Leslie Appleton-Young Year-end presentation

2019 Economic & Market
Forecast
REImagine
October 11, 2018
Leslie Appleton-Young
SVP & Chief Economist

Note: Not including transactions in foreclosure.
The CA Housing Market Recovery
Equity Sales (Aug 2018)
= 98.4%
Short Sales (Aug 2018)
= 0.3%
REO Sales (Aug 2018)
= 0.9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Equity Sales Short Sale REO
Equity Sales Vs. Distressed Sales
SERIES: Distressed Sales, Not Seasonally Adjusted
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

California Vs. U.S. – 9.5% gap in 2017
Homeownership Rates
53.7%
Peak: 60.2%
54.4%
64.5%
Peak: 69.0%
63.9%
45%
50%
55%
60%
65%
70%
75% CA US
SERIES: Homeownership Rates
SOURCE:U.S.Census Bureau

CA: Ownership Rebound?
54.3
64.4
50
55
60
65
70
75
Homeownership Rate
CA U.S.

California Homeownership Rates by Race and Ethnicity (2010-2014 Average)
… Homeownership Varies Sharply by Ethnicity
SERIES: Homeownership rate by ethnicity
SOURCE: CA HCD, PolicyLink, USC Program for Environmental and Regional Equity

CA: Majority Renter State by 2025
SERIES: Homeownership Rate
SOURCE:U.S.Census Bureau,AmericanCommunity Survey,C.A.R. projection
57.1%
59.7%
56.1%
41.0%
47.3%
44.2%
30%
40%
50%
60%
70%
2000 2005 2010 2015 2020 2025 2030 2035 2040
California Homeownership Rate
Fast Slow Avearge

42 of 142 Big Cities ALREADY Majority Renter
50%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Hawthorne
Glendale
LosAngeles
ElCajon
CostaMesa
Burbank
SantaBarbara
SantaClara
Lynwood
Alameda
SantaCruz
Sunnyvale
SanDiego
Sacramento
Stockton
RedwoodCity
Westminster
Compton
SanMateo
PaloAlto
Redding
BaldwinPark
Lancaster
Pittsburg
CitrusHeights
Carmichael
SanLeandro
ChulaVista
DalyCity
NewportBeach
Whittier
Visalia
Hemet
Concord
Clovis
Temecula
SanMarcos
LakeElsinore
SanClemente
WalnutCreek
Fontana
Hesperia
SimiValley
Lakewood
Livermore
CastroValley
Menifee
YorbaLinda
2017 California Renter Rate by City

Majority Renter Cities
76.0%
50.7%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Hawthorne
SantaMonica
EastLosAngeles
Glendale
Inglewood
SanFrancisco
LosAngeles
Bellflower
Alhambra
ElCajon
Florence-Graham
Oakland
CostaMesa
Merced
LongBeach
Burbank
Arden-Arcade
MountainView
SantaBarbara
ElMonte
Pasadena
SantaClara
SouthGate
Chico
Lynwood
Berkeley
Anaheim
Alameda
Salinas
SantaAna
SantaCruz
Davis
Madera
Sunnyvale
Irvine
Tustin
SanDiego
Fresno
Lodi
Sacramento
SanBernardino
Escondido
2017 California Renter Rate by City

4.2%
GDP 2018-Q2
1.7%
Job Growth
September 2018
3.7%
Unemployment
September 2018
Consumption
2018-Q2
Core CPI
August 2018
2.2%3.8%
U.S. Economy Our Biggest Strength

Employment: All-Time High
2.0%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
Feb-13
Jul-13
Dec-13
May-14
Oct-14
Mar-15
Aug-15
Jan-16
Jun-16
Nov-16
Apr-17
Sep-17
Feb-18
Jul-18
Nonfarm Employment Growth
California U.S.
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
Jan-00
Feb-01
Mar-02
Apr-03
May-04
Jun-05
Jul-06
Aug-07
Sep-08
Oct-09
Nov-10
Dec-11
Jan-13
Feb-14
Mar-15
Apr-16
May-17
Jun-18
California Nonfarm Employment

