1. Economic and Real Estate Outlook By Lawrence Yun, Ph.D. Chief Economist, National Association of REALTORS® Presentation at Arkansas REALTORS® Association Eastern Arkansas REALTORS® Association Northwest Arkansas Board of REALTORS® April 6 and 7, 2016

2. Lifetime Wealth at near All-Time High

3. Consumer Confidence Index

4. Median Household Income (Inflation Adjusted)

5. Annual GDP … Below 3% for 11 straight years

6. Sluggish GDP and Gap after Recession ($2.5 trillion gap … $7,000 per person) 3% Growth Line Slow 2% Growth Line

7. Sluggish Business Spending Despite High Profit

8. Homeownership Rate (seasonally adjusted … near 50-year low)

9. First-time collapse … why? Lowest in nearly 30 years … since 1987

10. Student Loan (in $billion)

11. H.O.M.E. Survey (Housing Opportunity and Market Experience) 87 percent of Americans believe homeownership is part of their personal American Dream HIGHER for 18-24 year olds at 91 percent

12. Even with Falling ownership rate, Home Sales Rising

13. Monthly Pending Sales Index - Steady (Seasonally Adjusted) Source: NAR

14. Monthly Pending Sales Index – What Triggered the Sustained Decline? (Seasonally Adjusted) Source: NAR

15. Jump in Mortgage Rate

16. Fed Rate Hike in December

17. Fed Rate Hike in December then again in May? then again in September? then again in …

18. Fed Policy and Mortgage Rate

19. What Determines Bond Yields? Federal Reserve’s short-term rate changes Inflation and erosion of purchasing power Foreign capital flow and demand for dollar Savings rate U.S. budget deficit Printing of money …

20. Federal Deficit - Shrinking ( $ million, 12 month total)

21. Federal Debt … Cumulative ( $ million; debt held by public excluding intra-governmental holdings)

22. U.S. Dollar Reversing the Decline … Stronger and Stronger

23. No CPI Inflation – Yet

24. Rents Rising at 7-year high

25. Rental Vacancy Rate (30-year low)

26. Multifamily Oversupply?

27. Rising Home Price is becoming Obstacle (Median National Existing Home Price)

28. New Home Price … Even Higher

29. Memphis and Little Rock Median Home Price – Very Affordable ! In $1000

30. Arkansas Home Price Index (Repeat Price Measurement by Federal Housing Finance Agency)

31. Would Home Sales Rise? Rising Mortgage Rates – Not Good Too Fast Rising Prices – Not Good Housing Equity for Pent-up Sellers – Good Credit Qualification Normalizes - Good Return Boomerang Buyers - Good Steadily increased supply - Good Job creation – Super Good

32. Pent-Up Home Sellers

33. Credit Box Opens? FICO New Method Fannie/Freddie – Lower down payment products FHA premiums … lowered Portfolio Lending … historic low mortgage default rates on recent vintages (2010-2014)

34. Trade-Up Opportunities from Housing Equity $ billion

35. Return Buyers

36. Housing Starts Thousand units

37. Arkansas Housing Permits

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

39. Jobs (8 million lost … 14 million gained) In thousands

40. Fresh Unemployment Insurance Claims In thousands

41. Unemployment Rate Falling Out-of-the-Labor Force Rising

42. Top and Bottom States for Jobs The Best% Gain in 12 months Idaho3.8 Utah3.5 Nevada3.4 Florida3.0 Washington3.0 California2.9 South Carolina2.9 Oregon2.7 Arizona2.3 The Worst% Gain in 12 months Wyoming0.2 Oklahoma0.1 Louisiana-0.4 West Virginia-1.8 North Dakota-2.0 Arkansas job growth rate of 1.6%, 24 nd rank

43. Jobs in Nashville and Memphis

44. Jobs in Little Rock and Fayetteville

45. Jobs in Mobile and Charleston SC

46. Jobs in Grand Rapids and Flint

47. FSBO collapse

48. Impossible Poker Face and Google Bump

49. Commercial Real Estate

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

51. Commercial Property Price Index Source: Federal Reserve

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

53. 2/3 of Members used 1031 Like-Kind Exchanges

54. Economic Forecast 201420152016 Forecast GDP Growth2.6%2.1%1.3% Job Growth+3.0 million+2.6 million+1.5 million CPI Inflation1.6%0.3%2.5% 10-year Treasury2.6%2.1%2.7%

55. Housing Forecast (as of March 2016) 201420152016 Forecast New Home Sales437,000500,000560,000 Existing Home Sales4.9 million5.3 million5.4 million Median Price Growth+ 5.7%+ 6%+4% 30-year Rate4.2%3.9%4.1%

56. REALTORS ® CRE Outlook Commercial Real Estate Vacancy Forecast (%) 2014.Q32014.Q42015.Q12015.Q22015.Q32015.Q42016.Q12016.Q22016.Q32016.Q4201420152016 Office15.714.915.115.915.815.515.315.114.914.816.015.615.0 Industrial9.911.611.310.810.39.89.49.08.58.412.011.78.8 Retail13.812.513.713.213.012.712.312.111.911.613.813.212.0 Multifamily6.16.88.46.66.76.6 6.76.67.1 Source: NAR Commercial Property Price Indices Forecast 200820092010201120122013201420152016 NCREIF 215.2165.1168.2186.5195.2211.9224.9 249.8249.0 Green St. Advisors 86.163.574.487.192.299.4106.7 117.5115.5 Sources: NAR, NCREIF, Green Street Advisors