reached five-year lows, welcome news to home buyers and sellers.

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1 SAN DIEGO COUNTY Market Overview a monthly real estate report September 21 As the California housing market grows more attractive, home buyers are more optimistic than they were a year ago, according to the latest survey by the California Association of REALTORS. While in 29, only 8% of home owners believed their homes would go up in value over the next year, that number has grown to 23% in 21. Home buying conditions are ideal: Mortgage interest rates are at all-time lows not seen since The benchmark 3-year, fixed-rate conventional mortgage was 4.44% by mid-august 21. Affordability is excellent nearly half of home buyers can afford the medianpriced home in California and nearly 47% can afford the median-priced home in Southern California. Sellers are meeting market realities by lowering the prices on nearly one-quarter of U.S. homes listed for sale in June 21, according to Trulia.com. That s up 9% from May 21. Lower property values mean that owning a home is now less expensive than renting in almost every Southern California community. Investors are stepping in and paying cash for distressed properties, reducing the number of foreclosures negatively impacting neighborhood home values. Distressed homes sell at as much as 15% less than nondistressed homes. Mortgage applications leapt on rock-bottom rates, according to the Mortgage Bankers Association, with demand for home refinancing reaching its highest level in 15 months by mid-august. The return of the jumbo loan According to Steve Cook, journalist and analyst for Real Estate Economy Watch, high-end sales picked up through the spring and early summer of 21. By mid-july, jumbo mortgage rates reached five-year lows, welcome news to home buyers and sellers. Only a year ago, jumbo loans were nearly 7%, and hard to get at that rate, says Cook. Tougher lending standards that often included down payments as high as 2% to 4% made it hard for many buyers. Only a handful of lenders were making jumbo loans that exceed Fannie and Freddie s conforming loan limits, which currently vary by locale from $417, to $729,75. The average U.S. rate for a 3-year fixed jumbo mortgage fell to 5.47% on June 29, the lowest since 25, when the real estate boom was near its peak, says Cook. Just a year ago, the average rate on a 3-year jumbo mortgage was 6.86%, he says. A single percentage point has a huge impact on demand at all price levels. A home owner with a 3-year fixed-rate $8, mortgage at 6.86% pays $5,247 a month, poses Cook. If he were to refinance at 5%, his monthly payments would be reduced by $952. Suddenly buyers can afford properties that were out of their price range simply due to the drop in rates. More lenders, like Wells Fargo, are aggressively marketing jumbo loans. While strict underwriting guidelines are still there, the lower rates on jumbo loans have opened the luxury market back up again, says Mike Reza, president of HomeServices Lending, an affiliate of Wells Fargo California, Renovation loans now available A home may not feel like home until you make it your own. Even well-designed homes require updates every few years. The typical home sold in 29 was built in 1991, according to data from the National Association of REALTORS, and most homes 8% to be exact were built before 198, according to U.S. Census data. From updating a kitchen or bath to adding a room, renovation financing provides qualified borrowers with the means to purchase or refinance properties in need of improvement, says Mike Reza. The borrower can choose a fixed-rate or adjustable-rate loan, based on the projected post-improved value of the property. To qualify for a renovation loan, borrowers must meet standard credit qualifications, just as they would for any other loan. The provisos for getting the loan are that the property must qualify for the loan program, the total costs must be supported by a bank appraisal, and the after-completion appraised value must support the home s value and the new mortgage amount, says Reza. Almost any kind of home improvement can be financed with a renovation loan, including new roof, HVAC, plumbing, electrical, hazard abatement, and cosmetic changes such as paint, siding, landscaping, floors and appliances, he notes. The first consideration is the property itself and whether its underlying value will support the renovations you want to make. You ll need to talk to a lender with a renovation specialist such as HomeServices Lending. He or she will tell you how to get started, and what documentation you ll need to get a quick loan approval. Before you go any further, you ll need to complete all inspections of the home, including structural, termite, or septic, if applicable. These should help you determine the scope of the work you need to do. If you are getting a HUD-affiliated loan, such as the FHA 23K home improvement program, your renovation specialist will introduce you to a HUD-approved consultant who will help you assess your needs. The consultant will go over your inspection reports and meet you at your property to inspect it and assist you with ideas and cost estimates. He or she will itemize the

