Q42014 quarterlyreport ezine by Pacific Union

Quarterly Real Estate Report Q4 2014

Table of Contents

The Forecasts Are In: Pacific Union Releases 2017 Real Estate Outlooks for 9 Northern California Regions 4 Contra Costa County 6 East Bay 12 Marin County 18 Napa County 24 San Francisco 30 Silicon Valley 40 Sonoma County 52 Sonoma Valley 58 Lake Tahoe/Truckee 64

The Forecasts Are In: Pacific Union Releases 2017 Real Estate Outlooks for 9 Northern California Regions On Nov. 5, 2014, Pacific Union teamed with noted consulting firm John Burns Real Estate Consulting (JBREC) to deliver a first-of-its-kind, forward-looking report and presentation that offer a lens into the future of the Bay Area’s residential real estate market and economy. In a live event at the SFJAZZ Center in San Francisco, which was simulcast live via the Internet and translated to Mandarin, we presented the factors that will shape the Bay Area and Lake Tahoe/Truckee real estate landscapes through December 2017. You can view a video of the entire event here. Now for the first time, we are releasing the detailed writings for each of the nine Northern California markets in which Pacific Union operates. Highlights from the forecast and reports include: • The Bay Area’s housing market is currently the hottest in the United States, but prices are close to peaking. • Job growth is outpacing population growth across the Bay Area – our economy is generating exceptional, high-paying jobs. • There are very few new homes being built. In 2013, more homes were constructed in the Houston metropolitan area than in the entire state of California. • Affordability in the Bay Area ranges from 23 percent in San Francisco to 43 percent in Sonoma County. • As a result, the rate of annual price appreciation in the Bay Area will likely slow from its current rate of roughly 8 percent to 1 to 4 percent beginning in 2016. The Bay Area is currently experiencing a perfect storm of hot market conditions, exceptional job growth, excellent income levels, and limited supply. Our outlook, explained in detail in this newsletter, illustrates slowing appreciation beginning in 2016, largely as a result of limited affordability. We recognize that neighborhoods and homes are different. Our real estate professionals are ultraqualified to assist you in decision support by combining our real estate outlook with your investment criteria to help you navigate the current market. Please be sure to consult with your Pacific Union real estate professional for specific advice. I truly hope your 2015 is off to a top-notch start. Sincerely,

Mark A. McLaughlin, CEO, Pacific Union Please remember to seek out local news, trend analysis, and expert advice for your real estate decisions.

Bay Area 10-Year Overview Here’s a look at home sales in the Bay Area’s real estate markets in the fourth quarter of 2014, with a glance back at the 10 preceding fourth quarters.

Bay Area: 10-Year Overview of Q4 Homes Sold REGION

Q4 '04

Q4 '05

Q4 '06

Q4 '07

Q4 '08

Q4 '09

Q4 '10

Q4 '11

Q4 '12

Q4 '13

Q4 '14

3,165

2,929

2,153

1,248

3,343

3,063

2,657

2,757

2,814

2,463

2,367

EAST BAY

813

831

708

510

515

601

595

634

807

757

671

MARIN COUNTY

661

580

541

390

303

522

454

453

593

558

519

NAPA COUNTY

414

316

266

161

281

325

282

324

376

313

268

SAN FRANCISCO (SFH)

856

807

652

488

481

649

615

665

737

712

659

SAN FRANCISCO (CONDOS)

575

563

548

490

353

516

447

466

625

690

607

SILICON VALLEY

763

661

618

467

335

573

584

500

686

589

544

CONTRA COSTA COUNTY

1,614

1,295

1,090

667

1,303

1,154

1,014

1,230

1,300

1,143

1,131

SONOMA VALLEY

175

127

108

110

127

142

126

145

LAKE TAHOE/TRUCKEE (SFH)

377

272

220

178

167

297

249

293

356

283

317

SONOMA COUNTY

LAKE TAHOE/TRUCKEE (CONDOS)

Click here to see specific 10-year data on key cities in the Bay Area.

Contra Costa County Quarterly Real Estate Report Q4 2014

Ellen Anderson Senior Vice President, Contra Costa County 925.743.9330 ellen.anderson@pacunion.com 101 Sycamore Valley Road West | Danville, CA 94526

Contra Costa County pacificunion.com

Contra Costa County: Q4 Results Real estate activity slowed in the fourth quarter in Pacific Union’s Contra Costa County region, held back by a shrinking pool of available homes. It’s a problem that has bedeviled the region for much of the past year, caused in part by would-be sellers who remain unsure of the market and where they will find their next homes. At the same time, buyers were more cautious in the fourth quarter, too. Except in the most sought-after communities such as Lafayette and Orinda, few buyers were willing to pay above the list price or engage in bidding wars. Home prices were up solidly compared with one year ago, although the pace of appreciation slowed significantly from what we saw one and two years ago — more evidence that the Bay Area’s real estate markets are gradually settling down after several years of frenzied recovery. Fewer high-end properties sold during the fourth quarter than in previous quarters, though that will likely change as spring approaches. Looking Forward: We expect to see more homes coming on the market in the first and second quarters of 2015, spurred not just by the advent of springtime but also the likelihood that the current near-record-low mortgage rates will soon disappear. Defining Contra Costa County: Our real estate markets in Contra Costa County include the cities of Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek. Sales data in the charts below includes single-family homes in these communities.

Median Sales Price

$1,300,000 $1,100,000

$1,036,975 $920,000

$900,000

$860,000

$931,500

$1,004,000

$1,050,000

$975,000

$1,040,000

$1,060,000 $965,000

$997,500

$1,015,000

$995,000

$700,000 $500,000 $300,000 $100,000

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Median sales price for single-family homes in these Contra Costa County communities: Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek.

Months’ Supply of Inventory

2.6 2.2

2.4

2.1

1.8 1.7

1.6

1.4

1.9 1.6

1.5

1.6

1.5

1.6

1.1

0.9

0.6 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for single-family homes in these Contra Costa County communities: Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek.

Contra Costa County pacificunion.com

Average Days on the Market

23 18

15 10 5 0

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Average days on market for single-family homes sold in these Contra Costa County communities: Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek.

Percentage of Properties Under Contract 45%

39.7%

40%

34.4%

35% 30% 25%

37.9%

38.2%

37.8%

30.2%

33.0%

32.0%

33.2%

33.5%

34.1%

Oct-14

Nov-14

Dec-14

29.9%

23.9%

20% 15% 10% 5% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Source: Terradatum, January 7, 2015. Percentage of single-family homes under contract in these Contra Costa County communities: Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek.

Sales Price as a Percentage of Original Price 103%

101.8%

102% 101%

100.2%

100%

102.0% 100.2%

99.9%

100.6% 99.1%

99% 98% 97%

97.3%

99.3% 98.2%

98.6%

98.4%

97.4%

96% 95% 94%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Sales price as % of original price (including adjustments) for single-family homes under contract in these Contra Costa County communities: Alamo, Blackhawk, Danville, Diablo, Lafayette, Moraga, Orinda, Pleasant Hill, San Ramon, and Walnut Creek.

Contra Costa County pacificunion.com

A Closer Look at Contra Costa County Contra Costa County Snapshot: Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Alamo

55,910,233

68,901,781

23%

13%

-23%

1,370,000

1,500,000

Blackhawk

34,962,300

33,101,888

-5%

-21%

1,240,000

1,378,000

11%

Danville

170,474,711

141,348,273

-17%

145

114

-21%

11%

1,045,000

1,160,000

11%

Diablo

7,174,000

7,737,025

33%

188

-77%

2,500,000

1,350,000

-46%

Lafayette

79,361,550

87,211,524

10%

-53%

1,155,000

1,180,000

Moraga

28,761,000

31,051,500

1,108,500

1,060,000

-4%

Orinda

70,786,565

82,696,340

17%

-8%

1,010,000

1,200,000

19%

Pleasant Hill

54,200,265

47,021,699

-13%

-24%

25%

580,000

650,000

12%

San Ramon

144,377,550

149,268,427

161

158

-2%

13%

830,000

891,240

Walnut Creek

113,469,950

128,550,065

13%

136

133

-2%

25%

786,500

888,420

13%

Source: Terradatum, January 7, 2015. Data is for single-family homes in selected Contra Costa County cities.

Contra Costa County pacificunion.com

Contra Costa County Housing and Economic Outlook While also forming its own dynamic employment base, Contra Costa primarily remains a comparatively affordable commuter housing market. The new BART rail line should make a major difference to home investment along state Route 4, where many buyers stretch to qualify for a home.

THE ECONOMY Solid Job Growth: Contra Costa County had over 335,000 employed individuals in 2013 and was projected to add another 5,800 by the end of 2014.Â That is a solid growth rate of about 1.7 percent for 2014. We project even stronger job growth through 2016, followed by an easing through 2018. Sector Growth: The education, health services, trade, transportation, and utilities sectors have experienced the largest job growth over the past year. Solid Employment: With an unemployment rate of 6.1 percent, the East Bay MSA (Contra Costa and Alameda County combined) is in line with the national average of 5.9 percent. High Incomes: With a median household income of over $78,000 in 2013, Contra Costa County enjoys a relatively higher income profile, well above the national norm of about $52,000, but is an outlet of affordable housing for the upper middle class. Income growth finally surged last year and is projected to be strong over the next few years. Jobs and Median Income Trends and Projections - Contra Costa County Jobs Total Change Change Rate Median Income Change Rate

2009 325,900 -17,300 -5.0% $75,700 -4.0%

2010 316,500 -9,400 -2.9% $74,100 -2.1%

2011 317,300 800 0.3% $73,200 -1.2%

2012 325,800 8,500 2.7% $74,300 1.5%

2013 335,100 9,300 2.9% $78,300 5.4%

2014P 340,900 5,800 1.7% $81,200 3.7%

2015P 349,200 8,300 2.4% $84,800 4.4%

2016P 357,300 8,100 2.3% $88,700 4.6%

2017P 362,300 5,000 1.4% $92,600 4.4%

2018P 365,500 3,200 0.9% $96,000 3.7%

Source: Moody Analytics

DEMOGRAPHICS Stable Growth: Contra Costa County has seen its population grow at a stable rate of around 1.4 percent in recent years. This equates to just over 14,000 additional residents annually over the last five years. Population growth, however, is projected to ease. Slower Growth Ahead: Though slower growth is forecast in the coming years, household growth should outpace population growth as millennials begin to move out and, more generally, household formations pick up. Population and Households Trends and Projections - Contra Costa County

2009

2010

2011

2012

2013

Current

2014P

2015P

2016P

2017P

2018P

1,037,900

1,052,700

1,065,900

1,078,300

1,095,100

1,103,400

1,102,500

1,109,500

1,118,000

1,127,600

1,137,800

14,500

14,800

13,200

12,300

16,900

5,200

7,400

7,000

8,500

9,700

10,200

1.4%

1.3%

1.2%

1.6%

0.5%

0.7%

0.6%

0.8%

0.9%

372,100

377,000

380,100

382,900

385,400

389,600

388,800

393,000

397,200

401,200

405,100

Change

4,800

4,900

3,100

2,800

2,500

3,600

3,400

4,200

4,100

3,900

Change Rate

1.3%

0.8%

0.7%

0.9%

1.1%

1.0%

Population Total Change Change Rate Household Total

1.0%

Source: Moody Analytics

Contra Costa County pacificunion.com

THE HOUSING MARKET Easing Home Prices: Our Burns Home Value Index (BHVI) estimates price appreciation for the entire resale market. Currently, the BHVI for the East Bay MSA shows prices have risen 8.7 percent over the last year, which has slowed from double-digit upticks in 2012 and 2013. JBREC forecasts slower price increases after 2015. Historically Solid Resale Volumes: The resale volume in 2013 was down 5 percent from 2012 to about 15,700 sales in Contra Costa County. Projections at the MSA level indicate strong volume growth through 2016, followed by marginal decreases in 2017-2018. Investors Leaving: Investors are purchasing about 18 percent of homes in the East Bay MSA, down from 31 percent at the peak in the beginning of 2013. Higher home prices, and hence lesser returns on rented homes, is the main reason. Affordability: Though low mortgage rates help keep affordability at a historically normal level in Contra Costa County, comparatively high prices mean homeownership is still somewhat expensive. The median income household would need to pay 36 percent of their income to buy the median-priced resale home and about 38 percent to afford the median-priced new home. New Home Pricing: New home prices have generally been at about the $500,000 level over the past year and a half, up nearly 10 percent from the calendar year 2013. Burns Home Value Index Trends and Projections - East Bay MSA Burns Home Value Index Change Rate Affordability Index

2009 110.97 -3.1% 1.9

2010 105.46 -5.0% 1.7

2011 99.51 -5.6% 0.7

2012 115.21 15.8% 0.5

2013 139.63 21.2% 3.3

Current 148.79 8.7% 4.8

2014P 149.41 7.0% 4.7

2015P 156.88 5.0% 5.3

2016P 160.01 2.0% 5.6

2017P 161.61 1.0% 5.7

2018P 161.61 0.0% 5.7

Source: John Burns Real Estate Consulting

Note: The Burns Affordability Index is scaled from 1 to 10, with 5 set to the long-term norm for a given market, 0 indicating excellent affordability and 10 indicating excellent affordability poor affordability compared to that market’s norm.

MARKET COLOR Bigger BART: An extension of the Bay Area Rapid Transit (BART) is currently underway, bringing the service to eastern Contra Costa County along the state Route 4 corridor via an eBART connecting train. With stops located in Antioch, Pittsburg, and eventually Brentwood, this extension will help alleviate often brutal congestion for state Route 4 corridor commuters, a key new home locale. The Antioch station is anticipated to open in late 2017, while the Brentwood station’s timing is still uncertain. Urban Lafayette: Lafayette is a high-end community in the affluent “Lamorinda” area. Historically characterized by large homes on large lots, aging households in the area are seeking more urbanized alternatives. But rather than having to move to San Francisco or Oakland, these households will have options in downtown Lafayette. KB Home, Lennar, and The New Home Company are all planning midrise, single-level condominiums in downtown Lafayette. Similar developments are planned in other parts of the East Bay, as empty-nesters and older couples look to downsize into lock-and-go convenience that is still luxurious enough to meet their needs.

