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					        2011 Housing Market
        Update

        Monterey County AOR
        Portola Hotel
        June 28, 2011.


Leslie Appleton-Young
Chief Economist
          Overview

US and California Economies

California Housing Market

Local/Regional Monterey Housing Market

Survey Highlights

California Forecast
  US and California
Economic Conditions
                                  Gross domestic Product
              2010: +2.9%; 2011 Q1: +1.9% Q2p: 2%
ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $

 8%
 7%
 6%
                                                                     ANNUAL                                                                               QTRLY
 5%
 4%
 3%
 2%
 1%
 0%
-1%
-2%
-3%
-4%
-5%
-6%
-7%
-8%
      1970
             1972
                    1974
                           1976
                                  1978
                                         1980
                                                1982
                                                       1984
                                                              1986
                                                                     1988
                                                                            1990
                                                                                   1992
                                                                                          1994
                                                                                                 1996
                                                                                                        1998
                                                                                                               2000
                                                                                                                      2002
                                                                                                                             2004
                                                                                                                                    2006
                                                                                                                                           2008
                                                                                                                                                  2010
                                                                                                                                                         Q2-10
                                                                                                                                                                 Q4-10
                          Components of GDP
                               Percent Change

   4.0

   3.0

   2.0

   1.0

   0.0

  -1.0                                               Q2 2010
  -2.0
                                                     Q3 2010
                                                     Q4 2010
  -3.0                                               Q1 2011
  -4.0
         Consumption Fixed Nonres.     Net Exports    Government
                      Investment
SOURCE: US Dept of Commerce,
Bureau of Economic Analysis
                         100
                               120
                                     140
                                           160




     20
          40
               60
                    80
Jan-88
Jan-89
Jan-90
                                                 INDEX, 100=1985


Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
                                                                   May 2011: 60.8




Jan-04
Jan-05
Jan-06
Jan-07
                                                                                    Consumer Confidence Index




Jan-08
Jan-09
Jan-10
Jan-11
      Dow Jones Stock Price and Consumer
                  Confidence
           30 Industrial Index vs. Consumer Confidence Index 1987-2011
     DJI                                      Dow Jones 30 Industrials                                                   Consumer Confidence Index                                                                                         Cons.
Monthly Avg.                                                                                                                                                                                                                               Conf.
 16,000                                                                                                                                                                                                                                     160

14,000                                                                                                                                                                                                                                     140

12,000                                                                                                                                                                                                                                     120

10,000                                                                                                                                                                                                                                     100

  8,000                                                                                                                                                                                                                                    80

  6,000                                                                                                                                                                                                                                    60

  4,000                                                                                                                                                                                                                                    40

  2,000                                                                                                                                                                                                                                    20

      0                                                                                                                                                                                                                                    0
          Jan-87
                   Jan-88
                            Jan-89
                                     Jan-90
                                              Jan-91
                                                       Jan-92
                                                                Jan-93
                                                                         Jan-94
                                                                                  Jan-95
                                                                                           Jan-96
                                                                                                    Jan-97
                                                                                                             Jan-98
                                                                                                                      Jan-99
                                                                                                                               Jan-00
                                                                                                                                        Jan-01
                                                                                                                                                 Jan-02
                                                                                                                                                          Jan-03
                                                                                                                                                                   Jan-04
                                                                                                                                                                            Jan-05
                                                                                                                                                                                     Jan-06
                                                                                                                                                                                              Jan-07
                                                                                                                                                                                                       Jan-08
                                                                                                                                                                                                                Jan-09
                                                                                                                                                                                                                         Jan-10
                                                                                                                                                                                                                                  Jan-11
                                                      0%
                                                           2%
                                                                4%
                                                                     6%
                                                                          8%
                                                                               10%
                                                                                          12%
                                                                                                14%
                                             Jan-90
                                             Jan-91
                                             Jan-92
                                             Jan-93
                                             Jan-94
                                             Jan-95
                                             Jan-96
                                             Jan-97
                                                                                     CA




SOURCE: CA Employment Development Division
                                             Jan-98
                                             Jan-99
                                             Jan-00
                                             Jan-01
                                                                                     US




                                             Jan-02
                                             Jan-03
                                             Jan-04
                                             Jan-05
                                             Jan-06
                                                                                                      Disappointing May Jobs Report




                                             Jan-07
                                             Jan-08
                                                                                                                                      Unemployment Rate CA v. US




                                             Jan-09
                                             Jan-10
                                             Jan-11
                                  U.S. Non-farm Job Growth
                                                    Month-to-Month Changes


                                           Recession Job Losses: 8.4 million
                                             Since Jan’10: +1.14 million
     600,000

