The document discusses the California housing market forecast for 2012, highlighting economic challenges such as high unemployment rates, low consumer spending, and stagnating job growth. It notes a significant decline in home sales and the impact of excessive borrowing against home equity on mortgage defaults. Additionally, it outlines fiscal policy responses and anticipated changes to housing market regulations and financing structures.

1. CALIFORNIA HOUSING
MARKET 2012 FORECAST
Murrieta Temecula Group
Wilson Creek Winery
October 7, 2011
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

3. U.S. Economic Outlook

5. 2011: A Year of Wild Cards
Political
Change
on
Oil Price Spikes Capitol
Hill
Arab Uprising
Sovereign
Debt
Crisis in
EuroZone
Debt Limit
Ceiling &
Downgrade Stock
of US Debt Market
Volatility

6. Gross Domestic Product: Stall Speed
2010: 2.8%; 2011 Q1: 0.4% Q2: 1.0%
ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $
8%
7%
ANNUAL QTRLY
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
-7%
-8%
2000
2002
2004
2006
2008
2010
Q2-10
Q4-10
Q2-11

7. Components of GDP:
Consumer Spending Weak; Gov’t Sector Down
Quarterly Percent Change
3.0
2.5 Q3 2010
Q4 2010
2.0
Q1 2011
1.5 Q2 2011
1.0
0.5
0.0
-0.5
-1.0
-1.5
Consumption Fixed Nonres. Net Exports Government
Investment
SOURCE: US Dept of Commerce, Bureau of Economic Analysis

8. Consumers Pulling Back
Home Equity & Reverse Wealth Effect
Consumer Spending 2011 Q1: 2.7% Q2: 0.4%
8%
QUARTERLY PERCENT CHANGE
6%
4%
2%
0%
-2%
-4%
1Q-2000
1Q-2001
1Q-2002
1Q-2003
1Q-2004
1Q-2005
1Q-2006
1Q-2007
1Q-2008
1Q-2009
1Q-2010
1Q-2011
SOURCE: US Dept of Commerce, Bureau of Economic Analysis

9. Unemployment Stubbornly High
August 2011
California (12.1%) vs. United States (9.1%)
14%
CA US
12%
10%
8%
6%
4%
2%
0%
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
SOURCE: CA Employment Development Division

10. U.S. Job Growth: Flat in August
Month-to-Month Changes
Recession Job Losses: 8.4 million
Since Jan’10: +1.8 million
500,000
400,000
300,000
200,000
100,000
0
-100,000
-200,000
-300,000
-400,000
-500,000
-600,000
-700,000
-800,000
-900,000
Jan-08
Apr-08
Jan-09
Apr-09
Jan-10
Apr-10
Jan-11
Apr-11
Jul-08
Oct-08
Jul-09
Oct-09
Jul-10
Oct-10
Jul-11
SOURCE: US Dept of Labor, Bureau of Labor Statistics

11. California Job Growth Faltering
Month-to-Month Changes
Recession Job Losses: 1.3 million
Since Jan’10: +188,100
100000
80000
60000
40000
20000
0
-20000
-40000
-60000
-80000
-100000
-120000
-140000
-160000
May-08
May-09
May-10
May-11
Sep-08
Nov-08
Sep-09
Nov-09
Sep-10
Nov-10
Mar-08
Mar-09
Mar-10
Mar-11
Jan-08
Jan-09
Jan-10
Jan-11
Jul-08
Jul-09
Jul-10
Jul-11
SOURCE: CA Employment Development Division

12. Where are California’s Jobs?
Employment Trends:
Construction & Financial Sectors Biggest Losers
Year to
Industry 2005 Jul-11
Date
Mining and Logging 23,600 27,600 4,000
Construction 905,300 567,300 -338,000
Manufacturing 1,502,600 1,257,600 -245,000
Trade, Transportation & Utilities 2,822,100 2,641,500 -180,600
Information 473,600 455,400 -18,200
Financial Activities 920,300 755,800 -164,500
Professional & Business Services 2,160,700 2,136,200 -24,500
Educational & Health Services 1,593,400 1,837,000 243,600
Leisure & Hospitality 1,475,200 1,531,600 56,400
Other Services 505,500 484,500 -21,000
Government 2,420,200 2,380,200 -40,000
TOTAL 14,802,500 14,074,700 -727,800
SOURCE: California Association of REALTORS®