East Bay Quarterly Real Estate Report Q4 2014

Pam Hoffman Senior Vice President, Managing Broker, East Bay Region 510.339.6460 phoffman@pacunion.com 1900 Mountain Boulevard | Oakland, CA 94611

East Bay pacificunion.com

East Bay: Q4 Results Fourth-quarter home sales typically start to slow as the holiday season approaches, but another factor was also at work during the last quarter of 2014: an extreme shortage of available homes in Pacific Union’s East Bay region. The number of new listings fell precipitously after the first week of November and didn’t recover. But if sellers were in short supply, buyers were not, and those properties that were available were quickly sold. The East Bay remains a popular destination for buyers priced out of San Francisco, and the most in-demand neighborhoods were those that score high on walkability ratings and are close to BART stations. Homes selling for $500,000 to $1 million saw the most sales activity, and those that were priced accurately attracted multiple offers and sold above their list prices. Looking Forward: With an exceptionally robust local economy and mortgage rates still hovering near record lows, we expect strong sales in 2015. Many sellers wait until springtime before putting their homes on the market, but we recommend that they start earlier — in January and February, when less competition will help their properties stand out. Talk with a real estate professional now if you plan to prepare your home for sale in the coming weeks. Defining the East Bay: Our real estate markets in the East Bay region include Oakland ZIP codes 94602, 94609, 94610, 94611, 94618, 94619, and 94705; Alameda; Albany; Berkeley; El Cerrito; Kensington; and Piedmont. Sales data in the charts below includes single-family homes in these communities.

Median Sales Price

$900,000 $800,000 $700,000

$700,000

$713,750

$725,000

Jan-14

Feb-14

$758,500

$813,500

$817,000

Apr-14

May-14

$842,500

$790,000

$834,000

$778,000

$835,000

$826,500

$820,000

Oct-14

Nov-14

Dec-14

$600,000 $500,000 $400,000 $300,000 $200,000 $100,000

Dec-13

Mar-14

Jun-14

Jul-14

Aug-14

Sep-14

Source: Terradatum, January 7, 2015. Median sales price for single-family homes in the East Bay.

Months’ Supply of Inventory

2.6 2.0

2.1

1.1

1.6

1.4

1.6

1.3 1.0

1.2

1.0

1.1

1.0

0.8

0.6 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

0.6

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for single-family homes in the East Bay.

East Bay pacificunion.com

Average Days on the Market 35

33 28

15 10 5 0

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Average days on market for single-family homes sold in the East Bay.

Percentage of Properties Under Contract 50%

42.8%

45% 40% 35% 30%

43.2%

45.6%

43.7%

36.1% 27.9%

45.6% 39.6%

46.2% 39.5%

36.2%

31.1%

25% 20% 15% 10% 5% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Percentage of single-family homes under contract in the East Bay.

Sales Price as a Percentage of Original Price 116%

113.2%

114% 112% 110% 108% 106% 104%

111.6%

111.8%

109.4%

109.2%

110.3%

109.3%

106.2%

112.1% 109.3%

107.7%

104.1% 100.8%

102% 100% 98% 96% 94%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Sales price as % of original price (including adjustments) for single-family homes under contract in the East Bay.

East Bay pacificunion.com

A Closer Look at the East Bay East Bay Snapshot: Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Homes Sold

Q4 '14

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Alameda

71,203,231

67,657,950

-5%

-14%

-4%

730,000

813,000

11%

Albany

26,781,750

14,772,000

-45%

-58%

-17%

680,500

845,000

24%

Berkeley

154,139,234

153,259,580

-1%

166

145

-13%

-26%

810,000

960,087

19%

El Cerrito

36,339,755

39,314,551

-4%

15%

595,000

685,000

15%

Kensington

21,572,105

23,635,720

10%

-10%

790,000

786,720

Oakland*

262,849,498

274,316,079

355

321

-10%

-8%

704,000

801,000

14%

Piedmont

33,603,000

50,060,776

49%

30%

-43%

1,327,500

1,725,000

30%

Source: Terradatum, January 7, 2015. Data is for single-family homes in selected East Bay cities; *Oakland ZIP codes 94602, 94609, 94610, 94611, 94618, 94619, and 94705.

East Bay Price Range Snapshot: Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Homes Sold

Q4 '14

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Q4 '13

-46%

121

-45%

20%

415,000

Q4 '14 405,000

% change -2%

Under $500,000

48,526,620

26,069,700

Over $500,000

557,961,953

596,946,956

636

605

-5%

-16%

771,750

852,000

10%

$500,000 $1 million

360,408,549

313,319,237

-13%

499

412

-17%

-12%

718,000

760,000

Over $1 million

197,553,404

283,627,719

44%

137

193

41%

-23%

1,260,000

1,328,000

Source: Terradatum, January 7, 2015. Data is for SFH in the East Bay: Alameda, Albany, Berkeley, El Cerrito, Kensington, Piedmont, and Oakland ZIP codes 94602, 94609, 94610, 94611, 94618, 94619, and 94705.

Oakland Snapshot: Q4 2014 vs. Q4 2013 Neighborhood

Homes Sold Q4 '13

Average Price

Q4 '14

% change

Q4 '13

Q4 '14

% change

Montclair / Joaquin Miller

$850,834

$980,696

15%

Crocker Highlands / Grand Lake

-13%

$865,568

$1,062,770

23%

Rockridge / Claremont

-33%

$1,074,012

$1,266,553

18%

Glenview / Oakmore

$710,296

$843,316

19%

Laurel / Dimond

-21%

$497,041

$640,159

29%

Redwood Heights / Lincoln Heights

-25%

$634,777

$672,777

Crestmont / Ridgemont / Skyline

-17%

$875,750

$1,110,700

Temescal / Piedmont Ave.

-62%

$655,615

$680,600

27% 4%

Source: EBRD, January 7, 2015. Data is for single-family homes in selected Oakland neighborhoods.

East Bay pacificunion.com

Alameda County Housing and Economic Outlook Benefitting from easy access to both San Francisco and Silicon Valley, Alameda County offers relatively affordable housing opportunities for commuters as well as quality housing for its own economic base. Areas with good schools significantly outperform those with mediocre schools.

THE ECONOMY Solid Job Growth: Alameda County had nearly 700,000 employed residents in 2013 and was projected to add another 12,200 by the end of 2014.Â Employment growth has been at 3-plus percent over for the past two years, and we anticipate solid increases going forward. Growing Sectors: The education, health services, trade, transportation, and utilities job sectors have experienced the largest job growth over the past year. Solid Employment: With an unemployment rate of 6.1 percent, the East Bay MSA (Contra Costa and Alameda County combined) is in line with the national average of 5.9 percent. Strong Incomes: At $70,900 in 2013, the Alameda County median household income is well above state and national benchmarks and low by Bay Area standards. Income levels rose in 2012 and really began to accelerate in 2013. They are projected to continue to grow through the next few years at fairly robust levels. Jobs and Median Income Trends and Projections - Alameda County Jobs Total Change Change Rate Median Income Change Rate

2009 657,800 -43,600 -6.2% $68,300 2.9%

2010 646,400 -11,400 -1.7% $67,000 -1.9%

2011 653,600 7,200 1.1% $66,200 -1.2%

2012 674,200 20,600 3.2% $67,500 2.0%

2013 698,700 24,500 3.6% $70,900 5.0%

2014P 728,100 17,200 2.4% $73,200 3.2%

2015P 745,000 16,900 2.3% $76,100 4.0%

2016P 755,500 10,500 1.4% $79,500 4.5%

2017P 762,300 6,800 0.9% $82,900 4.3%

2018P 1,638,111 14,900 0.9% $86,000 3.7%

Source: Moody Analytics

DEMOGRAPHICS Stable Growth: Alameda County has experienced population growth at a rate between 1.0 percent and 1.5 percent in recent years. This translates into over 100,000 additional residents in the past five years. Population growth is projected to ease to a level of less than 1 percent per year going forward. Slower Growth Ahead: Though slower growth is forecast in the coming years, household growth should outpace population growth as millennials begin to move out and, more generally, household formations pick up. We anticipate an increase of 28,200 additional households by the end of 2018.

Population and Households Trends and Projections - Alameda County

2009

2010

2011

2012

2013

Current

2014P

2015P

2016P

2017P

2018P

1,498,539

1,513,527

1,531,324

1,553,960

1,577,988

1,589,600

1,588,246

1,598,110

1,609,872

1,623,231

1,638,111

21,300

15,000

17,800

22,600

24,000

7,600

10,300

9,900

11,800

13,400

14,900

1.4%

1.0%

1.2%

1.5%

0.5%

0.7%

0.6%

0.7%

0.8%

0.9%

541,900

547,500

551,600

557,400

561,000

566,900

565,800

571,800

577,700

583,400

589,100

Change

7,700

5,600

4,100

5,800

3,600

5,300

4,800

6,000

5,900

5,700

5,800

Change Rate

1.4%

1.0%

0.8%

1.1%

0.6%

0.9%

0.8%

1.1%

1.0%

Population Total Change Change Rate Household Total

1.0%

Source: Moody Analytics

East Bay pacificunion.com

THE HOUSING MARKET Easing Home Price Growth: Our Burns Home Value Index (BHVI) estimates price appreciation for the entire resale market. Currently, the BHVI for the East Bay MSA shows prices have risen 8.7 percent over the last year, which has slowed from double digit upticks in 2012 and 2013. JBREC forecasts slower price increases after 2015. Slightly Declining Resale Volumes: Alameda County’s resale volume in 2013 was down 3 percent from 2012 to about 16,700 sales. Projections at the MSA level indicate strong volume growth through 2016, followed by marginal decreases in 2017-18. Investor Activity Slowing: Investors are purchasing about 18 percent of homes in the East Bay MSA, down from 31 percent at the peak in the beginning of 2013. Higher home prices, and hence lesser returns on rented homes, is the main reason. Affordability: Though low mortgage rates help keep affordability at a historically normal level, comparatively high prices in Alameda County mean homeownership is still a burden on an average income. The medianincome household would need to pay 56 percent of their income to buy the median-priced resale home and about 60 percent to afford the median-priced new home. New Home Pricing: New home prices have generally been at about the $720,000 level over the past year and a half in Alameda County, up more than 18 percent from the calendar year 2013. Burns Home Value Index Trends and Projections - East Bay MSA Burns Home Value Index Change Rate Affordability Index

2009 110.97 -3.1% 1.9

2010 105.46 -5.0% 1.7

2011 99.51 -5.6% 0.7

2012 115.21 15.8% 0.5

2013 139.63 21.2% 3.3

Current 148.79 8.7% 4.8

2014P 149.41 7.0% 4.7

2015P 156.88 5.0% 5.3

2016P 160.01 2.0% 5.6

2017P 161.61 1.0% 5.7

2018P 161.61 0.0% 5.7

Source: John Burns Real Estate Consulting

MARKET COLOR Urbanizing Alameda: While Dublin has become one of the most active and attractive new-home nodes in the Bay Area with a family-friendly suburban environment, other parts of Alameda County are urbanizing. Downtown Oakland and the nearby Waterfront district are slated for major urban infill projects, such as the Brooklyn Basin, that will offer an array of midrise and high-rise living options. Even historically more suburban Fremont in southwest Alameda County near Silicon Valley is urbanizing. Lennar, for instance, recently purchased 100 acres around an upcoming Bay Area Rapid Transit (BART) station that is expected to yield over 2,000 homes. Toll Brothers’ nearby 34-acre site is slated for about 1,000 homes. These densities will demand multistory living, likely both for-sale and rental housing. Throughout the region, builders are searching for more urban opportunities, both for the young tech-oriented households but also to satisfy older buyers eager to shed a high-maintenance home for a more convenient lifestyle.

Marin County Quarterly Real Estate Report Q4 2014

Brent Thomson President, Marin County 415.383.1900 brent.thomson@pacunion.com 575 Redwood Highway, Suite 150 | Mill Valley, CA 94941

Marin County pacificunion.com

Marin County: Q4 Results A tight supply of available homes held back fourth-quarter sales in Pacific Union’s Marin County region. Buyers were plentiful, however, resulting in rising sales prices overall and multiple offers on all well-priced homes in attractive areas. Homes priced from $1 million to $2 million saw the biggest increase in sales. Continuing a recent trend, the quarter also saw a significant number of private, off-market sales. Like other Bay Area regions, homeowners in Marin County were slow to put their properties on the market even as sales prices continued to rise — perhaps worried about their prospects after the transaction when they, too, would become buyers in a tight market. Buyers, meanwhile, were more selective than in past quarters, refusing to settle for anything less than exactly what they wanted. Looking Forward: We are optimistic that 2015 will be a strong year for Marin County home sales. The Bay Area’s vibrant economy will continue to encourage buyers, aided by near-record-low mortgage rates. And with no shortage of qualified buyers, would-be sellers should consider putting their homes on the market sooner rather than later. The supply of available homes will expand by the springtime, and properties on the market before then will enjoy less competition. Defining Marin County: Our real estate markets in Marin County include the cities of Belvedere, Corte Madera, Fairfax, Greenbrae, Kentfield, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon. Sales data in the charts below includes single-family homes in these communities.

Median Sales Price $1,300,000 $1,100,000 $900,000

$935,000

$995,000

$1,030,000 $1,001,500

$1,100,000

$1,054,100

$1,175,000

$1,051,500

$1,100,000 $991,000

$952,500

$1,020,000

$852,000

$700,000 $500,000 $300,000 $100,000

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Median sales price for single-family homes in these Marin County communities: Belvedere, Corte Madera, Fairfax, Greenbrae, Kentﬁeld, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon.

Months’ Supply of Inventory 3.1 2.6

2.6 2.1

2.6

1.8

1.8 1.5

1.6

1.9

1.8

1.5

1.4

1.1 0.6 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for single-family homes in these Marin County communities: Belvedere, Corte Madera, Fairfax, Greenbrae, Kentﬁeld, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon.

Marin County pacificunion.com

Average Days on the Market 90 80

84 75

70 56

Aug-14

Sep-14

40 30 20 10 0

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Average days on market for single-family homes sold in these Marin County communities: Belvedere, Corte Madera, Fairfax, Greenbrae, Kentﬁeld, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon.

Percentage of Properties Under Contract 45%

40.0%

40% 35%

32.0%

38.2% 33.8%

31.3%

35.2% 30.2%

30% 25% 20%

28.0%

29.5%

30.7% 26.5% 23.3%

18.6%

15% 10% 5% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Percentage of single-family homes under contract in these Marin County communities: Belvedere, Corte Madera, Fairfax, Greenbrae, Kentﬁeld, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon.

Sales Price as a Percentage of Original Price 102%

100.7% 99.3%

100%

98.0%

98%

97.4%

97.0%

97.5%

98.0% 95.8%

95.8%

96% 94%

98.2%

93.8%

94.5%

93.5%

92% 90% 88%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Sales price as % of original price (including adjustments) for single-family homes under contract in these Marin County communities: Belvedere, Corte Madera, Fairfax, Greenbrae, Kentﬁeld, Larkspur, Mill Valley, Novato, Ross, San Anselmo, San Rafael, Sausalito, and Tiburon.

