California and San Diego
Market Update
Presented by
Madeline Schnapp
Director of Economic Research, ForeclosureRadar
How to Understand (and leverage)
Market Conditions Today

Agenda
• California and San Diego Market Update
• Housing Market Recovery?
• 2013 Forecast
• Introducing PropertyRadar

Inventory at or near record lows
0
2
4
6
8
10
12
14
16
18
20
MonthsofUnsoldInventory
California Unsold Inventory Index
Months of Available Inventory - January 1990 to February 2013
Source: California Association of Realtors – CAR.org

Prices up sharply in 2012
Source: California Association of Realtors – www.car.org
$150,000
$250,000
$350,000
$450,000
$550,000
$650,000
MedianHomePrices($)
Median Home Prices - California and San Diego County
January 1990 through January 2013
California
San Diego
Prices Begin to Rise

Government intervention

0
10,000
20,000
30,000
40,000
50,000
60,000
NumberofNoticesorSales
California Foreclosure Activity
September 2006 through March 2013
Notice of Default
Notice of Trustee Sale
Foreclosure Sales
Source: ForeclosureRadar – www.foreclosureradar.com
Foreclosure activity slowing…

7
Foreclosure activity slowing…
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
No.ofNoticesorSales
Foreclosure Activity - San Diego County
September 2006 through March 2013
Notice of Default
Notice of Trustee Sale
Foreclosure Sales

Number of days to foreclose explodes

Lack of REO Inventory
In March 2013, REO’s 14% of home sales down from 62%
in March 2009
– 1,794 homes taken back in March 2013 in CA
• Down 94% from peak of 27,980 in July 2008
• Down 83% from average of 10,467/mo in 2011
• 101 in San Diego County, down 84% from 2011 monthly avg. of 638
– California’s current REO Inventory is 52,776
• About 4 months worth of inventory
• Takes banks 9 months to resell on average
• No excess inventory of bank owned homes!!!
• 2,899 REOs in San Diego County

Foreclosures will be with us for awhile
~10 Million Homes
6.3 Million Mortgages
1.7 Million Underwater
380,000 Delinquent
95,000 in Foreclosure
58,000 Bank Owned
15,000 Distressed Sales
533k / 15,000
=
~36 Months

Shadow inventory real but no wave
~10 Million Homes
6.3 Million Mortgages
1.7 Million Underwater
380,000 Delinquent
95,000 in Foreclosure
58,000 Bank Owned
15,000 Distressed Sales
~ 1.75M /15,000
=
~ 10 Years

Housing Market Recovery?

Housing Recovery Dependent
on Jobs and Income
Rising Employment
Rising Incomes

California employment on the rise

San Diego County Employment
(40,000)
(30,000)
(20,000)
(10,000)
-
10,000
20,000
30,000
40,000
NumberofJobs
San Diego County Employment Growth
March 2005 through March 2013

California personal income
gaining ground
$120,000
$130,000
$140,000
$150,000
$160,000
$170,000
$180,000
Income(Millionsof$)
California Personal Income (Millions of Dollars)
Q1 2000 through Q3 2012

What does a housing recovery
look like?
Rising Prices Increase in Market Activity
Increase in Building Activity

Market Activity Slows…
0
10,000
20,000
30,000
40,000
50,000
60,000
SalesVolume
Monthly Trend of California Real Estate Sales
Distressed vs. Equity Sales
January 2006 through March 2013
Distressed Sales
Non-Distressed Sales
Q1 2013 sales

Distressed Property Sales
Decline in Q1 2013
35%
40%
45%
50%
55%
60%
65%
70%
Distressed Property Sales - % of Total Sales
January 2012 to March 2013

Market Activity Slows
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
SalesVolume
California Real Estate Sales
Non-Distressed v. Distressed (Short Sales and Bank REO
Resales)
Short Sale
Bank REO Resale
Non-Distressed Sale

