Leslie Appleton Young 2010 Forecast

October 22, 2009

California Desert AOR

Leslie Appleton-Young

C.A.R. Vice President and Chief Economist

2010 California Real Estate Market Forecast

California Real Estate Market

THOUSANDS

0

100,000

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250,000

Home Sales Membership

California’s Housing Cycles and Membership1970-2009

Sales Hit Bottom in 2007, Up in 2008 & 2009

UNITS/MEDIAN PRICE $

SOURCE: California Association of REALTORS®

0

100,000

200,000

300,000

400,000

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19

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Sales of Existing Detached Homes Median Price

California Sales of Existing Homes and Median Price

-61% -25%

-44%

California vs U.S. Median Prices 1970-2009 1970: CA $24,640 US $23,000

2009: CA $271,000 US $172,600

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,00019

70

1972

1974

1976

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1992

1994

1996

1998

2000

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2006

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California

US

CA Price Trend

SOURCE: California Association of REALTORS®SOURCE: California Association of REALTORS®

129 132

181

224

282

327

266

194

152 146 148

26%

16%

-19%

-27%-22%

-4%1%

37%

2%

24%

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F

-30%

-20%

-10%

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50%

$ Volume of Sales Percent Change% Change$ in Billion

Dollar Volume of Sales Peaked in ’05Down 55% Thru ‘09


-55%

Sales of Existing Detached Homes and Pacific West Consumer Confidence

California, August 2009 Sales: 526,970 Units, Up 38.2% YTD, Up 9.0% YTY

0

100,000

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700,000

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0

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140

160

Sales Consumer Confidence INDEXUNITS

SOURCE: California Association of REALTORS®; The Conference Board

*Sales are seasonally adjusted and annualized

Median Price of Existing Detached HomesCalifornia, August 2009: $292,960, Down 16.9% YTY


T: Feb-09$245,170

-59% frompeak

P: May-07$594,530

$0

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$200,000

$300,000

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74%

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90%

20

04

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.07

Under 500 500 to 999 1 Mil +

Sales By Price RangeOctober 2004 – present

SOURCE: Mortgage Bankers Association, C.A.R.

Credit Freeze: 8/2007

Peak vs Current Price - August 2009

RegionPeak

MonthPeak Price

Aug-09 Median

% Chg From Peak

High Desert Apr-06 $334,860 $111,770 -66.6%

Monterey Region Aug-07 $798,210 $298,940 -62.5%

Riverside/San Bernardino Jan-07 $415,160 $166,600 -59.9%

Palm Springs/Lower Desert Jun-05 $393,370 $169,080 -57.0%

Sacramento Aug-05 $394,450 $192,050 -51.3%

CALIFORNIA May-07 $594,530 $292,960 -50.7%

Northern Wine Country Jan-06 $645,080 $347,920 -46.1%

Los Angeles Aug-07 $605,300 $339,980 -43.8%

Northern California Aug-05 $440,420 $255,600 -42.0%

San Diego May-06 $622,380 $375,710 -39.6%

San Luis Obispo Jun-06 $620,540 $382,560 -38.4%

San Francisco Bay Area May-07 $853,910 $531,580 -37.7%

Santa Clara Apr-07 $868,410 $555,000 -36.1%

Ventura Aug-06 $710,910 $466,200 -34.4%

Orange County Apr-07 $747,260 $499,440 -33.2%


Unsold Inventory IndexCalifornia, August 2009: 4.3 Months

0

2

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6

8

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12

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18

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MONTHS

Price Range (Thousand) Aug-09 Jul-09 Aug-08

$1,000K+ 12.8 9.6 10.8$750-1000K 6.1 5.2 7.6$500-750K 4.2 3.9 6.5$300-500K 3.9 3.5 6.3$0-300K 2.9 3.1 6.4Total 4.3 3.9 7.0

Unsold Inventory Index (Months)


Unsold Inventory Index: Over & Under $500K

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UII - Over $500k

UII - Under $500k

SOURCE: California Association of REALTORS®SOURCE: California Association of REALTORS®

California – A Tale of Two Markets

26%36%

40% 41%

51%56% 58%

66%73%

78% 80%

0%

20%

40%

60%

80%

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Distressed Sales to Total Sales Ratio(Aug 2009)


County/Region Mar-09 Jun-09 Jul-09 Aug-09

Marin 33.1% 21.6% 26.9% 26.4%San Luis Obispo 50.5% 41.8% 38.4% 35.5%Mendocino 41.9% 51.1% 40.0% 40.0%Orange 56.7% 44.5% 40.6% 41.4%Sonoma 67.1% 56.6% 46.8% 51.3%Napa 69.4% 51.9% 52.0% 55.7%Los Angeles 69.2% 61.2% 58.9% 57.6%Sacramento 70.5% 70.6% 65.9% 66.4%Kern 83.5% 76.9% 73.7% 72.9%Solano 88.4% 84.0% 83.3% 78.1%Riverside/San Bernardino 87.1% 83.5% 82.2% 79.5%