13. Nonfarm Employment
Riverside/SB Metro Area, August 2011: Down 0.6% YTY
Y-T-Y PERCENT CHANGE
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
SOURCE: CA Employment Development Division

14. 0%
2%
4%
6%
8%
10%
12%
14%
16%
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
SOURCE: CA Employment Development Division
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Unemployment Rate
Jan-06
Jan-07
Jan-08
Jan-09
Riverside County, August 2011: 14.7%
Jan-10
Jan-11

15. New Home Sales
Riverside County (Detached)
8000
, 2011 Q2 Sales: 653 Units
7000
6000
5000
4000
3000
2000
1000
0
Q1/88
Q1/89
Q1/90
Q1/91
Q1/92
Q1/93
Q1/94
Q1/95
Q1/96
Q1/97
Q1/98
Q1/99
Q1/00
Q1/01
Q1/02
Q1/03
Q1/04
Q1/05
Q1/06
Q1/07
Q1/08
Q1/09
Q1/10
Q1/11
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®;
Hanley Wood

16. 20
40
60
80
100
120
140
160
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
INDEX, 100=1985
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
September 2011: 45.4
Jul-08
Jan-09
Jul-09
Marginal Gains in September
Jan-10
Jul-10
Consumer Confidence Slipping
Jan-11
Jul-11

17. Crisis of Confidence:
Small Business Optimism Down
Source: National Federation of Independent Business

18. Consumer Prices Low but Heading Higher
CPI August 2011: All Items +3.8% YTY; Core +2.0% YTY
PERCENT CHANGE FROM A YEAR AGO, 100=1982-1984
6%
All Items
5%
Core
4%
3%
2%
1%
0%
-1%
-2%
-3%
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11

19. Monetary Policy

20. Mortgage Rates @ Historical Lows
Debt Down Grade Ignited Flight to Quality
FRM ARM
6.00%
MONTHLY WEEKLY
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
2009.01
2009.04
2009.07
2009.10
2010.01
2010.04
2010.07
2010.10
2011.01
2011.04
2011.07
8.4.11
8.25.11
9.15.11

21. Classic Liquidity Trap: Consumers Deleveraging
Low Rates and Low Borrowing
10%
9%
8%
7%
6%
5%
4%
3%
2% FRM
ARM
1%
Federal Funds
0%
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
SOURCE: Federal Home Loan Mortgage Corporation

22. Fiscal Policy

23. US Deficit Highest in Decades
2010: 11% of GDP (Revenues – Expenses)
4.0%
Deficit as a % of GDP
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-10.0%
-12.0%
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Source: US Treasury, BEA, compiled by C.A.R.
Note: Positive = Surplus

24. US Debt Jumped as Government
Responded to Financial Crisis
2010: 93% of GDP
100.0%
90.0%
Debt as a % of GDP
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Source: US Treasury, compiled by C.A.R.

25. Obama Jobs Proposal
What:
$450 Billion stimulus: Tax cuts ($250B) and infrastructure
spending ($200B)
Why:
Economy is stalled/Avoid double-dip
Zero job growth in August/high unemployment
Stabilize confidence: consumer, business, investor
How:
Increase taxes on the rich
Entitlement Reform
Tax Reform

26. Housing

27. California vs. U.S. Sales
US Home Sales CA Home Sales
7,000,000 700,000
6,000,000 600,000
5,000,000 500,000
4,000,000 400,000
3,000,000 300,000
2,000,000 200,000
1,000,000 100,000
0 0
SOURCE: California Association of REALTORS®

28. California vs. U.S. Median Price
US Median Price CA Median Price
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
SOURCE: California Association of REALTORS®

29. Housing Affordability: Records Highs
California Vs. U.S.
CA US
100%
% OF HOUSEHOLDS THAT CAN BUY
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Q1 2000
Q3 2000
Q1 2001
Q3 2001
Q1 2002
Q3 2002
Q1 2003
Q3 2003
Q1 2004
Q3 2004
Q1 2005
Q3 2005
Q1 2006
Q3 2006
Q1 2007
Q3 2007
Q1 2008
Q3 2008
Q1 2009
Q3 2009
Q1 2010
Q3 2010
Q1 2011
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

