1. Real Estate Trends and Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS ® Presentation at Provo Association of REALTORS® Provo, UT September 17, 2014

2. Existing Home Sales 20% cumulative increase over 2 years

3. Median Home Price (Near 20% gain in 2 years)

4. Monthly Pending Sales Index (Seasonally Adjusted) Source: NAR

5. Utah County Housing Statistics 2014 Home Sales Up 3% year-to-date to July Up 20% from 2 years ago Up 30% from 3 years ago Median Home Price About 10% Dollar Volume Up 13% in 2014

6. Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory Record High Household Wealth

7. GDP Rebound in 2014 Q2

8. GDP Still not Robust … Below 3% for 9 straight years

9. Sluggish Growth + Gap after Great Recession ($1.5 trillion gap … $4,700 per person) 3% Growth Line 2.2% Growth Line

10. GDP Growth = Job Creations (8 million lost … 8+ million gained) In thousands

11. Unemployment Rate

12. Employment Rate

13. Jobs in Provo-Orem In thousands

14. Jobs in Salt Lake City In thousands

15. Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory Record High Household Wealth

16. Monetary Policy by Federal Reserve (zero rate policy for 6 years!) %

17. Federal Reserve Balance Sheet from Quantitative Easing $ million

18. 30-year Mortgage Rates

19. Non-worrisome CPI Inflation - Yet

20. Rising Renters’ and Homeowners’ Rent Growth (Above 2% and On the Way to 3%)

21. REALTOR ® Rent Survey – Shows Rent Pressure

22. Monetary Policy Tapering Ends by the year end 2014 Fed Funds Rate … hike in 2015 Q1 Earlier Move to Tighten because of Inflation Pressure Long-term Steady State Rate (2016 onwards).. 10 year Treasury at 5.0% Mortgage Rates reaching 6.5% by 2016

23. Erratic Credit Availability FICO New Method Mel Watt – New overseer of Fannie/Freddie Consumer Financial Protection Bureau’s – Lawsuits … Bleeding Big Banks – Other 2000-page shuffling of Dodd-Frank … Squeezing Small Banks – Qualified Mortgages … or else – 3% Maximum Cap on Affiliated Business … Consumers worst off? FHA Hawk Program Ridiculous FHA premiums Historic low mortgage default rates on recent vintages (2010-2014)

24. Locked-in Effect of Low Rates? Housing cannot get back to normal in a hurry People move even in high interest rate environment Many unplanned landlords – Take advantage of rising rents while rates are low and fixed Potential future lock from longer holding period for capital gains tax exclusion

25. Reasons Why Sellers Move ReasonPercentage Home is too small or large29% Job relocation or closer to current job 20% Want to move closer to friends.. Better neighborhood 13% Neighborhood has become less desirable 10% Marriage, Divorce, Birth8% Moving due to retirement6% Upkeep is too difficult4% Cannot afford the mortgage and other expenses of owning 3%

26. Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory Record High Household Wealth

27. U.S. Population

28. Renter Households In thousands

29. Homeowner Households has not Grown since 2006 … but Primed to Grow In thousands

30. Pent Up Demand 20002013 Existing Home Sales5.2 m5.1 m New Home Sales880 K430 K Mortgage Rates8.0%4.0% Payroll Jobs132.0 m136.4 m Population282 m316 m

31. Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory and Moderate Price Growth Record High Household Wealth

32. Inventory of Homes for Sale Maryland inventory up 18% in July

33. Mismatch Growth

34. Change in Home Price (% change from one year ago)

35. Repeat Price Index

36. Shadow Inventory in Utah

37. Housing Starts Rising … Too Slowly Thousand units

38. Provo-Orem Housing Permits (year-to-date)

39. Time to Sell a New Spec Home (in months)

40. Sluggish Recovery in Housing Starts Cost of Construction Rising Faster than CPI Labor Shortage for construction work Construction loan difficulty for small local homebuilders … Dodd-Frank financial regulations?

41. Multiyear Recovery Likely More Jobs Manageable Mortgage Rates Population Pent-Up Demand More Inventory and Moderate Price Growth Record High Household Wealth

42. Household Net Worth at All-Time High

43. Vacation Home Sales

44. First-time Buyer Share

45. Young Adult Homeownership Rate (under 35 years old)

47. Millennial Housing Demand Returns Austin Dallas-Ft. Worth Denver Des Moines Grand Rapids Minneapolis New Orleans Ogden Salt Lake City Seattle-Tacoma

48. 10 best cities for millennials to buy a home By MarketWatchMarketWatch Published: Aug 3, 2014 8:14 a.m. ET

49. Economic Forecast 20132014 forecast 2015 forecast GDP Growth1.9% 2.7% Job Growth1.7% 1.8% CPI Inflation1.4%2.5%3.5% Consumer Confidence 738286 10-year Treasury2.5%2.8%3.6%

50. National Housing Forecast 20132014 forecast 2015 forecast Housing Starts925,0001.1 million1.4 million New Home Sales430,000Near 500,000Near 700,000 Existing Home Sales5.1 million4.9 million5.3 million Median Price Growth + 11.5%+ 5% to 6%+ 3% to 5% 30-year Rate4.0%4.4%5.4%

51. What Homebuyers Want?

52. Slide 52 Slightly More Preference For Condo or Apartment Living Than In 2011 Housing Type Preference (2013): Housing Type Preference (2011): Right now, if you could choose, which of the following would you prefer to live in: 6% Single Family Attached

53. What Buyers Want Most From Their Agent

54. Where Clients Come From From Members: – 21 percent repeat business from past clients – 21 percent referrals from past clients – 3 percent off member website (of those with a website) From Buyers: – 54 percent use an agent that was referred to them or they had worked with before – 9 percent found agent online From Sellers: – 64 percent use an agent that was referred to them or they had worked with before – 4 percent found agent online 2/3rds of buyers/sellers only contact 1 agent