     400,000

     200,000

            0

    -200,000

    -400,000

    -600,000

    -800,000

  -1,000,000
                                  Jul-08

                                           Oct-08




                                                                       Jul-09

                                                                                Oct-09




                                                                                                           Jul-10

                                                                                                                    Oct-10
                         Apr-08




                                                              Apr-09




                                                                                                  Apr-10




                                                                                                                                      Apr-11
                Jan-08




                                                     Jan-09




                                                                                         Jan-10




                                                                                                                             Jan-11
SOURCE: US Dept of Labor, Bureau of Labor Statistics
         -4%
               -2%
                     0%
                          2%
                               4%
                                    6%
                                         8%
                                              10%
                                                    12%
                                                             14%
                                                                             16%
Jan-80
Jan-81
Jan-82
Jan-83
Jan-84
Jan-85
Jan-86
Jan-87
Jan-88
Jan-89
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
                                                                                   PERCENT CHANGE FROM A YEAR AGO, 100=1982-1984




Jan-97
Jan-98
                                                          Core




Jan-99
Jan-00
                                                                 All Items




Jan-01
Jan-02
Jan-03
                                                                                                                                                                                   Consumer Price Index




Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
                                                                                                                                   May 2011: All Items +3.4% YTY; Core +1.5% YTY




Jan-11
                      Oil Prices A Near Term Concern
  West Texas Intermediate: Mar-11: $102.90• Mar-10: $81.20
Dollars per Barrel                                                                                                                                                         CPI (1982-84=100, NSA)
  $160
                                       Crude Oil
  $140
                                       Crude Oil Adjusted by CPI
  $120

  $100

   $80

   $60

   $40

   $20

    $0
         Jan-04




                                    Jan-05




                                                               Jan-06




                                                                                          Jan-07




                                                                                                                     Jan-08




                                                                                                                                                Jan-09




                                                                                                                                                                           Jan-10




                                                                                                                                                                                                      Jan-11
                           Sep-04




                                                      Sep-05




                                                                                 Sep-06




                                                                                                            Sep-07




                                                                                                                                       Sep-08




                                                                                                                                                                  Sep-09




                                                                                                                                                                                             Sep-10
                  May-04




                                             May-05




                                                                        May-06




                                                                                                   May-07




                                                                                                                              May-08




                                                                                                                                                         May-09




                                                                                                                                                                                    May-10
                                                          0%
                                                               1%
                                                                          2%
                                                                                          3%
                                                                                                 4%
                                                                                                      5%
                                                                                                           6%
                                                                                                                7%
                                                                                                                     8%
                                                                                                                          9%
                                                                                                                               10%
                                                 Jan-91

                                                 Jan-92

                                                 Jan-93

                                                 Jan-94

                                                 Jan-95

                                                 Jan-96

                                                 Jan-97




                                                                                           FRM
                                                                                    ARM
                                                 Jan-98




SOURCE: Federal Home Loan Mortgage Corporation
                                                 Jan-99



                                                                    Federal Funds
                                                 Jan-00

                                                 Jan-01

                                                 Jan-02

                                                 Jan-03

                                                 Jan-04
                                                                                                                                       Mortgage Rates




                                                 Jan-05
                                                                                                                                     Header Higher in 2012




                                                 Jan-06

                                                 Jan-07

                                                 Jan-08

                                                 Jan-09

                                                 Jan-10

                                                 Jan-11
            U.S. Existing Single-Family Home Sales
May 2011 Sales: -15.4% YTY, Median Price: -4.5% YTY
7,000,000                                                                                                                                                                                                                  $240,000
                                                                                                                                                                                                                           $230,000
6,500,000                                       Existing Single-Family Home Sales
                                                                                                                                                                                                                           $220,000
                                                Median Price
                                                                                                                                                                                                                           $210,000
6,000,000
                                                                                                                                                                                                                           $200,000
5,500,000                                                                                                                                                                                                                  $190,000
                                                                                                                                                                                                                           $180,000
5,000,000                                                                                                                                                                                                                  $170,000
                                                                                                                                                                                                                           $160,000
4,500,000                                                                                                                                                                                                                  $150,000
                                                                                                                                                                                                                           $140,000
4,000,000                                                                                                                                                                                                                  $130,000
                                                                                                                                                                                                                           $120,000
3,500,000
                                                                                                                                                                                                                           $110,000
3,000,000                                                                                                                                                                                                                  $100,000
                                                                                                                                                                                                                           $90,000
2,500,000                                                                                                                                                                                                                  $80,000
            Jan-89
                     Jan-90
                              Jan-91
                                       Jan-92
                                                Jan-93
                                                         Jan-94
                                                                  Jan-95
                                                                           Jan-96
                                                                                    Jan-97
                                                                                             Jan-98
                                                                                                      Jan-99
                                                                                                               Jan-00
                                                                                                                        Jan-01
                                                                                                                                 Jan-02
                                                                                                                                          Jan-03
                                                                                                                                                   Jan-04
                                                                                                                                                            Jan-05
                                                                                                                                                                     Jan-06
                                                                                                                                                                              Jan-07
                                                                                                                                                                                       Jan-08
                                                                                                                                                                                                Jan-09
                                                                                                                                                                                                         Jan-10
                                                                                                                                                                                                                  Jan-11
                                           100.0
                                                   120.0
                                                              140.0
                                                                      160.0