Unemployment Lowest in 40+ Years
2.4%
9.3%
0% 2% 4% 6% 8% 10%
San Francisco
South Bay
Sonoma
Orange County
San Diego
Ventura
Solano
Los Angeles
Monterey
Chico
Stanislaus
Modesto
Fresno
Merced
Tulare
0
2
4
6
8
10
12
14
Jan-76
Mar-78
May-80
Jul-82
Sep-84
Nov-86
Jan-89
Mar-91
May-93
Jul-95
Sep-97
Nov-99
Jan-02
Mar-04
May-06
Jul-08
Sep-10
Nov-12
Jan-15
Mar-17
Unemployment Rate
California U.S.

September 2018: 138.4
Consumer Confidence
Highest in 18 Years
138.4
0
20
40
60
80
100
120
140
160
INDEX,100=1985
SERIES: Consumer Confidence
SOURCE: The Conference Board

August 2018: All Items 2.7% YTY; Core +2.2% YTY
Inflation Remains Low
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
AnnualPercentChange
All Items Core
SERIES: Consumer Price Index
SOURCE: US Bureau of Labor Statistics

Wild Card – Financial Markets
SERIES: Dow 30
SOURCE: Yahoo Finance
21000
22000
23000
24000
25000
26000
27000
(Jan 2018 – Oct 2018)
24800
25000
25200
25400
25600
25800
26000
26200
26400
26600
26800
27000
(9/1/18 – 10/10/18)
Down
831 pts

30 Yr. FRM Hit 5%, 1st Time since Early 2011
SERIES: Average 30 Yr. Fixed Mortgage Rates
SOURCE: Mortgage News Daily
Oct 10: 5.00%

January 2012 – October 2018
Fed Has Raised rates 8x Since Dec 2015
4.63 4.71
3.94 4.01
2.00 2.25
0
1
1
2
2
3
3
4
4
5
5
FRM
ARM
Fed Funds Rate
Fed Raise Rate
the 1st time
since mid-2006
SERIES: 30Yr FRM, 5Yr ARM, Fed Funds Rate (Target Rate)
SOURCE: Freddie Mac, St. Louis Fed
MONTHLY WEEKLY

Rates Rising Recently, but Keep Perspective
SERIES: 30Yr FRM, 5Yr ARM
SOURCE: Freddie Mac
0
2
4
6
8
10
12
14
16
18
20
30-Year Fixed Rate Mortgage

Higher Rates Hurt Affordabiity
Q2-2018 Median Price $596,730
20% Down-payment
INTEREST RATE
MONTHLY MORTGAGE
SERIES: Housing Affordability Index
Minimum Qualifying Income
INTEREST RATE
$2,013
$2,144
$2,279
$2,419
$2,563
$2,711
$2,862
$3,017
$0
$400
$800
$1,200
$1,600
$2,000
$2,400
$2,800
$3,200
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%
$107,956
$113,196
$118,614
$124,203
$129,958
$135,871
$141,936
$148,145
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5%

California, August 2018 Sales: 399,600 Units, -2.1% YTD, -6.6% YTY
Market Off 2.1% YTD – 4 Months of YTY Declines
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
*Sales are seasonally adjusted and annualized
SERIES: Sales of Existing Single Family Homes
Aug-18:
399,600
Aug-17:
427,630

Statewide Home Sales Off 5.5% YOY
*Sales are seasonally adjusted and annualized
SERIES: Sales of Existing Single Family Homes
11.8%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18
Year-over-Year % Chg
Avg. year-over-year
% chg. = -5.5%
Last 4+ consecutive mo. with decline:
Avg. year-over-year % chg. = -1.9%

California, August 2018: $596,410, +0.8% MTM, +5.5% YTY
Price Growth Also Slowing Down
$-
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000 Peak: May-07
$594,530
Trough: Feb-09
$245,230
-59% from
peak
Aug-18:
$596,410Aug-17:
$565,320
SERIES: Median Price of Existing Single Family Homes

