Realty Executives Santa Clarita November 17, 2016 Leslie Appleton-Young Chief Economist & Vice President

Realty Executives Santa Clarita November 17, 2016 Leslie Appleton-Young Chief Economist & Vice President lesliea@car.org

Nobody had it priced in and the uncertainty Is absolutely enormous Every Wall Street Analyst After 11/8/16

Economic Stimulus Package

Key considerations $1 trillion in infrastructure investments over a 10-year period as part of an economic stimulus package. $100 billion per year in infrastructure investments to rebuild our highways, bridges, tunnels, airports, schools, hospitals. Boost economic growth GDP higher at least short-term More jobs = more housing demand Upward pressure on home prices

Trade Policy

Key considerations Trump made it very clear in his campaign message that the current trade deals are not working and he wanted a trade reform to bring jobs back to America. Withdraw from the Trans-Pacific Partnership (TPP) Renegotiate the North American Free Trade Agreement (NAFTA) Declare China a currency manipulator Tax imports from Mexico (Corona anyone?) Increase tariffs on Chinese imports

Tax Reform

Key considerations Tax Plan Overhaul of the current tax code Reduction in taxes paid by individuals and by corporations. Collapse the current 7personal tax brackets to 3 brackets Increase standard deduction for both single & married Eliminate the federal estate and gift taxes Repeal personal exemptions & Cap itemized deductions Repeal all taxes associated with Obamacare Provide a child care deduction Allow U.S. based manufacturers to elect full expensing of plant and equipment

The Fed

Days Numbered?

Mortgage Rates: Rising Post-Election 6 5 4 January 2010 November 10, 2016 NerdWallet Survey 11/14/16 4.10% MONTHLY WEEKLY 3.57 3 2.88 2 1 FRM ARM 0 2010/01 2010/09 2011/05 2012/01 2012/09 2013/05 2014/01 2014/09 2015/05 2016/01 2016/09 10.20.16 SERIES: 30Yr FRM, 5Yr ARM SOURCE: Freddie Mac

FHA Fannie & Freddie Dodd- Frank

Key considerations Republican stance has been to: Shrink Freddie Mac and Fannie Mae Reform FHA Reduce the government footprint in housing. Unclear how Trump reacts to both the needs of the voters and the platform of the Republican party when it comes to housing. (Nela Richardson, Redfin)

Key considerations Changes to Dodd-Frank financial regulation: A clear positive would be the lifting of compliance costs imposed on smallsized banks. Around 10,000 local and community banks fund construction and land development loans. With less regulatory burden, these small banks can make more loans and will boost home building activity Changes to financial regulations on large banks like Goldman Sachs and Wells Fargo could again lead us back to the days of cowboy capitalism and consequent exposure to a massive taxpayer bailout. (Lawrence Yun, NAR)

Drones? Student Debt? Lead Paint? Fair Housing Act? Immigrants Buying Homes? EPA s Land Use Policy?

CA Market Update

Cadence of Accountability How did I do with last year s forecast?

2016 Forecast Report Card 2015 Actual 2016 Forecast 2016 Projected SFH Resales (000s) 408.8 433.0 407.3 % Change 6.8% 6.3% -0.4% Median Price ($000s) $474.4 $491.3 $503.9 % Change 6.2% 3.2% 6.2% 30-Yr FRM 3.9% 4.5% 3.6% Housing Affordability Index 31% 27% 33% U.S. Gross Domestic Product 2.4% 2.7% 1.5%

Sales of Existing Detached Homes California, Oct. 2016 Sales: 442,970 Units, +0.4% YTD, +8.0% YTY 700,000 600,000 500,000 400,000 300,000 200,000 100,000 - Oct-15: 410,310 Oct-16: 442,970 SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS *Sales are seasonally adjusted and annualized