               20.0
                      40.0
                             60.0
                                    80.0




         0.0
Feb-05
                                                                              ANNUAL RATE
May-05
Aug-05
Nov-05
Feb-06
                                                                              SEASONALLY ADJUSTED




                                                           US
May-06
Aug-06
Nov-06
Feb-07
May-07
Aug-07
Nov-07
Feb-08
May-08
Aug-08
Nov-08
Feb-09
May-09
                                                                                                    Monthly 2005 - Present




Aug-09
Nov-09
Feb-10
May-10
                                                                                                                             U.S. Pending Home Sales Index




Aug-10
Nov-10
                                                           WEST




Feb-11
            Positive Signs…
Strong international growth

Stock market recovery

Real Estate net worth stabilizing

Rising rents and more qualified renters

Strong demand for distressed properties

Smart money chasing real estate (all cash sales)
        Structural Concerns…
Balance sheet and deleveraging issues

Financial sector weakness

Housing sector struggling – tight credit & inventory
over-hang: 4 million delinquent loans; 1.1 million
homes in foreclosure and 900,000 REOs

Mis-match between jobs and workforce skills
          Temporary Factors
Japanese Tsunami and earthquake

Middle East turmoil – “Arab Spring“

Greek/EU debt crisis

US debt ceiling debate
                          U.S. Economic Outlook

                            2004       2005   2006   2007   2008   2009   2010 2011f


  US GDP                    3.6% 3.1% 2.7% 2.0% 0.0% -2.6% 2.9% 2.4%

  Nonfarm Job
                            1.1% 1.7% 1.8% 1.1% -0.6% -4.4% -0.7% 1.2%
  Growth

  Unemployment              5.5% 5.1% 4.6% 4.6% 5.8% 9.3% 9.6% 8.9%

  CPI                       2.7% 3.4% 3.2% 2.8% 3.8% -0.4% 1.6% 2.3%

  Real Disposable
  Income, %                 3.4% 1.3% 4.0% 2.2% 0.5% 0.9% 1.4% 2.2%
  Change
   Forecast Date: May 2011
SOURCE: California Association of REALTORS®
                    California Economic Outlook


                         2004       2005       2006   2007   2008   2009    2010   2011f

Nonfarm Job
                         1.0%       1.8%       1.7%   0.8%   -1.3% -6.0% -1.4%     1.0%
Growth

Unemployment
                         6.2%       5.4%       4.9%   5.4%   7.2% 11.4% 12.4% 11.9%
Rate

Population
                         1.4%       1.2%       1.1%   1.1%   1.2%   1.1%    0.9%   1.0%
Growth
Real Disposable
Income, %                3.6%       1.3%       3.4%   1.5%   0.1%   -2.2%   1.6%   0.8%
Change


 Forecast Date: May 2011

 SOURCE: California Association of REALTORS®
            Federal Issues

High-cost Loan Limit - expires 10/1/11
Future of Fannie and Freddie in flux
MID and Tax Reform on the horizon
FHA targeted for market share drop
QRM (Qualified Residential Mortgage)
   20% Down – 30 year mortgage???
Short Sales – Standardization,
   Transparency and Communication
% Over 90-Days Delinquent (All Mortgages FRMs +ARMs)
                       SF Mortgages Originated between 2001 – 2008

                                           Enterprise (GSE)      Private-Label

     50%
     45%
     40%
     35%
     30%
     25%
     20%
     15%
     10%
      5%
      0%
                2001



                          2002



                                    2003



                                                2004



                                                          2005



                                                                      2006



                                                                                 2007



                                                                                        2008



                                                                                               All Years
 SOURCE: Federal Housing Finance Agency (using data from Fannie Mae, Freddie Mac, and
 CoreLogic, Inc.), Mortgage Bankers Association
           Now You See Fannie/Freddie Sales…
                               California, 2010 Sales: 494,900 Units,
                             2010 Conforming Share of CA Mtgs: 92%*
   UNITS                                          Jumbo Sales            Conforming Sales

