2014 - 2015 California Economic & Market Outlook

2014 - 2015 CALIFORNIA
ECONOMIC & MARKET
OUTLOOK
October 29,2014
SILVAR
Leslie Appleton-Young, Chief Economist

OVERVIEW
• Economic Outlook
• California Housing Market Outlook
• Housing Affordability
• Regional Market
• 2015 Forecast

-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014P
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Q1-12
Q2-12
Q3-12
Q4-12
Q1-13
Q2-13
Q3-13
Q4-13
Q1-14
Q2-14
ECONOMY: GAINING MOMENTUM
2013: 1.9%; 2014: 2.2%; 2015: 3.0%; 2014 Q2: 4.6%
ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $
ANNUALLY QUARTERLY
2009 Largest Annual Drop since 1938 (-3.4%)
SERIES: GDP
SOURCE: US Dept. of Commerce, Bureau of Economic Analysis

US UNEMPLOYMENT RATE BELOW 6%
CA - 7.3% (Sep. 2014) vs. US - 5.9% (Sep. 2014)
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14% US-CA CA US
SERIES: Unemployment Rate
SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

EMPLOYMENT GROWTH, CAVS. U.S.
-8
-6
-4
-2
0
2
4 California US
ANNUAL PERCENT CHANGE
SERIES:Total Nonfarm Employment

PERCENT JOB LOSSES PRIOR RECESSIONS –
RECENT CYCLEWORST BY FAR

EMPLOYMENT GROWTH, BY INDUSTRY
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Construction Manufacturing Service
SERIES:Total Nonfarm Employment By Industry
SOURCE: CA Employment Development Division
September 2014: CA +2.3%, +390,600

CALIFORNIA JOB CHANGES BY INDUSTRY
-2.2%
-1.7%
-0.3%
0.9%
1.3%
1.4%
1.5%
1.5%
2.1%
2.3%
3.3%
4.7%
4.9%
5.3%
6.2%
-3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7%
Nondurable Goods
Finance & Insurance
Government
Durable Goods
Educational Services
WholesaleTrade
RetailTrade
Transportation, Warehousing & Utilities
Real Estate & Rental & Leasing
Leisure & Hospitality
Health Care & Social Assistance
Professional, Scientific &Technical Services
Information
Admistrative & Support &Waste Services
Construction
SERIES:Total Nonfarm Employment By Industry
September 2014: CA +2.3%, +390,600

JOBTRENDS BY CALIFORNIA METRO AREA
1.1%
1.3%
1.7%
1.8%
1.9%
2.0%
2.0%
2.1%
2.5%
2.5%
3.5%
3.7%
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%
Modesto
Stockton MSA
Bakersfield
Los Angeles
Orange…
Ventura
Oakland
Sacramento
Fresno MSA
San Diego
San Jose
San Francisco
SERIES:Total Nonfarm Employment
SOURCE: CA Employment Development Division
ANNUALPERCENTCHANGE
September 2014: CA +2.3%, +390,600

CONSUMER PRICE INDEX
September 2014:All Items +1.7%YTY; Core +1.7%YTY
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6% All Items Core
SERIES: Consumer Price Index
SOURCE: US Bureau of Labor Statistics

CONSUMER CONFIDENCE: UNCERTAINTY
October 2014: 94.5
INDEX, 100=1985
SERIES: Consumer Confidence
SOURCE: The Conference Board
0
20
40
60
80
100
120

0%
1%
2%
3%
4%
5%
6%
2009/01
2009/04
2009/07
2009/10
2010/01
2010/04
2010/07
2010/10
2011/01
2011/04
2011/07
2011/10
2012/01
2012/04
2012/07
2012/10
2013/01
2013/04
2013/07
2013/10
2014/01
2014/04
2014/07
8.28.14
9.18.14
FRM
ARM
MORTGAGE RATES: WHAT HAPPENED?
January 2009 – October 2014
MONTHLY WEEKLY
SERIES: 30Yr FRM, 1Yr ARM
SOURCE: Federal Home Loan Mortgage Corporation

