2015 California Economic Outlook and Market Outlook. San Francisco Bay Area Real Estate Market Summary.

2015 CALIFORNIA
ECONOMIC &
MARKET
OUTLOOK
February 19, 2015
San FranciscoWCR & AOR
LeslieAppleton-Young,Chief Economist

OVERVIEW
• Macro-Economic Outlook
• California Housing Market Outlook
• Focus: Housing Affordability
• San Francisco Regional Market Stats
• 2015 Forecast
• In closing…

-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Q1-10
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
Q3-14
Q4-14
GROSS DOMESTIC PRODUCT
2013: 1.9% 2014: 2.4%; 2014 Q4: 2.6%
ANNUAL PERCENTCHANGE, CHAIN-TYPE (2005) $
ANNUALLY QUARTERLY
2009 Largest Annual Drop since 1938 (-3.4%)
SERIES: GDP
SOURCE: US Dept. of Commerce, Bureau of Economic Analysis

SERIES:Components of GDP
COMPONENTS OF GDP
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Consumption Fixed Nonres. Investment Net Exports Government
Q1 2014
Q2 2014
Q3 2014
Q4 2014
ANNUAL PERCENTCHANGE

SERIES:Components of GDP
COMPONENTS OF GDP: CONSUMPTION
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2000Q1
2000Q3
2001Q1
2001Q3
2002Q1
2002Q3
2003Q1
2003Q3
2004Q1
2004Q3
2005Q1
2005Q3
2006Q1
2006Q3
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2010Q1
2010Q3
2011Q1
2011Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3

CONSUMER CONFIDENCE – 7YEAR HIGH
January 2015: 102.9
0
20
40
60
80
100
120
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
Jan-15
INDEX, 100=1985
SERIES:Consumer Confidence
SOURCE: The Conference Board

UNEMPLOYMENT RATE FALLING
January 2015: US 5.7% (U6 = 11.3%) & CA 7.2%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14% US-CA CA US
SERIES: Unemployment Rate The U-6 rate covers the unemployed, underemployed and those who are not looking but who want a job
SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

LABOR FORCE PARTICIPATION RATE DOWN
CA- 62.5% (Dec. 2014) vs. USA- 62.7% (Dec. 2014)
60%
62%
64%
66%
68%
70%
US CA
Labor Force Rate
SERIES: Labor Force Participation Rate
SOURCE: BLS, Data Buffet

2007-2010 LOST JOBS REPLACED: JAN 2014
-8
-6
-4
-2
0
2
4 California US
SERIES:Total Nonfarm Employment

JOB LOSSES IN PRIOR RECESSIONS -
RECENT CYCLEWORST BY FAR

NONFARM EMPLOYMENT BY REGION
Nov 2014 Nov 2013 Change % Change
Southern California 8,721.2 8,553.1 168.1 2.0%
Bay Area 3,555.6 3,441.0 114.6 3.3%
Central Valley 2,068.4 2,021.6 46.8 2.3%
Central Coast 514.4 503.9 10.5 2.1%
North Central 139.4 137.7 1.7 1.2%
CALIFORNIA 15,650.5 15,306.4 344.1 2.2%
Nonfarm Employment (Thousands)
SOURCE: CA Employment Development Division

CA JOBTRENDS – BAY AREA LEADS
1.4%
1.8%
2.1%
2.1%
2.2%
2.2%
2.6%
2.6%
2.8%
3.2%
3.6%
3.8%
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0%
Los Angeles
Ventura
Modesto
Stockton MSA
Bakersfield
Orange County
Fresno MSA
Sacramento
Oakland
San Diego
San Francisco
San Jose
SOURCE: CA Employment Development Division
November 2014: CA +2.2%, +344,100

CONSTRUCTIONWORKERS IN DEMAND
-1.0%
-0.5%
-0.1%
0.7%
0.9%
1.4%
1.9%
2.7%
2.9%
2.9%
3.4%
3.6%
4.3%
6.2%
6.4%
-2% -1% 0% 1% 2% 3% 4% 5% 6% 7%
Nondurable Goods
Finance & Insurance
Government
Durable Goods
Retail Trade
Transportation, Warehousing & Utilities
Real Estate & Rental & Leasing
Wholesale Trade
Educational Services
Information
Leisure & Hospitality
Health Care & Social Assistance
Professional, Scientific & Technical Services
Admistrative & Support & Waste Services
Construction
SERIES:Total Nonfarm Employment By Industry
November 2014: CA +2.2%, +344,100;
250K new construction jobs in next 5 years