    700,000

    600,000

    500,000

    400,000

    300,000

    200,000

    100,000

             0
                     2003          2004          2005         2006           2007   2008    2009   2010

SOURCE: California Association of REALTORS®
*Based on C.A.R. estimates, includes All Conforming: Fannie/Freddie/FHA/VA
                                         …Now You Don’t!
    Without Fannie & Freddie Worst Case Scenario: No Private Response
              2010 Conforming Share of CA Mortgages: 92%*
   UNITS                                                         Jumbo Sales

    700,000

    600,000

    500,000

    400,000

    300,000

    200,000

    100,000

             0
                     2003          2004          2005         2006          2007          2008   2009   2010

SOURCE: California Association of REALTORS®
*Based on National Share of Fannie/Freddie Share from Inside Mortgage Finance Estimates
   QRM – Qualified Residential Mortgage
Proposed Requirements (March 2011)
   20% Down
   28/36 Debt to Income
   25% equity stake to refi ; 30% equity for cash-out refi
   Squeaky clean credit
   Exempt
     • Fannie and Freddie (under conservatorship)
     • FHA and VA
     • Estimates of rate differential: .75% to 3%
     • Comment period ends August 2011
             On Average over last 12 years,
          Less than 1 in 5 Fannie/Freddie Loans
                  Would Have Met QRM




  SOURCE: Federal Housing Finance Agency
SOURCE: Mortgage Bankers Association, C.A.R.
                      Mortgage Originations: 1990-2010
                                                      Refinance vs. Purchase
   ORIGINATION (BIL $)                                                                                                                        30-YR FIXED RATE MORTGAGE

       900                                                                                                                                                                            12.0%
                                                       Refinance Originations (Bil $)
       800                                             Purchase Originations (Bil $)
                                                       Fixed Rate Mortgage                                                                                                            10.0%
       700

       600                                                                                                                                                                            8.0%

       500
                                                                                                                                                                                      6.0%
       400

       300                                                                                                                                                                            4.0%

       200
                                                                                                                                                                                      2.0%
       100

          0                                                                                                                                                                           0.0%
              Q1/90
                      Q1/91
                              Q1/92
                                      Q1/93
                                              Q1/94
                                                      Q1/95
                                                              Q1/96
                                                                      Q1/97
                                                                              Q1/98
                                                                                      Q1/99
                                                                                              Q1/00
                                                                                                      Q1/01
                                                                                                              Q1/02
                                                                                                                      Q1/03
                                                                                                                              Q1/04
                                                                                                                                      Q1/05
                                                                                                                                              Q1/06
                                                                                                                                                      Q1/07
                                                                                                                                                              Q1/08
                                                                                                                                                                      Q1/09
                                                                                                                                                                              Q1/10
Source: Mortgage Bankers Association of America
What Happened?
Trustee Sales in Anaheim
  Scheduled for 10/7/10
                 1872 W. Admiral, 92801


3 bd, 2.5 ba, built in 1982
Purchased in Sept 2005
for $594,000 with 30%
down.
In April 2006, added a
second for $57,000.
In Oct 2006, refinanced
the second into a new
second for $100,000.
Defaulted in 2010
Zestimate of current value
= $364,000.
            1572 W. Orangewood, 92802

3 bd, 2 ba, 2,016 sq ft
built in 1977.
Purchased in June 2003
for $455,000 with 30%
down.
March 2004: added a
second for $75,000;
added a third for $90,500;
added a fourth for
$80,000.
Within one year of
purchase, the property had
$565,000 in debt on it!
Defaulted in 2010.
Zestimate of current value
= $442,000.
                       8871 Regal, 92804


3 bd, 2 ba, 1,314 sq ft
built in 1956.
Purchased as REO in
2007 for $417,000 with
zero down.
Had previously sold for
$568,000 in 2005.
Defaulted in 2010.
Zestimate of current value
= $367,500.
                 2414 E. Underhill, 92806


3 bd, 2 ba, 1,459 sq ft
built in 1957.
Purchased for $640,000
in July 2006 with
piggyback financing:
$500,000 first and
$140,000 second, i.e.
zero down.
Defaulted in 2010.
Zestimate of current value
= $387,000.
                       Conclusions

Excessive borrowing against home equity contributed
significantly to the foreclosure story.

