6.5% from 2005
2007 annual median price up 0.7% from 2006
2008 annual median price down 37.8% from 2007
2009 annual median price down 21.1% from 2008
2010 annual median price up 10.2% from 2009
2011 annual median price down 6.2% from 2010
2012 annual median price up 11.6% from 2011
SERIES: Median Price of Existing Single Family Homes
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

21. Income Required to Buy a Median-Priced Home in CA: (Peak vs. Current)
Change in minimum required income: $38,641
Increase in income attributed to interest rate increase: $365 (0.9% of total change)
Increase in income attributed to price increase : $38,276 (99.1% of total change)
SERIES: Housing Affordability Index
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

22. Housing Affordability Down Sharply Since q1 2012
California vs. U.S. –
% OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME
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 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®

23. Share of First-Time Buyers Up But Still Below Long-Run Average
Share of FTB bounced back after dipping to the lowest level since It remains below the long run average of 38 percent, and it is the second lowest in the last 7 years.
The slight increase in the share of FTB could be attributed to the growth in the economy and the slowdown in investors activity.
2004 – 26.0% (lowest on record)
Q. Was the buyer a first-time buyer?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

24. Financial characteristics: First-Time vs. Repeat
First-time Buyers
Repeat Buyers
All Buyers
Median Household Income
$80,000
$120,000
$100,000
Median Monthly Mortgage Payment
$1,477
$1,868
$1,800
Median Downpayment (in $$)
$32,500
$70,000
Median Downpayment (in % to Price)
10%
20%
19.7%
C.A.R.’s 2014 Annual Housing Market Survey shows that first-time homebuyers have lower annual median incomes -- $80,000 versus $120,000, when compared to repeat buyers. They also make significantly smaller median downpayments than repeat buyers do -- $32,500 against $100,000. The median loan-to-value (LTV) ratio faced by first-time homebuyers is higher at 90 percent, as compared to the 79 percent loan-to-value ratio faced by repeat buyers. The higher LTV ratio could also place first-timers in a higher risk category, which is typically discounted with a higher mortgage rate. Factoring in the higher loan-to-value ratio, many first-time homebuyers have to shoulder a large monthly financial burden.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

25. The Median Down Payment Remained the same as in 2013
The percent of down payment to price and the median down payment remained virtually the same in 2014.
Q. What was the amount of downpayment?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

26. Median Down Payment First-Time Homebuyers Vs. Repeat Homebuyers
First-time buyers increased down payment by 3.4% to $32,500, and repeat buyers increased down payment by 3.8% to $100,000
Q. What was the amount of downpayment?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

27. Cash Source for Down Payment First-Time Buyer vs. Repeat Buyer
First-time Buyers
Repeat Buyers
All Buyers
Personal saving
63.3%
50.8%
54.8%
Proceeds from sale of previous residence
0.0%
22.7%
15.6%
Borrowed or gift from relatives
15.5%
4.5%
8.1%
Sale of personal assets other than real property
1.7%
3.5%
2.9%
Inheritance
4.0%
3.2%
Proceeds from sale or refi of another property
4.6%
Other
13.5%
11.0%
12.2%
The cash source for down payment used to be quite different before 2007…
Q. What was the source of the cash the buyer used for a downpayment or to purchase the residence?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

28. Student loan debt an issue for 25% of renters
SERIES: 2013 Renter Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

29. Student debt: Drags on Home sales
Data from 2006 to 2013 is quarterly.
House payment includes piti.

30. Rising Share of Never-Married Adults
% of men and women ages 25 and older who have never been married
After decades of declining marriage rates and changes in family structure, the share of American adults who have never been married is at an historic high. In 2012, one-in-five adults ages 25 and older (about 42 million people) had never been married, according to a new Pew Research Center analysis of census data. In 1960, only about one-in-ten adults (9%) in that age range had never been married.
The dramatic rise in the share of never-married adults and the emerging gender gap are related to a variety of factors. Adults are marrying later in life, and the shares of adults cohabiting and raising children outside of marriage have increased significantly.
In addition, shifting public attitudes, hard economic times and changing demographic patterns may all be contributing to the rising share of never-married adults.
SOURCE: Pew Research Center analysis of the decennial census and American Community Survey

