2012 ANNUAL HOUSING MARKET SURVEY. Methodology C.A.R. has conducted the Annual Housing Market Survey...

2012 ANNUAL HOUSING MARKET SURVEY

Methodology

• C.A.R. has conducted the Annual Housing Market Survey since 1981. 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 2012.

• 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.

CA Unsold Inventory: Nearing Record Lows September 2012: 3.7 Months

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-120

2

4

6

8

10

12

14

16

18

MONTHS

Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.

2005 2006 2007 2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

60%

0

1

2

3

4

5

657%

4.2

% with Multiple Offers # of Multiple offers (Average)

Supply Shortage Creates More Market Competition

• Share of home sales with multiple offers is the highest in at least the last 12 years

2005 2006 2007 2008 2009 2010 2011 20120%

20%

40%

60%

80%

100%

59%

% of Sales with Price Discount

Long Run Average = 68%

Market Competition Leads to Fewer Sales with Price Discount

2005 2006 2007 2008 2009 2010 2011 20120%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

2

4

6

8

10

12

14

16

Med. Price Discount

Med. Weeks on MLS 2.1%, 5 weeks

Median Price Discount & Weeks on Market

Q. What was the original list sales price of the property? What was the final sales price of the property? How many weeks did the property remain on the MLS?

More Buyers Are Purchasing with Cash

2005

2006

2007

2008

2009

2010

2011

2012

0%

5%

10%

15%

20%

25%

30%30%

% of All Cash Sales

• Almost one-third of buyers paid with all cash

• The share of all cash buyers has been on the rise since 2006

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

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

REO Sales(2011 vs. 2012)

2012 2011

Share of Total Sales 12.3% 19.7%

Median Home Price $185,000 $189,500

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

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

Share of International Buyers

Q. Was the buyer an international buyer – a person who was a citizen of another country who wished to purchase residential real estate in the U.S.?

2008 2009 2010 2011 20120%

1%

2%

3%

4%

5%

6%

7%

8%

9%

7.8%

6.0%5.3%

5.7% 5.8%

Country of International Buyer

• China (39.1%)

• Canada (13.0%)

• India (8.7%)

• Mexico (8.7%)

One of Five REALTORS® Worked with an International Buyer in the Past 12 Months

Q. How many properties have you sold to an international buyer in the last 12 months?

0 1 2 3 4 5+0%

10%

20%

30%

40%

50%

60%

70%

80%

90%79%

9%5% 3% 1% 3%

# of Properties

% Who Sold to International Buyers

# of Properties Sold to International Buyers in the Last 12 Months

Demand for Investment & Second/ Vacation Homes Dips Slightly, But Remains Strong

1998

2000

2002

2004

2006

2008

2010

2012

0%

5%

10%

15%

20%

25%

Investment/Rental PropertyVacation/Second Home

7%

16%

For Those Who Purchased an Investment Property:

17%

83%

Investment to Flip

Rental Property

Home Buyer Profile(By Type of Sales)

Equity Sales

REO Sales

Short Sales

Median Age of Buyers 45 40 40

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 20.0% 10.0% 13.0%

Distressed Sales Have a Higher Share of First-Time Buyers Than Equity Sales

2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

60%

30%

41%

45%

All Sales Equity Sales REO Sales Short Sales

Q. Was the buyer a first-time buyer?

Share of First-Time Buyers Remains Below Average But Improves from 2011

Q. Was the buyer a first-time buyer?

2005 2006 2007 2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

36%

% First-Time Home Buyers Long Run Average

Long Run Average = 39%

First-time Buyer Housing Affordability Index(California)

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0%

10%

20%

30%

40%

50%

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90%

100%

% OF HOUSEHOLDS THAT CAN BUY

SOURCE: California Association of REALTORS®

First-time Buyer HAI vs. Eff Interest Rates2

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1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%CA Eff Interest Rates

% OF HOUSEHOLDS THAT CAN BUY

SOURCE: California Association of REALTORS®

First-time Buyer HAI vs. Entry Level Median Price 2

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$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

Entry Level Median Price CA

% OF HOUSEHOLDS THAT CAN BUY

SOURCE: California Association of REALTORS®

Reasons For Buying

Q. What was the single most important reason for buying the property?

Tired of Renting; 25.0%

Desired Larger Home; 14.0%

Investment/ Tax Considerations; 18.0%

Desired Better Location; 15.0%

Change in Family Status; 6.0%

Changed Jobs; 4.0%

Foreclosure/Short Sale/Default; 4.0%

Desired Smaller Home; 3.0%

Retirement/Move to Re-tirement Community;

