2017 10 12 EXPO ForecastLAYFinal

Leslie Appleton-Young
Chief Economist & Vice President

2017 Forecast Report Card
2016 2017 2017
Actual Forecast Projected
SFH Resales (000s) 416.7 413.0 421.9
% Change 1.8% 1.4% 1.3%
Median Price ($000s) $502.3 $525.6 $538.5
% Change 5.4% 4.3% 7.2%
30-Yr FRM 3.6% 4.0% 4.0%
Housing Affordability Index 31% 29% 29%
U.S. Gross Domestic Product 1.6% 2.2% 2.1%
What to expect in 2018
US economic and job growth expanding

CA economy out-preforming the nation maybe not
Rates rising in response to growth & Fed policy
Affordability challenges for first time & repeat buyers
Boomers arent moving if they do they lease more often
Millennials leaving the nest & the state getting a life
Listings & new units remain low wrt trend & demand
Hang-over - Formerly owner-occupied units now rentals
Macro Economic Outlook
Stronger Economic Growth in Q2
Consumer Led Economy
3.1% 3.3%
GDP 2017-Q2 Consumption

2017-Q2
4.2% 1.2%
Unemployment Job Growth

Sep 2017 Sep 2017
Economic Growth
2016: 1.6% 2017(p) 2.1% 2018(f) 2.3%
6%
5% ANNUALLY QUARTERLY
4%
Annual Percent Change,
3%
Chain-type (2009) $
2%
1%
0%
-1%
-2%
-3%
2009 Largest Annual Drop since 1946 (-2.8%)
-4%
2005 2008 2011 2014 Q3-11 Q2-12 Q1-13 Q4-13 Q3-14 Q2-15 Q1-16 Q4-16
SERIES: GDP
SOURCE: US Dept. of Commerce, Bureau of Economic Analysis
Consumers Driving the Economy
2016: 2.7%; 2017 Q2: 3.3%
ANNUAL PERCENT CHANGE
6%
5% ANNUALLY QUARTERLY
Annual Percent Change
4%
3%
2%
1%
0%
-1%
-2%
-3%
2005
2007
2009
2011
2013
2015
2012 Q2
2012 Q4
2013 Q2
2013 Q4
2014 Q2
2014 Q4
2015 Q2
2015 Q4
2016 Q2
2016 Q4
2017 Q2
SERIES: Personal Consumption
SOURCE: US Dept. of Commerce, Bureau of Economic Analysis
Confidence? Holding on to Trump Bump
September 2017: 119.8
140
120
100
INDEX, 100=1985
80
60
40
20
SERIES: Consumer Confidence

SOURCE: The Conference Board
S&P 500: Historic Highs
August 2017: 2,456.2
3000
2500
Monthly Average
2000
1500
1000
500
0
Mortgage Rates: Surged Post-Election
January 2010 October 05, 2017
6
MONTHLY WEEKLY
5
4 3.81 3.85
3.16 3.18
3
2
FRM
ARM
1
SERIES: 30Yr FRM, 5Yr ARM

SOURCE: Freddie Mac
Extremely Tight Labor Markets
September 2017: US 4.2% & August 2017: CA 5.4%
14%
12% US-CA CA US
10%
8%
6%
4%
2%
0%
-2%
-4%
SERIES: Unemployment Rate

SOURCE: US Bureau of Labor Statistics, CA Employment Development Division
Unemployment rate Metro Area
August 2017: California 5.4%
Bakersfield 9.4%
Fresno MSA 8.6%
Stockton MSA 7.5%
Modesto 7.5%
Inland Empire 6.2%
Los Angeles 5.4%
Ventura 5.3%
Sacramento 5.2%
San Diego 4.7%
Oakland 4.4%
Orange County 4.2%
San Jose 3.9%
San Francisco 3.3%
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0%
SERIES: Civilian Unemployment Rate

SOURCE: CA Employment Development Division
California 7 Year Jobs Recovery
Recession Job Losses: 1.3 million
Since Jan10: +2.4 million
150,000
MONTH TO MONTH CHANGES
100,000
50,000
-50,000
-100,000
-150,000
SERIES: Total Nonfarm Employment

