Market Snapshot November 1, 2008 How the Dominos Toppled & 2009 Real Estate Forecast Leslie Appleton-Young, California Association of Realtors® vice-president and chief economist, presented her 2009 California Real Estate Market Forecast on Oct. 15, 2008 in Long Beach. She explained, "It is a mistake to paint the California housing market with a broad brush because that is completely inaccurate.” She emphasized that there is lots of regional disparity even within cities and neighborhoods and so it is important to focus on local area data. Leslie noted that there in lies the importance of keeping in touch with a knowledgeable local Realtor®, who can keep you informed about the specific local market conditions. Here's a brief summary of current state-wide market conditions as she described. Further on, you'll see a description of market conditions in our local communities. State-wide domino like events  began a chain that eventually led up to the financial crisis in mid Sept. '08 • 2004-2006 double digit home price increases occur in a hot sellers market • Home prices peak – 2005/2006/2007 (lower priced communities earlier than higher priced) • Subprime mortgage meltdown began in last quarter of 2005 in areas with lots of new construction, buyers with little or no down payments and holding subprime loans. In our area, Brentwood, Antioch, Pittsburgh and surrounding areas. Foreclosures began, prices began dropping in those areas. •This downturn began to spread throughout the state in the central valley from north to south, the main areas with lots of new construction and subprime loans. In 2007, Stockton was called the foreclosure capital of the US. •The coastal and nearby areas, such as our area, and high end homes, generally fared much better until August of 2007 when the national credit crunch hit and larger jumbo loans all of a sudden became much harder to obtain as lending requirements became more stringent and investors left the jumbo market. The numbers of sales in the upper price ranges slowed. • In Oct. 2007, state wide sales reached their low point. Prices began to drop dramatically. State wide median closed sales prices dropped 34.5% in 2008 y-t-d. In 2007, 40% of those sales were in the price ranges under $500,000. In '08, 70% of closed sales were under $500,000. •Lowering prices caused sales to increase. In 2008 numbers of sales are up 12% compared to 2007. Fueled by decreasing prices, declining inventory and the return of local investors and international investors, sales numbers in July, August and September 08 were at a very, very strong pace particularly in the lower price ranges where affordability had increased. • Then came the start of our current financial crisis in September. • Fannie Mae/Freddie Mac taken over by Government in September 08. • Many financial institutions reveal severe losses, cannot raise/maintain capital. Some close. • Recovery Plan passed by Congress 10/08. We're waiting now to see if/when banks pass along the dollars received from the government to lenders who provide mortgage funds. Forecast: What we might see in 2009 in CA Leslie Appleton-Young forecasts that 2009 will look something like the following: • Probably in the 3rd or 4th quarter we'll see the bottom in terms of a state-wide median price BUT that's predicated on the return to normalcy in the credit markets. • Weak (recession-like) GDP through Quarter 2-2009 • Improved outlook in Quarter 3-Quarter 4 2009 • Weak job picture, unemployment rate up • Inflation a concern but in check • Likely to see another government stimulus package in early 2009 • CRITICAL CONCERN: How soon will financial system stabilize and enable economic activity to return to normal? • Projected 12.5% increase in numbers of home sales over 2008 • Projected state-wide median price about $358,000, down 6% from 2008 • With many bargains available in the lower price ranges under $500,000, there most likely will be a large number of first time buyers, plus local and international investors in the CA market. In many areas, the markets are currently very positive. A lot of areas have bottomed out and are moving forward. The upper end markets, having entered the slowdown later will recover somewhat later and are anticipating the return of interested investors to finance the demand for jumbo loans. • The CA housing market will be improving at a much faster pace than the overall US market. The CA market went down a lot more initially. BUYER'S NOTE: The temporary loan limit of $729,750 for conforming loans will be lowered starting January '09 to $625,500. Conforming loans (those loan amounts which conform to FNMA/FHLMC loan limits) are at lower interest rates than the larger Jumbo Loans. ________   Quick Look: 5 Local Communities Here's a snapshot below of recent market activity in 5 selected local communities. Calculations were done from about the 5th to the 5th of each of the months below.  