The Magical Mystery TourU.S. Residential Real Estate Markets

and the Path Ahead

Alex Villacorta, Ph.D.Director, Research & Analytics

Clear Capital

Here Comes the SunKnow Your Sources: Clear Capital

• Premium provider of residential valuation solutions and market data for large financial services companies.

• The Company’s customers include the largest U.S. banks, GSEs, investment firms and other financial organizations.

• Our products and solutions leverage our extensive vendor network and progressive technology to provide residential real estate valuations including:• Appraisal Products• Broker Price Opinion Products• Data Products & Home Pricing Indices• Web-based Platform Services

• Tens of thousands of reports completed every month

Berkeley Real Estate & Economics Symposium 2011

Ticket to RideCurrent Housing Market Vitals

Berkeley Real Estate & Economics Symposium 2011

Decline Since Peak: -39.5%

DipDouble

Dip

-2.7%

3.5%

-6.9%

Berkeley Real Estate & Economics Symposium 2011

All Together NowRegional Decline Since Peak of Market (Q2 2006)

West: down 8.3% since 2010

Northeast:unchanged since 2010

Come TogetherCondo Market versus Single Family Residences

Berkeley Real Estate & Economics Symposium 2011

-41.9%

60.7%

-38.6%

42.2%

Can’t Buy Me LoveNational, Top, Mid, and Low Tier

Berkeley Real Estate & Economics Symposium 2011

Low Tier: Nearly double the declinesTop Tier:

Nearly double the $$ declines

YesterdayMajor Home Price Indices Since 1975

Get BackReal Home Price Indices Since 1975

Helter SkelterUnemployment’s Effects on Foreclosure

Berkeley Real Estate & Economics Symposium 2011

20042005200620072008200920102011

Help!REO Saturation and Price Fluctuations 2005-2011

Berkeley Real Estate & Economics Symposium 2011

Berkeley Real Estate & Economics Symposium 2011

I’m Looking Through YouPerforming, REO, and Blended 2005-2011

Phoenix MSA Price-per-Square-Foot

National Two Year Forecast

Sluggish improvement over next two years

Here There and EverywhereForecasting the Market

California Two Year ForecastSan Francisco MSA Two Year ForecastSacramento MSA Two Year ForecastRiverside MSA Two Year ForecastLos Angeles MSA Two Year Forecast

Let It BeChanges on the Horizon

• Potential Game Changers• REO Volume Spikes

• Current inventory dammed up• Significant shadow inventory yet to come down the pike

• Fannie Mae / Freddie Mac Request for Information• Rental Program• Bulk Sales

• Assistance programs for homeowners• Attorney General settlement

• Principal forgiveness • Disruptions to natural process could be high

risk/reward game

We Can Work It OutWhat Lies Ahead

• Are we out of the Woods?• No, but some local markets are• Relative stability since first dip anticipated• All things equal, expect a flat 2012, • Another try at a recovery in Q2 2013• REO volume is a challenge, but opportunity still out there• Uncertainty/pessimism still biggest challenge to recovery• Policy and regulation changes remain in question

• The devil you know is better than the devil you don’t