Sales of Existing Detached Homes So.CA Oct-2016 Sales: 11,039 Units, +0.5% YTD, +1.6% YTY 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Sales of Existing Detached Homes Southern California Region County Oct-16 Sep-16 Oct-15 M-t-M Y-t-Y Y-t-D Los Angeles 3,638 3,660 3,761-0.6% -3.3% -1.1% Orange County 1,516 1,563 1,403-3.0% 8.1% -0.1% Riverside County 1,944 2,134 1,875-8.9% 3.7% 4.3% San Bernardino 1,239 1,309 1,227-5.3% 1.0% 1.6% San Diego 1,956 2,011 1,827-2.7% 7.1% 0.5% Ventura 549 536 585 2.4% -6.2% -3.3% Santa Barbara 197 212 191-7.1% 3.1% 0.9% SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

MEDIAN PRICE OF EXISTING DETACHED HOMES California, Oct. 2016: $513,520, +1.2% MTM, +7.3% YTY $700,000 $600,000 P: May-07 $594,530 Oct-15: $478,780 Oct-16: $513,520 $500,000 $400,000 $300,000 T: Feb-09 $245,230-59% from peak $200,000 $100,000 $- SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Median Price of Existing Detached Homes Southern California, Oct-2016: $490,880, +6.2% YTY $700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $- SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Median Price of Existing Detached Homes Southern California Region County Oct-16 Sep-16 Oct-15 M-t-M Y-t-Y Los Angeles $533,370 $546,920 $509,570-2.5% 4.7% Orange County $750,000 $739,000 $700,000 1.5% 7.1% Riverside County $355,950 $352,250 $330,000 1.1% 7.9% San Bernardino $247,590 $254,330 $231,330-2.7% 7.0% San Diego $576,620 $569,000 $520,500 1.3% 10.8% Ventura $631,330 $629,420 $604,610 0.3% 4.4% Santa Barbara $595,000 $732,500 $725,000-18.8% -17.9% SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Peak vs. 6/16: Southern California Region Last Cyclical Peak Month Last Cyclical Peak Price Jun-16 Median %Chg From Peak Orange County Jun-07 $775,420 $759,490-2.1% San Diego County May-06 $622,380 $594,430-4.5% Ventura Couty Aug-06 $710,910 $674,310-5.1% CALIFORNIA May-07 $594,530 $519,440-12.6% Riverside County Jun-06 $431,710 $357,810-17.1% Los Angeles Metro May-07 $578,700 $477,230-17.5% Inland Empire Jun-06 $389,380 $319,100-18.0% Los Angeles County Sep-07 $625,810 $502,190-19.8% San Bernardino County Aug-06 $350,290 $245,220-30.0% SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Peak vs. 6/16 Median: Central Valley Region Last Cyclical Peak Month Last Cyclical Peak Price Jun-16 Median %Chg From Peak CALIFORNIA May-07 $594,530 $519,440-12.6% Madera County Feb-08 $275,000 $234,720-14.6% Sacramento County Aug-05 $394,450 $332,580-15.7% Placer County Aug-05 $527,990 $444,590-15.8% Kern (Bakersfield) County Jun-06 $299,920 $238,400-20.5% Kings County Mar-06 $268,050 $211,110-21.2% Tulare County Dec-05 $269,710 $211,820-21.5% Fresno County Jun-06 $313,510 $242,240-22.7% San Benito County May-05 $671,190 $511,500-23.8% Merced County Oct-05 $344,610 $207,580-39.8% SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Peak vs. 6/16 Median: Bay Area Region Last Cyclical Peak Month Last Cyclical Peak Price Jun-16 Median %Chg From Cyclical Peak San Francisco County May-07 $972,010 $1,350,000 38.9% San Mateo County Oct-07 $1,020,000 $1,306,250 28.1% Santa Clara County Apr-07 $865,000 $1,050,000 21.4% Alameda County May-07 $709,420 $803,000 13.2% San Francisco Bay Area May-07 $789,250 $841,960 6.7% Marin County Jun-07 $1,149,390 $1,218,500 6.0% Sonoma County Jan-06 $650,330 $608,000-6.5% Contra Costa County May-07 $698,420 $625,000-10.5% CALIFORNIA May-07 $594,530 $519,440-12.6% Napa County Aug-06 $729,170 $619,000-15.1% Solano County Jun-06 $492,800 $390,000-20.9% SERIES: Median Price of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Don t Bother Commuting in Major Metros <1 hour 1-2 hours 2+ hours Impossible! Don't bother! from Palo Alto to San Francisco? 13% 52% 20% 15% from Riverside to Irvine? 12% 51% 23% 13% Q4 - What is the average commute time

