2016 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 sent via email to a random sample of 26,430 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 2016. The survey instrument was a questionnaire with both multiple choice and open-ended questions. There were 1,582 valid survey responses, equivalent to a response rate of 6.0 percent. The margin of error for this survey was +/- 2.4 percent at a 95 percent confidence level.

Investor Buyers? Dropping But Still Have Demand Demand for Investment Properties remained near lowest level since 2009 SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 3

Investors : Still Buying to Rent 2014: 30% 2015: 26% 2016: 20% 2014: 70% 2015: 74% 2016: 80% SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® 4

International Buyers Dropping The share of international buyers dropped to the lowest level in 9 years 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.? SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

REALTORS® Worked with International Buyers in the Past 12 Months # of Properties Sold to International Buyers in the Last 12 Months % Who Sold to International Buyers Q. How many properties have you sold to an international buyer in the last 12 months? SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Country of International Buyer China (53%) Mexico (10%) India (10%) SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Intended Use For property? home Q7 SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Share of First-Time Buyers remains Below Long-Run Average SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Reasons For Buying First-Time vs. Repeat Q. What was the single most important reason for selling/buying the property? SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Characteristics of Homes: First-Time vs. Repeat (2016)   First-time Buyers Repeat Buyers All Buyers Median Sales Price $437,000 $585,000 $533,500 Median Square Footage 1,479 1,800 1,700 % of Detached Single-Family 76.8% 77.3% 76.5% % of Condo/Townhome 19.9% 14.3% 16.0% SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Financial Characteristics: First-Time vs. Repeat (2015)   First-time Buyers Repeat Buyers All Buyers Median Household Income $97,500 $140,000 $120,000 Median Monthly Mortgage Payment $1,582 $1,694 $1,669 Median Downpayment (in $$) $39,500 $96,000 $74,500 Median Downpayment (in % to Price) 10% 20% 19.6% SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® SERIES: 2015 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Financial Characteristics I: First-Time vs. Repeat (2016)   First-time Buyers Repeat Buyers All Buyers Median Household Income $100,000 $140,000 $120,000 Median Monthly Mortgage Payment $1,265 $1,441 $1,280 Median Downpayment (in $$) $25,000 $78,000 Median Downpayment (in % to Price) 7.0% 20% 18.5% SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Financial characteristics II: First-Time vs. Repeat (2016)   First-time Buyers Repeat Buyers All Buyers % of buyers with zero down payment 10.4% 5.2% 7.2% % of cash buyers 8.7% 25.5% 20.8% % of home buyers with a second mortgage 4.8% 5.1% % with FHA Loan 31.4% 10.2% 17.3% SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Percent of Buyers with Zero Down Payment SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Proportion of Transactions With Second Mortgages Q. In addition to the first mortgage or assumption, was there a second mortgage? SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Percent of Buyers with Second Mortgage SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

FHA/VA made up nearly a quarter of all loans Q. Please indicate the type of mortgage. SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

First-Time Buyer Generation Breakdown SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Many Millennials Are First-Time Buyers SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Buyers Generation Breakdown 31% Millennials 19 – 36 39% Gen X 37 – 51 26% Baby Boomers 52 – 70 4% Silent Gen 71 and older SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Millennials: American Dream is still Important Q. How important is fulfilling the 'American Dream' to you? SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

…And Homeownership is part of it SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Q. Which factors contribute to your ideal of the `American Dream`

Many Millennials Also Believe Buying a Home Is a Safe Investment Do you think home purchase is still a safe investment? SERIES: 2016 Generations / Millennials Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Reasons for Delay in Home Buying SERIES: 2016 Student Loan Debt and Housing Report SOURCE: National Association of Realtors®

Many Non-Homeowners Delayed Buying a Home Because of Student Debt % of Loan borrowers (non-homeowners only) SERIES: 2016 Student Loan Debt and Housing Report SOURCE: National Association of Realtors®

