1. Real Estate Market Update/ 2012 FORECAST Integrated Real Estate Services - San diego January 31, 2012 Leslie Appleton-Young, Chief Economist

2. Overview US and California Economies California Housing Market Regional & Local Markets 2011 Annual Market Survey 2012 Housing Market Forecast CA Buyers & Sellers in Today’s Housing Market

3. U.S. Economic Outlook

4. Economy Slowly Gaining Post-Stimulus Momentum GDP 2010: 2.8% 2011:1.8% 2012: 2.6% ANNUAL QTRLY 2009 Largest Annual Drop since 1938 (-3.4%)

5. Performance Targets for National Economy SOURCE: California Association of REALTORS®

6. QUARTERLY PERCENT CHANGE Consumer Spending Rebounding Holiday and Auto Sales Consumer Spending 2011 Q3: 2.4% SOURCE: US Dept of Commerce, Bureau of Economic Analysis

7. INDEX, 100=1985 Consumer Confidence: Nov/Dec Rebound Income Concerns Trump Job Gains January 2012: 61.1

8. CA Underwater Mortgages: Reverse Wealth Effect SOURCE: CoreLogic

9. Unemployment: Heading Lower U.S. at 3 year low December 2011 SOURCE: CA Employment Development Division California (11.1%) vs. United States (8.5%)

10. U.S. Non-farm Job Growth: Gaining! SOURCE: US Dept of Labor, Bureau of Labor Statistics Month-to-Month Changes Recession Job Losses: 8.8 million Since Jan 2010: +2.4 million Created 1.6 million jobs in 2011

11. California Non-farm Job Growth SOURCE: CA Employment Development Division Month-to-Month Changes Recession Job Losses: 1.3 million Since Jan’10: +282,000

12. Nonfarm Employment San Diego County, December 2011: Up 2.2% YTY SOURCE: CA Employment Development Division Y-T-Y PERCENT CHANGE

13. Unemployment Rate San Diego County, December 2011: 8.9% SOURCE: CA Employment Development Division

14. Where are California’s Jobs? Employment Trends: Construction & Financial Sectors Biggest Losers SOURCE: California Association of REALTORS®

15. CA New Housing Permits 2011: 47,015 units, Up 5.0% from 2010 SOURCE: CBIA Household Growth: 220,000-250,000/yr

16. SOURCE: Federal Home Loan Mortgage Corporation Classic Liquidity Trap: Consumers Deleveraging Low Rates and Tight Credit Fed easing through 2014

17. US Deficit Highest in Decades 2010: 11% of GDP (Revenues – Expenses) Source: US Treasury, BEA, compiled by C.A.R. Note: Positive = Surplus

18. Federal Issues – Critical Concerns for the REALTOR Party Future of Fannie and Freddie? FHA? Tax Reform on the horizon – Mortgage Interest Deduction? QRM (Qualified Residential Mortgage) 20% Down requirement -- Is the future of the 30 year mortgage in doubt?

19. U.S. Economic Outlook SOURCE: California Association of REALTORS® Forecast Date: January 2012

20. California Economic Outlook SOURCE: California Association of REALTORS® Forecast Date: January 2012

21. California Housing Market

22. Sales Hit Bottom 4 Years Ago Median Price 2011 = 2002 “Lost Decade” UNITS/MEDIAN PRICE $ SOURCE: California Association of REALTORS® -61% -25% -44%

23. Sales of Existing Detached Homes and Pacific West Consumer Confidence California, December 2011 Sales: 520,940 Units, Up 1.1% YTD, Up 0.1% YTY INDEXUNITS SOURCE: California Association of REALTORS®; The Conference Board *Sales are seasonally adjusted and annualized

24. INDEX, 100 = 03/16/90 Mortgage Loan Applications for Purchase January 20, 2012: 184.8 Source: Mortgage Bankers Association

25. Mortgage Applications/ Total Purchase Loans (Weekly % Chg.)

26. Statewide Median Price Stalled California, December 2011: $285,920, Down 6.2% YTY SOURCE: California Association of REALTORS®

27. Median Prices Bottomed Almost 3 Years Ago Trough vs. Current Price – December 2011 Southern California SOURCE: California Association of REALTORS®

28. Housing Affordability: Historic High’s California Vs. U.S. SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® % OF HOUSEHOLDS THAT CAN BUY QTRLYMonthly

29. Unsold Inventory Index California, December 2011: 4.2 Months SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® MONTHS

30. Tight Supply of Inventory for REO Sales SOURCE: California Association of REALTORS®

31. Higher Price = Higher Inventory Unsold Inventory Index (Months of Supply) SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