   39% of new defaults from 2006 to 2008
   attributable to home equity borrowing

“House Prices, Home Equity-Based Borrowing, and the U.S. Household
Leverage Crisis” by Mian and Sufi: American Economic Review
(forthcoming):
Understanding the
Financial Crisis
California Housing Market
California’s Housing Cycles and Membership
                 1970-2010
    THOUSANDS   Home Sales   Membership

700,000                                   250,000

600,000
                                          200,000
500,000

400,000                                   150,000

300,000                                   100,000
200,000
                                          50,000
100,000

      0                                   0
          1970
          1972
          1974
          1976
          1978
          1980
          1982
          1984
          1986
          1988
          1990
          1992
          1994
          1996
          1998
          2000
          2002
          2004
          2006
          2008
          2010
       Hitting Bottom: Sales 2007, Prices 2009
 California Sales of Existing Homes and Median Price

  UNITS/MEDIAN PRICE $                            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
SOURCE: California Association of REALTORS®
                                 Dollar Volume of Sales
                                          2011 Projection: +4%
   $ in Billion                                                                                                  % Change
                                               $ Volume of Sales          Percent Change

    $350.0                        37%
                                                                                                                   35%
    $300.0                                         26% $327
                                           24%
                                                                                                                   25%
                                                   $282    16%
                                                                                   -
    $250.0                                                        $266
                                                                                   54%                             15%
    $200.0                2%               $224                                                          4%
                                                                          $194                    0%               5%
                                  $181                                                     -2%
    $150.0
                                                                                   $154 $150 $150 $156             -5%
                  $129 $132                                       -19%
    $100.0                                                                                                         -15%
                                                                                   -21%
                                                                          -27%
      $50.0                                                                                                        -25%

       $0.0                                                                                                        -35%




                                                                                                         2011F
                   2000


                          2001


                                   2002


                                            2003


                                                    2004


                                                           2005


                                                                   2006


                                                                            2007


                                                                                    2008


                                                                                           2009


                                                                                                  2010
SOURCE: California Association of REALTORS®
Sales of Existing Detached Homes and Pacific West Consumer Confidence
California, May 2011 Sales: 471,840 Units, -2.0 YTD, -5.8% MTM, -14.4% YTY

    UNITS                                            Sales             Consumer Confidence                                       INDEX

    700,000                                                                                                                      160

    600,000                                                                                                                      140

                                                                                                                                 120
    500,000
                                                                                                                                 100
    400,000
                                                                                                                                 80
    300,000
                                                                                                                                 60
    200,000
                                                                                                                                 40

    100,000                                                                                                                      20

            0                                                                                                                    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: California Association of REALTORS®; The Conference Board

 *Sales are seasonally adjusted and annualized
      Median Price of Existing Detached
California, May 2011: $291,760 -.07% MTM 10.9 YTY
                       Homes
 $700,000                                                                   P: May-07
                                                                            $594,530
 $600,000

 $500,000                                                                                           T: Feb-09
                                                                                                     $245,230
 $400,000                                                                                           -59% from
                                                                                                       peak
 $300,000

 $200,000

 $100,000

        $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: California Association of REALTORS®
                                                       0
                                                           2
                                                               4
                                                                   6
                                                                       8
                                                                           10
                                                                                12
                                                                                     14
                                                                                          16
                                                                                               18
                                                                                                    20
                                              Jan-88


                                                                                                         MONTHS
                                              Jan-89
                                              Jan-90
                                              Jan-91
                                              Jan-92
                                              Jan-93
                                              Jan-94
                                              Jan-95
                                              Jan-96
                                              Jan-97
                                              Jan-98




SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
                                              Jan-99
                                              Jan-00
                                              Jan-01
                                              Jan-02
                                              Jan-03
                                              Jan-04
                                              Jan-05
                                              Jan-06
                                                                                                                                                     Unsold Inventory Index




                                              Jan-07
                                                                                                                  California, May 2011: 5.4 Months




                                              Jan-08
                                              Jan-09
                                              Jan-10
                                              Jan-11
                                  Unsold Inventory By Price Range
  California - Existing Homes May 2010 vs. May 2011
                                             Months Supply

                                                                                                                  10.1
                              $1,000K+
                                                                                                         9
  Price Range (Thousands)




                                                                                   5.5
                            $750-1000K
                                                                                               7.2


                                                                         4.4
                             $500-750K
                                                                                         6.2


                                                                   3.8                                       Last Year
                             $300-500K
                                                                                    5.8


                                                             3.2                                             This Year
                               $0-300K
                                                                               5


                                         0        2                4                 6               8       10          12

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
            Unsold Inventory Index (Months)



     Price Range (Thousand) May-10 Apr-11 May-11

   $1,000K+                                   10.1   9.5   9.0
   $750-1000K                                  5.5   7.0   7.2
   $500-750K                                   4.4   5.9   6.2
   $300-500K                                   3.8   5.4   5.8
   $0-300K                                     3.2   4.9   5.0




SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
                          Unsold Inventory By Price Range
                                                                       Jan 2005 – March 2011
 MONTHS
  30
                          $0 - 300K

