2014 Residential Economic Issues & Trends Forum: REALTOR® Party Convention & Trade Expo

1. Residential Economic Issues & Trends Forum

2. Housing Market and Economic Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® PresentaAon in Washington, D.C. May 15, 2014

3. U.S. Popula:on 0 50 100 150 200 250 300 350 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013 In millions

4. Jobs in America – Less Smooth 0 20000 40000 60000 80000 100000 120000 140000 160000 1968 -‐ Jan 1969 -‐ Dec 1971 -‐ Nov 1973 -‐ Oct 1975 -‐ Sep 1977 -‐ Aug 1979 -‐ Jul 1981 -‐ Jun 1983 -‐ May 1985 -‐ Apr 1987 -‐ Mar 1989 -‐ Feb 1991 -‐ Jan 1992 -‐ Dec 1994 -‐ Nov 1996 -‐ Oct 1998 -‐ Sep 2000 -‐ Aug 2002 -‐ Jul 2004 -‐ Jun 2006 -‐ May 2008 -‐ Apr 2010 -‐ Mar 2012 -‐ Feb 2014 -‐ Jan

5. Jobs to Popula:on Ra:o (16 years and over) 50 52 54 56 58 60 62 64 66 1968 -‐ Jan 1969 -‐ Oct 1971 -‐ Jul 1973 -‐ Apr 1975 -‐ Jan 1976 -‐ Oct 1978 -‐ Jul 1980 -‐ Apr 1982 -‐ Jan 1983 -‐ Oct 1985 -‐ Jul 1987 -‐ Apr 1989 -‐ Jan 1990 -‐ Oct 1992 -‐ Jul 1994 -‐ Apr 1996 -‐ Jan 1997 -‐ Oct 1999 -‐ Jul 2001 -‐ Apr 2003 -‐ Jan 2004 -‐ Oct 2006 -‐ Jul 2008 -‐ Apr 2010 -‐ Jan 2011 -‐ Oct 2013 -‐ Jul

6. Sluggish Growth + Gap aXer Great Recession ($1.5 trillion gap … $4,700 per person) 0 5,000 10,000 15,000 20,000 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 GDP in 2009 Dollars Real GDP Real GDP W/O Recession 3% Growth Line 2.2% Growth Line

7. Recent Year Ac:vity GDP Contrac:on in 2014 Q1 -‐10 -‐5 0 5 10 2007 -‐ Q1 2007 -‐ Q3 2008 -‐ Q1 2008 -‐ Q3 2009 -‐ Q1 2009 -‐ Q3 2010 -‐ Q1 2010 -‐ Q3 2011 -‐ Q1 2011 -‐ Q3 2012 -‐ Q1 2012 -‐ Q3 2013 -‐ Q1 2013 -‐ Q3 2014 -‐ Q1 GDP Annualized Growth Rate

8. But No Fresh Recession in Sight -‐6 -‐4 -‐2 0 2 4 GDP Growth Rate from one year ago

9. Cyclical Housing Sector: Single-‐Family Exis:ng Home Sales Only (Best Es:ma:on – could be oﬀ by several % points) 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Q1

10. Single-‐Family Sales to Popula:on Ra:o (Average = 1.36%) 0.0 0.5 1.0 1.5 2.0 2.5 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Q1 %

11. # of People per Housing Unit 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

12. Single-‐Family Sales to Household Ra:o (Average = 3.66%) 2.00 2.50 3.00 3.50 4.00 4.50 5.00 5.50 6.00 1968 1973 1978 1983 1988 1993 1998 2003 2008 2013

13. Monthly Pending Sales Index (Seasonally Adjusted) 70.0 75.0 80.0 85.0 90.0 95.0 100.0 105.0 110.0 115.0 Source: NAR

14. Exis:ng Home Sales -‐ Closings 3,000,000 3,500,000 4,000,000 4,500,000 5,000,000 5,500,000 2011 -‐ Jan 2011 -‐ Mar 2011 -‐ May 2011 -‐ Jul 2011 -‐ Sep 2011 -‐ Nov 2012 -‐ Jan 2012 -‐ Mar 2012 -‐ May 2012 -‐ Jul 2012 -‐ Sep 2012 -‐ Nov 2013 -‐ Jan 2013 -‐ Mar 2013 -‐ May 2013 -‐ Jul 2013 -‐ Sep 2013 -‐ Nov 2014 -‐ Jan 2014 -‐ Mar

15. Causes of Recent Sales Slowdown •  Bad winter –  Only delayed sales not cancella:on •  Lack of inventory –  Steadily more inventory coming to market •  Home prices rose too fast –  Showing signs of slowing •  Mortgage credit diﬃcul:es –  New Qualiﬁed Mortgage Rules –  Surely cannot get worse! •  Mortgage rates jumped –  Trouble !