FORECASTERS HAVE BEEN EXPECTING
RATESTO RISE
Percent
0
1
2
3
4
5
6
0
1
2
3
4
5
6
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Actual 10-year Treasury yield (solid black line)
Predictions out to five quarters ahead of professional forecasters (hatched lines)
Percent
SERIES: Loan Officer Survey
SOURCE: Philadelphia Federal Reserve Survey of Professional Forecasters, Bloomberg

MORTGAGE RATES + 1% SPRING 2013
ACTUALTAPERING? NO IMPACT?
0%
1%
2%
3%
4%
5%
6%
7%
8% FRM ARM Federal Funds
SERIES: 30Yr FRM, 1Yr ARM, Federal Funds
SOURCE: Federal Home Loan Mortgage Corporation

U.S. DEPOSITORY INSTITUTIONS:
HIGH LEVEL OF EXCESS RESERVES SINCE 9/08
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
SERIES: Excess Reserves of Depository Institutions
SOURCE: Federal Reserve Bank of Saint Louis
$ BILLIONS

U.S. ECONOMIC FORECAST
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%
SERIES: U.S. Economic Outlook
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

CALIFORNIA ECONOMIC FORECAST
SERIES: CA Economic Outlook
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%
0.9%
2014 P
2.2%
7.5%
0.9%
3.0%
2015 F
2.4%
6.7%
0.9%
3.8%

CALIFORNIA HOUSING
MARKET OUTLOOK

TODAY’S MARKET
• Clearly well on the road to recovering - Bay Area
strongest regional market
• Volume – A bit down, still reliant on investment sales
• Prices up sharply, but increases slowing in most markets
• Inventory remains tight but up from last year
• Pent-up/unrealized demand not yet translating into sales
• Affordability challenges emerging once again…

CA SALES FLAT SINCE SPRING 2014
California, Sep. 2014 Sales: 396,440 Units, -9.5%YTD, -4.2%YTY
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
*Sales are seasonally adjusted and annualized
SERIES: Sales of Existing Single Family Homes
Sep-14:
396,440
Sep-13:
413,850

MULTIPLE OFFERS DECLINEWITH LESS
INTENSE MARKET COMPETITION IN 2014
AFTER PEAKING IN 2013
72%
53%
5.7
4.3
0
1
2
3
4
5
6
7
0%
10%
20%
30%
40%
50%
60%
70%
80%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
% with Multiple Offers # of Multiple offers (Average)
SERIES: 2014 Housing Market Survey

49 % SOLD BELOW ASKING IN 2014
7%
11%
28%
54%
0% 20% 40% 60%
20% or more
10% to 19.99%
5% to 9.99%
Less than 5%
% of Price Reduction
(Properties Sold Below Asking Price)
49%
18%
33%
Sale Price to Asking Price
BelowAsking Price At Asking Price Above Asking Price
Median Reduction:
4.5% of List Price

50%
33%
0%
10%
20%
30%
40%
50%
60%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
% of Sales above Asking Price
Long Run Average = 19%
FEWER HOMES SOLD ABOVETHE ASKING PRICE AS
MARKET COMPETITION COOLED IN 2014
0
2
4
6
8
10
12
14
16
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Med. Price Discount
Med.Weeks on MLS
0%, 2.1
weeks
Median Price Discount & Weeks on Market
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?

INVESTMENT HOMES : 15% MARKET
SHARE
19%
15%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Long Run Average: 12 %

WE’VE COME A LONGWAY SINCE 2009:
EQUITY SALES: 9 OUT OF 10TRANSACTIONS
91.0%
4.6%
4.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
Jul-12
Oct-12
Jan-13
Apr-13
Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Equity Sales Short Sale REO
SERIES: Distressed Sales, Not Seasonally Adjusted

DISTRESSED SALES: BAY AREA
Percent ofTotal Sales
0%
10%
20%
30%
40%
50%
60%
Alameda Contra Costa Marin Napa Solano Sonoma
2.5% 2.9% 1.8%
4.5%
13%
4.2%
23% 22%
25%
36%
60%
32%
Aug-14 Aug-12
SERIES: Distressed Sales, Not Seasonally Adjusted

SANTA CLARA COUNTY
Preforeclosure: 486 • Auction: 465 • Bank Owned: 71
SOURCE: PropertyRadar.com as of 10/14/14

