1. Real Estate Reality Check By David Wluka 2006 MAR President

2. Housing Market Overview A Decade of Expansion 1995-2005 A Decade of Expansion 1995-2005 66% Increase in Residential Home Sales 66% Increase in Residential Home Sales 136% in Statewide Median Selling Price 136% in Statewide Median Selling Price No Net Gain in Annual Housing Production No Net Gain in Annual Housing Production

3. A Divided Real Estate Nation Red = Expanding (31% of the country by population) Blue = Contracting (69%) Source: NAR, Existing Home Sales 2006 Q2 vs 2005 Q2

4. Dismissing the Housing Bubble Although Boston area Price Income Ratio is 3 to 1, Mortgage Debt Servicing Costs to Income Ratio Is Within Historic Averages Although Boston area Price Income Ratio is 3 to 1, Mortgage Debt Servicing Costs to Income Ratio Is Within Historic Averages Limited Use of Specialty Mortgage Products locally (17% Interest-Only Loans in 2004) Limited Use of Specialty Mortgage Products locally (17% Interest-Only Loans in 2004) Investor Home Buying Activity Relatively Low in Mass. Investor Home Buying Activity Relatively Low in Mass.

5. What Happened? Boom ended August 2005 Boom ended August 2005 Mortgage rates rose almost one point Mortgage rates rose almost one point Affordability conditions deteriorated Affordability conditions deteriorated Speculative investors pulled out Speculative investors pulled out Homebuyer confidence plunged Homebuyer confidence plunged Resort buyers went to sidelines Resort buyers went to sidelines Trade-up buyers to sidelines Trade-up buyers to sidelines First-time buyers priced out of market First-time buyers priced out of market

6. Northeast Home Prices Source: NAR % 6% cumulative price growth from 1990 to 2000 84% rise in the past five years

7. Single Family Sales Median Selling Price Average Single Family Sales Median Selling Price Average GREATERBOSTON2,971$499,900$632,7513114$496,925$633,157 STATEWIDE12,439$360,000$448,24113,918$364,900$444,691 2006 Second Quarter2005 Second Quarter SINGLE FAMILY HOME SALES

8. 2 nd Quarter Sales by Year YearAll Sales 19907,314 19919,468 199211,216 199311,149 199413,438 199510,906 199614,703 199715,675 YearAll Sales 199715,675 199817,878 199918,377 200016,802 200116,219 200217,449 200316,336 200420,529 200520,708 200618,624

10. The Aftermath Sellers’ market transitioning to buyers’ market Sellers’ market transitioning to buyers’ market Home sales plummet, prices lag, inventories rise Home sales plummet, prices lag, inventories rise Cooling markets left with high percentage of exotic loans Cooling markets left with high percentage of exotic loans Builders offering non-price incentives Builders offering non-price incentives Days-on-market lengthening Days-on-market lengthening Residential construction activity slows Residential construction activity slows Home prices beginning to soften Home prices beginning to soften

11. Cooling Metro Markets (Existing Home Sales: 2006 Q2 vs 2005 Q2) MSASalesPrices Las Vegas, NV -20%+6.3% Phoenix, AZ -31%+11.8 Miami, FL -23%+2.0% Sarasota, FL -29%+0.2% Washington, DC -21%+3.3% San Diego, CA -22%+1.2% Sacramento, CA -35%+0.8% Boston, MA -9%+0.6% Source: NAR

12. Lengthening Days on Market MSA June 2005 June 2006 Boston58108 Detroit75103 Las Vegas 4655 Los Angeles 3454 Miami4767 Phoenix2153 Washington DC 2748 Source: NAR

13. What Will Happen? 2006 corrections different from previous real estate corrections 2006 corrections different from previous real estate corrections Cooling markets have healthy local economies Cooling markets have healthy local economies Seller-to-buyer transitions almost complete Seller-to-buyer transitions almost complete Prices expected to fall for remainder of year Prices expected to fall for remainder of year Price fall will be limited due to Pent-up Demand at Lower Prices Price fall will be limited due to Pent-up Demand at Lower Prices Some Local Markets are Fragile and Vulnerable to Rate Rise Some Local Markets are Fragile and Vulnerable to Rate Rise Soft Landing Soft Landing

14. So…What do I do? Look at your house as if you’re a Buyer! Look at your house as if you’re a Buyer! Clean it Clean it Fix it Fix it Stage it Stage it

15. Get Help – Use a Realtor ® “Right Price” your house “Right Price” your house Make it competitive Make it competitive Qualifying prospects Qualifying prospects Marketing Marketing Nationally Realtor ® marketed homes sell for an average of 16% more than FSBOs Nationally Realtor ® marketed homes sell for an average of 16% more than FSBOs

16. Real Estate Reality Check By David Wluka 2006 MAR President