Economic and Housing Market Outlook ( ) October 31, Contra Costa AOR

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1 Economic and Housing Market Outlook ( ) Contra Costa AOR October 31, 2012 Oscar Wei Senior Research Analyst California Association of REALTORS

2 Overview US and California Economies California Housing Market Local Market Conditions Market Opportunities California Forecast

3 US and California Economic Conditions

4 Gross Domestic Product: Growth is stalling 2011: 1.6%; 2012 Q3: 2.0% ANNUAL PERCENT CHANGE, CHAIN-TYPE (2005) $ 8% 7% 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% -7% -8% 2009 Largest Annual Drop since 1938 (-3.4%) ANNUAL QTRLY Q2-10 Q4-10 Q2-11 Q4-11 Q2-12

5 Unemployment: Cyclical & Structural Heading Down: At 3 year lows 14% 12% CA US 10% 8% 6% 4% 2% 0% Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 SOURCE: CA Employment Development Division

6 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 U.S. Non-farm Job Growth Month-to-Month Changes Recession Job Losses: 8.8 million Since Jan 10: +4.2 million SOURCE: CA Employment Development Division

7 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 California Non-farm Job Growth Month-to-Month Changes Recession Job Losses: 1.3 million Since Jan 10: + 486,000 SOURCE: CA Employment Development Division

8 Job Trends by California Metro Area Annual Percentage Change in Nonfarm Jobs Stockton San Francisco San Jose Fresno San Diego Sacramento Riverside Oakland Bakersfield Orange County Los Angeles Modesto Ventura 0.4% July 2012: CA +2.6%, thousand Jobs 3.5% 3.1% 2.9% 2.8% 2.3% 2.1% 2.1% 2.0% 1.6% 1.3% 4.4% 6.3% 2.0% 0.0% 2.0% 4.0% 6.0% 8.0% Source: CA EDD, Labor Market Information Division, LAEDC

9 8% 6% 4% 2% 0% 2% 4% 6% 8% 10% Professional & Business Services Leading Sector Professional & Business Services 12% Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 SOURCE: CA Employment Development Department

10 Construction Is Making a Comeback 15% 10% Construction 5% 0% 5% 10% 15% 20% 25% Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 SOURCE: CA Employment Development Department

11 Manufacturing Stumbling but Worst Is Over 2% 0% Manufacturing 2% 4% 6% 8% 10% 12% 14% Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 SOURCE: CA Employment Development Department

12 Consumer Confidence Uneven But Things Are Getting Better September 2012: INDEX, 100= Jan 05 Jul 05 Jan 06 Jul 06 Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 SOURCE: The Conference Board

13 Consumer Price Index Subdued for Now September 2012: All Items +2.0% YTY; Core +0.7% YTY PERCENT CHANGE FROM A YEAR AGO 10% 8% All Items Core 6% 4% 2% 0% -2% -4% Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 SOURCE: U.S. Bureau of Labor Statistics

14 U.S. Economic Outlook Indicator p 2013f US GDP 0.30% 3.50% 3.00% 1.70% 2.00% 2.30% Nonfarm Job Growth 0.60% 4.40% 0.70% 1.20% 1.40% 1.60% Unemployment 5.80% 9.30% 9.60% 9.00% 8.20% 8.00% CPI 3.80% 0.40% 1.60% 3.20% 2.00% 2.10% Real Disposable Income, % Change 0.50% 0.90% 1.80% 1.30% 1.60% 1.60%

15 California Economic Outlook Indicator p 2013f Nonfarm Job Growth 1.3% 6.0% 1.1% 0.9% 1.6% 1.6% Unemployment Rate 7.2% 11.3% 12.4% 11.7% 10.7% 9.9% Population Growth 0.8% 0.6% 0.7% 0.7% 0.8% 0.9% Real Disposable Income, % Change 1.0% 3.1% 1.8% 1.5% 0.3% 1.0%

16 Economic Risks Fiscal cliff Fall election Tax reform State and local government finances Euro Zone crisis Future of Fannie and Freddie

17 California Housing Market

18 CA Sales of Existing Detached Homes September 2012 Sales: 484,240 Units, Up 5.6% YTD, Down 1.2% YTY UNITS 700,000 Sales 600, , , , , ,000 0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 SOURCE: California Association of REALTORS ; The Conference Board *Sales are seasonally adjusted and annualized

