2012 Annual Housing Market Survey

Transcription

1 2012 Annual Housing Market Survey

2 California Association of REALTORS 2012 Annual Housing Market Survey 2 Table of Contents Introduction... 3 Key Findings... 3 Survey Methodology... 4 Housing Market Outlook... 5 Supply Shortage Intensifies Market Competition... 7 First Time Buyers Benefit from Higher Housing Affordability... 9 Investors Competing Head-to-Head with First-Time Buyers Cash Buyers on the Rise as Competition Intensifies International Buyers Continue to Show Interest in California Real Estate Repeat Buyers Returning to the Market Many Sellers Remained Underwater More Sellers Planning to Repurchase Concluding Remarks List of Exhibits... 19

3 California Association of REALTORS 2012 Annual Housing Market Survey 3 Introduction The 2012 Annual Housing Market Survey takes a comprehensive look at the recent developments in the California real estate market and provides an overview for the housing market from different perspectives. In particular, the report examines the sales trends of the distressed and non-distressed markets, discusses the financial aspects of the real estate environment, and provides insights on investors, first-time buyers, and other tiers of the consumer demographics. Key Findings With an imbalance between supply and demand, home buyers have been fiercely competing with each other. Nearly six of ten home sales (57 percent) received multiple offers. The share of home sales that received multiple offers was the highest in at least the last 12 years. On average, each home sale received 4.2 offers, a slight increase from 3.5 offers in The fierce market competition led to fewer properties being sold under the list price. Historically, 68 percent of all homes sold below their asking price. In 2012, the share of home sales with a discount from the list price dropped to 59 percent, the lowest since Bargain properties typically attracted more multiple offers. Seven of ten REO sales and short sales received multiple offers, while half of equity sales got more than one offer. The share of all cash buyers has been on the rise since Almost one-third of all homebuyers paid with all cash in 2012, and it was more than triple what it was in 2001 when the share was 8.8 percent. Despite a slight dip from 2011, demand for investment properties and second homes remained strong in Sixteen percent of all sales went to investors, and seven percent went to second or vacation homebuyers. For those who purchased an investment property, 83 percent bought it as a rental property and the rest of them bought it as an investment to flip. The share of first-time buyers remained below the long run average of 39 percent but improved from After dropping for two consecutive years since it peaked in 2009, the proportion of first-time buyers increased from 34.2 percent in 2011 to 35.8 percent in Historically low levels of mortgage rates, which led to higher housing affordability across the state, were one of the contributing factors in the hike of the share of first-time buyers. Many first-time buyers were interested in distressed properties with deeply discounted price tags. In fact, 40 percent of all first-time buyers either bought an REO sale or a short sale in With distressed sales properties being relatively more affordable, 41 percent of REO sales and 45 percent of short sales were purchased by first-time buyers. Sellers who planned on purchasing another home rose for the second consecutive years, after six years of decline since Two of five (40 percent) home sellers planned to repurchase as the housing market started slowly recovering. Home buyers bought for many different reasons. A quarter of the buyers bought because they were tired of renting a property. Nearly one of five (18%) bought their home because

4 California Association of REALTORS 2012 Annual Housing Market Survey 4 of investment and/or tax considerations. Other purchased because they desired a better location (15%), they wanted a bigger house (14%), or their family status changed (6%). More than half of the first-time buyers purchased their home because they were tired of renting, while the primary reason to buy for repeat buyers was for investment/tax considerations. With tight lending standards continuing to prevail in the housing market, repeat buyers have been relying mostly on their savings, rather than the proceeds from their previous residence, as their primary source of down payment. Only 18 percent of repeat buyers considered the proceeds as their primary source, slightly above last year, but still the second lowest since the survey started tracking the statistics, and was much lower than 45.1 percent in Meanwhile, the share of repeat buyers who used their savings as the primary source of down payment remained high at 55 percent in 2012, down from 58.6 percent in Survey Methodology C.A.R. has conducted the Annual Housing Market Survey since The questions and methodology have stayed essentially the same throughout that time. The survey was mailed to a random sample of 15,000 REALTORS throughout California. The sample represented the geographical distribution of C.A.R. membership across the state. The survey asked REALTORS to provide information from their most recent sales transaction that closed escrow in the second quarter of The survey instrument was a seven-page questionnaire with both multiple choice and open-ended questions. There were 932 valid survey responses, equivalent to a response rate of 6.2 percent. The margin of error for this survey was +/- 3.2 percent at a 95 percent confidence level.