Making Traffic Disappear is Most Desired Super Power Make traffic disappear 29% Flying 26% Instant mortgage approval 21% Invisibility 19% Super strength 4.9% Q12 - Which super power would you like to have? 0% 5% 10% 15% 20% 25% 30% 35%

Do you plan to leave the country if? [CATEGORY NAME] [VALUE] [CATEGORY NAME] [VALUE] [CATEGORY NAME] [VALUE]

Economic Outlook

Macro Economic Summary 2.9% 3.6% GDP 2016-Q3 5.0% Consumption 2016-Q3 1.7% Unemployment 2016-09 Job Growth 2016-09

Slow Economic Growth Below 3% for 11Years US GDP 2015: 2.6%; 2016 Q1:.8% Q2: 1.4% Q3: 2.9% ANNUAL PERCENT CHANGE, CHAIN-TYPE (2009) $ 6% 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% ANNUALLY QUARTERLY 2009 Largest Annual Drop since 1946 (-2.8%) 2005 2007 2009 2011 2013 2015 Q2-11 Q4-11 Q2-12 Q4-12 Q2-13 Q4-13 Q2-14 Q4-14 Q2-15 Q4-15 Q2-16 SERIES: GDP SOURCE: US Dept. of Commerce, Bureau of Economic Analysis

Consumer Confidence Dropped in October Next Release 11/29/16 October 2016: 98.6 120 100 INDEX, 100=1985 80 60 40 20 0 SERIES: Consumer Confidence SOURCE: The Conference Board

Unemployment Rate Falling September 2016: US 5.0% & CA 5.5% 14% US-CA CA US 12% 10% 8% 6% 4% 2% 0% -2% -4% The U-6 rate covers the unemployed, underemployed and those who are not looking but who want a job SERIES: Unemployment Rate SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

Unemployment by CA Metro September 2016: California 5.5% Bakersfield Fresno MSA Stockton MSA Modesto Inland Empire Ventura Sacramento Los Angeles San Diego Oakland Orange County San Jose San Francisco 3.2% 5.5% 5.4% 5.2% 4.7% 4.4% 4.1% 3.8% 6.2% 7.5% 7.5% 8.3% 9.2% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

CA Jobs Are Back Recession Job Losses: 1.3 million, Since Jan 10: +2.2 million MONTH TO MONTH CHANGES 150,000 100,000 50,000 0-50,000-100,000-150,000 SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

Ca Leads Nation in Job Growth 2.3 v. 1.7 6 California US ANNUAL PERCENT CHANGE 4 2 0-2 -4-6 -8 SERIES: Total Nonfarm Employment SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

California Job Growth by Industry September 2016: CA +2.3%, +379,800 (YTY) Educational Services Professional, Scientific & Technical Services Construction Leisure & Hospitality Real Estate & Rental & Leasing Health Care & Social Assistance Admistrative & Support & Waste Services Information Transportation, Warehousing & Utilities Government Wholesale Trade Retail Trade Finance & Insurance Durable Goods Nondurable Goods -1.3% -1.6% 0.4% 2.3% 1.7% 1.7% 1.7% 1.1% 4.0% 3.6% 3.4% 3.1% 2.9% 4.8% 6.3% ANNUAL PERCENT CHANGE -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% SERIES: Total Nonfarm Employment By Industry SOURCE: US Bureau of Labor Statistics, CA Employment Development Division

Silicon Valley Still Leads But Central Valley Has Housing September 2016: CA +2.3%, +379,800 (YTY) San Jose Sacramento 2.9% Orange 2.8% Modesto 2.8% Oakland 2.6% San Francisco 2.6% Fresno MSA 2.6% Inland Empire 2.3% San Diego 2.2% Stockton 1.7% Bakersfield 1.6% Los Angeles 1.6% Ventura 1.2% 3.6% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% SERIES: Total Nonfarm Employment SOURCE: CA Employment Development Division

