Economic and Market Outlook 2010-11 California Desert Association of REALTORS November 11, 2010

1. Economic and Market Outlook 2010-11California Desert Association of REALTORS� November 11, 2010

2. www.car.org ? Market Data ? Speeches

3. Overview US and California Economy California Housing Market Local/Regional Housing Market California Forecast Opportunities

4. US and California Economic Conditions

5. Gross Domestic Product 2009: -2.6%; 2010 Q3: +2.0% Notes: E � expected, F � forecast, P- preliminary 1929 though first quarter 2009 annual GDP figures were revised in July 2009 using 2005 benchmark. Notes: E � expected, F � forecast, P- preliminary 1929 though first quarter 2009 annual GDP figures were revised in July 2009 using 2005 benchmark.

6. Unemployment Rate California vs. United States CA: 7/10 12.3% 6/10 12.3% 5/10 12.4% 4/10 12.5% 2/10 9 12.5% 1/10 12.5% 12/09 12.3% 11/09 12.3% 10/09 12.5% 9/09 12.3 8/09 12.3% 7/09 11.9% 6/09 11.6% 5/09 11.6% 4/09 11.1% 3/09 11.2% 2/09 10.6% 1/09 10.1% 12/08 8.7% US: 7/10 9.5% 6/10 9.5% 5/10 9.7% 4/10 9.9% 3/10 9.7% 2/10 9.7% 1/10 9.7% 12/09 10.0% 11/09 10.0% 11/09 10.0% 10/09 10.2% 9/09 9.8% 8/09 9.7% 7/09 9.4% 6/09 9.5% 5/09 9.4% 4/09 8.9% 3/09 8.5% 2/09 8.1% 1/09 7.6% 12/08 7.2% California not seasonally adjusted: 12.2% Sept-09 Based on revised figures during EDD�s early-2009 rebenchmarking, CA job market has been on a par with US market over past several months. SOURCE: http://www.labormarketinfo.edd.ca.gov/?pageid=164 CA: 7/10 12.3% 6/10 12.3% 5/10 12.4% 4/10 12.5% 2/10 9 12.5% 1/10 12.5% 12/09 12.3% 11/09 12.3% 10/09 12.5% 9/09 12.3 8/09 12.3% 7/09 11.9% 6/09 11.6% 5/09 11.6% 4/09 11.1% 3/09 11.2% 2/09 10.6% 1/09 10.1% 12/08 8.7% US: 7/10 9.5% 6/10 9.5% 5/10 9.7% 4/10 9.9% 3/10 9.7% 2/10 9.7% 1/10 9.7% 12/09 10.0% 11/09 10.0% 11/09 10.0% 10/09 10.2% 9/09 9.8% 8/09 9.7% 7/09 9.4% 6/09 9.5% 5/09 9.4% 4/09 8.9% 3/09 8.5% 2/09 8.1% 1/09 7.6% 12/08 7.2% California not seasonally adjusted: 12.2% Sept-09 Based on revised figures during EDD�s early-2009 rebenchmarking, CA job market has been on a par with US market over past several months. SOURCE: http://www.labormarketinfo.edd.ca.gov/?pageid=164

7. U.S. Non-farm Job Growth

8. California Non-farm Job Growth State and Area Employment, Hours, and Earnings 1-Month Net Change Series Id: SMS06000000000000001 Seasonally Adjusted State: California Area: Statewide Industry: Total Nonfarm State and Area Employment, Hours, and Earnings 1-Month Net Change Series Id: SMS06000000000000001 Seasonally Adjusted State: California Area: Statewide Industry: Total Nonfarm

9. California Employment Trends by Industry

10. Consumer Price Index September 2010: All Items 1.1% YTY; Core 0.8% YTY �Core Inflation� is All Items Less Food and Energy The CPI data is seasonally adjusted. SOURCE: Go to http://www.economy.com/freelunch/fl_dictionary.asp?m=34174038-A1EF-4C70-9374-59144B50A3F5&h=H0022000400040002&f=0&c=undefined First choose "All Items." "Monthly" and "Yr/Yr%" series. Then find "All items less food and energy" towards the bottom of the CPI list. Do the same as above. �Core Inflation� is All Items Less Food and Energy The CPI data is seasonally adjusted. SOURCE: Go to http://www.economy.com/freelunch/fl_dictionary.asp?m=34174038-A1EF-4C70-9374-59144B50A3F5&h=H0022000400040002&f=0&c=undefined First choose "All Items." "Monthly" and "Yr/Yr%" series. Then find "All items less food and energy" towards the bottom of the CPI list. Do the same as above.