5 California Association of REALTORS 2012 Annual Housing Market Survey 5 Housing Market Outlook The California housing market ended 2012 with another solid year, with the annual sales of existing single-family home increasing 5.4 percent from 2012 to 525,120. It was the second consecutive year with year-over-year gain in sales, and sales were at the highest level since One reason for strong sales in California was the recordlow interest rate levels reached in Mortgage rates had been trending downward since July 2011 after the Federal Reserve announced its commitment to keep interest rates low until at least The average rate for 30-year fixed rate mortgages had since declined to below four percent, and set a historical record low of 3.35 percent in November 2012 and December With rates dropping consistently since early 2011 and home prices remaining significantly below the level reached in the cyclical peak in 2007, the increase in housing affordability convinced many buyers who were previously on the fence to finally make a home purchase. Sales composition, however, was very different in 2012 as compared to that of three years ago when 60 percent of all sales were Real Estate Owned sales (REO). The market conditions have improved since then, and the share of REO sales had declined to 11 percent of total sales as of December 2012, while the share of equity sales surged to over 60 percent of total sales. The increase in the share of equity sales was due primarily to better overall economic and housing environments, but the lack of REO inventory also played a role in the change in the mix of sales. The statewide median price of existing single-family homes, meanwhile, also showed significant improvement from The median price of existing single-family homes increased 11.6 percent year-over-year to $314,340 in The hike in price was due to upward price pressure resulting from supply constraint, as well as from more demand for higher-priced homes. Unsold Inventory for homes in December 2012, for example, declined 40 percent from the same month of last year and the decrease was more pronounced in the lower-price segments (see Table 1). This was due in part to the lack of supply in REO properties, as REO inventory dropped by more than half from the same time last year.

6 California Association of REALTORS 2012 Annual Housing Market Survey 6 Exhibit 1: Change in Inventory by Price Range (Year-to-Year) Dec % % -40.3% -35.4% -26.9% $0 - $300k $300 - $500k $500 - $750k $750 - $1000k $1000k+ Exhibit 2: Equity Sales and Short Sales Continued to Improved, While REO Sales Dropped % -6 Equity Sales Short Sales REO Sales

7 California Association of REALTORS 2012 Annual Housing Market Survey 7 Supply Shortage Intensifies Market Competition While the California housing market continued to show strong sales growth since early 2012, the lack of inventory remained an issue throughout the year. In December, the California Association of REALTORS (C.A.R.) reported a supply of inventory at 2.6 months, which was less than half of the norm of about seven months, and was at the lowest level since Aug The shortage of supply was across the board, but the decline was especially pronounced for distressed properties, as short sales inventory and bank-owned (REO) inventory declined from last December by 53 percent and 48 percent respectively, while equity sales decreased 11 percent from last year. With an imbalance between supply and demand, home buyers have been fiercely competing with each other. The market competitiveness is evident in the increase in the number of sales with multiple offers, as reported in C.A.R. s latest 2012 Annual Housing Market Survey. Nearly six of ten home sales (57 percent) received multiple offers, and the percent of sales with multiple offers was the highest in the last 12 years. On average, each home sale received 4.2 offers, a slight increase from 3.5 offers in With bank-owned properties being the best bargain in the market, the competition was most intense in the REO segment. More than seven of ten REO sales (71 percent) received multiple offers, an increase from 58 percent in The short sale market was not as competitive as the REO market, but nevertheless, nearly two-thirds of sales received more than one offer, a jump from 58 percent in The intense market competition led to more properties being sold above the asking price. In 2012, the share of homes sold with a price above the list price increased to 33.1 percent, more than doubled the long-run average of 15 percent over the last 20 years. It was also the highest since 2005 when the housing market was extremely competitive. One third (33.6 percent) of the REO properties in 2012 were sold above the asking price, as compared to 30.4 percent for short sales and 19 percent for equity sales.