U.S. Economic Outlook 2011 2012 2013 2014 2015 2016p 2017f US GDP 1.8% 2.3% 2.2% 2.4% 2.4% 1.5% 2.2% Nonfarm Job Growth 1.2% 1.7% 1.7% 1.9% 2.1% 1.8% 1.4% Unemployment 8.9% 8.1% 7.4% 6.2% 5.3% 4.9% 4.7% CPI 3.1% 2.1% 1.5% 1.6% 0.1% 1.4% 2.1% Real Disposable Income, % Change 2.5% 3.2% -1.4% 2.7% 3.4% 2.7% 2.7% 30-Yr FRM 4.5% 3.7% 4.0% 4.2% 3.9% 3.6% 4.0% SERIES: U.S. Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

California Economic Outlook Nonfarm Job Growth Unemployment Rate Population Growth Real Disposable Income, % Change 2011 2012 2013 2014 2015 2016p 2017f 1.1% 2.4% 3.0% 2.2% 2.7% 2.3% 1.6% 11.8% 10.4% 8.9% 7.5% 6.2% 5.5% 5.3% 0.7% 0.7% 0.9% 0.9% 0.9% 1.0% 1.0% 3.5% 4.7% -1.1% 3.2% 3.6% 2.9% 3.5% SERIES: CA Economic Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

The New Normal

The New Housing Normal Lack of supply hinders sales High-end: discretionary & slowing Low/Moderate-end: demand continues unabated Urban coastal CA slowing Inland and Central and Northern CA growing Migration patterns mirror housing affordability and jobs Demographics is Destiny: Boomers aren t moving, even when they retire

Supply: Listings

UII remained at low levels Below last year Oct. 2015: 3.6 Months; Oct. 2016: 3.4 Months 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Note: Unsold Inventory Index represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were Active, Pending, and Contingent (when available) and divide the sum by the number of Sold properties for the month in question. SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

So Cal supply down in all counties San Bernardino dropping most October 2016 Year-to-Year % Chg. Sales Active Listings 20% 16% 10% 0% 8% 4% 1% 7% 3% 2% -10% -3% -10% -3% -7% -8% -5% -6% -2% -6% -20% SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Where is the inventory? Long-Time Homeowners are not moving as in the past Low rate on current mortgage Low property taxes Capital gains hit Where can I afford to go? Could not qualify for a mortgage today Remodel and stay Are we headed for the European Model where children inherit the home of their parents? One more thing Secular decline in marriage

Fewer housing units being turned over since the Great Recession 10% 9% Housing Turnover Rate (Single-Family Homes only) CA US 8% 7% 6% 5% 4% 4.8% 4.2% 3% 2% 1% 0% 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 SERIES: Percent of existing single-family homes being sold SOURCE: Census Bureau, American Community Survey, Moody s Analytics, C.A.R.

Years Owned Home Before Selling 12 All Sellers 10 10 8 6 4 2 0 SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Owners Investing in Staying Put? $ Billions 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 Alterations/Additions Reach All-Time High & Gaining Steam Up 16% from 2015 YTD levels $3.9 Billion through July 0.0 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 Year-to-Date Through July SOURCE: California Homebuilding Foundation (CHF)/Construction Industry Research Board (CIRB) Downloaded from Moody s Analytics

Boomers Not Moving as Often 71% of Californian s aged 55+ haven t moved since 1999 35% 30% 25% 20% 15% 10% 5% 0% California Homeowners by Length of Tenure, 2013 Under 55 55+ 31.8% 24.4% 24.0% 21.3% 9.0% 14.2% 12.4% 11.0% 12.0% 10.7% 8.9% 7.3% 5.7% 0.9% 0.8% 1.9% 1978 & Earlier 1979 to 1984 1985 to 1989 1990 to 1994 1995 to 1999 2000 to 2005 2005 to 2009 2010 to 2013 SERIES: Distribution of Home Ownership by Year Moved In SOURCE: U.S. Census Bureau, 2013 American Housing Survey

