1. CALIFORNIA HOUSING MARKET OUTLOOK August 21,2015 2015 California GAD Institute Joel Singer, Chief Executive Officer

2. OVERVIEW Economic Outlook California Housing Market Outlook Membership Survey Legislative and Industry Issues Consumer Behavior

3. ECONOMIC OUTLOOK

4. GDP BOUNCED BACK AFTER A SLOW START 2014: 2.4%; 2015 Q2: 2.3% 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

5. UNEMPLOYMENT RATES AT 7-YEAR LOWS June 2015: US 5.3% & CA 6.3% SERIES: Unemployment Rate SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

6. EMPLOYMENT GROWTH, CALIFORNIA VS. U.S. ANNUAL PERCENT CHANGE SERIES: Total Nonfarm Employment SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

7. JOB TRENDS BY CALIFORNIA METRO AREA SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division ANNUAL PERCENT CHANGE June 2015: CA +2.9%, +461,800

8. CONSUMER CONFIDENCE INDEX June 2015: 101.4 INDEX, 100=1985 SERIES: Consumer Confidence SOURCE: The Conference Board

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

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

11. CALIFORNIA HOUSING MARKET OUTLOOK

12. SALES OF EXISTING DETACHED HOMES California, Jul 2015 Sales: 449,530 Units, +7.1% YTD, +12.7% YTY *Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Jul-15: 449,530 Jul-14: 398,980

13. MEDIAN PRICE OF EXISTING DETACHED HOMES California, Jul 2015: $488,260, -0.3% MTM, +5.4% YTY SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Jul-15: $488,260 Jul-15: $463,330

14. INVENTORY CONTINUED TO DECLINE FROM LAST YEAR Jul 2014: 3.8 Months; Jul 2015: 3.3 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®

15. DEMAND OUTPACING SUPPLY SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® July 2015

16. CA PERMITS UP BUT MORE UNITS NEEDED 2014: 85,065 Units, Up 3.4% from 2013 2015f: 91,750 Units SERIES: New Housing Permits SOURCE: Construction Industry Research Board Household Growth: 165,000/yr

17. POPULATION AND HOUSEHOLDS WILL CONTINUE TO GROW California 1970-2020 SOURCE: Moody’s Analytics

18. Housing market is improving given fundamentals – Low mortgage rates – Job & Income growth are back And yet… – Supply is significantly below long-run average – Share of first-time buyers LOW – Affordability key concern for renters 2015 - WHERE ARE WE TODAY?

19. SHARE OF FIRST-TIME BUYERS UP IN ’14 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®

20. HOUSING AFFORDABILITY DOWN SHARPLY SINCE Q1 2012 California vs. U.S. – 1984-2014 % OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® AnnualQuarterly

21. CALIFORNIA’S MAJOR METROS ARE LESS AFFORDABLE THAN THE AVERAGE U.S. METRO SOURCE: Legislative Analyst’s Office

22. STATE’S LOW-INCOME HH’S SPEND MUCH MORE! SOURCE: Legislative Analyst’s Office

23. HOUSING AFFORDABILITY DOWN SHARPLY SINCE Q1 2012 California vs. U.S. – 1984-2014 % OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® AnnualQuarterly

24. HOUSING AFFORDABILITY IN CA: BY COUNTY SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® HAI % able to purchase median priced home 2015 Q1

25. AFFORDABLE INVENTORY AVAILABLE TO MEDIAN-INCOME HOUSEHOLDS SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 2015 Q1

26. HOW WAGES MEASURED AGAINST INCOME REQUIRED TO BUY A HOME (2014) SOURCE: Bureau of Labor Statistics, C.A.R. Annual Mean Wage California

27. MILLENNIAL “TRUE” HOMEOWNERSHIP FALLING …

28. SHARE OF FIRST-TIME BUYERS UP IN ’14 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®

29. MILLENIALS – DIFFERENT HOUSING ASPIRATIONS – OR LACK OF MEANS?

30. AN INCREASING NUMBER OF THEM STILL LIVE WITH THEIR PARENTS SOURCE: U.S. Dept. of Commerce, Wells Fargo Securities LLC

31. MAJORITY RENT BECAUSE THEY CAN’T AFFORD TO BUY Why do you rent instead of buying? SERIES: 2014 Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

32. MILLENNIALS’ BIGGEST CONCERNS What are your biggest concerns about home ownership? SERIES: 2014 Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

33. STUDENT DEBT: DRAGS ON HOME SALES

34. MOST MILLENNIALS IN CALIFORNIA 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 ?

35. MANY OF THEM, HOWEVER, PLAN TO LEAVE THE NEST BY 2018 SOURCE: 2013 Demand Institute Housing & Community Survey; 2013 Demand Institute Housing Forecasts

36. WHAT FACTORS WILL ENCOURAGE MILLENNIALS TO BUY A HOME IN THE FUTURE Source: Carrington Mortgage Services, LLC and One Poll

37. HOMEOWNERS DO NOT MOVE AS OFTEN AS THEY USED TO SERIES: Percent of existing single-family homes being sold SOURCE: Census Bureau, American Community Survey, Moody’s Analytics, C.A.R. Tenure of Homeowners (Years)

38. HOMEOWNERS DO NOT MOVE AS OFTEN AS THEY USED TO Reasons for longer tenure: Mortgage Lock-in effects “Underwater” homeowners Lack of “affordable” trade-up/down properties More costly to move than to remodel Investors using properties as rental Prop. 13?

