The document provides an overview of the state of the US economy in 2011 and outlook for 2012, focusing on key factors like GDP growth, unemployment, housing market trends, and consumer confidence. It discusses volatility in stock markets, oil prices, sovereign debt crises, and political changes. Graphics show GDP growth stalling near 2% in 2011 while unemployment remained high nationally and in California. Housing permits, prices and sales declined sharply since the 2000s but are expected to stabilize or rise in 2012 with low interest rates and pent-up demand. Federal policy on tax deductions and the future of Fannie Mae/Freddie Mac could impact the housing market.

1. It’s The Economy,
Stupid
February 29, 2012
With your host…
Gene Wunderlich

2. 2011: A Year of Economic Wild Cards
Political
Change
on
Oil Price Spikes Capitol
Hill
Arab Spring
Sovereign
Debt
Crisis in
EuroZone
Debt Limit Stock
Ceiling & Market
Downgrade Volatility
of US Debt

3. • Lenders
• Short Sales
• Interest Rates
• Federal Economic Policy
• Inflation
• Regulations
• Shadow Inventory
• Unemployment
• Global Economy
• Foreclosures
• Mortgage Interest Deduction
• Strategic Foreclosures

4. Consumer Confidence?
Highest Since April
November 2011: 64.5
Overall, 62 percent of those
160 surveyed say they’re optimistic
INDEX,
about what 2012 will bring for the
100=1985 country, according to the
140
Associated Press-GfK survey. And
for themselves and their families,
120 Americans are even more positive,
with 78 percent telling pollsters
100 they are personally hopeful about
the year ahead.
80
60
40
20
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11

5. Gross Domestic Product: Stall Speed
2010: 2.8%; 2011 Q1: 0.4% Q2: 1.0% 2011 Q3: 2.5%
8%
7%
6%
ANNUAL QTRLY
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%
-4%
-5%
-6%
2009 Largest Annual Drop since 1938 (-3.4%)
-7%
-8%
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
Q1-09
Q3-09
Q1-10
Q3-10
Q1-11
Q3-11

6. Unemployment Stubbornly High
December 2011
California (11.1%) vs. United States (8.5%)
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

7. How Many Years to Get Job
Market Back to Normal?
Jobs added per month Assumed new jobs How many years?
needed for growing
population per month
100,000 100,000 Treading water and
never back to normal
200,000 100,000 6.3 years
300,000 100,000 3.2 years
400,000 100,000 2.1 years

8. California Sales of Existing Homes
and Median Price
Housing Cycle Comparisons 1970- 2011
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

9. California vs. U.S. Median Price
US Median Price CA Median Price
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$0
California Association of REALTORS®

10. 0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
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
California Vs. U.S.
% OF HOUSEHOLDS THAT CAN BUY
Q1 2008
Records Highs
Q3 2008
CA
Q1 2009
Q3 2009
Q1 2010
Housing Affordability:
US
Q3 2010
Q1 2011
California Association of REALTORS®

11. 0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
2009.01
2009.04
2009.07
2009.10
2010.01
MONTHLY
2010.04
FRM
2010.07
2010.10
ARM
2011.01
2011.04
2011.07
8.4.11
8.25.11
WEEKLY
9.15.11
Mortgage Rates @ Historical Lows

12. Median Price & Affordability Index

13. CA New Housing Permits:
Opportunity
300,000
Single Family Multi-Family
250,000
Average 1988-09: 138,000
200,000
150,000
100,000
50,000
0
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2009: 36,200 2010: 39,000 2011: ??
SOURCE: CBIA. Forecast: C.A. R.

14. CA Underwater Mortgages:
Reverse Wealth Effect
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

15. Regional Sales by Year
8000
7000
6 7 7
6000 6 5 4
5 5
2 2 5
8 8
5000 2 5
8 5 9 8
7 2
9 4
4000 0
2 3
3000 1
6 2
2000 6
7
1000 6
0
2004 2005 2006 2007 200 2009 2010 2011
Southwest California

16. Regional Median Price by Year
500000
450000
Your median home is worth
$
$636 bucks more than it was
400000
4 $ two years ago. (But 52% less
$
350000 $
4
8 4 than is was 5 years ago.)
3 9 4
8 3 ,
300000 4
9 7 7 , $
, , 1
250000 9 2
3 3 2 8 8
200000 8 6 $ $ $
8 7
4 2 2 2
9 ,
3 3 3
150000
8 8 5
4
7 , , ,
100000
3 9 7 6
9 0 2
50000
2 1 8
0
2004 2005 2006 2007 200 2009 2010 2011
Southwest California

17. Sales by Type

18. 2012 Preview : State
 Accelerated 3% withholding
 4% flat tax – including services
 Point of sale mandates
 Mortgage interest deduction
 40+ ballot propositions
 Taxes, taxes, Texas

19. Federal Issues – Critical Concerns
• High-cost Loan Limits - expired 10/1/11 (except
FHA)
• Future of Fannie and Freddie? FHA?
• Tax Reform on the horizon
Mortgage Interest Deduction?
Capital Gains?
• QRM (Qualified Residential Mortgage) 20% Down
Is the future of the 30 year mortgage in doubt?

20. 2012 – What’s Ahead
• Stable to increasing home sales
• Stable median price
• Declining inventory of resale homes
• Rising rents
• Lack of new home inventory
• Compelling affordability
• Record low interest rates
Pent up demand

21. 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

22. Warren Buffett says:
Houses are another attractive investment at current prices,
Buffett said. He added he might buy a couple hundred
thousand homes if only he could figure out a way to
manage them effectively. He said he isn’t very handy.
2/27/12
Jimmy Buffett says:
The weather is here, wish you were beautiful
The skies are too clear, life's easy today.
The beer is too cold, the daiquiri's too fruitiful
There's no place like home when it's this far away

23. Thank You.
Any questions?
GAD@SRCAR.ORG