Most Have Equity in their Home No, 8% Yes, 92% Do you have equity in your home? SERIES: 2016 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Majority Do Not Plan to Sell Home When they Retire Yes, 36% No, 64% Do you plan to sell your current home when you retire? SERIES: 2016 Baby Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Do you worry about your children not having the same opportunities to succeed as you did? About the same, 24% No, they will have have better opportunities, 24% Yes, they will have worse opportunities, 52% Do you worry about your children or grandchildren not having the same opportunities to succeed as you did? SERIES: 2016 Generations / Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Time to talk: ¾ Plan of have already Helped Children with Down Payment No, 23% Yes, I have already helped, 24% Yes, I am planning to help, 53% Are you planning to provide help for your children to buy a home by contributing to their down payment or mortgage payments? SERIES: 2016 Generations / Boomer Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

California s Single-Family Housing Stock 7,500,000 Owner-Occupied (left) Renter-Occupied (right) 3,000,000 7,000,000 2,500,000 6,500,000 2,000,000 1,500,000 6,000,000 1,000,000 5,500,000 500,000 5,000,000 2000 2003 2006 2009 2012 2015 SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS) Downloaded from the National Bureau of Economic Research (NBER) 0

More Single Family Units Now Rentals 8,000,000 7,000,000 Potentially between 400,000 and 700,000 SF Rentals that Used to be Owner-Occupied 6,919,164 6,527,730 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 1,940,607 2,674,808 0 SF Owners SF Renters 2000 2005 2010 2015 SOURCE: U.S. Census Bureau, Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS) Downloaded from the National Bureau of Economic Research (NBER)

Supply: New Housing Units

Missing 65,000 New Units Annually 350000 300000 2015: 95,822 (42,959 sf, 52,863 mf) 2016p: 98,300 total units Single Family Multi-Family 250000 200000 Household Growth: 165,000/yr. 150000 100000 50000 0 SERIES: California New Housing Permits SOURCE: Construction Industry Research Board

Most Underbuilt Counties in California 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 New Jobs vs. New Permits (2010-2015) 381,300 174,833 162,740 127,542 141,162 95,245 98,149 105,586 88,134 35,426 44,923 40,434 18,141 14,901 18,108 31,255 Jobs Permits 66,054 44,772 6,349 10,890 SOURCE: California Employment Development Department, Construction Industry Research Board

Affordability

Housing Affordability Best in C.V. 60 50 2016-Q2: % able to purchase median-priced home 57 56 56 54 52 50 50 50 48 46 45 45 45 41 40 30 32 31 30 29 27 26 26 25 25 20 22 20 20 19 18 17 14 13 10 0 SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

CA Housing Affordability Peaked Q1 2012 California vs. U.S. 1984-2016 % OF HOUSEHOLDS THAT CAN BUY A MEDIAN-PRICED HOME 80% 70% 60% CA US Annual Quarterly 57% 50% 40% 30% 31% 20% 10% 0% SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Wages v. Income Required to Qualify California $130,000 2015 Annual Mean Wage $126,560 $110,000 $90,000 $70,000 $72,360 $67,920 $93,550 $92,170 $101,260 $92,571 $50,000 $45,810 $30,000 $28,430 $10,000 -$10,000 Retail Salespersons Chefs and Head Cooks Elementary School Teachers Firefighters Police and Sherriff's Patrol Officers Computer Programmers Registered Nurses Software Developers (Applications) Min. Inc Required to Buy a Med. Home SOURCE: Bureau of Labor Statistics, C.A.R.

Share of First-Time Buyers remains Below Long-Run Average % First-Time Home Buyers Long Run Average 50% 40% Long Run Average = 38% 30% 29.5% 20% 10% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Los Angeles: Net Exit to Inland Empire and Kern County County Moved To/ From Total Number Moved to Los Angeles County Total Number Moved from Los Angeles County Total Net Migration Inland Empire 25,777 50,531-24,754 Kern 2,466 10,460-7,816 Orange 23,887 31,435-7,548 San Diego 8,916 7,240 1,676 Ventura 7,464 7,543-79

San Francisco: Affordability & Jobs Drive Migration County Moved To/ From Total Number Moved to San Francisco County Total Number Moved from San Francisco County Total Net Migration Alameda 3983 10345-6362 San Mateo 6161 7984-1823 Contra Costa 1856 2998-1142 Sonoma 557 1602-1045 Marin 1428 1918-490 Napa 0 243-243 Solano 796 815-19 Santa Clara 4041 2691 1350

The median income in Oakland is $47,000, which translates to $1,175/month for rent, but the average monthly rent in Oakland is $3,000.