16. Inventory of Homes for Sale 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 2007 -‐ Jan 2007 -‐ May 2007 -‐ Sep 2008 -‐ Jan 2008 -‐ May 2008 -‐ Sep 2009 -‐ Jan 2009 -‐ May 2009 -‐ Sep 2010 -‐ Jan 2010 -‐ May 2010 -‐ Sep 2011 -‐ Jan 2011 -‐ May 2011 -‐ Sep 2012 -‐ Jan 2012 -‐ May 2012 -‐ Sep 2013 -‐ Jan 2013 -‐ May 2013 -‐ Sep 2014 -‐ Jan

17. Change in Inventory (% change from one year ago) -‐30 -‐25 -‐20 -‐15 -‐10 -‐5 0 5 10 15 20 2007 -‐ Jan 2007 -‐ May 2007 -‐ Sep 2008 -‐ Jan 2008 -‐ May 2008 -‐ Sep 2009 -‐ Jan 2009 -‐ May 2009 -‐ Sep 2010 -‐ Jan 2010 -‐ May 2010 -‐ Sep 2011 -‐ Jan 2011 -‐ May 2011 -‐ Sep 2012 -‐ Jan 2012 -‐ May 2012 -‐ Sep 2013 -‐ Jan 2013 -‐ May 2013 -‐ Sep 2014 -‐ Jan

18. Home Price Index in Phoenix and St. Louis Repeat-‐Transac:on Home Price Index 80 130 180 230 280 330 1995 -‐ Q1 1995 -‐ Q4 1996 -‐ Q3 1997 -‐ Q2 1998 -‐ Q1 1998 -‐ Q4 1999 -‐ Q3 2000 -‐ Q2 2001 -‐ Q1 2001 -‐ Q4 2002 -‐ Q3 2003 -‐ Q2 2004 -‐ Q1 2004 -‐ Q4 2005 -‐ Q3 2006 -‐ Q2 2007 -‐ Q1 2007 -‐ Q4 2008 -‐ Q3 2009 -‐ Q2 2010 -‐ Q1 2010 -‐ Q4 2011 -‐ Q3 2012 -‐ Q2 2013 -‐ Q1

19. Change in Home Price (% change from one year ago) -‐10 -‐5 0 5 10 15 2011 -‐ Jan 2011 -‐ Mar 2011 -‐ May 2011 -‐ Jul 2011 -‐ Sep 2011 -‐ Nov 2012 -‐ Jan 2012 -‐ Mar 2012 -‐ May 2012 -‐ Jul 2012 -‐ Sep 2012 -‐ Nov 2013 -‐ Jan 2013 -‐ Mar 2013 -‐ May 2013 -‐ Jul 2013 -‐ Sep 2013 -‐ Nov 2014 -‐ Jan 2014 -‐ Mar NAR Case-‐Shiller CoreLogic

20. Median Home Price – Rising ($40,000 Equity Gain in 3 years) $166,100 $176,800 $197,100 $208,200 $150,000 $160,000 $170,000 $180,000 $190,000 $200,000 $210,000 $220,000 2011 2012 2013 2014 forecast

21. Inevitable Rise in Mortgage Rates will further hurt Aﬀordability 1/3rd of homeowners have no mortgage 1/3rd have 4.3% rate or lower 1/3rd have higher rate 3 4 5 6 7 8 9 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 2008 -‐ Jan 2008 -‐ Jul 2009 -‐ Jan 2009 -‐ Jul 2010 -‐ Jan 2010 -‐ Jul 2011 -‐ Jan 2011 -‐ Jul 2012 -‐ Jan 2012 -‐ Jul 2013 -‐ Jan 2013 -‐ Jul 2014 -‐ Jan %

22. Locked-‐in Eﬀect of Low Rates? •  Housing cannot get back to normal in a hurry •  People move even in high interest rate environment –  Marriage, divorce, new baby, school district, new job, fed-‐up with local government, … •  Many unplanned landlords –  Take advantage of rising rents while rates are low and ﬁxed •  Poten:al future lock from longer holding period for capital gains tax exclusion

23. Rising Renters’ and Homeowners’ Rent Growth (On the Way to 3%) -‐1 0 1 2 3 4 5 2003 -‐ Jan 2003 -‐ Jun 2003 -‐ Nov 2004 -‐ Apr 2004 -‐ Sep 2005 -‐ Feb 2005 -‐ Jul 2005 -‐ Dec 2006 -‐ May 2006 -‐ Oct 2007 -‐ Mar 2007 -‐ Aug 2008 -‐ Jan 2008 -‐ Jun 2008 -‐ Nov 2009 -‐ Apr 2009 -‐ Sep 2010 -‐ Feb 2010 -‐ Jul 2010 -‐ Dec 2011 -‐ May 2011 -‐ Oct 2012 -‐ Mar 2012 -‐ Aug 2013 -‐ Jan 2013 -‐ Jun 2013 -‐ Nov Owners' Equivalent Rent Renters' Rent

24. REALTOR® Rent Survey – Shows Rent Pressure 0 10 20 30 40 50 60 Falling Rising

25. If there is persistent housing shortage … then the basle begins Landlord from Hell versus Rent Control

26. Housing Starts Rising … More Inventory But Needs to Reach 1.5 1.7 million 0 500 1000 1500 2000 2500 2000 -‐ Jan 2001 -‐ Jan 2002 -‐ Jan 2003 -‐ Jan 2004 -‐ Jan 2005 -‐ Jan 2006 -‐ Jan 2007 -‐ Jan 2008 -‐ Jan 2009 -‐ Jan 2010 -‐ Jan 2011 -‐ Jan 2012 -‐ Jan 2013 -‐ Jan 2014 -‐ Jan mul:family single-‐family Thousand units (annualized) Long-term Average

27. New Home Sales 0 200 400 600 800 1000 1200 1400 1600 2000 -‐ Jan 2001 -‐ Jan 2002 -‐ Jan 2003 -‐ Jan 2004 -‐ Jan 2005 -‐ Jan 2006 -‐ Jan 2007 -‐ Jan 2008 -‐ Jan 2009 -‐ Jan 2010 -‐ Jan 2011 -‐ Jan 2012 -‐ Jan 2013 -‐ Jan 2014 -‐ Jan In thousand units

28. Sluggish Recovery in Housing Starts •  Cost of Construc:on Rising Faster than CPI •  Labor Shortage for construc:on work •  Construc:on loan diﬃculty for small local homebuilders … Dodd-‐Frank ﬁnancial regula:ons?