Marin County pacificunion.com

A Closer Look at Marin County Marin County Snapshot: Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Belvedere

7,033,000

22,940,000

226%

100%

115

120

2,292,000

3,775,000

65%

Corte Madera

24,757,734

16,418,250

-34%

-48%

61%

1,012,000

1,350,000

33%

Fairfax

17,935,302

15,627,000

-13%

-35%

-29%

619,000

860,000

39%

Greenbrae

7,215,600

10,132,225

40%

14%

139

-72%

1,006,600

1,320,000

31%

Kentfield

38,607,049

29,566,500

-23%

-17%

-8%

1,800,000

1,850,000

Larkspur

17,989,375

29,270,750

63%

50%

1,487,000

1,447,000

-3%

Mill Valley

128,202,550

106,939,125

-17%

-25%

-13%

1,180,000

1,316,500

12%

Novato

84,043,369

91,854,627

113

666,600

751,000

13%

Ross

38,181,500

48,625,000

27%

44%

113

-25%

2,725,000

3,000,000

10%

San Anselmo

59,020,925

52,663,600

-11%

-21%

-19%

902,500

1,070,000

19%

San Rafael

118,472,140

115,587,310

-2%

122

118

-3%

827,500

899,500

Sausalito

28,348,500

26,640,000

-6%

-14%

11%

1,300,000

1,392,500

Tiburon

56,838,000

98,722,887

74%

42%

1,865,000

2,385,500

28%

Source: Terradatum, January 7, 2015. Data is for single-family homes in selected Marin County cities.

Marin County pacificunion.com

Marin County Housing and Economic Outlook This affluent San Francisco suburban bedroom community hasn’t experienced the same price surge as San Francisco. Supply constraints and great schools make this market a safer long-term investment than most areas.

THE ECONOMY Decent Jobs: Marin County is San Francisco’s quieter, more suburban neighbor on the other side of the Golden Gate Bridge. It has an employment basis of only 110,000 and recent job growth has been a solid 2,600 jobs in the last year. We project continued good job growth ahead. High Pay Growth: For the San Francisco MSA as a whole (San Mateo, San Francisco, and Marin Counties), the higher paying sectors – finance, information, and professional and business services – are critical and have experienced tremendous growth over the last two years. These sectors added over 44,000 jobs MSA-wide from 2011 to 2013. Highly Employed Population: Only 4.5 percent of the labor pool cannot find a suitable job. Well Off and Getting Better: Marin County is highly affluent, supporting a 2014 median household income of $91,200 per year. Wage growth has recently been solid and is projected to be quite strong for the next few years. Jobs and Median Income Trends and Projections - Marin County Jobs Total Change Change Rate Median Income Change Rate

2009 102,900 -6,800 -6.2% $85,800 -2.4%

2010 101,400 -1,500 -1.5% $84,500 -1.5%

2011 102,800 1,400 1.4% $83,400 -1.3%

2012 105,700 2,900 2.8% $85,600 2.6%

2013 109,200 3,500 3.3% $87,800 2.6%

2014P 111,800 2,600 2.3% $91,200 3.9%

2015P 113,800 2,000 1.8% $96,300 5.6%

2016P 115,600 1,800 1.6% $101,600 5.5%

2017P 117,100 1,500 1.3% $106,500 4.8%

2018P 118,100 1,000 0.9% $111,200 4.4%

Source: Moody Analytics

DEMOGRAPHICS Slow and Steady: Marin County is home to about 250,000 people in 105,000 households. Population growth is forecast to remain fairly slow as it has been historically, both a function of high housing prices and a generally slow growth sentiment. By the Numbers: Growth projections translate into about 1,500 new residents annually in Marin County, or about 1,000 new households, with household growth projected to increase at a somewhat faster pace.

Population and Households Trends and Projections - Marin County

Population Total

2009

2010

2011

250,900

252,900

255,300

Change

2,500

2,000

Change Rate

1.0%

0.8%

102,400

103,300

Household Total

2012

2013

Current

2014P

2015P

2016P

2017P

2018P

255,800

258,000

259,700

259,500

260,900

262,500

264,200

265,700

2,400

600

2,100

1,200

1,500

1,600

1,700

1,500

0.9%

0.2%

0.8%

0.5%

0.6%

103,900

103,600

104,200

105,100

105,000

106,000

107,100

108,200

109,100

Change

1,100

900

500

-200

600

700

1,000

1,100

Change Rate

1.0%

0.9%

0.5%

-0.2%

0.6%

0.7%

0.9%

1.1%

1.0%

900 0.9%

Source: Moody Analytics

Marin County pacificunion.com

Burns Home Value Index Trends and Projections - San Francisco MSA Burns Home Value Index Change Rate Affordability Index

2009 130.71 -1.0% 4.3

2010 125.49 -4.0% 4.1

2011 122.68 -2.2% 3.2

2012 141.35 15.2% 3.0

2013 163.68 15.8% 5.0

Current 171.69 7.8% 6.1

2014P 171.86 5.0% 6.1

2015P 180.28 4.9% 6.7

2016P 181.54 0.7% 7.0

2017P 182.81 0.7% 7.1

2018P 183.55 0.4% 7.2

Source: John Burns Real Estate Consulting

MARKET COLOR Building Here and There: Like neighboring Sonoma County, there is very little new development activity in Marin County. The New Home Company made a splash with its Rose Lane community in Larkspur, offering conventional large detached homes, small-lot cottages, and even age-restricted low-rise condominiums. Marin County will continue to be a generally undersupplied, slow-growing market characterized by occasional subdivisions in generally infill sites, typically located from Tiburon to the north. SMART Commuting: The SMART train will provide a rail commuter option that parallels the congested Highway 101 from Sonoma County to the north and into Marin County, terminating at Larkspur. With several stations slated to open in 2016, SMART riders can catch a ferry in Larkspur into the massive – and generally high-paying – San Francisco jobs node.

Napa County Quarterly Real Estate Report Q4 2014

Linda Carroll Regional Executive, Napa County 707.251.8805 linda.carroll@pacunion.com 944 Main Street | Napa, CA 94559

Napa County pacificunion.com

Napa County: Q4 Results Pacific Union’s Napa County region enjoyed robust sales throughout the fourth quarter. The supply of homes was tight — a common problem throughout the Bay Area — but buyers were eager to scoop up any fairly priced property and in all areas of the county, from the city of Napa in the south to high-end communities such as St. Helena farther north. Napa County is no longer the tight seller’s market of a year ago. Properties sat on the market longer in the fourth quarter, and buyers were able to negotiate deals that were unheard of in the first and second quarters. That said, attractive properties that were priced well still commanded multiple offers throughout the county. Looking Forward: We expect to see increased inventory levels beginning in January and continuing through the spring and summer. Many sellers wait until flowers are blooming and their properties are looking their best before they put their homes on the market, but we encourage them to get a jump on the competition and put out a for-sale sign early in the year. Rents are high and mortgage rates are low, and many prospective homebuyers may find that they can pay less in monthly mortgage payments than they would in rent. Defining Napa County: Our real estate markets in Napa County include the cities of American Canyon, Angwin, Calistoga, Napa, Oakville, Rutherford, St. Helena, and Yountville. Sales data in the charts below includes all single-family homes in Napa County.

Median Sales Price $700,000 $600,000 $500,000

$475,000

$528,000

$527,000

$510,022

$471,000

$610,000

$602,500

$592,000

$575,000

$563,250

$535,000

$510,000

$530,000

$400,000 $300,000 $200,000 $100,000

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Median sales price for single-family homes in Napa County.

Months’ Supply of Inventory 6.1 5.1

4.3

4.7

4.2

4.1 3.1

5.3

4.9

3.5

3.6

3.0

3.4

3.7

4.0

4.2 3.0

2.1 1.1 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for single-family homes in Napa County.

Napa County pacificunion.com

Average Days on the Market 140

127

120 100

110 91

100

Sep-14

Oct-14

95 81

60 40 20 0

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Average days on market for single-family homes sold in Napa County.

Percentage of Properties Under Contract 30%

24.8%

25%

20.3%

20% 15%

23.3% 19.3%

19.3%

17.5% 14.5%

16.0%

16.3%

16.9%

Jul-14

Aug-14

Sep-14

17.7%

19.6%

17.7%

10% 5% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Percentage of single-family homes under contract in Napa County.

Sales Price as a Percentage of Original Price 98% 96% 94%

96.4% 94.1%

92%

90.0%

90%

95.4%

95.8%

95.1%

93.7%

93.5%

93.4%

92.5%

91.6%

90.7% 88.6%

88% 86% 84%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Sales price as % of original price (including adjustments) for single-family homes under contract in Napa County.

Napa County pacificunion.com

A Closer Look at Napa County Napa County Snapshot: Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

American Canyon

18,567,150

11,826,350

-36%

-42%

-29%

373,000

407,500

Angwin

5,779,000

6,720,000

16%

-57%

138

294

113%

629,000

2,100,000

234%

Calistoga

14,311,250

6,587,900

-54%

-56%

142

122

-14%

644,500

565,000

-12%

Napa

121,901,482

130,286,684

206

189

-8%

479,500

559,000

17%

St. Helena

36,437,582

35,820,500

-2%

36%

155

141

-9%

1,110,000

778,000

-30%

Yountville

4,572,500

6,060,088

33%

-10%

715,000

790,000

10%

Source: Terradatum, January 7, 2015. Data is for single-family homes in selected Napa County cities.

Napa County Price Range Snapshot: Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Under $500,000

61,609,432

41,492,263

-33%

164

104

-37%

-6%

385,000

418,250

$500,000 $999,999

72,312,532

83,112,171

15%

111

124

12%

627,000

650,000

$1 million - $3 million

57,852,000

61,992,088

144

126

-13%

1,550,000

1,614,000

Over $3 million

21,820,000

10,705,000

-51%

340

158

-54%

7,175,000

3,505,000

-51%

Source: Terradatum, January 7, 2015. Data is for single-family homes in Napa County.

Napa County pacificunion.com

Napa County Housing and Economic Outlook Net worth drives the second-home and retiree markets in Napa, and net-worth growth has been fantastic. Rising stock and home prices continue to create Napa housing opportunities for the affluent, and the locals benefit from the increased spending.

THE ECONOMY Robust Job Growth: Napa County added 3,000 net new jobs in 2013 and was projected to add another 2,500 in 2014, which would bring the county to over 69,000 jobs. That is a strong projected growth rate of 3.8 percent. We project strong job growth next year, and then easing through 2018. Tourism and Job Diversity: The health, education, tourism, manufacturing, and professional business services sectors matter most to the local economy. Highly Employed Population: Only 4.8 percent of the labor pool cannot find a suitable job. Middle Class: At $68,100 per year, Napa enjoys a solid income profile not far above the statewide and national norms. Napa County is much more of a middle-class area than is perceived by many from outside Napa, who only know it for its vineyards and luxury vacation homes. Jobs and Median Income Trends and Projections - Napa County Jobs Total Change Change Rate Median Income Change Rate

2009 61,400 -4,000 -6.1% $63,900 -2.7%

2010 60,600 -800 -1.3% $63,500 -0.6%

2011 61,200 600 1.0% $62,600 -1.4%

2012 63,600 2,400 3.9% $63,400 1.3%

2013 66,600 3,000 4.7% $66,100 4.3%

2014P 69,100 2,500 3.8% $68,100 3.0%

2015P 71,600 2,500 3.6% $70,600 3.7%

2016P 73,100 1,500 2.1% $72,800 3.1%

2017P 74,100 1,000 1.4% $74,900 2.9%

2018P 74,600 500 0.7% $76,700 2.4%

Source: Moody Analytics

DEMOGRAPHICS Usually Slow Growth: Napa has long favored a slow-growth sentiment. Population growth has fallen below 1.0 percent in recent years and household growth is at 0.6 percent year over year. We project continued slow growth going forward, though we expect household growth to outpace population growth as millennials begin to move out and, more generally, household formation trends to gravitate back toward long-term norms. Slow Growth Future: Growth projections translate into only about 600 to 1,200 new Napa County residents annually over next few years, or just a few hundred new households annually. Population and Households Trends and Projections - Napa County

Population Total

2009

2010

2011

2012

2013

Current

141,100

2015P

136,800

137,900

138,900

140,300

Change

1,200

1,500

1,100

1,000

1,400

600

800

Change Rate

0.9%

1.1%

0.8%

0.7%

1.0%

0.4%

0.6%

48,500

49,000

49,300

49,600

49,800

50,100

50,500

Household Total

141,200

2014P

135,300

141,700

2016P

2017P

2018P

142,600

143,700

144,800

600

900

1,100

0.4%

0.6%

0.8%

51,000

51,500

52,100

Change

300

500

300

400

200

300

400

500

600

Change Rate

0.6%

1.0%

0.6%

0.7%

0.3%

0.6%

0.5%

0.8%

1.0%

1.1%

500 1.0%

Source: Moody Analytics

Napa County pacificunion.com

THE HOUSING MARKET Slowing Home Price Appreciation: Our Burns Home Value Index (BHVI) estimates price appreciation for the entire resale market. Currently, the BHVI shows prices have risen 8.0 percent over the last year, which has slowed from double-digit upticks in 2012 and 2013. JBREC forecasts slow but steady growth in this measure over the next few years, from 2.0 to 5.4 percent. Slightly Declining Volumes: We expect 2014 resale volume to barely exceed 2013. We project flat to slightly declining volumes over the next few years, but this is at a level very roughly in line with the long-term norm of about 1,250 to 1,450 sales per year. Investors Slowing Down: Investors are purchasing about 26 percent of Napa market homes, down from 36 percent at the peak at the end of 2012. Affordability: Though low mortgage rates help keep affordability at a historically normal level in Napa County, comparatively high prices mean homeownership is still expensive. The median-income household would need to pay 43 percent of their income to buy the median-priced resale home and about 56 percent to afford the median-priced new home. Expensive New Homes: New home prices bounce all over the place due to low supply. The median August price was $970,000, which is much higher than last year’s $533,525. Burns Home Value Index Trends and Projections - Napa County Burns Home Value Index Change Rate Affordability Index

2009 110.96 -9.2% 3.6

2010 102.86 -7.3% 2.1

2011 98.71 -4.0% 1.0

2012 110.41 11.9% 0.6

2013 129.57 17.4% 3.3

Current 137.97 8.0% 4.8

2014P 138.64 7.0% 4.7

2015P 146.13 5.4% 5.3

2016P 151.97 4.0% 5.6

2017P 156.84 3.2% 5.9

2018P 159.97 2.0% 6.1

Source: John Burns Real Estate Consulting

MARKET COLOR Napa is an extremely slow-growth market with very little new home activity. So the Napa Pipe development, with 945 homes and a commercial component anchored by a Costco and a hotel, will make a huge impact. There has been fierce neighborhood antagonism to this development located just south of the city of Napa, fueled by concerns about impacts on traffic and services, and more recently about seismic risk after the August earthquake. Still, the Napa Pipe development continues to move through the entitlement process. When and if this project gets off the ground, it would be the 1,000-pound gorilla of the Napa housing market. Other new housing developments will be of the infill variety, particularly given the demise of the Pacific Union College “ecovillage” plan.

