Impact of Tax Reform on Real Estate Market CoreLogic Connects Impact of Tax Reform on Real Estate Market March 14, 2018

Residential Real Estate Tax Plan Summary Loan limit for mortgage interest deduction drops from $1 million to $750,000 Tax deduction for property, state and local income taxes capped at $10,000 Home equity deduction preserved if money spent on home improvement Tax Legislation Timeline: 2017 Key Dates November 16: House passes bill December 2: Senate passes bill December 15: Revised bill emerges from Conference Committee December 20: House and Senate pass revised bill December 22: President signs Public law no. 115-97

Tax Reform’s Impact on Housing Prices NAR/PwC Short run: 10.2% price decline (ranging from 8-12% depending on local market) Long run: Smaller decreases to no impact (depending on supply elasticities) Major assumptions Deductible portion of mortgage interest falls from 75% to 15% Deductible portion of property tax falls from 75% to 0% Owner-occupied housing stock fixed Moody’s Analytics Peak decline 3.7% (U.S. average) in summer 2019 Effect varies by homeowner costs As much as 11% decline in high-cost counties, 1% increase in low-cost counties JPMorgan 0.9% decline in home prices at U.S. level; 3.5% decline for homes valued>$1 million High-cost states decline more: 2.4% decline in CA, NY; 0.4% to 0.5% increase in IN, SD Assumptions: MITD loan size capped at $500,000, property tax capped at $10,000, state & local income tax not deductible. NAR/PwC - May 14, 2017 (the two assumptions used to be 75%) Moody’s – December 18, 2017 JPMorgan – January 18, 2018 Source: PwC, Impact of Tax Reform Options on Owner-Occupied Housing, Prepared for the NAR, May 15, 2017; Moody’s Analytics, U.S. Macro Outlook: A Plan That Doesn't Get It Done, Mark Zandi, December 18, 2017; JPMorgan, The Impact of Tax Reform on the Housing Market, November 22, 2017.

CoreLogic Analysis of Early Impact Event study: Compare pre- and post-event housing market trend to detect impact Identify high-cost areas and compare to non-high-cost areas Average property tax and annual mortgage interest expense by ZIP code High-frequency, current CoreLogic data Loan Application Multiple Listing Service (MLS) Appraisal Public Record Compare recent trend with prior years’ average (benchmark approach) NAR/PwC - May 14, 2017 (the two assumptions used to be 75%) Moody’s – December 18, 2017 JPMorgan – January 18, 2018

Taxes Highest in Northeast, Loan Amounts Largest in California Purchase Mortgage Originations > $750K Source: CoreLogic (2017 annual average)

Methodology Top 500 High-Cost Zip Codes Zips Ranked by Median Origination Mortgage Amount Zips Ranked by Median Property Tax Amount Mortgage Interest Amount = Original Mortgage Balance * Interest Rate @ 4% Zips Ranked by sum of Mortgage Interest Amount and Property Tax Amount High-cost zips are based on sum of zip-level median tax amount and mortgage interest amount paid in 2017 (original loan balance times interest rate @ 4%). Select Top 500 as High-Cost Zips Source: CoreLogic Public Record Data, 2017

Top 500 High-Cost Zip Codes Note: Zips are ranked based on by sum of median tax and interest amount paid in 2017

High-Cost Zip Codes in Washington, D.C. Area 15 high-cost zips in Washington, D.C. area out of the top 500 high-cost zips in the nation Note: Zips are ranked based on by sum of median tax and interest amount paid in 2017

High-Cost Areas Purchase Demand Remains Similar to Prior Years House Bill Passed Tax Law Passed Source: CoreLogic

Non-High-Cost Areas Purchase Demand Remains Similar to Prior Years House Bill Passed Tax Law Passed Source: CoreLogic

High-Cost Home Sale Volume Remains Similar to Prior Years House Bill Passed Tax Law Passed Source: CoreLogic

Non-High-Cost Areas Home Sales Volume Remains Similar to Prior Years House Bill Passed Tax Law Passed Source: CoreLogic

High-Cost Areas Inventory Remains Similar to Prior Years House Bill Passed Tax Law Passed Source: CoreLogic

Non-High-Cost Areas Inventory Remains Similar to Prior Years House Bill Passed Tax Law Passed Source: CoreLogic

High-Cost Areas Price Remains Similar to Prior Years House Bill Passed Tax Law Passed Source: CoreLogic Home Price Index

Non-High-Cost Areas Price Remains Similar to Prior Years House Bill Passed Tax Law Passed Source: CoreLogic Home Price Index

Purchase Appraisals Have Similar Trend to Prior Years House Bill Passed Tax Law Passed 1st week Prior Year (2017) 1st week Next Year (2018) Source: CoreLogic

High-Cost Areas High End Home Sales Shows No Sign of a Slowdown Contract volume, based on contract price Source: CoreLogic

Non-High-Cost Areas High End Sales Continue to Trend Higher Contract volume, based on contract price Source: CoreLogic

Summary Simulations project home price declines with larger effects in high-cost areas Our analysis uses an ‘event study’ approach with high-frequency, current data, with a focus on high-cost ZIPs compared with the rest of the market Purchase demand, home sales, inventory-for-sale, and price in both high cost areas and non-high cost areas remain similar to prior years (but it is early…) High-end home sales show no signs of a slowdown in either high-cost or non- high-cost areas We will continue to monitor housing market performance in light of tax reform NAR/PwC - May 14, 2017 (the two assumptions used to be 75%) Moody’s – December 18, 2017 JPMorgan – January 18, 2018

Where to find more information Look for regular updates to our housing forecast, commentary and data at https://www.corelogic.com/insights-index.aspx @CoreLogicEcon @DrFrankNothaft @TheSamKhater The views, opinions, forecasts and estimates herein are those of the CoreLogic Office of the Chief Economist, are subject to change without notice and do not necessarily reflect the position of CoreLogic or its management.  The Office of the Chief Economist makes every effort to provide accurate and reliable information, however, it does not guarantee accuracy, completeness, timeliness or suitability for any particular purpose. CORELOGIC and the CoreLogic logo are trademarks of CoreLogic, Inc. and/or its subsidiaries.