Distressed Sales to Total Sales Ratio


Distressed Sales vs. Non Distressed Sales

DistressedNon-Distressed

Median Home Price $250,000 $485,000

Price/SF $154 $277

Percent of Sales with Multiple Offers 68.1% 44.7%

Number of Offers (Average) 6.1 4.0

Percent of All Cash Sales 22.4% 17.1%

Number of Days on MLS 43 50

Number of Days in Escrow 45 35

Percent of Sales with Net Cash Loss 68.9% 17.9%

Net Cash Gain/Net Cash Loss to Seller -$100,000 $85,000

Source: C.A.R. 2009 Housing Market Survey

-100%

-50%

0%

50%

100%

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250%

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20

05

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06

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20

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.07

Under 500 500 to 999 1 Mil + Total

Year-to-Year Percent Change in Sales


By Price Interval


-15%

-10%

-5%

0%

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20

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Under 500 500 to 999 1 Mil +

Year-to-Year Percent Change in Median Price


Within Price Interval


Regional Markets

Home Sales in Southern California Regions

0

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High Desert Los Angeles Orange PalmSprings

Riverside/SB San Diego Sta. BarbaraArea

Ventura

Aug-08

Aug-09


High Desert 111,771$ 110,653$ 169,203$ 1.0% -33.9%Los Angeles 339,982$ 339,432$ 394,869$ 0.2% -13.9%

499,437$ 500,212$ 511,268$ -0.2% -2.3%Palm Springs 169,076$ 163,077$ 221,944$ 3.7% -23.8%

166,601$ 165,465$ 225,394$ 0.7% -26.1%375,706$ 372,645$ 388,712$ 0.8% -3.3%828,750$ 882,500$ 1,000,000$ -6.1% -17.1%

Sta. Barbara-North Cnty. 244,047$ 243,477$ 266,666$ 0.2% -8.5%466,197$ 456,435$ 478,408$ 2.1% -2.6%

Riverside/SB

Ventura

Sta. Barbara-So. Coast

Y-t-Y

San Diego

County Aug-09 Jul-09 Aug-08 M-t-M

Orange

Median Price of Existing Detached HomesSouthern California Regions


Riverside County

Economic Profile

Riverside County Profile

Characteristic Statistic State Rank

2007 Population Estimate 2,061,597 4

% Population Change 1990-2000 32.0% 4

% Population Change 1980-1990 76.48% 1

% White 2007 46.7%

% Hispanic 2007 40.3%

% Black 2007 6.3%

% Asian & Pacific Islander 2007 4.5%

2007 Per Capita Income $24,885

2007 Median Household Income $58,145

2007 Median Age 31.5

Land Area Square Miles 7,207 4

2000 Total Establishments 26,565 8

2007 Civilian Employment 977,980

Sales of Existing Detached Homes and Pacific West Consumer Confidence

Riverside County, August 2009: 1,645 Units, Up 48.1% YTD, Down 1.6% YTY

SOURCE: California Association of REALTORS®; The Conference Board

INDEXUNITS

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Sales Consumer Confidence

Sales of Existing Detached HomesRiverside County, 2008: 17,271 Units, Up 91.4% YTY


UNITS

0

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19

89

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1,000

1,500

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2006200720082009

ANNUAL MONTHLY

Median Price of Existing Detached HomesRiverside County, August 2009: $173,510, Down 24.4% YTY

$0

$50,000

$100,000

$150,000

$200,000

$250,000

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Median Price Annual ComparisonRiverside County, 2008: $238,984, Down 39.7% YTY


$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,0001

98

9

19

91

19

93

19

95

19

97

19

99

20

01

20

03

20

05

20

07

$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

Ja

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2006200720082009

MONTHLYANNUAL

Aug-09 Aug-08Yearly %Change

Riverside County $190,000 $247,000 -23.1%

Banning $115,000 $157,500 -27.0%

Beaumont $207,000 $261,000 -20.7%

Cathedral City $150,000 $217,500 -31.0%

Corona $307,545 $350,000 -12.1%

Desert Hot Springs $91,500 $135,000 -32.2%

Hemet $118,000 $174,000 -32.2%

Indio $180,000 $240,000 -25.0%

La Quinta $275,000 $377,000 -27.1%

Lake Elsinore $175,000 $220,000 -20.5%

Menifee $195,000 $255,000 -23.5%

Mira Loma $315,000 $359,000 -12.3%

Moreno Valley $140,000 $183,000 -23.5%

Median Home Sales PriceRiverside County

SOURCE: C.A.R.; DataQuick Information Systems. The price statistics are derived from all types of home sales -- new and existing, condos and single-family.