Affordability Is a Down Payment Issue, But Also a Monthly Mortgage Payment Issue Highest Down Pmt. in $ Since 2005, but lowest down pmt. in % in last 7 yrs. SERIES: 2016 Annual Housing Market Survey SOURCE: California Association of REALTORS®

Share of Cash Buyers Remains near the Lowest Level Since 2009 One-fifth of buyers paid with all cash The share of all cash buyers is virtually flat in the last 6 years SERIES: 2016 Annual Housing Market Survey SOURCE: California Association of REALTORS®

Housing Affordability peaked q1 2012 prices v Housing Affordability peaked q1 2012 prices v. low rates and income growth California vs. U.S. – 1984-2016 Annual Quarterly C.A.R.’s traditional Housing Affordability Index (HAI) was replaced with the First-Time Buyer Housing Affordability Index (FTB-HAI) in 2006. Note this slide takes the average of the 3 months in each of the quarters. 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. SERIES: Housing Affordability Index of Traditional Buyers SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Median Monthly Mortgage Payment - CA What Will Happen When Mortgage Rates Increase? MONTHLY MORTGAGE Q3-2016 Median Price $515,940 20% Downpayment INTEREST RATE SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Minimum Qualifying Income - CA What Will Happen When Mortgage Rates Increase? Q3-2016 Median Price $515,940 20% Downpayment Minimum Qualifying Income SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® INTEREST RATE

Housing Affordability Index - CA What Will Happen When Mortgage Rates Increase? % OF HOUSEHOLDS THAT CAN BUY, ALL ELSE CONSTANT Q3-2016 Median Price $515,940 20% Downpayment SERIES: Housing Affordability Index SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® INTEREST RATE

Reasons for Changing County All Buyers SERIES: 2016 Annual Housing Market Survey SOURCE: California Association of REALTORS®

Tight Supply Pushed up Home Prices, as one-third of Homes Were Sold above the Asking Price Long Run Average = 20% SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Market remained Competitive, as inventory level continued to be low SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Sellers with Net Cash Loss Dropped to the Lowest Level in the last 10 years Long Run Average = 11.6% Q. What was the net cash gain or net loss to the seller as a result of this sale? SERIES: 2016 Annual Housing Market Survey SOURCE: California Association of REALTORS®

Net Cash Gain to Sellers Highest since 2007 Q. What was the net cash gain or net loss to the seller as a result of this sale? SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

UII remained at low levels; Decreasing from last year Oct. 2015: 3.6 Months; Oct. 2016: 3.4 Months Range since 1988: Low: 1.3 months in April 2004 High: 18.8 months in Feb 1991 Long-run average: 6.9 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. SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Years Owned Home Before Selling Long-Time Homeowners are not moving as in the past because: Low rate on current mortgage Low property taxes Capital gains hit Where can I afford to go? Remodel and stay SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Sellers Generation Breakdown Median Age: 52 8% Millennials 19 – 36 31% Gen X 37 – 51 47% Baby Boomers 52 – 70 14% Silent Gen 71 and older SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Seller Generation Breakdown: Past & Present SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Reasons For Selling SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS® Q. What was the single most important reason for selling the property?

Sellers - More than Half of All Sellers Plan to Buy Another Home SERIES: 2016 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

More Sellers Moving out of County, Even out of California Location of Seller’s New Home   2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Within the same county 38% 41% 37% 45% 47% 42% 49% 46% 44% 40% In another county in California 23% 18% 24% 17% 21% 19% 20% In another state 31% 28% 29% 27% 22% 25% Out of US 1% 2% 0% Don't Know/Not sure 7% 11% 9% 10% 12% 16% 15% 13% Total 100% SERIES: 2016 Annual Housing Market Survey SOURCE: California Association of REALTORS®

Reasons for Changing County for Sellers Top Five Reasons SERIES: 2016 Annual Housing Market Survey SOURCE: California Association of REALTORS®

More investors selling their investment properties Long Run Average = 19.5% SERIES: 2016 Annual Housing Market Survey SOURCE: California Association of REALTORS®

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? SERIES: 2016 Annual Housing Market Survey SOURCE: California Association of REALTORS®