1. February 21, 2013
With your host…
Gene Wunderlich

2. 2013: A Year of Economic Wild Cards
Political
Oil Price Spikes Change
/
CA
supermajority
Arab Spring
Fiscal Cliff
Debt
Crisis in
EuroZone
Debt Limit Stock
Ceiling & Market
Downgrade Volatility
of US Debt

3. • Lenders
• Short Sales
• Foreclosures
• Federal Economic Policy • Interest Rates
• Regulations • Inflation
• Mortgage Interest Deduction • Shadow Inventory
• Strategic Foreclosures • Global Economy
• Future of GSE’s • Unemployment
Unprecedented era of government involvement in housing

4. “Just because you don’t take an interest in politics
doesn’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.
You may still be on the menu,
but hopefully we can keep you from being
the main course
2012 addendum

5. NAR: 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 ($11+
million). Its 1.1 million members can do a lot of
lobbying."
CAR: The most effective
business advocacy group in
Sacramento.

6. Red State? Blue State?
Under all is the land…
Realtor® Preamble

7. May 2012
12,000+ Realtors® Rally for the American Dream

8. The Realtor® Home
Washington D.C.

9. So how is the housing market?

10. 250
Southwest California Homes
Single Family Homes
Unit Sales
200
150
100
50
0
3/11 6/11 9/11 12/11 3/12 6/12 9/12 12/12
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

11. Southwest California Homes
Annual Sales Volume
Single Family Homes
10,000
9,000
9
8,000 8 8 , 8
7 8
, , 6 , 7
7,000
, ,
4 4 6 2 ,
6 6 0
6,000
7 5 5 6 5
9 , 0
5,000 5 0 4 9
2 6 4
6
4,000 5
4
4
3,000 ,
0
2,000
1
1,000 5
0

12. Lake Elsinore
Annual Sales Volume
Single Family Homes
2,000
1,805
1,800
1,600
1,405 1,405
1,400 1,287 1,270
1,165
1,200
1,038 999
962
1,000
800
600 494
400
200
0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

13. CA Median Price of Existing Detached Homes
• November 2012: $349,300, Up 24.8% YTY
$700,000 P: May-07
$594,530
$600,000
11/12
$500,000 $349,300
T: Feb-09 +30% from
$245,230 trough
$400,000 -59% from
peak
$300,000
$200,000
$100,000
$-
SOURCE: California Association of REALTORS®

14. Southwest California Homes
Median Price
$499,147
$500,000
$461,437 $452,888
$450,000
$400,698
$400,000 53% drop
$350,000 9% gain
$288,822
$300,000
$247,648 $241,438 256,539
$250,000
$234,974
$200,000
$150,000
$100,000
$50,000
$0
2004 2005 2006 2007 2008 2009 2010 2011 2012

15. Lake Elsinore
Median Price
$450,000 $433,996
$391,725
$400,000 $377,597
$350,000
$323,681 60% drop
$300,000
$250,000 $230,115 $230,459 7% gain
$200,000
$187,347 $180,856 $187,696
$174,666
$150,000
$100,000
$50,000
$0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

16. Southwest California Homes
Single Family Homes
Median Price
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
January over January prices rose
• 30% in Lake Elsinore ($162,622/$233,280),
$100,000 • 18% in Canyon Lake ($233,445/$284,577),
• 17% in Menifee (161,143/$195639),
$50,000
• 15% in Temecula ($286,246/$334,928),
• 12% in Murrieta ($259,975/$294,929)
• 9% in Wildomar ($204,109/$225,299)
$0
3/11 6/11 9/11 12/11 3/12 6/12 9/12 12/12
Temecula Murrieta Lake Elsinore Menifee Wildomar Canyon Lake

17. Southwest California Homes
January Demand
300
2 2
250 2
2 . .
2 6
1 . 2 8
3 0
. 1
8 1
2 8 9
200
1 1
1 2
1 1 1
8
1 4
6 3 .
6 1 1 2
150 9 4
9 1
1 1
1 1
6 8
1 0 9
0 9 .
100 9
7 7
6 6 4
5 5 0
4 5
9 2
6 5
3 3
50 2 2
0 4
6 8 1 1 1 0 2 0
. . . . . .
2 7 2 8 1 8
0
On Market (Supply) Pending Closed (Demand) Days on Market Months Supply Absorption rate *
Murrieta Temecula Lake Elsininore Menifee Canyon Lake Wildomar
* Absorption rate - # of new listings for the month/# of sold listings for the month

18. Southwest California Homes
Inventory levels
2500
Active Inventory
Down 74%
2000 Since February
1500
1000
500
0
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12
2010 2011 2012

19. Lake Elsinore
Inventory Level
350
317
300 290
253
250
-66%
196
200
149
150
121
112 112 107 107
99 95
100
50
0
3/12 6/12 9/12 12/12

20. Lake Elsinore
Absorption Rate
450.00
4.3
400.00
3.7
3.4
350.00
300.00 2.8
250.00 2.4
200.00
1.7 1.8
1.6 1.6
150.00
.9 .9
100.00 .8
50.00
0.00
3/12 6/12 9/12 12/12