Median Home Sales PriceRiverside County

Aug-09 Aug-08Yearly %Change

Murrieta $236,000 $280,000 -15.7%

Norco $307,000 $445,000 -31.0%

Palm Desert $255,000 $335,000 -23.9%

Palm Springs $133,000 $277,000 -52.0%

Perris $140,000 $185,000 -24.3%

Rancho Mirage $460,000 $465,000 -1.1%

Riverside $230,000 $242,000 -5.0%

San Jacinto $138,000 $185,000 -25.4%

Sun City $155,000 $215,000 -27.9%

Temecula $261,000 $325,000 -19.7%

Wildomar $236,477 $300,000 -21.2%

Winchester $232,000 $280,000 -17.1%

SOURCE: C.A.R.; DataQuick Information Systems. The price statistics are derived from all types of home sales -- new and existing, condos and single-family.

Unsold Inventory IndexRiverside and San Bernardino Counties, August 2009: 2.7 Months


MONTHS

0

5

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Inland Empire Riverside & San Bernardino

Median Time on the MarketSingle-Family Homes – Riverside, August 2009: 28.9 Days

0

20

40

60

80

100

120

140

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New Housing PermitsRiverside County, August 2009: 370 Units, Down 38.9% YTD

SOURCE: Construction Industry Research Board

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

Jan-

88

Jan-

89

Jan-

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Jan-

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Jan-

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Jan-

93

Jan-

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Jan-

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Jan-

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Jan-

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Jan-

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Jan-

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Jan-

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Jan-

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Jan-

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Jan-

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Jan-

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Jan-

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Jan-

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Jan-

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Jan-

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Single Family Multi-Family

Median Price for New HomesRiverside County 2Q09 Detached: $299,900, Attached: $242,990

SOURCE: California Association of REALTORS®;Hanley Wood

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000Q

1/8

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Q1

/89

Q1

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Q1

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Q1

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Q1

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Q1

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Detached

Attached

ForeclosuresRiverside County

SOURCE: Real Estate Research Council

0

2000

4000

6000

8000

10000

12000

14000Q

1/89

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

Riverside: Hybrid MapForeclosure Mapping

Source: ForeclosureRadar.com

Riverside: Street MapForeclosure Mapping


Palm Springs: Hybrid MapForeclosure Mapping


Palm Springs: Street MapForeclosure Mapping


Desert Hot Springs: Hybrid MapForeclosure Mapping


Indio: Hybrid MapForeclosure Mapping


Desert Hot Springs: Street MapForeclosure Mapping


Indio: Street MapForeclosure Mapping


2009 Housing Market Survey

0%

1%

2%

3%

4%

5%

6%

7%

8%

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

0

2

4

6

8

10

12

14

16Med. Price DiscountMed. Weeks on MLS

Median Price Discount And Weeks On Market

Q. What was the original list sales price of the property? What was the final sales price of the property? How many weeks did the property remain on the MLS?

4.6%, 6.4 weeks

69%

0%

20%

40%

60%

80%

100%

Percent with Price DiscountSelling price below listing price

Long Run Average = 68%

Q. What was the original list sales price of the property? What was the final sales price of the property?

$220,640

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$160,000

$180,000

$200,000

$220,000

$240,000

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

Median Net Cash To Sellers2005: $220K 2009: $50K

Q. What was the net cash gain or net loss to the seller as a result of this sale?

$50,000

Sellers Reporting a Net Cash LossPercent of All Sellers

32.9%

0%

5%

10%

15%

20%

25%

30%

35%

Q. What was the net cash gain or net loss to the seller as a result of this sale?

Long Run Average = 9.3%

Proportion of Home Sellers Planning to Repurchase

39.4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

89 90 91 92 93 94 95 96 97 98 00 01 02 03 04 05 06 07 08 09

Q. Is the seller planning on purchasing another home?

Proportion of First-Time HomebuyersCalifornia

47.0%

38.6%

0%

10%

20%

30%

40%

50%

60%

81 83 85 87 89 91 93 95 97 99 01 03 05 07 09

% First-Time Home Buyers Long Run Average

Q. Was the buyer a first-time buyer?

FHA and VA Mortgages(First Mortgage)