19 Share of Equity Sales Has Been Trending Upward Since Early % 60% Equity Sales Short Sale REO 63.0% 50% 40% 30% 24.3% 20% 10% 12.3% 0% Jan-09 Jun-09 Nov-09 Apr-10 Sep-10 Feb-11 Jul-11 Dec-11 May-12 SOURCE: California Association of REALTORS

20 Equity Sales and Short Sales Continued to Improve, While REO Sales Dropped (% Change in Sales Year to Year) 20% 14.1% 3.6% 0% -20% -40% -60% -59.0% Equity Sales Short Sales REO Sales SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

21 Change in Sales by Sales Type (Year-to-Year) 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% -70% Equity Sales Short Sales REO Sales 14.1% 3.6% -59.0% Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

22 REO & Short Sales: Bay Area (Percent of Total Sales) 100% 80% 60% Sep 2012 Short Sales REO Sales 40% 20% 18% 18% 16% 26% 42% 0% 10% 10% 8% 11% 13% 18% 7% 4% 17% 24% 13% SOURCE: California Association of REALTORS

23 Sales Dropped in Lower Price Segments (% Change in Sales Year to Year) % Chg in Sales 20% 14.1% 15.1% 10% 6.7% 0% -10% -20% -30% -27.7% -15.4% $0 - $200k $200 - $300k $300 - $400k $400 - $500k $500k+ SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

24 Change in Sales by Price Range (Year-to-Year) 40% $0 - $200k $200 - $300k $300 - $400k $400 - $500k $500k+ 30% 20% 10% 0% 15.1% 14.1% 6.7% -10% -20% -30% -40% -15.4% -27.7% Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

25 Median Price of Existing Detached Homes California, September 2012: $345,000, Up 19.5% YTY $700,000 P: May 07 $594,530 $600,000 $500,000 $400,000 T: Feb 09 $245,230 59% from peak $300,000 $200,000 $100,000 $- SOURCE: California Association of REALTORS

26 CA Unsold Inventory: Nearing Record Lows California, September 2012: 3.7 Months MONTHS Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Note: Unsold Inventory Index represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were Active, Pending, and Contingent (when available) and divide the sum by the number of Sold properties for the month in question. SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

27 Unsold Inventory Index: Shortage Across All Price Ranges Price Range (Thousand) Sep-11 Aug-12 Sep-12 $1,000K $ K $ K $ K $0-300K Note: Unsold Inventory Index represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were Active, Pending, and Contingent (when available) and divide the sum by the number of Sold properties for the month in question. SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

28 Tight Supply of Inventory, Especially for REO Sales Unsold Inventory Index (Months) 3.8 Sep Equity Sales REO Sales Short Sales SOURCE: California Association of REALTORS

29 Unsold Inventory Index (Months) 9 Inventory Has Been Declining Since Early 2012 Equity Sales REO Short Sales Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 SOURCE: California Association of REALTORS

30 Housing Permits Improving Slowly 2012(p): 52,000 units, Up 10.4% from 2011 Single Family Multi-Family 250,000 Household Growth: 220, ,000/yr 200, , ,000 50, P SOURCE: Construction Industry Research Board

31 Supply Shortage Creates More Market Competition Share of home sales with multiple offers is the highest in at least the last 12 years 60% 50% 40% 30% 20% 10% 0% % with Multiple Offers # of Multiple offers (Average) 57%

32 Demand for Investment & Second/ Vacation Homes Dipped Slightly, But Remained Strong Vacation/Second Home Investment/Rental Property 25% 20% 7% 15% 10% 5% 0% %

33 For Those Who Purchased an Investment Property: Investment to Flip Rental Property

34 More Buyers Are Purchasing with Cash % of All Cash Sales 30% 30% 25% 20% Almost one third of buyers paid with all cash The share of all cash buyers has been on the rise since % 10% 5% 0%

35 One of Five REALTORS Worked with an International Buyer in the Past 12 Months % Who Sold to International Buyers 90% 80% 70% 60% 50% 40% 30% 79% # of Properties Sold to International Buyers in the Last 12 Months 20% 10% 0% 9% 5% 3% 1% 3% # of Properties Q. How many properties have you sold to an international buyer in the last 12 months?