-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
YTY%Chg.inPrice
Condo Single-Family Homes
Price Gains Slowing Across the State
SERIES: Median Price of Existing Condo/Townhomes

Price Gains Slowing Across the State
0%
2%
4%
6%
8%
10%
12%
14%
YTY%Chg.inPrice
Condo Single-Family Homes
Decelerating
Growth

So Cal: Orange & SD Above Prior Peak
SERIES: Median Price of Existing Detached Homes
Region
Peak
Month
Peak
Price
Aug-18
%Chg Fr
Peak
Orange Jun-07 $775,420 $838,500 8.1%
San Diego May-06 $622,380 $660,000 6.0%
Los Angeles Sep-07 $625,812 $607,490 -2.9%
So CA Jun-07 $589,710 $555,000 -5.9%
Ventura Aug-06 $710,910 $660,000 -7.2%
Riverside Jun-06 $431,710 $400,750 -7.2%
San Bernardino Aug-06 $350,290 $290,000 -17.2%

Central Coast: SC & SLO
Region
Peak
Month
Peak
Price
Aug-18
%Chg Fr
Peak
Santa Cruz Oct-07 $865,000 $917,500 6.1%
San Luis Obispo Oct-05 $619,950 $630,000 1.6%
Monterey Aug-07 $777,000 $599,000 -22.9%
Santa Barbara Jul-07 $878,120 $572,500 -34.8%

Central Valley: All Below Prior Peak
Region
Peak
Month
Peak
Price
Aug-18
%Chg Fr
Peak
Sacramento County Aug-05 $394,450 $369,950 -6.2%
Madera County Feb-08 $275,000 $254,900 -7.3%
Placer County Aug-05 $527,990 $475,000 -10.0%
Fresno County Jun-06 $313,500 $280,000 -10.7%
San Joaquin County Jun-06 $426,830 $380,000 -11.0%
Tulare County Dec-05 $269,710 $239,000 -11.4%
Stanislaus County Sep-05 $370,100 $319,900 -13.6%
San Benito County May-05 $671,190 $575,000 -14.3%
Kings County Mar-06 $268,050 $227,750 -15.0%
Merced County Oct-05 $344,610 $288,396 -16.3%
Kern County Jun-06 $299,920 $247,000 -17.6%
Glenn County Feb-07 $312,500 $225,500 -27.8%

Bay Area: All But Contra Costa & Solano
Region
Peak
Month
Peak
Price Aug-18
%Chg Fr
Peak
San Francisco May-07 $972,010 $1,550,000 59.5%
Santa Clara Oct-07 $865,000 $1,295,000 49.7%
San Mateo Oct-07 $1,020,000 $1,500,000 47.1%
Alameda May-07 $709,420 $960,000 35.3%
Bay Area May-07 $789,250 $935,000 18.5%
Marin Jun-07 $1,149,390 $1,222,500 6.4%
Napa Jun-07 $729,170 $752,500 3.2%
Sonoma Jan-06 $650,330 $670,000 3.0%
Contra Costa May-07 $698,420 $650,000 -6.9%
Solano Jun-07 $492,800 $455,000 -7.7%

CA Consumer Poll: Sept 2018
SERIES: 2018 Google Consumer Poll
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®Do you think it's a good time to buy a home in California? (n=300)
Do you think it's a good time to sell a home in California? (n=300)
22%
78%
Yes No
Do you think it's a good time to buy a
home in California?
57%
43%
Yes No
Do you think it's a good time to sell a
home in California?

