Real gross domestic product California vs. United States

Real gross domestic product California vs. United States Percent change, year ago 6 4 U.S. California 2 0-2 -4-6 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Source: Bureau of Economic Analysis.

Unemployment rate California vs. United States Percent 14 California 12 10 8 U.S. 6 4 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: Bureau of Labor Statistics, IHS Global Insight.

Employment growth Non-farm employment, California vs. United States Percent change, year ago 4 California 2 0-2 U.S. -4-6 -8 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: Bureau of Labor Statistics, IHS Global Insight.

Percent gains in non-farm jobs Major metros vs. California and United States, 09/2011-09/2012 Percent change, year ago San Francisco 2.9 San Jose 2.5 San Diego 2.1 California 1.9 Los Angeles 1.8 U.S. 1.4 0 1 2 3 Sources: U.S. Bureau of Labor Statistics, Moody's Analytics, Milken Institute.

Fed s accommodating policy Fed funds rate vs. 10-year bond yield Percent 6 5 4 10-year T-note yield 3 2 1 Federal funds rate 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: Federal Reserve Board, U.S. Department of the Treasury, Moody's Analytics.

First-time buyer housing affordability index California Index 80 70 60 50 40 30 20 10 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: California Association of Realtors, National Association of Realtors, Moody's Analytics.

Months supply of homes California vs. United States Months 18 16 California 14 12 U.S. 10 8 6 4 2 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: California Association of Realtors, National Association of Realtors, Moody's Analytics.

Existing single-family home sales California vs. United States Percent change, year ago 120 California 100 80 60 40 20 0-20 U.S. -40-60 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: National Association of Realtors, Moody's Analytics.

Housing starts and residential permits issued California, based on 3-month moving average data Percent change, year ago 60 40 Permits 20 0-20 Housing starts -40-60 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: U.S. Census Bureau, Moody's Analytics Estimated, Milken Institute.

California metros with highest percent gains in prices Ranked by latest one-year change in median sales price of existing SF home Sources: National Association of Realtors, Moody's Analytics. 2012Q2 (US$, ths.) 1-year percent change 5-year percent change Santa Barbara 458 11.9-42.5 San Jose 638 9.9-23.9 Salinas 289 9.7-60.1 Redding 169 9.1-39.6 San Francisco 535 7.6-34.6 Fresno 144 7.2-49.2 Stockton 196 6.9-47.2 Riverside 184 6.7-53.5 Visalia 125 6.6-48.1 Bakersfield 141 6.6-48.9

Foreclosure rates Loans in foreclosure at end of quarter, California vs. United States Percent 6 5 4 3 California U.S. 2 1 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sources: Mortgage Bankers Association, Moody's Analytics.

Industrial availability rates 2012 Q3, selected California markets Percent 18 U.S. availability rate: 13.3% 15 12 9 6 Central Valley Sacramento San Diego Inland Empire Silicon Valley San Francisco Peninsula Orange County Greater Los Angeles Source: CB Richard Ellis.

Office vacancy rates 2012 Q3, selected California markets Percent 24 22 20 18 U.S. vacancy rate: 15.5% 16 14 12 10 Sacramento Inland Empire Greater Los Angeles Orange County Silicon Valley San Francisco Peninsula Source: CB Richard Ellis.

Office space developer sentiment index for 2015 <50 marker tightening, >50 market weakening Index 82 80 78 76 74 72 70 Silicon Valley San Francisco San Diego Orange County East Bay Los Angeles Source: Allen Matkins / UCLA Anderson Forecast.

Retail vacancy rates 2012 Q3, selected California metros Percent 12 9 6 3 Sacramento San Bernardino /Riverside San Diego Oakland -East Bay Los Angeles San Jose Orange County San Francisco Source: ReisReport.

Apartment vacancy rates 2012 Q3, selected California metros Percent 5.0 4.5 4.0 U.S. vacancy rate: 4.6% 3.5 3.0 2.5 San Sacramento Bernardino /Riverside Los Angeles Orange County Oakland -East Bay San Francisco San Diego San Jose Sources: ReisReport, CB Richard Ellis.

California negative - equity mortgages Percent Negative equity share in CA Near negative equity share in CA 40 35 30 29.0 25 20 15 10 5 0 Q4-2009 Q1-2010 Q2-2010 Q3-2010 Q4-2010 Q1-2011 Q2-2011 Q3-2011 Q4-2011 Q1-2012 Q2-2012 4.4 Source: CoreLogic.

California borrowers: 29% underwater Percent 8 7 U.S. California 7.3 7.1 6 5 4 3 2 1 3.6 3.0 2.6 2.3 2.0 1.2 0 100% to 104% 105% to 109% 110% to 114% 115% to 119% 120% to 124% Loan-to-value 125% to 149% 150% to 224% 225%+ Source: CoreLogic.

California housing affordability at record highs but still trails U.S. Share of households that can buy Percent 80 70 U.S. 60 50 40 California 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: California Association of Realtors.