30. CA Underwater Mortgages
Negative Equity Share in CA Near Negative Equity Share in CA
40%
35%
30.2%
30%
25%
20%
15%
10%
4.6%
5%
0%
Q4-2009
Q1-2010
Q2-2010
Q3-2010
Q4-2010
Q1-2011
Q2-2011
SOURCE: CoreLogic

31. Mortgage Originations: 1990-2010
• Refinance vs. Purchase
ORIGINATION (BIL $) 30-YR FIXED RATE MORTGAGE
900 12.0%
Refinance Originations (Bil $)
800 Purchase Originations (Bil $)
Fixed Rate Mortgage 10.0%
700
600 8.0%
500
6.0%
400
300 4.0%
200
2.0%
100
0 0.0%
Q1/90
Q1/91
Q1/92
Q1/93
Q1/94
Q1/95
Q1/96
Q1/97
Q1/98
Q1/99
Q1/00
Q1/01
Q1/02
Q1/03
Q1/04
Q1/05
Q1/06
Q1/07
Q1/08
Q1/09
Q1/10
Source: Mortgage Bankers Association of America

32. What Happened?

33. Trustee Sales in Anaheim
Scheduled for 10/7/10

34. 1872 W. Admiral, 92801
•3 bd, 2.5 ba, built in 1982
•Purchased in Sept 2005
for $594,000 with 30%
down.
•In April 2006, added a
second for $57,000.
•In Oct 2006, refinanced
the second into a new
second for $100,000.
•Defaulted in 2010
•Zestimate of current value
= $364,000.

35. 1572 W. Orangewood, 92802
•3 bd, 2 ba, 2,016 sq ft
built in 1977.
•Purchased in June 2003
for $455,000 with 30%
down.
•March 2004: added a
second for $75,000;
added a third for $90,500;
added a fourth for
$80,000.
•Within one year of
purchase, the property had
$565,000 in debt on it!
•Defaulted in 2010.
•Zestimate of current value
•= $442,000.

36. 8871 Regal, 92804
•3 bd, 2 ba, 1,314 sq ft
built in 1956.
•Purchased as REO in
2007 for $417,000 with
zero down.
•Had previously sold for
$568,000 in 2005.
•Defaulted in 2010.
•Zestimate of current
value = $367,500.

37. 2414 E. Underhill, 92806
•3 bd, 2 ba, 1,459 sq ft
built in 1957.
•Purchased for $640,000
in July 2006 with
piggyback financing:
$500,000 first and
$140,000 second, i.e.
zero down.
•Defaulted in 2010.
•Zestimate of current
value = $387,000.

38. Conclusions
• Excessive borrowing against home equity is the
untold part of the foreclosure story.
• “House Prices, Home Equity-Based Borrowing, and
the U.S. Household Leverage Crisis” by Mian and
Sufi: American Economic Review :
• 39% of new defaults from 2006 to 2008
• attributable to home equity borrowing

39. Understanding the
Financial Crisis

40. Federal Issues – Critical Concerns
High-cost Loan Limit - expires 10/1/11
Future of Fannie and Freddie in flux - Increase
guarantee fee likely
FHA targeted for market share drop
Tax Reform on the horizon – MID?
QRM (Qualified Residential Mortgage)
20% Down – Is the future of the 30 year
mortgage in doubt?

41. U.S. Economic Outlook
2005 2006 2007 2008 2009 2010 2011f 2012f
•
US GDP 3.1% 2.7% 2.0% 0.0% -2.6% 2.9% 1.7% 2.0%
Nonfarm Job
1.7% 1.8% 1.1% -0.6% -4.4% -0.7% 1.0% 0.9%
Growth
Unemployment 5.1% 4.6% 4.6% 5.8% 9.3% 9.6% 9.0% 8.9%
CPI 3.4% 3.2% 2.8% 3.8% -0.4% 1.6% 3.2% 2.3%
Real Disposable
Income, % 1.3% 4.0% 2.2% 0.5% 0.9% 1.4% 1.7% 1.5%
Change
Forecast Date: September 2011
SOURCE: California Association of REALTORS®

42. California Economic Outlook
2005 2006 •
2007 2008 2009 2010 2011f 2012f
Nonfarm Job
1.8% 1.7% 0.8% -1.3% -6.0% -1.4% 1.5% 2.1%
Growth
Unemployment
5.4% 4.9% 5.4% 7.2% 11.4% 12.4% 12.0% 11.2%
Rate
Population
1.2% 1.1% 1.1% 1.2% 1.1% 0.9% 0.9% 0.9%
Growth
Real Disposable
Income, % 1.3% 3.4% 1.5% 0.1% -2.2% 1.6% 1.5% 2.0%
Change
Forecast Date: September 2011
SOURCE: California Association of REALTORS®

