Dr. Lawrence Yun, chief economist and senior vice president of research for the National Association of REALTORS presentation at the Charleston Trident Association of REALTORS 2012 Midyear Residential Real Estate Market Update. Dr. Yun shares national and local (Charleston, SC) data recapping market activity through July 2012 and offers a forecast for the remainder of 2012 and beyond.

2. Real Estate and Economic Outlook
Lawrence Yun, Ph.D.
Chief Economist
NATIONAL ASSOCIATION OF REALTORS®
Presentation at Charleston Trident Association of REALTORS®
August 15, 2012

3. Annual Existing Home Sales:
A Tough, Flat 4 years
8
In million units
7 7.08
6 6.52
5
5.02
4 4.12 4.34 4.18 4.26
3
2
1
0
2005 2006 2007 2008 2009 2010 2011

4. Despite Second Home Sales Recovery
In thousands
4000
3500
3000
2500
2000 Investment
1500
1000 Vacation
500
0
2005 2006 2007 2008 2009 2010 2011
53% of REALTOR® members own a residential investment property
29% own a commercial property
19% own a vacation home

5. Owner-Occupancy Sales Falling
In thousands
6000
5000
4000
3000
2000
1000
0
2005 2006 2007 2008 2009 2010 2011

6. 2012 First Half: Strongest in 5 years
6,000,000
5,000,000
4,000,000
2008
2009
3,000,000
2010
2,000,000 2011
2012
1,000,000
0
Q1 Q2 Q3 Q4

7. Charleston Region Housing Statistics
• Closing Sales of 10,748 in July 2012 (12-month total)
… Up 19% from July, 2011
• Median price … up 3.4% from one year ago
• Inventory … down 26%
• Months Supply … 7.1 (from 11.4 one year ago)
Source: Charleston Trident MLS

8. Monthly Pending Home Sales Index
(Seasonally Adjusted)
115
110
105 Homebuyer Tax Credit
100
95
90
85
80
75
70
2007 - 2007 - 2008 - 2008 - 2009 - 2009 - 2010 - 2010 - 2011 - 2011 - 2012 -
Jan Jul Jan Jul Jan Jul Jan Jul Jan July Jan
Source: NAR

9. REALTOR® Member Market Survey
Buyer Traffic Seller Traffic
80.0
60.0
40.0
20.0
0.0

10. Annual Membership
(NRDS count at year-end)
1,500,000
1,400,000
1,300,000
1,200,000
1,100,000
1,000,000
900,000
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
10

11. Improving Factors for Higher Sales in 2012:
1. High Affordability and Job Creation
2. Solid stock market recovery from 2008
3. Rising rents and a larger pool of qualified renters
4. Pent-up release of Household Formation
• Rising demand for ownership and rentals as
young-adults move out of parent’s basement
5. Smart money chasing real estate (i.e., investors)
6. Consumer confidence in buying an appreciating
asset

12. 50
70
90
110
130
150
170
190
210
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Best Affordability Conditions
2004
2006
2008
2010
2012

13. 1,000
1,500
2,000
2,500
3,000
3,500
500
0
2005 - Jan
2005 - Jun
2005 - Nov
2006 - Apr
2006 - Sep
2007 - Feb
2007 - Jul
2007 - Dec
2008 - May
2008 - Oct
2009 - Mar
2009 - Aug
2010 - Jan
2010 - Jun
2010 - Nov
2011 - Apr
2011 - Sep
S&P 500 (Almost 100% from low point)
2012 - Feb
NASDAQ (More than 100% increase from low point)
S&P 500
NASDAQ

14. 0
1
2
3
4
5
-1
2000 - Jan
2000 - Jul
2001 - Jan
2001 - Jul
2002 - Jan
2002 - Jul
2003 - Jan
2003 - Jul
2004 - Jan
2004 - Jul
2005 - Jan
2005 - Jul
2006 - Jan
2006 - Jul
2007 - Jan
2007 - Jul
Rent Growth
2008 - Jan
% change from one year ago
2008 - Jul
2009 - Jan
2009 - Jul
2010 - Jan
2010 - Jul
(Component from Consumer Price Index)
2011 - Jan
2011 - Jul
2012 - Jan

15. Annual Household Formation…
Future Rent Pressure?
(3 separate Census data)
In millions
Household Formation leads to increase ownership and renters;
Could begin to return to normal of at least 1 million from 2012.

