1. Housing Forecast In-Depth Analysis by Region Presented By: Stanley F. Duobinis, Ph.D. President Crystal Ball Economics, Inc.

2. Regional Differences New home construction on a state-by-state basis shows wide variations. Last year single-family housing starts grew in 43 states, but declined in 8 states. The largest increase was 20.6 percent. The biggest decline was 5.8 percent. For multifamily housing starts the spread was even wider, with the largest increase at 94.5 percent and the biggest drop at 29.2 percent. In multifamily, 23 states saw declines, while 28 states experienced growth.

3. Single-family Starts Pct Chg 2003-2004 U.S. = 6.4

4. Multifamily Housing Starts Pct Chg 2003-2004 U.S. =-0.5

5. Single-family Starts Pct Chg 2004-2005 U.S. =-2.8

6. Multifamily Housing Starts Pct Chg 2004-2005 U.S. =-5.7

7. What Causes A State to Perform Better Or Worse Than Others? We need more housing in an area because we have more people, or we are building second homes. So, areas with strong population growth should have strong housing markets. The exceptions will be those areas that are full of second homes – ski areas, beach resorts, etc. But even there population growth will be a key indicator because of growth in the “service” population. That means more people leads to more houses.

8. Change in Population 2000-2004

9. Average Annual Percent Change in Population

10. Keys To Population Change Population growth is driven by: –Births –Deaths –Net Migration – both foreign and domestic Of these there is little variation across states except for Net Migration.

11. Net Migration 2000-2004

12. Drivers to Net Migration International migration is very much connected to the “entry cities.” That is places where international migrants have come in the past – New York, Baltimore, Chicago, Los Angeles, San Francisco, etc. Domestic migration is very much connected to where job opportunities are located. It is also related to past patterns of migration.

13. Net Migration: International 2000-2004

14. Net Migration – Domestic 2000-2004

15. Total Employment Growth 2000 to 2004

16. Employment Growth Variation in employment growth across states is really just a function of what industries you have. Manufacturing has been a drag in recent years. Defense has become a growth industry. High-tech has been both a plus and a minus.

17. Manufacturing’s Share of Employment

18. Military Prime Contract Dollars

19. Conclusion: Jobs & Housing Are Tightly Connected An area’s housing market will prosper or slide as its local job market expands or contracts. The differential across state housing markets is due to differences in growth or contraction of their economies.

20. Housing vs. Job Growth: U.S. Total Housing Starts (R) Total Employment (L) Thousands

21. Housing vs. Job Growth: Tucson Total Housing Starts (R) Total Employment (L)

22. Housing vs. Job Growth: San Jose Total Housing Starts (R) Total Employment (L)

23. Housing vs. Job Growth: Columbus Total Housing Starts (R) Total Employment (L)

24. Housing vs. Job Growth: Chicago Total Housing Starts (R) Total Employment (L)

25. Prices vs. Housing Starts: Tucson Total Housing Starts (R) Home Prices (L)

26. Prices vs. Housing Starts: San Jose Total Housing Starts (R) Home Prices (L)

27. Prices vs. Housing Starts: Columbus Total Housing Starts (R) Home Prices (L)

28. Prices vs. Housing Starts: Chicago Total Housing Starts (R) Home Prices (L)

29. House Prices vs. Job Growth: Tucson House Prices (R) Total Employment (L)

30. House Prices vs. Job Growth: San Jose House Prices (R) Total Employment (L)

31. House Prices vs. Job Growth: Columbus House Prices (R) Total Employment (L)

32. House Prices vs. Job Growth: Chicago House Prices (R) Total Employment (L)

33. Total Employment Growth 1994-2004

34. Starts Per Capita 2005 U.S. = 6.6