29. Exis:ng vs. New Home Price $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 2000 -‐ Jan 2002 -‐ Jan 2004 -‐ Jan 2006 -‐ Jan 2008 -‐ Jan 2010 -‐ Jan 2012 -‐ Jan 2014 -‐ Jan Exis:ng New

30. Economic Outlook

31. Monetary Policy •  Tapering Ends by the year end 2014 •  Fed Funds Rate … hike in 2015 Q1 •  Earlier Move to Tighten because of Inﬂa:on Pressure •  Long-‐term Steady State Rate (2016 onwards) .. 10 year Treasury at 5.0% … 250 basis points higher than current

32. Core Price InﬂaAon: Less than 2%; but rose at 2.5% annualized rate (% change from one year ago) 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 1999 -‐ Jan 1999 -‐ Jul 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 2008 -‐ Jan 2008 -‐ Jul 2009 -‐ Jan 2009 -‐ Jul 2010 -‐ Jan 2010 -‐ Jul 2011 -‐ Jan 2011 -‐ Jul 2012 -‐ Jan 2012 -‐ Jul 2013 -‐ Jan 2013 -‐ Jul 2014 -‐ Jan All items exlcuding fuel and energy

33. GDP Growth = Job Crea:ons (8 million lost … 8 million gained) 124000 126000 128000 130000 132000 134000 136000 138000 140000 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 2008 -‐ Jan 2008 -‐ Jul 2009 -‐ Jan 2009 -‐ Jul 2010 -‐ Jan 2010 -‐ Jul 2011 -‐ Jan 2011 -‐ Jul 2012 -‐ Jan 2012 -‐ Jul 2013 -‐ Jan 2013 -‐ May 2013 -‐ Nov In thousands

34. Local Market Job Comparisons Fast Growing States 1-‐year Growth Rate Nevada 3.8% North Dakota 3.7% Colorado 3.0% Florida 3.0% Oregon 2.7% Texas 2.7% Utah 2.6% Delaware 2.4% California 2.3% Arizona 1.9% Slow Moving States 1-‐year Growth Rate New Mexico -‐0.2% Kentucky -‐0.2% New Jersey 0.0% Virginia 0.1% Alaska 0.2% West Virginia 0.3% Pennsylvania 0.3% Maryland 0.3% D.C. 0.4% Mississippi 0.5%

35. Business Spending in rela:on to Corporate Proﬁts … Huge Poten:al for Business Spending Increase 0 500 1000 1500 2000 2500 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 1999 -‐ Q3 2001 -‐ Q1 2002 -‐ Q3 2004 -‐ Q1 2005 -‐ Q3 2007 -‐ Q1 2008 -‐ Q3 2010 -‐ Q1 2011 -‐ Q3 2013 -‐ Q1 Proﬁts Business Spending

36. Economic Forecast 2013 2014 forecast 2015 forecast GDP Growth 1.9% 2.2% 2.9% Job Growth 1.7% 1.6% 1.9% CPI Inﬂa:on 1.4% 2.5% 3.5% Consumer Conﬁdence 73 82 86 10-‐year Treasury 2.5% 3.0% 3.8%

37. Housing Market Outlook

38. Pent Up Demand 2000 2013 Exis:ng Home Sales 5.2 m 5.1 m New Home Sales 880 K 430 K Mortgage Rates 8.0% 4.0% Payroll Jobs 132.0 m 136.4 m Popula:on 282 m 316 m

39. Vaca:on Home Sales -‐ 200 400 600 800 1,000 1,200 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 In thousands

40. Household Net Worth 40000 45000 50000 55000 60000 65000 70000 75000 2000 -‐ Q1 2000 -‐ Q4 2001 -‐ Q3 2002 -‐ Q2 2003 -‐ Q1 2003 -‐ Q4 2004 -‐ Q3 2005 -‐ Q2 2006 -‐ Q1 2006 -‐ Q4 2007 -‐ Q3 2008 -‐ Q2 2009 -‐ Q1 2009 -‐ Q4 2010 -‐ Q3 2011 -‐ Q2 2012 -‐ Q1 2012 -‐ Q4 $ billion

41. Home Countries for Interna:onal Buyers Preliminary Analysis, Subject to Change * Includes People’s Republic of China, Taiwan, and Hong Kong Brazil Canada China* Germany India Japan Mexico Russia United Kingdom 2011 3% 23% 9% 4% 7% 2% 7% 1% 7% 2012 3% 24% 12% 3% 6% 1% 8% 2% 6% 2013 2% 23% 12% 3% 5% 1% 8% 2% 5% 2014P 2% 18% 18% 3% 4% 2% 9% 1% 6% 0% 5% 10% 15% 20% 25% 30% Distribu:on of Interna:onal Sales by Country of Origin