San Francisco Quarterly Real Estate Report Q4 2014

Patrick Barber President 415.929.7100 patrick.barber@pacunion.com One Letterman Drive, Building C, Suite 500 | San Francisco, CA 94129

San Francisco pacificunion.com

San Francisco: Q4 Results Real estate activity typically pulls back in San Francisco during the fourth quarter as buyers and sellers alike turn their attention to holiday planning, and such was the case as 2014 wound down. The seasonal slowdown helped keep the inventory of available homes exceptionally tight across all price points in the fourth quarter, and unit sales also decelerated. Coming after an exceptional year of strong sales and price appreciation that ranked among the highest in the nation, the slowdown was predictable — even beyond the expected holiday relaxation factor. Still, single-family homes and condominiums that were fairly priced sold quickly, with many receiving multiple offers. Fourth-quarter sales activity was not as frenzied as in past quarters, but the positive economic fundamentals of the San Francisco market remain unmatched: one of the most desirable locations in the nation, an expanding job base, and economic growth that shows little sign of slowing down. Looking Forward: The year 2015 should shape up to be another busy one for buyers and sellers. We expect to see inventory levels rise appreciably in the first quarter; sales prices will also continue to rise, although not likely at the pace seen in 2014. Mortgage rates hovered near record lows throughout 2014 but are likely to succumb to upward-force vectors in 2015 — an added incentive for buyers to close deals early in the year to lock in low rates.

Single-Family Homes – Median Sales Price $1,300,000 $1,100,000

$1,100,000

$1,050,000 $947,000

$925,000

Dec-13

Jan-14

$1,180,000

$1,175,000 $1,090,500 $1,082,000

$985,000

$964,000

$1,040,000

$1,150,000 $1,082,000

$900,000 $700,000 $500,000 $300,000 $100,000

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Median sales price for single-family homes in San Francisco.

Condominiums – Median Sales Price $1,050,000

$1,100,000

$950,000

$1,000,000 $900,000 $800,000

$945,000

$977,000

$920,000

$970,000

$957,500

$980,000

$950,000

$1,006,500

$1,025,000

$970,000

$770,000

$700,000 $600,000 $500,000 $400,000 $300,000 $200,000 $100,000

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Median sales price for condominiums in San Francisco.

San Francisco pacificunion.com

Single-Family Homes – Months’ Supply of Inventory

2.6 2.1

2.1

2.1 1.7

1.6 1.1

1.8 1.5

1.4

1.6

1.6 1.2

1.1

1.1 0.7

0.6 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for single-family homes in San Francisco.

Condominiums – Months’ Supply of Inventory

2.0

2.1 1.9

1.7

1.7 1.5 1.3 1.1

1.6 1.3

1.8

1.7

1.4

1.3

1.2

1.3

1.0

0.9

0.7

0.7 0.5 0.3 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for condominiums in San Francisco.

Single-Family Homes – Average Days on the Market

30 25

May-14

Jun-14

Jul-14

Aug-14

Oct-14

Nov-14

20 15 10 5 0

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

Sep-14

Dec-14

Source: Terradatum, January 7, 2015. Average days on market for single-family homes sold in San Francisco.

San Francisco pacificunion.com

Condominiums – Average Days on the Market

60 50

47 40

40 35

Mar-14

Apr-14

Oct-14

Nov-14

20 10 0

Dec-13

Jan-14

Feb-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Dec-14

Source: Terradatum, January 7, 2015. Average days on market for condominiums sold in San Francisco.

Single-Family Homes – Percentage of Properties Under Contract 42.0%

45%

37.5%

40%

40.8% 36.7%

36.1%

35.5%

Jun-14

Jul-14

32.9%

32.3%

35% 30%

40.6%

42.0%

35.6%

34.0%

27.9%

25% 20% 15% 10% 5% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Percentage of single-family homes under contract in San Francisco.

Condominiums – Percentage of Properties Under Contract

50%

46.1%

45% 40% 35%

41.2%

38.9% 33.0%

40.2%

33.4%

37.8%

40.5%

37.8%

37.0%

36.3%

Aug-14

Sep-14

Oct-14

33.4%

34.6%

30% 25% 20% 15% 10% 5% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Percentage of condominiums under contract in San Francisco.

San Francisco pacificunion.com

Single-Family Homes â&#x20AC;&#x201C; Sales Price as a Percentage of Original Price 115%

113.4% 109.3%

110%

109.7%

109.1%

109.7%

109.6% 107.2%

106.9%

105.3%

103.6%

105% 100%

110.3%

109.8%

99.5%

95% 90%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2014. Sales price as % of original price (including adjustments) for single-family homes under contract in San Francisco.

Condominiums â&#x20AC;&#x201C; Sales Price as a Percentage of Original Price 110%

108.2%

108%

105.5%

106%

106.9%

107.9%

106.7%

107.6% 105.2%

104% 102%

101.3%

100%

106.0%

105.7%

104.0% 101.3%

99.9%

98% 96% 94%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Sales price as % of original price (including adjustments) for condominiums under contract in San Francisco.

San Francisco pacificunion.com

Delving into San Franciscoâ&#x20AC;&#x2122;s Districts

San Francisco is defined by 10 separate districts, each of which encompasses several neighborhoods. District 1:

Inner Richmond, Central Richmond, Outer Richmond, JordanPark/Laurel Heights, Lake, Lone Mountain, Sea Cliff.

District 2: Outer Sunset, Central Sunset, Inner Sunset, Outer Parkside, Parkside, Inner Parkside, Golden Gate Heights. District 3: Pine Lake Park, Merced Manor, Lake Shore, Lakeside, Stonestown, Merced Heights, Ingleside, Ingleside Heights, Oceanview. District 4: Balboa Terrace, Diamond Heights, Forest Hill, Forest Hill Extension, Forest Knolls, Ingleside Terrace, Midtown Terrace, Miraloma Park, Monterey Heights, Mount Davidson Manor, Sherwood Forest, St. Francis Wood, Sunnyside, West Portal, Westwood Highlands, Westwood Park. District 5: Buena Vista/Ashbury Heights, Clarendon Heights, Cole Valley/Parnassus Heights, Corona Heights, Duboce Triangle, Eureka Valley/Dolores Heights, Glen Park, Haight-Ashbury, Mission Dolores, Noe Valley, Twin Peaks. District 6: Alamo Square, Anza Vista, Hayes Valley, Lower Pacific Heights, North Panhandle, Western Addition. District 7: Cow Hollow, Marina, Pacific Heights, Presidio Heights. District 8: Downtown, Financial District/Barbary Coast, Nob Hill, North Beach, North Waterfront, Russian Hill, Telegraph Hill,

Tenderloin, Van Ness/Civic Center.

District 9: Bernal Heights, Central Waterfront/Dogpatch, Inner Mission, Mission Bay, Potrero Hill, South Beach,

South of Market, Yerba Buena.

District 10: Bayview, Bayview Heights, Candlestick Point, Crocker Amazon, Excelsior, Hunters Point, Little Hollywood,

Outer Mission, Mission Terrace, Portola, Silver Terrace, Visitacion Valley.

San Francisco pacificunion.com

San Francisco Snapshot: SFH, Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

District 1

92,234,628

District 2

District 3

District 4

District 5

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

19%

-12%

110,106,919

126,791,192

130,112,434

147

124

-16%

41,161,209

33,420,388

-19%

-22%

114,459,024

130,304,745

14%

-1%

175,942,526

198,591,899

13%

-1%

49%

15%

-3%

Q4 '13 $

1,317,500

-5%

31%

-31%

-23%

-2%

Q4 '14

% change

1,540,000

17%

835,000

950,000

14%

750,000

810,000

1,053,500

1,250,000

19%

1,662,500

1,785,000

1,550,000

2,195,000

42%

3,812,500

3,800,000

District 6

24,549,000

36,463,000

District 7

184,407,998

187,752,971

District 8

24,075,000

11,465,000

-52%

-29%

-54%

2,500,000

2,050,000

-18%

District 9

91,895,075

87,884,000

-4%

-8%

-4%

1,151,000

1,267,500

10%

District 10

83,794,800

89,792,698

134

121

-10%

603,750

716,000

19%

Source: Terradatum, January 7, 2015. Data is for single-family homes in San Francisco districts.

San Francisco Snapshot: Condos, Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

District 1

29,463,066

41,384,500

40%

-17%

894,000

1,300,000

45%

District 2

10,478,422

7,725,000

-26%

-36%

-31%

729,500

875,000

20%

District 3

4,364,000

3,900,000

-11%

21%

491,500

471,000

-4%

District 4

7,106,338

8,909,948

25%

-33%

485,000

589,000

21%

District 5

111,543,546

97,644,500

-12%

-13%

-3%

1,150,000

1,175,000

District 6

67,704,500

70,989,281

-16%

73%

760,000

1,090,000

43%

District 7

107,400,475

125,422,667

17%

-9%

1,212,500

1,350,000

11%

District 8

120,686,114

88,968,651

-26%

120

-31%

-9%

760,000

860,000

13%

District 9

232,961,163

222,187,415

-5%

228

210

-8%

852,750

954,444

12%

District 10

9,735,807

8,337,673

-14%

-11%

63%

530,000

535,500

Source: Terradatum, January 7, 2015. Data is for condominiums in San Francisco districts.

San Francisco pacificunion.com

San Francisco Price Range Snapshot: SFH, Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Under $1 million

288,661,726

208,293,634

-28%

392

270

-31%

745,000

782,500

$1 million - $3 million

416,746,728

529,734,450

27%

267

333

25%

-13%

1,420,000

1,425,000

Over $3 million

253,901,998

277,865,970

-24%

3,800,000

3,883,500

Source: Terradatum, January 7, 2015. Data is for single-family homes in San Francisco County.

San Francisco Price Range Snapshot: Condos, Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Under $1 million

284,974,430

$1 million - $2 million

Over $2 million

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

-27%

422

298

-29%

17%

208,752,740

309,390,300

371,196,395

20%

230

272

18%

107,078,701

95,520,500

-11%

-3%

Q4 '13 $

681,250

-30%

Q4 '14

% change

730,750

1,267,500

1,310,000

2,583,050

2,475,000

-4%

Source: Terradatum, January 7, 2015. Data is for condominiums in San Francisco County.

San Francisco pacificunion.com

San Francisco County Housing and Economic Outlook A surging tech employment base and a flood of activity from overseas continue to drive San Francisco’s home prices higher. While San Francisco emerges as one of the most expensive places to live in the world, and for good reason, the recent surge in prices concerns us that a slowdown in tech could indeed result in a slowdown in home prices.

THE ECONOMY Great Job Growth: San Francisco County is the financial center of Northern California and increasingly a tech/software hub. It is the most concentrated jobs node in the Bay Area, with over 620,000 employed and over 55,000 net new jobs added over the last two years (2012-2013). We project continued solid job increases ahead, albeit at slower rates of growth. High Pay Growth: For the San Francisco MSA as a whole (San Mateo, San Francisco, and Marin Counties), the higher-paying sectors – finance, information, and professional and business services – added over 44,000 jobs MSA-wide from 2011 to 2013. San Francisco specifically has become a favorite place for new software and tech companies with unparalleled urban amenities. Highly Employed Population: Only 4.5 percent of the labor pool cannot find a suitable job. Affluence: San Francisco County is very affluent, evidenced by its 2014 median household income of $78,100, though wealth disparities remain. Wage growth has been solid for the last two years and is projected to remain solid to strong going forward. Jobs and Median Income Trends and Projections - San Francisco County Jobs Total Change Change Rate Median Income Change Rate

2009 539,800 -24,600 -4.4% $69,600 -2.0%

2010 538,200 -1,600 -0.3% $69,900 0.4%

2011 552,000 13,800 2.6% $71,000 1.6%

2012 581,600 29,600 5.4% $74,000 4.2%

2013 608,500 26,900 4.6% $76,100 2.8%

2014P 622,700 14,200 2.3% $78,100 2.6%

2015P 634,100 11,400 1.8% $81,300 4.1%

2016P 644,300 10,200 1.6% $84,900 4.4%

2017P 652,800 8,500 1.3% $88,200 3.9%

2018P 658,500 5,700 0.9% $91,000 3.2%

Source: Moody Analytics

DEMOGRAPHICS Steady Growth Ahead: San Francisco County is approaching a population of 850,000 and has over 360,000 households. Recent growth has been fairly strong for such a built-out, physically small locale, and is expected to grow steadily over the next few years. By the Numbers: Growth projections translate into about 8,000 to 9,000 new residents annually in San Francisco County or about 4,000 to 5,000 new households each year. Household sizes are typically smaller than the norm in more suburban areas.

Population and Households Trends and Projections - San Francisco County

Population Total Change Change Rate Household Total

2009

2010

2011

2012

2013

Current

2014P

2015P

2016P

2017P

2018P

801,900

805,700

815,000

827,400

838,200

848,300

846,700

855,000

863,600

872,300

881,500

10,800

3,800

9,300

12,400

10,800

8,200

8,500

8,300

8,600

8,800

9,200

1.4%

0.5%

1.2%

1.5%

1.3%

1.0%

1.1%

345,600

346,000

348,700

352,500

356,200

361,200

360,200

365,100

370,300

375,400

380,400 5,000

Change

3,000

400

2,700

3,800

3,700

4,200

4,100

4,800

5,200

5,100

Change Rate

0.9%

0.1%

0.8%

1.1%

1.0%

1.2%

1.1%

1.3%

1.4%

1.3%

Source: Moody Analytics

San Francisco pacificunion.com

THE HOUSING MARKET Prices Strong Then Slower: Our Burns Home Value Index (BHVI) estimates price appreciation for the entire resale market. Currently, the BHVI for the San Francisco MSA shows prices up 7.8 percent over the last year, and we expect 7 percent appreciation over the next four years. Consistent Resale Volumes: There have been over 5,800 resales in San Francisco County over the last 12 months. At the MSA level, we forecast sales growth of about 3 to 5 percent for the next two years, but dipping to slight decreases in 2017-2018. Investors Still Here: San Francisco MSA investor activity has slowly diminished, but remains at about 22 percent, down from a high of over 24 percent in early 2013. While never as high a market share as in more outlying parts of the region, investors still represent a healthy part of the market. Much of this is in the form of overseas money, most often from China. Affordability Decreasing: Though mortgage rates remain historically low, the San Francisco MSA’s current affordability level is worse than its long-term norm. Within San Francisco County, a household earning the median income would need to pay 71 percent of their income to buy the median-priced resale home and 66 percent for the median-priced new home (the discrepancy due to far higher densities in the new home environment). Thus thousands of people working in San Francisco live elsewhere or rent. New Homes Difficult to Find: San Francisco County has a tremendous amount of potential supply, but actual supply is typically constrained. Supply conditions and local incomes mean new home prices are always high despite small home sizes and high densities. Over the past year and a half, new home prices have fluctuated wildly depending on what sold in any given month but have centered in the high-$800,000s. This compares to a new home median for all of 2013 of $738,637.