Inventory is Growing
SERIES: Unsold Inventory Index of Existing Single Family Homes
3.3
0
2
4
6
8
10
12
14
16
18
Jan-05
Jun-05
Nov-05
Apr-06
Sep-06
Feb-07
Jul-07
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
May-13
Oct-13
Mar-14
Aug-14
Jan-15
Jun-15
Nov-15
Apr-16
Sep-16
Feb-17
Jul-17
Dec-17
May-18

Shift Started in January 2018; Tipped in April
SERIES: Growth in Active Listings
17.2%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
+ 17.2 % Active Listings in August

Biggest Gains At Low End
SERIES: Unsold Inventory Index of Existing Single Family Homes
7.0%
8.0%
7.0%
3.5%
2.9%
2.4%
0.5%
0.0%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Under $300K $300-$500K $500-750K $750-1000K $1-1.5M $1.5-2M $2-$3M $3M +
Active Listings Growth

Discrepancies Point to Weaker Demand
Where did the buyers go?
7.0% 8.0% 7.0%
3.5% 2.9% 2.4%
0.5% 0.0%
-21.1%
-7.3% -7.0%
0.9%
10.2%
8.2%
-1.1%
8.6%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Under $300K $300-$500K $500-750K $750-1000K $1-1.5M $1.5-2M $2-$3M $3M +
Sales vs. Active Listings Growth
Listings Sales

Listings Taking Longer to Sell
SERIES: Median Time of Market of Existing Single Family Homes
20
0
10
20
30
40
50
60
70
80
1/1/2005
7/1/2005
1/1/2006
7/1/2006
1/1/2007
7/1/2007
1/1/2008
7/1/2008
1/1/2009
7/1/2009
1/1/2010
7/1/2010
1/1/2011
7/1/2011
1/1/2012
7/1/2012
1/1/2013
7/1/2013
1/1/2014
7/1/2014
1/1/2015
7/1/2015
1/1/2016
7/1/2016
1/1/2017
7/1/2017
1/1/2018
7/1/2018
Median Time on Market (Days)

More Listings With Price Reductions
SERIES: Listing Price of Existing Single Family Homes
39.9%
4.3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
1/1/2010 1/1/2011 1/1/2012 1/1/2013 1/1/2014 1/1/2015 1/1/2016 1/1/2017 1/1/2018
Reduced-Price Listings
Share Reduced Median Reduction

Listing & Sale Prices Dropping > $1M
-4.5%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
200701
200704
200707
200710
200801
200804
200807
200810
200901
200904
200907
200910
201001
201004
201007
201010
201101
201104
201107
201110
201201
201204
201207
201210
201301
201304
201307
201310
201401
201404
201407
201410
201501
201504
201507
201510
201601
201604
201607
201610
201701
201704
201707
201710
201801
201804
201807
California $1M Homes: Sales vs. List Price Growth
Typically 4-6 month lag
List Price Sales Price

State of the Housing Market -
Study of Housing: Insight, Forecast, Trends (S.H.I.F.T)

• C.A.R. has conducted the Annual Housing Market Survey since 1981.
• E-mailed to a random sample of 30,355 REALTORS® throughout CA
• Asked about their most recent transaction (Q2 2018).
• 1,492 valid survey responses, 4.9 percent response rate.
• The margin of error +/- 2.5 percent at a 95 percent confidence level.
Methodology

Case Study: First-Time Buyer in San Francisco
SERIES: 2018 Housing Market Survey
Buyer’s Profile
Age: 45
Marital Status: Married with dependents
Income: $120,000
Down Payment: $150,000
Down Payment Source: Sales of personal assets
(other than real property)
Reason to Buy: Tired of Renting
Characteristics of Home
Size: 1,200 sq. ft
Property Type: Condominium
Location: San Francisco County
Price: $755,000
“Have you looked into the housing
market into the Bay Area? It is
RIDICULOUSLY impossibly
competitive.”*
*Quotes from first-time buyers from the 2018 State of the Consumer Report
“Finding a home I could afford
[was the most difficult part of
the process] – the worst part
about the buying process is that
the list prices are fake.”*

First Time Buyers: Below LT Trend
34.8%
0%
10%
20%
30%
40%
50%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
% First-Time Home Buyers Long Run Average
Long Run Average = 37.4%

Affordability: Big Problem for First-Time Buyers
SERIES: 2018 Annual Housing Market Survey
SOURCE: California Association of REALTORS®
49%
19%
11%
1%
5%
2%
5%
0%
1%
8%
18%
14%
12%
12%
7%
5%
5%
7%
1%
18%
0% 10% 20% 30% 40% 50% 60%
Housing affordability
Quality of life
Closer to family/relative
Second home
Job change
Shorter commute to work/school
Quality of school
Retired
Quality of community services
Other
First-Time Buyers Repeat Buyers
Q: Primary reason for changing county?