   25                     $300-500K

                          $500-750K

   20                     $750-1000K

                          $1,000K+-

   15


   10


    5


    0
                 Apr-05
                          Jul-05
                                   Oct-05


                                                     Apr-06
                                                              Jul-06
                                                                       Oct-06


                                                                                         Apr-07
                                                                                                  Jul-07
                                                                                                           Oct-07


                                                                                                                             Apr-08
                                                                                                                                      Jul-08
                                                                                                                                               Oct-08


                                                                                                                                                                 Apr-09
                                                                                                                                                                          Jul-09
                                                                                                                                                                                   Oct-09


                                                                                                                                                                                                     Apr-10
                                                                                                                                                                                                              Jul-10
                                                                                                                                                                                                                       Oct-10
        Jan-05




                                            Jan-06




                                                                                Jan-07




                                                                                                                    Jan-08




                                                                                                                                                        Jan-09




                                                                                                                                                                                            Jan-10




                                                                                                                                                                                                                                Jan-11
SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®
City of Monterey
                        Sales of Residential Homes
        Monterey, May 2011: 16 Units, Up 77.8% MTM, Up 33.3% YTY




SOURCE: Clarus Market Metrics
               Median Price of Residential Homes
      Monterey, May 2011: $506,000, Up 3.5% MTM, Down 14.4% YTY




SOURCE: Clarus Market Metrics
                                For Sale Properties
     Monterey, May 2011: 118 Units, Down 1.7% MTM, Down 0.8% YTY




SOURCE: Clarus Market Metrics
                       Months Supply of Inventory
                                Monterey, May 2011: 3.7 Months




SOURCE: Clarus Market Metrics
Salinas
                        Sales of Residential Homes
        Salinas, May 2011: 106 Units, Even 0% MTM, Down 5.4% YTY




SOURCE: Clarus Market Metrics
               Median Price of Residential Homes
       Salinas, May 2011: $225,000, Even 0% MTM, Down 10.0% YTY




SOURCE: Clarus Market Metrics
                                For Sale Properties
     Salinas, May 2011: 551 Units, Down 2.0% MTM, Down 24.5% YTY




SOURCE: Clarus Market Metrics
                       Months Supply of Inventory
                                Salinas, May 2011: 2.3 Months




SOURCE: Clarus Market Metrics
Carmel
                        Sales of Residential Homes
     Carmel, May 2011: 13 Units, Down 18.8% MTM, Down 18.8% YTY




SOURCE: Clarus Market Metrics
               Median Price of Residential Homes
     Carmel, May 2011: $825,000, Down 30.0% MTM, Down 26.7% YTY




SOURCE: Clarus Market Metrics
                                For Sale Properties
       Carmel, May 2011: 196 Units, Up 6.5% MTM, Down 12.1% YTY




SOURCE: Clarus Market Metrics
                       Months Supply of Inventory
                                Carmel, May 2011: 9.3 Months




SOURCE: Clarus Market Metrics
Monterey County
                        Sales of Residential Homes
 Monterey County, May 2011: 275 Units, Up 3.0% MTM, Down 13.5% YTY




SOURCE: Clarus Market Metrics
               Median Price of Residential Homes
Monterey County, May 2011: $250,000, Down 2.0% MTM, Down 11.0% YTY




SOURCE: Clarus Market Metrics
                                For Sale Properties
Monterey County, May 2011: 1,811 Units, Up 0.3% MTM, Down 18.5% YTY




SOURCE: Clarus Market Metrics
                       Months Supply of Inventory
                        Monterey County, May 2011: 3.6 Months




SOURCE: Clarus Market Metrics
                               Monterey County
            Preforeclosure: 714 • Auction: 985 • Bank Owned: 439




Source: ForeclosureRadar.com as of 06/27/11
                                       Monterey
              Preforeclosure: 49 • Auction: 65 • Bank Owned: 23




Source: ForeclosureRadar.com as of 06/27/11
                                         Carmel
               Preforeclosure: 22 • Auction: 36 • Bank Owned: 8




Source: ForeclosureRadar.com as of 06/27/11
                                         Salinas
            Preforeclosure: 304 • Auction: 478 • Bank Owned: 200




Source: ForeclosureRadar.com as of 06/27/11
                                     Bakersfield
                                  Preforeclosure: 1,361




Source: ForeclosureRadar.com as of 06/27/11
                                     Bakersfield
                                       Auction: 1,329




Source: ForeclosureRadar.com as of 06/27/11
                                     Bakersfield
                                   Bank Owned: 1,072




Source: ForeclosureRadar.com as of 06/27/11
2010 Annual
Housing Market
Summary
                      Home Sellers Planning to
                     Repurchase at Historic Lows