8 California Association of REALTORS 2012 Annual Housing Market Survey 8 Exhibit 3: Supply Shortage Creates More Market Competition 6 5 % with Multiple Offers # of Multiple offers (Average) 57% Properties also stayed on the market for a much shorter time than they did in 2011 because of the increased market competition. As shown in the graph on the right in exhibit 4, a residential property typically stayed on a multiple listing service (MLS) for five weeks in That s a significant drop from 10.5 weeks in 2011, and was the lowest since Historically, a property stayed on the market for an average of 6.4 weeks. Exhibit 4: Market Competition Leads to More Sales with Above Asking Price % of Sales with Price Discount 59% 1 9% 8% 7% 6% Median Price Discount & Weeks on Market Med. Price Discount 2.1%, 5 weeks % 4% 3% 2% 1% Med. Weeks on MLS

9 California Association of REALTORS 2012 Annual Housing Market Survey 9 With the tight supply conditions not expected to disappear anytime soon, the intense market competition is here to stay. Multiple offers and above-asking-price offers most likely will continue to be the norm of the market in the upcoming year. First Time Buyers Benefit from Higher Housing Affordability One of the main groups of buyers that competed in the housing market was first-time buyers. First-time buyers represented more than one-third of the total home buyers. The share of firsttime buyers remained below the long run average of 39 percent in 2012, but improved from the previous year. It was the first year that the share grew after two consecutive years of decline since it peaked in The share of first-time buyers hit a record high of 47 percent in 2009 and was at 44 percent in 2010 when home buyer tax credits fueled the demand for entry level homes after the Great Recession. The expiration of the credits pulled demand from firsttime buyers back in 2011, but record-setting housing affordability index (HAI) lured them back in Historically low levels of mortgage rates, coupled with home prices remaining at levels significantly below the cyclical peak, led to higher housing affordability across the state. While housing affordability may have retreated slightly from the peak levels in the first quarter of 2012, it remained at levels substantially above those observed in Exhibit 5: First-Time Buyer HAI vs. Effective Interest Rates First-time buyer HAI in CA Effective Interest Rates

10 California Association of REALTORS 2012 Annual Housing Market Survey 10 Exhibit 6: First-Time Buyer HAI vs. Entry Level Median Price Entry Level Median Price First-time HAI in CA $600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $0 First-time buyers bought their property for different reasons, but the primary reason for over half of them was because they were tired of renting. With average rents keep on rising in many areas in California, while the cost of borrowing continues to decline, buying instead of renting makes more sense to these buyers. Other top reasons to buy include: Desire for a larger home (10 percent) Investment and tax considerations (8 percent) Desire for a better location (6 percent). Exhibit 7: Reasons For Buying: First-Time Homebuyers vs. Repeat Homebuyers First-Time Buyers Repeat Buyers

11 California Association of REALTORS 2012 Annual Housing Market Survey 11 Distressed properties continue to play a big part in the first-time buyers housing market, as they are relatively more affordable as compared to non-distressed properties. Four of ten firsttime buyers either bought an REO or a short-sale in Investors Competing Head-to-Head with First-Time Buyers Low home prices not only encouraged first-time buyers to purchase their entry-level home, but also lured investors who wanted to add a piece of real estate to their portfolio. Despite a slight dip from 2011, the demand for investment properties and second homes remained strong in 2012 and stayed above the long run average of 11 percent. Sixteen percent of total sales went to investors as compared to 17 percent in the previous year. Another 7 percent of sales were purchased by vacation/second home buyers, unchanged from The demand for investment properties has grown significantly since At the beginning of the past decade, the share of sales pertaining to investment home buyers was merely 7 percent, but had more than doubled since then. Investors were clearly looking for bargains and were directly competing with first-time buyers in the distressed market. Over half of all properties purchased by investors were either short sales or REO/foreclosures. Furthermore, 24 percent of all REO sales and short sales were bought primarily for investment and tax purposes, while only 9 percent of all equity sales were bought primarily for the same reason. Exhibit 8: Equity Sales vs. REO Sales vs. Short Sales Equity Sales REO Sales Short Sales Median Age of Buyers Median Household Income $120,000 $85,000 $75,000 % of First Time Buyers 30.3% 40.6% 44.9% % of International Buyers 6.7% 3.7% 4.9% % Bought as Investment to Flip 2.2% 4.6% 0.5% % Bought as Investment to Rent 8.8% 19.3% 23.5% Median Down Payment $84,000 $28,000 $23,500 % of Down Payment For those who purchased an investment property, most of them planned to rent it out rather than to flip it. More than eight of ten investors bought the property as a rental property but only 17 percent bought it as an investment to flip. Since flippers typically hold on to their properties for a shorter period of time, this is consistent with survey results that suggest recent investment homeowners are keeping their property longer than investors in the mid 2000 s