US-CA prices over-shot trend line snapping back slowly 1970-2013 US$, thousands 600 500 California 400 300 200 California price trend 100 U.S. 0 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 Source: California Association of Realtors.

Mortgage rates at 50 year lows, but credit is tight: Defensive Lending Percent 12 10 8 6 FRM ARM 4 2 0 Federal funds 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: Federal Home Loan Mortgage Corporation.

Fannie & Freddie are the market Origination by product Source: LPS CoreLogic.

Sales of existing detached homes Seasonally adjusted and annualized, California Thousands units 700 600 500 400 300 200 100 0 2005 2006 2007 2008 2009 2010 2011 2012 Source: California Association of Realtors.

Share of distressed sales to total sales Sep. 2012 REOs 12% Short Sales 24% Equity Sales 63% Other Distressed Sales (Not Specified) 1% Source: California Association of Realtors.

Share of equity sales has been trending upward since early 2012 Percent 70 60 Equity sales 50 40 30 REO 20 10 Short sales 0 2009 2010 2011 2012 Source: California Association of Realtors.

Sales dropped in lower price segments Sales, California Percent change, year ago 20 10 0-10 -20-30 $0 - $200k $200 - $300k $300 - $400k $400 - $500k $500k+ Source: California Association of Realtors.

REO and short sales Southern California, share of total sales, Sep. 2012 Percent 40 30 REO sales Short sales 20 10 0 Los Angeles Orange Riverside San Bernardino San Diego Source: California Association of Realtors.

Median price of existing detached homes California, Sep. 2012: $345,000, up 19.5% from year ago US$, thousands 700 P: May-07 $594,530 600 500 400 300 T: Feb-09 $245,230-59% from peak 200 100 0 2005 2006 2007 2008 2009 2010 2011 2012 Source: California Association of Realtors.

Unsold inventory: nearing record lows California, Sep. 2012: 3.7 months Months 18 16 14 12 10 8 6 4 2 0 2005 2006 2007 2008 2009 2010 2011 2012 Source: California Association of Realtors.

Unsold inventory index Months of supply Price range (Thousand) Sep-11 Aug-12 Sep-12 $1,000K+ 9.9 6.1 7.7 $750-1000K 6.1 4.0 4.7 $500-750K 6.0 3.1 3.6 $300-500K 5.4 3.0 3.3 $0-300K 4.6 2.8 3.2 Source: California Association of Realtors.

Tight supply of inventory, especially for REO sales Unsold inventory index, Sep. 2012 Months 4 3 2 1 0 Equity sales REO sales Short sales Source: California Association of Realtors.

Extremely low levels of active listings at the state level Unsold inventory index, active listing only, Sep. 2012 Months 3 2 1 0 Equity sales REO sales Short sales Source: California Association of Realtors.

Inventory remained in short supply Unsold inventory index Months 9 8 7 6 5 Short sales 4 3 Equity sales 2 1 REO sales 0 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Source: California Association of Realtors.

Low inventory pushing prices upward in REOs & equity sales Percent 15 10 5 0-5 -10-15 Equity sales REO Short sales -20 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Source: California Association of Realtors.

The California foreclosure funnel 8.6 Million Homes 6.8 Million Mortgages 2.07 Million Underwater Source: California Association of Realtors.

684,000/18,000 = 38 months of Inventory 434,000 Delinquent 180,000 in Foreclosure 70,000 Bank Owned 18,000 Distressed Sales Source: California Association of Realtors.

California foreclosure inventories Sep. 2012 Thousands units Preforeclosure Scheduled for Sale Bank Owned 180 160 140 120 100 80 6 month average: 60 Preforeclosure: 91,014 40 Schedule for sale: 85,022 20 Bank owned: 68,690 0 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Source: ForeclosureRadar.com.

2012 Annual Housing Market Survey

Equity sales vs. REO vs. Short sales 2012 Equity Sales REO Sales Short Sales Share of total sales 64.7% 12.3% 21.7% Median home price $448,000 $185,000 $235,000 Square footage 1,750 1,500 1,600 Price / SF $243 $116 $154 Sales-to-list price ratio 97.3% 100.0% 99.9% % of sales with multiple offers 50.9% 70.8% 66.1% Avg. number of offers 4.0 4.2 4.3 % of all cash sales 27.3 43.1% 26.7% Days on MLS 32 30 90 Days in Escrow 35 45 50 Source: California Association of Realtors.

Equity sales 2011 vs. 2012 2012 2011 Share of total sales 64.7% 58.7% Median home price $448,000 $431,000 Square footage 1,750 1,783 Price / SF $243 $250 Sales-to-list price ratio 97.3% 95.9% % of sales with multiple offers 50.9% 35.2% Avg. number of offers 4.0 3.0 % of all cash sales 27.3% 25.5% Days on MLS 32 67 Days in Escrow 35 35 Source: California Association of Realtors.