3.0%Other; 9.0%

Reasons For Buying First Time Homebuyers Vs. Repeat Homebuyers

Q. What was the single most important reason for selling/buying the property?

Tired of Renting

Desired Larger Home

Investment/ Tax Considerations

Desired Better Location

Change in Family Status

Changed Jobs

Foreclosure/Short Sale/Default

Desired Smaller Home

Retirement/Move to Retirement Community

Other

0% 10% 20% 30% 40% 50% 60%

Repeat Buyers First-Time Buyers

Median Down PaymentFirst-Time Homebuyers Vs. Repeat Homebuyers

Q. What was the amount of downpayment?

2005 2006 2007 2008 2009 2010 2011 2012$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

$140,000

$20,500

$100,000

First-Time Buyers Repeat Buyers

2005 2006 2007 2008 2009 2010 2011 2012$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

0%

5%

10%

15%

20%

25%

$65,000

20%

Median Down Payment % of Down Payment to Price

Q. What was the amount of downpayment?

The Median Down Payment Up 24 Percent from 2011, As Home Prices Increase

Cash Source for Down PaymentFirst-Time Buyer vs. Repeat Buyer

Q. What was the source of the cash the buyer used for a downpayment or to purchase the residence?

  First-time Buyers Repeat Buyers All Buyers

Personal savings 68.9% 53.2% 59.0%Proceeds from sale of previous residence 0.0% 17.4% 11.1%

Borrowed or gift from relatives 20.3% 5.0% 10.5%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 0.0% 3.8% 2.2%

Other 4.8% 4.0% 4.6%

Repeat Buyers Rely on Personal Savings As Down Payment

Q. What was the source of the cash the buyer used for a down payment or to purchase the residence?

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

60%

17%

53%

Sale of Previous Residence Savings

0%

10%

20%

30%

40%

50%

4.6%7.4%

1.8%

All Hombuyers First-Time Buyers Repeat Buyers

Percent of Buyers with Zero Down Payment

Proportion of Transactions With Second Mortgages

Q. In addition to the first mortgage or assumption, was there a second mortgage?

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

1.8%

Percent of Home Sales with Second Mortgage

Percent of Buyers with Second Mortgage

2005 2006 2007 2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

60%

70%

First-Time Buyers Repeat Buyers

Q. Please indicate the type of mortgage

Share of FHA Still Significantly Higher than 2007, But Was the Lowest in 4 Years

(First Mortgage)

2005 2006 2007 2008 2009 2010 2011 20120%

10%

20%

30%

40%

24%

4%

FHA VA

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% 20.0%

Share of All Home Sales 23.5% 72.7%

Percent of Mortgages with Distressed Property 50.0% 26.9%

Percent of First-Time Buyers 76.6% 34.3%

Seller Household FormationEquity 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% 0.0% 19.9%2 or More Individuals (Related or Unrelated) 10.6% 0.0% 9.6%

Banks/Lending Institutions 0.6% 98.2% 0.6%

Other 6.3% 0.0% 3.2%

Total 100.0% 100.0% 100.0%

Home Seller Profile(By Type of Sales)

  Equity Sales Short Sales

Median Age of Sellers 58 45

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

As Sellers with Net Cash Loss Hit a Record High …

Q. What was the net cash gain or net loss to the seller as a result of this sale?

2005 2006 2007 2008 2009 2010 2011 20120%

5%

10%

15%

20%

25%

30%

35% 33.5%

Long Run Average = 12.3%

Q. What was the net cash gain or net loss to the seller as a result of this sale?

2005 2006 2007 2008 2009 2010 2011 2012$0

$50,000

$100,000

$150,000

$200,000

$250,000

$25,000

The Median Net Cash Gain to Sellers Reaches a Record Low in 2012

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0

1

2

3

4

5

6

7

8

7.0

All Sellers

Years Owned Home Before Selling

Reasons For Selling

Q. What was the single most important reason for selling the property?

Foreclosure/Short Sale/Default; 26.5%

Change in Family Sta-tus; 13.3%

Retirement/Move to Retirement Community; 11.0%

Investment/ Tax Considerations; 10.2%

Desired Better Location; 9.9%

Desired Smaller Home; 6.3%

Changed Jobs; 3.8%

Desired Larger Home; 7.1% Other; 11.9%

More than a Quarter of Sellers Sold Because Their Properties Were in Distressed Status