12 California Association of REALTORS 2012 Annual Housing Market Survey 12 Exhibit 9: For Those Who Purchased an Investment Property Investment to Flip Rental Property Cash Buyers on the Rise as Competition Intensifies To be competitive in a housing market with tight inventory and a restrictive lending environment, many buyers who wanted to have an edge over other buyers opted to make all cash offers for their home purchase. Since an All Cash transaction does not have to go through lengthy lending approval process, the escrow process would be faster and is less likely to fall through, making the offer more attractive and convenient. Survey results suggest that All Cash buyers has been on the rise since the mid of 2000 s, increasing from 11 percent in 2005 to 30 percent in Almost one-third of all home buyers as seen in exhibit 10, paid with all cash in 2012, which was more than 3 times what it was in 2001 when the share of all cash buyers was merely 8.8 percent. The share of all cash buyers in 2012 was also nearly double the long-run average of 15.1 percent since Exhibit 10: More Buyers Are Purchasing with Cash 3 25% 2 15% 1 5% % of All Cash Sales 3

13 California Association of REALTORS 2012 Annual Housing Market Survey 13 In recent years, we have also seen a persistent participation of international buyers of whom more than a third (36.5 percent) paid with all cash, partly because it was more difficult for international buyers to obtain a loan locally for real estate finance purposes. International Buyers Continue to Show Interest in California Real Estate The share of international buyers increased slightly for the second year, to 5.8 percent, suggesting that international buyers continued to show interest in purchasing real estate in California. Survey results showed that 80 percent of all international buyers bought their property as a primary residence, 14 percent as an investment/rental property, 4 percent as a second/vacation home, and 2 percent as an investment to flip. The majority of international buyers came from China (39.1 percent), Canada (13 percent), India (8.7 percent) and Mexico (8.7 percent). Exhibit 11: Share of International Buyers 9% 8% 7.8% 2 out of 10 REALTORS confirmed that they have 7% 6% 5% 4% % 5.7% 5.8% worked with an international buyer in the past 12 months. 3% 2% 1%

14 California Association of REALTORS 2012 Annual Housing Market Survey 14 Repeat Buyers Returning to the Market While the share of first-time buyers has improved, the housing market continued to be dominated by repeat buyers, as almost two-thirds of all sales in 2012 were purchased by this group. With home prices growing by double-digit in many markets in California, many repeat buyers returned to the market as market conditions have become more favorable than what we observed in the last few years. Increasing home prices in the last year have helped many homeowners who were previously underwater to gain some equity back, and lure those sellers who were looking to upgrade. Nearly a quarter of repeat buyers said their main reason for buying was for investment and tax considerations. Two of ten bought because they wanted to move to a better location, while 17 percent wanted a larger home, and 8 percent were tired of renting. As the housing market continues to recover, many repeat buyers are still relying heavily on their personal savings as a means for their down payment, rather than the proceeds from their previous residence. Only 17 percent of repeat buyers considered the proceeds as their primary source, a slight increase from 2011, but still the second lowest since the survey started tracking the statistic and was much lower than the peak of 45.1 percent reached in On the contrary, the share of repeat buyers who used their savings as the primary source of payment remained at a high level of 53 percent in 2012 in spite of dipping from 57 percent from Exhibit 12: Repeat Buyers Rely on Personal Savings as Down Payment Sale of Previous Residence Savings 53% 17%