California Job Growth Slowing
4 CA 1.6%
California US
US 1.4%
2
-2
-4
-6
-8

Employment By Region
Nonfarm Employment (Thousands)
Aug 2017 Aug 2016 Change % Change
Southern California 9,155.0 9,053.8 101.2 1.1%
Bay Area 3,640.4 3,590.3 50.1 1.4%
Central Valley 2,213.8 2,177.6 36.2 1.7%
Central Coast 537.6 529.9 7.7 1.5%
North Central 150.9 145.5 5.4 3.7%
CALIFORNIA 16,777.8 16,512.7 265.1 1.6%

Construction Jobs Lead Growth
August 2017: CA +1.6%, +265,100 (YTY)
Construction 6.0%
Educational Services 4.0%
Health Care & Social Assistance 2.7%
Leisure & Hospitality 2.2%
Government 1.8%
Wholesale Trade 1.6%
Real Estate & Rental & Leasing 1.5%
Information 1.2%
Admistrative & Support & Waste Services 1.0%
Finance & Insurance 0.5%
Transportation, Warehousing & Utilities 0.2%
Durable Goods 0.1%
Retail Trade 0.0%
Professional, Scientific & Technical Services -0.4%
Nondurable Goods -1.1%
-2% -1% 0% 1% 2% 3% 4% 5% 6% 7%
SERIES: Total Nonfarm Employment By Industry

Commercial Real Estate
Outlook
Key Takeaways
Office
Job growth continues to fuel demand, but appears to be
slowing down
Firms decision to increase workplace density will continue to
affect vacancy and rent growth
Retail
Demand for retail space continues to be affected by the
growth of e-commerce (amazon Prime: 46% US households)
Fundamentals ok for now, but developers concern about
the future
Key Takeaways
Industrial
Demand for industrial space remains strong as online
shopping continues to grow
More supply is needed and developers are optimistic
Multifamily
Sustained job growth continues to fuel housing demand in
the rental market
Rent growth leveling off as more supply come on the market
REALTORS CRE U.S. Outlook
U.S. Economic Outlook
2012 2013 2014 2015 2016 2017p 2018f
US GDP 2.2% 1.7% 2.4% 2.6% 1.6% 2.1% 2.3%

Nonfarm Job
1.7% 1.7% 1.9% 2.1% 1.8% 1.4% 1.2%
Growth
Unemployment 8.1% 7.4% 6.2% 5.3% 4.9% 4.4% 4.2%
CPI 2.1% 1.5% 1.6% 0.1% 1.4% 2.0% 2.2%

Real Disposable
3.2% -1.4% 2.7% 3.4% 2.7% 2.1% 3.0%
I ncome, %
30-Yr FRM 3.7% 4.0% 4.2% 3.9% 3.6% 4.0% 4.3%
SERIES: U.S. Economic Outlook

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS
California Economic Outlook
2012 2013 2014 2015 2016 2017p 2018f

Nonfarm Job
2.4% 3.0% 2.2% 2.7% 2.3% 1.6% 1.2%
Grow th
Unemployment
10.4% 8.9% 7.5% 6.2% 5.5% 4.8% 4.6%
Rate
CA Population
38.0 38.4 38.7 39.1 39.4 39.7 40.0
(Million)
Population
0.7% 0.9% 0.9% 0.9% 0.9% 0.8% 0.8%
Grow th
Real Disposable
4.7% -1.1% 3.2% 3.6% 3.0% 4.1% 4.3%
Income, % Change
SERIES: CA Economic Outlook

Abundance of Uncertainty
Tax Reform
Tax reform passes, Sales Down & Prices Flat
President Trumps tax reform proposal includes changes that will increase
the cost of homeownership. Do you expect its effect to be:
60%
Up Down Same/Flat 57%
50%
48%
40% 37% 38%

30%
20%
14%
10% 5%
0%
On Prices On Sales
SERIES: 2017 EXPO FUN SURVEY
SOURCE: C.A.R.
Impact of Tax Reform
Two Provisions on the Individual Tax Reform Proposal:

- Doubling the Standard Deduction
- Repeal the state and local tax deduction
Impact on the housing market:

- The repeal of the state and local tax deduction increases the cost of
owning a home
- Incentives of using MID as a tax saving tool as a homeowner would be
nullified
- Home values decline as these tax saving advantages vanish
Impact of Tax Reform on the Housing Market
- The proposed tax reform would lead to fewer sales transactions as

the tax incentives of being a homeowner vanish for many who
want to purchase a property. Home sales would decline 3.4
percent if the proposed tax reform were to be implemented
- The decline in home values would also lead to homeowners

reluctance to put their property on the market and further tighten
up the housing supply condition in California. An estimated 1.5
percent would be lost in the first year after the implementation of
the tax reform.
Incentives for Homeownership Obliterated
First-time buyers ($100K income, $437K home) - federal tax

incentive to own vs. rent drops from $3,291 to zero in the first year.
Typical buyers ($120K income, $533.5K home):