43. California Housing Market

44. California Sales of Existing Homes
and Median Price
Housing Cycle Comparisons 1970- 2011
UNITS/MEDIAN PRICE $ Sales of Existing Detached Homes Median Price
700,000
-44%
600,000
500,000
-61% -25%
400,000
300,000
200,000
100,000
0
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
SOURCE: California Association of REALTORS®

45. Dollar Volume of Sales
Down 5% in 2011, Up 3% in 2012
$ in Billion % Change
$ Volume of Sales Percent Change
$350 50%
$327
37% 40%
$300
24% 30%
$250
26% 20%
$200 16% 10%
2%
$150 3% 0%
$129
-2% -1.0%
-5% -10%
$100
$150 $143 $147
-20%
-19%
$50 -22%
-27% -30%
$0 -40%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
SOURCE: California Association of REALTORS®

46. Sales of Existing Detached Homes and
Pacific West Consumer Confidence
California, August 2011 Sales: 497,390 Units, Down 0.4% YTD, Up 10.2% YTY
UNITS Sales Consumer Confidence INDEX
700,000 160
600,000 140
120
500,000
100
400,000
80
300,000
60
200,000
40
100,000 20
0 0
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
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
SOURCE: California Association of REALTORS®; The Conference Board
*Sales are seasonally adjusted and annualized

47. Median Price of Existing
Detached Homes
California, August 2011: $297,060, Down 7.4% YTY
$700,000 P: May-07
$594,530
$600,000
$500,000 T: Feb-09
$245,230
$400,000 -59% from
peak
$300,000
$200,000
$100,000
$0
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
SOURCE: California Association of REALTORS®

48. 0
2
4
6
8
10
12
14
16
18
20
Jan-88
MONTHS
Jan-89
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Unsold Inventory Index
Jan-07
Jan-08
California, August 2011: 5.0 Months
Jan-09
Jan-10
Jan-11

49. Unsold Inventory Index (Months)
Price Range (Thousand) Aug-10 Jul-11 Aug-11
$1,000K+ 11.1 9.2 9.1
$750-1000K 7.0 6.9 6.2
$500-750K 6.4 6.3 5.6
$300-500K 5.7 5.6 5.2
$0-300K 4.8 5.1 4.6
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

50. Unsold Inventory By Price Range
Jan 2005 – August 2011
MONTHS
30
$0 - 300K
$300-500K
25
$500-750K
$750-1000K
20 $1,000K+-
All
15
10
5
0
Jan-05
Apr-05
Jan-06
Apr-06
Jan-07
Apr-07
Jan-08
Apr-08
Jan-09
Apr-09
Jan-10
Apr-10
Jan-11
Apr-11
Jul-05
Oct-05
Jul-06
Oct-06
Jul-07
Oct-07
Jul-08
Oct-08
Jul-09
Oct-09
Jul-10
Oct-10
Jul-11
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

51. Asking Rents for Class A&B Apartments
Inland Empire, 2011 Q2: $1,089 Up 2.8% YTY
$1,200
$1,000
$800
$600
$400
$200
$0
Q3/97
Q2/98
Q1/99
Q4/99
Q3/00
Q2/01
Q1/02
Q4/02
Q3/03
Q2/04
Q1/05
Q4/05
Q3/06
Q2/07
Q1/08
Q4/08
Q3/09
Q2/10
Q1/11
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®;
REALFACTS

52. Vacancy Rates for Class A&B Apartments
Inland Empire, 2011 Q2: 6.2%
VACANCY RATE
9.0%
8.0%
7.0%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
1990
1993
Q4/95
Q2/97
Q1/98
Q4/98
Q3/99
Q2/00
Q1/01
Q4/01
Q3/02
Q2/03
Q1/04
Q4/04
Q3/05
Q2/06
Q1/07
Q4/07
Q3/08
Q2/09
Q1/10
Q4/10
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®;
REALFACTS

