1. Winding Down to an Expansion David Lereah Ph.D., Chief Economist NATIONAL ASSOCIATION OF REALTORS ® David Lereah Ph.D., Chief Economist NATIONAL ASSOCIATION OF REALTORS ®

2. Painting the Boom Record Home Sales Second Homebuying Frenzy Stretching Credit Media Frenzy Doom/Gloom Predictions Record Home Sales Second Homebuying Frenzy Stretching Credit Media Frenzy Doom/Gloom Predictions

3. Hot Markets in the Past 3 Years (2005 Q2 vs 2002 Q2) Source: NAR

4. Signs of Tiring Stretching credit Rising mortgage rates Affordability dropping Rising inventories Lengthening days on market More speculation Rolling activity Stretching credit Rising mortgage rates Affordability dropping Rising inventories Lengthening days on market More speculation Rolling activity

5. But Real Estate Expansion Intact Economic growth sufficient 4 million new jobs in the past 2 years Unsteady stock market Mortgage rates will remain under 7% Katrina (and Wilma) ’06 bounce back effect Near-term demographic trends favorable –Boomers, Immigrants, Boomer Children Supply/Demand better balanced Economic growth sufficient 4 million new jobs in the past 2 years Unsteady stock market Mortgage rates will remain under 7% Katrina (and Wilma) ’06 bounce back effect Near-term demographic trends favorable –Boomers, Immigrants, Boomer Children Supply/Demand better balanced

6. Favorable Near-Term Demographic Trends Million Looking for Second Homes Looking for Second Homes Trade Up Buyers First-time Buyers Large Wealth Transfer To Younger Ones Large Wealth Transfer To Younger Ones

7. Most Metros are Healthy, Few Fragile Fundamentals Market Analysis Influencing Factors Stress Test Fundamentals Market Analysis Influencing Factors Stress Test

8. Risks on the Horizon Economic Risks –Rising Oil Prices –Inflationary Pressures –Potential Job Losses –Swelling Federal Budget Deficit Political Risks –Tax Reform –Fannie Mae/Freddie Mac Regulatory Reform Economic Risks –Rising Oil Prices –Inflationary Pressures –Potential Job Losses –Swelling Federal Budget Deficit Political Risks –Tax Reform –Fannie Mae/Freddie Mac Regulatory Reform

9. Winding Down to an Expansion David Lereah Ph.D., Chief Economist NATIONAL ASSOCIATION OF REALTORS ® David Lereah Ph.D., Chief Economist NATIONAL ASSOCIATION OF REALTORS ®