31. Buyer Household Formation (over the years)
2000
2005
2010
2011
2012
2013
2014
Single
30.8%
29.7%
32.4%
28.6%
28.9%
22.4%
21.7%
Married Couple with Dependents
33.8%
36.9%
34.8%
33.6%
39.4%
42.6%
Married Couple without Dependents
27.1%
19.2%
23.8%
24.2%
24.0%
25.1%
23.5%
2 or More Individuals (Related or Unrelated)
7.2%
13.8%
11.2%
10.7%
11.5%
9.6%
9.1%
Other
1.4%
0.5%
1.8%
1.7%
2.0%
3.5%
3.1%
Total
100.0%
Household income for a married couple is typically higher than that for a single. As more Americans decided to get married at a later age, many singles simply did not have the purchasing power to buy a home as prices continued to rise at a double-digit rate in the past two years. As a result, the number of single home buyers declined in recent years.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

32. Location of Buyer’s Previous Residence
First-time Buyers
Repeat Buyers
All Buyers
Within the same county
63.9%
56.2%
58.2%
In another county in California
18.1%
21.6%
20.0%
In another state
1.4%
11.0%
7.9%
Out of US
3.6%
2.1%
2.5%
Don't Know/Not sure
13.1%
9.1%
11.4%
Total
100.0%
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

33. Location of Buyer’s Previous Residence
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Within the same county
63%
61%
65%
64%
62%
57%
58%
In another county in California
21%
23%
22%
17%
18%
24%
19%
20%
In another state 6% 8% 7%
Out of US 1% 2% 3%
Don't Know/Not sure 9%
10%
11%
12%
Total
100%
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

34. Reasons for Changing County
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

35. Percent of Buyers with Zero Down Payment
The share of first-time buyers who put zero down payment increased to 11.3 percent. The share of zero down payment is the highest since 2007.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

36. Proportion of Transactions With Second Mortgages
Very few home buyers are using a second mortgage to finance their new property, partly because of the decline in home prices from the peak years and partly because of tighter lending standards. Since 2006, the percent of home sales with second mortgage has dropped from 43.4% to 4.1% in 2014.
Q. In addition to the first mortgage or assumption, was there a second mortgage?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

37. Percent of Buyers with Second Mortgage
The impact was more pronounced to first-time buyers than to repeat buyers. First-time buyers with second mortgage declined from 62.8 percent in 2006 to 5.8 percent in 2014, while repeat buyers declined from 35.0 percent in 2006 to 3.2 percent.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

38. Share of FHA Still Significantly Higher than 2007, But Was the Lowest in 7 Years (First Mortgage)
After the housing market collapsed in 2008, the popularity of FHA loans grew markedly as conventional loans became more difficult to obtain. FHA and VA loans have become more favorable to home buyers since late 2007 as a result of the changing environment in the financial market. FHA loans generally require a lower down payment and have less-rigid credit-qualifying guidelines than conventional loans. Because of these advantages, there has been an increase in the demand for FHA loans since FHA loans as a first mortgage accounted for just one percent of total mortgages between , but has jumped from 1.2 percent of all loans in 2007 to 16 percent in Since it peaked in 2009 though, the share of FHA has been declining for the last five years and it was at the lowest level in the last 7 years.
Q. Please indicate the type of mortgage.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

39. Why do we care about low level of first-time buyer?
It signals a constrained flow of new households in the housing market
Trade-up market cannot be replenished in the long run
First-time buyers represent the main impulse that drives the state’s homeownership rate

40. Homeownership Rates California Vs. U.S.
But California rate has lagged US rate by 10+ percent for most of period
SERIES: Homeownership Rates
SOURCE: U.S. Census Bureau

41. Buyers’ Financial Profile (by Age range)
Age 30 and under
Age 30-44
Age 45-64
Age 65 and up
Median Income
$65,000
$100,000
$120,000
Median Price
$284,000
$508,500
$495,000
$400,000
Downpayment ($)
$20,000
$62,000
$109,000
Downpayment (% to Sale Price)
5.0%
13.7%
20.0%
22.0%
% of First-Time Buyers
85.4%
45.6%
13.3%
4.5%
Diff. Between Median Income and Mini. Req. Income
-$26,508
$8,492
$28,492
% Can Afford to Buy a Median-Priced Home
28.6%
64.8%
66.4%
59.1%
Housing affordability differs between age groups, as their financial characteristics vary. Potential homebuyers aged 30 and under are the ones who face the biggest challenge in the current housing affordability crisis. Based on results from the C.A.R Annual Housing Market Survey, this group of young consumers not only has a lower household income than other age groups, but they also put a smaller downpayment when buying a property. As such, they are the group that is the least qualified to buy a median –priced home. Many of them also tend to purchase their home in the lower-priced segment, which is also the market with the tightest housing supply and the most competitive. Not surprisingly, this is also the age group with the most first-time buyers.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