53. Market Breakdown:
Equity v. Distressed
Sales

54. Share of Distressed Sales to Total Sales
60% Aug-10 Jul-11 Aug-11
44.5% 42.9% 43.7%
40%
24.7% 25.2% 24.4%
19.3% 18.9%
20% 17.5%
0%
REOs Short Sales Distressed Sales
SOURCE: California Association of REALTORS®

55. Tight Supply of Inventory
for REO Sales
Aug-11
Unsold
Inventory Index
(Months)
8.1
9
8
7 5.7
6
5
4 2.6
3
2
1
0
Equity Sales REO Sales Short Sales

56. REO & Short Sales: Southern
California
(Percent of Total Sales)
100% Aug 2011
80% Short Sales
REO Sales
60%
14%
26%
40%
24%
20% 20%
20% 35% 49%
12% 8%
0%
19%
Los
Angeles Orange
Riverside
San
Bernardino San Diego
SOURCE: California Association of REALTORS®

57. REO & Short Sales: Central Valley
(Percent of Total Sales)
100% Aug 2011
Short Sales
80% REO Sales
7%
60%
23% 30%
40% 24% 19%
67%
20% 36%
37%
38% 41%
0%
Madera
Merced
San Benito
Sacramento
Kern
SOURCE: California Association of REALTORS®

58. REO & Short Sales: Bay Area
(Percent of Total Sales)
100% Aug 2011
80% Short Sales
REO Sales
60%
26%
40% 20%
15%
20% 18%
28% 15% 21% 45%
13%
0% 11%
10% 24%
Marin
Napa
San
Mateo Santa
Clara Solano
Sonoma
SOURCE: California Association of REALTORS®

59. REO & Short Sales: Rest of California
(Percent of Total Sales)
100% Aug 2011
80%
Short Sales
REOs
60%
11% 7%
40% 8% 25%
5%
48% 7% 57%
13% 9%
20% 34%
25% 36% 20%
32% 39% 51%
0%
15%
SOURCE: California Association of REALTORS®

61. California Foreclosure Filings
August 2011
NTS: 24,260, -16.9% YTD • NOD: 32,338, -21.5% YTD
Notice of Trustee Sale - Counts Notice of Defaults - Counts
65,000 6 Month Average:
60,000
NTSs: 23,806
55,000
50,000 NODs: 23,625
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Nov-07
Nov-08
Nov-09
Nov-10
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jul-07
Sep-07
Jul-08
Sep-08
Jul-09
Sep-09
Jul-10
Sep-10
Jul-11
May-07
May-08
May-09
May-10
May-11
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
SOURCE: ForeclosureRadar.com

62. CA Foreclosure Outcomes
August 2011
REO: -12.2% YTD • 3rd Party: -4.1% YTD • Cancel: -19.7% YTD
REOs Sold to 3rd Party Cancellations
6 Month Average:
30,000
REO: 10,880
25,000 3rd Party: 3,616
Cancelled: 14,447
20,000
15,000
10,000
5,000
0
Jan-07
Apr-07
Jan-08
Apr-08
Jan-09
Apr-09
Jan-10
Jan-11
Jul-07
Oct-07
Jul-08
Oct-08
Jul-09
Oct-09
Apr-10
Jul-10
Oct-10
Apr-11
Jul-11
SOURCE: ForeclosureRadar.com

63. CA Foreclosure Inventories
August 2011
Preforeclosure: -17.5% YTD • Schedule for Sale: -17.8% YTD •
Bank Owned: 7.0% YTD
6 Month Average:
Preforeclosure Scheduled for Sale Bank Owned Preforeclosure: 115,742
Schedule for Sale:
200,000 105,138
Bank Owned: 108,635
150,000
100,000
50,000
0
Jan-07
Apr-07
Jan-08
Jan-09
Jan-10
Jan-11
Jul-07
Oct-07
Apr-08
Jul-08
Oct-08
Apr-09
Jul-09
Oct-09
Apr-10
Jul-10
Oct-10
Apr-11
Jul-11
SOURCE: ForeclosureRadar.com

64. 0
2000
4000
6000
8000
10000
12000
14000
Q1/89
Q1/90
Q1/91
Q1/92
Q1/93
Q1/94
SOURCE: Real Estate Research Council
Q1/95
Q1/96
Q1/97
Q1/98
Q1/99
Q1/00
Q1/01
Q1/02
Foreclosures
Riverside County
Q1/03
Q1/04
Q1/05
Q1/06
Q1/07
Q1/08
Q1/09
Q1/10
Q1/11