Q. Please indicate the type of mortgage

32.0%

4.7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

2001 2002 2003 2004 2005 2006 2007 2008 2009

FHA VA

FHA Loans in CA# of Total Loans in CA & US

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

Oc

t-0

6

De

c-0

6

Fe

b-0

7

Ap

r-0

7

Ju

n-0

7

Au

g-0

7

Oc

t-0

7

De

c-0

7

Fe

b-0

8

Ap

r-0

8

Ju

n-0

8

Au

g-0

8

No

v-0

8

Ja

n-0

9

Ma

r-0

9

Ma

y-0

9

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

CA Total US Total

CA Tops All States with a 10% Market Share of all FHA Lending in US (Source: Inside FHA Lending)

Source: HUD

CA Endorsements US Endorsements

FHA vs. Conventional(New First Mortgages)

FHA Conventional

Median Home Price $261,500 $455,000

Median Down Payment (Dollar) $9,888 $92,000

Median Down Payment (% to Price) 3.5% 20.0%

Share of All Home Sales 32.0% 63.3%Percent of Mortgages with Distressed Property 62.6% 37.4%

Percent of First-Time Buyers 75.8% 40.2%

55.4%

5.14

0%

10%

20%

30%

40%

50%

60%

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

0

1

2

3

4

5

6% with Multiple Offers

# of Multiple offers (Average)

Multiple Offers:Over 1/2 homes sold 2009 had multiple offers

0%

10%

20%

30%

40%

50%

1998 2000 2002 2004 2006 2008

All Hombuyers First-Time BuyersRepeat Buyers

Percent of Buyers with Zero Down PaymentFirst-Time Buyers vs. Repeat Buyers

5.0%

3.7%

2.8%

19.6%

0%

2%4%

6%8%

10%12%

14%16%

18%20%

22%

Percent of All Cash Sales

12.1%

5.2%

0%

5%

10%

15%

20%

1998 2000 2002 2004 2006 2008

Investment/Rental Property Vacation/Second Home

Buyer Use of Property(All Homes)

20%

0% 0% 0%0% 0%

19% 20%

8%

18%

30%

0%

55%

0%5%

16%

42%

14% 16%

7%3%

0%

15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Desiredlarger home

Desiredbetter/other

location

Mortgagepaymentwent up(reindex)

Moved torental to

save money

Job loss Troublemaking

mortgagepayments

2006 2007 2008 2009

Signs of Distress in 2008-2009

Sellers Are Reacting to Financial Stress

The Role of Market Conditions In the Decision to Sell

SOURCE: C.A.R. 2009 Survey of Home Sellers

While Buyers See Opportunities …

10%

9%

67%

22%

39%

Price decreases motivated us

Low interest rates helped us move toa better location, neighborhood

Likelihood that interest rates will moveup motivated us

Low interest rates helped us buy alarger home

Moved to an area where it was moreaffordable

The Role Of Market ConditionsIn The Decision To Buy

SOURCE: C.A.R. 2009 Survey of Home Buyers

The Bottom Line: Great Time to be a First Time Buyer

First-time Buyer Housing Affordability IndexCalifornia Vs. U.S. 2000-2009

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20

00

Q1

20

00

Q3

20

01

Q1

20

01

Q3

20

02

Q1

20

02

Q3

20

03

Q1

20

03

Q3

20

04

Q1

20

04

Q3

20

05

Q1

20

05

Q3

20

06

Q1

20

06

Q3

20

07

Q1

20

07

Q3

20

08

Q1

20

08

Q3

20

09

Q1

CA US

% OF HOUSEHOLDS THAT CAN BUY


Federal First-Time Buyer Tax Credit

• Legislation Passed February 2009

• Retroactive to January 1, 2009

• Extended/modified version of 2008 Tax Credit– Current expiration November 30, 2009– 6 month extension under deliberation

• National Impact – 1.4 million families in US (IRS)

• California Results – 39% of first-timers would not have bought in 2009 w/o tax credit (C.A.R. Survey)

Bought Home Regardless of Federal First-Time Home Buyer Tax Credit?

Q. Would you have bought a home if there were not a Federal First-Time Home Buyer Tax Credit, or if you knew you did not qualify for the credit? CAR Telephone Survey 2009

39%

52%

26%

11%

17%

6%

51%

68%

31%

Total (N = 200)

Income Under $100K(N = 96)

Income $100K andover (N = 104)

Yes No Unsure

0% 0% 0%

5%

8%9% 9%

10%

31%

27%

0%

5%

10%

15%

20%

25%

30%

35%

1 2 3 4 5 6 7 8 9 10

Mean = 8.1 Median = 9

Scale: “1” = very easy, “10” = very difficult

Level of Difficulty to Obtain Financing(All Buyers)