42. Will China overtake the U.S. in GDP? Had An:cipated around 2010 0 5000 10000 15000 20000 25000 1929 1933 1937 1941 1945 1949 1953 1957 1961 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017 2021 2025 U.S. (growing 3%) China (growing 8%)

43. Chinese Yuan vs. U.S. Dollar (Yuan per $) 5.00 5.50 6.00 6.50 7.00 7.50 8.00 8.50 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 2008 -‐ Jan 2008 -‐ Jul 2009 -‐ Jan 2009 -‐ Jul 2010 -‐ Jan 2010 -‐ Jul 2011 -‐ Jan 2011 -‐ Jul 2012 -‐ Jan 2012 -‐ Jul 2013 -‐ Jan 2013 -‐ Jul 2014 -‐ Jan

44. Global Pent-‐Up Demand from Rising World Popula:on 0 2 4 6 8 10 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 In billions World-‐Class Ci:es will Beneﬁt ! •  Boston, Chicago, Dallas, Miami, New York, San Diego, San Francisco, Washington D.C., etc.

45. Housing Forecast 2013 2014 forecast 2015 forecast Housing Starts 925,000 1.07 million 1.4 million New Home Sales 430,000 510,000 710,000 Exis:ng Home Sales 5.1 million 4.9 million 5.2 million Median Price $197,000 $209,000 $219,000 30-‐year Rate 4.0% 4.7% 5.5% Dollar Volume Es:mate +21% +3% +11%

46. Housing Market and Economic Outlook Lawrence Yun, Ph.D. Chief Economist NATIONAL ASSOCIATION OF REALTORS® PresentaAon in Washington, D.C. May 15, 2014

47. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Housing Demand Eric Belsky May 2014 Washington, DC

48. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Federal Surveys Providing a Murky Picture on Extent of Recent Household Growth 0 500 1,000 1,500 2011 2012 2013 Change in Households (Thousands) Housing Vacancy Survey Current Population Survey American Community Survey Note: Data for 2013 American Community Survey is not yet available and is not presented on this slide. Household growth for Housing Vacancy Survey uses revised 2010/12 vintage weights, and the Current Population Survey uses 2010 vintage weights

49. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Hard to Know What’s Happening With Household Growth But . . . Long-Run Housing Production Is WAY Below Narrow Normal Range 0 500 1,000 1,500 2,000 Lagging Ten-Year Annual Average Housing Completions and Manufactured Home Placements (Thousands) Median Source: US Census Bureau

50. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E WAITING FOR STRONGER DEMAND REBOUND 50

51. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Even CPS Suggests Cumulative Household Growth Is Now 1.5 Million Below Even Modest 1.14M ’95 -’00 Trend -4,000 -3,000 -2,000 -1,000 0 1,000 2006 2007 2008 2009 2010 2011 2012 Change in Number of Households (Thousands) CPS vs 1995-2000 Rate CPS vs. 2000-2005 Rate

52. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Nearly 3 Million More Adults in Their 20s and Early 30s Lived with their Parents In 2012 Than 2007 0 500 1,000 1,500 2,000 20-24 25-29 30-34 Age Change from 2007-2012 in Number of Adult Children Living with Parents (Thousands) Source: JCHS tabulations of US Census Bureau, Current Population Survey

53. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Real Median Incomes for All Young Adult Households Have Declined Since Great Recession -15 -10 -5 0 20-24 25-29 30-34 35-39 Age 2007-2012 Change in Real Median Household Incomes (Percent) Note: Percent change based on dollar values that have adjusted for inflation using the CPI-U for All Items. Source: JCHS tabulations of US Census Bureau, Current Population Survey.

54. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E A Significant But Lower Fraction of Adult Children Living with Parents Were Employed Full Time in ‘12 than ‘07 0 50 100 20-24 25-29 30-34 35-39 Age Share of Adult Children Living with Parents Who Have Full-Time Employment (Percent) 2007 2012 Source: JCHS tabulations of US Census Bureau, Current Population Survey

55. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Student Default Rates Have Soared, Hindering Ability to Qualify for a Mortgage 0 2 4 6 8 10 12 14 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 2012:Q3 2013:Q1 2013:Q3 Share of Seriously Delinquent Student Loans (Percent) Note: Seriously delinquent student loans are defined as 90-plus days delinquent. Source: Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit.

56. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E 0 10 20 30 40 50 60 70 80 90 100 2004 2010 Payments are 15 percent or greater of monthly income Payments are 10 to 14.9 percent of monthly income Payments are 5 to 9.9 percent of monthly income0 10 20 30 40 50 60 70 80 90 100 2004 2010 Share of Households with Head Aged 20 to 29 (Percent), By Tenure and Year Student Debt Payments May Pose a Significant Barrier to Mortgage Borrowing For As Many 1 in 10 Renters in Their 20s Renters Owners Source: JCHS tabulations of Federal Reserve Board, Survey of Consumer Finances

57. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E 0 10 20 30 40 50 60 70 80 90 100 2004 2010 0 10 20 30 40 50 60 70 80 90 100 2004 2010 Payments are 15 percent or greater of monthly income Payments are 10 to 14.9 percent of monthly income Payments are 5 to 9.9 percent of monthly income Payments are less than 5 percent of monthly income Has student loan debt but not making payments on it Has no student loan debt And Even Smaller Share of Renters in Their 30s Are Spending 5 Percent+ of Income on Student Debt Renters Owners Source: JCHS tabulations of Federal Reserve Board, Survey of Consumer Finances Share of Households with Head Aged 30 to 39 (Percent), By Tenure and Year

58. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Household Growth Is Expected to Rival or Top 1995-2000 Annual Average Pace 500 600 700 800 900 1,000 1,100 1,200 1,300 1995-2000 CPS HVS Source: JCHS Household Projections (for Projected Annual Average Household Growth) 500 600 700 800 900 1,000 1,100 1,200 1,300 2000-2010 Decennial Census 500 600 700 800 900 1,000 1,100 1,200 1,300 JCHS Projections 15-25 Low Projection Middle Projection High Projection Average Annual Household Growth (Thousands)

59. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Minority Households Will Account for 76 Percent of Household Growth Over the Next Decade 0 20 40 60 80 100 Household Composition in 2012 ACS Projected Composition of Household Growth, 2015-2025 Percent Share of Households, by Race and Ethnicity Asian/other Hispanic Black, non-Hispanic White, non-Hispanic Source: JCHS tabulations of US Census Bureau, 2012 American Community Survey; JCHS Household Projections, Middle Series

60. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E The Greatest Increase in Households Will Be Among Households 65 and Older 0 2 4 6 8 10 12 14 <25 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80+ 2015 2025 Projected Households (Millions) 60 Source: JCHS households projections.

61. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E WILL V. WAY 61

62. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Nearly All People Under Age 45 Expect to Buy in the Future . . . 0 20 40 60 80 100 Under 25 25 to 34 35 to 44 45 to 54 55 to 64 % Who Expect to Buy a Home at Some Point in the Future Source: Drew and Herbert, 2012. Based on Fannie Mae National Housing Survey 2010-2012.

63. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E But Underwriting Has Tightened Dramatically 0 20 40 60 80 100 2006 2007 2008 2009 2010 2011 2012 Share of FHA-Insured Mortgages by Dollar Volume (Percent) Below 640 640-679 680-850 0 20 40 60 80 100 2001 2011 Share of Freddie Mac and Fannie Mae Originations (Percent) Higher Risk Medium Risk Lower Risk Notes: Higher (lower) risk loans are to borrowers with credits scores under 690 (above 750) and have loan-to- value ratios above 85% (below 75%). FHA data exclude records with no credit score information. Sources: Amherst Securities; US Department of Housing and Urban Development. Credit Score

64. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E Demanding More Down or Capping Credit Scores Disproportionately Impacts Minorities 12 38 11 29 60 27 18 49 18 5 23 6 0 10 20 30 40 50 60 70 3% Downpayment 10% Downpayment FICO 660 PercentofPerforming LoansExcluded Non-Hispanic White African American Latino Asian 64 Percent of performing loans excluded from mortgage market 2004-2008 originations (1st lien, owner occupied, full doc only--excludes IO, neg. am and < 5 year hybrid ARMs) Source: Roberto Quercia, Lei Ding, and Carolina Reid (2012). Balancing Risk and Access: Underwriting Standards for Qualified Residential Mortgages, Center for Community Capital Research Report, January 2012.

65. © 2 0 1 2 P R E S I D E N T A N D F E L L O W S O F H A R V A R D C O L L E G E . . . And those with Lower Incomes 25 49 2522 49 18 13 42 12 7 32 8 0 10 20 30 40 50 60 3% Downpayment 10% Downpayment FICO 660 PercentofPerforming LoansExcluded Low-Income Moderate-Income Middle-Income Upper-Income 65 Percent of performing loans excluded from mortgage market 2004-2008 originations (1st lien, owner occupied, full doc only--excludes IO, neg. am and < 5 year hybrid ARMs) Note: Income categories are defined as follows: low—less than 50% of MSA median income; moderate—50-79%; middle—80-119%; and upper —120%+ of MSA median income. Source: Roberto Quercia, Lei Ding, and Carolina Reid (2012). Balancing Risk and Access: Underwriting Standards for Qualified Residential Mortgages, Center for Community Capital Research Report, January 2012.

66. Dennis McGill

67. National Association of REALTORS® May 15, 2014 Zelman & Associates Equity Research

68. Drivers of New Shelter q  Accelerating Household Formations q  Decoupling of households q  Improving job growth q  Increasing consumer confidence q  Near Record Occupancy Levels in Rental Housing q  Constrained Resale Housing Inventory q  Deficit of Shelter

69. New Housing Supply Implied by Decade Analysis 500 1,490 1,090 155 330 260 55 80 70 720 1,925 1,440 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2010-13 2014-19 2010-19 Manufactured Housing 2-4 Unit Multi-Family 5-Plus Multi-Family Single-Family New Housing Supply, in Thousands Annual Average Source: Census Bureau, Zelman & Associates analysis

70. CPS Not Perfect But Showed Strongest Alignment With Decennial Census990 1,395 740 700 1,935 655 1,430 1,550 1,380 855 1,855 1,100 2,000 730 1,355 1,050 1,645 780 400 360 1,155 1,155 1,465 0 500 1,000 1,500 2,000 2,500 1Q91 1Q92 1Q93 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 Current Population Survey Change in National Households in Thousands With Trailing Three-Year Average Source: Census Bureau, Zelman & Associates analysis