66. Riverside
Preforeclosure: 1,167 • Auction: 1,235 • Bank Owned: 504
Source: ForeclosureRadar.com as of 10/05/11

67. Riverside
Preforeclosure: 1,167
Source: ForeclosureRadar.com as of 10/05/11

68. Riverside
Auction: 1,235
Source: ForeclosureRadar.com as of 10/05/11

69. Riverside
Bank Owned: 504
Source: ForeclosureRadar.com as of 10/05/11

70. Temecula
Preforeclosure: 427 • Auction: 371 • Bank Owned: 157
Source: ForeclosureRadar.com as of 10/05/11

71. Murrieta
Preforeclosure: 454 • Auction: 463 • Bank Owned: 202
Source: ForeclosureRadar.com as of 10/05/11

72. Regional Housing
Markets

73. Sales of Existing Detached Homes and Consumer Confidence
Riverside County, August 2011: 2,320 Units, Down 2.5% YTD, Up 11.2% YTY
UNITS Sales Consumer Confidence INDEX
3500 160
3000 140
120
2500
100
2000
80
1500
60
1000
40
500 20
0 0
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®;
The Conference Board

74. Sales of Existing Detached Homes
Riverside County, 2010: 26,044 Units, Down 19.2% YTY
UNITS ANNUAL MONTHLY
35,000 3,500
30,000 3,000
25,000 2,500
20,000 2,000
15,000
1,500
10,000
1,000
2008
5,000
2009
500
2010
0 2011
1989
1992
1995
1998
2001
2004
2007
2010
0
Oct
Jun
Aug
Jan
Apr
Jul
Nov
Sept
Feb
Dec
Mar
May
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

75. Median Price of Existing Detached Homes
Riverside County, August 2011: $202,060, Down 2.9%
YTY
$500,000
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

76. Median Price Annual Comparison
Riverside County, 2010: $206,180, Up 12.9% YTY
ANNUAL MONTHLY
$450,000 $450,000
$400,000 $400,000
$350,000 $350,000
$300,000 $300,000
$250,000 $250,000
$200,000 $200,000
$150,000 $150,000
$100,000 $100,000 2008
2009
$50,000 2010
$50,000
2011
$- $-
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
Nov
Jun
Aug
Jan
Jul
May
Sept
Oct
Feb
Apr
Dec
Mar
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

77. Median Home Sales Price
Riverside County
Yearly %
Aug-10 Aug-11
Change
AGUANGA $119,000 $25,000 -79.0%
ANZA $103,000 $172,500 67.5%
BANNING $138,000 $113,250 -17.9%
BEAUMONT $193,000 $185,000 -4.2%
BLYTHE $117,500 $159,500 35.7%
CABAZON $290,000 $48,500 -83.3%
CALIMESA $162,000 $77,000 -52.5%
CATHEDRAL CITY $160,000 $139,500 -12.8%
COACHELLA $146,000 $135,500 -7.2%
CORONA $325,000 $314,000 -3.4%
DESERT HOT SPRINGS $89,500 $89,250 -0.3%
HEMET $125,000 $120,000 -4.0%
HOMELAND $50,000 $279,000 458.0%
SOURCE: DataQuick Information Systems. The price statistics are derived from
all types of home sales -- new and existing, condos and single-family.

78. Median Home Sales Price
Riverside County
Yearly %
Aug-10 Aug-11
Change
IDYLLWILD $190,000 $186,000 -2.1%
INDIAN WELLS $415,000 $483,500 16.5%
INDIO $180,000 $160,000 -11.1%
LA QUINTA $275,000 $242,500 -11.8%
LAKE ELSINORE $200,000 $182,000 -9.0%
MECCA $55,000 $35,000 -36.4%
MENIFEE $211,000 $195,000 -7.6%
MIRA LOMA $311,500 $240,000 -23.0%
MORENO VALLEY $156,000 $159,000 1.9%
MOUNTAIN CENTER $136,500 $299,500 119.4%
MURRIETA $250,000 $242,500 -3.0%
NORCO $372,500 $340,000 -8.7%
NUEVO $155,000 $145,000 -6.5%
SOURCE: DataQuick Information Systems. The price statistics are derived from
all types of home sales -- new and existing, condos and single-family.