15 California Association of REALTORS 2012 Annual Housing Market Survey 15 Many Sellers Remained Underwater Many sellers sold their home with a loss in 2012, and the number of sellers who sold their home with a loss rose after falling two consecutive years and was above the long run average for the fifth year. One-third (33.5 percent) of all sellers sold their home with a loss in 2012, a jump from the 21.8 percent recorded in It was the highest on record since C.A.R started tracking net cash losses, and was more than double the long-run average of 12.3 percent. Exhibit 13: Median Net Cash Gain to Sellers Reaches a Record Low in 2012 $250,000 $200,000 $150,000 $100,000 $50,000 $ $25,000 With more homeowners selling their properties at a loss, the net cash gain that sellers received in general also hit a record low. After two consecutive years of significant declines in prices, the median net cash gain from home sales fell 67 percent from $75,000 in 2011 to $25,000 in The typical equity home sellers had a median net cash gain of $50,000, while short sellers had a median net cash loss of $110,000. With more than a third of the home sales being distressed properties, the primary reasons to sell were obscured by those who were forced to sell for financial reasons. More than a quarter of all home sellers, for example, sold because their properties were in distressed status, as compared to one percent in 2006 before the housing market crashed. To understand if there is any fundamental change to homeowners desire to sell, we examined the reasons to sell for distressed sales separately from those for equity sales. More than four of five (86 percent) distressed sellers sold their property because the property was either in foreclosure, short sales, or default status. Meanwhile, equity home sellers reasons to sell were more in line with those collected in past years. Almost two of ten sold their property because of a change in the family status. Retirement or moving to a retirement community followed with 16 percent. Other reasons to sell include sellers desire for a better location (14 percent), investment/tax consideration (13 percent), and their desire for a larger home (10 percent).

16 California Association of REALTORS 2012 Annual Housing Market Survey 16 Exhibit 14: Reasons for Selling Desired Larger Home, 7.1% Other, 11.9% Changed Jobs, 3.8% Desired Smaller Home, 6.3% Desired Better Location, 9.9% Investment/ Tax Considerations, 10.2% Foreclosure/Sh ort Sale/Default, 26.5% Change in Family Status, 13.3% Retirement/Mo ve to Retirement Community, 11. More Sellers Planning to Repurchase As home prices steadily trend upward while mortgage rates continue to reach record low levels, more sellers want to take advantage of the low borrowing cost and plan to repurchase another home. After six years of decline since 2005, sellers who planned on buying or had already bought another home rose for the second consecutive year in Two of five (40 percent) home sellers planned to repurchase as the housing market started its slow recovery, an increase from 38 percent in Those who planned on purchasing were primarily sellers with non-distressed properties, as 51 percent of them planned to repurchase. Only 22 percent of short sale sellers planned to repurchase, and none of the REO sellers planned to buy another house. Nearly half of those sellers who planned to repurchase said that their new home would be located within the same county, a significant increase from 38 percent reported in the peak year of the recent housing market cycle. Meanwhile, about one-fifth of sellers who planned to purchase a new home decided to buy in another state outside of California, a drop from 31 percent in 2005 when the median price was over $500,000. Higher housing affordability in recent years was probably a big factor in the surge in more sellers wanting to stay within the same county and the steep decline in sellers wanting to move to another state. Since 2005, the statewide median price has declined 39 percent from $522,670 to $317,000(p) in 2012, while the average 30-year fixed rate mortgage dropped from 5.87 percent to 3.8 percent. The decreases in interest rates and home prices pushed the California housing affordability index up from 15 percent in the third quarter of 2005 to 49

17 California Association of REALTORS 2012 Annual Housing Market Survey 17 percent in the same quarter of 2012, making homeowners less inclined to move because of affordability. Despite an increasing number of sellers planning to return to the market, more than six of ten sellers still did not plan to repurchase another home, and their top reason for not planning to buy was because they were lenders/banks. This is not a surprise as 98 percent of REO sellers were either a bank or a lending institution. To better assess the fundamental reasons behind why a true seller decided not to buy, we examined the survey results of REO sales, short sales and equity sales separately: For REO sellers, nine of ten (88 percent) did not plan on buying another home because they were lenders/banks Short sale homeowners did not plan on buying another home primarily because they had poor credit background (31 percent), and also because they did not have the cash for the down payment (17 percent). Top reasons for equity home sellers not planning to repurchase were 1) they prefer to have less financial obligation (20 percent), 2) they already own another house (16 percent), and 3) they moved to or planned on moving to a retirement facility/nursing home (12 percent). Concluding Remarks With home prices in 2012 surging by double-digit from 2011, there are concerns about the market entering into another period of housing speculation like what it went through in the mid 2000 s. Discussions on whether the current housing market recovery is justified surface from time to time and the debate will continue in What is clear from evidence suggested by surveys and research studies, however, is that conditions for the housing market and for real estate financing are healthier than the environment that we observed in the mid of 2000 s before the housing market started deteriorating. The environment for housing finance in 2012 required home buyers to be more responsible financially than they were in Recent home buyers had more skin in the game than many of those who purchased a few years ago when the housing market was at its peak. In general, more buyers were putting a bigger down payment on their home purchased, while there were fewer buyers with zero down payment. The share of buyers who used a second lien to finance their property also shrank significantly from the peak of the current housing cycle, and those who opted for an Adjusted Rate Mortgage (ARM) took a dive from the mid of 2000 s. There were also more buyers offering all cash to pay for their house in 2012, as cash buyers in the current market made up nearly three times what it was in 2006.