71. Electric Data Supports Accelerating Trend in CPS Households 1.4% 1.2% 1.4% 1.4% 1.5% 1.3% 1.6% 1.5% 1.5% 1.7% 1.7% 1.5% 1.1% 1.2% 1.5% 1.4% 1.2% 0.8% 0.2% 0.4% 0.3% 0.5% 0.8% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Residential Electric Customers % Change CPS Average Households % Chg Source: Census Bureau, Energy Information Administration, Zelman & Associates analysis

72. Not Surprisingly, Young Adult Employment Driving Household Growth 86.0% 87.0% 88.0% 89.0% 90.0% 91.0% 92.0% 93.0% 94.0% 95.0% 96.0% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% 1.6% 1.8% 2.0% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % Change Residential Electric Customers - left 20-34 Year Old Employment Rate - right Source: BLS, Energy Information Administration, Zelman & Associates analysis

73. High Occupancy Supports Stable Rent Growth (10%) (8%) (6%) (4%) (2%) 0% 2% 4% 6% 8% 10% 91.0% 91.5% 92.0% 92.5% 93.0% 93.5% 94.0% 94.5% 95.0% 95.5% 96.0% 2Q97 4Q97 2Q98 4Q98 2Q99 4Q99 2Q00 4Q00 2Q01 4Q01 2Q02 4Q02 2Q03 4Q03 2Q04 4Q04 2Q05 4Q05 2Q06 4Q06 2Q07 4Q07 2Q08 4Q08 2Q09 4Q09 2Q10 4Q10 2Q11 4Q11 2Q12 4Q12 2Q13 4Q13 Occupancy Rent Growth National Rent Growth and Occupancy Long-Term Average = 94% Source: Axiometrics, Zelman & Associates analysis

74. Recession Delayed Move to Single-Family for Many Married Couples 15.0% 15.6% 16.3% 14.7% 14.2% 15.3% 15.4% 15.6% 15.5% 17.1% 15.3% 16.3% 15.9% 16.2% 15.4% 16.9% 16.2% 17.1% 17.4% 18.6% 18.7% 19.3% 10% 12% 14% 16% 18% 20% 1Q92 1Q93 1Q94 1Q95 1Q96 1Q97 1Q98 1Q99 1Q00 1Q01 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 Percentage of 25-34 Year Old Married Couples that Reside in Traditional Apartments We believe that majority of change of late has been due to recessionary impacts that should unwind Source: Census Bureau, Zelman & Associates analysis

75. Constrained Single-Family Rental Supply and Strong Demand Drive Price Inflation 84.0 88.3 86.1 81.7 83.6 86.6 84.8 77.9 79.4 84.8 79.3 80.7 23.5 23.2 32.2 34.7 34.1 35.2 39.7 44.8 42.7 35.0 43.5 40.7 10 20 30 40 50 60 70 80 90 100 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Mar-13 Feb-14 Mar-14 Demand Supply Supply Versus Demand of Single-Family Rentals 0-100 Scale Source: Zelman & Associates Single-Family Rental Survey

76. Existing Inventory Relative to Households ~30% Lower Than Last Two Decades 2.8% 2.0% 2.1% 1.4% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 1980s 1990s 2000s 1Q14 Existing Home Inventory as Percentage of Households ~30% discount to average of last two decades Source: Census Bureau, NAR, Zelman & Associates analysis

77. Inventories at 30-Year Lows Support Robust Home Price Outlook 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 1Q90 3Q90 1Q91 3Q91 1Q92 3Q92 1Q93 3Q93 1Q94 3Q94 1Q95 3Q95 1Q96 3Q96 1Q97 3Q97 1Q98 3Q98 1Q99 3Q99 1Q00 3Q00 1Q01 3Q01 1Q02 3Q02 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 1Q11 3Q11 1Q12 3Q12 1Q13 3Q13 1Q14 Seasonally-Adjusted Single-Family New and Existing Home Inventory as Percentage of Households 3.5% 4.8% -5.4% Average real change in existing home prices per range of for-sale inventory. Source: Census Bureau, NAR, Zelman & Associates analysis

78. Ranking of Local Resale Markets80 75 73 72 71 71 70 70 68 68 67 66 66 65 65 64 64 63 63 61 58 58 57 57 57 54 51 62 40 50 60 70 80 90 Houston SanFrancisco Austin LosAngeles Denver Miami Orlando Charlotte LasVegas Dallas WashingtonD.C. SaltLakeCity Charleston Indianapolis Raleigh Naples SanAntonio InlandEmpire Atlanta SanDiego Chicago Tampa Sacramento Philadelphia Jacksonville Phoenix Cincinnati National Ranking of Local Resale Markets Trailing Three Month Average 0 = Extreme Buyers' Market, 100 = Extreme Sellers' Market Source: Zelman & Associates Homebuilding Survey

79. Distressed Sales Decline Due to Shrinking Supply While Traditional Sales Remain Healthy -3% -3% -11% -19% -18% -18% -12% -14% -17% -14% -16% -5% 30% 32% 23% 19% 22% 23% 6% 1% -13% -36% -14% 23% 11% 15% 15% 13% 18% 15% 19% 23% 9% -45% -35% -25% -15% -5% 5% 15% 25% 35% 45% 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 Year-Over-Year Change in Existing Home Sales REO Sales Short Sales Traditional Sales Source: CoreLogic, Zelman & Associates analysis