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

93%

88%

68%

81%

76%

79%

3%

1%

2%

2%

2%

7%

9%

30%

17%

22%

19%

0% 20% 40% 60% 80% 100%

Short Sale

REO

Regular MarketSales

Repeat Buyers

First-Time Buyers

All Buyers

Yes No Unsure

Q. Do you know the term of your loan?

9.4%

5.8%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Q1

-19

79

Q2

-19

80

Q3

-19

81

Q4

-19

82

Q1

-19

84

Q2

-19

85

Q3

-19

86

Q4

-19

87

Q1

-19

89

Q2

-19

90

Q3

-19

91

Q4

-19

92

Q1

-19

94

Q2

-19

95

Q3

-19

96

Q4

-19

97

Q1

-19

99

Q2

-20

00

Q3

-20

01

Q4

-20

02

Q1

-20

04

Q2

-20

05

Q3

-20

06

Q4

-20

07

Q1

-20

09

Delinquency Rate - CA Foreclosure Rate - CA

CA Mortgage Foreclosure & Delinquency RatesCalifornia: Q2-2009, NSA

SOURCE: Mortgage Bankers Association

Delinquencies: Long Run Average: 4.1%

Foreclosure Rate: Long Run Average: 1.0%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

Se

p-0

6

Oc

t-0

6

No

v-0

6

De

c-0

6J

an

-07

Fe

b-0

7

Ma

r-0

7A

pr-

07

Ma

y-0

7

Ju

n-0

7

Ju

l-0

7A

ug

-07

Se

p-0

7

Oc

t-0

7N

ov

-07

De

c-0

7

Ja

n-0

8

Fe

b-0

8M

ar-

08

Ap

r-0

8

Ma

y-0

8

Ju

n-0

8J

ul-

08

Au

g-0

8

Se

p-0

8O

ct-

08

No

v-0

8

De

c-0

8

Ja

n-0

9F

eb

-09

Ma

r-0

9

Ap

r-0

9M

ay

-09

Ju

n-0

9

Ju

l-0

9

Au

g-0

9

Notice of DefaultsNotice of Trustee SaleREO

California Foreclosure Activity 09/06 - Present

SOURCE: ForeclosureRadar.com

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

55,000

60,000

65,000

Ja

n-0

8

Fe

b-0

8

Ma

r-0

8

Ap

r-0

8

Ma

y-0

8

Ju

n-0

8

Ju

l-0

8

Au

g-0

8

Se

p-0

8

Oc

t-0

8

No

v-0

8

De

c-0

8

Ja

n-0

9

Fe

b-0

9

Ma

r-0

9

Ap

r-0

9

Ma

y-0

9

Ju

n-0

9

Ju

l-0

9

Au

g-0

9

Notice of Defaults - CountsNotice of Trustee SaleREO

California Foreclosure Activity 2008 - present

September 2008: CA SB 1137 Takes Effect

September 18, 2008: Paulson asks For TARP Funds

Government Intervention

SOURCE: ForeclosureRadar.com

February 11 2009:Frank’s Moratorium Request

February 20, 2009: CA Foreclosure Prevention Act

March 4, 2009:Making Home Affordable/HAMP

US and California Economic Conditions

Historic Fiscal Stimulus

Fiscal Policy: “Spend Now – Worry Later”

To date: $3 trillion in government spending

MBS purchases ($693 billion)

TARP ($372 billion)

Obama stimulus package ($304 billion)

Cash for Clunkers

First-time Buyer Tax Credit

Extension of Unemployment Benefits

Tax Cuts

Result: Federal budget deficit will reach 1.6 trillion this year

Gross Domestic Product

-7%

-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Q3

-08

Q4

-08

Q1

-09

Q2

-09

2008: +0.4%; 2009P -2.6%; Q2: -0.7%

ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $

ANNUAL QTRLY

QUARTERLY PERCENT CHANGE

-4

-2

0

2

4

6

8

1Q

-19

90

1Q

-19

91

1Q

-19

92

1Q

-19

93

1Q

-19

94

1Q

-19

95

1Q

-19

96

1Q

-19

97

1Q

-19

98

1Q

-19

99

1Q

-20

00

1Q

-20

01

1Q

-20

02

1Q

-20

03

1Q

-20

04

1Q

-20

05

1Q

-20

06

1Q

-20

07

1Q

-20

08

1Q

-20

09

Personal Consumption2009 Q2: -0.87%

SOURCE: US Dept of Commerce, Bureau of Economic Analysis

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Q1

-19

60

Q1

-19

62

Q1

-19

64

Q1

-19

66

Q1

-19

68

Q1

-19

70

Q1

-19

72

Q1

-19

74

Q1

-19

76

Q1

-19

78

Q1

-19

80

Q1

-19

82

Q1

-19

84

Q1

-19

86

Q1

-19

88

Q1

-19

90

Q1

-19

92

Q1

-19

94

Q1

-19

96

Q1

-19

98

Q1

-20

00

Q1

-20

02

Q1

-20

04

Q1

-20

06

Q1

-20

08

SOURCES: BEA S&P 500

U.S. Savings Rate: 1960 – 2009Is increase Permanent or Temporary?