$5,782 to $362 in the first year.
Mid-range buyers ($150K income, $615K home):

$8,099 to $1,334 in the first year.
High-end buyers/SF/LA Metro Buyers ($200K income, $1.2M home):

$16,615 to $5,725 in the first year.
Tax Expenditures Estimates: CA
Deductions for Mortgage Interest and
Property Taxes in California
(FY2018-2027)
250 226.7
200
173.8
150
100 74.5
50 34.8 34.8
0.0
0
Mortgage Interest Property Tax Deduction Mortgage Interest &
Deduction Property Tax Coimbined
Current Law Comprehensive Tax Reform Option

Housing Market Trends
C.A.R. Membership & SF Sales
Home Sales
Membership 250,000
600,000
Sales Peaks: 1978, 1988, 2004-05
Membership Peaks: 1980, 1990, 2006 200,000
500,000
400,000 150,000
300,000
100,000
200,000
50,000
100,000
0 0
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
Sales: Stalled with Strong Fundamentals
August 2017 Sales: 427,630 Units, +2.7% YTD, +1.3% YTY
700,000
600,000
Aug-16: Aug-17:
422,190 427,630
500,000
400,000
300,000
200,000
100,000
SERIES: Sales of Existing Single Family Homes

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS *Sales are seasonally adjusted and annualized
Sales Began 2017 Strong Growth Slowing
Year-over-Year % Chg
20%
15%
11.8%
10%
5%
0%
-5%
-10%
Avg. year-over-year % chg. = 3%
-15%
Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17
SERIES: Sales of Existing Single Family Homes

*Sales are seasonally adjusted and annualized
CA Median Price Continues to Rise
August 2017: $565,330, +2.9% MTM, +7.2% YTY
P: May-07
$700,000
$594,530 Aug -17:
Aug-16: $565,330
$600,000 $527,490
$500,000
T: Feb-09
$245,230
$400,000 -59% from
peak
$300,000
$200,000
$100,000
$-
SERIES: Median Price of Existing Single Family Homes

Southern California: Peak vs. Aug 2017
Peak Peak %Chg Fr
Region Aug-17
Month Price Peak
Orange Jun-07 $775,420 $789,000 1.8%
San Diego May-06 $622,380 $605,000 -2.8%
California May-07 $594,530 $565,330 -4.9%
Los Angeles Sep-07 $625,812 $575,130 -8.1%
Ventura Aug-06 $710,910 $640,000 -10.0%
Riverside Jun-06 $431,710 $388,500 -10.0%
Inland Empire Jun-06 $389,380 $341,340 -12.3%
LA Metro May-07 $578,700 $499,970 -13.6%
San Bernardino Aug-06 $350,290 $269,950 -22.9%
SERIES: Median Price of Existing Detached Homes

Central Valley: Peak v. Current Price
Peak Peak %Chg Fr
Region Aug-17
Month Price Peak
Madera County Feb-08 $275,000 $263,500 -4.2%
California May-07 $594,530 $565,330 -4.9%
San Benito County May-05 $671,190 $600,000 -10.6%
Sacramento County Aug-05 $394,450 $348,000 -11.8%
Placer County Aug-05 $527,990 $462,000 -12.5%
Kings County Mar-06 $268,050 $225,000 -16.1%
Tulare County Dec-05 $269,710 $224,900 -16.6%
San Joaquin County Jun-06 $426,830 $355,000 -16.8%
Fresno County Jun-06 $313,500 $259,000 -17.4%
Stanislaus County Sep-05 $370,100 $294,290 -20.5%
Kern County Jun-06 $299,920 $235,100 -21.6%
Merced County Oct-05 $344,610 $250,000 -27.5%
Glenn County Feb-07 $312,500 $225,000 -28.0%

