This document summarizes the key economic and housing market trends in the United States and California. It discusses the slow economic recovery at the national and state level, high unemployment rates, weakness in consumer spending and housing markets. Specifically, it outlines the large number of foreclosures and distressed sales in California's housing market, declining home prices, and skepticism about a near-term rebound in home values. It also provides an overview of the National Association of Realtors' legislative agenda focusing on issues like the mortgage interest deduction, government support for housing finance, and flood insurance programs.

1. It’s STILL The Economy, StupidWith theOctober 14, 2011With your host…Gene Wunderlich

2. Here’s the Good News!National RecessionEnded 6/09SoCalRecessionEnded 9/10That’s the good news – We should stop here

3. EconomyHousingPoliticsFraud

4. Too many & Lenders

5. Short Sales

6. Interest Rates

7. Inflation

8. Shadow Inventory

9. Global Economy

10. Federal Economic Policy

11. Regulations

12. Unemployment

13. Foreclosures

14. Mortgage Interest Deduction

15. Strategic Foreclosures2011: A Year of Economic Wild CardsJapaneseEarthquake & TsunamiSovereign DebtCrisis in EuroZoneOil Price SpikesArab SpringDebt Limit Ceiling & Downgrade of US Debt Political Change on Capitol Hill Stock Market Volatility

16. EconomyGovernment's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. Ronald ReaganAmerican President

18. Gross Domestic Product: Stall Speed2010: 2.8%; 2011 Q1: 0.4% Q2: 1.0% ANNUAL PERCENT CHANGEANNUALQTRLY

19. US Deficit Highest in Decades2010: 11% of GDP (Revenues – Expenses)Source: US Treasury, BEA, compiled by C.A.R.

20. US Debt Jumped as Government Responded to Financial Crisis 2010: 93% of GDPSource: US Treasury, BEA, compiled by C.A.R.

21. Components of GDP:Consumer Spending Weak; Gov’t Sector DownQuarterly Percent ChangeUS Dept of Commerce, Bureau of Economic Analysis

22. Consumers Pulling BackHome Equity & Reverse Wealth EffectConsumer Spending 2011 Q1: 2.7% Q2: 0.4%Quarterly Percent ChangeQUARTERLY PERCENT CHANGEUS Dept of CommerceBureau of Economic Analysis

23. Unemployment Stubbornly High September 2011 California (12.1%) vs. United States (9.1%) CA Employment Development Division

24. U.S. Job Growth: Flat in August – 103,000 jobs in September Recession Job Losses: 8.4 millionSince Jan’10: +1.8 millionUS Dept of Labor, Bureau of Labor Statistics

25. Total Payroll Jobs in the U.S. (same as in 2000, but with 30 million more people)

26. How Many Years to Get Job Market Back to Normal?

27. California Job Growth: FalteringMonth-to-Month ChangesRecession Job Losses: 1.3 millionSince Jan’10: +188,100CA Employment Development Division

28. Where are California’s Jobs? Employment Trends: Construction & Financial Biggest LosersCalifornia Association of REALTORS®

29. Where Are California’s Jobs Going? From Jan. 1 of this year through June 16, we have had 129 disinvestment events occur, an average of 5.4 per week.

30. In 2010 we saw an average of 3.9 events per week.

31. In 2009 the total was 51 events.

32. Our rate today is more than 5 times what it was then.No one knows the real level of activity because smaller companies are not required to file layoff notices with the state. A conservative estimate is that only 1 out of 5 company departures becomes public knowledge, which means California may suffer more than 1,000 disinvestment events this year. The capital directed to out-of-state or out-of-country, while difficult to calculate, is nonetheless in the billions of dollars.The top five destinations are (1) Texas, (2) Arizona, (3) Colorado, (4) Nevada and Utah tied; and (5) Virginia and North Carolina tied.Joseph VranichBusiness Relocation Coach

33. Crisis of Confidence: Small Business Optimism DownNational Federation of Independent Business

34. Consumer Confidence SlippingLowest Since April ‘09August 2011: 44.5INDEX, 100=1985Housing Next

35. HousingThe housing market will get worse before it gets better.James Wilson American Politician (1742 – 1798)

36. Wall Street Journal9/21/11“Home Forecast Calls For PAIN.”Prices to stumble through 2015

37. California vs. U.S. SalesCalifornia Association of REALTORS®

38. California Sales of Existing Homes and Median PriceHousing Cycle Comparisons 1970- 2011-44%UNITS/MEDIAN PRICE $-25%-61%California Association of REALTORS®