Q. What was the single most important reason for selling/buying the property?

2005 2006 2007 2008 2009 2010 2011 20120%

5%

10%

15%

20%

25%

30%

35%

26.5%

% of Homes Sold Due to Foreclosure/Short Sale/Default

Reasons For Selling HomeEquity 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% 0% 1% 13%Retirement/Move to Retirement Community 16% 0% 1% 11%

Investment/ Tax Considerations 13% 3% 1% 10%

Desired Better Location 14% 0% 2% 10%

Desired Smaller Home 9% 0% 1% 6%

Changed Jobs 5% 0% 1% 4%

Desired Larger Home 10% 0% 1% 7%

Other 15% 0% 7% 12%

Q. What was the single most important reason for selling the property?

More Sellers Are Planning to Buy Another Home As the Market Slowly Recovers

Q. Is the seller planning on purchasing another home?

2005 2006 2007 2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

60%

70%

80%

40%

Location of Seller’s New Home

  2005 2006 2007 2008 2009 2010 2011 2012

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% 20% 20% 22%

Out of US 1% 2% 1% 1% 2% 1% 1% 1%

Don't Know/Not sure 7% 11% 9% 10% 12% 16% 10% 10%

Total 100% 100% 100% 100% 100% 100% 100% 100%

For Those Who Do Not Plan to Repurchase, Here Are Their Top 5 Reasons:

Seller is a lender/bank

Seller prefers to have less financial obligation

Poor credit background

Lack of cash for down payment

Decide to live with family/friends

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

15.3%

14.4%

8.8%

8.6%

8.1%

Reasons Sellers Not Planning to Buy Another Home

Equity Sales REO Sales Short Sales

Seller is a lender/bank 0% 88% 3%

Seller prefers to have less financial obligation 20% 0% 12%

Poor credit background 0% 3% 31%

Lack of cash for down payment 6% 3% 17%

Out of work/unemployment 3% 0% 10%

Decide to live with family/friends 11% 0% 9%

Waiting for market to bottom 1% 0% 0%

Other 57% 6% 19%

Total 100% 100% 100%

Q. Why is the seller not planning to purchase another home?

Top Reasons Under “Other” for Equity Sellers Not Planning to Buy Another Home

Seller Has Another Home

Moved to Retirement Facility/Nursing Home

Deceased

Inheritance

Seller Is a Builder

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

15.8%

12.0%

11.0%

3.4%

3.4%

2008 2009 2010 2011 20120%

10%

20%

30%

40%

50%

19.0%

25.7%

45.3%

Equity Sales REO Sales Short Sales

Property Fallen Out of Escrow

Q. Had the property fallen out of escrow prior to this sale?

Reasons Why Property Fell Out of Escrow

Q. Do you know why the property fell out of escrow previously?

2008 2009 2010 2011 2012

Buyer changed mind and decided not to buy 33% 37% 44% 51% 42%

Buyer could not secure a mortgage 33% 41% 30% 19% 21%

- because of his/her credit background NA NA NA 14% 14%

- because the appraised value was too low NA NA NA 5% 7%

Lender's delay in approving the short sale NA NA NA 9% 13%

Buyer could not come up with the down payment 11% 6% 5% 4% 5%

Seller decided not to sell 1% 0% 1% 1% 1%

Lender's delay in approving the REO sale NA NA NA 1% 0%

Other 22% 18% 20% 16% 18%

Total 100% 100% 100% 100% 100%

2005 2006 2007 2008 2009 2010 2011 2012$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

0%

10%

20%

30%

40%

50%

60%

44%

$3,000

% needs RepairMedian Repair Costs/Price Adjustment

Repair Costs/Price Adjustments

Q. Did the seller repair items, make adjustments to the purchase price, or make any other concessions during escrow due to discovered defects?

How Client Found Their Agent

Q. How did your client find and select you to represent them?

Recommendations of Friends

Client was Friend/Relative/Neighbor

Represented Them in Previous Home Transaction

Referral from Business Associates

Web page/Internet/Socia Media

Open House

Yard Signs

Door-to-Door Farming

Listing Agent for Home Purchased

Direct Mail Marketing

Print Ads/Newspaper & Magazine

Relocation Referral

Telephone Marketing

Other

0% 5% 10% 15% 20% 25% 30%

Buyers Have More “Skin” in the Game

2006 2012

% of buyers with 20+% down payment 43.2% 54.4%

% of buyers with zero down payment 21.1% 4.6%

% of cash buyers 11.0% 30.0%

% of home buyers with a second mortgage 43.4% 1.8%

% of buyer with ARM 32.6% 3.5%

Less Likelihood to Default as Monthly Payment Is More Affordable

2006 2012

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 12.0% 51.0%