1st QUARTER 2018 HOME TRENDS:DENVER

Key messages for homes Prices are up 8% in the prior 12 months vs historical 6%. Inventories are tighter than last year, especially for homes under 1,775 SF. In 2018, we expect 5-8% appreciation, flat unit sales volume, and continued very tight inventories. The crunch is / will be tightest in the first-time buyer market. No relief in sight under $350K. Metric Performance Observations Average Home Price 1Q17 vs. 1Q16: 2Q17 vs. 2Q16: 3Q17 vs. 3Q16: 4Q17 vs. 4Q16: 1Q17 vs. 1Q18: +9% +8% +7% Prices grew an average of 10% annually in 2014 - 2016. They grew 8% in 2017. Our historical appreciation rate from 1971 to 2016 averaged just over 6% per year. Much of the above-average gain is due to the severe shortage of small (affordable) homes available to sell. The mix has shifted to higher end properties. In our view, smaller size segment appreciation will continue to outpace larger home categories in 2018. Condos are appreciating a little faster than homes. MOI (Months of Inventory) 04/01/17: 07/01/17: 10/01/17: 01/01/17: 04/01/18: 1.0 1.3 1.4 0.8 0.9 MOI has been generally stable for 48 months. There is a normal level of seasonal variation. On 4/1/18 it was 0.9 months, about unchanged from 4/1/17. The smallest 50% of market (homes up to 1745 sq. feet) have approximately 0.4 MOI – a very strong seller’s market. The luxury market (largest 10%) was a little more balanced at 2.6 MOI. Denver will remain a strong sellers market at lower price points for at least another 12-18 months. Showings per Active Listing per Month 4Q 2014: 4Q 2015: 4Q 2016: 4Q 2017: 1Q 2018: 12.6 12.8 13.2 15.9 22.6 Showings are a good leading indicator for UC… which predicts sales. Showings in 4Q17 were a little ahead of the average of 2013-2016. Since 2013, “desirable” homes in good condition under $350K that are priced accurately usually sell rapidly with many showings. Sometimes with multiple offers. This is true at all but the highest price points. Under Contract (UC) 4,614 5,117 4,278 2,524 4,210 UC is a good leading indicator of closed sales volume. At the end of 4Q17, the number of homes UC was -19% vs 4Q17. End of 1Q18 was down -9%.... An improvement. We anticipate 2Q18 sales volume to be a less than as 2Q17 by about -2% to -5%. There is a lot of buyer demand, as evidenced by the showing traffic. We continue to have a supply side problem (not enough listings and new builds relative to demand). Number Sold +4% +3% -5% -4% -3% In 2014 unit sales declined -7% vs. 2013. 2015 volume was flat. 2016 unit volume was -2%. 2017 was down -1% vs. 2016. No sales bubble here! Price increases have not (yet) brought extra inventory in the market. It’s likely that increased prices will increase inventory, but it is impossible to know when. 2018 volume isn’t likely to grow much / any from 2017 unless we get more inventory. Since inventory is down, it’s no surprise that sales unit count was down -3% in 1Q18. Inventory 2,994 4,194 4,460 2,386 2,682 Inventory levels continue to stay historically low, especially for smaller homes. Inventories should have increased in 2013… we’re still waiting. In our view, inventory for the smallest 50% of homes will remain tight – or get even tighter – in 2018. While it’s difficult to buy, do it now if you can. It could be more difficult in 2018. Inventory was down -12% at the end of 3Q17 vs. end 3Q16. It was down -13% in 4Q17 vs 4Q16. It was down -10% in 1Q18. Updates come from the YCRE city chart, and the YC trends data by quarter, and YCRE Showing Trends Excel Data Source: Recolorado.com; YCRE analysis

(DMAR trends report: update each month’s number) Historical context Inventory levels of homes and condos available for purchase are historically low. It took several years for the inventory to get this tight; it will take several years for inventory to build to historically “normal” levels. Denver Metro (homes, condos and townhomes) Inventory (top line) and monthly sales (bottom line), 2008-2017 Updated (DMAR trends report: update each month’s number) 4/17 LW FINAL. I re-sized the chart, please keep it like this. End of Month Active Inventory This chart is updated using the DMAR Trends report, historic month end inventory and number of solds Data Source: Denver Metro Association of Realtors: DMAR Market Trends Report January 2018

Historical context CF updated 4/17 LW final Average Denver home price from 1971-2016 was mostly an upward march: +6.3% per year. In the last recession, prices dropped 25% from 2006 peak, hitting bottom in 2008. Prices have risen ever since. In 1Q18 the average was $484,000. The overall average home (no condos) price in 2017 was $475,000. CF updated 4/17 LW final Denver Metro (HOMES only, not condos or townhomes) Sales Prices in $000 Average Annual Appreciation = 6.3% Peak (1987) to trough (1988): $105 to 101K -4% Peak (2006) to through (2009): $322K to $241K: -25% Consolidate with slide 14 in the short version This data comes from YCRE Trends Data Data Source: Recolorado.com; YCRE analysis