International Buyers: Flat for 3 Years
8%
6%
5%
6% 6%
8%
6%
4%
3% 3%
3%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Q. Was the buyer an international buyer – a person who was a citizen of
another country who wished to purchase residential real estate in the U.S.?
The share of international buyers dropped to the lowest level in at least ten years

Case Study: Seller Leaving California
Seller’s Profile
Age: 56
Marital Status: Married Couple with Dependents
Income: $200,000
Yrs. Owned: 25
Net cash gain: $1,050,000
Reason for selling: Desired larger home
State moving to: Utah
Characteristics of Home
Size: 1,948 sq. ft
Property Type: Single-Family Home
Location: Los Angeles County
Price: $1,175,000
“We doubled the size of our house
and lowered our mortgage
payment.”*
*Lopez, S. (2017) ‘They’re leaving California for Las Vegas for find middle-class life
that eluded them’. Los Angles Times, 3 December
“L.A would have been my first
choice, and I didn’t want to have
to leave California. I couldn’t
afford to stay there”*

Sellers Aren’t Not Moving
11.5
0
2
4
6
8
10
12
14
Years Owned Home Before Selling
Long-Time Homeowners are not
moving as in the past because:
• Low rate on current mortgage
• Low property taxes
• Capital gains hit
• Where can I afford to go?
• Why not remodel and stay?

29% Of Sellers Moving Out of California
Up 10% from 2013
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Within the same county 38% 41% 37% 45% 47% 42% 49% 49% 46% 44% 44% 40% 38% 36%
In another county in
California
23% 18% 24% 17% 21% 21% 19% 18% 20% 21% 20% 21% 20% 21%
In another state 31% 28% 29% 27% 19% 20% 20% 22% 19% 22% 22% 25% 28% 29%
Out of US 1% 2% 1% 1% 2% 1% 1% 1% 0% 1% 1% 1% 1% 1%
Don't Know/Not sure 7% 11% 9% 10% 12% 16% 10% 10% 15% 13% 13% 13% 14% 13%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
Location of Seller’s New Home

Permits: CA Not Building Enough
SERIES: California New Housing Permits
SOURCE: Construction Industry Research Board
0
50000
100000
150000
200000
250000
300000
350000
Single Family Multi-Family
CA HCD Projected
Housing Needs:
180,000/yr.
2017: 112,886 (55,779 sf, 57,107 mf )
2018f: 127,780 (64,900 sf, 62,880 mf)

CA: Less new housing per capita than
other states (2005 – 2016)
SOURCE: U.S. Census Bureau, C.A.R.
3,971
5,592
533
1,142
1,090
559
1,101
California
Texas
Oregon
Washington
New York
Nevada
Arizona
Population Added
1,000 People
1,072,121
1,728,257
174,466
374,157
379,019
202,332
416,330
California
Texas
Oregon
Washington
New York
Nevada
Arizona
Housing Units Added
Number
270
309
327
328
348
362
378
California
Texas
Oregon
Washington
New York
Nevada
Arizona
Ratio of Housing Units Added to
Population Added
Units per 1,000 People
+40%

VI. What Are the
Consequences?

California, 1984-2018
Housing Affordability is Off Sharply
SERIES: Housing Affordability Index of Traditional Buyers
26%
53%
0%
10%
20%
30%
40%
50%
60%
70%
80%
%OFHOUSEHOLDSTHATCANBUYA
MEDIAN-PRICED
HOME
Annual Quarterly

