1. A GOOD YEAR FOR THE CALIFORNIA HOUSING MARKET SO FAR, HOW DID WE GET THERE? October 31, 2013 Oscar Wei, Senior Research Analyst

2. CALIFORNIA HOUSING MARKET OUTLOOK

3. Sales of Existing Detached Homes California, Sept. 2013 Sales: 412,880 Units, -3.1% YTD, -2.6% YTY *Sales are seasonally adjusted and annualized SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

4. Median Price of Existing Detached Homes California, September 2013: $428,810, Up 24.4% YTY SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

5. CA Unsold Inventory: Nearing Record Lows California, September 2013: 3.6 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®

6. SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Change in Inventory by Price Range (Year-to-Year)

7. Supply of Inventory Remained Tight, But Continued to Improve SERIES: Distressed Unsold Inventory Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® UNSOLD INVENTORY INDEX (MONTHS) California: September 2013

8. For the 5 th Month in a Row, the Supply of Distressed Sales Improved SERIES: Distressed Months Supply of Inventory SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® UNSOLD INVENTORY INDEX (MONTHS)

9. California Housing Market Outlook SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

10. Sales Bounce back in 2014, as Price Continues to Grow Units (Thousand) Price (Thousand) SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

11. CA: Dollar Volume Steadily Improving Up 25.3% in 2013, Up 9.3% in 2014 % Change$ in Billion -60% SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

12. 2013 ANNUAL HOUSING MARKET SURVEY

13. Methodology C.A.R. has conducted the Annual Housing Market Survey since 1981. The questions and methodology have stayed essentially the same throughout that time. The survey was sent via email to a random sample of 20,199 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 2013. The survey instrument was a questionnaire with both multiple choice and open-ended questions. There were 976 valid survey responses, equivalent to a response rate of 4.8 percent. The margin of error for this survey was +/- 3.2 percent at a 95 percent confidence level.

14. Supply Shortage Creates More Market Competition Share of home sales with multiple offers is the highest in at least the last 15 years SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

15. Long Run Average = 18% Market Competition Leads to More Sales with Above Asking Price

17. Equity Sales vs. REO vs. Short Sales (2013) Equity SalesREO SalesShort Sales Share of Total Sales 80.8%4.9%14.0% Median Home Price $456,635$175,500$276,500 Square Footage 1,6781,4001,650 Price / SF $270$101$146 Sales-to-List Price Ratio 100.0%100.0%103.0% % of Sales With Multiple Offers 69.0%91.2%75.7% Avg. Number of Offers 5.27.47.1 % of All Cash Sales 25.2%50.0%35.7% Days on MLS 101514 Days in Escrow 303560 SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

18. Equity Sales (2011 vs. 2012 vs. 2013) 201120122013 Share of Total SalesShare of Total Sales58.7%64.7%80.8% Median Home PriceMedian Home Price$431,000$448,000$456,635 Square FootageSquare Footage1,7831,7501,678 Price / SFPrice / SF$250$243$270 Sales-to-List Price RatioSales-to-List Price Ratio95.9%97.3%100.0% % of Sales With Multiple Offers% of Sales With Multiple Offers35.2%50.9%69.0% Avg. Number of OffersAvg. Number of Offers3.04.05.2 % of All Cash Sales% of All Cash Sales25.5%27.3%25.2 Days on MLSDays on MLS673210 Days in EscrowDays in Escrow353530 SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

19. REO Sales (2011 vs. 2012 vs. 2013) 201120122013 Share of Total Sales 19.7%12.3% 4.9% Median Home Price $189,500$185,000 $175,500 Square Footage 1,5001,500 1,400 Price / SF $112$116 $101 Sales-to-List Price Ratio 98.0%100.0% 100.0% % of Sales With Multiple Offers 58.3%70.8%91.2% Avg. Number of Offers 4.34.2 7.4 % of All Cash Sales 34.0%43.1% 50.0% Days on MLS 5030 15 Days in Escrow 3545 35 SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

20. Short Sales (2011 vs. 2012 vs. 2013) 201120122013 Share of Total Sales 20.2%21.7%14.0% Median Home Price $287,000$235,000$276,500 Square Footage 1,6001,6001,650 Price / SF $175$154$146 Sales-to-List Price Ratio 95.9%99.9%103.0% % of Sales With Multiple Offers 57.5%66.1%75.7% Avg. Number of Offers 3.64.37.1 % of All Cash Sales 23.3%26.7%35.7% Days on MLS 1419014 Days in Escrow 455060 SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