Bay Area: Peak v. Current Price
Peak Peak %Chg Fr
Month Price Aug-17 Peak
Region
San Francisco May-07 $972,010 $1,380,000 42.0%
San Mateo Oct-07 $1,020,000 $1,375,000 34.8%
Santa Clara Oct-07 $865,000 $1,150,000 32.9%
Alameda May-07 $709,420 $867,500 22.3%
Marin Jun-07 $1,149,390 $1,207,120 5.0%
Sonoma Jan-06 $650,330 $625,500 -3.8%
California May-07 $594,530 $565,330 -4.9%
Contra Costa May-07 $698,420 $627,860 -10.1%
Napa Jun-07 $729,170 $654,000 -10.3%
Solano Jun-07 $492,800 $410,000 -16.8%

Supply
At some point a supply problem becomes a
demand problem Joel Singer
Inventory Remains on a Downward Trend
August 2017: 2.9 Months; August 2016: 3.4 Months Active listing declining for last 26 months
18 CA Unsold Inventory Index (Months) Year-over-Year % Chg
16 15%
14 10%
12 5%
10 0%
8
-5%
6
-10%
4
-15%
2 -11.9%
0
-20%
Jan-15
May-15
Nov-15
Jan-16
May-16
Nov-16
Jan-17
May-17
Mar-15
Jul-15
Sep-15
Mar-16
Jul-16
Sep-16
Mar-17
Jul-17
Jan-05
Jan-07
Jan-09
Jan-11
Jan-13
Jan-15
Jan-17
Sep-05
May-06
Sep-07
May-08
Sep-09
May-10
Sep-11
May-12
Sep-13
May-14
Sep-15
May-16
Note: Unsold Inventory Index represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined
as the number of properties that were Active, Pending, and Contingent (when available) and divide the sum by the number of Sold properties for the month in question.
SERIES: Unsold Inventory Index of Existing Single Family Homes

Supply Declined Most in the Lower End
August 2017
Active Listing
10%
1.9%
0%
-10% -7.6% -7.8%

-11.2% -10.0% -11.5%
-20% -17.1%
-30%
-29.0%
-40%
SERIES: Active Listings of Existing Single Family Homes

Inventory Continued to Drop Across All Regions
9.0 Bay Area So CA Central Valley
8.0
7.0
6.0
5.0
4.0
3.0
3.0 2.8
2.0 1.9
1.0
0.0
Note: Unsold Inventory Index represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined
as the number of properties that were Active, Pending, and Contingent (when available) and divide the sum by the number of Sold properties for the month in question.
SERIES: Unsold Inventory Index of Existing Single Family Homes

Inventory Index Highest in Millions
14
12 11.5
9.7
10
8
6.4
6 4.7 4.9
4.5
4 2.73.1 3.03.7 3.3 3.6 3.6 3.4
2.93.1 2.6 3.0 3.1
2.6
2.6 2.9
2
Aug-17 Aug-16
Turnover Rate Very Low: US & CA
Housing Turnover Rate

10% (Single-Family Homes only) Long-Time Homeowners are not
9% CA US Linear (CA)
moving as in the past because:
8% CA turnover rate trend
7%
Capital gains hit
6%
5.3% Low property taxes
5%
Low rate on current mortgage
4.6%
4%
Demographic shift
3%
Where can I afford to go?
2%
1%
0%
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
SERIES: Percent of existing single-family homes being sold

SOURCE: Census Bureau, American Community Survey, Moodys Analytics, C.A.R.
Affordability
Housing Affordability In CA: 29%
2017-Q2: % able to purchase median-priced home
70
60 57
54 53 52 52
51
50 48 47 47 47 47 46
45 44 44 43 43 43
42
40 39 39 38
40 36 35
33 31
29 28 27
30 27 26 26 25
25
21 21 19
20 17 17 17 16
14
12
10
SERIES: Housing Affordability Index of Traditional Buyers

Housing Affordability Peaked Q1 2012
California, 1984-2017
80%
Annual Quarterly
% OF HOUSEHOLDS THAT CAN BUY A
70%
60%
57%
MEDIAN-PRICED
50%
HOME
40%
30% 29%
20%
10%
0%
SERIES: Housing Affordability Index of Traditional Buyers

Californias Single-Family Housing Stock
7,500,000 Owner-Occupied (left) Renter-Occupied (right) 3,000,000
2,500,000
7,000,000
2,000,000
6,500,000
1,500,000
6,000,000
1,000,000
5,500,000
500,000
5,000,000 0
2000 2003 2006 2009 2012 2015
SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS)
Downloaded from the National Bureau of Economic Research (NBER)
More Single Family Units Now Rentals
8,000,000 Potentially between 400,000 and 700,000 SF Rentals that Used to be Owner-Occupied
6,919,164
7,000,000 6,527,730
6,000,000
5,000,000
4,000,000
3,000,000 2,674,808
1,940,607
2,000,000
1,000,000
0
SF Owners SF Renters
2000 2005 2010 2015
SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS)
Downloaded from the National Bureau of Economic Research (NBER)
Most Underbuilt Counties in California
New Jobs vs. New Permits (2010-2015)