2 prospective renovations and improvements into a work write-up, a document you can use as your renovation guide when you hire your contractors. You should interview several contractors before hiring anyone. Get recommendations from friends and relatives, and ask for references. Also request copies of the contractor s license and insurance, which is required in most states. All contractor documentation should be given to your renovation specialist. Your contractor or contractors must provide a detailed estimate and scope of the work to be done, including materials and costs. That way you, the contractor, the appraiser, the HUD consultant and the lender all have the same expectations based on this final work write-up, advises Reza. The lender will send an appraiser to see if the property will support the cost of the renovations compared to the value of similar, nearby properties. Once approved, your loan can proceed to closing and the funds will be disbursed according to the terms of your contract. Draws are paid to your contractors by an assigned draw specialist when the draw inspection is complete. All work must start within 3 days of closing and must be completed within six to nine months, if renovations are over $5,. Once all work is completed, the draw specialist will give you a letter of completion to sign and return for the release of final funds. In some cases, the lender may require a final inspection by the appraiser to insure that all proposed work has been done and provide a completion certificate. If you are buying or selling an older home, a renovation loan can help you add value to the property that will be enjoyed for years to come, says Reza. For more information, contact Mike Reza: mortgage@prusocal.com. Reverse mortgages, seniors 62 and older benefit Another effect of the four-year housing recession is the gain in popularity of reverse mortgages. Older home owners who want to tap their home s equity safely are more protected under today s stricter guidelines. Conventional reverse mortgages are only available to home owners age 62 or older, who occupy the home as a principal residence, and who either own their home outright or have substantial equity in the property. Creditworthiness and monthly income are not factors, but home owners are expected to pay hazard insurance and property taxes and to maintain the property. Reverse mortgages work in an ingenious way, and they can be a blessing to home owners who want to stay in their homes. With a conventional loan, principal and interest are included in the monthly payment. With a reverse mortgage, interest is added to the loan balance each month as no monthly payments are required. Approximately 9% of reverse mortgages are FHA-insured Home Equity Conversion Mortgages (HECM). The HECM guarantees that the FHA will meet the lender s obligations to the borrower, limits loan origination costs, and ensures full repayment of the loan to the lender up to the maximum claim amount. Reverse mortgages are based on the home s current value, borrower s age and existing interest rates, explains Dr. James Gaines, research economist for the Real Estate Center at Texas A&M University. Borrowers can choose to receive loan proceeds in a single lump sum payment or as periodic predetermined payments, a line of credit, or both. According to Dr. Gaines, reverse mortgages have advantages and other considerations that should be reviewed carefully by borrowers. In fact, the FHA insists that home owners be counseled to make sure they understand the transaction before they are allowed to sign for the loan. Advantages of a reverse mortgage No fixed due date No repayment required as long as the home remains the principal residence of the borrower Nonrecourse loan the amount can never exceed the selling price Borrowers hold title to property Loan proceeds not taxable Flexible options for receiving loan proceeds Considerations in choosing a reverse mortgage Loan-to-value ratios typically yield only 65% to 8% of the home s present value. Upon death the loan is considered due and payable, which requires the sale of the home or refinancing the home. The loan becomes due and payable if the borrower fails to remain in the home for 12 months, pay taxes or maintain the home. Terms and conditions of reverse mortgages may be difficult to understand; borrowers are required to attend a HUD-approved counseling session. Using a reverse mortgage to buy a new home The reverse mortgage industry was developed to enable seniors age 62 and above to stay in their homes and utilize mortgage proceeds to supplement their income. But not all seniors want to remain in their current home. Some seniors want to downsize, or trade their two-stories for one level, or live in a home with barrier-free Universal Design that makes it easier to reach cabinets, turn doorknobs, use a wheelchair, and more, says Kevin Kaltenbach, reverse mortgage supervisor for HomeServices Lending, LLC. Others may want to relocate closer to family, or enjoy the activities of a senior community. Now thanks to the FHA s reverse mortgage for purchase program, seniors can use the advantages of a traditional reverse mortgage to buy a new home. Kaltenbach explains, Like FHA conventional reverse mortgages, the reverse mortgage for purchase program allows seniors to buy a new home with no credit or income requirements, and no monthly payments for as long as they occupy the home as their primary residence, maintain the home, pay property taxes, and so on. How it works is that borrowers either sell their current home to fund a down payment, or keep their current home as a