Burns Home Value Index Trends and Projections - San Francisco MSA Burns Home Value Index Change Rate Affordability Index

2009 130.71 -1.0% 4.3

2010 125.49 -4.0% 4.1

2011 122.68 -2.2% 3.2

2012 141.35 15.2% 3.0

2013 163.68 15.8% 5.0

Current 171.69 7.8% 6.1

2014P 171.86 5.0% 6.1

2015P 180.28 4.9% 6.7

2016P 181.54 0.7% 7.0

2017P 182.81 0.7% 7.1

2018P 183.55 0.4% 7.2

Source: John Burns Real Estate Consulting

MARKET COLOR Urban Publics: Some traditionally suburban-oriented big public builders like KB Home and Lennar are making inroads into the urban heart of San Francisco. KB Home will build a 74-unit midrise in the South Beach district and is looking for more sites in the city. Lennar recently opened its much anticipated 750acre Hunter’s Point – Candlestick Point redevelopment in the southeastern part of the city. Lennar also has a major stake in the potential Treasure Island redevelopment. Trumark, a private builder also typically in more suburban locales, has multiple San Francisco sites lined up for building. The proposed Parkmerced redevelopment could add another 8,000 units as well. Lowdown on the Waterfront: In June 2014, San Franciscans approved Proposition B, which gives them a greater say in the development of any future housing units along a 7.5-mile stretch of San Francisco’s waterfront. The measure requires voter approval for any new building on Port of San Francisco property that exceeds existing height limits of 105 feet. This is likely to lead to diminished development in the area. The most immediate result was that the Golden State Warriors terminated a plan to build an arena on Piers 30–32 and a mixed-used project at Pier 70 was reworked to lower the maximum height from 230 feet to 90 feet.

Silicon Valley Quarterly Real Estate Report Q4 2014

David Barca Vice President, Silicon Valley 650.314.7200 dbarca@pacunion.com 1706 El Camino Real, Suite 220 | Menlo Park CA 94025

Silicon Valley pacificunion.com

Silicon Valley: Q4 Results October and November were exceptionally strong months for real estate activity in Pacific Union’s Silicon Valley region, but sales dropped off a ledge after the last week of November. December was as slow as the previous months were busy. Inventory remained flat throughout the quarter, while the average sales price continued rising. Many homes attracted multiple offers from buyers, but not at the levels seen in previous quarters. Overall, buyers started to regain some control on the market, holding back on bidding for overpriced homes. With home prices in Palo Alto, Menlo Park, and nearby communities starting at $2 million and $3 million, we saw a migration of buyers — first-time buyers in particular — to more affordable areas such as Redwood City and San Carlos, where improving schools and more vibrant downtowns have helped increase their desirability. Looking Forward: We expect business to pick up again in January, with rising inventory levels and renewed interest among both buyers and sellers thanks to the Bay Area’s strong economic growth. The likelihood of mortgage rates trending significantly higher later this year will be a strong impetus for buyers to close deals. Defining Silicon Valley: Our real estate markets in the Silicon Valley region include the cities and towns of Atherton, Los Altos (excluding county area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside. Sales data in the charts below includes all single-family homes in these communities. Defining the Mid-Peninsula: Our real estate markets in the Mid-Peninsula subregion include the cities of Burlingame (excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area). Sales data in the charts below includes all single-family homes in these communities.

Median Sales Price

$3,100,000 $2,600,000 $2,330,000

$2,600,000 $2,350,000

$2,466,000

$2,316,000

$2,415,000

$2,430,000

$2,400,000

$2,566,000 $2,450,000 $2,450,000

$2,500,000

$2,399,100

$2,100,000 $1,600,000 $1,100,000 $600,000 $100,000

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Median sales price for single-family homes in these Silicon Valley communities: Atherton, Los Altos (excluding County area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside.

Months’ Supply of Inventory 3.6 2.9

3.1

2.6 2.1 1.6

1.8 1.6

2.2 1.8

1.7

1.5

1.6

1.6 1.1

1.1

1.2 0.9

0.6 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for single-family homes in these SIlicon Valley communities: Atherton, Los Altos (excluding County area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside.

Silicon Valley pacificunion.com

Average Days on the Market

50 40

37 29

37 31

10 0

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Average days on market for single-family homes sold in these Silicon Valley communities: Atherton, Los Altos (excluding County area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside.

Percentage of Properties Under Contract

45%

29.6%

30% 25% 20%

34.2%

33.9%

35%

40.7%

39.5%

39.2%

40%

30.7%

33.5%

34.7%

32.0%

29.5%

25.1% 18.8%

15% 10% 5% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Percentage of single-family homes under contract in these Silicon Valley communities: Atherton, Los Altos (excluding County area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside.

Sales Price as a Percentage of Original Price

108%

106.4%

106% 104% 102%

104.5%

104.8% 102.9%

102.0%

105.5% 103.8%

103.3% 102.2% 101.0%

100.7%

101.8%

100%

99.0%

98% 96% 94%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Sales price as % of original price (including adjustments) for single-family homes under contract in these Silicon Valley communities: Atherton, Los Altos (excluding County area), Los Altos Hills, Menlo Park (excluding east of U.S. 101), Palo Alto, Portola Valley, and Woodside.

Silicon Valley pacificunion.com

A Closer Look at Silicon Valley Silicon Valley Snapshot: Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Atherton

Q4 '14

110,637,776

Los Altos*

Los Altos Hills

Menlo Park**

Palo Alto

Portola Valley

40,220,000

Woodside

50,423,050

Homes Sold

Avg. Days on Market

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

-12%

-47%

137,600,000

24%

144,078,240

166,856,601

16%

-9%

100,599,688

112,881,125

12%

-10%

132,346,388

175,732,000

33%

15%

272,342,758

230,223,110

-15%

109

-22%

42,021,000

20%

58,755,000

17%

12%

Median Price Q4 '13 $

4,075,000

-45%

-27%

13%

20%

-19%

25%

Q4 '14

% change

5,375,000

32%

2,190,000

2,505,001

14%

3,050,000

3,575,000

17%

1,690,000

2,000,000

18%

2,300,000

2,500,000

2,300,000

2,292,500

2,350,000

2,100,000

-11%

Source: Terradatum, January 7, 2015. Data is for single-family homes in selected Silicon Valley cities. *Excludes County area **Excludes east of U.S. 101

Silicon Valley pacificunion.com

Santa Clara County Housing and Economic Outlook The booming tech market continues to drive home prices and rents beyond the reach of most employees. Ongoing expansions by major local employers should continue to create more affluence for years to come.

THE ECONOMY Vibrant Tech Boom: Santa Clara County is the focal point of the nationâ&#x20AC;&#x2122;s tech sector The county added a remarkable 40,000 net new jobs last year and should add nearly 35,000 more this year, pushing employment to nearly 1 million. We project job growth to ease in the coming years, but still remain strong for the next two years at nearly 30,000 annually before slowing. Tech Sets the Stage: For the San Jose MSA as a whole (which includes Santa Clara County and far smaller San Benito County), manufacturing, education/health, and trade/utilities play an important role, but the high-paying professional and business services is paramount at about 20 percent of total jobs. The tech sector is the engine that drives Silicon Valley, and tech jobs are distributed throughout a variety of sectors. Highly Employed Population: Only 5.5 percent of the labor pool cannot find a suitable job. Affluence: With a median income of $106,100 per year, Santa Clara County is one of the most affluent areas in the nation. And also unlike the nation as a whole, income growth has been robust â&#x20AC;&#x201C; 8.5 percent in 2013 and projected to come in at 5.6 percent in 2014 with solid growth forecast for the next few years. Jobs and Median Income Trends and Projections - Santa Clara County Jobs Total Change Change Rate Median Income Change Rate

2009 855,600 -5,600 -6.1% $85,200 -3.1%

2010 853,100 -2,500 -0.3% $84,200 -1.2%

2011 873,500 20,400 2.4% $86,900 3.2%

2012 908,200 34,700 4.0% $92,600 6.6%

2013 948,200 40,000 4.4% $100,500 8.5%

2014P 982,700 34,500 3.6% $106,100 5.6%

2015P 1,012,300 29,600 3.0% $111,200 4.8%

2016P 1,039,900 27,600 2.7% $116,500 4.8%

2017P 1,053,500 13,600 1.3% $121,200 4.0%

2018P 1,063,000 9,500 0.9% $125,400 3.5%

Source: Moody Analytics

DEMOGRAPHICS Steady Growth, Potentially Slowing: Santa Clara County is nearing 1.9 million residents in over 625,000 households, making it one of the largest population centers on the West Coast. Population growth has been fairly strong recently at 1.4 percent in 2012 and 2013, though it appears to be slowing. This is at least in part due to constrained housing supply, but note that population growth could outpace the projections seen in the table below, particularly as more rental product comes onto the market. Pushed Out?: Growth projections translate into about 10,000 to 15,000 new residents annually in Santa Clara County, adding about 6,000 to 7,000 housing units to existing stock each year. High prices and lack of new supply make Santa Clara County a major exporter of housing demand into more outlying parts of the Bay Area.

Population and Households Trends and Projections - Santa Clara County

Population Total

2009

2010

2011

2012

2013

Current

2014P

2015P

2016P

2017P

2018P

1,765,100

1,786,500

1,811,300

1,836,000

1,862,400

1,873,000

1,871,900

1,881,700

1,893,600

1,907,400

1,922,400

24,200

21,400

24,800

24,700

26,300

6,300

9,600

9,700

11,900

13,800

15,000

1.4%

1.2%

1.4%

0.3%

0.5%

0.6%

0.7%

0.8%

597,300

605,300

610,400

616,600

620,300

626,100

624,900

631,100

638,100

645,100

652,000

Change

8,700

8,100

5,100

6,200

3,700

5,100

4,600

6,200

7,000

6,900

Change Rate

1.5%

1.3%

0.8%

1.0%

0.6%

0.8%

0.7%

1.0%

1.1%

Change Change Rate Household Total

1.1%

Source: Moody Analytics

Silicon Valley pacificunion.com

THE HOUSING MARKET Slowing Home Price Appreciation: Our Burns Home Value Index (BHVI) estimates price appreciation for the entire resale market. Currently, the BHVI for the San Jose MSA shows prices have risen 7.5 percent over the last year. Greater San Jose experienced growth rates of 17.0 percent and 13.5 percent in 2012-2013, so the projected BHVI increases ranging from 1.0 percent to 4.6 percent from 2015-2018 signal a normalizing market. Consistent Resales Volumes: Over the past 12 months, Santa Clara County has supported over 18,000 resales. We forecast solid increase over the next two years of about 7.0 to 8.0 percent or more, followed by modest dips the following two years. Though these 18,000-20,000 annual sales are roughly in line with the long-term norm, this volume level is just more than half the market peak experienced in 2004. Investors Fewer and Shrinking: Investor activity was never as strong in the San Jose MSA as it was in many other regional markets given the strength of conventional demand. Still, investors represented 16 percent of the market in the second quarter, down from a Q1 2013 peak of 21 percent. Affordability: Though low mortgage rates help keep affordability at a historically normal level in the San Jose MSA, high prices mean homeownership still requires a fairly high share of incomes in spite of the areaâ&#x20AC;&#x2122;s affluence. The median-income household would need to pay 42 percent of their income to buy the medianpriced resale home and 44 percent for the median-priced new home (similar because new home densities are almost always higher than the existing housing stock). Expensive and Uncommon New Homes: Limited new supply and the tremendous appeal of Santa Clara County means new home prices are consistently high. Over the past year and a half, the median new home price has centered at about $765,000. This compares to a full year 2013 median new home price of $721,190.

Burns Home Value Index Trends and Projections - San Jose MSA Burns Home Value Index Change Rate Affordability Index

2009 119.01 -1.8% 3.7

2010 117.03 -1.7% 4.1

2011 115.18 -1.6% 3.0

2012 134.79 17.0% 2.6

2013 153.03 13.5% 4.3

Current 162.34 7.5% 4.9

2014P 163.74 7.0% 4.9

2015P 171.27 4.6% 5.3

2016P 175.90 2.7% 5.6

2017P 179.42 2.0% 5.9

2018P 181.21 1.0% 6.0

Source: John Burns Real Estate Consulting

MARKET COLOR Apple Campus 2 Breaks Ground: Apple Inc. has started construction in Cupertino on its sprawling new campus. When completed, the new campus is expected to have over 3 million square feet of space housing at least 12,000 employees. Apple will keep its existing campus, indicating they will continue to add new jobs in Cupertino. Venture Capital Reaching Dot-Com Levels: Venture-capital investment in Silicon Valley is growing exponentially this year. In the first six months of 2014, venture-capital investment was already at the full year 2013 total value. If the trend continues, investment would be back to around $20-$24 billion for the full year, above the 1999 level, but still below 2000 when the tech bubble burst. Bonuses and stock options at tech companies in the region are a major pillar of the housing market.

Silicon Valley pacificunion.com

San Mateo County Housing and Economic Outlook Located between two of the hottest counties in the U.S. – San Francisco and Santa Clara – San Mateo County offers great housing options to those who want a better value per square foot and are willing to commute.

