The New Real Estate ConsumerMay 3, 2012

Joel Singer, CEO, C.A.R.

Outline

The “New” Consumer

California’s Unique Demographics

Home Buyers & Sellers – Experiential Data

Investors

A Generational Buying Opportunity!

Who is the New Real Estate Consumer?

Demographics

CA v. US Population Growth: 1971-2049

19

71

19

74

19

77

19

80

19

83

19

86

19

89

19

92

19

95

19

98

20

01

20

04

20

07

20

10

20

13

20

16

20

19

20

22

20

25

20

28

20

31

20

34

20

37

20

40

20

43

20

46

20

49

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

California

Nation

SOURCE: U.S. Census Bureau; California Department of Finance; CALIFORNIA ASSOCIATION OF REALTORS®

Projected

Ethnicity Comparisons: US v. CA

U.S. Buyers

U.S. Sellers

US Population

CA Population

CA Buyers

CA Sellers

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

White HispanicAfrican American Asian/Pacific IslanderAmerican Indian/Alaska native Other

Source: U.S. Census Bureau 2010 American Community Survey, NAR 2011 Profile of Home Buyers & Sellers, C.A.R. 2011 Buyer & Seller Surveys

Top 10 CA Home Buyer Surnames

NGUYEN

LEE

GARCIA

CHEN

RODRIGUEZ

LOPEZ

HERNANDEZ

GONZALEZ

MARTINEZ

KIM

0 200 400 600 800 1000 1200 1400 1600Number of Buyers

SOURCE: DataQuick Information Systems, 2010

Gender: US v. CA

U.S. CA CA Buyers CA Sellers0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0.491642485536813

0.497210755642606

0.520.43

0.508357514463187

0.502789244357394

0.480.57

Male Female

Sources: 2010 U.S. Census Bureau American Community Survey, 2011 C.A.R. Buyer & Seller Surveys

Median Age: US v. CA

U.S. Populati

on

U.S. Buye

rs

U.S. Se

llers

CA Population

CA Buyers

CA Selle

rs0

10

20

30

40

50

60

37

45

53

35 35 34

Source: U.S. Census Bureau 2010 American Community Survey, NAR 2011 Profile of Home Buyers & Sellers, C.A.R. 2011 Buyer & Seller Surveys

CA Buyers & Sellers are Getting Younger

2007 2008 2009 2010 20110

5

10

15

20

25

30

35

40

45

5046

4137

40

3539 39

37 36 35

Sellers BuyersMedian Age

Q: What is your age?

Source: C.A.R. 2011 Buyer & Seller Surveys

Household Income: US v. CA

CA Buyers

CA Sellers

US Buyers

US Sellers

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

$200,000+$150,000-$199,999$100,000-$149,999$75,000-$99,999$50,000-$74,999

Source: NAR 2011 Profile of Home Buyers & Sellers, C.A.R. 2011 Buyer & Seller Surveys

Buyer & Seller Marital Status: CA v. US CA Has More Alternative Family Structures

US Sellers

US Buyers

CA Sellers

CA Buyers

0%10%

20%30%

40%50%

60%70%

80%90%

100%

MarriedSingleOther

Source: U.S. Census Bureau 2010 American Community Survey, NAR 2011 Profile of Home Buyers & Sellers, C.A.R. 2011 Buyer & Seller Surveys

1st-time vs. Repeat Buyers & Sellers

CA Buyers CA Sellers US Buyers US Sellers0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Repeat1st-time

Source: NAR 2011 Profile of Home Buyers & Sellers, C.A.R. 2011 Buyer & Seller Surveys

The Real Estate Transaction as Experienced by Buyers & Sellers

Before the Selling/Buying Process Begins…

Sellers considered selling more than 4 months, on average, before doing so

Buyers considered buying for 4 months before contacting an agent

Buyers investigated for 6 weeks prior to contacting an agent

Source: C.A.R. 2011 Buyer & Seller Surveys

Average Selling Process is Long: 9.5 months

Home listed

Escrow opens

Escrow closes

Source: C.A.R. 2011 Seller Survey

+7 mos. +1.5 mos.

Jan. Aug. Oct.