79. Median Home Sales Price
Riverside County
Yearly %
Aug-10 Aug-11
Change
PALM DESERT $220,000 $225,000 2.3%
PALM SPRINGS $213,500 $175,000 -18.0%
PERRIS $165,000 $150,000 -9.1%
RANCHO MIRAGE $374,500 $365,000 -2.5%
RIVERSIDE $195,000 $193,000 -1.0%
SAN JACINTO $143,000 $135,000 -5.6%
SUN CITY $165,000 $164,000 -0.6%
TEMECULA $267,750 $278,500 4.0%
THOUSAND PALMS $130,000 $135,000 3.9%
WHITE WATER $90,000 $62,500 -30.6%
WILDOMAR $226,500 $210,000 -7.3%
WINCHESTER $240,000 $227,500 -5.2%
RIVERSIDE COUNTY $200,000 $190,250 -4.9%
SOURCE: DataQuick Information Systems. The price statistics are derived
from all types of home sales -- new and existing, condos and single-family.

80. Unsold Inventory Index
Riverside County, August 2011: 4.4 Months
MONTHS
25
20
15
10
5
0
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

81. Median Time on the Market
Single-Family Homes – Riverside, August 2011: 53.5
Days
90
80
70
60
50
40
30
20
10
0
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

82. Riverside

83. Sales of Residential Homes
Riverside, September 2011: 285 Units
Down 30.0% MTM, Down 10.9% YTY
SOURCE: Clarus Market Metrics

84. Median Price of Residential Homes
Riverside, September 2011: $195,000
Down 2.5% MTM, Down 2.5% YTY
SOURCE: Clarus Market Metrics

85. For Sale Properties
Riverside, September 2011
1,617 Units, Down 11.3% MTM, Down 27.9% YTY
SOURCE: Clarus Market Metrics

86. Months Supply of Inventory
Riverside, September 2011: 2.4 Months
SOURCE: Clarus Market Metrics

87. Temecula

88. Sales of Residential Homes
Temecula, September 2011
134 Units, Down 27.2% MTM, Down 30.6% YTY
SOURCE: Clarus Market Metrics

89. Median Price of Residential Homes
Temecula, September 2011
$264,100, Down 4.3% MTM, Down 0.3% YTY
SOURCE: Clarus Market Metrics

90. For Sale Properties
Temecula, September 2011
757 Units, Down 13.2% MTM, Down 27.8% YTY
SOURCE: Clarus Market Metrics

91. Months Supply of Inventory
Temecula, September 2011: 1.9 Months
SOURCE: Clarus Market Metrics

92. Murrieta

93. Sales of Residential Homes
Murrieta, September 2011
144 Units, Down 28.4% MTM, Down 27.3% YTY
SOURCE: Clarus Market Metrics

94. Median Price of Residential Homes
Murrieta, September 2011
$236,000, Down 0.8% MTM, Down 1.3% YTY
SOURCE: Clarus Market Metrics

95. For Sale Properties
Murrieta, September 2011
904 Units, Down 13.7% MTM, Down 32.0% YTY
SOURCE: Clarus Market Metrics

96. Months Supply of Inventory
Murrieta, September 2011: 2.5 Months
SOURCE: Clarus Market Metrics

97. 2011 Annual Housing
Market Survey

98. 2 in 5 Homes Sold Were
Distressed Properties
2008 2009 2010 2011
59%
60%
40%
20% 20%
20%
0%
REOs Short Sales Equity Sales
Q. Was the property purchased/sold as a
foreclosure, REO, short sale, or none of the above?

99. Equity vs. REO vs. Short Sales
Equity Sales REO Sales Short Sales
Share of Total Sales 58.7% 19.7% 20.2%
Median Home Price $431,000 $240,000 $287,000
Square Footage 1,783 1,500 1,600
Price / SF $250 $112 $175
Sales-to-List Price Ratio 95.9% 98.0% 95.9%
% of Sales With Multiple Offers 35.2% 58.3% 57.5%
Avg. Number of Offers 3.0 3.0 3.6
% of All Cash Sales 25.5% 34.0% 23.3%
Days on MLS 67 50 141
Days in Escrow 35 35 45

100. 1 in 3 Sellers Sold Because They
Were in Distress
35% Sold due to foreclosure/Short sale/Default 30%
30%
25%
20%
15%
10%
5%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Q. What was the single most important reason for
selling/buying the property?