39. NET MIGRATION – CA TO OTHER STATES

40. NET MIGRATION BY ANNUAL INCOME, 2007-2013

41. CA PERMITS UP BUT MORE UNITS NEEDED 2014: 85,065 Units, Up 3.4% from 2013 2015f: 91,750 Units SERIES: New Housing Permits SOURCE: Construction Industry Research Board Household Growth: 165,000/yr

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

43. WHAT IS OUR FUTURE? “… If current trends continue, California will build less than 60 percent of the new housing needed over the next 20 years.” Little Hoover Commission Report on Housing in California

44. SOLVING CALIFORNIA’S HOUSING PROBLEM

45. SOLUTIONS Production Gap is Primary Source of CA’s Housing Problems Solutions must include: – Increase in Production Infill and brownfield opportunities in urban areas where shortage is critical – Revitalization of Neighborhoods – Change Incentive Structure Facing Cities Fiscal Housing & Zoning Requirements Enforce housing elements of general plans, create incentives to comply – Improve Business & Legal Climate for Developers – CEQA Reform

46. SOLUTIONS Attitude Shift is Essential to Moving Toward Solutions… – By Households as Residents – By Households as Taxpayers – By Local Elected Officials – By State Officials … and an Attitude Shift Requires Education and Heightened Awareness of Problems, Implications, and Solutions! Solutions will take time

47. 2015 MEMBERSHIP SURVEY

48. UNAIDED AWARENESS OF REAL ESTATE ASSOCIATIONS IN 2015 Q: What industry (real estate) associations or other organizations are you aware of?

49. AWARENESS OF ASSOCIATIONS SLIGHTLY UP FOR C.A.R./NAR Q: What industry (real estate) associations or other organizations are you aware of?

50. 84% FIND C.A.R HELPFUL IN THEIR REAL ESTATE BUSINESS Q: Do you feel that organized real estate, such as C.A.R, helps you in your real estate business?

51. HOW C.A.R HELPS REALTORS® Q: Why do you feel that organized real estate does help you in your real estate business?

52. OVER THE YEARS LEGAL HOTLINE REMAINS TOP BENEFIT, ZIPFORM® “BIGGEST GAINER” Q: What benefits, information, events, services or products does the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) offer REALTORS® like you?

53. WHEN I HEAR C.A.R., I THINK… (UNAIDED RESPONSES) Q: When you hear CALIFORNIA ASSOCIATION OF REALTORS®, what is the first thing that comes to mind? [Single response only.] (Selected listing of highest frequency responses) 2012201320142015 Industry advocate (41%) Keepings member on top of key issues (41%) Keepings member on top of key issues (28%) Lobbying (24%) Essential (18%)Lobbying (25%)Lobbying (24%) Code of Ethics (23%) Protects interests of REALTORS® (13%) Essential (21%) Code of ethics (17%) Keepings member on top of key issues (22%) Supportive (9%) Legal services (9%) Legal services (13%) zipForm® (16%) Keepings member on top of key issues (6%) Education, training (5%) zipForm® (11%) Legal Services (15%)

54. 2015 TOP 5 BENEFITS MENTIONED Q: What benefits, information, events, services or products does the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) offer REALTORS® like you?

55. Q: Please rate C.A.R on a series of programs on a scale of 1 to 10, with 10 being extremely satisfied and 1 being extremely dissatisfied. SATISFACTION OF SERVICES AND PROGRAMS

56. LEGISLATIVE & INDUSTRY ISSUES

57. Q: Please rate the following legislative issues on a 10pt. Scale in order of their importance, with 10 being extremely important and 1 being extremely unimportant. FINANCE AMONG THE MOST IMPORTANT LEGISLATIVE ISSUES IN 2015 IN 2015 (AVERAGE SCORE)

58. Q: Please rate the following industry issues on a 10pt. Scale in order of their importance, with 10 being extremely important and 1 being extremely unimportant. ETHICS AND PROFESSIONALISM MOST IMPORTANT INDUSTRY ISSUES IN 2015

59. INVENTORY & FINANCING GREATEST CHALLENGES IN 2015 Q: What do you anticipate will be the greatest challenge in your real estate business over the next year?

60. CONSUMER BEHAVIOR

61. TOP 5 REASONS FOR BUYING Q. What were your main reasons for buying your home?

62. REASONS FOR NOT BUYING SOONER FIRST-TIME BUYERS VS. REPEAT BUYERS Q. Why didn’t you buy a home sooner?

63. TOP REASONS FOR SELLING Q: What was your primary reason for selling your home?

64. REASONS FOR SELLING DIFFER ACROSS GENERATIONS Q: What was your primary reason for selling your home? AllGen YGen XBoomersSilent Desired better location19%25%20% 4.5% Wanted larger home13%25%24%3.3%2.3% Downsizing12%1.6%6.6%14%32% Change in family status11%16%13%7.6%9.1% Relocating for work11%14%16%8.1%0% I was retiring8.0%0%0.6%17%5% Trouble making mortgage payment 4.3%4.7%5.4%2.9%7.0% I am an empty nester3.3%0%o%7.1%2.3% I lost my job2.9%3.1%1.8%4.3%0% For the investment advantages 2.1%1.6%3.0%0.5%6.8%

65. 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?.

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

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

68. SELLER SATISFACTION WITH AGENT IS CORRELATED TO FACILITATING THE TRANSACTION Q: Please explain why you had that level of satisfaction with your agent.

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

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

71. 35% OF BUYERS USE SOCIAL MEDIA IN BUYING PROCESS Q. How did you use social media (such as Facebook, Twitter, YouTube, etc.) in your home buying process?

72. THANK YOU! joels@car.org