Consumer Behavior: Permanent Change or Temporary Hiatus From Spending?

“Credit impaired lower income consumers can’t spend the way they used to and wealth impaired affluent consumers won’t.”

UCLA Forecast 9/09

Consumer Price IndexAugust 2009: All Items -1.4% YTY; Core 1.5% YTY

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Ja

n-8

0

Ja

n-8

1

Ja

n-8

2

Ja

n-8

3

Ja

n-8

4

Ja

n-8

5

Ja

n-8

6

Ja

n-8

7

Ja

n-8

8

Ja

n-8

9

Ja

n-9

0

Ja

n-9

1

Ja

n-9

2

Ja

n-9

3

Ja

n-9

4

Ja

n-9

5

Ja

n-9

6

Ja

n-9

7

Ja

n-9

8

Ja

n-9

9

Ja

n-0

0

Ja

n-0

1

Ja

n-0

2

Ja

n-0

3

Ja

n-0

4

Ja

n-0

5

Ja

n-0

6

Ja

n-0

7

Ja

n-0

8

Ja

n-0

9

All Items

Core

PERCENT CHANGE FROM A YEAR AGO, 100=1982-1984

Historic Monetary Stimulus

SOURCE: Federal Home Loan Mortgage Corporation

Mortgage Rates and Monetary Policy“Whatever it Takes”

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Ja

n-9

1J

ul-

91

Ja

n-9

2J

ul-

92

Ja

n-9

3J

ul-

93

Ja

n-9

4J

ul-

94

Ja

n-9

5J

ul-

95

Ja

n-9

6J

ul-

96

Ja

n-9

7J

ul-

97

Ja

n-9

8J

ul-

98

Ja

n-9

9J

ul-

99

Ja

n-0

0J

ul-

00

Ja

n-0

1J

ul-

01

Ja

n-0

2J

ul-

02

Ja

n-0

3J

ul-

03

Ja

n-0

4J

ul-

04

Ja

n-0

5J

ul-

05

Ja

n-0

6J

ul-

06

Ja

n-0

7J

ul-

07

Ja

n-0

8J

ul-

08

Ja

n-0

9J

ul-

09

FRM

ARM

Federal Funds

SOURCE: Federal Home Loan Mortgage Corporation – 30-yr FRMFederal Reserve Board – 10-Year T-Bond

30-Year FRM vs. 10-Year T-Bond Above-Average Risk Premiums Associated With Mortgage Loans

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Ja

n-9

1J

ul-

91

Ja

n-9

2J

ul-

92

Ja

n-9

3J

ul-

93

Ja

n-9

4J

ul-

94

Ja

n-9

5J

ul-

95

Ja

n-9

6J

ul-

96

Ja

n-9

7J

ul-

97

Ja

n-9

8J

ul-

98

Ja

n-9

9J

ul-

99

Ja

n-0

0J

ul-

00

Ja

n-0

1J

ul-

01

Ja

n-0

2J

ul-

02

Ja

n-0

3J

ul-

03

Ja

n-0

4J

ul-

04

Ja

n-0

5J

ul-

05

Ja

n-0

6J

ul-

06

Ja

n-0

7J

ul-

07

Ja

n-0

8J

ul-

08

Ja

n-0

9J

ul-

09

FRM

10-YearT-Bond

RiskPrem

Average. Risk

Premium: 1.6%

Lower spread in 2009 - FED purchasesfrom Fannie and Freddie

Distressed Commercial RE Growing

billions

Distressed properties include those that are in bankruptcy, foreclosures, those that have received lender forbearance, or lender REO.

Distressed properties include those that are in bankruptcy, foreclosures, those that have received lender forbearance, or lender REO.

Commercial Debt Crisis Ahead

billions

Commercial MBS Market

billions

INDEX, 100=1985

Consumer Confidence Index: Better…Sort OfAugust 2009: 54.5 September 2009: 53.1

20

30

40

50

60

70

80

90

100

110

120

130

140

150

160

Ja

n-8

8

Ja

n-8

9

Ja

n-9

0

Ja

n-9

1

Ja

n-9

2

Ja

n-9

3

Ja

n-9

4

Ja

n-9

5

Ja

n-9

6

Ja

n-9

7

Ja

n-9

8

Ja

n-9

9

Ja

n-0

0

Ja

n-0

1

Ja

n-0

2

Ja

n-0

3

Ja

n-0

4

Ja

n-0

5

Ja

n-0

6

Ja

n-0

7

Ja

n-0

8

Ja

n-0

9

DJIMonthly

Avg.

