By NAR Research Denver Housing Market Conditions and Prospects

Denver Metro Home Prices: Did not Experience Rapid Price Growth Source: NAR $ thousand

Denver is “Affordable” Western Market (2006) Source: NAR

Existing Home Sales in Colorado at Near Historic Highs In thousand units Source: NAR

Something appears Out of Whack! National Income and Price Trend Income and Price set to Index of 100 in 1990 Source: NAR

However, Consider that Low Historic Rates permits Higher Loans to be taken out without Higher Monthly Payments Source: Freddie Mac 1970s 9% average 1980s 13% average 1990s 8% average 2000s 6.5% average

Better Metric on Assessing Housing Market Bubble is Mortgage Obligation to Income Looks Manageable at the National Level Source: NAR %

All Real Estate is Local and National Trends may not apply at Denver

Mortgage Obligation to Income Very High in Some Markets San Diego 45% !!! Source: NAR

Mortgage Obligation to Income Very Favorable in Denver and Below Historic Average Denver Source: NAR

Apartment Rent Now Rising and will Begin to Squeeze Renters in Denver Source: Torto-Wheaton Research %

National Foreclosure Rates High only in Subprime Loans 2007 Q1 Data: MBA

Colorado Foreclosure Rates also High in Subprime Loans

Delinquency Leading to Foreclosure shows “Bad” Performance by Subprime Loans (Latest Foreclosure/Delinquency ratio) Better Loss Mitigation Programs for VA and FHA Bottom Line: FHA and VA are superior to Subprime Loans

Healthier Future Market Job growth leads to accumulating and releasing of pent-up housing demandJob growth leads to accumulating and releasing of pent-up housing demand Cut back in new home construction thins out inventory and strengthen home pricesCut back in new home construction thins out inventory and strengthen home prices Shift to “traditional” productsShift to “traditional” products –Reckless lenders going belly up –Wall Street tightening –FHA revival –Higher prevalence of fixed-rate mortgages –Could lead to a temporary setback for homebuying but will bring forth a much healthier housing market conditions in the future

Job Gains in Denver Region Source: BLS 12-month net payroll job changes in thousands

Denver Office Vacancy Rate Falling due to Job Gains % Source: NAR/Torto-Wheaton

Denver Office Rent - Positive Source: NAR/Torto-Wheaton %

Wage Growth Picking Up % Source: BLS

U.S. Migration Trend Favors Warm-Weather, Low-Tax States (Top vs. Bottom) State Net Migration from 2000 to 2006 Florida + 1,221,000 Arizona + 541,000 Texas + 452,000 Georgia + 378,000 North Carolina + 347,000 Nevada + 318,000 Michigan - 239,000 New Jersey - 277,000 Massachusetts - 290,000 Illinois - 473,000 California - 950,000 New York - 1,242,000 Source: Census

Mountain States Benefiting State Net Migration from 2000 to 2006 Arizona + 541,000 Nevada + 318,000 Colorado + 80,000 New Mexico + 23,000 Wyoming + 5,000 Utah -18,000 (expected to be positive if including 2007) Source: Census

Denver New Single-Family Construction Falling … Very Good in Limiting Oversupply Conditions Source: Census

FHA Market Share for Home Purchase in Denver … will revive and much better than Subprime Loans Source: HMDA,NAR estimate

Local Forecasts: Who Will be on Top? Presented by Lawrence Yun, Vice President of Research at NAR Midyear Meetings in May

Top Five Markets (in random order) NashvilleAustin Salt Lake City DenverRaleigh-Durham Watch out for these small markets St. George, UT Myrtle Beach, SC Watch out for these small markets St. George, UT Myrtle Beach, SC

Best Evidence for Homebuying: Household Wealth Accumulation Source: Federal Reserve Median Net Worth $184,400 $4,000

Summary Denver clearly looks to be “underpriced”Denver clearly looks to be “underpriced” –Compared to other Western Markets –Based on Mortgage servicing cost to income ratio Job growth and educated workforce will provide solid demand for homesJob growth and educated workforce will provide solid demand for homes Homebuilder cutback is good for housing in limiting oversupply conditionsHomebuilder cutback is good for housing in limiting oversupply conditions FHA loan revival will help for the better for low-and- moderate income households buy their first homes (good move away from risky subprimes)FHA loan revival will help for the better for low-and- moderate income households buy their first homes (good move away from risky subprimes) Subprime resets on the horizon, but to be overwhelmed by above positive factorsSubprime resets on the horizon, but to be overwhelmed by above positive factors Denver – one of the markets to watch and one of the markets to be on top over the next two yearsDenver – one of the markets to watch and one of the markets to be on top over the next two years