THE ECONOMY Great Job Growth: San Mateo County is part Silicon Valley and part suburban extension of San Francisco. It is a major employment node in its own right, with 15,000 net new jobs added in 2013 and about 6,000 to 8,000 new jobs projected annually through 2016. High Pay Growth: For the San Francisco MSA as a whole (San Mateo, San Francisco, and Marin Counties), the higher-paying sectors – finance, information, and professional and business services – are critical and have experienced tremendous growth over the last two-plus years. These sectors added over 44,000 jobs MSAwide from 2011 to 2013. Highly Employed Population: Only 4.5 percent of the labor pool cannot find a suitable job. Affluence: San Mateo County is highly affluent, supporting a 2014 median household income of $87,500 per year. Wage growth was strong last year after a few years of stagnation, and is forecast to remain healthy for the next few years at least. Jobs and Median Income Trends and Projections - San Mateo County Jobs Total Change Change Rate Median Income Change Rate

2009 321,300 -18,200 -5.4% $83,500 -2.1%

2010 315,300 -6,000 -1.9% $82,200 -1.6%

2011 323,900 8,600 2.7% $82,100 -0.1%

2012 337,500 13,600 4.2% $82,700 0.7%

2013 352,500 15,000 4.4% $85,400 3.3%

2014P 360,700 8,200 2.3% $87,500 2.5%

2015P 367,300 6,600 1.8% $91,300 4.3%

2016P 373,200 5,900 1.6% $95,400 4.5%

2017P 378,100 4,900 1.3% $99,000 3.8%

2018P 381,400 3,300 0.9% $102,200 3.2%

Source: Moody Analytics

DEMOGRAPHICS Steady Growth Ahead: San Mateo County is home to about 750,000 people in over 265,000 households. Population growth is forecast to ease somewhat over the near term, but household growth should be higher as household formations trend back toward longer-term norms. By the Numbers: Growth projections translate into about 7,000 to 8,000 new residents annually in San Mateo County, or about 3,000 to 4,000 new households each year. As is true in most of the core Bay Area, many working in the county cannot afford to live there and thus seek housing in outlying parts of the region. Population and Households Trends and Projections - San Mateo County

Population Total

2009

2010

2011

2012

2013

Current

2014P

2015P

2016P

2017P

2018P

713,600

719,800

728,300

738,700

747,000

755,300

753,800

761,200

768,900

776,800

784,600

Change

9,800

6,100

8,500

10,400

8,300

6,700

6,800

7,300

7,700

7,900

Change Rate

1.4%

0.9%

1.2%

1.4%

1.1%

0.9%

1.0%

255,900

258,200

260,000

262,400

264,500

268,100

267,400

271,100

275,300

279,300

283,000

Change

3,500

2,300

1,800

2,400

2,200

3,100

2,900

3,800

4,100

4,000

3,800

Change Rate

1.4%

0.9%

0.7%

0.9%

0.8%

1.2%

1.1%

1.4%

1.5%

Household Total

1.3%

Source: Moody Analytics

Silicon Valley pacificunion.com

THE HOUSING MARKET Prices Strong Then Slower: Our Burns Home Value Index (BHVI) estimates price appreciation for the entire resale market. Currently, the BHVI for the San Francisco MSA shows prices up 7.8 percent over the last year, and we expect 7 percent appreciation over the next four years. After solid growth projected in 2014 and 2015, we forecast much slower growth below 1 percent annually. Consistent Resale Volumes: There have been over 7,500 resales in San Mateo County over the last 12 months. At the MSA level, we forecast sales growth of about 3 percent to 5 percent for the next two years. Affordability Decreasing: Despite low mortgage rates, the San Francisco MSA’s current affordability level is worse than its long-term norm. Specific just to San Mateo County, a household earning the median income would need to pay 61 percent of their income to buy the median-priced resale home and 67 percent for the median-priced new home. This is why so many who work in the county live elsewhere or rent. Expensive New Homes and Few of Them: San Mateo County has long been undersupplied for new homes. This combines with its affluence and appeal to push home prices to extraordinary levels. Over the past year, new home pricing has averaged about $950,000 and mainly for attached product. Burns Home Value Index Trends and Projections - San Francisco MSA Burns Home Value Index Change Rate Affordability Index

2009 130.71 -1.0% 4.3

2010 125.49 -4.0% 4.1

2011 122.68 -2.2% 3.2

2012 141.35 15.2% 3.0

2013 163.68 15.8% 5.0

Current 171.69 7.8% 6.1

2014P 171.86 5.0% 6.1

2015P 180.28 4.9% 6.7

2016P 181.54 0.7% 7.0

2017P 182.81 0.7% 7.1

2018P 183.55 0.4% 7.2

Source: John Burns Real Estate Consulting

MARKET COLOR Where to Build?: San Mateo County has been a notoriously difficult development environment. Years of planning finally brought the Bay Meadows master plan in San Mateo to the market last year, where there will eventually be over 1,000 residential units and hundreds of thousands of square feet of commercial space. The Saltworks planned community in Redwood City, however, continues to face a buzz saw of local antagonism and is currently being “scaled back” from already diminished expectations. San Mateo County will likely continue to be characterized mainly by small infill sites here and there, with the occasional new apartment complex.

Mid-Peninsula pacificunion.com

Median Sales Price

$1,700,000

$1,556,250

$1,500,000

$1,352,500

$1,300,000

$1,434,000 $1,300,500

$1,500,000

$1,436,500 $1,341,000

$1,328,000

$1,350,000 $1,305,000

$1,357,500

$1,450,000

$1,100,000 $900,000 $700,000 $500,000 $300,000 $100,000

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Median sales price for single-family homes in these San Mateo County communities: Burlingame (excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area).

Monthsâ&#x20AC;&#x2122; Supply of Inventory

3.6

3.1

3.1 2.6

2.3

2.1 1.6

1.7 1.3

1.2

1.3

1.4

1.5 1.2

1.3 0.9

1.1

1.1 0.5

0.6 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for single-family homes in these San Mateo County communities: Burlingame (excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area).

Average Days on the Market

60 49

50 40

33 26

25 19

10 0

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Source: Terradatum, January 7, 2015. Average days on market for single-family homes sold in these San Mateo County communities: Burlingame (excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area).

Mid-Peninsula pacificunion.com

Percentage of Properties Under Contract

50%

45.5%

42.3%

45% 40% 35% 30% 25%

39.0%

39.9%

Jul-14

Aug-14

Sep-14

101.2%

101.4%

44.9% 35.7%

31.7%

29.7% 22.5%

46.6%

42.1%

24.2%

20% 15% 10% 5% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Percentage of single-family homes under contract in these San Mateo County communities: Burlingame (excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area).

Sales Price as a Percentage of Original Price

105% 103.2%

104% 103%

103.9%

103.6%

103.2%

102.5%

102% 101% 100% 99% 98%

101.1%

100.7%

101.4%

99.8%

99.0% 98.1%

97% 96% 95%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Sales price as % of original price (including adjustments) for single-family homes under contract in these San Mateo County communities: Burlingame (excluding Ingold Millsdale Industrial Center), Hillsborough, and San Mateo (excluding the North Shoreview/Dore Cavanaugh area).

A Closer Look at the Mid-Peninsula

Mid-Peninsula Snapshot: Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

-18%

-25%

44%

1,550,000

1,700,000

10%

-11%

19%

3,350,000

3,050,000

-9%

151

147

-3%

997,425

1,101,000

10%

Burlingame*

107,649,373

88,794,888

Hillsborough

129,405,800

117,599,500

-9%

San Mateo**

170,521,535

186,581,451

Q4 '13

Q4 '14

% change

Source: Terradatum, January 7, 2015. Data is for single-family homes in selected San Mateo County cities. * Excludes Ingold Millsdale Industrial Center ** Excludes the North Shoreview/Dore Cavanaugh area

Mid-Peninsula pacificunion.com

2009 321,300 -18,200 -5.4% $83,500 -2.1%

2010 315,300 -6,000 -1.9% $82,200 -1.6%

2011 323,900 8,600 2.7% $82,100 -0.1%

2012 337,500 13,600 4.2% $82,700 0.7%

2013 352,500 15,000 4.4% $85,400 3.3%

2014P 360,700 8,200 2.3% $87,500 2.5%

2015P 367,300 6,600 1.8% $91,300 4.3%

2016P 373,200 5,900 1.6% $95,400 4.5%

2017P 378,100 4,900 1.3% $99,000 3.8%

2018P 381,400 3,300 0.9% $102,200 3.2%

Source: Moody Analytics

Population Total

2009

2010

2011

2012

2013

Current

2014P

2015P

2016P

2017P

2018P

713,600

719,800

728,300

738,700

747,000

755,300

753,800

761,200

768,900

776,800

784,600

Change

9,800

6,100

8,500

10,400

8,300

6,700

6,800

7,300

7,700

7,900

Change Rate

1.4%

0.9%

1.2%

1.4%

1.1%

0.9%

1.0%

255,900

258,200

260,000

262,400

264,500

268,100

267,400

271,100

275,300

279,300

283,000

Change

3,500

2,300

1,800

2,400

2,200

3,100

2,900

3,800

4,100

4,000

3,800

Change Rate

1.4%

0.9%

0.7%

0.9%

0.8%

1.2%

1.1%

1.4%

1.5%

Household Total

1.3%

Source: Moody Analytics

Mid-Peninsula pacificunion.com

THE HOUSING MARKET Prices Strong Then Slower: Our Burns Home Value Index (BHVI) estimates price appreciation for the entire resale market. Currently, the BHVI for the San Francisco MSA shows prices up 7.8 percent over the last year, and we expect 7 percent appreciation over the next four years. After solid growth projected in 2014 and 2015, we forecast much slower growth below 1 percent annually. Consistent Resale Volumes: There have been over 7,500 resales in San Mateo County over the last 12 months. At the MSA level, we forecast sales growth of about 3 percent to 5 percent for the next two years. Affordability Decreasing: Despite low mortgage rates, the San Francisco MSA’s current affordability level is worse than its long-term norm. Specific just to San Mateo County, a household earning the median income would need to pay 61 percent of their income to buy the median-priced resale home and 67 percent for the median-priced new home. This is why so many who work in the county live elsewhere or rent. Expensive New Homes and Few of Them: San Mateo County has long been undersupplied for new homes. This combines with its affluence and appeal to push home prices to extraordinary levels. Over the past year, new home pricing has averaged about $950,000 and mainly for attached product. Burns Home Value Index Trends and Projections - San Francisco MSA Burns Home Value Index Change Rate Affordability Index

2009 130.71 -1.0% 4.3

2010 125.49 -4.0% 4.1

2011 122.68 -2.2% 3.2

2012 141.35 15.2% 3.0

2013 163.68 15.8% 5.0

Current 171.69 7.8% 6.1

2014P 171.86 5.0% 6.1

2015P 180.28 4.9% 6.7

2016P 181.54 0.7% 7.0

2017P 182.81 0.7% 7.1

2018P 183.55 0.4% 7.2

Source: John Burns Real Estate Consulting

Sonoma County Quarterly Real Estate Report Q4 2014

Rick Laws Senior Vice President, Sonoma County 707.547.3800 rick.laws@pacunion.com 3333 Mendocino Avenue, Suite 210 | Santa Rosa, CA 95403

Sonoma County pacificunion.com

Sonoma County: Q4 Results The last quarter of 2014 bore remarkable similarities to the first quarter in Sonoma County, with a constrained supply of available homes and a ready pool of would-be buyers. Many sellers continued to receive multiple offers on well-priced properties, although bidding activity was not as frenetic as it was at the start of the year, and price appreciation has slowed considerably from the double-digit percentage increases that had become commonplace. Even with the limited supply, buyers in the fourth quarter no longer bid as franticly on overpriced properties or those with problems as they might have as recently as six months ago. This change in attitude caught some sellers by surprise, but it reflects the growing normalization of the market as buyers began to show some signs of price resistance, especially at the higher end of the market. The fourth quarter saw fewer sales of homes priced below $500,000, reflecting the virtual disappearance of distressed properties such as short sales and foreclosures on the market. Looking Forward: Sonoma County may see fewer sales overall in the first quarter, but dollar volume will continue rising as buyers choose from more high-end homes on the market. Springtime is always a busy season for real estate, and 2015 will be no different. Defining Sonoma County: Our real estate markets in Sonoma County include the cities of Cotati, Healdsburg, Penngrove, Petaluma, Rohnert Park, Santa Rosa, Sebastopol, and Windsor. Sales data in the charts below includes all single-family homes and farms and ranches in Sonoma County.

Median Sales Price $550,000 $500,000

$465,000

$460,000

$450,000

$491,500 $449,325

$468,950

$487,500

$495,000

$507,000

$475,000

$516,500

$496,000

$489,950

$482,000

Sep-14

Oct-14

Nov-14

$400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Dec-14

Source: Terradatum, January 7, 2015. Median sales price for single-family homes and farms/ranches in Sonoma County.

Monthsâ&#x20AC;&#x2122; Supply of Inventory 3.1 2.5

2.6 2.1

2.5 2.1

2.0

2.4

2.2

2.4 2.1

2.2

2.2 1.9

1.6

1.3

1.1 0.6 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for single-family homes and farms/ranches in Sonoma County.

Sonoma County pacificunion.com

Average Days on the Market

90 80

81 72

74 59

Jul-14

Aug-14

Sep-14

Oct-14

50 40 30 20 10 0

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Average days on market for single-family homes and farms/ranches sold in Sonoma County.

Percentage of Properties Under Contract

40%

33.4%

35%

25%

31.7%

31.4%

27.3%

30%

30.0%

29.3%

28.0%

29.8%

30.1%

Oct-14

Nov-14

26.6%

29.0%

21.9%

20% 15% 10% 5% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Dec-14

Source: Terradatum, January 7, 2015. Percentage of single-family homes and farms/ranches under contract in Sonoma County.

Sales Price as a Percentage of Original Price

100%

98.9%

99% 98% 97%

96.9%

96.8%

96.9%

95.9%

96% 95%

98.4% 97.6% 96.6%

96.0%

96.6% 95.5% 93.9%

93.7%

94% 93% 92% 91%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Sales price as % of original price (including adjustments) for single-family homes and farms/ranches under contract in Sonoma County.

Sonoma County pacificunion.com

A Closer Look at Sonoma County Sonoma County Snapshot: Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Healdsburg

39,869,556

37,209,095

-7%

-2%

111

102

-8%

755,500

579,000

-23%

Petaluma

85,186,684

71,316,473

-16%

151

117

-23%

-3%

508,000

540,050

Rohnert Park

19,322,183

30,559,900

58%

44%

-25%

399,500

430,000

Santa Rosa

238,480,612

256,728,269

459

457

416,000

456,000

10%

Sebastopol

39,702,740

56,962,833

43%

-12%

626,000

720,000

15%

Windsor

40,148,673

34,807,450

-13%

-20%

-3%

459,000

482,000

Source: Terradatum, January 7, 2015. Data is for single-family homes and farms/ranches in selected Sonoma County cities.

Sonoma County Price Range Snapshot: Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

440,000

470,000

-28%

1,370,000

1,320,000

-4%

Under $1 million

511,914,258

525,060,409

1065

1,028

-3%

$1 million and over

133,555,905

173,003,890

30%

103

32%

137

Q4 '13

Q4 '14

% change

Source: Terradatum, January 7, 2015. Data is for single-family homes and farms/ranches in selected Sonoma County cities.

Sonoma County pacificunion.com

Sonoma County Housing and Economic Outlook While net worth drives the second-home and retiree market in Sonoma, and net-worth growth has been fantastic, most residents work locally or commute a very long way to San Francisco. We are most bullish on retirement opportunities in Sonoma because of the surge in people reaching their late 60s right now.