21. Share of Cash Buyers decreases for the first time after 7 years of continuous Increase Over a quarter of buyers paid with all cash The share of all cash buyers had been on the rise until this year SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

22. Demand for Investment & Second/ Vacation Homes Rises from Last Year’s Dip 6% 19% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

23. For Those Who Purchased an Investment Property: 18% 82% Investment to Flip Rental Property SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

24. For Those Who Purchased an Investment Property: REO Sales Equity Sales Short Sales 2012 2013

25. Home Buyer Profile (By Type of Sales) - 2012 SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

26. Home Buyer Profile (By Type of Sales) - 2013 SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

27. Home Buyer Profile (By Type of Sales) - 2013 SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

28. More Distressed Sales Are Being Absorbed by Investors Overtime SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

29. Share of First-Time Buyers is the Lowest Since 2006 Q. Was the buyer a first-time buyer? Long Run Average = 38% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

30. Reasons for Buying Q. What was the single most important reason for buying the property? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

31. Reasons For Buying First Time Homebuyers Vs. Repeat Homebuyers Q. What was the single most important reason for selling/buying the property? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

32. First-Time Buyers Bought Because They Were Tired of Renting, Highest in Three Years Q. Was the buyer a first-time buyer? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

33. Q. What was the amount of downpayment? The Median Down Payment Up 8% from 2012, As Home Prices Continue to Increase SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

34. Median Down Payment First-Time Homebuyers Vs. Repeat Homebuyers Q. What was the amount of downpayment? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

35. Cash Source for Down Payment First-Time Buyer vs. Repeat Buyer Q. What was the source of the cash the buyer used for a downpayment or to purchase the residence? First-time BuyersRepeat BuyersAll Buyers Personal saving 70.5%55.7%59.0% Proceeds from sale of previous residence 0.0%21.5%15.7% Borrowed or gift from relatives 13.9%4.3%7.0% Sale of personal assets other than real property 2.4%2.3%2.3% Inheritance2.0%3.0%2.8% Proceeds from sale or refi of another property 0.0%3.1%2.2% Other11.2%10.1%11.0% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

36. Repeat Buyers Rely on Personal Savings As Down Payment Q. What was the source of the cash the buyer used for a down payment or to purchase the residence? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

37. International Buyers are Getting a Bigger Slice of the Market than Last Year. 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: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

38. Country of International Buyer China (34%) Canada (10%) Mexico (15%) SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

39. REALTORS® Worked with International Buyers in the Past 12 Months Q. How many properties have you sold to an international buyer in the last 12 months? % Who Sold to International Buyers # of Properties Sold to International Buyers in the Last 12 Months SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

40. Reasons For Selling Q. What was the single most important reason for selling the property? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

41. One of Six Sellers Sold Because Their Properties Were in Distressed Status Q. What was the single most important reason for selling/buying the property? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

42. Reasons For Selling Home (2013) Equity vs. REO vs. Short Sales Equity Sales REO Sales Short Sales All Sales Foreclosure/Short Sale/Default 2%91%74%16% Change in Family Status 13%4%5%12% Retirement/Move to Retirement Community 12%0%1%10% Investment/ Tax Considerations 12%0%1%11% Desired Better Location 14%0%2%11% Desired Smaller Home 7%0%1%6% Changed Jobs 7%0%6%6% Desired Larger Home 15%0%2%13% Other18%4%8%17% Q. What was the single most important reason for selling the property? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

43. Seller Household Formation Equity vs. REO vs. Short Sales Equity SalesREO SalesShort Sales Single25.8%0.0%31.6% Married Couple with Dependents 31.2%2.6%38.6% Married Couple without Dependents 26.3%5.3%18.4% 2 or More Individuals (Related or Unrelated) 9.0%0.0%7.0% Banks/Lending Institutions 0.3%84.2%0.9% Other7.3%7.9%3.5% Total100.0%100.0%100.0% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

44. Q. What was the net cash gain or net loss to the seller as a result of this sale? After Reaching a Record Low in 2012, the Median Net Cash Gain to Sellers Bounced Back. SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

45. Sellers with Net Cash Loss Dropped to the Lowest Level since 2007 Q. What was the net cash gain or net loss to the seller as a result of this sale? Long Run Average = 12.8% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

46. Home Seller Profile (By Type of Sales) Equity SalesShort Sales Median Age of Sellers 5550 Median Household Income $100,000$60,000 Years Seller Lived in Home 9 8 Percent of Sales with Net Cash Loss 6.2%40.4% Median Net Cash Gain/Net Cash Loss to Seller $80,000$0 SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