16. Home Price:
Big Declines from 2006 to 2008
Small Declines from 2009 to 2011
(index set at 100 from 2000)
Case-Shiller FHFA
220
200
180
160
140
120
100
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
- Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan

17. Home Prices Index
350
300
250
Charleston
200
Phoenix
150
100
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
- Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1 - Q1
Source: Federal Housing Finance Agency

18. Home Prices
Metric % change from one year ago Comment
NAR + 7.9% Mix of homes impact price …
fewer distressed sales recently
Case-Shiller - 1.9% Lagging indicator … one month
1.3% jump in April
FHFA + 3.0% 3 straight monthly increase to
April
Core Logic + 2.0% 3 straight monthly increase to
May
FNC - 1.8% 3 straight monthly increase to
May
Radar Logic - 0.2% 3 straight monthly increase to
April

19. Equity and Underwater Homeowners
Positive Equity Negative Equity
Homeowners Homeowners
Early 2012 About 65 million 11 to 12 million
Of which 25 million have
no mortgages
After 5% price 67 million 9 million
appreciation
After 10% price 69 million 7 million
appreciation
Source: Census, Federal Reserve, CoreLogic, NAR estimates

20. 15% of Homeowners are Underwater
Homeowners
15%
Underwater
Abovewater
85%

21. 0
2
4
6
8
10
12
14
2005 - Jan
2005 - May
2005 - Sep
2006 - Jan
2006 - May
2006 - Sep
2007 - Jan
2007 - May
2007 - Sep
2008 - Jan
2008 - May
2008 - Sep
2009 - Jan
2009 - May
2009 - Sep
2010 - Jan
(Around 6 months is normal)
2010 - May
2010 - Sep
Inventory in Months Supply
2011 - Jan
2011 - May
2011 - Sep
2012 - Jan
2012 - May

22. Visible Housing Inventory
(Existing inv. At 6-year low; New inv. at 50-year low)
4,500,000
4,000,000
3,500,000
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
- Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan
Existing New

23. Shadow Inventory
(Seriously delinquent mortgage + homes in foreclosure process)
million units
5.0
4.0
3.0
2.0
1.0
0.0
2002 - Q1
2000 - Q1
2000 - Q3
2001 - Q1
2001 - Q3
2002 - Q3
2003 - Q1
2003 - Q3
2004 - Q1
2004 - Q3
2005 - Q1
2005 - Q3
2006 - Q1
2006 - Q3
2007 - Q1
2007 - Q3
2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
2010 - Q3
2011 - Q1
2011 - Q3
2012 - Q1
Shadow Inventory can be defined as those distressed properties not yet on the market but will at
some point appear given the serious delinquency situation.
Latest and Forecast: Shadow inventory admittedly is still high, but it is about 1 million fewer than two
years ago and is anticipated to steadily diminish over time. The falling share of distressed properties
over time will lead to the median price of all homes that gets transacted to be higher.

24. 500
1000
1500
2000
2500
0
2000 - Jan
2000 - Jul
2001 - Jan
2001 - Jul
2002 - Jan
Source: Census, HUD
2002 - Jul
2003 - Jan
2003 - Jul
Thousand units (annualized)
2004 - Jan
2004 - Jul
2005 - Jan
multifamily
2005 - Jul
2006 - Jan
2006 - Jul
2007 - Jan
2007 - Jul
single-family
Housing Starts
2008 - Jan
2008 - Jul
2009 - Jan
2009 - Jul
2010 - Jan
2010 - Jul
2011 - Jan
(Well Below 50-year average of 1.5 million each year)
2011 - Jul
2012 - Jan
Long-term Average

25. 0
10000
12000
2000
4000
6000
8000
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Charleston Housing Permits
2009
2010
2011

26. 50,000
55,000
65,000
70,000
75,000
80,000
60,000
1980 - Q1
1981 - Q3
1983 - Q1
1984 - Q3
1986 - Q1
1987 - Q3
1989 - Q1
1990 - Q3
1992 - Q1
1993 - Q3
1995 - Q1
1996 - Q3
Homeowners
1998 - Q1
1999 - Q3
2001 - Q1
2002 - Q3
2004 - Q1
2005 - Q3
2007 - Q1
Owner Occupied Housing Units
2008 - Q3
2010 - Q1
2011 - Q3

27. 25,000
29,000
31,000
33,000
35,000
39,000
41,000
27,000
37,000
1980 - Q1
1981 - Q3
1983 - Q1
1984 - Q3
1986 - Q1
1987 - Q3
1989 - Q1
1990 - Q3
1992 - Q1
1993 - Q3
1995 - Q1
1996 - Q3
1998 - Q1
Rental Households
1999 - Q3
2001 - Q1
2002 - Q3
2004 - Q1
2005 - Q3
2007 - Q1
Rental Occupied Housing Units
2008 - Q3
2010 - Q1
2011 - Q3