SAN JOSE

CITY OF SANTA CLARA

PALO ALTO

SALES GROWING IN HIGHER PRICE RANGES
SERIES: Sales of Existing Detached Homes
-22.9%
-0.7%
-2.9%
4.9% 5.9%
2.8%
18.5%
28.3%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Sep-14Year-over-Year % Chg. in Sales

CHANGE IN SALES BY PRICE RANGE
(Year-to-Year)
-22.9%
9.0%
-0.7%
-2.9%
4.9%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
$0 - $200k $500k+ $200 - $300k $300 - $400k $400 - $500k
SERIES: Sales of Existing Detached Homes

PRICE PLATEAU AHEAD; ANNUAL GAINS
SLOWING
California, Sep. 2014: $460,940, Up 7.6%YTY
SERIES: Median Price of Existing Single Family Homes
Sep-14:
$460,940
Sep-13:
$428,290
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
P: May-07
$594,530
T: Feb-09
$245,230
-59% from
peak

TROUGHVS. CURRENT PRICE
By Counties, August 2014
SERIES: Median Price of Existing Detached Homes
Region Trough
Month
Trough
Price
Aug-14
Median
%Chg Fr
Trough
Santa Barbara Mar-09 $296,590 $806,030 171.8%
Monterey May-09 $203,500 $492,500 142.0%
Alameda Jan-09 $346,236 $732,220 111.5%
Lake Jun-11 $85,620 $178,330 108.3%
California Feb-09 $245,230 $480,280 95.8%
Santa Clara Feb-09 $445,000 $865,000 94.4%
Merced Jan-10 $96,670 $186,670 93.1%
Los Angeles May-10 $248,850 $474,640 90.7%
Tehama Feb-11 $83,330 $156,000 87.2%
Riverside Apr-09 $171,480 $318,640 85.8%

$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000 California US
CALIFORNIAVS. U.S. MEDIAN PRICES
1970-2014
SERIES: Median Price of Existing Single Family Homes

INVENTORY IMPROVING FROM LASTYEAR
Sept 2013: 3.6 Months; Sept 2014: 4.2 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.
0
2
4
6
8
10
12
14
16
18
SERIES: Unsold Inventory Index of Existing Single Family Homes

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
Price Range (Thousand) Sep-14 Aug-14 Sep-13
$1,000K+ 5.5 5.0 5.9
$750-999K 4.3 3.9 3.7
$500-749K 3.9 3.8 3.5
$400-499K 3.9 3.8 3.3
$300-399K 4.1 4.0 3.3
$200-299K 4.0 4.0 3.2
$0-199K 3.9 3.8 3.2

WHYWAS/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

BUYINGTO RENTV. FLIP; CHANGE IN
PREFERRED INVESTMENT STRATEGY
Investment to Flip
Rental Property

REAL ENEMY OFTHE FUTURE OF
CALIFORNIA?
• Housing Affordability
• TheAchilles 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

HOUSING AFFORDABILITY DOWN
SHARPLY SINCE Q1 2012
% OF HOUSEHOLDSTHAT CAN BUY
A MEDIAN-PRICED HOME
SERIES: Housing Affordability Index ofTraditional Buyers
0%
10%
20%
30%
40%
50%
60%
70%
80% CA US
California vs. U.S. – 1984-2014
Annual Quarterly

SOME GOOD NEWS:MEDIAN CA HOUSE
PAYMENTWELL BELOW PEAK
PEAK
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 2009 Q1
SERIES: Housing Affordability Index
PITI/Month
Peak: $3,668/mo (2007 Q2)
Latest: $2,340/mo (2014 Q2)

… MINIMUM QUALIFYING INCOME
ALSOWELL BELOW PEAK
$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
Jan-80Jan-82Jan-84Jan-86Jan-88Jan-90Jan-92Jan-94 Jan-
96
Jan-98Jan-00Jan-02Jan-04 2006
Q1
2012
Q1
Min. Income
Peak: $146,701/yr (2007 Q2)
Latest: $93,593/yr (2014 Q2)