3 rental investment if they have enough cash to put toward the new home purchase, he says. The down payment can only come from the sale of the current home, the sale of other assets, or savings. The borrowers may not use cash from credit cards, bridge loans, seller financing or seller contributions to closing costs. The total of the down payment plus the proceeds from the reverse mortgage must be enough to pay for the new home. The sale of the current home and the purchase of the new home can be completed in a single transaction. Homes eligible for purchase include singlefamily homes, HUD-approved condominiums, planned unit developments, two- to four-unit properties, and manufactured homes built after June 15, Reverse mortgages to purchase may not be used on co-ops, second homes, boarding houses, bed and breakfasts, or homes on leased land. Borrowers must occupy the home as their primary residence within 6 days of the closing date. If they are purchasing new or ongoing construction, the construction must be complete and a certificate of occupancy must be issued prior to the loan application. For an aging population that is living longer and likely to outlive savings or outspend Social Security and other retirement funds, reverse mortgages for purchase can be a legitimate option, says Kaltenbach. To learn more, contact Kevin Kaltenbach at mortgage@ prusocal.com. Advice for buyers: Now is the time to take advantage of near-record low mortgage rates you can t lock in a rate until you have a signed contract. However, you can get preapproved for a loan.this positions you like a cash buyer, one whose offer sellers are likely to accept over others. Already having financing underway is a big advantage in negotiations. With home prices still well below peaks, and interest rates at record lows, you will be in a strong position to get the home you want. Advice for sellers: Many buyers may need to close quickly to take advantage of terrific mortgage interest rates. Delays in the sales transaction for any reason could cause their rates to go up. You can assure a quick sale by complying with all requests for inspections, disclosures, and repairs well in advance of the closing date. With over 3,4 sales associates in 58 offices across Southern California and the Central Coast, Prudential California Realty is the name to trust when buying or selling a home. Our agents close more than $12 billion in sales volume and well over 16, transactions each year. We also provide every aspect of domestic and international relocation to corporations around the world. As one of the top five brokerages in the nation and the largest affiliate in the Prudential Real Estate international network, we have the resources and connections to protect your interests and make sure your experience is a successful one. Prudential California Realty is proud to be a member of HomeServices of America Inc., a Berkshire Hathaway affiliate. For more information, visit SAN DIEGO COUNTY San Diego County is enjoying a heated seller s market in homes priced under $1 million. Like other areas of Southern California, supply builds once homes price above conforming and conforming jumbo ranges. While upscale and unique homes aren t expected to sell at the same pace as more affordable homes, inventory levels of one or two years supply are typical. Once supply approaches or surpasses the two-year level, the market is considered stagnant, so homes priced $1 million to $3 million are definitely in a buyer s market, and inventories of homes priced higher are stagnant. All residential properties in SANDICOR MLS 9 quarters List Price Range (Less than $1 million) through June 3, 21 All Properties - 9 Quarters through June 3, 21 $45 $4 $35 $3 $25 Avg Sale Price Listings Sold Units 9,193 9,82 8,9 8,895 8,413 8,271 7,399 7,187 7,89 15, 12, 9, The heated seller s market in homes under $1 million has encouraged an 11% gain in prices, but sales volume has slowed only slightly due to the momentum. $2 $15 $388 $358 $298 $32 $316 $336 $34 $337 $351 6, $1 3, $5 1-year avg. price trend: Up 11 % 2-year avg. price trend: Down 9.6 % 1-year sales trend: Down 2.1 % 2-year sales trend: Up 2.2 % $ 28/2 28/3 28/4 29/1 29/2 29/3 29/4 21/1 21/2 Analysis dates are April 1, 28 through June 3, 21. Does not reflect all activity in the market place. Copyright 21, Real Data Strategies, Inc. All rights reserved.

