As we approach year end, you may be wondering: What can we expect to happen in the US Markets and the economy and how will that affect rates and house prices? At Opes Advisors, our CEO Susan McHan has been working with our Chief Investment Officer, Mark Duvall, CFA® to help answer that question and we’ve just completed our “Outlook 2015: Making Sense of the Economy and the Current Markets.” I thought it would be beneficial to you to hear some of our current perspective. ________________________________________ Our Outlook for Interest Rates As the graph below indicates, we have been experiencing a long term downtrend in interest rates since 1982. The rise in rates in 2013 followed by the drop in 2014 is consistent with a sideways trending market. We believe that short-term interest rates will rise slowly while longer-term interest rates will remain in a tight range below 3.2%. We expect the Fed to raise short-term rates in the first half of 2015 and longer-term rates to rise gradually. Rates today are still low relative to long-term historical levels and within the average range of the past 3-4 years. This is important, as interest rates are a significant factor in determining home affordability. With interest rates remaining low, national and regional home affordability remains high. Our Overall Outlook Beyond interest rates, “Outlook 2015” captures our perspective on the following topics: • What is our Economic Outlook for 2015 and beyond? What factors do we watch to inform our perspective? • What factors informed our Interest rate Outlook and what factors determine whether they will rise or fall in the future? • And importantly, how will the economy and interest rates impact our real estate markets, your business and your clients as we move into 2015 and beyond? I would welcome the opportunity to share our complete Outlook with you. Please call me if you’d be interested in learning more about our Outlook and hearing a full presentation.

1. Opes Advisors
Outlook 2015:
Making Sense of the Economy and Current Markets
Help when you make the most
Important financial decisions of your life.

2. Four Relevant Drivers for 2015
• Economic Environment
• Stock Indexes and Interest Rates
• Housing Market Conditions
• Mortgage Changes and Regulatory Environment
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3. Plan for More Growth
US Economy:
• Economic indicators all point to growth opportunities for the remainder of 2014 and into 2015.
The new unfilled orders, strong financial position of the consumer, leading indicator upward trends
and likely ongoing low interest rates will continue to fuel the growth of the US economy.
• Annual Employment finished 1.2% above last year through August; there are now 145.3 million
individuals employed in the US; highest level since late 2008. The seasonally adjusted
unemployment rate has fallen to 5.8% as the overall economy continues to strengthen.
• The S&P 500 Index set a record in October closing again above 2000; it is 14% higher than one year
ago. Corporate profits are up 15% higher year over year if you ignore the financial services sector.
We still see single digit gains for 2015.
• The gradual rise in housing prices nationally is pulling asset prices up opening up the possibility of
refinancing and selling of homes previously under water; and increasing movement of people
toward areas with more jobs. Housing is stabilizing nationally, and areas where bubble like
symptoms arose, we see this dissipating somewhat in Q4 and Q1 of 15. Global growth fears and
volatility in the stock market will slow this rise down.
• Inflation remains largely in check, consumer price index up 1.6% above a year ago, but we look for
this to level off with commodity prices, global slowdowns and US Oil and Natural Gas production.
• Housing Starts ended 2013 18.3% higher; 2014 is projected to end up 8%, 2015 to still have further
increases to 9% and then level off. Millennials will be in the market in the next five years.
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4. Plan for More Growth
Bay Area Economy:
• E-Commerce Retail Sales are growing at a robust pace, up 16.2% over the past 12 months,
far exceeding growth in other retail sectors – bodes well for our local economies.
• Unemployment has dropped from above the national average to below it over the past two
years. Growing local economy continues; San Francisco Metropolitan Area unemployment
5.0 and San Jose 5.2 as of September, compared to the national average, US at 5.8%.
• High Tech and Social Media generating local positive effects with their stock market value,
restricted stock unit values, and bonus plans. This continues to have a positive wealth
effect for local communities; we have the leading innovators in consumer electronics, social
media, search engine (and possibly driverless cars), and automotive manufacturing.
• High paying jobs have increased; we have specific requirements and roles fulfilled uniquely
in our Silicon Valley Area; we do not see this pattern changing and see Venture Capital
Investments continuing at a strong level.
• Rising home prices and increased jobs and wealth, have brought buyers off the sidelines,
although we will have seasonal adjustments in prices and demand we do not see an overall
change in our markets or permanent decrease in demand. We do believe that the slight
rise in rates, and lower affordability rates will put a ceiling on the steep rises in some
communities.
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5. Four RVenture Capital – Investment Higher and Local
83% More Investment than any other Region
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6. Bay Area Housing and Mortgages
Current Sales, Prices and Trends:
• A total of 7,693 new and resale houses and condos sold in the nine-county San Francisco
Bay Area in October 2014. That was up 3.4 percent from 7,443 in September and up 1.3
percent from 7,595 in October 2013, according to CoreLogic DataQuick data.
• The median price paid for a home in the nine-county Bay Area in October 2014 was
$601,000. That was down 0.5 percent from $604,000 in September, and up 11.3 percent
from $539,750 in October 2013. The median sales price peaked at $665,000 in June and July
2007, then dropped to a low of $290,000 in March 2009. We are currently within 9% of
the peak prior to the crisis with interest rates over 2.5 points below the peak.
• Jumbo loans, accounted for 55.3 percent of last month’s purchase lending, up from a
revised 54.7 percent in September and up from 47.8 percent a year ago. Jumbo usage
dropped to as low as 17.1 percent in January 2009.
• Adjustable-rate mortgages (ARMs), an important indicator of mortgage availability,
accounted for 24.0 percent of the Bay Area’s home purchase loans in October.
• The typical monthly mortgage payment that buyers committed to paying was $2307.
Adjusted for inflation, last month’s payment was 20.4 percent below the typical payments in
1989; the peak of the prior real estate cycle. It is 41.2 percent below the current cycle's
peak in July 2007. ©2014 Opes Advisors, Inc. All rights reserved www.opesadvisors.com 6