60% of Sellers Did Not Close Escrow on Time Because…

Source: C.A.R. 2011 Seller Survey

Loan did not fund on timeLender did not approve termsTrouble with buyer’s loan approvalProblems/mistakes on loan documents

Paperwork not completed on timeWalk-through changes not completedTitle company late with recordingMistakes by other agentInsurance problemsEscrow company mistake

Average Buying Process is Lengthy:7.5 Months

Consider buying

Investigate homes &

neighborhoods

Contact agent

Close escrow

Source: C.A.R. 2011 Buyer & Seller Surveys

+1.5 mos. +2.5 mos.

Jan. Feb. May

+2 mos.

July

Make an offer

View 12 homes with agent

Aug.

+1.5 mos.

Consumers are Doing their Homework Online

77% of sellers & 52% of buyers

used social media

51% of buyers Googled their

agent

58% of buyers & 66% of sellers

found their agents online

Source: C.A.R. 2011 Buyer & Seller Surveys

Most Important Websites for Buyers & Sellers

Q: What was the single most important web site you used in your home selling process?

Source: C.A.R. 2011 Buyer & Seller Surveys

Buyers are Motivated by AffordabilitySellers are Motivated by Financial Strains

Top 5 Reasons for Buying

• Price decreases (39%)• Favorable

price/financing (14%)• Desired better location

(14%)• Desired larger home

(14%)• Tired of renting (8%)

Top 5 Reasons for Selling

• Could not afford mortgage (22%)

• Job/income uncertainty (13%)

• Loss of household income (12%)

• Low prices allowed upgrade (7%)

• Mortgage is too expensive (7%)

Source: C.A.R. 2011 Buyer & Seller Surveys

Quick Facts About Buyer Financing

• Nearly all (92%) obtained financing, but 72% found it difficult

• More than 3 out of 4 (77%) put 20 - 25% down

• An overwhelming majority (84%) obtained traditional financing (30-year, fixed-rate loan)

Q. For which of the following did you use the internet as a part of your home buying process? Source: C.A.R. 2011 Buyer Survey

Overpricing? Average Sale Price is 13% Lower than List Price

Average$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$385,996

$335,025

ListSale

Q: What was the initial listing price of your home? Selling price? Source: C.A.R. 2011 Seller Survey

Expectations About Future Home Prices:Buyers Optimistic – Sellers Pessimistic

Buye

rs

Selle

rs

Buy

ers

Sel

lers

Buye

rs

Sel

lers

0%10%20%30%40%50%60%70%80%90%

100%

UpUnsureFlatDown

Q. Do you think home prices in your neighborhood will go up, down, or stay flat in 1 year? 5 years? 10 years? Source: C.A.R. 2011 Buyer & Seller Surveys

In 1 Yr. In 5 Yrs. In 10 Yrs.

Most Sellers Rent & Don’t Intend to Buy Again

12%

81%

19%

Own Rent: Not buying another homeRent: Buying another home

Q: Do you own or rent your current home?

Source: C.A.R. 2011 Seller Survey

Seller Migration

From To0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

53%36%

27%

21%

20%

9%

34%

Another StateOther CANorCalSoCal

Source: C.A.R. 2011 Seller Survey

94% of Buyers & Nearly 100% of Sellers Used an Agent Because…

Buyers

Most responsive (28%)

Worked with agent before (18%)

1st to respond (17%)

Most aggressive (16%)

Sellers

1st to respond (21%)

Most responsive (21%)

Most aggressive (19%)

Worked with agent before (11%)

Source: C.A.R. 2011 Buyer & Seller SurveysQ: What was the single most important reason for selecting the agent you used?

Agent Response Time Is Important

Q. Please rate the importance of the agent’s response time in the decision on your final selection on a scale of one to five, with five being extremely important and one being not at all important.

Source: C.A.R. 2011 Buyer Survey

Buyers Expect Faster Response Time

Instantly

With

in 30mins.

With

in 1 hr.

With

in 2 hrs.

With

in 4 hrs.