….But Not in San Diego County
3,000
3,750
4,500
5,250
6,000
6,750
7,500
8,250
9,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
120,000
SalesVolume
SalesVolume
Total Q1 Sales Comparison - California, San Diego County
Q1 2002 to Q1 2013
Total California Sales
Total San Diego Sales

Cash Sales Now 30% of Total Sales
0%
5%
10%
15%
20%
25%
30%
35%
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
%ofTotalSales
SalesVolume
Cash Sales, Volume and % of Total Sales
2001 through 2013 YTD
Cash Sales
Cash Sales as % of Total Sales
Cash sales
through
March 2013

California home building permits
on the rise

Negative Equity on the Decline
Homeowner equity critical
to housing recovery

Home equity slowly improving
35%
45%
55%
65%
MortgageDebt-to-ValueRatio(%)
Annual Trends of Mortgage Debt-to-Value Ratio (%)
1995 to 2012

Negative equity on the decline
Source: CoreLogic – www.corelogic.com
24%
28%
32%
36%
NegativeEquityShare(%)
California Negative Equity (%)
Q4 2009 to Q4 2012

Negative Equity
-
200
400
600
800
1,000
1,200
1,400
NumberofHomeowners(inThousands)
Equity
California Homeowner Equity, March 2013
5.3 million
homeowners have
5% or more equity
in their properties

Negative Equity
0
200
400
600
800
1,000
5% 10% 15% 20% 25%
NumberofCaliforniaHomeowners
(inThousands)
Increase In California Home Prices
Number of California Homeowners
that Exit Negative Equity Positions if
Home Prices Increase by Certain Amounts

2013 Forecast

Demand will remain strong
• QE ∞ will keep interest rates low
• In many parts of CA rents higher than
house payments
• Early foreclosure “victims” may now
qualify again for a mortgage and
choose to buy

Supply will remain tight
• Government intervention will continue
to slow foreclosures, ie. CA
Homeowner’s Bill of Rights
• Homeowners with equity not moving up
• 2 million underwater homeowners can’t
buy or sell (except short)
• New home supply lagging demand
• Lack of REO inventory
• Short sales will likely increase

Home prices will rise
• Lack of supply, and continued demand
will put upward pressure on prices
• But increases will be constrained:
– By Credit Terms
– By Appraisals
– By Affordability and ROI

Other factors
• More households will become renters
than homeowners through short sales
and foreclosures
• Trustee sale investors will continue to
see strong competition, though
institutional investors will exit as
rental ROI’s decline, leaving more
opportunity for flippers

Putting your head in the sand is
not going to find you inventory

Farming for Inventory – A Story

PropertyRadar Introduction
• Expanding beyond foreclosures to ALL properties
• All the functionality from ForeclosureRadar and more
• New modern HTML 5 user interface
• Same functionality on both computers and tablets
• No more FLASH
• Powerful new search and analysis tools
• Expanded search criteria
• New mapping tools
• Filter buttons
• And much more

Driving a Neighborhood with a Client
Expertise at your
Fingertips!

Driving with a client, they are interested in this home

Explore Mode

Property Details
$550.000

Get a Broader View of Neighborhood

Are Many People Underwater?

Explore Mode

Are there Lots of Foreclosures?

How Stable is the Neighborhood?

Show the Aerial View, Property Type, Est.
Value, and much more!

Property Search
Access to over 100
Search Criteria!

Farm For Near Negative
Equity Homeowners that have
Lived in their Homes for 8 or
More Years.

Pick Your Geography

Single Family Home

3 Bedrooms

With the Value You Want

Find Near Negative Equity Properties

That are not the Primary Residence

Search Results

Search Out the Owner
$550,000

Owner in Linked in

– Farm for short sale
opportunities
– Locate and mail to renters
who may eventually become
buyers
Other opportunities to find inventory

San Diego County Comeback

Commercial Property Opportunities

Commercial Property Opportunities

Commercial Property Opportunities

Commercial Property Opportunities

Commercial Property Opportunities

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