The Future of Affiliated Business Arrangements:How to Protect Mortgage, Title, Insurance Revenue…and More

Keynote Speaker:• Ken Trepeta – Director of Real Estate Services, National Association of REALTORS®

Moderator:• Ed Krafchow – Chairman & CEO, Better Homes and Gardens Real Estate

Mason-McDuffiePanelists:• Merle Whitehead, President & CEO, Realty USA• Joan Docktor, President, Berkshire Hathaway HomeServices Fox & Roach,

REALTORS®• Richard L. (Dick) Schlott, Chairman & CEO, Gloria Nilson & Co. Real Estate

THE CALIFORNIA MARKETTo infinity and beyond!!!

Ed KrafchowCEO

Better Homes and Gardens/Mason-McDuffie Real Estate

California Housing Market Outlook

SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

• Sales should improve in 2015• Interest rates up in 2015, but economic growth should help push sales up• The demographic demand for housing is not going to lessen

• Prices will increase at a more moderate pace• 2014: up 10% from 2013• 2015: up single-digit from 2014

• Inventory should improve but remains tight• Lack of housing turnover due to mortgage “lock-in” effect• More homes need to be built

• Affordability will continue to be a challenge in 2015• Student debt drags on home sales, especially for first-time buyers• Financial constraints weigh heavily on perceptions, keeping some out of market

Fannie & Freddie are the Market: 85%; 24% of first-time buyers used FHA loans

Source: LPS, C.A.R. 2013 Annual Housing Market Survey

CA: Dollar Volume Steadily Improving, Projected to be Up 5.2% in 2014

$ in Billion

SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

SERIES: CA Housing Market OutlookSOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

CA: SFH Sales UnitsProjected to be Down 4.4% in 2014

DUI EXERCISE

• POINTS OF LIGHT FROM THE CALIFORNIA MARKET• THE GRAY ECONOMY

• LOCKED IN AND LOCKED OUT

• THE FONZI EFFECT

• DISPARITY DEVELOPING BETWEEN URBAN AND SUBURBAN MARKETS

• 25,000 HOMES A MONTH (WHAT HAPPENED?)

• THE COUCH REPORT

• THE REAL ESTATE INDUSTRY LEAD THE COUNTRY OUT OF THE DOWNTURN BUT IS NOW A LAGGING INDICATOR OF THE ECONOMY

REALITY LEVEL SET

• REAL ESTATE INDUSTRY

• HIGHT POINT 7.5m

• LOW POINT 4.3m

• 2014 PROJECTED 5.1

• 2015 PROJECTED 5.2

• THE AUTOMOBILE INDUSTRY

• HIGHPOINT 16m

• LOWPOINT 9.6M

• 2014 PROJECTED 17.2M

CONCLUSION

• THE AUTO INDUSTRY HAS RETURNED TO HEALTH AND SNAPPED BACK

• INTEREST RATES ARE GREAT

• TECHNOLOGY IS BOOMING

• EMPLOYMENT IS NORMAL AND GETTING BETTER

• THERE ARE VAST SUMS OF MONEY FOR INVESTMENT INTO BUSINESSES

• THE STOCK MARKET IS REACHING RECORD HIGHS

• FOREIGN INVESTMENT INTO USA REAL ESTATE CONTINUES ON

• NEW HOME BUILDING IS BACK BUT AT AN UNEVEN PACE

• AND THE REAL ESTATE INDUSTRY IS IN STASIS

QUESTIONS FOR THE PANEL

• HOW HAS THE VERTICAL BUSINESSES IN PARTICULAR THE MORTGAGE BUSINESS AFFECTED YOUR BUSINESS?

• WHAT ARE YOU DOING INTERNALLY TO AFFECT YOUR BUSINESS AND MAKE IT BETTER?

• IF YOU HAD A MAGIC WAND HOW WOULD YOU CHANGE THIS INDUSTRY?