11. U.S. Economic Outlook

12. California Economic Outlook

13. Economy Recap Recession over, slow recovery expected Government support in first half of 2010 Private sector economy must accelerate thereafter Business, Global Trade, Consumers Labor market: mixed signals, job growth in late �10 Inflation: in check through 2011 Monetary policy: no rate hikes until 2011

15. Sales of Existing Detached Homes and Pacific West Consumer Confidence California, September 2010 Sales: 466,580 Units, -12.2% YTY, -8.8% YTD

16. CA Sales Back to Pre-Peak Levels by mid �08 California Vs. U.S. 2000-Present NAR Sales of Existing Single Family Homes, NOT Sales of (All) Existing HomesNAR Sales of Existing Single Family Homes, NOT Sales of (All) Existing Homes

17. Median Price of Existing Detached Homes California, September 2010: $309,900, Up 4.5% YTY

18. Trough vs. Current Price � Sep 2010

19. Unsold Inventory Index California, September 2010: 6.2 Months

20. Unsold Inventory Index (Months)

21. Distressed Sales to Total Sales Ratio

23. Price Differential by Type of Sale REO, Short-Sale, Regular

24. California Foreclosure Filings, Sept. 2010 NOD: 31,594, -36.3% YTD � NTS: 26,039, -7.6% YTD Oct 2010: 6 month and 3 month moving averages for both NODs and NTSs have been very steady throughout 2010. Oct 2010: 6 month and 3 month moving averages for both NODs and NTSs have been very steady throughout 2010.

25. California Foreclosure Outcomes, Sept. 2010 REO: -7.1% YTD � 3rd Party: +67.7% YTD � Cancel: +111.8% YTD Oct 2010: REO: 6 month and 3 month moving averages Cancellations: 6 month MA peaking, 3 month falling in Sept 3rd Party: 6 mo and 3 mo MA steady Oct 2010: REO: 6 month and 3 month moving averages Cancellations: 6 month MA peaking, 3 month falling in Sept 3rd Party: 6 mo and 3 mo MA steady

26. First-time Buyer Housing Affordability Index California Vs. U.S. 2000-2010

27. Median Price to Median HH Income Ratio California

28. Mortgage Rates The Fed Funds Rate was reduced to a target range of 0 to .25% in mid-December 2008. The spread between the FRM and ARM continues to be narrow by historic standards. SOURCE: Fed funds - Haver Analytics FRM: http://www.freddiemac.com/pmms/pmms30.htm ARM: http://www.freddiemac.com/pmms/pmmsarm.htm The Fed Funds Rate was reduced to a target range of 0 to .25% in mid-December 2008. The spread between the FRM and ARM continues to be narrow by historic standards. SOURCE: Fed funds - Haver Analytics FRM: http://www.freddiemac.com/pmms/pmms30.htm ARM: http://www.freddiemac.com/pmms/pmmsarm.htm

29. What Happens When Rates Increase? Monthly Mortgage Payment on Median Priced Home Based on Sep 2010 Median Home Price of 309,900 On average a � percentage point in the mortgage rate changes the payment by $70. Mortgages are rounded to the nearest 10.Based on Sep 2010 Median Home Price of 309,900 On average a � percentage point in the mortgage rate changes the payment by $70. Mortgages are rounded to the nearest 10.