REO sales 2011 vs. 2012 2012 2011 Share of total sales 12.3% 19.7% Median home price $185,000 $240,000 Square footage 1,500 1,500 Price / SF $116 $112 Sales-to-list price ratio 100.0% 98.0% % of sales with multiple offers 70.8% 58.3% Avg. number of offers 4.2 4.3 % of all cash sales 43.1% 34.0% Days on MLS 30 50 Days in Escrow 45 35 Source: California Association of Realtors.

Short sales 2011 vs. 2012 2012 2011 Share of total sales 21.7% 20.2% Median home price $235,000 $287,000 Square footage 1,600 1,600 Price / SF $154 $175 Sales-to-list price ratio 99.9% 95.9% % of sales with multiple offers 66.1% 57.5% Avg. number of offers 4.3 3.6 % of all cash sales 26.7% 23.3% Days on MLS 90 141 Days in Escrow 50 45 Source: California Association of Realtors.

Demand for investment & second/ vacation homes dips slightly, but remains strong Percent 18 16 14 Investment/Rental property Vacation/Second home 12 10 7% 8 6 4 2 0 2005 2006 2007 2008 2009 2010 2011 2012 Source: California Association of Realtors. 16%

For those who purchased an investment property Investment to Flip Rental Property Source: California Association of Realtors.

Pent-up housing demand is looming Source: California Association of Realtors.

Housing permits improving slowly 2012(p): 52,000 units, Up 10.4% from 2011 Thousands units 250 200 Household Growth: 220,000-250,000/yr 150 100 Multi-Family Single Family 50 0 2005 2006 2007 2008 2009 2010 2011 2012P Source: Construction Industry Research Board.

Recovery will continue in 2013, with both sales and the median price up 700 Sales of existing detached homes (Thousands units) 600 Median price (US$, thousands) 600 500 523 530 500 400 300 200 100 0 2005 2007 2009 2011 2013f Source: Construction Industry Research Board. 400 300 $335 $317 200 2005 2007 2009 2011 2013f

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Shortage of workers pushes up labor costs California Thousands 950 900 Average hourly earnings (R) 850 800 750 700 650 600 Employees (L) 550 500 2007 2008 2009 2010 2011 2012 US$ 32 31 30 29 28 27 26 25 24 Source: BLS.

Snapshot of the fiscal cliff Change in budget deficit under current law, between fiscal year 2012 & 2013 Source: U.S. Congressional Budget Office. Revenues $billion % of GDP End of Bush tax cuts& AMT indexing 221 1.5 End of payroll tax cut 95 0.6 Other expiring tax cuts 65 0.4 Start of Affordable Care Act taxes 18 0.1 Subtotal 399 2.6 Spending Automatic discretionary spending cuts 65 0.4 End of emergency unemp. benefits 26 0.2 Cut to physicians Medicare payments 11 0.1 Subtotal 103 0.7 Other changes in revenues and spending 105 0.7 Total 607 4.0 Effects of automatic stabilizers -47-0.3 Total change 560 3.7

Fiscal cliff tax increases United States, in US$ billions Higher taxes on income below $250,000, higher estate taxes, alternative minimum tax. $279 Higher taxes on income above $250,000. $52 Expiration of Social Security tax cut. $115 Expiration of temporary tax breaks for businesses and individuals. $110 Expiration of extended unemployment benefits. $30 Defense spending cuts. $32 Across-the-board cuts to education, health, law enforcement, other programs. $53 Total $671 Sources: CBO, Tax Policy Center

High-income households receive sizable tax cuts from extension of "middle-income" tax cuts Average federal tax cut by adjusted gross income, 2013 Income (US$, thousands) < 10 10-20 20-30 30-40 40-50 50-75 75-100 100-200 200-500 500-1,000 >1,000 $121 $756 $1,289 $1,573 $1,713 $2,198 $3,658 $5,442 $6,447 $10,504 $12,112-2,000 4,000 6,000 8,000 10,000 12,000 14,000 Source: Tax Policy Center.

California will likely be hit hardest by fiscal cliff s cuts California will shed nearly a quarter of a million jobs (135,000 from defense cuts alone), lose over $11 billion dollars in income and see its Gross State Product drop by $22.6 billion. Source: Huffington Post cited from The Economic Impact of the Budget Control Act of 2011 on DOD &non-dod Agencies, Stephen S. Fuller (University Professor and Director of Center for Regional Analysis at George Mason University; July 17, 2012)..

Proposition 30 s impact on personal income tax rates Married filers Prop 30 Income bracket Before After $96,058-$500,000 9.3% 9.3% $501,000-$600,000 9.3% 10.3% $601,000-$1,000,000 9.3% 11.3% > $1,000,000 10.3% 13.3% Sources: Tax Foundation, California Department of Finance.

California benefits most from mortgage interest deduction California ranked highest in average deduction among deducting returns, $18,876, and also highest among all returns, $5,520. But had a lower percentage of tax returns claiming the deduction. About three in ten deducted mortgage interest (19th highest nationwide). Source: Tax Foundation.