THE ECONOMY Solid Job Growth: Sonoma County added 7,400 net new jobs in 2013 and was projected to add 4,000 in 2014, pushing total jobs to over 186,000. The 2014 figure would be a solid 2.2 percent improvement from 2013, with similar rates projected for the next two years before we expect job growth to slow. Tourism and Some Tech: Tourism-based leisure and hospitality jobs trail only trade/utilities and education and health in job volumes in Sonoma County. Professional and business services is also a key sector, however, with a sizeable tech presence in the county, including Agilent in Santa Rosa. Highly Employed Population: Only 5.4 percent of the labor pool cannot find a suitable job. Middle Class: At $61,000 per year, Sonoma supports an essentially middle-class income profile, though there are high-end jobs in the professional services and tech sectors. Substantial housing demand, however, also comes from more affluent areas to the south such as San Francisco. Jobs and Median Income Trends and Projections - Sonoma County Jobs Total Change Change Rate Median Income Change Rate

2009 173,500 -14,700 -7.8% $61,600 -3.9%

2010 169,800 -3,700 -2.1% $59,700 -3.1%

2011 171,700 1,900 1.1% $58,300 -2.3%

2012 175,000 3,300 1.9% $58,200 -0.2%

2013 182,400 7,400 4.2% $59,500 2.2%

2014P 186,400 4,000 2.2% $61,000 2.5%

2015P 190,900 4,500 2.4% $62,900 3.1%

2016P 195,900 5,000 2.6% $64,800 3.0%

2017P 197,900 2,000 1.0% $66,700 2.9%

2018P 198,900 1,000 0.5% $68,300 2.4%

Source: Moody Analytics

DEMOGRAPHICS Steady Growth: Sonoma is not a huge population center, with about 500,000 residents at present. Population growth is modest, below 1.0 percent in recent years, with household growth slightly higher. We project slow and steady population growth ahead at just under 1.0 percent annually. We expect household growth, however, to outpace population growth as millennials begin to move out and, more generally, household formation trends to gravitate back toward long-term norms. More of the Same: Growth projections translate into approximately 8,500-9,000-plus new Sonoma residents annually over the next few years, or about 2,300-2,800 new households each year.

Population and Households Trends and Projections - Sonoma County

Population Total

2009

2010

2011

2012

2013

Current

2014P

2015P

2016P

2017P

2018P

479,500

484,700

487,500

490,600

495,000

499,800

499,000

503,000

507,300

511,600

516,000

Change

6,400

5,200

2,900

3,000

4,400

3,800

4,000

4,400

4,300

4,400

Change Rate

1.4%

1.1%

0.6%

0.9%

0.8%

0.9%

0.8%

0.9%

183,800

186,500

188,500

191,100

192,900

195,600

195,100

197,800

200,500

203,000

205,400

Change

2,900

2,700

2,000

2,600

1,800

2,400

2,200

2,700

2,800

2,500

2,300

Change Rate

1.6%

1.5%

1.0%

1.4%

1.0%

1.2%

1.1%

1.4%

1.2%

Household Total

1.2%

Source: Moody Analytics

Sonoma County pacificunion.com

THE HOUSING MARKET Slowing Home Price Appreciation: Our Burns Home Value Index (BHVI) estimates price appreciation for the entire resale market. Currently, the BHVI shows prices have risen 8.4 percent over the last year, which is down from a tremendous rate of 16.9 percent in 2013. JBREC forecasts far more modest growth in this measure going forward, ranging from 1.0 percent to 4.0 percent from 2015-2018. Consistent Resales Volumes: We project 2014 resale volume to come in at about 11 percent below the 2013 level of 6,322 sales. We project about 6,000 sales each of the next two years, but then sales to decline very slightly the next two years. This is down from about 8,000-10,000 annual resales, however, from the late 1990s through 2005. Investors Slowing but Still Key: Investors are purchasing about 29 percent of the Sonoma market homes, down marginally from 34 percent at the peak at the end of 2012. Affordability: Though low mortgage rates help keep affordability at a historically normal level in Sonoma County, comparatively high prices mean homeownership is still expensive. The median income household would need to pay 47 percent of their income to buy the median-priced resale home and about 44 percent to afford the median-priced new home (the lower new home price due to typically higher new home densities). Expensive and Uncommon New Homes: Very limited activity means new home prices can fluctuate but typically average from the mid-$400s to the low-$500s. Over the past year and a half, the median new home price was about $475,000 countywide, which compares to $432,560 for calendar year 2013. Burns Home Value Index Trends and Projections - Sonoma County Burns Home Value Index Change Rate Affordability Index

2009

110.74 -2.0% 2.7

2010

102.14 -7.8% 2.4

2011

95.18 -6.8% 1.1

2012

109.15 14.7% 1.1

2013

127.63 16.9% 3.9

Current

136.27 8.4% 5.3

2014P

139.11 9.0% 5.3

2015P

144.68 4.0% 5.8

2016P

149.02 3.0% 6.1

2017P

152.00 2.0% 6.4

2018P

153.52 1.0% 6.5

Source: John Burns Real Estate Consulting

MARKET COLOR University Park: University Park is an upcoming 1,200-plus-unit master planned community in Rohnert Park, north of Petaluma. Brookfield Homes plans to offer an array of mainly smaller-lot detached homes. Interestingly, Brookfield may carve out several hundred of the 1,200-plus homes to fashion an age-restricted (55-plus) community. There are very few age-restricted new home options throughout the region and strong potential demand given an aging population. Regardless, with so few future new home communities throughout Sonoma County likely to enter the market in the near term at least, University Park will be a key part of the housing landscape. SMART Commuting: The SMART train will provide a rail commuter option that parallels the congested Highway 101 through Sonoma County and into Marin County to the south. With several stations slated to open in 2016, SMART riders can catch a ferry in Larkspur into the massive – and generally high-paying – San Francisco jobs node.

Sonoma Valley Quarterly Real Estate Report Q4 2014

Jill Silvas Regional Executive, Sonoma Valley 707.939.9500 jill.silvas@pacunion.com 135 West Napa Street, Suite 200 | Sonoma, CA 95476

Sonoma Valley pacificunion.com

Sonoma Valley: Q4 Results Pacific Union’s Sonoma Valley region saw strong sales throughout the fourth quarter. There was no shortage of would-be buyers, and well-priced properties in good condition continued to attract multiple offers. In a change from past quarters, buyers started to gain an upper hand in negotiations with sellers, a sign of a normalizing real estate market. Once buyers completed due diligence, they weren’t shy about asking for concessions or repairs, and sellers found that they had to be more careful in pricing their homes — some with unrealistic expectations found themselves sitting on properties far longer than they would have even six months earlier. Homes sold well across Sonoma Valley and at all price points, but especially those that were priced under $750,000. Inventory remained exceptionally tight. Looking Forward: The year 2015 looks to be a busy one for buyers and sellers in the Sonoma Valley region. With a strong Bay Area economy and mortgage rates still hovering near record lows, the first quarter should be exceptionally active. We recommend that sellers not wait until the spring to put their properties on the market. Buyers are active year-round, and those properties on the market in January, February, and March face less competition and will stand out. Defining Sonoma Valley: Our real estate markets in Sonoma Valley include the cities of Glen Ellen, Kenwood, and Sonoma. Sales data in the charts below refers to all residential properties – including single-family homes, condominiums, and farms and ranches – in these communities.

Median Sales Price $800,000

$750,000

$700,000

$608,500

$600,000 $500,000

$610,672

$540,000

$500,000

$477,000

$697,500

$645,000 $555,000

$525,000

$580,250

$589,500

$587,500

$400,000 $300,000 $200,000 $100,000

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Median sales price for single-family homes, condominiums, and farms/ranches in Sonoma Valley.

Months’ Supply of Inventory 3.6 3.1

3.3

3.3 3.0

3.0

3.0 2.7

2.6

2.3

2.2

2.1

1.6

1.3

1.1 0.6 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for single-family homes, condominiums, and farms/ranches in Sonoma Valley.

Sonoma Valley pacificunion.com

Average Days on the Market

120

105

100 80

80 69

40 20 0

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Average days on market for single-family homes, condominiums, and farms/ranches sold in Sonoma Valley.

Percentage of Properties Under Contract

35% 30% 25%

22.7%

23.9%

26.6%

28.3%

31.1%

30.5% 27.0% 22.0%

22.7%

25.3%

26.7%

28.7%

20.8%

20% 15% 10% 5% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Percentage of single-family homes, condominiums, and farms/ranches under contract in Sonoma Valley.

Sales Price as a Percentage of Original Price

102% 99.5%

100% 98% 96%

96.8%

95.1%

94.6%

94% 92%

97.5%

96.7%

92.2%

91.8%

Jan-14

Feb-14

93.7%

93.5%

Oct-14

Nov-14

92.5%

94.7%

90% 88% 86%

Dec-13

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Dec-14

Source: Terradatum, January 7, 2015. Sales price as % of original price (including adjustments) for single-family homes, condominiums, and farms/ranches under contract in Sonoma Valley.

Sonoma Valley pacificunion.com

A Closer Look at Sonoma Valley Sonoma Valley Snapshot: Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Q4 '14

Glen Ellen

9,087,000

16,995,192

Kenwood

1,458,200

9,758,500

Sonoma

81,605,075

92,991,303

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

Q4 '13

87%

125%

42%

726,750

Q4 '14 787,000

569%

167%

128

246%

480,000

1,081,250

14%

115

119

27%

510,000

580,000

% change 8% 125% 14%

Source: Terradatum, January 7, 2015. Data is for single-family homes, condominiums, and farms/ranches in selected Sonoma Valley cities.

Sonoma Valley pacificunion.com

2009 173,500 -14,700 -7.8% $61,600 -3.9%

2010 169,800 -3,700 -2.1% $59,700 -3.1%

2011 171,700 1,900 1.1% $58,300 -2.3%

2012 175,000 3,300 1.9% $58,200 -0.2%

2013 182,400 7,400 4.2% $59,500 2.2%

2014P 186,400 4,000 2.2% $61,000 2.5%

2015P 190,900 4,500 2.4% $62,900 3.1%

2016P 195,900 5,000 2.6% $64,800 3.0%

2017P 197,900 2,000 1.0% $66,700 2.9%

2018P 198,900 1,000 0.5% $68,300 2.4%

Source: Moody Analytics

Population and Households Trends and Projections - Sonoma County

Population Total

2009

2010

2011

2012

2013

Current

2014P

2015P

2016P

2017P

2018P

479,500

484,700

487,500

490,600

495,000

499,800

499,000

503,000

507,300

511,600

516,000

Change

6,400

5,200

2,900

3,000

4,400

3,800

4,000

4,400

4,300

4,400

Change Rate

1.4%

1.1%

0.6%

0.9%

0.8%

0.9%

0.8%

0.9%

183,800

186,500

188,500

191,100

192,900

195,600

195,100

197,800

200,500

203,000

205,400

Change

2,900

2,700

2,000

2,600

1,800

2,400

2,200

2,700

2,800

2,500

2,300

Change Rate

1.6%

1.5%

1.0%

1.4%

1.0%

1.2%

1.1%

1.4%

1.2%

Household Total

1.2%

Source: Moody Analytics

Sonoma Valley pacificunion.com

THE HOUSING MARKET Slowing Home Price Appreciation: Our Burns Home Value Index (BHVI) estimates price appreciation for the entire resale market. Currently, the BHVI shows prices have risen 8.4 percent over the last year, which is down from a tremendous rate of 16.9 percent in 2013. JBREC forecasts far more modest growth in this measure going forward, ranging from 1.0 percent to 4.0 percent from 2015-2018. Consistent Resales Volumes: We project 2014 resale volume to come in at about 11 percent below the 2013 level of 6,322 sales. We project about 6,000 sales each of the next two years, but then sales to decline very slightly the next two years. This is down from about 8,000-10,000 annual resales, however, from the late 1990s through 2005. Investors Slowing but Still Key: Investors are purchasing about 29 percent of the Sonoma market homes, down marginally from 34 percent at the peak at the end of 2012. Affordability: Though low mortgage rates help keep affordability at a historically normal level in Sonoma County, comparatively high prices mean homeownership is still expensive. The median income household would need to pay 47 percent of their income to buy the median-priced resale home and about 44 percent to afford the median-priced new home (the lower new home price due to typically higher new home densities). Expensive and Uncommon New Homes: Very limited activity means new home prices can fluctuate but typically average from the mid-$400s to the low-$500s. Over the past year and a half, the median new home price was about $475,000 countywide, which compares to $432,560 for calendar year 2013. Burns Home Value Index Trends and Projections - Sonoma County Burns Home Value Index Change Rate Affordability Index

2009

110.74 -2.0% 2.7

2010

102.14 -7.8% 2.4

2011

95.18 -6.8% 1.1

2012

109.15 14.7% 1.1

2013

127.63 16.9% 3.9

Current

136.27 8.4% 5.3

2014P

139.11 9.0% 5.3

2015P

144.68 4.0% 5.8

2016P

149.02 3.0% 6.1

2017P

152.00 2.0% 6.4

2018P

153.52 1.0% 6.5

Source: John Burns Real Estate Consulting

Lake Tahoe/Truckee Quarterly Real Estate Report Q4 2014

Sally Gardner Regional Executive, Tahoe/Truckee Tahoe City 530.581.1882 | Truckee 530.587.7098 | Squaw Valley 530.584.6282 sally.gardner@pacunion.com

Lake Tahoe/Truckee pacificunion.com

Lake Tahoe/Truckee: Q4 Results The fourth quarter is traditionally a busy time in Pacific Union’s Lake Tahoe/Truckee region, as out-of-town buyers — many from the Bay Area — shop for vacation homes in time for the coming ski season. This year was no different, helped by several high-end sales at the end of the year. Sales were particularly brisk in Martis Camp and the Village at Squaw Valley, as well as for homes priced above $1 million across the region. Unlike in the Bay Area, the Lake Tahoe/Truckee region had an ample supply of homes at various price points in the fourth quarter, giving buyers an opportunity to find exactly what they were looking for. Attractive homes that were fairly priced were subject to multiple offers, but properties with unrealistically high prices typically sat on the market for months on end without a single bid. Looking Forward: First-quarter home sales in the Lake Tahoe/Truckee area are influenced by the weather; all it takes is a good snowstorm or two for Bay Area residents to pack their skis and head for the Sierras. If the weather cooperates, we look forward to a busy winter and spring. And as the snow recedes, we expect to see a healthy supply of new listings hit the market. Defining Lake Tahoe/Truckee: Our real estate markets in Tahoe/Truckee include the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley, Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe. Sales data in the charts below includes single-family homes and condominiums in these communities.