HOUSE PAYMENT (INFLATION ADJUSTED)
IS AT LATE 1970’S LEVEL
PITI/Month
(ADJUSTED FOR INFLATION)
Peak: $928/mo (2006)
Latest: $458/mo (2013)
$-
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

MINIMUM QUALIFYING INCOME ISTHE
SAME AS 35YEARS AGO
Min. Income
(Adjusted for Inflation) Peak: $37,122 (2006)
Latest: $18,337 (2013)
$-
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011

HOUSING AFFORDABILITY INDEX
WhatWill HappenWhen MORTGAGE RATES
Increase?
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
35%
34%
32%
29% 27% 26%
24%
22%
Q2-2014 Median Price $457,140
20% Down payment
INTEREST RATE
% OF HOUSEHOLDSTHAT CAN BUY, ALL ELSE CONSTANT

MEDIAN MONTHLY MORTGAGE PAYMENT
WhatWill HappenWhen Mortgage Rates
Increase?
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
$1,542
$1,642
$1,746 $1,853
$1,963
$2,076
$2,193
$2,312
INTEREST RATE
MONTHLY MORTGAGE
20% Down payment

MINIMUM QUALIFYING INCOME
WhatWill HappenWhen Mortgage Rates
Increase?
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
$82,703
$86,717
$90,867 $95,149
$99,557
$104,087
$108,734
$113,490
INTEREST RATE
MONTHLY MORTGAGE
20% Down payment

INCOME REQUIREDTO BUY A MEDIAN-
PRICED HOME IN CA: (PEAKVS. CURRENT)
$56,324
$93,593
$0
$20,000
$40,000
$60,000
$80,000
$100,000
2012 Q1 2014 Q2
• 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)

SHARE OF FIRST-TIME BUYERS UP
BUT STILL BELOW LONG-RUN AVERAGE
28.1%
30.5%
0%
10%
20%
30%
40%
50%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
% First-Time Home Buyers Long Run Average
Long Run Average = 38%
QUESTION: Was the buyer a first-time buyer?

WHY DOWE 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

FINANCIAL CHARACTERISTICS:
FIRST-TIMEVS. 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 $100,000 $70,000
Median Downpayment (in % to Price) 10% 20% 19.7%

REASONS FOR RENTING INSTEAD OF
BUYING
SERIES: 2013 Renter Survey
44%
9%
6%
6%
6%
5%
5%
3%
2%
Can't afford to buy
Poor credit / Can't qualify
Renting is easier
Young/Starting out/Not ready
Flexibility/Freedom if renting
Cost/Upkeep/Responsibility
Plan to / Saving for down
Never considered it/No interest
Disabled/On disability

STUDENT LOAN DEBT AN ISSUE FOR 25% OF
RENTERS
SERIES: 2013 Renter Survey
Yes, 23%
No, 75%
Refused,
2%
Student Loan Debt
78%
8%
6%
3%
2%
2%
<$10,000
$10-$20K
$20-$50K
$50-$100K
> $100K
Refused
Amount of Debt

STUDENT DEBT: DRAGS ON HOME SALES

HOMEOWNERSHIP RATE LOWER IN CA
CaliforniaVs. U.S.
40%
45%
50%
55%
60%
65%
70%
75% CA US
SERIES: Homeownership Rates
SOURCE: U.S. Census Bureau

HOMEOWNERSHIP RATE BY AGE OF
HOUSEHOLDER
SOURCE: Census Bureau

MILLENNIAL HOMEOWNERSHIP FALLING
SOURCE: Census Bureau

CALIFORNIA’S HOUSING DELEMMA
• Even with everything (or at least most things)
going right, our homeownership market is in
trouble…
• The rental market, even with the conversion of
500,000 SFH’s, is still exhibiting inadequate
supply

HOWTO MAKE IT MORE AFFORDABLE?
ONEWORD: SUPPLY
• CA Housing Needs = Minimally 165,000 Units
Annually
– Regulatory Problem
– Impact Fees
– Public Attitudes

CA PERMITS UP BUT MORE UNITS NEEDED
2013: 57,496 Units, Up 43.0% from 2012
SERIES: New Housing Permits
SOURCE: Construction Industry Research Board
0
50000
100000
150000
200000
250000
300000
350000 Single Family Multi-Family
Household Growth: 220,000-250,000/yr