32. California’s Million-Dollar Home Sales Source: DataQuick Information Systems Year Number of Homes

33. Market Breakdown: Equity v. Distressed Sales

34. Share of Distressed Sales to Total Sales SOURCE: California Association of REALTORS®

35. Share of Distressed Sales Climbed in December 2012 Following Seasonal Trend

36. SOURCE: California Association of REALTORS® REO & Short Sales: Southern California (Percent of Total Sales)

38. Mortgage Foreclosure & Delinquency Rates California: Q3-2011 SOURCE: Mortgage Bankers Association Delinquencies: Long Run Average: 4.4% Foreclosure Rate: Long Run Average: 1.2%

39. Foreclosures San Diego County SOURCE: Real Estate Research Council

41. Carlsbad Preforeclosure: 199 Auction: 212 Bank Owned: 66 Source: ForeclosureRadar.com as of 01/30/2012.

42. Del Mar Preforeclosure: 13 Auction: 20 Bank Owned: 7 Source: ForeclosureRadar.com as of 01/30/2012.

43. Rancho Bernardo Preforeclosure: 87 Auction: 85 Bank Owned: 29 Source: ForeclosureRadar.com as of 01/30/2012.

44. Sacramento Preforeclosure: 2,216 Auction: 1,905 Bank Owned: 1,560 Source: ForeclosureRadar.com as of 08/19/11

45. Sacramento Preforeclosure: 2,216 Auction: 1,905 Bank Owned: 1,560 Source: ForeclosureRadar.com as of 08/19/11

46. Sacramento Preforeclosure: 2,216 Auction: 1,905 Bank Owned: 1,560 Source: ForeclosureRadar.com as of 08/19/11

47. Sacramento Preforeclosure: 2,216 Auction: 1,905 Bank Owned: 1,560 Source: ForeclosureRadar.com as of 08/19/11

48. Local Market Conditions

49. Carlsbad

50. Sales of Residential Homes Carlsbad, December 2011: 112 Units Up 6.7% MTM, Down 3.4% YTY SOURCE: Clarus Market Metrics

51. Median Price of Residential Homes Carlsbad, December 2011: $502,500, Down 3.4% MTM, Down 15.2% YTY SOURCE: Clarus Market Metrics

52. For Sale Properties Carlsbad, December 2011: 829 Units, Down 11.8% MTM, Down 9.1% YTY SOURCE: Clarus Market Metrics

53. Months Supply of Inventory Carlsbad, December 2011: 5.7 Months SOURCE: Clarus Market Metrics

54. Del Mar

55. Sales of Residential Homes Del Mar, December 2011: 13 Units Up 18.2% MTM, Even 0% YTY SOURCE: Clarus Market Metrics

56. Median Price of Residential Homes Del Mar, December 2011: $962,500 Up 23.4% MTM, Down 3.7% YTY SOURCE: Clarus Market Metrics

57. For Sale Properties Del Mar, Dec. 2011: 182 Units Down 9.5% MTM, Down 29.2% YTY SOURCE: Clarus Market Metrics

58. Months Supply of Inventory Del Mar, December 2011: 9.9 Months SOURCE: Clarus Market Metrics

59. Rancho Bernardo

60. Sales of Residential Homes Rancho Bernardo, December 2011: 64 Units Up 3.2% MTM, Even 0% YTY SOURCE: Clarus Market Metrics

61. Median Price of Residential Homes Rancho Bernardo, Dec. 2011: $277,500 Down 21.3% MTM, Down 25.5% YTY SOURCE: Clarus Market Metrics

62. For Sale Properties Rancho Bernardo, Dec. 2011: 413 Units Down 7.01% MTM, Down 13.8% YTY SOURCE: Clarus Market Metrics

63. Months Supply of Inventory Rancho Bernardo, December 2011: 7.0 Months SOURCE: Clarus Market Metrics

64. 2011 Annual Housing Market Survey

65. Equity vs. REO vs. Short Sales Equity SalesREO SalesShort Sales Share of Total Sales58.7%19.7%20.2% Median Home Price$431,000$240,000$287,000 Square Footage1,7831,5001,600 Price / SF$250$112$175 Sales-to-List Price Ratio95.9%98.0%95.9% % of Sales With Multiple Offers35.2%58.3%57.5% Avg. Number of Offers3.0 3.6 % of All Cash Sales25.5%34.0%23.3% Days on MLS6750141 Days in Escrow35 45