MORTGAGE RATES UP 1% IN MID-2013
SIXYEARS OF 0% FED FUNDS RATE
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

CPI REMAINS SUBDUED
December 2014: All Items +.8%YTY; Core +1.6%YTY
-3%
-2%
-1%
0%
1%
2%
3%
4%
5%
6% All Items Core
SERIES:Consumer Price Index
SOURCE: US Bureau of Labor Statistics

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

MORTGAGE RATES DEFIED FORECASTERS IN 2014
• January 2009 – December 2014
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
2014/10
11.06.14
11.27.14
12.18.14
FRM
ARM
MONTHLY WEEKLY
SERIES: 30Yr FRM, 1Yr ARM
SOURCE: Federal Home Loan Mortgage Corporation

ISTHERE A FORECAST BIAS FOR RISING RATES?
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

CREDIT AVAILABILITY UPVERYSLIGHTLY

MORTGAGE ORIGINATION SHARE
Refinance Share vs. Purchase Share
0%
1%
2%
3%
4%
5%
6%
7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Refinance Share (%) Purchase Share (%) FRM
30YR FRM
SERIES: Mortgage Originations
SOURCE: Mortgage Bankers Association of America

NEW HOME SALES
US, Dec. 2014 Sales: 481,000 Units, +1.6%YTD, +8.8%YTY
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
SERIES: New Home Sales, Seasonally Adjusted Annualized Rate
SOURCE: US Census Bureau

MEDIAN PRICE OF NEW HOME SALES
US, Dec. 2014: $208,300, Up 8.3%YTY
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
SERIES: Existing Home Sales
SOURCE: NATIONAL ASSOCIATION OF REALTORS®

SALES OF EXISTING HOMES
US, December 2014 Sales: 5,040,000 Units, -3.1%YTD, +3.5%YTY
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000

MEDIAN PRICE OF EXISTING HOMES
US, December 2014: $209,500, Up 6.0%YTY
$0
$50,000
$100,000
$150,000
$200,000
$250,000

US: SALES OF EXISTING HOMES
Region Dec-14 Nov-14 Dec-13 MTM YTY YTD
U.S. 5,040,000 4,920,000 4,870,000 2.4% 3.5% -3.1%
Northeast 660,000 680,000 640,000 -2.9% 3.1% -3.0%
Midwest 1,090,000 1,130,000 1,120,000 -3.5% -2.7% -5.0%
South 2,170,000 2,090,000 2,020,000 3.8% 7.4% 0.0%
West 1,120,000 1,020,000 1,090,000 9.8% 2.8% -7.6%

REGIONAL PRICETRENDS UP SHARPLY
Region Dec-14 Nov-14 Dec-13 MTM YTY
U.S. $209,500 $207,200 $197,700 1.1% 6.0%
Northeast $246,600 $247,000 $239,000 -0.2% 3.2%
Midwest $159,100 $160,800 $151,100 -1.1% 5.3%
South $184,100 $178,100 $172,700 3.4% 6.6%
West $299,600 $295,300 $283,700 1.5% 5.6%

November October
Core Logic Home Price Index 5.5% 5.4%
Zillow Home Value Index 6.6% 5.4%
Existing-Homes, Median Sales Price 5.0% 5.5%
New Homes, Median Sales Price 5.2% 12.3%
FHFA House Price Index 5.3% 4.3%
S&P/Case-Shiller Home Price Index 4.7% 4.6%
Year Over Year % Increase
Home Price Measure
NATIONAL HOME PRICE MEASURES:
PRICE GAINS MODERATING
SERIES: Home Price Measures
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

C.A.R. LENDER
PERFORMANCE
INDEX

OBJECTIVES
The Index seeks to efficiently combine experiences from
REALTORS® and survey feedback to address the
performance of lenders throughout the lending process.The
CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.)
updates the index on a semi-annually basis in order to gauge
the overall climate of the real estate finance environment as
it relates to consumers and REALTORS®.The Index
measures the satisfaction REALTORS® have in their most
recent housing transaction and when tracked over time, the
Index will illustrate the current performance of lenders from
the REALTORS® perspective.