Same day

1 business

day0%

10%

20%

30%

40%

50%

60%

Expected Actual

Q. What was the typical response time you expected from your agent to return any form of communication to you?

Q. On average, what was the actual response time of your agent to return any form of communication to you?

Source: C.A.R. 2011 Buyer Survey

Sellers Also Expect Faster Response

Instantly

With

in 30 Minutes

With

in 1 Hour

With

in 2 Hours

With

in 4 Hours

Same day

1 business

day0%5%

10%15%20%25%30%35%40%45%

Actual Expected

Q: On average, what was the ACTUAL time of your agent to return any form of communication to you?

Q: What was the typical response time you EXPECTED from your agent to return any form of communication with you?

Source: C.A.R. 2011 Seller Survey

Room for Improvement in Agent Response

14%

38%

48%

Surpassed Met Below

Q. Did your agent meet your expectations on response time? Source: C.A.R. 2011 Seller Survey

Agent / Seller Communication Gap

E-mail

Text message

Instant messaging

TelephoneFacebook

In-person

69%64%

26%18%

6%5%

73%

1%

47%

3%

Preferred Actual

Q: What was the actual method of communication used most frequently with your agent?

Q: What was your preferred method of communication with your agent?

Source: C.A.R. 2011 Seller Survey

Agent / Buyer Communication Gap

E-mail

Text message

TelephoneTwitter

FacebookIn-perso

n

73%

32%37%

21%14%6%

70%

1%

50%

0%

3%

Preferred Actual

Q: What was the actual method of communication used most frequently with your agent?

Q: What was your preferred method of communication with your agent?

Source: C.A.R. 2011 Buyer Survey

Buyer Satisfaction Ratings

Category Rating

Information on housing market conditions provided by agent 3.27

Agent’s negotiating skills 3.20

Assistance provided by agent in searching for a home 3.39

Professional referrals from agent provided (i.e. lender, inspector, etc.) 3.12

Value received for what you paid the agent 3.61

Overall process of finding a home 3.56

Overall satisfaction with agent 3.44

Q. Please rate your degree of satisfaction with these aspects of your home buying experience. (Scale: 1= Not at all satisfied, 5=Extremely satisfied) Source: C.A.R. 2011 Buyer Survey

Buyer Reasons for Satisfaction/Dissatisfaction

Worked hard (55%)Helped find best home (55%)Quick to respond (31%)Negotiated good deal (29%)Listened to needs (20%)

Slow response (51%)Communication problems

(19%)Didn’t communicate

effectively (14%)Didn’t negotiate aggressively

(12%)Wasted time with homes I’m

not likely to buy (3%)

Q. Why do you have that level of satisfaction with your agent?Source: C.A.R. 2011 Buyer Survey

Seller Satisfaction Ratings

Category Mean Rating

Marketing the home 3.58

Setting the price 3.39

Assuring the buyer is qualified 3.13

Time on market before going into escrow 3.12

Preparing the home for sale 3.11

Value received for what you paid your real estate agent 3.07

Negotiating the transaction 3.04

Escrow closing on time 2.99

Overall satisfaction with the real estate agent 2.82

Communications with your agent 2.72

Overall satisfaction with the home selling process 2.63

Q: Please rate your degree of satisfaction with your agent for each of the following aspects on a scale of 1 to 5, where 1 is least satisfied and 5 is most satisfied.

Q: Please rate your degree of satisfaction with your agent for each of the following aspects on a scale of 1 to 5, where 1 is least satisfied and 5 is most satisfied. Source: C.A.R. 2011 Seller Survey

Seller Reasons for Satisfaction/Dissatisfaction

Negotiated good dealGot the best price for the homeWorked hardListened to needsQuick to respondSold home quicklyKept updated on transaction

House took too long to sellDidn’t get desired price

Didn’t communicate effectively/efficiently

Q. Why do you have that level of satisfaction with your agent?Source: C.A.R. 2011 Seller Survey

Advice from Buyers to Agents

1. Gain better understanding of where market is headed2. Learn how to handle a distressed property transaction3. Respond faster4. Communicate how the client wants and better5. Gain better understanding of where interest rates are

headed6. Provide more assistance in acquiring mortgage approval7. Negotiate better

Q. What advice would you give to real estate agents to improve the process or the level of service?

Source: C.A.R. 2011 Buyer Survey

Advice from Sellers to Agents

1. Sell home faster2. Improve communication speed3. Negotiate more aggressively4. Improve communication quality5. Market home more aggressively6. Price home to sell from start7. Gain more expertise in short sales8. Provide quality information on market9. Listen betterQ: What advice would you give to real estate agents to improve the process or level of service?