18 California Association of REALTORS 2012 Annual Housing Market Survey 18 Meanwhile, the likelihood of default has been reduced as monthly mortgage payments in general are more affordable than a few years ago. Housing affordability has more than quadrupled from what it was in 2006, as the cost of borrowing remained at record low levels and the annual median price for 2012 was 43 percent below the annual median price for As the economy continues to improve slowly but steadily, the housing market condition will remain healthy in With housing affordability hovering near record level, sales will be strong in the upcoming year. The statewide median price is expected to increase modestly in With the change in the mix of sales slanted towards the high-end market, and the shortage of inventory, there is an upward pressure on home prices. The fierce market competition, however, will continue to be the norm in 2013 as tight supply condition remains an issue, especially for areas with a significant share of REO sales. Exhibit 15: Buyers Have More Skin in the Game % of buyers with 20+% down payment 43.2% 54.4% % of buyers with zero down payment 21.1% 4.6% % of cash buyers % of home buyers with a second mortgage 43.4% 1.8% % of buyer with ARM 32.6% 3.5% Exhibit 16: Less Likelihood of Defaulting as Monthly Payment is More Affordable Average mortgage rate (FRM) 6.4% 3.7% Median home price for existing single-family homes $556,430 $319,340 Median household income for home buyers $100,000 $100,000 Housing Affordability Index

19 California Association of REALTORS 2012 Annual Housing Market Survey 19 List of Exhibits Exhibit 1: Change in Inventory by Price Range (Year-to-Year)... 6 Exhibit 2: Equity Sales and Short Sales Continued to Improved, While REO Sales Dropped... 6 Exhibit 3: Supply Shortage Creates More Market Competition... 8 Exhibit 4: Market Competition Leads to More Sales with Above Asking Price... 8 Exhibit 5: First-Time Buyer HAI vs. Effective Interest Rates... 9 Exhibit 6: First-Time Buyer HAI vs. Entry Level Median Price Exhibit 7: Reasons For Buying: First-Time Homebuyers vs. Repeat Homebuyers Exhibit 8: Equity Sales vs. REO Sales vs. Short Sales Exhibit 9: For Those Who Purchased an Investment Property Exhibit 10: More Buyers Are Purchasing with Cash Exhibit 11: Share of International Buyers Exhibit 12: Repeat Buyers Rely on Personal Savings as Down Payment Exhibit 13: Median Net Cash Gain to Sellers Reaches a Record Low in Exhibit 14: Reasons for Selling Exhibit 15: Buyers Have More Skin in the Game Exhibit 16: Less Likelihood of Defaulting as Monthly Payment is More Affordable Exhibit 17: CA Unsold Inventory: Nearing Record Lows Exhibit 18: Equity Sales vs. REO vs. Short Sales Exhibit 19: Equity Sales (2011 vs. 2012) Exhibit 20: REO Sales (2011 vs. 2012) Exhibit 21: Short Sales (2011 vs. 2012) Exhibit 22: Share of International Buyers... 24