450,000 Jobs
400,000 381,300 Permits
350,000
300,000
250,000
200,000 174,833 162,740
127,542 141,162
150,000 105,586
88,134 95,245 98,149
100,000 66,054
35,426 44,923 40,434 31,255 44,772
50,000 18,141 14,901 18,108 6,349 10,890
0
SOURCE: California Employment Development Department, Construction Industry Research Board

Q: Hows the Market?
A: Its Complicated
2017 Annual Housing

Market Survey
Methodology
Started in 1981 36 years ago

On-line survey In the field July and August 2017
The survey was sent via email to a random sample of 25,804
REALTORS throughout California. The sample represented the
geographical distribution of C.A.R. membership across the state.
Asks about closed transactions in Q2 2017
Questionnaire with both multiple choice and open-ended
questions. There were 1,303 valid survey responses, equivalent to a
response rate of 5.0 percent. The margin of error for this survey
was +/- 2.6 percent at a 95 percent confidence level.
Who is Buying in California?
Median Age: 45
31% 40% 24% 4%

Age 20 37 Age 38 52 Age 53 71 72 and older
SERIES: 2017 Housing Market Survey
Who is Selling in California?
Median Age: 57
11% 27% 48% 14%

Age 20 37 Age 38 52 Age 53 71 72 and older
Tight Supply Pushed up Home Prices
1/3 Sold Above Asking
60%
% of Sales Above Asking Price
50%
40%
32% 33%
30%
Long Run Average = 20%
20%
10%
0%

Market Competitiveness Up in 2017
6 out of 10 had Multiple Offers
% with Multiple Offers
# of Multiple offers (Average)
80% 7
70% 6
60%
60%
52% 5
50%
4
4.0 4.1
40%
3
30%
2
20%
10% 1
0% 0
2005200620072008200920102011201220132014201520162017

Even Within So CA
Southern
Inland Empire LA/OC/SD California
California
% with Multiple
54.8% 62.7% 58.8% 60.4%
Offer
% of Sales Above
24.3% 33.4% 28.5% 32.9%
Asking Price
Days on Market 18.5 14 14 13

Competitiveness by Price Range: LA/OC/SD
$301k - $501k - $751k - $1001 and

$0 -$300k All Prices
$500k $750k $1000k up
% with Multiple
58.3% 67.2% 71.6% 73.5% 48.2% 62.7%
Offer
% of Sales
Above 46.2% 32.3% 33.3% 40.0% 22.6% 33.4%
Asking Price
Days on Market 8 10 13.5 8.5 25 14

By Region
% of Multiple Offer % of Sales Above Days on Market
90% Asking Price
70%
80% 77%
59.8% SF Bay Area 10
60%
70%
59% 50%
60%
50% So CA 14
50% 40%
40% 28.5%
30% Other Counties
23.8% 15
30% in CA
20%
20%
10%
10% California 13
0% 0%
SF Bay Area So CA Rest of CA SF Bay Area So CA Rest of CA 0 10 20

Most Competitive for First-Time Buyers
First-time Buyers Repeat Buyers All Buyers
% with Multiple Offer 68.8% 55.5% 60.4%
% of Sales Above
41% 28.8% 32.9%
Asking Price
Days on Market 10 14 13

Partly Because Many of Them Live in the Supply
Constraint Bay Area
Where are the buyers? % of First-Time Buyers
Bay Area So CA Rest of CA
45%
40%
40%
35% 32%
First-Time Buyers 24% 54% 22% 30% 30%
30%
25%
20%
15%
Repeat Buyers 17% 59% 24% 10%
5%
0%
Bay Area So CA Rest of CA California
0% 50% 100%

Share of 1sTime Buyers Up but Below LR Average
National Share is 50%
% First-Time Home Buyers Long Run Average
50%
Long Run Average = 37.4%

40%
31.7%
30%
20%
10%
0%

International Buyers 3% of Transactions
9%
The share of international buyers dropped to the lowest level in 9 years
8% 8%
8%
7%
6% 6%
6% 6% 6%
5%
5%
4% 4%
3% 3%
3%
2%
1%
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
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.?

