1. Economic and Housing Market Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS ® Presentation at 2012 Resort and Second-Home Symposium Kiawah Island, SC March 19, 2012 OUTLOOK

2. Monthly Existing Home Sales … Recovering Tax Credit Impact Old Data New Data

3. Annual U.S. Existing Home Sales … Flat Line for 4 tough years

4. Second Home Sales In thousands

5. Case-Shiller Price Index… Stability from 2009

6. Median Price of Transacted Homes: Vacation Home Suffered More Primary (Blue) vs Vacation (Red) Source: NAR

7. Columbia and Myrtle Beach (Home Price Index: 1995 = 100) Source: Federal Housing Finance Agency

8. Bend and Portland, Oregon (Home Price Index: 1995 = 100) Source: Federal Housing Finance Agency

9. Santa Fe and Albuquerque (Home Price Index: 1995 = 100) Source: Federal Housing Finance Agency

10. Las Vegas and Miami vs Kansas City and Milwaukee (Home Price Index: 1995 = 100) Source: Federal Housing Finance Agency

11. U.S. Housing Starts Lowest since the Second World War… in the past three years Housing Starts in thousands

12. New Home Inventory – 50 year low

13. Visible Existing Home Inventory (6-year lows)

14. Serious Delinquent Mortgages … Mostly those who took out loans in bubble years (90+ days late or in foreclosure process)

15. Fannie and Freddie Performance Mortgage Default after 18 months Fannie Mae Vintage Cumulative Default Rate after 18 months 20023.1% 20032.5% 20044.6% 20054.8% 200611.6% 200728.7% 200812.6% 20091.2% Freddie Mac Vintage Cumulative Default Rate after 18 months 20022.7% 20031.2% 20042.0% 20051.8% 20066.0% 200722.3% 200813.7% 20091.1% Source: Federal Housing Finance Agency

16. Foreclosure Starts (% of all mortgage outstanding; about 1/3 of homes are free and clear)

17. Foreclosure Inventory (% of all mortgage outstanding; about 1/3 of homes are free and clear)

18. Economic Expansion (GDP growth after recession should be sustained 4% to 5% … not 1.7% as occurred in 2011) Desired Pace

19. Total U.S. Payroll Jobs … Recovering (3.4 million job creation from low point in 2010) In thousands

20. Labor Force Participation Rate %

21. Financial Industry Corporate Profits

22. Federal Reserve Loose Monetary Policy

23. Banks/Regulators Restricting Credit (Average Credit Scores of Approved Loans) Normal20092010If Normal Fannie720761762720 Freddie720757758720 FHA650682698660 15% to 20% Higher Sales

24. CPI Rent is Rising… Biggest Weight to CPI (% change from 12 month ago)

25. Home Value Undervaluation (Recent analysis by The Economist magazine) MetricMagnitude of Over or Undervaluation U.S. Home PricesHome Price vs. Rent8% undervaluation U.S. Home PricesHome Price vs. Income22% undervaluation U.K. Home PricesHome Price vs. Rent28% overvaluation U.K. Home PricesHome Price vs. Income20% overvaluation Ireland Home PricesHome Price vs. Rent10% overvaluation Ireland Home PricesHome Price vs. IncomeProper valuation (neither over nor under)

26. Improving Factors for Higher Home Sales Improving Factors –Job Creation –Solid stock market recovery from 2008 –Rising rents and larger pool of qualified renters –Pent-up Release of Household Formation –Smart money chasing real estate (instead of gold?) –Consumer confidence OK (no longer dire) –Great affordability conditions –Favorable demographics for second home buyers Potential Huge Positive … Lending opens up Potential Huge Negative … Washington policy

27. Annual Household Formation… Future Rent Pressure? (3 separate Census data) In millions Household Formation leads to increase ownership and renters; Could begin to return to normal of at least 1 million from 2012.

28. Expensive Gold Price (Hedge against Inflation?) Will Investors shift money to alternative inflation hedge instrument … to real estate?

29. Consumer Confidence

30. Best Affordability Conditions

31. Monthly Pending Home Sales Index (Seasonally Adjusted) Homebuyer Tax Credit

32. Median Age and Income of Homebuyers Primary37 years old with $69,600 Investment 45 years old with $87,600 Vacation49 years old with $99,500

33. U.S. Population Aged 55-to-64

34. Forecast Population Aged 55-to-64

35. Rising World Population

36. Washington Policy Obstacles –QRM 20% downpayment rules –Mortgage Interest Deduction Limitation on second homes –Capital gains tax increase –Lower loan limit for conforming mortgages More consumers face jumbo mortgages –Rising mortgages rates (market forces of higher inflation and high budget deficit)

37. Forecast 201120122013 Existing Home Sales4.26 million4.55 million4.70 million New Home Sales305,000370,000510,000 Housing Starts599,000710,000980,000 Existing Home Price$166,100$168,000$172,000 GDP Growth+1.8%+2.3%+3.1% Payroll Job Gains+1.7 million+2.3 million+2.6 million 30-yr Mortgage4.7%4.4%5.4% Second Home and Resort Markets suffered more … Therefore, Ripe for a stronger recovery for both sales and prices

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