30. California Desert/Southern California

31. Nonfarm Employment Riverside/San Bernardino Metropolitan Area, September 2010: Down 1.6% YTY Sectoral Strengths: State and Local Government Retail Trade Manufacturing Education and Health Services One of the leaders in California job growth SOURCE: http://www.labormarketinfo.edd.ca.gov/?PAGEID=166 Sectoral Strengths: State and Local Government Retail Trade Manufacturing Education and Health Services One of the leaders in California job growth SOURCE: http://www.labormarketinfo.edd.ca.gov/?PAGEID=166

32. Unemployment Rate Riverside County, September 2010: 15.3% California not seasonally adjusted: 12.2% for Sept 2010 Based on revised figures during EDD�s 2010 rebenchmarking. Jobless rate rising and above than other regions and state Wide divergence in jobless rate throughout country SOURCE: http://www.labormarketinfo.edd.ca.gov/?pageid=164 California not seasonally adjusted: 12.2% for Sept 2010 Based on revised figures during EDD�s 2010 rebenchmarking. Jobless rate rising and above than other regions and state Wide divergence in jobless rate throughout country SOURCE: http://www.labormarketinfo.edd.ca.gov/?pageid=164

33. Sales of Existing Detached Homes Riverside County, 2009: 21,026 Units, Up 21.7% YTY Historical data has been revised due to refined methodology. Peak: 21,199 units in 2003 Valley: 4,762 units in 1993 2009 annual sales up 21.7% from 2008 2008 annual sales up 91.4% from 2007 2007 annual sales down 38.8% from 2006 2006 annual sales down 18.3% from 2005 2005 annual sales down 1.9% from 2004 2004 annual sales down 13.3% from 2003 2003 annual sales up 13.2% from 2002 2002 annual sales up 13.1% from 2001 2001 annual sales down 2.9% from 2000 2000 annual sales up 10.8% from 1999Historical data has been revised due to refined methodology. Peak: 21,199 units in 2003 Valley: 4,762 units in 1993 2009 annual sales up 21.7% from 2008 2008 annual sales up 91.4% from 2007 2007 annual sales down 38.8% from 2006 2006 annual sales down 18.3% from 2005 2005 annual sales down 1.9% from 2004 2004 annual sales down 13.3% from 2003 2003 annual sales up 13.2% from 2002 2002 annual sales up 13.1% from 2001 2001 annual sales down 2.9% from 2000 2000 annual sales up 10.8% from 1999

34. Sales of Existing Detached Homes and Pacific West Consumer Confidence Riverside County, September 2010: 1,273 Units, Down 19.7% YTD, Down 19.5% YTY Historical data has been revised due to refined methodology. Peak: 21,199 units in 2003 Valley: 4,762 units in 1993 2009 annual sales up 21.7% from 2008 2008 annual sales up 91.4% from 2007 2007 annual sales down 34.9% from 2006 2006 annual sales down 23.9% from 2005 2005 annual sales down 1.9% from 2004 2004 annual sales down 13.3% from 2003 2003 annual sales up 13.2% from 2002 2002 annual sales up 13.1% from 2001 2001 annual sales down 2.9% from 2000 2000 annual sales up 10.8% from 1999 Consumer Confidence 10/93: 41.0 01/00: 148.6 03/03: 63.0 5/07: 128.4 2/09: 24.3 Historical data has been revised due to refined methodology. Peak: 21,199 units in 2003 Valley: 4,762 units in 1993 2009 annual sales up 21.7% from 2008 2008 annual sales up 91.4% from 2007 2007 annual sales down 34.9% from 2006 2006 annual sales down 23.9% from 2005 2005 annual sales down 1.9% from 2004 2004 annual sales down 13.3% from 2003 2003 annual sales up 13.2% from 2002 2002 annual sales up 13.1% from 2001 2001 annual sales down 2.9% from 2000 2000 annual sales up 10.8% from 1999 Consumer Confidence 10/93: 41.0 01/00: 148.6 03/03: 63.0 5/07: 128.4 2/09: 24.3