80. Distressed Sales as a Percentage of Total Existing Home Sales are Declining 3% 3% 3% 4% 6% 6% 7% 11% 17% 19% 22% 30% 35% 29% 26%26% 30% 25% 29% 30% 34% 28% 26% 27% 29% 24% 22% 24%24% 19% 17% 18%18% 0% 5% 10% 15% 20% 25% 30% 35% 40% 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Distressed Sales as % of Existing Home Sales Source: CoreLogic, Zelman & Associates analysis

81. Availability of Distressed Homes Remains Constrained Across All Channels 36.1 29.6 20.4 33.3 30.7 18.7 34.0 28.9 23.5 38.2 31.7 26.1 10 20 30 40 50 60 70 MLS Trustee / Auction Sales Portfolios 2Q13 3Q13 4Q13 1Q14 Availability of REO For Sale 0 = No Availability 100 = Abundant Availability Source: Zelman & Associates Single-Family Rental Survey

82. Relative to Households, 2013 Closings 20% Lower Than 25-Year Average 5.6% 5.9% 5.7% 5.6% 5.0% 4.7% 4.4% 4.8% 5.2% 5.4% 5.2% 5.6% 5.7% 6.2% 6.3% 6.1% 6.0% 6.2% 6.5% 7.2% 7.6% 6.8% 5.4% 4.3% 3.9% 3.7% 3.6% 3.9% 4.3% 4.1% 4.2% 4.4% 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% 4.5% 5.0% 5.5% 6.0% 6.5% 7.0% 7.5% 8.0% 8.5% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E Home Closings as Percentage of Households Source: Census Bureau, Company data, CoreLogic, NAR, Zelman & Associates analysis

83. Resale Days on Market Down Sequentially and Year Over Year in March 91 62 55 98 66 53 0 20 40 60 80 100 120 Mar-12 Mar-13 Mar-14 Mar-12 Mar-13 Mar-14 Median Number of Days on Market Until Sale All Existing Home Sales Non-Distressed Homes Source: NAR, Zelman & Associates analysis

84. After First Increase Since 2007, Double-Digit Growth Projected in AD&C Lending in 2014-15 54% 34% 4% 4% -6% -15% -23% -22% -13% -1% 7% 15% 9% 22% 21% 14% 22% 0% 10% 21% 31% 24% 13% -5% -23% -27% -19% -9% 5% 14% 12% 500 700 900 1,100 1,300 1,500 1,700 1,900 2,100 2,300 -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E Change in Outstanding AD&C Loans Total Housing Starts Source FDIC, Zelman & Associates analysis

85. Both High and Low-Income Buyers at Record Level of Affordability 10% 12% 14% 16% 18% 20% 22% 24% 26% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 All incomes Upper-Middle and Upper Income Lower and Lower-Middle Income Median Front-End DTI of Purchase Originations Assuming 30-Year Fixed Rate Mortgage Source: HMDA, Zelman & Associates analysis

86. Investor Mortgages During Peak Were Highly Levered and Poorly Underwritten 4% 4% 4% 5% 5% 6% 6% 6% 6% 7% 7% 8% 9% 11% 14% 17% 16% 14% 12% 9% 10% 12% 12% 11% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Investor Share of Unit Purchase Mortgage Originations Note: Investor mortgages accounted for 53% of growth from 1999-2005, excluding non owner-occupants that falsely applied as owners for more favorable terms Source: Census Bureau, Company data, CoreLogic, HMDA. NAR, Zelman & Associates analysis

87. Cash Purchases Higher Across Market But Mix is Critical Element 14% 13% 13% 14% 15% 14% 14% 15% 18% 20% 23% 25% 24% 22% 65% 43% 49% 43% 46% 47% 54% 65% 74% 79% 76% 76% 73% 73% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 % of Owner-Occupant Purchases Using Cash % of Investor Purchases Using Cash Source: Census Bureau, Company data, CoreLogic, HMDA, NAR, Zelman & Associates analysis

88. Zelman Survey Indicates Underwriting is Loosening While Credit Quality is Improving 68.7 70.7 72.6 74.6 74.8 74.9 75.4 76.5 76.7 76.5 76.6 76.1 74.8 73.5 71.7 70.9 70.0 61.3 60.3 59.2 59.6 59.2 58.1 57.9 58.6 60.5 64.4 66.4 67.4 68.3 68.7 68.0 68.8 69.0 50 55 60 65 70 75 80 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 Internal Underwriting Criteria Index 0 = Extremely Easy 100 = Extremely Tight Applicant Credit Quality Index 0 = Extremely Weak 100 = Extremely Strong Source: Zelman & Associates Mortgage Survey

89. Owner-Occupant Purchases Mortgages Post Double-Digit Growth in 2013 -3% 6% 1% 5% 3% 2% -11% -22% -26% -8% -6% -9% 15% 15% 0% 12% 8% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E Year-Over-Year Change in Owner-Occupied Unit Purchase Mortgage Originations Source: HMDA, Zelman & Associates analysis