International Buyers: Metro Areas Preferred
% of International Buyers Where are the properties?

Bay Area So CA Rest of CA
5%
4.4%
9%
4% 3.6%
20%
3.0% 3.1%
3%
2.2%
2%
1.1%
1%
0%
71%

Cash Outflow Restrictions Had a Negative
Effect on the Share of Chinese Buyers
2016 2017
China (53%) China (31%)
Mexico (10%) Mexico (6%)
India (10%) India (9%)
Q. What country did the (international) buyer come from?

Share of Cash Buyers Steady
% of All Cash Sales
35%
30%
25%
22%
20%
15%
10%
One-fifth of buyers paid with all cash 5%
The share of all cash buyers is virtually 0%

unchanged in the last 4 years

Investor Buyers Inched Up in 2017;
More Flippers in the Market
% to Total Sales Vacation/Second Home

30%
Investment/Rental Property
Vs.
25%
20% 4.1%
15% Flip Rent
10%
2014: 30% 2014: 70%
13.8%
5% 2015: 26% 2015: 74%
2016: 20% 2016: 80%
0%
2017: 24% 2017: 76%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017

Net Cash Gain to Sellers Highest since 2006
$250,000
$200,000
$200,000
$150,000
$100,000
$50,000
$0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Q. What was the net cash gain or net loss to the seller as a result of this sale?

Sellers with Net Cash Loss Dropped to the
Lowest Level in the last 11 years
35% Long Run Average = 11.2%
30%
25%
20%
15%
10%
5%
2.1%
0%
Q. What was the net cash gain or net loss to the seller as a result of this sale?

Sellers Are Not Moving as Often as Before
12 11
Years Owned Home Before Selling
Long-Time Homeowners are not
10
moving as in the past because:
8
Capital gains hit
6
Low property taxes
4 Low rate on current mortgage
Where can I afford to go?
2
Remodel and stay
0

Sellers Who Planned to Buy Another Home
Reached the Highest Level since 2006
80%
0% 50% 100%
70%
60% Millennials 76%

54%
50%
40%
Gen X's 63%
30%
Baby Boomers 60%
20%
10%
Silent
28%
0% Generations

Sellers Moving out of California: Highest since 2007
Location of Sellers New Home
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Within the same county 37% 45% 47% 42% 49% 49% 46% 44% 44% 40% 38%
In another county in
24% 17% 21% 21% 19% 18% 20% 21% 20% 21% 20%
California
In another state 29% 27% 19% 20% 20% 22% 19% 22% 22% 25% 28%
Out of US 1% 1% 2% 1% 1% 1% 0% 1% 1% 1% 1%
Don't Know/Not sure 9% 10% 12% 16% 10% 10% 15% 13% 13% 13% 14%
Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

FHA Loans Lowest since 2007
FHA VA
40%
30%
20%
5.8%
10%
14.8%
0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Q. Please indicate the type of mortgage.

How Client Found Their Agent
All Buyers
0% 5% 10% 15% 20% 25%
Represented Them in Previous Home
Client was Friend/Relative/Neighbor
Referral from a client
Recommendations of Friends
Refferal from Business Associates
Other
Web page/Internet
Open House
Door-to-Door Farming
Relocation Referral
Walk in /Floor Call
Direct Mail Marketing
Yard Signs
Listing Agent for Home Purchased
Social Media
Telephone Marketing
Print Ads/Newspaper & Magazine
Q. How did your client find and select you to represent them?
Regional Housing Markets
Northern California
Sales Median Price

-0.2% YTD $390,000
6.6% YTY 9.9% YTY
UII MTM Price Sales

3.6 20.0 $213 98.2%
Months Days Per Sq Ft To List Ratio
2017 Northern California
YTD Sales: Mixed Bag
2017 Northern California
Median Prices YTY
Northern Wine
Sales Median Price

-2.9% YTD $613,500
3.9% YTY 7.8% YTY
UII MTM Price Sales

3.5 40.0 $359 100.0%
2017 Northern Wine
YTD Sales
2017 Northern Wine
Median Prices YTY
Bay Area
Sales Median Price

2.6% YTD $856,200
6.5% YTY 10.2% YTY
UII MTM Price Sales

1.9 15.0 $489 101.9%
2017 Bay Area
YTD Sales
2017 Bay Area
Median Prices YTY
Central Valley
Sales Median Price

