1. Real Estate Trends and Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS ® Presentation at Associated Taxpayers of Idaho Boise, ID December 10, 2014

2. GDP Rebound in 2014 Q2 and Q3

3. Jobs (8 million lost … 10 million gained) In thousands

4. Weekly New Unemployment Insurance Claims In thousands

5. Unemployment Rate

6. Jobs in Boise Area In thousands

7. Jobs: U.S. vs Boise Area

8. Household Net Worth at All-Time High

9. But Wait … “I am not feeling it”

10. GDP Still not Robust … Below 3% for 9 straight years

11. Sluggish Growth + Gap after Great Recession ($1.5 trillion gap … $4,700 per person) 3% Growth Line 2.2% Growth Line

12. Employment Rate

13. Renter Households from 2010 (Increased by 4 million) In thousands

14. Homeowner Households from 2010 (Decreased by 1 million) In thousands

15. Homeownership Rate

16. Household Net Worth ($5,500 vs. $195,500) Source: Federal Reserve Survey of Consumer Finances

17. Median Home Price (Near 20% gain in 2 years)

18. The Reason for Not Feeling It Very Slow Housing Market Recovery Very Slow Commercial Market Recovery Holds Back Economic Recovery

19. Existing Home Sales 20% cumulative increase over 2 years

20. Monthly Pending Sales Index … Making Upward U-Turn (Seasonally Adjusted) Source: NAR

21. Two and Out? Or Multi-year Expansion? (Single-Family Existing Home Sales Only)

22. Pent Up Demand 20002013 Existing Home Sales5.2 m5.1 m New Home Sales880 K430 K Mortgage Rates8.0%4.0% Payroll Jobs132.0 m136.4 m Population282 m316 m

23. Housing Starts Rising … Too Slowly Thousand units

24. Time to Sell a New Spec Home (in months)

25. Sluggish Recovery in Housing Starts Cost of Construction Rising Faster than CPI Labor Shortage for construction work Construction loan difficulty for small local homebuilders … Dodd-Frank financial regulations?

26. Ada County Housing Statistics Home Sales down 1% year-to-date October 2013 up 14% 2012 up 1% 2011 up 9% Average Price up 10% 2013 up 17% 2012 up 13% 2011 down 9%

27. Boise Area Housing Permits (year-to-date)

28. Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory Record High Household Wealth

29. “Take This Job and Shove It … I ain’t working here no more” Quit Rate in thousands

30. Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory Record High Household Wealth

31. Monetary Policy by Federal Reserve (zero rate policy for 6 years!) %

32. Federal Reserve Balance Sheet from Quantitative Easing $ million

33. 30-year Mortgage Rates

34. Non-worrisome CPI Inflation – Yet COLA of 1.7% in 2015

35. Rising Renters’ and Homeowners’ Rent Growth (Above 3%)

36. REALTOR ® Rent Survey – Shows Rent Pressure

37. Oil Price

38. Monetary Policy Quantitative Easing … Finished Fed Funds Rate … hike in 2015 Q2 Earlier Move to Tighten because of Inflation Pressure Long-term Steady State Rate (2016 onwards).. 10 year Treasury at 5.0% Mortgage Rates reaching 6% by 2016

39. Erratic Credit Availability FICO New Method Mel Watt – New overseer of Fannie/Freddie Consumer Financial Protection Bureau’s – Lawsuits … Bleeding Big Banks – Other 2000-page shuffling of Dodd-Frank … Squeezing Small Banks Ridiculous FHA premiums … should decline Historic low mortgage default rates on recent vintages (2010-2014)

40. Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory Record High Household Wealth

41. U.S. Population

42. Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory and Moderate Price Growth Record High Household Wealth

43. Inventory of Homes for Sale Maryland inventory up 18% in July

44. Shadow Inventory in Idaho

45. Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory and Moderate Price Growth Record High Household Wealth

46. Vacation Home Sales

47. Economic Forecast 20132014 Likely 2015 Forecast 2016 Forecast GDP Growth2.2% 2.7%2.9% Job Growth+2.3 million+2.5 million +2.6 million CPI Inflation1.5%1.6%2.7%3.3% Consumer Confidence 73879598 10-year Treasury 2.5%2.6%3.2%4.3%

48. Housing Forecast 20132014 Likely 2015 Forecast 2016 Forecast Housing Starts925,0001.0 million1.3 million1.4 million New Home Sales 430,000440,000620,000700,000 Existing Home Sales 5.1 million4.9 million5.3 million5.4 million Median Price Growth + 11.5%+ 5.3%+ 4% 30-year Rate4.0%4.2%4.9%6.0% Underwriting Standards Strict TransitionNormal

49. Commercial Real Estate

50. Commercial Investment Sales of Large Properties (Properties valued at $2.5 million and over)

51. Federal Reserve Commercial Property Price Index

52. REALTOR® Markets & Deal Size (Not $2.5 million Properties)

53. Small Banks Important to REALTORS®

54. Forecast over the next 2 years Increased occupancy and falling vacancy (new supply lacking) Rising rents … can offset rising rates to support property values Overall … improving business opportunities

55. OFFICE 201420152016 Vacancy Rate 16.2%15.8%15.6% Net Absorption ('000 sq. ft.) 36,19250,67857,782 Completions ('000 sq. ft.) 26,45041,79944,862 Rent Growth 2.6%3.2%3.6% INDUSTRIAL 201420152016 Vacancy Rate 8.9%8.5%8.1% Net Absorption ('000 sq. ft.) 107,580104,948105,044 Completions ('000 sq. ft.) 83,42468,75561,720 Inventory ('000,000 sq. ft.) 8,4688,5378,598 Rent Growth 2.4%2.8%2.9% RETAIL 201420152016 Vacancy Rate 9.8%9.7%9.4% Net Absorption ('000 sq. ft.) 11,21419,31424,313 Completions ('000 sq. ft.) 7,27512,19616,342 Rent Growth 2.0%2.4%3.0% MULTI-FAMILY 201420152016 Vacancy Rate 4.0% 4.2% Net Absorption (Units) 223,421170,065140,128 Completions (Units) 191,481146,461122,381 Rent Growth 4.0%3.9%3.5% Sources: National Association of REALTORS® / Reis, Inc. Commercial Real Estate Forecast

56. Washington Policy Watch on Commercial Real Estate Facilitate Covered Bonds to help credit flow Raise cap on holding of commercial RE loans by credit unions Preserve Like-Kind Exchanges Preserve Terrorism Insurance Preserve capital gains status on carried interest Depreciation Rules should match economic life Oppose lease-accounting changes

57. How Young Are REALTORS® ?

58. Let’s Spin the Bottle !

59. Spin the Globe … Find the Source of Improving Standard of Living

60. When, How, What, Why? British Glorious Revolution of 1688 – William and Mary arrives to say … – Power not with King but with people via Parliament – No Taxation with Representation – Life, Liberty, and (Acquire) Property American Revolution of 1766 – Power resides not with King but with people – No Taxation with Representation – Life, Liberty, and the Pursuit of Happiness

61. Participants in Democracy to Protect Property Rights!