A. GARY ANDERSON CENTER FOR ECONOMIC RESEARCHCHAPMAN UNIVERSITY

Payroll Job GrowthPayroll Job Growthyy

Yr/Yr % Change3Yr/Yr % Change

0 U.S.

-3 CA

-6Dec. '06

Mar. '07

Jun. '07

Sep. '07

Dec. '07

Mar. '08

Jun. '08

Sep. '08

Dec. '08

Mar. '09

Jun. '09

Payroll Job GrowthPayroll Job GrowthJJ ’08 t08 t JJ ’0909June June ’08 to 08 to June June ’0909

Number of JobsMetropolitan Areas

Number of JobsGained (+) or Lost (-)

(In thousands)

% Change

Inland Empire 76 3 6 2Inland Empire -76.3 -6.2Sacramento -46.2 -5.2San Francisco -50.5 -5.0Ventura -14.7 -5.0Orange County -70.8 -4.7Santa Clara 43 4 4 7Santa Clara -43.4 -4.7Los Angeles -188.3 -4.6Oakland -46.3 -4.5San Diego -54.7 -4.2Fresno -11.2 -3.7

Change in Payroll Employment California

June ’08 to June ’09

Number of Jobs %Number of JobsGained (+) or Lost (-)

%Change

Construction -150,500 -17.8Manufacturing -115,100 -8.0Trade, Transportation & Utilities -189,000 -6.5Financial Activities 50 300 5 9Financial Activities -50,300 -5.9Professional & Business Services -121,700 -5.4Information -22,100 -4.6 Leisure & Hospitality -62,500 -4.0Government/Other -15,400 -0.5Educational & Health Services +19,900 +1.2Total -706,700 -4.7

California California P ll E l tP ll E l tPayroll EmploymentPayroll Employment

Yr/Yr % Change3

Yr/Yr % Change

1991 2001 2007

0

-3

-6-6 0 6 12 18 24 30 36

Months

The Most Influential Economic The Most Influential Economic V i bl Aff ti J b O tl kV i bl Aff ti J b O tl kVariables Affecting Job OutlookVariables Affecting Job Outlook

Projected Impact2009 2010

Real GDP

Real Exports

Construction Spending

Real GDPReal GDP

Qtr/Qtr % Change8

Qtr/Qtr % Change

3.43.44

4

0

--6.46.4

-8

-4 6.46.4

08:1 08:2 08:3 08:4 09:1 09:2 09:3 09:4 10:1 10:2 10:3 10:4

The Most Influential Economic The Most Influential Economic V i bl Aff ti J b O tl kV i bl Aff ti J b O tl kVariables Affecting Job OutlookVariables Affecting Job Outlook

Projected Impact2009 2010

Real GDP

Real Exports

Construction Spending

California California Total Building Permit ValuationTotal Building Permit ValuationTotal Building Permit ValuationTotal Building Permit Valuation

Billions of $

65.475Billions of $

59.251.255

--27%27%

--35%35%37.3

24 135

--35%35%

24.1

1515'05 '06 '07 '08 '09

The Most Influential Economic The Most Influential Economic V i bl Aff ti J b O tl kV i bl Aff ti J b O tl kVariables Affecting Job OutlookVariables Affecting Job Outlook

Projected Impact2009 2010

Real GDP

Real Exports

Construction Spending

Job Growth Job Growth

Annual % Change4

Annual % Change

1.8 1.70.8

2 -437KJOBS

-56KJOBS

-1 2-0.4

2

0

-1.2

-2.9-4

-2CALIFORNIA

4'05 '06 '07 '08 '09 '10

A. GARY ANDERSON CENTER FOR ECONOMIC RESEARCHTHE GEORGE L. ARGYROS SCHOOL OF BUSINESS & ECONOMICS

“I don’t use the word ‘bubble’ because I don’t think there is one,” said … an economist and di t f USC’ t f ldirector of USC’s master of real-estate development program. “Bubble is a word that you use to Bubble is a word that you use to characterize markets that are irrational that don’t have irrational, that don t have underlying economic fundamentals to explain what’s fundamentals to explain what s going on. I don’t think that’s what’s really going on in today’s y g g yhousing market.”

September 25, 2005

Esmael Adibi … has the opposite viewpoint.

“Is there a housing bubble? Yes, I believe there is,” he saidhe said.

His concern about a bubble, he said, stems from three other factors the popularity of adjustable rate three other factors – the popularity of adjustable-rate mortgages, the large number of real-estate investors

d d h b d th bl f and second-home buyers, and the problem of affordability.

