1. Presented by: Jim Diffley Phil Hopkins Jeannine Cataldi US Regional Services January 21, 2003 Regional Housing Outlook: Prices, Affordability, Construction Costs

2. 2 Past bubbles Past bubbles California late 1980s New England mid 1980s Oil Patch early-mid 1980s Current Trend: OFHEO appreciation (year ago) Current Trend: OFHEO appreciation (year ago) 2001q19.0% q28.7 q38.7 q47.7 2002q17.0 q27.3 q36.2

3. 3California

4. 4 Los Angeles

5. 5 San Jose

6. 6Massachusetts

7. 7Boston

8. 8Texas

9. 9Houston

10. 10Florida

11. 11Denver

12. 12 Price / Income

13. 13Affordability

14. 14 2002 Price Gains (OFHEO) 2002/2001q3 2002/1997 New England 9.8% 62.0% Middle Atlantic 9.2 43.1 Pacific 7.6 52.2 South Atlantic6.7 36.5 West North Central5.1 37.8 Mountain3.7 31.7 East North Central3.7 28.9 West South Central3.1 28.6 East South Central3.1 23.6

15. 15 Recent Developments November data Existing Home Sales Existing Home Sales median price +9.7% y/y average price +11.2% SF Bay Area prices declining 5 consecutive months SF Bay Area prices declining 5 consecutive months higher end homes the culprit

16. 16 Top 10 States (OFHEO q3) Rhode Island 14.1% Rhode Island 14.1% New Jersey 11.0 New Jersey 11.0 New York 10.2 New York 10.2 Maryland 10.1 Maryland 10.1 Maine 10.0 Maine 10.0 New Hampshire 10.0 New Hampshire 10.0 Massachusetts 10.0 Massachusetts 10.0 Florida9.4 Florida9.4 Connecticut8.9 Connecticut8.9 California8.8 California8.8

17. 17 Top 10 Large Metros (OFHEO q3) (only one negative) One Year Five Year Nassau-Suffolk 14.7%77.8 Nassau-Suffolk 14.7%77.8 Providence 13.555.5 Providence 13.555.5 Miami 13.449.2 Miami 13.449.2 San Diego 13.279.1 San Diego 13.279.1 Riverside 11.855.8 Riverside 11.855.8 Los Angeles 11.556.8 Los Angeles 11.556.8 Washington 11.349.6 Washington 11.349.6 New York 11.163.6 New York 11.163.6 Sacramento 11.163.2 Sacramento 11.163.2 Bergen-Passaic 11.054.9 Bergen-Passaic 11.054.9 San Jose -3.976.9 San Jose -3.976.9

18. 18 Top 10 Large Metros (NAR q3) Sacramento 24.6% Sacramento 24.6% Providence 24.1 Providence 24.1 Nassau-Suffolk 23.9 Nassau-Suffolk 23.9 San Diego 21.5 San Diego 21.5 Orange County 20.3 Orange County 20.3 New York 19.4 New York 19.4 Los Angeles 17.6 Los Angeles 17.6 Newark 17.2 Newark 17.2 Washington 17.0 Washington 17.0 Miami 16.2 Miami 16.2

19. 19 Avg. Price Existing Single Family Home over Disposable Income per Hhld 2002q2 Large Metros Population >1 Million San Francisco 5.40 San Francisco 5.40 Oakland 4.92 Oakland 4.92 San Jose 4.79 San Jose 4.79 Los Angeles 4.67 Los Angeles 4.67 Orange County 4.67 Orange County 4.67 San Diego 4.61 San Diego 4.61 Boston 4.32 Boston 4.32 New York 4.14 New York 4.14 Sacramento 3.72 Sacramento 3.72 Bergen-Passaic 3.56 Bergen-Passaic 3.56 Seattle 3.52 Seattle 3.52

20. 20 Avg. Price Existing Single Family Home over Disposable Income per Hhld 2002q2 Other Metros Population <= 1 Million Santa Barbara 6.22 Santa Barbara 6.22 Santa Cruz 5.71 Santa Cruz 5.71 Salinas 5.63 Salinas 5.63 Santa Rosa 5.02 Santa Rosa 5.02 Honolulu 4.83 Honolulu 4.83 Venture 4.34 Venture 4.34 Boulder 4.17 Boulder 4.17 Vallejo 4.10 Vallejo 4.10 Bellingham 3.99 Bellingham 3.99 Greeley 3.81 Greeley 3.81 Santa Fe 3.81 Santa Fe 3.81

21. 21 Housing Price & Income Trends 2002q2 vs. 1992q2 Same Point in the Business Cycle – 3 quarters after end of recession Same Point in the Business Cycle – 3 quarters after end of recession Ratio of Sales Price of Existing Single Home over Disposable Income per Household Ratio of Sales Price of Existing Single Home over Disposable Income per Household In 245 out of 278 MSAs 2002q2 ratio > 1992q2 ratio Rising Ratio Reflects Increase In Equity from Price Appreciation Affordability must consider combined effects from interest rate decline, income growth & price appreciation Decline in interest rates and PI growth has offset price rises, maintaining affordability in most areas Some MSAs with high price/income ratios may see sharp declines in prices if interest rates and income growth slows

22. 22 Migration : 2001,2002 Winners 2001 2002 Florida299,233299,015 Florida299,233299,015 California200,827218,322 California200,827218,322 Texas168,164202,499 Texas168,164202,499 Arizona 98,247106,354 Arizona 98,247106,354 Georgia 81,403 80,629 Georgia 81,403 80,629 North Carolina 61,499 65,622 North Carolina 61,499 65,622 Nevada 71,118 59,357 Nevada 71,118 59,357 Virginia 39,706 51,132 Virginia 39,706 51,132 Washington 43,603 41,887 Washington 43,603 41,887 Maryland 33.042 40,884 Maryland 33.042 40,884

23. 23 Vacancy Rates : 2000 (exc. 2nd homes) New Hampshire 2.9% New Hampshire 2.9% Massachusetts3.2 Massachusetts3.2 Minnesota3.2 Minnesota3.2 Vermont3.7 Vermont3.7 California3.9 California3.9 Rhode Island4.1 Rhode Island4.1 New Jersey4.1 New Jersey4.1 Wisconsin4.1 Wisconsin4.1 Colorado4.3 Colorado4.3 Connecticut4.4 Connecticut4.4

24. 24 Regional Construction Wages 2002q2 Average Annual Wage Growth New England $48,6572.0% Middle Atlantic 47,9792.2 East North Central 44,8483.6 Pacific 44,596 -0.2 West South Central 44,4810.7 West North Central 40,735 3.1 Mountain 38,9310.4 South Atlantic 37,2953.2 East South Central 35,1681.9

25. 25 Regional CPI (2002q3 ya) New England2.01% New England2.01% Middle Atlantic1.79 Middle Atlantic1.79 South Atlantic1.72 South Atlantic1.72 East South Central1.86 East South Central1.86 East North Central1.82 East North Central1.82 West North Central1.75 West North Central1.75 West South Central1.77 West South Central1.77 Mountain1.75 Mountain1.75 Pacific1.56 Pacific1.56 US1.75 US1.75 Max:Rhode Island2.89 Max:Rhode Island2.89 Min:Idaho -1.15 Min:Idaho -1.15