1.5% YTD $315,000
4.6% YTY 8.6% YTY
UII MTM Price Sales

2.8 15.0 $185 99.2%
2017 Central Valley
YTD Sales
2017 Central Valley
Median Prices YTY
Central Coast
Sales Median Price

1.3% YTD $635,000
7.1% YTY -2.1% YTY
UII MTM Price Sales

4.3 24.0 $376 97.9%
2017 Central Coast
YTD Sales
2017 Central Coast
Median Prices YTY
Southern California
Sales Median Price

3.4% YTD $528,000
4.8% YTY 6.7% YTY
UII MTM Price Sales

3.0 20.0 $301 98.9%
2017 Southern Cal
YTD Sales
2017 Southern Cal
Median Prices YTY
2017 Forecast
Hows the market? A tad hot.
How would you describe the real estate market in your area today?
43%
37%
20%
Too hot Too cold Just right

SOURCE: C.A.R.
Prices Up, Sales Flat, Rates Up, Affordability
What do you think will happen for the CA market in 2018?
80%
Up Down Same/Flat 72%
70%
64% 64%
60%
50% 45% 42%

39%
40%
29% 30% 33%
30% 24% 21%
20%
19%
7% 8%
10%
3%
0%
Home prices Home Sales Inventory Mortgage interest Affordability
rates
SOURCE: C.A.R.
Challenges: Affordability and Supply
What will be the biggest challenge for the housing market in 2018?
60%
50%
50%
40% 36%
30%
20%
10% 6% 6%
2%
0%
Lack of Lack of Increase in New brokerage Recession

inventory affordability mortgage rates models (Open
Door, Instant
Offer, etc)
SOURCE: C.A.R.
California Housing Market Outlook
2012 2013 2014 2015 2016 2017p 2018f
SFH Resales (000s) 439.8 414.9 382.7 409.4 416.7 421.9 426.2
% Change 4.1% -5.9% -7.8% 7.0% 1.8% 1.3% 1.0%

Median Price
$319.3 $407.2 $446.9 $476.3 $502.3 $538.5 $561.0
($000s)
% Change 11.6% 27.5% 9.8% 6.6% 5.4% 7.2% 4.2%
Housing
51% 36% 30% 31% 31% 29% 26%
Affordability Index
30-Yr FRM 3.7% 4.0% 4.2% 3.9% 3.6% 4.0% 4.3%
SERIES: CA Housing Market Outlook

Sales and Price up in 2017 and in 2018
Sales of Existing Detached Homes Median Price

700 $600 $561
$539
600 $500
500
Price (Thousand)
426.2 $400
Units (Thousand)
421.9
400
$300
300
$200
200
$100
100
0 $0
2005 2007 2009 2011 2013 2015 2017p 2005 2007 2009 2011 2013 2015 2017p

CA: Dollar Volume
Up 8.6% in 2017, Up 5.2% in 2018
$ in Billion % Change
$400 30%
$ Volume of Sales Percent Change
$350 20%
$301
$300
10%
$244 $239
$250 $227
$209 0%
$195
$200
$164 $169 $171
-10%
$150 $133 $140
$131 $127 $121
-20%
$100
$50 -30%
$0 -40%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017p 2018f

2017 Challenges & Opportunities
SMDs: Slow Moving Disasters
CA Housing Affordability Crisis

CA Pension Funds
Boomers: Not prepared for Retirement
Millennials: Student Loan Debt
Skewing of the Income Distribution
Institutional Investor ownership of SFH
Tax Reform
Lack of Affordability Biggest Challenge
Recession, 6%
Mortagage rate
increase, 10%
Lack of
Lack of inventory,
28%
affordability,
56%
Q2 - What will be the biggest challenge for the housing market in 2017?
2018 Opportunities
Up your game Do YOU.