This information is intended as a general market overview. There may be some inaccuracies  in these figures and the source data. CLOSED BELOW ASKING 9/07 10/07 11/07 12/07 1/08 2/08 3/08 4/08 5/08 6/08 7/08 8/08 9/08 10/08 Alamo 9 7 4 5 4 11 8 10 8 10 12 7 11 10 Danville 19 23 13 17 11 29 24 19 32 34 26 33 20 23 Walnut Creek 18 13 14 14 13 29 22 18 28 30 29 39 23 27 Lafayette 5 12 6 6 4 8 12 7 18 18 9 16 13 7 Orinda 8 9 8 6 8 12 3 3 11 11 12 11 4 10 Totals 59 64 45 48 40 89 69 57 97 103 88 106 71 77 CLOSED AT ASKING 9/07 10/07 11/07 12/07 1/08 2/08 3/08 4/08 5/08 6/08 7/08 8/08 9/08 10/08 Alamo 3 0 0 0 0 0 1 1 1 0 2 2 1 0 Danville 3 0 2 2 1 2 0 3 1 3 0 3 3 2 Walnut Creek 1 6 3 5 2 2 1 4 2 5 5 4 5 0 Lafayette 2 4 1 0 0 1 5 4 5 3 2 3 2 1 Orinda 1 9 2 1 3 1 3 2 3 3 2 2 4 1 Totals 10 19 8 8 6 6 10 14 12 14 11 14 15 4 CLOSED OVER ASKING 9/07 10/07 11/07 12/07 1/08 2/08 3/08 4/08 5/08 6/08 7/08 8/08 9/08 10/08 Alamo 1 1 1 0 0 1 0 0 1 0 1 1 1 0 Danville 0 1 2 0 1 0 1 3 2 2 3 6 4 2 Walnut Creek 4 1 0 2 1 2 8 5 5 2 4 4 6 8 Lafayette 5 6 3 2 0 5 4 5 7 3 4 3 1 4 Orinda 2 3 2 2 2 4 5 3 2 3 4 2 3 1 Totals 12 12 8 6 4 12 18 16 17 10 16 16 15 15   PENDING SALES 9/07 10/07 11/07 12/07 1/08 2/08 3/08 4/08 5/08  6/08 7/08 8/08 9/08 10/08 Alamo 8 10 10 11 9 14 18 17 22 23 14 18 18 11 Danville 37 29 33 25 27 41 39 45 55 43 58 49 41 32 Walnut Creek 28 33 32 25 37 37 47 52 58 74 68 48 56 53 Lafayette 20 19 14 10 11 31 33 46 33 31 39 24 27 22 Orinda 15 14 14 10 14 13 16 20 27 20 15 17 25 18 Totals 108 105 103 81 98 136 153 180 195 191 194 156 167 136 Conclusions: Pending sales showed a decline in October. At this point, the cause appears to be the usual fall slowdown coupled perhaps with a side effect of the financial market collapse in mid September. It is interesting to note that there were 15 sales that closed OVER ASKING price in October. That usually means there was competition for the sale or another factor. There were fewer sales that closed AT ASKING than in September.   ______________   Closed Sales Reported to CCAR MLS Selected Communities Single Family Detached Homes 11/1/08     Active Listings (1st of month)    Closed Sales Year-to-Date (1st of month) AVERAGE Closed Sales Prices   Area 10/08 11/08 % 10/08    11/08 %   2007 ytd Oct     ytd Nov % +/- last  month  Alamo 131 124 -5% 92 105 +14% $1,662,983 $1,549,113 $1,530,925 -1%  Blackhawk 66 67 +2% 48 56 +17% $1,533,339 $1,406,484 $1,399,140 -1%  Clayton 51 45 -12% 83 88 +6% $780,892 $661,070 $665,924 +1%  Concord 347 344 -1% 684 785 +15% $581,945 $396,849 $391,692 -1%  Danville 195 195 0 274 306 +12% $1,135,693 $1,036,109 $1,033,738 -0.2%  Dublin 99 108 +9% 196 228 +16% $820,105 $683,294 $675,759 -1%  Lafayette 95 97 +2% 165 165 0 $1,252,175 $1,241,358 $1,249,696 +1%  Livermore 337 337 0 528 606 +15% $738,121 $574,743 $560,935 -2%  Martinez 136 140 +3% 199 223 +12% $569,630 $444,671 $442,371 -1%  Moraga 20 22 +10% 68 75 +10% $1,136,500 $1,124,151 $1,113,623 -1%  Orinda 71 71 0 114 129 +13% $1,304,113 $1,258,258 $1,253,155 -0.4%  Pleasant H 77 77 0 154 172 +12% $690,751 $557,117 $554,286 -1%  Pleasanton 250 230 -8% 349 388 +11% $1,024,135 $1,025,965 $1,015,614 -1%  San Ramon 205 214 +4% 425 475 +12% $911,061 $827,594 $821,769 -1%  Walnut Cr 170 172 +1% 304 342 +13% $969,070 $861,543 $849,231 -1% *Please note there may be some inaccuracies in the data above. Use this only as an overall market snapshot. The national MLS vendor who processes our MLS data does display inconsistent search results at times. Conclusions: All communities except one showed more closed sales than in September. That is a reflection of the strong sales in late August and September. Average closed sales prices decline somewhat in each community except Lafayette and Clayton, where prices increased. Buyers are continuing to see this period as an excellent time to buy.     ______________ Conclusions: Our CAR chief economist emphasized the local variation in sales activity and prices within regions, cities and within neighborhoods around the state. Note below the variation in price increases and decreases within different communities here locally. Lafayette comes out the star in this list. Prices have declined in Lafayette from its peak prices in 7/06, but since Oct. '05 has shown a 1% increase in average year-to-date closed sales prices. Orinda and Pleasanton have also done well. You can see that the lowest priced communities, for the most part, have seen the largest declines in value. Foreclosures have impacted values in many of these less expensive communities.   Sellers market Oct. 05 vs Buyers market Oct. 08 y-t-d average closed sales prices single family detached homes   Oct. 05