SALESOFRESIDENTIALHOMES
Santa Clara County, September 2014: 844 Units
Down 9.8% MTM, Down 11.9%YTY
SOURCE: Clarus Market Metrics

MEDIANPRICEOFRESIDENTIALHOMES
Santa Clara County, September 2014: $852,500
Down 0.9% MTM, Up 10.0%YT

FORSALEPROPERTIES
Santa Clara County, September 2014: 2,598 Units
Note: “For Sale Properties” represents the overall supply that exist throughout the entire month, including any listings that appear as “Active” any
point in time during the month.

MONTH’SSUPPLYOFINVENTORY
Santa Clara County, September 2014: 1.5 Months
Note: “Month’s Supply of Inventory” 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 “For Sale” on the last day of the month in question. The inventory
figure is then divided by the number of properties that went Under Contract during the month.

City of Santa Clara, September 2014: 57 Units
Up 21.3% MTM, Up 16.3%YTY

City of Santa Clara, September 2014: $840,000
Down 4.1% MTM, Up 14.9%YTY

FORSALEPROPERTIES
City of Santa Clara, September 2014: 77 Units

City of Santa Clara, September 2014: 0.9 Months

San Jose, September 2014: 444 Units

San Jose, September 2014: $746,994
Down 3.6% MTM, Up 7.5%YTY

FORSALEPROPERTIES
San Jose, September 2014: 1,396 Units

San Jose, September 2014: 1.5 Months

Palo Alto, September 2014: 27 Units

Palo Alto, September 2014: $2,999,890

FORSALEPROPERTIES
Palo Alto, September 2014: 83 Units

Palo Alto, September 2014: 1.1 Months

CALIFORNIA HOUSING MARKET FORECAST
SERIES: CA Housing Market Outlook
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%

CALIFORNIA HOUSING MARKET OUTLOOK
Sales Down for 2014 but will Improve in 2015; Price Gains
Slowing
Units
(Thousand)
380 403
0
100
200
300
400
500
600
700
2005 2007 2009 2011 2013 2015f
Sales of Existing Detached Homes
$455
$479
$0
$100
$200
$300
$400
$500
$600
2005 2007 2009 2011 2013 2015f
Median Price
Price
(Thousand)

CA: DOLLARVOLUME UP FOR 4THYEAR
$301
$244
$164
$133 $131 $127 $121
$140
$169 $173
$193
-40%
-30%
-20%
-10%
0%
10%
20%
30%
$0
$50
$100
$150
$200
$250
$300
$350
$400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014p 2015f
$Volume of Sales Percent Change
% Change$ in Billion
-60%
Up 2.7% in 2014, Up 11.3% in 2015

REAL ESTATE IS CONSIDEREDTHE BEST
LONGTERM INVESTMENT
SOURCE: Gallup

“Make no mistake about it, the way that working-
class people build wealth is through
homeownership, not the stock market, not their
401(k) and not a pension.”
JohnTaylor, President of the National Community
Reinvestment Coalition,

ATTITUDETOWARDTHE HOME BUYING PROCESS –
MIXED RESULTS
SOURCE: How would you describe your attitude towards the home buying process?
C.A.R. 2014 Millennial Survey
0%
10%
20%
30%
40%
50%
60%
Positive Negative Neutral N/A Other
50%
34%
8%
4%
4%

MOST MILLENNIALS UNCERTAIN/DOUBTFUL
THATTHEY COULD OBTAINA MORTGAGE
NOW?AMILLENNIAL ETHNICITY
SOURCE: C.A.R. 2014 Millennial Survey
Q: Could you obtain a mortgage if you applied now ?
Yes 22%
No 33%
Don't know
45%

PEOPLEWOULD PREFERTHE FOLLOWING OVER
GOINGTHROUGHTHE HOME MORTGAGE PROCESS
AGAIN:
SOURCE: Guaranteed Rate Mortgage Survey of 1,000 adults 25 and older USA Today April 2014

C.A.R. Strategic Planning Books

THANKYOU!
www.car.org/marketdata
lesliea@car.org

2014 - 2015 California Economic & Market Outlook

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