What is your WHY? Selling houses or changing lives?
Revisit: What business are YOU in? Find your niche
Reconnect: Who are YOUR clients?
Educate first time-home buyers Focus on Financial Literacy
Become well versed on down payment assistance programs,
debt management and improving credit
Reach out to Boomers
Think globally We may be affordable for some
One more thing
All Creatures Great and Small
Do you have a pet / Do you consider your pet a part of your family
No, its just a (special)
animal, 8%
No I
dont,
37%
Yes I have a
pet, 63%
Yes, my pet is
my family,
92%

SOURCE: C.A.R.
4 out of 10 Pet Drives Moving Decisions
If you were to move, would your pets' needs be paramount in your
purchase decision.
42%
28%
16%
13%
No, but I double We have a equal, They complain, but I My pet makes the
down on the treats. deliberative process. try to ignore it. decision for me.
SOURCE: C.A.R.
Speaking of independence
What about a different kind of Do you pay for their cell phone plan?
animal... Do you live with a
Millennial?
No, they like to
Yes, sigh, I live
with a Millennial,
pretend to be
14%
Nope, I'm FREE!!!!, 86% Yes, they just make lots of

noise if I don't. 67%
SOURCE: C.A.R.
The 2% - Have you done your part?
70%
63%
60%
50%
40%
30%
30%
20%
10% 5% 2%
0%
Unfortunately, I'm No, but I may keep it Yes, I "helped" my Yes, I got married!
happily married. in mind, just to help child or friends to get Thank you Leslie for
the real estate married. the push.
industry.
SOURCE: C.A.R.
Thank You & Congratulations
Joanie & Coy Trisha & Michael Miriam & Anthony

The Economy of Love
Give Freely
Receive Graciously
Thank You

2017 10 12 EXPO ForecastLAYFinal

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Chief Economist & Vice President

US economic and job growth expanding

GDP 2017-Q2 Consumption

Unemployment Job Growth

SERIES: Consumer Confidence

SERIES: 30Yr FRM, 5Yr ARM

SERIES: Unemployment Rate

SERIES: Civilian Unemployment Rate

SERIES: Total Nonfarm Employment

SERIES: Total Nonfarm Employment

Aug 2017 Aug 2016 Change % Change

Southern California 9,155.0 9,053.8 101.2 1.1%

Bay Area 3,640.4 3,590.3 50.1 1.4%

Central Valley 2,213.8 2,177.6 36.2 1.7%

Central Coast 537.6 529.9 7.7 1.5%

North Central 150.9 145.5 5.4 3.7%

CALIFORNIA 16,777.8 16,512.7 265.1 1.6%

SERIES: Total Nonfarm Employment By Industry

2012 2013 2014 2015 2016 2017p 2018f

US GDP 2.2% 1.7% 2.4% 2.6% 1.6% 2.1% 2.3%

CPI 2.1% 1.5% 1.6% 0.1% 1.4% 2.0% 2.2%

SERIES: U.S. Economic Outlook

2012 2013 2014 2015 2016 2017p 2018f

SERIES: CA Economic Outlook

40% 37% 38%

Two Provisions on the Individual Tax Reform Proposal:

Impact on the housing market:

- The proposed tax reform would lead to fewer sales transactions as

- The decline in home values would also lead to homeowners

First-time buyers ($100K income, $437K home) - federal tax

Typical buyers ($120K income, $533.5K home):

Mid-range buyers ($150K income, $615K home):

High-end buyers/SF/LA Metro Buyers ($200K income, $1.2M home):

Current Law Comprehensive Tax Reform Option

SERIES: Sales of Existing Single Family Homes

SERIES: Sales of Existing Single Family Homes

SERIES: Median Price of Existing Single Family Homes

SERIES: Median Price of Existing Detached Homes

SERIES: Median Price of Existing Detached Homes

SERIES: Median Price of Existing Detached Homes

18 CA Unsold Inventory Index (Months) Year-over-Year % Chg

SERIES: Unsold Inventory Index of Existing Single Family Homes

-10% -7.6% -7.8%

SERIES: Active Listings of Existing Single Family Homes

9.0 Bay Area So CA Central Valley

SERIES: Unsold Inventory Index of Existing Single Family Homes

Housing Turnover Rate

SERIES: Percent of existing single-family homes being sold

SERIES: Housing Affordability Index of Traditional Buyers

SERIES: Housing Affordability Index of Traditional Buyers

New Jobs vs. New Permits (2010-2015)

SOURCE: California Employment Development Department, Construction Industry Research Board

2017 Annual Housing

Started in 1981 36 years ago

31% 40% 24% 4%

11% 27% 48% 14%

SERIES: 2017 Housing Market Survey

SERIES: 2017 Housing Market Survey

Days on Market 18.5 14 14 13

SERIES: 2017 Housing Market Survey

$301k - $501k - $751k - $1001 and

Days on Market 8 10 13.5 8.5 25 14

SERIES: 2017 Housing Market Survey