36 More Sellers Are Planning to Buy Another Home as the Market Slowly Recovers 80% 70% 60% 50% 40% 40% 30% 20% 10% 0% Q. Is the seller planning on purchasing another home?

37 Regional/Local Real Estate Market

38 ALAMEDA COUNTY

39 Sales of Residential Homes Alameda County, September 2012: 1,072 Units Down 22.6% MTM, Down 6.6% YTY SOURCE: Clarus Market Metrics

40 Median Price of Residential Homes Alameda County, September 2012: $406,000 Down 1.0% MTM, Up 19.4% YTY SOURCE: Clarus Market Metrics

41 Month s Supply of Inventory Alameda County, September 2012: 1.1 Months Note: Month s Supply of Inventory represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were For Sale on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics

42 CONTRA COSTA COUNTY

43 Sales of Residential Homes Contra Costa County, September 2012: 1,056 Units Down 21.7% MTM, Down 15.0% YTY SOURCE: Clarus Market Metrics

44 Median Price of Residential Homes Contra Costa County, September 2012: $325,000 Up 6.2% MTM, Up 28.5% YTY SOURCE: Clarus Market Metrics

45 Month s Supply of Inventory Contra Costa County, September 2012: 1.1 Months Note: Month s Supply of Inventory represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were For Sale on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics

46 WALNUT CREEK

47 Sales of Residential Homes Walnut Creek, September 2012: 118 Units Down 28.5% MTM, Down 8.5% YTY SOURCE: Clarus Market Metrics

48 Median Price of Residential Homes Walnut Creek, September 2012: $478,000 Up 18.9% MTM, Up 35.4% YTY SOURCE: Clarus Market Metrics

49 Month s Supply of Inventory Walnut Creek, September 2012: 0.8 Months Note: Month s Supply of Inventory represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were For Sale on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics

50 DANVILLE

51 Sales of Residential Homes Danville, September 2012: 58 Units Down 20.5% MTM, Up 16.0% YTY SOURCE: Clarus Market Metrics

52 Median Price of Residential Homes Danville, September 2012: $761,920 Down 7.1% MTM, Down 2.3% YTY SOURCE: Clarus Market Metrics

53 Month s Supply of Inventory Danville, September 2012: 1.6 Months Note: Month s Supply of Inventory represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were For Sale on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics

54 CONCORD

55 Sales of Residential Homes Concord, September 2012: 96 Units Down 40.0% MTM, Down 31.4% YTY SOURCE: Clarus Market Metrics

56 Median Price of Residential Homes Concord, September 2012: $287,500 Down 4.2% MTM, Up 18.3% YTY SOURCE: Clarus Market Metrics

57 Month s Supply of Inventory Concord, September 2012: 0.9 Months Note: Month s Supply of Inventory represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were For Sale on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics

58 RICHMOND

59 Sales of Residential Homes Richmond, September 2012: 88 Units Down 25.4% MTM, Down 18.5% YTY SOURCE: Clarus Market Metrics

60 Median Price of Residential Homes Richmond, September 2012: $196,750 Up 8.3% MTM, Up 38.6% YTY SOURCE: Clarus Market Metrics

61 Month s Supply of Inventory Richmond, September 2012: 1.2 Months Note: Month s Supply of Inventory represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were For Sale on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics

62 EL SOBRANTE

63 Sales of Residential Homes El Sobrante, September 2012: 11 Units Down 21.4% MTM, Even 0% YTY SOURCE: Clarus Market Metrics

64 Median Price of Residential Homes El Sobrante, September 2012: $305,000 Up 24.1% MTM, Up 28.8% YTY SOURCE: Clarus Market Metrics

65 Month s Supply of Inventory El Sobrante, September 2012: 1.2 Months Note: Month s Supply of Inventory represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were For Sale on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics

66 EL CERRITO

67 Sales of Residential Homes El Cerrito, September 2012: 16 Units Up 6.7% MTM, Down 5.9% YTY SOURCE: Clarus Market Metrics

68 Median Price of Residential Homes El Cerrito, September 2012: $444,825 Down 12.3% MTM, Down 5.2% YTY SOURCE: Clarus Market Metrics