4 Inventory in Months Supply August 2, 21 Detached Properties - Inventory in Months Under $3K $3K - $399K $4K - $499K $5K - $599K $6K - $699K $7K - $799K Detached homes priced under $399K are selling as fast as they can close. The remaining market is well-balanced in favor of buyers and sellers. Only when homes are priced $9K and above does the market turn in favor of buyers. $8K - $899K 6.8 $9K and over Inventory in Months Supply August 2, 21 Copyright 21, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only. Attached Properties - Inventory in Months Under $3K $3K - $399K $4K - $499K $5K - $599K $6K - $699K Attached homes are also selling well, with a healthy balanced market for homes priced under $699K. Only homes priced $9K and above are in a sluggish buyer s market. $7K - $799K 11.1 $8K - $899K 9.5 $9K and over Pricing Reality August 2, 21 List prices per square foot by MLS status Copyright 21, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only. Detached Properties - Pricing Reality for Sellers, per square foot Active $389 Sellers should carefully consider current buyer demand when pricing their home for sale. When list prices per square foot of Backup and Pending status properties are below that of Active properties, sellers should ask for pricing counsel from their Agent. The chasm between active detached listings price per square foot and those of solds is vast, further illustrating the greater activity in the more affordable price points. Pending $245 Sold $251 $ $1 $2 $3 $4 $5 Pricing Reality August 2, 21 List prices per square foot by MLS status Copyright 21, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only. Attached Properties - Pricing Reality for Sellers, per square foot Active $369 Sellers should carefully consider current buyer demand when pricing their home for sale. When list prices per square foot of Backup and Pending status properties are below that of Active properties, sellers should ask for pricing counsel from their Agent. Attached homes are also selling significantly faster in the more affordable price points, judging by the gap between active listings price per square foot and solds. Pending $231 Sold $239 $ $1 $2 $3 $4 $5 Copyright 21, Real Data Strategies, Inc. All rights reserved. Use is by license agreement only.

5 Monthly Listings Taken and Absorbed 12 months through July, 21 4, 3, Detached Properties - Monthly Listings Taken and Absorbed 12 Months through July 21 New Listings 2,55 2,72 2,134 2, 1,782 1,59 3, Listings Absorbed 3,352 3,31 3,122 3,7 2,955 2,34 2,515 2, Since the first of the year, sellers have flooded the market with new detached home listings, while absorption rates appear to be flattening. Sellers should carefully consider inventory levels and competing homes when pricing their homes for sale. 1, 1, 29/8 29/9 29/1 29/11 29/12 21/1 21/2 21/3 21/4 21/5 21/6 21/7 New Listings Monthly Listings Taken and Absorbed 12 months through July, 21 Listings Absorbed ,8 1,5 Attached Properties - Monthly Listings Taken and Absorbed 12 Months through July 21 1,2 1,53 1,79 1, New Listings 937 Listings Absorbed 871 1,21 1,335 1,57 1,517 1,376 1,518 1,543 1,4 1,2 1, While sellers added inventory in 21, absorption rates were able to keep up. However, sellers should note that absorption rates appear to be flattening, so they should carefully consider inventory levels and competing homes before pricing their home for sale /8 29/9 29/1 29/11 29/12 21/1 21/2 21/3 21/4 21/5 21/6 21/7 New Listings Listings Absorbed quarters through June 3, 21 Detached Properties - 9 Quarters through June 3, 21 $6 $5 $4 5,36 5,927 5,75 6,594 Avg Sale Price 6,7 6,352 Listings Sold Units 6,476 1, 8, 6, Detached home prices recovered almost to the two-year average by Q2 21. $3 $2 5,193 5,19 $551 $498 $439 $393 $424 $449 $462 $468 $486 4, $1 1-year avg. price trend: Up 14.5 % 2-year avg. price trend: Down 11.9 % 1-year sales trend: Down 1.8 % 2-year sales trend: Up 2.8 % 2, $ 28/2 28/3 28/4 29/1 29/2 29/3 29/4 21/1 21/2 9 quarters through June 3, 21 Analysis dates are April 1, 28 through June 3, 21. Does not reflect all activity in the market place. Copyright 21, Real Data Strategies, Inc. All rights reserved. Attached Properties - 9 Quarters through June 3, 21 $4 $3 2,993 2,891 Avg Sale Price Listings Sold Units 2,888 2,84 2,941 2,872 4, 3, After a two-year drubbing, prices rose nicely in attached homes under $1 million. $2 2,589 2,227 2,381 2, $344 $311 $258 $229 $241 $252 $263 $242 $255 $1 1, 1-year avg. price trend: Up 5.6 % 2-year avg. price trend: Down 25.9 % 1-year sales trend: Up 1.1 % 2-year sales trend: Up 1.9 % $ 28/2 28/3 28/4 29/1 29/2 29/3 29/4 21/1 21/2 Analysis dates are April 1, 28 through June 3, 21. Does not reflect all activity in the market place. Copyright 21, Real Data Strategies, Inc. All rights reserved. 21 Prudential California Realty Independently owned and operated. Objective data used in this report provided by Real Data Strategies. Inc. An independently owned and operated member of the Prudential Real Estate Affiliates, Inc. This is not intended as a solicitation if your property is currently listed with another broker.