           100%

            90%
            80%
            70%
            60%

            50%                                                       33%
            40%
            30%
            20%

            10%
              0%
                   2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010


Q. Is the seller planning on purchasing another home?
           Net Cash To Sellers at Record Lows

            $240,000
            $220,000
            $200,000
            $180,000
            $160,000
            $140,000
            $120,000
            $100,000
             $80,000
             $60,000
                                                                                                         $35,000
             $40,000
             $20,000
                   $0
                          2000

                                 2001

                                         2002


                                                2003

                                                       2004

                                                              2005

                                                                     2006

                                                                            2007

                                                                                    2008

                                                                                           2009

                                                                                                  2010
Q. What was the net cash gain or net loss to the seller as a result of this sale?
       Multiple Offers Common:
Buyers Face Highly Competitive Market
           %with M ultiple Offers
60%                                                            6
           # of M ultiple offers (Average)
                                                        51%
50%                                                            5

40%                                                            4
                                                        4.1
30%                                                            3

20%                                                            2

10%                                                            1

0%                                                             0
      2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
      More Buyers Pay with All Cash

                        Percent of All Cash Sales
                                                                          23%
24%
22%
20%
18%
16%
14%
12%
10%
 8%
 6%
 4%
 2%
 0%
   00

          01

                 02

                        03

                               04


                                      05

                                             06

                                                    07

                                                           08

                                                                  09

                                                                         10
 20

        20

               20

                      20

                             20


                                    20

                                           20

                                                  20

                                                         20

                                                                20

                                                                       20
      Investor Sales Continue to Grow
             Investm ent/Rental Property   Vacation/Second Hom e

20%

                                                                 5.3%
15%


10%

                                                                 13.4%
5%


0%
      2000       2002       2004      2006      2008      2010
2010 Survey of
Home Buyers
Home Buyers Who Looked at Newspaper/Magazine
          Ads to Search for a Home


                                      2006         2007           2008   2009   2010

   All buyers                         20%           12%           13%    13%    8%

   First-time buyers                  14%           12%           10%    10%    7%

   Repeat buyers                      21%           12%           14%    14%    9%

   Internet buyers                    15%           13%           10%    10%    6%

   Traditional buyers                 35%           11%           24%    24%    21%




Q. Did you look at newspaper/magazine ads to search for a home?
Became Aware of Home Purchased Through Agent




              All Buyers                                                         85%

   First-Time Buyers                                                      77%

       Repeat Buyers                                                              91%

       Internet Buyers                                                      83%

   Traditional Buyers                                                                  98%


Q. Did you become aware of the home you purchased through a real estate agent?
       Level of Difficulty to Obtain Financing
                                             (All Buyers)
                                        2009: Mean = 8.1 Median = 9
                                        2010: Mean = 8.5, Median = 9


  40%                             Scale: “1” = very easy, “10” = very difficult              37%
  35%
                                                                                                       30%
  30%
                                                   2009     2010
  25%
  20%
  15%                                                                              12%
  10%                                                  6%       7%
                                                                          5%
    5%                                       3%
               0%        0%        0%
    0%
               1         2        3         4         5         6         7        8         9        10
Q. Please rate how easy of difficult it was to obtain financing on a scale of 1 to 10, with 1 being very easy and
10 being very difficult.
 Buyers Who Know the Terms of Their Loan

                                           Yes   No

            All Buyers                    90%                10%


    First-Time Buyers                     89%                11%


       Repeat Buyers                      90%                10%

       Regular Market
                                          91%                9%
           Sales

                   REO                    88%                12%


            Short Sale                    91%                9%


                        0%         20%   40%     60%   80%    100%
Q. Do you know the terms of your loan?
2011 Survey of Home
Buyers:
The Agent Experience
                    Quick Facts

•  94% of buyers used an agent
•  58% of buyers found their agent online
•  56% of buyers interviewed at least 2 agents
•  51% Googled their agent
•  93% are receptive to receiving information via
   social media
• 54% would work with same agent again
•80% would find agent ratings beneficial
                How Buyers Found Their Agents




Q. How did you find your real estate agent?
                           # of Agents Interviewed


                                                8
                                               19%
                                      3
                                     12%
                                                                     1
                                                                    44%


                                       2
                                      36%




Q. How many agents did you interview prior to selecting the agent
you used in your recent home purchase?
                   Why Buyers Chose their Agent