20 California Association of REALTORS 2012 Annual Housing Market Survey 20 Exhibit 23: # of Properties Sold to International Buyers in the Last 12 Months Exhibit 24: Demand for Investment & Second/ Vacation Homes Dips Slightly, But Remains Strong Exhibit 25: Distressed Sales Have a Higher Share of First-Time Buyers Than Equity Sales Exhibit 26: Share of First-Time Buyers Remains Below Average But Improves from Exhibit 27: First-Time Buyer Housing Affordability Index (California) Exhibit 28: Reasons for Buying Exhibit 29: Median Down Payment Exhibit 30: Median Down Payment Up 24 Percent from 2011, As Home Prices Increase Exhibit 31: Cash Source for Down Payment Exhibit 32: Percent of Buyers with Zero Down Payment Exhibit 33: Proportion of Transactions with Second Mortgages Exhibit 34: Percent of Buyers with Second Mortgage Exhibit 35: Share of FHA Still Significantly Higher than 2007, But Was the Lowest in 4 years (First Mortgage) Exhibit 36: FHA vs. Conventional (New First Mortgage) Exhibit 37: Seller Household Formation (Equity vs. REO vs. Short Sales) Exhibit 38: Home Seller Profile (By type of Sales) Exhibit 39: As Sellers with Net Cash Loss Hit A Record High Exhibit 40: Years Owned Home Before Selling Exhibit 41: More than a Quarter of Sellers Sold Because Their Properties Were in Distressed Status Exhibit 42: Reasons For Selling Home (Equity vs. REO vs. Short Sales) Exhibit 43: More Sellers are Planning to Buy Another Home As the Market Slowly Recovers Exhibit 44: Location of Seller s New Home... 35

21 California Association of REALTORS 2012 Annual Housing Market Survey 21 Exhibit 45: For Those Who Do Not Plan to Repurchase, Here are Their Top 5 Reasons: Exhibit 46: Reasons Sellers Not Planning to Buy Another Home Exhibit 47: Top Reasons Under Other for Equity Sellers Not Planning to Buy Another Home. 37 Exhibit 48: Property Fallen Out of Escrow Exhibit 49: Reasons Why Property Fell Out of Escrow Exhibit 50: Repair Costs/Price Adjustments Exhibit 51: How Client Found Their Agent... 39

22 California Association of REALTORS 2012 Annual Housing Market Survey 22 Exhibit 17: CA Unsold Inventory: Nearing Record Lows MONTHS Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Exhibit 18: Equity Sales vs. REO vs. Short Sales 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% % % of Sales With Multiple Offers 50.9% 70.8% 66.1% Avg. Number of Offers % of All Cash Sales % 26.7% Days on MLS Days in Escrow

23 California Association of REALTORS 2012 Annual Housing Market Survey 23 Exhibit 19: Equity Sales (2011 vs. 2012) 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 % of All Cash Sales 27.3% 25.5% Days on MLS Days in Escrow Exhibit 20: REO Sales (2011 vs. 2012) 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 % of Sales With Multiple Offers 70.8% 58.3% Avg. Number of Offers % of All Cash Sales 43.1% 34. Days on MLS Days in Escrow 45 35

24 California Association of REALTORS 2012 Annual Housing Market Survey 24 Exhibit 21: Short Sales (2011 vs. 2012) 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 % of All Cash Sales 26.7% 23.3% Days on MLS Days in Escrow Exhibit 22: Share of International Buyers 9% 8% 7.8% 7% 6% % 5.7% 5.8% 5% 4% 3% 2% 1%

25 California Association of REALTORS 2012 Annual Housing Market Survey 25 Exhibit 23: # of Properties Sold to International Buyers in the Last 12 Months % % 5% 3% 1% 3% # of Properties Exhibit 24: Demand for Investment & Second/ Vacation Homes Dips Slightly, But Remains Strong Investment/Rental Property Vacation/Second Home 25% 2 15% 1 5%

26 California Association of REALTORS 2012 Annual Housing Market Survey 26 Exhibit 25: Distressed Sales Have a Higher Share of First-Time Buyers Than Equity Sales 6 All Sales Equity Sales REO Sales Short Sales % 41% Exhibit 26: Share of First-Time Buyers Remains Below Average But Improves from % First-Time Home Buyers Long Run Average %

27 California Association of REALTORS 2012 Annual Housing Market Survey 27 Exhibit 27: First-Time Buyer Housing Affordability Index (California) Q Q Q Q Q Q Q Q Q Q Q Q Q1 Exhibit 28: Reasons for Buying Desired Smaller Home, 3. Foreclosure/Short Sale/Default, 4. Changed Jobs, 4. Retirement/Move to Retirement Community, 3. Other, 9. Tired of Renting, 25. Desired Larger Home, 14. Change in Family Status, 6. Desired Better Location, 15. Investment/ Tax Considerations, 18.

