1. Tatiana Bailey, Ph.D. Director, Southern Colorado Economic Forum January 9, 2015 Presentation for Pikes Peak Area Realtors

2. Tatiana Bailey, Ph.D.

3. Overview National Indicators – The Big Picture Labor Force, Employment & Unemployment Real Estate Market Tatiana Bailey, Ph.D.

4. Real Growth in GDP vs. Year Ago Source: Federal Reserve Bank of St. Louis Q3: 2.7%* *Real GDP Percent Change from Q1 Year Ago, SA Tatiana Bailey, Ph.D.

7. S&P 500 Not Seasonally Adjusted Source: S&P Dow Jones Indices LLC Tatiana Bailey, Ph.D.

8. University of Michigan Consumer Sentiment Source: Federal Reserve Bank of St. Louis Tatiana Bailey, Ph.D.

9. Per Capita Personal Income Source: Bureau of Economic Analysis El Paso is 88% of Colorado Teller is 95% Tatiana Bailey, Ph.D.

10. Overview National Indicators Labor Force, Employment & Unemployment Housing Tatiana Bailey, Ph.D.

11. Monthly Unemployment Rate Source: BLS-LAUS, Forum Current: Nov. 2014 Percentage 4.6% TC 5.1% EPC 5.5% U.S. 4.0% CO Data not seasonally adjusted Tatiana Bailey, Ph.D.

12. Survey Employer Data: Total U.S. Monthly Non-Farm Job Openings SA (000's) Source: Federal Reserve Bank of St. Louis Job Openings (000’s) Data now through October 2014 Tatiana Bailey, Ph.D.

13. Household Data: Employment/Population, Labor Force Participation Rate SA Source: Federal Reserve Bank of St. Louis Percentage Data through November 2014 Tatiana Bailey, Ph.D.

14. Household Data: U.S. Civilian Participation Rates SA Employment/Population SA Blue and Red are same as before but on a different scale Source: Federal Reserve Bank of St. Louis Percentage Tatiana Bailey, Ph.D.

15. El Paso County Labor Force & Employment Note: Data runs through November 2014 Source: BLS-LAUS Labor Force and Employment Tatiana Bailey, Ph.D.

16. El Paso County Employment by Sector 2001 and Q2 of 2014 Source: Colorado Department of Labor QCEW Tatiana Bailey, Ph.D.

17. CS MSA Employment Projections 2023 Source: Colorado Department of Labor QCEW Population Tatiana Bailey, Ph.D.

18. Overview National Indicators Labor Force, Employment & Unemployment Housing – National and Local Picture Tatiana Bailey, Ph.D.

19. National Picture - Housing  U.S. home prices increased 5.5% comparing 11/14 to 11/13.  Marks 33 months of year over year increases in home prices.  Perhaps prices are stabilizing because November prices (over October prices) edged up only.1%.  Colorado is one of seven states that reached new highs in the home price index (other states were ND, OK, SD, TENN, TX and WY).  This may not be sustainable for oil-producing states if oil prices stay low.  Remember the big picture - consumer confidence, GDP, stable prices (low inflation) and 241,000 new jobs in December Tatiana Bailey, Ph.D.

20. National Picture - Incentives  Tax extension via the Mortgage Forgiveness Tax Relief Act (no taxes on mortgage debt forgiven for “upside down” homes)  Fannie Mae and Freddie Mac announced a new 3% down payment product and previously the minimum down payment was 3.5%.  President announced that the Federal Housing Administration (FHA) will lower its annual insurance premiums from 1.35% to.85%.  FHA volume soared during the recession to help make up for the lack of credit in the private market, but there were two negative externalities to that: 1.There were more bad loans made (at least now there is no “bubble”). 2.FHA more than doubled the insurance premium to build back up its reserve.  Impact particularly first time home buyers (most of the FHA business) and will create a difference in monthly payments of about $80. Tatiana Bailey, Ph.D.

21. National Picture - Incentives  News caused home builder stocks to rise on Wednesday while those of mortgage insurers fell.  Obama also expected to address the issue of “putbacks” at the FHA, which is when lenders are forced to buy back loans (has been expensive for lenders and borrowers)  Lastly, interest rates for at least Q1 and Q2 will stay low and even after that, it’s not likely that they will increase significantly when you compare to historical rates.  VA loans at 3.25% and conventional loans at just under 4%.  Housing across the nation should remain strong. Tatiana Bailey, Ph.D.

22.  Colorado Springs home sales finished 2014 at an 8-year high. Sales were actually 28.4% higher in December 2014 than they were in December 2013. There have been increases for 5 straight months.  December was not an aberration – for all of 2014 the Pikes Peak region had 11,197 home sales which is almost a 4% increase over 2013.  The average sale price for single family homes was 4.1% higher and 13.3% higher for condos and townhomes in December.  For the (entire) 2014 year, average sale prices were 2.8% higher for single family homes and 2.3% higher for condos and townhomes. Local Picture Tatiana Bailey, Ph.D.

25. Home Sales Source: PPAR (RSC) Number of Homes Tatiana Bailey, Ph.D.

26. Source: PPAR (RSC) and UCCS Forum Average & Median Home Prices, More Recent Data Tatiana Bailey, Ph.D.

28. Source: El Paso County Public Trustee Number of Foreclosures Number of Foreclosures, El Paso County Tatiana Bailey, Ph.D.

29. Local Picture  The increased activity alongside moderate building activity means that the inventory of homes fell to a 14 year low (20% lower than last year!).  This may cause upward pressure on prices in the Pikes Peak region. Stagnant wages may mitigate this (and/or interest rate increases in Q3/Q4).  Good news is that housing appreciation here in the PP region is strong, but there are no indications of a bubble.  Bad news is that our local economy has still a bit lackluster. If we want a sustainable, healthy real estate market here, we need job growth and higher paying jobs. Tatiana Bailey, Ph.D.

30. Pikes Peak Single and Multi-Family Permits Source: PPRBD and UCCS Forum Number of Permits Tatiana Bailey, Ph.D.

31. Local Picture We see this in the bifurcated model:  Market is split - $350k and below sales and prices will be good  $500k and up - these homes selling in roughly 6 months  Higher prices (e.g. $700k) is taking 1 year with losses (e.g. $100k)  I do believe 2015 may have some positive, local economic growth. New leadership at the RBA and some changes in city government coupled with the massive growth in most of the rest of the state hints that we may have some of the necessary components in place for expansion and growth in the greater, Colorado Springs area. Tatiana Bailey, Ph.D.

33. Source: PPAR (RSC) and UCCS Forum *Estimate Tatiana Bailey, Ph.D.