35. Existing Home Sales � CDAR Sept. �10: 539 Sales, -8.5% YTY, -4.1% YTD

36. Sales of Existing Detached Homes

37. Median Price Annual Comparison Riverside County, 2009: $172,714, Down 27.7% YTY Historical data has been revised due to refined methodology. Peak: $415,008 in 2006 Valley: $113,776 in 1996 High: Feb 2007: $430,769 2009 annual median price down 27.7% from 2008 2008 annual median price down 39.8% from 2007 2007 annual median price down 4.8% from 2006 2006 annual median price up 5.8% from 2005 2005 annual median price up 18.9% from 2004 2004 annual median price up 33.1% from 2003 2003 annual median price up 22.8% from 2002 2002 annual median price up 17.4% from 2001 2001 annual median price up 16.5% from 2000 2000 annual median price up 12.7% over 1999 Is the affordable alternative in the regionHistorical data has been revised due to refined methodology. Peak: $415,008 in 2006 Valley: $113,776 in 1996 High: Feb 2007: $430,769 2009 annual median price down 27.7% from 2008 2008 annual median price down 39.8% from 2007 2007 annual median price down 4.8% from 2006 2006 annual median price up 5.8% from 2005 2005 annual median price up 18.9% from 2004 2004 annual median price up 33.1% from 2003 2003 annual median price up 22.8% from 2002 2002 annual median price up 17.4% from 2001 2001 annual median price up 16.5% from 2000 2000 annual median price up 12.7% over 1999 Is the affordable alternative in the region

38. Median Price of Existing Detached Homes Riverside County, September 2010: $194,210, Up 11.2% YTY Historical data has been revised due to refined methodology. Peak: $415,008 in 2006 Valley: $113,776 in 1996 High: Feb 2007: $430,769 2009 annual median price down 27.7% from 2008 2008 annual median price down 39.8% from 2007 2007 annual median price down 4.8% from 2006 2006 annual median price up 5.8% from 2005 2005 annual median price up 18.9% from 2004 2004 annual median price up 33.1% from 2003 2003 annual median price up 22.8% from 2002 2002 annual median price up 17.4% from 2001 2001 annual median price up 16.5% from 2000 2000 annual median price up 12.7% over 1999 Is the affordable alternative in the regionHistorical data has been revised due to refined methodology. Peak: $415,008 in 2006 Valley: $113,776 in 1996 High: Feb 2007: $430,769 2009 annual median price down 27.7% from 2008 2008 annual median price down 39.8% from 2007 2007 annual median price down 4.8% from 2006 2006 annual median price up 5.8% from 2005 2005 annual median price up 18.9% from 2004 2004 annual median price up 33.1% from 2003 2003 annual median price up 22.8% from 2002 2002 annual median price up 17.4% from 2001 2001 annual median price up 16.5% from 2000 2000 annual median price up 12.7% over 1999 Is the affordable alternative in the region

39. Existing Home Median Price � CDAR Sept. �10: $184,400, -4.2% MTM, +10.1% YTY

40. Median Price of Existing Detached Homes Southern California Regions

41. Unsold Inventory Index Riverside and San Bernardino Counties, Sept. 2010: 5.3 Months Supply of homes peaked in the last quarter of 2007, but has been dropping since. Long Run Average: 7.1 months Supply of homes peaked in the last quarter of 2007, but has been dropping since. Long Run Average: 7.1 months

42. Unsold Inventory Index (Months) Press Release Tables UIIPress Release Tables UII

43. Foreclosure Filings � Riverside County

44. Foreclosure Outcomes � Riverside County

45. Foreclosure Inventories-Riverside County

46. Asking Rents for Class A&B Apartments Inland Empire, 2010 Q3: $1,326 Up 0.6% YTY California Asking Rent: $1,373 Q3 2010California Asking Rent: $1,373 Q3 2010

47. Vacancy Rates for Class A&B Apartments Inland Empire, 2010 Q3: 4.4% California Vacancy Rates: 5.4% Q3 2010California Vacancy Rates: 5.4% Q3 2010