Only Lassen County Beats US Affordability
64
535352515049484847464545454443434242414139383838383737
333332302928262625
232222
2020201918161614141412
0
10
20
30
40
50
60
70
2018-Q2: % able to purchase median-priced home
SERIES: Housing Affordability Index of Traditional Buyers

• Los Angeles
• San Diego
• San Jose
• Oxnard
• San Francisco
Realtor.com 4/18/2018
Least Affordable Metros are in CA

2. CA is Home to
Record Number of
Homeless

#2: Largest Number of Homelessness
SERIES: Estimates of Homeless People in January 2017
SOURCE: The U.S. Department of Housing & Urban Development
Estimates of Homeless People – By State, 2017
Top 5 State with Largest Increases
(2016 – 2017)
• California 16,136/13.7%
• New York 3,151/3.6%
• Oregon 715/5.4%
• Nevada 435/5.9%
• Texas 426/1.8%

3. CA is Losing Workers
to More Affordable
States: Two Step

~750K People Have Left Since 2010
-169,336
-57,563
-24,972
-60,839
-41,362
-104,317
-163,922
-105,210
-180,000
-160,000
-140,000
-120,000
-100,000
-80,000
-60,000
-40,000
-20,000
0
2010 2011 2012 2013 2014 2015 2016 2017
California Net Domestic Migration

Step 1: Coastal to Cheaper Markets
-19,854
-21,935
-34,217 -40,361
-42,503
-48,609
-65,534
-79,132
-101,914
-124,148
Santa
Barbara
Colorado Oregon Washington Kern Nevada (ST) Arizona Texas San
Bernardino
Riverside
Coastal Southern California Out Migration (2010-2016)
Elsewhere in CA
Another State

Step 2: Pricing Prior Residents Out of State
-3,575
-5,117
-7,732 -7,970 -8,344
-10,604
-10,680
-10,699
-16,374
-17,859
Hawaii Colorado Nevada (ST) Idaho North
Carolina
Utah Georgia Kern County Arizona Texas
Inland Empire Out Migration
(2010-2016)
Elsewhere in CA
Another State

4. CA soon to be a
majority renter state

54.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
NewYork
California
Nevada
Hawaii
RhodeIsland
Massachusetts
Texas
Oregon
NorthDakota
Georgia
Washington
Colorado
Florida
NewJersey
Arizona
Arkansas
Illinois
Alaska
Kansas
Ohio
Connecticut
Louisiana
Nebraska
NorthCarolina
NewMexico
Maryland
Tennessee
Virginia
Missouri
Montana
SouthDakota
Wisconsin
Pennsylvania
Oklahoma
Idaho
Alabama
Delaware
Indiana
Iowa
Kentucky
Wyoming
Maine
Mississippi
Utah
Vermont
NewHampshire
Minnesota
SouthCarolina
Michigan
WestVirginia
Homeownership Rate
California: 2nd lowest in nation
SERIES: Homeownership Rates
SOURCE:U.S.Census Bureau (Current PopulationSurvey)

5. CA is pricing itself out
of its future

Q: What needs to be
done?
A: Build More Housing

Global Capitals Do Density
#10 Shanghai
#69 Paris
#27 Mexico City#35 Rio de Janerio
#43 London
Source: citymayors.com

#90 Los Angeles
#104 San Francisco/Oakland
#107 San Jose
#119 Honolulu
#120 Las Vegas
#121 Miami
U.S. Cities Ranked by Density
Global Ranking 1-125
www.citymayors.com

• E-mail survey to 866 members of the Board of Directors.
• There were 451 survey responses, equivalent to a response rate of
52.1%.
• The margin of error for this survey was ±3.2% at a 95% confidence level.
• Field dates: October 1- 8, 2018
Methodology
SERIES: 2018 Director’s Survey

Which choice best applies to your one-year outlook
for California home values? (n=441)
One-Year Outlook
25%
38%
37%
There is risk to the upside
There is risk to the downside
The risk is balanced

Which choice best applies to your
five-year outlook for California home values? (C.A.R.
n=437, Pulsenomics n=112)
5-Year Outlook: Directors more optimistic
25%
40%
34%
17%
55%
28%
There is risk to the upside
There is risk to the downside
The risk is balanced
C.A.R. Directors
Pulsenomics Experts