47. More Sellers Are Planning to Buy Another Home As the Market Slowly Recovers Q. Is the seller planning on purchasing another home? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

48. For Those Who Do Not Plan to Repurchase, Here Are Their Top 5 Reasons: SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

49. Reasons Sellers Not Planning to Buy Another Home (2012) Q. Why is the seller not planning to purchase another home? Equity SalesREO SalesShort Sales Seller is lender/bank 0%88%3% Seller prefers to have less financial obligation 20%0%12% Poor credit background 0%3%31% Lack of cash for down payment 6%3%17% Out of work/unemployment 3%0%10% Decide to live with family/friends 11%0%9% Waiting for market to bottom 1%0%0% Other57%6%19% Total100%100%100% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

50. Reasons Sellers Not Planning to Buy Another Home (2013) Q. Why is the seller not planning to purchase another home? Equity SalesREO SalesShort Sales Seller is lender/bank 0%88%5% Seller prefers to have less financial obligation 26%0%18% Poor credit background 1%0%19% Lack of cash for down payment 3%0%18% Out of work/unemployment 4%0%9% Decide to live with family/friends 7%0%9% Waiting for market to bottom 3%4%0% Other56%8%23% Total100%100%100% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

51. Top Reasons Under “Other” for Equity Sellers Not Planning to Buy Another Home SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

52. Location of Seller’s New Home 200520062007200820092010201120122013 Within the same county 38%41%37%45%47%42%49%49%46% In another county in California 23%18%24%17%21%21%19%18%20% In another state 31%28%29%27%19%20%20%22%19% Out of US 1%2%1%1%2%1%1%1%0% Don't Know/Not sure 7%11%9%10%12%16%10%10%15% Total100%100%100%100%100%100%100%100%100% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

53. IS THE HOUSING RECOVERY SUSTAINABLE?

54. Buyers Have More “Skin” in the Game 200620122013 % of buyers with 20% or more down payment 43.2%54.4%52.2% % of buyers with zero down payment 21.1%4.6%5.9% % of cash buyers 11.0%29.6%27.4% % of home buyers with a second mortgage 43.4%1.8%2.2% % of buyer with ARM 32.6%3.5%4.0% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

55. Percent of Buyers with Zero Down Payment SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

56. Proportion of Transactions With Second Mortgages Q. In addition to the first mortgage or assumption, was there a second mortgage? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

57. Percent of Buyers with Second Mortgage SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

58. Q. Please indicate the type of mortgage. Share of FHA Still Significantly Higher than 2007, But Was the Lowest in 6 Years (First Mortgage) SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

59. Less Likelihood to Default as Monthly Payment Is More Affordable 200620122013 Average mortgage rate (FRM) 6.4%3.7%3.8% Median home price for existing single-family homes $556,430$319,310$408,600 Median household income for home buyers $100,000$100,000$100,000 Housing Affordability Index 12.0%51.0%36.0% SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

60. Mortgage Rates January 2009 – October 2013 MONTHLY WEEKLY SERIES: 30Yr FRM, 1Yr ARM SOURCE: Federal Home Loan Mortgage Corporation

61. Housing Affordability Hit by Mortgage Rate and Price Gains But Still Attractive % OF HOUSEHOLDS THAT CAN BUY SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

62. House Payment Is Significantly Below What It was at the Peak SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® PITI/Month Peak: $3,668/mo (2007 Q2) Latest: $1,998/mo (2013 Q2)

63. … And Minimum Qualifying Income Is More Than 40% Below the Peak SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Min. Income Peak: $146,701/yr (2007 Q2) Latest: $79,914/yr (2013 Q2)

64. CA Median Monthly Mortgage Payment What Will Happen When Mortgage Rates Increase? Q2-2013 Median Price $415,770 20% Downpayment INTEREST RATE MONTHLY MORTGAGE SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

65. CA Minimum Qualifying Income What Will Happen When Mortgage Rates Increase? Q2-2013 Median Price $415,770 20% Downpayment INTEREST RATE MONTHLY MORTGAGE SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

66. CA Housing Affordability Index What Will Happen When Mortgage Rates Increase? Q2-2013 Median Price $415,770 20% Downpayment INTEREST RATE % OF HOUSEHOLDS THAT CAN BUY, ALL ELSE CONSTANT SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

67. 2014: Many Market Opportunities First-time Buyers Formerly “Underwater” Homeowners Property Management International Clients

68. How Client Found Their Agent Q. How did your client find and select you to represent them? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

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