Austin: 70% Raleigh: 40% Portland: 30%

Demand & Desire for Homeownership

Real Estate is Still Considered the Best Long Term Investment SOURCE: Gallup

Millennials: American Dream is still Important 40% 35% 30% 25% 34% 31% 25% 20% 15% 10% 5% 4% 6% 0% Not at All Important Of Little Importance Moderately Important Important Very Important How important is fulfilling the 'American Dream' to you? SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

And Homeownership is part of it 20% 18% 16% 14% 12% 10% 18% 18% 16% 14% 12% 11% 10% 8% 6% 4% 2% 0% Owning a home A fulfilling job Having a family Education Seeing the world Helping others Becoming wealthy Which factors contribute to your ideal of the `American Dream` SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

50% 45% 40% 35% Many Millennials Also Believe Buying a Home Is a Safe Investment 45% 37% 30% 25% 20% 15% 12% 10% 5% 0% 1% 5% Strongly Disagree Disagree Neighter Agree nor Disagree Agree Strongly Agree Q. Do you think home purchase is still a safe investment? SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Nearly ½ Renters Plan to Buy a Home No plans to buy 28% Not sure 24% In 5+ Years 11% 3-5 Years In 2 Years 13% 14% Within a year 9.6% Q. When do you plan to buy your next home? 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 77

55% of Renters Have Made Preparations to Buy a Home No preparations 45% Searched for homes 34% Searched for home buying process information online 21% Spoken to a REALTOR 16% Consulted credit counselor/financial advisor 12.0% Pre-qualified with a lender 9.0% Other 1.0% Q. Have you made any of the following preparations to buy a home? Please select all that apply. 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 78

69% of Millennial renters would look into purchasing if knew about lower down-payments All Millennial Owners No, 31% Yes, 69% If You knew you could qualify with lower down-payment, would you start to look for a house? SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Only 19% Know about FHA Loans Are you aware of FHA Loans? Yes, [VALUE] No, [VALUE] FHA backed loans only require a 3.5% down-payment. SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Student Loan Debt: 47% (34 or Under)

Student Debt Delayed Decisions to Move out of Family Member s Home After College? % of Loan borrowers SERIES: 2016 Student Loan Debt and Housing Report SOURCE: National Association of Realtors

2016: Market Conditions Annual Housing Market survey

Market Remained Very Competitive 80% 70% 60% 50% 40% 30% 20% 10% 0% % with Multiple Offers # of Multiple offers (Average) 53% 52% 4.0 4.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 7 6 5 4 3 2 1 0 SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Investor Buyers? Dropping Still Have Demand in Lower-Priced Segments Demand for Investment Properties remained at the Lowest level since 2009 % to Total Sales 30% Investment/Rental Property Vacation/Second Home 25% 20% 15% 10% 5% 0% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

International Buyers Dropping 9% 8% 8% The share of international buyers dropped to the lowest level in 9 years 8% 7% 6% 6% 5% 6% 6% 6% 5% 4% 3% 2% 1% 4% 3% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 Q. Was the buyer an international buyer a person who was a citizen of another country who wished to purchase residential real estate in the U.S.? SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Local Housing Markets

Valencia

Sales of Single Family Homes Valencia, October 2016: 62 Units +8.2% 2015, +0.8% 2016 YTD, -1.6% YTY SOURCE: Clarus Market Metrics

Median Price of Single Family Homes Valencia, October 2016: $580,000 Down 1.4% MTM, Up 6.9% YTY SOURCE: Clarus Market Metrics

For Sale Properties Valencia, October 2016: 242 Units -0.5% 2015, -5.4% 2016 YTD, +3.0% YTY Note: For Sale Properties represents the overall supply that exist throughout the entire month, including any listings that appear as Active any point in time during the month. SOURCE: Clarus Market Metrics

Canyon Country

Sales of Single Family Homes Canyon Country, October 2016: 47 Units +17.0% 2015, +0.2% 2016 YTD, -23.0% YTY SOURCE: Clarus Market Metrics