39. California vs. U.S. Median PriceCalifornia Association of REALTORS®

40. Housing Affordability: Records Highs California Vs. U.S.% OF HOUSEHOLDS THAT CAN BUYCalifornia Association of REALTORS®

41. Mortgage Rates @ Historical LowsWEEKLYMONTHLY

42. Median Price of Existing Detached HomesCalifornia, August 2011: $297,060, Down 7.4% YTYCalifornia Association of REALTORS®

43. Share of Distressed Sales to Total SalesCalifornia Association of REALTORS®

44. Underwater Much?

45. Distressed Sales: Bay Area(Percent of Total Sales)California Association of REALTORS®

46. Distressed Sales: Central Valley(Percent of Total Sales)California Association of REALTORS®

47. Distressed Sales: Southern CA(Percent of Total Sales)California Association of REALTORS®

48. 1872 W. Admiral, 928013 bd, 2.5 ba, built in 1982

49. Purchased in Sept 2005 for $594,000 with 30% down.

50. In April 2006, added a second for $57,000.

51. In Oct 2006, refinanced the second into a new second for $100,000.

52. Defaulted in 2010

53. Zestimate of current value = $364,000.1572 W. Orangewood, 928023 bd, 2 ba, 2,016 sq ft built in 1977.

54. Purchased in June 2003 for $455,000 with 30% down.

55. March 2004: added a second for $75,000; added a third for $90,500; added a fourth for $80,000.

56. Within one year of purchase, the property had $565,000 in debt on it!

57. Defaulted in 2010.

58. Zestimate of current value

59. = $442,000.Inevitable Conclusion…Excessive borrowing against home equity is the untold part of the foreclosure story.

60. “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

61. California Foreclosure FilingsAugust 2011NTS: 24,260, -16.9% YTD • NOD: 32,338, -21.5% YTD 6 Month Average:NTSs: 23,806NODs: 23,625California Association of REALTORS®

62. 1 in 3 Sellers Sold Because They Were in DistressCalifornia Association of REALTORS®

63. Sellers with a Net Cash LossLong Run Average = 11.2%What was the net cash gain or net loss to the seller as a result of this sale?California Association of REALTORS®

64. Net Cash to SellersQ. What was the net cash gain or net loss to the seller as a result of this sale?California Association of REALTORS®

65. Proportion of Sellers Planning to RepurchaseQ. Is the seller planning on purchasing another home?California Association of REALTORS®

66. Reasons Sellers Not Planning to Buy Another Home

67. California Housing Market OutlookForecast Date: September 2011California Association of REALTORS®

68. Compelling AffordabilityMonthly Mortgage to buy a Median Priced Home

69. CA New Housing PermitsAverage 1988-09: 138,0002009: 36,200 2010: 39,000SOURCE: CBIA. Forecast: C.A. R.California Association of REALTORS®

70. Direction of Home Prices: Sellers Skeptical; Buyers Hopeful California Association of REALTORS®

71. 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

72. PoliticsIf you want to understand your government, don't begin by reading the Constitution. Instead, read selected portions of the Washington telephone directory containing listings for all the organizations with titles beginning with the word National. George WillJournalist & Author

73. “Just because you don’t take an interest in politicsdoesn’t mean politics won’t take an interest in you.” Pericles: 500 B.C. If you don’t have a seat at the table…You’ll probably be on the menu.Wunderlich Codicil: 2000 A.D.

75. The Realtor®Party

76. The Realtor®PartyWE…Are a Special Interest Group.The Realtor® Party

77. The Realtor®PartyNAR: The largest grassroots Political Action Group in this country."These groups are powers in Washington. The National Association of Realtors gave more money than any other group to candidates in the last election ($4+ million). Its 1.1 million members can do a lot of lobbying."CAR: The most effective business advocacy group in Sacramento.

78. The Realtor®PartyRed State? Blue State?Under all is the land…Realtor® Preamble

80. Challenges at the Federal LevelMortgageInterest Deduction