| 0 /zillow Millennials, Rents, and Mortgages: Challenges for the future Dr. Skylar Olsen, Senior Economist

| 1 /zillow The state of the market: currently down 10.1% from peak Source: Zillow

| 2 /zillow Seattle Metro: currently down 11.7% from peak Source: Zillow

| 3 /zillow All but 1 top 30 metro areas show annual home value appreciation Source: Zillow

| 4 /zillow Seattle metro leads Puget Sound in annual home value gain

| 5 /zillow Most ZIP codes in the Seattle metro saw annual value gains King CountyMetro (Snohomish, King, Pierce)

| 6 /zillow Appreciation is slowing down: United States

| 7 /zillow Appreciation is slowing down: Seattle

| 8 /zillow Returning inventory softens appreciation Source: Zillow

| 9 /zillow Negative equity has declined steadily since 2012 Q1 9 Source: Zillow (2014 Q2)

| 10 /zillow But remains widespread, 17% nationally 10 Source: Zillow (2014 Q2)

| 11 /zillow Negative equity remains widespread, 17% nationally 11 Source: Zillow (2014 Q2)

| 12 /zillow Source: Zillow Local negative equity is not uniform

| 13 /zillow Loan-to-value distribution of mortgaged homeowners (U.S.) 13 Source: Zillow (2014 Q2)

| 14 /zillow Loan-to-value distribution of mortgaged homeowners (Seattle) 14 Source: Zillow (2014 Q2)

| 15 /zillow Negative Equity: Share of underwater homes by value tier 15 Source: Zillow (2014 Q2)

| 16 /zillow United States: Price-to-income ratio and affordability (2014 Q2) Source: Zillow

| 17 /zillow Seattle: Price-to-income ratio and affordability (2014 Q2) Source: Zillow

| 18 /zillow San Jose: Price-to-income ratio and affordability (2014 Q2) Source: Zillow

| 19 /zillow Mortgage affordability in the largest metropolitan areas Source: Zillow 19

| 20 /zillow Rent affordability below historical average in most metro areas Source: Zillow 20

| 21 /zillow Market response to rental demand 21 Source: Current Population Survey

| 22 /zillow Recovery is Transitioning From constrained supply driven price appreciation To a recovery driven by fundamentals

| 23 /zillow Home sales continue to increase annually from their trough Source: NAR, Census

| 24 /zillow New home sales strongest in South and West regions Source: NAR, Census

| 25 /zillow Renter households are forming faster than owner households 25 Source: Current Population Survey

| 26 /zillow Millennial renters are optimistic about homeownership… 83 percent of millennial renters are “confident” or “somewhat confident” that they will eventually buy a home. Source: Zillow U.S. Housing Confidence Survey, July 2014

| 27 /zillow …But their timelines for when they expect to buy a home have been delayed somewhat. Generation X remains a plurality of expected new home buyers over the next year, but looking forward 1 to 5 years out, millennials will become the plurality. Source: Zillow U.S. Housing Confidence Survey, July 2014

| 28 /zillow In some respects, millennials are more conventional in their views on home ownership than older generations Nearly two-thirds of millennials think owning a home is necessary to live the “American Dream” and almost half agree that owning a home is necessary to be a “respected member of society.” Source: Zillow U.S. Housing Confidence Survey, July 2014

| 29 /zillow Young people are increasingly delaying the hallmarks of adulthood: marriage, family and homeownership | 29 Source: Zillow analysis of March Current Population Survey, , made available by IPUMS USA Despite these long-term trends, homeownership is much more cyclical than either marriage or child rearing: During the long housing boom from 1992 to 2005, the ownership rate among this group increased 6 pts while the share married fell 6 pts and the share with children fell 2 pts.

| 30 /zillow Even if employed, low rental affordability leaves many struggling to save for a down payment | 30

| 31 /zillow Seattle: Price-to-income ratio and affordability (2014 Q2) Source: Zillow

| 32 /zillow Coping strategy: return to the nest

| 33 /zillow Coping strategy: double up

| 34 /zillow Coping strategy: double up

| 35 /zillow Young adults have found jobs, but there are more part-time workers and incomes have suffered | 35 Source: Zillow analysis of March Current Population Survey, 2010 and 2013, made available by IPUMS USA

| 36 /zillow Young adults have found jobs, but there are more part-time workers and incomes have suffered | 36 Source: Zillow analysis of March Current Population Survey, 2010 and 2013, made available by IPUMS USA

| 37 /zillow Signs of credit easing to marginal buyers

| 38 /zillow Demand however is slow to return

| 39 /zillow Forecasts

| 40 /zillow Zillow home value forecast: August 2014 to August 2015 Source: Zillow

| 41 /zillow Forecasted annual appreciation: ZIP codes in King County

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