28 California Association of REALTORS 2012 Annual Housing Market Survey 28 Exhibit 29: Median Down Payment First-Time Buyers Repeat Buyers $140,000 $120,000 $100,000 $100,000 $80,000 $60,000 $40,000 $20,000 $20,500 $ Exhibit 30: Median Down Payment Up 24 Percent from 2011, As Home Prices Increase Median Down Payment % of Down Payment to Price $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 2 $65, % 2 15% 1 5%

29 California Association of REALTORS 2012 Annual Housing Market Survey 29 Exhibit 31: Cash Source for Down Payment First-time Buyers Repeat Buyers All Buyers Personal savings 68.9% 53.2% 59. Proceeds from sale of previous residence % 11.1% Borrowed or gift from relatives 20.3% % Sale of personal assets other than real property 4.5% 12.9% 9.7% Inheritance 1.4% 3.8% 2.9% Proceeds from sale or refi of another property % 2.2% Other 4.8% % Exhibit 32: Percent of Buyers with Zero Down Payment 5 All Hombuyers First-Time Buyers Repeat Buyers % 4.6% 1.8%

30 California Association of REALTORS 2012 Annual Housing Market Survey 30 Exhibit 33: Proportion of Transactions with Second Mortgages 5 Percent of Home Sales with Second Mortgage % Exhibit 34: Percent of Buyers with Second Mortgage First-Time Buyers Repeat Buyers

31 California Association of REALTORS 2012 Annual Housing Market Survey 31 Exhibit 35: Share of FHA Still Significantly Higher than 2007, But Was the Lowest in 4 years (First Mortgage) 4 FHA VA 3 4% % Exhibit 36: FHA vs. Conventional (New First Mortgage) FHA Conventional Median Home Price $250,000 $456,000 Median Down Payment (Dollar) $8,820 $100,000 Median Down Payment (% to Price) 3.5% 20. Share of All Home Sales 23.5% 72.7% Percent of Mortgages with Distressed Property % Percent of First-Time Buyers 76.6% 34.3%

32 California Association of REALTORS 2012 Annual Housing Market Survey 32 Exhibit 37: Seller Household Formation (Equity vs. REO vs. Short Sales) Equity Sales REO Sales Short Sales Single 29.3% 0.9% 27.6% Married Couple with Dependents 27.1% 0.9% 39.1% Married Couple without Dependents 26.1% % 2 or More Individuals (Related or Unrelated) 10.6% % Banks/Lending Institutions 0.6% 98.2% 0.6% Other 6.3% % Total Exhibit 38: Home Seller Profile (By type of Sales) Equity Sales Short Sales Median Age of Sellers Median Household Income $110,000 $65,500 Years Seller Lived in Home 10 7 Percent of Sales with Net Cash Loss 23.7% 71.9% Median Net Cash Gain/Net Cash Loss to Seller $50,000 $-110,000

33 California Association of REALTORS 2012 Annual Housing Market Survey 33 Exhibit 39: As Sellers with Net Cash Loss Hit A Record High 35% 33.5% 3 25% 2 15% 1 5% Exhibit 40: Years Owned Home Before Selling 8 All Sellers

34 California Association of REALTORS 2012 Annual Housing Market Survey 34 Exhibit 41: More than a Quarter of Sellers Sold Because Their Properties Were in Distressed Status 35% 3 25% 2 15% 1 5% % of Homes Sold Due to Foreclosure/ Short Sale/Default 26.5% Exhibit 42: Reasons For Selling Home (Equity vs. REO vs. Short Sales) Equity Sales REO Sales Short Sales All Sales Foreclosure/Short Sale/Default 2% 97% 85% 27% Change in Family Status 17% 1% 13% Retirement/Move to Retirement Community 16% 1% 11% Investment/ Tax Considerations 13% 3% 1% 1 Desired Better Location 14% 2% 1 Desired Smaller Home 9% 1% 6% Changed Jobs 5% 1% 4% Desired Larger Home 1 1% 7% Other 15% 7% 12%

35 California Association of REALTORS 2012 Annual Housing Market Survey 35 Exhibit 43: More Sellers are Planning to Buy Another Home As the Market Slowly Recovers Exhibit 44: Location of Seller s New Home Within the same county 38% 41% 37% 45% 47% 42% 49% 49% In another county in California 23% 18% 24% 17% 21% 21% 19% 18% In another state 31% 28% 29% 27% 19% % Out of US 1% 2% 1% 1% 2% 1% 1% 1% Don't Know/Not sure 7% 11% 9% 1 12% 16% 1 1 Total