“…it’s going to be devastating.”September 25, 2005

Resale SingleResale Single--Family Housing PricesFamily Housing Pricesgg y gy g

Thousands of $594594

Jun.’07Jun.’07

$600Thousands of $

$

$500 --54%54%325325

$300

$400CALIFORNIA

325325275275

$200

$300

Jun. '02

Jun. '03

Jun. '04

Jun. '05

Jun. '06

Jun. '07

Jun. '08

Jun. '09

Existing Home SalesExisting Home Salesgg

Yr/Yr % Change100Yr/Yr % Change 82.782.7

50CALIFORNIA

4 44 4

0

4.44.4

--38 338 3

-50

--38.338.3

5004:1 04:3 05:1 05:3 06:1 06:3 07:1 07:3 08:1 08:3 09:1

Unsold Inventory By Price RangeUnsold Inventory By Price RangeCalifornia Existing Homes June ’09 vs June ’08California Existing Homes June ’09 vs June ’08California Existing Homes June ’09 vs. June ’08California Existing Homes June ’09 vs. June ’08

Th d f $9.1

11 2$1,000K+

Thousands of $

7.4

6 7

11.2

6.1$750-1000K

$500 750KLast Year

6.7

6.93.9

3.2

$500-750K

$300-500KThis Year

9.22.8$0-300

Source: California Association of REALTORS®

0 2 4 6 8 10 12 14Months Supply

Factors Affecting Housing PricesFactors Affecting Housing Pricesg gg g

Projected ImpactProjected Impact2009 2010

Housing Affordability *Housing Affordability

* Housing affordability is computed based on home prices, mortgage rates, and median family income.

Percent of Median Family Income Needed for Percent of Median Family Income Needed for Mortgage Pa ment on MedianMortgage Pa ment on Median Priced HomePriced HomeMortgage Payment on MedianMortgage Payment on Median--Priced HomePriced Home

P t50

36 436 4

45.445.4Percent

40CALIFORNIA

36.436.4

20

3018.318.3

10

20

0'89 '92 '95 '98 '01 '04 '07 '10f

Factors Affecting Housing PricesFactors Affecting Housing Pricesg gg g

Projected ImpactProjected Impact2009 2010

Housing Affordability * positive positiveHousing Affordability

Underwriting Standards

positive positive

negative neutral

New Housing Permits

* Housing affordability is computed based on home prices, mortgage rates, and median family income.

Factors Affecting Housing PricesFactors Affecting Housing Pricesg gg g

Projected ImpactProjected Impact2009 2010

Housing Affordability * positive positiveHousing Affordability

Underwriting Standards

positive positive

negative neutral

New Housing Permits

Inventory of Resale Homes

positive positive

y

* Housing affordability is computed based on home prices, mortgage rates, and median family income.

Factors Affecting Housing PricesFactors Affecting Housing Pricesg gg g

Projected ImpactProjected Impact2009 2010

Housing Affordability * positive positiveHousing Affordability

Underwriting Standards

positive positive

negative neutral

New Housing Permits

Inventory of Resale Homes

positive positive

negative neutraly

Unemployment Rate

g

negative

ti

negative

t lJob Creation negative neutral* Housing affordability is computed based on home prices, mortgage rates, and median family income.

Resale SingleResale Single--Family Housing PricesFamily Housing Pricesgg y gy g

Annual % Change50Annual % Change

16.56.6 0.8

25

-0.80.8

25

0

-35.4-25.3

-50

-25CALIFORNIA

50'05 '06 '07 '08 '09 '10

A. GARY ANDERSON CENTER FOR ECONOMIC RESEARCHTHE GEORGE L. ARGYROS SCHOOL OF BUSINESS & ECONOMICS

Ratio of MedianRatio of Median--Priced Existing Priced Existing SingleSingle Famil Home to Median Famil IncomeFamil Home to Median Famil Income

R ti

SingleSingle--Family Home to Median Family IncomeFamily Home to Median Family Income

9.0Ratio 8.58.5

Hi t i l M 5 35 15 16.0 Historical Mean = 5.35.15.1

3.83.8

3.03.0'89 '92 '95 '98 '01 '04 '07 '10f

Ratio of California Ratio of California H P i t U SH P i t U S

Ratio

Home Prices to U.S.Home Prices to U.S.

3.0Ratio

2.62.6

Hi t i l M 1 9

2.12.1

2.0 Historical Mean = 1.91.41.4

1.01.0'89 '92 '95 '98 '01 '04 '07 '10f

Median Home Price Appreciation & Median Home Price Appreciation & Inflation RatesInflation RatesInflation RatesInflation Rates

I d

500

Index

CALIFORNIA

300400 397

5.4%

CALIFORNIA

200300

2363.4%

237237100100

0100

'83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09f'84 '88 '90 '92 '94'86 '96 '98 '00 '02 '04 '06 '08 '10f

A. GARY ANDERSON CENTER FOR ECONOMIC RESEARCHCHAPMAN UNIVERSITY