Single-Family Homes – Median Sales Price $800,000 $700,000

$740,000

$699,000 $614,605

$600,000

$629,000

$610,000

$605,000

$665,000

$530,000

$595,000

$589,000

$529,277

$607,342

$574,500

$500,000 $400,000 $300,000 $200,000 $100,000

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Median sales price for single-family homes in the Lake Tahoe/Truckee region.

Condominiums – Median Sales Price $500,000

$445,000

$450,000 $400,000 $350,000

$416,000

$390,000

$387,500

$345,000

$350,000

$334,000

$392,500

$385,000 $345,000

$370,250

$290,000

$300,000

$262,000

$250,000 $200,000 $150,000 $100,000

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Median sales price for condominiums in the Lake Tahoe/Truckee region.

Lake Tahoe/Truckee pacificunion.com

Single-Family Homes – Months’ Supply of Inventory 12.1

10.8

10.1 8.1 6.1

8.7

7.3

7.0

6.7

6.3

8.7

7.5

7.0

5.8

5.8 4.7

4.1

4.3

2.1 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for single-family homes in the Lake Tahoe/Truckee region.

Condominiums – Months’ Supply of Inventory 14.1

12.9 11.4

12.1 10.1 8.1

10.6 8.9

8.8 7.2

9.6

8.6

7.8

6.9

6.5

6.1

6.0

Oct-14

Nov-14

4.1 2.1 0.1

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Dec-14

Source: Terradatum, January 7, 2015. Months' supply of inventory for condominiums in the Lake Tahoe/Truckee region.

Single-Family Homes – Average Days on the Market 160

140

140 120

127 107 93

100

101

100

95 72

Sep-14

Oct-14

118

40 20 0

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Average days on market for single-family homes sold in the Lake Tahoe/Truckee region.

Lake Tahoe/Truckee pacificunion.com

Condominiums – Average Days on the Market 250 197

200 150

150

122

154

137 114

100

101

83 54

50 0

127

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

120

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Average days on market for condominiums sold in the Lake Tahoe/Truckee region.

Single-Family Homes – Percentage of Properties Under Contract 20%

17.2%

18% 16%

14.1%

11.1%

12% 10%

14.9%

13.5%

14%

11.1% 9.1%

8.7%

12.4%

12.5%

Aug-14

Sep-14

13.3% 11.6%

8.6%

8% 6% 4% 2% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Percentage of single-family homes under contract in the Lake Tahoe/Truckee region.

Condominiums – Percentage of Properties Under Contract 16% 11.5%

12% 10%

14.6%

13.7%

14%

11.9%

10.5%

9.1%

8.9% 7.1%

8.2%

9.6%

9.5%

9.1% 6.0%

6% 4% 2% 0%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Percentage of condominiums under contract in the Lake Tahoe/Truckee region.

Lake Tahoe/Truckee pacificunion.com

Single-Family Homes â&#x20AC;&#x201C; Sales Price as a Percentage of Original Price

98%

94%

95.6%

95.4%

96%

96.2%

95.2%

94.1% 92.8%

92%

92.1%

93.3%

91.3%

91.9% 89.8%

89.2%

90%

91.1%

88% 86% 84%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Sales price as % of original price (including adjustments) for single-family homes under contract in the Lake Tahoe/Truckee region.

Condominiums â&#x20AC;&#x201C; Sales Price as a Percentage of Original Price

98%

96.7%

96.1%

96% 94%

94.6% 93.0%

94.8%

96.0%

96.4%

94.1%

92.5%

92% 89.5%

90%

89.0% 87.6%

88%

87.3%

86% 84% 82%

Dec-13

Jan-14

Feb-14

Mar-14

Apr-14

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Source: Terradatum, January 7, 2015. Sales price as % of original price (including adjustments) for condominiums under contract in the Lake Tahoe/Truckee region.

Lake Tahoe/Truckee pacificunion.com

A Closer Look at Tahoe/Truckee Lake Tahoe/Truckee Snapshot: SFH, Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Alpine Meadows

3,745,500

Donner Lake

Donner Summit

Martis Valley

North Lake Tahoe

Q4 '14

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

20%

-26%

4,222,500

13%

6,669,400

4,384,900

-34%

-62%

125

5,346,250

8,875,700

66%

25%

38,819,606

70,394,159

81%

29%

136

39,035,601

57,122,000

46%

12%

123

110

Q4 '13 $

675,000

-41%

16%

49%

-11%

Q4 '14

% change

567,500

-16%

415,000

1,150,000

177%

377,250

445,000

18%

612,803

1,133,750

85%

520,000

558,500

7% -15%

Northstar

7,592,000

5,690,000

-25%

-22%

114

305

168%

815,000

695,000

Squaw Valley

10,052,800

5,185,000

-48%

-40%

259

348

34%

2,125,000

2,070,000

-3%

Tahoe City

8,549,500

28,611,500

235%

71%

-13%

507,500

830,000

64%

Tahoe Donner

49,836,525

46,102,909

-7%

-21%

41%

583,750

630,000

Truckee

43,799,606

84,453,159

93%

51%

101

29%

545,000

597,813

10%

West Shore

21,045,810

40,291,500

91%

58%

117

135

15%

545,000

529,000

-3%

Source: Terradatum, January 7, 2015. Data is for single-family homes in the Lake Tahoe/Truckee region.

Lake Tahoe/Truckee Snapshot: Condos, Q4 2014 vs. Q4 2013 Sales Volume Q4 '13

Alpine Meadows

315,000

Donner Lake

60,000

Donner Summit

Q4 '14 $

905,000

210,000

Homes Sold

Avg. Days on Market

Median Price

% change

Q4 '13

Q4 '14

% change

Q4 '13

Q4 '14

% change

187%

100%

200%

315,000

n/a

190

n/a

60,000

n/a

290

n/a

Q4 '13

Q4 '14

% change

452,500

44%

210,000

n/a

North Lake Tahoe

10,844,520

12,556,500

16%

176

148

-16%

335,000

367,500

10%

NorthStar

5,417,500

7,549,150

39%

112

116

375,000

405,000

Squaw Valley

5,991,400

5,946,500

-1%

-36%

283

164

-42%

520,000

670,000

29%

Tahoe City

5,519,270

5,475,500

-1%

-25%

135

36%

320,001

315,000

-2%

Tahoe Donner

3,014,500

3,748,500

24%

18%

125

-25%

292,500

295,000

Truckee

12,646,400

11,860,500

-6%

-10%

129

-24%

437,500

448,500

West Shore

6,522,000

5,760,000

-12%

-50%

307

265%

980,000

2,275,000

132%

Source: Terradatum, January 7, 2015. Data is for condominiums in the Lake Tahoe/Truckee region.

Lake Tahoe/Truckee pacificunion.com

Lake Tahoe Area Housing and Economic Outlook As a year-round resort getaway for affluent Bay Area residents, the Lake Tahoe housing market depends heavily on the health of the Bay Area economy and housing markets, both of which have appreciated tremendously in the last few years.

BAY AREA IMPACT Feeder Markets: An analysis of housing and employment data from core Bay Area MSAs helps us understand how the Lake Tahoe market will perform. Strong job growth, and income and net-worth growth in the Bay Area means stronger demand in Lake Tahoe. High and rising home prices in the Bay Area and a strong sales environment provide the equity for primary or second homes in Lake Tahoe. Jobs and Income: Bay Area jobs have been booming over the last three years, with 4 percent annual job growth since 2011. We project this growth to continue going forward, though at a somewhat more conservative rate. The Bay Area is a highly affluent region with the current median household income in the East Bay and San Francisco MSAs of about $75,000 to $80,000-plus, and topping $100,000 in the San Jose MSA. Strong Sales: Existing home sales have been strong throughout the Bay Area in recent years and are projected to maintain steady growth, though the San Francisco MSA will be relatively stagnant. High Prices: Pricing of existing homes has surged in all three core Bay Area MSAâ&#x20AC;&#x2122;s. We project existing home prices will rise solidly this year and next, but appreciation will be more modest from 2016-2018. (JBREC does not project home prices, but the table below shows our price change rate projections for each MSA.)

Employment Trends and Projections - Bay Area MSA

2009

2010

2011

2012

2013

Current

2014P

2015P

2016P

2017P

2018P

East Bay MSA San Francisco MSA San Jose MSA Aggregate Total

983,500 964,000 868,300 2,815,800

962,900 955,000 865,600 2,783,500

971,000 978,700 886,100 2,835,800

999,900 1,024,800 921,100 2,945,800

1,033,900 1,070,100 961,800 3,065,800

1,058,900 1,111,200 998,800 3,168,900

1,051,900 1,095,100 996,800 3,143,800

1,077,400 1,115,100 1,026,800 3,219,300

1,102,400 1,133,100 1,054,800 3,290,300

1,117,900 1,148,100 1,068,600 3,334,600

1,127,900 1,158,100 1,078,200 3,364,200

Aggregate Change Aggregate Change Rate

-167,600 -5.6%

-32,300 -1.1%

52,300 1.9%

110,000 3.9%

120,000 4.1%

88,700 2.9%

78,000 2.5%

75,500 2.4%

71,000 2.3%

44,300 1.4%

29,600 0.9%

2018P 33,660 16,800 19,710 70,170

Source: U.S. Department of Labor

Source: U.S. Bureau of Labor

Existing Home Sales Trends and Projections - Bay Area East Bay MSA San Francisco MSA San Jose MSA Aggregate Total

2009 34,036 13,120 19,146 66,302

2010 30,652 13,629 18,058 62,339

2011 31,000 14,587 18,209 63,796

2012 33,750 17,635 20,273 71,658

2013 32,392 17,873 20,053 70,318

Current 31,046 17,010 18,662 66,718

2014P 31,000 16,900 18,900 66,800

2015P 34,200 17,800 20,500 72,500

2016P 36,900 18,400 21,870 77,170

2017P 35,190 17,600 20,790 73,580

Aggregate Change Aggregate Change Rate

10,954 19.8%

-3,963 -6.0%

1,457 2.3%

7,862 12.3%

-1,340 -1.9%

-4,369 -6.1%

-3,518 -5.0%

5,700 8.5%

4,670 6.4%

-3,590 -4.7%

Sales

-3,410 -4.6%

Source: DataQuick

Existing Home Pricing Trends and BHVI Projections - Bay Area Median Pricing

East Bay MSA San Francisco MSA San Jose MSA

Source: DataQuick

2009 $290,424 $669,548 $486,217

2010 $337,723 $705,562 $544,453

2011 $318,057 $669,212 $524,921

2012 $352,634 $718,174 $582,690

2013 $467,309 $851,747 $709,190

Current $585,000 $912,000 $787,000

2014P 7.0% 5.0% 7.0%

2015P 5.0% 4.9% 4.6%

2016P 2.0% 0.7% 2.7%

2017P 1.0% 0.7% 2.0%

2018P 0.0% 0.4% 1.0%

Source: DataQuick

Lake Tahoe/Truckee pacificunion.com

DEMOGRAPHICS Steady Growth Ahead: Lake Tahoe has just over 37,000 residents in about 15,600 households. The area’s population has declined since 2000 at a rate of -1.0 percent per year, but is forecast to grow over the next five years and roughly reach its 2000 level by 2019. By the Numbers: Growth projections for the next five years translate into about 400 new residents annually in the Lake Tahoe area, or about 200 new households each year. Household growth at a higher rate than population is common in largely secondary markets like Lake Tahoe.

Population and Households Trends and Projections - Lake Tahoe Area, California 2000 39,436 15,491 2.53

Population Total Annualized Change Rate Household Total Avg. HH Size

2010 35,531 -1.0% 14,758 2.37

2014 37,328 1.3% 15,647 2.35

2019P 39,402 1.1% 16,619 2.34

Source: ESRI. The Lake Tahoe area is defined as the following eight California ZIP codes: 96140, 96141, 96142, 96143, 96145, 96146, 96148, and 96150.

THE HOUSING MARKET Prices Up: The median sales price for existing homes in the Lake Tahoe area has been increasing at a solid to strong rate. Single-family home prices are up 6.4 percent year over year, and condominium pricing is up 9.2 percent. Median pricing can fluctuate considerably from month to month given the comparatively low volumes and the variety of homes that might come onto the market. Higher Supply Levels: There is a considerable amount of homes on the market in Lake Tahoe, with just under seven months of supply available. This is relatively high in terms of larger market standards, but for high-end, second-home-oriented markets it is to be expected. Extended Days to Sell: High-end vacation homes typically stay on the market longer than conventional housing given how discretionary a second home purchase is. In Lake Tahoe, the average single-family home is on the market for close to three months, and it is not uncommon for condominiums to be up for sale longer. Existing Home Pricing and Supply Trends - Lake Tahoe / Truckee Median Sales Price Single-Family Homes Condominiums Months of Supply Single-Family Homes Condominiums Avg Days on the Market Single-Family Homes Condominiums

Sep-13 $550,000 $350,250

Oct-13 $545,000 $381,500

Nov-13 $560,000 $374,500

Dec-13 $614,605 $345,000

Jan-14 $605,000 $262,000

Feb-14 $699,000 $390,000

Mar-14 $610,000 $290,000

Apr-14 $530,000 $334,000

May-14 $629,000 $387,500

Jun-14 $529,277 $350,000

Jul-14 $595,000 $445,000

Aug-14 $665,000 $345,000

Sep-14 $585,000 $382,500

YoY % 6.4% 9.2%

4.9 5.5

5.1 5.2

5.3 7.0

6.2 7.2

8.5 8.8

6.6 12.9

7.3 11.4

6.8 8.9

5.7 7.8

8.5 10.6

10.6 8.5

7.1 6.8

6.8 6.8

38.8% 23.6%

97 159

101 113

94 159

107 122

93 150

100 150

140 137

101 54

95 114

72 83

66 127

54 53

87 200

-10.3% 25.8%

Source: Pacific Union. The Lake Tahoe / Truckee region includes the communities of Alpine Meadows, Donner Lake, Donner Summit, Lahontan, Martis Valley, North Shore Lake Tahoe, Northstar, Squaw Valley,Tahoe City, Tahoe Donner, Truckee, and the West Shore of Lake Tahoe. YOY figures measure September 2014 against September 2013.

MARKET COLOR Reno Wins the Tesla War: Northern Nevada won the battle for the new Tesla gigafactory. A $1.25 billion tax incentive program assembled by the state enticed Tesla to choose Nevada for this facility. The project will have more than 5 million square feet of manufacturing space and is expected to generate a $100 billion economic impact over 20 years. Though some economists have challenged the ultimate level of economic impact from Tesla’s operations, there is no question it will boost the Northern Nevada economy and could produce more local buyers for Lake Tahoe’s vacation homes.

Follow Pacific Union

pacificunion.com