1. Presentation at NAR Leadership Summit Chicago, IL August 17, 2007 Presentation at NAR Leadership Summit Chicago, IL August 17, 2007 Lawrence Yun, Ph.D. Senior Economist NATIONAL ASSOCIATION OF REALTORS® Lawrence Yun, Ph.D. Senior Economist NATIONAL ASSOCIATION OF REALTORS® After the Storm

2. Subprime Loan Implosion Homeowners facing higher resetting rates and foreclosuresHomeowners facing higher resetting rates and foreclosures Wall Street reassessing riskWall Street reassessing risk Sub-prime brokers desperate for Wall Street fundingSub-prime brokers desperate for Wall Street funding Potential homebuyers left out in the coldPotential homebuyers left out in the cold

3. Subprime Loan Exposure Source: NAR Estimate

4. Foreclosure Rates by Loan Type 2007 Q1 Data: MBA

5. Foreclosed Homes Source: NAR Estimate

6. National Mortgage Delinquencies (Big swings for subprime; no real change in prime) Job Losses pushes up delinquency Housing boom permits re-financing and lowers delinquency Stagnant Prices Data: MBA

7. Rising Foreclosures States with Marked Price Deceleration/Declines Undergoing rising Foreclosures Percent change in foreclosure rate in 2005 Q1 vs 2006 Q4

8. High Foreclosure States (2007 Q1) Data: MBA

9. Delinquency to Foreclosure (Latest Foreclosure/Delinquency ratio) Better Loss Mitigation Programs for VA and FHA

10. Not All Markets are Suffering … States with Falling Foreclosures Mostly Strong Job Growth and Price Appreciating States Percent change in foreclosure rate in 2005 Q1 vs 2006 Q4

11. 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 Short-term Pain from lower home salesShort-term Pain from lower home sales Long-term Gain from lower defaultsLong-term Gain from lower defaults

12. Steady U.S. Job Gains Near 2 Million in Past 12 months Source: BLS 12-month payroll job changes in millions

13. Wage Growth Picking Up % Source: BLS

14. Aggregate U.S. Wages and Salary Disbursement Source: BEA $ billion

15. Corporate Profits – Record High Source: BEA $ billion

16. S&P 500 Index Source: NYSE Profit = $800 billionProfit = $1,600 billion

17. Economic Growth % annualized growth rate

18. Consumer Spending % annualized growth rate

19. Business Spending % annualized growth rate

20. Export Growth $ billion

21. Worry Spot - Oil Price Source: Wall Street Journal $ per barrel

22. Economic Outlook 200620072008 GDP3.3%2.0%2.8% CPI Inflation 3.2%2.6%2.4% Job Growth 1.9%1.5%1.5% Unemployment Rate 4.6%4.6%4.7% The Fed cuts rate in early 2008

23. U.S. Existing-Home Sales Source: NAR In thousand units 15% Retreat from Peak

24. U.S. New-Home Sales Source: NAR, Census 34% Retreat from Peak In thousand units

25. Inventory of Homes Source: Census

26. Home Price Growth Source: NAR % change from a year ago

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

28. Mortgage Obligation to Income Manageable Source: NAR %

29. Renters Getting Squeezed Source: Torto-Wheaton Research %

30. Fed Controls on Short Rates Only Source: Freddie Mac, Federal Reserve %

31. House prices 'to soar 40 percent within next five years' News from National Housing Federation in U.K. … August 2007News from National Housing Federation in U.K. … August 2007 U.K. home prices soared 156% past 10 years … twice as fast as U.S. home pricesU.K. home prices soared 156% past 10 years … twice as fast as U.S. home prices Not building Enough Homes! Housing Shortage!Not building Enough Homes! Housing Shortage!

32. U.S. New Single-Family Construction Source: Census 33% 2-year Tumble

33. Florida New Single-Family Construction Source: Census 70% 2-year Tumble

34. States with Sharp Construction Contraction (YTD May 2007 vs YTD May 2006)

35. Buyers Lining Up ? 20052007Difference Total Home Sales 8.4 million 6.9 million - 1.5 million Subprime Loans 1.6 million 800,000 (?) - 800,000 Jobs 133.7 million 138.0 million + 4.3 million Wage + Salary $5.7 trillion $6.4 trillion + $700 billion Household Wealth $52 trillion $57 trillion + $5 trillion Home Prices $219,600$219,300 - $300 Mortgage Rates 5.9%6.5% + 0.6% points

36. FHA Market Share for Home Purchase Source: HMDA,NAR estimate

37. National Housing Outlook 200620072008 Existing-Home Sales 6.48 million 6.04 million 6.38 million New Home Sales 1.05 million 0.85 million Housing Starts 1.80 million 1.43 million 1.40 million 30-Year FRM 6.4%6.5%6.6% 1-Year ARM 5.5%5.5%5.2% Existing-Home Price Growth 1.0%-1.2%2.0%

38. Median Home Price in Los Angeles Source: NAR

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