48. Market Cycle - CDAR

49. Market Cycle - CDAR

50. First-time Buyer Housing Affordability Index Riverside County, 2nd Quarter 2010: 75% C.A.R.�s traditional Housing Affordability Index (HAI) was replaced with the First-Time Buyer Housing Affordability Index (FTB-HAI) in 2006. C.A.R. began producing its Housing Affordability Index (HAI) in 1984. At that time, fixed-rate mortgages were the prevailing form of financing a home purchase, while the calculations used to produce the HAI reflected a 20 percent down payment. The methodology also assumed a monthly payment for principal, interest, taxes and insurance that was no more than 30 percent of a household�s income. In the more than two decades since the CALIFORNIA ASSOCIATION OF REALTORS� first conceived the HAI, the mortgage finance landscape has changed dramatically. The range of mortgage products available to buyers as well as underwriting criteria has changed. C.A.R. developed the new index measuring affordability for first-time home buyers to better reflect the realities of today�s real estate market.C.A.R.�s traditional Housing Affordability Index (HAI) was replaced with the First-Time Buyer Housing Affordability Index (FTB-HAI) in 2006. C.A.R. began producing its Housing Affordability Index (HAI) in 1984. At that time, fixed-rate mortgages were the prevailing form of financing a home purchase, while the calculations used to produce the HAI reflected a 20 percent down payment. The methodology also assumed a monthly payment for principal, interest, taxes and insurance that was no more than 30 percent of a household�s income. In the more than two decades since the CALIFORNIA ASSOCIATION OF REALTORS� first conceived the HAI, the mortgage finance landscape has changed dramatically. The range of mortgage products available to buyers as well as underwriting criteria has changed. C.A.R. developed the new index measuring affordability for first-time home buyers to better reflect the realities of today�s real estate market.

52. Sources of Population Growth Riverside County (1981-2009) Net migration positive Natural increase is constant Net migration positive Natural increase is constant

53. San Bernardino (9,914) Los Angeles (9,442) Orange County (6,970) San Diego (4,682) Clark (728) Total incoming for 2008: 44,893 Total outgoing for 2008: 42,086

54. New Housing Permits Riverside County, August 2010: 315 Units, Up 17.7% YTD 2009 annual new housing permits: 4,200 units, down 29.0% from 2008 2008 annual new housing permits: 5,919 units, down 52.5% from 2007 2007 annual new housing permits: 12,453 units, down 50.6% from 2006 2006 annual new housing permits: 25,211 units, down 26.1% from 2005 2005 annual new housing permits: 34,134 units, down 0.3% from 2004 2004 annual new housing permits: 34,226 units, up 12.7% from 2003 2003 annual new housing permits: 30,361 units, up 34.0% from 2002 2002 annual new housing permits up 19.2% from 2001 2001 annual new housing permits up 23.4% from 2000 2000 annual permits up 5.7% over 1999 2009 annual new housing permits: 4,200 units, down 29.0% from 2008 2008 annual new housing permits: 5,919 units, down 52.5% from 2007 2007 annual new housing permits: 12,453 units, down 50.6% from 2006 2006 annual new housing permits: 25,211 units, down 26.1% from 2005 2005 annual new housing permits: 34,134 units, down 0.3% from 2004 2004 annual new housing permits: 34,226 units, up 12.7% from 2003 2003 annual new housing permits: 30,361 units, up 34.0% from 2002 2002 annual new housing permits up 19.2% from 2001 2001 annual new housing permits up 23.4% from 2000 2000 annual permits up 5.7% over 1999

55. Forecasts

56. California Housing Market Outlook

57. California Housing Market Dollar Volume Up Marginally in 2010, Better in 2011 $ Volume of Sales = Median Price x Annual Sales $ Volume of Sales = Median Price x Annual Sales

58. Market Recap Q: Has Market Hit Bottom? A: YES State sales hit bottom in late �07 State median price hit bottom in early �09 Some parts of state still looking for bottom but are close Inventory Marginally Higher but Lean More MLS inventory at higher price ranges Distressed properties at steady pace, more short sales Looking Ahead This Year: Sales down 10%, Price up 11% Next Year: Sales up 2%, Price up 2% Supply: More discretionary sellers Historic Opportunity for Qualified Buyers

59. Thinking About Next Year � Education/Training Buyers is all shapes/sizes Changing landscape of distressed sales Capitalize on technology Information & insights Public policy: GSE reform, loan limits, local/state

60. How�s Your Competitive Edge? Consumers are more connected, more mobile than ever. Are you� Utilizing mobile technology: laptops, etc? Going wireless? Capitalizing on Internet marketing? Measuring your return on time/investment with respect to social media?

61. www.car.org ? Market Data ? Speeches