69 Month s Supply of Inventory El Cerrito, September 2012: 1.0 Months Note: Month s Supply of Inventory represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were For Sale on the last day of the month in question. The inventory figure is then divided by the number of properties that went Under Contract during the month. SOURCE: Clarus Market Metrics

70

71 Alameda County Preforeclosure: 1,870 Auction: 2,489 Bank Owned: 540 Source: ForeclosureRadar.com as of 10/25/12.

72 Alameda County Preforeclosure: 1,870 Auction: 2,489 Bank Owned: 540 Source: ForeclosureRadar.com as of 10/25/12.

73 Alameda County Preforeclosure: 1,870 Auction: 2,489 Bank Owned: 540 Source: ForeclosureRadar.com as of 10/25/12.

74 Alameda County Preforeclosure: 1,870 Auction: 2,489 Bank Owned: 540 Source: ForeclosureRadar.com as of 10/25/12.

75 Contra Costa County Preforeclosure: 2,042 Auction: 2,385 Bank Owned: 639 Source: ForeclosureRadar.com as of 10/25/12.

76 Contra Costa County Preforeclosure: 2,042 Auction: 2,385 Bank Owned: 639 Source: ForeclosureRadar.com as of 10/25/12.

77 Contra Costa County Preforeclosure: 2,042 Auction: 2,385 Bank Owned: 639 Source: ForeclosureRadar.com as of 10/25/12.

78 Contra Costa County Preforeclosure: 2,042 Auction: 2,385 Bank Owned: 639 Source: ForeclosureRadar.com as of 10/25/12.

79 Walnut Creek Preforeclosure: 77 Auction: 99 Bank Owned: 32 Source: ForeclosureRadar.com as of 10/25/12.

80 Danville Preforeclosure: 68 Auction: 104 Bank Owned: 13 Source: ForeclosureRadar.com as of 10/25/12.

81 Concord Preforeclosure: 210 Auction: 247 Bank Owned: 72 Source: ForeclosureRadar.com as of 10/25/12.

82 Richmond Preforeclosure: 234 Auction: 249 Bank Owned: 77 Source: ForeclosureRadar.com as of 10/29/12.

83 El Sobrante Preforeclosure: 17 Auction: 26 Bank Owned: 22 Source: ForeclosureRadar.com as of 10/29/12.

84 El Cerrito Preforeclosure: 20 Auction: 28 Bank Owned: 7 Source: ForeclosureRadar.com as of 10/29/12.

85 Market Opportunities

86 Mortgage Rates at 50 Year Lows January 2009 October 2012 WEEKLY AVERAGE MONTHLY WEEKLY 6% 5% 4% 3% 2% FRM ARM 1% 0% SOURCE: Federal Home Loan Mortgage Corporation

87 Home Prices Rising but Still Very Attractive $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 California Statewide Median Price $ Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12

88 CA Housing Affordability at Record Highs % OF HOUSEHOLDS THAT CAN BUY 80% CA US 70% 60% 50% 40% 30% 20% 10% 0% Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

89 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 fiveyear 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

90 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

91 California Housing Market Forecast

92 California Housing Market Outlook Indicator p 2013f SFH Resales (000s) % Change 27.3% 23.8% 10.0% 1.1% 5.1% 1.3% Median Price ($000s) $ $ $ $ $ $ % Change 37.8% 21.1% 10.9% 6.2% 10.9% 5.7% 30 Yr FRM 6.0% 5.1% 4.7% 4.5% 3.8% 4.0% 1 Yr ARM 5.2% 4.7% 3.5% 3.0% 2.8% 2.8%

93 Recovery Will Continue in 2013, with Both Sales and the Median Price Up Units (Thousand) 700 Sales of Existing Detached Homes Price (Thousand) $600 Median Price $500 $400 $300 $200 $317 $ $ f $ f SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

94 Dollar Volume of Sales Improving Up 16.5% in 2012, Up 7.0% in 2013 $ in Billion $400 $350 $300 $250 $200 $150 $100 $50 $0 $ Volume of Sales Percent Change $327-54% $266 $194 $178 $166 $154 $150 $150 $ p 2013f SOURCE: CALIFORNIA ASSOCIATION OF REALTORS % Change 20% 15% 10% 5% 0% 5% 10% 15% 20% 25% 30%

95 Speeches Speeches & Presentations

96 For more information:

97 THANK YOU!

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