LENDER PERFORMANCE IMPROVING
31
33
41
56
66
0
10
20
30
40
50
60
70
2010 2011 2012 2013 2014
SOURCE: California Association of REALTORS®

LENDER SATISFACTION HAS IMPROVED
SIGNIFICANTLY OVERTHE PAST FOURYEARS
1 2 3 4 5
The timeliness of responses to your inquiries
Knowledge/professionalism of the
representative you worked with
Length of time to obtain approval/disapproval
of the short sale transaction
Expectations of financial contributions from
the seller at or after closing
Timeliness of buyer's financing approval
Your overall satisfaction with this lender
3.74
3.92
3.5
3.7
3.64
3.71
3.30
3.57
2.92
3.39
3.42
3.23
2.80
3.10
2.38
3.09
2.73
2011
2012
2013
2014
Very Dissatisfied Very Satisfied

EASE OF CLOSING
0% 10% 20% 30% 40% 50%
1
2
3
4
5
27%
23%
11%
19%
20%
16%
18%
10%
28%
27%
12%
13%
15%
28%
31%
8%
11%
13%
19%
49%
2011
2012
2013
2014
Extremel
y Easy
Extremely
Difficult

U.S. ECONOMIC OUTLOOK 2014 - 2015
2009 2010 2011 2012 2013 2014p 2015f
US GDP -3.4% 2.4% 1.8% 2.8% 1.9% 2.5% 3.0%
Nonfarm Job Growth -4.4% -0.7% 1.2% 1.7% 1.7% 2.0% 2.3%
Unemployment 9.3% 9.6% 8.9% 8.1% 7.4% 6.2% 5.6%
CPI -0.4% 1.6% 3.1% 2.1% 1.5% 1.5% 1.6%
Real Disposable
Income, % Change 0.9% 1.8% 1.3% 1.5% 0.7% 2.4% 2.4%
SERIES: U.S. Economic Outlook

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

CALIFORNIA’S HOUSING CYCLES AND MEMBERSHIP
1970-2014
0
50,000
100,000
150,000
200,000
250,000
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014p
Home Sales Membership
*Sales are seasonally adjusted and annualizedSERIES: Sales of Existing Single Family Homes

2014 SALES DOWN 7.6%; JAN LOWEST SINCE 2008
California, Jan. 2015 Sales: 351,890 Units, -2.7%YTD, -2.7%YTY
-
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
Jan-15
*Sales are seasonally adjusted and annualizedSERIES: Sales of Existing Single Family Homes
Jan-15:
351,890
Jan-14:
361,790

HOME SALES IN BAY AREA COUNTIES
0
100
200
300
400
500
600 January-15 January-14
SERIES: Sales of Existing Detached Homes

SHAREOF EQUITY SALES REMAINED STEADY ATTHE
HIGHEST LEVEL SINCE LATE 2007
90.5%
4.8%
4.3%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
Oct-14
Equity Sales Short Sale REO
SERIES: Distressed Sales, Not Seasonally Adjusted

BAY AREA REO & SHORT SALES
Percent ofTotal Sales: Dec 2014
1%
2% 2% 2% 2% 1%
6%
3%
2%
3%
1%
1%
0% 1%
5%
3%
0%
2%
4%
6%
8%
10%
12%
Alameda Contra
Costa
Marin Napa San Mateo Santa Clara Solano Sonoma
REO Sales Short Sales
SERIES: Distressed Sales, Not Seasonally Adjusted

SAN FRANCISCO
Preforeclosure: 140 • Auction: 108 • Bank Owned: 8
SOURCE: PropertyRadar on 2/19/15

MARIN COUNTY
Preforeclosure: 64 • Auction: 37 • BankOwned: 17

SAN RAFAEL

OAKLAND
Preforeclosure: 255 • Auction: 146 • BankOwned: 66

ALAMEDA COUNTY

MEDIAN PRICE OF EXISTING DETACHED HOMES
California, Dec. 2014: $452,570, +1.7% MTM, +3.1%
YTY
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000 P: May-07
$594,530
T: Feb-09
$245,230
-59% from
peak
SERIES: Median Price of Existing Single Family Homes
Dec-14:
$452,570
Dec-13:
$444,830

PRICE PER SQUARE FOOT
January 2015: $203, Down 3.5% MTM, Up 1.8%YTY
$0
$50
$100
$150
$200
$250
$300
$350
$400
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
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
Oct-14
Jan-15
PRICE PER SQ. FT.
SERIES: Median Price Per Square Feet

SF: STRONGEST PRICE GAINS INTHE STATE

SF: 10YEARS OF PRICE GAINS 2004-2014
Source: Property Shark

PRICE GAINS DOWN SHARPLY SINCE MID 2013
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50% Condo Single-Family Homes
SERIES: Sales of SFH and Condo Units
YTY%Chg. in Price

INVENTORY IMPROVING BUT STILL LOW
Jan 2015: 5.0 Months; Jan 2014: 4.3 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.
0
2
4
6
8
10
12
14
16
18
Jan-05
Jul-05
Jan-…
Jul-06
Jan-07
Jul-07
Jan-…
Jul-08
Jan-…
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
SERIES: Unsold Inventory Index of Existing Single Family Homes