What’s your outlook for the number of
transactions in California next year? (n=443)
2019 Sales Forecast?
3%
37%
29%
27%
4%
Down down
down
Down slightly Flat Up slightly Up a lot

When do you expect California
housing market conditions to shift decidedly
in favor of home buyers? (C.A.R. n=438, Pulsenomics US n= 98, West n=91)
When Will Market Conditions Shift?
30%
8%
27%
23%
6%
1%
4%
2%
6%
8%
14%
28%
20%
14%
10%
5%
7%
13%
43%
18%
6%
9%
Shifted
already
Prior to
year-end
2018
2019 2020 2021 2022 Sometime
after 2022
Never
C.A.R. Directors
Pulsenomics West
Pulsenomics United States

What is the price of an entry-level home
in your market? (n=438)
Entry Level Home Price
5%
16%
25%
28%
17%
10%

The prevailing rate for a 30-year fixed rate mortgage is 4.75. What do you expect it to be
One year from now? (C.A.R. n=425, Pulsenomics n=100)
At the time you expect the current business cycle will reach its peak?(C.A.R. n=374, Pulsenomics n=94)
Expected Rate for a 30-Year FRM
1 year:
C.A.R. Directors: 5.25%
Pulsenomics Experts: 5.00%
At cycle peak:
C.A.R. Directors: 6.00%
Pulsenomics Experts: 5.25%

U.S. Economic Outlook
SERIES: U.S. Economic Outlook
2013 2014 2015 2016 2017 2018p 2019f
US GDP 1.7% 2.4% 2.6% 1.6% 2.3% 3.0% 2.4%
Nonfarm Job Growth 1.7% 1.9% 2.1% 1.8% 1.4% 1.6% 1.3%
Unemployment 7.4% 6.2% 5.3% 4.9% 4.4% 3.9% 3.7%
CPI 1.5% 1.6% 0.1% 1.4% 2.0% 2.5% 2.4%
Real Disposable Income, % Change -1.4% 2.7% 3.4% 2.7% 2.1% 2.8% 2.6%
30-Yr FRM 4.0% 4.2% 3.9% 3.6% 4.0% 4.7% 5.2%

California Economic Outlook
SERIES: CA Economic Outlook
2013 2014 2015 2016 2017 2018p 2019f
Nonfarm Job Growth 3.0% 2.2% 2.7% 2.3% 1.6% 2.0% 1.4%
Unemployment 8.9% 7.5% 6.2% 5.5% 4.8% 4.3% 4.3%
CA Population (Million) 38.4 38.7 39.1 39.4 39.6 39.9 40.2
Population Growth 0.9% 1.0% 0.8% 0.6% 0.8% 0.7% 0.7%
Real Disposable Income, % Change -2.1% 5.6% 3.9% 1.6% 1.6% 2.4% 3.0%

California Housing Market Outlook
SERIES: CA Housing Market Outlook
2013 2014 2015 2016 2017 2018p 2019f
SFH Resales (000s) 414.9 382.7 409.4 417.7 424.1 410.5 396.8
% Change -5.9% -7.8% 7.0% 2.0% 1.5% -3.2% -3.3%
Median Price ($000s) $407.2 $446.9 $476.3 $502.3 $538.0 $575.8 $593.4
% Change 27.5% 9.8% 6.6% 5.4% 7.2% 7.0% 3.1%
Housing Affordability
Index
36% 30% 31% 31% 29% 28% 25%
30-Yr FRM 4.0% 4.2% 3.9% 3.6% 4.0% 4.7% 5.2%

• Listings are up & prices are favorable for sellers
• Call frustrated potential buyers and tell them the good
news
• Rates are rising – don’t wait
• Provide sellers a teachable moment
• Know where people are moving and why and work your
referral network
• Get involved in the political process – this is your future
Opportunities

Read This: California’s Housing Future

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