1. ECONOMIC AND HOUSING OUTLOOK David Crowe Chief Economist Blue Ridge Home Builders Association February 27, 2014

2. Five Turn Around Points 1. Consumer is back 2. Pent up demand waiting 3. Growing need for new construction 4. Distressed sales diminishing 5. Builders see it

3. 1. Consumer is back

4. Real GDP Growth Picking up speed 3.0% 3.7%

5. Payroll Employment: US and Charlottesville US and Charlottesville are nearly back US Trend (Left axis) US Millions

6. Unemployment Will Continue to Fall Charlottesville

7. Consumer Confidence Returns Back to pre-recession levels Conference Board University of Michigan

8. Motor Vehicle and Home Furnishing Sales Other Durable Sectors Rising Steadily

9. Household Balance Sheets Debt and savings closer to long term averages Savings Rate

10. Annual Housing Starts Pace - VA 13%

11. Annual Housing Starts Pace - Charlottesville 7%

12. 2. Pent up demand waiting

13. Household Formations Are on the Rise Year-over-year change in households rising again Thousands Avg: 1.4 million (12% renters) Avg: 0.5 million (130% renters ) Avg: 0.6 million (129% renters)

14. Share and Excess Number of Young Adults with Parents

15. Local Population Growth Exceeds National Average % change

16. 3. Growing need for new construction

17. Home Sales Volume New homes have more ground to make up (000s)

18. New Homes Share of Sales New homes half historic share of sales

19. Existing Home Turnover Rate Current turnover lower than normal

20. Cumulative Lost Existing Sales Substantial pent up sales

21. House Prices Return to Near-Normal House Price-to-Income Ratio US Charlottesville Virginia Long-term 3.2 3.3 2.9 Peak 4.7 4.8 5.1 Current 3.7 3.9 4.0 Peak/Long-term US: 4.7/3.2 = 150% Charlottesville: 4.8/3.3 = 149% Virginia: 5.1/2.9 = 175%

22. Rates (inverted) & New Home Sales Still room for higher rates & more sales Forecast

23. 4. Distressed sales diminishing

24. Seriously Delinquent Rates: Peak and Current - Largest correction in states with highest peak Std Dev 4Q2009 3.32 4Q2013 2.19

25. 5. Builders see it

26. New Home Sales and NAHB/Wells Fargo Housing Market Index 1 month peak to peak (000s) 1 month peak to peak 3 months trough to trough 2 months peak to peak

27. Builders’ Concerns Increasing Share of builders citing issue

28. Forecasts

29. Remodeling Market Index (RMI) Above 50 for 5 of the past 6 quarters

30. Residential Remodeling Billions 2009 $, SAAR Actual Adjusted

31. Multifamily Production Index Above 50 for seven consecutive quarters (000s)

32. 1995-2003331,000 ”Normal” 2010114,000 2011178,00056% 2012247,00039% 2013306,00025% 2014333,0008% 2015363,0009% Multifamily Housing Starts Healthy Response from Growth in Renters Trough to Current: 4 th Q 09 = 82,000 4 rh Q 13 = 351,000 +328% 2013Q4: 106% of “Normal”

33. NAHB/Wells Fargo Housing Market Index Builder sentiment dips, but improved overall from recession depth Single-family starts (R) HMI (L)

34. Existing and New Home Sales – On the Rise New (L) Existing (R)

35. 2000-20031,343,000 ”Normal” 2010471,000 2011434,000-8% 2012537,00024% 2013622,00016% 2014822,00032% 20151,159,00041% Single-Family Starts – Beginning a Recovery Trough to Current: Mar 09 = 353,000 Jan 14 = 573,000 +62% 2013Q4: 49% of “Normal” 2015Q4: 93%

36. Percent of 'Normal' (annual average 2000-2003) PeakTroughNow US129%32%47% VA115%36%48% Charlottesville120%41%

37. Single-family Permits Relative to ‘normal’ annual average 2000-2003

38. Recovery Will Vary By State Source: US Census Bureau

39. Rank Q4 2015 Bottom 20% 20% to 40% 40% to 60% 60% to 80% Top 20% The Long Road Back to Normal < 84% 84% - 88% 89% - 94% 94% - 101% 102% < Relative to Normal This map shows how the states rank in the return to more normal levels of housing production. By the end of 2015, the top 20% will be back to normal production levels. The bottom 20% will be below 84% of normal production.

40. Questions? Answers: www.housingeconomics.com eyeonhousing.org dcrowe@nahb.org