66. Proportion of Sellers Planning to Repurchase Q. Is the seller planning on purchasing another home?

67. Reasons Sellers Not Planning to Buy Another Home Q. Why is the seller not planning to purchase another home?

68. Reasons For Selling All Home Sellers Q. What was the single most important reason for selling/buying the property?

69. Investments & Second/ Vacation Homes

70. Foreign Buyers Q. Was the buyer a foreign buyer?

71. California Housing Market Forecast

72. Forecast Progress Report Source: CALIFORNIA ASSOCIATION OF REALTORS® Forecast Date: September 2011 vs October 2010

73. California Housing Market Outlook Source: CALIFORNIA ASSOCIATION OF REALTORS® Forecast Date: September 2011

74. Buyers in Today’s Market: 2011 Survey of California Home Buyers

75. Age Q. What is your age? Median Age: 35

76. Buyers Are Getting Younger

77. Buyers Are Highly Educated Q. What is the highest level of education you have completed?

78. Percentage of First-time Buyers Remains High Q. Was this your first home purchase?

79. The Buying Experience  Considered buying for over 4 months & investigated homes/neighborhoods for 2.5 months, on average, before contacting an agent  Viewed 12 homes in 8 weeks with agent  76% didn’t close escrow on time  49% owned previous home  Motivated by price decreases & mortgage interest and property tax deductions  80% found home through agent

80. Living Arrangement Before Purchase Q. What was your living arrangement immediately before your recent home purchase?

81. Buyers Spend More Time Considering Purchases Before Contacting Agent Q. How many weeks did you consider buying a home before contacting a real estate agent?

82. Time Spent Less Time Investigating Options Before Contacting Agent Q. How many weeks did you spend investigating homes and neighborhoods before contacting a real estate agent?

83. Buyers Viewed Fewer Homes With Agent Q. About how many different homes did you preview and visit with him/her [agent] prior to your purchase? * Reflects only buyers who used an agent

84. What Got Buyers Off the Fence? Q. What got you off the fence and motivated you to buy your home when you did?

85. How Buyers Found Home: 80% Agent - 2011 - Q. How did you find the home your purcahsed?

86. How Buyers Found Home: 90% Agent - 2007 - Q. How did you find the home your purcahsed?

87. Top 10 Websites Used Real estate company website Real estate agent website Q. Which websites did you use as part of your home buying process?

88. Most Useful Websites Real estate company website Real estate agent website Q. What was the most useful website that you visited during your home buying process?

89. Quick Facts  92% of buyers obtained financing, but 72% found it difficult  42% of buyers put 20% down  Over 84% obtained a 30-year, fixed rate loan Q. For which of the following did you use the internet as a part of your home buying process?

90. Buyers Continue to Have Difficulties Obtaining Financing 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. 2009: Mean = 8.1 Median = 9 2010: Mean = 8.5, Median = 9 2011: Mean = 8.0, Median = 9

91. Quick Facts About Homebuyers  94% of buyers used an agent  58% of buyers found their agent online  56% of buyers interviewed at least 2 agents  51% Googled their agent  93% are receptive to receiving information via social media  54% would work with same agent again  80% would find agent ratings beneficial

92. # of Agents Interviewed Q. How many agents did you interview prior to selecting the agent you used in your recent home purchase?

93. Why Buyers Chose their Agent 1. Most responsive (28%) 2. Worked with agent before (18%) 3. First to respond (17%) 4. Most aggressive (16%) 5. Most knowledgeable (6%) Q. What was the single most important reason for selecting the agent that you used in your recent home purchase?

94. Agent Response Time Is Very Important - Rating on 1 to 5 Scale - Q. Please rate the importance of the agent’s response time in the decision on your final selection on a scale of one to five, with five being extremely important and one being not at all important.

95. Agents Need to Improve Response Time - Rating on 1 to 5 Scale - Q. Did your real estate agent meet your expectations on response time? Please rate your agent’s response time on a scale of one to five, with five being agent exceedingly surpassed expectations and one being agent fell way below expectations.

96. Q. What was the typical response time you expected from your agent to return any form of communication to you? Over 1/3 of Buyers Expect Instant Response from Agent - Up 50% in Recent Years -

97. Closing Thoughts

98. Direction of Home Prices: Sellers Skeptical; Buyers Hopeful Q: Do you think home prices in your neighborhood will go up, down or stay flat in one year, five years and 10 years?

99. Real Estate: It’s Time To Buy Again SOURCE: “Real estate: It’s time to buy again” Fortune Magazine’s 3/28/11 article written by Shawn Tully “ Forget stocks. Don't bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.”

100. 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”

101. 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”

104. Thank You www.car.org.marketdata lesliea@car.org