Dow Jones Stock Price and Consumer Confidence30 Industrial Index vs. Consumer Confidence Index 1987-2009

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Ja

n-8

7J

ul-

87

Ja

n-8

8J

ul-

88

Ja

n-8

9J

ul-

89

Ja

n-9

0J

ul-

90

Ja

n-9

1J

ul-

91

Ja

n-9

2J

ul-

92

Ja

n-9

3J

ul-

93

Ja

n-9

4J

ul-

94

Ja

n-9

5J

ul-

95

Ja

n-9

6J

ul-

96

Ja

n-9

7J

ul-

97

Ja

n-9

8J

ul-

98

Ja

n-9

9J

ul-

99

Ja

n-0

0J

ul-

00

Ja

n-0

1J

ul-

01

Ja

n-0

2J

ul-

02

Ja

n-0

3J

ul-

03

Ja

n-0

4J

ul-

04

Ja

n-0

5J

ul-

05

Ja

n-0

6J

ul-

06

Ja

n-0

7J

ul-

07

Ja

n-0

8J

ul-

08

Ja

n-0

9J

ul-

09

0

20

40

60

80

100

120

140

160

Dow Jones 30 Industrials Consumer Confidence Index Cons. Conf.

Unemployment RateCalifornia (8/09 12.2%) vs. United States (9/09 9.8%)

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Ja

n-9

0J

ul-

90

Ja

n-9

1J

ul-

91

Ja

n-9

2J

ul-

92

Ja

n-9

3J

ul-

93

Ja

n-9

4J

ul-

94

Ja

n-9

5J

ul-

95

Ja

n-9

6J

ul-

96

Ja

n-9

7J

ul-

97

Ja

n-9

8J

ul-

98

Ja

n-9

9J

ul-

99

Ja

n-0

0J

ul-

00

Ja

n-0

1J

ul-

01

Ja

n-0

2J

ul-

02

Ja

n-0

3J

ul-

03

Ja

n-0

4J

ul-

04

Ja

n-0

5J

ul-

05

Ja

n-0

6J

ul-

06

Ja

n-0

7J

ul-

07

Ja

n-0

8J

ul-

08

Ja

n-0

9J

ul-

09

US-CA CA US

SOURCE: CA Employment Development Division

Employment Growth, California vs. U.S. 8/09 CA: -4.9% YTY 9/09 US: -4.2% YTY

YEAR TO YEAR % CHANGE

-6

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

Ja

n-9

1J

ul-

91

Ja

n-9

2J

ul-

92

Ja

n-9

3J

ul-

93

Ja

n-9

4J

ul-

94

Ja

n-9

5J

ul-

95

Ja

n-9

6J

ul-

96

Ja

n-9

7J

ul-

97

Ja

n-9

8J

ul-

98

Ja

n-9

9J

ul-

99

Ja

n-0

0J

ul-

00

Ja

n-0

1J

ul-

01

Ja

n-0

2J

ul-

02

Ja

n-0

3J

ul-

03

Ja

n-0

4J

ul-

04

Ja

n-0

5J

ul-

05

Ja

n-0

6J

ul-

06

Ja

n-0

7J

ul-

07

Ja

n-0

8J

ul-

08

Ja

n-0

9J

ul-

09

California US


Nonfarm Employment By Region


Nonfarm NonfarmEmployment Employment Percent

Aug-09 Aug-08 Change ChangeSouthern California 7,918.8 8,289.4 -370.6 -4.5%

Bay Area 3,088.7 3,243.6 -154.9 -4.8%

Central Valley 1,906.2 1,990.4 -84.2 -4.2%

Central Coast 478.0 492.0 -14 -2.8%

North Central 131.6 137.9 -6.3 -4.6%

CALIFORNIA 14,234.1 14,975.6 -741.5 -5.0%

(Thousands)

Nonfarm EmploymentRiverside/San Bernardino Metropolitan Area, August 2009: Down 6.0% YTY