101. Sellers with a Net Cash Loss
35%
30%
25%
21.8%
20%
Long Run Average = 11.2%
15%
10%
5%
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Q. What was the net cash gain or net loss to
the seller as a result of this sale?

102. Net Cash to Sellers
Median
$250,000
$200,000
$150,000
$100,000 $75,000
$50,000
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Q. What was the net cash gain or net loss to the seller as a result of this sale?

103. Median Price Discount &
Weeks On Market
3.9%, 10.5 weeks
8% 16
Med. Price Discount
7% Med. Weeks on MLS 14
6% 12
5% 10
4% 8
3% 6
2% 4
1% 2
0% 0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Q. 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?

104. Multiple Offers
% with Multiple Offers # of Multiple offers (Average)
60% 6
50% 5
40% 4
30% 3
20% 2
10% 1
0% 0
2000 2002 2004 2006 2008 2010

105. Proportion of Sellers Planning to
Repurchase
80%
70%
60%
50%
40%
30%
20%
10%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Q. Is the seller planning on purchasing another home?

106. Reasons Sellers Not Planning to
Buy Another Home
Seller is a lender/bank 19.8%
Seller prefers to have less financial obligation 11.4%
Poor credit background 10.9%
Lack of cash for down payment 5.7%
Out of work/unemployment 4.9%
Decide to live with family/friends 4.7%
Waiting for market to bottom 2.7%
Other 40.0%
0% 10% 20% 30% 40% 50%
Q. Why is the seller not planning to purchase another home?

107. Reasons For Selling
All Home Sellers
Foreclosure/Short
Sale/Default
Change in Family Status
Retirement/Move to
Retirement Community
Investment/ Tax
Consderations
Desired Better Location
Desired Smaller Home
Changed Jobs
Desired Larger Home
Other
0% 5% 10% 15% 20% 25% 30% 35%
Q. What was the single most important reason for selling/buying the property?

108. Cash Sales on the Rise
% of All Sales
30%
25%
20%
15%
10%
5%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

109. Investments & Second/
Vacation Homes
Investment/Rental Property Vacation/Second Home
25%
20% 7%
15%
10%
17%
5%
0%

110. Foreign Buyers
10%
% of Foreign Buyers
8%
8%
6% 6%
6% 5%
4%
2%
0%
2008 2009 2010 2011
Q. Was the buyer a foreign buyer?

111. Years Owned Home Before Selling
(All Sellers and Second Home/Investment Home Sellers
All Sellers Second Home and Investment Home Sellers
14
12
10
8
7.0
6 6.0
4
2
0

112. California Housing
Market Forecast

113. Forecast Progress Report
2010 2011
Projected Forecast 2011
2010 Actual
October October Projected
2010 2010
SFH Resales
492.0 491.5 502.0 491.1
(000s)
% Change -10.0% -10.1% 2.0% -0.1%
Median Price
$306.5 $303.1 $312.5 $291.0
($000s)
% Change 11.5% 10.2% 2.0% -4.0%
Forecast Date: September 2011 vs October 2010
Source: CALIFORNIA ASSOCIATION OF REALTORS®

114. California Housing Market Outlook
2005 2006 2007 2008 2009 2010 2011f 2012f
SFH Resales
625.0 477.5 346.9 441.8 546.9 491.5 491.1 496.2
(000s)
% Change 0.03% -23.6% -27.3% 27.3% 23.8% -10.1% -0.1% 1.0%
Median
Price $522.7 $556.4 $560.3 $348.5 $275.0 $303.1 $291.0 $296.0
($000s)
% Change 16.0% 6.5% 0.7% -37.8% -21.1% 10.2% -4.0% 1.7%
30-Yr FRM 5.9% 6.4% 6.3% 6.0% 5.1% 4.7% 4.5% 4.7%
1-Yr ARM 4.5% 5.5% 5.6% 5.2% 4.7% 3.5% 3.0% 3.1%
Forecast Date: September 2011
Source: CALIFORNIA ASSOCIATION OF REALTORS®

115. Closing Thoughts

116. Direction of Home Prices: Sellers
Skeptical; Buyers Hopeful
Down Flat Unsure Up
100%
80%
60%
40%
20%
0%
Sellers Buyers
Q: Do you think home prices in your neighborhood will go up, down or stay flat in one year, five years and 10 years?

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

118. 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”

119. 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”

120. C.A.R. Strategic Planning Book Pics

121. Thank You
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