42. Homeownership Rate by Age of Householder
SOURCE: Census Bureau

43. Millennial Homeownership falling
SOURCE: Census Bureau

44. Reasons for Buying
Home buyers bought for many different reasons. More than 2 of 10 buyers bought because they were tired of renting a property and another 18 percent purchased their home because they desired a larger home. Other top reasons for buying include the desire for a better location (16%) and buying for investment /tax considerations.
Q. What was the single most important reason for buying the property?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

45. Reasons For Buying First Time Homebuyers Vs. Repeat Homebuyers
First-time buyers bought their property for different reasons. Over half of first time buyers wanted to buy because they were tired of renting. With average rents continuing to rise in many markets in California and the cost of borrowing remaining below the historical norms, buying makes more sense than renting to many buyers. Other top reasons to buy include:
Desire for a larger home (14 percent)
Desire for a better location (10 percent)
Change in family status (7 percent)
The primary reason to buy for repeat buyers was split among the desire for a larger home, the desire for a better location, and for investment/tax considerations
Q. What was the single most important reason for selling/buying the property?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

46. First-Time Buyers Bought Because They Were Tired of Renting
Q. Was the buyer a first-time buyer?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

47. First-time Buyers need YOUR help Connect EARLY and OFTEN
Financial Literacy: How to manage their finances
What about student-loan debt?
Can my parents help me out?
How do I increase my credit score?
How to save for a down payment and how much?
What programs are available? Tools to find out – Downpayment Resource on car.org

48. Downpayment.car.org
The California Mortgage Resource Directory has been up and running since Feb 2013.
It is now updated with new widget that is more mobile friendly and shows a ticker of the number of available programs available to potential homeowners.

49. Inventory Improving From Last Year
Oct 2013: 3.3 Months; Oct 2014: 3.8 Months
Range since 1988:
Low: 1.3 months in April 2004
High: 18.8 months in Feb 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®

50. Why was/is Inventory so Low?
Demand Side
Housing affordability was at historic highs
Low rates hurt investment alternatives
International buyers
Supply Side
Little new construction for last 5 years
Underwater homeowners are stuck
Mortgage Lock-In Effect
No inventory to move up
Foreclosure pipeline drying up
Investors are renting instead of flipping
Off-market (aka “pocket’) listings

51. Buying to Rent: Winning Investment Strategy
2013: 18%
2014: 30%
Investment to Flip
2013: 82%
2014: 70%
For those who purchased an investment property, 70 percent bought it as a rental property and the rest of them bought it as an investment to flip. Investors who bought their investment property to flip jumped from 18 percent in 2013, but still significantly lower than those who bought the property to rent it out.
Rental Property

52. For Those Who Purchased an Investment Property:
2011
2012
2013
2014
Investment
Flip – 15%
Flip – 20%
Flip – 12%
Flip – 23%
Rent – 85%
Rent – 80%
Rent – 88%
Rent – 77%
Equity Sales
Investment
Flip – 14%
Flip – 9%
Flip – 26%
Flip – 62%
Rent – 86%
Rent – 91%
Rent – 74%
Rent – 38%
Distressed Sales
Investors who purchased a distressed property are more likely to flip the property than investors who purchased an equity sale.