Y-T-Y PERCENT CHANGE

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Ja

n-9

1J

ul-

91

Ja

n-9

2J

ul-

92

Ja

n-9

3J

ul-

93

Ja

n-9

4J

ul-

94

Ja

n-9

5J

ul-

95

Ja

n-9

6J

ul-

96

Ja

n-9

7J

ul-

97

Ja

n-9

8J

ul-

98

Ja

n-9

9J

ul-

99

Ja

n-0

0J

ul-

00

Ja

n-0

1J

ul-

01

Ja

n-0

2J

ul-

02

Ja

n-0

3J

ul-

03

Ja

n-0

4J

ul-

04

Ja

n-0

5J

ul-

05

Ja

n-0

6J

ul-

06

Ja

n-0

7J

ul-

07

Ja

n-0

8J

ul-

08

Ja

n-0

9J

ul-

09

Unemployment RateRiverside County, August 2009: 15.0%


0%

2%

4%

6%

8%

10%

12%

14%

16%

Ja

n-9

0J

ul-

90

Ja

n-9

1J

ul-

91

Ja

n-9

2J

ul-

92

Ja

n-9

3J

ul-

93

Ja

n-9

4J

ul-

94

Ja

n-9

5J

ul-

95

Ja

n-9

6J

ul-

96

Ja

n-9

7J

ul-

97

Ja

n-9

8J

ul-

98

Ja

n-9

9J

ul-

99

Ja

n-0

0J

ul-

00

Ja

n-0

1J

ul-

01

Ja

n-0

2J

ul-

02

Ja

n-0

3J

ul-

03

Ja

n-0

4J

ul-

04

Ja

n-0

5J

ul-

05

Ja

n-0

6J

ul-

06

Ja

n-0

7J

ul-

07

Ja

n-0

8J

ul-

08

Ja

n-0

9J

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09

Employment by Sector

-20%

-15%

-10%

-5%

0%

5%

To

tal N

on

farm

Co

ns

tru

cti

on

Ma

nu

fac

turi

ng

Wh

ole

sa

le

Re

tail

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ns

& U

til

Fin

& In

s

Re

al E

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en

tal/

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as

ing

Pro

f S

ci &

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ch

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uc

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alt

h C

are

an

d S

oc

ial

As

st

2008 2009 2010

% Change

YTY % Changes in California 2008-2010

SOURCE: CA EDD, LAEDC

New Housing PermitsCalifornia, 1988-2009: Down 48.8% YTD

0

50,000

100,000

150,000

200,000

250,000

300,0001

98

8

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

YT

D

Single Family Multi-Family

SOURCE: Construction Industry Research Board

2010 Forecast

U.S. Economy

2004 2005 2006 2007 2008 2009f 2010f

US GDP 3.6% 3.1% 2.7% 2.1% 0.4% -2.6% 1.9%

Nonfarm Job Growth

1.1% 1.7% 1.8% 1.1% -0.4% -3.7% -1.0%

Unemployment 5.5% 5.1% 4.6% 4.6% 5.8% 9.3% 10.0%

CPI 2.7% 3.4% 3.2% 2.8% 3.8% -0.5% 1.9%

Real Disposable Income, % Change

3.4% 1.3% 4.0% 2.2% 0.5% 0.8% 2.1%


Forecast Date: October 2009

California Economy

2004 2005 2006 2007 2008 2009f 2010f

Nonfarm Job Growth

1.0% 1.8% 1.7% 0.8% -1.2% -4.3% -1.1%

Unemployment Rate

6.2% 5.4% 4.9% 5.4% 7.2% 11.6% 12.1%

Population Growth

1.4% 1.2% 1.1% 1.1% 1.2% 1.1% 1.1%

Real Disposable Income, % Change

3.6% 1.3% 3.4% 1.5% 0.1% -0.4% 0.1%



California Housing Market Outlook

2003 2004 2005 2006 2007 2008 2009F 2010F

SFH Resales (000s)

601.8 624.7 625.0 477.5 346.9 439.8 540.0 527.5

% Change 5.1% 3.8% 0.03% -23.6% -27.3% 26.8% 22.8% -2.3%

Median Price ($000s)

$371.5 $450.8 $522.7 $556.4 $560.3 $346.4 $271.0 $280.0

% Change 17.5% 21.3% 16.0% 6.5% 0.7% -38.2% -21.8% 3.3%

30-Yr FRM 5.8% 5.8% 5.9% 6.4% 6.3% 6.0% 5.2% 5.6%

1-Yr ARM 3.8% 3.9% 4.5% 5.5% 5.6% 5.2% 4.8% 5.2%

Source: CALIFORNIA ASSOCIATION OF REALTORS®


Forecast Wild Cards

• First-time Buyer Tax Credit

• Additional Stimulus – Job Creation ?

• Foreclosure Pipeline

• Commercial Defaults – Impact on Credit Market

• Inflation - Will Fed monetize the deficit?

• H1N1 (Stock tip: Purell)

Market Opportunities

• First time buyers: Growing share of the market

• Connect with past clients: Valuable information to share

and receive (LISTEN)

• Educate clients: What is Responsible Homeownership?

• Educate yourself: Professional Development is Critical

In Closing….

www.car.org Economics

Thank [email protected]

Leslie Appleton Young 2010 Forecast

Real Estate

Transcript of Leslie Appleton Young 2010 Forecast