1. Economic and Housing Outlook By Lawrence Yun, Ph.D. Chief Economist, National Association of REALTORS® Presentation at Fayetteville Association of REALTORS® January 26, 2016

2. Lifetime Wealth at All-Time High

3. Consumer Confidence Index

4. Median Household Income (Inflation Adjusted)

5. Annual GDP … Below 3% for 10 straight years

6. Sluggish Growth + Gap after Recession ($1.7 trillion gap … $5,000 per person) 3% Growth Line 2.2% Growth Line

7. Homeownership Rate (seasonally adjusted … 50-year low)

8. Young People: Under 35 years old Historic Low Homeownership Rate

9. First-time collapse … why? Lowest in nearly 30 years … since 1987

10. Difficulty Facing First-time Buyers – Student loan debt, even among successful first-time home buyers: – 41% have student loan debt and typical amount is $25,000 No affordable inventory: – 51% hardest task is finding the right property Competition from vacation buyers and investors – Buying similar priced/size homes and paying all cash

11. Student Loan (in $billion)

12. H.O.M.E. Survey (Housing Opportunity and Market Experience) Desire to own remains strong and is strengthening: – 87 percent of Americans believe homeownership is part of their personal American Dream – HIGHER for 18-24 year olds at 91 percent

13. Even with Falling ownership rate, Home Sales to Rise Further

14. Monthly Pending Sales Index Losing Momentum (Seasonally Adjusted) Source: NAR

15. Trigger? Jump in Mortgage Rate

16. Fed Rate Hike in December?

17. Fed Rate Hike in December then again in March

18. Fed Rate Hike in December then again in March then again in August then again in …

19. Fed Policy and Mortgage Rate

20. What Determines Bond Yields? Federal Reserve’s short-term rate changes Inflation and erosion of purchasing power Foreign capital flow and demand for dollar Savings rate U.S. budget deficit Printing of money …

21. Federal Deficit - Shrinking ( $ million, 12 month total)

22. Federal Debt … Cumulative ( $ million; debt held by public excluding intra-governmental holdings)

23. U.S. Dollar Reversing the Decline … Stronger and Stronger

24. No CPI Inflation – Yet

25. Rents Rising at 7-year high

26. Rental Vacancy Rate (30-year low)

27. Multifamily Oversupply?

28. Credit Box Opens? FICO New Method Fannie/Freddie – Lower down payment products FHA premiums … lowered Portfolio Lending … historic low mortgage default rates on recent vintages (2010-2014)

29. 29 Mortgage Credit Remains Tight Sources: Fannie Mae, Moody’s Analytics Weighted Average FICO Credit Score on purchase mortgages

30. Fannie/Freddie G-fees for Highways?

31. Rising Home Price is becoming Obstacle (Median National Existing Home Price)

32. New Home Price … Even Higher

33. Fayetteville Price Index

34. Real Solution to Affordability … More Supply More Supply – Existing Homeowners List Homes – Shadow Inventory of Distressed Homes – Newly Constructed Homes – More Rental Housing … Can be converted to Condominiums Later

35. Pent-Up Home Sellers

36. Shadow Inventory (% of mortgages in foreclosure or late payment)

37. Housing Starts Thousand units

38. Why Would Home Sales Rise? Rising Mortgage Rates – Not Good Too Fast Rising Prices – Not Good Housing Equity for Pent-up Sellers – Good Return Boomerang Buyers - Good Steadily increased supply - Good Job creation – Super Good

39. Trade-Up Opportunities from Housing Equity $ billion

40. Return Buyers

41. Fayetteville Housing Permits

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

43. Jobs (8 million lost … 13 million gained) In thousands

44. Fresh Unemployment Insurance Claims In thousands

45. Top and Bottom States for Jobs The Best% Gain in 12 months Idaho3.8 Utah3.5 Nevada3.4 Florida3.0 Washington3.0 California2.9 South Carolina2.9 Oregon2.7 Arizona2.3 The Worst% Gain in 12 months Wyoming0.2 Oklahoma0.1 Louisiana-0.4 West Virginia-1.8 North Dakota-2.0 NC job growth rate of 2.2%

46. Fayetteville Jobs In thousands

47. Charlotte Jobs In thousands

48. Raleigh Jobs In thousands

49. Oil Price

50. Supply and Demand: Oil in U.S. 19 21 5 9

51. FSBO collapse

52. Impossible Poker Face and Google Bump

53. Economic Forecast 201420152016 Forecast GDP Growth2.6%2.1%1.3% Job Growth+3.0 million+2.6 million+1.5 million CPI Inflation1.6%0.3%2.8% 10-year Treasury2.6%2.1%2.7% (over 3% by year-end)

54. Housing Forecast for 2016 2013201420152016 Forecast Housing Starts925,0001 million1.1 million1.2 million New Home Sales430,000437,000500,000570,000 Existing Home Sales5.1 million4.9 million5.3 million Median Price Growth + 11.5%+ 5.7%+ 6% 30-year Rate4.0%4.2%3.9%4.3%

55. 2/3 of Members used 1031 Like-Kind Exchanges