28. 59
60
61
62
64
65
66
67
69
70
63
68
%
1965 - Q1
1967 - Q1
1969 - Q1
1971 - Q1
1973 - Q1
1975 - Q1
1977 - Q1
1979 - Q1
1981 - Q1
1983 - Q1
1985 - Q1
1987 - Q1
1989 - Q1
1991 - Q1
(Lowest in 15 years)
1993 - Q1
1995 - Q1
1997 - Q1
1999 - Q1
2001 - Q1
2003 - Q1
2005 - Q1
Homeownership Rate at 65.4%
2007 - Q1
2009 - Q1
2011 - Q1

29. Wealth Distribution
(Federal Reserve data on median net worth, with 2011 NAR estimate)
$300,000
$250,000
$200,000 1998
2001
$150,000
2004
$100,000 2007
2010
$50,000
$0
Renter Owner
Data Source for Median Net Worth: Federal Reserve

30. Banks/Regulators
Restricting Credit
(Average Credit Scores of Approved Loans)
Normal 2009 2010 If Normal
Fannie 720 761 762 720
Freddie 720 757 758 720
FHA 650 682 698 660
15% to 20% Higher Sales

31. -200
-100
0
100
200
300
400
500
2001 - Q1
$ billion
2001 - Q3
2002 - Q1
2002 - Q3
2003 - Q1
2003 - Q3
2004 - Q1
2004 - Q3
2005 - Q1
2005 - Q3
2006 - Q1
2006 - Q3
2007 - Q1
2007 - Q3
2008 - Q1
(excluding Federal Reserve)
2008 - Q3
2009 - Q1
2009 - Q3
Financial Industry Profits
2010 - Q1
2010 - Q3
2011 - Q1
2011 - Q3
2012 - Q1

32. Economy Growing, though Slowly
%
Real GDP
4
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
-1
forecast forecast
-2
-3
-4

33. 10
20
30
-40
-30
-20
-10
0
2000 - Q1
2000 - Q3
2001 - Q1
2001 - Q3
2002 - Q1
2002 - Q3
2003 - Q1
2003 - Q3
2004 - Q1
2004 - Q3
2005 - Q1
2005 - Q3
2006 - Q1
2006 - Q3
2007 - Q1
2007 - Q3
2008 - Q1
2008 - Q3
2009 - Q1
2009 - Q3
2010 - Q1
2010 - Q3
2011 - Q1
Home Buyer Tax Credit
Residential Investment Spending Growth
2011 - Q3
2012 - Q1

34. Payroll Jobs Changes
(December to December)
3
In millions
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
-1
forecast forecast
-2
-3
-4
-5
-6

35. 61
63
64
65
66
67
68
62
%
1990 - Jan
1991 - Jan
1992 - Jan
1993 - Jan
1994 - Jan
1995 - Jan
1996 - Jan
1997 - Jan
1998 - Jan
1999 - Jan
2000 - Jan
2001 - Jan
2002 - Jan
2003 - Jan
2004 - Jan
2005 - Jan
2006 - Jan
2007 - Jan
2008 - Jan
2009 - Jan
2010 - Jan
Labor Force Participation Rate
2011 - Jan
2012 - Jan

36. %
10
20
30
40
50
60
70
80
90
0
100
1948 - Jan
1951 - Jan
1954 - Jan
1957 - Jan
Source: BLS
1960 - Jan
1963 - Jan
1966 - Jan
1969 - Jan
1972 - Jan
1975 - Jan
1978 - Jan
1981 - Jan
1984 - Jan
1987 - Jan
1990 - Jan
1993 - Jan
Women
Men
1996 - Jan
1999 - Jan
Labor Force Participation Rate
2002 - Jan
2005 - Jan
2008 - Jan
2011 - Jan

37. 200
220
260
280
300
320
240
2000 -…
2000 -…
2001 -…
In thousands
2001 -…
2002 -…
2002 -…
2003 -…
2003 -…
2004 -…
2004 -…
2005 -…
2005 -…
2006 -…
2006 -…
2007 -…
2007 -…
2008 -…
2008 -…
2009 -…
2009 -…
2010 -…
2010 -…
Charleston Payroll Jobs
2011 -…
2011 -…
2012 -…

38. Charleston Payroll Jobs from 1940
In thousands
350
300
250
200
150
100
50
0
1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012
- Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan - Jan

39. Unemployment Rate
%
(Average during the Year)
12
10
8
6
4
2
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
forecast forecast
Need to add 250,000 jobs each month for the next 8 years to bring
the unemployment rate down to 5%.