MORE INVENTORYAT 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.
Price Range (Thousand) Dec-14 Nov-14 Dec-13
$1,000K+ 4.3 5.5 4.3
$750-999K 3.1 4.2 3.2
$500-749K 3.0 4.1 2.7
$400-499K 3.0 3.9 2.6
$300-399K 3.2 4.2 2.8
$200-299K 3.3 4.3 3.0
$0-199K 3.4 4.5 3.1
SERIES: Unsold Inventory Index of Existing Single Family Homes

WHERE ISTHE INVENTORY?
– Investors renting instead of flipping
– Mortgage Lock-In Effect
– Where will I go?
– Foreclosure pipeline is dry
– New construction recovering but LOW
– Off- MLS (aka “pocket’) listings not being
counted in listing stats

ANNUAL HOUSING MARKET
SURVEY:
2014 FINDINGS

MULTIPLE OFFERS DECLINE -
LESS INTENSE MARKET COMPETITION
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

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
QUESTION:What was the original list sales price of the property? What was the final sales price of the property?

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
Below Asking Price At Asking Price Above Asking Price
Median Reduction:
4.5% of List Price

$70,000
20%
0%
5%
10%
15%
20%
25%
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Median Down Payment % of Down Payment to Price
Q.What was the amount of downpayment?
20% REMAINSTHE MEDIAN DOWN PAYMENT

INVESTMENT BUYERS DROPPING :
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 %

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

HOUSING AFFORDABILITY:
CRISIS BREWING

SHARE OF FIRST-TIME BUYERS UP IN ’14 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?

HOUSING AFFORDABILITY DOWN
SHARPLY SINCE Q1 2012
California vs. U.S. – 1984-2014
% 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
Annual Quarterly

HOUSING AFFORDABILITY INDEX
San Francisco County, 4th Quarter 2014: 14%
0%
5%
10%
15%
20%
25%
30%
35%
SERIES: Housing Affordability Index ofTraditional Buyers

FIRST-TIME BUYER HOUSING AFFORDABILITY
INDEX
San Francisco County, 4th Quarter 2014: 33%
0%
10%
20%
30%
40%
50%
60%
SERIES: Housing Affordability Index of First Time Buyers

BAY AREA HOUSING AFFORDABILITY DROPPING
4th Quarter 2014
0 10 20 30 40 50 60 70
United States
California
S.F. Bay Area
Alameda
Contra-Costa (Central County)
Marin
Napa
San Francisco
San Mateo
Santa Clara
Solano
Sonoma
Q4/2014 Q4/2013
SERIES: Housing Affordability Index

HOMEOWNERSHIP RATE FALLING
CaliforniaVs. U.S.
53.7%
Peak: 60.2%
54.9%
64.5%
Peak: 69.0%
64.8%
40%
45%
50%
55%
60%
65%
70%
75% CA US
SERIES: Homeownership Rates
SOURCE: U.S. Census Bureau

MILLENNIAL HOMEOWNERSHIP FALLING
SOURCE: Census Bureau

$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000 California US
CA PRICES UPWARD MARCHWILL SLOW
1970-2014

CAV. US REAL PRICE GAP: $10KTO $246K
1970-2014
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000 California US
$10K to $246
2014 DollarValue

INCOME TO BUY MEDIAN-PRICED HOME IN CA:
UP SHARPLY INTWO
$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)
SERIES: Housing Affordability Index

REASONS FOR RENTING INSTEAD OF BUYING
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
SERIES: 2013 Renter Survey

STUDENT LOAN DEBT:25% OF RENTERS
Yes, 23%
No, 75%
Refused, 2%
Student Loan Debt
SERIES: 2013 Renter Survey
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

CALIFORNIA’S HOUSING DILEMMA
• 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 and rising rents
• CA Housing Needs = Minimally 165,000 UnitsAnnually
– Regulatory Problem
– Impact Fees
– Public Attitudes

CA PERMITS UP BUT MORE UNITS NEEDED
2014p: 83,000 (43,000 sf, 40,000 mf)
2015f: 101,000 total units
SERIES: New Housing Permits
SOURCE: Construction Industry Research Board
0
50000
100000
150000
200000
250000
300000
350000
Single Family Multi-Family
Household Growth: 165,000/yr

REGIONAL & LOCAL HOUSING
MARKETS

SALESOFRESIDENTIALHOMES
San Francisco, January 2015: 254 Units
Down 38.8% MTM, Down 18.8%YTY
SOURCE: Clarus Market Metrics

MEDIANPRICEOFRESIDENTIALHOMES
San Francisco, January 2015: $952,500
Down 2.3% MTM, Up 2.4%YTY

FORSALEPROPERTIES
San Francisco, January 2015: 714 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
San Francisco, January 2015: 1.8 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.

