John Husing, Ph.D. Economics & Politics, Inc. Chief Economist, IEEP

1. CA Real Estate Status John Husing, Ph.D. Economics & Politics, Inc. Chief Economist, IEEP

2. After Losing 8.71 Million Jobs … Now At A Record Level of JobsU.S. Jobs Long Slow Growth - Not Over-Heating Now What?

3. Unemployment Rates: Full Employment 18.0% 10.6% 9.1% 4.4%

4. Cut Taxes … Increase Spending • Lower Taxes • Massive Increase in Spending on Infrastructure • Result: Increased Deficit Spending Increased Upward Pressure on Employment • Increased Pressure On Prices FED Rate Increase Needed to Reduce Economic Pressure

5. Interest Rate History10 year Bond; 30-Year Fixed Mortgage 4 Fed Board Members Already Saying More Than 3 Rate Increases in 2017 4.16% 2.43%

6. Consumer Prices: Hit 2.1% Fed Target 2.1%

7. Gross Domestic ProductVery Slow Growth

8. Consumer Spending Quite Aggressive

9. Business Investment SpendingWeak

10. Residential Construction SpendingGaining Speed

11. Current Consumer ConfidenceSky High! 126.1

12. Looking Six Month Ahead Consumer Confidence Has Leaped 105.5

13. Required FICO Scores – 30 Year FixedFannie Mae Debt to Income: 36% or less … 680 if LTV 75% … 620 if Less Debt to Income: 45% or less … 700 if LTV 75% … 640 if Less Issue: Maximum Allowable Level for Conforming Loans 68.1% 55.1%

14. U.S. Home Sales Almost Back to 1990s Levels

15. U.S. Median Home PricesSoaring!

17. California Job Gains/Losses Up 1,064,038 6.7% Up 2007 15,844,325 2016 16,908,363 Recovery 2,243,097 Great Recession -1,179,058

18. U.S. & CA Unemployment History 5.3% 4.7% Prime Rate: 21% Cold War Ends Great Recession Dot.Com

19. CA’s East-West Split in Prosperity

20. Job Quality: Split

21. Gold Mine Theory Secondary Tier Primary Tier

22. Potential For Higher Interest Rates Privatize Fannie Mae & Freddie Mac Pressure FHA Due To Size of Guarantee Portfolio • Fed Already Discussing More Rate Rises In 2017 Due to Hot Economy • Housing More Expensive • Dampen Home Sales & Residential Construction Jobs • All Mortgages Rates Act Like Jumbo Rates – Some Increase in Rates • Housing More Expensive • Still Have Lower Down Payments For Qualifying Homes But Not Lower FHA fees • Dampen Home Sales & Residential Construction Jobs

23. Construction - Strong Job Growth! 9.2%

24. Housing Permits, Single Family ResidentialSeasonally Adjusted Annual Rate

25. Housing Permits, AttachedSeasonally Adjusted Annual Rate

26. Expanded Bay Area Median Price TrendAll Time High +12.%

27. So. CA Coastal Counties Median Price TrendNearing All Time High -1.3%

28. So. Inland Counties Median Price TrendWell Below All Time High -19.6%

29. Central Valley Median Price TrendWell Below All Time High -17.7%

30. Demand & Supply Growth 8% 7% 6% -2% -4% -9% Southern CA Bay Area Central Valley

31. Months of Housing Supply Available By California Region Bay Area So. CA Central Valley 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 3.6 3.2 2.4 Source: CA Association of Realtors

32. High Priced Bay Area & Central Coast FHA Loan Limits $379,500 to $636,150

33. Mix Priced So. CaliforniaLow Priced Central Valley FHA Loan Limits $379,500 to $636,150

34. Families Forced Inland CEQA Empowers Abusers … Hurts Middle Class Families

35. Legislative Craziness

36. CEQA Repeatedly Abused • NIMBYS Wanting To Stop Projects, Drive Up Their Costs • Lawyers Using Threat Of Suits As A Cash Cow • Business Wanting To Drive Up The Costs Of Their Competitors • Unions Using Threat of Suits To Force Developers To Use Their Members

37. SB 350Home & Building Retrofit Pick A Census Year … What Share of CA Homes Will Need To Be Retrofitted? Will They Be Allowed To Sell Without Retrofit Given CARB Command & Control Approach? Who Will Pay For Retrofit?

38. Political Keys (41-44 Votes) • Moderate Democrats from Poor Districts Their Party is Hurting Their Constituents (13-16) • Combined With Republicans Create Legislation Rolling Back Regulators (28) • CEQA • AQMD • CARB

39. Some Legislative Ideas • CEQA Reform • Extend CEQA litigation transparency from amicus briefs and attorney fee motions to CEQA petitions, so courts know who is suing and why. • End duplicative CEQA lawsuits against implementation of projects and plans for which a legally adequate EIR has already been approved. • Apply statewide the judicial remedy rule for the Kings Arena project, allowing deficient CEQA studies to be fixed (with more mitigation if needed) but allowing the project to be completed – unless it would cause significant risk to public health, natural ecology or irreplaceable tribal resources. • Legislative Review of CARB and AQMD Proposed Rules With Eye To Unintended Consequences of Cumulative Impacts On Poverty, Public Health

40. www.johnhusing.com