    1. Most responsive (28%)

    2. Worked with agent before (18%)

    3. First to respond (17%)

    4. Most aggressive (16%)

    5. Most knowledgeable (6%)

Q. What was the single most important reason for selecting the agent that you
used in your recent home purchase?
                Buyers Who Googled Their Agent
                                        - Historical Trend -
        100%
         90%
         80%
         70%
         60%
         50%
         40%
         30%
         20%
         10%
           0%
                                   2010                                      2011


Q. Did you Google your agent to find out information about him/her before the final selection?
       Percent of Home Buyers Who “Google” Agent
                   Before Final Selection




Q. Did you “Google” your agent to find out information about him/her before the
final selection?
         Method of Communicating With Agent
                               - Preferred vs Actual -


                          Preferred                                   Actual
             E-mail          73%                                       70%
             Telephone       37%                                       50%
             Text message    32%                                        1%
             Twitter         21%                                        0%
             Facebook        14%                                        0%
             In-person       6%                                         3%



Q. What was your preferred method of communicating with your agent? How did
your agent actually communicate with you?
              Agent Response Time Is Important
                                   - Rating on 1 to 5 Scale -
                                            Median Rating: 5




Q. Please rate the importance of the agent’s response time in the decision on your final selection on a scale of
one to five, with five being extremely important and one being not at all important.
   Expected vs Actual Response Time
                               Expected   Actual

100%
 90%
 80%
 70%
 60%
 50%
 40%
 30%
 20%
 10%
  0%
       Instantly   Within Within 1 Within 2 Within 4   Same      1
                   30mins.  hr.     hrs.     hrs.       day   business
                                                                day
     Expected vs. Actual Agent Response Time



                                                             2011
                Surpassed expectations                       14%
                Met expectations                             38%
                Below expectations                           48%




Q. Did your agent meet your expectations on response time?
                   Agents Need to Improve Response Time
                            - Rating on 1 to 5 Scale -




Q. Did your real estate agent meet your expectations on response time? Please rate your
agent’s response time on a scale of one to five, with five being agent exceedingly surpassed
expectations and one being agent fell way below expectations.
           Reasons for Satisfaction With Agent

    1.    Worked hard on my behalf (55%)
    2.    Helped find the best home for me (55%)
    3.    Always quick to respond (31%)
    4.    Negotiated good deal on my behalf (29%)
    5.    Listened to what we needed (20%)




Q. Why do you have that level of satisfaction with your agent?
        Reasons for Dissatisfaction With Agent

    1. Slow to respond (51%)
    2. Didn’t communicate they way I wanted (19%)
    3. Didn’t communicate effectively during
       transaction (14%)
    4. Didn’t negotiate aggressively on my behalf
       (12%)
    5. Wasted time with homes I’m not likely to buy
       (3%)



Q. Why do you have that level of satisfaction with your agent?
     Most Buyers Would Work With Agent Again




Q. Would you work with the same agent again?
           Advice to Agents from Home Buyers
    1. Gain better understanding of where market is
       headed
    2. Learn how to handle a distressed property
       transaction
    3. Respond faster
    4. Communicate how the client wants and better
    5. Gain better understanding of where interest rates
       are headed
    6. Provide more assistance in acquiring mortgage
       approval
    7. Negotiate better
Q. What advice would you give to real estate agents to improve the process or the
level of service?
California Housing
 Market Forecast
           California Housing Market Outlook

                         2005     2006        2007    2008    2009    2010   2011f
        SFH
        Resales         625.0     477.5       346.9   441.8   546.9   494.9 510.0
        (000s)
        % Change        0.03% -23.6% -27.3% 27.3% 23.8% -9.5%                3.1%
        Median
        Price           $522.7 $556.4 $560.3 $348.5 $275.0 $302.9 $300.0
        ($000s)
        % Change        16.0%     6.5%        0.7% -37.8% -21.1% 10.2% -1.0%
        30-Yr FRM        5.9%     6.4%        6.3%    6.0%    5.1%    4.7%   5.2%
         1-Yr ARM        4.5%     5.5%        5.6%    5.2%    4.7%    3.5%   3.7%



 Forecast Date: May 2011

Source: CALIFORNIA ASSOCIATION OF REALTORS®
   Real Estate: 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
    8 in 10 Americans Agree Buying a Home
     is the Best Investment One Can Make




SOURCE: Pew Research Center’s “Home Sweet Home. Still. Five Years After the Bubble Burst”
                  8 in 10 Renters Would Like to
                         Buy in the Future
    “…renters are hardly
    immune to the allure of
    homeownership, even
    in the face of the five-
    year decline in prices.
    Asked if they rent out
    of choice or because
    they cannot afford to
    buy a home, just
    24% say they
    rent out of
    choice.”

SOURCE: Pew Research Center’s “Home Sweet Home. Still. Five Years After the Bubble Burst”
2011 Strat Planning Book Selections
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