7. Stock Indices’ Strong Correlation with
Bay Area Real Estate Prices
S&P and Dow Jones Returns single digits 2015
100.80
100.60
100.40
100.20
100.00
99.80
99.60
99.40
Bay Area Median Home Prices up from lows in step with S&P
S&P Returns up 220% since the lows of Mar 2009
Our Projection for S&P Returns high single digits
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
DJIA Growth S&P 500 Growth Bay Area Median Home $ growth
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8. Affordability in Bay Area Down From Peak
Q1 2006 – Q2 2014 Housing Affordability Index
80%
70%
60%
50%
40%
30%
20%
10%
0%
Q1/06 Q3/06 Q1/07 Q3/07 Q1/08 Q3/08 Q1/09 Q3/09 Q1/10 Q3/10 Q1/11 Q3/11 Q1/12 Q3/12 Q1/13 Q3/13 Q1/14
California United States San Francisco Bay
The graph above illustrates the percentage of households that can afford to purchase a home in their respective regions.
HAI - In Percentages
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9. 3 Key Interest Rate Drivers
10 Year (Benchmark) Treasury Yield at 2.35%
DRIVER INDICATOR
Fundamental
• Supply, Demand and Inflation
Expectations
Monetary Policy • Fed Reserve Commitment and Actions
Technical (Trend) • Secular (Long Term) Cycle
Let’s look in more detail at the Drivers and 2015
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10. Current Monetary Policy (Fed Actions)
Direct Influence on
Short Term Rates
As a Major Investor
• Fed sets the Discount Rate – rate
banks borrow money from
Federal Reserve bank and while
speculation is rampant; this is
expected to rise middle of 2015.
• Fed Funds Rate – rate banks
charge each other for overnight
loans, directly influenced by Fed
increasing or decreasing required
ratio of reserves to deposits
• Current situation, the Fed
completed with their purchasing
of treasuries
• Reinvesting Maturities of long
term Treasury debt is still
happening and can stop if the
Fed wants to limit stimulus
before raising rates
• Currently, Fed actions have stopped purchasing additional bonds, and could begin
to raise short term rates 2015; we believe if growth continues could happen by Q2.
• Volatility will follow if the Fed raised short term rates. Supply and Demand will
have the most influence on longer term rates.
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11. Long Term Trend - Clues to Future Direction
• Trends are marked out by long-term directional ranges in interest rates.
o Changing the trend requires a major change in policy or economic circumstances.
• While interest rate movements appear large at the time they are occurring, a
longer term perspective demonstrates how frequently and to what degree
interest rates move up and down.
o Despite varying opinions to the contrary, technical trends suggest the limits of how far
rates may shift around, at least until something major shifts differently than outlined
in this presentation; the long range trend holds.
• There has been a long rate trend downward in interest rates. The rise in rates in
2013 along with the 2014 drop in rates is consistent with a sideways trending
market. And while recent rises may signify that the long term downward trend
is ending, it doesn’t mean it will rise to interruptive levels.
• As you will see from the next slide, we are entering a new phase of a range
bound interest rate cycle.
We believe ©2014 Opes Advisors, Inc. All rights reservedrates will remwwawi.onp eisnad vtishorsi.sco mfairly low band for a while. 11

12. Rates to Remain Range-Bound
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13. 10 Year Treasuries and Mortgage Rates
Rate Forecasts Next Four Quarters
10 Year Treasuries
December 2014: 2.11 – 2.61
March 2015: 2.07 – 2.57
June 2015: 2.13 – 2.63
September 2015: 2.27 – 2.77
Other Key Rates:
Prime: 3.25%
Fixed Mortgages: 4%-4.75%
ARM Mortgages: 2.75% - 4%
Volatility Interruption When/if Fed Raises Short Term Rates
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14. Assessment Of Mortgage Changes for 2015
Fannie and Freddie
• No movement on lowering the conventional conforming amounts; could happen toward
end of 2015.
• GSE’s will continue to raise rates to encourage private investment
• Further tightening of guidelines to eventually meet QM guides, each release of the new
DU has tightened DTI and qualification levels.
• Stage is set to begin to combine entities in standardized security platform, though this
will not happen in the near future.
QM and ATR
Requirements
• The market and our clients are adjusting to the new Qualified Mortgage rules of
mortgages
• This sets the stage for new investment to finally come to market.
• This will bode well for the Bay Area and any market that relies on Non Conventional and
Non QM loans for real estate purchase. These are happening now, but the pricing is not
where it needs to be … YET.
• 2015 will have more product investment than all of the last eight years
Private Investment
Alive and Well
2015 Trajectory Change
• Asset backed lending
• Asset depletion lending
• Expanded Lower Credit FICO Guidelines
• Self Employment Borrower Help
• We see guides to continue to expand this next year in order to serve those that can truly
afford their payments
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15. Q & A
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16. Contact Us
Your Name Here
Mortgage Advisor
NMLS 0000000
you@opesadvisors.com
000.000.0000
Opes Advisors is licensed by the CA Department of Business Oversight 4150089 under the California Residential Mortgage
Lenders Act, Oregon ML-4902, Washington CL-1178435 and NMLS 235584. Equal Opportunity Lender. Opes Advisors is a
registered investment advisor with the Securities and Exchange Commission (SEC).
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