53. CA Permits UP but more units needed
2013: 80,318 Units, Up 37.2% from 2012
Household Growth: 220, ,000/yr
Red line represents approximate number of new households per year (estimated range: 220 to 250 thousand per year)
SERIES: New Housing Permits
SOURCE: Construction Industry Research Board

54. Pocket Listings SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

55. Years Owned Home Before Selling
SERIES: 2013 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

56. Reasons For Selling
Q. What was the single most important reason for selling the property?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

57. Sellers Who Sold Because Their Properties Were in Distressed Status Were Back to 2007 Level
Note: Prior to 2007, only those who selected “Foreclosures” were included in the percent of homes sold due to Foreclosure/Short Sale/Default.
Q. What was the single most important reason for selling/buying the property?
SERIES: 2013 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

58. Sellers with Net Cash Loss Dropped to the Lowest Level since 2006
Long Run Average = 12.2%
Another sign of the housing market improving: Number of sellers who sold their home with a loss dropped for the second consecutive years and was at the lowest level since 2006.
Only 8 percent of all sellers sold their home with a loss in 2012, a drop from the 13.2 percent recorded in 2013.
Q. What was the net cash gain or net loss to the seller as a result of this sale?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

59. Net Cash Gain to Sellers Rose Again for the Second Year
Net cash gain climbed up to $100,000 in 2014 after increasing to $55,000 in It was the highest since 2008, when the net cash gain was also $100,000 in 2008.
Q. What was the net cash gain or net loss to the seller as a result of this sale?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

60. Nearly Half of All Sellers Are Planning to Buy Another Home As the Market Recovers
Sellers continued to feel optimistic about the housing market and were more comfortable with their financial situation in the last couple years. As the economy and the housing market continued to recover from the Great Recession, many of them regained confidence in owning a property. The share of sellers who planned on purchasing another home was about the same as Almost half (48%) of them planned to repurchase as the housing market continued to recover, and it was the second highest in the last 7 years. Those who planned on purchasing were primarily sellers with non-distressed properties, as 50 percent of them planned to repurchase. Only 24 percent of distressed home sellers planned to buy another house .
Q. Is the seller planning on purchasing another home?
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

61. Location of Seller’s New Home
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Within the same county
38%
41%
37%
45%
47%
42%
49%
46%
44%
In another county in California
23%
18%
24%
17%
21%
19%
20%
In another state
31%
28%
29%
27%
22%
Out of US 1% 2% 0%
Don't Know/Not sure 7%
11% 9%
10%
12%
16%
15%
13%
Total
100%
After peaking in 2011 and 2012, the share of sellers who relocated within the same county starting dropping again in the last couple years. The surge in home prices in recent years, which led in the decline in housing affordability in many regions across the state, was a factor in the drop of the share of sellers who want to stay within the same county.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

62. For Those Who Do Not Plan to Repurchase, Here Are Their Top Reasons:
Top reasons for home sellers not planning to repurchase were 1) they preferred to have less financial obligation (21 percent), 2) they already owned another house (16 percent), and 3) they decided to live with family/friends (9 percent). The top reasons were different from those in 2012 when nearly half of all home sales were distressed properties. While sellers preference for less financial obligation and sellers owning another property were also top reasons for not repurchasing, the number one reason that seller did not plan on repurchasing in 2012 was that seller is a lender. Lack of cash for down payment and poor credit background were also top reasons not to repurchase in 2012.
SERIES: 2014 Housing Market Survey
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

63. Key Takeaways
Sales down from 2013, but improving in recent months; investment sales still play a role
International buyers continue to show interest in buying in CA
Prices up sharply, but increases slowing in most markets
Housing affordability remains a challenge, especially to first-time buyers
Sellers are optimistic about the housing market

64. California Housing Market forecast
SFH Resales (000s)
% Change
Median Price ($000s)
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%
SERIES: CA Housing Market Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

65. Join us for our next webinar…
Working with International Home Buyers in California
Thursday, January 29, 2014
2:00 PM - 3:00 PM
To register:
Get the inside scoop on interacting with international clients and discover how REALTORS® can improve their level of service and grow their business!
The 2014 International Home Buyers Survey takes a look at international homebuyer activity in California in greater detail. The survey provides insights on why international buyers chose to purchase property in California and their specific needs. The survey also touches upon the demographics of international buyers and the financial aspects of their transactions.

67. For more information: http://www.facebook.com/CARResearchgroup

68. Read Research & Economics’ blog at: HousingMatters.car.org
Sharing the most up-to-date information about California’s housing market.
Read Research & Economics’ blog at:
HousingMatters.car.org
Data Visualization. Economic Trends.
Housing Affordability. Housing Trends. Market Outlook.

69. Thank You! www.car.org/marketdata Facebook: CARResearchgroup
Twitter: CARResearchInfo