Investors

Share of Investors is Growing Rapidly

Source: C.A.R Annual Housing Market SurveyQ: How was/will the property (be) occupied?

Investors Buy Primarily Single-family Homes

Source: C.A.R Annual Housing Market SurveyQ: What type of residence was purchased / sold?

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110%

10%20%30%40%50%60%70%80%90%

100%

Type of Residence

Detached Single-family Townhouse Stacked CondominiumMobile Home Other

Investors Prefer Distressed Properties

Source: C.A.R Annual Housing Market SurveyQ from the Survey: Was the property purchased as a(n)?

20082009

20102011

0%10%20%30%40%50%60%70%80%90%

100%

Type of Sales

Traditional/Non-distressed Foreclosure REOShort Sale Other

Popular Destinations/Largest Markets

Source: C.A.R Annual Housing Market SurveyQ : In what country was the property located?

L.A.

San Diego

Riverside

Investors Buy Below the Median

Source: C.A.R Annual Housing Market SurveyQ: What was the final sales price of the property?

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

$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000 Median Sales Price

Investment Properties All Properties

Thousands

…and Pay All Cash!

Source: C.A.R Annual Housing Market SurveyQ: What was the nature of the financing arrangement?

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20110%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Financing

Cash Newly Originated 1st Mortgage Assumption of Existing 1st Mortgage Tax Deferred Exchange Other

A Once-in-a-Generation Buying Opportunity!

Economy Showing Signs of Improvement

Up Down

Inflation

Disposable Income

Consumer confidence

Personal spending

Personal savings

Unemployment

Housing Market Demonstrating Stability

Mortgage ratesMedian priceForeclosuresForeclosure inventory

SalesAffordability

Recent Headlines

“New Real Estate Poll: Americans Increasingly Optimistic about Homeownership”

~RISMedia 3/15/12

“Investors Are Looking to Buy Homes by the Thousands”~The New York Times 4/2/12

“Pending home sales near 2-year high”~Inman News 4/26/12

“Housing market may be on rebound at last”~Los Angeles Times 4/25/12

Buy vs Rent Analysis:$3,760 a Year Cheaper to Buy in CA

State Of Cali-fornia

Los Angeles Metropolitan

Area

MO Inland Empire

Oakland Metropolitan

Area

Orange County

Sacramento MSA

San Diego County

San Francisco Metropolitan

Area

Santa Clara County

($8,000)

($6,000)

($4,000)

($2,000)

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$3,760

$7,360 $6,850

($4,880)($5,510)

$6,400

$260

($3,870)

($5,570)

Total Savings (1 year)

Source: C.A.R. 9/11 Analysis

“Top 5 Reasons it’s Smarter to Buy than Rent”

Real estate keeps pace with/exceeds inflation

Lowest interest rates since 1950’s

Increasing interest rates add up fast/questionable future availability

Certain Markets have already bottomed

Forced Savings Build wealth

Source: Inman News 3-26-12

SOURCE: Federal Home Loan Mortgage Corporation

Mortgage Rates at Record Lows

19841986

19881990

19921994

19961998

20002002

20042006

20082010

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

FRM

ARM

Federal Funds

Housing Affordability IndexCA vs. U.S. Annual Rate

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

0%

10%

20%

30%

40%

50%

60%

70%US - CA CA US

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

% OF HOUSEHOLDS THAT CAN BUY

California vs. U.S. Median PricesCA Return on Investment by Year of

Purchase19

70

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

California CA Price Trend US

187% 48% 18%

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

1061%

Disposable Income Expected to Rise

Key Conclusions

Capture more clients with a strong internet presence

Beat the competition by being responsive and aggressive

Have reliable lender references to assist buyers with financing

Take the free advice from clients to improve your business

Thank You!