90. Big Banks Not Representative of Market; Smaller Institutions Stepping Up 10% 1% 0% -9% -16% -7% 29% 27% 12% 3% -12% 15% -20% -10% 0% 10% 20% 30% 40% CreditUnions RegionalBanks MortgageCompanies AllBanks NationalBanks Total CreditUnions MortgageCompanies RegionalBanks AllBanks NationalBanks Total Year-Over-Year Growth in Purchase Unit Originations by Institution Type 2011 2012 Source: HMDA, Zelman & Associates analysis

91. Higher-Quality Borrowers Led Recovery in 2012, But Entry-Level Credits Joined in 2013 35% 27% 8% -10% 15% 21% 21% 10% 3% 15% -20% -10% 0% 10% 20% 30% 40% A+ A B C Total 2012 2013 Owner-Occupied Purchase Mortgage Year-Over-Year Growth by Credit Bucket Source: HMDA, Ellie Mae, Zelman & Associates analysis

92. Purchase Activity in Younger Age Cohorts Likely Stronger than Assumed 8% 19% 13% 20% 15% 9% 19% 14% 16% 15% 0% 5% 10% 15% 20% 25% Under 30 30-39 40-49 50-plus All 2012 2013 Owner-Occupied Purchase Mortgage Year-Over-Year Growth by Age Source: HMDA, Ellie Mae, Zelman & Associates analysis

93. Lack of Savings for a Downpayment Most Cited as Hurdle to Credit… 55% 44% 19% 19% 42% 31% 25% 19% 0% 10% 20% 30% 40% 50% 60% I do not have enough savings for a downpayment My monthly income would not support the cost of ownership I have bad credit I have too much debt I do not have enough savings for a downpayment My monthly income would not support the cost of ownership I have bad credit I have too much debt Reasons Young Adults Do Not Believe They Would Qualify for a Mortgage Respondents Requested to Select All that Apply - Answers Do Not Sum to 100% 25-29 Year Olds 30-34 Year Olds Source: Zelman & Associates Consumer Survey

94. …But Consumers Don’t Understand Actual Downpayment Requirements 9% 11% 11% 16% 15% 18% 12% 14% 13% 30% 28% 32% 27% 37% 24% 38% 24% 29% 30% 29% 19% 16% 10% 16% 13% 12% 19% 17% 22% 24% 31% 26% 21% 23% 31% 25% 14% 10% 14% 10% 12% 21% 13% 19% 15% 0% 20% 40% 60% 80% 100% 120% 18-21 22-24 25-29 30-34 35-39 40-44 45-59 50-Plus Total Over 20% 16-20% 11-15% 6-10% 0-5% Perceived Downpayment Requirement for Purchase Mortgage Note: FHA Downpayment Requirement = 3.5% Source: FHA, Zelman & Associates Consumer Survey

95. Surprisingly, Credit Scores Improved During Downturn for Bottom Quartile of Consumers 606 607 609 609 608 607 608 612 614 616 621 703 706 708 710 712 713 713 712 712 713 712 550 570 590 610 630 650 670 690 710 730 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 4Q03 4Q04 4Q05 4Q06 4Q07 4Q08 4Q09 4Q10 4Q11 4Q12 4Q13 Bottom Quartile Median Consumer Credit Scores Source: Federal Reserve, Zelman & Associates analysis

96. Nearly a Quarter of Under-35 Age Cohort is Debt Free, Better than History 20% 19% 17% 19% 17% 20% 16% 22% 24% 14% 11% 0% 5% 10% 15% 20% 25% 1989 1992 1995 1998 2001 2004 2007 2010 Under 35 25-29 30-34 Percentage of Under-35 Age Cohort That is Debt Free Federal Reserve Survey of Consumer Finances Zelman 2014 Survey Source: Federal Reserve, Zelman & Associates Consumer Survey

97. Contrary to Fears, Student Loan Debt Uncorrelated to Household Formation 17% 23% 20% 14% 13% 13% 16% 18% 17% 0% 5% 10% 15% 20% 25% With Without Total With Without Total With Without Total Share of Young Adults Living at Home, Depending on Student Loan Status 25-29 Year Olds 25-34 Year Olds30-34 Year Olds Source: Zelman & Associates Consumer Survey

98. Important to Differentiate Between Ownership and Living in a Single-Family Home 27% 26% 47% 62% 34% 46% 62% 77% 0% 10% 20% 30% 40% 50% 60% 70% 80% Living at Home All Renters Married Renters Married Renters With Children Living at Home All Renters Married Renters Married Renters With Children Hypothetical Housing Decisions for 25-34 Renters or Those Living at Home Purchase if Moved in Next Year Single-Family if Moved in Next Year Single-Family Share Higher than Purchase Share for Every Segment Source: Zelman & Associates Consumer Survey

99. Historical Drivers of Younger Ownership Rates Point to Future Gains 40% 41% 42% 43% 44% 45% 46% 47% 48% 49% 50% 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 2009 2010 2011 2012 2013 Homeownership Rate of 25-34 Year Olds From 2004 to 2012, initial losses were driven by falling real incomes and lower affordability, while additional losses resulted from lower employment and incomes, falling home prices, and tighter credit. From 1993 to 2004, rising real incomes, lower interest rates relative to the 1980s and more lenient underwriting standards helped to increase ownership rates. Homeownership rates fell despite the decline in interest rates as real income growth stagnated and affordability remained elusive. Source: Census Bureau, Zelman & Associates analysis

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