21. January Market Activity
By Sales Type
Standard Sale Bank Owned Short Sale
% of % of % of % of % of % of
Active MKT Sold MKT Active MKT Sold MKT Active MKT Sold MKT
Temecula 157 84% 59 53% 9 5% 15 14% 18 10% 34 31%
Murrieta 138 82% 77 55% 14 8% 15 11% 16 9% 46 33%
Wildomar 17 65% 13 38% 5 19% 6 18% 4 15% 14 41%
Lake
Elsinore 86 74% 45 45% 10 9% 14 14% 18 16% 36 36%
Menifee 77 65% 73 51% 18 15% 18 13% 19 16% 46 32%
Canyon
Lake 55 86% 13 43% 4 6% 5 17% 4 6% 11 37%
Regional
Average 530 76% 280 52% 60 8% 73 14% 79 12% 187 35%

23. What lies ahead?

24. CA Prices Still Below Trend Line
Spells Opportunity
$600,000
California
$500,000 US
CA Price Trend
$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
2012
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

25. Pent-Up Demand for Housing is Real
Household Formation will Rebound with Jobs
38,000 13,400
37,000 13,200
In thousands
575 13,000
36,000
377K 12,800
35,000 12,600
34,000 12,400
33,000 12,200
Total Population, California
Number of Households, California (right axis) 12,000
32,000
Projected linear estimate 11,800
31,000 Projection, based on U.S. 0.55% growth rate
11,600
30,000 11,400
2000- 2002- 2004- 2006- 2008- 2010-
2001 2003 2005 2007 2009 2011

26. When it Does CA will Start Building Again
2012(p): 52,000 units, Up 10.4% from 2011
Single Family Multi-Family
250,000
Household Growth: 220,000-250,000/yr.
200,000
150,000
100,000
50,000
0
2005 2006 2007 2008 2009 2010 2011 2012P
SOURCE: Construction Industry Research Board

27. Unemployment
16.0
Current US
14.0 unemployment:
7.8%
12.0
% of people out of work:
10.0 14.7%
8.0
6.0
4.0
There’s two ways to reduce unemployment:
2.0 #1 – put people to work
#2 – people quit looking for work
0.0
11-06
11-07
11-08
11-09
11-11
11-12
11-10
1-06
3-06
5-06
7-06
9-06
1-08
3-08
5-08
7-08
9-08
1-08
3-09
5-09
7-06
9-09
3-11
5-11
7-11
9-11
1-12
3-12
5-12
7-12
9-12
1-07
3-07
5-07
7-07
9-07
1-10
3-10
5-10
7-10
9-10
1-11 US CA RivCo Lake Elsinore Temecula Murrieta

28. Mortgage Rates at 50 Year Lows
Fed will continue QE until U=6.5%
8%
FRM
7%
ARM
6%
Federal Funds
5%
4%
3%
2%
1%
0%
Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12
SOURCE: Federal Home Loan Mortgage Corporation

29. California Housing Market Outlook
Indicator 2008 2009 2010 2011 2012p 2013f
SFH Resales
(000s) 441.81 546.86 492.29 497.86 523.25 530
% Change 27.3% 23.8% -10.0% 1.1% 5.1% 1.3%
Median Price
($000s) $ 348.5 $ 275.0 $ 305.0 $ 286.0 $ 317.0 $ 335.0
% Change -37.8% -21.1% 10.9% -6.2% 10.9% 5.7%
30-Yr FRM 6.0% 5.1% 4.7% 4.5% 3.8% 4.0%
1-Yr ARM 5.2% 4.7% 3.5% 3.0% 2.8% 2.8%

30. Signs of U.S. Housing Recovery
1. Prices have bottomed!
2. Home equity up 20% last year to $7.71Trillion
as rising prices begin to reverse negative
equity
3. New and Existing Home Sales at four- year
highs
4. Low inventory across the board
5. Housing starts at four-year high
6. Threat of shadow inventory fading as
delinquencies, foreclosures decline
7. Foreclosure starts at 6 year low

31. But there a few issues…
1. Mortgage rates are low but credit is tight
2. “Defensive” Lending is prevalent
3. Appraisals lagging today’s market
4. Listings are scarce:
– Underwater homeowners are stuck
– Investors are renting instead of flipping
– Some sellers still don’t get it

32. The Political Economy
• Fiscal Cliff Averted but Tax and
Spend Decisions Await – 60 Day
Deadline
• Tax Reform:
•Mortgage Interest Deductibility
•Mortgage Debt Forgiveness
• Future of Fannie and Freddie
• Future of FHA

33. Opportunities at the Local Level…
Coalitions!
• Murrieta-Temecula Group • City of Temecula
• EDC of Southwest California • City of Murrieta
• Southwest California Legislative Council • City of Lake Elsinore
•Temecula Valley Chamber of Commerce
• City of Wildomar
•Murrieta Chamber of Commerce
• City of Menifee
•Wildomar Chamber of Commerce
• City of Canyon Lake
•Lake Elsinore Valley Chamber of Commerce
• Building Industry Association • Riverside County
• Apartment Managers Association • Riverside County D.A.
• Property Mangers Association
• NSDAOR, TIGAR, IVAOR
• Southern California Escrow Association
• California League of Cities • Commercial Real Estate

34. 5 years from now
there will be people who say
“I wish I would have bought
a home in 2013.”
http://www.slideshare.net/genewunderlich