Median Price of Single Family Homes Canyon Country, October 2016: $505,000 Up 5.2% MTM, Up 10.4% YTY SOURCE: Clarus Market Metrics

For Sale Properties Canyon Country, October 2016: 179 Units +9.9% 2015, -10.8% 2016 YTD, -20.8% YTY Note: For Sale Properties represents the overall supply that exist throughout the entire month, including any listings that appear as Active any point in time during the month. SOURCE: Clarus Market Metrics

Saugus

Sales of Single Family Homes Saugus, October 2016: 54 Units +1.2% 2015, +11.2% 2016 YTD, +20.0% YTY SOURCE: Clarus Market Metrics

Median Price of Single Family Homes Saugus, October 2016: $549,500 Up 4.6% MTM, Up 14.7% YTY SOURCE: Clarus Market Metrics

For Sale Properties Saugus, October 2016: 207 Units -2.9% 2015, -4.6% 2016 YTD, +6.2% YTY Note: For Sale Properties represents the overall supply that exist throughout the entire month, including any listings that appear as Active any point in time during the month. SOURCE: Clarus Market Metrics

2017 Forecast

Varying Market Expectations for 2017 100% 90% 80% 70% 47% 31% 36% 62% 60% 50% 40% 30% 40% 44% 35% Up Flat Down 20% 10% 0% 35% 25% 29% 13% 3.0% Prices Sales Inventory Interest rates Q1 - What do you think will happen to the California real estate market in 2017?

California Housing Market Outlook 2011 2012 2013 2014 2015 2016p 2017f SFH Resales (000s) 422.6 439.8 414.9 382.7 408.8 407.3 413.0 % Change 1.4% 4.1% -5.9% -7.8% 6.8% -0.4% 1.4% Median Price ($000s) $286.0 $319.3 $407.2 $446.9 $474.4 $503.9 $525.6 % Change -6.2% 11.6% 27.5% 9.8% 6.2% 6.2% 4.3% Housing Affordability Index 53% 51% 36% 30% 31% 33% 29% 30-Yr FRM 4.5% 3.7% 4.0% 4.2% 3.9% 3.6% 4.0% SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

Sales down for 2016 but Improve in 2017; Price will Grow Steadily this Year and Next Units (Thousand) Sales of Existing Detached Homes Price (Thousand) Median Price 700 600 $600 $500 $504 $526 500 400 300 200 413.0 407.3 $400 $300 $200 100 $100 0 2005 2007 2009 2011 2013 2015 2017f $0 2005 2007 2009 2011 2013 2015 2017f SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS

CA: Dollar Volume Up 5.8% in 2016, Up 5.8% in 2017 $ in Billion % Change $400 30% $ Volume of Sales Percent Change $350 $300 $250 $200 $150 $100 $301 $244 $164 $133 $131 $127 $121 $140 $169 $171 $194 $205 $217 20% 10% 0% -10% -20% $50 $0-40% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016p 2017f SERIES: CA Housing Market Outlook SOURCE: CALIFORNIA ASSOCIATION OF REALTORS -30%

Take 5 for 2017 the more affordable the market, the better it is doing

Take 5: 2017 Market 1. CA home sales up slightly down on $$$ coast; up $ inland 2. CA median price up 4.3% flat $$$, up $ 3. Demand drivers (jobs; income; mortgage rates; household formation) strong 4. Boomers staying put 5. Affordability concerns fuel out-migration of Millennials in search of housing they can afford

2017 Challenges & Opportunities

Lack of Affordability Biggest Challenge Mortagage rate increase, 10% [CATEGORY NAME], 6% Lack of inventory, 28% [CATEGORY NAME], [VALUE] Q2 - What will be the biggest challenge for the housing market in 2017?

2017 Wild Cards Economy Under Trump Unexpected rise in rates Economic collapse Tech giants crumble Hit to equities Global instability Other Black Swans

2017 Opportunities Up your game Always a good option What business are YOU in? Educate first time-home buyers talk to their parents Become well versed on down payment assistance programs, debt management and improving credit to turn renters into buyers. Don t give up on international buyers Stay involved & stay current Get married!

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