40. Consumer Price Inflation
(Above Fed’s preferred 2% core inflation rate)
Rent All Items Core
%
5
4
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013
-1 forecast forecast

41. Prepare for Early Move (2014)
by Federal Reserve
Fed Funds 30-year Mortgage
%
7
6
5
4
3
2
1
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
forecast forecast forecast
Modestly higher rates could help home sales as banks re-staff mortgage
work for home purchase applications and less refinance applications.

42. Forecast Summary
2011 2012 2013
History Forecast Forecast
Existing Home Sales 4.26 million 4.6 million 5.0 million
New Home Sales 301,000 390,000 630,000
Housing Starts 611,000 770,000 1,150,000
Existing Home Price $166,100 $173,000 $182,000
GDP Growth +1.7% +2.0% +2.9%
Payroll Job Gains +1.7 million +1.5 million +2.3 million
Fed Funds Rate 0.1% 0.1% 0.1%
30-yr Mortgage 4.7% 3.8% 4.1%

43. Risks to Forecast
• Washington Policy
– QRM 20% down payment requirement?
– Other Dodd-Frank rules? Help or Hurt?
– Basel 3 … capital rule that punishes private mortgage with low
down payment and commercial loans
– Trim mortgage interest deduction?
– Capital gains tax on home sale?
– Fiscal Cliff on January 1, 2013 … if no new compromised budget,
then:
• Automatic deep cuts to military and domestic spending
• Automatic higher taxes
• 3% shaved off GDP

44. -1600000
-1400000
-1200000
-1000000
-800000
-600000
-400000
400000
-200000
200000
0
2000 - Jan
2000 - Aug
2001 - Mar
2001 - Oct
2002 - May
2002 - Dec
2003 - Jul
2004 - Feb
$ million; 12-month Total
2004 - Sep
2005 - Apr
2005 - Nov
2006 - Jun
2007 - Jan
2007 - Aug
2008 - Mar
2008 - Oct
2009 - May
2009 - Dec
U.S. Federal Budget Deficit
2010 - Jul
2011 - Feb
2011 - Sep
2012 - Apr

45. World Report Card
Country 10-Year Borrowing Rate
Switzerland 0.5%
Germany 1.3%
Singapore 1.3%
United States 1.4%
United Kingdom 1.5%
Canada 1.6%
France 2.2%
Brazil 2.9%
Italy 6.0%
Spain 6.8%
Greece 26.0%
Source: Bloomberg as of July 26, 2012

46. State Report Card
State 10-year Borrowing Rate above
Benchmark (% points)
Average State borrowing costs Around 3.5%
Rhode Island Benchmark + 0.5%
Michigan Benchmark + 0.7%
Nevada Benchmark + 0.7%
California Benchmark + 0.9%
Illinois Benchmark + 1.6%
Source: WSJ

47. Commercial Real Estate

48. Big Transactions Coming Back
$2.5 million property and above
Source: Real Capital Analytics, 4Q 2011.
13

49. REALTOR® Business Deals
(Majority are less than $1 million)

50. Underwriting Standards?

51. Multifamily Fundamentals
Completions Net Absorption Vacancy
250,000 9.0
8.0
200,000
7.0
150,000 6.0
5.0
100,000
4.0
50,000 3.0
2.0
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1.0
-50,000 Source: NAR/REIS 0.0

52. Office Fundamentals
Completions Net Absorption Vacancy
150 20.0
Millions
18.0
100
16.0
14.0
50
12.0
0 10.0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 8.0
-50
6.0
4.0
-100
2.0
-150 Source: NAR/REIS 0.0

53. Commercial Market Forecast
OFFICE 2011 2012 2013
Vacancy Rate 16.6% 16.3% 15.9%
Net Absorption ('000 sq. ft.) 20,178 31,700 53,000
Completions ('000 sq. ft.) 11,659 25,474 37,847
Rent Growth 1.4% 1.7% 2.4%
INDUSTRIAL 2011 2012 2013
Vacancy Rate 12.4% 11.9% 11.1%
Net Absorption ('000 sq. ft.) 61,957 41,249 59,855
Completions ('000 sq. ft.) 20,462 26,947 54,881
Rent Growth -0.5% 1.8% 2.3%
RETAIL 2011 2012 2013
Vacancy Rate 12.9% 12.2% 11.0%
Net Absorption ('000 sq. ft.) 1,238 13,547 23,330
Completions ('000 sq. ft.) 4,207 12,677 19,878
Rent Growth -0.2% 0.7% 1.4%
MULTI-FAMILY 2011 2012 2013
Vacancy Rate 5.4% 4.6% 4.5%
Net Absorption (Units) 238,398 126,621 102,687
Completions (Units) 38,014 88,839 93,706
Rent Growth 2.5% 3.5% 3.8%

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