1. Economic and Commercial Real Estate Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS ® Presentation at NAR Annual Conference Commercial Real Estate & Economic Trends Forum San Francisco, CA November 8, 2013

2. GDP Growth … Unimpressive but no Fresh Recession (Could be on the verge of recession if not for housing recovery)

3. U.S. Total Payroll Jobs (8 million lost … 7 million gained) In thousands

4. States with Fast Job Growth StateJob Growth Rate 1North Dakota3.2% 2Utah2.7% 3Idaho2.5% 4Texas2.4% 5Colorado2.3% 6Minnesota2.3% 7Georgia2.1% 8Washington2.1% 9Arizona2.0% 10New Jersey2.0%

5. Unemployment Rate

6. Employment Rate

7. Labor Force Participation Rate: Record Low for Men and Cyclical Low for Women (Adults 20 years old and up)

8. Well Shy of Long Run Trend ( 6 to 8 million more jobs needed) In millions

9. Consumer Spending Growth (2% growth; not 3% or 4%)

10. Business Spending Growth (3% growth; not sustained 5% to 10%)

11. Monetary and Fiscal Policies

12. Monetary Policy by Federal Reserve (zero rate policy to 2015 ?) %

13. Federal Reserve Balance Sheet from Quantitative Easing $ million

14. Consumer Price Inflation Less than 2% (% change from one year ago)

15. Rising Renters’ and Homeowners’ Rent Growth (Above 2% and On the Way to 3%)

16. Household Net Worth

17. Federal Government Spending (Stimulus … Flat … Decline)

18. Shrinking Budget Deficit (in $billion)

19. Federal Government Annual Spending/Revenue $ trillion

20. Federal Debt Held By Public (Cumulative Accumulation as % of GDP)

21. Germany Too High Trade Surplus No Stimulus Budget Surplus in 2013 (though still has high debt from prior deficits) Blame Germany for holding back the World Economy? Or Emulate Germany’s Economic Reforms?

22. International Sovereign Borrowing Cost Country10-year Government Borrowing Cost Japan0.6% Switzerland1.1% Germany1.7% France2.3% Canada2.4% U.S.2.5% Britain2.6% China4.0% Spain4.1% Italy4.2% Russia7.5% India8.6% Greece8.7% Brazil11.6%

23. Consumer Confidence Now and About Future

24. Productivity and Income Doubling Productivity GrowthYears for Income to DoubleExamples 1%72 yearsU.S. today? 2%36 years1970 to 2007 (pre-financial market crash) 3%24 yearsU.S. post-war to 1970 5%14 yearsAsian Tigers

25. GDP Forecast

26. Commercial Market Activity

27. Transactions Up 27% YoY – 2013 YTD Source: Real Capital Analytics

28. CRE Prices Advance – CBD Off & Apt Lead Source: Real Capital Analytics

29. Spreads Remain Elevated Source: Real Capital Analytics

30. REALTOR® Markets Deal Size Source: NAR

31. REALTOR® CRE Markets Rebound

32. Prices Accelerate in REALTOR® Markets

33. Small Banks Important to REALTORS®

34. SIOR Markets in Recovery

35. CCIM Quarterly Market Trends

36. Apartment Fundamentals

37. Apartment Rents

38. Apartment Vacancy Comparison

39. Apartment Investments Source: Real Capital Analytics

40. Renter Households In thousands

41. Homeowner Households has not Grown since 2006 … but Primed to Grow In thousands

42. Household Formation Bursting Out (in millions)

43. Office Fundamentals

44. Office Rents

45. Office Vacancy Comparison

46. Office Investments Source: Real Capital Analytics

47. Jobs in Professional Business and Financial Services … at New Peak In millions

48. Retail Fundamentals

49. Retail Rents

50. Retail Vacancy Comparison

51. Retail Investments Source: Real Capital Analytics

52. Jobs in Retail Trade (Still Below Prior Peak)

53. Spending Effect from Higher Home Prices 18% cumulative gains over 2 years Median Existing Home Price

54. Industrial Fundamentals

55. Industrial Rents

56. Industrial Vacancy Comparison

57. Industrial Investments Source: Real Capital Analytics

58. Jobs in Wholesale Trade (Still Below Prior Peak) In millions

59. U.S. International Trade Long-Term Growth

60. U.S. International Trade But No Growth in Recent Years

61. International Dimension

62. International CRE Investment in U.S. Source: Real Capital Analytics

63. Volume of International Transactions (April 2012 to March 2013)

64. REALTORS® Working With International Clients In Past 12 Months, 27 Percent of REALTORS® Have Worked with an International Client. – Clients Residing in Another Country: 51 Percent. – Clients Residing in this Country: 49 Percent. – A Niche Market on Buyer Side: Facility with languages and cultures very helpful. – On Sellers Side—Understanding of foreign cultures helpful.

65. Percent of Total U.S. International Sales by Country Top Countries—2013 Report *China includes PROC, Hong Kong, Taiwan

66. Top State Destinations—2013 Report

67. Majority of International Buyers Pay All Cash

68. Impact of the Value of the Dollar on Foreign Purchases

69. U.S. Dollar vs. Chinese Yuan (Yuan per $)

70. U.S. Dollar vs. Euro ($ per Euro)

71. Broad U.S. Dollar Strength/Weakness (Broad Trade Weighted)

72. REALTORS® Working With International Clients