Alameda County, January 2015: 624 Units

Alameda County, January 2015: $555,000

FORSALEPROPERTIES
Alameda County, January 2015: 1,932 Units

Alameda County, January 2015: 1.2 Months

Oakland, January 2015: 151 Units

Oakland, January 2015: $420,000

FORSALEPROPERTIES
Oakland, January 2015: 533 Units

Oakland, January 2015: 1.6 Months

Marin County, January 2015: $823,120

Marin County, January 2015: 114 Units

FORSALEPROPERTIES
Marin County, January 2015: 478 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.

Marin County, January 2015: 1.6 Months

San Rafael, January 2015: 22 Units

San Rafael, January 2015: $755,000

FORSALEPROPERTIES
San Rafael, January 2015: 115 Units
Up 9.5% MTM, Down 12.9%YTY

San Rafael, January 2015: 1.4 Months

CALIFORNIA HOUSING MARKET OUTLOOK
2009 2010 2011 2012 2013 2014 2015f
SFH Resales (000s) 474.9 416.5 422.6 439.8 414.9 383.3 402.5
% Change 24.5% -12.3% 1.4% 4.1% -5.9% -7.6% 5.0%
Median Price ($000s) $275.0 $305.0 $286.0 $319.3 $407.2 $447.0 $478.7
% Change -21.1% 10.9% -6.2% 11.6% 27.5% 9.8% 7.1%
Housing Affordability
Index 51% 48% 53% 51% 36% 30% 27%
30-Yr FRM 5.0% 4.7% 4.5% 3.7% 4.0% 4.3% 4.5%
SERIES:CA Housing Market Outlook

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

INTERNATIONAL BUYERS
MAKETHEIR MARK

1/3 FROM CHINA
Please tell us about your last closed transaction with an international client. What is your client’s country of permanent residence?
3.8%
4.7%
8.3%
14%
35%
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%
India
Japan
Mexico
Canada
China/Hong Kong

INTENDED USE FOR PROPERTY? HOME
4%
27%
38%
30%
0%
2%
7%
91%
0% 20% 40% 60% 80% 100%
Other
Vacation/Second Home
Investment/Rental Property
Primary Residence
US Buyer
International Buyer
What was the intended use of the property in your last closed transaction with an international client?

ALL CASH INTERNATIONAL BUYERS
0%
20%
40%
60%
80%
100%
International buyers Traditional buyers
69%
27%
31%
73%
All cash Obtained financing
SOURCE: 2013 International Client Survey, 2013 Annual Housing Market Survey
How did your last international buyer pay for the property?

MILLENNIALS:TOMORROW’S HOME
OWNERS?

OVER 1/3 LIVEWITHTHEIR PARENTS
What is your current living situation?
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
I rent I live with my
parents
I own I live in a dorm Other:
41%
36%
20%
1%
1%
SERIES: 2014 Millennials Survey

MILLENNIALS’ BIGGEST CONCERNS
What are your biggest concerns about home ownership?
Price/Affordability (45%)
Problems with Credit, Mortgages, orTaxes (19%)
Maintenance/Upkeep (14%)
Satisfaction with Home/Location (7%)
Responsibility (4%)
SERIES: 2014 Millennials Survey

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/DOUBTFULTHAT
THEY 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%

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

THE FINANCE HELPLINE
finance.car.org
(213)739-8383
financehelpline@car.org

DOWN PAYMENT RESOURCE DIRECTORY
DOWNPAYMENT.CAR.ORG
Down Payment Resource™
Homeownership Program Index’s
Key Findings:
•Over 300 programs in California
•59% provide direct down payment &
closing cost assistance
•10% provide mortgage credit up to
$2,000 for the life of the loan
•26% are available to repeat buyers
There are hundreds of homeownership programs
available to help motivate buyers. Visit
downpayment.car.org to find them.

STAY CONNECTEDWITH RESEARCH
CARResearchGroup
CARResearchInfo
On.car.org/CARResearch
Housingmatters.car.org

THANKYOU!
www.car.org/marketdata
lesliea@car.org
This presentation can be found on
www.car.org/marketdata
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2015 California Economic Outlook and Market Outlook. San Francisco Bay Area Real Estate Market Summary.

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