Historical context: Denver condo prices Average Denver condo price from 1972 to 2016 has mostly been a march upwards: appreciating +5.6% per year. 2016 condo prices were up 10% from 2015 ($282,000). There was a similar gain in 2017. The average price of condos and townhomes in 1Q18 was $326,000 (red line). Denver Condos & townhouses (no homes) CF updated 4/17 LW final Sales Prices in $000 Peak (2006) to trough (2009): $191K to $157K, -15% Peak (1985) to trough (1989): $83K to $56K, -33% Consolidate with slide 12 in the short version This comes from YCRE Trends Data (Condo) Why did condos appreciate less than homes? One guess: The average home price in 1972 was $29K, and the average condo price was $28K. We’d guess the initial condos were relatively luxurious in great locations. Condos built since then have been positioned as “entry level” – smaller than homes, and thus less expensive. Data Source: Recolorado.com; YCRE analysis

Denver Homes (no condos or townhomes) Based on above grade sf Current market Overall, there was 0.9 month of inventory (MOI) for homes (not condos) on 4/1/2018.  There is less than 0.4 MOI on homes under 1,775 SF (very strong seller’s market).  Homes under 1,775 SF are generally selling at a 0.9% premium to asking price. CF updated 4/17 LW FINAL Denver Homes (no condos or townhomes) Based on above grade sf Price Change Apr ’16 – Mar ’17 vs Apr ‘17 – Mar ’18 # Active Listings As of 4/1/18 # Sold Listings 4/1/17 – 3/31/18 Months of Inventory As of 4/1/18 % Listings UC As of 4/1/18 0.9 Avg. +8% Avg. 61% Avg. Average DOM: 14 Average DOM: 13 Average DOM: 16 Average DOM: 28 This data comes from YCRE Trends Data Excel Average DOM: 43 Average DOM: 76 Data Source: Recolorado.com; YCRE analysis

Historical context: Mortgage rates Mortgage rates were up modestly recently, but are still very low by historical standards. The average mortgage rate was 4.44% on 3/29/18. TC – Updated Otherwise 4/17 LW Final 30 year fixed rate: 1971-2016 30 year fixed rate: 2011-17 Current = 4.44% ’70s Avg = 9% ’80s Avg = 13% ’90s Avg = 8% ’00s Avg = 6.5% ’10s Avg = 4.1% Source(s): Freddie Mac, Your Castle Real Estate http://www.freddiemac.com/pmms/pmms_archives.html

Historical context: Affordability We compared average Denver per capita income, average home Denver price, and the average annual mortgage rate to find DTI (Debt to Income). A lower number means more affordable. We are just above the historic average for the past 45 years. DTI (Average Debt to Income) for Denver Metro Assumed 10% down payment Less affordable Mortgage rates peak at 16.9% in 1981! More affordable Max Lending Guideline = 45% Update needed end of 2016 By 2008 prices fall 25% and mortgage rates had fallen… yet average income in Denver was steady in the recession Source(s): Freddie Mac, Your Castle Real Estate http://www.freddiemac.com/pmms/pmms_archives.html

Economic forecast for denver Local economist Patty Silverstein and the Census Bureau expect the Denver population will continue to grow around 50,000 people per year. Where are they going to live? 2015 population – 3.05 million Source: Colorado Division of Local Government, State Demography Office.

Denver Construction trends 16,000 units were permitted in 2014 and 18,000 units in 2015. That’s for rental (top bar, in yellow) and for sale (blue bar). 21,700 new units per year (14,000 for sale, 7,000 for rental) required to keep pace with 50,000 new residents per year. 4/17 LW final Approved permits Required New Units Source(s): The Genesis Group, Home Builder’s Association of Metropolitan Denver Note: Seven County Metro Denver includes Adams, Arapahoe, Boulder, Broomfield, Denver, Douglas and Jefferson Counties

Households added versus housing units added The Denver Area has been adding households at a higher rate than housing units for a decade. 4/17 LW final Comparing households added versus housing units added Added yearly to the metro area Added 21,575 more households than housing units Added 16,668 more housing units than households Source: Denver Post; State Demography Office

I-70 Project through northeast Denver $1.2 Billion Complete reconstruction of I-70 from Brighton Boulevard to I-270 including the addition of one Express Lane in each direction; Removing the 50-year-old viaduct and lowering the interstate between Brighton and Colorado Boulevards; Construction of a new 4-acre cover over the interstate between Clayton and Columbine Streets; Widening I-70 from I-270 to Chambers Road to accommodate one Express Lane in each direction; and Restriping I-70 from I-25 to Brighton Boulevard to accommodate one Express Lane in each direction. . Source: Denver Post; State Demography Office

DIA Gate Expansion and terminal improvements $1.8 billion Great Hall renovation, starts this year $1.5 billion new gate expansion requested by DIA’s airlines 39 new gates, 35% increase 12 on Concourse A West 4 on Concourse B West 7 on Concourse B East 16 on Concourse C East Meets forecast passenger traffic of 80 million by 2030. Built 22 years ago, DIA’s original capacity was 50 million passengers. . Source: Denver Post; State Demography Office